----

----

|                                                                                           |   |          |      |
|------------------------------------------------------------------------------------------------|--------|---------------|-----------|
| SYNERGX      SYSTEMS INC. AND SUBSIDIARIES                                                     |   |          |      |
|                                                                                           |   |          |      |
| CONDENSED      CONSOLIDATED BALANCE SHEET                                                      |   |          |      |
|                                                                                           |   |          |      |
| (Unaudited)                                                                                    |   |          |      |
|                                                                                           |   |          |      |
|                                                                                           |   |          |      |
|                                                                                           |   | June      30, |      |
|                                                                                           |   | 2008          |      |
| ASSETS                                                                                         |   |          |      |   |
|                                                                                           |   |          |      |   |
| CURRENT      ASSETS                                                                            |   |          |      |   |
|   Cash                                                                               |   | $             | 187,670   |   |
|   Accounts      receivable, principally trade, less allowance                        |   |          |      |   |
|      for      doubtful accounts of $347,685                           |   |          | 5,122,468 |   |
|   Inventories,      net                                                              |   |          | 2,041,655 |   |
|   Deferred      taxes, less valuation allowance of  $810,500               |   |          | 230,100   |   |
|   Prepaid      expenses and other current assets                                     |   |          | 493,187   |   |
|                                                                                           |   |          |      |   |
| TOTAL      CURRENT ASSETS                                                                      |   |          | 8,075,080 |   |
|                                                                                           |   |          |      |   |
|                                                                                           |   |          |      |   |
|                                                                                           |   |          |      |   |
| PROPERTY      AND EQUIPMENT -at cost, less                                                     |   |          |      |   |
|    accumulated      depreciation and amortization of $2,013,692                 |   |          | 824,806   |   |
|                                                                                           |   |          |      |   |
| OTHER      ASSETS                                                                              |   |          | 131,264   |   |
|                                                                                           |   |          |      |   |
|                                                                                           |   |          |      |   |
|                                                                                           |   |          |      |   |
|                                                                                           |   |          |      |   |
| TOTAL      ASSETS                                                                              |   | $             | 9,031,150 |   |
|                                                                                           |   |          |      |
|                                                                                           |   |          |      |   |
| See      accompanying Notes to the  Condensed Consolidated Financial      Statements |   |          |      |   |
|                                                                                           |   |          |      |   |

----

|                                                                                  |   |          |       |
|---------------------------------------------------------------------------------------|--------|---------------|------------|
| SYNERGX      SYSTEMS INC. AND SUBSIDIARIES                                            |   |          |       |
|                                                                                  |   |          |       |
| CONDENSED      CONSOLIDATED BALANCE SHEET                                             |   |          |       |
|                                                                                  |   |          |       |
| (Unaudited)                                                                           |   |          |       |
|                                                                                  |   |          |       |
|                                                                                  |   |          |       |
|                                                                                  |   | June      30, |       |
|                                                                                  |   | 2008          |       |
|                                                                                  |   |          |       |   |
| LIABILITIES      AND STOCKHOLDERS' EQUITY                                             |   |          |       |   |
|                                                                                  |   |          |       |   |
| CURRENT      LIABILITIES                                                              |   |          |       |   |
|                                                                                  |   |          |       |   |
|    Note      payable to bank                                           |   | $             | 1,197,886  |   |
|    Notes      payable - current portion                                |   |          | 26,005     |   |
|    Accounts      payable and accrued expenses                          |   |          | 2,047,600  |   |
|    Deferred      revenue                                               |   |          | 1,297,362  |   |
|                                                                                  |   |          |       |   |
| TOTAL      CURRENT LIABILITIES                                                        |   |          | 4,568,853  |   |
|                                                                                  |   |          |       |   |
|                                                                                  |   |          |       |   |
|                                                                                  |   |          |       |   |
|                                                                                  |   |          |       |   |
|    Notes      payable - less current portion                           |   |          | 65,031     |   |
|                                                                                  |   |          |       |   |
| TOTAL      LIABILITIES                                                                |   |          | 4,633,884  |   |
|                                                                                  |   |          |       |   |
|                                                                                  |   |          |       |   |
|                                                                                  |   |          |       |   |
| STOCKHOLDERS'      EQUITY                                                             |   |          |       |   |
|                                                                                  |   |          |       |   |
|   Preferred      stock, 2,000,000 shares authorized-                        |   |          |       |   |
|      none      issued and outstanding                        |   |          | --         |   |
|   Common      stock, 10,000,000 shares authorized, $.001                    |   |          |       |   |
|      par      value; issued and outstanding 5,210,950 shares |   |          | 5,211      |   |
|   Additional      Paid in Captal                                            |   |          | 6,853,412  |   |
|   Accumulated      deficit                                                  |   |          | (2,461,357 | )  |
|                                                                                  |   |          |       |   |
| TOTAL      STOCKHOLDERS' EQUITY                                                       |   |          | 4,397,266  |   |
|                                                                                  |   |          |       |   |
|                                                                                  |   |          |       |   |
| TOTAL      LIABILITIES AND STOCKHOLDERS' EQUITY                                       |   | $             | 9,031,150  |   |
|                                                                                  |   |          |       |
|                                                                                  |   |          |       |   |
| See      accompanying Notes to the Condensed Consolidated Financial      Statements   |   |          |       |   |
|                                                                                  |   |          |       |   |

----

| SYNERGX      SYSTEMS INC. AND SUBSIDIARIES                                                                                                                                                                                          |   |                                     |      |    |
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|------------------------------------------|-----------|---------|
|                                                                                                                                                                                                                                |   |                                     |      |    |   |   |
| CONDENSED      CONSOLIDATED STATEMENTS OF OPERATIONS                                                                                                                                                                                |   |                                     |      |    |
|                                                                                                                                                                                                                                |   |                                     |      |    |   |   |
|                                     (Unaudited) |   |                                     |      |    |   |   |
|                                                                                                                                                                                                                                |   |                                     |      |    |   |   |
|                                                                                                                                                                                                                                |   |                                     |      |    |   |   |
|                                                                                                                                                                                                                                |   | For      the Three Months Ended June 30, |      |
|                                                                                                                                                                                                                                |   | 2008                                     |      |    | 2007 |   |
|                                                                                                                                                                                                                                |   |                                     |      |    |   |   |   |   |
|                                                                                                                                                                                                                                |   |                                     |      |    |   |   |   |   |
| Product      sales                                                                                                                                                                                                                  |   | $                                        | 2,822,196 |    |   | $ | 2,867,969 |   |
| Subcontract      sales                                                                                                                                                                                                              |   |                                     | 397,601   |    |   |   | 60,900 |   |
| Service      revenue                                                                                                                                                                                                                |   |                                     | 1,319,367 |    |   |   | 1,245,506 |   |
|                                                                                                                                                                                                                                |   |                                     |      |    |   |   |   |   |
| Total      revenues                                                                                                                                                                                                                 |   |                                     | 4,539,164 |    |   |   | 4,174,375 |   |
|                                                                                                                                                                                                                                |   |                                     |      |    |   |   |   |   |
|                                                                                                                                                                                                                                |   |                                     |      |    |   |   |   |   |
|                                                                                                                                                                                                                                |   |                                     |      |    |   |   |   |   |
| Cost      of product sales                                                                                                                                                                                                          |   |                                     | 2,400,695 |    |   |   | 2,365,456 |   |
| Cost      of subcontract sales                                                                                                                                                                                                      |   |                                     | 339,770   |    |   |   | 51,122 |   |
| Cost      of service revenue                                                                                                                                                                                                        |   |                                     | 693,089   |    |   |   | 550,202 |   |
| Selling,      general and administrative                                                                                                                                                                                            |   |                                     | 1,732,963 |    |   |   | 1,258,257 |   |
| Depreciation      and amortization                                                                                                                                                                                                  |   |                                     | 62,933    |    |   |   | 40,773 |   |
|                                                                                                                                                                                                                                |   |                                     |      |    |   |   |   |   |
| Total      operating expenses                                                                                                                                                                                                       |   |                                     | 5,229,450 |    |   |   | 4,265,810 |   |
|                                                                                                                                                                                                                                |   |                                     |      |    |   |   |   |   |
|                                                                                                                                                                                                                                |   |                                     |      |    |   |   |   |   |
| (Loss)      from operations                                                                                                                                                                                                         |   |                                     | (690,286  | )  |   |   | (91,435 | ) |
|                                                                                                                                                                                                                                |   |                                     |      |    |   |   |   |   |
| Other      income (expenses)                                                                                                                                                                                                        |   |                                     |      |    |   |   |   |   |
|   Interest      expense                                                                                                                                                                                                   |   |                                     | (12,409   | )  |   |   | (36,145 | )  |
|                                                                                                                                                                                                                                |   |                                     |      |    |   |   |   |   |
|                                                                                                                                                                                                                                |   |                                     | (12,409   | )  |   |   | (36,145 | )  |
|                                                                                                                                                                                                                                |   |                                     |      |    |   |   |   |   |
|                                                                                                                                                                                                                                |   |                                     |      |    |   |   |   |   |
| (Loss)      before provision  for income taxes                                                                                                                                                                            |   |                                     | (702,695  | )  |   |   | (127,580 | )  |
|                                                                                                                                                                                                                                |   |                                     |      |    |   |   |   |   |
| Provision      (benefit)  for income taxes:                                                                                                                                                                               |   |                                     |      |    |   |   |   |   |
|    Current                                                                                                                                                                                                           |   |                                     | 1,000     |    |   |   |   |   |
|    Deferred                                                                                                                                                                                                          |   |                                     | 50,000    |    |   |   | (51,000 | )  |
|                                                                                                                                                                                                                                |   |                                     |      |    |   |   |   |   |
|                                                                                                                                                                                                                                |   |                                     | 51,000    |    |   |   | (51,000 | )  |
|                                                                                                                                                                                                                                |   |                                     |      |    |   |   |   |   |
| Net      (loss)                                                                                                                                                                                                                     |   | $                                        | (753,695  | )  |   | $ | (76,580 | )  |
|                                                                                                                                                                                                                                |   |                                     |      |    |   |   |
|                                                                                                                                                                                                                                |   |                                     |      |    |   |   |   |   |
|                                                                                                                                                                                                                                |   |                                     |      |    |   |   |   |   |
| (Loss)      Per Common Share                                                                                                                                                                                                        |   |                                     |      |    |   |   |   |   |
|    Basic      and diluted (loss) Per Share                                                                                                                                                                           |   | $                                        | (0.14     | )  |   | $ | (0.01 | )  |
|                                                                                                                                                                                                                                |   |                                     |      |    |   |   |   |   |
| Weighted      average number of common share                                                                                                                                                                                        |   |                                     |      |    |   |   |   |   |
|   equivalents      outstanding basic and dilutive                                                                                                                                                                         |   |                                     | 5,210,950 |    |   |   | 5,210,950 |   |
|                                                                                                                                                                                                                                |   |                                     |      |    |   |   |   |   |
| See      accompanying Notes to the Condensed Consolidated Financial      Statements                                                                                                                                                 |   |                                     |      |    |   |
|                                                                                                                                                                                                                                |   |                                     |      |    |   |   |   |   |

----

|                                                                                                                                                                                                                                                                      |   |                                    |       |    |   |   |
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|-----------------------------------------|------------|---------|--------|--------|
|                                            SYNERGX SYSTEMS INC. AND SUBSIDIARIES |   |                                    |       |    |   |   |
|                                                                                                                                                                                                                                                                      |   |                                    |       |    |   |   |
| CONDENSED      CONSOLIDATED STATEMENTS OF OPERATIONS                                                                                                                                                                                                                      |   |                                    |       |    |
|                                                                                                                                                                                                                                                                      |   |                                    |       |    |   |   |
|                                      (unaudited)                                                               |   |                                    |       |    |   |   |
|                                                                                                                                                                                                                                                                      |   |                                    |       |    |   |   |
|                                                                                                                                                                                                                                                                      |   |                                    |       |    |   |   |
|                                                                                                                                                                                                                                                                      |   |                                    |       |    |   |   |
|                                                                                                                                                                                                                                                                      |   | For      the Nine Months ended June 30, |       |
|                                                                                                                                                                                                                                                                      |   | 2008                                    |       |    | 2007   |   |
|                                                                                                                                                                                                                                                                      |   |                                    |       |    |   |   |   |   |
| Product      sales                                                                                                                                                                                                                                                        |   | $                                       | 10,056,760 |    |   | $      | 7,908,860 |   |
| Subcontract      sales                                                                                                                                                                                                                                                    |   |                                    | 900,368    |    |   |   | 227,600 |   |
| Service      revenue                                                                                                                                                                                                                                                      |   |                                    | 3,952,239  |    |   |   | 3,756,785 |   |
|                                                                                                                                                                                                                                                                      |   |                                    |       |    |   |   |   |   |
| Total      revenues                                                                                                                                                                                                                                                       |   |                                    | 14,909,367 |    |   |   | 11,893,245 |   |
|                                                                                                                                                                                                                                                                      |   |                                    |       |    |   |   |   |   |
|                                                                                                                                                                                                                                                                      |   |                                    |       |    |   |   |   |   |
| Cost      of product sales                                                                                                                                                                                                                                                |   |                                    | 8,417,744  |    |   |   | 5,903,154 |   |
| Cost      of subcontract sales                                                                                                                                                                                                                                            |   |                                    | 769,594    |    |   |   | 185,509 |   |
| Cost      of service revenue                                                                                                                                                                                                                                              |   |                                    | 1,941,241  |    |   |   | 1,968,291 |   |
| Selling,      general and administrative                                                                                                                                                                                                                                  |   |                                    | 4,622,957  |    |   |   | 4,057,259 |   |
| Depreciation      and amortization                                                                                                                                                                                                                                        |   |                                    | 171,555    |    |   |   | 122,319 |   |
|                                                                                                                                                                                                                                                                      |   |                                    |       |    |   |   |   |   |
| Total      operating expenses                                                                                                                                                                                                                                             |   |                                    | 15,923,091 |    |   |   | 12,236,532 |   |
|                                                                                                                                                                                                                                                                      |   |                                    |       |    |   |   |   |   |
| (Loss)      from operations                                                                                                                                                                                                                                               |   |                                    | (1,013,724 | )  |   |   | (343,287 | )  |
|                                                                                                                                                                                                                                                                      |   |                                    |       |    |   |   |   |   |
| Other      income (expenses):                                                                                                                                                                                                                                             |   |                                    |       |    |   |   |   |   |
|   Interest      expense                                                                                                                                                                                                                                         |   |                                    | (95,223    | )  |   |   | (100,748 | )  |
|   Gain  on  equity      investment                                                                                                                                                                                                          |   |                                    | 0          |    |   |   | 82,673 |   |
|                                                                                                                                                                                                                                                                      |   |                                    |       |    |   |   |   |   |
|                                                                                                                                                                                                                                                                      |   |                                    | (95,223    | )  |   |   | (18,075 | )  |
|                                                                                                                                                                                                                                                                      |   |                                    |       |    |   |   |   |   |
|                                                                                                                                                                                                                                                                      |   |                                    |       |    |   |   |   |   |
| (Loss)      before provision for income taxes                                                                                                                                                                                                                             |   |                                    | (1,108,947 | )  |   |   | (361,362 | )  |
|                                                                                                                                                                                                                                                                      |   |                                    |       |    |   |   |   |   |
| (Benefit)      provision for income taxes:                                                                                                                                                                                                                                |   |                                    |       |    |   |   |   |   |
|    Current                                                                                                                                                                                                                                                 |   |                                    | 4,000      |    |   |   | 2,000 |   |
|    Deferred                                                                                                                                                                                                                                                |   |                                    | 100,000    |    |   |   | (63,000 | )  |
|                                                                                                                                                                                                                                                                      |   |                                    |       |    |   |   |   |   |
|                                                                                                                                                                                                                                                                      |   |                                    | 104,000    |    |   |   | (61,000 | )  |
|                                                                                                                                                                                                                                                                      |   |                                    |       |    |   |   |   |   |
| Net      (loss)                                                                                                                                                                                                                                                           |   | $                                       | (1,212,947 | )  |   | $      | (300,362 | )  |
|                                                                                                                                                                                                                                                                      |   |                                    |       |    |   |   |
|                                                                                                                                                                                                                                                                      |   |                                    |       |    |   |   |   |   |
| (Loss)      Per Common Share:                                                                                                                                                                                                                                             |   |                                    |       |    |   |   |   |   |
|    Basic  and      diluted (loss) Per Share                                                                                                                                                                                                      |   | $                                       | (0.23      | )  |   | $      | (0.06 | )  |
|                                                                                                                                                                                                                                                                      |   |                                    |       |    |   |   |   |   |
| Weighted      average number of common share                                                                                                                                                                                                                              |   |                                    |       |    |   |   |   |   |
|   equivalents      outstanding basic and dilutive                                                                                                                                                                                                               |   |                                    | 5,210,950  |    |   |   | 5,210,950 |   |
|                                                                                                                                                                                                                                                                      |   |                                    |       |    |   |   |   |   |
|                                                                                                                                                                                                                                                                      |   |                                    |       |    |   |   |   |   |
| See      accompanying Notes to the Condensed Consolidated Financial      Statements                                                                                                                                                                                  |   |                                    |       |    |   |
|                                                                                                                                                                                                                                                                      |   |                                    |       |    |   |   |   |   |

----

|                                                                                                                |   |                                    |       |    |   |   |
|---------------------------------------------------------------------------------------------------------------------|--------|-----------------------------------------|------------|---------|--------|--------|
| SYNERGX      SYSTEMS INC. AND SUBSIDIARIES                                                                          |   |                                    |       |    |   |   |
|                                                                                                                |   |                                    |       |    |   |   |
| CONDENSED      CONSOLIDATED STATEMENTS OF CASH FLOWS                                                                |   |                                    |       |    |   |   |
|                                                                                                                |   |                                    |       |    |   |   |
|  (Unaudited)                                                                                                   |   |                                    |       |    |   |   |
|                                                                                                                |   | For      the Nine Months Ended June 30, |       |
|                                                                                                                |   | 2008                                    |       |    | 2007   |   |
| OPERATING      ACTIVITIES                                                                                           |   |                                    |       |    |   |   |   |   |
| Net      (loss)                                                                                                     |   | $                                       | (1,212,947 | )  |   | $      | (300,362 | )  |
|  Adjustments      to reconcile net  (loss)  to net cash provided      by                   |   |                                    |       |    |   |   |   |   |
|      (used      in ) operating activities:                                                 |   |                                    |       |    |   |   |   |   |
|          Depreciation      and amortization *                          |   |                                    | 192,931    |    |   |   | 143,694 |   |
|          Deferred      taxes (benefit)                                 |   |                                    | 100,000    |    |   |   | (63,000 | )  |
|          Share-based      compensation                                 |   |                                    | 21,471     |    |   |   | 23,571 |   |
|         Gain      on sale of equity investment                              |   |                                    |       |    |   |   | (82,673 | )  |
|   Changes      in operating assets and liabilities:                                                       |   |                                    |       |    |   |   |   |   |
|     Accounts      receivable, net                                                               |   |                                    | 1,343,843  |    |   |   | 1,500,172 |   |
|     Inventories,      net                                                                       |   |                                    | (263       | )  |   |   | (1,765,721 | )  |
|     Prepaid      expenses and other current assets                                              |   |                                    | 451,567    |    |   |   | (592,996 | )  |
|     Other      assets                                                                           |   |                                    | (39,641    | )  |   |   | (547 | )  |
|     Accounts      payable and accrued expenses                                                  |   |                                    | (417,947   | )  |   |   | 568,125 |   |
|     Deferred      revenue                                                                       |   |                                    | 467,358    |    |   |   | 1,316 |   |
|                                                                                                                |   |                                    |       |    |   |   |   |   |
| NET      CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES                                                            |   |                                    | 906,372    |    |   |   | (568,421 | )  |
|                                                                                                                |   |                                    |       |    |   |   |   |   |
| INVESTING      ACTIVITIES                                                                                           |   |                                    |       |    |   |   |   |   |
|   Proceeds      from sale of equity investment                                                            |   |                                    |       |    |   |   | 9,218 |   |
|   Proceeds      from note receivable                                                                      |   |                                    | 69,429     |    |   |   | 7,346 |   |
|   Purchases      of property and equipment                                                                |   |                                    | (151,156   | )  |   |   | (193,884 | ) |
|                                                                                                                |   |                                    |       |    |   |   |   |   |
| NET      CASH  (USED IN) INVESTING ACTIVITIES                                                             |   |                                    | (81,727    | )  |   |   | (177,320 | )  |
|                                                                                                                |   |                                    |       |    |   |   |   |   |
| FINANCING      ACTIVITIES                                                                                           |   |                                    |       |    |   |   |   |   |
|   Principal      payments on notes payable                                                                |   |                                    | (17,386    | )  |   |   | (20,301 | )  |
|   (Payments)      and proceeds from note payable bank - net                                               |   |                                    | (872,680   | )  |   |   | 799,912 |   |
|                                                                                                                |   |                                    |       |    |   |   |   |   |
| NET      CASH (USED IN) PROVIDED BY FINANCING ACTIVITIES                                                            |   |                                    | (890,066   | )  |   |   | 779,611 |   |
|                                                                                                                |   |                                    |       |    |   |   |   |   |
|                                                                                                                |   |                                    |       |    |   |   |   |   |
| NET      (DECREASE)  INCREASE  IN CASH                                                          |   |                                    | (65,421    | )  |   |   | 33,870 |   |
|                                                                                                                |   |                                    |       |    |   |   |   |   |
| Cash      at beginning of the period                                                                                |   |                                    | 253,091    |    |   |   | 272,908 |   |
|                                                                                                                |   |                                    |       |    |   |   |   |   |
| Cash      at end of the period                                                                                      |   | $                                       | 187,670    |    |   | $      | 306,778 |   |
|                                                                                                                |   |                                    |       |    |   |   |
| SUPPLEMENTAL      CASH FLOW INFORMATION:                                                                            |   |                                    |       |    |   |   |   |   |
|                                                                                                                |   |                                    |       |    |   |   |   |   |
| Cash      paid during the period for:                                                                               |   |                                    |       |    |   |   |   |   |
|      Income      taxes                                                                     |   | $                                       | 15,449     |    |   | $      | 12,911 |   |
|      Interest                                                                              |   | $                                       | 91,319     |    |   | $      | 103,674 |   |
|                                                                                                                |   |                                    |       |    |   |   |   |   |
| *      Depreciation of $21,375 is included in cost of product and service      sales for the nine months ended |   |
|     June      30, 2008 and 2007.                                                                |   |                                    |       |    |   |   |   |   |
|                                                                                                                |   |                                    |       |    |   |   |   |   |
| During      the nine months ended June 30, 2008, the Company purchased equipment of      $21,798 through financing. |   |
|                                                                                                                |   |                                    |       |    |   |   |   |   |
| See      accompanying Notes to the Condensed Consolidated Financial      Statements                                 |   |                                    |       |    |   |
|                                                                                                                |   |                                    |       |    |   |   |   |   |

----

----

----

|                              |   |    2007 |    |   | Weighted      Average      Exercise Price |   | Weighted      Average      Remaining      ContractualTerm |   | Weighted      Average      Intrinsic Value |   |      | Weighted      AverageGrant      DateFair Value |   |
|-----------------------------------|--------|------------------------|---------|--------|------------------------------------------------|--------|-----------------------------------------------------------|--------|-------------------------------------------------|--------|-----------|------------------------------------------------|--------|
| Outstanding      October 1, 2007  |   |                   | 116,000 |   |                                           | $      | 2.43                                                      |   |                                            |   |      |                                           |   |  $ | 1.21 |   |
| Granted                           |   |                   | --      |   |                                           |   |                                                      |   |                                            |   |      |                                           |   |   |   |   |
| Expired                           |   |                   | (34,000 | )      |                                           |   | 2.50                                                      |   |                                            |   |      |                                           |   |   |   |   |
| Outstanding      June 30, 2008    |   |                   | 82,000  |   |                                           |   | 2.40                                                      |   | 1.85 Yrs                                        |   |  -0- |                                           |   |  $ | 1.21 |   |
| Exercisable      at June 30, 2008 |   |                   | 45,200  |   |                                           |   | 2.46                                                      |   | 1.70 Yrs                                        |   |  -0- |                                           |   |  $ | 1.21 |   |

|                              |   |   |   |   | Weighted AverageGrant      Date Fair Value |   |
|-----------------------------------|--------|--------|--------|--------|------------------------------------------------------|--------|
| Nonvested      at October 1, 2007 |   |   | 53,200 |   |                                                 | $      | 1.25 |   |
| Vested                            |   |   | 16,400 |   |                                                 |   | 1.21 |   |
| Nonvested      at June 30, 2008   |   |   | 36,800 |   |                                                 | $      | 1.21 |   |

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| Deferred Tax      Assets                            |   |   |      |
|-----------------------------------------------------|--------|--------|-----------|
| Allowance      for doubtful accounts                |   | $      | 139,000   |   |
| Inventory      reserve                              |   |   | 189,200   |   |
| Net      operating loss carryforward (through 2026) |   |   | 776,200   |   |
| Other                                               |   |   | (63,800   | ) |
| Total      Deferred Tax Asset                       |   | $      | 1,040,600 |   |
| Valuation      Allowance                            |   |   | (810,500  | ) |
| Net      Deferred Tax Asset                         |   | $      | 230,100   |   |

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|                              |   |   Three Months      Ended |      |   | Nine Months      Ended         |   |
|-----------------------------------|--------|-------------------------------------|-----------|--------|--------------------------------|--------|
|                              |   | June    30,                         |      |   | June      30,                  |   |
|                              |   | 2008                                |      |   | 2007                           |   |   | 2008 |   |   | 2007 |   |
|                              |   |                                |      |   | (In      thousands of dollars) |   |   |   |   |
|                              |   |                                |      |   |                           |   |   |   |   |
| Product      Revenue              |   | $                                   | 2,822     |   |                           | $      | 2,868 |   |   | $ | 10,057 |   |   | $ | 7,909 |   |
| Subcontract      Revenue          |   |                                | 398       |   |                           |   | 61 |   |   |   | 900 |   |   |   | 227 |   |
| Service      Revenue              |   |                                | 1,319     |   |                           |   | 1,245 |   |   |   | 3,952 |   |   |   | 3,757 |   |
| Total      Revenue                |   | $                                   | 4,539     |   |                           | $      | 4,174 |   |   | $ | 14,909 |   |   | $ | 11,893 |   |
|                              |   |                                |      |   |                           |   |   |   |   |   |   |   |   |   |   |   |
| Gross      Profit Product         |   |                                | 421       |   |                           |   | 503 |   |   |   | 1,639 |   |   |   | 2,006 |   |
| Gross      Profit Subcontract     |   |                                | 58        |   |                           |   | 10 |   |   |   | 131 |   |   |   | 42 |   |
| Gross      Profit Service         |   |                                |  626 |   |                           |   |  695 |   |   |   | 2,011 |   |   |   | 1,789 |   |
| Total      Gross Profit           |   | $                                   | 1,105     |   |                           | $      | 1,208 |   |   | $ | 3,781 |   |   | $ | 3,837 |   |
|                              |   |                                |      |   |                           |   |   |   |   |   |   |   |   |   |   |   |
|  Gross      Margin Product % |   |                                | 15        | %      |                           |   | 18 | % |   |   | 16 | % |   |   | 25 | % |
| Gross      Margin Subcontract %   |   |                                |  15  | %      |                           |   |   16 | % |   |   |  15 | % |   |   | 19 | % |
| Gross      Margin Service %       |   |                                | 48        | %      |                           |   | 56 | % |   |   | 51 | % |   |   | 48 | % |

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