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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

Form 10-K

|                                             |                                                                                         
|-------------------------------------------- | ----------------------------------------------------------------------------------------
|x                                            | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934    
|                                            
|For the Fiscal Year Ended September 30, 2002
|                                            
|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

Securities registered pursuant to Section 12(b) of the Act:
NoneSecurities registered pursuant to Section 12(g) of the Act:
None

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 if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrants knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to
this Form 10-K. o

The common stock of the registrant is not publicly traded. Therefore, the
aggregate market value of the common stock is not readily determinable.

Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule12b-2 of the Act) Yeso No x

As of November 30, 2002, 14,060,000 shares of common stock, par value $0.01 per
share, were outstanding.

DOCUMENTS INCORPORATED BY REFERENCE
Certain exhibits are incorporated by reference in Item 15 of this report.



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TABLE OF CONTENTS



|                                                  |                                                                                                         |  |  |  |  |  |  | 
|------------------------------------------------- | ------------------------------------------------------------------------------------------------------- |  |  |  |  |  |  | 
|PART I                                           
|                                                  | Item 1. Business                                                                                       
|                                                  | Item 2. Properties                                                                                     
|                                                  | Item 3. Legal Proceedings                                                                              
|                                                  | Item 4. Submission of Matters to a Vote of Security Holders                                            
|PART II                                          
|                                                  | Item 5. Market for Registrants Common Equity and Related Stockholder Matters                          
|                                                  | Item 6. Selected Financial Data                                                                        
|                                                  | Item 7. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS          
|                                                  | Item 7A. Quantitative and Qualitative Disclosures About Market Risk                                    
|                                                  | Item 8. Financial Statements and Supplementary Data                                                    
|                                                  | Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure           
|PART III                                         
|                                                  | Item 10. Directors and Executive Officers of the Registrant                                            
|                                                  | Item 11. Executive Compensation                                                                        
|                                                  | Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
|                                                  | Item 13. Certain Relationships and Related Transactions                                                
|                                                  | Item 14. Controls and Procedures                                                                       
|PART IV                                          
|                                                  | Item 15. Exhibits, Financial Statement Schedules, and Reports on Form 8-K                              
|EX-10.8: FORM OF CHANGE IN CONTROL WAIVER AGRMT  
|EX-12.1: RATIO OF EARNINGS TO FIXED CHARGES      
|EX-23.1: CONSENT OF ERNST & YOUNG LLP            
|EX-23.2: NOTICE RE CONSENT OF ARTHUR ANDERSEN LLP
|EX-99.1: CERTIFICATION OF CHIEF EXECUTIVE OFFICER
|EX-99.2: CERTIFICATION OF CHIEF FINANCIAL OFFICER



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IPC ACQUISITION CORP.
FORM 10-K
For the Fiscal Year Ended September 30, 2002
INDEX

|          |                                                                          |  |                                                                                                |    |      |    | 
|--------- | ------------------------------------------------------------------------ |  | ---------------------------------------------------------------------------------------------- | -- | ---- | -- | 
|          |                                                                          |  |                                                                                                |    | Page
|          |                                                                          |  |                                                                                                |    |     
|Part I.  
|          | Item 1.                                                                  |  | Business                                                                                       |    |      | 1  | 
|          | Item 2.                                                                  |  | Properties                                                                                     |    |      | 11 | 
|          | Item 3.                                                                  |  | Legal Proceedings                                                                              |    |      | 11 | 
|          | Item 4.                                                                  |  | Submission of Matters to a Vote of Security Holders                                            |    |      | 11 | 
|Part II. 
|          | Item 5.                                                                  |  | Market for Registrant's Common Equity and Related Stockholder Matters                          |    |      | 12 | 
|          | Item 6.                                                                  |  | Selected Financial Data                                                                        |    |      | 12 | 
|          | Item 7.                                                                  |  | Management's Discussion and Analysis of Financial Condition and Results of Operations          |    |      | 14 | 
|          | Item 7A.                                                                 |  | Quantitative and Qualitative Disclosures About Market Risk                                     |    |      | 25 | 
|          | Item 8.                                                                  |  | Financial Statements and Supplementary Data                                                    |    |      | 26 | 
|          | Item 9.                                                                  |  | Changes in and Disagreements With Accountants on Accounting and Financial Disclosure           |    |      | 58 | 
|Part III.
|          | Item 10.                                                                 |  | Directors and Executive Officers of the Registrant                                             |    |      | 58 | 
|          | Item 11.                                                                 |  | Executive Compensation                                                                         |    |      | 61 | 
|          | Item 12.                                                                 |  | Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters |    |      | 63 | 
|          | Item 13.                                                                 |  | Certain Relationships and Related Transactions                                                 |    |      | 65 | 
|Part IV. 
|          | Item 14.                                                                 |  | Controls and Procedures                                                                        |    |      | 66 | 
|          | Item 15.                                                                 |  | Exhibits, Financial Statement Schedules, and Reports on Form 8-K                               |    |      | 66 | 
|          |                                                                          |  |                                                                                                |    |      |    | 
|          | Signatures                                                               |  |                                                                                                | 70 |     
|          | Certifications Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 |  |                                                                                                | 71 |     





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PART I




Item 1. Business

Overview

We are the leader in advanced trading room communications systems known as
turret systems, or dealerboards, based on our installed base of approximately
110,000 institutional trading positions worldwide. Our primary business is 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. 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, and
exchange trading industries. Our customers include Bear Stearns, Deutsche Bank,
Goldman Sachs, JPMorgan Chase, Merck-Medco, Morgan Stanley, the New York City
Metropolitan Transit Authority, the New York Stock Exchange and PSE&G. We have
offices in 18 major financial centers and our installed base of turret systems
is located in 49 countries, with the majority located in the United States. In
previous reports, we calculated the number of our customers based on the number
of locations in which we provided maintenance, service and support. Going
forward, we will calculate the number of our customers based on the number of
companies to whom we provide maintenance, service and support. As of September
30, 2002, we provide maintenance, service and support to more than 705
customers.

We manage our business through two major operating units called Trading
Systems and Information Transport Systems, or I.T.S. For the period
from November 15, 2001 to September 30, 2002, Trading Systems accounted for approximately 83% of our
revenues and approximately 99% of our net loss and I.T.S. accounted for
approximately 17% of our revenues and approximately 1% of our net loss.

History

Our business was established in 1973 as Interconnect Planning Corporation
to provide telephone equipment specifically designed for the financial trading
community. The business originally went public in 1983. In 1986, it was
acquired by Contel Corporation and became known as Contel IPC. Shortly
thereafter, Contel IPC opened our current manufacturing facility in the United
States and commenced operations in the United Kingdom. In 1990, Contel was
acquired by GTE, and in October 1991, GTE sold the business to Richard and
Peter Kleinknecht and others who renamed the business IPC Information Systems,
Inc. In October 1994, IPC Information Systems, Inc. completed an initial public
offering, and in April 1998, Citicorp Venture Capital Ltd. acquired the
business. In December 1998, we purchased the assets of Reuters Voice Systems, a
business unit of Reuters Group PLC, which included 9,000 trading positions. In
June 1999, we acquired V-Band Corporation, which included 17,000 trading
positions. In June 2000, IPC Information Systems, Inc. was acquired by Global
Crossing Ltd., and in July 2001, Global Crossing sold our Asian operations to
Asia Global Crossing Ltd. In December 2001, Global Crossing and its affiliates
sold IPC Information Systems, Inc., Asia Global Crossing IPC Trading Systems
Pty Ltd., and various assets related to the operation of these
businesses to a group including Goldman Sachs Capital Partners 2000, or GSCP 2000, and other private equity
funds affiliated with Goldman, Sachs & Co. In March 2002, we
purchased the international customer base and related assets of the
turret business of Hitachi, Ltd., which included approximately
1,800 positions.

Our Competitive Strengths

We believe that we have the following key competitive strengths:

Leading position in the industry.With an operating history of over 29
years, we have built strong relationships with our customers key information
technology decision makers. We believe that these long-term customer
relationships, as well as our large installed base and our market knowledge,
make us the leader in the industry and give us a competitive advantage that
would be difficult to replicate.

Service excellence and product reliability.Due to the mission-critical
nature of turret systems to overall trading operations, we believe our service
excellence and the reliability of our products have been the essential elements
of our ability to retain existing customers and attract new customers.

Compelling business model.Our business model has historically enabled us
to generate cash flow on a predictable basis. Because we believe our customers replace
their turret systems approximately every five to seven years, we believe that we
are able to

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effectively target future sales opportunities. Many of our customers have
long-term planning cycles that we believe provide us with visibility of future
potential revenues. Separately, we provide maintenance services to a majority
of our installed base. These service contracts provide us with a recurring
revenue stream and further insight into our customers needs. In addition, our
operating margins, scaleable cost structure, modest working capital needs and
low required capital expenditures have historically enabled us to generate
significant free cash flow.

Mission-critical offering with limited sensitivity to budgetary
pressures.We believe that the function of turret systems as a critical
component of a trading institutions operational infrastructure results in
relative insensitivity to changes in customers information technology budgets.
We believe turret systems account for less than 10% of the overall fixed costs
to build a typical trading floor, and significantly less than 10% of overall
costs when factoring in connectivity, salaries and other variable operating
charges. While sales of other information technology items may suffer when our
customers budgets decrease, we believe the critical nature of turret systems
makes them less susceptible to these changes.

Technological preparedness.While our industry is not characterized by
rapid technological changes, we believe that for next-generation products, such
as our high-speed internet protocol, or IP, based turret systems, we have a
developmental lead over our competitors with our
IQMXTM product. This product
integrates voice, data and video at the trading position. As IP becomes the
standard communications technology over the next several years, we expect our
IQMX family of products to gain further market acceptance. In addition, our
strong client relationships and our commitment to research and development
enable us to anticipate future client needs and develop new technologies to
satisfy those needs.

Senior management team with over 10 years average tenure.Our senior
executives have an average of over 10 years of experience at our Company and
have: (1) effectively managed our performance through both favorable and
challenging markets; (2) developed and maintained long-standing client
relationships; (3) expanded product offerings, innovated technological changes
and opened new geographic and industry markets; and (4) successfully integrated
acquisitions.

Our Strategy

The key elements of our strategy are to:

Generate revenue growth through replacement sales, systems upgrades and
expansions.Regular turnover of our installed base is driven primarily by
customers facility moves, mergers or consolidations and the development of new
trading markets and products. Additionally, other factors, such as customer
business initiatives, including global trading platform standardization,
regulatory developments, and customer expansion affect turnover, as customers
require more flexible, efficient and technologically advanced turret systems.
By developing new systems, such as IQMX, that address these factors in a
timely, proactive fashion, we believe we can increase overall turnover rates,
as customers are motivated to replace older, less-advanced equipment with our
latest most-advanced product offerings.

Expand the addressable market by developing new products and services and
capitalizing on new trends.We believe there is an opportunity to increase our
revenues by strategically broadening our product portfolio, enhancing our
technology architecture and addressing new developments in the marketplace.
Examples of our efforts include:



°Providing Rich Media delivery capabilities.The introduction of our IQ MX product and its associated applications module creates the opportunity to
deliver a variety of new services to trading positions. These services, called
Rich Media, add IP-based real-time video as a new dimension to voice and data
communications. Our Rich Media services are sold as incremental capabilities
onto the existing IQ MX configuration, eliminating the need to purchase
stand-alone equipment and leveraging our installed base and desktop presence.




°Developing applications. Application integration and development is
driven by the need to create a seamless and efficient work environment in much
the same way that increasingly sophisticated call centers were developed in the
mid-1990s. We have demonstrated our capability in this market through sales of
our computer telephony interface, or CTI, products to large, global customers.




°Increasing our penetration of disaster recovery and contingency planning
markets.We intend to further penetrate the growing disaster recovery and
business continuity market. We believe we can effectively leverage our leading
market position and customer relationships to drive future business in this
area from both existing customers and emerging third-party providers.




°Penetrating
middle office support positions.In June 2002, we released
the ICMXTM, a Voice over Internet Protocol, or VoIP, intercom module, and a
member of our IQMX family of turret products. The IC MX extends intercom
functionality


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by providing hands-free communication between sites, a unified numbering plan,
group calls and all calls and support for hoot and hollar applications, an open broadcast system which allows a trader to communicate with a  large group of other traders located around the world. Compact
in size and with features designed specifically for support functions off a
trading floor, we believe the ICMX will position us to penetrate a large number
of trading support positions.

Increase our market share through organic growth and opportunistic
acquisitions.We intend to continue to increase our market share by (1)
converting customers from competitors systems to our own, (2) further
expanding into currently under-penetrated markets, (3) winning competitive bids
for new installation opportunities, and (4) expanding geographically into areas
where we are not already a market leader. We plan to achieve these objectives
through a combination of expanding our direct presence, continuing our new
product development efforts and making strategic acquisitions and/or alliances.

Continue and leverage our track record for service excellence.We believe
our high level of customer service differentiates us from our competition,
positions us to capture more revenue from our existing client base by providing
value-added services, and allows us to maintain our pricing and profitability.

TRADING SYSTEMS

Our Trading Systems unit designs, manufactures, sells, installs and
maintains turret systems. A turret system consists of specialized desktop
consoles and associated backroom switching equipment that delivers significant
call volumes in a highly reliable, non-blocking manner. Our turret systems
scale to support up to 4,000 trading positions and 23,000 telephone lines, and
can be networked to build one integrated trading floor across multiple
geographically-dispersed sites. The largest trading
floor that currently uses our products has approximately 2,500 trading
positions and approximately 14,600 telephone lines. These turret systems
incorporate a proprietary design, including many features designed to increase
trader productivity, such as (1) expanded access to telephone lines, (2) rapid
call completion, (3) high voice quality, (4) built-in redundancy, (5) trader
mobility, (6) personalized call button layouts and (7) the ability to implement
system upgrades via software changes as opposed to hardware changes. We
anticipate that the continuing emphasis on disaster recovery and contingency
planning will lead to increased purchases of new turret systems and related
services by our customers.

Industry Overview

The turret systems industry is characterized by a small number of
manufacturers who have developed highly specialized voice communications
systems sold primarily to companies in the global financial and exchange
trading industries. Traders require highly reliable, non-blocking
simultaneous access to multiple lines which cannot be provided by traditional
private branch exchange, or PBX, systems. Turret systems must be highly
reliable because of the time-sensitive nature of trading activity and the high
potential opportunity cost of a service outage. As a result, product
reliability is one of the most significant factors in choosing among turret
system vendors. Other factors include service quality and the ability to
provide a standardized technology platform on a global basis. We believe our
market leadership is based on our success in meeting customer requirements.

We have found that demand for new turret systems is primarily
event-driven. We believe the key events that drive demand are: (1) physical
facility moves of trading positions and (2) the addition of new trading
positions due to customer growth. Facility moves are triggered primarily by (a)
projected return on investment results such as beneficial real estate pricing
or lease/sublease arrangements, (b) merger and acquisition activity among
firms, (c) obsolescence of trading facilities and (d) headcount changes beyond
current facility capacity. Disaster recovery and contingency planning have
gained increasing importance among our customers and we anticipate increased
growth in this area. In addition, categories such as derivatives, the emergence
of new specialty firms, such as sector-focused hedge funds, and the expansion
of firms internationally drive new purchase orders for turret systems. Demand
is also fueled by customer decisions to upgrade technology and standardize
trading platforms worldwide.

Organizational Structure

Trading Systems has five major focus areas:

Advanced Communication Systems.We provide highly reliable voice
communications between institutional traders, their trading counterparties and
their associated middle and back office support personnel. Our flagship
Alliance MX turret system is used by the majority of our existing customers and
we believe it is currently the industrys most widely used turret system. To
meet evolving client needs, we have also expanded our equipment portfolio to
include both dealerboards and modular products based on open communications
standards such as VoIP. Our VoIP turret system offering, the first in the
industry, is called IQMX and integrates voice, data and video at the trading
position. To date, we have sold approximately 6,100 IQMX positions.

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Application Development.We develop applications that integrate our
turret systems products and services into our customers business environments.
We design proprietary applications for critical processes, such as CTI, that
automate trading functions to maximize user efficiency. Our application
development services are a strategic extension of our desktop voice systems,
providing value-added software applications that converge voice and data
applications in the trading environment. Along with IQMX, we offer our
application module, which consists of a full color touch screen, a software
platform and a full suite of software products. These software products provide
a broad range of options ranging from custom-developed applications to
shrink-wrapped solutions. In addition, we have published our application
program interface, or API, to allow third-party software vendors to deploy
software solutions that interoperate with our turret systems products.

Rich Media Delivery.Enabled by broadband IP connectivity, we believe
Rich Media services are beginning to change the way people communicate. We plan
to address this market opportunity through IQMX and its associated applications
module. Our high-speed IP connection to the trading position and its associated
real-time display enables us to develop and deliver a variety of IP-based media
services, including broadcast television, streaming online programming and
archived media access.

Professional Services.Our project management, field service and
development organizations provide a variety of professional services to our
customers, including the extensive technology and service support required by
our customers for their large, complex trading floor projects, and may involve
dedicated on-site personnel teams. We also provide our customers with
24-hour-a-day, seven-day-a-week service on an as-needed basis, responding
quickly to the needs of our customers. Product and application development is
coordinated through an experienced staff of more than 90 professionals, with
significant expertise in
financial markets voice and data communications.

Service and Support.We provide contract-based maintenance services for a
majority of our installed base and realize recurring revenues through these
contracts, after an initial one-year warranty period. Service and support are
an important part of Trading Systems value proposition and are provided by a
global operations organization that supports clients and products deployed in
34 countries. Because of the mission-critical nature of our products, the
service levels we provide are higher than those typically available for other
commercial products. We also receive additional revenues through moves, adds
and changes, or MACs, to the installed base.

Competition

In the worldwide market for turret systems, our main competitors are
Syntegra, an affiliate of British Telecom, and Etrali S.A., an affiliate of
France Telecom. We also compete with Hitachi Ltd., and Siemens A.G., which have
historically achieved strong market shares in their respective domestic
markets. Additional competition could come from several areas including
incumbent equipment and software providers that are developing next-generation
IP-based telephony software and equipment. Other sources of potential
competition include start-up vendors that are developing soft switch
technology, call center systems, PBX equipment and software focused on
deployment in an all-IP environment. We believe we are able to compete
effectively against these companies due to the high quality of our products,
our experience and reputation for providing outstanding service, our ability to
provide a standardized technology platform on a global scale and our research
and development focused on new products and technologies.

Products and Services

Our Trading Systems unit designs, manufactures, installs and maintains
turret systems. A turret system is installed in addition to, and communicates
with, a companys PBX, but has enhanced features compared to a PBX.

Key features of our turret systems include:

Reliability. On a trading floor, a lost connection could result in a lost
transaction, and the outage of the entire telecommunications system could be
extremely damaging to a trading firm. Our turret systems are designed with
distributed architecture utilizing redundant equipment and circuitry with
parallel internal transmission paths. This architecture is designed to ensure
that no single failure within the system can cause a failure of the entire
system.

Call Capacity.Our turret systems are designed to allow every user to be
on one or more telephone lines simultaneously without call blocking or a
degradation of call setup speed. The Tradenet MX and the Alliance MX systems,
discussed below, are designed to support up to 23,000 telephone lines in
simultaneous use by up to 2,000 and 4,000 trading positions, respectively.

User Programmability and Mobility.Our digital turret systems allow each
trader to customize the system with personal speed-dial and direct connections
and associated displays, and to store personal settings in memory in the
systems backroom switching equipment. A trader can access his customized
settings from any other turret on the system at the same location or at any
remote network-linked location.

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Our turret systems products and services include:

VoIP Desktop Turret Systems.We believe our VoIP turret systems, branded
IQMX, will simplify and expand traders ability to access and integrate
information from all sourcesvoice, video and dataon one platform and
enhance the opportunities for creating new tools and advanced network services
that accommodate traders needs for instantly accessible and readily managed
information from all sources. IQMX includes four basic modules:

°The Control Moduleis the primary building block of the turret system. It
includes controls for two handsets, a telephone keypad, ten soft keys and 30
dynamic buttons per page. These give end-users access to as many as 600 lines.

°The Application Moduleis designed around a high-resolution, full color
touch screen. The module includes 40 on-screen dynamic buttons per page, eight
soft keys and the equivalent of a Slimline CIearDeal 8-channel speaker module.
The application module is capable of delivering new services, including
broadcast television, streaming media and the Internet.

°The 4-Channel Speaker Moduleconsists of four programmable channels,
volume control knobs and a speaker. Additional speakers can be added to support
up to 32 channels per position.

°The Button Moduleincludes 30 hard buttons that may access up to 600
lines across multiple pages and an integrated 8-channel speaker module.

Customers can combine these modules for flexibility to meet a traders
button and speaker requirements.

Voice Trading SystemsDesktop Trading Consoles.We have developed a
variety of desktop trading consoles including:

°ICMX.The ICMX is a VoIP intercom module built for the Alliance MX
platform. It extends intercom functionality to managers, support staff and
other non-traders, providing hands-free communication between sites, a unified
numbering plan, group calls and all calls and support for hoot and holler
applications.

°MX Slimline. MX Slimline turret systems use advanced digital technology
in an easy-to-use voice workstation. Software flexibility and an
ISDN-compatible design enable the MX Slimline desktop trading console to
support business applications such as virtual private lines and voice/data
integration. The MX Slimline desktop trading console supports two independent
voice paths used for separate right and left handsets. The MX Slimline desktop
trading console allows traders to customize their workstations to fit their
needs, including the ability to program their own features and lines, speed
dials and speakers.

°Slimline ClearDeal. Through our development of Slimline ClearDeal, an
open-line speaker system, we have become a significant supplier of standard and
custom-designed speaker solutions for financial communications worldwide. Our
speaker products, together with the Alliance MX platform, have become the
generally accepted standard on foreign exchange and currency trading floors
worldwide because of their range of functionality, performance and flexibility.

°TradePhone MX. The TradePhone MX is a multi-button telephone that is
designed to operate with both the Tradenet MX and the Alliance MX switching
platforms. This product is targeted at trading support, sales and research
personnel who communicate directly with traders. Providing the functionality of
a turret system in a scaled down version, the TradePhone MX is cost-effective
for use off of the trading floor.

°ExchangeFone II. Specialized products such as our ExchangeFone II
telephone system were designed specifically for exchange floors and work with
our Alliance MX voice trading system and the Tradenet MX.

Voice Trading SystemsBackroom Switching Platforms.We have developed a
variety of backroom switching platforms. Our backroom switching platforms
include:

°Tradenet MX. Introduced in 1992, Tradenet MX is our first digital system.
Tradenet MX combines an advanced mesh switching technology with custom software
and powerful processing and bandwidth capabilities for a wide range of
functions and flexibility. The fully digital proprietary system, based on a
fault tolerant switch, is not vulnerable to isolated component failure. Its
distributed architecture design provides reliability by harnessing the
computing power of multiple SUN® Microsystems SPARC microprocessors throughout
the system and provides rapid and easily programmable switching of voice calls.
Tradenet MX is designed to allow software upgrades without major hardware
upgrades, which enables us to respond rapidly to market developments or to a
customers request.

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°Alliance MX. Introduced in 1997, the Alliance MX offers all of the same
functionality as the Tradenet MX but provides higher density configurations,
four times the switching bandwidth, advanced CTI functionality, universal
slots, on-demand selective recording and a simplified power distribution
system.

°Alliance VS/MX. Alliance VS/MX provides trading opportunities for small
offices with up to 32 traders. The Alliance VS/MX system chassis is slightly
larger than a tower personal computer and plugs into a standard electrical
outlet. Alliance VS/MX is a digital connectivity panel with advanced CTI
functionality and universal slots which enables it to provide traditional voice
functions and gives it the ability to act as a gateway to the data network.

°Alliance MX Integrated Recorder. One integral part of the trading
environment is call recording. It can resolve problem trades, reduce liability
insurance premiums and train new recruits. By incorporating the recording
function into the Alliance MX system, Trading Systems offers increased
recording capacity, plus advanced features such as trader-initiated recording,
call marking for quick retrieval, selective recording and trader-controlled
playback with quick access to the last 10 calls.

CTI Solutions.We have developed software applications to complement our
turret systems, including:

°TradeSmart CTI. The TradeSmart CTI enables our Alliance MX turret systems
to integrate with the customers computer network. This suite of products
allows traders, head traders and their communications support staff to use
applications that can enhance their productivity, profitability and
effectiveness. The TradeSmart CTI supports five to 2,000 trading positions,
using one-to-many server architecture that allows it to grow incrementally to
handle additional trading positions. Pay as you grow expansion reduces
initial expenses, making this a cost-effective solution.

°Application Programming Interface. API enables clients programming staff
and third-party vendors to develop integrated applications for our voice
trading systems. Many customers have comprehensive, in-house programming staffs
to build all of their trading floor applications. We complement them by
providing a Software Developers Kit, or SDK, a tool that allows developers to
write software applications that access the Alliance MX turret system.

°Custom-Developed Applications. Our professional services department is
dedicated to delivering customers solutions that enhance their trading systems.
These solutions may include elements from the TradeSmart CTI standardized
product offerings, as well as customized software that solves specific
business problems. Custom-developed applications extend the functionality of
the Alliance MX turret systems and integrate the turret system with other
applications running on the trading desk.

TradeCentral Applications Platform and IP-Video.We have also developed
video applications to complement our turret systems. The first applications
were launched in June 2002:

°
TraderVision streaming video. Using the IQMX application module,
streaming IP video is provided directly to the trader. Any video composite
output may be streamed via IP multi-cast to the IQMX. Up to 30 channels are
supported.

° TradeCentral applications platform. The TradeCentral platform provides
an open interface and SDKs, which allow clients and third party vendors to
build and support applications that operate on the IQMX.

Turret System Installation, Maintenance and Support.The installation of
a turret system involves extensive planning to ensure that all materials and
labor are coordinated to be completed on-time and within budget. Detailed
analysis is performed, defining all required features and lines. The cabling
infrastructure is installed and tested prior to delivery of backroom switching
equipment. The desktop consoles are installed and the complete system is
rigorously tested. In addition to turret system installation, we provide
contractual maintenance services to our customers, which provide us with
recurring revenue which in fiscal year 2002 accounted for $85.7 million, or
35.7% of Trading Systems total revenues of $240.4 million.

Sales and Marketing

Our Trading Systems sales efforts are organized on a global basis to
promote relationships with, and to provide enhanced services to, customers that
have significant international operations. The organization is managed through
three regions. The regions and associated direct offices include: (1) the
Americaswhich includes Atlanta, Boston, Chicago, Cincinnati, Connecticut,
Dallas, Houston, Los Angeles, Minneapolis, New Jersey, New York, Philadelphia,
San Francisco and Toronto; (2) Europe, which includes London, Milan, Paris and
Zurich; and (3) Asia, which includes Hong Kong, Singapore, Sydney and Tokyo.

Distributors are used in emerging markets, in territories where the
installed base does not support a direct presence and where language and
cultural differences require a local presence. Key areas covered by
distributors include: (1) Latin and South

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America, including Argentina, Brazil, the Caribbean, Chile, Mexico and
Venezuela; (2) Asia, including India, Indonesia, Japan, Korea, Malaysia, New
Zealand, Philippines, Taiwan and Thailand; and (3) Europe, the Middle East and
Africa, or EMEA, including Italy, Portugal, Russia, Saudi Arabia, Scandinavia,
South Africa, Spain, Sweden, Turkey and the United Arab Emirates.

Accounts are classified as either global or regional. Global accounts are
assigned a global account director to manage and coordinate account activity on
a global basis. Regional account managers are assigned to both global and
regional accounts to support local selling efforts. This approach allows the
sales management team to coordinate account strategies across regions in order
to provide a seamless support infrastructure for global financial institutions.
Customers designated as global accounts benefit from standard pricing, volume
purchase agreements and a single point of contact for their global
communications requirements.

We manage our business through Sales Information Systems, or SIS, that
track and forecast five quarters of customer demand on a job-by-job basis. This
system is used by our sales and finance departments to project quarterly
results, and by our manufacturing department to assist in schedule production
and procurement.

A SIS report is maintained for each direct office or distributor. It is
updated and managed on a bi-weekly basis through the regional sales
organizations. The results and the overall performance of the business are
consolidated automatically and reviewed at a monthly business review by our
sales, finance, operations, manufacturing and engineering departments.

INFORMATION TRANSPORT SYSTEMS

Our I.T.S. unit provides physical
connectivity within buildings among both voice and data communications devices,
including turret systems, telephone switching equipment, PBX facilities,
facsimile machines, computer networks and video conference facilities. The
I.T.S. organization targets its business towards medium to large companies in
the New York metropolitan area. I.T.S. also bundles its services with Trading
Systems products so that customers, construction consultants and general
contractors can benefit from a turnkey trading floor solution from a single
vendor. Because information and communications systems are mission-critical
functions, many customers prefer that the same company installs and maintains
their turret systems and the cabling that supports them.

Industry Overview

Integrated high-speed internal data communications networks are critical
to many companies. Companies are installing increasingly complex computing
environments centered around local area networks, or LANs, and wide area
networks, or WANs, that connect networked desktop personal computers and
workstations, printers, telecommunications equipment, file servers and
facsimile machines. As network requirements have grown and network designs have
become more complex, many companies have chosen to outsource their LAN/WAN
design, installation and maintenance needs to independent specialists.

Organizational Structure

Our I.T.S. unit has two major focus areas:

Structured Cabling Systems.Providing a customer with cabling
infrastructure includes several distinct phases: network design, documentation,
installation, certification and ongoing service and maintenance. I.T.S. offers
its cabling infrastructure customers design input on various system elements,
including diversity of cable routing, uninterruptible power systems, security
safeguards and cable management systems. I.T.S. has narrowed its focus on the
higher margin components of design, installation and support of LANs, WANs and
data connectivity and reduced its involvement in the more competitive and lower
margin cabling infrastructure projects. I.T.S. places special emphasis on the
testing and certification phases of the project
because todays high-speed networks demand that products be installed in
accordance with strict manufacturer specifications.

Network Maintenance and Support.I.T.S. offers a broad line of
post-installation maintenance and support services to customers for MACs or as
part of a technical services contract. These contracts provide customers with
access to a wide range of our technical and operational resources, including
network engineering analysis, on-site technical support, help desk support,
user training and network reconfiguration. I.T.S. technicians maintain close
relationships with their customer counterparts to ensure service reliability.

Competition

We have many competitors in the I.T.S. business due to the highly
fragmented nature of the data networking market, which includes large public
telecommunications companies and privately held electrical providers. Although
a number of companies compete

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for parts of our I.T.S. business, such as cable installation,
we believe that our expertise and our ability to support the full range of data
network design and installation requirements of large national and
international customers enable us to compete effectively in this market.

Products and Services

Our I.T.S. unit provides cabling infrastructure, design, implementation
and maintenance services for high speed data networks, including LANs and WANs.
This business line includes four major product and service areas: (1)
value-added services; (2) networking products; (3) cabling infrastructure; and
(4) network maintenance and support. Customers purchase these products and
services on a stand-alone basis or in bundled combinations. All of our fiscal
year 2002 I.T.S. revenue was from projects performed in the New York City
metropolitan area. In addition, I.T.S. has a core group of highly skilled
project managers and design engineers who are dispatched to manage installation
projects. Our I.T.S. unit provides the following products and services:

Value-Added Services.We provide a wide range of value-added services,
including network and trading room design, consulting, engineering
implementation, project management, staging and operational testing of
workstations and technology and operational outsourcing.

Networking Products.We market and service a full line of third-party
manufactured networking products including LAN hubs, adapters, bridges,
routers, network management software and protocol converters. We are a
certified reseller of third-party networking products. We sell these products
on a stand-alone basis or fully installed, configured and integrated with
customer systems.

Cabling Infrastructure.Cabling infrastructure provides physical
connectivity within buildings among communications devices, including turret
systems, telephone switching equipment, PBX facilities, facsimile machines,
computer networks and video conference facilities. Providing a customer with
cabling infrastructure includes several distinct phases: network design,
documentation, installation, certification and ongoing service and maintenance.
We offer our cabling infrastructure customers design input on various system
elements, including diversity of cable routing, uninterruptible power systems,
security safeguards and cable management systems.

Network Maintenance and Support.We offer a broad line of
post-installation maintenance and support services to customers for MACs or as
part of a technical services contract. These contracts provide customers with
access to a wide range of our technical and operational resources, including
network engineering analysis, on-site technical support, help desk support,
user training and network reconfiguration. These services provide us with a
recurring revenue stream, which in fiscal year 2002 accounted for $13.7
million, or 26.7% of I.T.S. total revenues of $51.2 million.

Sales and Marketing

Through a coordinated sales and marketing effort with Trading Systems,
I.T.S. is able to position itself early in the contract bid process. Sales of
turret systems for a new or reconfigured trading floor have significantly more
lead time than bidding and contracting for cabling services. As a result,
I.T.S. often has knowledge regarding large projects in a customers pipeline
before its competition. The ability to market and sell the I.T.S. product into
the Trading Systems customer base is an important synergy that exists between
the two units. I.T.S. has two employees dedicated to sales. Each has regional
responsibility for developing and managing relationships with general
contractors and construction consultants.

Customers

Our customers are concentrated primarily in the global financial and
exchange trading industries, which include investment and commercial banks,
foreign exchange and commodity brokers and dealers, market exchanges, mutual
and hedge fund companies, asset managers, and insurance companies. We also
provide equipment and services to commodity trading operations in non-financial
firms. Historically, almost all of our consolidated revenues have been derived
from sales to customers in the financial trading community. Our customers
include Bear Stearns, Deutsche Bank, Goldman Sachs, JP Morgan Chase,
Merck-Medco, Morgan Stanley, the New York City Metropolitan Transit Authority,
the New York Stock Exchange and PSE&G.

Research and Development

Our research and development efforts are driven by our sales and product
management teams. Interoperability and integration of trading positions are a
strategic focus. We utilize our core competencies in voice communications
systems,

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application services and Rich Media delivery to provide solutions that meet the
evolving needs of our customers. We work closely with our customers to
understand their future requirements and invest in research and development to
ensure that our
products address customer needs.

Historically, the research and development budget has represented 9% to
11% of new turret systems sales. The research and development budget is
determined annually through the evaluation of each product category and its
expected impact on revenue over the succeeding 24 months.

For the periods October 1, 1999 to June 14, 2000, June 15, 2000 to
September 30, 2000, fiscal year ended September 30, 2001, October 1, 2001 to
December 20, 2001 and November 15, 2001 to September 30, 2002, we recorded
expenses of $8.9 million, $4.0 million, $15.5 million, $3.5 million and $11.6
million, respectively, on research and development. As of September 30, 2002,
we employed approximately 80 persons in the area of research, development and
product engineering.

Intellectual Property

We rely on a combination of patents, trade secrets, trademarks, copyrights
and other intellectual property rights, nondisclosure agreements and other
protective measures to protect our proprietary rights. We currently have 18
United States patents, including design patents. We also rely on unpatented
know-how and trade secrets and employ various methods, including
confidentiality agreements with employees and consultants, to protect our trade
secrets and know-how.

Environmental Matters

We are subject to various federal, state and local environmental laws and
regulations, including those governing the use, discharge and disposal of
hazardous substances in the ordinary course of our manufacturing process.
Although we believe that our current manufacturing operations comply in all
material respects with applicable environmental laws and regulations, there is
no assurance that environmental legislation may not in the future be enacted or
interpreted to create environmental liability with respect to our facilities or
operations.

Employees

As of September 30, 2002, we had 630 full-time non-union employees
worldwide with 610 associated with Trading Systems and 20 associated with
I.T.S. This includes 455 in North America, 135 in EMEA, and 40 in Asia. Of
these, 60 were engaged in marketing and sales, 80 in research, 110 in
manufacturing and 380 in branch operations, finance and corporate
administration.

As of September 30, 2002, approximately 350 of our United States workers
are represented by collective bargaining units, including approximately 310
workers who are retained under labor pooling agreements that IPC Information
Systems has entered into with Kleinknecht Electric Company, a New York
corporation, or KEC-NY, and Kleinknecht Electric Company, a New Jersey
corporation, or KEC-NJ, each a former affiliate of ours and companies owned by
one of our minority stockholders. Under these agreements, KEC-NY and KEC-NJ are
signatories to collective bargaining agreements with the union locals that
represent these employees. In addition, pursuant to these agreements, KEC-NY
and KEC-NJ are responsible for paying our employees, remitting payroll taxes
and making any required contributions to any union benefit plans covering the
employees. We reimburse KEC-NJ and KEC-NY for these expenses, pay them a total
fee of $50,000 per month and have agreed to indemnify them for liabilities
related to our employees. IPC Information Systems, Inc. has a standby letter of
credit in place in favor of KEC-NY and KEC-NJ in an amount of $1.5 million for
labor compensation and benefits related to these employees. The agreements also
require IPC Information Systems, Inc. to indemnify the shareholders of KEC-NJ
and KEC-NY for losses, up to $5 million, we cause relating to the union pension
plans in which our employees covered by these agreements participate.

We have never experienced a work stoppage. Management believes that
current relations with labor are good and that existing union contracts will be
renewed.

The IPC Acquisition

On December 20, 2001, we purchased 100% of the common stock of IPC
Information Systems, Inc. and 100% of the ordinary shares of Asia Global
Crossing IPC Trading Systems Australia Pty. Ltd. from Global Crossing Ltd. and
its affiliates. In addition, we acquired various assets owned by affiliates of
Global Crossing related to the operation of these businesses. Under the
purchase agreement, the total purchase price for the shares and assets was $360
million, subject to various adjustments for working capital and customer
advances.

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At the closing, the purchase price was reduced by approximately $9.75
million for estimated working capital and customer advance adjustments. On
January 16, 2002, Global Crossing and its affiliates paid us $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, we delivered to Global Crossing and its affiliates
our determination of the amount of working capital and customer advances as of
the closing. Based on our determination of these amounts, Global Crossing or
various of its affiliates are obligated to pay us an additional amount of $4.8
million. We have not been paid this additional amount, nor has it been
reflected as a reduction of the purchase price. On September 30, 2002, we filed
a proof of claim in the bankruptcy case of Global Crossing and one of its
affiliates for approximately $4.5 million relating to their pro rata portion of
working capital and customer advance adjustments owed to us. We expect to also
seek remedies against affiliates of Global Crossing that have not
filed for bankruptcy for the
working capital and customer advance adjustments owed to us, although there are
no assurances that such efforts will be successful.

The IPC 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 million by a
group including 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. This deferred portion of the purchase price
will not be paid to Global Crossing unless various contingent liabilities of
former affiliates that we guaranteed have been paid by Global Crossing or we
have been released from these guarantees. Such contingent liabilities include
equipment lease, real estate lease and employee obligations and may include
other third party obligations. An amount equal to the deferred payment was
deposited into a bank account in our name and will be released to us as the
guaranteed obligations and other liabilities are paid by Global Crossing or we
are released from these obligations and other liabilities. While we have
structured this agreement so that we retain ownership of the deposited funds,
there can be no assurance that a contrary position will not be taken in Global
Crossings bankruptcy case. Through September 30, 2002, we have paid
approximately $13.5 million of these contingent liabilities and an equal amount
has been withdrawn from the aforementioned bank account.

At the
closing of the IPC Acquisition, we and various of our 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, we 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, we negotiated with Global Crossing to resolve the
issues raised in the motion and subsequently reached an agreement to
amend the network services, channel sales and transition services
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 temporarily 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, we filed an
objection to Global Crossings proposed rejection of the purchase agreement. If no
prior agreement is reached, a hearing on our objection will be held before the
bankruptcy court on January 7, 2003.

If the
bankruptcy court permits Global Crossing to reject the purchase
agreement, Global Crossing would likely be relieved of its
obligations under the purchase agreement, including, among other
things, indemnifying us for known tax liabilities imposed upon IPC
Information Systems, Inc. and its subsidiaries prior to their
purchase by us from Global Crossing, and paying the
$4.8 million in working capital owed to us under the purchase
agreement. If the purchase agreement is rejected, we may also be
liable for other pre-IPC Acquisition tax liabilities if Global
Crossing does not include IPC Information Systems, Inc. and its
subsidiaries in certain tax returns for periods prior to and including
the IPC Acquisition. Such tax liabilities, which we estimate to be in the range of $0 to $36 million, could have a material adverse
effect on our financial condition and results of operations,
including requiring us to seek financing to pay any additional
pre-IPC Acquisition tax liabilities. Additionally, though the
deferred portion of the purchase price is currently held in a bank
account under our control and is only to be paid by Global Crossing
or its affiliates upon fulfillment of certain obligations and
liabilities by those entities, as discussed above, there can be no
assurance that Global Crossing will not take a contrary position in
connection with the hearing on our objection.

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Item 2. Properties

We have two product development facilities that are located in Fairfield,
Connecticut and Westbrook, Connecticut. Additionally, we lease our executive
offices in New York City and our branch offices and sales offices in the United
States, United Kingdom, Canada, Hong Kong, Australia, Japan, Milan and
Singapore. The 32,000 square foot Fairfield facility is leased and houses the
engineering organization. The 85,000 square foot Westbrook facility owned by us
is used for production, with 30,000 square feet designated for assembly and
testing, 30,000 square feet designated for warehousing and 25,000 square feet
designated for administrative purposes. The production facility is scaleable
and has sufficient capacity to meet the future anticipated demand. Although we
carry insurance, including business interruption insurance, on the Westbrook
facility, a calamity at the facility could have a material adverse effect on
us.

Prior to the completion of the IPC Acquisition, we leased six floors at
67-73 Worship Street, London, England at an annual rate of approximately
£565,000, or $888,000, assuming an exchange rate of £1 to $1.5715. Of these six
floors, we use 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, we remain liable to the landlord for all six
floors. Pursuant to the purchase agreement with Global Crossing, we entered
into a sublease for a portion of these premises with an affiliate of Global
Crossing, which filed a petition for relief under Chapter 11 of Title 11 of the
United States Code on August 30, 2002, and the landlord has consented to that
sublease. In accordance with the procedures set forth in the Plan, the sublease
will be assumed by Global Crossings affiliate as of the effective date of the
Plan. Through December 18, 2002, Global Crossings affiliate has made all of
its required sublease payments. At the closing of the IPC Acquisition, we
deferred approximately $3.2 million of the purchase price, which represents
approximately two years of rental payments under the sublease and the estimated
costs to restore the premises for use as a general office facility in the event
Global Crossings affiliate were to vacate the premises. In the event that we,
rather than Global Crossing or its affiliates, pay the landlord amounts up to
$3.2 million with respect to Global Crossings portion of this space, under the
terms of the purchase agreement we will no longer be obligated to make a
deferred purchase price payment in the corresponding amount to Global Crossing.




Item 3. 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 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 4. Submission of Matters to a Vote of Security Holders

No matters were submitted to a vote of security holders during the fourth
quarter of fiscal year 2002.

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PART II




Item 5. Market for Registrants Common Equity and Related Stockholder Matters

There is no public trading market for our common stock. As of September
30, 2002, there were 26 shareholders of record of our common stock. We have not
paid dividends and do not anticipate paying any such dividends in the
foreseeable future. In addition, the indenture governing our senior
subordinated notes and our senior secured credit facilities place restrictions
on our ability to pay dividends.

On November 15, 2001, we sold to GSCP 2000 and its affiliates 1,000 shares
of our common stock for $10,000. On December 19, 2001, we sold to GSCP 2000 and
its affiliates an additional 13.899 million shares of our common stock for
approximately $139 million. On December 19, 2001, we sold to Richard
Kleinknecht 100,000 shares of our common stock for $1 million. These shares
were sold in reliance upon Section 4(2) of the Securities Act of 1933, as
amended.




Item 6. Selected Financial Data

|                                                                       |                         |                    |                   |                    |                   |               |                    |                    |                  |                    |                   |                   |                    |      |                  |      |   |   |             |       |                   |   |       |      |   |   |             |      | 
|---------------------------------------------------------------------- | ----------------------- | ------------------ | ----------------- | ------------------ | ----------------- | ------------- | ------------------ | ------------------ | ---------------- | ------------------ | ----------------- | ----------------- | ------------------ | ---- | ---------------- | ---- | - | - | ----------- | ----- | ----------------- | - | ----- | ---- | - | - | ----------- | ---- | 
|                                                                       |                         |                    | Predecessors (1) 
|                                                                       |                         |                    |                   |                    |                   |               |                   
|                                                                       |                         |                    |                   |                    |                   |               |                    |                    |                  |                    |                   |                   |                    |      |                  |      |   |   |             |       |                   |   |       |      |   |   | Period from
|                                                                       |                         |                    |                   |                    |                   |               |                    |                    |                  |                    | Period from       |                   | Period from        |      |                  |      |   |   | Period from |       | November 15, 2001
|                                                                       |                         |                    | Fiscal Year Ended |                    | Fiscal Year Ended |               | October 1, 1999 to |                    | June 15, 2000 to |                    | Fiscal Year Ended |                   | October 1, 2001 to |      | to September 30,
|(dollars in millions)                                                  |                         | September 30, 1998 |                   | September 30, 1999 |                   | June 14, 2000 |                    | September 30, 2000 |                  | September 30, 2001 |                   | December 20, 2001 |                    | 2002
|                                                                       |                         |                    |                   |                    |                   |               |                    |                    |                  |                    |                   |                   |                    |      |                 
|                                                                       |                         |                    | (unaudited)       |                    |                   |               |                    |                    |                  |                    |                   |                   |                    |      |                  |      |   |   |             |       |                   |   |       |      |   |   |            
|Statement of Operations Data:                                          |                         |                    |                   |                    |                   |               |                    |                    |                  |                    |                   |                   |                    |      |                  |      |   |   |             |       |                   |   |       |      |   |   |             |     
|Total revenue                                                          |                         | $                  | 260.1             |                    |                   | $             | 265.7              |                    |                  | $                  | 174.5             |                   |                    | $    | 103.7            |      |   | $ | 279.7       |       |                   | $ | 58.8  |      |   | $ | 232.8       |     
|Cost of goods sold (exclusive of depreciation) (2)                     |                         |                    | 153.6             |                    |                   |               | 159.3              |                    |                  |                    | 102.5             |                   |                    |      | 79.8             |      |   |   | 164.6       |       |                   |   | 32.8  |      |   |   | 161.1       |     
|                                                                       |                         |                    |                   |                    |                   |               |                    |                    |                  |                    |                   |                   |                    |      |                  |      |   |   |             |       |                   |   |       |      |   |   |             |     
|                                                                       | Gross profit            |                    |                   | 106.5              |                   |               |                    | 106.4              |                  |                    |                   | 72.0              |                    |      |                  | 23.9 |   |   |             | 115.1 |                   |   |       | 26.0 |   |   |             | 71.7 | 
|                                                                      
|Research and development expense                                       |                         |                    | 8.3               |                    |                   |               | 9.8                |                    |                  |                    | 8.9               |                   |                    |      | 4.0              |      |   |   | 15.5        |       |                   |   | 3.5   |      |   |   | 11.6        |     
|Selling, general and administrative expenses                           |                         |                    | 49.2              |                    |                   |               | 36.9               |                    |                  |                    | 29.5              |                   |                    |      | 12.2             |      |   |   | 33.5        |       |                   |   | 17.1  |      |   |   | 34.6        |     
|Depreciation and amortization                                          |                         |                    | 6.6               |                    |                   |               | 8.5                |                    |                  |                    | 7.1               |                   |                    |      | 14.0             |      |   |   | 48.6        |       |                   |   | 10.7  |      |   |   | 15.1        |     
|                                                                       |                         |                    |                   |                    |                   |               |                    |                    |                  |                    |                   |                   |                    |      |                  |      |   |   |             |       |                   |   |       |      |   |   |             |     
|                                                                       | Operating income (loss) |                    |                   | 42.4               |                   |               |                    | 51.2               |                  |                    |                   | 26.5              |                    |      |                  | (6.3 | ) |   |             | 17.4  |                   |   |       | (5.4 | ) |   |             | 10.4 | 
|                                                                      
|Interest expense, net                                                  |                         |                    | (6.8              | )                  |                   |               | (20.3              | )                  |                  |                    | (16.1             | )                 |                    |      | (5.7             | )    |   |   | (27.9       | )     |                   |   | (6.0  | )    |   |   | (21.5       | )   
|Other income (expense), net                                            |                         |                    |                  |                    |                   |               | 0.4                |                    |                  |                    |                  |                   |                    |      |                 |      |   |   | 2.0         |       |                   |   |      |      |   |   | (0.3        | )   
|                                                                       |                         |                    |                   |                    |                   |               |                    |                    |                  |                    |                   |                   |                    |      |                  |      |   |   |             |       |                   |   |       |      |   |   |             |     
|Income (loss) before income taxes                                      |                         |                    | 35.6              |                    |                   |               | 31.3               |                    |                  |                    | 10.4              |                   |                    |      | (11.9            | )    |   |   | (8.4        | )     |                   |   | (11.3 | )    |   |   | (11.5       | )   
|Income tax provision (benefit)                                         |                         |                    | 14.7              |                    |                   |               | 12.2               |                    |                  |                    | 4.1               |                   |                    |      | (2.6             | )    |   |   | 4.4         |       |                   |   | (0.3  | )    |   |   | (2.3        | )   
|Extraordinary loss on retirement of debt (net of income
taxes of $7.3) |                         |                    |                  |                    |                   |               |                   |                    |                  |                    |                  |                   |                    |      | (10.6            | )    |   |   |            |       |                   |   |      |      |   |   |            |     
|                                                                       |                         |                    |                   |                    |                   |               |                    |                    |                  |                    |                   |                   |                    |      |                  |      |   |   |             |       |                   |   |       |      |   |   |             |     
|Net income (loss)                                                      |                         | $                  | 20.9              |                    |                   | $             | 19.1               |                    |                  | $                  | 6.3               |                   |                    | $    | (19.9            | )    |   | $ | (12.8       | )     |                   | $ | (11.0 | )    |   | $ | (9.2        | )   
|                                                                       |                         |                    |                   |                    |                   |               |                    |                    |                  |                    |                   |                   |                    |      |                  |      |   |   |             |       |                   |   |       |      |   |   |             |     
|Other Data:                                                            |                         |                    |                   |                    |                   |               |                    |                    |                  |                    |                   |                   |                    |      |                  |      |   |   |             |       |                   |   |       |      |   |   |             |     
|EBITDA (3)                                                             |                         | $                  | 49.0              |                    |                   | $             | 60.1               |                    |                  | $                  | 33.6              |                   |                    | $    | 7.7              |      |   | $ | 68.1        |       |                   | $ | 5.4   |      |   | $ | 25.1        |     
|Adjusted EBITDA (4)                                                    |                         | $                  | 58.4              |                    |                   | $             | 60.1               |                    |                  | $                  | 38.4              |                   |                    | $    | 32.6             |      |   | $ | 78.8        |       |                   | $ | 14.8  |      |   | $ | 59.4        |     
|Ratio of earnings to fixed charges (5)                                 |                         |                    | 4.2x              |                    |                   |               | 2.5x               |                    |                  |                    | 1.6x              |                   |                    |      |                 |      |   |   |            |       |                   |   |      |      |   |   |            |     

(1)  Predecessors refers to the Company as it operated (a) on a stand-alone basis through June 14, 2000 as IPC Information Systems, Inc. and (b) through December 20, 2001 following the acquisition of IPC Information Systems, Inc. by Global Crossing. Accordingly, the financial statements from June 15,
2000 through December 20, 2001 reflect the changes and adjustments for purchase accounting as well as changes as a result of ownership under Global Crossing.

(2)  The period from June 15, 2000 through September 30, 2000 cost of goods sold reflects fair value inventory adjustments of $24.9 million associated with the purchase accounting treatment of the acquisition of IPC Information Systems, Inc. by Global Crossing in June 2000. Fiscal year ended September
30, 2001 cost of goods sold reflects fair value inventory adjustments of $10.7 million associated with the purchase accounting treatment of the acquisition of IPC Information Systems, Inc. by Global Crossing in June 2000. We had no operations prior to our acquisition of IPC Information Systems from
Global Crossing on December 20, 2001. The period from November 15, 2001 (date of initial capitalization) through September 30, 2002 costs of goods sold reflects fair value inventory adjustments of $34.3 million associated with the purchase accounting treatment of the IPC Acquisition in December 2001.

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(3)  EBITDA represents earnings before interest, taxes, depreciation and amortization. EBITDA is presented because we believe it is frequently used by securities analysts, investors and other interested parties in the evaluation of companies in our industry. However, other companies in our industry may calculate EBITDA differently
than we do. EBITDA is not a measurement of financial performance under generally accepted accounting principles and should not be construed as an indicator of a companys performance or liquidity or in isolation from or as a substitute for net income, cash flow from operations or any other cash flow data prepared in accordance
with generally accepted accounting principles. See the Statement of Cash Flows included in our consolidated financial statements.

(4)  Adjusted EBITDA is calculated by adding back to EBITDA the incremental inventory costs associated with the purchase accounting treatment of, and a non-recurring merger related charge associated with, the acquisition of IPC Information Systems, Inc. by Global Crossing in June 2000 and the IPC Acquisition in December 2001. In
addition, Adjusted EBITDA for the period from October 1, 2001 through December 20, 2001 is calculated by further adding back certain one-time selling, general and administrative expenses allocated to us by Global Crossing and the additional bonus expenses incurred by us to pay bonuses consistent with past practices. Adjusted
EBITDA for the fiscal year ended 1998 is calculated by further adding back certain one-time change in control expenses. The adjustments were as follows:

|                                                    |  |                  |      |             |  |               |      |               |  |             |      |                   |  |                   |      |  |  |   |      |  |  |   |      |  |  |   |      | 
|--------------------------------------------------- |  | ---------------- | ---- | ----------- |  | ------------- | ---- | ------------- |  | ----------- | ---- | ----------------- |  | ----------------- | ---- |  |  | - | ---- |  |  | - | ---- |  |  | - | ---- | 
|                                                    |  | Predecessors (1) |      |             |  |              
|                                                    |  |                  |      |             |  |              
|                                                    |  | Fiscal Year      |      | Fiscal Year |  | Period from   |      | Period from   |  | Fiscal Year |      | Period from       |  | Period from      
|                                                    |  | Ended            |      | Ended       |  | October 1,    |      | June 15, 2000 |  | Ended       |      | October 1,        |  | November 15, 2001
|                                                    |  | September        |      | September   |  | 1999 to       |      | to September  |  | September   |      | 2001 to           |  | to September 30, 
|(dollars in millions)                               |  | 30, 1998         |      | 30, 1999    |  | June 14, 2000 |      | 30, 2000      |  | 30, 2001    |      | December 20, 2001 |  | 2002             
|                                                    |  |                  |      |             |  |               |      |               |  |             |      |                   |  |                  
|                                                    |  | (unaudited)      |      |             |  |               |      |               |  |             |      |                   |  |                   |      |  |  |   |      |  |  |   |      |  |  |  
|EBITDA                                              |  | $                | 49.0 |             |  | $             | 60.1 |               |  | $           | 33.6 |                   |  | $                 | 7.7  |  |  | $ | 68.1 |  |  | $ | 5.4  |  |  | $ | 25.1 | 
|Non-recurring merger related charge                 |  |                  | 9.4  |             |  |               |     |               |  |             | 4.8  |                   |  |                   |     |  |  |   |     |  |  |   |     |  |  |   |     | 
|Inventory cost                                      |  |                  |     |             |  |               |     |               |  |             |     |                   |  |                   | 24.9 |  |  |   | 10.7 |  |  |   |     |  |  |   | 34.3 | 
|Allocated selling, general and administrative costs |  |                  |     |             |  |               |     |               |  |             |     |                   |  |                   |     |  |  |   |     |  |  |   | 6.9  |  |  |   |     | 
|Bonus payments                                      |  |                  |     |             |  |               |     |               |  |             |     |                   |  |                   |     |  |  |   |     |  |  |   | 2.5  |  |  |   |     | 
|                                                    |  |                  |      |             |  |               |      |               |  |             |      |                   |  |                   |      |  |  |   |      |  |  |   |      |  |  |   |      | 
|Adjusted EBITDA                                     |  | $                | 58.4 |             |  | $             | 60.1 |               |  | $           | 38.4 |                   |  | $                 | 32.6 |  |  | $ | 78.8 |  |  | $ | 14.8 |  |  | $ | 59.4 | 
|                                                    |  |                  |      |             |  |               |      |               |  |             |      |                   |  |                   |      |  |  |   |      |  |  |   |      |  |  |   |      | 

(5)  The ratio of earnings to
fixed charges is computed by dividing earnings by fixed charges. For
this purpose, earnings include net income (loss) before taxes and fixed charges (adjusted for interest capitalized during the period). Fixed charges include interest, whether expensed or capitalized, amortization of deferred
financing fees and the portion of rental expense that is representative of the interest factor in these rentals. For the period from June 15, 2000 to September 30, 2000, earnings were insufficient to cover fixed charges by $11.9 million because of the inclusion of the inventory fair value step-up in cost of sales of $24.9 million
and the amortization of the goodwill of $6.2 million from the acquisition of IPC Information Systems, Inc. by Global Crossing in June 2000. For the year ended September 30, 2001, earnings were insufficient to cover fixed charges by $8.4 million because of the inclusion of the inventory fair value step-up in cost of sales of $10.7
million and the amortization of the goodwill of $21.1 million from the acquisition of IPC Information Systems, Inc. by Global Crossing in June 2000. For the period from October 1, 2001 to December 20, 2001, earnings were insufficient to cover fixed charges by $11.3 million because of the year end intercompany charge of $6.9
million, the inclusion of $2.5 million of other bonus amounts and goodwill amortization of $4.7 million resulting from the ownership of IPC Information Systems by Global Crossing. For the period from November 15, 2001 to September 30, 2002, earnings were insufficient to cover fixed charges by $11.5 million because of the
inclusion of the fair value step-up of inventory in cost of sales of $34.3 million resulting from the IPC Acquisition in December 2001.

|                                    |  |                  |       |           |  |           |       |           |  |          |       |           |  |   |       |   |  |   |       |  |  |   |       | 
|----------------------------------- |  | ---------------- | ----- | --------- |  | --------- | ----- | --------- |  | -------- | ----- | --------- |  | - | ----- | - |  | - | ----- |  |  | - | ----- | 
|                                    |  | Predecessors (1) |       |           |  |           |       |           |  |         
|                                    |  |                  |       |           |  |           |       |           |  |         
|                                    |  | September        |       | September |  | September |       | September |  | December |       | September
|(dollars in millions)               |  | 30, 1998         |       | 30, 1999  |  | 30, 2000  |       | 30, 2001  |  | 31, 2001 |       | 30, 2002 
|                                    |  |                  |       |           |  |           |       |           |  |          |       |          
|                                    |  | (unaudited)      |       |           |  |           |       |           |  |          |       |           |  |   |       |   |  |   |       |  |  |  
|Balance Sheet Data (at period end): |  |                  |       |           |  |           |       |           |  |          |       |           |  |   |       |   |  |   |       |  |  |   |       | 
|Cash                                |  | $                | 26.8  |           |  | $         | 4.9   |           |  | $        | 3.2   |           |  | $ | 4.5   |   |  | $ | 25.0  |  |  | $ | 25.3  | 
|Net working capital                 |  |                  | 57.4  |           |  |           | 70.1  |           |  |          | (6.3  | )         |  |   | (52.2 | ) |  |   | 68.3  |  |  |   | 43.5  | 
|Total assets                        |  |                  | 236.2 |           |  |           | 226.3 |           |  |          | 531.4 |           |  |   | 489.1 |   |  |   | 517.7 |  |  |   | 430.2 | 
|Long-term debt                      |  |                  | 189.5 |           |  |           | 222.7 |           |  |          |      |           |  |   |      |   |  |   | 249.8 |  |  |   | 214.6 | 
|Total debt                          |  |                  | 189.5 |           |  |           | 242.7 |           |  |          |      |           |  |   |      |   |  |   | 255.0 |  |  |   | 221.1 | 
|Stockholders equity                |  |                  | (33.1 | )         |  |           | (87.3 | )         |  |          | 318.6 |           |  |   | 244.0 |   |  |   | 138.6 |  |  |   | 137.0 | 

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Item 7. 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 consolidated financial statements and related
notes included elsewhere in this filing.

Some of the matters discussed in this filing include forward-looking
statements. Statements that are predictive in nature, that depend upon or refer
to future events or conditions or that include words such as expects,
anticipates, intends, plans, believes, estimates, thinks, and
similar expressions are forward-looking statements. These statements involve
known and unknown risks, uncertainties and other risk factors, including but
not limited to those described in our Registration Statement on Form S-4 (No.
333-82540), 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

We are the leader in advanced trading room communications systems known as
turret systems, or dealerboards, based on our installed base of approximately
110,000 institutional trading positions worldwide. Our primary business is 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. 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
and exchange trading industries.

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

Revenue from Trading Systems and I.T.S. sales and installation is
recognized upon completion of the installation, except for revenue from sales
of turret products to distributors, which is recognized upon shipment. Under
contract provisions, customers are progress-billed prior to the completion of
the installation. The revenue related to such advance payments is deferred
until system installation is completed. All costs incurred on uncompleted
contracts are accumulated and recorded as inventory on customer sites awaiting
installation. In addition, contracts for annual recurring 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.

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.

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

Impact of the IPC 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 IPC Acquisition was accounted for as an asset purchase, the book value of
our assets was adjusted to reflect the allocation of

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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 fiscal year ended September 30, 2002 represent
the sum of the amounts separately reported for the pre-IPC Acquisition period
from October 1, 2001 to December 20, 2001 and the post-IPC Acquisition period
from December 21, 2001 to September 30, 2002. The amounts presented below for
the fiscal year ended September 30, 2000 represent the sum of the amounts
separately reported for the period before we were acquired by Global Crossing
from October 1, 1999 to June 14, 2000 and the post-acquisition period from June
15, 2000 to September 30, 2000.

Recent Events

We continue to expect current market conditions to cause our customers to
exercise caution with information technology and communications spending, which
may cause decreased product sales and installation revenue in the 2003 fiscal
year. Accordingly, we have reduced our work force by approximately 8%, or 75
employees, in the fourth quarter of the 2002 fiscal year to reduce fixed costs
in the 2003 fiscal year. The reduction in work force included 21 employees from
our engineering staff, 35 employees from our operations staff and 19 employees
from our corporate staff. The total amount of severance and other benefits
charged to the selling, general and administrative category of our income
statement in the fourth quarter of the 2002 fiscal year was $0.6 million, of
which $0.5 million has been paid through September 30, 2002. The amount of
severance and other benefits accrued on our balance sheet at September 30, 2002
was $0.1 million.

Comparison of the Year Ended September 30, 2002 (FY 2002) to the Year Ended
September 30, 2001 (FY 2001) and FY 2001 to the Year Ended September 30, 2000
(FY 2000).

The following table sets forth, as a percentage of revenue, our
consolidated statements of operations for the periods indicated.

|                                                |                                 |                                           |     |         |    |         |     |         |    |    |     |    |    |   
|----------------------------------------------- | ------------------------------- | ----------------------------------------- | --- | ------- | -- | ------- | --- | ------- | -- | -- | --- | -- | -- | --
|                                                |                                 |                                           |     | FY 2002 |    | FY 2001 |     | FY 2000
|                                                |                                 |                                           |     |         |    |         |     |        
|REVENUE:                                        |                                 |                                           |     |         |    |         |     |         |    |    |     |   
|                                                | Product sales and installations |                                           |     | 66      | %  |         |     | 65      | %  |    |     | 65 | % 
|                                                | Service                         |                                           |     | 34      | %  |         |     | 35      | %  |    |     | 35 | % 
|                                                |                                 |                                           |     |         |    |         |     |         |    |    |     |    |   
|                                                |                                 |                                           | 100 | %       |    |         | 100 | %       |    |    | 100 | % 
|                                                |                                 |                                           |     |         |    |         |     |         |    |    |     |    |   
|Cost of goods sold (exclusive of depreciation): |                                 |                                           |     |         |    |         |     |         |    |    |     |   
|                                                | Product sales and installations |                                           |     | 48      | %  |         |     | 38      | %  |    |     | 46 | % 
|                                                | Service                         |                                           |     | 19      | %  |         |     | 21      | %  |    |     | 20 | % 
|                                                |                                 |                                           |     |         |    |         |     |         |    |    |     |    |   
|                                                |                                 |                                           | 67  | %       |    |         | 59  | %       |    |    | 66  | % 
|                                                |                                 |                                           |     |         |    |         |     |         |    |    |     |    |   
|                                                |                                 | Gross profit                              |     |         | 33 | %       |     |         | 41 | %  |     |    | 34 | % 
|                                                |                                 |                                           |     |         |    |         |     |         |    |    |     |    |   
|Research and development                        |                                 |                                           | 5   | %       |    |         | 6   | %       |    |    | 5   | % 
|Selling, general and administrative expense     |                                 |                                           | 18  | %       |    |         | 12  | %       |    |    | 15  | % 
|Depreciation and amortization                   |                                 |                                           | 9   | %       |    |         | 17  | %       |    |    | 7   | % 
|                                                |                                 |                                           |     |         |    |         |     |         |    |    |     |    |   
|                                                |                                 | Income (loss) from operations             |     |         | 2  | %       |     |         | 6  | %  |     |    | 7  | % 
|                                                |                                 |                                           |     |         |    |         |     |         |    |    |     |    |   
|Other income (expense):                         |                                 |                                           |     |         |    |         |     |         |    |    |     |   
|                                                | Interest expense, net           |                                           |     | (9      | %) |         |     | (10     | %) |    |     | (8 | %)
|                                                | Other income (expense), net     |                                           |     | 0       | %  |         |     | 1       | %  |    |     | 0  | % 
|                                                |                                 |                                           |     |         |    |         |     |         |    |    |     |    |   
|                                                |                                 | Income (loss) before income taxes         |     |         | (8 | %)      |     |         | (3 | %) |     |    | (1 | %)
|                                                |                                 |                                           |     |         |    |         |     |         |    |    |     |    |   
|Income tax expense (benefit)                    |                                 |                                           | (1  | %)      |    |         | 2   | %       |    |    | 1   | % 
|                                                |                                 |                                           |     |         |    |         |     |         |    |    |     |    |   
|                                                |                                 | Income (loss) before extraordinary charge |     |         | (7 | %)      |     |         | (5 | %) |     |    | (2 | %)
|                                                |                                 |                                           |     |         |    |         |     |         |    |    |     |    |   
|Extraordinary loss on retirement of debt        |                                 |                                           |    |         |    |         |    |         |    |    | (3  | %)
|                                                |                                 |                                           |     |         |    |         |     |         |    |    |     |    |   
|Net income (loss)                               |                                 |                                           | (7  | %)      |    |         | (5  | %)      |    |    | (5  | %)
|                                                |                                 |                                           |     |         |    |         |     |         |    |    |     |    |   

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Revenue.

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

|                                |       |         |              |         |  |        |         |         |  |         |        |         |   |        |   |        |   |   |         |         |  |   |         |         |   |   |       |       |  |  |   |   |  
|------------------------------- | ----- | ------- | ------------ | ------- |  | ------ | ------- | ------- |  | ------- | ------ | ------- | - | ------ | - | ------ | - | - | ------- | ------- |  | - | ------- | ------- | - | - | ----- | ----- |  |  | - | - | -
|                                |       |         | Consolidated
|                                |       |         |             
|                                |       |         |              |         |  |        |         |         |  |         | $      |         | % |        |   |        |   |   |         |         |  |   | $       |         | %
|(in thousands)                  |       | FY 2002 |              | FY 2001 |  | Change |         | Change  |  | FY 2001 |        | FY 2000 |   | Change |   | Change
|                                |       |         |              |         |  |        |         |         |  |         |        |         |   |        |   |       
|REVENUE:                        |       |         |              |         |  |        |         |         |  |         |        |         |   |        |   |        |   |   |         |         |  |   |         |         |   |   |       |       |  |  |   |  
|Product sales and installations |       | $       | 192,194      |         |  | $      | 181,267 |         |  | $       | 10,927 |         |   |        | 6 | %      |   | $ | 181,267 |         |  | $ | 181,482 |         |   | $ | (215  | )     |  |  | 0 | %
|Service                         |       |         | 99,370       |         |  |        | 98,430  |         |  |         | 940    |         |   |        | 1 | %      |   |   | 98,430  |         |  |   | 96,727  |         |   |   | 1,703 |       |  |  | 2 | %
|                                |       |         |              |         |  |        |         |         |  |         |        |         |   |        |   |        |   |   |         |         |  |   |         |         |   |   |       |       |  |  |   |  
|                                | Total |         | $            | 291,564 |  |        | $       | 279,697 |  |         | $      | 11,867  |   |        |   | 4      | % |   | $       | 279,697 |  |   | $       | 278,209 |   |   | $     | 1,488 |  |  |   | 1 | %
|                                |       |         |              |         |  |        |         |         |  |         |        |         |   |        |   |        |   |   |         |         |  |   |         |         |   |   |       |       |  |  |   |  

|                                |       |   |                          |         |         |   |         |         |        |   |         |        |         |  |        |   |        |   |         |         |  |   |         |         |   |   |        |      |   |  |    |    |  
|------------------------------- | ----- | - | ------------------------ | ------- | ------- | - | ------- | ------- | ------ | - | ------- | ------ | ------- |  | ------ | - | ------ | - | ------- | ------- |  | - | ------- | ------- | - | - | ------ | ---- | - |  | -- | -- | -
|                                |       |   | Trading Systems Division
|                                |       |   |                         
|                                |       |   |                          |         |         |   |         |         |        |   | $       |        | %       |  |        |   |        |   |         |         |  |   | $       |         | %
|                                |       |   | FY 2002                  |         | FY 2001 |   | Change  |         | Change |   | FY 2001 |        | FY 2000 |  | Change |   | Change
|                                |       |   |                          |         |         |   |         |         |        |   |         |        |         |  |        |  
|REVENUE:                        |       |   |                          |         |         |   |         |         |        |   |         |        |         |  |        |   |        |   |         |         |  |   |         |         |   |   |        |      |   |  |    |   
|Product sales and installations |       | $ | 154,690                  |         |         | $ | 138,165 |         |        | $ | 16,525  |        |         |  | 12     | % |        | $ | 138,165 |         |  | $ | 141,225 |         |   | $ | (3,060 | )    |   |  | (2 | %)
|Service                         |       |   | 85,704                   |         |         |   | 82,851  |         |        |   | 2,853   |        |         |  | 3      | % |        |   | 82,851  |         |  |   | 80,550  |         |   |   | 2,301  |      |   |  | 3  | % 
|                                |       |   |                          |         |         |   |         |         |        |   |         |        |         |  |        |   |        |   |         |         |  |   |         |         |   |   |        |      |   |  |    |   
|                                | Total |   | $                        | 240,394 |         |   | $       | 221,016 |        |   | $       | 19,378 |         |  |        | 9 | %      |   | $       | 221,016 |  |   | $       | 221,775 |   |   | $      | (759 | ) |  |    | 0  | %
|                                |       |   |                          |         |         |   |         |         |        |   |         |        |         |  |        |   |        |   |         |         |  |   |         |         |   |   |        |      |   |  |    |   

|                                |       |   |                 |        |         |   |        |        |        |   |         |        |         |  |        |     |        |   |        |        |  |   |        |        |   |   |       |       |  |  |    |    |  
|------------------------------- | ----- | - | --------------- | ------ | ------- | - | ------ | ------ | ------ | - | ------- | ------ | ------- |  | ------ | --- | ------ | - | ------ | ------ |  | - | ------ | ------ | - | - | ----- | ----- |  |  | -- | -- | -
|                                |       |   | I.T.S. Division
|                                |       |   |                
|                                |       |   |                 |        |         |   |        |        |        |   | $       |        | %       |  |        |     |        |   |        |        |  |   | $      |        | %
|                                |       |   | FY 2002         |        | FY 2001 |   | Change |        | Change |   | FY 2001 |        | FY 2000 |  | Change |     | Change
|                                |       |   |                 |        |         |   |        |        |        |   |         |        |         |  |        |     |       
|REVENUE:                        |       |   |                 |        |         |   |        |        |        |   |         |        |         |  |        |     |        |   |        |        |  |   |        |        |   |   |       |       |  |  |    |   
|Product sales and installations |       | $ | 37,504          |        |         | $ | 43,102 |        |        | $ | (5,598  | )      |         |  | (13    | %)  |        | $ | 43,102 |        |  | $ | 40,257 |        |   | $ | 2,845 |       |  |  | 7  | % 
|Service                         |       |   | 13,666          |        |         |   | 15,579 |        |        |   | (1,913  | )      |         |  | (12    | %)  |        |   | 15,579 |        |  |   | 16,177 |        |   |   | (598  | )     |  |  | (4 | %)
|                                |       |   |                 |        |         |   |        |        |        |   |         |        |         |  |        |     |        |   |        |        |  |   |        |        |   |   |       |       |  |  |    |   
|                                | Total |   | $               | 51,170 |         |   | $      | 58,681 |        |   | $       | (7,511 | )       |  |        | (13 | %)     |   | $      | 58,681 |  |   | $      | 56,434 |   |   | $     | 2,247 |  |  |    | 4  | %
|                                |       |   |                 |        |         |   |        |        |        |   |         |        |         |  |        |     |        |   |        |        |  |   |        |        |   |   |       |       |  |  |    |   

Comparison of FY 2002 to FY 2001

Consolidated

The increase in revenue in FY 2002 from FY 2001 is primarily due to an
increase in both installation and service revenue from our Trading Systems
unit, which was partially offset by a decrease in both installation and service
revenue from our I.T.S. unit. As expected, the uncertainty of the financial
markets since the events of September 11th have caused consolidated revenues
for the second half of FY 2002 to be lower compared to the first
half of FY 2002. This uncertainty, combined with the overall
decline in the global economy, has caused our customers to extend their
planning and implementation cycles. While we expect this downward trend to
continue into the 2003 fiscal year, there can be no certainty as to the degree
or duration of this downturn. For the periods presented, no single customer
accounted for 10% or more of total revenues. We expect our fiscal
year 2003 revenues to be down 7-12% compared to FY 2002.

Trading Systems

The increase in product sales and installation revenue in FY 2002 from FY
2001 is primarily due to the completion of two large installation projects
totaling $26.1 million during FY 2002, while there were no installations of
comparable size completed in FY 2001. The increase in service revenue in FY
2002 from FY 2001 was primarily due to growth of the existing customer base and
the purchase of the Hitachi, Ltd. trading system service base outside of Japan.
This increase was partially offset by the loss of service revenue from several
trading floors as a result of the events of September 11th.

I.T.S.

The decrease in installation revenue in FY 2002 from FY 2001 is primarily
due to higher number of average-size jobs under $1.0 million completed in FY
2001, which generate less installation revenue than larger-size jobs.
We believe this was caused by the general decline in the construction,
real estate, and general contracting industries. The
revenue associated with these larger-size jobs was $13.2 million in FY 2002 compared to
$16.9 million in FY 2001. The decrease in service revenue in FY 2002 from FY 2001
is primarily due to a large customer merger in the financial industry in the
second half of FY 2001, which resulted in continued but lower service
requirements for that customer in FY 2002.

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##### Table of Contents



Comparison of FY 2001 to FY 2000

Consolidated

The increase in revenue in FY 2001 from FY 2000 is primarily due to an
increase in service revenue from our Trading Systems unit. Revenue from
installation projects remained flat in FY 2001 from FY 2000, with a decrease in
Trading Systems offsetting an increase in our I.T.S. unit for the period. For
the periods presented, no single customer accounted for 10% or more of total
revenues.

Trading Systems

The decrease in product sales and installation revenue in FY 2001 from FY
2000 is primarily due to a higher volume of large installation projects
completed in FY 2000 as compared to FY 2001. The increase in service revenue in
FY 2001 from FY 2000 is primarily due to the expansion of the customer base, as
well as the acquisition of two distributors in Australia and Singapore.

I.T.S.

The increase in revenue in FY 2001 from FY 2000 is primarily due to a
higher volume of large installation projects completed in FY 2001 as compared
to FY 2000. The decrease in service-related revenue is primarily due to a large
customer merger in the financial industry in the second half of FY 2001, which
resulted in continued but lower service requirements for that customer for the
remainder of FY 2001.

Cost of Revenue.

The following table sets forth our consolidated cost of revenue (excluding
depreciation and amortization) and our cost of revenue (excluding depreciation
and amortization) as reported for our two major operating units (including and
excluding the amortization of inventory step-up, which is an alternate presentation of
our cost of revenue which we believe is frequently used by securities
analysts, investors and other interested parties in
evaluating our cost of revenue).

|                                |       |              |                                               |         |                                               |         |      |      |   |        |         |         |      |      |    |         |   |      |    |        |      |   |         |         |  |  |      |    |   |   |        |         |  |  |    |    |   |  |    |    |  
|------------------------------- | ----- | ------------ | --------------------------------------------- | ------- | --------------------------------------------- | ------- | ---- | ---- | - | ------ | ------- | ------- | ---- | ---- | -- | ------- | - | ---- | -- | ------ | ---- | - | ------- | ------- |  |  | ---- | -- | - | - | ------ | ------- |  |  | -- | -- | - |  | -- | -- | -
|(dollars in thousands)          |       | Consolidated
|                                |       |             
|                                |       |              |                                               |         |                                               |         | % of |      |   |        |         |         | % of |      | %  |         |   |      |    |        | % of |   |         |         |  |  | % of |    | %
|COST OF REVENUE:                |       | FY 2002      |                                               | Rev.    |                                               | FY 2001 |      | Rev. |   | Change |         | FY 2002 |      | Rev. |    | FY 2001 |   | Rev. |    | Change
|                                |       |              |                                               |         |                                               |         |      |      |   |        |         |         |      |      |    |         |   |      |    |       
|                                |       |              | (including amortization of inventory step-up) |         | (excluding amortization of inventory step-up)
|Product sales and installations |       | $            | 138,474                                       |         |                                               |         | 72   | %    |   | $      | 106,252 |         |      |      | 59 | %       |   |      | 13 | %      |      | $ | 104,979 |         |  |  | 55   | %  |   | $ | 95,574 |         |  |  | 53 | %  |   |  | 2  | % 
|Service                         |       |              | 55,481                                        |         |                                               |         | 56   | %    |   |        | 58,349  |         |      |      | 59 | %       |   |      | (3 | %)     |      |   | 54,675  |         |  |  | 55   | %  |   |   | 58,349 |         |  |  | 59 | %  |   |  | (4 | %)
|                                |       |              |                                               |         |                                               |         |      |      |   |        |         |         |      |      |    |         |   |      |    |        |      |   |         |         |  |  |      |    |   |   |        |         |  |  |    |    |   |  |    |   
|                                | Total |              | $                                             | 193,955 |                                               |         |      | 67   | % |        | $       | 164,601 |      |      |    | 59      | % |      |    | 8      | %    |   | $       | 159,654 |  |  |      | 55 | % |   | $      | 153,923 |  |  |    | 55 | % |  |    | 0  | %
|                                |       |              |                                               |         |                                               |         |      |      |   |        |         |         |      |      |    |         |   |      |    |        |      |   |         |         |  |  |      |    |   |   |        |         |  |  |    |    |   |  |    |   

|                                |       |         |                                               |         |                                               |         |      |      |   |        |        |         |      |      |    |         |   |      |    |        |      |   |        |         |  |  |      |    |   |   |        |         |  |  |    |    |   |  |    |    |  
|------------------------------- | ----- | ------- | --------------------------------------------- | ------- | --------------------------------------------- | ------- | ---- | ---- | - | ------ | ------ | ------- | ---- | ---- | -- | ------- | - | ---- | -- | ------ | ---- | - | ------ | ------- |  |  | ---- | -- | - | - | ------ | ------- |  |  | -- | -- | - |  | -- | -- | -
|                                |       |         | Trading Systems Division                     
|                                |       |         |                                              
|                                |       |         |                                               |         |                                               |         | % of |      |   |        |        |         | % of |      | %  |         |   |      |    |        | % of |   |        |         |  |  | % of |    | %
|COST OF REVENUE:                |       | FY 2002 |                                               | Rev.    |                                               | FY 2001 |      | Rev. |   | Change |        | FY 2002 |      | Rev. |    | FY 2001 |   | Rev. |    | Change
|                                |       |         |                                               |         |                                               |         |      |      |   |        |        |         |      |      |    |         |   |      |    |       
|                                |       |         | (including amortization of inventory step-up) |         | (excluding amortization of inventory step-up)
|Product sales and installations |       | $       | 104,452                                       |         |                                               |         | 68   | %    |   | $      | 70,018 |         |      |      | 51 | %       |   |      | 17 | %      |      | $ | 72,193 |         |  |  | 47   | %  |   | $ | 60,352 |         |  |  | 44 | %  |   |  | 3  | % 
|Service                         |       |         | 43,193                                        |         |                                               |         | 50   | %    |   |        | 44,607 |         |      |      | 54 | %       |   |      | (4 | %)     |      |   | 42,453 |         |  |  | 50   | %  |   |   | 44,607 |         |  |  | 54 | %  |   |  | (4 | %)
|                                |       |         |                                               |         |                                               |         |      |      |   |        |        |         |      |      |    |         |   |      |    |        |      |   |        |         |  |  |      |    |   |   |        |         |  |  |    |    |   |  |    |   
|                                | Total |         | $                                             | 147,645 |                                               |         |      | 61   | % |        | $      | 114,625 |      |      |    | 52      | % |      |    | 9      | %    |   | $      | 114,646 |  |  |      | 48 | % |   | $      | 104,959 |  |  |    | 47 | % |  |    | 1  | %
|                                |       |         |                                               |         |                                               |         |      |      |   |        |        |         |      |      |    |         |   |      |    |        |      |   |        |         |  |  |      |    |   |   |        |         |  |  |    |    |   |  |    |   

|                                |       |         |                                               |        |                                               |         |      |      |   |        |        |         |      |      |    |         |   |      |   |        |      |   |        |        |  |  |      |    |   |   |        |        |  |  |    |    |   |  |   |   |  
|------------------------------- | ----- | ------- | --------------------------------------------- | ------ | --------------------------------------------- | ------- | ---- | ---- | - | ------ | ------ | ------- | ---- | ---- | -- | ------- | - | ---- | - | ------ | ---- | - | ------ | ------ |  |  | ---- | -- | - | - | ------ | ------ |  |  | -- | -- | - |  | - | - | -
|                                |       |         | I.T.S. Division                              
|                                |       |         |                                              
|                                |       |         |                                               |        |                                               |         | % of |      |   |        |        |         | % of |      | %  |         |   |      |   |        | % of |   |        |        |  |  | % of |    | %
|COST OF REVENUE:                |       | FY 2002 |                                               | Rev.   |                                               | FY 2001 |      | Rev. |   | Change |        | FY 2002 |      | Rev. |    | FY 2001 |   | Rev. |   | Change
|                                |       |         |                                               |        |                                               |         |      |      |   |        |        |         |      |      |    |         |   |      |   |       
|                                |       |         | (including amortization of inventory step-up) |        | (excluding amortization of inventory step-up)
|Product sales and installations |       | $       | 34,022                                        |        |                                               |         | 91   | %    |   | $      | 36,234 |         |      |      | 84 | %       |   |      | 7 | %      |      | $ | 32,786 |        |  |  | 88   | %  |   | $ | 35,222 |        |  |  | 82 | %  |   |  | 6 | %
|Service                         |       |         | 12,288                                        |        |                                               |         | 90   | %    |   |        | 13,742 |         |      |      | 88 | %       |   |      | 2 | %      |      |   | 12,222 |        |  |  | 89   | %  |   |   | 13,742 |        |  |  | 88 | %  |   |  | 1 | %
|                                |       |         |                                               |        |                                               |         |      |      |   |        |        |         |      |      |    |         |   |      |   |        |      |   |        |        |  |  |      |    |   |   |        |        |  |  |    |    |   |  |   |  
|                                | Total |         | $                                             | 46,310 |                                               |         |      | 91   | % |        | $      | 49,976  |      |      |    | 85      | % |      |   | 6      | %    |   | $      | 45,008 |  |  |      | 88 | % |   | $      | 48,964 |  |  |    | 83 | % |  |   | 5 | %
|                                |       |         |                                               |        |                                               |         |      |      |   |        |        |         |      |      |    |         |   |      |   |        |      |   |        |        |  |  |      |    |   |   |        |        |  |  |    |    |   |  |   |  

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##### Table of Contents



|                                |       |              |                                               |         |                                               |         |      |      |   |        |         |         |      |      |    |         |   |      |     |        |      |   |        |         |  |  |      |    |   |   |         |         |  |  |    |    |   |  |    |    |   
|------------------------------- | ----- | ------------ | --------------------------------------------- | ------- | --------------------------------------------- | ------- | ---- | ---- | - | ------ | ------- | ------- | ---- | ---- | -- | ------- | - | ---- | --- | ------ | ---- | - | ------ | ------- |  |  | ---- | -- | - | - | ------- | ------- |  |  | -- | -- | - |  | -- | -- | --
|(dollars in thousands)          |       | Consolidated
|                                |       |             
|                                |       |              |                                               |         |                                               |         | % of |      |   |        |         |         | % of |      | %  |         |   |      |     |        | % of |   |        |         |  |  | % of |    | %
|COST OF REVENUE:                |       | FY 2001      |                                               | Rev.    |                                               | FY 2000 |      | Rev. |   | Change |         | FY 2001 |      | Rev. |    | FY 2000 |   | Rev. |     | Change
|                                |       |              |                                               |         |                                               |         |      |      |   |        |         |         |      |      |    |         |   |      |     |       
|                                |       |              | (including amortization of inventory step-up) |         | (excluding amortization of inventory step-up)
|Product sales and installations |       | $            | 106,252                                       |         |                                               |         | 59   | %    |   | $      | 127,335 |         |      |      | 70 | %       |   |      | (11 | %)     |      | $ | 95,574 |         |  |  | 53   | %  |   | $ | 104,333 |         |  |  | 57 | %  |   |  | (4 | %)
|Service                         |       |              | 58,349                                        |         |                                               |         | 59   | %    |   |        | 54,961  |         |      |      | 57 | %       |   |      | 2   | %      |      |   | 58,349 |         |  |  | 59   | %  |   |   | 53,047  |         |  |  | 55 | %  |   |  | 4  | % 
|                                |       |              |                                               |         |                                               |         |      |      |   |        |         |         |      |      |    |         |   |      |     |        |      |   |        |         |  |  |      |    |   |   |         |         |  |  |    |    |   |  |    |   
|                                | Total |              | $                                             | 164,601 |                                               |         |      | 59   | % |        | $       | 182,296 |      |      |    | 66      | % |      |     | (7     | %)   |   | $      | 153,923 |  |  |      | 55 | % |   | $       | 157,380 |  |  |    | 57 | % |  |    | (2 | %)
|                                |       |              |                                               |         |                                               |         |      |      |   |        |         |         |      |      |    |         |   |      |     |        |      |   |        |         |  |  |      |    |   |   |         |         |  |  |    |    |   |  |    |   

|                                |       |         |                                               |         |                                               |         |      |      |   |        |        |         |      |      |    |         |   |      |     |        |      |   |        |         |  |  |      |    |   |   |        |         |  |  |    |    |   |  |    |    |   
|------------------------------- | ----- | ------- | --------------------------------------------- | ------- | --------------------------------------------- | ------- | ---- | ---- | - | ------ | ------ | ------- | ---- | ---- | -- | ------- | - | ---- | --- | ------ | ---- | - | ------ | ------- |  |  | ---- | -- | - | - | ------ | ------- |  |  | -- | -- | - |  | -- | -- | --
|                                |       |         | Trading Systems Division                     
|                                |       |         |                                              
|                                |       |         |                                               |         |                                               |         | % of |      |   |        |        |         | % of |      | %  |         |   |      |     |        | % of |   |        |         |  |  | % of |    | %
|COST OF REVENUE:                |       | FY 2001 |                                               | Rev.    |                                               | FY 2000 |      | Rev. |   | Change |        | FY 2001 |      | Rev. |    | FY 2000 |   | Rev. |     | Change
|                                |       |         |                                               |         |                                               |         |      |      |   |        |        |         |      |      |    |         |   |      |     |       
|                                |       |         | (including amortization of inventory step-up) |         | (excluding amortization of inventory step-up)
|Product sales and installations |       | $       | 70,018                                        |         |                                               |         | 51   | %    |   | $      | 90,001 |         |      |      | 64 | %       |   |      | (13 | %)     |      | $ | 60,352 |         |  |  | 44   | %  |   | $ | 69,369 |         |  |  | 49 | %  |   |  | (5 | %)
|Service                         |       |         | 44,607                                        |         |                                               |         | 54   | %    |   |        | 42,418 |         |      |      | 53 | %       |   |      | 1   | %      |      |   | 44,607 |         |  |  | 54   | %  |   |   | 40,719 |         |  |  | 51 | %  |   |  | 3  | % 
|                                |       |         |                                               |         |                                               |         |      |      |   |        |        |         |      |      |    |         |   |      |     |        |      |   |        |         |  |  |      |    |   |   |        |         |  |  |    |    |   |  |    |   
|                                | Total |         | $                                             | 114,625 |                                               |         |      | 52   | % |        | $      | 132,419 |      |      |    | 60      | % |      |     | (8     | %)   |   | $      | 104,959 |  |  |      | 47 | % |   | $      | 110,088 |  |  |    | 50 | % |  |    | (3 | %)
|                                |       |         |                                               |         |                                               |         |      |      |   |        |        |         |      |      |    |         |   |      |     |        |      |   |        |         |  |  |      |    |   |   |        |         |  |  |    |    |   |  |    |   

|                                |       |         |                                               |        |                                               |         |      |      |   |        |        |         |      |      |    |         |   |      |    |        |      |   |        |        |  |  |      |    |   |   |        |        |  |  |    |    |   |  |    |    |   
|------------------------------- | ----- | ------- | --------------------------------------------- | ------ | --------------------------------------------- | ------- | ---- | ---- | - | ------ | ------ | ------- | ---- | ---- | -- | ------- | - | ---- | -- | ------ | ---- | - | ------ | ------ |  |  | ---- | -- | - | - | ------ | ------ |  |  | -- | -- | - |  | -- | -- | --
|                                |       |         | I.T.S. Division                              
|                                |       |         |                                              
|                                |       |         |                                               |        |                                               |         | % of |      |   |        |        |         | % of |      | %  |         |   |      |    |        | % of |   |        |        |  |  | % of |    | %
|COST OF REVENUE:                |       | FY 2001 |                                               | Rev.   |                                               | FY 2000 |      | Rev. |   | Change |        | FY 2001 |      | Rev. |    | FY 2000 |   | Rev. |    | Change
|                                |       |         |                                               |        |                                               |         |      |      |   |        |        |         |      |      |    |         |   |      |    |       
|                                |       |         | (including amortization of inventory step-up) |        | (excluding amortization of inventory step-up)
|Product sales and installations |       | $       | 36,234                                        |        |                                               |         | 84   | %    |   | $      | 37,334 |         |      |      | 93 | %       |   |      | (9 | %)     |      | $ | 35,222 |        |  |  | 82   | %  |   | $ | 34,964 |        |  |  | 87 | %  |   |  | (5 | %)
|Service                         |       |         | 13,742                                        |        |                                               |         | 88   | %    |   |        | 12,543 |         |      |      | 78 | %       |   |      | 10 | %      |      |   | 13,742 |        |  |  | 88   | %  |   |   | 12,328 |        |  |  | 76 | %  |   |  | 12 | % 
|                                |       |         |                                               |        |                                               |         |      |      |   |        |        |         |      |      |    |         |   |      |    |        |      |   |        |        |  |  |      |    |   |   |        |        |  |  |    |    |   |  |    |   
|                                | Total |         | $                                             | 49,976 |                                               |         |      | 85   | % |        | $      | 49,877  |      |      |    | 88      | % |      |    | (3     | %)   |   | $      | 48,964 |  |  |      | 83 | % |   | $      | 47,292 |  |  |    | 84 | % |  |    | (1 | %)
|                                |       |         |                                               |        |                                               |         |      |      |   |        |        |         |      |      |    |         |   |      |    |        |      |   |        |        |  |  |      |    |   |   |        |        |  |  |    |    |   |  |    |   

Comparison of FY 2002 to FY 2001

Consolidated

Cost of revenue for FY 2002 includes a charge resulting from the
amortization of the step-up in inventory of $34.3 million (relating to the IPC
Acquisition in December 2001) and cost of revenue for FY 2001 reflects a charge
of $10.7 million (relating to the June 2000 acquisition of IPC Information
Systems, Inc. by Global Crossing). This purchase accounting inventory fair
value step-up is a non-cash GAAP adjustment that is recorded when a company
is acquired as we have been in the two respective years.

The increase in product sales and installation cost of revenue (excluding
the inventory step-up, depreciation and amortization) as a percentage of
revenue in FY 2002 from FY 2001 is primarily due to lower margins realized from
sales of the IQMX, as well as lower margins realized on large installations in
both the Trading Systems and I.T.S. operating units. The lower margins for the
IQMXare typical with the introduction of a new voice trading system. The
decrease in service cost of revenue (excluding the inventory step-up,
depreciation and amortization) as a percentage of revenue in FY 2002 from FY
2001 is primarily due to the sale of services by our Trading Systems unit,
which have higher margins and comprise a larger percentage of total service
revenue for FY 2002. We expect our consolidated fiscal year 2003
gross margins to reflect a decline of 2-3 percentage points due
to pricing pressures and volume decreases.

Trading Systems

The increase in product sales and installation cost of revenue (excluding
the inventory step-up, depreciation and amortization) as a percentage of
revenue in FY 2002 from FY 2001 is primarily due to the lower margins attained
from sales of the IQMX. The lower margins for the
IQMX are typical with the
introduction of a new voice trading system. In addition, our largest
installation in FY 2002 included the installation of the
IQMX, which was sold
to a global customer at a higher than normal discount. We anticipate margins
will increase in the 2003 fiscal year as the IQMX is accepted in the
marketplace and the manufacturing process becomes more cost efficient. The
decrease in service cost of revenue (excluding the inventory step-up,
depreciation and amortization) as a percentage of revenue in FY 2002 from FY
2001 is primarily due to an increase in maintenance revenue, which have higher
margins than MAC revenue.

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I.T.S.

The increase in product sales and installation cost of revenue (excluding
the inventory step-up, depreciation and amortization) as a percentage of
revenue in FY 2002 from FY 2001 is primarily due to lower margins associated
with certain large installations in FY 2002. These lower margins in FY 2002 are
mainly due to pricing pressures resulting from the decline in current market
conditions. The slight increase in service cost of revenue (excluding the
inventory step-up, depreciation and amortization) as a percentage of revenue
in FY 2002 from FY 2001 is primarily due to the loss of high margin revenue
from one customer that was principally offset by higher margins realized from
disaster recovery work in FY 2002.

Comparison of FY 2001 to FY 2000

Consolidated

Cost of revenue for FY 2001 and FY 2000 includes a charge resulting from
the amortization of the step-up in inventory of $10.7 million and $24.9
million, respectively (relating to the June 2000 acquisition of IPC Information
Systems, Inc. by Global Crossing). This purchase accounting inventory fair
value step-up is a non-cash GAAP adjustment that is recorded when a company
is acquired as we had been in FY 2000.

The decrease in product sales and installation cost of revenue (excluding
the inventory step-up, depreciation and amortization) as a percentage of
revenue in FY 2001 from FY 2000 is primarily due to higher margins realized in
both the Trading Systems and I.T.S. operating units. The increase in service
cost of revenue (excluding the inventory step-up, depreciation and
amortization) as a percentage of revenue in FY 2001 from FY 2000 is primarily
due to lower margins realized in both the Trading Systems and I.T.S. operating
units.

Trading Systems

The decrease in product sales and installation cost of revenue (excluding
the inventory step-up, depreciation and amortization) as a percentage of
revenue in FY 2001 from FY 2000 is primarily due to the sale in FY 2001 of
various products that sell at higher margins. The increase in service cost of
revenue (excluding the inventory step-up, depreciation and amortization) as a
percentage of revenue in FY 2001 from FY 2000 is primarily due to the growth in
service revenue in the European and Asia Pacific regions in FY 2001. The
customers in these regions are primarily serviced by subcontractors, who
generally have higher costs than Company-supplied direct labor.

I.T.S.

The decrease in installation cost of revenue (excluding the inventory
step-up, depreciation and amortization) as a percentage of revenue in FY 2001
from FY 2000 is primarily due to higher margins associated with the larger
sized installations that made up a higher percentage of revenue in FY 2001. The
increase in service cost of revenue (excluding the inventory step-up,
depreciation and amortization) as a percentage of revenue in FY 2001 from FY
2000 is primarily due to the loss of high margin revenue from one customer.

Research and Development Expense.

|                         |  |              |         |  |  |   |         |  |  |   |        |   |  |  |        |   |  |   |         |  |  |   |         |   |  |   |        |  |  |        |   |  | 
|------------------------ |  | ------------ | ------- |  |  | - | ------- |  |  | - | ------ | - |  |  | ------ | - |  | - | ------- |  |  | - | ------- | - |  | - | ------ |  |  | ------ | - |  | 
|(dollars in thousands)   |  | Consolidated
|                         |  |             
|                         |  |              |         |  |  |   |         |  |  | $ |        | % |  |  |        |   |  |   |         |  |  | $ |         | % | 
|                         |  |              | FY 2002 |  |  |   | FY 2001 |  |  |   | Change |   |  |  | Change |   |  |   | FY 2001 |  |  |   | FY 2000 |   |  |   | Change |  |  | Change |   |  | 
|                         |  |              |         |  |  |   |         |  |  |   |        |   |  |  |        |   |  |   |         |  |  |   |         |   |  |   |        |  |  |        |  
|Research and development |  | $            | 15,136  |  |  | $ | 15,502  |  |  | $ | (366   | ) |  |  | (2%    | ) |  | $ | 15,502  |  |  | $ | 12,878  |   |  | $ | 2,624  |  |  | 20     | %

Research and development efforts are focused on the next generation of
Trading Systems products, applications, and enhancements of our current product
lines. Our investments in research and development on a year to year basis
reflected above are substantially the same from period to period. We expect to
adjust our research and development expenditures downward by 20% or more in the
future in an effort to reduce fixed costs.

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Comparison of FY 2002 to FY 2001

Research and development expenses decreased slightly in FY 2002 from FY
2001 due primarily to our effort to reduce fixed costs.

Comparison of FY 2001 to FY 2000

The increase in research and development expense in FY 2001 from FY 2000
was primarily due to our efforts to expand our CTI product offerings and
develop software products for the application modules that are sold with our
IQMX turret systems.

Selling, General and Administrative Expense.

|                                            |  |              |        |         |  |        |        |        |  |         |        |         |  |        |    |        |  |   |        |  |  |   |        |   |  |   |        |   |  |  |     |   
|------------------------------------------- |  | ------------ | ------ | ------- |  | ------ | ------ | ------ |  | ------- | ------ | ------- |  | ------ | -- | ------ |  | - | ------ |  |  | - | ------ | - |  | - | ------ | - |  |  | --- | --
|(dollars in thousands)                      |  | Consolidated
|                                            |  |             
|                                            |  |              |        |         |  |        |        |        |  | $       |        | %       |  |        |    |        |  |   |        |  |  | $ |        | %
|                                            |  | FY 2002      |        | FY 2001 |  | Change |        | Change |  | FY 2001 |        | FY 2000 |  | Change |    | Change
|                                            |  |              |        |         |  |        |        |        |  |         |        |         |  |        |    |       
|Selling, general and administrative expense |  | $            | 51,686 |         |  | $      | 33,541 |        |  | $       | 18,145 |         |  |        | 54 | %      |  | $ | 33,541 |  |  | $ | 41,682 |   |  | $ | (8,141 | ) |  |  | (20 | %)

Comparison of FY 2002 to FY 2001

Selling, general and administrative expenses increased in FY 2002 from FY
2001 primarily due to the inclusion of additional expenses in FY 2002 that were
necessary for us to operate as a stand alone entity. Also, the increase in FY
2002 reflects the inclusion of $2.5 million of employee bonuses related to the
IPC Acquisition and a $6.9 million charge for corporate related services from
Global Crossing in FY 2002, compared to only a $1.9 million charge for
corporate related services from Global Crossing in FY 2001. We have completed a
work force reduction to address our expectation for a reduction in revenue in
fiscal year 2003. We expect our selling, general and administrative expenses in
fiscal year 2003 to reflect a 25% reduction from FY 2002 primarily due to the
exclusion of the intercompany charges we received in the past from Global
Crossing, a reduction in our workforce and the elimination of other
discretionary spending.

Comparison of FY 2001 to FY 2000

Selling, general and administrative expenses decreased in FY 2001 from FY
2000 primarily due to a non-recurring merger related charge of $4.8 million in
FY 2000 relating to the acquisition of IPC Information Systems, Inc. by Global
Crossing in June 2000, as well as a reduction in general and administrative
expenses in FY 2001 resulting from the integration of various corporate
functions with Global Crossing.

Depreciation and Amortization.

|                              |  |              |        |         |  |        |        |        |  |         |         |         |  |        |     |        |  |   |        |  |  |   |        |   |  |   |        |  |  |  |     |  
|----------------------------- |  | ------------ | ------ | ------- |  | ------ | ------ | ------ |  | ------- | ------- | ------- |  | ------ | --- | ------ |  | - | ------ |  |  | - | ------ | - |  | - | ------ |  |  |  | --- | -
|(dollars in thousands)        |  | Consolidated
|                              |  |             
|                              |  |              |        |         |  |        |        |        |  | $       |         | %       |  |        |     |        |  |   |        |  |  | $ |        | %
|                              |  | FY 2002      |        | FY 2001 |  | Change |        | Change |  | FY 2001 |         | FY 2000 |  | Change |     | Change
|                              |  |              |        |         |  |        |        |        |  |         |         |         |  |        |     |       
|Depreciation and amortization |  | $            | 25,802 |         |  | $      | 48,635 |        |  | $       | (22,833 | )       |  |        | (47 | %)     |  | $ | 48,635 |  |  | $ | 21,086 |   |  | $ | 27,549 |  |  |  | 131 | %

Comparison of FY 2002 to FY 2001

The decrease in depreciation and amortization in FY 2002 from FY 2001 is
primarily due to the adoption in FY 2002 of Statement of Financial Accounting
Standards No. 142 Goodwill and Other Intangible Assets, in which
goodwill and indefinite lived intangible assets are no longer subject to
periodic amortization, as well as a change in the carrying amount of
amortizable intangible assets resulting from the IPC Acquisition.

Comparison of FY 2001 to FY 2000

The increase in depreciation and amortization in FY 2001 from FY 2000 is
primarily due to an increase in the carrying amount of amortizable intangible
assets relating to Global Crossings acquisition of IPC Information Systems,
Inc. in June 2000.

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Interest Expense, net.

|                       |  |              |        |         |  |        |        |        |  |         |      |         |  |        |    |        |  |   |        |  |  |   |        |   |  |   |       |  |  |  |    |  
|---------------------- |  | ------------ | ------ | ------- |  | ------ | ------ | ------ |  | ------- | ---- | ------- |  | ------ | -- | ------ |  | - | ------ |  |  | - | ------ | - |  | - | ----- |  |  |  | -- | -
|(dollars in thousands) |  | Consolidated
|                       |  |             
|                       |  |              |        |         |  |        |        |        |  | $       |      | %       |  |        |    |        |  |   |        |  |  | $ |        | %
|                       |  | FY 2002      |        | FY 2001 |  | Change |        | Change |  | FY 2001 |      | FY 2000 |  | Change |    | Change
|                       |  |              |        |         |  |        |        |        |  |         |      |         |  |        |    |       
|Interest expense, net  |  | $            | 27,520 |         |  | $      | 27,871 |        |  | $       | (351 | )       |  |        | (1 | %)     |  | $ | 27,871 |  |  | $ | 21,828 |   |  | $ | 6,043 |  |  |  | 28 | %

Comparison of FY 2002 to FY 2001

Interest expense, net in FY 2002 remained relatively flat as compared to
FY 2001. Interest expense, net in FY 2002 is primarily related to interest on
our outstanding senior subordinated notes and indebtedness under our senior
secured credit facilities. Interest expense, net in FY 2001 is primarily
related to interest charged by Global Crossing for cash funding of
our operations.

Comparison of FY 2001 to FY 2000

The increase in interest expense, net in FY 2001 from FY 2000 is primarily
due to the interest that was charged by Global Crossing in FY 2001 for
intercompany borrowings following its acquisition of IPC Information Systems,
Inc., relating to the extinguishment of our 107/8% Senior Discount Notes due
2008 and previous revolving credit facility and the cash funding of our
operations.

Provision for Income Taxes.

Our effective tax rate for FY 2002, FY 2001 and FY 2000 was 11.4%, (52.3)%
and (29.6)%, respectively. The comparability of these periods is significantly
impacted by the IPC Acquisition in FY 2002 and Global Crossings acquisition of
IPC Information Systems, Inc. in FY 2000 and reflects the tax impact of
purchase accounting as well as the jurisdictions in which our income is
generated.

Liquidity and Capital Resources

For
fiscal years 2002, 2001 and 2000, we satisfied our operating cash
requirements through cash provided by operations, capital loans, financing,
intercompany financing from Global Crossing in FY 2001 and FY 2000 and bank
lines of credit. Our principal uses of cash were to fund working capital
requirements, operating losses, capital expenditures and repayment of
borrowings. Non-operating cash requirements relating to the transfer of ownership
of us in FY 2002 and FY 2000 are detailed below.

Comparison of FY 2002 to FY 2001

Cash provided by operating activities was $47.8 million for FY 2002 as
compared to $33.3 million for FY 2001. This increase of $14.5 million reflects
improvements to our working capital position, including a reduction of accounts
receivable through improved collections and reduced inventory levels due to the
completion of certain large jobs.

Cash used in investing activities in FY 2002 of $354.2 million reflects
$345.8 million used for the IPC Acquisition and $8.4 million of capital
expenditures. Cash used in investing activities in FY 2001 of $9.4 million
related exclusively to capital expenditures.

Cash provided by financing activities was $328.4 million for FY 2002 as
compared to $23.4 million for FY 2001. This increase of $305.0 million was
primarily due to the financing activity resulting from the IPC Acquisition.
Cash inflows in FY 2002 included $140 million of common equity contribution
from a group including 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 Acquisition, $3.9 million of principal repayment
under the amortization schedule in our senior secured credit facilities and an
excess cash flow repayment of $30 million required under our credit agreement.
Cash inflows in FY 2001 related primarily to proceeds from intercompany
borrowings from our former parent.

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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 $0.5 million for FY 2002 as
compared to an increase of $0.9 million for FY 2001.

Comparison of FY 2001 to FY 2000

Cash provided by operating activities was $33.3 million in FY 2001 as
compared to $70.0 million in FY 2000. Cash provided by operating activities in
FY 2001 is primarily due to $20.8 million of customer advances and collections
on jobs not yet completed, which was partially offset by cash outflows of $18.9
million relating to accounts payable and other accrued expenses.
Cash provided by operating activities in FY 2001 also included net income,
after adding back non-cash charges, of $23.4 million, which was primarily
related to the amortization of goodwill and intangible assets, as well as net
decreases of various other assets net of liabilities. Cash from operating
activities in FY 2000 was primarily due to a reduction in inventory of $22.1
million due to job completions, and a reduction in various other assets and
liabilities of $33.0 million, which was partially offset by an increase in
accounts receivable of $16.0 million. Cash provided by operating activities in
FY 2000 also included net income of $30.9 million after adding back $44.5
million of non-cash charges. These non-cash charges primarily related to the
extinguishment of our
107/8% Senior Discount Notes due 2008 and repayments of
our previous revolving credit facility.

Cash
used in investing activities was $9.4 million in FY 2001 as compared
to $3.8 million in FY 2000. Cash used in investing activities for both years
related exclusively to capital expenditures used to fund our research and
development efforts and the purchase of advanced machinery and equipment in our
manufacturing facility.

Cash used in financing activities was $23.4 million in FY 2001 as compared
to $63.3 million in FY 2000. FY 2001 financing activity consisted almost
exclusively of repayments of borrowings to Global Crossing. FY 2000 financing
activity consisted of cash used to payoff our 107/8% Senior Discount Notes due
2008 and repayments of our previous revolving credit facility. The remaining
financing activity in FY 2000 related to net proceeds from funding by Global
Crossing for daily operations.



We expect that our capital expenditures for fiscal year 2003 will be
approximately $6.0 million. We expect that capital expenditures will be
comparable in the next few years. We have no off balance sheet arrangements or
other relationships with unconsolidated affiliates.

Our primary future uses of cash will be to fund interest expense and
principal repayments on our debt, capital expenditures, research and
development efforts and working capital as needed for potential strategic
acquisitions and/or alliances. Our primary future sources of cash will be cash
flows from operations and, if necessary, borrowings under the revolving credit
facility. At September 30, 2002, we had $25.3 million of unrestricted cash and
$7.3 million of restricted cash remaining from the $20.8 million deferred
purchase obligation to Global Crossing. The restricted cash balance relates to
the deferred purchase obligation under the purchase agreement. While we
structured the purchase agreement so that we retain ownership of the deposited
funds, there can be no assurance that a contrary position will not be taken in
Global Crossings bankruptcy case. Through September 30, 2002, we have paid
approximately $13.5 million of the contingent liabilities related to the
deferred purchase obligation from the IPC Acquisition. Additionally, we had
liquidity available to us of $10.7 million through our $15 million revolving
credit facility under our senior secured credit facilities under which there
were no amounts outstanding at September 30, 2002 ($15 million revolving credit
facility reduced by outstanding letters of credit of $4.3 million at September
30, 2002).

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.

We believe 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.

Additionally, certain tax returns for periods prior
to and including the IPC Acquisition are not yet due and still must
be filed by Global Crossing pursuant to the purchase agreement.
Global Crossing has informed us that as a result of its rejection of
the purchase agreement, it may not include IPC Information Systems
and its subsidiaries in such tax returns. In our objection to Global
Crossings rejection of the purchase agreement, we have
requested the bankruptcy court to uphold the purchase agreement and,
in any event, to order Global Crossing to include IPC Information
Systems and its subsidiaries in such tax returns even if the
rejection of the purchase agreement is permitted. It is possible,
however, that the bankruptcy court will not grant our request. We
believe that Global Crossing is contractually required to include IPC
Information Systems and its subsidiaries in such tax returns, and
further believe that Global Crossing does not have any legal basis to
exclude IPC Information Systems and its subsidiaries from these tax
returns. If, however, Global Crossing does not include IPC
Information Systems and its subsidiaries in such tax returns and IPC
Information Systems and its subsidiaries are required to separately
file these tax returns and pay any pre-IPC Acquisition tax
liabilities, such liabilities, which we estimate to be in the range
of $0 to $36 million, could have a material adverse effect on
our financial condition and results of operations, including
requiring us to seek financing to pay any additional pre-IPC
Acquisition tax liabilities.

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Contractual Obligations and Other Commercial Commitments

The following summarizes our contractual obligations at September 30,
2002, and the effect such obligations are expected to have on our liquidity and
cash flow in future periods.

|                                 |                                    |                        |         |         |  |       |           |        |     |       |        |        |         |   |        |        |  |   |         |         | 
|-------------------------------- | ---------------------------------- | ---------------------- | ------- | ------- |  | ----- | --------- | ------ | --- | ----- | ------ | ------ | ------- | - | ------ | ------ |  | - | ------- | ------- | 
|(in thousands)                   |                                    | Payments Due by Period
|                                 |                                    |                       
|                                 |                                    |                        |         |         |  |       | Less than |        | 1-3 |       | 4-5    |        | After 5
|Contractual
Obligations:         |                                    | Total                  |         | 1 year  |  | years |           | years  |     | years
|                                 |                                    |                        |         |         |  |       |           |        |     |       |        |        |         |   |        |        |  |   |         |        
|Deferred Compensation Agreements |                                    | $                      | 5,603   |         |  | $     | 633       |        |     | $     | 970    |        |         | $ | 1,011  |        |  | $ | 2,989   |        
|Long-term debt                   |                                    |                        | 221,062 |         |  |       | 6,460     |        |     |       | 14,766 |        |         |   | 49,836 |        |  |   | 150,000 |        
|Operating Leases                 |                                    |                        | 27,426  |         |  |       | 5,072     |        |     |       | 8,050  |        |         |   | 6,302  |        |  |   | 8,002   |        
|                                 |                                    |                        |         |         |  |       |           |        |     |       |        |        |         |   |        |        |  |   |         |        
|                                 | Total Contractual Cash Obligations |                        | $       | 254,091 |  |       | $         | 12,165 |     |       | $      | 23,786 |         |   | $      | 57,149 |  |   | $       | 160,991 | 
|                                 |                                    |                        |         |         |  |       |           |        |     |       |        |        |         |   |        |        |  |   |         |        

|                                          |                              |           |                                            |        |           |       |       |       |     |       |        |       |  |   |   |   |  |   |   |   | 
|----------------------------------------- | ---------------------------- | --------- | ------------------------------------------ | ------ | --------- | ----- | ----- | ----- | --- | ----- | ------ | ----- |  | - | - | - |  | - | - | - | 
|                                          |                              |           | Amount of Commitment Expiration Per Period
|                                          |                              |           |                                           
|                                          |                              |           | Total                                      |        |           |       |       |       |     |       |        |       |  |   |   |   |  |   |  
|                                          |                              |           | Amounts                                    |        | Less than |       | 1-3   |       | 4-5 |       | Over 5
|Other Commercial Commitments:             |                              | Committed |                                            | 1 year |           | years |       | years |     | years
|                                          |                              |           |                                            |        |           |       |       |       |     |       |        |       |  |   |   |   |  |   |   |  
|Line of Credit                            |                              | $         |                                           |        |           | $     |      |       |     | $     |       |       |  | $ |  |   |  | $ |  |  
|Standby Letters of Credit                 |                              |           | 4,250                                      |        |           |       | 4,250 |       |     |       |       |       |  |   |  |   |  |   |  |  
|Guaranties for Global Crossing Affiliates |                              |           | 7,625                                      |        |           |       | 3,850 |       |     |       | 3,775  |       |  |   |  |   |  |   |  |  
|                                          |                              |           |                                            |        |           |       |       |       |     |       |        |       |  |   |   |   |  |   |   |  
|                                          | Total Commercial Commitments |           | $                                          | 11,875 |           |       | $     | 8,100 |     |       | $      | 3,775 |  |   | $ |  |  |   | $ |  | 
|                                          |                              |           |                                            |        |           |       |       |       |     |       |        |       |  |   |   |   |  |   |   |  

Recent Accounting Pronouncements

In August 2001, the Financial Accounting Standards Board, or 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. Management does not believe the adoption of this standard will have a
material impact on our 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 No. 121, Accounting for Impairment of Long Lived
Assets and the accounting and reporting provisions of APB
Opinion No. 30,
Reporting the Results of OperationsReporting the Effects of Disposal of a
Segment of a Business, and Extraordinary and Unusual and Infrequently Occurring
Events and Transactions, for the disposal of a segment of a business (as
previously defined in that Opinion). This statement was adopted by us on
October 1, 2002. Management does not believe the adoption of this standard will
have a material impact on our 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 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.
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. Management does not believe the adoption of this standard will have a
material impact on our consolidated financial statements.

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

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initiated after December 31, 2002. Management does not believe the adoption of
this standard will have a material impact on our consolidated financial
statements.

Summary of Critical Accounting Policies

The discussion and analysis of our financial condition and results of
operations are based upon our 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 consolidated
financial statements.

Revenue Recognition

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

Inventories

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

Impairment of Long-Lived Assets

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

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 IPC Acquisition, we had filed a consolidated
federal tax return and separate and combined state tax returns with our parent.
For purposes of the accompanying combined financial statements for the period
October 1, 2001 to December 20, 2001, income taxes have been prepared in
accordance with SFAS 109 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. We are
now required to file separate tax returns.

Business Combinations

During the 2002 fiscal year, the IPC Acquisition required significant
estimates and judgments related to the fair value of assets acquired and
liabilities assumed. Certain of the liabilities are subjective in nature. These
liabilities have been reflected in

24



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##### Table of Contents



the purchase accounting based upon the most recent information available, and
principally include Federal and state payroll taxes, state sales taxes, state
income taxes, value added tax, or VAT, and income taxes in several
foreign countries. The ultimate settlement of such liabilities may be for
amounts which are different from the amounts presently recorded.

Other Matters

We do not have any off balance sheet financial arrangements.




Item 7A. Quantitative and Qualitative Disclosures 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.

As an international company, we are exposed to foreign currency risk. In
order to minimize the risk caused by currency fluctuations, we entered into two
foreign currency hedging contracts, commonly known as collars, in the third
quarter of the 2002 fiscal year with notional amounts of £4 million and £6
million, or approximately $6.3 million and $9.4 million,
respectively, assuming an exchange rate of  £1 to
$1.5715, and maturity dates of September 13, 2002 and September 18, 2002,
respectively. We used these collars to minimize exchange rate risk when
repatriating funds from our UK subsidiary. We repatriated these funds in
September 2002 in connection with our required bank debt repayments. The
currency hedged was the British Pound. Under Statement of Financial Accounting
Standards No.133, Accounting for Derivative Instruments and Hedging
Activities, we are required to recognize all derivatives as either assets or
liabilities in the consolidated statement of financial position and measure
those instruments at fair value. As of September 30, 2002, we
recognized a loss of $0.3 million as a component of other income and expense in
the consolidated statement of operations in connection with the settlement of
these collars. As of September 30, 2002, there was no foreign currency hedging
instruments or other derivatives outstanding.

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 market value of our long-term debt at
September 30, 2002 is shown in the table below. Due to current economic
conditions, the fair market 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 September 30, 2002, they did not affect the interest rate on our senior
secured credit facilities.

|                |               |                                                                          |  |               |       |                           |  |      |     |      |  |      |     |            |  |       |     |  |  |   |      |  |  |   |      |  |  |   |       |  |  |   |       | 
|--------------- | ------------- | ------------------------------------------------------------------------ |  | ------------- | ----- | ------------------------- |  | ---- | --- | ---- |  | ---- | --- | ---------- |  | ----- | --- |  |  | - | ---- |  |  | - | ---- |  |  | - | ----- |  |  | - | ----- | 
|                |               |                                                                          |  | Fair          |       |                           |  |      |     |      |  |      |     |            |  |       |     |  |  |   |      |  |  |   |      |  |  |   |       |  |  |  
|                |               |                                                                          |  | Value on      |       | Future Principal Payments
|                |               |                                                                          |  | September 30, |       |                          
|(in millions)   |               | 2002                                                                     |  | 2003          |       | 2004                      |  | 2005 |     | 2006 |  | 2007 |     | Thereafter |  | Total
|                |               |                                                                          |  |               |       |                           |  |      |     |      |  |      |     |            |  |      
|Long-Term Debt: |               |                                                                          |  |               |       |                           |  |      |     |      |  |      |     |            |  |       |     |  |  |   |      |  |  |   |      |  |  |   |       |  |  |  
|                | Fixed Rate    |                                                                          |  |               |       |                           |  |      |     |      |  |      |     |            |  |       |     |  |  |   |      |  |  |   |      |  |  |   |       |  |  |   |      
|                |               | Senior
Subordinated
Notes,
interest
payable
at
11.50%,
maturing
2009     |  | $             | 120.0 |                           |  | $    |    |      |  | $    |    |            |  | $     |    |  |  | $ |     |  |  | $ |     |  |  | $ | 150.0 |  |  | $ | 150.0 | 
|                |               |                                                                          |  |               |       |                           |  |      |     |      |  |      |     |            |  |       |     |  |  |   |      |  |  |   |      |  |  |   |       |  |  |  
|                | Variable Rate |                                                                          |  |               |       |                           |  |      |     |      |  |      |     |            |  |       |     |  |  |   |      |  |  |   |      |  |  |   |       |  |  |   |      
|                |               | Senior
Secured
Credit
Facilities Term
Loan
(7.50%
at
September 30,
2002) |  | $             | 67.5  |                           |  | $    | 6.5 |      |  | $    | 7.4 |            |  | $     | 7.4 |  |  | $ | 37.8 |  |  | $ | 12.0 |  |  | $ |      |  |  | $ | 71.1  | 
|                |               |                                                                          |  |               |       |                           |  |      |     |      |  |      |     |            |  |       |     |  |  |   |      |  |  |   |      |  |  |   |       |  |  |  

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Item 8. Financial Statements and Supplementary Data

The following consolidated financial statements and the related notes
thereto of IPC Acquisition Corp., the Report of Independent Auditors and
Reprinted Copy of the Report of Independent Public Accountants are filed as a
part of this Form 10-K.

|                                                                                                                                                                                                                                                                                                                                                        |  |      |    | 
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ---- | -- | 
|                                                                                                                                                                                                                                                                                                                                                        |  | Page
|                                                                                                                                                                                                                                                                                                                                                        |  |     
|Report of Independent Auditors                                                                                                                                                                                                                                                                                                                          |  |      | 27 | 
|                                                                                                                                                                                                                                                                                                                                                        |  |      |    | 
|Reprinted Copy of Report of Independent Public Accountants                                                                                                                                                                                                                                                                                              |  |      | 28 | 
|                                                                                                                                                                                                                                                                                                                                                        |  |      |    | 
|Consolidated Balance Sheets as of September 30, 2001, December 31, 2001 and September 30, 2002                                                                                                                                                                                                                                                          |  |      | 29 | 
|                                                                                                                                                                                                                                                                                                                                                        |  |      |    | 
|Consolidated Statements of Operations for the period from October 1, 1999 to June 14, 2000,
the period from June 15, 2000 to September 30, 2000, the fiscal year ended September 30,
2001, the period from October 1, 2001 to December 20, 2001, and the period from November 15,
2001 (date of initial capitalization) to September 30, 2002           |  |      | 30 | 
|                                                                                                                                                                                                                                                                                                                                                        |  |      |    | 
|Consolidated Statements of Cash Flows for the period from October 1, 1999 to June 14, 2000,
the period from June 15, 2000 to September 30, 2000, the fiscal year ended September 30,
2001, the period from October 1, 2001 to December 20, 2001, and the period from November 15,
2001 (date of initial capitalization) to September 30, 2002           |  |      | 31 | 
|                                                                                                                                                                                                                                                                                                                                                        |  |      |    | 
|Consolidated Statements of Stockholders Equity for the period from October 1, 1999 to June
14, 2000, the period from June 15, 2000 to September 30, 2000, the fiscal year ended
September 30, 2001, the period from October 1, 2001 to December 20, 2001, and the period from
November 15, 2001 (date of initial capitalization) to September 30, 2002 |  |      | 32 | 
|                                                                                                                                                                                                                                                                                                                                                        |  |      |    | 
|Notes to Consolidated Financial Statements                                                                                                                                                                                                                                                                                                              |  |      | 33 | 

26



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##### Table of Contents



IPC ACQUISITION CORP.

REPORT OF INDEPENDENT AUDITORS

The Board of Directors and Stockholders
IPC Acquisition Corp.

We have audited the accompanying consolidated balance sheet of IPC
Acquisition Corp. as of December 31, 2001 and September 30, 2002, and the
related consolidated statements of operations, stockholders equity and cash
flows for the period from November 15, 2001 (date of initial capitalization) to
September 30, 2002 and the combined statements of operations, cash flows and
stockholders equity of IPC Information Systems, including the Trading Systems
division and Information Transport Systems division, operating divisions of a
wholly owned subsidiary of Global Crossing Ltd., and Asia Global Crossing IPC
Trading Systems Australia Pty. Ltd. (the Predecessor), for the period from
October 1, 2001 to December 20, 2001 (the Predecessor Period). Our audits
also included the financial statement schedule listed in the Index at Item
15(a) for the periods October 1, 2001 through September 30, 2002. These
financial statements and schedule are the responsibility of the Companys
management. Our responsibility is to express an opinion on these financial
statements and schedule based on our audits. The combined balance sheets of IPC
Information Systems, Inc. as of September 30, 2000 and 2001, and the statements
of operations, stockholders equity, and cash flows for the period October 1,
1999 to June 14, 2000, the period from June 15, 2000 to September 30, 2000, and
the year ended September 30, 2001 were audited by other auditors who have
ceased operations. Those auditors expressed an unqualified opinion on those
financial statements in their report dated December 4, 2001.

We conducted our audits in accordance with auditing standards generally
accepted in the United States. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of IPC
Acquisition Corp. at December 31, 2001 and September 30, 2002 and the
consolidated results of its operations and its cash flows for the period from
November 15, 2001 to September 30, 2002 and the combined results of operations
and cash flows of IPC Information Systems for the period from October 1, 2001
to December 20, 2001, in conformity with accounting principles generally
accepted in the United States. Also, in our opinion, the related financial
statement schedule for the periods October 1, 2001 through September 30, 2002,
when considered in relation to the basic financial statements taken as a whole,
presents fairly in all material respects the information set forth therein.



| | /s/ ERNST &YOUNG LLP
| | --------------------

MetroPark, New Jersey
December 4, 2002

27



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##### Table of Contents



REPRINTED COPY OF REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To IPC Information Systems:

We have audited the accompanying combined balance sheets of the entities
identified in Note 1, collectively referred to as IPC Information Systems,
including the Trading Systems division and Information Transport Systems
division, operating divisions of a wholly owned subsidiary of Global Crossing
Ltd., and Asia Global Crossing IPC Trading Systems Australia Pty. Ltd., an
operating division of a wholly owned subsidiary of Asia Global Crossing Ltd.,
as of September 30, 2000 and 2001, and the related combined statements of
operations, capital, and cash flows for the year ended September 30, 1999, the
period from October 1, 1999 to June 14, 2000 (the Predecessor Periods), the
period from June 15, 2000 to September 30, 2000 and the year ended September
30, 2001 (the Successor Periods). These combined financial statements are the
responsibility of the Companys management. Our responsibility is to express an
opinion on these financial statements based on our audits.

We conducted our audits in accordance with auditing standards generally
accepted in the United States. Those standards require that we plan and perform
the audits to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of IPC Information Systems as
of September 30, 2000 and 2001, and the results of their operations and their
cash flows for the year ended September 30, 1999, the period from October 1,
1999 to June 14, 2000, the period from June 15, 2000 to September 30, 2000 and
the year ended September 30, 2001, in conformity with accounting principles
generally accepted in the United States.

ARTHUR ANDERSEN LLP

Roseland, New Jersey
December 4, 2001 (except with respect to the matters discussed in Note 16 as to
which the date is January 16, 2002)

|      |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|----- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Note: |  | Reprinted above is a copy of the report previously expressed by such
firm which has ceased operations. The reprinting of this report is not
equivalent to a current reissuance of such report as would be required if
such firm was still operating. The consolidated balance sheet as of
September 30, 2000 and the combined statement of operations, capital and
cash flows for the year ended September 30, 1999 referred to in this
report have not been included in the accompanying financial statements or
schedule. Certain items in the September 30, 2001 and other Predecessor
Period and Successor Period financial statements have been reclassified from amounts previously
reported to conform to the presentation of the September 30, 2002
financial statements. Because such firm has not consented to the inclusion
of this report in this annual report, it may be more difficult for you to
seek remedies against such firm and your ability to seek relief against
such firm may be impaired.

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##### Table of Contents



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

|                                                    |                                                                                                                                                                                                                                                |                                            |   |                                      |         |             |   |          |         |           |   |         |         |  |  | 
|--------------------------------------------------- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ------------------------------------------ | - | ------------------------------------ | ------- | ----------- | - | -------- | ------- | --------- | - | ------- | ------- |  |  | 
|                                                    |                                                                                                                                                                                                                                                |                                            |   |                                      |         | Predecessor |   |          |         |           |   |         |         | 
|                                                    |                                                                                                                                                                                                                                                |                                            |   |                                      |         |             |   |          |         |           |   |         |         | 
|                                                    |                                                                                                                                                                                                                                                |                                            |   |                                      |         | September   |   | December |         | September
|                                                    |                                                                                                                                                                                                                                                |                                            |   |                                      |         | 30, 2001    |   | 31, 2001 |         | 30, 2002 
|                                                    |                                                                                                                                                                                                                                                |                                            |   |                                      |         |             |   |          |         |          
|                                                    |                                                                                                                                                                                                                                                |                                            |   | Assets                               |         |             |   |          |         |           |   |         |         |  |  | 
|Assets:                                             |                                                                                                                                                                                                                                                |                                            |   |                                      |         |             |   |          |         |           |   |        
|                                                    | Cash                                                                                                                                                                                                                                           |                                            | $ | 4,536                                |         |             | $ | 25,046   |         |           | $ | 25,294  |        
|                                                    | Restricted cash                                                                                                                                                                                                                                |                                            |   |                                     |         |             |   | 20,800   |         |           |   | 7,272   |        
|                                                    | Accounts receivable, net of allowance of $2,648,
$125 and $1,245, respectively                                                                                                                                                                 |                                            |   | 77,496                               |         |             |   | 66,804   |         |           |   | 52,468  |        
|                                                    | Inventories, net                                                                                                                                                                                                                               |                                            |   | 45,258                               |         |             |   | 67,810   |         |           |   | 22,218  |        
|                                                    | Prepaid and other current assets                                                                                                                                                                                                               |                                            |   | 2,919                                |         |             |   | 2,832    |         |           |   | 4,614   |        
|                                                    |                                                                                                                                                                                                                                                |                                            |   |                                      |         |             |   |          |         |           |   |        
|                                                    |                                                                                                                                                                                                                                                | Total current assets                       |   |                                      | 130,209 |             |   |          | 183,292 |           |   |         | 111,866 | 
|                                                    | Property, plant and equipment, net                                                                                                                                                                                                             |                                            |   | 20,368                               |         |             |   | 21,203   |         |           |   | 21,004  |        
|                                                    | Goodwill                                                                                                                                                                                                                                       |                                            |   | 185,033                              |         |             |   | 77,310   |         |           |   | 72,279  |        
|                                                    | Tradenames                                                                                                                                                                                                                                     |                                            |   | 15,867                               |         |             |   | 18,000   |         |           |   | 18,462  |        
|                                                    | Technology, net                                                                                                                                                                                                                                |                                            |   | 29,308                               |         |             |   | 44,816   |         |           |   | 39,987  |        
|                                                    | Customer list, net                                                                                                                                                                                                                             |                                            |   | 94,838                               |         |             |   | 152,785  |         |           |   | 150,683 |        
|                                                    | Assembled workforce, net                                                                                                                                                                                                                       |                                            |   | 12,617                               |         |             |   |         |         |           |   |        |        
|                                                    | Deferred financing costs, net                                                                                                                                                                                                                  |                                            |   |                                     |         |             |   | 19,712   |         |           |   | 15,116  |        
|                                                    | Other assets                                                                                                                                                                                                                                   |                                            |   | 871                                  |         |             |   | 552      |         |           |   | 835     |        
|                                                    |                                                                                                                                                                                                                                                |                                            |   |                                      |         |             |   |          |         |           |   |        
|                                                    |                                                                                                                                                                                                                                                | Total assets                               |   | $                                    | 489,111 |             |   | $        | 517,670 |           |   | $       | 430,232 | 
|                                                    |                                                                                                                                                                                                                                                |                                            |   |                                      |         |             |   |          |         |           |   |        
|                                                    |                                                                                                                                                                                                                                                |                                            |   | Liabilities and Stockholders Equity |         |             |   |          |         |           |   |         |         |  |  | 
|Liabilities:                                        |                                                                                                                                                                                                                                                |                                            |   |                                      |         |             |   |          |         |           |   |        
|                                                    | Current portion of long term debt                                                                                                                                                                                                              |                                            | $ |                                     |         |             | $ | 5,250    |         |           | $ | 6,460   |        
|                                                    | Accounts payable                                                                                                                                                                                                                               |                                            |   | 9,254                                |         |             |   | 6,597    |         |           |   | 4,530   |        
|                                                    | Accrued expenses and other current liabilities                                                                                                                                                                                                 |                                            |   | 15,029                               |         |             |   | 27,209   |         |           |   | 23,562  |        
|                                                    | Current portion of deferred compensation                                                                                                                                                                                                       |                                            |   | 471                                  |         |             |   | 471      |         |           |   | 633     |        
|                                                    | Income taxes payable                                                                                                                                                                                                                           |                                            |   | 1,934                                |         |             |   | 2,736    |         |           |   | 2,373   |        
|                                                    | Customer advances on installation contracts                                                                                                                                                                                                    |                                            |   | 41,388                               |         |             |   | 43,327   |         |           |   | 11,232  |        
|                                                    | Deferred revenue on maintenance contracts                                                                                                                                                                                                      |                                            |   | 10,204                               |         |             |   | 8,633    |         |           |   | 12,261  |        
|                                                    | Due to affiliates                                                                                                                                                                                                                              |                                            |   | 104,106                              |         |             |   |         |         |           |   |        |        
|                                                    | Deferred purchase price obligation                                                                                                                                                                                                             |                                            |   |                                     |         |             |   | 20,800   |         |           |   | 7,272   |        
|                                                    |                                                                                                                                                                                                                                                |                                            |   |                                      |         |             |   |          |         |           |   |        
|                                                    |                                                                                                                                                                                                                                                | Total current liabilities                  |   |                                      | 182,386 |             |   |          | 115,023 |           |   |         | 68,323  | 
|                                                    | Term loan                                                                                                                                                                                                                                      |                                            |   |                                     |         |             |   | 99,750   |         |           |   | 64,602  |        
|                                                    | Senior subordinated notes                                                                                                                                                                                                                      |                                            |   |                                     |         |             |   | 150,000  |         |           |   | 150,000 |        
|                                                    | Deferred taxes, net                                                                                                                                                                                                                            |                                            |   | 56,679                               |         |             |   | 10,940   |         |           |   | 7,190   |        
|                                                    | Deferred compensation                                                                                                                                                                                                                          |                                            |   | 3,377                                |         |             |   | 3,354    |         |           |   | 3,119   |        
|                                                    | Other long term liabilities                                                                                                                                                                                                                    |                                            |   | 2,623                                |         |             |   |         |         |           |   |        |        
|                                                    |                                                                                                                                                                                                                                                |                                            |   |                                      |         |             |   |          |         |           |   |        
|                                                    |                                                                                                                                                                                                                                                | Total liabilities                          |   |                                      | 245,065 |             |   |          | 379,067 |           |   |         | 293,234 | 
|                                                    |                                                                                                                                                                                                                                                |                                            |   |                                      |         |             |   |          |         |           |   |        
|Commitments
and Contingencies
Stockholders Equity: |                                                                                                                                                                                                                                                |                                            |   |                                      |         |             |   |          |         |           |   |        
|                                                    | Common stock, $0.01 par value (authorized
25,000,000 shares; none issued and outstanding
at September 30, 2001; 14,000,000 shares issued
and outstanding at December 31, 2001;
14,060,000 shares issued and outstanding at
September 30, 2002) |                                            |   |                                     |         |             |   | 140      |         |           |   | 141     |        
|                                                    | Paid in capital                                                                                                                                                                                                                                |                                            |   | 278,048                              |         |             |   | 139,560  |         |           |   | 140,159 |        
|                                                    | Notes receivable for purchases of common stock                                                                                                                                                                                                 |                                            |   |                                     |         |             |   |         |         |           |   | (383    | )      
|                                                    | Accumulated deficit                                                                                                                                                                                                                            |                                            |   | (32,710                              | )       |             |   | (1,382   | )       |           |   | (9,200  | )      
|                                                    | Accumulated other comprehensive income (loss)                                                                                                                                                                                                  |                                            |   | (1,292                               | )       |             |   | 285      |         |           |   | 6,281   |        
|                                                    |                                                                                                                                                                                                                                                |                                            |   |                                      |         |             |   |          |         |           |   |        
|                                                    |                                                                                                                                                                                                                                                | Total stockholders equity                 |   |                                      | 244,046 |             |   |          | 138,603 |           |   |         | 136,998 | 
|                                                    |                                                                                                                                                                                                                                                |                                            |   |                                      |         |             |   |          |         |           |   |        
|                                                    |                                                                                                                                                                                                                                                | Total liabilities and stockholders equity |   | $                                    | 489,111 |             |   | $        | 517,670 |           |   | $       | 430,232 | 
|                                                    |                                                                                                                                                                                                                                                |                                            |   |                                      |         |             |   |          |         |           |   |        

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

29



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##### Table of Contents

\

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

|                                                                        |                                 |                                           |         |               |        |                   |         |                    |         |                    |         |                  |         |                   |         |             |         |   |         |         |         |  
|----------------------------------------------------------------------- | ------------------------------- | ----------------------------------------- | ------- | ------------- | ------ | ----------------- | ------- | ------------------ | ------- | ------------------ | ------- | ---------------- | ------- | ----------------- | ------- | ----------- | ------- | - | ------- | ------- | ------- | -
|                                                                        |                                 |                                           |         | Predecessors 
|                                                                        |                                 |                                           |         |              
|                                                                        |                                 |                                           |         | Period from   |        | Period from       |         |                    |         |                    |         |                  |         |                   |         | Period from
|                                                                        |                                 |                                           |         | October 1     |        | June 15,          |         |                    |         |                    |         | Period from      |         | November 15, 2001
|                                                                        |                                 |                                           |         | 1999 to       |        | 2000 to September |         | Fiscal Year Ended  |         | October 1, 2001 to |         | to September 30,
|                                                                        |                                 |                                           |         | June 14, 2000 |        | 30, 2000          |         | September 30, 2001 |         | December 20, 2001  |         | 2002            
|                                                                        |                                 |                                           |         |               |        |                   |         |                    |         |                    |         |                 
|Revenue:                                                                |                                 |                                           |         |               |        |                   |         |                    |         |                    |         |                  |         |                   |         |             |         |   |         |        
|                                                                        | Product sales and installations |                                           | $       | 108,488       |        |                   | $       | 72,994             |         |                    | $       | 181,267          |         |                   | $       | 35,691      |         |   | $       | 156,503 |        
|                                                                        | Service                         |                                           |         | 66,021        |        |                   |         | 30,706             |         |                    |         | 98,430           |         |                   |         | 23,089      |         |   |         | 76,281  |        
|                                                                        |                                 |                                           |         |               |        |                   |         |                    |         |                    |         |                  |         |                   |         |             |         |   |         |        
|                                                                        |                                 |                                           | 174,509 |               |        |                   | 103,700 |                    |         |                    | 279,697 |                  |         |                   | 58,780  |             |         |   | 232,784 |        
|                                                                        |                                 |                                           |         |               |        |                   |         |                    |         |                    |         |                  |         |                   |         |             |         |   |         |        
|Cost of goods sold (exclusive of
depreciation):                         |                                 |                                           |         |               |        |                   |         |                    |         |                    |         |                  |         |                   |         |             |         |   |         |        
|                                                                        | Product sales and installations |                                           |         | 65,802        |        |                   |         | 61,533             |         |                    |         | 106,252          |         |                   |         | 18,869      |         |   |         | 119,605 |        
|                                                                        | Service                         |                                           |         | 36,744        |        |                   |         | 18,217             |         |                    |         | 58,349           |         |                   |         | 13,953      |         |   |         | 41,528  |        
|                                                                        |                                 |                                           |         |               |        |                   |         |                    |         |                    |         |                  |         |                   |         |             |         |   |         |        
|                                                                        |                                 |                                           | 102,546 |               |        |                   | 79,750  |                    |         |                    | 164,601 |                  |         |                   | 32,822  |             |         |   | 161,133 |        
|                                                                        |                                 |                                           |         |               |        |                   |         |                    |         |                    |         |                  |         |                   |         |             |         |   |         |        
|                                                                        |                                 | Gross profit                              |         |               | 71,963 |                   |         |                    | 23,950  |                    |         |                  | 115,096 |                   |         |             | 25,958  |   |         |         | 71,651  |  
|Research and development                                                |                                 |                                           | 8,854   |               |        |                   | 4,024   |                    |         |                    | 15,502  |                  |         |                   | 3,519   |             |         |   | 11,617  |        
|Selling, general and administrative expense                             |                                 |                                           | 29,480  |               |        |                   | 12,202  |                    |         |                    | 33,541  |                  |         |                   | 17,110  |             |         |   | 34,576  |        
|Depreciation and amortization                                           |                                 |                                           | 7,083   |               |        |                   | 14,003  |                    |         |                    | 48,635  |                  |         |                   | 10,737  |             |         |   | 15,065  |        
|                                                                        |                                 |                                           |         |               |        |                   |         |                    |         |                    |         |                  |         |                   |         |             |         |   |         |        
|                                                                        | Income (loss) from operations   |                                           |         | 26,546        |        |                   |         | (6,279             | )       |                    |         | 17,418           |         |                   |         | (5,408      | )       |   |         | 10,393  |        
|Other income (expense):                                                 |                                 |                                           |         |               |        |                   |         |                    |         |                    |         |                  |         |                   |         |             |         |   |         |        
|                                                                        | Interest expense, net           |                                           |         | (16,142       | )      |                   |         | (5,686             | )       |                    |         | (27,871          | )       |                   |         | (5,987      | )       |   |         | (21,533 | )      
|                                                                        | Other income (expense), net     |                                           |         | (18           | )      |                   |         | 30                 |         |                    |         | 2,028            |         |                   |         | 49          |         |   |         | (346    | )      
|                                                                        |                                 |                                           |         |               |        |                   |         |                    |         |                    |         |                  |         |                   |         |             |         |   |         |        
|                                                                        |                                 | Income (loss) before income taxes         |         |               | 10,386 |                   |         |                    | (11,935 | )                  |         |                  | (8,425  | )                 |         |             | (11,346 | ) |         |         | (11,486 | )
|Income tax provision (benefit)                                          |                                 |                                           | 4,134   |               |        |                   | (2,582  | )                  |         |                    | 4,406   |                  |         |                   | (318    | )           |         |   | (2,286  | )      
|                                                                        |                                 |                                           |         |               |        |                   |         |                    |         |                    |         |                  |         |                   |         |             |         |   |         |        
|                                                                        |                                 | Income (loss) before
extraordinary charge |         |               | 6,252  |                   |         |                    | (9,353  | )                  |         |                  | (12,831 | )                 |         |             | (11,028 | ) |         |         | (9,200  | )
|Extraordinary loss on retirement of debt,
net of income taxes of $7,269 |                                 |                                           |        |               |        |                   | (10,526 | )                  |         |                    |        |                  |         |                   |        |             |         |   |        |        
|                                                                        |                                 |                                           |         |               |        |                   |         |                    |         |                    |         |                  |         |                   |         |             |         |   |         |        
|Net income (loss)                                                       |                                 | $                                         | 6,252   |               |        | $                 | (19,879 | )                  |         | $                  | (12,831 | )                |         | $                 | (11,028 | )           |         | $ | (9,200  | )      
|                                                                        |                                 |                                           |         |               |        |                   |         |                    |         |                    |         |                  |         |                   |         |             |         |   |         |        

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

30



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##### Table of Contents



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

|                                                                                         |                                                                                           |                                                     |                                   |              |         |                  |         |                  |         |                      |         |                     |         |                   |         |                  |         |   |        |          |          |   |        | 
|---------------------------------------------------------------------------------------- | ----------------------------------------------------------------------------------------- | --------------------------------------------------- | --------------------------------- | ------------ | ------- | ---------------- | ------- | ---------------- | ------- | -------------------- | ------- | ------------------- | ------- | ----------------- | ------- | ---------------- | ------- | - | ------ | -------- | -------- | - | ------ | 
|                                                                                         |                                                                                           |                                                     |                                   |              |         | Predecessors    
|                                                                                         |                                                                                           |                                                     |                                   |              |         |                 
|                                                                                         |                                                                                           |                                                     |                                   |              |         | Period from Oct. |         | Period from      |         |                      |         |                     |         | Period from Oct.  |         | Period from Nov.
|                                                                                         |                                                                                           |                                                     |                                   |              |         | 1, 1999          |         | June 15, 2000 to |         | Fiscal Year          |         | 1, 2001 to Dec. 20, |         | 15, 2001 to Sept.
|                                                                                         |                                                                                           |                                                     |                                   |              |         | to June 14, 2000 |         | Sept. 30, 2000   |         | Ended Sept. 30, 2001 |         | 2001                |         | 30, 2002         
|                                                                                         |                                                                                           |                                                     |                                   |              |         |                  |         |                  |         |                      |         |                     |         |                  
|Cash flows from operating activities:                                                    |                                                                                           |                                                     |                                   |              |         |                  |         |                  |         |                      |         |                     |         |                   |         |                  |         |   |        |         
|Net income (loss)                                                                        |                                                                                           | $                                                   | 6,252                             |              |         | $                | (19,879 | )                |         | $                    | (12,831 | )                   |         | $                 | (11,028 | )                |         | $ | (9,200 | )       
|Adjustments to reconcile net income (loss) to net cash
provided by operating activities: |                                                                                           |                                                     |                                   |              |         |                  |         |                  |         |                      |         |                     |         |                   |         |                  |         |   |        |         
|                                                                                         | Depreciation and amortization                                                             |                                                     |                                   | 3,753        |         |                  |         | 1,762            |         |                      |         | 6,992               |         |                   |         | 1,393            |         |   |        | 3,951    |         
|                                                                                         | Amortization of goodwill and intangibles                                                  |                                                     |                                   | 3,330        |         |                  |         | 12,241           |         |                      |         | 41,643              |         |                   |         | 9,344            |         |   |        | 11,114   |         
|                                                                                         | Amortization of deferred financing costs                                                  |                                                     |                                   |             |         |                  |         |                 |         |                      |         |                    |         |                   |         |                 |         |   |        | 2,304    |         
|                                                                                         | Provision for doubtful accounts                                                           |                                                     |                                   | 767          |         |                  |         | 647              |         |                      |         | 793                 |         |                   |         | 1,018            |         |   |        | 1,288    |         
|                                                                                         | Deferred income taxes                                                                     |                                                     |                                   | (915         | )       |                  |         | (12,933          | )       |                      |         | (13,148             | )       |                   |         | (4,761           | )       |   |        | (7,170   | )       
|                                                                                         | Employee deferred compensation charge                                                     |                                                     |                                   | (11          | )       |                  |         | (7               | )       |                      |         | (29                 | )       |                   |         | (19              | )       |   |        | (77      | )       
|                                                                                         | Non-cash interest on senior discount notes                                                |                                                     |                                   | 16,295       |         |                  |         |                 |         |                      |         |                    |         |                   |         |                 |         |   |        |         |         
|                                                                                         | Issuance of stock for litigation settlement                                               |                                                     |                                   | 1,774        |         |                  |         |                 |         |                      |         |                    |         |                   |         |                 |         |   |        |         |         
|                                                                                         | Extraordinary loss on retirement of senior discount
notes, net of income taxes            |                                                     |                                   |             |         |                  |         | 17,795           |         |                      |         |                    |         |                   |         |                 |         |   |        |         |         
|Changes in operating assets and liabilities:                                             |                                                                                           |                                                     |                                   |              |         |                  |         |                  |         |                      |         |                     |         |                   |         |                  |         |   |        |         
|                                                                                         | Accounts receivables                                                                      |                                                     |                                   | (3,655       | )       |                  |         | (12,411          | )       |                      |         | (1,151              | )       |                   |         | 4,702            |         |   |        | 17,957   |         
|                                                                                         | Inventories                                                                               |                                                     |                                   | (14,230      | )       |                  |         | 36,283           |         |                      |         | (1,056              | )       |                   |         | 1,823            |         |   |        | 59,557   |         
|                                                                                         | Prepaids and other current assets                                                         |                                                     |                                   | 5,774        |         |                  |         | 1,168            |         |                      |         | 4,429               |         |                   |         | (281             | )       |   |        | (1,414   | )       
|                                                                                         | Other assets                                                                              |                                                     |                                   | 680          |         |                  |         | 19,013           |         |                      |         | (28                 | )       |                   |         | 322              |         |   |        | (154     | )       
|                                                                                         | Accounts payable and accrued expenses                                                     |                                                     |                                   | 13,436       |         |                  |         | (8,441           | )       |                      |         | (18,894             | )       |                   |         | 7,019            |         |   |        | (10,972  | )       
|                                                                                         | Income taxes payable                                                                      |                                                     |                                   | (2,109       | )       |                  |         | 365              |         |                      |         | 3,147               |         |                   |         | (988             | )       |   |        | 2,948    |         
|                                                                                         | Customer advances and deferred revenue                                                    |                                                     |                                   | 20,037       |         |                  |         | (16,979          | )       |                      |         | 20,816              |         |                   |         | 9,326            |         |   |        | (37,627  | )       
|                                                                                         | Other liabilities                                                                         |                                                     |                                   | (115         | )       |                  |         | 320              |         |                      |         | 2,623               |         |                   |         | (2,623           | )       |   |        |         |         
|                                                                                         |                                                                                           |                                                     |                                   |              |         |                  |         |                  |         |                      |         |                     |         |                   |         |                  |         |   |        |         
|                                                                                         |                                                                                           | Net cash provided by operating activities           |                                   |              | 51,063  |                  |         |                  | 18,944  |                      |         |                     | 33,306  |                   |         |                  | 15,247  |   |        |          | 32,505   |  
|                                                                                         |                                                                                           |                                                     |                                   |              |         |                  |         |                  |         |                      |         |                     |         |                   |         |                  |         |   |        |         
|Cash flows from investing activities:                                                    |                                                                                           |                                                     |                                   |              |         |                  |         |                  |         |                      |         |                     |         |                   |         |                  |         |   |        |         
|                                                                                         | Capital expenditures                                                                      |                                                     |                                   | (2,761       | )       |                  |         | (1,053           | )       |                      |         | (9,370              | )       |                   |         | (1,902           | )       |   |        | (6,506   | )       
|                                                                                         | Payment for acquisitions, net of cash acquired
(includes restricted cash of $7.3 million) |                                                     |                                   |             |         |                  |         |                 |         |                      |         |                    |         |                   |         |                 |         |   |        | (345,746 | )       
|                                                                                         |                                                                                           |                                                     |                                   |              |         |                  |         |                  |         |                      |         |                     |         |                   |         |                  |         |   |        |         
|                                                                                         |                                                                                           | Net cash used in investing activities               |                                   |              | (2,761  | )                |         |                  | (1,053  | )                    |         |                     | (9,370  | )                 |         |                  | (1,902  | ) |        |          | (352,252 | )
|                                                                                         |                                                                                           |                                                     |                                   |              |         |                  |         |                  |         |                      |         |                     |         |                   |         |                  |         |   |        |         
|Cash flows from financing activities:                                                    |                                                                                           |                                                     |                                   |              |         |                  |         |                  |         |                      |         |                     |         |                   |         |                  |         |   |        |         
|                                                                                         | Proceeds from (repayments of) intercompany borrowings                                     |                                                     |                                   | (63,179      | )       |                  |         | 72,939           |         |                      |         | (23,186             | )       |                   |         | (15,134          | )       |   |        |         |         
|                                                                                         | Principal payments on capital leases                                                      |                                                     |                                   | (331         | )       |                  |         | (304             | )       |                      |         | (234                | )       |                   |         |                 |         |   |        |         |         
|                                                                                         | Borrowings (repayments) under the revolving credit
facility                               |                                                     |                                   | 12,290       |         |                  |         | (45,712          | )       |                      |         |                    |         |                   |         |                 |         |   |        |         |         
|                                                                                         | Principal repayments on term loan                                                         |                                                     |                                   |             |         |                  |         |                 |         |                      |         |                    |         |                   |         |                 |         |   |        | (33,938  | )       
|                                                                                         | Proceeds from term loan, net of issuance costs                                            |                                                     |                                   |             |         |                  |         |                 |         |                      |         |                    |         |                   |         |                 |         |   |        | 98,600   |         
|                                                                                         | Proceeds from senior subordinated notes, net of
issuance costs                            |                                                     |                                   |             |         |                  |         |                 |         |                      |         |                    |         |                   |         |                 |         |   |        | 138,980  |         
|                                                                                         | Principal repayments on senior discount notes                                             |                                                     |                                   |             |         |                  |         | (43,272          | )       |                      |         |                    |         |                   |         |                 |         |   |        |         |         
|                                                                                         | Proceeds from the exercise of stock options                                               |                                                     |                                   | 4,224        |         |                  |         |                 |         |                      |         |                    |         |                   |         |                 |         |   |        |         |         
|                                                                                         | Proceeds from equity issuances, net                                                       |                                                     |                                   |             |         |                  |         |                 |         |                      |         |                    |         |                   |         |                 |         |   |        | 139,917  |         
|                                                                                         |                                                                                           |                                                     |                                   |              |         |                  |         |                  |         |                      |         |                     |         |                   |         |                  |         |   |        |         
|                                                                                         |                                                                                           | Net cash (used in) provided by financing activities |                                   |              | (46,996 | )                |         |                  | (16,349 | )                    |         |                     | (23,420 | )                 |         |                  | (15,134 | ) |        |          | 343,559  |  
|                                                                                         |                                                                                           |                                                     |                                   |              |         |                  |         |                  |         |                      |         |                     |         |                   |         |                  |         |   |        |         
|Effect of exchange rate changes on cash                                                  |                                                                                           |                                                     | (2,462                            | )            |         |                  | (2,160  | )                |         |                      | 868     |                     |         |                   | (1,996  | )                |         |   | 1,482  |         
|                                                                                         |                                                                                           |                                                     |                                   |              |         |                  |         |                  |         |                      |         |                     |         |                   |         |                  |         |   |        |         
|                                                                                         |                                                                                           | Net (decrease) increase in cash                     |                                   |              | (1,156  | )                |         |                  | (618    | )                    |         |                     | 1,384   |                   |         |                  | (3,785  | ) |        |          | 25,294   |  
|Cash, beginning of period                                                                |                                                                                           |                                                     | 4,926                             |              |         |                  | 3,770   |                  |         |                      | 3,152   |                     |         |                   | 4,536   |                  |         |   |       |         
|                                                                                         |                                                                                           |                                                     |                                   |              |         |                  |         |                  |         |                      |         |                     |         |                   |         |                  |         |   |        |         
|Cash, end of period                                                                      |                                                                                           | $                                                   | 3,770                             |              |         | $                | 3,152   |                  |         | $                    | 4,536   |                     |         | $                 | 751     |                  |         | $ | 25,294 |         
|                                                                                         |                                                                                           |                                                     |                                   |              |         |                  |         |                  |         |                      |         |                     |         |                   |         |                  |         |   |        |         
|Supplemental disclosures of cash flow information:                                       |                                                                                           |                                                     |                                   |              |         |                  |         |                  |         |                      |         |                     |         |                   |         |                  |         |   |        |         
|                                                                                         |                                                                                           |                                                     | Cash paid during the periods for: |              |         |                  |         |                  |         |                      |         |                     |         |                   |         |                  |         |   |        |          |          |   |       
|                                                                                         |                                                                                           |                                                     |                                   | Income taxes |         | $                | 1,609   |                  |         | $                    | 1,398   |                     |         | $                 | 2,755   |                  |         | $ | 1,338  |          |          | $ | 2,574  | 
|                                                                                         |                                                                                           |                                                     |                                   |              |         |                  |         |                  |         |                      |         |                     |         |                   |         |                  |         |   |        |         
|                                                                                         |                                                                                           |                                                     |                                   | Interest     |         | $                | 4,345   |                  |         | $                    | 123     |                     |         | $                 | 478     |                  |         | $ | 66     |          |          | $ | 15,005 | 
|                                                                                         |                                                                                           |                                                     |                                   |              |         |                  |         |                  |         |                      |         |                     |         |                   |         |                  |         |   |        |         

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

31



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##### Table of Contents



IPC ACQUISITION CORP.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS EQUITY
(In Thousands)

|                                                 |                                                            |   |              |     |                 |   |            |         |          |   |               |    |              |   |                   |         |                   |   |                  |        |   |   |      |      |   |   |         |         |  
|------------------------------------------------ | ---------------------------------------------------------- | - | ------------ | --- | --------------- | - | ---------- | ------- | -------- | - | ------------- | -- | ------------ | - | ----------------- | ------- | ----------------- | - | ---------------- | ------ | - | - | ---- | ---- | - | - | ------- | ------- | -
|                                                 |                                                            |   |              |     |                 |   |            |         |          |   |               |    |              |   | Retained Earnings |         | Accumulated Other |   | Notes Receivable |        |   |   |     
|                                                 |                                                            |   |              |     |                 |   |            |         |          |   | Subscription  |    | (Accumulated |   | Comprehensive     |         | for Purchases of  |   |                  |        |  
|                                                 |                                                            |   | Common Stock |     | Paid in Capital |   | Receivable |         | Deficit) |   | Income (Loss) |    | Common Stock |   | Total            
|                                                 |                                                            |   |              |     |                 |   |            |         |          |   |               |    |              |  
|Predecessor                                      |                                                            |   |              |     |                 |   |            |         |          |   |               |    |              |   |                   |         |                   |   |                  |        |   |   |      |      |   |   |         |        
|Balance at September 30, 1999                    |                                                            | $ | 85           |     |                 | $ | (90,554    | )       |          | $ |              |    |              | $ | 2,187             |         |                   | $ | 965              |        |   | $ |     |      |   | $ | (87,317 | )      
|                                                 | Stock option exercises                                     |   |              | 5   |                 |   |            | 4,219   |          |   |               |    |              |   |                   |         |                   |   |                  |        |   |   |      |      |   |   |         | 4,224   |  
|                                                 | Shares issued for settlement of claim                      |   |              |     |                 |   |            | 1,774   |          |   |               |    |              |   |                   |         |                   |   |                  |        |   |   |      |      |   |   |         | 1,774   |  
|                                                 | Purchase accounting adjustments                            |   |              | (90 | )               |   |            | 332,773 |          |   |               |    |              |   |                   | (8,439  | )                 |   |                  | 1,497  |   |   |      |      |   |   |         | 325,741 |  
|                                                 | Net income                                                 |   |              |     |                 |   |            |         |          |   |               |    |              |   |                   | 6,252   |                   |   |                  |        |   |   |      |      |   |   |         | 6,252   |  
|                                                 | Foreign currency translation
adjustments                   |   |              |     |                 |   |            |         |          |   |               |    |              |   |                   |         |                   |   |                  | (2,462 | ) |   |      |      |   |   |         | (2,462  | )
|                                                 |                                                            |   |              |     |                 |   |            |         |          |   |               |    |              |   |                   |         |                   |   |                  |        |   |   |      |      |   |   |         |        
|                                                 | Total comprehensive income                                 |   |              |     |                 |   |            |         |          |   |               |    |              |   |                   |         |                   |   |                  |        |   |   |      |      |   |   |         | 3,790   |  
|                                                 |                                                            |   |              |     |                 |   |            |         |          |   |               |    |              |   |                   |         |                   |   |                  |        |   |   |      |      |   |   |         |        
|Balance at June 15, 2000                         |                                                            | $ |             |     |                 | $ | 248,212    |         |          | $ |              |    |              | $ |                  |         |                   | $ |                 |        |   | $ |     |      |   | $ | 248,212 |        
|                                                 |                                                            |   |              |     |                 |   |            |         |          |   |               |    |              |   |                   |         |                   |   |                  |        |   |   |      |      |   |   |         |        
|Predecessor                                      |                                                            |   |              |     |                 |   |            |         |          |   |               |    |              |   |                   |         |                   |   |                  |        |   |   |      |      |   |   |         |        
|                                                 | Capital contribution                                       |   | $            |    |                 |   | $          | 92,406  |          |   | $             |   |              |   | $                 |        |                   |   | $                |       |   |   | $    |     |   |   | $       | 92,406  |  
|                                                 | Net loss                                                   |   |              |     |                 |   |            |         |          |   |               |    |              |   |                   | (19,879 | )                 |   |                  |        |   |   |      |      |   |   |         | (19,879 | )
|                                                 | Foreign currency translation
adjustments                   |   |              |     |                 |   |            |         |          |   |               |    |              |   |                   |         |                   |   |                  | (2,160 | ) |   |      |      |   |   |         | (2,160  | )
|                                                 |                                                            |   |              |     |                 |   |            |         |          |   |               |    |              |   |                   |         |                   |   |                  |        |   |   |      |      |   |   |         |        
|                                                 | Total comprehensive loss                                   |   |              |     |                 |   |            |         |          |   |               |    |              |   |                   |         |                   |   |                  |        |   |   |      |      |   |   |         | (22,039 | )
|                                                 |                                                            |   |              |     |                 |   |            |         |          |   |               |    |              |   |                   |         |                   |   |                  |        |   |   |      |      |   |   |         |        
|Balance at September 30, 2000                    |                                                            |   |             |     |                 |   | 340,618    |         |          |   |              |    |              |   | (19,879           | )       |                   |   | (2,160           | )      |   |   |     |      |   |   | 318,579 |        
|                                                 | Deemed dividend to parent                                  |   |              |     |                 |   |            | (11,474 | )        |   |               |    |              |   |                   |         |                   |   |                  |        |   |   |      |      |   |   |         | (11,474 | )
|                                                 | Deemed dividend on stock option
repatriation               |   |              |     |                 |   |            | (51,096 | )        |   |               |    |              |   |                   |         |                   |   |                  |        |   |   |      |      |   |   |         | (51,096 | )
|                                                 | Net loss                                                   |   |              |     |                 |   |            |         |          |   |               |    |              |   |                   | (12,831 | )                 |   |                  |        |   |   |      |      |   |   |         | (12,831 | )
|                                                 | Foreign currency translation
adjustments                   |   |              |     |                 |   |            |         |          |   |               |    |              |   |                   |         |                   |   |                  | 868    |   |   |      |      |   |   |         | 868     |  
|                                                 |                                                            |   |              |     |                 |   |            |         |          |   |               |    |              |   |                   |         |                   |   |                  |        |   |   |      |      |   |   |         |        
|                                                 | Total comprehensive loss                                   |   |              |     |                 |   |            |         |          |   |               |    |              |   |                   |         |                   |   |                  |        |   |   |      |      |   |   |         | (11,963 | )
|                                                 |                                                            |   |              |     |                 |   |            |         |          |   |               |    |              |   |                   |         |                   |   |                  |        |   |   |      |      |   |   |         |        
|Balance at September 30, 2001                    |                                                            |   |             |     |                 |   | 278,048    |         |          |   |              |    |              |   | (32,710           | )       |                   |   | (1,292           | )      |   |   |     |      |   |   | 244,046 |        
|                                                 | Net loss                                                   |   |              |     |                 |   |            |         |          |   |               |    |              |   |                   | (11,028 | )                 |   |                  |        |   |   |      |      |   |   |         | (11,028 | )
|                                                 | Foreign currency translation
adjustments                   |   |              |     |                 |   |            |         |          |   |               |    |              |   |                   |         |                   |   |                  | (1,965 | ) |   |      |      |   |   |         | (1,965  | )
|                                                 |                                                            |   |              |     |                 |   |            |         |          |   |               |    |              |   |                   |         |                   |   |                  |        |   |   |      |      |   |   |         |        
|                                                 | Total comprehensive loss                                   |   |              |     |                 |   |            |         |          |   |               |    |              |   |                   |         |                   |   |                  |        |   |   |      |      |   |   |         | (12,993 | )
|                                                 |                                                            |   |              |     |                 |   |            |         |          |   |               |    |              |   |                   |         |                   |   |                  |        |   |   |      |      |   |   |         |        
|Balance at December 20, 2001                     |                                                            | $ |             |     |                 | $ | 278,048    |         |          | $ |              |    |              | $ | (43,738           | )       |                   | $ | (3,257           | )      |   | $ |     |      |   | $ | 231,053 |        
|                                                 |                                                            |   |              |     |                 |   |            |         |          |   |               |    |              |   |                   |         |                   |   |                  |        |   |   |      |      |   |   |         |        
|IPC
Acquisition Corp.                            |                                                            |   |              |     |                 |   |            |         |          |   |               |    |              |   |                   |         |                   |   |                  |        |   |   |      |      |   |   |         |        
|Initial equity subscription at November
15, 2001 |                                                            | $ |             |     |                 | $ | 10         |         |          | $ | (10           | )  |              | $ |                  |         |                   | $ |                 |        |   | $ |     |      |   | $ |        |        
|                                                 | Issuance of common stock                                   |   |              | 141 |                 |   |            | 140,149 |          |   |               | 10 |              |   |                   |         |                   |   |                  |        |   |   |      |      |   |   |         | 140,300 |  
|                                                 | Issuance of notes receivable for
purchases of common stock |   |              |     |                 |   |            |         |          |   |               |    |              |   |                   |         |                   |   |                  |        |   |   |      | (383 | ) |   |         | (383    | )
|                                                 | Net loss                                                   |   |              |     |                 |   |            |         |          |   |               |    |              |   |                   | (9,200  | )                 |   |                  |        |   |   |      |      |   |   |         | (9,200  | )
|                                                 | Foreign currency translation
adjustments                   |   |              |     |                 |   |            |         |          |   |               |    |              |   |                   |         |                   |   |                  | 6,281  |   |   |      |      |   |   |         | 6,281   |  
|                                                 |                                                            |   |              |     |                 |   |            |         |          |   |               |    |              |   |                   |         |                   |   |                  |        |   |   |      |      |   |   |         |        
|                                                 | Total comprehensive loss                                   |   |              |     |                 |   |            |         |          |   |               |    |              |   |                   |         |                   |   |                  |        |   |   |      |      |   |   |         | (2,919  | )
|                                                 |                                                            |   |              |     |                 |   |            |         |          |   |               |    |              |   |                   |         |                   |   |                  |        |   |   |      |      |   |   |         |        
|Balance at September 30, 2002                    |                                                            | $ | 141          |     |                 | $ | 140,159    |         |          | $ |              |    |              | $ | (9,200            | )       |                   | $ | 6,281            |        |   | $ | (383 | )    |   | $ | 136,998 |        
|                                                 |                                                            |   |              |     |                 |   |            |         |          |   |               |    |              |   |                   |         |                   |   |                  |        |   |   |      |      |   |   |         |        

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

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IPC ACQUISITION CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2002

1. Basis of Presentation

IPC Acquisition Corp. (the Company) was incorporated in Delaware and
initially capitalized on November 15, 2001 for the purpose of entering into a
purchase agreement to acquire: (1) 100% of the shares of common stock of IPC
Information Systems, Inc. and 100% of the ordinary shares of Asia Global
Crossing IPC Trading Systems Australia Pty Ltd. from Global Crossing Ltd.
(Global Crossing) and its affiliates and (2) various assets owned by
affiliates of Global Crossing related to the operation of these businesses
(collectively IPC). As used herein, the Company refers to IPC Acquisition
Corp. and its subsidiaries.

Effective December 20, 2001, pursuant to a purchase agreement, as amended,
between IPC Acquisition Corp. and Global Crossing, IPC Acquisition Corp.
completed the acquisition of IPC (the IPC Acquisition). The Companys
financial statements for the period from November 15, 2001 (date of initial
capitalization) to September 30, 2002 are substantially comprised of the
funding and closing of the IPC Acquisition on December 20, 2001 and the results
of operations of IPC from the closing through September 30, 2002. Under the
purchase agreement, the total purchase price for the shares and assets was $360
million, subject to various adjustments for working capital and customer
advances. Global Crossing and certain of its subsidiaries filed for bankruptcy
protection on January 28, 2002 (see Note 3).

The Company, headquartered in New York, designs, manufactures, installs
and services 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. The Company also installs and services the cabling infrastructure
and networks within the same building that connect voice and data
communications for traders and others in the global financial and exchange
trading industries.

The Company markets its products and services worldwide in major financial
centers, with the majority located in the United States.

2. Summary of Significant Accounting Policies

Principles of Consolidation and Combination

The combined financial statements for the period October 1, 1999 to June
14, 2000 represents IPC Information Systems, Inc. as it operated as a stand
alone company. The combined financial statements for the periods June 15, 2000
to September 30, 2000, October 1, 2000 to September 30, 2001 and October 1,
2001 to December 20, 2001 include the accounts of IPC (the Predecessor).
Intercompany balances and transactions have been eliminated.

The consolidated financial statements for the period November 15, 2001
(date of initial capitalization) to September 30, 2002 include the accounts of
the Company and its wholly owned subsidiaries. The principal activity of the
Company consists of the IPC Acquisition, and the results of operations of the
acquired business from December 20, 2001 through September 30, 2002.
Intercompany balances and transactions have been eliminated.

Revenue Recognition

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

Cash and Cash Equivalents

The Company maintains cash with several high credit quality financial
institutions. Temporary cash investments with original maturities of three
months or less are considered cash equivalents. Temporary cash investments are
stated at cost, which approximates fair value. These investments are not
subject to significant market risk.

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IPC ACQUISITION CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  Continued
September 30, 2002

Trade Receivables

Trade accounts receivable potentially expose the Company to concentrations
of credit risk, as a large volume of business is conducted with several major
financial institutions, primarily companies in the brokerage, banking and
financial services industries. To help reduce this risk, customers are
progress-billed prior to the completion of the contract. At September 30, 2001,
December 31, 2001 and September 30, 2002, uncollected accounts receivable
recorded in customer advances amounted to $12.8 million, $7.9 million, and $6.3
million, respectively.

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. Cost of goods sold for
the period ended September 30, 2002 reflects fair value inventory adjustments
of $34.3 million associated with the purchase accounting treatment of the IPC
Acquisition on December 20, 2001. Similarly, cost of goods sold for the fiscal
year ended September 30, 2001 and the period from June 15, 2000 to September
30, 2000 include fair value inventory adjustments of $24.8 million and $10.7
million, respectively, associated with the purchase of the Predecessor by
Global Crossing in June 2000.

Property, Plant and Equipment

Property, plant and equipment are stated at cost and depreciated on a
straight-line basis over the shorter of their estimated useful lives or related
contract terms beginning in the year the asset was placed into service. Normal
repair and maintenance costs are expensed as incurred. The useful lives by
asset category are as follows:

|                                  |  |          |  | 
|--------------------------------- |  | -------- |  | 
|Buildings                         |  | 20 years
|Furniture, fixtures and equipment |  | 5 years 
|Computer software                 |  | 3 years 

Leasehold improvements are amortized over the lesser of the lease term or
the estimated useful life of the improvements.

Impairment of Long-Lived Assets

The Company reviews 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 to date. See Effects of Recently
Issued Accounting Standards below.

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 periods October 1, 1999 to June
14, 2000, June 15, 2000 to September 30, 2000, fiscal year ended September 30,
2001, and October 1, 2001 to December 20, 2001, the costs allocated to goodwill
were amortized on a straight-line basis over the periods benefited, principally
10 years, and resulted in amortization of $3.3 million, $6.2 million, $21.1
million and $4.7 million, respectively.

The Company adopted Statement of Financial Accounting Standards No.142
Goodwill and Other Intangible Assets (SFAS No.142), effective upon the IPC
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 September 30, 2002. However, such assets are tested
for impairment annually using the two-step process specifically provided in
SFAS No.142. Other intangible assets are carried at cost. Technology and
customer lists are amortized over the estimated useful lives of 7 and 20 years,
respectively. Tradenames have been deemed to have an indefinite life and will
not be subject to amortization expense, but instead will be subject to annual
impairment tests in accordance with the provisions of SFAS No.142.

The Company completed the required initial impairment test within the
first six months of adoption as well as the annual impairment test as of July
1, 2002 (the first day of the fourth quarter of fiscal year 2002), and
concluded that there was no impairment to its recorded goodwill or indefinite
live intangible assets. The Company believes the recorded values of goodwill
and tradenames in the amounts of $72.3 million and $18.5 million, respectively,
are fully recoverable.

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IPC ACQUISITION CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  Continued
September 30, 2002

Deferred Financing Costs

As part of the IPC Acquisition, the Company capitalized certain debt
issuance costs in the amount of $17.4 million relating to the establishment of
the senior secured credit facilities and the issuance of the senior
subordinated notes. These costs are being amortized over the respective lives
of the debt using the effective interest method. Amortization expense related
to deferred financing costs is included in interest expense in the accompanying
consolidated statement of operations and aggregated approximately $2.3 million
for the period ended September 30, 2002.

Research and Development

Research and development expenditures are charged to expense as incurred.

Income Taxes

In accordance with Statement of Financial Accounting Standards No.109,
Accounting for Income Taxes (SFAS No. 109), the Company recognizes 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.

For the
fiscal year ended September 30, 2001 and the period
October 1, 2001 to December 20, 2001, the Predecessor had
filed a consolidated Federal income tax return with its parent. Prior
to the fiscal year ended September 30, 2001, the Predecessor
filed separate Federal income tax returns. These income taxes have been prepared in
accordance with SFAS No.109 and SEC Staff Accounting Bulletin Topic 1B,
utilizing the separate return method. Resulting payables for taxes have been
recorded as adjustments to the intercompany accounts. The Company is now
required to file separate tax returns.

Effective as of the date of the IPC Acquisition, the Company provides
deferred income taxes on the unremitted earnings of its foreign subsidiaries.

Use of Estimates

The preparation of financial statements in conformity with accounting
principles generally accepted in the United States requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities, and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.

Foreign Currency Translation Adjustment

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
year-end exchange rate and revenue and expense amounts are translated at the
average rates of exchange prevailing during the year. The resulting foreign
currency translation adjustments are accumulated as a component of other
comprehensive income. Gains and losses resulting from foreign currency
transactions are recognized in other income (expense).

Fair Value of Financial Instruments

The Companys financial instruments at September 30, 2002 consist of
accounts receivable, accounts payable and debt. As of September 30, 2002, the
Company did not have any derivative financial instruments. The Company
believes the reported carrying amounts of its accounts receivable and accounts
payable approximates fair value, based upon the short term nature of these
accounts. The fair value of borrowings under the senior secured credit
facilities was $67.5 million at September 30, 2002 as it bears interest at a floating rate.
The fair value of the senior subordinated notes was $120 million at September
30, 2002.

Stock-Based Compensation

As permitted by SFAS No.123, Accounting for Stock-Based Compensation,
the Company has elected to follow Accounting Principal Board Opinion No.25,
Accounting for Stock Issued to Employees (APB 25) and related
interpretations

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IPC ACQUISITION CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  Continued
September 30, 2002

in accounting for the 2002 Stock Option Plan. Under APB 25, no compensation
expense is recognized at the time of the option grant if the exercise price of the
Companys employee stock option is fixed and equals or exceeds the fair market
value of the underlying common stock on the date of the grant.

Reclassifications

Certain items in the September 30, 2001 and other Predecessor Period
financial statements have been reclassified from amounts previously reported to
conform to the presentation of the September 30, 2002
consolidated financial statements.

Effects of Recently Issued Accounting Standards

In August 2001, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards, (SFAS) No.143, Accounting for
Asset Retirement Obligations (SFAS No.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 No.143 is effective for fiscal years beginning after June 15,
2002, with earlier application encouraged. The Company adopted SFAS No.143 on
October 1, 2002. Management does not believe the adoption of this standard will
have a material impact on the Companys consolidated financial statements.

In August 2001, the FASB issued SFAS No.144, Accounting for the
Impairment or Disposal of Long-Lived Assets (SFAS No.144). SFAS No.144
addresses financial accounting and reporting for the impairment or disposal of
long-lived assets. This statement supersedes SFAS No.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 No.144 was adopted by the Company on October 1,
2002. Management does not believe the adoption of this standard will have a
material impact on the Companys 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 No.145). SFAS No.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 No.145. The
Company adopted SFAS No.145 on October 1, 2002. Management does not believe the
adoption of this standard will have a material impact on the
Companys consolidated
financial statements.

In July 2002, the FASB issued SFAS No.146, Accounting for Costs
Associated with Exit or Disposal Activities (SFAS No.146) and 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 No.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 No.146 effective for exit or disposal activities initiated
after December 31, 2002. Management does not believe the adoption of this
standard will have a material impact on the Companys consolidated financial statements.

3. Acquisitions

The IPC Acquisition

On December 20, 2001, the Company purchased 100% of the common stock of
IPC Information Systems, Inc. and 100% of the ordinary shares of Asia Global
Crossing IPC Trading Systems Australia Pty. Ltd. from Global Crossing Ltd. and
its affiliates. In addition, the Company acquired various assets owned by
affiliates of Global Crossing related to the operation of these

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IPC ACQUISITION CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  Continued
September 30, 2002

businesses. Under the purchase agreement, the total purchase price for the
shares and assets was $360 million, subject to various adjustments for working
capital and customer advances.

At the closing, the purchase price was reduced by approximately $9.75
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 determination
of these amounts, Global Crossing or various of its affiliates are obligated to
pay the Company an additional amount of $4.8 million. The Company has not been
paid this additional amount, nor has it been reflected as a reduction of the
purchase price. On September 30, 2002, the Company filed a proof of claim in
the bankruptcy case of Global Crossing and one of its affiliates for
approximately $4.5 million relating to their pro rata portion of working
capital and customer advance adjustments owed to the Company. The Company
expects to also seek remedies against affiliates of Global Crossing
that have not filed for bankruptcy for the working capital and customer advance adjustments owed to the
Company, although there are no assurances that such efforts will be successful.

The IPC Acquisition was accounted for by the purchase method and acquired
intangible assets are recognized apart from goodwill in accordance with SFAS
No.141, Business Combinations (SFAS No.141). The purchase price exceeded
the fair value of the net assets acquired by approximately $69.4 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 the
year ended September 30, 2002 are not comparable to any prior period.

In connection with the IPC Acquisition, the Company recorded the following
amounts to reflect the purchase price allocation described above (in
thousands):

|                                              |               |   |         |         | 
|--------------------------------------------- | ------------- | - | ------- | ------- | 
|Goodwill                                      |               | $ | 69,427  |        
|Fair value increase to inventory              |               |   | 34,300  |        
|Identified intangibles:                       |               |   |         |        
|                                              | Customer list |   |         | 153,000 | 
|                                              | Technology    |   |         | 45,000  | 
|                                              | Tradenames    |   |         | 18,000  | 
|Deferred taxes                                |               |   | (14,360 | )      
|                                              |               |   |         |        
|Net impact of purchase accounting adjustments |               | $ | 305,367 |        
|                                              |               |   |         |        

The IPC 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 million by a
group including Goldman Sachs Capital Partners, or 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. This deferred
portion of the purchase price will not be paid to Global Crossing unless
various contingent liabilities of former affiliates that the Company guaranteed
have been paid by Global Crossing or the Company has been released from these
guarantees. Such contingent liabilities include equipment lease, real estate
lease and employee obligations and may include other third party obligations.
An amount equal to the deferred payment was deposited into a bank account in
the Companys name and will be released to the Company as the guaranteed
obligations and other liabilities are paid by Global Crossing or the Company is
released from these obligations and other liabilities. While the Company has
structured this agreement so that it retains ownership of the deposited funds,
there can be no assurance that a contrary position will not be taken in Global
Crossings bankruptcy case. Through September 30, 2002, the Company has paid
approximately $13.5 million of these contingent liabilities and an equal amount
has been withdrawn from the aforementioned bank account.

At the closing of the IPC 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.

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IPC ACQUISITION CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  Continued
September 30, 2002

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. If no prior agreement is reached, a hearing on the Companys objection
will be held before the bankruptcy court on January 7, 2003.

If the
bankruptcy court permits Global Crossing to reject the purchase
agreement, Global Crossing would likely be relieved of its
obligations under the purchase agreement, including, among other
things, indemnifying the Company for known tax liabilities imposed upon IPC
Information Systems, Inc. and its subsidiaries prior to their
purchase by the Company from Global Crossing, and paying the
$4.8 million in working capital owed to the Company under the purchase
agreement. If the purchase agreement is rejected, the Company may also be
liable for other pre-IPC Acquisition tax liabilities if Global
Crossing does not include IPC Information Systems, Inc. and its
subsidiaries in certain tax returns for periods prior to and
including the IPC Acquisition. Such tax liabilities, which the Company
estimates to be in the range of $0 to $36 million, could have a
material adverse effect on the Companys financial condition and results of
operations, including requiring the Company to seek financing to pay any
additional pre-IPC Acquisition tax liabilities. Additionally, though
the deferred portion of the purchase price is currently held in a
bank account under the Companys control and is only to be paid to Global
Crossing or its affiliates upon fulfillment of certain obligations
and liabilities by those entities, as discussed above, there can be
no assurance that Global Crossing will not take a contrary position
in connection with the hearing on the Companys objection.

Prior to
the completion of the IPC Acquisition, the Company leased six floors at
67-73 Worship Street, London, England at an annual rate of approximately
£565,000, or $888,000, assuming an exchange rate of £1 to $1.5715. 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, which filed a petition for relief under Chapter 11 of Title 11 of the
United States Code on August 30, 2002, and the landlord has consented to that
sublease. In accordance with the procedures set forth in the Plan, the sublease
will be assumed by Global Crossings affiliate as of the effective date of the
Plan. Through December 18, 2002, Global Crossings affiliate has made all of
its required sublease payments. At the closing of the IPC Acquisition, the Company
deferred approximately $3.2 million of the purchase price, which represents
approximately two years of rental payments under the sublease and the estimated
costs to restore the premises for use as a general office facility in the event
Global Crossings affiliate were to vacate the premises. In the event that the Company,
rather than Global Crossing or its affiliates, pay the landlord amounts up to
$3.2 million with respect to Global Crossings portion of this space, under the
terms of the purchase agreement the Company will no longer be obligated to make a
deferred purchase price payment in the corresponding amount to Global Crossing.

Set forth below is the unaudited pro forma results of operations of the
Company for the fiscal year ended September 30, 2001 and the period October 1,
2001 to December 20, 2001, as if the IPC Acquisition and the related financings
occurred as of the beginning of each period.

The unaudited pro forma 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 IPC
Acquisition and the related financings occurred as of the beginning of each
period, or to project the results for any future period.

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

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IPC ACQUISITION CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  Continued
September 30, 2002

|                  |  |               |         |            |  |             |        |  
|----------------- |  | ------------- | ------- | ---------- |  | ----------- | ------ | -
|                  |  | Predecessors 
|                  |  |              
|                  |  |               |         |            |  | Period from
|                  |  | Fiscal Year   |         | October 1,
|                  |  | Ended         |         | 2001 to   
|                  |  | September 30, |         | December  
|(in thousands)    |  | 2001          |         | 20, 2001  
|                  |  |               |         |           
|Revenue           |  | $             | 279,697 |            |  | $           | 58,780 |  
|Net income (loss) |  | $             | 11,200  |            |  | $           | (3,870 | )

IPC has received notices of taxes due from various jurisdictions related
to Federal and state payroll taxes, state income taxes, state sales taxes, VAT, and income taxes in several foreign countries. These notices are
for periods prior to the IPC Acquisition. Under the purchase agreement, Global
Crossing is responsible for payment of these taxes. Since Global Crossing is
now under bankruptcy protection, the bankruptcy court must approve any such tax
payments by Global Crossing for periods prior to the commencement of Global
Crossings bankruptcy case. If the bankruptcy court does not approve Global
Crossings payment of all amounts that are due with respect to these taxes,
these jurisdictions may proceed against IPC for these amounts. If the purchase
agreement is rejected, Global Crossing may avoid its obligations to pay the
taxes and to indemnify the Company for payment of the taxes. Currently, the
aggregate amount of taxes for which IPC has received notices is approximately $5.2 million and was recorded on the consolidated balance sheet
as part of the Companys purchase accounting. The ultimate settlement of these
liabilities may be for amounts which are different from the amounts presently
recorded.

Additionally,
certain tax returns for periods prior to and including the IPC
Acquisition are not yet due and still must be filed by Global
Crossing pursuant to the purchase agreement. Global Crossing has
informed the Company that as a result of its rejection of the
purchase agreement, it may not include IPC
Information Systems and its subsidiaries in such tax returns. In the
Companys objection to Global Crossings rejection of the
purchase agreement, the Company has requested the bankruptcy court to
uphold the purchase agreement and, in any event, to order Global
Crossing to include IPC Information Systems and its subsidiaries in
such tax returns even if the rejection of the purchase agreement is
permitted. It is possible, however, that the Court will not grant the
Companys request. The Company believes that Global Crossing is
contractually required to include IPC Information Systems and its
subsidiaries in such tax returns, and further believes that Global
Crossing does not have any legal basis to exclude IPC Information
Systems and subsidiaries from these tax returns. If, however, Global
Crossing does not include IPC Information Systems and its
subsidiaries in such tax returns and IPC Information Systems and its
subsidiaries are required to separately file these tax returns and
pay any pre-IPC Acquisition tax liabilities, such liabilities, which
the Company estimates to be in the range of $0 to $36 million,
could have a material adverse effect on the Companys financial
condition and results of operations, including requiring the Company
to seek financing to pay any additional pre-IPC Acquisition tax
liabilities.

Acquisition of Hitachi Turret Business

On March 11, 2002, the Company entered into an agreement to purchase the
international customer base and related assets of the turret business of
Hitachi, Ltd for approximately $2.5 million. This transaction was completed on
March 29, 2002, and has been accounted for under purchase accounting in
accordance with SFAS No. 141. This acquisition would not have had a material
impact on the Companys results of operations for the period October 1, 2001 to
December 20, 2001, and the period November 15, 2001 to
September 30, 2002.

4. Inventories (in thousands)

|                                                  |  |             |        |          |  |           |        |  |  |   |        | 
|------------------------------------------------- |  | ----------- | ------ | -------- |  | --------- | ------ |  |  | - | ------ | 
|                                                  |  | Predecessor |        |          |  |           |        |  |  |  
|                                                  |  |             |        |          |  |           |        |  |  |  
|                                                  |  | September   |        | December |  | September
|                                                  |  | 30, 2001    |        | 31, 2001 |  | 30, 2002 
|                                                  |  |             |        |          |  |          
|Components and manufacturing work in process      |  | $           | 9,720  |          |  | $         | 7,114  |  |  | $ | 6,091  | 
|Inventory on customer sites awaiting installation |  |             | 25,775 |          |  |           | 51,536 |  |  |   | 8,025  | 
|Parts and maintenance supplies                    |  |             | 9,763  |          |  |           | 9,160  |  |  |   | 8,102  | 
|                                                  |  |             |        |          |  |           |        |  |  |   |        | 
|                                                  |  | $           | 45,258 |          |  | $         | 67,810 |  |  | $ | 22,218 | 
|                                                  |  |             |        |          |  |           |        |  |  |   |        | 

5. Property, Plant and Equipment (in thousands)

|                                  |  |             |        |          |  |           |        |   |  |   |        |  
|--------------------------------- |  | ----------- | ------ | -------- |  | --------- | ------ | - |  | - | ------ | -
|                                  |  | Predecessor |        |          |  |           |        |   |  |  
|                                  |  |             |        |          |  |           |        |   |  |  
|                                  |  | September   |        | December |  | September
|                                  |  | 30, 2001    |        | 31, 2001 |  | 30, 2002 
|                                  |  |             |        |          |  |          
|Building                          |  | $           | 2,080  |          |  | $         | 1,893  |   |  | $ | 1,893  |  
|Furniture, fixtures and equipment |  |             | 19,886 |          |  |           | 16,616 |   |  |   | 19,224 |  
|Leasehold improvements            |  |             | 2,613  |          |  |           | 1,501  |   |  |   | 2,738  |  
|Construction in progress          |  |             | 1,799  |          |  |           |       |   |  |   |       |  
|Land                              |  |             | 1,440  |          |  |           | 1,349  |   |  |   | 1,349  |  
|                                  |  |             |        |          |  |           |        |   |  |   |        |  
|                                  |  |             | 27,818 |          |  |           | 21,359 |   |  |   | 25,204 |  
|Less: accumulated depreciation    |  |             | (7,450 | )        |  |           | (156   | ) |  |   | (4,200 | )
|                                  |  |             |        |          |  |           |        |   |  |   |        |  
|                                  |  | $           | 20,368 |          |  | $         | 21,203 |   |  | $ | 21,004 |  
|                                  |  |             |        |          |  |           |        |   |  |   |        |  

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IPC ACQUISITION CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  Continued
September 30, 2002

Depreciation and amortization expense for the periods October 1, 1999 to
June 14, 2000, June 15, 2000 to September 30, 2000, fiscal year ended September
30, 2001, October 1, 2001 to December 20, 2001, and November 15, 2001 to
September 30, 2002 was $3.7 million, $1.8 million, $7.0 million, $1.4 million,
and $4.0 million, respectively. Additionally, during the period November 15,
2001 to September 30, 2002, a reclassification of $2.7 million was made from
furniture, fixtures and equipment to inventory for equipment leased to
customers.

6. Goodwill and Intangible Assets

The Company adopted SFAS No. 142, effective December 20, 2001 (the date of
the IPC 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
Predecessor been accounting for its goodwill and indefinite lived intangible
assets (tradenames) under SFAS No.142 for all periods presented, the
Predecessors net income (loss) would have been as follows:

|                                                                        |  |                    |       |                   |  |                    |         |                    |  |                   |         |   |  |             |         |   |  |   |        |  
|----------------------------------------------------------------------- |  | ------------------ | ----- | ----------------- |  | ------------------ | ------- | ------------------ |  | ----------------- | ------- | - |  | ----------- | ------- | - |  | - | ------ | -
|                                                                        |  | Predecessors      
|                                                                        |  |                   
|                                                                        |  | Period from        |       | Period from       |  |                    |         |                    |  |                   |         |   |  | Period from
|                                                                        |  | October 1, 1999 to |       | June 15,          |  | Fiscal Year        |         | Period from        |  | November 15, 2001
|                                                                        |  | June 14,           |       | 2000 to September |  | Ended              |         | October 1, 2001 to |  | to September 30, 
|(in thousands)                                                          |  | 2000               |       | 30, 2000          |  | September 30, 2001 |         | December 20, 2001  |  | 2002             
|                                                                        |  |                    |       |                   |  |                    |         |                    |  |                  
|Reported net income (loss)                                              |  | $                  | 6,252 |                   |  | $                  | (19,879 | )                  |  | $                 | (12,831 | ) |  | $           | (11,028 | ) |  | $ | (9,200 | )
|Add back goodwill amortization, net of tax                              |  |                    | 2,108 |                   |  |                    | 3,925   |                    |  |                   | 13,367  |   |  |             | 2,978   |   |  |   |       |  
|Add back amortization of indefinite lived
intangible assets, net of tax |  |                    |      |                   |  |                    | 1,243   |                    |  |                   | 4,263   |   |  |             | 950     |   |  |   |       |  
|                                                                        |  |                    |       |                   |  |                    |         |                    |  |                   |         |   |  |             |         |   |  |   |        |  
|Adjusted net income (loss)                                              |  | $                  | 8,360 |                   |  | $                  | (14,711 | )                  |  | $                 | 4,799   |   |  | $           | (7,100  | ) |  | $ | (9,200 | )
|                                                                        |  |                    |       |                   |  |                    |         |                    |  |                   |         |   |  |             |         |   |  |   |        |  

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

|                   |                                  |                                            |                     |          |             |          |          |   |           |         |  |   |         |         | 
|------------------ | -------------------------------- | ------------------------------------------ | ------------------- | -------- | ----------- | -------- | -------- | - | --------- | ------- |  | - | ------- | ------- | 
|                   |                                  |                                            |                     |          | Predecessor |          |          |   |           |         |  |   |        
|                   |                                  |                                            |                     |          |             |          |          |   |           |         |  |   |        
|                   |                                  |                                            |                     |          | September   |          | December |   | September
|(in thousands)     |                                  | 30, 2001                                   |                     | 31, 2001 |             | 30, 2002
|                   |                                  |                                            |                     |          |             |          |          |   |          
|Intangible assets: |                                  |                                            |                     |          |             |          |          |   |           |         |  |  
|                   | Amortized intangible assets:     |                                            |                     |          |             |          |          |   |           |         |  |   |        
|                   |                                  | Technology                                 |                     | $        | 35,940      |          |          | $ | 45,000    |         |  | $ | 45,000  |        
|                   |                                  | Customer list                              |                     |          | 108,904     |          |          |   | 153,000   |         |  |   | 154,030 |        
|                   |                                  | Effect of currency translation adjustments |                     |          |            |          |          |   |          |         |  |   | 2,754   |        
|                   |                                  | Accumulated amortization                   |                     |          | (20,698     | )        |          |   | (399      | )       |  |   | (11,114 | )      
|                   |                                  |                                            |                     |          |             |          |          |   |           |         |  |  
|                   |                                  |                                            | Net carrying amount |          | $           | 124,146  |          |   | $         | 197,601 |  |   | $       | 190,670 | 
|                   |                                  |                                            |                     |          |             |          |          |   |           |         |  |  
|                   | Non-amortized intangible assets: |                                            |                     |          |             |          |          |   |           |         |  |   |        
|                   |                                  | Goodwill                                   |                     | $        | 185,033     |          |          | $ | 77,310    |         |  | $ | 70,636  |        
|                   |                                  | Tradenames                                 |                     |          | 15,867      |          |          |   | 18,000    |         |  |   | 18,000  |        
|                   |                                  | Effect of currency translation adjustments |                     |          |            |          |          |   |          |         |  |   | 2,105   |        
|                   |                                  | Assembled workforce                        |                     |          | 12,617      |          |          |   |          |         |  |   |        |        
|                   |                                  |                                            |                     |          |             |          |          |   |           |         |  |  
|                   |                                  |                                            | Net carrying amount |          | $           | 213,517  |          |   | $         | 95,310  |  |   | $       | 90,741  | 
|                   |                                  |                                            |                     |          |             |          |          |   |           |         |  |  

Amortization expense for those intangible assets still required to be
amortized under SFAS No.142 was $11.1 million for the period from November 15,
2001 to September 30, 2002. Amortization expense for goodwill and intangible
assets prior to the adoption of SFAS No.142 was $3.3 million, $12.2 million,
$41.6 million and $9.3 million for the periods October 1, 1999 to June 14,
2000, June 15, 2000 to September 30, 2000, fiscal year ended September 30,
2001, and October 1, 2001 to December 20, 2001, respectively. The Company
estimates amortization expense on a straight-line basis will approximate
$14.1 million for each of the five succeeding fiscal years ending September 30,
2007.

The final 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

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IPC ACQUISITION CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  Continued
September 30, 2002

operating units. Such goodwill, including $24.4 million allocated to the
Companys non-U.S. operations which is non-deductible for income tax purposes,
was allocated to the Companys operating segments as follows: $71.3 million to
Trading Systems and $1.0 million to I.T.S.

7. Accrued Expenses and Other Current Liabilities (in thousands)

|                                  |  |             |        |          |  |           |        |  |  |   |        | 
|--------------------------------- |  | ----------- | ------ | -------- |  | --------- | ------ |  |  | - | ------ | 
|                                  |  | Predecessor |        |          |  |           |        |  |  |  
|                                  |  |             |        |          |  |           |        |  |  |  
|                                  |  | September   |        | December |  | September
|                                  |  | 30, 2001    |        | 31, 2001 |  | 30, 2002 
|                                  |  |             |        |          |  |          
|Accrued compensation and benefits |  | $           | 6,273  |          |  | $         | 6,874  |  |  | $ | 7,719  | 
|Warranty reserves                 |  |             | 2,373  |          |  |           | 2,430  |  |  |   | 2,159  | 
|Sales taxes payable               |  |             | 792    |          |  |           | 1,033  |  |  |   | 1,267  | 
|Job accruals                      |  |             | 4,010  |          |  |           | 2,530  |  |  |   | 1,867  | 
|Accrued transaction costs         |  |             |       |          |  |           | 7,900  |  |  |   | 651    | 
|Accrued interest                  |  |             |       |          |  |           | 757    |  |  |   | 5,072  | 
|Other accruals                    |  |             | 1,581  |          |  |           | 5,685  |  |  |   | 4,827  | 
|                                  |  |             |        |          |  |           |        |  |  |   |        | 
|                                  |  | $           | 15,029 |          |  | $         | 27,209 |  |  | $ | 23,562 | 
|                                  |  |             |        |          |  |           |        |  |  |   |        | 

8. Long Term Debt

Senior Secured Credit Facilities

On December 20, 2001, the Company entered into senior secured credit
facilities with a group of lenders, comprised of (i) a $105 million term loan
and (ii) a $15 million revolving credit facility. The maturity date of the
loans is December 31, 2006. The Company had no outstanding borrowings under the
revolving credit facility at September 30, 2002. However, the amount available
to the Company at September 30, 2002 under the revolving credit facility is
reduced by outstanding letters of credit of $4.3 million.

The term loan was borrowed in full at the closing and the proceeds
thereunder funded a portion of the consideration for the IPC Acquisition.
Quarterly principal repayments of $1.3 million were required beginning on March
31, 2002, increasing to $2.6 million on March 31, 2003 through December 31,
2005 and further increasing to $17.1 million for each quarter in 2006.
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 excess cash flow, as defined.

There is no required amortization of the revolving credit facility.
Outstanding borrowings under the revolving credit facility may be prepaid at
any time, in whole or in part, without premium or penalty and may be reborrowed
at any time prior to December 31, 2006. A letter of credit subfacility of $5
million is available under the revolving credit facility. At September 30,
2002, an aggregate of $4.3 million letters of credit have been issued, thereby
reducing the amount available for borrowing under the revolving credit facility
to $10.7 million.

Borrowings under the senior secured credit facilities bear interest, at
the Companys option, at either (i) a base rate (defined as a rate per annum
equal to the greater of (a) the prime rate in effect on such day, and (b) the
federal funds effective rate in effect on such day plus 1/2 of 1%) plus the
applicable margin (as defined below) (the Base Rate Loans) or (ii) an
adjusted LIBOR rate (the rate (as adjusted for statutory reserve requirements
for eurocurrency liabilities) for Eurodollar deposits for a
period of one, two, three or six months (as selected by the Company) (the
Eurodollar Rate Loans)), in each case plus the applicable margin. The
applicable margin is (i) with respect to Base Rate Loans, 3.50% per annum and
(ii) with respect to Eurodollar Rate Loans, 4.50% per annum; provided, that in
no event will the applicable interest rate on the senior secured credit
facilities be less than 7.50%. Interest is payable quarterly for Base Rate
Loans and at the end of the relevant interest period (or
quarterly in certain cases) for all Eurodollar Loans. The default rate under
the senior secured credit facilities is equal to the base rate plus 2%. At
September 30, 2002, the interest rate on borrowings under the senior secured
credit facilities was 7.50%.

The senior secured credit facilities require the Company to pay a
commitment fee calculated at a rate equal to 1% per annum on the average daily
unused portion of the revolving credit facility and an annual administrative
fee of $125,000.

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

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IPC ACQUISITION CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  Continued
September 30, 2002

On September 30, 2002, the Company made an excess free cash flow repayment
of $30 million based upon 75% of the Companys free cash flow for the period
ended September 30, 2002.

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

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

As of September 30, 2002, annual principal repayments required under the
$105 million term loan, (excluding any future excess free cash flow amounts),
by fiscal year, are as follows (in thousands):

|     |  |   |        | 
|---- |  | - | ------ | 
|2003 |  | $ | 6,460  | 
|2004 |  |   | 7,383  | 
|2005 |  |   | 7,383  | 
|2006 |  |   | 37,838 | 
|2007 |  |   | 11,998 | 
|     |  |   |        | 
|     |  | $ | 71,062 | 
|     |  |   |        | 

Senior Subordinated Notes

The Company issued $150 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 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 million. The senior subordinated notes mature on December 15, 2009. The
senior subordinated notes are general unsecured obligations of the Company, are
subordinated in right of payment to all existing and future senior debt,
including the senior secured credit facilities, are pari passu in right of
payment with any future senior subordinated indebtedness of the Company, and
are unconditionally guaranteed by certain of the Companys domestic restricted
subsidiaries.

Interest on the senior subordinated notes accrue at the rate of 11.50% per
annum and is payable semi-annually in arrears on June 15 and December 15,
commencing on June 15, 2002. Pursuant to a registration rights agreement
entered into at the time the senior subordinated notes were issued, on June 21,
2002 the Company completed an exchange offer registered under the Securities
Act of 1933, as amended, in which 100% of the outstanding senior subordinated
notes were exchanged for a different series of senior subordinated notes having
substantially identical terms.

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

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IPC ACQUISITION CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  Continued
September 30, 2002

9. Deferred Compensation and Other Benefit Plans

Deferred Compensation

The Company has deferred compensation agreements with certain past key
officers and employees. Amounts to be paid range from $6,250 to $75,000 per
individual per annum and are non-interest-bearing, with the payments commencing
on specified dates. Payments began in 1992 and continue through 2019. The gross
and discounted present value (using an interest rate of 7.5%), net of cash
payments, of the amounts to be paid under these agreements aggregated $5.6
million and $3.8 million, respectively, at September 30, 2002.

Approximate payments for subsequent fiscal periods related to the deferred
compensation agreements at September 30, 2002, are as follows (in thousands):

|                                  |                                   |   |       |        |  
|--------------------------------- | --------------------------------- | - | ----- | ------ | -
|Fiscal year ending September 30,: |                                   |   |       |       
|2003                              |                                   | $ | 633   |       
|2004                              |                                   |   | 467   |       
|2005                              |                                   |   | 503   |       
|2006                              |                                   |   | 521   |       
|2007                              |                                   |   | 490   |       
|Thereafter                        |                                   |   | 2,989 |       
|                                  |                                   |   |       |       
|                                  | Total minimum payments            |   |       | 5,603  |  
|                                  | Less amount representing interest |   |       | (1,851 | )
|                                  |                                   |   |       |       
|                                  | Present value of minimum payments |   | $     | 3,752  |  
|                                  |                                   |   |       |       

Pension Plans

The Company offers its qualified U.S. employees the opportunity to
participate in a defined contribution employee retirement plan in accordance
with section 401(k) of the Internal Revenue Code. Eligible employees are
entitled to contribute up to 50% of their annual compensation, subject to
certain limitations ($11,000 for the year ended December 31, 2002). The
Companys matching contributions is subject to the discretion of the board of
directors. IPC UK, IPC Singapore, IPC Hong Kong and IPC Australia have defined
contribution plans covering their employees. Employee contributions are limited
by statute, generally not to exceed 17.5% (UK), 16.0% (Singapore), 10.0% (Hong
Kong) and 9.0% (Australia) of base salary. The Companys contributions to these
plans, net of forfeitures, for the periods October 1, 1999 to June 14, 2000,
June 15, 2000 to September 30, 2000, fiscal year ended September 30, 2001,
October 1, 2001 to December 20, 2001, and November 15, 2001 to September 30,
2002, were $0.1 million, $0.1 million, $0.3 million, $0.1 million and $0.5
million, respectively.

The Company paid to Kleinknecht Electric Company New York (KEC-NY) and
Kleinknecht Electric Company New Jersey (KEC-NJ), both former affiliated
companies owned by one of the Companys minority stockholders, in accordance
with labor pooling agreements, approximately $5.6 million, $2.0 million, $8.9
million, $1.9 million and $5.6 million, for the periods October 1, 1999 to June
14, 2000, June 15, 2000 to September 30, 2000, fiscal year ended September 30,
2001, October 1, 2001 to December 20, 2001, and November 15, 2001 to September
30, 2002, respectively. These payments represented pass-through contributions
to various union sponsored pension plans.

Stock Option Plan

In February 2002, the Company adopted the 2002 Stock Option Plan. The
option plan provides for the grant of options to purchase shares of the
Companys common stock to selected employees, officers, consultants and
directors. The purpose of the option plan is to provide an incentive to
employees, officers, consultants and directors to devote their abilities and
industry to the Companys success. The maximum number of shares that may be
made the subject of options granted under the option plan is 900,000. Through
September 30, 2002, the Company had granted 769,550 stock options with an
option price of $10 per share, which was the fair value of the Companys common
stock at such date. The Company accounts for these options pursuant to APB
Opinion No. 25 Accounting for Stock Options Issued to Employees. Accordingly,
no compensation expense was recognized for these grants.

The option plan is administered by the compensation committee of the
Companys board of directors, which determines the individuals to whom options
are awarded, the number of shares subject to each award, the exercise price of
the option and other terms and conditions of the awards. Unless otherwise
provided by the compensation committee, an option becomes exercisable for 25%
of the shares subject to the option on each of the first four anniversaries of
the date the compensation committee grants

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IPC ACQUISITION CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  Continued
September 30, 2002

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 November 15, 2001 (date of
initial capitalization) to September 30, 2002 are as follows:

|                                  |  |           |         |                  |  |   |       | 
|--------------------------------- |  | --------- | ------- | ---------------- |  | - | ----- | 
|                                  |  | Number of |         | Weighted Average
|                                  |  | Shares    |         | Exercise Price  
|                                  |  |           |         |                 
|Outstanding at November 15, 2001  |  |           |        |                  |  |   |      | 
|Granted                           |  |           | 769,550 |                  |  | $ | 10.00 | 
|Exercised                         |  |           |        |                  |  |   |      | 
|Cancelled                         |  |           | (18,525 | )                |  |   | 10.00 | 
|                                  |  |           |         |                  |  |   |       | 
|Outstanding at September 30, 2002 |  |           | 751,025 |                  |  | $ | 10.00 | 
|                                  |  |           |         |                  |  |   |       | 

Of the total stock options outstanding, none were exercisable at September
30, 2002. The amount of additional options available to be granted pursuant to
the option plan was 148,975 at September 30, 2002.

Pro forma information regarding net income (loss) and earnings (loss) per
share is required by SFAS No.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
grant using a Black-Scholes option pricing model with the following
assumptions: weighted-average risk-free interest rate of 3.5% for the period
ended September 30, 2002; no dividends; volatility factor of the expected
market price of the Companys common stock of 74.2% for the period ended
September 30, 2002, and a weighted-average expected life of the options of 5
years for the period ended September 30, 2002.

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 the
options granted during the period from November 15, 2001 to September 30, 2002
is amortized to expense over the option vesting periods. The weighted-average
grant date fair value of options granted during the period ended September 30,
2002 was $6.28. The Companys pro forma net loss for the period ended September
30, 2002 would be $9.3 million. This amount may not necessarily be indicative
of the pro forma effect of SFAS 123 for future periods in which options may be
granted.

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 will be 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
44Table of ContentsIPC ACQUISITION CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  Continued
September 30, 2002Sarbanes-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 had been purchased under the plan by certain directors, officers
and other key
employees. 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. The interest rate for
the promissory notes received is equal to the applicable federal rate which is
currently 3.18%. The promissory notes are due on the first of the three
following events to occur, (1) the later of the fifth anniversary of the date
the promissory note was issued or the 180th day immediately following an initial
public offering of the Companys stock, (2) the 30th day following termination
of employment, or (3) the 180th day following death.10. Restructuring ChargeThe Company continues to expect current market conditions to cause the
Companys customers to exercise caution with information technology and
communications spending, which may cause decreased product sales and
installation revenue in the 2003 fiscal year. Accordingly, the Company reduced
its work force by approximately 8%, or 75 employees, in the fourth quarter of
the 2002 fiscal year to reduce fixed costs in the 2003 fiscal year. The
reduction in work force included 21 employees from the Companys engineering
staff, 35 employees from the Companys operations staff and 19 employees from
the Companys corporate staff. The total amount of severance and other benefits
charged to the selling, general and administrative category of the Companys
statement of operations in the fourth quarter of the 2002 fiscal year was $0.6
million. As of September 30, 2002, $0.5 million has been paid and $0.1 million
remains accrued.11. Foreign Currency InstrumentsAs an international company, the Company is exposed to foreign currency
risk. In order to minimize the risk caused by currency fluctuations, the
Company entered into two foreign currency hedging contracts, commonly known as
collars, in the third quarter of the 2002 fiscal year with notional amounts of
£4 million and £6 million, or approximately
$6.3 million and $9.4 million, respectively, assuming an
exchange rate of £1 to $1.5715, and maturity dates of September 13, 2002 and
September 18, 2002, respectively. The Company used these collars to minimize
exchange rate risk when repatriating funds from its UK subsidiary. The Company
repatriated these funds in September 2002 in connection with its required bank
debt repayments. The currency hedged was the British Pound. Under Statement of
Financial Accounting Standards No.133, Accounting for Derivative Instruments
and Hedging Activities, the Company is required to recognize all derivatives
as either assets or liabilities in the consolidated statement of financial
position and measure those instruments at fair value. As of September 30, 2002,
the Company recognized a loss of $0.3 million as a component of other income
and expense in the consolidated statement of operations in connection with the
settlement of these collars. As of September 30, 2002, there was no foreign
currency hedging instruments or other derivatives outstanding.12. Commitments and ContingenciesOperating LeasesThe Company, through its subsidiaries, has entered into various operating
leases for real estate, equipment, automobiles and telecommunications lines and
circuits.Rental expenses under operating leases were $2.5 million, $0.8 million,
$3.9 million, $1.0 million and $4.3 million for the periods October 1, 1999 to
June 14, 2000, June 15, 2000 to September 30, 2000, fiscal year ended September
30, 2001, October 1, 2001 to December 20, 2001 and November 15, 2001 to
September 30, 2002, respectively.Future minimum annual rental payments required under noncancellable
operating leases at September 30, 2002 are as follows (in thousands):45Table of ContentsIPC ACQUISITION CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  Continued
September 30, 2002

|           |  |   |        | 
|---------- |  | - | ------ | 
|2003       |  | $ | 5,072  | 
|2004       |  |   | 4,526  | 
|2005       |  |   | 3,524  | 
|2006       |  |   | 3,166  | 
|2007       |  |   | 3,136  | 
|Thereafter |  |   | 8,002  | 
|           |  |   |        | 
|           |  | $ | 27,426 | 
|           |  |   |        | 

Legal Proceedings

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

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

13. Related Party Transactions

Services

Through December 20, 2001, Global Crossing and IPC performed various
services and provided certain equipment for each other. Services and/or
equipment provided by Global Crossing were billed to IPC and settled through a
periodic cash transfer to Global Crossing. Revenue related to services provided
by IPC to Global Crossing amounted to $2.2 million, $1.1 million, $2.9 million,
$0.4 million, for the periods October 1, 1999 to June 14, 2000, June 15, 2000
to September 30, 2000, fiscal year ended September 30, 2001, and October 1,
2001 to December 20, 2001, respectively.

Through December 20, 2001, Global Crossing allocated certain shared costs
to IPC for items such as human resources, information technology, legal and
communication that amounted to $2.7 million and $0.5 million, for the fiscal
year ended September 30, 2001 and the period from October 1, 2001 to December
20, 2001, respectively. Additionally, Global Crossing allocated a corporate
charge to IPC of $1.9 million and $6.9 million for the fiscal year ended
September 30, 2001 and the period from October 1, 2001 to December 20, 2001,
which represented the allocation for fiscal year 2000 and 2001. IPC allocated
charges to Global Crossing for shared real estate locations that amounted to
$1.0 million for the period October 1, 2001 to December 20, 2001. Management
believes that the costs allocated to IPC are reasonable.

The Company provides certain services to Goldman, Sachs & Co., an
affiliate of GSCP 2000. GSCP 2000 and other private equity funds affiliated
with Goldman, Sachs & Co. own substantially all of the
Companys common stock.
Services provided by the Company are billed to Goldman Sachs and settled
through the collection of trade receivables. Revenue related to these services
amounted to $2.9 million and $4.4 million for the periods October 1, 2001 to
December 20, 2001 and November 15, 2001 to September 30, 2002, respectively. At
December 31, 2001 and September 30, 2002, the Company has recorded on its
consolidated balance sheet $2.4 million and $1.1 million of trade receivables
and $0.7 million and $2.7 million of customer advances, respectively, related
to maintenance services provided to Goldman Sachs.

The Company provides installation projects and maintenance services on
turrets to Goldman, Sachs & Co. The Company was paid $0.1 million for the
period from November 15, 2001 to September 30, 2002 by Goldman, Sachs & Co. for
these projects and services.

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IPC ACQUISITION CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  Continued
September 30, 2002

Goldman Sachs and its related investment funds provided advisory and other
services to GSCP 2000 and the Company in connection with sourcing, structuring
and arranging of the IPC Acquisition and received fees of $8.0 million for
those services. Goldman Sachs also acted as an initial purchaser in the
offering of the outstanding senior subordinated notes and an affiliate of
Goldman Sachs acted as the arranger and syndication agent under the Companys
senior secured credit facilities. In connection with these transactions,
Goldman Sachs and its affiliates received aggregate fees of approximately $9.3
million.

Agreements

As of September 30, 2002, approximately 350 of the Companys staff in the
United States are represented by collective bargaining units, including
approximately 310 workers who are retained under labor pooling agreements that
the Company has entered into with KEC-NY and KEC-NJ, a company owned by one of
our minority stockholders. Under these agreements, KEC-NY and KEC-NJ are
signatories to collective bargaining agreements with the union locals that
represent these employees. In addition, pursuant to these agreements, KEC-NY
and KEC-NJ are responsible for paying the employees, remitting payroll taxes
and making any required contributions to any union benefit plans covering the
employees. The Company reimburses KEC-NJ and KEC-NY for these expenses, pays
them a total fee of $50,000 per month and has agreed to indemnify them for
liabilities related to the Companys employees. The Company has a standby
letter of credit in place in favor of KEC-NY and KEC-NJ in the amount of $1.5
million for labor compensation and benefits related to these employees. The
agreements also require the Company to indemnify the shareholders of KEC-NY and
KEC-NJ for losses, up to $5 million, the Company causes relating to the union
pension plan in which the Companys employees covered by these agreements
participate.

14. Income Taxes

Pretax income (loss) consisted of the following (in thousands):

|                           |  |                    |        |                    |  |                    |         |                    |  |                  |         |                   |  |   |         |             |  |   |         |  
|-------------------------- |  | ------------------ | ------ | ------------------ |  | ------------------ | ------- | ------------------ |  | ---------------- | ------- | ----------------- |  | - | ------- | ----------- |  | - | ------- | -
|                           |  | Predecessors       |        |                    |  |                   
|                           |  |                    |        |                    |  |                   
|                           |  | Period from        |        |                    |  |                    |         |                    |  |                  |         |                   |  |   |         | Period from
|                           |  | October 1, 1999 to |        | Period from        |  |                    |         |                    |  | Period from      |         | November 15, 2001
|                           |  | June 14,           |        | June 15, 2000 to   |  | Fiscal Year Ended  |         | October 1, 2001 to |  | to September 30,
|(in thousands)             |  | 2000               |        | September 30, 2000 |  | September 30, 2001 |         | December 20, 2001  |  | 2002            
|                           |  |                    |        |                    |  |                    |         |                    |  |                 
|United States              |  | $                  | 5,086  |                    |  | $                  | (16,735 | )                  |  | $                | (24,725 | )                 |  | $ | (16,230 | )           |  | $ | (22,080 | )
|Foreign                    |  |                    | 5,300  |                    |  |                    | 4,800   |                    |  |                  | 16,300  |                   |  |   | 4,884   |             |  |   | 10,594  |  
|                           |  |                    |        |                    |  |                    |         |                    |  |                  |         |                   |  |   |         |             |  |   |         |  
|Total pretax income (loss) |  | $                  | 10,386 |                    |  | $                  | (11,935 | )                  |  | $                | (8,425  | )                 |  | $ | (11,346 | )           |  | $ | (11,486 | )
|                           |  |                    |        |                    |  |                    |         |                    |  |                  |         |                   |  |   |         |             |  |   |         |  

The provision (benefit) for income taxes consisted of the following (in
thousands):

|               |                 |                               |       |                    |       |                    |         |                   |        |                    |         |                  |       |                   |        |        |      |             |        |        |        |  
|-------------- | --------------- | ----------------------------- | ----- | ------------------ | ----- | ------------------ | ------- | ----------------- | ------ | ------------------ | ------- | ---------------- | ----- | ----------------- | ------ | ------ | ---- | ----------- | ------ | ------ | ------ | -
|               |                 |                               |       | Predecessors       |       |                    |         |                  
|               |                 |                               |       |                    |       |                    |         |                  
|               |                 |                               |       | Period from        |       |                    |         |                   |        |                    |         |                  |       |                   |        |        |      | Period from
|               |                 |                               |       | October 1, 1999 to |       | Period from        |         |                   |        |                    |         | Period from      |       | November 15, 2001
|               |                 |                               |       | June 14,           |       | June 15, 2000 to   |         | Fiscal Year Ended |        | October 1, 2001 to |         | to September 30,
|(in thousands) |                 | 2000                          |       | September 30, 2000 |       | September 30, 2001 |         | December 20, 2001 |        | 2002              
|               |                 |                               |       |                    |       |                    |         |                   |        |                    |         |                 
|Current:       |                 |                               |       |                    |       |                    |         |                   |        |                    |         |                  |       |                   |        |        |      |             |        |       
|               | State and local |                               | $     | 652                |       |                    | $       | 1,903             |        |                    | $       | 2,582            |       |                   | $      | 747    |      |             | $      | 490    |       
|               | Foreign         |                               |       | 2,091              |       |                    |         | 1,709             |        |                    |         | 5,835            |       |                   |        | 1,344  |      |             |        | 4,394  |       
|               | Federal         |                               |       | 2,306              |       |                    |         | 6,738             |        |                    |         | 9,137            |       |                   |        | 2,352  |      |             |        |       |       
|               |                 |                               |       |                    |       |                    |         |                   |        |                    |         |                  |       |                   |        |        |      |             |        |       
|               |                 |                               | 5,049 |                    |       |                    | 10,350  |                   |        |                    | 17,554  |                  |       |                   | 4,443  |        |      |             | 4,884  |       
|               |                 |                               |       |                    |       |                    |         |                   |        |                    |         |                  |       |                   |        |        |      |             |        |       
|Deferred:      |                 |                               |       |                    |       |                    |         |                   |        |                    |         |                  |       |                   |        |        |      |             |        |       
|               | State           |                               |       | (202               | )     |                    |         | (2,849            | )      |                    |         | (2,897           | )     |                   |        | (1,050 | )    |             |        | (930   | )     
|               | Foreign         |                               |       |                   |       |                    |         |                  |        |                    |         |                 |       |                   |        |       |      |             |        | (452   | )     
|               | Federal         |                               |       | (713               | )     |                    |         | (10,083           | )      |                    |         | (10,251          | )     |                   |        | (3,711 | )    |             |        | (5,788 | )     
|               |                 |                               |       |                    |       |                    |         |                   |        |                    |         |                  |       |                   |        |        |      |             |        |       
|               |                 |                               | (915  | )                  |       |                    | (12,932 | )                 |        |                    | (13,148 | )                |       |                   | (4,761 | )      |      |             | (7,170 | )     
|               |                 |                               |       |                    |       |                    |         |                   |        |                    |         |                  |       |                   |        |        |      |             |        |       
|               |                 | Total tax provision (benefit) |       | $                  | 4,134 |                    |         | $                 | (2,582 | )                  |         | $                | 4,406 |                   |        | $      | (318 | )           |        | $      | (2,286 | )
|               |                 |                               |       |                    |       |                    |         |                   |        |                    |         |                  |       |                   |        |        |      |             |        |       

47



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IPC ACQUISITION CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  Continued
September 30, 2002

The components of net deferred tax assets (liabilities) are as follows (in
thousands):

|                          |                                                    |                              |   |                    |         |                   |   |                    |     |    |   |         |         |       |   |        |       |         |   |         |         |   |   |         |         |   |   |        |        |  |   |         |         |   |   |         |        |  
|------------------------- | -------------------------------------------------- | ---------------------------- | - | ------------------ | ------- | ----------------- | - | ------------------ | --- | -- | - | ------- | ------- | ----- | - | ------ | ----- | ------- | - | ------- | ------- | - | - | ------- | ------- | - | - | ------ | ------ |  | - | ------- | ------- | - | - | ------- | ------ | -
|                          |                                                    |                              |   | Predecessor        |         |                   |   |                    |     |    |   |         |         |       |   |        |       |         |   |         |         |   |   |         |         |   |   |       
|                          |                                                    |                              |   |                    |         |                   |   |                    |     |    |   |         |         |       |   |        |       |         |   |         |         |   |   |         |         |   |   |       
|                          |                                                    |                              |   | September 30, 2001 |         | December 31, 2001 |   | September 30, 2002
|                          |                                                    |                              |   |                    |         |                   |   |                   
|                          |                                                    |                              |   | US                 |         | Foreign           |   | Total              |     | US |   | Foreign |         | Total |   | US     |       | Foreign |   | Total  
|                          |                                                    |                              |   |                    |         |                   |   |                    |     |    |   |         |         |       |   |        |       |         |   |        
|Deferred tax assets:      |                                                    |                              |   |                    |         |                   |   |                    |     |    |   |         |         |       |   |        |       |         |   |         |         |   |   |         |         |   |   |        |        |  |   |         |         |   |   |        
|                          | Excess book over tax
depreciation                  |                              | $ | 682                |         |                   | $ |                   |     |    | $ | 682     |         |       | $ |       |       |         | $ |        |         |   | $ |        |         |   | $ | 607    |        |  | $ |        |         |   | $ | 607     |       
|                          | Amortization of intangibles                        |                              |   | 443                |         |                   |   |                   |     |    |   | 443     |         |       |   |       |       |         |   |        |         |   |   |        |         |   |   |       |        |  |   |        |         |   |   |        |       
|                          | Inventory and receivables                          |                              |   | 2,225              |         |                   |   |                   |     |    |   | 2,225   |         |       |   | 4,520  |       |         |   |        |         |   |   | 4,520   |         |   |   | 1,962  |        |  |   |        |         |   |   | 1,962   |       
|                          | Accrued expenses and deferred
compensation         |                              |   | 2,533              |         |                   |   | 369                |     |    |   | 2,902   |         |       |   | 2,937  |       |         |   |        |         |   |   | 2,937   |         |   |   | 2,101  |        |  |   |        |         |   |   | 2,101   |       
|                          | Net operating loss
carryforwards                   |                              |   |                   |         |                   |   |                   |     |    |   |        |         |       |   | 1,558  |       |         |   |        |         |   |   | 1,558   |         |   |   | 8,895  |        |  |   |        |         |   |   | 8,895   |       
|                          |                                                    |                              |   |                    |         |                   |   |                    |     |    |   |         |         |       |   |        |       |         |   |         |         |   |   |         |         |   |   |        |        |  |   |         |         |   |   |        
|                          | Total                                              |                              |   | 5,883              |         |                   |   | 369                |     |    |   | 6,252   |         |       |   | 9,015  |       |         |   |        |         |   |   | 9,015   |         |   |   | 13,565 |        |  |   |        |         |   |   | 13,565  |       
|                          |                                                    | Less valuation allowance     |   |                    |        |                   |   |                    |    |    |   |         |        |       |   |        |      |         |   |         |        |   |   |         |        |   |   |        |       |  |   |         |        |   |   |         |       |  
|                          |                                                    |                              |   |                    |         |                   |   |                    |     |    |   |         |         |       |   |        |       |         |   |         |         |   |   |         |         |   |   |        |        |  |   |         |         |   |   |        
|                          |                                                    | Total deferred tax assets    |   |                    | 5,883   |                   |   |                    | 369 |    |   |         | 6,252   |       |   |        | 9,015 |         |   |         |        |   |   |         | 9,015   |   |   |        | 13,565 |  |   |         |        |   |   |         | 13,565 |  
|                          |                                                    |                              |   |                    |         |                   |   |                    |     |    |   |         |         |       |   |        |       |         |   |         |         |   |   |         |         |   |   |        |        |  |   |         |         |   |   |        
|Deferred tax liabilities: |                                                    |                              |   |                    |         |                   |   |                    |     |    |   |         |         |       |   |        |       |         |   |         |         |   |   |         |         |   |   |        |        |  |   |         |         |   |   |        
|                          | Intangible assets                                  |                              |   | (62,806            | )       |                   |   |                   |     |    |   | (62,806 | )       |       |   | (75    | )     |         |   |        |         |   |   | (75     | )       |   |   | (701   | )      |  |   |        |         |   |   | (701    | )     
|                          | Acquisition tax liabilities                        |                              |   |                   |         |                   |   |                   |     |    |   |        |         |       |   | (6,547 | )     |         |   |        |         |   |   | (6,547  | )       |   |   | (6,547 | )      |  |   |        |         |   |   | (6,547  | )     
|                          | Unremitted earnings of foreign
entities            |                              |   |                   |         |                   |   |                   |     |    |   |        |         |       |   |       |       |         |   |        |         |   |   |        |         |   |   | (706   | )      |  |   |        |         |   |   | (706    | )     
|                          | Excess tax over book
depreciation                  |                              |   |                   |         |                   |   | (125               | )   |    |   | (125    | )       |       |   | (80    | )     |         |   |        |         |   |   | (80     | )       |   |   |       |        |  |   |        |         |   |   |        |       
|                          | Excess book over tax basis in
foreign subsidiaries |                              |   |                   |         |                   |   |                   |     |    |   |        |         |       |   |       |       |         |   | (13,497 | )       |   |   | (13,497 | )       |   |   |       |        |  |   | (12,801 | )       |   |   | (12,801 | )     
|                          |                                                    |                              |   |                    |         |                   |   |                    |     |    |   |         |         |       |   |        |       |         |   |         |         |   |   |         |         |   |   |        |        |  |   |         |         |   |   |        
|                          |                                                    | Net deferred tax liabilities |   | $                  | (56,923 | )                 |   | $                  | 244 |    |   | $       | (56,679 | )     |   | $      | 2,313 |         |   | $       | (13,497 | ) |   | $       | (11,184 | ) |   | $      | 5,611  |  |   | $       | (12,801 | ) |   | $       | (7,190 | )
|                          |                                                    |                              |   |                    |         |                   |   |                    |     |    |   |         |         |       |   |        |       |         |   |         |         |   |   |         |         |   |   |        |        |  |   |         |         |   |   |        

The current income tax provision (benefit) and deferred tax asset
(liability) were computed using the separate return method. Foreign earnings
are assumed to be repatriated to the United States.

IPC was included in the Global Crossing consolidated return for
federal income tax purposes for the period ended December 20, 2001. Federal law
provides that each member of an affiliated group that files a consolidated
return is liable for the groups entire tax obligation. Thus, to the extent
Global Crossing or other members of the group failed to make any federal income
tax payments required of them by law for 2001, the Company could be liable for
the shortfall. Similar principles may apply for state income tax purposes in
many states. Global Crossing has advised the Company that it does not believe
that it had federal income tax liability for 2001. The Company cannot
independently verify this information and can give no assurance that this
information is correct. If Global Crossings federal income tax
liabilities are
significant and are imposed on IPC, these liabilities could have a material
adverse effect on the Companys financial condition and results of operations.

Based on the separate return tax computation for IPC, the current federal
tax liability for the period ended December 20, 2001 was treated as an
intercompany liability to an affiliate included in Global Crossings
consolidated federal tax return. For tax years ending prior to December 20,
2001, IPC filed a separate federal tax return with its affiliates and
subsidiaries.

A reconciliation between the statutory U.S. federal income tax rate and
the effective tax rate is as follows:

|                                                     |  |                    |      |                    |  |                    |       |                    |  |                  |       |                   |  |  |       |             |  |  |       |   
|---------------------------------------------------- |  | ------------------ | ---- | ------------------ |  | ------------------ | ----- | ------------------ |  | ---------------- | ----- | ----------------- |  |  | ----- | ----------- |  |  | ----- | --
|                                                     |  | Predecessors       |      |                    |  |                   
|                                                     |  |                    |      |                    |  |                   
|                                                     |  | Period from        |      |                    |  |                    |       |                    |  |                  |       |                   |  |  |       | Period from
|                                                     |  | October 1, 1999 to |      | Period from        |  |                    |       |                    |  | Period from      |       | November 15, 2001
|                                                     |  | June 14,           |      | June 15, 2000 to   |  | Fiscal Year Ended  |       | October 1, 2001 to |  | to September 30,
|(in thousands)                                       |  | 2000               |      | September 30, 2000 |  | September 30, 2001 |       | December 20, 2001  |  | 2002            
|                                                     |  |                    |      |                    |  |                    |       |                    |  |                 
|Statutory U.S. Federal tax rate                      |  |                    | 35.0 | %                  |  |                    | 35.0  | %                  |  |                  | 35.0  | %                 |  |  | 35.0  | %           |  |  | 35.0  | % 
|State and local income taxes, net of Federal benefit |  |                    | 2.8  | %                  |  |                    | 5.2   | %                  |  |                  | 2.5   | %                 |  |  | (4.3  | )%          |  |  | 5.3   | % 
|Incremental foreign tax effect                       |  |                    | 4.5  | %                  |  |                    | (0.7  | )%                 |  |                  | (0.8  | )%                |  |  | (5.7  | )%          |  |  | (9.3  | )%
|Goodwill amortization                                |  |                    |     |                    |  |                    | (22.1 | )%                 |  |                  | (86.5 | )%                |  |  | (27.7 | )%          |  |  |      |   
|Other, net                                           |  |                    | (2.5 | )%                 |  |                    | 4.2   | %                  |  |                  | (2.5  | )%                |  |  | 5.5   | %           |  |  | (11.1 | )%
|                                                     |  |                    |      |                    |  |                    |       |                    |  |                  |       |                   |  |  |       |             |  |  |       |   
|                                                     |  |                    | 39.8 | %                  |  |                    | 21.6  | %                  |  |                  | (52.3 | )%                |  |  | 2.8   | %           |  |  | 19.9  | % 
|                                                     |  |                    |      |                    |  |                    |       |                    |  |                  |       |                   |  |  |       |             |  |  |       |   

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IPC ACQUISITION CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  Continued
September 30, 2002

At September 30, 2002, for U.S. Federal income tax purposes, the Company has
NOL carryforwards of approximately $22.2 million. For U.S. Federal income tax
purposes, NOL carryforwards expire through 2022. NOL amounts, carryforward
years, and rules of the use vary greatly for state income tax purposes.

IPC has received notices of taxes due from various jurisdictions related
to Federal and state payroll taxes, state income taxes, state sales taxes, VAT, and income taxes in several foreign countries. These notices are
for periods prior to the IPC Acquisition. Under the purchase agreement, Global
Crossing is responsible for payment of these taxes. Since Global Crossing is
now under bankruptcy protection, the bankruptcy court must approve any such tax
payments by Global Crossing for periods prior to the commencement of Global
Crossings bankruptcy case. If the bankruptcy court does not approve Global
Crossings payment of all amounts that are due with respect to these taxes,
these jurisdictions may proceed against IPC for these amounts. If the purchase
agreement is rejected, Global Crossing may avoid its obligations to pay the
taxes and to indemnify the Company for payment of the taxes. Currently, the
aggregate amount of taxes for which IPC has received notices is approximately $5.2 million and is accrued in the Companys consolidated balance
sheet at September 30, 2002. The ultimate settlement of these liabilities may
be for amounts which are different from the amounts presently recorded.

Additionally, certain tax
returns for periods prior to and including the IPC Acquisition are not yet due and still
must be filed by Global Crossing pursuant to the purchase agreement. Global Crossing has
informed the Company that as a result of its rejection of the purchase agreement, it may
not include IPC Information Systems and its subsidiaries in such tax returns.
In the Company's objection to Global Crossing's rejection of the purchase agreement,
the Company has requested the bankruptcy court to uphold the purchase agreement and, in any
event, to order Global Crossing to include IPC Information Systems and its subsidiaries in such
tax returns even if the rejection of the purchase agreement is permitted.
It is possible, however, that the Court will not grant the Company's request. The Company
believes that Global Crossing is contractually required to include IPC Information Systems and
its subsidiaries in such tax returns, and further believes that Global Crossing does not have
any legal basis to exclude IPC Information Systems and its subsidiaries from these tax returns.
If, however, Global Crossing does not include IPC Information Systems and its subsidiaries in
such tax returns and IPC Information Systems and its subsidiaries are required to separately file
these tax returns and pay any pre-IPC Acquisition tax liabilities, such liabilities, which the
Company estimates to be in the range of $0 to $36 million, could have a material adverse effect
on the Company's financial condition and results of operations, including requiring the Company to
seek financing to pay any additional pre-IPC Acquisition tax liabilities.

15. Business Segment Information

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

|                                             |                                 |               |         |                 |         |        |        |              |        |   |         |         |         | 
|-------------------------------------------- | ------------------------------- | ------------- | ------- | --------------- | ------- | ------ | ------ | ------------ | ------ | - | ------- | ------- | ------- | 
|                                             |                                 |               |         | Predecessor    
|                                             |                                 |               |         |                
|                                             |                                 |               |         | Trading Systems |         | I.T.S. |        | Consolidated
|                                             |                                 |               |         |                 |         |        |        |             
|                                             |                                 |               |         | (in thousands) 
|Period from October 1, 1999 to June 14, 2000 |                                 |               |         |                 |         |        |        |              |        |   |         |        
|Revenue:                                     |                                 |               |         |                 |         |        |        |              |        |   |         |        
|                                             | Product sales and installations |               | $       | 82,286          |         |        | $      | 26,202       |        |   | $       | 108,488 |        
|                                             | Service                         |               |         | 55,323          |         |        |        | 10,698       |        |   |         | 66,021  |        
|                                             |                                 |               |         |                 |         |        |        |              |        |   |         |        
|                                             |                                 | Total revenue |         | $               | 137,609 |        |        | $            | 36,900 |   |         | $       | 174,509 | 
|Direct margin                                |                                 |               | 90,722  |                 |         |        | 7,696  |              |        |   | 98,418  |        
|Income from operations                       |                                 |               | 25,196  |                 |         |        | 1,350  |              |        |   | 26,546  |        
|Depreciation and amortization                |                                 |               | 6,815   |                 |         |        | 268    |              |        |   | 7,083   |        
|Interest expense, net                        |                                 |               | (16,142 | )               |         |        |       |              |        |   | (16,142 | )      
|Income tax provision                         |                                 |               | 4,134   |                 |         |        |       |              |        |   | 4,134   |        
|Goodwill, net                                |                                 | $             | 13,099  |                 |         |        |       |              |        | $ | 13,099  |        
|Total assets                                 |                                 | $             | 272,707 |                 |         | $      | 25,623 |              |        | $ | 298,330 |        
|Capital expenditures                         |                                 | $             | 2,692   |                 |         | $      | 69     |              |        | $ | 2,761   |        

49



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IPC ACQUISITION CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  Continued
September 30, 2002

|                                                |                                 |               |         |                 |        |        |        |              |        |   |         |        |         | 
|----------------------------------------------- | ------------------------------- | ------------- | ------- | --------------- | ------ | ------ | ------ | ------------ | ------ | - | ------- | ------ | ------- | 
|                                                |                                 |               |         | Predecessor    
|                                                |                                 |               |         |                
|                                                |                                 |               |         | Trading Systems |        | I.T.S. |        | Consolidated
|                                                |                                 |               |         |                 |        |        |        |             
|                                                |                                 |               |         | (in thousands) 
|Period from June 15, 2000 to September 30, 2000 |                                 |               |         |                 |        |        |        |              |        |   |         |       
|Revenue:                                        |                                 |               |         |                 |        |        |        |              |        |   |         |       
|                                                | Product sales and installations |               | $       | 58,939          |        |        | $      | 14,055       |        |   | $       | 72,994 |        
|                                                | Service                         |               |         | 25,227          |        |        |        | 5,479        |        |   |         | 30,706 |        
|                                                |                                 |               |         |                 |        |        |        |              |        |   |         |       
|                                                |                                 | Total revenue |         | $               | 84,166 |        |        | $            | 19,534 |   |         | $      | 103,700 | 
|Direct margin                                   |                                 |               | 23,162  |                 |        |        | 2,607  |              |        |   | 25,769  |       
|Income (loss) from operations                   |                                 |               | (6,349  | )               |        |        | 70     |              |        |   | (6,279  | )     
|Depreciation and amortization                   |                                 |               | 13,851  |                 |        |        | 152    |              |        |   | 14,003  |       
|Interest expense, net                           |                                 |               | (5,686  | )               |        |        |       |              |        |   | (5,686  | )     
|Income tax benefit                              |                                 |               | (2,582  | )               |        |        |       |              |        |   | (2,582  | )     
|Goodwill, net                                   |                                 | $             | 206,150 |                 |        |        |       |              |        | $ | 206,150 |       
|Total assets                                    |                                 | $             | 507,515 |                 |        | $      | 23,845 |              |        | $ | 531,360 |       
|Capital expenditures                            |                                 | $             | 1,004   |                 |        | $      | 49     |              |        | $ | 1,053   |       

|                                     |                                 |               |         |                 |         |        |        |              |        |   |         |         |         | 
|------------------------------------ | ------------------------------- | ------------- | ------- | --------------- | ------- | ------ | ------ | ------------ | ------ | - | ------- | ------- | ------- | 
|                                     |                                 |               |         | Predecessor    
|                                     |                                 |               |         |                
|                                     |                                 |               |         | Trading Systems |         | I.T.S. |        | Consolidated
|                                     |                                 |               |         |                 |         |        |        |             
|                                     |                                 |               |         | (in thousands) 
|Fiscal Year Ended September 30, 2001 |                                 |               |         |                 |         |        |        |              |        |   |         |        
|Revenue:                             |                                 |               |         |                 |         |        |        |              |        |   |         |        
|                                     | Product sales and installations |               | $       | 138,165         |         |        | $      | 43,102       |        |   | $       | 181,267 |        
|                                     | Service                         |               |         | 82,851          |         |        |        | 15,579       |        |   |         | 98,430  |        
|                                     |                                 |               |         |                 |         |        |        |              |        |   |         |         |        
|                                     |                                 | Total revenue |         | $               | 221,016 |        |        | $            | 58,681 |   |         | $       | 279,697 | 
|Direct margin                        |                                 |               | 129,746 |                 |         |        | 12,508 |              |        |   | 142,254 |        
|Income from operations               |                                 |               | 12,700  |                 |         |        | 4,718  |              |        |   | 17,418  |        
|Depreciation and amortization        |                                 |               | 48,370  |                 |         |        | 265    |              |        |   | 48,635  |        
|Interest expense, net                |                                 |               | (27,871 | )               |         |        |       |              |        |   | (27,871 | )      
|Income tax provision                 |                                 |               | 4,406   |                 |         |        |       |              |        |   | 4,406   |        
|Goodwill, net                        |                                 | $             | 185,033 |                 |         |        |       |              |        | $ | 185,033 |        
|Total assets                         |                                 | $             | 459,066 |                 |         | $      | 30,045 |              |        | $ | 489,111 |        
|Capital expenditures                 |                                 | $             | 8,982   |                 |         | $      | 388    |              |        | $ | 9,370   |        

|                                                 |                                 |               |         |                 |        |        |        |              |        |   |         |        |        | 
|------------------------------------------------ | ------------------------------- | ------------- | ------- | --------------- | ------ | ------ | ------ | ------------ | ------ | - | ------- | ------ | ------ | 
|                                                 |                                 |               |         | Predecessor    
|                                                 |                                 |               |         |                
|                                                 |                                 |               |         | Trading Systems |        | I.T.S. |        | Consolidated
|                                                 |                                 |               |         |                 |        |        |        |             
|                                                 |                                 |               |         | (in thousands) 
|Period from October 1, 2001 to December 20, 2001 |                                 |               |         |                 |        |        |        |              |        |   |         |       
|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  |       
|Income (loss) from operations                    |                                 |               | (6,498  | )               |        |        | 1,090  |              |        |   | (5,408  | )     
|Depreciation and amortization                    |                                 |               | 10,729  |                 |        |        | 8      |              |        |   | 10,737  |       
|Interest expense, net                            |                                 |               | (5,987  | )               |        |        |       |              |        |   | (5,987  | )     
|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   |       

50



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IPC ACQUISITION CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  Continued
September 30, 2002

|                                                    |                                 |               |         |                |         |        |        |              |        |   |         |         |         | 
|--------------------------------------------------- | ------------------------------- | ------------- | ------- | -------------- | ------- | ------ | ------ | ------------ | ------ | - | ------- | ------- | ------- | 
|                                                    |                                 |               |         | TradingSystems |         | I.T.S. |        | Consolidated
|                                                    |                                 |               |         |                |         |        |        |             
|                                                    |                                 |               |         | (in thousands)
|Period from November 15, 2001 to September 30, 2002 |                                 |               |         |                |         |        |        |              |        |   |         |        
|Revenue:                                            |                                 |               |         |                |         |        |        |              |        |   |         |        
|                                                    | Product sales and installations |               | $       | 127,246        |         |        | $      | 29,257       |        |   | $       | 156,503 |        
|                                                    | Service                         |               |         | 66,909         |         |        |        | 9,372        |        |   |         | 76,281  |        
|                                                    |                                 |               |         |                |         |        |        |              |        |   |         |        
|                                                    |                                 | Total revenue |         | $              | 194,155 |        |        | $            | 38,629 |   |         | $       | 232,784 | 
|Direct margin                                       |                                 |               | 84,215  |                |         |        | 5,717  |              |        |   | 89,932  |        
|Income (loss) from operations                       |                                 |               | 10,475  |                |         |        | (82    | )            |        |   | 10,393  |        
|Depreciation and amortization                       |                                 |               | 14,760  |                |         |        | 305    |              |        |   | 15,065  |        
|Interest expense, net                               |                                 |               | (21,533 | )              |         |        |       |              |        |   | (21,533 | )      
|Income tax benefit                                  |                                 |               | (2,286  | )              |         |        |       |              |        |   | (2,286  | )      
|Goodwill, net                                       |                                 | $             | 71,308  |                |         | $      | 971    |              |        | $ | 72,279  |        
|Total assets                                        |                                 | $             | 415,395 |                |         | $      | 14,837 |              |        | $ | 430,232 |        
|Capital expenditures                                |                                 | $             | 6,480   |                |         | $      | 26     |              |        | $ | 6,506   |        

Information about the Companys operations by geographic location is as
follows:

|                   |              |      |                    |                    |                  |                    |                   |                   |                    |      |                  |         |                   |   |         |         |             |   |         |         | 
|------------------ | ------------ | ---- | ------------------ | ------------------ | ---------------- | ------------------ | ----------------- | ----------------- | ------------------ | ---- | ---------------- | ------- | ----------------- | - | ------- | ------- | ----------- | - | ------- | ------- | 
|                   |              |      | Predecessors       |                    |                  |                    |                  
|                   |              |      |                    |                    |                  |                    |                  
|                   |              |      | Period from        |                    |                  |                    |                   |                   |                    |      |                  |         |                   |   |         |         | Period from
|                   |              |      | October 1, 1999 to |                    | Period from      |                    |                   |                   |                    |      | Period from      |         | November 15, 2001
|                   |              |      | June 14,           |                    | June 15, 2000 to |                    | Fiscal Year Ended |                   | October 1, 2001 to |      | to September 30,
|(in thousands)     |              | 2000 |                    | September 30, 2000 |                  | September 30, 2001 |                   | December 20, 2001 |                    | 2002
|                   |              |      |                    |                    |                  |                    |                   |                   |                    |     
|Revenues:          |              |      |                    |                    |                  |                    |                   |                   |                    |      |                  |         |                   |   |         |         |             |   |         |        
|                   | Americas     |      | $                  | 131,266            |                  |                    | $                 | 63,924            |                    |      | $                | 213,081 |                   |   | $       | 44,939  |             |   | $       | 169,069 | 
|                   | Europe       |      |                    | 37,443             |                  |                    |                   | 24,237            |                    |      |                  | 47,817  |                   |   |         | 10,424  |             |   |         | 48,928  | 
|                   | Asia Pacific |      |                    | 5,800              |                  |                    |                   | 15,539            |                    |      |                  | 18,799  |                   |   |         | 3,417   |             |   |         | 14,787  | 
|                   |              |      |                    |                    |                  |                    |                   |                   |                    |      |                  |         |                   |   |         |         |             |   |         |        
|                   |              | $    | 174,509            |                    |                  | $                  | 103,700           |                   |                    | $    | 279,697          |         |                   | $ | 58,780  |         |             | $ | 232,784 |        
|                   |              |      |                    |                    |                  |                    |                   |                   |                    |      |                  |         |                   |   |         |         |             |   |         |        
|Long-lived assets: |              |      |                    |                    |                  |                    |                   |                   |                    |      |                  |         |                   |   |         |         |             |   |         |        
|                   | Americas     |      | $                  | 32,206             |                  |                    | $                 | 318,019           |                    |      | $                | 287,192 |                   |   | $       | 275,816 |             |   | $       | 227,265 | 
|                   | Europe       |      |                    | 6,252              |                  |                    |                   | 66,779            |                    |      |                  | 58,563  |                   |   |         | 57,197  |             |   |         | 54,375  | 
|                   | Asia Pacific |      |                    | 214                |                  |                    |                   | 13,341            |                    |      |                  | 13,147  |                   |   |         | 16,214  |             |   |         | 20,775  | 
|                   |              |      |                    |                    |                  |                    |                   |                   |                    |      |                  |         |                   |   |         |         |             |   |         |        
|                   |              | $    | 38,672             |                    |                  | $                  | 398,139           |                   |                    | $    | 358,902          |         |                   | $ | 349,227 |         |             | $ | 302,415 |        
|                   |              |      |                    |                    |                  |                    |                   |                   |                    |      |                  |         |                   |   |         |         |             |   |         |        

Included in the Europe and Asia Pacific revenues are U.S. export sales to
unaffiliated customers of $2.0 million and $6.7 million for the period October
1, 1999 to June 14, 2000, $1.2 million and $14.5 million for the period June
15, 2000 to September 30, 2000, $2.0 million and $12.6 million for the fiscal
year ended September 30, 2001, $1.1 million and $0.3 million for the period
October 1, 2001 to December 20, 2001, and $1.1 million and $5.3 million, for
the period November 15, 2001 to September 30, 2002, respectively.

Transfers from the United States to Europe and Asia Pacific, eliminated in
consolidation, were $19.5 million and $0.9 million for the period October 1,
1999 to June 14, 2000, $5.4 million and $1.6 million for the period June 15,
2000 to September 30, 2000, $17.8 million and $4.0 million for the fiscal year
ended September 30, 2001, $5.6 million and $1.1 million for the period October
1, 2001 to December 20, 2001, and $14.1 million and $5.4 million for the period
November 15, 2001 to September 30, 2002.

The Company performs periodic credit evaluations of its customers
financial condition and although the Company does not generally require
collateral, it does require cash payments in advance when the assessment of
credit risk associated with a customer is substantially higher than normal.
Credit losses have consistently been within managements expectations and are
provided for in the consolidated financial statements.

For the periods October 1, 1999 to June 14, 2000, June 15, 2000 to
September 30, 2000, fiscal year ended September 30, 2001, October 1, 2001 to
December 20, 2001 and from November 15, 2001 to September 30, 2002, no single
customer accounted for 10% or more of total revenues.

As of September 30, 2002, the Companys operations employed approximately
630 persons on a full-time or full-time equivalent basis, 40 of which are
covered under collective bargaining agreements. Additionally, the Company
subcontracts approximately 350 employees covered under collective bargaining
agreements.

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IPC ACQUISITION CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  Continued
September 30, 2002

16. Guarantor Subsidiaries Financial Information

Certain of the Companys domestic restricted subsidiaries guarantee the
senior secured credit facilities and the senior subordinated notes. Information
regarding the guarantors is as follows (in thousands):

Condensed Combining Statement of Operations
For the Period October 1, 1999 to June 14, 2000

|                                |              |   |              |        |               |   |              |        |          |   |         |        |   |   |         |        | 
|------------------------------- | ------------ | - | ------------ | ------ | ------------- | - | ------------ | ------ | -------- | - | ------- | ------ | - | - | ------- | ------ | 
|                                |              |   | Guarantor    |        | Non-Guarantor |   |              |        |         
|                                |              |   | Subsidiaries |        | Subsidiaries  |   | Eliminations |        | Combined
|                                |              |   |              |        |               |   |              |        |         
|Revenue                         |              | $ | 157,630      |        |               | $ | 39,379       |        |          | $ | (22,500 | )      |   | $ | 174,509 |       
|Cost of goods sold              |              |   | 93,715       |        |               |   | 27,024       |        |          |   | (18,193 | )      |   |   | 102,546 |       
|                                |              |   |              |        |               |   |              |        |          |   |         |        |   |   |         |       
|                                | Gross profit |   |              | 63,915 |               |   |              | 12,355 |          |   |         | (4,307 | ) |   |         | 71,963 | 
|Other operating expenses        |              |   | 37,435       |        |               |   | 7,982        |        |          |   |        |        |   |   | 45,417  |       
|                                |              |   |              |        |               |   |              |        |          |   |         |        |   |   |         |       
|Income (loss) from operations   |              |   | 26,480       |        |               |   | 4,373        |        |          |   | (4,307  | )      |   |   | 26,546  |       
|Interest expense and other, net |              |   | (16,410      | )      |               |   | 250          |        |          |   |        |        |   |   | (16,160 | )     
|Income tax provision            |              |   | 2,618        |        |               |   | 1,516        |        |          |   |        |        |   |   | 4,134   |       
|                                |              |   |              |        |               |   |              |        |          |   |         |        |   |   |         |       
|Net income (loss)               |              | $ | 7,452        |        |               | $ | 3,107        |        |          | $ | (4,307  | )      |   | $ | 6,252   |       
|                                |              |   |              |        |               |   |              |        |          |   |         |        |   |   |         |       

Condensed Combining Statement of Cash Flows
For the Period October 1, 1999 to June 14, 2000

|                                           |  |              |         |               |  |              |        |          |  |   |   |  |  |   |         |  
|------------------------------------------ |  | ------------ | ------- | ------------- |  | ------------ | ------ | -------- |  | - | - |  |  | - | ------- | -
|                                           |  | Guarantor    |         | Non-Guarantor |  |              |        |         
|                                           |  | Subsidiaries |         | Subsidiaries  |  | Eliminations |        | Combined
|                                           |  |              |         |               |  |              |        |         
|Net cash provided by operating activities  |  | $            | 45,714  |               |  | $            | 5,349  |          |  | $ |  |  |  | $ | 51,063  |  
|Capital expenditures                       |  |              | (2,661  | )             |  |              | (100   | )        |  |   |  |  |  |   | (2,761  | )
|                                           |  |              |         |               |  |              |        |          |  |   |   |  |  |   |         |  
|Net cash used in investing activities      |  |              | (2,661  | )             |  |              | (100   | )        |  |   |  |  |  |   | (2,761  | )
|Repayments of intercompany borrowings      |  |              | (57,144 | )             |  |              | (6,035 | )        |  |   |  |  |  |   | (63,179 | )
|Borrowings under revolving credit facility |  |              | 12,290  |               |  |              |       |          |  |   |  |  |  |   | 12,290  |  
|Proceeds from exercise of stock options    |  |              | 4,224   |               |  |              |       |          |  |   |  |  |  |   | 4,224   |  
|Principal payments on capital leases       |  |              | (331    | )             |  |              |       |          |  |   |  |  |  |   | (331    | )
|                                           |  |              |         |               |  |              |        |          |  |   |   |  |  |   |         |  
|Net cash used in financing activities      |  |              | (40,961 | )             |  |              | (6,035 | )        |  |   |  |  |  |   | (46,996 | )
|Effect of exchange rate changes on cash    |  |              | (2,462  | )             |  |              |       |          |  |   |  |  |  |   | (2,462  | )
|                                           |  |              |         |               |  |              |        |          |  |   |   |  |  |   |         |  
|Net decrease in cash                       |  |              | (370    | )             |  |              | (786   | )        |  |   |  |  |  |   | (1,156  | )
|Cash at beginning of period                |  |              | (138    | )             |  |              | 5,064  |          |  |   |  |  |  |   | 4,926   |  
|                                           |  |              |         |               |  |              |        |          |  |   |   |  |  |   |         |  
|Cash at end of period                      |  | $            | (508    | )             |  | $            | 4,278  |          |  | $ |  |  |  | $ | 3,770   |  
|                                           |  |              |         |               |  |              |        |          |  |   |   |  |  |   |         |  

Condensed Combining Statement of Operations
For the Period June 15, 2000 to September 30, 2000

|                                            |              |   |              |        |               |   |              |      |          |   |        |       |  |   |         |        | 
|------------------------------------------- | ------------ | - | ------------ | ------ | ------------- | - | ------------ | ---- | -------- | - | ------ | ----- |  | - | ------- | ------ | 
|                                            |              |   | Guarantor    |        | Non-Guarantor |   |              |      |         
|                                            |              |   | Subsidiaries |        | Subsidiaries  |   | Eliminations |      | Combined
|                                            |              |   |              |        |               |   |              |      |         
|Revenue                                     |              | $ | 85,618       |        |               | $ | 24,820       |      |          | $ | (6,738 | )     |  | $ | 103,700 |       
|Cost of goods sold                          |              |   | 63,712       |        |               |   | 25,106       |      |          |   | (9,068 | )     |  |   | 79,750  |       
|                                            |              |   |              |        |               |   |              |      |          |   |        |       |  |   |         |       
|                                            | Gross profit |   |              | 21,906 |               |   |              | (286 | )        |   |        | 2,330 |  |   |         | 23,950 | 
|Other operating expenses                    |              |   | 26,646       |        |               |   | 3,583        |      |          |   |       |       |  |   | 30,229  |       
|                                            |              |   |              |        |               |   |              |      |          |   |        |       |  |   |         |       
|Income (loss) from operations               |              |   | (4,740       | )      |               |   | (3,869       | )    |          |   | 2,330  |       |  |   | (6,279  | )     
|Interest expense and other, net             |              |   | (5,758       | )      |               |   | 102          |      |          |   |       |       |  |   | (5,656  | )     
|Extraordinary
loss on senior discount notes |              |   | (17,795      | )      |               |   |             |      |          |   |       |       |  |   | (17,795 | )     
|Income tax provision (benefit)              |              |   | (11,410      | )      |               |   | 1,559        |      |          |   |       |       |  |   | (9,851  | )     
|                                            |              |   |              |        |               |   |              |      |          |   |        |       |  |   |         |       
|Net income (loss)                           |              | $ | (16,883      | )      |               | $ | (5,326       | )    |          | $ | 2,330  |       |  | $ | (19,879 | )     
|                                            |              |   |              |        |               |   |              |      |          |   |        |       |  |   |         |       

52



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IPC ACQUISITION CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  Continued
September 30, 2002

Condensed Combining Statement of Cash Flows
For the Period June 15, 2000 to September 30, 2000

|                                                      |  |              |         |               |  |              |        |          |  |   |   |  |  |   |         |  
|----------------------------------------------------- |  | ------------ | ------- | ------------- |  | ------------ | ------ | -------- |  | - | - |  |  | - | ------- | -
|                                                      |  | Guarantor    |         | Non-Guarantor |  |              |        |          |  |   |   | 
|                                                      |  | Subsidiaries |         | Subsidiaries  |  | Eliminations |        | Combined
|                                                      |  |              |         |               |  |              |        |         
|Net cash provided by operating activities             |  | $            | 13,963  |               |  | $            | 4,981  |          |  | $ |  |  |  | $ | 18,944  |  
|Capital expenditures                                  |  |              | (973    | )             |  |              | (80    | )        |  |   |  |  |  |   | (1,053  | )
|                                                      |  |              |         |               |  |              |        |          |  |   |   |  |  |   |         |  
|Net cash used in investing activities                 |  |              | (973    | )             |  |              | (80    | )        |  |   |  |  |  |   | (1,053  | )
|Proceeds from (repayments of) intercompany borrowings |  |              | 79,359  |               |  |              | (6,420 | )        |  |   |  |  |  |   | 72,939  |  
|Repayments under revolving credit facility            |  |              | (45,712 | )             |  |              |       |          |  |   |  |  |  |   | (45,712 | )
|Principal payments on senior discount notes           |  |              | (43,272 | )             |  |              |       |          |  |   |  |  |  |   | (43,272 | )
|Principal payments on capital leases                  |  |              | (304    | )             |  |              |       |          |  |   |  |  |  |   | (304    | )
|                                                      |  |              |         |               |  |              |        |          |  |   |   |  |  |   |         |  
|Net cash used in financing activities                 |  |              | (9,929  | )             |  |              | (6,420 | )        |  |   |  |  |  |   | (16,349 | )
|Effect of exchange rate changes on cash               |  |              | (2,160  | )             |  |              |       |          |  |   |  |  |  |   | (2,160  | )
|                                                      |  |              |         |               |  |              |        |          |  |   |   |  |  |   |         |  
|Net increase (decrease) in cash                       |  |              | 901     |               |  |              | (1,519 | )        |  |   |  |  |  |   | (618    | )
|Cash at beginning of period                           |  |              | (508    | )             |  |              | 4,278  |          |  |   |  |  |  |   | 3,770   |  
|                                                      |  |              |         |               |  |              |        |          |  |   |   |  |  |   |         |  
|Cash at end of period                                 |  | $            | 393     |               |  | $            | 2,759  |          |  | $ |  |  |  | $ | 3,152   |  
|                                                      |  |              |         |               |  |              |        |          |  |   |   |  |  |   |         |  

Condensed Combining Balance Sheet at September 30, 2001

|                                      |                                                                  |                           |   |              |         |               |   |              |         |          |   |        |        |   |   |         |         | 
|------------------------------------- | ---------------------------------------------------------------- | ------------------------- | - | ------------ | ------- | ------------- | - | ------------ | ------- | -------- | - | ------ | ------ | - | - | ------- | ------- | 
|                                      |                                                                  |                           |   | Guarantor    |         | Non-Guarantor |   |              |         |          |   |        |        |   |   |        
|                                      |                                                                  |                           |   | Subsidiaries |         | Subsidiaries  |   | Eliminations |         | Combined
|                                      |                                                                  |                           |   |              |         |               |   |              |         |         
|Assets:                               |                                                                  |                           |   |              |         |               |   |              |         |          |   |        |        |   |   |        
|                                      | Cash                                                             |                           | $ | (703         | )       |               | $ | 5,239        |         |          | $ |       |        |   | $ | 4,536   |        
|                                      | Accounts receivable, net                                         |                           |   | 64,005       |         |               |   | 13,491       |         |          |   |       |        |   |   | 77,496  |        
|                                      | Inventories, net                                                 |                           |   | 41,991       |         |               |   | 8,254        |         |          |   | (4,987 | )      |   |   | 45,258  |        
|                                      | Prepaid and other current assets                                 |                           |   | 410          |         |               |   | 2,509        |         |          |   |       |        |   |   | 2,919   |        
|                                      | Due from affiliate                                               |                           |   | (13,977      | )       |               |   | 13,597       |         |          |   | 380    |        |   |   |        |        
|                                      |                                                                  |                           |   |              |         |               |   |              |         |          |   |        |        |   |   |        
|                                      |                                                                  | Total current assets      |   |              | 91,726  |               |   |              | 43,090  |          |   |        | (4,607 | ) |   |         | 130,209 | 
|                                      | Property, plant and equipment, net                               |                           |   | 18,595       |         |               |   | 1,773        |         |          |   |       |        |   |   | 20,368  |        
|                                      | Goodwill and intangibles, net                                    |                           |   | 265,467      |         |               |   | 72,196       |         |          |   |       |        |   |   | 337,663 |        
|                                      | Deferred financing costs                                         |                           |   |             |         |               |   |             |         |          |   |       |        |   |   |        |        
|                                      | Other assets                                                     |                           |   | 722          |         |               |   | 149          |         |          |   |       |        |   |   | 871     |        
|                                      |                                                                  |                           |   |              |         |               |   |              |         |          |   |        |        |   |   |        
|                                      |                                                                  | Total assets              |   | $            | 376,510 |               |   | $            | 117,208 |          |   | $      | (4,607 | ) |   | $       | 489,111 | 
|                                      |                                                                  |                           |   |              |         |               |   |              |         |          |   |        |        |   |   |        
|Liabilities and stockholders equity: |                                                                  |                           |   |              |         |               |   |              |         |          |   |        |        |   |   |        
|                                      | Accounts payable, accrued expenses and other current liabilities |                           | $ | 17,521       |         |               | $ | 9,167        |         |          | $ |       |        |   | $ | 26,688  |        
|                                      | Customer advances and deferred revenue                           |                           |   | 45,138       |         |               |   | 6,454        |         |          |   |       |        |   |   | 51,592  |        
|                                      | Due to affiliates                                                |                           |   | 104,106      |         |               |   |             |         |          |   |       |        |   |   | 104,106 |        
|                                      |                                                                  |                           |   |              |         |               |   |              |         |          |   |        |        |   |   |        
|                                      |                                                                  | Total current liabilities |   |              | 166,765 |               |   |              | 15,621  |          |   |        |       |   |   |         | 182,386 | 
|                                      | Other long-term liabilities                                      |                           |   | 62,679       |         |               |   |             |         |          |   |       |        |   |   | 62,679  |        
|                                      |                                                                  |                           |   |              |         |               |   |              |         |          |   |        |        |   |   |        
|                                      |                                                                  | Total liabilities         |   |              | 229,444 |               |   |              | 15,621  |          |   |        |       |   |   |         | 245,065 | 
|                                      | Total stockholders equity                                       |                           |   | 147,066      |         |               |   | 101,587      |         |          |   | (4,607 | )      |   |   | 244,046 |        
|                                      |                                                                  |                           |   |              |         |               |   |              |         |          |   |        |        |   |   |        
|                                      | Total liabilities and stockholders equity                       |                           | $ | 376,510      |         |               | $ | 117,208      |         |          | $ | (4,607 | )      |   | $ | 489,111 |        
|                                      |                                                                  |                           |   |              |         |               |   |              |         |          |   |        |        |   |   |        

53



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##### Table of Contents



IPC ACQUISITION CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  Continued
September 30, 2002

Condensed Combining Statement of Operations
For the Fiscal Year Ended September 30, 2001

|                                |              |   |              |        |               |   |              |        |          |   |         |        |   |   |         |         | 
|------------------------------- | ------------ | - | ------------ | ------ | ------------- | - | ------------ | ------ | -------- | - | ------- | ------ | - | - | ------- | ------- | 
|                                |              |   | Guarantor    |        | Non-Guarantor |   |              |        |          |   |         |        |  
|                                |              |   | Subsidiaries |        | Subsidiaries  |   | Eliminations |        | Combined
|                                |              |   |              |        |               |   |              |        |         
|Revenue                         |              | $ | 245,038      |        |               | $ | 58,679       |        |          | $ | (24,020 | )      |   | $ | 279,697 |        
|Cost of goods sold              |              |   | 145,815      |        |               |   | 41,498       |        |          |   | (22,712 | )      |   |   | 164,601 |        
|                                |              |   |              |        |               |   |              |        |          |   |         |        |   |   |         |        
|                                | Gross profit |   |              | 99,223 |               |   |              | 17,181 |          |   |         | (1,308 | ) |   |         | 115,096 | 
|Other operating expenses        |              |   | 82,041       |        |               |   | 15,637       |        |          |   |        |        |   |   | 97,678  |        
|                                |              |   |              |        |               |   |              |        |          |   |         |        |   |   |         |        
|Income (loss) from operations   |              |   | 17,182       |        |               |   | 1,544        |        |          |   | (1,308  | )      |   |   | 17,148  |        
|Interest expense and other, net |              |   | (26,236      | )      |               |   | 393          |        |          |   |        |        |   |   | (25,843 | )      
|Income tax provision (benefit)  |              |   | (175         | )      |               |   | 4,581        |        |          |   |        |        |   |   | 4,406   |        
|                                |              |   |              |        |               |   |              |        |          |   |         |        |   |   |         |        
|Net income (loss)               |              | $ | (8,879       | )      |               | $ | (2,644       | )      |          | $ | (1,308  | )      |   | $ | (12,831 | )      
|                                |              |   |              |        |               |   |              |        |          |   |         |        |   |   |         |        

Condensed Combining Statement of Cash Flows
For the Fiscal Year Ended September 30, 2001

|                                          |  |              |         |               |  |              |        |          |  |   |   |  |  |   |         |  
|----------------------------------------- |  | ------------ | ------- | ------------- |  | ------------ | ------ | -------- |  | - | - |  |  | - | ------- | -
|                                          |  | Guarantor    |         | Non-Guarantor |  |              |        |          |  |   |   | 
|                                          |  | Subsidiaries |         | Subsidiaries  |  | Eliminations |        | Combined
|                                          |  |              |         |               |  |              |        |         
|Net cash provided by operating activities |  | $            | 21,213  |               |  | $            | 12,093 |          |  | $ |  |  |  | $ | 33,306  |  
|Capital expenditures                      |  |              | (9,353  | )             |  |              | (17    | )        |  |   |  |  |  |   | (9,370  | )
|                                          |  |              |         |               |  |              |        |          |  |   |   |  |  |   |         |  
|Net cash used in investing activities     |  |              | (9,353  | )             |  |              | (17    | )        |  |   |  |  |  |   | (9,370  | )
|Repayments of intercompany borrowings     |  |              | (13,590 | )             |  |              | (9,596 | )        |  |   |  |  |  |   | (23,186 | )
|Principal payments on capital leases      |  |              | (234    | )             |  |              |       |          |  |   |  |  |  |   | (234    | )
|                                          |  |              |         |               |  |              |        |          |  |   |   |  |  |   |         |  
|Net cash used in financing activities     |  |              | (13,824 | )             |  |              | (9,596 | )        |  |   |  |  |  |   | (23,420 | )
|Effect of exchange rate changes on cash   |  |              | 868     |               |  |              |       |          |  |   |  |  |  |   | 868     |  
|                                          |  |              |         |               |  |              |        |          |  |   |   |  |  |   |         |  
|Net increase (decrease) in cash           |  |              | (1,096  | )             |  |              | 2,480  |          |  |   |  |  |  |   | 1,384   |  
|Cash at beginning of period               |  |              | 393     |               |  |              | 2,759  |          |  |   |  |  |  |   | 3,152   |  
|                                          |  |              |         |               |  |              |        |          |  |   |   |  |  |   |         |  
|Cash at end of period                     |  | $            | (703    | )             |  | $            | 5,239  |          |  | $ |  |  |  | $ | 4,536   |  
|                                          |  |              |         |               |  |              |        |          |  |   |   |  |  |   |         |  

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

|                                |              |   |              |        |               |   |              |       |          |   |        |     |   |   |         |        | 
|------------------------------- | ------------ | - | ------------ | ------ | ------------- | - | ------------ | ----- | -------- | - | ------ | --- | - | - | ------- | ------ | 
|                                |              |   | Guarantor    |        | Non-Guarantor |   |              |       |          |   |        |     |  
|                                |              |   | Subsidiaries |        | Subsidiaries  |   | Eliminations |       | Combined
|                                |              |   |              |        |               |   |              |       |         
|Revenue                         |              | $ | 52,098       |        |               | $ | 13,777       |       |          | $ | (7,095 | )   |   | $ | 58,780  |       
|Cost of goods sold              |              |   | 30,610       |        |               |   | 9,226        |       |          |   | (7,014 | )   |   |   | 32,822  |       
|                                |              |   |              |        |               |   |              |       |          |   |        |     |   |   |         |       
|                                | Gross profit |   |              | 21,488 |               |   |              | 4,551 |          |   |        | (81 | ) |   |         | 25,958 | 
|Other operating expenses        |              |   | 28,427       |        |               |   | 2,939        |       |          |   |       |     |   |   | 31,366  |       
|                                |              |   |              |        |               |   |              |       |          |   |        |     |   |   |         |       
|Income (loss) from operations   |              |   | (6,939       | )      |               |   | 1,612        |       |          |   | (81    | )   |   |   | (5,408  | )     
|Interest expense and other, net |              |   | (6,218       | )      |               |   | 280          |       |          |   |       |     |   |   | (5,938  | )     
|Income tax provision (benefit)  |              |   | 639          |        |               |   | (957         | )     |          |   |       |     |   |   | (318    | )     
|                                |              |   |              |        |               |   |              |       |          |   |        |     |   |   |         |       
|Net income (loss)               |              | $ | (13,796      | )      |               | $ | 2,849        |       |          | $ | (81    | )   |   | $ | (11,028 | )     
|                                |              |   |              |        |               |   |              |       |          |   |        |     |   |   |         |       

54



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##### Table of Contents



IPC ACQUISITION CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  Continued
September 30, 2002

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

|                                                      |  |              |         |               |  |              |        |          |  |   |   |  |  |   |         |  
|----------------------------------------------------- |  | ------------ | ------- | ------------- |  | ------------ | ------ | -------- |  | - | - |  |  | - | ------- | -
|                                                      |  | Guarantor    |         | Non-Guarantor |  |              |        |         
|                                                      |  | 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  | )
|Proceeds from (repayments 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 Consolidating Balance Sheet at
December 31, 2001

|                                      |                                                                  |                           |   |             |         |              |   |               |         |              |   |              |        |   |   |          |          |   |   |         |         | 
|------------------------------------- | ---------------------------------------------------------------- | ------------------------- | - | ----------- | ------- | ------------ | - | ------------- | ------- | ------------ | - | ------------ | ------ | - | - | -------- | -------- | - | - | ------- | ------- | 
|                                      |                                                                  |                           |   | IPC         |         | Guarantor    |   | Non-Guarantor |         |              |   |             
|                                      |                                                                  |                           |   | Acquisition |         | Subsidiaries |   | Subsidiaries  |         | Eliminations |   | Consolidated
|                                      |                                                                  |                           |   |             |         |              |   |               |         |              |   |             
|Assets:                               |                                                                  |                           |   |             |         |              |   |               |         |              |   |              |        |   |   |          |          |   |   |        
|                                      | Cash                                                             |                           | $ | 24,654      |         |              | $ | 549           |         |              | $ | (157         | )      |   | $ |         |          |   | $ | 25,046  |        
|                                      | Restricted cash                                                  |                           |   | 20,800      |         |              |   |              |         |              |   |             |        |   |   |         |          |   |   | 20,800  |        
|                                      | Accounts receivable, net                                         |                           |   |            |         |              |   | 44,663        |         |              |   | 22,141       |        |   |   |         |          |   |   | 66,804  |        
|                                      | Inventories, net                                                 |                           |   |            |         |              |   | 64,782        |         |              |   | 7,233        |        |   |   | (4,205   | )        |   |   | 67,810  |        
|                                      | Prepaid and other current assets                                 |                           |   |            |         |              |   | 828           |         |              |   | 2,004        |        |   |   |         |          |   |   | 2,832   |        
|                                      | Due from affiliate                                               |                           |   |            |         |              |   | 34,169        |         |              |   | (34,630      | )      |   |   | 461      |          |   |   |        |        
|                                      |                                                                  |                           |   |             |         |              |   |               |         |              |   |              |        |   |   |          |          |   |   |        
|                                      |                                                                  | Total current assets      |   |             | 45,454  |              |   |               | 144,991 |              |   |              | (3,409 | ) |   |          | (3,744   | ) |   |         | 183,292 | 
|                                      | Investment in subsidiaries                                       |                           |   | 360,177     |         |              |   |              |         |              |   |             |        |   |   | (360,177 | )        |   |   |        |        
|                                      | Property, plant and equipment, net                               |                           |   |            |         |              |   | 19,427        |         |              |   | 1,776        |        |   |   |         |          |   |   | 21,203  |        
|                                      | Goodwill and intangibles, net                                    |                           |   |            |         |              |   | 224,679       |         |              |   | 68,232       |        |   |   |         |          |   |   | 292,911 |        
|                                      | Deferred financing costs, net                                    |                           |   | 19,712      |         |              |   |              |         |              |   |             |        |   |   |         |          |   |   | 19,712  |        
|                                      | Other assets                                                     |                           |   |            |         |              |   | 663           |         |              |   | (111         | )      |   |   |         |          |   |   | 552     |        
|                                      |                                                                  |                           |   |             |         |              |   |               |         |              |   |              |        |   |   |          |          |   |   |        
|                                      |                                                                  | Total assets              |   | $           | 425,343 |              |   | $             | 389,760 |              |   | $            | 66,488 |   |   | $        | (363,921 | ) |   | $       | 517,670 | 
|                                      |                                                                  |                           |   |             |         |              |   |               |         |              |   |              |        |   |   |          |          |   |   |        
|Liabilities and stockholders equity: |                                                                  |                           |   |             |         |              |   |               |         |              |   |              |        |   |   |          |          |   |   |        
|                                      | Current portion of long-term debt                                |                           | $ | 5,250       |         |              | $ |              |         |              | $ |             |        |   | $ |         |          |   | $ | 5,250   |        
|                                      | Accounts payable, accrued expenses and
other current liabilities |                           |   |            |         |              |   | 33,057        |         |              |   | 3,956        |        |   |   |         |          |   |   | 37,013  |        
|                                      | Customer advances and deferred revenue                           |                           |   |            |         |              |   | 45,003        |         |              |   | 6,957        |        |   |   |         |          |   |   | 51,960  |        
|                                      | Deferred purchase price obligation                               |                           |   | 20,800      |         |              |   |              |         |              |   |             |        |   |   |         |          |   |   | 20,800  |        
|                                      |                                                                  |                           |   |             |         |              |   |               |         |              |   |              |        |   |   |          |          |   |   |        
|                                      |                                                                  | Total current liabilities |   |             | 26,050  |              |   |               | 78,060  |              |   |              | 10,913 |   |   |          |         |   |   |         | 115,023 | 
|                                      | Long-term debt                                                   |                           |   | 249,750     |         |              |   |              |         |              |   |             |        |   |   |         |          |   |   | 249,750 |        
|                                      | Other long-term liabilities                                      |                           |   | 10,940      |         |              |   | 3,354         |         |              |   |             |        |   |   |         |          |   |   | 14,294  |        
|                                      |                                                                  |                           |   |             |         |              |   |               |         |              |   |              |        |   |   |          |          |   |   |        
|                                      |                                                                  | Total liabilities         |   |             | 286,740 |              |   |               | 81,414  |              |   |              | 10,913 |   |   |          |         |   |   |         | 379,067 | 
|                                      |                                                                  |                           |   |             |         |              |   |               |         |              |   |              |        |   |   |          |          |   |   |        
|                                      | Total stockholders equity                                       |                           |   | 138,603     |         |              |   | 308,346       |         |              |   | 55,575       |        |   |   | (363,921 | )        |   |   | 138,603 |        
|                                      |                                                                  |                           |   |             |         |              |   |               |         |              |   |              |        |   |   |          |          |   |   |        
|                                      | Total liabilities and stockholders equity                       |                           | $ | 425,343     |         |              | $ | 389,760       |         |              | $ | 66,488       |        |   | $ | (363,921 | )        |   | $ | 517,670 |        
|                                      |                                                                  |                           |   |             |         |              |   |               |         |              |   |              |        |   |   |          |          |   |   |        

55



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##### Table of Contents



IPC ACQUISITION CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  Continued
September 30, 2002

Condensed Consolidating Balance Sheet at September 30, 2002

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

Condensed Consolidated Statement of Operations
For the Period November 15, 2001 to September 30, 2002

|                                |              |   |             |   |              |   |               |        |              |   |              |        |  |   |         |       |  |   |         |        | 
|------------------------------- | ------------ | - | ----------- | - | ------------ | - | ------------- | ------ | ------------ | - | ------------ | ------ |  | - | ------- | ----- |  | - | ------- | ------ | 
|                                |              |   | IPC         |   | Guarantor    |   | Non-Guarantor |        |              |   |             
|                                |              |   | Acquisition |   | Subsidiaries |   | Subsidiaries  |        | Eliminations |   | Consolidated
|                                |              |   |             |   |              |   |               |        |              |   |             
|Revenue                         |              | $ |            |   |              | $ | 193,365       |        |              | $ | 59,907       |        |  | $ | (20,488 | )     |  | $ | 232,784 |       
|Cost of goods sold              |              |   |            |   |              |   | 143,770       |        |              |   | 39,611       |        |  |   | (22,248 | )     |  |   | 161,133 |       
|                                |              |   |             |   |              |   |               |        |              |   |              |        |  |   |         |       |  |   |         |       
|                                | Gross profit |   |             |  |              |   |               | 49,595 |              |   |              | 20,296 |  |   |         | 1,760 |  |   |         | 71,651 | 
|Other operating expenses        |              |   |            |   |              |   | 50,354        |        |              |   | 10,904       |        |  |   |        |       |  |   | 61,258  |       
|                                |              |   |             |   |              |   |               |        |              |   |              |        |  |   |         |       |  |   |         |       
|Income (loss) from operations   |              |   |            |   |              |   | (759          | )      |              |   | 9,392        |        |  |   | 1,760   |       |  |   | 10,393  |       
|Interest expense and other, net |              |   | (21,725     | ) |              |   | 157           |        |              |   | (311         | )      |  |   |        |       |  |   | (21,879 | )     
|Income tax provision (benefit)  |              |   |            |   |              |   | (6,680        | )      |              |   | 4,394        |        |  |   |        |       |  |   | (2,286  | )     
|                                |              |   |             |   |              |   |               |        |              |   |              |        |  |   |         |       |  |   |         |       
|Net income (loss)               |              | $ | (21,725     | ) |              | $ | 6,078         |        |              | $ | 4,687        |        |  | $ | 1,760   |       |  | $ | (9,200  | )     
|                                |              |   |             |   |              |   |               |        |              |   |              |        |  |   |         |       |  |   |         |       

56



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##### Table of Contents



IPC ACQUISITION CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  Continued
September 30, 2002

Condensed Consolidated Statement of Cash Flows
For the Period November 15, 2001 to September 30, 2002

|                                                    |  |             |          |              |  |              |        |               |  |              |        |   |  |   |      |   |  |   |          |  
|--------------------------------------------------- |  | ----------- | -------- | ------------ |  | ------------ | ------ | ------------- |  | ------------ | ------ | - |  | - | ---- | - |  | - | -------- | -
|                                                    |  |             | IPC      |              |  | Guarantor    |        | Non-Guarantor |  |              |        |   |  |   |      |  
|                                                    |  | Acquisition |          | Subsidiaries |  | Subsidiaries |        | Eliminations  |  | Consolidated
|                                                    |  |             |          |              |  |              |        |               |  |             
|Net cash provided by (used in) operating activities |  | $           | 12,810   |              |  | $            | (1,475 | )             |  | $            | 21,170 |   |  | $ |     |   |  | $ | 32,505   |  
|Capital expenditures                                |  |             |         |              |  |              | (5,043 | )             |  |              | (1,463 | ) |  |   |     |   |  |   | (6,506   | )
|Acquisitions, net of cash acquired                  |  |             | (350,246 | )            |  |              | 3,806  |               |  |              | (57    | ) |  |   | 751  |   |  |   | (345,746 | )
|                                                    |  |             |          |              |  |              |        |               |  |              |        |   |  |   |      |   |  |   |          |  
|Net cash used in investing activities               |  |             | (350,246 | )            |  |              | (1,237 | )             |  |              | (1,520 | ) |  |   | 751  |   |  |   | (352,252 | )
|Proceeds from debt, net of issuance costs           |  |             | 237,580  |              |  |              |       |               |  |              |       |   |  |   |     |   |  |   | 237,580  |  
|Principal payments on term loan                     |  |             | (33,938  | )            |  |              |       |               |  |              |       |   |  |   |     |   |  |   | (33,938  | )
|Proceeds from equity issuances, net                 |  |             | 139,917  |              |  |              |       |               |  |              |       |   |  |   |     |   |  |   | 139,917  |  
|                                                    |  |             |          |              |  |              |        |               |  |              |        |   |  |   |      |   |  |   |          |  
|Net cash (used in) provided by financing activities |  |             | 343,559  |              |  |              |       |               |  |              |       |   |  |   |     |   |  |   | 343,559  |  
|Effect of exchange rate changes on cash             |  |             |         |              |  |              | 1,482  |               |  |              |       |   |  |   |     |   |  |   | 1,482    |  
|                                                    |  |             |          |              |  |              |        |               |  |              |        |   |  |   |      |   |  |   |          |  
|Net increase (decrease) in cash                     |  |             | 6,123    |              |  |              | (1,230 | )             |  |              | 19,650 |   |  |   | 751  |   |  |   | 25,294   |  
|Cash at beginning of period                         |  |             |         |              |  |              | (380   | )             |  |              | 1,131  |   |  |   | (751 | ) |  |   |         |  
|                                                    |  |             |          |              |  |              |        |               |  |              |        |   |  |   |      |   |  |   |          |  
|Cash at end of period                               |  | $           | 6,123    |              |  | $            | (1,610 | )             |  | $            | 20,781 |   |  | $ |     |   |  | $ | 25,294   |  
|                                                    |  |             |          |              |  |              |        |               |  |              |        |   |  |   |      |   |  |   |          |  

17. Quarterly Financial Information (Unaudited):

The following table sets forth unaudited quarterly financial information
for the fiscal years ended September 30, 2001 and 2002 (in thousands):

Predecessor:

|                                      |                                                        |  |               |         |           |  |          |        |               |  |   |        |  |  |   |        | 
|------------------------------------- | ------------------------------------------------------ |  | ------------- | ------- | --------- |  | -------- | ------ | ------------- |  | - | ------ |  |  | - | ------ | 
|                                      |                                                        |  | Quarter Ended
|                                      |                                                        |  |              
|                                      |                                                        |  | December 31,  |         | March 31, |  | June 30, |        | September 30,
|                                      |                                                        |  |               |         |           |  |          |        |              
|Fiscal year ended September 30, 2001: |                                                        |  |               |         |           |  |          |        |               |  |   |        |  |  |   |       
|                                      | Revenue                                                |  | $             | 60,945  |           |  | $        | 72,778 |               |  | $ | 76,062 |  |  | $ | 69,912 | 
|                                      | Gross profit (excluding depreciation and amortization) |  | $             | 16,644  |           |  | $        | 31,641 |               |  | $ | 36,006 |  |  | $ | 30,805 | 
|                                      | Net income (loss)                                      |  | $             | (23,457 | )         |  | $        | 1,760  |               |  | $ | 5,136  |  |  | $ | 3,730  | 

|                                      |                                                        |  |                    |         |                      |  |               |        |          |  |               |        |   |  |   |        |   |  |   |        | 
|------------------------------------- | ------------------------------------------------------ |  | ------------------ | ------- | -------------------- |  | ------------- | ------ | -------- |  | ------------- | ------ | - |  | - | ------ | - |  | - | ------ | 
|                                      |                                                        |  | Predecessor        |         |                      |  |               |        |          |  |               |        |   |  |   |        |   |  |  
|                                      |                                                        |  |                    |         |                      |  |               |        |          |  |               |        |   |  |   |        |   |  |  
|                                      |                                                        |  | Period from        |         | Period from          |  | Quarter Ended
|                                      |                                                        |  | October 1, 2001 to |         | November 15, 2001    |  |              
|                                      |                                                        |  | December 20, 2001  |         | to
December 31, 2001 |  | March 31,     |        | June 30, |  | September 30,
|                                      |                                                        |  |                    |         |                      |  |               |        |          |  |              
|Fiscal year ended September 30, 2002: |                                                        |  |                    |         |                      |  |               |        |          |  |               |        |   |  |   |        |   |  |   |       
|                                      | Revenue                                                |  | $                  | 58,780  |                      |  | $             | 14,329 |          |  | $             | 78,205 |   |  | $ | 62,808 |   |  | $ | 77,442 | 
|                                      | Gross profit (excluding depreciation and amortization) |  | $                  | 25,958  |                      |  | $             | 389    |          |  | $             | 17,635 |   |  | $ | 18,869 |   |  | $ | 34,758 | 
|                                      | Net income (loss)                                      |  | $                  | (11,028 | )                    |  | $             | (1,382 | )        |  | $             | (5,310 | ) |  | $ | (5,385 | ) |  | $ | 2,877  | 

57



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Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure

None.




PART III




Item 10. Directors and Executive Officers of the Registrant

Our directors and executive officers are as follows:

|                 |  |     |    |                  |  |                                                                    |  | 
|---------------- |  | --- | -- | ---------------- |  | ------------------------------------------------------------------ |  | 
|Name             |  | Age |    | Present Position
|                 |  |     |    |                 
|Greg Kenepp      |  |     | 41 |                  |  | President and Director                                            
|Timothy Whelan   |  |     | 36 |                  |  | Chief Financial Officer                                           
|Michael Sheehan  |  |     | 50 |                  |  | Senior Vice President, Global Sales                               
|Stefanie Sovak   |  |     | 40 |                  |  | Senior Vice President, Business Development and Product Management
|Colin Knight     |  |     | 61 |                  |  | President, EMEA                                                   
|Lee Cornwell     |  |     | 41 |                  |  | Managing Director, EMEA                                           
|Kevin Esposito   |  |     | 43 |                  |  | Senior Vice President, Finance                                    
|Gary Everett     |  |     | 49 |                  |  | Vice President, Engineering                                       
|Anthony Scimeca  |  |     | 40 |                  |  | Managing Director, Americas                                       
|Pete Simms       |  |     | 44 |                  |  | Vice President, Production Services and Solutions                 
|Jack Daly        |  |     | 36 |                  |  | Director                                                          
|Robert Gheewalla |  |     | 35 |                  |  | Director                                                          
|Joseph Gleberman |  |     | 44 |                  |  | Chairman of the Board                                             
|Eric Schwartz    |  |     | 40 |                  |  | Director                                                          
|Lance Boxer      |  |     | 48 |                  |  | Director                                                          

Greg Kenepphas been our President and a Director of the Company since
December 2001. From September 2001 to December 2001, Mr. Kenepp was President
of IPC Information Systems, Inc. From July 2000 to September 2001, Mr. Kenepp
was Senior Vice President of Global Crossings Financial Markets division,
which included IPC Information Systems, Inc. and IXnet. From June 1995 to June
2000, Mr. Kenepp held a variety of positions at IPC Information Systems, Inc.,
serving most recently as Senior Vice President of Product Development. Prior to that,
Mr. Kenepp held senior management positions at Integrated Network Corporation,
a telecommunications company, and AT&T Bell Laboratories. He received a BS from
Clarkson University and an MS from Stanford University.

Timothy Whelanhas been our Chief Financial Officer since December 2001.
From January 2001 to December 2001, Mr. Whelan was the Sales and Marketing
Chief Financial Officer of Global Crossing. From July 2000 to January 2001, Mr.
Whelan was Divisional Chief Financial Officer of Global Crossings Financial
Markets division. From December 1999 to June 2000, Mr. Whelan was Vice
President, Finance and Chief Financial Officer of IPC Information Systems, Inc.
and IXnet. Mr. Whelan was Vice President of IPC Information Systems, Inc. and
IXnet from May 1999 to December 1999. Mr. Whelan is a certified public
accountant and previously worked for Ernst &Young from 1992 to 1999. He
previously spent four years as a U.S. Naval Officer.

Michael Sheehanhas been our Senior Vice President, Global Sales since
December 2001. From December 2000 to December 2001, Mr. Sheehan was Senior Vice
President, Global Sales of IPC Information Systems, Inc. Since September 1987,
Mr. Sheehan had held a variety of positions at IPC Information Systems, Inc.,
serving most recently as Vice President of Sales, New York and Eastern Region.
From September 1986 to September 1987, Mr. Sheehan was a Senior Director at
Walsh Lowe, a financial industry consulting firm. Prior to that, he held a
variety of global account positions at AT&T.

Stefanie Sovakhas been our Senior Vice President, Business Development
and Product Management since December 2001. From June 2000 to December 2001,
Ms. Sovak was Senior Vice President, Business Development and Product
Management of IPC Information Systems, Inc. From August 1999 to June 2000, Ms.
Sovak was the Vice President of Product Management for IPC Information Systems,
Inc. and, from September 1996 to August 1999, she was Vice President of

58



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Corporate Communications for IPC Information Systems, Inc. Ms. Sovak worked for
Ascom Timeplex as Assistant Vice President of Marketing Communications from
October 1993 to September 1996. Ms. Sovak received a BS from Georgetown
University and has over 17 years of marketing and sales experience in the
communications industry.

Colin Knighthas been our President, EMEA since October 2002. From August
2001 to October 2002, Mr. Knight was Vice President of Operations for mmO2
Ltd., a cellular and mobile data operator. From October 1987 to August 2001,
Mr. Knight held a variety of positions at Syntegra, an affiliate of British
Telecommunications that focuses on financial trading systems, serving most
recently as its deputy managing director.

Lee Cornwellhas been our Managing Director, EMEA since
December 2001. From March 2000 to December 2001, Mr. Cornwell was Vice
President, Operations of the EMEA and Asia Regions of IPC Information Systems,
Inc. Mr. Cornwell has held a variety of positions at IPC Information Systems,
Inc. since joining the company as a project manager in March 1997. Prior to
that, Mr. Cornwell was infrastructure manager at Deutsche Bank from
March 1996 to March 1997 and project consultant at NatWest Markets from January
1994 to March 1996.

Kevin Espositohas been our Senior Vice President, Finance since December
2001. From June 2000 to December 2001, Mr. Esposito was Vice President, Finance
of IPC Information Systems, Inc. Mr. Esposito held a number of positions at
Global Crossing, most recently serving as the Chief Accounting Officer and
Financial Controller of IPC Information Systems, Inc. from January 1997 to June
2000. Mr. Esposito joined IPC Information Systems, Inc. in September 1986 from
Consolidated
Goldfield Ltd., where he served as staff accountant from March 1985 to
September 1986. Prior to that, he served as a staff accountant for Pinkertons
Inc., from February 1984 to March 1985. He received a BS in accounting in 1983.

Gary Everetthas been our Vice President, Engineering since December 2001.
From April 1999 to December 2001, Mr. Everett was Vice President, Engineering
of IPC Information Systems, Inc. Mr. Everett has held a variety of other
engineering management positions at IPC Information Systems, Inc. since
February 1988. Mr. Everett previously held engineering positions at Phillips
Medical Systems and ITT.

Anthony Scimecahas been our Managing Director of Americas since December
2001. From December 1999 to December 2001, Mr. Scimeca was Vice President and
General Manager of the I.T.S. unit of IPC Information Systems, Inc. From
October 1996 to December 1999, Mr. Scimeca was Vice President of Operations for
the New York region of IPC Information Systems, Inc.

Pete Simmshas been our Vice President, Production Services and Solutions
since December 2001. From April 2000 to December 2001, Mr. Simms was the Vice
President, Production Services and Solutions of IPC Information Systems, Inc.
Prior to that, Mr. Simms was the Manager of PlanningDistribution/Order
Administration for IPC Information Systems, Inc. from January 1990 to March
2000. Mr. Simms holds an MBA from the University of New Haven and a BA magna
cum laudefrom Western New England College.

Jack Dalyhas been a Director of our Company since December 2001. Mr. Daly
is a Vice President in the Principal Investment Area of Goldman, Sachs & Co.,
where he has worked since 2000. From 1998 to 2000, he was a member of the
Investment Banking Division of Goldman, Sachs & Co. From 1991 to 1997, Mr. Daly
was a Senior Instructor of Mechanical & Aerospace Engineering at Case Western
Reserve University. He earned a BS and MS in Engineering from Case Western
Reserve University and an MBA from the Wharton School of Business.

Robert Gheewallahas been a Director of our Company since December 2001.
Mr. Gheewalla is a Managing Director in the Principal Investment Area of
Goldman, Sachs & Co., where he has worked since 1994. He currently serves as a
director for GT Group Telecom. He received a B.A. from Tufts University, an MSc
from The London School of Economics while on a Fulbright Scholarship and an MBA
from Harvard Business School.

Joseph Glebermanhas been Chairman of the Board since December 2001. Mr.
Gleberman has been a Managing Director of Goldman, Sachs & Co. since 1996. From
1990 to 1996, Mr. Gleberman was a Partner of Goldman, Sachs & Co. Mr. Gleberman
serves as a director of aaiPharma, Inc., BackWeb Technologies Ltd. and MCG
Capital Corporation. He earned a BA in Engineering and an MA in Economics from
Yale University and an MBA from Stanford University Graduate School of
Business.

Eric Schwartzhas been a Director of our Company since December 2001. Mr.
Schwartz has been a Managing Director of Goldman, Sachs & Co. since 1996 and is
currently Co-Chief Operating Officer of the Equities Division of Goldman, Sachs
& Co., a position he has held since May 2000. From 1994 to 1996, Mr. Schwartz
was a Partner of Goldman, Sachs & Co. From 1998 to May 2000, he was responsible
for derivatives, convertibles, and Global Securities Services and, from 1991 to
1998, he

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worked in Equity Capital Markets. Mr. Schwartz earned a BSE from the University
of Pennsylvania and an MBA from the Wharton School of Business.

Lance Boxerhas been a Director of our Company since February 2002. Since
October 2001, Mr. Boxer has been the President and Chief Executive Officer of
Sphera Optical Network, Inc., a company which filed a petition for relief under
Chapter 11 of Title 11 of the United States Code in February 2002. From July
2000 to June 2001, Mr. Boxer was President and Chief Executive Officer of
XOSoft. From October 1998 to June 2000, Mr. Boxer held a variety of positions
at Lucent Technologies, serving most recently as President of Lucents
Communications Software Group. Prior to that, Mr. Boxer held a variety of
positions at MCI, serving most recently as Chief Information Officer from
September 1995 to October 1998. He received a BS and an MBA from New York
University.

Board of Directors

Our board of directors currently consists of six directors.

Committees of the Board of Directors

Our board of directors has two committees: an audit committee and a
compensation committee. The audit committee recommends the annual appointment
of auditors with whom the audit committee reviews the scope of audit and
non-audit assignments and related fees, accounting principles we use in
financial reporting, internal auditing procedures and the adequacy of our
internal control procedures. The current members of the audit committee are
Jack Daly, Robert Gheewalla and Lance Boxer. The compensation committee reviews
and approves the compensation and benefits for our employees, directors and
consultants, administers our employee benefit plans, authorizes and ratifies
stock option grants and other incentive arrangements and authorizes employment
and related agreements. The current members of the compensation committee are
Greg Kenepp, Joseph Gleberman and Eric Schwartz.

Compensation of Directors

Directors who are also our employees or employees of our principal
stockholders will receive no additional compensation for their services as
directors. Currently, we have one director, Lance Boxer, who is not employed by
us or our principal stockholders. As compensation for his services as a
director, Mr. Boxer receives $1,000 per meeting and has been granted, subject
to specified conditions, a stock option for 5,000 shares of our common stock
pursuant to our 2002 Stock Option Plan. In addition, Mr. Boxer participated in
our equity investment plan.

Indemnification of Directors and Officers

As permitted by Delaware law, our certificate of incorporation provides
that no director will be personally liable to us or our stockholders for
monetary damages for breach of fiduciary duty as a director, except for
liability:



| |  |  | for any breach of duty of loyalty to us or to our stockholders;                                                                             
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | for acts or omissions not in good faith or that involve intentional misconduct or a knowing violation of law;                               
|
| |  |  | for unlawful payment of dividends or unlawful stock repurchases or
redemptions under Section 174 of the Delaware General Corporation Law;
or
|
| |  |  | for any transaction from which the director derived an improper
personal benefit.                                                           

Our certificate of incorporation also provides that if Delaware law is amended
to permit further elimination or limitation of the personal liability of
directors, then the liability of a director of our Company will be eliminated
or limited to the fullest extent permitted by Delaware law.

In addition, our amended and restated bylaws provide that:



| |  |  | we are required to indemnify our directors and officers to the
fullest extent permitted by Delaware law, subject to specified
exceptions;                                                                        
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | we may indemnify our other employees and agents to the extent that we
indemnify our officers and directors, unless otherwise prohibited by
law, our certificate of incorporation, our bylaws or other agreements;

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| |  |  | we may be required to advance expenses to our directors and executive
officers as incurred in connection with legal proceedings against them
for which they may be indemnified; and
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | the rights conferred in the bylaws are not exclusive.                                                                                                                              

We have purchased insurance on behalf of our directors and officers
against various liabilities that may be asserted against, or incurred by, such
persons in their capacities as directors or officers of our Company, or that
may arise out of their status as directors or officers of our Company.

Employee Agreements

IPC Information Systems, Inc. was a party to nearly identical change in
control agreements with 18 executives, including each named executive officer.
However, in April 2002, in connection with the grant of nonqualified stock
options under our 2002 Stock Option Plan, 16 of the 18 executives who entered
into change in control agreements, including each named executive officer,
entered into a change in control waiver agreement. Under the change in control
waiver agreement, the executive waived any rights the executive may have had
under the change in control agreement in return for the stock option grant. In
addition, if the executive is terminated by us prior to December 20, 2002
without cause or the executive quits with good reason, then the executive is
entitled to (i) six months of continuation of salary, (ii) six months of
continuation of health and life insurance benefits, and (iii) a
lump-sum cash
payment equal to 50% of the executives target bonus for the 2000 fiscal year
or the year in which the termination occurs, whichever is higher.

The two executives who did not enter into change in control waiver
agreements are no longer with us. These former executives are seeking payments
under the original change in control agreements. While we do not believe that
these former executives are entitled to any such payments, it is possible that
a contrary position could prevail.




Item 11. Executive Compensation

The following table provides summary information concerning all
compensation earned by our President and each of our other four most highly
compensated executive officers for the fiscal year ended September 30, 2002
paid by IPC Information Systems, Inc. and its affiliates:

SUMMARY COMPENSATION TABLE

|                            |                                                                    |        |                     |           |            |                    |           |                  |  |  |                     |  |  |   |        |  | 
|--------------------------- | ------------------------------------------------------------------ | ------ | ------------------- | --------- | ---------- | ------------------ | --------- | ---------------- |  |  | ------------------- |  |  | - | ------ |  | 
|                            |                                                                    |        |                     |           |            |                    |           |                  |  |  | Long-Term           |  |  |   |       
|                            |                                                                    |        |                     |           |            |                    |           |                  |  |  | Compensation
Awards |  |  |   |       
|                            |                                                                    |        | Annual Compensation |           |            |                    |           |                  | 
|                            |                                                                    |        |                     |           | Securities |                    | All Other
|Name and Principal Position |                                                                    | Salary |                     | Bonus (1) |            | Underlying Options |           | Compensation (2)
|                            |                                                                    |        |                     |           |            |                    |           |                 
|Greg Kenepp                 |                                                                    | $      | 275,000             |           |            | $                  | 175,000   |                  |  |  | 105,000             |  |  |   |       | 
|                            | President                                                          |        |                     |           |            |                    |           |                  |  |  |                     |  |  |   |        |  | 
|Timothy Whelan              |                                                                    | $      | 225,000             |           |            | $                  | 140,000   |                  |  |  | 56,250              |  |  |   |       | 
|                            | Chief Financial Officer                                            |        |                     |           |            |                    |           |                  |  |  |                     |  |  |   |        |  | 
|Stefanie Sovak              |                                                                    | $      | 190,000             |           |            | $                  | 140,000   |                  |  |  | 52,500              |  |  |   |       | 
|                            | Senior Vice President, Business Development and Product
Management |        |                     |           |            |                    |           |                  |  |  |                     |  |  |   |        |  | 
|Anthony Scimeca             |                                                                    | $      | 190,000             |           |            | $                  | 70,000    |                  |  |  | 27,000              |  |  | $ | 13,323 | 
|                            | Managing Director, Americas                                        |        |                     |           |            |                    |           |                  |  |  |                     |  |  |   |        |  | 
|Michael Sheehan             |                                                                    | $      | 180,000             |           |            | $                  | 170,000   |                  |  |  | 52,500              |  |  | $ | 24,188 | 
|                            | Senior Vice President, Global Sales                                |        |                     |           |            |                    |           |                  |  |  |                     |  |  |   |        |  | 



---

|(1) |  | Bonus amounts are a combination of amounts paid by us in connection with 2001 performance and the acquisition of IPC Information Systems, Inc.
and are reflected in our statement of operations for the period October 1, 2001 to December 20, 2001, as well as amounts paid by Global Crossing
upon completion of the acquisition of IPC Information Systems, Inc.
|--- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|(2) |  | Includes commission payments received during fiscal year 2002.                                                                                                                                                                                                                                                                                                     

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OPTION GRANTS IN THE LAST COMPLETED FISCAL YEAR

|                |  |                    |         |                                    |  |                     |       |                |  |                 |        |  |  |   |         |  |  |   |           | 
|--------------- |  | ------------------ | ------- | ---------------------------------- |  | ------------------- | ----- | -------------- |  | --------------- | ------ |  |  | - | ------- |  |  | - | --------- | 
|                |  |                    |         | Potential Realizable Value at     
|                |  |                    |         | Assumed Annual Rates of Stock     
|                |  | Individual Grants  |         | Price Appreciation for Option Term
|                |  |                    |         |                                   
|                |  | Number of          |         |                                    |  |                     |       |                |  |                 |        |  |  |   |         |  |  |  
|                |  | Securities         |         |                                    |  |                     |       |                |  |                 |        |  |  |   |         |  |  |  
|                |  | Underlying Options |         | Exercise Price                     |  |                     |       |                |  |                 |        |  |  |   |         | 
|Name            |  | Granted            |         | ($/Share)                          |  | Expiration Date (1) |       | Gain at 5% (2) |  | Gain at 10% (2)
|                |  |                    |         |                                    |  |                     |       |                |  |                
|Greg Kenepp     |  |                    | 105,000 |                                    |  | $                   | 10.00 |                |  |                 | 4/5/12 |  |  | $ | 661,500 |  |  | $ | 1,669,500 | 
|Timothy Whelan  |  |                    | 56,250  |                                    |  | $                   | 10.00 |                |  |                 | 4/5/12 |  |  | $ | 354,375 |  |  | $ | 894,375   | 
|Stefanie Sovak  |  |                    | 52,500  |                                    |  | $                   | 10.00 |                |  |                 | 4/5/12 |  |  | $ | 330,750 |  |  | $ | 834,750   | 
|Michael Sheehan |  |                    | 52,500  |                                    |  | $                   | 10.00 |                |  |                 | 4/5/12 |  |  | $ | 330,750 |  |  | $ | 834,750   | 
|Anthony Scimeca |  |                    | 27,000  |                                    |  | $                   | 10.00 |                |  |                 | 4/5/12 |  |  | $ | 170,100 |  |  | $ | 429,300   | 

(1)  The expiration dates set forth in this column represent the latest dates on which the options could be exercised by the option
holder if such option holder remained employed by us.

(2)  The dollar amounts set forth in these columns are based on assumed annual rates of stock appreciation from the market price at
the date of grant of 5% and 10% (compounded annually) over the full term of the grant. The 5% and 10% assumed rates of appreciation
are mandated by the rules of the SEC, and do not represent our estimates or projection of the future appreciation of the value of
our common stock.

AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION VALUES

For each named executive officer, as of September 30, 2002, the following table
provides:



| |  | the total number of shares of our common stock received upon the
exercise of options during the fiscal year ending September 30, 2002;                                
|- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------
| 
| |  | the value realized upon such exercises; and                                                                                                                           
| 
| |  | the total number of shares of our common stock underlying stock
options held by the named executive officers (exercisable and
unexercisable) as of September 30, 2002.

|                |  |              |   |              |  |                            |   |                        |  |                         |   |                      |  |  |         |  |  |  |   |  |  |  |   | 
|--------------- |  | ------------ | - | ------------ |  | -------------------------- | - | ---------------------- |  | ----------------------- | - | -------------------- |  |  | ------- |  |  |  | - |  |  |  | - | 
|                |  |              |   |              |  |                            |   |                        |  | Number of Securities    |   | Value of Unexercised
|                |  |              |   |              |  |                            |   | Underlying Unexercised |  | In-the-Money Options at
|                |  | Shares       |   |              |  | Options at Fiscal Year End |   | Fiscal Year End (1)   
|                |  | Acquired on  |   | Value        |  |                            |   |                       
|Name            |  | Exercise (#) |   | Realized ($) |  | Exercisable                |   | Unexercisable          |  | Exercisable             |   | Unexercisable       
|                |  |              |   |              |  |                            |   |                        |  |                         |  
|Greg Kenepp     |  |              |  |              |  |                            |  |                        |  |                         |  |                      |  |  | 105,000 |  |  |  |  |  |  |  |  | 
|Timothy Whelan  |  |              |  |              |  |                            |  |                        |  |                         |  |                      |  |  | 56,250  |  |  |  |  |  |  |  |  | 
|Stefanie Sovak  |  |              |  |              |  |                            |  |                        |  |                         |  |                      |  |  | 52,500  |  |  |  |  |  |  |  |  | 
|Anthony Scimeca |  |              |  |              |  |                            |  |                        |  |                         |  |                      |  |  | 27,000  |  |  |  |  |  |  |  |  | 
|Michael Sheehan |  |              |  |              |  |                            |  |                        |  |                         |  |                      |  |  | 52,500  |  |  |  |  |  |  |  |  | 



---

|(1) |  | There is no public trading market
for shares of our common stock. The value of our common stock as of December
20, 2001 was $10.00 per share. Management has estimated that the
value has not changed since then based on our current
performance and long-term outlook.
|--- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Stock Option Plan

In
February 2002, we adopted the 2002 Stock Option Plan. The
option plan provides for the grant of options to purchase shares of
our 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 our success. The maximum number of shares that may be
made the subject of options granted under the option plan is 900,000. Through
September 30, 2002, we have granted 769,550 stock options with an
option price of $10 per share under the option plan. We account 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.

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The
option plan is administered by the compensation committee of our 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 our current stockholders
no longer owning any interests in us or any successor corporation will
be set forth in the option agreement. Under the form option agreements that
have been approved by our 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 us 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 our stockholders no longer having any ownership interest
in us or any successor corporation, the option will become fully
vested and exercisable.

Key Employee Equity Investment Plan

In
February 2002, we 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 our common stock at its
current fair market value. The plan is administered by the compensation
committee of our 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 will be 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 had been purchased under the
plan by certain directors, officers and other key employees. Promissory notes
received by us for shares purchased by directors, officers and other
of our key employees prior to the adoption of the Sarbanes-Oxley Act
totaled $0.4 million.




Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

PRINCIPAL STOCKHOLDERS

The following table sets forth information regarding beneficial ownership
of our common stock as of September 30, 2002 by (1) each person who is the
beneficial owner of more than five percent of the outstanding shares of our
common stock, (2) each of our directors, (3) each of our named executive
officers, and (4) all of our executive officers and directors as a group.
Except as otherwise indicated, the persons or entities listed below have sole
voting and investment power with respect to all shares of common stock
beneficially owned by them. For the purposes of this table, beneficial
ownership is determined in accordance with Rule 13d-3 under the Exchange Act
pursuant to which a person or group of persons is deemed to have beneficial
ownership of any shares of common stock that such person has the right to
acquire within 60 days after the date of this report.

63



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##### Table of Contents



|                                                            |  |                           |            |            |  |  |      |  
|----------------------------------------------------------- |  | ------------------------- | ---------- | ---------- |  |  | ---- | -
|                                                            |  | Shares Beneficially Owned
|                                                            |  |                          
|Name                                                        |  | Number                    |            | Percentage
|                                                            |  |                           |            |           
|5% Stockholders:                                            |  |                           |            |            |  |  |      |  
|Entities affiliated with The Goldman Sachs Group, Inc. (a)  |  |                           | 13,900,000 |            |  |  | 98.9 | %
|Directors and named executive officers:                     |  |                           |            |            |  |  |      |  
|Greg Kenepp                                                 |  |                           | 12,000     |            |  |  | *    |  
|Timothy Whelan                                              |  |                           | 9,000      |            |  |  | *    |  
|Stefanie Sovak                                              |  |                           | 9,000      |            |  |  | *    |  
|Anthony Scimeca                                             |  |                           | 500        |            |  |  | *    |  
|Michael Sheehan                                             |  |                           | 2,000      |            |  |  | *    |  
|Pete Simms                                                  |  |                           | 2,000      |            |  |  | *    |  
|Kevin Esposito                                              |  |                           | 1,500      |            |  |  | *    |  
|Jack Daly (b)                                               |  |                           |           |            |  |  |     |  
|Robert Gheewalla (c)                                        |  |                           |           |            |  |  |     |  
|Joseph Gleberman (d)                                        |  |                           |           |            |  |  |     |  
|Eric Schwartz (e)                                           |  |                           |           |            |  |  |     |  
|Lance Boxer (f)                                             |  |                           | 1,000      |            |  |  | *    |  
|All directors and executive officers as a group (15 people) |  |                           | 37,000     |            |  |  | *    |  



---

|*   |  | Less than one percent.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|--- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|(a) |  | Of these shares 7,894,612 shares are owned by GS Capital Partners 2000,
L.P., 2,868,598 shares are owned by GS Capital Partners 2000 Offshore,
L.P., 2,506,813 shares are owned by GS Capital Partners 2000 Employee
Fund, L.P., 329,977 shares are owned by GS Capital Partners 2000 GmbH &
Co. Beteiligungs KG, 200,000 shares are owned by Stone Street Fund 2000,
L.P., and 100,000 shares are owned by Bridge Street Special Opportunities
Fund, L.P. Affiliates of The Goldman Sachs Group, Inc. and Goldman, Sachs
& Co. are the general or managing partners or investment managers of these
partnerships. The Goldman Sachs Group, Inc. and Goldman, Sachs & Co. each
disclaims beneficial ownership of the shares owned by these partnerships
to the extent that partnership or membership interests, as the case may
be, in such partnerships are held by persons other than The Goldman Sachs
Group, Inc., Goldman, Sachs & Co. and its affiliates. The address of each
of these partnerships, Goldman, Sachs & Co. and The Goldman Sachs Group,
Inc. is 85 Broad Street, New York, New York 10004.
|   
|(b) |  | Mr. Daly, who is a Vice President in the Principal Investment Area of
Goldman, Sachs & Co., disclaims beneficial ownership of the securities
owned by The Goldman Sachs Group, Inc., Goldman, Sachs & Co., and its
affiliates. The address for Mr. Daly is 85 Broad Street, New York, New
York 10004.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|   
|(c) |  | Mr. Gheewalla, who is a Managing Director in the Principal Investment
Area of Goldman, Sachs & Co., disclaims beneficial ownership of the
securities owned by The Goldman Sachs Group, Inc., Goldman, Sachs & Co.
and its affiliates. The address for Mr. Gheewalla is 85 Broad Street, New
York, New York 10004.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|   
|(d) |  | Mr. Gleberman, who is a Managing Director of Goldman, Sachs & Co.,
disclaims beneficial ownership of the securities owned by The Goldman
Sachs Group, Inc., Goldman, Sachs & Co. and its affiliates. The address
for Mr. Gleberman is 85 Broad Street, New York, New York 10004.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|   
|(e) |  | Mr. Schwartz, who is a Managing Director of Goldman, Sachs & Co.,
disclaims beneficial ownership of the securities owned by The Goldman
Sachs Group, Inc., Goldman, Sachs & Co. and its affiliates. The address
for Mr. Schwartz is 85 Broad Street, New York, New York 10004.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|   
|(f) |  | The address for Mr. Boxer is c/o IPC Acquisition Corp., 88 Pine Street, New
York, New York 10005.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              

64



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##### Table of Contents



Equity Compensation Plan Information

The following table provides certain information with respect to all of
our equity compensation plans in effect as of September 30, 2002:

|                                                               |  |                   |         |                   |  |                     |       |                     |  |                     |   | 
|-------------------------------------------------------------- |  | ----------------- | ------- | ----------------- |  | ------------------- | ----- | ------------------- |  | ------------------- | - | 
|                                                               |  |                   |         |                   |  |                     |       |                     |  | Number of          
|                                                               |  |                   |         |                   |  |                     |       |                     |  | securities         
|                                                               |  |                   |         |                   |  |                     |       |                     |  | remaining available
|                                                               |  | Number of         |         |                   |  |                     |       | for future issuance
|                                                               |  | securities to be  |         |                   |  |                     |       | under the equity   
|                                                               |  | issued upon       |         | Weighted-average  |  | compensation plans 
|                                                               |  | exercise of       |         | exercise price of |  | (excluding         
|                                                               |  | outstanding       |         | outstanding       |  | securities         
|                                                               |  | options, warrants |         | options, warrants |  | reflected in column
|                                                               |  | and rights        |         | and rights        |  | (a))               
|Plan Category                                                  |  | (a)               |         | (b)               |  | (c)                
|                                                               |  |                   |         |                   |  |                    
|Equity compensation
plans approved by
security holders         |  |                   |        |                   |  |                     |      |                     |  |                     |  | 
|Equity compensation
plans not approved
by security
holders(1) |  |                   | 751,025 |                   |  | $                   | 10.00 |                     |  | 188,975            
|Total                                                          |  |                   | 751,025 |                   |  | $                   | 10.00 |                     |  | 188,975            



---

|(1) |  | For a description of the material features of our equity compensation plans
not approved by security holders, see the description of the Stock Option Plan
and Key Employee Equity Investment Plan in Item 11 of this report.
|--- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------




Item 13. Certain Relationships and Related Transactions

Goldman Sachs Capital Partners
2000

GSCP 2000 and other private equity funds affiliated with Goldman, Sachs &
Co. own substantially all of our common stock. Goldman, Sachs & Co., an
affiliate of GSCP 2000 and its related investment funds, provided advisory and
other services to GSCP 2000 and us in connection with sourcing, structuring and
arranging the acquisition and received fees of $8 million for those services.
Goldman, Sachs & Co. also acted as an initial purchaser in the offering of our
outstanding senior subordinated notes and an affiliate of Goldman, Sachs & Co.
acted as the arranger and syndication agent under our senior secured credit
facilities. In connection with these transactions, Goldman, Sachs & Co. and its
affiliates received aggregate fees of approximately $9.3 million. Goldman, Sachs
& Co. and its affiliates may in the future provide commercial banking,
investment banking or other financial advisory services to us and our
affiliates. Goldman, Sachs & Co. and/or its affiliates also purchase goods and
services from us from time to time and may do so in the future.

We provide installation projects and maintenance services on turrets to
Goldman, Sachs & Co. We were paid $0.1 million for the period from November 15,
2001 to September 30, 2002 by Goldman, Sachs & Co. for these projects and
services.

We provide certain services to Goldman, Sachs & Co. Services provided by
us are billed to Goldman Sachs and settled through the collection of trade
receivables. Revenue related to these services amounted to $4.4 million for the
period November 15, 2001 to September 30, 2002. For the periods ended December
31, 2001 and September 30, 2002, we have recorded on our balance sheet $2.4
million and $1.1 million of trade receivables and $0.7 million and $2.7 million
of customer advances related to maintenance from Goldman Sachs.

Stockholders Agreement

We have entered into a stockholders agreement with GSCP 2000 and the other
private equity funds affiliated with Goldman, Sachs & Co. who own our common
stock and Richard Kleinknecht, a minority holder of our common stock. This
agreement provides GSCP 2000 and the other Goldman, Sachs & Co. funds with
various management rights, including the right to designate at least one member
of our board of directors. The agreement also provides specified restrictions
on Kleinknechts

65



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##### Table of Contents



ability to transfer shares of our common stock. GSCP 2000 has advised us that
it and the other Goldman, Sachs & Co. funds may seek additional minority
stockholders to invest in up to approximately twenty percent of our common
stock held by them. In connection with any investment by minority stockholders,
we may enter into stockholders agreements with those minority stockholders. We
expect any stockholders agreement to contain customary terms, including terms
regarding corporate governance and other rights relating to the stockholders
investment in our common stock.




Item 14. Controls and Procedures

Within the 90 days prior to the filing of this report, our Chief Executive
Officer and Chief Financial Officer, with the participation of other members of
management, carried out an evaluation of the effectiveness of the design and
operation of our disclosure controls and procedures (as defined in Rule
15d-14(c) of the Securities Exchange Act of 1934). Based upon that evaluation,
our Chief Executive Officer and Chief Financial Officer concluded that our
disclosure controls and procedures are effective to ensure that the information
required to be included in this report has been recorded, processed, summarized
and reported on a timely basis. There have been no significant changes in
internal controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation. There have been
no corrective actions taken with regard to significant deficiencies and
material weaknesses subsequent to the date of our most recent evaluation.




PART IV




Item 15. Exhibits, Financial Statement Schedules, and Reports on Form 8-K

The following documents are filed as part of this report:



|(a) |  | (1) Financial Statements See index to Financial Statements in Item 8 of
this report.
|--- |  | -------------------------------------------------------------------------------------
|   
|(a) |  | (2) Financial Statement Schedules                                                    

Schedule II: Valuation and Qualifying Accounts

Schedules not listed above have been omitted because the information
required to be set forth therein is not applicable or is included elsewhere in
the financial statements or notes thereto.

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##### Table of Contents



Schedule II

Valuation and Qualifying Accounts
(in thousands)

|                                 |                                                     |  |                     |       |                    |  |                    |       |                   |  |             |      |   |  |   |       | 
|-------------------------------- | --------------------------------------------------- |  | ------------------- | ----- | ------------------ |  | ------------------ | ----- | ----------------- |  | ----------- | ---- | - |  | - | ----- | 
|                                 |                                                     |  |                     |       |                    |  |                    |       |                   |  | Deductions- |      |   |  |  
|                                 |                                                     |  |                     |       |                    |  |                    |       |                   |  | Write-offs, |      |   |  |  
|                                 |                                                     |  | Balance at          |       | Additions- Charged |  | Payments and Other |       | Balance at End of
|                                 |                                                     |  | Beginning of Period |       | to Expense         |  | Adjustments        |       | Period           
|                                 |                                                     |  |                     |       |                    |  |                    |       |                  
|Allowance for doubtful accounts: |                                                     |  |                     |       |                    |  |                    |       |                   |  |             |      |   |  |   |      
|                                 | IPC
Acquisition Corp:                               |  |                     |       |                    |  |                    |       |                   |  |             |      |   |  |   |       | 
|                                 | Period from November 15, 2001 to September 30, 2002 |  | $                   |      |                    |  | $                  | 1,288 |                   |  | $           | (43  | ) |  | $ | 1,245 | 
|                                 | PredecessorIPC Information Systems:                |  |                     |       |                    |  |                    |       |                   |  |             |      |   |  |   |       | 
|                                 | Period from October 1, 2001 to December 20, 2001    |  | $                   | 2,648 |                    |  | $                  | 1,018 |                   |  | $           | 847  |   |  | $ | 4,513 | 
|                                 | Year ended September 30, 2001                       |  | $                   | 2,601 |                    |  | $                  | 793   |                   |  | $           | (746 | ) |  | $ | 2,648 | 
|                                 | Period from June 15, 2000 to September 30, 2000     |  | $                   | 1,723 |                    |  | $                  | 647   |                   |  | $           | 231  |   |  | $ | 2,601 | 
|                                 | Period from October 1, 1999 to June 14, 2000        |  | $                   | 1,498 |                    |  | $                  | 767   |                   |  | $           | (542 | ) |  | $ | 1,723 | 

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(a) (3) Exhibits

The following exhibits are filed with this report.

Exhibit Index

|        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|Number  |  | Description                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|       
|2.1     |  | Purchase Agreement dated as of November
16, 2001 among Global Crossing Ltd., Asia
Global Crossing Ltd, Global Crossing North
America Holdings Inc., Saturn Global
Network Services Holdings Limited, IXnet
Hong Kong Ltd., Asia Global Crossing Pte
Ltd, GS Capital Partners 2000, L.P., GS
Capital Partners 2000 Offshore, L.P., GS
Capital Partners 2000 Offshore L.P., GS
Capital Partners 2000 GMBH & Co.
Beteiligungs KG, Bridge Street Special
Opportunities Fund 2000, L.P., GS Capital
Partners 2000 Employee Fund, L.P., Stone
Street Fund 2000 and GS IPC Acquisition
Corp. (Certain exhibits and schedules to
this agreement have been omitted. Such
exhibits and schedules are described in
the agreement. The Company hereby agrees
to furnish to the SEC, upon its request,
any or all of such omitted exhibits or
schedules.) (incorporated by reference to
exhibit 2.1 to the Companys Registration
Statement on Form S-4 (No. 333-82540)).
|       
|2.2     |  | Amendment date as of December 20, 2001
among Global Crossing Ltd., Asia Global
Crossing Ltd, Global Crossing North
America Holdings Inc., Saturn Global
Network Services Holdings Limited, IXnet
Hong Kong Ltd., Asia Global Crossing Pte
Ltd, GS Capital Partners 2000, L.P., GS
Capital Partners 2000 Offshore, L.P., GS
Capital Partners 2000 Offshore L.P., GS
Capital Partners 2000 GMBH & Co.
Beteiligungs KG, Bridge Street Special
Opportunities Fund 2000, L.P., GS Capital
Partners 2000 Employee Fund, L.P., Stone
Street Fund 2000, L.P. and IPC Acquisition
Corp. to the Purchase Agreement dated as
of November 16, 2001 among the parties to
this Amendment (incorporated by reference
to exhibit 2.2 to the Companys
Registration Statement on Form S-4 (No.
333-82540)).                                                                                                                                                                  
|       
|3.1     |  | Amended and Restated Certificate of
Incorporation of the Company (incorporated
by reference to exhibit 3.1 to the
Companys Registration Statement on Form
S-4 (No. 333-82540)).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|       
|3.2     |  | Amended and Restated Bylaws of the Company
(incorporated by reference to exhibit 3.2
to the Companys Registration Statement on
Form S-4 (No. 333-82540)).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|       
|4.1     |  | Indenture, dated as of December 20, 2001,
among the Company, the subsidiary
guarantors listed on schedule I thereto
and The Bank of New York as trustee
relating to the 11.50% senior subordinated
notes due 2009 (incorporated by reference
to exhibit 4.1 to the Companys
Registration Statement on Form S-4 (No.
333-82540)).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|       
|4.2     |  | The Exchange and Registration Rights
Agreement, dated December 20, 2001, among
the Company, the guarantors listed on
schedule I thereto, Goldman, Sachs & Co.
and Scotia Capital (USA) Inc. relating to
the 11.50% senior subordinated notes due
2009 (incorporated by reference to exhibit
4.2 to the Companys Registration
Statement on Form S-4 (No. 333-82540)).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|       
|10.1    |  | Amended and Restated Stockholders
Agreement dated as of December 19, 2001,
among GS Capital Partners 2000, L.P., GS
Capital Partners 2000 Offshore, L.P., GS
Capital Partners 2000 GMBH & Co.
Beteiligungs, GS Capital Partners 2000
Employee Fund, L.P., Stone Street Fund
2000, L.P., Bridge Street Special
Opportunities Fund 2000, L.P., Richard
Kleinknecht and IPC Acquisition Corp.
(incorporated by reference to exhibit 10.1
to the Companys Registration Statement on
Form S-4 (No. 333-82540)).                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|       
|10.2    |  | Credit and Guaranty Agreement, dated as of
December 20, 2001, among IPC Acquisition
Corp., certain subsidiaries of IPC
Acquisition Corp. as Guarantors, various
lenders, Goldman Sachs Credit Partners
L.P. as Sole Lead Arranger and Syndication
Agent, The Bank of Nova Scotia as
Administrative Agent and Collateral Agent,
and General Electric Capital Corporation
as Documentation Agent (incorporated by
reference to exhibit 10.2 to the Companys
Registration Statement on Form S-4 (No.
333-82540)).                                                                                                                                                                                                                                                                                                                                                                                                                                             
|       
|10.3    |  | Amended and Restated Labor Pooling
Agreement, dated as of December 18, 1997,
by and between Kleinknecht Electric
Company, Inc. (NY) and IPC Information
Systems, Inc. (incorporated by reference
to exhibit 10.3 to the Companys
Registration Statement on Form S-4 (No.
333-82540)).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|       
|10.4    |  | Amended and Restated Labor Pooling Agreement, dated as of
December 18, 1997, by and between Kleinknecht                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     

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##### Table of Contents



|      |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|----- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|     
|      |  | Electric
Company, Inc. (NJ) and IPC Information Systems, Inc.
(incorporated by reference to exhibit 10.4 to the
Companys Registration Statement on Form S-4 (No.
333-82540)).                                                                                                                                                                                                                                                                                                                      
|     
|10.5  |  | Network Services, Channel Sales and Transition Services
Agreement, dated December 20, 2001, among the Company,
IPC Information Systems, Inc., Asia Global Crossing, IPC
Trading Systems Australia Pty Ltd., Asia Global Crossing
Asia Pacific Commercial Ltd., Global Crossing Limited and
Global Crossing Telecommunications, Inc. (incorporated by
reference to exhibit 10.5 to the Companys Registration
Statement on Form S-4 (No. 333-82540)).                                                
|     
|10.6  |  | Amendment dated as of July 3, 2002 among IPC Acquisition
Corp., IPC Information Systems, Inc., IPC Information
Systems Australia Pty Ltd, Asia Global Crossing Asia
Pacific Commercial Ltd., Global Crossing Limited and
Global Crossing Telecommunications Inc., to the Network
Services, Channel Sales and Transition Services Agreement
dated as of December 20, 2001 (incorporated by reference
to exhibit 10.1 to the Companys quarterly report for the
quarterly period ended June 30, 2002).
|     
|10.7  |  | Form of Change In Control Agreement (incorporated by
reference to exhibit 10.6 to the Companys Registration
Statement on Form S-4 (No. 333-82540)).                                                                                                                                                                                                                                                                                                                                                
|     
|*10.8 |  | Form of Change In Control Waiver Agreement.                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|     
|10.9  |  | 2002 Stock Option Plan, dated February 15, 2002
(incorporated by reference to exhibit 10.7 to the
Companys Registration Statement on Form S-4 (No.
333-82540)).                                                                                                                                                                                                                                                                                                                                    
|     
|10.10 |  | Key Employee Equity Investment Plan, dated February 15,
2002 (incorporated by reference to exhibit 10.8 to the
Companys Registration Statement on Form S-4 (No.
333-82540)).                                                                                                                                                                                                                                                                                                                       
|     
|*12.1 |  | Ratio of Earnings to Fixed Charges.                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|     
|21.1  |  | List of Subsidiaries (incorporated by reference to
exhibit 21.1 to the Companys Registration Statement on
Form S-4 (No. 333-82540)).                                                                                                                                                                                                                                                                                                                                                               
|     
|*23.1 |  | Consent of Ernst & Young LLP, Independent Auditors.                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|     
|*23.2 |  | Notice Regarding Consent of Arthur Andersen LLP.                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|     
|*99.1 |  | Certificate of Chief Executive Officer pursuant to 18
U.S.C. Section 1350, adopted pursuant to Section 906 of
the Sarbanes-Oxley Act of 2002.                                                                                                                                                                                                                                                                                                                                                       
|     
|*99.2 |  | Certificate of Chief Financial Officer pursuant to 18
U.S.C. Section 1350, adopted pursuant to Section 906 of
the Sarbanes-Oxley Act of 2002.                                                                                                                                                                                                                                                                                                                                                       



---

|* |  | Filed herewith
|- |  | --------------



| | (b) |  | Reports on Form 8-K                                                                                    
| | --- |  | -------------------------------------------------------------------------------------------------------
|
| |     |  | The Company has filed no reports on Form 8-K during the period November 15, 2001 to September 30, 2002.

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SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) 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, in the City of New
York, State of New York, on the 27th day of December 2002.

IPC Acquisition Corp.

By: /s/ Greg Kenepp
Greg Kenepp
President and Director

Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.

|                                           |  |                                                                     |  |                  
|------------------------------------------ |  | ------------------------------------------------------------------- |  | -----------------
|Signature                                  |  | Title                                                               |  | Date             
|                                          
|By: /s/ GREG KENEPP

Greg Kenepp           |  | President and Director(Principal Executive Officer)                 |  | December 27, 2002
|                                          
|By: /s/ TIMOTHY WHELAN

Timothy Whelan     |  | Chief Financial Officer(Principal Financial and Accounting
Officer) |  | December 27, 2002
|                                          
|By: /s/ JOSEPH GLEBERMAN

Joseph Gleberman |  | Chairman of the Board                                               |  | December 27, 2002
|                                          
|By: /s/ JACK DALY

Jack Daly               |  | Director                                                            |  | December 27, 2002
|                                          
|By: /s/ ROBERT GHEEWALLA

Robert Gheewalla |  | Director                                                            |  | December 27, 2002
|                                          
|By: /s/ ERIC SCHWARTZ

Eric Schwartz       |  | Director                                                            |  | December 27, 2002
|                                          
|By: /s/ LANCE BOXER

Lance Boxer           |  | Director                                                            |  | December 27, 2002

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##### Table of Contents



Certifications

I, Greg Kenepp, certify that:



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



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



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



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



|6. |  | The registrants other certifying officers and I have indicated in this
annual report whether there were significant changes in internal controls
or in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any
corrective actions with regard to significant deficiencies and material
weaknesses.
|-- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|                        |  |                 |  |                                   
|----------------------- |  | --------------- |  | ----------------------------------
|Date: December 27, 2002 |  | /s/ Greg Kenepp |  |                                   
|                        |  |                 |  |                                   
|                        |  |                 |  | Greg Kenepp
President and Director

71



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##### Table of Contents



I, Timothy Whelan, certify that:



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



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



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



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



|6. |  | The registrants other certifying officers and I have indicated in this
annual report whether there were significant changes in internal controls
or in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any
corrective actions with regard to significant deficiencies and material
weaknesses.
|-- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|                        |  |                    |  |                                       
|----------------------- |  | ------------------ |  | --------------------------------------
|Date: December 27, 2002 |  | /s/ Timothy Whelan |  |                                       
|                        |  |                    |  |                                       
|                        |  |                    |  | Timothy Whelan
Chief Financial Officer

72



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##### Table of Contents



Supplemental Information to be Furnished With Reports Filed Pursuant to Section
15(d) of the Act by Registrants Which Have Not Registered Securities Pursuant
to Section 12 of the Act.

The registrant has not sent an annual report or proxy materials to its
security holders during the last fiscal year. The registrant does not
currently intend to send an annual report or proxy materials to security
holders subsequent to this filing.

73