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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
 WASHINGTON, D.C. 20549
 FORM 10-QSB
  þ
    
    QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
 For the quarterly period ended  September 30, 2006
 o
    
    TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT
 For the transition period from -
 Commission file number  333-113925
 Kahiki Foods, Inc.
 
   
   
   
  (614) 322-3180
 
  
  þ o
 
 o o
 o þ
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##### 



INDEX
    
    PAGEPART I. FINANCIAL INFORMATIONItem 1. Financial Statements
    
    
    4     Balance Sheets as of September 30, 2006 (Unaudited) and March 31, 2006     Statements of Income (Unaudited) for the Three Months Ended September 30, 2006 and 2005     Statements of Income (Unaudited) for the Six Months Ended September 30, 2006 and 2005     Statements of Cash Flows (Unaudited) for the Six Months Ended September 30, 2006 and 2005     Notes to Unaudited Financial StatementsItem 2. Managements Discussion and Analysis or Plan of Operation
    
    
    25Item 3. Controls and Procedures
    
    
    33PART II. OTHER INFORMATIONItem 1. Legal Proceedings
    
    
    33Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    33Item 3. Defaults upon Senior Securities
    
    
    34Item 4. Submission of Matters to a Vote of Security Holders
    
    
    34Item 5. Other Information
    
    
    35Item 6. Exhibits and Reports on Form 8-K
    
    
    35Signatures
    
    
    35Index to Exhibits
    
    
    36Exhibits
    
    
    39EX-31.1EX-31.2EX-32
  3




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##### Table of Contents



September 30, 2006(unaudited)
    
    
    March 31, 2006ASSETSCurrent AssetsCash
    
    $
    
    
    
    $
    833,655Accounts receivable, net
    
    
    2,136,640
    
    
    
    2,231,727Inventories
    
    
    1,805,673
    
    
    
    1,543,534Refundable income taxes
    
    
    503,676
    
    
    
    493,365Other current assets
    
    
    161,838
    
    
    
    284,315Total Current Assets
    
    
    4,607,827
    
    
    
    5,386,596Property And Equipment, Net
    
    
    12,097,357
    
    
    
    12,211,280Other AssetsDeferred loan costs
    
    
    132,502
    
    
    
    137,366Restricted deposits
    
    
    437,241
    
    
    
    426,394Other deposits
    
    
    20,517
    
    
    
    22,761Total Other Assets
    
    
    590,260
    
    
    
    586,521Total Assets
    
    $
    17,295,444
    
    
    $
    18,184,397LIABILITIES AND STOCKHOLDERS EQUITYCurrent LiabilitiesCurrent portion of long-term debt
    
    $
    7,846,399
    
    
    $
    9,029,071Accounts payable
    
    
    2,532,326
    
    
    
    2,115,587Accrued expenses
    
    
    399,695
    
    
    
    455,984Income taxes payable
    
    
    
    
    
    
    20,240Total Current Liabilities
    
    
    10,778,420
    
    
    
    11,620,882Deferred income taxes
    
    
    66,000
    
    
    
    66,000Long-term debt
    
    
    399,154
    
    
    
    383,991Total Liabilities
    
    
    11,243,574
    
    
    
    12,070,873Stockholders EquityPreferred stock, no par value, 1,000,000
shares authorized; 943,491 and 930,741
shares issued and outstanding,
respectively
    
    
    2,122,854
    
    
    
    2,094,167Common stock, no par value, 9,000,000
shares authorized; 3,831,698 and
3,811,698 shares issued and
outstanding, respectively
    
    
    2,834,489
    
    
    
    2,813,460Retained earnings
    
    
    1,094,527
    
    
    
    1,205,897Total Stockholders Equity
    
    
    6,051,870
    
    
    
    6,113,524Total Liabilities And
Stockholders Equity
    
    $
    17,295,444
    
    
    $
    18,184,397
  4




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Three Months Ended September 30,20052006
    
    
    (restated)Net sales
    
    $
    5,874,977
    
    
    $
    5,115,646Cost of sales
    
    
    4,745,443
    
    
    
    4,187,752Gross profit
    
    
    1,129,534
    
    
    
    927,894Selling, general and administrative
expenses
    
    
    1,024,895
    
    
    
    1,195,852Income (loss) from operations
    
    
    104,639
    
    
    
    (267,958
    )Other income (expense):Interest expense
    
    
    (144,837
    )
    
    
    (183,445
    )Interest and other income
    
    
    12,470
    
    
    
    7,690Life insurance proceeds
    
    
    
    
    
    
    750,000Total other income (expense)
    
    
    (132,367
    )
    
    
    574,245Income (loss) before income taxes
    
    
    (27,728
    )
    
    
    306,287Income tax expense (benefit)
    
    
    (10,916
    )
    
    
    (85,000
    )Net income (loss)
    
    
    (16,812
    )
    
    
    391,287Less income allocable as preferred
stock dividends
    
    
    26,654
    
    
    
    Income (loss) available
to common stockholders
    
    $
    (43,466
    )
    
    $
    391,287Weighted average shares outstanding:Basic
    
    
    3,828,220
    
    
    
    3,670,848Diluted
    
    
    5,084,117
    
    
    
    3,998,731Net income (loss) per common share:Basic
    
    $
    (0.01
    )
    
    $
    0.11Diluted
    
    $
    
    
    
    $
    0.10
  5




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Six Months Ended September 30,20052006
    
    
    (restated)Net sales
    
    $
    11,819,853
    
    
    $
    10,123,928Cost of sales
    
    
    9,426,303
    
    
    
    8,386,681Gross profit
    
    
    2,393,550
    
    
    
    1,737,247Selling, general and administrative
expenses
    
    
    2,280,471
    
    
    
    2,154,127Income (loss) from operations
    
    
    113,079
    
    
    
    (416,880
    )Other income (expense):Interest expense
    
    
    (274,629
    )
    
    
    (255,305
    )Interest and other income
    
    
    17,951
    
    
    
    8,078Life insurance proceeds
    
    
    
    
    
    
    750,000Total other income (expense)
    
    
    (256,678
    )
    
    
    502,773Income (loss) before income taxes
    
    
    (143,599
    )
    
    
    85,893Income tax expense (benefit)
    
    
    (60,916
    )
    
    
    (85,000
    )Net income (loss)
    
    
    (82,683
    )
    
    
    170,893Less income allocable as preferred
stock dividends
    
    
    52,832
    
    
    
    Income (loss) available
to common stockholders
    
    $
    (135,515
    )
    
    $
    170,893Weighted average shares outstanding:Basic
    
    
    3,820,004
    
    
    
    3,666,028Diluted
    
    
    5,075,901
    
    
    
    3,993,911Net income (loss) per common share:Basic
    
    $
    (0.04
    )
    
    $
    0.05Diluted
    
    $
    (0.02
    )
    
    $
    0.04
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Six Months Ended September 30,20052006
    
    
    (restated)Cash Flows From Operating Activities:Net income (loss)
    
    $
    (82,683
    )
    
    $
    170,893Adjustments to reconcile net income (loss)
to net cash provided by (used in)
operating activities:Depreciation and amortization
    
    
    478,548
    
    
    
    409,795Deferred taxes
    
    
    
    
    
    
    (85,000
    )Life insurance proceeds and deposits
    
    
    184,205
    
    
    
    (750,000
    )Net value of property and equipment written off
    
    
    
    
    
    
    1,263Compensation expense from stock options
    
    
    9,829
    
    
    
    Changes in operating assets and liabilities:Accounts receivable
    
    
    95,087
    
    
    
    (411,319
    )Inventories
    
    
    (262,139
    )
    
    
    (40,424
    )Refundable income taxes
    
    
    (10,311
    )
    
    
    44,787Other assets
    
    
    (70,331
    )
    
    
    (44,903
    )Accounts payable
    
    
    416,739
    
    
    
    195,318Accrued expenses
    
    
    (56,289
    )
    
    
    39,296Income taxes payable
    
    
    (20,240
    )
    
    
    (5,350
    )Net cash provided by (used in) operating activities
    
    
    682,415
    
    
    
    (475,644
    )Cash Flows From Investing Activities:Purchase of
equipment and improvements
    
    
    (359,761
    )
    
    
    (2,208,438
    )Net cash used in investing activities
    
    
    (359,761
    )
    
    
    (2,208,438
    )Cash Flows From Financing Activities:Line of credit  net
    
    
    (793,783
    )
    
    
    1,342,395Proceeds from long-term debt
    
    
    170,818
    
    
    
    2,282,810Payments on long-term debt
    
    
    (544,544
    )
    
    
    (478,333
    )Capitalized cost of financing
    
    
    
    
    
    
    7,750Proceeds from the exercise of stock options
    
    
    11,200
    
    
    
    8,430Net cash provided by (used in) financing activities
    
    
    (1,156,309
    )
    
    
    3,163,052Net increase (decrease) in cash
    
    
    (833,655
    )
    
    
    478,970Cash  beginning of period
    
    
    833,655
    
    
    
    Cash  end of period
    
    $
    
    
    
    $
    478,970
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Six Months Ended September 30,20052006
    
    
    (restated)Supplemental Disclosures Of Cash Flow Information:Cash paid for:Interest
    
    $
    275,005
    
    
    $
    230,690Income taxes
    
    
    (30,365
    )
    
    
    (1,057
    )Non-cash transactions:Declaration of stock dividend on Preferred
Stock (12,750 shares)
    
    
    28,687
    
    
    
    
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September 30,
    
    
    March 31,2006
    
    
    2006Raw food products
    
    $
    434,852
    
    
    $
    509,947Frozen work in process
    
    
    217,231
    
    
    
    188,343Frozen and packaged finished goods
    
    
    891,113
    
    
    
    520,641Packaging and supplies
    
    
    287,477
    
    
    
    349,603Inventory reserve
    
    
    (25,000
    )
    
    
    (25,000
    )Total inventories
    
    $
    1,805,673
    
    
    $
    1,543,534
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September 30,
    
    
    March 31,2006
    
    
    2006Land
    
    $
    114,485
    
    
    $
    114,485Building and improvements
    
    
    10,280,415
    
    
    
    10,198,773Machinery and equipment
    
    
    3,570,393
    
    
    
    3,311,177Furniture and fixtures
    
    
    180,590
    
    
    
    161,68914,145,883
    
    
    
    13,786,124Less accumulated depreciation
    
    
    (2,048,526
    )
    
    
    (1,574,844
    )Total property and equipment
    
    $
    12,097,357
    
    
    $
    12,211,280
   September 30,
    
    
    March 31,2006
    
    
    2006Deposit held by State of Ohio
    
    $
    
    
    
    $
    184,425Current deferred taxes
    
    
    56,000
    
    
    
    56,000Prepaid insurance
    
    
    47,542
    
    
    
    10,487Interest rate swap
    
    
    11,000
    
    
    
    18,000Other
    
    
    47,296
    
    
    
    15,403Total
    
    $
    161,838
    
    
    $
    284,315
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September 30,
    
    
    March 31,2006
    
    
    2006Capital leases and loans for
the purchase of equipment:Capital leases of equipment
    
    $
    438,401
    
    
    $
    383,418Capital leases of equipment,
in default
    
    
    127,997
    
    
    
    186,792Loans payable, in default
    
    
    122,995
    
    
    
    229,088Capital leases and loans for
the purchase of land and buildings:Capital lease of land
    
    
    51,386
    
    
    
    60,372ODOD loan, in default
    
    
    3,775,000
    
    
    
    3,850,000Unsecured borrowings:Loan payable
    
    
    69,082
    
    
    
    94,831Note payable to Mrs. Alice Tsao, a
related party, in default
    
    
    60,000
    
    
    
    120,000KeyBank financing:Term loan, in default
    
    
    1,829,475
    
    
    
    1,988,561Revolver loan, in default
    
    
    1,706,217
    
    
    
    2,500,000Short-term loan, in default
    
    
    65,000
    
    
    
    Total debt
    
    
    8,245,553
    
    
    
    9,413,062Less current portion
    
    
    (7,846,399
    )
    
    
    (9,029,071
    )Long-term debt
    
    $
    399,154
    
    
    $
    383,991
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September 30,
    
    
    March 31,2006
    
    
    2006Payroll and related accruals
    
    $
    292,205
    
    
    $
    312,692Interest
    
    
    58,624
    
    
    
    61,206Property taxes
    
    
    48,866
    
    
    
    81,907Other
    
    
    
    
    
    
    179Total
    
    $
    399,695
    
    
    $
    455,984
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Three months ended
    
    
    Six months endedSept. 30, 2005
    
    
    Sept. 30, 2005Net income (loss) available to common
stockholders, as reported
    
    $
    391,287
    
    
    $
    170,893Total stock-based compensation
expense determined under fair
value based methods for all
awards, net of tax benefit
    
    
    13,758
    
    
    
    27,516Net income (loss) available to common
stockholders, as adjusted
    
    $
    377,529
    
    
    $
    143,377Basic earnings per share:As reported
    
    $
    0.11
    
    
    $
    0.05As adjusted
    
    
    0.10
    
    
    
    0.04Diluted earnings per share:As reported
    
    $
    0.10
    
    
    $
    0.04As adjusted
    
    
    0.09
    
    
    
    0.04
  Weighted AverageOptions
    
    Exercise PriceBalance outstanding at March 31, 2005
    
    
    404,800
    
    
    $
    0.83Issued
    
    
    
    
    
    
    Exercised
    
    
    (63,350
    )
    
    $
    0.36Cancelled or expired
    
    
    (39,250
    )
    
    $
    2.31Balance outstanding at March 31, 2006
    
    
    302,200
    
    
    $
    0.74Issued
    
    
    
    
    
    
    Exercised
    
    
    (20,000
    )
    
    $
    0.56Cancelled or expired
    
    
    (10,000
    )
    
    $
    0.56Balance outstanding at Sept. 30, 2006
    
    
    272,200
    
    
    $
    0.76Exercisable March 31, 2005
    
    
    271,133
    
    
    $
    0.62Exercisable March 31, 2006
    
    
    255,450
    
    
    $
    0.70Exercisable September 30, 2006
    
    
    261,533
    
    
    $
    0.69
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Weighted AverageOptions
    
    Exercise PriceBalance outstanding at March 31, 2005
    
    
    386,666
    
    
    $
    0.58Issued
    
    
    
    
    
    
    Exercised
    
    
    (126,000
    )
    
    $
    0.41Cancelled or expired
    
    
    
    
    
    
    Balance outstanding at March 31, 2006
and at September 30, 2006
    
    
    260,666
    
    
    $
    0.67Exercisable March 31, 2005
    
    
    386,666
    
    
    $
    0.58Exercisable March 31, 2006
    
    
    260,666
    
    
    $
    0.67Exercisable September 30, 2006
    
    
    260,666
    
    
    $
    0.67
     To Barron Partners LP
    
    294,117 warrants at $2.25 per shareTo Barron Partners LP
    
    294,117 warrants at $3.00 per shareTo three consultants
    
    30,000 warrants at $2.25 per share
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Three-month period ended September 30,2006
    
    
    2005Basic earnings per share:Numerator  income (loss) available to
common shareholders
    
    $
    (43,466
    )
    
    $
    391,287Denominator:Weighted average outstanding Common Shares
    
    
    3,828,220
    
    
    
    3,670,848Basic earnings (loss) per share
    
    $
    (0.01
    )
    
    $
    0.11Diluted earnings per share:Numerator  net income (loss)
    
    $
    (16,812
    )
    
    $
    391,287Denominator:Weighted average outstanding Common Shares
    
    
    3,828,220
    
    
    
    3,670,848Effect of dilutive options
    
    
    312,406
    
    
    
    327,883Dilutive Preferred Shares
    
    
    943,491
    
    
    
    Total shares in denominator
    
    
    5,084,117
    
    
    
    3,998,731Diluted earnings (loss) per share
    
    $
    
    
    
    $
    0.10
 Six-month period ended September 30,2006
    
    
    2005Basic earnings per share:Numerator  income (loss) available to common shareholders
    
    $
    (135,515
    )
    
    $
    170,893Denominator:Weighted average outstanding
Common Shares
    
    
    3,820,004
    
    
    
    3,666,028Basic earnings (loss) per share
    
    $
    (0.04
    )
    
    $
    0.05Diluted earnings per share:Numerator  net income (loss)
    
    $
    (82,683
    )
    
    $
    170,893Denominator:Weighted average outstanding Common Shares
    
    
    3,820,004
    
    
    
    3,666,028Effect of dilutive options
    
    
    312,406
    
    
    
    327,883Dilutive Preferred Shares
    
    
    943,491
    
    
    
    Total shares in denominator
    
    
    5,075,901
    
    
    
    3,993,911Diluted earnings (loss) per share
    
    $
    (0.02
    )
    
    $
    0.04
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Revised
    
    
    OriginalKey
    
    
    Amount
    
    
    AmountIncome statement (unaudited) for three
months ended Sept. 30, 2005:Net sales
    
    
    1
    
    
    $
    5,115,646
    
    
    $
    5,217,817Cost of sales
    
    
    1
    
    
    
    4,187,752
    
    
    
    4,289,923GROSS PROFIT
    
    
    1
    
    
    
    927,894
    
    
    
    927,894Income statement (unaudited) for six
months ended Sept. 30, 2005:Net sales
    
    
    1
    
    
    
    10,123,928
    
    
    
    10,315,823Cost of sales
    
    
    1
    
    
    
    8,386,681
    
    
    
    8,578,576GROSS PROFIT
    
    
    1
    
    
    
    1,737,247
    
    
    
    1,737,247Statement of cash flows (unaudited) for
the six months ended Sept. 30, 2005:CASH FLOWS FROM OPERATING ACTIVITIES:Accounts payable
    
    
    2
    
    
    
    195,318
    
    
    
    205,886Net cash provided by (used in)
operating activities
    
    
    2
    
    
    
    (475,644
    )
    
    
    (465,076
    )
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Revised
    
    
    OriginalKey
    
    
    Amount
    
    
    AmountCASH FLOWS FROM INVESTING ACTIVITIES:Purchase of equipment and improvements
    
    
    3
    
    
    
    (2,208,438
    )
    
    
    Purchase of equipment
    
    
    3
    
    
    
    
    
    
    
    (1,156,937
    )Purchase of new facility improvements
    
    
    3
    
    
    
    
    
    
    
    (1,051,701
    )Proceeds from the disposal of property and equipment
    
    
    3
    
    
    
    
    
    
    
    200CASH FLOWS FROM FINANCING ACTIVITIES:Payments on long-term debt
    
    
    4
    
    
    
    (478,333
    )
    
    
    (408,333
    )Payments of bond obligation
    
    
    4
    
    
    
    
    
    
    
    (70,000
    )Net increase (decrease) in cash
    
    
    2
    
    
    
    478,970
    
    
    
    489,538Cash  beginning of period
    
    
    2
    
    
    
    
    
    
    
    (10,568
    )Cash  end of period
    
    
    2
    
    
    
    478,970
    
    
    
    478,970
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Three months ended
    
    Six months endedSep. 30, 06
    
    Sep. 30, 05
    
    Sep. 30, 06
    
    Sep. 30, 05Percentages of net sales:Net sales
    
    100.0%
    
    100.0%
    
    100.0%
    
    100.0%Cost of sales
    
    (80.8)
    
    (81.9)
    
    (79.7)
    
    (82.8)Gross profit
    
    19.2
    
    18.1
    
    20.3
    
    17.2Selling, general, and administrative expense
    
    (17.4)
    
    (23.3)
    
    (19.3)
    
    (21.3)Income (loss) from operations
    
    1.8
    
    (5.2)
    
    1.0
    
    (4.1)Interest (expense)
    
    (2.5)
    
    (3.6)
    
    (2.3)
    
    (2.5)Other income, net
    
    0.2
    
    14.7
    
    0.1
    
    7.5Income tax credit (expense)
    
    0.2
    
    1.7
    
    0.5
    
    0.8Net income (loss)
    
    (0.3)%
    
    7.6%
    
    (0.7)%
    
    1.7%
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##### Table of Contents



Directors elected
    
    Votes for
    
    Votes withheldAlice W. Tsao
    
    
    4,469,614
    
    
    
    20,000Charles Dix
    
    
    4,469,614
    
    
    
    20,000John Dix
    
    
    4,489,614
    
    
    
    0Allen Proctor
    
    
    4,489,614
    
    
    
    0R. L. Richards
    
    
    4,488,614
    
    
    
    1,000Bradford M. Sprague
    
    
    4,489,614
    
    
    
    0
  
   
      
    
    The declaration of a dividend on preferred shares in the form of 12,750 additional preferred
shares and the issuance of those additional shares, and
    
    The actions by the shareholders at the Annual Meeting held on August 23 2006.
 
   
 /s/ Alan L. HooverAlan L. Hoover, President and Chief Executive OfficerDate: November 9, 2006/s/ Frederick A. NiebauerFrederick A. Niebauer, Chief Financial Officer and TreasurerDate: November 9, 2006 35




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##### Table of Contents



EXHIBIT
    
    DESCRIPTION OF EXHIBIT
    
    LOCATION3.1
    
    Amended and Restated Articles
of Incorporation of Registrant
    
    Incorporated herein by reference
to Exhibit 3.1 of Registration
Statement on Form SB-2
(Registration No. 333-126268)3.2
    
    Code of Regulations of the
Registrant
    
    Incorporated herein by reference
to Exhibit 3.2 of Registration
Statement on Form SB-2
(Registration No. 333-113925)4.1
    
    Specimen Common Share
Certificate
    
    Incorporated herein by reference
to Exhibit 4.1 of Registration
Statement on Form SB-2
(Registration No. 333-113925)4.2
    
    $2.25 Common Share Purchase
Warrant
    
    Incorporated herein by reference
to Exhibit 4.2 of Registration
Statement on Form SB-2
(Registration No. 333-113925)4.3
    
    $3.00 Common Share Purchase
Warrant
    
    Incorporated herein by reference
to Exhibit 4.3 of Registration
Statement on Form SB-2
(Registration No. 333-113925)4.4*
    
    2001 Non-Qualified and
Incentive Stock Option Plan
of Registrant
    
    Incorporated herein by reference
to Exhibit 4.5 of Registration
Statement on Form SB-2
(Registration No. 333-113925)4.7
    
    Specimen Series A Preferred
Share Certificate
    
    Incorporated herein by reference
to Exhibit 4.7 of Report on Form
10-KSB for the fiscal year ended
March 31, 2006 filed on
July 14, 200610.1
    
    Loan Agreement between
Registrant and The Director
of Development of Ohio dated
as of December 1, 2002
    
    Incorporated herein by reference
to Exhibit 10.2 of Registration
Statement on Form SB-2
(Registration No. 333-113925)10.2
    
    Convertible Note Purchase
Agreement between Registrant
and Townsends, Inc. dated
December 21, 2004
    
    Incorporated herein by reference
to Exhibit 10.1 of Report on
Form 8-K filed on December 28,
200410.3
    
    Convertible Promissory Note of
Registrant to Townsends, Inc.
dated December 21, 2004
    
    Incorporated herein by reference
to Exhibit 10.2 of Report on
Form 8-K filed on December 28,
2004
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##### Table of Contents



EXHIBIT
    
    DESCRIPTION OF EXHIBIT
    
    LOCATION10.4
    
    Convertible Promissory Note of
Registrant to Townsends, Inc.
dated June 3, 2005
    
    Incorporated herein by reference
to Exhibit 10.2 of Report on
Form 8-K filed on June 9, 200510.5
    
    Registration Rights Agreement
between Registrant and
Townsends, Inc. dated
December 21, 2004
    
    Incorporated herein by reference
to Exhibit 10.3 of Report on Form
8-K filed on December 28, 200410.6
    
    Supply Agreement between
Registrant and Townsends, Inc.
dated December 21, 2004
    
    Incorporated herein by reference
to Exhibit 10.4 of Report on Form
8-K filed on December 28, 200410.7
    
    Co-Pack and Storage Agreement
between Registrant and
Townsends, Inc. dated
December 21, 2004
    
    Incorporated herein by reference
to Exhibit 10.5 of Report on Form
8-K filed on December 28, 200410.8
    
    Term Promissory Note of
Registrant to KeyBank
National Association dated
December 17, 2004
    
    Incorporated herein by reference
to Exhibit 10.6 of Report on Form
8-K filed on December 28, 200410.9
    
    Subordinated Promissory Note
to Alice Tsao dated
August 19, 2003
    
    Incorporated herein by reference
to Exhibit 10.9 of Report on Form
10-KSB/A for the fiscal year
ended March 31, 2005 filed on
March 30, 200610.10*
    
    Employment Agreement with
Alan L. Hoover
    
    Incorporated herein by reference
to Exhibit 10.10 of Report on
Form 10-KSB for the fiscal year
ended March 31, 2006 filed on
July 14, 200610.11
    
    Registration Rights Agreement
between Registrant and
Barron Partners LP, dated
February 27, 2004
    
    Incorporated herein by reference
to Exhibit 10.11 of Report on
Form 10-KSB for the fiscal year
ended March 31, 2006 filed on
July 14, 200610.12
    
    Promissory Note of
Registrant to KeyBank
National Association dated
June 1, 2004 (revolver)
    
    Incorporated herein by reference
to Exhibit 10.12 of Report on
Form 10-KSB for the fiscal year
ended March 31, 2006 filed on
July 14, 200610.13
    
    Business Loan Agreement
(Asset Based) between
Registrant and KeyBank
National Association dated
June 1, 2004 (revolver)
    
    Incorporated herein by reference
to Exhibit 10.13 of Report on
Form 10-KSB for the fiscal year
ended March 31, 2006 filed on
July 14, 2006
 37




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##### Table of Contents



EXHIBIT
    
    DESCRIPTION OF EXHIBIT
    
    LOCATION10.14
    
    Addendum to Business Loan
Agreement (Asset Based)
between Registrant and KeyBank
National Association dated
June 1, 2004 (revolver)
    
    Incorporated herein by reference
to Exhibit 10.12 of Report on
Form 10-KSB for the fiscal year
ended March 31, 2006 filed on
July 14, 200614.1
    
    Code of Ethics
    
    Incorporated herein by reference
to Exhibit 14.1 of Report on Form
10-KSB for the fiscal year ended
March 31, 2005 filed on June 21,
2005.16.1
    
    Letter on change in accountant
    
    Incorporated herein by reference
to Exhibit 16.1 of Report on Form
8-K filed on December 28, 200431.1
    
    Certification of the Chief
    
    Included hereinExecutive Officer Pursuant toSection 302 of the Sarbanes-Oxley Act of 200231.2
    
    Certification of the Chief
    
    Included hereinFinancial Officer Pursuant toSection 302 of the Sarbanes-Oxley Act of 200232
    
    Certification of the Chief
    
    Included hereinExecutive Officer and ChiefFinancial Officer pursuant toRule 15d-14(b) and Section 1350of Chapter 63 of Title 18 of theUnited States Code, as adoptedpursuant to Section 906 of theSarbanes-Oxley Act of 2002
  38