| ý                                                      | ANNUAL                REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF                1934     |
|-------------------------------------------------------------|------------------------------------------------------------------------------------------------------------------|
|                                                        |                                                                                                             |
| For                the fiscal year ended September 30, 2007 |
|                                                        |                                                                                                             |
| o                                                           | TRANSITION                REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF                1934 |

| Delaware                                                                                                                     |   | 22-3499261                                          |
|------------------------------------------------------------------------------------------------------------------------------|--------|-----------------------------------------------------|
| (State                or other jurisdiction of incorporation or organization)                                                |   | (I.R.S.                Employer Identification No.) |
|                                                                                                                         |   |                                                |
| 149                Avenue at the Common, Suite 3, Shrewsbury, New Jersey                07702                                |
| (Address                of principal executive offices)                                                                      |
|                                                                                                                         |   |                                                |
| (732)                866-0300                                                                                                |
| (Registrant’s                telephone number, including area code)                                                    |
|                                                                                                                         |   |                                                |
| Securities                registered under Section 12(b) of the Exchange Act:   Not                Applicable |
|                                                                                                                         |   |                                                |
| Securities                registered under Section 12(g) of the Exchange Act:                                                |
| Common                Stock, $.04 par value                                                                                  |
| (Title                of class)                                                                                              |

| Large                accelerated filer  ̈ | Accelerated                filer  ̈ | Non-accelerated                filer ý |
|-----------------------------------------------|-----------------------------------------|---------------------------------------------|

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| PART                I                                       |                                                                                                                                          | PAGE   |
|-------------------------------------------------------------|-----------------------------------------------------------------------------------------------------------------------------------------------|--------|
| ITEM                1.                                      | BUSINESS                                                                                                                                      | 4      |
| ITEM                1A.                                     | RISK                FACTORS                                                                                                                   | 8      |
| 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 COMMON EQUITY, RELATED                STOCKHOLDER MATTERSAND                ISSUER PURCHASES OF EQUITY SECURITIES   | 12     |
| ITEM                6.                                      | SELECTED                FINANCIAL                DATA                                                                                         | 13     |
| ITEM                7.                                      | MANAGEMENT’S                DISCUSSION AND ANALYSIS                OF FINANCIAL CONDITION AND RESULTS OF                OPERATIONS      | 13     |
| ITEM                7A.                                     | QUANTITATIVE                AND QUALITATIVE                DISCLOSURE ABOUT MARKET RISK                                                       | 21     |
| ITEM                8.                                      | FINANCIAL                STATEMENTS AND                SUPPLEMENTARY DATA                                                                     | 22     |
| ITEM                9.                                      | CHANGES                IN AND DISAGREEMENT WITH                ACCOUNTANTS ON ACCOUNTING AND FINANCIAL                DISCLOSURE              | 22     |
| ITEM                9A.                                     | CONTROLS                AND PROCEDURES                                                                                                        | 22     |
|                                                        |                                                                                                                                          |   |
| PART                III                                     |                                                                                                                                          |   |
| ITEM                10.                                     | DIRECTORS,                EXECUTIVE OFFICERS,AND                CORPORATE GOVERNANCE.                                                         | 23     |
| ITEM                11.                                     | EXECUTIVE                COMPENSATION                                                                                                         | 24     |
| ITEM                12.                                     | SECURITIES                OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED                STOCKHOLDER                MATTERS | 30     |
| ITEM                13.                                     | CERTAIN                RELATIONSHIPS AND RELATED                TRANSACTIONSAND                DIRECTOR INDEPENDENCE                          | 32     |
| ITEM                14.                                     | PRINCIPAL                ACCOUNTING FEES AND SERVICES                                                                                         | 32     |
|                                                        |                                                                                                                                          |   |
| PART                IV                                      |                                                                                                                                          |   |
| ITEM                15.                                     | EXHIBITS,                FINANCIAL STATEMENT                SCHEDULES                                                                         | 33     |
|                                                        |                                                                                                                                          |   |
| INDEX                TO FINANCIAL                STATEMENTS | F-1                                                                                                                                           |

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PART      I

| ITEM                1. | BUSINESS |
|------------------------|----------|

----

| ·   | technology                asset disposition services; |
|--------------------|-------------------------------------------------------|

| ·   | recycling                services; |
|--------------------|------------------------------------|

| ·   | data                security protection; and |
|--------------------|----------------------------------------------|

| ·   | asset                auditing and tracking. |
|--------------------|---------------------------------------------|

| ·   | Risk                Identification–                Green-Tech assesses the client needs and identifies the risks that                the                client faces in disposing of its technology                assets |
|--------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Risk                Analysis– The                risks identified by Green-Tech and their potential impact on the                client                are analyzed and designated as either high, medium or low                risk |
|--------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Risk                Planning– After                analyzing the possible impact of the identified risks, Green-Tech                develops                step-by-step action plans outlining potential options on a worst                case                scenario basis |
|--------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Risk                Tracking –                Green-Tech monitors “trigger events” that indicate that a risk is about to                become a reality |
|--------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Risk                Control –                Green-Tech takes the steps to minimize the adverse consequences of                a risk                scenario. |
|--------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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| ITEM                1A. | RISK                FACTORS |
|-------------------------|-----------------------------|

----

----

|   | Ÿ | its                clients’ perception of our ability to add value through our services; |
|--------|--------|------------------------------------------------------------------------------------------------|

|   | Ÿ | competition,                including pricing policies of its competitors; and |
|--------|--------|--------------------------------------------------------------------------------|

|   | Ÿ | general                economic conditions. |
|--------|--------|---------------------------------------------|

|   | Ÿ | the                demand for IT staffing services; |
|--------|--------|-----------------------------------------------------|

|   | Ÿ | the                quality and scope of its services; |
|--------|--------|-------------------------------------------------------|

|   | Ÿ | seasonal                trends, primarily as a result of holidays, vacations and inclement                weather; |
|--------|--------|--------------------------------------------------------------------------------------------------------------------|

|   | Ÿ | the                number of billing days in any period; |
|--------|--------|----------------------------------------------------------|

|   | Ÿ | the                ability to transition consultants from completed assignments to new                engagements; |
|--------|--------|--------------------------------------------------------------------------------------------------------------------|

|   | Ÿ | the                ability to forecast demand for services and thereby maintain an                appropriately balanced and sized workforce; and |
|--------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------|

|   | Ÿ | the                ability to manage consultant turnover. |
|--------|--------|-----------------------------------------------------------|

----

| ITEM                2. | PROPERTIES |
|------------------------|------------|

| ITEM                3. | LEGAL                PROCEEDINGS |
|------------------------|----------------------------------|

| ITEM                4. | SUBMISSION                OF MATTERS TO A VOTE OF SECURITY                HOLDERS |
|------------------------|-----------------------------------------------------------------------------------|

----

PART      II

| ITEM                5. | MARKET                FOR COMMON EQUITY, RELATED STOCKHOLDER MATTERS, AND ISSUER PURCHASES                OF                EQUITY SECURITIES. |
|------------------------|------------------------------------------------------------------------------------------------------------------------------------------------|

| Fiscal                Year 2006                 | High | Low  |
|-------------------------------------------------|------|------|
| Quarter                Ended December 31, 2005  | 0.07 | 0.01 |
| Quarter                Ended March 31, 2006     | 0.02 | 0.01 |
| Quarter                Ended June 30, 2006      | 0.05 | 0.02 |
| Quarter                Ended September 30, 2006 | 0.05 | 0.01 |

| Fiscal                Year 2007                 | High | Low  |
|-------------------------------------------------|------|------|
| Quarter                Ended December 31, 2006  | 0.02 | 0.01 |
| Quarter                Ended March 31, 2007     | 0.02 | 0.01 |
| Quarter                Ended June 30, 2007      | 0.02 | 0.01 |
| Quarter                Ended September 30, 2007 | 0.10 | 0.01 |

|                                        | 9/30/02 | 9/30/03 | 9/30/04 | 9/30/05 | 9/30/06 | 9/30/07 |
|---------------------------------------------|---------|---------|---------|---------|---------|---------|
| Stratus                Services Group, Inc. | 100.00  | 206.67  | 116.67  | 10.83   | 2.00    | 3.92    |
| NASDAQ                Composite             | 100.00  | 150.59  | 162.76  | 185.69  | 196.70  | 236.91  |
| Peer                Group (1)               | 100.00  | 133.32  | 145.47  | 170.20  | 190.62  | 178.59  |

| Adecco                SA                            | Comsys                It Partners Inc.           | Monster                Worldwide Inc.          |
|-----------------------------------------------------|--------------------------------------------------|------------------------------------------------|
| Administaff                Inc.                     | Cross                Country Healthcare Inc.     | MPS                Group Inc.                  |
| Allied                Healthcare International Inc. | General                Employees Ents            | National                Technical Systems Inc. |
| AMN                Healthcare Services Inc.         | Gevity                HR Inc.                    | On                Assignment Inc.              |
| Analysts                International               | Heidrick                Struggles International  | RCM                Technologies Inc.           |
| ATC                Healthcare Inc.                  | Hudson                Highland Group Inc.        | Resources                Connection Inc.       |
| Barrett                Business Services Inc.       | Kelly                Services Inc.               | Robert                Half International       |
| Butler                International                 | Kforce                Inc.                       | Spherion                Corp.                  |
| CDI                Corp.                            | Korn                Ferry International          | Teamstaff                Inc.                  |
| Comforce                Corp.                       | Labor                Ready Inc.                  | Techteam                Global Inc.            |
| Computer                Horizons Corp.              | Manpower                Inc.                     | Volt                Information Science Inc.   |
| Computer                Task Group Inc.             | Medical                Staffing Network Holdings | Westaff                Inc.                    |

----

| ITEM                6. | SELECTED                FINANCIAL DATA. |
|------------------------|-----------------------------------------|

|                                                                                                                   | Year                Ended September 30, |
|------------------------------------------------------------------------------------------------------------------------|-----------------------------------------|
|                                                                                                                   | 2007                                    | 2006 | 2005 |   | 2004 |   | 2003 |   |
|                                                                                                                   |                                    |   |   |   |   |   |   |   |
| Income                statement data:                                                                                  |                                    |   |   |   |   |   |   |   |
| Revenues                                                                                                               | $ 8,210                            | $ 5,131 | $ 4,521 |   | $ 1.150 | (1) | $ — | (1) |
| Gross                profit                                                                                            |  2,492                             |  1,526 |  1,318 |   |  384 |   |  — |   |
| Operating                (loss) from continuing operations                                                             |  (479)                             |  (1,556) |  (3,960) |   |  (3,055) |   |  (2,464) |   |
| Net                (loss) from continuing operations                                                                   |  (677)                             |  (2,055) |  (634) |   |  (1,834) |   |  (2,707) |   |
| Net                (loss) from continuing operations attributable to common                stockholders                |  (719)                             |  (2,097) |  (676) |   |  (7,148) |   |  (4,337) |   |
|                                                                                                                   |                                    |   |   |   |   |   |   |   |
| Per                share data:                                                                                         |                                    |   |   |   |   |   |   |   |
| Net                (loss) from continuing operations attributable to common stockholders–                basic   | $ (.01)                            | $ (.05) | $ (.04) |   | $ (.94) |   | $ (.25) |   |
| Net                (loss) from continuing operations attributable to common stockholders–                diluted | $ (.01)                            | $ (.05) | $ (.04) |   | $ (.94) |   | $ (.25) |   |
| Cash                dividends declared                                                                                 |  3⁄4                            |  3⁄4 |  3⁄4 |   |  3⁄4 |   |  3⁄4 |   |
|                                                                                                                   |                                    |   |   |   |   |   |   |   |
|                                                                                                                   | Year                Ended September 30, |
|                                                                                                                   | 2007                                    | 2006 | 2005 |   | 2004 |   | 2003 |   |
|                                                                                                                   |                                    |   |   |   |   |   |   |   |
| Balance                sheet data:                                                                                     |                                    |   |   |   |   |   |   |   |
| Net                working capital (deficiency)                                                                        | $(8,038)                                | $(7,339) | $(9,161) |   | $(16,267) |   | $(7,979) |   |
| Long-term                obligations, including current portion                                                        |  2,323                             |  1,457 |  858 |   |  2,649 |   |  4,001 |   |
| Put                option liability                                                                                    |  —                           |  — |  — |   |  673 |   |  823 |   |
| Warrant                liability                                                                                       |  —                           |  — |  2 |   |  5,266 |   |  — |   |
| Minority                Interest in Subsidiaries                                                                       |  547                               |  41 |  22 |   |  — |   |  — |   |
| Redeemable                convertible preferred stock                                                                  |  —                           |  — |  2,218 |   |  2,218 |   |  3,810 |   |
| Stockholders’                equity (deficiency)                                                                 |  (7,780)                           |  (8,055) |  (9,876) |   |  (9,773) |   |  (4,915) |   |
| Total                assets                                                                                            |  3,805                             |  2,015 |  18,798 |   |  27,907 |   |  25,151 |   |

| ITEM                7. | MANAGEMENT’S                DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF                OPERATIONS. |
|------------------------|----------------------------------------------------------------------------------------------------------------------------|

----

----

|                                                                                        |          |
|---------------------------------------------------------------------------------------------|---------------|
| Sales                price – cancellation of accounts payable – related parties | $3,315,719    |
|                                                                                        |          |
| Less                costs of sale:                                                          |          |
| Write-off                of amounts due from                ALS                             | (376,394)     |
| Other                costs (including $75,000                to a related party)            | (322,952)     |
|                                                                                        |          |
| Balance                                                                                     | 2,616,373     |
| Net                assets sold                                                              |  377,265 |
| Gain                                                                                        | $2,239,108    |

| (a) | On                December 2, 2005, we completed the sale, effective as of November                21,                2005, of substantially all of the tangible and intangible assets,                excluding accounts receivable, of several of our offices located                in the                Western half of the United States (the “ALS Purchased Assets”) to ALS. The                offices sold were the following: Chino, California; Colton, California;                Los Angeles, California; Los Nietos, California; Ontario, California;                Santa Fe Springs, California and the Phoenix, Arizona branches and                the                Dallas Morning News Account (the “Western Offices”). Pursuant to the terms                of an Asset Purchase Agreement between us and ALS dated December                2, 2005                (the “ALS Asset Purchase Agreement”), the purchase price for the ALS                Purchased Assets was paid or is payable as                follows: |
|-----|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|  | • | $250,000                was paid over the 60 days following December 2, 2005, for our documented                cash flow requirements, all of which is payable at a rate no faster                than                $125,000 per 30 days; |
|--|---------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|  | • | $1,000,000                payable by ALS is being paid directly to certain taxing authorities                to                reduce our tax obligations; and |
|--|---------|----------------------------------------------------------------------------------------------------------------------------------------------------------------|

|  | • | $3,537,000                which was paid by means of the cancellation of all net indebtedness                owed                by us to ALS outstanding as of the close of business on December                2,                2005. |
|--|---------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|  | In                addition to the foregoing amounts, ALS also assumed our obligation                to pay                $798,626 due under a certain promissory note issued by us to Provisional                Employment Solutions, Inc. As a result of the sale of the ALS Purchased                Assets to ALS, all sums due and owing to ALS by us were deemed paid                in                full and no further obligations                remain. |
|--|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (b) | On                December 5, 2005, we completed the sale, effective as of November                28, 2005                (the “AI Effective Date”), of substantially all of the tangible and                intangible assets, excluding accounts receivable and other certain                items,                as described below, of three of our California offices (the “AI Purchased                Assets”) to Accountabilities, Inc. (“AI”) The offices sold were the                following: Culver City, California; Lawndale, California and Orange,                California (the “Other California Offices”). Pursuant to the terms of an                Asset Purchase Agreement between the Company and AI dated December                5, 2005                (the “AI Asset Purchase Agreement”), AI has agreed to pay to us an earnout                amount equal to two percent of the sales of the Other California                Offices                for the first twelve month period after the AI Effective Date; one                percent                of the sales of the Other California Offices for the second twelve                month                period after the AI Effective Date; and one percent of the sales                of the                Other California Offices for the third twelve month period from the                AI                Effective Date. In addition, a Demand Subordinated Promissory Note                between                us and AI dated September 15, 2005 which had an outstanding principal                balance of $125,000 at the time of closing was deemed paid and marked                canceled. |
|-----|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

| (c) | On                December 7, 2005, we completed the sale, effective as of November                28, 2005                (the “SOP Effective Date”), of substantially all of the tangible and                intangible assets, excluding accounts receivable and other assets                as                described below, of several of our Northeastern offices (the “SOP                Purchased Assets”) to Source One Personnel, Inc. (“SOP”). The offices sold                were the following: Cherry Hill, New Jersey; New Brunswick, New Jersey;                Mount Royal/Paulsboro, New Jersey (soon to be Woodbury Heights, New                Jersey); Pennsauken, New Jersey; Norristown, Pennsylvania; Fairless                Hills,                Pennsylvania; New Castle Delaware and the former Freehold, New Jersey                profit center (the “NJ/PA/DE Offices”). The assets of Deer Park, New York,                Leominster, Massachusetts, Lowell, Massachusetts and Athol, Massachusetts                (the “Earn Out Offices”) were also purchased (collectively the “NJ/PA/DE                Offices” and the “Earn Out Offices” shall be referred to as the “Purchased                Offices”). In addition to the foregoing, the SOP Purchased Assets also                included substantially all of the tangible and intangible assets,                excluding accounts receivable and other assets as described below,                used by                us in the operation of our business at certain facilities of certain                customers including the following: the Setco facility in Cranbury                New                Jersey, the Record facility in Hackensack, New Jersey, the UPS-MI                (formerly RMX) facility in Long Island, New York, the UPS-MI (formerly                RMX) facility in the State of Connecticut, the UPS-MI (formerly RMX)                facility in the State of Ohio, the APX facility in Clifton, New Jersey                (the “Earn Out On-Site Business”) and the Burlington Coat Factory in                Burlington, New Jersey, the Burlington Coat Factory facility in Edgewater                Park, New Jersey and the UPS-MI (formerly RMX) facility in Paulsboro,                New                Jersey (the foregoing business and the “Earn-Out On-Site Businesses” shall                be referred to herein collectively as the “On-Site Businesses”). Pursuant                to the SOP Asset Purchase Agreement between us and SOP dated December                7,                2005 (the “SOP Asset Purchase Agreement”), the purchase price for the SOP                Purchased Assets was paid or  payable as follows (the “SOP                Purchase Price”): |
|-----|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|  | · | An                aggregate of $974,031 of indebtedness owed by us to SOP (i) under                certain                promissory notes previously issued by us to SOP and (ii) in connection                with a put right previously exercised by SOP with respect to 400,000                shares of our common stock was                cancelled. |
|--|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|  | · | SOP                is required to make the following earn out payments to us during                the three                year period commencing on the SOP Effective Date (the “Earn Out                Period”): |
|--|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|  | · | Two                percent of sales (excluding taxes on sales) from the Earn Out Offices                and                the Earn Out On-Site Businesses for the initial twelve months of                the Earn                Out Period. |
|--|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|  | · | One                percent of sales (excluding taxes on sales) from the Earn Out Offices                and                the Earn Out On-Site Businesses for the second twelve months of the                Earn                Out Period. |
|--|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|  | · | One                percent of sales (excluding taxes on sales) from the Earn Out Offices                and                the Earn Out On-Site Businesses for the third twelve months of the                Earn                Out Period. |
|--|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (d) | On                December 7, 2005 (the “Closing Date”), we completed the sale of                substantially all of the tangible and intangible assets, excluding                cash                and cash equivalents, of two of our California branch offices (the“TES                Purchased Assets”) to Tri-State Employment Service, Inc. (“TES”). The                offices sold were the following: Bellflower, California and West                Covina,                California (the “California Branch Offices”). Pursuant to the terms of an                Asset Purchase Agreement between the Registrant and TES dated December                7,                2005 (the “TES Asset Purchase Agreement”), TES has agreed to pay to us as                follows: |
|-----|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|  | · | two                percent of sales of the California Branch Offices to existing clients                for                the first twelve month period after the Closing                Date; |
|--|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|  | · | one                percent of sales of the California Branch Offices to existing clients                for                the second twelve month period after the Closing Date;                and |
|--|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|  | · | one                percent of sales of the California Branch Offices to existing clients                for                the third twelve month period after the Closing                Date. |
|--|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

| Sold                to:                                |   |           |   |
|--------------------------------------------------------|---|-----------|---|
| ALS                                                    | $ | 4,340,459 |   |
| AI                                                     |   | (10,013   | ) |
| SOP                                                    |   | (190,879  | ) |
| TES                                                    |   | (275,520  | ) |
|                                                        |   | 3,864,047 |   |
|                                                        |   |           |   |
| Other                costs of sales                    |   | (60,000   | ) |
| Gain                on sale of discontinued operations | $ | 3,804,047 |   |

----

|                                                                |   | Year                Ended September 30, |                   |
|----------------------------------------------------------------|---|-----------------------------------------|------------------------|
|                                                                |   | 2007                                    | 2006                   | 2005 |   |   |   |
| Cash                provided by (used in) operating activities | $ | (759,184)                               | $  7,955,991 | $  6,886,346 |   |   |   |
| Cash                provided by (used in) investing activities |   | 1,017,203                               | 1,316,953              | (289,217) |   |   |   |
| Cash                used in financing activities               |   | -                                       | (7,969,175)            | (3,012,326) |   |   |   |
| Net                                                            | $ | 258,019                                 | $  1,303,769 | $  3,584,803 |   |   |   |

----

----

| • | During                the year Joseph J. Raymond, our Chairman, President and Chief Executive                Officer, loaned us $100,000, all of which was repaid during the                year.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |
|---------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| • | During                the year, a significant shareholder loaned us $44,500, all of which                was                repaid during the year.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |
| • | At                September 30, 2007, we owed: $41,000 under a demand note bearing                interest                at 10% a year to a corporation owned by the son of Joseph J. Raymond;                $3,123 to a trust formed for the benefit of a family member of a                former                member of our board of Directors under a promissory note bearing                interest                at 12% a year which became due in full in August 2005 and $41,598                to a                former member of our Board of Directors under a promissory note bearing                interest at 12% a year which became due in full in May 2006                                                                                                                                                                                                                                                                                                       |
| • | The                nephew of our Chairman, President and CEO is affiliated with Pinnacle                Investment Partners, LP (“Pinnacle”).  The Company also believes                that PIP Management, Inc., which was designated as the advisor to                the                Series I holders, is also affiliated with Pinnacle.  In January                2006, we entered into an agreement with Pinnacle pursuant to which                we                issued to Pinnacle, effective as of December 28, 2005, a secured                convertible promissory note in the aggregate principal amount of                $2,356,850 in exchange for all the outstanding shares of Series I                Preferred Stock (see Notes 14 and 15 to the Consolidated Financial                Statements).  As of September 30, 2007, $618,850 was outstanding                under the secured convertible promissory note. |

|                                                               |         | Payments                Due by Fiscal Period (in Thousands) |
|--------------------------------------------------------------------|--------------|-------------------------------------------------------------|
|                                                               |         |                                                        | 2009                - | 2011                - |   |
|                                                               | Total        | 2008                                                        | 2010 | 2012 | Thereafter |
|                                                               |         |                                                        |   |   |   |
| Contractual                Obligations:                            |         |                                                        |   |   |   |
| Long-term                debt obligations                          | $ 2,323 | $ 1,073                                                | $ 559 | $ 691 | $ — |
| Operating                lease obligations                         |  189    |  60                                                    |  119 |  10 |  3⁄4 |
| Series                A redemption payable                         |  300    |  300                                                   |   |   |   |
| Worker’s                compensation insurance liability (a) |  251    |  68                                                    |   |  39 |   |
| TOTAL                                                              | $ 3,063 | $ 1,501                                                | $ 822 | $ 740 | $ 3⁄4 |
|                                                               |         |                                                        |   |   |   |

----

| (a) | In                December 2006, we entered into an agreement with the California                Compensation Insurance Fund (the “Fund”) whereby the Fund agreed to reduce                our then liability of $2,023,000 to $300,000 provided that we make                certain                monthly payments aggregating $300,000 over 56 months.  At                September 30, 2007, $1,974,000 ins included in accounts payable and                accrued expenses on the attached consolidated balance                sheet.  The difference of $1,723,000 has not been recognized in                earnings at this time since it is contingent upon our paying the                $300,000                in accordance with the terms of the                agreement. |
|-----|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ITEM                7A. | QUANTITATIVE                AND QUALITATIVE DISCLOSURE ABOUT MARKET                RISKS |
|-------------------------|------------------------------------------------------------------------------------------|

----

| ITEM                8. | FINANCIAL                STATEMENTS AND SUPPLEMENTARY DATA. |
|------------------------|-------------------------------------------------------------|

| ITEM                9. | CHANGES                IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL                DISCLOSURE. |
|------------------------|---------------------------------------------------------------------------------------------------------------------|

| ITEM                9A. | CONTROLS                AND PROCEDURES |
|-------------------------|----------------------------------------|

----

PART      III

| ITEM                10. | DIRECTORS,                EXECUTIVE OFFICERS AND CORPORATE                GOVERNANCE. |
|-------------------------|---------------------------------------------------------------------------------------|

| Name                                | Age    | Position                                                                                  |
|-------------------------------------|--------|-------------------------------------------------------------------------------------------|
|                                |   |                                                                                      |
| Joseph                J. Raymond    | 72     | Chairman                of the Board, President andChief                Executive Officer |
|                                |   |                                                                                      |
| Norman                Goldstein     | 66     | Director                                                                                  |
|                                |   |                                                                                      |
| Michael                A. Maltzman  | 60     | Chief                Financial Officer & Treasurer                                    |
|                                |   |                                                                                      |
| Thurston                J. Hartford | 45     | Director                                                                                  |
|                                |   |                                                                                      |
| Jamie                Raymond        | 40     | President                of STS                                                           |
|                                |   |                                                                                      |
| J.                Todd Raymond      | 39     | Corporate                Secretary                                                        |

----

| ITEM                11. | EXECUTIVE                COMPENSATION |
|-------------------------|---------------------------------------|

----

|   | (a) | The                combined value of all cash and non-cash benefits provided to the                individual or individuals; |
|--------|-----|-------------------------------------------------------------------------------------------------------------------------------|

|   | (b) | The                compensation history of the individual or individuals as compared                to other                individuals with comparable expertise at Stratus; |
|--------|-----|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (c) | Our                financial condition; |
|--------|-----|-----------------------------------------|

|   | (d) | Comparable                compensation practices at similar companies location and the services                provided; and |
|--------|-----|------------------------------------------------------------------------------------------------------------------------------|

|   | (e) | The                projected total cost and benefit to us for post-employment benefits. |
|--------|-----|-----------------------------------------------------------------------------------------|

----

----

| SUMMARY                COMPENSATION TABLEfor                Fiscal Year End September 30,                2007 |
|---------------------------------------------------------------------------------------------------------------|
| Name                and Principal Position                                                                    | Year | Salary                ($) | Bonus                ($) | Stock                Awards ($)(1) | Option                Awards ($) | Non-Equity                Incentive Plan Compensation ($) | Change                in Pension Value and Nonqualified Deferred Compensation Earnings                ($) | All                Other Compensation ($) | Total                ($) |
| (a)                                                                                                           | (b) | (c) | (d) | (e) | (f) | (g) | (h) | (i) | (j) |
| Joseph                J. RaymondChairman                andChief                Executive Officer             | 20072006 2005 | $63,000 26,923160,385 | $---   --- 10,000 | $                     --- 16,000     --- | $                       --------- | $                       --------- | $                       --------- | $                       --------- | $63,00042,923170,385 |
| Michael                A. MaltzmanChief                Financial Officer and Treasurer                        | 20072006 2005 | $179,584 178,729172,308 | $---   6,000 27,450 | $                     --- 16,000     --- | $                       --------- | $                       --------- | $                       --------- | $                       --------- | $160,095200,729199,750 |
| Jamie                RaymondPresident                of STS                                                   | 20072006 2005 | $160,095 138,960126,760 | $---  6,000    --- | $                     --- 16,000     --- | $                       --------- | $                       --------- | $                       --------- | $                       --------- | $179,584160,960199,758 |

----

| OUTSTANDING                EQUITY AWARDSfor                Fiscal Year End September 30,                2007 |
|--------------------------------------------------------------------------------------------------------------|
|                                                                                                         | Option                  Awards | Stock                  Awards |
| Name                                                                                                         | Date                of Grant | Number                of Securities Underlying Unexercised Options(#)                Exercisable | Number                of Securities Underlying Unexercised Options (#)                Unexercisable | Equity                Incentive Plan Awards: Number of Securities Underlying Unexercised                Unearned Options(#) | Option                Exercise Price($) | Option                Expiration Date | Number                of Shares or Units of Stock That Have Not Vested(#) | Market                Value of Shares or Units of Stock That Have Not Vested($) | Equity                Incentive Plan Awards: Number of Unearned Shares, Units or Other                Rights                That Have Not Vested(#) | Equity                Incentive Plan Awards: Market or Payout Value of Unearned Shares,                Units or                Other Rights That Have Not Vested($) |
| Joseph                J. RaymondChairman                andChief                Executive Officer            | - | - | - | - | - | - | - | - | - | - |
| Michael                A. MaltzmanChief                Financial Officer and Treasurer                       | 04/20/05 | 750,000 | - | - | $0.26 | 04/19/15 | 83,334 | $1,667 | - | - |
| Jamie                RaymondPresident                of STS                                                  | - | - | - | - | - | - | - | - | - | - |

----

| • | willfully                or repeatedly fails in any material respect to perform his obligations                under the Raymond Agreement, subject to certain opportunities to                cure such                failure;                   |
|---------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| • | is                convicted of a crime which constitutes a felony or misdemeanor or                has                entered a plea of guilty or no contest with respect to a felony or                misdemeanor during his term of employment; |
| • | has                committed any act which constitutes fraud or gross                negligence;                                                                                                                                                   |
| • | is                determined by the Board of Directors to be dependent upon alcohol                or                drugs; or                                                                                                                     |
| • | breaches                confidentiality or non-competition provisions of the Raymond                Agreement.                                                                                                                                     |

| • | the                assignment to him of any duties inconsistent in any material respect                with                his position or any action which results in a significant diminution                in                his position, authority, duties or responsibilities;                                                                                                                                                                                                                                                                                                                                                                                                                                     |
|---------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| • | a                reduction in his base salary unless his base salary is, at the time                of the                reduction, in excess of $200,000 and the percentage reduction does                not                exceed the percentage reduction of our gross sales over the prior                twelve                month period;                                                                                                                                                                                                                                                                                                                                                                       |
| • | We                require Mr. Raymond to be based at any location other than within                50 miles                of our current executive office location; and                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |
| • | a                Change in Control of our Company, which includes the acquisition                by any                person or persons acting as a group of beneficial ownership of more                than                20% of our outstanding voting stock, mergers or consolidations of                our                company which result in the holders of Stratus’ voting stock immediately                before the transaction holding less than 80% of the voting stock                of the                surviving or resulting corporation, the sale of all or substantially                all                of our assets, and certain changes in our Board of                Directors. |

----

|   | Option                Exercises and Stock Vested Table |
|--------|--------------------------------------------------------|

| OPTION                EXERCISES AND STOCK                VESTED                     |
|-------------------------------------------------------------------------------------|
|                                                                                | Option                Awards | Stock                Awards |
| Name(a)                                                                             | Number                of Shares Acquired on Exercise(#)(b) | Value                Realized on Exercise($)(c) | Number                of Shares Acquired on Vesting(#)(d) | Value                Realized on Vesting($)(e) |
| Joseph                J. RaymondChairman                and Chief Executive Officer | --- | --- | --- | --- |
| Michael                A. MaltzmanChief                Financial Officer            | --- | --- | 83,333 | 1,667 |
| James                RaymondPresident                of STS                         | --- | --- | --- | --- |

| ITEM                12. | SECURITY                OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED                STOCKHOLDER MATTERS |
|-------------------------|------------------------------------------------------------------------------------------------------------------------------|

----

|                                                                                                  | Common                Stock                                          |   | Series                FPreferred                Stock |   |
|-------------------------------------------------------------------------------------------------------|----------------------------------------------------------------------|--------|-------------------------------------------------------|--------|
| Name                of Beneficial Owner                                                               | Amount                andNature                ofBeneficialOwnership |   | %                ofClass                              |   | Amount                andNature                ofBeneficialOwnership |   | %                ofClass |   |   |
| Joseph                J. Raymond                                                                      | 8,098,495                                                            | (1)    | 11.3                                                  | %      | 6,000 |   | 100.0 | % |   |
| Pinnacle                Investment Partners, LLP                                                      | 7,721,258                                                            | (2)    | 9.99                                                  |   | 3⁄4 |   | 3⁄4 |   |   |
| Michael                A. Maltzman                                                                    | 3,511,666                                                            | (3)    | 5.0                                                   |   | 3⁄4 |  | 3⁄4 |  |   |
| Norman                Goldstein                                                                       | 2,040,275                                                            |   | 2.9                                                   |   |   |   |   |   |   |
| Jamie                Raymond                                                                          | 3,035,056                                                            |   | 4.4                                                   |   | 3⁄4 |   | 3⁄4 |   |   |
| Bernard                Freedman                                                                       | 11,000,000                                                           |   | 15.8                                                  |   | 3⁄4 |   | 3⁄4 |   |   |
| Thurston                Hartford                                                                      | 2,000,000                                                            |   | 2.9                                                   |   | 3⁄4 |   | 3⁄4 |   |   |
| All                Directors and Executive Officers as a Group (5 Persons) (1) and                (3) | 18,685,492                                                           |   | 25.8                                                  | %      | 6,000 |  | 100.0 | % |   |

| (1) | Includes                (i) 1,500,000 shares of common stock issuable as of December 31,                2007,                upon conversion of 6,000 shares of Series F Preferred Stock; and                (ii)                570,500 shares of common stock issuable pursuant to warrants owned                by a                corporation of which Mr. Raymond is the sole owner.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |
|-----|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (2) | Represents                shares issuable upon conversion of secured Convertible Note and subject                to                warrants which are currently exercisable.  Does not include                8,266,242 shares of our common stock acquirable upon the conversion                of a                convertible note and exercise of warrants held by the                stockholder.  Pursuant to the terms of the convertible note and                warrants, the number of shares of our common stock that may be acquired                by                the stockholder upon any conversion of the convertible note and exercise                of the warrants is limited, to the extent necessary, to ensure that                following such conversion or exercise, the number of shares of our                common                stock then beneficially owned by the stockholder does not exceed                9.99% of                the total number of shares of our common stock then                outstanding.  Accordingly, in light of the beneficial ownership                cap, the stockholder is entitled to acquire in the aggregate 7.721,258                shares of our common stock.  Based upon public releases issued                by Pinnacle and documents filed with the Securities and Exchange                Commission, the Company understands that Chris Janish, Pinnacle’s Fund                Manager and President of PIP Management, Inc., the general partner                of                Pinnacle, has voting and dispositive power with respect to the shares                held                by Pinnacle. |
| (3) | Includes                750,000 shares subject to options which are currently exercisable                or may                become exercisable within 60 days of December 31,                2007.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |

| Plan                Category                                                  | Number                of securitiesto                be issued uponexercise                ofoutstanding                options,warrants                and rights(a) | Weighted-averageexercise                price ofoutstanding                options,warrants                and rights(b) | Number                of securities remaining available for future issuance underequity                compensation plans (excluding securities reflectedIn                column (a))(c) |
|-------------------------------------------------------------------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------------------------------------------------------------------------------------------------------------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                                                                          |                                                                                                                                                                  |                                                                                                                     |                                                                                                                                                                                      |
| Equity                compensation plans approved by security holders (1)     | 199,000                                                                                                                                                               | $                           .26                                   | 19,801,000                                                                                                                                                                                |
|                                                                          |                                                                                                                                                                  |                                                                                                                     |                                                                                                                                                                                      |
| Equity                compensation plans not approved by security holders (2) | 551,000                                                                                                                                                               | $                           .26                                   | 0                                                                                                                                                                                         |
|                                                                          |                                                                                                                                                                  |                                                                                                                     |                                                                                                                                                                                      |
| Total                                                                         | 750,000                                                                                                                                                               | $                           .26                                   | 19,801,000                                                                                                                                                                                |

| (1)    | Our                equity incentive plans provide for the issuance of incentive awards                to                officers, directors, employees and consultants in the form of stock                options, stock appreciation rights, restricted stock and deferred                stock,                and in lieu of cash compensation. |
|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |                                                                                                                                                                                                                                                                                                                                                |
| (2)    | Represents                shares subject to options granted to Michael A. Maltzman which expire                in                April 2015.                                                                                                                                                                                                        |

----

| ITEM                13. | CERTAIN                RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR                INDEPENDENCE. |
|-------------------------|----------------------------------------------------------------------------------------------------------|

| ITEM                14. | PRINCIPAL                ACCOUNTING FEES AND SERVICES |
|-------------------------|-------------------------------------------------------|

|                              | 2007          | 2006          |
|-----------------------------------|---------------|---------------|
|                              |          |          |
| Audit                Fees         | $ 39,500 | $ 22,500 |
| Audit-Related                Fees |  -0-     |  -0-     |
| Tax                Fees           |  7,500   |  15,130  |
| All                Other Fees     |  -0-     |  -0-     |

----

PART      IV

| ITEM                15. | EXHIBITS,                FINANCIAL STATEMENT SCHEDULES |
|-------------------------|--------------------------------------------------------|

| (a)    | Financial                statements and                financial statement schedules.  Reference is made to Index of                Financial Statements and Financial Statement Schedules hereinafter                contained. |
|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |                                                                                                                                                                                                                                       |
| (b)    | Exhibits                                                                                                                                                                                                                                   |

| Number | Description                                                                                                                                                                                                                                                                                                                                                                                |
|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |                                                                                                                                                                                                                                                                                                                                                                                       |
| 2.1    | Asset                Purchase Agreement, dated July 9, 1997, among the Company and Royalpar                Industries, Inc., Ewing Technical Design, Inc., LPL Technical Services,                Inc. and Mainstream Engineering Company, Inc., as amended by Amendment                No.                1 to the Asset Purchase Agreement, dated as of July 29,                1997.(1) |
|   |                                                                                                                                                                                                                                                                                                                                                                                       |
| 2.2    | Asset                Purchase Agreement, effective January 1, 1999, by and between the                Company                and B&R Employment Inc.(1)                                                                                                                                                                                                                                |
|   |                                                                                                                                                                                                                                                                                                                                                                                       |
| 2.3    | Asset                Purchase Agreement, dated June 16, 2000, by and between the Company                and                Outsource International of America, Inc.(5)                                                                                                                                                                                                                     |
|   |                                                                                                                                                                                                                                                                                                                                                                                       |
| 2.4    | Asset                Purchase Agreement, dated October 13, 2000, by and between the Company                and                Outsource International of America, Inc.(6)                                                                                                                                                                                                                  |
|   |                                                                                                                                                                                                                                                                                                                                                                                       |
| 2.5    | Asset                Purchase Agreement, dated January 2, 2001, by and between the Company                and                Cura Staffing Inc. and Professional Services, Inc.(15)                                                                                                                                                                                                        |
|   |                                                                                                                                                                                                                                                                                                                                                                                       |
| 2.6    | Asset                Purchase Agreement, dated July 27, 2001, by and between the Company                and                Source One Personnel, Inc.(8)                                                                                                                                                                                                                                   |
|   |                                                                                                                                                                                                                                                                                                                                                                                       |
| 2.7    | Asset                Purchase Agreement, dated December 27, 2001, by and between the Company                and Provisional Employment Solutions, Inc.(9)                                                                                                                                                                                                                                  |
|   |                                                                                                                                                                                                                                                                                                                                                                                       |
| 2.8    | Asset                Purchase Agreement, dated as of January 24, 2002 among the Company,                Charles Sahyoun, Sahyoun Holdings, LLC and SEA Consulting Services                Corporation.  Information has been omitted from the exhibit                pursuant to an order granting confidential                treatment.(16)                                    |
|   |                                                                                                                                                                                                                                                                                                                                                                                       |
| 2.9    | Asset                Purchase Agreement dated as of March 4, 2002, by and among Wells                Fargo                Credit, Inc. and the Company.(22)                                                                                                                                                                                                                                |
|   |                                                                                                                                                                                                                                                                                                                                                                                       |
| 2.10   | Asset                Purchase Agreement dated November 19, 2002, by and between the Company                and                Elite Personnel Services, Inc.(23)                                                                                                                                                                                                                           |
|   |                                                                                                                                                                                                                                                                                                                                                                                       |
| 2.11   | Asset                Purchase Agreement dated as of September 10, 2003 between the Company                and                D/O Staffing, LLC.(28)                                                                                                                                                                                                                                        |
|   |                                                                                                                                                                                                                                                                                                                                                                                       |
| 2.12   | Asset                Purchase Agreement dated as of August 18, 2003 between the Company                and                ALS, LLC.(28)                                                                                                                                                                                                                                                    |
|   |                                                                                                                                                                                                                                                                                                                                                                                       |
| 2.13   | Asset                Purchase Agreement dated as of June 10, 2005 between Stratus Services                Group, Inc. and ALS, LLC. (33)                                                                                                                                                                                                                                                   |
|   |                                                                                                                                                                                                                                                                                                                                                                                       |
| 2.14   | Asset                Purchase Agreement dated as of October 21, 2005 between Stratus Services                Group, Inc. and Source One Financial Staffing, LLC.                (34)                                                                                                                                                                                                       |
|   |                                                                                                                                                                                                                                                                                                                                                                                       |
| 2.16   | Asset                Purchase Agreement dated as of December 2, 2005 between Stratus Services                Group, Inc. and ALS, LLC. (35)                                                                                                                                                                                                                                                |
|   |                                                                                                                                                                                                                                                                                                                                                                                       |
| 2.17   | Asset                Purchase Agreement dated as of December 5, 2005 between Stratus Services                Group, Inc. and Accountabilities, Inc. (35)                                                                                                                                                                                                                                   |
|   |                                                                                                                                                                                                                                                                                                                                                                                       |
| 2.18   | Asset                Purchase Agreement dated as of December 7, 2005 between Stratus Services                Group, Inc. and Source One Personnel, Inc (35)                                                                                                                                                                                                                                |
|   |                                                                                                                                                                                                                                                                                                                                                                                       |
| 2.19   | Asset                Purchase Agreement dated as of December 7, 2005 between Stratus Services                Group, Inc. and Tri-State Employment Service, Inc.                (35)                                                                                                                                                                                                        |

----

| 2.20   | Asset                Purchase Agreement dated as of August 1, 2007 among Transworld Assets,                LLC, Green-Tech Assets, Inc. and CC Laurel, Inc. (53)                                                                                                                 |
|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| 3.1    | Amended                and Restated Certificate of Incorporation of the                Company.(1)                                                                                                                                                                               |
|   |                                                                                                                                                                                                                                                                             |
| 3.1.1  | Certificate                of Designation, Preferences and Rights of Series A Preferred                Stock.(10)                                                                                                                                                                |
|   |                                                                                                                                                                                                                                                                             |
| 3.1.2  | Certificate                of Amendment to Certificate of Designation.(14)                                                                                                                                                                                                       |
|   |                                                                                                                                                                                                                                                                             |
| 3.1.3  | Certificate                of Designation, Preferences and Rights of Series B Preferred                Stock.(14)                                                                                                                                                                |
|   |                                                                                                                                                                                                                                                                             |
| 3.1.4  | Certificate                of Designation, Preferences and Rights of Series E Preferred                Stock.(21)                                                                                                                                                                |
|   |                                                                                                                                                                                                                                                                             |
| 3.1.5  | Certificate                of Amendment to Certificate of Designation, Preferences and Rights                of                Series E Preferred Stock.(21)                                                                                                                     |
|   |                                                                                                                                                                                                                                                                             |
| 3.1.6  | Certificate                of Designation, Preferences and Rights of Series F Preferred                Stock.(21)                                                                                                                                                                |
|   |                                                                                                                                                                                                                                                                             |
| 3.1.7  | Certificate                of Designation, Preferences and Rights of Series H Preferred                Stock.(24)                                                                                                                                                                |
|   |                                                                                                                                                                                                                                                                             |
| 3.1.8  | Certificate                of Amendment to Certificate of Designation, Preferences and Rights                of                Series E Preferred Stock.(28)                                                                                                                     |
|   |                                                                                                                                                                                                                                                                             |
| 3.1.9  | Form                of Certificate of Designation, Preferences and Rights of Series I                Preferred Stock.(31)                                                                                                                                                        |
|   |                                                                                                                                                                                                                                                                             |
| 3.1.10 | Certificate                of Amendment to Restated Certificate of                Incorporation.(31)                                                                                                                                                                             |
|   |                                                                                                                                                                                                                                                                             |
| 3.2    | By-Laws                of the Registrant.(2)                                                                                                                                                                                                                                     |
|   |                                                                                                                                                                                                                                                                             |
| 4.1.1  | Specimen                Common Stock Certificate of the Company.(1)                                                                                                                                                                                                              |
|   |                                                                                                                                                                                                                                                                             |
| 4.1.2  | Form                of 6% Convertible Debenture.(11)                                                                                                                                                                                                                             |
|   |                                                                                                                                                                                                                                                                             |
| 4.1.8  | Specimen                Series E Stock Certificate of the Company.(21)                                                                                                                                                                                                           |
|   |                                                                                                                                                                                                                                                                             |
| 4.1.9  | Specimen                Series F Stock Certificate of the Company.(21)                                                                                                                                                                                                           |
|   |                                                                                                                                                                                                                                                                             |
| 4.1.10 | Exchange                Agreement between Pinnacle Investment Partners, LP and the                Company.(21)                                                                                                                                                                   |
|   |                                                                                                                                                                                                                                                                             |
| 4.1.11 | Exchange                Agreement between Transworld Management Services, Inc. and the                Company.(21)                                                                                                                                                               |
|   |                                                                                                                                                                                                                                                                             |
| 4.1.12 | Stock                Purchase Agreement between Joseph J. Raymond, Sr., and the Company                regarding Series F Preferred Stock. (21)                                                                                                                                  |
|   |                                                                                                                                                                                                                                                                             |
| 4.1.13 | Specimen                Series I Stock Certificate of the Company.(32)                                                                                                                                                                                                           |
|   |                                                                                                                                                                                                                                                                             |
| 4.2.1  | Warrant                for the Purchase of 10,000 Shares of Common Stock of Stratus Services                Group, Inc., dated November 30, 1998, between Alan Zelinsky and the                Company and supplemental letter thereto dated December 2,                1998.(1) |
|   |                                                                                                                                                                                                                                                                             |
| 4.2.2  | Warrant                for the Purchase of 40,000 Shares of Common Stock of Stratus Services                Group, Inc., dated November 23, 1998, between David Spearman and                the                Company.(1)                                                       |
|   |                                                                                                                                                                                                                                                                             |
| 4.2.3  | Warrant                for the Purchase of 10,000 Shares of Common Stock of Stratus Services                Group, Inc., dated November 30, 1998, between Sanford Feld and the                Company, and supplemental letter thereto dated December 2,                1998.(1) |
|   |                                                                                                                                                                                                                                                                             |
| 4.2.4  | Warrant                for the Purchase of 20,000 Shares of Common Stock of Stratus Services                Group, Inc., dated November 30, 1998, between Peter DiPasqua, Jr.                and the                Company.(1)                                                  |
|   |                                                                                                                                                                                                                                                                             |
| 4.2.5  | Warrant                for the Purchase of 20,000 Shares of Common Stock of Stratus Services                Group, Inc., dated December 2, 1998, between Shlomo Appel and the                Company.(1)                                                                         |
|   |                                                                                                                                                                                                                                                                             |
| 4.2.6  | Form                of Underwriter’s Warrant Agreement between the Company and Hornblower                & Weeks, Inc., including form of warrant                certificate.(7)                                                                                       |

----

| 4.2.7   | Warrant                for the Purchase of Common Stock dated as of December 4, 2000 issued                to                May Davis Group, Inc.(13)                                                                            |
|---------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|    |                                                                                                                                                                                                                              |
| 4.2.8   | Warrant                for the Purchase of Common Stock dated as of December 4, 2000 issued                to                Hornblower & Weeks, Inc.(13)                                                                     |
|    |                                                                                                                                                                                                                              |
| 4.2.9   | Warrant                for the Purchase of Common Stock dated as of December 12, 2001 issued                to                International Capital Growth.  (15)                                                       |
|    |                                                                                                                                                                                                                              |
| 4.2.10  | Warrant                for the Purchase of Common Stock dated as of April 9, 2002 issued                to                CEOCast.(22)                                                                                            |
|    |                                                                                                                                                                                                                              |
| 4.2.11  | Warrant                for the Purchase of Common Stock dated as of October 17, 2001 issued                to                Stetson Consulting.(22)                                                                              |
|    |                                                                                                                                                                                                                              |
| 4.2.12  | Warrant                for the Purchase of Common Stock dated as of November 3, 2003 issued                to                Advantage Services Group, LLC.(28)                                                                   |
|    |                                                                                                                                                                                                                              |
| 4.2.13  | Warrant                Agreement between the Company and American Stock Transfer & Trust                Company, including form of warrant certificate for warrant comprising                part                of unit.(31) |
|    |                                                                                                                                                                                                                              |
| 4.2.14  | Secured                Convertible Promissory Note dated as of December 28, 2005 issued                to                Pinnacle Investment Partners, L.P. (36)                                                                  |
|    |                                                                                                                                                                                                                              |
| 10.1.1  | Employment                Agreement dated September 1, 1997, between the Company and Joseph                J.                Raymond.(1)*                                                                                         |
|    |                                                                                                                                                                                                                              |
| 10.1.7  | Consulting                Agreement, dated as of August 11, 1997, between the Company and Jeffrey                J.                Raymond.(1)                                                                                    |
|    |                                                                                                                                                                                                                              |
| 10.1.8  | Non-Competition                Agreement, dated June 19, 2000 between the Company and Outsource                International of America, Inc.(5)                                                                                  |
|    |                                                                                                                                                                                                                              |
| 10.1.9  | Non-Competition                Agreement, dated October 27, 2000 between the Company and Outsource                International of America, Inc.(6)                                                                               |
|    |                                                                                                                                                                                                                              |
| 10.1.10 | Option                to purchase 1,000,000 shares of the Company’s Common Stock issued to                Joseph J. Raymond.(11)                                                                                            |
|    |                                                                                                                                                                                                                              |
| 10.1.11 | Option                to purchase 500,000 shares of the Company’s Common Stock issued to Joseph                J. Raymond.  (19)                                                                                  |
|    |                                                                                                                                                                                                                              |
| 10.1.12 | Option                to purchase 1,750,000 shares of the Company’s Common Stock issued to                Joseph J. Raymond.(19)                                                                                            |
|    |                                                                                                                                                                                                                              |
| 10.1.13 | Non-Competition                Agreements dated December 1, 2002 between the Company and each of                Elite                Personnel Services, Inc. and Bernard Freedman.(23)                                           |
|    |                                                                                                                                                                                                                              |
| 10.1.14 | Employment                Agreement dated December 1, 2002 between the Company and Bernard                Freedman.(23)                                                                                                           |
|    |                                                                                                                                                                                                                              |
| 10.2.1  | Lease,                effective October 1, 2002, for offices located at 500 Craig Road,                Manalapan, New Jersey 07726.(22)                                                                                           |
|    |                                                                                                                                                                                                                              |
| 10.4.2  | Promissory                Note and Security Agreement in the amount of $400,000, dated as of                June                19, 2000, issued by the Company to Outsource International of America,                Inc.(5)     |
|    |                                                                                                                                                                                                                              |
| 10.4.3  | Promissory                Note in the amount of $100,000, dated as of June 19, 2000, issued                by the                Company to Outsource International of America,                Inc.(5)                            |

| 10.4.4 | Promissory                Note and Security Agreement in the amount of $75,000, dated as of                October                27, 2000, issued by the Company to Outsource International of America,                Inc.(6) |
|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |                                                                                                                                                                                                                            |
| 10.4.5 | Promissory                Note and Security Agreement in the amount of $600,000, dated as of                July                27, 2001, issued by the Company to Source One Personnel,                Inc.(8)                 |
|   |                                                                                                                                                                                                                            |
| 10.4.6 | Promissory                Note and Security Agreement in the amount of $1.8 million, dated                as of                July 27, 2001, issued by the Company to Source One Personnel,                Inc.(8)             |
|   |                                                                                                                                                                                                                            |
| 10.4.7 | Promissory                Note in the amount of $1,264,000 dated as of December 1, 2002, issued                by                the Company to Elite Personnel Services,                Inc.(23)                               |

----

| 10.5.1 | Registration                Rights Agreement, dated August, 1997, by and among the Company and                AGR                Financial, L.L.C.(1)                                                                                      |
|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |                                                                                                                                                                                                                                       |
| 10.5.2 | Registration                Rights Agreement, dated August 1997, by and among the Company and                Congress                Financial Corporation (Western).(1)                                                                   |
|   |                                                                                                                                                                                                                                       |
| 10.5.3 | Form                of Registration Rights Agreement, dated December 4, 2000, by and                among the                Company and purchasers of the Company’s 6% Convertible                Debenture.(11)                    |
|   |                                                                                                                                                                                                                                       |
| 10.5.4 | Registration                Rights Agreement, dated as of December 4, 2000, between the Company,                May                Davis Group, Inc., Hornblower & Weeks, Inc. and the other parties                named therein.(13) |
|   |                                                                                                                                                                                                                                       |
| 10.6.1 | Stock                Purchase and Investor Agreement, dated August 1997, by and between                the                Company and Congress Financial Corporation                (Western).(1)                                          |
|   |                                                                                                                                                                                                                                       |
| 10.6.2 | Stock                Purchase and Investor Agreement, dated August 1997, by and among                the                Company and AGR Financial, L.L.C.(1)                                                                               |
|   |                                                                                                                                                                                                                                       |
| 10.6.3 | Form                of Securities Purchase Agreement, dated December 4, 2000 by and between                the Company and purchasers of the Company’s 6% Convertible                Debenture.(11)                                  |
|   |                                                                                                                                                                                                                                       |
| 10.7.1 | 1999                Equity Incentive Plan.(1)**                                                                                                                                                                                            |
|   |                                                                                                                                                                                                                                       |
| 10.7.2 | 2000                Equity Incentive Plan.(11)**                                                                                                                                                                                           |
|   |                                                                                                                                                                                                                                       |
| 10.7.3 | 2001                Equity Incentive Plan.(12)**                                                                                                                                                                                           |
|   |                                                                                                                                                                                                                                       |
| 10.7.4 | 2002                Equity Incentive Plan.(19)**                                                                                                                                                                                           |
|   |                                                                                                                                                                                                                                       |
| 10.7.5 | Form                of Option issued under 1999 Equity Incentive                Plan.(19)**                                                                                                                                                |
|   |                                                                                                                                                                                                                                       |
| 10.7.6 | Form                of Option issued under 2000 Equity Incentive                Plan.(19)**                                                                                                                                                |
|   |                                                                                                                                                                                                                                       |
| 10.7.7 | Form                of Option issued under 2001 Equity Incentive                Plan.(19)**                                                                                                                                                |
|   |                                                                                                                                                                                                                                       |
| 10.7.8 | Form                of Option issued under 2002 Equity Incentive                Plan.(19)**                                                                                                                                                |
|   |                                                                                                                                                                                                                                       |
| 10.8   | Debt                to Equity Conversion Agreement by and between the Company and B&R                Employment, Inc.(3)                                                                                                               |
|   |                                                                                                                                                                                                                                       |
| 10.8.1 | Amendment                to Debt to Equity Conversion Agreements by and between the Company                and                B&R Employment, Inc.(2)                                                                                  |
|   |                                                                                                                                                                                                                                       |
| 10.8.2 | Forbearance                Agreement dated January 24, 2002 between the Company and Source One                Personnel.  (20)                                                                                                   |
|   |                                                                                                                                                                                                                                       |
| 10.8.3 | Modification                of Forbearance Agreement dated June 4, 2002 between the Company and                Source                One Personnel, together with Exhibits                thereto.(21)                                     |

| 10.10  | Allocation                and Indemnity Agreement dated as of January 24, 2002 among the Company,                Charles Sahyoun and Sahyoun Holdings, LLC.(20)                                                                                                  |
|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |                                                                                                                                                                                                                                                             |
| 10.11  | Letter                Agreement dated April 15, 2002 between the Company, Sahyoun Holdings,                LLC                and Joseph J. Raymond, Sr. amending the Allocation and Indemnity                Agreement                dated April 18, 2002.(17) |
|   |                                                                                                                                                                                                                                                             |
| 10.12  | Exchange                Agreement dated March 11, 2002 by and between Transworld Management                Services, Inc. and the Company.(22)                                                                                                                   |
|   |                                                                                                                                                                                                                                                             |
| 10.13  | Securities                Purchase Agreement dated March 11, 2002, by and between Pinnacle                Investment Partners, LP and the Company.(22)                                                                                                           |
|   |                                                                                                                                                                                                                                                             |
| 10.14  | Operating                Agreement of Stratus Technology                Services.(28)                                                                                                                                                                            |

----

| 10.15  | Form                of Securities Purchase Agreement between the Company and Series E                Shareholders.(27)                                                                                                                                                              |
|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |                                                                                                                                                                                                                                                                                |
| 10.16  | Compromise                Agreement between the Company and Series E Shareholders dated July                30,                2003.(27)                                                                                                                                            |
|   |                                                                                                                                                                                                                                                                                |
| 10.17  | Redemption                Agreement dated July 31, 2003 between Artisan (UK) plc and the                Company.(29)                                                                                                                                                                |
|   |                                                                                                                                                                                                                                                                                |
| 10.18  | Agreement                to Exchange Series H Preferred Shares for Series E Preferred Shares                between the Company and Pinnacle Investment Partners,                L.P.(27)                                                                                           |
|   |                                                                                                                                                                                                                                                                                |
| 10.20  | Letter                Agreement regarding Receivables between the Company and Advantage                Services                Group, LLC.  (28)                                                                                                                          |
|   |                                                                                                                                                                                                                                                                                |
| 10.21  | Waiver                Letter Agreement between the Company and Series E                Shareholders.(31)                                                                                                                                                                            |
|   |                                                                                                                                                                                                                                                                                |
| 10.22  | Letter                Agreement between the Company and the Series A Holders extending                the time                for issuance of shares.(31)                                                                                                                           |
|   |                                                                                                                                                                                                                                                                                |
| 10.27  | Payment                Plan Agreement between the Company and the California EDD.                (38)                                                                                                                                                                               |
|   |                                                                                                                                                                                                                                                                                |
| 10.31  | Employment                Agreement of Michael A. Maltzman, CFO. (39)                                                                                                                                                                                                               |
|   |                                                                                                                                                                                                                                                                                |
| 10.33  | Stratus                Services Group, Inc. Non-Competition and Non-Solicitation Agreement.                (33)                                                                                                                                                                     |
|   |                                                                                                                                                                                                                                                                                |
| 10.34  | ALS,                LLC Non-Competition and Non-Solicitation Agreement.                (33)                                                                                                                                                                                         |
|   |                                                                                                                                                                                                                                                                                |
| 10.53  | Non-Competition                and Non-Solicitation Agreement executed by Stratus Services Group,                Inc.                for the benefit of ALS, LLC. (34)                                                                                                              |
|   |                                                                                                                                                                                                                                                                                |
| 10.62  | Non-Competition                and Non-Solicitation Agreement dated December 2, 2005 between Stratus                Services Group, Inc. and ALS, LLC binding Stratus Services Group,                Inc to                the terms thereto. (51)                                  |
|   |                                                                                                                                                                                                                                                                                |
| 10.63  | Non-Competition                and Non-Solicitation Agreement dated December 5, 2005 between Stratus                Services Group, Inc. and Accountabilities, Inc. binding Stratus Services                Group, Inc to the terms thereto. (51)                                   |
|   |                                                                                                                                                                                                                                                                                |
| 10.64  | Non-Competition                and Non-Solicitation Agreement dated December 7, 2005 between Stratus                Services Group, Inc. and Source One Personnel binding Stratus Services                Group, Inc. to the terms thereto. (51)                                    |
|   |                                                                                                                                                                                                                                                                                |
| 10.65  | Non-Competition                and Non-Solicitation Agreement dated December 7, 2005 between Stratus                Services Group, Inc. and Tri-State Employment Service, Inc. binding                Stratus Services Group, Inc. to the terms thereto. (51)                      |
|   |                                                                                                                                                                                                                                                                                |
| 10.66  | Non-Competition                and Non-Solicitation Agreement dated December 7, 2005 between Stratus                Services Group, Inc. and Tri-State Employment Service, Inc. binding                Tri-State Employment Service, Inc. to the terms thereto.                (51) |
|   |                                                                                                                                                                                                                                                                                |
| 10.67  | Exchange                Agreement dated as of December 28, 2005 between Stratus Services                Group,                Inc. and Pinnacle Investment Partners, L.P. (51)                                                                                                      |
|   |                                                                                                                                                                                                                                                                                |
| 10.68  | Settlement                Agreement between California Compensation Insurance Fund and Stratus                Services Group, Inc. (52)                                                                                                                                             |
|   |                                                                                                                                                                                                                                                                                |
| 10.69  | Membership                Interest Purchase Agreement between Stratus Services Group, Inc.                and                Fusion Business Services, LLC (54)                                                                                                                     |
|   |                                                                                                                                                                                                                                                                                |
| 10.70  | Promissory                Note issued by Transworld Assets, LLC to Green-Tech Assets, Inc.                dated                August 1, 2007. (53)                                                                                                                                 |
|   |                                                                                                                                                                                                                                                                                |
| 10.71  | Guaranty                issued by Stratus Services Group, Inc. dated August 1, 2007.                (53)                                                                                                                                                                            |
|   |                                                                                                                                                                                                                                                                                |
| 10.72  | Registration                Rights Agreement dated as of August 1, 2007 between Stratus Services                Group, Inc. and Thurston J. Hartford. (53)                                                                                                                          |
|   |                                                                                                                                                                                                                                                                                |
| 10.73  | Operating                Agreement of Transworld Assets, LLC. (55)                                                                                                                                                                                                                  |
|   |                                                                                                                                                                                                                                                                                |
| 21     | Subsidiaries                of Registrant. (filed herewith)                                                                                                                                                                                                                         |

----

| 23     | Consent                of E. Randall Gruber, CPA, P.C.(filed herewith)                                                                            |
|--------|---------------------------------------------------------------------------------------------------------------------------------------------------|
|   |                                                                                                                                              |
| 24     | Power                of Attorney (located on signature pages of this                filing).                                                      |
|   |                                                                                                                                              |
| 31.1   | Certification                of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley                Act of 2002.(filed herewith) |
|   |                                                                                                                                              |
| 31.2   | Certification                of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley                Act of 2002.(filed herewith) |

| 32.1   | Certification                of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley                Act of 2002.(filed herewith) |
|--------|---------------------------------------------------------------------------------------------------------------------------------------------------|
|   |                                                                                                                                              |
| 32.2   | Certification                of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley                Act of 2002.(filed herewith) |
|   |                                                                                                                                              |
| *      | Constitutes                a management contract required to be filed pursuant to Item 14(c)                of Form                10-K.          |
|   |                                                                                                                                              |
| **     | Constitutes                a compensation plan required to be filed pursuant to Item 14(c) of                Form                10-K.            |

| Footnote                1  | Incorporated                by reference to similarly numbered Exhibits filed with Amendment                No. 1 to                the Company’s Registration Statement on Form SB-2 (Registration Statement                No. 333-83255) as filed with the Securities and Exchange Commission                on                September 3, 1999. |
|----------------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                       |                                                                                                                                                                                                                                                                                                                                                       |
| Footnote                2  | Incorporated                by reference to similarly numbered Exhibits filed with Amendment                No. 6 to                the Company’s Registration Statement on Form SB-2 (Registration Statement                No. 333-83255) as filed with the Securities and Exchange Commission                on                February 1, 2000.  |
|                       |                                                                                                                                                                                                                                                                                                                                                       |
| Footnote                3  | Incorporated                by reference to similarly numbered Exhibits filed with Amendment                No. 3 to                the Company’s Registration Statement on Form SB-2 (Registration Statement                No. 333-83255) as filed with the Securities and Exchange Commission                on                December 17, 1999. |
|                       |                                                                                                                                                                                                                                                                                                                                                       |
| Footnote                4  | Incorporated                by reference to similarly numbered Exhibits filed with Amendment                No. 7 to                the Company’s Registration Statement on Form SB-2 (Registration Statement                No. 333-83255) as filed with the Securities and Exchange Commission                on                March 17, 2000.    |
|                       |                                                                                                                                                                                                                                                                                                                                                       |
| Footnote                5  | Incorporated                by reference to the Exhibits to the Company’s Form 8-K, as filed with the                Securities and Exchange Commission on June 30, 2000.                                                                                                                                                                            |
|                       |                                                                                                                                                                                                                                                                                                                                                       |
| Footnote                6  | Incorporated                by reference to the Exhibits to the Company’s Form 8-K, as filed with the                Securities and Exchange Commission on November 3, 2000.                                                                                                                                                                         |
|                       |                                                                                                                                                                                                                                                                                                                                                       |
| Footnote                7  | Incorporated                by reference to Exhibit 1.2 filed with Amendment No. 5 to the Company’s                Registration Statement on Form SB-2 (Registration Statement No. 333-83255)                as filed with the Securities and Exchange Commission on February                11,                2000.                                |
|                       |                                                                                                                                                                                                                                                                                                                                                       |
| Footnote                8  | Incorporated                by reference to the Exhibits to the Company’s Form 8-K, as filed with the                Securities and Exchange Commission on August 9, 2001.                                                                                                                                                                           |
|                       |                                                                                                                                                                                                                                                                                                                                                       |
| Footnote                9  | Incorporated                by reference to the Exhibits to the Company’s Form 8-K, as filed with the                Securities and Exchange Commission on January 2, 2002.                                                                                                                                                                          |
|                       |                                                                                                                                                                                                                                                                                                                                                       |
| Footnote                10 | Incorporated                by reference to Exhibit 3 filed with Form 10-Q for the Quarter ended                June                30, 2001 as filed with the Securities and Exchange Commission on                August                14, 2001.                                                                                                        |
|                       |                                                                                                                                                                                                                                                                                                                                                       |
| Footnote                11 | Incorporated                by reference to similarly numbered Exhibits to the Company’s Form 10-KSB,                as filed with the Securities and Exchange Commission on December                29,                2000.                                                                                                                        |
|                       |                                                                                                                                                                                                                                                                                                                                                       |
| Footnote                12 | Incorporated                by reference to similarly numbered Exhibits filed with the Company’s                Registration Statement on Form S-1 (Registration Statement No. 333-55312)                as filed with the Securities and Exchange Commission on February                9,                2001.                                     |
|                       |                                                                                                                                                                                                                                                                                                                                                       |
| Footnote                13 | Incorporated                by reference to the Exhibits to the Company’s Form S-1/A, as filed with                the Securities and Exchange Commission on April 11,                2001.                                                                                                                                                          |

----

| Footnote                14 | Incorporated                by reference to the Exhibits to the Company’s Form 8-K, as filed with the                Securities and Exchange Commission on April 4, 2002.                                                                                                                          |
|----------------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                       |                                                                                                                                                                                                                                                                                                     |
| Footnote                15 | Incorporated                by reference to similarly numbered Exhibits filed with the Registrant’s                Form 10-K for the fiscal year ended September 30, 2001, and filed                with the                Securities and Exchange Commission on January 25,                2002. |

| Footnote                16 | Incorporated                by reference to similarly numbered Exhibits filed with the Registrant’s                Form 10-K/A for the fiscal year ended September 30, 2001, as filed                with                the Securities and Exchange Commission on March 5,                2002.                                                 |
|----------------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                       |                                                                                                                                                                                                                                                                                                                                                   |
| Footnote                17 | Incorporated                by reference to the Exhibits to the Company’s Form 10-Q for the quarter                ended March 31, 2002, as filed with the Securities and Exchange Commission                on May 15, 2002.                                                                                                                    |
|                       |                                                                                                                                                                                                                                                                                                                                                   |
| Footnote                18 | Incorporated                by reference to the Exhibits to the Company’s Form 8-K, as filed with the                Securities and Exchange Commission on April 4, 2002.                                                                                                                                                                        |
|                       |                                                                                                                                                                                                                                                                                                                                                   |
| Footnote                19 | Incorporated                by reference to the Exhibits to the Company’s Form S-8, as filed with the                Securities and Exchange Commission on September 17,                2002.                                                                                                                                                    |
|                       |                                                                                                                                                                                                                                                                                                                                                   |
| Footnote                20 | Incorporated                by reference to the Exhibits to the Company’s Form 10-K, as filed with the                Securities and Exchange Commission on January 25, 2002, as amended                by the                Company’s Form 10-K/A, as filed with the Securities and Exchange                Commission on March 5, 2002. |
|                       |                                                                                                                                                                                                                                                                                                                                                   |
| Footnote                21 | Incorporated                by reference to the Company’s 10-Q, for the quarter ended June 30, 2002,                as filed with the Securities and Exchange Commission on August 14,                2002.                                                                                                                                      |
|                       |                                                                                                                                                                                                                                                                                                                                                   |
| Footnote                22 | Incorporated                by reference to the similarly numbered Exhibits filed with the Company’s                Registration Statement on Form S-1 (Registration Statement No. 333-100149)                as filed with the Securities and Exchange Commission on September                27,                2002.                          |
|                       |                                                                                                                                                                                                                                                                                                                                                   |
| Footnote                23 | Incorporated                by reference to Exhibits to the Company’s Form 8-K, as filed with the                Securities and Exchange Commission on November 26,                2002.                                                                                                                                                         |
|                       |                                                                                                                                                                                                                                                                                                                                                   |
| Footnote                24 | Incorporated                by reference to the similarly numbered Exhibits to the Company’s Form                10-K, as filed with the Securities and Exchange Commission on December                23,                2002.                                                                                                                  |
|                       |                                                                                                                                                                                                                                                                                                                                                   |
| Footnote                25 | Incorporated                by reference to the Exhibits to the Company’s Form S-1, as filed with the                Securities and Exchange Commission on February 2, 2003.                                                                                                                                                                     |
|                       |                                                                                                                                                                                                                                                                                                                                                   |
| Footnote                26 | Incorporated                by reference to the Exhibits to the Company’s Form S-1, as filed with the                Securities and Exchange Commission on March 20, 2003.                                                                                                                                                                       |
|                       |                                                                                                                                                                                                                                                                                                                                                   |
| Footnote                27 | Incorporated                by reference to the similarly numbered exhibits to the Company’s Form 10-Q                for the quarterly period ended June 30, 2003, as filed with the Securities                and Exchange Commission on August 13, 2003.                                                                                      |
|                       |                                                                                                                                                                                                                                                                                                                                                   |
| Footnote                28 | Incorporated                by reference to similarly numbered exhibits to the Company’s Form 10-K for                the fiscal year ended September 30, 2003 as filed with the Securities                and                Exchange Commission on December 24, 2003.                                                                          |
|                       |                                                                                                                                                                                                                                                                                                                                                   |
| Footnote                29 | Incorporated                by reference to similarly numbered exhibits to Amendment No. 2 to                the                Company’s Registration Statement on Form S-1 filed with the Securities and                Exchange Commission on March 30, 2004.                                                                                 |
|                       |                                                                                                                                                                                                                                                                                                                                                   |
| Footnote                30 | Incorporated                by reference to similarly numbered exhibits to Post-Effective Amendment                No. 1 to the Company’s Registration Statement on Form S-1 filed with the                Securities and Exchange Commission on June 14, 2004.                                                                                  |
|                       |                                                                                                                                                                                                                                                                                                                                                   |
| Footnote                31 | Incorporated                by reference to similarly numbered exhibits to the Company’s Form 10-Q for                the quarter ended June 30, 2004 as filed with the Securities and                Exchange                Commission on August 16, 2004.                                                                                     |
|                       |                                                                                                                                                                                                                                                                                                                                                   |
| Footnote                32 | Incorporated                by reference to similarly numbered exhibits to Amendment No. 1 to                the                Company’s Registration Statement on Form S-4 filed with the Securities and                Exchange Commission on March 30,                2004.                                                                  |

----

|                       |                                                                                                                                                                                                             |
|----------------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| Footnote                33 | Incorporated                by reference to similarly numbered exhibits to the Company’s Form 8-K, as                filed with the Securities and Exchange Commission on June 15,                2005.    |
|                       |                                                                                                                                                                                                             |
| Footnote                34 | Incorporated                by reference to similarly numbered exhibits to the Company’s Form 8-K, as                filed with the Securities and Exchange Commission on October 25,                2005. |

| Footnote                35 | Incorporated                by reference to similarly numbered exhibits to the Company’s Form 8-K, as                filed with the Securities and Exchange Commission on December 23,                2005.                                                                                           |
|----------------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                       |                                                                                                                                                                                                                                                                                                        |
| Footnote                36 | Incorporated                by reference to similarly numbered exhibits to the Company’s Form 8-K, as                filed with the Securities and Exchange Commission on January 18,                2006.                                                                                            |
|                       |                                                                                                                                                                                                                                                                                                        |
| Footnote                37 | Incorporated                by reference to similarly numbered exhibits to the Company’s Form 8-K/A,                as filed with the Securities and Exchange Commission on January 21,                2006.                                                                                          |
|                       |                                                                                                                                                                                                                                                                                                        |
| Footnote                38 | Incorporated                by reference to similarly numbered exhibits to the Company’s Report on                Form 10-Q for the quarterly period ended December 31, 2004, as filed                with                the Securities and Exchange Commission on February 14,                2005. |
|                       |                                                                                                                                                                                                                                                                                                        |
| Footnote                39 | Incorporated                by reference to similarly numbered exhibits to the Company’s Report on                Form 10-Q for the quarterly period ended March 30, 2005, as filed                with the                Securities and Exchange Commission on May 16, 2005.                        |
|                       |                                                                                                                                                                                                                                                                                                        |
| Footnote                40 | Incorporated                by reference to similarly numbered exhibits to the Company’s Report on                Form 10-Q for the quarterly period ended June 30, 2005, as filed                with the                Securities and Exchange Commission on August 17, 2005.                      |
|                       |                                                                                                                                                                                                                                                                                                        |
| Footnote                41 | Incorporated                by reference to similarly numbered exhibits to the Company’s Form 8-K, as                filed with the Securities and Exchange Commission on August 30,                2005.                                                                                             |
|                       |                                                                                                                                                                                                                                                                                                        |
| Footnote                42 | Incorporated                by reference to similarly numbered exhibits to the Company’s Form 8-K, as                filed with the Securities and Exchange Commission on September 8,                2005.                                                                                           |
|                       |                                                                                                                                                                                                                                                                                                        |
| Footnote                43 | Incorporated                by reference to similarly numbered exhibits to the Company’s Form 8-K, as                filed with the Securities and Exchange Commission on September 14,                2005.                                                                                          |
|                       |                                                                                                                                                                                                                                                                                                        |
| Footnote                44 | Incorporated                by reference to similarly numbered exhibits to the Company’s Form 8-K, as                filed with the Securities and Exchange Commission on September 21,                2005.                                                                                          |
|                       |                                                                                                                                                                                                                                                                                                        |
| Footnote                45 | Incorporated                by reference to similarly numbered exhibits to the Company’s Form 8-K, as                filed with the Securities and Exchange Commission on October 4,                2005.                                                                                             |
|                       |                                                                                                                                                                                                                                                                                                        |
| Footnote                46 | Incorporated                by reference to similarly numbered exhibits to the Company’s Form 8-K, as                filed with the Securities and Exchange Commission on October 7,                2005.                                                                                             |
|                       |                                                                                                                                                                                                                                                                                                        |
| Footnote                47 | Incorporated                by reference to similarly numbered exhibits to the Company’s Form 8-K, as                filed with the Securities and Exchange Commission on October 12,                2005.                                                                                            |
|                       |                                                                                                                                                                                                                                                                                                        |
| Footnote                48 | Incorporated                by reference to similarly numbered exhibits to the Company’s Form 8-K, as                filed with the Securities and Exchange Commission on November 7,                2005.                                                                                            |
|                       |                                                                                                                                                                                                                                                                                                        |
| Footnote                49 | Incorporated                by reference to similarly numbered exhibits to the Company’s Form 8-K, as                filed with the Securities and Exchange Commission on November 18,                2005.                                                                                           |
|                       |                                                                                                                                                                                                                                                                                                        |
| Footnote                50 | Incorporated                by reference to similarly numbered exhibits to the Company’s Form 8-K, as                filed with the Securities and Exchange Commission on November 30,                2005.                                                                                           |
|                       |                                                                                                                                                                                                                                                                                                        |
| Footnote                51 | Incorporated                by reference to similarly numbered exhibits to the Company’s Form 10-K, as                filed with the Securities and Exchange Commission on February 3,                2006.                                                                                           |
|                       |                                                                                                                                                                                                                                                                                                        |

----

| Footnote                52 | Incorporated                by reference to similarly numbered exhibits to the Company’s Form 8-K, as                filed with the Securities and Exchange Commission on December 7,                2006.                                                                                            |
|----------------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                       |                                                                                                                                                                                                                                                                                                        |
| Footnote                53 | Incorporated                by reference to similarly numbered exhibits to the Company’s Form 8-K, as                filed with the Securities and Exchange Commission on August 6,                2007.                                                                                              |
|                       |                                                                                                                                                                                                                                                                                                        |
| Footnote                54 | Incorporated                by reference to similarly numbered exhibits to the Company’s Report on                Form 10-Q for the quarterly period ended December 31, 2006, as filed                with                the Securities and Exchange Commission on February 14,                2007. |
|                       |                                                                                                                                                                                                                                                                                                        |
| Footnote                55 | Incorporated                by reference to similarly numbered exhibits to the Company’s Report on                Form 10-Q for the quarterly period ended June 30, 2007, as filed                with the                Securities and Exchange Commission on August 13,                2007        |

----

|                                             | STRATUS                SERVICES GROUP, INC. |
|--------------------------------------------------|---------------------------------------------|
|                                             |                                        |   |
|                                             |                                        |   |
| Date:  January                14, 2008 | By:                                         | /s/                Joseph J. Raymond |   |
|                                             |                                        | Joseph                J. Raymond |
|                                             |                                        | Chairman                of the Board of Directors,President                and Chief Executive Officer |
|                                             |                                        |   |

| Signature                               |                                                        | Title                                                               |                            | Date |   |
|-----------------------------------------|-------------------------------------------------------------|---------------------------------------------------------------------|---------------------------------|------|--------|
|                                    |                                                        |                                                                |
|                                    |                                                        |                                                                |
| /s/                Joseph J. Raymond    |                                                        | Chairman,                Chief Executive Officer and Director       | January                14, 2008 |
| Joseph                J. Raymond        | (Principal                Executive Officer)                |                                                                |
|                                    |                                                        |                                                                |
|                                    |                                                        |                                                                |
| /s/                Michael A. Maltzman  |                                                        | Vice                President, Chief Financial Officer and Director | January                14, 2008 |
| Michael                A. Maltzman      | (Principal                Financing and Accounting Officer) |                                                                |
|                                    |                                                        |                                                                |
|                                    |                                                        |                                                                |
| /s/                Norman Goldstein     |                                                        | Director                                                            | January                14, 2008 |
| Norman                Goldstein         |                                                        |                                                                |
|                                    |                                                        |                                                                |
|                                    |                                                        |                                                                |
| /s/                Thurston J. Hartford | Director                                                    | January                14, 2008                                     |
| Thurston                J. Hartford     |                                                        |                                                                |

----

INDEX      TO CONSOLIDATED FINANCIAL      STATEMENTS

| Report                of Gruber & Company, LLC                                               | F-2    |
|--------------------------------------------------------------------------------------------------|--------|
| Consolidated                Financial Statements                                                 |   |
| Consolidated                Balance Sheets                                                       | F-3    |
| Consolidated                Statements of                Operations                              | F-5    |
| Consolidated                Statements of Cash                Flows                              | F-6    |
| Consolidated                Statements of Stockholders’                Equity (Deficiency) | F-8    |
| Notes                to Consolidated Financial                Statements                         | F-14   |

----

----

Consolidated      Balance Sheets

|                                                                                                                                                                                                                                             |   | September                30, |       |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|------------------------------|------------|
| Assets                                                                                                                                                                                                                                           |   | 2007                         |       |   | 2006 |   |
| Current                assets                                                                                                                                                                                                                    |   |                         |       |   |   |   |
| Cash                                                                                                                                                                                                                                             |   | $                            | 144,849    |   |   | $ | 84,881 |   |
| Accounts                receivable – less allowance for doubtful accounts of $200,000 and                $3,039,000                                                                                                                        |   |                         | 1,104,650  |   |   |   | 815,463 |   |
| Unbilled                receivables                                                                                                                                                                                                              |   |                         | 176,690    |   |   |   | 126,191 |   |
| Due                from related party                                                                                                                                                                                                            |   |                         | -          |   |   |   | 499,264 |   |
| Notes                receivable (current portion)                                                                                                                                                                                                |   |                         | -          |   |   |   | 80,000 |   |
| Prepaid                insurance                                                                                                                                                                                                                 |   |                         | 53,351     |   |   |   | 12,244 |   |
| Prepaid                expenses and other current assets                                                                                                                                                                                         |   |                         | 269,988    |   |   |   | 244,662 |   |
| Assets                held for sale                                                                                                                                                                                                              |   |                         | -          |   |   |   | — |   |
|                                                                                                                                                                                                                                             |   |                         | 1,749,528  |   |   |   | 1,862,705 |   |
|                                                                                                                                                                                                                                             |   |                         |       |   |   |   |   |   |
| Property                and equipment, net of                accumulated depreciation                                                                                                                                                            |   |                         | 186,279    |   |   |   | 145,727 |   |
| Intangible                assets, net of                accumulated amortization                                                                                                                                                                 |   |                         | 94,444     |   |   |   | - |   |
| Goodwill                                                                                                                                                                                                                                         |   |                         | 1,766,336  |   |   |   | — |   |
| Other                assets                                                                                                                                                                                                                      |   |                         | 8,820      |   |   |   | 6,350 |   |
|                                                                                                                                                                                                                                             |   | $                            | 3,805,407  |   |   | $ | 2,014,782 |   |
| Liabilities                and Stockholders’ Equity (Deficiency)                                                                                                                                                                           |   |                         |       |   |   |   |   |   |
| Current                liabilities                                                                                                                                                                                                               |   |                         |       |   |   |   |   |   |
| Loans                payable (current                portion)                                                                                                                                                                                    |   | $                            | 130,983    |   |   | $ | 72,477 |   |
| Loans                payable - related                parties                                                                                                                                                                                    |   |                         | 85,721     |   |   |   | 87,721 |   |
| Notes                payable – acquisitions                (current portion) (including $52,859 to related                party)                                                                                                           |   |                         | 349,673    |   |   |   | 203,663 |   |
| Note                payable - related party                (current portion)                                                                                                                                                                     |   |                         | 506,233    |   |   |   | 265,308 |   |
| Line                of                credit                                                                                                                                                                                                     |   |                         | 642,570    |   |   |   | 596,950 |   |
| Insurance                obligation                payable                                                                                                                                                                                       |   |                         | 13,154     |   |   |   | 7,348 |   |
| Accounts                payable and accrued                expenses                                                                                                                                                                              |   |                         | 4,349,523  |   |   |   | 3,736,396 |   |
| Accrued                payroll and                taxes                                                                                                                                                                                          |   |                         | 190,969    |   |   |   | 107,204 |   |
| Payroll                taxes                payable                                                                                                                                                                                              |   |                         | 3,218,455  |   |   |   | 3,823,710 |   |
| Series                A redemption                payable                                                                                                                                                                                        |   |                         | 300,000    |   |   |   | 300,000 |   |
|                                                                                                                                                                                                                                             |   |                         | 9,787,281  |   |   |   | 9,200,777 |   |
|                                                                                                                                                                                                                                             |   |                         |       |   |   |   |   |   |
|                                                                                                                                                                                                                                             |   |                         |       |   |   |   |   |   |
| Loans                payable (net of current portion)                                                                                                                                                                                            |   |                         | 35,013     |   |   |   | — |   |
| Notes                payable – acquisitions (net of current portion) (including $109,664                to related                party)                                                                                                   |   |                         | 430,241    |   |   |   | 476,017 |   |
| Note                payable – related party (net of current portion)                                                                                                                                                                       |   |                         | 110,617    |   |   |   | 351,542 |   |
| Notes                payable – minority interest investors                                                                                                                                                                                 |   |                         | 675,000    |   |   |   | - |   |
|                                                                                                                                                                                                                                             |   |                         | 11,038,152 |   |   |   | 10,028,336 |   |
|                                                                                                                                                                                                                                             |   |                         |       |   |   |   |   |   |
| Commitments                and contingencies                                                                                                                                                                                                     |   |                         |       |   |   |   |   |   |
|                                                                                                                                                                                                                                             |   |                         |       |   |   |   |   |   |
| Minority                interest                                                                                                                                                                                                                 |   |                         | 547,135    |   |   |   | 41,316 |   |
|                                                                                                                                                                                                                                             |   |                         |       |   |   |   |   |   |
| Stockholders’                equity (deficiency)                                                                                                                                                                                           |   |                         |       |   |   |   |   |   |
| Preferred                stock, $.01 par value, 5,000,000 shares authorized                                                                                                                                                                      |   |                         |       |   |   |   |   |   |
|                                                                                                                                                                                                                                             |   |                         |       |   |   |   |   |   |
| Series                F voting convertible preferred stock, $.01 par value, 6,000 and 6,000                shares issued and outstanding, liquidation preference of $600,000                (including unpaid dividends of $133,000 and $91,000) |   |                         | 733,000    |   |   |   | 691,000 |   |

----

| Common                stock, $.04 par value, 100,000,000 shares authorized; 69,568,615                and                64,479,754 shares issued and outstanding |   |   | 2,782,745   |   |   |   | 2,619,190   |   |
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------|-------------|--------|--------|--------|-------------|--------|
| Additional                paid-in capital                                                                                                                         |   |   | 9,760,516   |   |   |   | 9,407,238   |   |
| Accumulated                deficit                                                                                                                                |   |   | (21,056,141 | )      |   |   | (20,772,298 | )      |
| Total                stockholders’ equity (deficiency)                                                                                                      |   |   | (7,779,880  | )      |   |   | (8,054,870  | )      |
|                                                                                                                                                              |   | $      | 3,805,407   |   |   | $      | 2,014,782   |   |

----

Consolidated      Statements of      Operations

|                                                                                                     |   | Years                Ended September 30, |       |
|----------------------------------------------------------------------------------------------------------|--------|------------------------------------------|------------|
|                                                                                                     |   | 2007                                     |       |   | 2006 |   |   | 2005 |   |
|                                                                                                     |   |                                     |       |   |   |   |   |   |   |
| Revenues                                                                                                 |   | $                                        | 8,209,564  |   |   | $ | 5,131,081 |   |   | $ | 4,520,643 |   |
|                                                                                                     |   |                                     |       |   |   |   |   |   |   |   |   |   |
| Cost                of revenues ($-0-, $479,873                and $491,358 to related parties)          |   |                                     | 5,717,297  |   |   |   | 3,605,244 |   |   |   | 3,202,716 |   |
|                                                                                                     |   |                                     |       |   |   |   |   |   |   |   |   |   |
| Gross                profit                                                                              |   |                                     | 2,492,267  |   |   |   | 1,525,837 |   |   |   | 1,317,927 |   |
|                                                                                                     |   |                                     |       |   |   |   |   |   |   |   |   |   |
| Selling,                general and                administrative expenses                               |   |                                     | 2,971,755  |   |   |   | 3,082,139 |   |   |   | 5,278,186 |   |
|                                                                                                     |   |                                     |       |   |   |   |   |   |   |   |   |   |
| Operating                (loss) from continuing                operations                                |   |                                     | (479,488   | ) |   |   | (1,556,302 | ) |   |   | (3,960,259 | ) |
|                                                                                                     |   |                                     |       |   |   |   |   |   |   |   |   |   |
| Interest                expense                                                                          |   |                                     | (246,342   | ) |   |   | (481,762 | ) |   |   | (1,895,283 | ) |
|                                                                                                     |   |                                     |       |   |   |   |   |   |   |   |   |   |
|  Other                income (expense)                (net)                                         |   |                                     | —    |   |   |   | (398 | ) |   |   | 16,420 |   |
|                                                                                                     |   |                                     |       |   |   |   |   |   |   |   |   |   |
|  Gain                on change in fair value                of warrants                             |   |                                     | -          |   |   |   | 2,135 |   |   |   | 5,263,854 |   |
|                                                                                                     |   |                                     |       |   |   |   |   |   |   |   |   |   |
| (Loss)                from continuing operations                before minority interest                 |   |                                     | (725,830   | ) |   |   | (2,035,531 | ) |   |   | (575,268 | ) |
| Minority                interest in net (income)                loss of consolidated subsidiaries        |   |                                     | 49,048     |   |   |   | (19,811 | ) |   |   | (58,926 | ) |
|                                                                                                     |   |                                     |       |   |   |   |   |   |   |   |   |   |
|  (Loss)                from continuing                operations                                    |   |                                     | (676,782   | )  |   |   | (2,055,342 | ) |   |   | (634,194 | ) |
| Discontinued                operations — income                (loss) from discontinued operations |   |                                     | (125,000   | ) |   |   | (307,044 | ) |   |   | (1,973,475 | ) |
| Gain                on sale of discontinued                operations (net)                              |   |                                     | 517,939    |   |   |   | 3,804,047 |   |   |   | 2,239,108 |   |
| Net                earnings                (loss)                                                        |   |                                     | (283,843   | ) |   |   | 1,441,661 |   |   |   | (368,561 | ) |
| Dividends                on preferred                stock                                               |   |                                     | (42,000    | ) |   |   | (42,000 | ) |   |   | (42,000 | ) |
| Net                earnings (loss) attributable                to common stockholders                    |   | $                                        | (325,843   | ) |   | $ | 1,399,661 |   |   | $ | (410,561 | ) |
|                                                                                                     |   |                                     |       |   |   |   |   |   |   |   |   |   |
| Basic:                                                                                                   |   |                                     |       |   |   |   |   |   |   |   |   |   |
| (Loss)                from continuing                operations                                          |   | $                                        | (.01       | ) |   | $ | (.05 | ) |   | $ | (.04 | ) |
| Earnings                from discontinued                operations                                      |   |                                     | .01        |   |   |   | .08 |   |   |   | .02 |   |
| Net                earnings                (loss)                                                        |   | $                                        | -          |   |   | $ | .03 |   |   | $ | (.02 | ) |
|                                                                                                     |   |                                     |       |   |   |   |   |   |   |   |   |   |
| Diluted:                                                                                                 |   |                                     |       |   |   |   |   |   |   |   |   |   |
| (Loss)                from continuing                operations                                          |   | $                                        | (.01       | ) |   | $ | (.05 | ) |   | $ | (.04 | ) |
| Earnings                from discontinued                operations                                      |   |                                     | .01        |   |   |   | .08 |   |   |   | .02 |   |
| Net                earnings                (loss)                                                        |   | $                                        | -          |   |   | $ | .03 |   |   | $ | (.02 | ) |
|                                                                                                     |   |                                     |       |   |   |   |   |   |   |   |   |   |
| Weighted                average shares,                outstanding per common share                      |   |                                     |       |   |   |   |   |   |   |   |   |   |
| Basic                                                                                                    |   |                                     |       |   |   |   |   |   |   |   |   |   |
| Diluted                                                                                                  |   |                                     |       |   |   |   |   |   |   |   |   |   |
|                                                                                                     |   |                                     | 66,873,827 |   |   |   | 43,721,219 |   |   |   | 17,115,983 |   |
|                                                                                                     |   |                                     | 66,873,827 |   |   |   | 53,406,997 |   |   |   | 17,115,983 |   |

----

Consolidated      Statements of Cash      Flows

|                                                                                                                                                                                                                                                  |   | Years                Ended September 30, |       |
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|------------------------------------------|------------|
|                                                                                                                                                                                                                                                  |   | 2007                                     |       |   | 2006 |   |   | 2005 |   |
| Cash                flows from (used in) operating activities                                                                                                                                                                                         |   |                                     |       |   |   |   |   |   |   |
| Net                earnings (loss)                                                                                                                                                                                                                    |   | $                                        | (283,843   | ) |   | $ | 1,441,661 |   |   | $ | (368,561 | ) |
| Adjustments                to reconcile net earnings (loss) to net cash used by operating                activities                                                                                                                                   |   |                                     |       |   |   |   |   |   |   |   |   |   |
| Depreciation                                                                                                                                                                                                                                          |   |                                     | 81,088     |   |   |   | 111,399 |   |   |   | 326,126 |   |
| Amortization                                                                                                                                                                                                                                          |   |                                     | 5,556      |   |   |   | 41,902 |   |   |   | 382,842 |   |
| Provision                for doubtful accounts                                                                                                                                                                                                        |   |                                     | 125,000    |   |   |   | 3⁄4 |   |   |   | 1,000,000 |   |
| Loss                on impairment of goodwill                                                                                                                                                                                                         |   |                                     | 3⁄4     |   |   |   | 3⁄4 |   |   |   | 3,263,272 |   |
| Deferred                financing costs amortization                                                                                                                                                                                                  |   |                                     | 3⁄4     |   |   |   | 3⁄4 |   |   |   | 1,748 |   |
| (Gain)                loss on sales of discontinued operations                                                                                                                                                                                        |   |                                     | (517,939   | ) |   |   | (3,804,047 | ) |   |   | (2,239,108 | ) |
| Stock                compensation                                                                                                                                                                                                                     |   |                                     | -          |   |   |   | 100,400 |   |   |   | 42,000 |   |
| Common                stock and warrants issued for fees                                                                                                                                                                                              |   |                                     | -          |   |   |   | 13,000 |   |   |   | 261,300 |   |
| Imputed                interest                                                                                                                                                                                                                       |   |                                     | 35,343     |   |   |   | 41,704 |   |   |   | 73,392 |   |
| Accrued                interest                                                                                                                                                                                                                       |   |                                     | 50,879     |   |   |   | 40,497 |   |   |   | (26,853 | ) |
| Gain                on change in fair value of warrants                                                                                                                                                                                               |   |                                     | -          |   |   |   | (2,135 | ) |   |   | (5,263,854 | ) |
| Minority                interest                                                                                                                                                                                                                      |   |                                     | (49,048    | ) |   |   | 19,811 |   |   |   | 58,926 |   |
| Dividends                on preferred stock                                                                                                                                                                                                           |   |                                     | -          |   |   |   | 163,625 |   |   |   | (715 | ) |
| Intrinsic                value of beneficial conversion feature of convertible preferred                stock                                                                                                                                         |   |                                     | -          |   |   |   | 1,674 |   |   |   | 3⁄4 |   |
| Changes                in operating assets and liabilities                                                                                                                                                                                            |   |                                     |       |   |   |   |   |   |   |   |   |   |
| Accounts                receivable                                                                                                                                                                                                                    |   |                                     | (219,202   | ) |   |   | 11,104,275 |   |   |   | 1,612,166 |   |
| Prepaid                insurance                                                                                                                                                                                                                      |   |                                     | (28,107    | ) |   |   | 443,637 |   |   |   | 1,473,175 |   |
| Prepaid                expenses and other current assets                                                                                                                                                                                              |   |                                     | 8,999      |   |   |   | 181,378 |   |   |   | 54,610 |   |
| Other                assets                                                                                                                                                                                                                           |   |                                     | (2,470     | ) |   |   | 27,556 |   |   |   | 91,878 |   |
| Insurance                obligation payable                                                                                                                                                                                                           |   |                                     | 5,806      |   |   |   | (106,025 | ) |   |   | (21,602 | ) |
| Accrued                payroll and taxes                                                                                                                                                                                                              |   |                                     | 83,765     |   |   |   | (177,630 | ) |   |   | (870,592 | ) |
| Payroll                taxes payable                                                                                                                                                                                                                  |   |                                     | (605,255   | ) |   |   | (785,875 | ) |   |   | (543,561 | ) |
| Accounts                payable and accrued expenses                                                                                                                                                                                                  |   |                                     | 147,374    |   |   |   | (2,113,242 | ) |   |   | 3,833,709 |   |
| Total                adjustments                                                                                                                                                                                                                      |   |                                     | (878,211   | ) |   |   | 5,301,904 |   |   |   | 3,508,859 |   |
|                                                                                                                                                                                                                                                  |   |                                     | (1,162,054 | ) |   |   | 6,743,565 |   |   |   | 3,140,298 |   |
| Cash                flows from (used in) investing activities                                                                                                                                                                                         |   |                                     |       |   |   |   |   |   |   |   |   |   |
| Purchase                of property and equipment                                                                                                                                                                                                     |   |                                     | (32,000    | ) |   |   | (36,367 | ) |   |   | (233,721 | ) |
| Payments                for business acquisitions                                                                                                                                                                                                     |   |                                     | (1,192,643 | ) |   |   | 3⁄4 |   |   |   | (136,000 | ) |
| Net                proceeds from (payments in connection with) sale of discontinued                operations (including $499,264 and $750,736 from a related party                in 2007                and 2006) (net of $10,000 in costs in 2006) |   |                                     | 1,017,203  |   |   |   | 1,329,999 |   |   |   | (322,952 | ) |
| Collection                of notes receivable                                                                                                                                                                                                         |   |                                     | -          |   |   |   | 6,609 |   |   |   | 20,343 |   |
|                                                                                                                                                                                                                                                  |   |                                     | (207,440   | ) |   |   | 1,300,241 |   |   |   | (672,330 | ) |
| Cash                flows from (used in) financing activities                                                                                                                                                                                         |   |                                     |       |   |   |   |   |   |   |   |   |   |
| Proceeds                from loans payable                                                                                                                                                                                                            |   |                                     | 50,000     |   |   |   | 3⁄4 |   |   |   | 125,000 |   |
| Payments                of loans payable                                                                                                                                                                                                              |   |                                     | (11,121    | ) |   |   | (5,973 | ) |   |   | (115,241 | ) |
| Proceeds                from loans payable – related parties                                                                                                                                                                                    |   |                                     | 144,500    |   |   |   | 3⁄4 |   |   |   | 665,000 |   |
| Payments                of loans payable – related parties                                                                                                                                                                                      |   |                                     | (146,500   | ) |   |   | (24,002 | ) |   |   | (792,852 | ) |
| Payments                of note payable – related parties                                                                                                                                                                                       |   |                                     | 3⁄4     |   |   |   | (1,515,000 | ) |   |   | 3⁄4 |   |
| Payments                of notes payable – acquisitions                                                                                                                                                                                         |   |                                     | (11,337    | ) |   |   | (77,783 | ) |   |   | (883,675 | ) |
| Proceeds                from minority interest investors (net)                                                                                                                                                                                        |   |                                     | 1,348,925  |   |   |   | 3⁄4 |   |   |   | 3⁄4 |   |
| Proceeds                from exercise of warrants                                                                                                                                                                                                     |   |                                     | 9,375      |   |   |   | 3⁄4 |   |   |   | 3⁄4 |   |
| Net                proceeds from (repayment of) line of credit                                                                                                                                                                                        |   |                                     | 45,620     |   |   |   | (6,362,218 | ) |   |   | (2,097,381 | ) |
| Cash                overdraft                                                                                                                                                                                                                         |   |                                     | 3⁄4     |   |   |   | (14,731 | ) |   |   | (9,761 | ) |
| Redemption                of preferred stock                                                                                                                                                                                                          |   |                                     | 3⁄4     |   |   |   | 3⁄4 |   |   |   | (34,000 | ) |
| Dividends                paid                                                                                                                                                                                                                         |   |                                     | 3⁄4     |   |   |   | 3⁄4 |   |   |   | (20,000 | ) |
|                                                                                                                                                                                                                                                  |   |                                     | 1,429,462  |   |   |   | (7,999,709 | ) |   |   | (3,162,910 | ) |
| Net                change in cash                                                                                                                                                                                                                     |   |                                     | 59,968     |   |   |   | 44,097 |   |   |   | (694,942 | ) |

----

| Cash                – beginning                                                                    |   |   | 84,881    |   |   |   | 40,784     |   |   |   | 735,726    |   |
|----------------------------------------------------------------------------------------------------------|--------|--------|-----------|--------|--------|--------|------------|--------|--------|--------|------------|--------|
| Cash                – ending                                                                       |   | $      | 144,849   |   |   | $      | 84,881     |   |   | $      | 40,784     |   |
|                                                                                                     |   |   |      |   |   |   |       |   |   |   |       |   |
| Supplemental                disclosure of cash paid                                                      |   |   |      |   |   |   |       |   |   |   |       |   |
| Interest                                                                                                 |   | $      | 364,984   |   |   | $      | 421,022    |   |   | $      | 2,404,231  |   |
|                                                                                                     |   |   |      |   |   |   |       |   |   |   |       |   |
|                                                                                                     |   |   |      |   |   |   |       |   |   |   |       |   |
| Schedule                of noncash investing and financing activities                                    |   |   |      |   |   |   |       |   |   |   |       |   |
| Fair                value of assets acquired                                                             |   | $      | 2,163,745 |   |   | $      | 3⁄4     |   |   | $      | 358,500    |   |
| Less:                cash paid                                                                           |   |   | (669,000  | )      |   |   | 3⁄4     |   |   |   | (136,000   | )      |
| Less:                common stock and put options issued                                                 |   |   | (400,000  | )      |   |   | 3⁄4     |   |   |   | (16,500    | )      |
| Liabilities                assumed                                                                       |   | $      | 1,094,745 |   |   | $      | 3⁄4     |   |   | $      | 206,000    |   |
| Sale                of discontinued operations:                                                          |   |   |      |   |   |   |       |   |   |   |       |   |
| Gain                on sale                                                                              |   | $      | 517,939   |   |   | $      | 3,804,047  |   |   | $      | 2,239,108  |   |
| Net                assets sold                                                                           |   |   | 3⁄4    |   |   |   | 1,683,783  |   |   |   | 377,265    |   |
| Due                from related party                                                                    |   |   | 499,264   |   |   |   | (499,264   | )      |   |   | 3⁄4     |   |
| Accrued                earn-out                                                                          |   |   | 3⁄4    |   |   |   | (167,203   | )      |   |   | 3⁄4     |   |
| Cancellation                of amounts due from related parties                                          |   |   | 3⁄4    |   |   |   | (3,541,364 | )      |   |   | 376,394    |   |
| Cancellation                of accounts payable-related parties (net)                                    |   |   | 3⁄4    |   |   |   | 3⁄4     |   |   |   | (3,315,719 | )      |
| Accrued                expenses                                                                          |   |   | 3⁄4    |   |   |   | 60,000     |   |   |   | 3⁄4     |   |
| Net                cash received (paid)                                                                  |   | $      | 1,017,203 |   |   | $      | 1,339,999  |   |   | $      | (322,952   | )      |
|                                                                                                     |   |   |      |   |   |   |       |   |   |   |       |   |
| Assignment                of note receivable in exchange for notes payable -                acquisitions |   | $      | 80,000    |   |   | $      | 3⁄4     |   |   | $      | 3⁄4     |   |
| Issuance                of common stock upon conversion of convertible preferred                stock    |   | $      | -         |   |   | $      | 24,366     |   |   | $      | 3⁄4     |   |
| Issuance                of Series F Preferred Stock in exchange for accrued                dividends     |   | $      | -         |   |   | $      | 45,000     |   |   | $      | 3⁄4     |   |
| Issuance                of warrants for fees                                                             |   | $      | -         |   |   | $      | 13,000     |   |   | $      | 3⁄4     |   |
| Accrued                interest converted to loan payable                                                |   | $      | -         |   |   | $      | 3⁄4     |   |   | $      | 21,600     |   |
| Issuance                of common stock in exchange for loans and notes payable                          |   | $      | 3⁄4    |   |   | $      | 15,000     |   |   | $      | 3⁄4     |   |
| Put                option liability converted to loan payable                                            |   | $      | 3⁄4    |   |   | $      | 3⁄4     |   |   | $      | 18,000     |   |
| Cumulative                dividends and accretion on preferred stock                                     |   | $      | 42,000    |   |   | $      | 42,000     |   |   | $      | 42,000     |   |

----

|                                                                   |   |   |       |   | Common                Stock |   |    | Preferred                Stock |   |
|------------------------------------------------------------------------|--------|--------|------------|--------|-----------------------------|--------|---------|--------------------------------|--------|
|                                                                   |   | Total  |       |   | Amount                      |   |    | Shares                         |   |   | Amount |   |   | Shares |   |
|                                                                   |   |   |       |   |                        |   |    |                           |   |   |   |   |   |   |   |
| Balance                – September 30, 2004                      |   | $      | (9,773,210 | )      |                        | $      | 672,914 |                           |   |   | 16,822,854 |   |   | $ | 730,700 |   |   |   | 6,572 |   |
| Net                (loss)                                              |   |   | (368,561   | )      |                        |   | 3⁄4  |                           |   |   | 3⁄4 |   |   |   | 3⁄4 |   |   |   | 3⁄4 |   |
| Dividends                on preferred stock                            |   |   | (20,000    | )      |                        |   | 3⁄4  |                           |   |   | 3⁄4 |   |   |   | 22,000 |   |   |   | 3⁄4 |   |
| Issuance                of common stock in connection with acquisition |   |   | 16,500     |   |                        |   | 2,000   |                           |   |   | 50,000 |   |   |   | 3⁄4 |   |   |   | 3⁄4 |   |
| Exercise                of put option                                  |   |   | 3⁄4     |   |                        |   | (200    | )                              |   |   | (5,000 | ) |   |   | 3⁄4 |   |   |   | 3⁄4 |   |
| Issuance                of restricted stock                            |   |   | 42,000     |   |                        |   | 10,000  |                           |   |   | 250,000 |   |   |   | 3⁄4 |   |   |   | 3⁄4 |   |
| Redemption                of Series E Preferred Stock                  |   |   | (34,000    | )      |                        |   | 3⁄4  |                           |   |   | 3⁄4 |   |   |   | (34,000 | ) |   |   | (325 | ) |
| Issuance                of common stock to Series I holders            |   |   | 217,750    |   |                        |   | 82,952  |                           |   |   | 2,073,808 |   |   |   | 3⁄4 |   |   |   | 3⁄4 |   |
| Issuance                of common stock for fees                       |   |   | 43,550     |   |                        |   | 16,591  |                           |   |   | 414,761 |   |   |   | 3⁄4 |   |   |   | 3⁄4 |   |
| Balance                – September 30, 2005                      |   | $      | (9,875,971 | )      |                        | $      | 784,257 |                           |   |   | 19,606,423 |   |   | $ | 718,700 |   |   |   | 6,247 |   |

----

|                                                                   |   | AdditionalPaid-InCapital |       |   | AccumulatedDeficit |   |
|------------------------------------------------------------------------|--------|--------------------------|------------|--------|--------------------|--------|
|                                                                   |   |                     |       |   |               |   |
| Balance                – September 30, 2004                      |   | $                        | 10,668,574 |   |               | $      | (21,845,398 | ) |
| Net                (loss)                                              |   |                     | 3⁄4     |   |               |   | (368,561 | ) |
| Dividends                on preferred stock                            |   |                     | (42,000    | )      |               |   | 3⁄4 |   |
| Issuance                of common stock in connection with acquisition |   |                     | 14,500     |   |               |   | 3⁄4 |   |
| Exercise                of put options                                 |   |                     | 200        |   |               |   | 3⁄4 |   |
| Issuance                of restricted stock                            |   |                     | 32,000     |   |               |   | 3⁄4 |   |
| Redemption                of Series E Preferred Stock                  |   |                     | 3⁄4     |   |               |   | 3⁄4 |   |
| Issuance                of common stock to Series I holders            |   |                     | 134,798    |   |               |   | 3⁄4 |   |
| Issuance                of common stock for fees                       |   |                     | 26,959     |   |               |   | 3⁄4 |   |
| Balance                – September 30, 2005                      |   | $                        | 10,835,031 |   |               | $      | (22,213,959 | ) |

----

|                                                                            |   |   |       |   | Common                Stock |   |      | Preferred                Stock |   |
|---------------------------------------------------------------------------------|--------|--------|------------|--------|-----------------------------|--------|-----------|--------------------------------|--------|
|                                                                            |   | Total  |       |   | Amount                      |   |      | Shares                         |   |   | Amount |   |   | Shares |   |
|                                                                            |   |   |       |   |                        |   |      |                           |   |   |   |   |   |   |   |
| Net                earnings                                                     |   | $      | 1,441,661  |   |                        | $      | 3⁄4    |                           |   |   | 3⁄4 |   |   | $ | 42,000 |   |   |   | 3⁄4 |   |
| Dividends                on preferred stock                                     |   |   | 3⁄4     |   |                        |   | 3⁄4    |                           |   |   | 3⁄4 |   |   |   | 3⁄4 |   |   |   | 3⁄4 |   |
| Conversion                of Series I Preferred Stock for Common Stock          |   |   | 26,040     |   |                        |   | 153,600   |                           |   |   | 3,840,000 |   |   |   | 3⁄4 |   |   |   | 3⁄4 |   |
| Conversion                of Series F Preferred Stock for Common Stock          |   |   | 3⁄4     |   |                        |   | 120,000   |                           |   |   | 3,000,000 |   |   |   | (45,000 | ) |   |   | 3⁄4 |   |
| Issuance                of warrants for services provided                       |   |   | 13,000     |   |                        |   | 3⁄4    |                           |   |   | 3⁄4 |   |   |   | 3⁄4 |   |   |   | 3⁄4 |   |
| Conversion                of convertible notes payable for common stock         |   |   | 225,000    |   |                        |   | 1,033,333 |                           |   |   | 25,833,331 |   |   |   | 3⁄4 |   |   |   | 3⁄4 |   |
| Issuance                of common stock in exchange for loans and notes payable |   |   | 15,000     |   |                        |   | 40,000    |                           |   |   | 1,000,000 |   |   |   | 3⁄4 |   |   |   | 3⁄4 |   |
| Issuance                of common stock to employees                            |   |   | 100,400    |   |                        |   | 488,000   |                           |   |   | 12,200,000 |   |   |   | 3⁄4 |   |   |   | 3⁄4 |   |
| Cancellation                of Series E Preferred Stock dividends               |   |   | 3⁄4     |   |                        |   | 3⁄4    |                           |   |   | 3⁄4 |   |   |   | (24,700 | ) |   |   | (247 | ) |
| Balance                – September 30, 2006                               |   | $      | (8,054,870 | )      |                        | $      | 2,619,190 |                           |   |   | 65,479,754 |   |   | $ | 691,000 |   |   |   | 6,000 |   |

----

|                                                                             |   | AdditionalPaid-InCapital |      |   | AccumulatedDeficit |   |
|----------------------------------------------------------------------------------|--------|--------------------------|-----------|--------|--------------------|--------|
|                                                                             |   |                     |      |   |               |   |
| Net                earnings                                                      |   | $                        | 3⁄4    |   |               | $      | 1,441,661 |   |
| Dividends                on preferred stock                                      |   |                     | (42,000   | )      |               |   | 3⁄4 |   |
| Conversion                of Series I Preferred Stock for Common Stock           |   |                     | (127,560  | )      |               |   | 3⁄4 |   |
| Conversion                of Series F Preferred Stock dividends for Common Stock |   |                     | (75,000   | )      |               |   | 3⁄4 |   |
| Issuance                of warrants for services provided                        |   |                     | 13,000    |   |               |   | 3⁄4 |   |
| Conversion                of convertible notes payable for Common Stock          |   |                     | (808,333  | )      |               |   | 3⁄4 |   |
| Issuance                of Common Stock in exchange for loans and notes payable  |   |                     | (25,000   | )      |               |   | 3⁄4 |   |
| Issuance                of common stock to employees                             |   |                     | (387,600  | )      |               |   | 3⁄4 |   |
| Cancellation                of Series E Preferred Stock dividends                |   |                     | 24,700    |   |               |   | 3⁄4 |   |
| Balance                – September 30, 2006                                |   | $                        | 9,407,238 |   |               | $      | (20,772,298 | ) |

----

|                                                                                                                                   |   |   |       | Common                Stock |   | Preferred                Stock |   |
|----------------------------------------------------------------------------------------------------------------------------------------|--------|--------|------------|-----------------------------|--------|--------------------------------|--------|
|                                                                                                                                   |   | Total  |       | Amount                      |   | Shares                         |   | Amount |   | Shares |   |
|                                                                                                                                   |   |   |       |                        |   |                           |   |   |   |   |   |
| Net                (loss)                                                                                                              |   | $      | (283,843   | )                      | $      | -                              |   |   | - |   | $ | - |   |   | - |   |
| Dividends                on preferred                stock                                                                             |   |   | -          |                        |   | -                              |   |   | - |   |   | 42,000 |   |   | - |   |
| Exercise                of                Warrants                                                                                     |   |   | 9,375      |                        |   | 750                            |   |   | 18,750 |   |   | - |   |   | - |   |
| Issuance                of common stock in                exchange for additional 1% interest in subsidiary                            |   |   | 756        |                        |   | 2,805                          |   |   | 70,111 |   |   | - |   |   | - |   |
| Increase                in investment in                subsidiary resulting from minority interest contributed                capital |   |   | 294,702    |                        |   | -                              |   |   | - |   |   | - |   |   | - |   |
| Issuance                of common stock in                connection with acquisition                                                  |   |   | 223,600    |                        |   | 80,000                         |   |   | 2,000,000 |   |   | - |   |   | - |   |
| Issuance                of common stock to                employees                                                                    |   |   | 30,400     |                        |   | 80,000                         |   |   | 2,000,000 |   |   | - |   |   | - |   |
| Balance                - September 30,                2007                                                                             |   | $      | (7,779,880 | )                           | $      | 2,782,745                      |   |   | 69,568,615 |   | $ | 733,000 |   |   | 6,000 |   |

----

|                                                                                                                                   |   | AdditionalPaid-InCapital |      | AccumulatedDeficit |   |
|----------------------------------------------------------------------------------------------------------------------------------------|--------|--------------------------|-----------|--------------------|--------|
|                                                                                                                                   |   |                     |      |               |   |
| Net                (loss)                                                                                                              |   | $                        | -         |               | $      | (283,843 |  ) |
| Dividends                on preferred                stock                                                                             |   |                     | (42,000   | )                  |   | - |   |
| Exercise                of                warrants                                                                                     |   |                     | 8,625     |               |   | - |   |
| Issuance                of common stock in                exchange for additional 1% interest in subsidiary                            |   |                     | (2,049    | )                  |   | - |   |
| Increase                on investment in                subsidiary resulting from minority interest contributed                capital |   |                     | 294,702   |               |   | - |   |
| Issuance                of common stock in                connection with acquisition                                                  |   |                     | 143,600   |               |   | - |   |
| Issuance                of common stock to                employees                                                                    |   |                     | (49,600   | )                  |   | - |   |
| Balance                - September 30,                2007                                                                             |   | $                        | 9,760,517 |               | $      | (21,056,141 | ) |

----

Notes      to Consolidated Financial      Statements

| Note                1 - | Description                of                Business and Segment                Information |
|-------------------------|----------------------------------------------------------------------------------------------|

| Revenues:                                         |   |   |      |
|---------------------------------------------------|--------|--------|-----------|
| Information                technology services    |   | $      | 7,614,074 |   |
| Technology                asset disposal business |   |   | 595,490   |   |
| Consolidated                revenues              |   | $      | 8,209,564 |   |
|                                              |   |   |      |   |
| Operating                (loss):                  |   |   |      |   |
| Information                technology services    |   | $      | 59,261    |   |
| Technology                asset disposal business |   |   | 1,509     |   |
| Corporate                expenses                 |   |   | (540,258  | ) |
| Consolidated                operating (loss)      |   | $      | (479,488  | ) |

| Note                2 - | Newly-Formed                Subsidiary |
|-------------------------|----------------------------------------|

| Note                3 - | Significant                Accounting                Policies |
|-------------------------|---------------------------------------------------------------|

----

----

|                                   | Method        | EstimatedUseful                Life |
|----------------------------------------|---------------|-------------------------------------|
| Furniture                and fixtures  | Straight-line | 3-5                years            |
| Office                equipment        | Straight-line | 3-5                years            |
| Computer                equipment      | Straight-line | 5                years              |
| Computer                software       | Straight-line | 3                years              |
| Machinery                and equipment | Straight-line | 3                years              |
| Truck                                  | Straight-line | 2                years              |

| Risk-free                interest rate |   |                     | 4      | % |
|----------------------------------------|--------|--------------------------|--------|---|
| Dividend                yield          |   |                     | 0      | % |
| Expected                life           |   | 4-7                years |   |
| Volatility                             |   |                     | 100    | % |

|                                                                                                                                                                                 |   |   |       |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------|------------|
| Net                  (loss) attributable to common stockholders, as                  reported                                                                                        |   | $      | (410,561   | ) |
|                                                                                                                                                                                 |   |   |       |   |
| Deduct:                                                                                                                                                                              |   |   |       |   |
| Total                  stock-based employee compensationexpense                  determined under fair value basedmethod for all                  awards, net of related tax effects |   |   | (613,097   | ) |
|                                                                                                                                                                                 |   |   |       |   |
|  Pro                forma net (loss) attributable to commonstockholders                                                                                                         |   | $      | (1,023,658 | ) |
|                                                                                                                                                                                 |   |   |       |   |
| (Loss)                  from continuing operations per common share attributable to common                  stockholders:                                                            |   |   |       |   |
| Basic                – as reported                                                                                                                                             |   | $      | (.02       | ) |
| Basic                – pro forma                                                                                                                                               |   | $      | (.06       | ) |
|                                                                                                                                                                                 |   |   |       |   |
| Diluted                – as reported                                                                                                                                           |   | $      | (.02       | ) |
| Basic                – pro forma                                                                                                                                               |   | $      | (.06       | ) |

----

----

| Note                4 - | Discontinued                Operations |
|-------------------------|----------------------------------------|

|   | (a) | Effective                as of June 5, 2005 (the “Effective Date”), the Company sold substantially                all of the assets, excluding accounts receivable of its six Northern                California offices to ALS, LLC (“ALS”) a related party (see Note                16).  The son of the Company’s Chief Executive Officer is a 50%                member in ALS. |
|--------|-----|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| Sales                price - cancellation of accounts payable - related parties |   | $      | 3,315,719 |   |
|---------------------------------------------------------------------------------|--------|--------|-----------|--------|
|                                                                                 |   |   |      |   |
| Less                costs of sale:                                              |   |   |      |   |
| Write-off                of amounts due from ALS                                |   |   | (376,394  | )      |
| Other                costs (including $75,000 to a related party) (see Note 17) |   |   | (322,952  | )      |
|                                                                                 |   |   |      |   |
| Balance                                                                         |   |   | 2,616,373 |   |
| Net                assets sold                                                  |   |   | 377,265   |   |
| Gain                                                                            |   | $      | 2,239,108 |   |

|   | (b) | In                December 2005, the Company completed the following series of transactions                pursuant to which we sold substantially all of our assets used to                conduct                its staffing services business, other than the IT staffing solutions                business that is conducted through the Company’s 50% owned joint venture,                STS. |
|--------|-----|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (i) | On                December 2, 2005, the Company completed the sale, effective as of                November                21, 2005, of substantially all of the tangible and intangible assets,                excluding accounts receivable, of several of its offices located                in the                Western half of the United States (the “ALS Purchased Assets”) to ALS, a                related party (see Note 17).  The offices sold were the                following:  Chino, California; Colton, California; Los Nietos,                California; Ontario, California; Santa Fe Springs, California and                the                Phoenix, Arizona branches and the Dallas Morning News Account (the                “Western Offices”).  Pursuant to the terms of an Asset Purchase                Agreement between the Company and ALS dated December 2, 2005 (the“ALS                Asset Purchase Agreement”), the purchase price for the ALS Purchased                Assets was paid or is payable as follows: |
|--------|-----|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | • | $250,000                was paid over the 60 days following December 2, 2005, at a rate no                faster                than $125,000 per 30 days; |
|--------|---------|------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | • | $1,000,000                payable by ALS is being paid directly to certain taxing authorities                to                reduce the Company’s tax obligations; and |
|--------|---------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | • | $3,537,000                was paid by means of the cancellation of all net indebtedness owed                by the                Company to ALS outstanding as of the close of business on December                2,                2005. |
|--------|---------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | In                addition to the foregoing amounts, ALS also assumed the Company’s                obligation to pay $798,626 due under a certain promissory note issued                by                the Company to Provisional Employment Solutions, Inc.  As a                result of the sale of the ALS Purchased Assets to ALS, all sums due                and                owing to ALS by Stratus were deemed paid in full and no further                obligations remain. |
|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

|   | (ii) | On                December 5, 2005, we completed the sale, effective as of November                28, 2005                (the “AI Effective Date”), of substantially all of the tangible and                intangible assets, excluding accounts receivable and other certain                items,                as described below, of three of our California offices (the “AI Purchased                Assets”) to Accountabilities, Inc. (“AI”)  The offices sold were                the following:  Culver City, California; Lawndale, California                and Orange, California (the “Other California                Offices”).  Pursuant to the terms of an Asset Purchase Agreement                between the Company and AI dated December 5, 2005 (the “AI Asset Purchase                Agreement”), AI has agreed to pay to the Company earnout amount equal to                two percent of the sales of the Other California Offices for the                first                twelve month period after the AI Effective Date; one percent of the                sales                of the Other California Offices for the second twelve month period                after                the AI Effective Date; and one percent of the sales of the Other                California Offices for the third twelve month period from the AI                Effective                Date.  In addition, a Demand Subordinated Promissory Note                between the Company and AI dated September 15, 2005 which had an                outstanding principal balance of $125,000 at the time of closing                was                deemed paid and marked canceled. Certain assets held by the Other                California Offices were excluded from the sale, including cash and                cash                equivalents, accounts receivable, and the Company’s rights to receive                payments from any source. |
|--------|------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (iii) | On                December 7, 2005, the Company completed the sale, effective as of                November                28, 2005 (the “SOP Effective Date”), of substantially all of the tangible                and intangible assets, excluding accounts receivable and other assets                as                described below, of several of our Northeastern offices (the “SOP                Purchased Assets”) to Source One Personnel, Inc. (“SOP”).  The                offices sold were the following:  Cherry Hill, New Jersey; New                Brunswick, New Jersey; Mount Royal/Paulsboro, New Jersey (soon to                be                Woodbury Heights, New Jersey); Pennsauken, New Jersey; Norristown,                Pennsylvania; Fairless Hills, Pennsylvania; New Castle Delaware and                the                former Freehold, New Jersey profit center (the “NJ/PA/DE                Offices”).  The assets of Deer Park, New York, Leominster,                Massachusetts, Lowell, Massachusetts and Athol, Massachusetts (the“Earn                Out Offices”) were also purchased (collectively the “NJ/PA/DE Offices” and                the “Earn Out Offices” shall be referred to as the “Purchased                Offices”).  In addition to the foregoing, the SOP Purchased                Assets also included substantially all of the tangible and intangible                assets, excluding accounts receivable and other assets as described                below,                used by the Company in the operation of its business at certain facilities                of certain customers including the following:  the Setco                facility in Cranbury New Jersey, the Record facility in Hackensack,                New                Jersey, the UPS-MI (formerly RMX) facility in Long Island, New York,                the                UPS-MI (formerly RMX) facility in the State of Connecticut, the UPS-MI                (formerly RMX) facility in the State of Ohio, the APX facility in                Clifton,                New Jersey (the “Earn Out On-Site Business”) and the Burlington Coat                Factory in Burlington, New Jersey, the Burlington Coat Factory facility                in                Edgewater Park, New Jersey and the UPS-MI (formerly RMX) facility                in                Paulsboro, New Jersey (the foregoing business and the “Earn-Out On-Site                Businesses” shall be referred to herein collectively as                the  “On-Site Businesses”).  Pursuant to the SOP Asset                Purchase Agreement between the Company and SOP dated December 7,                2005 (the                “SOP Asset Purchase Agreement”), the purchase price for the SOP Purchased                Assets was paid or is payable as follows (the “SOP Purchase Price”): |
|--------|-------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | An                aggregate of $974,031 of indebtedness owed by the Company to SOP                (i) under                certain promissory notes previously issued by the Company to SOP                and (ii)                in connection with a put right previously exercised by SOP with respect                to                400,000 shares of our common stock was cancelled. |
|--------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | SOP                is required to make the following earn out payments to the Company                during                the three year period commencing on the SOP Effective Date (the “Earn Out                Period”): |
|--------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | Two                percent of sales (excluding taxes on sales) from the Earn Out Offices                and                the Earn Out On-Site Businesses for the initial twelve months of                the Earn                Out Period. |
|--------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | One                percent of sales (excluding taxes on sales) from the Earn Out Offices                and                the Earn Out On-Site Businesses for the second twelve months of the                Earn                Out Period. |
|--------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | One                percent of sales (excluding taxes on sales) from the Earn Out Offices                and                the Earn Out On-Site Businesses for the third twelve months of the                Earn                Out Period. |
|--------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

|   | (iv) | On                December 7, 2005 (the “Closing Date”), the Company completed the sale of                substantially all of the tangible and intangible assets, excluding                cash                and cash equivalents, of two of its California branch offices (the“TES                Purchased Assets”) to Tri-State Employment Service, Inc.                (“TES”).  The offices sold were the                following:  Bellflower, California and West Covina, California                (the “California Branch Offices”).   Pursuant to the terms                of an Asset Purchase Agreement between the Company and TES dated                December                7, 2005 (the “TES Asset Purchase Agreement”), TES has agreed to pay to the                Company an earnout amount as follows: |
|--------|------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | one                percent of sales of the California Branch Offices to existing clients                for                the second twelve month period after the Closing Date; and |
|--------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | one                percent of sales of the California Branch Offices to existing clients                for                the third twelve month period after the Closing Date. |
|--------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|                                                        |   | Year                Ended    |     |
|-------------------------------------------------------------|--------|------------------------------|----------|
|                                                        |   | September                30, |     |
|                                                        |   | 2007                         |     |   | 2006 |   |   | 2005 |   |
|                                                        |   |                         |     |   |   |   |   |   |   |
| Revenues                                                    |   | $                            | —  |   |   | $ | 18,265,587 |   |   | $ | 118,012,289 |   |
| Cost                of revenues                             |   |                         | —  |   |   |   | 16,218,630 |   |   |   | 102,261,055 |   |
| Gross                profit                                 |   |                         | —  |   |   |   | 2,046,957 |   |   |   | 15,751,234 |   |
| Selling,                general and administrative expenses |   |                         | —  |   |   |   | 1,950,622 |   |   |   | 12,807,131 |   |
| Other                charges                                |   |                         | 125,000  |   |   |   | — |   |   |   | 4,002,391 |   |
| Operating                income (loss)                      |   |                         | —  |   |   |   | 96,335 |   |   |   | (1,058,288 | ) |
| Interest                expense                             |   |                         | —  |   |   |   | (205,056 | ) |   |   | (912,078 | ) |
| Other                income (expense)                       |   |                         | —  |   |   |   | (198,323 | ) |   |   | (3,109 | ) |
| Net                income (loss)                            |   | $                            | (125,000 | ) |   | $ | (307,044 | ) |   |   | (1,973,475 | ) |

|                                                   |   | Year                Ended September 30, |    |
|--------------------------------------------------------|--------|-----------------------------------------|---------|
|                                                   |   | 2007                                    |    |   | 2006 |   |
| Sold                to:                                |   |                                    |    |   |   |   |
| ALS                                                    |   | $                                       | — |   |   | $ | 4,340,459 |   |
| AI                                                     |   |                                    | 176,298 |   |   |   | (10,013 | ) |
| SOP                                                    |   |                                    | 183,224 |   |   |   | (190,879 | ) |
| TES                                                    |   |                                    | 158,417 |   |   |   | (275,520 | ) |
|                                                   |   |                                    | 517,939 |   |   |   | 3,864,047 |   |
|                                                   |   |                                    |    |   |   |   |   |   |
| Other                costs of sales                    |   | $                                       | — |   |   |   | (60,000 | ) |
| Gain                on sale of discontinued operations |   | $                                       | 517,939 |   |   | $ | 3,804,047 |   |

----

| Note                5 - | Acquisitions |
|-------------------------|--------------|

|   | (a) | Effective                as of August 2, 2007, the Company’s newly formed subsidiary, Transworld                (see Note 2), purchased substantially all of the assets used by Green-Tech                Assets, Inc. and its affiliate, CC Laurel, Inc. (the “Seller”) in their                technology asset disposal business located in Providence, Rhode Island.                The purpose of the acquisition was to generate future cash flow for                the                Company and provide cross-selling opportunities between the Company’s                subsidiaries. |
|--------|-----|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| Accounts                receivable    |   | $      | 245,484   |   |
|---------------------------------------|--------|--------|-----------|--------|
| Property                and equipment |   |   | 35,000    |   |
| Other                assets           |   |   | 16,925    |   |
| Intangible                assets      |   |   | 100,000   |   |
| Goodwill                              |   |   | 1,766,336 |   |
| Total                                 |   | $      | 2,163,745 |   |

|                                                                                                     |   | UnauditedYear                Ending September 30, |       |
|----------------------------------------------------------------------------------------------------------|--------|---------------------------------------------------|------------|
|                                                                                                     |   | 2007                                              |       |   | 2006 |   |
| Revenues                                                                                                 |   | $                                                 | 10,367,461 |   |   | $ | 6,274,662 |   |
|                                                                                                     |   |                                              |       |   |   |   |   |   |
| Net                (loss) from continuing operations attributable to common                stockholders  |   |                                              | (755,710   | ) |   |   | (2,261,007 | ) |
|                                                                                                     |   |                                              |       |   |   |   |   |   |
| Net                (loss) per share attributable to common stockholders basic and                diluted |   | $                                                 | (.01       | ) |   | $ | (.05 | ) |

|   | (b) | Effective                as of March 7, 2005, the Company purchased substantially all of the                tangible and intangible assets excluding accounts receivable, of                Team One                Personnel Solutions, LLC (“Team One”), which was comprised of three branch                offices in Northern California.  These offices provide temporary                light industrial and clerical staffing and had strengthened the Company’s                presence in the Northern California region.  The purchase price                was $242, 500 of which $20,000 was paid in cash.  The balance                was comprised of a promissory note for $160,000, payable $7,091 per                month,                including interest at 6% a year, over 24 months, 50,000 shares of                the                Company’s Common Stock, and a net liability for unpaid workers’                compensation premium of $46,000.  In addition, there was                $116,000 of costs to a related party (see Note 17) in connection                with the                acquisition. |
|--------|-----|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| Note                6 - | Line                of                Credit |
|-------------------------|----------------------------------------------|

| Note                7 - | Property                and                Equipment |
|-------------------------|------------------------------------------------------|

|                                      |   | 2007   |     |   | 2006   |   |
|-------------------------------------------|--------|--------|----------|--------|--------|--------|
|                                      |   |   |     |   |   |   |
| Furniture                and fixtures     |   | $      | 143,912  |   |   | $      | 138,796 |   |
| Office                equipment           |   |   | 13,230   |   |   |   | 13,230 |   |
| Computer                equipment         |   |   | 150,418  |   |   |   | 168,592 |   |
| Computer                software          |   |   | 99,142   |   |   |   | 27,221 |   |
| Machinery                and equipment    |   |   | 9,000    |   |   |   | - |   |
| Truck                                     |   |   | 8,000    |   |   |   | - |   |
|                                      |   |   | 423,702  |   |   |   | 347,839 |   |
| Accumulated                depreciation   |   |   | (237,423 | )      |   |   | (202,112 | ) |
| Net                property and equipment |   | $      | 186,279  |   |   | $      | 145,727 |   |

| Note                8 - | Goodwill                and Other                Intangible Assets |
|-------------------------|--------------------------------------------------------------------|

|                                    |   | 2007   |    |   | 2006   |   |
|-----------------------------------------|--------|--------|---------|--------|--------|--------|
|                                    |   |   |    |   |   |   |
| Covenant-not-to-compete                 |   | $      | 100,000 |   |   | $      | - |   |
| Accumulated                amortization |   |   | (5,556  | )      |   |   | - |   |
|                                    |   | $      | 94,444  |   |   | $      | - |   |

| For                the Years Ending                September 30, |   |
|------------------------------------------------------------------|--------|
| 2008                                                             |   | $ | 33,333 |   |
| 2009                                                             |   |   | 33,333 |   |
| 2010                                                             |   |   | 27,778 |   |

| Note                9 - | Loans                Payable |
|-------------------------|------------------------------|

|                                 |   | 2007   |    |   | 2006   |   |
|--------------------------------------|--------|--------|---------|--------|--------|--------|
| Promissory                note (i)   |   | $      | 53,450  |   |   | $      | 53,450 |   |
| Promissory                note (ii)  |   |   | 10,656  |   |   |   | 19,027 |   |
| Promissory                note (iii) |   |   | 51,890  |   |   |   | - |   |
| Promissory                note (iv)  |   |   | 50,000  |   |   |   | - |   |
|                                 |   | $      | 165,996 |   |   | $      | 72,477 |   |

| (i) | Note                is payable $1,500 per week, including interest at 5% per                year.  No payments have been made since September                2005. |
|-----|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

| (ii)  | In                May 2006, the Company issued 500,000 shares of its common stock to                the                note holder in payment of $7,500 of accrued interest due on the promissory                note.  The Company also agreed to pay the remaining portion of                the promissory note and accrued interest at the rate of $2,221 per                month                including interest at 12% per year. |
|-------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (iii) | In                December 2006, the Company financed the cost of certain equipment,                software and services with a note in the amount of $52,729.  The                note is payable in 6 monthly payments of $50 followed by 42 monthly                payments of $1,706 and includes interest at 9.64% per                year.                                                                                         |
| (iv)  | In                April 2007, the Company borrowed $50,000 under a note that is due                on                demand with interest at 12% per                year.                                                                                                                                                                                                                                                                           |

|   | The                maturities on loans payable are as follows: |
|--------|----------------------------------------------------------------|

| Year                Ending September                30, |   |
|---------------------------------------------------------|--------|
| 2008                                                    |   | $ | 130,983 |   |
| 2009                                                    |   |   | 18,577 |   |
| 2010                                                    |   |   | 16,436 |   |
|                                                    |   | $ | 165,996 |   |

| Note                10 - | Notes                Payable –                Acquisitions |
|--------------------------|------------------------------------------------------------------|

| Year                ending September                30 |   |   |    |
|--------------------------------------------------------|--------|--------|---------|
| 2008                                                   |   |   | 349,673 |   |
| 2009                                                   |   |   | 162,801 |   |
| 2010                                                   |   |   | 167,204 |   |
| 2011                                                   |   |   | 100,236 |   |
|                                                   |   | $      | 779,914 |   |

| Note                11 - | Accounts                Payable and                Accrued Expenses |
|--------------------------|---------------------------------------------------------------------|

|                                                            |   | 2007   |      |   | 2006   |   |
|-----------------------------------------------------------------|--------|--------|-----------|--------|--------|--------|
| Accounts                payable                                 |   | $      | 3,600,815 |   |   | $      | 3,078,061 |   |
| Accrued                compensation                             |   |   | 66,929    |   |   |   | 28,757 |   |
| Workers’                compensation claims reserve       |   |   | 258,712   |   |   |   | 313,712 |   |
| Accrued                interest                                 |   |   | 87,567    |   |   |   | 36,688 |   |
| Contingent                portion of acquisition purchase price |   |   | 45,000    |   |   |   | 45,000 |   |
| Accrued                other                                    |   |   | 290,500   |   |   |   | 234,178 |   |
|                                                            |   | $      | 4,349,523 |   |   | $      | 3,736,396 |   |

| Note                12 - | Payroll                Tax                Liabilities |
|--------------------------|-------------------------------------------------------|

----

| Note                13 - | Income                Taxes |
|--------------------------|-----------------------------|

|                                              |   | 2007   |       |   | 2006   |   |
|---------------------------------------------------|--------|--------|------------|--------|--------|--------|
| Current                assets and liabilities     |   |   |       |   |   |   |
| Allowance                for doubtful accounts    |   | $      | 80,000     |   |   | $      | 30,000 |   |
| Valuation                allowance                |   |   | (80,000    | )      |   |   | (30,000 | ) |
| Net                current deferred tax asset     |   | $      | 3⁄4     |   |   | $      | 3⁄4 |   |
|                                              |   |   |       |   |   |   |   |   |
| Non-current                assets and liabilities |   |   |       |   |   |   |   |   |
| Net                operating loss carry forward   |   | $      | 9,259,000  |   |   | $      | 9,212,000 |   |
| Intangibles                                       |   |   | (8,000     | )      |   |   | 3⁄4 |   |
| Valuation                allowance                |   |   | (9,251,000 | )      |   |   | (9,212,000 | ) |
| Net                non-current deferred tax asset |   | $      | 3⁄4     |   |   | $      | 3⁄4 |   |

|                                                   |   | 2007   |    |   | 2006   |   |     | 2005   |   |
|--------------------------------------------------------|--------|--------|---------|--------|--------|--------|----------|--------|--------|
| Income                taxes (benefit) is comprised of: |   |   |    |   |   |   |     |   |   |
| Current                                                |   | $      | 3⁄4  |   |   | $      | 3⁄4   |   |   | $ | 3⁄4 |   |
| Deferred                                               |   |   | (89,000 | )      |   |   | 954,000  |   |   |   | (1,014,000 | ) |
| Change                in valuation allowance           |   |   | 89,000  |   |   |   | (954,000 | )      |   |   | 1,014,000 |   |
|                                                   |   | $      | 3⁄4  |   |   | $      | 3⁄4   |   |   | $ | 3⁄4 |   |

| Expiration                DateYear                Ending September                30, |   |   |      |
|---------------------------------------------------------------------------------------|--------|--------|-----------|
|                                                                                  |   |   |      |
| 2012                                                                                  |   | $      | 122,000   |   |
| 2018                                                                                  |   |   | 1,491,000 |   |
| 2019                                                                                  |   |   | 392,000   |   |
| 2021                                                                                  |   |   | 4,860,000 |   |
| 2022                                                                                  |   |   | 4,407,000 |   |
| 2023                                                                                  |   |   | 6,029,000 |   |
| 2024                                                                                  |   |   | 2,432,000 |   |
| 2025                                                                                  |   |   | 3,147,000 |   |
| 2026                                                                                  |   |   | 149,000   |   |
| 2027                                                                                  |   |   | 118,000   |   |

----

|                                                         |   | 2006   |   |   | 2005   |   |   | 2004             |   |
|--------------------------------------------------------------|--------|--------|--------|--------|--------|--------|--------|------------------|--------|
|                                                         |   |   |   |   |   |   |   |             |   |
| Statutory                rate                                |   |   | 34.0   | %      |   |   | (34.0  | )              % |   |   | (34.0 | )              % |
| State                taxes net                               |   |   | 6.0    |   |   |   | (6.0   | )                |   |   | (6.0 | ) |
| Other                differences, net                        |   |   |   |   |   |   | 3⁄4 |             |   |   | 3⁄4 |   |
| Valuation                allowance                           |   |   | (40.0  | )      |   |   | 40.0   |             |   |   | 40.0 |   |
| Benefit                from net operating loss carryforwards |   |   | 3⁄4 |   |   |   | 3⁄4 |             |   |   | 3⁄4 |   |
|                                                         |   |   | 3⁄4 | %      |   |   | 3⁄4 | %                |   |   | — | % |

| Note                14 - | Preferred                Stock |
|--------------------------|--------------------------------|

----

----

| Note                15 - | Note                Payable – Related                Party |
|--------------------------|------------------------------------------------------------------|

|   | • | $1,800,000                was due and payable in cash upon the earlier of the Company’s receipt of                $1,800,000 of accounts receivable or March 15, 2006.  At                September 30, 2006, $210,000 of this has not been paid. |
|--------|---------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | • | $331,850                and accrued interest at a rate of 12% per annum is payable in 24                equal                installments of principal and interest during the period commencing                June                28, 2007 and ending on May 28, 2009. |
|--------|---------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | • | $225,000                and accrued interest thereon at the rate of 6% per annum becomes                due and                payable on December 28, 2007; provided, however, that the Company                has the                right to pay such amount in cash or shares of its common stock (valued                at                $0.0072 per share). |
|--------|---------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | • | $331,850                of the principal amount and unpaid interest accrued thereon is convertible                into the Company’s Common Stock at a conversion price of $.06 per share. |
|--------|---------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | • | $225,000                of the principal amount and unpaid accrued interest thereon is convertible                into the Company’s Common Stock at a conversion price of                $0.0072.  During the year ended September 30, 2006, $150,000 of                principal was converted into 20,833,331 shares of the Company’s Common                Stock. |
|--------|---------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| Note                16 - | Derivative                Instruments |
|--------------------------|---------------------------------------|

----

| Note                17 - | Related                Party                Transactions |
|--------------------------|----------------------------------------------------------|

----

| Note                18 - | Commitments                and                Contingencies |
|--------------------------|-------------------------------------------------------------|

| For                the Years Ending                September 30, |         |
|------------------------------------------------------------------|--------------|
| 2008                                                             |  60,000 |
| 2009                                                             |  60,000 |
| 2010                                                             |  59,000 |
| 2011                                                             |  10,000 |

| Note                19 - | Stock                Options and                Warrants |
|--------------------------|----------------------------------------------------------|

| 1999                Plan | — | 125,000                shares authorized, 24,000 issued, 24,000 vested                   |
|--------------------------|---------|------------------------------------------------------------------------------------------|
| 2000                Plan | — | 125,000                shares authorized, 25,000 issued, 25,000 vested                   |
| 2001                Plan | — | 250,000                shares authorized, 50,000 issued, 50,000 vested                   |
| 2002                Plan | — | 1,250,000                shares authorized, 100,000 issued, 100,000 vested               |
| 2006                Plan | — | 20,000,000                shares authorized, 2,000,000 issued, -0-                vested |

----

|                                             |   | Options |       |   | Weighted                AverageExercise                Price |   |
|--------------------------------------------------|--------|---------|------------|--------|--------------------------------------------------------------|--------|
|                                             |   |    |       |   |                                                         |   |
| Outstanding                at September 30, 2004 |   |    | 1,828,583  |   |                                                         | $      | 4.87 |   |
| Granted                                          |   |    | 1,050,000  |   |                                                         |   | .26 |   |
| Canceled                                         |   |    | (31,250    | )      |                                                         |   | 7.98 |   |
| Exercised                                        |   |    | 3⁄4     |   |                                                         |   | 3⁄4 |   |
|                                             |   |    |       |   |                                                         |   |   |   |
| Outstanding                at September 30, 2005 |   |    | 2,847,333  |   |                                                         | $      | 3.14 |   |
| Granted                                          |   |    | 3⁄4     |   |                                                         |   | 3⁄4 |   |
| Canceled                                         |   |    | (2,097,333 | )      |                                                         |   | 4.16 |   |
| Exercised                                        |   |    | 3⁄4     |   |                                                         |   | 3⁄4 |   |
|                                             |   |    |       |   |                                                         |   |   |   |
| Outstanding                at September 30, 2006 |   |    | 750,000    |   |                                                         | $      | .26 |   |
| Granted                                          |   |    | 3⁄4     |   |                                                         |   | 3⁄4 |   |
| Canceled                                         |   |    | 3⁄4     |   |                                                         |   | 3⁄4 |   |
| Exercised                                        |   |    | 3⁄4     |   |                                                         |   | 3⁄4 |   |
|                                             |   |    |       |   |                                                         |   |   |   |
| Outstanding                at September 30, 2007 |   |    | 750,000    |   |                                                         | $      | .26 |   |
| Exercisable                at September 30, 2007 |   |    | 750,000    |   |                                                         | $      | .26 |   |

|   | Following                is a summary of the status of stock options outstanding at September                30,                2007: |
|--------|---------------------------------------------------------------------------------------------------------------------------------------|

|          |   |   | Outstanding                Options |   |                                    |   |                                 | Exercisable                Options |   |
|---------------|--------|--------|------------------------------------|--------|-----------------------------------------|--------|--------------------------------------|------------------------------------|--------|
| ExercisePrice |   |   | Number                             |   | WeightedAverageRemainingContractualLife |   | WeightedWeightedAverageExercisePrice |                               |   | Number |   |   | WeightedAverageExercisePrice |   |
|          |   |   |                               |   |                                    |   |                                 |                               |   |   |   |   |   |   |
| $             | .26    |   |                               |   | 750,000                                 |   | 7.5                years             |                               | $      | .26 |   |   |   | 750,000 |   |   | $ | .26 |   |

| Number                of Warrants |       |   | Price                Per Share |   | Expiring                In |
|-----------------------------------|------------|--------|--------------------------------|--------|----------------------------|
|                              |       |   |                           |   |                       |
|                              | 14,213,653 |   |                           | $      | .50                        |   | 2008 |
|                              | 3,000,000  |   |                           |   | .05                        |   | 2009 |

|                                             |   | Warrants |       |   | Weighted                AverageExercise                Price |   |
|--------------------------------------------------|--------|----------|------------|--------|--------------------------------------------------------------|--------|
|                                             |   |     |       |   |                                                         |   |
| Outstanding                at September 30, 2004 |   |     | 15,732,820 |   |                                                         | $      | .87 |   |
| Granted                                          |   |     | 3⁄4     |   |                                                         |   | 3⁄4 |   |
| Canceled                                         |   |     | (23,750    | )      |                                                         |   | 18.11 |   |
| Exercised                                        |   |     | 3⁄4     |   |                                                         |   | 3⁄4 |   |
|                                             |   |     |       |   |                                                         |   |   |   |
| Outstanding                at September 30, 2005 |   |     | 15,709,070 |   |                                                         | $      | .84 |   |
| Granted                                          |   |     | 3,000,000  |   |                                                         |   | .05 |   |

----

| Canceled                                         |   |   | (37,500    | )      |   |   | 26.67  |   |
|--------------------------------------------------|--------|--------|------------|--------|--------|--------|--------|--------|
| Exercised                                        |   |   | 3⁄4     |   |   |   | 3⁄4 |   |
|                                             |   |   |       |   |   |   |   |   |
| Outstanding                at September 30, 2006 |   |   | 18,671,570 |   |   | $      | .66    |   |
| Granted                                          |   |   | 3⁄4     |   |   |   | 3⁄4 |   |
| Canceled                                         |   |   | (1,439,167 | )      |   |   | .98    |   |
| Exercised                                        |   |   | (18,750    | )      |   |   | .50    |   |
|                                             |   |   |       |   |   |   |   |   |
| Outstanding                at September 30, 2007 |   |   | 17,213,653 |   |   | $      | .42    |   |

| Note                20 - | Major                Customers |
|--------------------------|--------------------------------|

| Note                21 - | Retirement                Plans |
|--------------------------|---------------------------------|

| Note                22 - | Selected                Quarterly                Financial Data (unaudited) |
|--------------------------|-----------------------------------------------------------------------------|

|                                                                                                    |   | FirstQuarter |      |   | SecondQuarter |   |      | ThirdQuarter |   |   | FourthQuarter |   |
|---------------------------------------------------------------------------------------------------------|--------|--------------|-----------|--------|---------------|--------|-----------|--------------|--------|--------|---------------|--------|
|                                                                                                    |   |         |      |   |          |   |      |         |   |   |          |   |
| Year                ended September 30, 2007:                                                           |   |         |      |   |          |   |      |         |   |   |          |   |
| Revenues                from continuing operations                                                      |   | $            | 1,862,854 |   |          | $      | 1,810,705 |         |   | $      | 2,079,589     |   |   | $ | 2,456,416 |   |
| Gross                profit from continuing operations                                                  |   |         | 589,051   |   |          |   | 559,604   |         |   |   | 599,384       |   |   |   | 744,228 |   |
| Net                earnings (loss)  from discontinued operations                              |   |         | 175,859   |   |          |   | 100,635   |         |   |   | 183,653       |   |   |   | (67,208 | ) |
| Net                earnings (loss) from continuing operations                                           |   |         | (143,383  | )      |          |   | (186,617  | )            |   |   | (143,638      | )      |   |   | (203,144 | ) |
| Net                (loss) from continuing operations attributable to common                stockholders |   |         | (153,883  | )      |          |   | (197,117  | )            |   |   | (154,138      | )      |   |   | (213,644 | ) |
| Net                earnings (loss) attributable to common stockholders                                  |   |         | 21,976    |   |          |   | (96,482   | )            |   |   | 29,515        |   |   |   | (280,852 | ) |
|                                                                                                    |   |         |      |   |          |   |      |         |   |   |          |   |   |   |   |   |
| Basic                earnings (loss) per share attributable to common                stockholders       |   |         |      |   |          |   |      |         |   |   |          |   |   |   |   |   |
| Continuing                operations                                                                    |   |         | 3⁄4    |   |          |   | 3⁄4    |         |   |   | 3⁄4        |   |   |   | 3⁄4 |   |
| Discontinued                operations                                                                  |   |         | 3⁄4    |   |          |   | 3⁄4    |         |   |   | 3⁄4        |   |   |   | 3⁄4 |   |
| Total                                                                                                   |   |         | 3⁄4    |   |          |   | 3⁄4    |         |   |   | 3⁄4        |   |   |   | 3⁄4 |   |
|                                                                                                    |   |         |      |   |          |   |      |         |   |   |          |   |   |   |   |   |
| Diluted                earnings (loss) per share                attributable                            |   |         |      |   |          |   |      |         |   |   |          |   |   |   |   |   |
| to                common                stockholders                                                    |   |         |      |   |          |   |      |         |   |   |          |   |   |   |   |   |
| Continuing                operations                                                                    |   |         | 3⁄4    |   |          |   | 3⁄4    |         |   |   | 3⁄4        |   |   |   | 3⁄4 |   |
| Discontinued                operations                                                                  |   |         | 3⁄4    |   |          |   | 3⁄4    |         |   |   | 3⁄4        |   |   |   | 3⁄4 |   |
| Total                                                                                                   |   |         | 3⁄4    |   |          |   | 3⁄4    |         |   |   | 3⁄4        |   |   |   | 3⁄4 |   |

----

|                                                                                                        |   | FirstQuarter |       |   | Second Quarter |   |      | ThirdQuarter |   |   | FourthQuarter |   |
|-------------------------------------------------------------------------------------------------------------|--------|--------------|------------|--------|---------------------|--------|-----------|--------------|--------|--------|---------------|--------|
| Year                  ended September 30, 2006:                                                             |   |         |       |   |                |   |      |         |   |   |          |   |
| Revenues                  from continuing operations                                                        |   | $            | 1,233,858  |   |                | $      | 1,190,086 |         |   | $      | 1,282,074     |   |   | $ | 1,425,063 |   |
| Gross                  profit from continuing operations                                                    |   |         | 411,602    |   |                |   | 318,518   |         |   |   | 371,498       |   |   |   | 424,219 |   |
| Net                  earnings from discontinued operations                                                  |   |         | 3,049,398  |   |                |   | 20,284    |         |   |   | 215,425       |   |   |   | 211,896 |   |
| Net                  (loss) from continuing operations                                                      |   |         | (1,188,956 | )      |                |   | (488,838  | )            |   |   | (195,938      | )      |   |   | (181,610 | ) |
| Net                  (loss) from continuing operations attributable to common                  stockholders |   |         | (1,199,456 | )      |                |   | (499,338  | )            |   |   | (206,438      | )      |   |   | (192,110 | ) |
| Net                  earnings (loss) attributable to common stockholders                                    |   |         | 1,849,942  |   |                |   | (479,054  | )            |   |   | 8,987         |   |   |   | 19,786 |   |
|                                                                                                        |   |         |       |   |                |   |      |         |   |   |          |   |   |   |   |   |
| Basic                  earnings (loss) per share attributable to common                  stockholders       |   |         |       |   |                |   |      |         |   |   |          |   |   |   |   |   |
| Continuing                  operations                                                                      |   |         | (.06       | )      |                |   | (.01      | )            |   |   | —       |   |   |   | — |   |
| Discontinued                  operations                                                                    |   |         | .15        |   |                |   | —   |         |   |   | —       |   |   |   | — |   |
| Total                                                                                                       |   |         | (.09       | )      |                |   | (.01      | )            |   |   | —       |   |   |   | — |   |
|                                                                                                        |   |         |       |   |                |   |      |         |   |   |          |   |   |   |   |   |
| Diluted                  earnings (loss) per share attributable to common                  stockholders     |   |         |       |   |                |   |      |         |   |   |          |   |   |   |   |   |
| Continuing                  operations                                                                      |   |         | (.06       | )      |                |   | (.01      | )            |   |   | —       |   |   |   | — |   |
| Discontinued                  operations                                                                    |   |         | .14        |   |                |   | —   |         |   |   | —       |   |   |   | — |   |
| Total                                                                                                       |   |         | .08        |   |                |   | (.01      | )            |   |   | —       |   |   |   | — |   |

----

|                                                                                                                 |   | FirstQuarter |       |   | Second Quarter |   |      | ThirdQuarter |   |   | FourthQuarter |   |
|----------------------------------------------------------------------------------------------------------------------|--------|--------------|------------|--------|---------------------|--------|-----------|--------------|--------|--------|---------------|--------|
|                                                                                                                 |   |         |       |   |                |   |      |         |   |   |          |   |
| Year                  ended September 30, 2005:                                                                      |   |         |       |   |                |   |      |         |   |   |          |   |
| Revenues                  from continuing operations                                                                 |   | $            | 1,112,846  |   |                | $      | 1,121,881 |         |   | $      | 1,180,222     |   |   | $ | 1,105,694 |   |
| Gross                  profit from continuing operations                                                             |   |         | 326,962    |   |                |   | 312,005   |         |   |   | 340,665       |   |   |   | 338,295 |   |
| Net                  earnings (loss) from discontinued operations                                                    |   |         | 1,024,992  |   |                |   | 218,900   |         |   |   | 2,464,295     |   |   |   | (3,442,554 | ) |
| Net                  earnings (loss) from continuing operations                                                      |   |         | (1,295,896 | )      |                |   | 3,366,069 |         |   |   | (372,998      | )      |   |   | (2,331,369 | ) |
| Net                  earnings (loss) from                  continuing operations attributable to common stockholders |   |         | (1,306,396 | )      |                |   | 3,355,569 |         |   |   | (383,498      | )      |   |   | (2,341,869 | ) |
| Net                  earnings (loss) attributable to common stockholders                                             |   |         | (281,404   | )      |                |   | 3,574,469 |         |   |   | 2,080,797     |   |   |   | (5,784,423 | ) |
|                                                                                                                 |   |         |       |   |                |   |      |         |   |   |          |   |   |   |   |   |
| Basic                  earnings (loss) per share attributable to common                  stockholders:               |   |         |       |   |                |   |      |         |   |   |          |   |   |   |   |   |
| Continuing                  operations                                                                               |   |         | (.08       | )      |                |   | .20       |         |   |   | (.02          | )      |   |   | (.13 | ) |
| Discontinued                  operations                                                                             |   |         | .06        |   |                |   | .01       |         |   |   | .14           |   |   |   | (.20 | ) |
| Total                                                                                                                |   |         | (.02       | )      |                |   | .21       |         |   |   | .12           |   |   |   | (.33 | ) |
|                                                                                                                 |   |         |       |   |                |   |      |         |   |   |          |   |   |   |   |   |
| Diluted                  earnings (loss) per share                  attributable to common stockholders:             |   |         |       |   |                |   |      |         |   |   |          |   |   |   |   |   |
| Continuing                  operations                                                                               |   |         | (.08       | )      |                |   | .17       |         |   |   | (.02          | )      |   |   | (.13 | ) |
| Discontinued                  operations                                                                             |   |         | .06        |   |                |   | .01       |         |   |   | .12           |   |   |   | (.20 | ) |
| Total                                                                                                                |   |         | (.02       | )      |                |   | .18       |         |   |   | .10           |   |   |   | (.33 | ) |

----

| Allowance                for Doubtful Accounts |   | Balance                atbeginning                ofperiod |      |   | Charged                tobad                debtexpense |   |      | Other  |   |   | Deductions(Write-offs                ofbad                debts) |   |   | Balance                atend                ofperiod |       |
|------------------------------------------------|--------|------------------------------------------------------------|-----------|--------|---------------------------------------------------------|--------|-----------|--------|--------|--------|------------------------------------------------------------------|--------|--------|------------------------------------------------------|------------|
|                                           |   |                                                       |      |   |                                                    |   |      |   |   |   |                                                             |   |   |                                                 |       |
| September                30:                   |   |                                                       |      |   |                                                    |   |      |   |   |   |                                                             |   |   |                                                 |       |
| 2007                                           |   | $                                                          | 75,000    |   |                                                    | $      | 125,000   |   |   | $      | 3⁄4                                                           |   |   | $                                                    | 3⁄4     |   |   | $ | 200,000 |   |
| 2006                                           |   |                                                       | 3,039,000 |   |                                                    |   | 75,000    |   |   |   | 8,000                                                            |   |   |                                                 | (3,047,000 | ) |   |   | 75,000 |   |
| 2005                                           |   |                                                       | 2,038,000 |   |                                                    |   | 1,000,000 |   |   |   | 3,000                                                            |   |   |                                                 | (2,000     | ) |   |   | 3,039,000 |   |

| Valuation                Allowance for Deferred Taxes |   | Balance                atbeginning                ofperiod |       |   | Charged                tocosts                andexpenses                (1) |   |      | Other  |   |   | Deductions |   |   | Balance                atend                ofperiod |   |
|-------------------------------------------------------|--------|------------------------------------------------------------|------------|--------|------------------------------------------------------------------------------|--------|-----------|--------|--------|--------|------------|--------|--------|------------------------------------------------------|--------|
|                                                  |   |                                                       |       |   |                                                                         |   |      |   |   |   |       |   |   |                                                 |   |
| September                30:                          |   |                                                       |       |   |                                                                         |   |      |   |   |   |       |   |   |                                                 |   |
| 2007                                                  |   | $                                                          | 9,242,000  |   |                                                                         | $      | 89,000    |   |   | $      | 3⁄4     |   |   | $                                                    | 3⁄4 |   |   | $ | 9,331,000 |   |
| 2006                                                  |   |                                                       | 10,196,000 |   |                                                                         |   | (954,000  | )      |   |   |       |   |   |                                                 |   |   |   |   | 9,242,000 |   |
| 2005                                                  |   |                                                       | 9,182,000  |   |                                                                         |   | 1,014,000 |   |   |   | 3⁄4     |   |   |                                                 | 3⁄4 |   |   |   | 10,196,000 |   |

| (1) | Reflects                the increase (decrease) in the valuation allowance associated with                net                operating losses of the Company. |
|-----|---------------------------------------------------------------------------------------------------------------------------------------------------------------|

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