**UNITED
      STATES**


**SECURITIES
      AND EXCHANGE COMMISSION**


WASHINGTON,
      D.C. 20549





**FORM
      10-K**





**x** **ANNUAL REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES
      EXCHANGE**


**ACT
      OF 1934**




**FOR
      THE FISCAL YEAR ENDED MARCH 31, 2008**




**o** **TRANSITION REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES
      EXCHANGE**


**ACT
      OF 1934**




**FOR
      THE TRANSITION PERIOD FROM ______________
      TO________________**




*COMMISSION
      FILE NO. 0-15840*




**KINGSTON
      SYSTEMS INC.**




(NAME
      OF
      SMALL BUSINESS ISSUER IN ITS CHARTER)





DELAWARE
            
            14-1688816(STATE
                OR OTHER JURISDICTION
              OF
                INCORPORATION OR ORGANIZATION)
            
            (IRS
                EMPLOYER
              IDENTIFICATION
                NUMBER)





**8
      MERRILL INDUSTRIAL DRIVE UNIT 12**


**HAMPTON,
      NEW HAMPSHIRE 03842**


(ADDRESS
      OF PRINCIPAL EXECUTIVE OFFICES)





(603)
      758-1333


(ISSUER'S
      TELEPHONE NUMBER)





Securities
      registered under Section 12(b) of the Securities Exchange Act


of
      1934,
      as amended ("Exchange Act"): NONE.





Title
      of
      each class name of each exchange on which registered Securities


registered
      under Section 12(g) of the Exchange Act:




**COMMON
      STOCK, PAR VALUE $0.01 PER SHARE.**




Indicate
      by check mark if the registrant is a well-known seasoned issuer, as defined
      in
      Rule 405 of the Securities Act. o Yes x No




Indicate
      by check mark if the registrant is not required to file reports pursuant to
      Section 13 or Section 15(d) of the Act. o Yes x No




Indicate
      by check mark whether the registrant (1) has filed all reports required to
      be
      filed under Section 13 or 15(d) of the Securities Exchange Act of 1934, during
      the preceding 12 months (or for such shorter period that the registrant was
      required to file such reports), and (2) has been subject to such filing
      requirements for the past 90 days. x Yes o No




Indicate
      by check mark if disclosure of delinquent filers pursuant to Item 405 of
      Regulation S-K is not contained in this herein, and no disclosure will be
      contained, to the best of registrant's knowledge, in definitive proxy or
      information statements incorporated by reference in Part III of this Form 10-K
      or any amendment to this Form 10-K. x Yes o No




Indicate
      by check mark whether the registrant is a large accelerated filer, an
      accelerated filer, a non-accelerated filer, or a smaller reporting company. o Large
      accelerated filer o Accelerated filer o Non-accelerated filer x Smaller
      reporting company





Indicate
      by check mark whether the registrant is a shell company (as defined in Rule
      12b-2 of the Exchange Act). o Yes x No




The
      aggregate market value of the voting stock held by non-affiliates of the
      registrant, computed by reference to the price at which the stock was sold,
      or
      the prices of such stock as of September 29, 2007 was $2,165,825.
      Shares of common stock held by each executive officer and director, and by
      certain persons who own 5% or more of the outstanding common stock, have been
      excluded in that such persons may be deemed to be affiliates. This determination
      of affiliate status is not necessarily a conclusive determination for other
      purposes.




Number
      of
      shares outstanding of Issuer's common stock, $0.01 par value, outstanding on
      June 30, 2008: 5,576,234




Documents
      Incorporated by Reference: Certificate of Incorporation, By-laws and Code of
      Ethics, Agreement with Coastline Financial Services Group .










**TABLE
      OF CONTENTS**





**Page******
            
            **Number(s)****PART
                I**Item
                1.
            Description
                of Business
            2-8Item
                2.
            Description
                of Property
            8Item
                3.
            Legal
                Proceedings
            8Item
                4.
            Submission
                of Matters to a Vote of Security Holders
            9**PART
                II**Item
                5.
            Market
                for Common Equity, Related Shareholder Matters and Issuer Purchases
                of
                Equity Securities
            9Item
                6.
            Selected
                Financial Data
            9-10Item
                7.
            Management's
                Discussion and Analysis of Financial Condition and Results of
                Operations
            10-15Item
                7A.
            Quantitative
                and Qualitative Disclosures About Market Risk
            15Item
                8.
            Financial
                Statements and Supplementary Data
            15Item
                9.
            Changes
                in and Disagreements with Accountants on Accounting and Financial
                Disclosure
            16Item
                9A.
            Controls
                and Procedures
            16Item
                9A(T).
            Controls
                and Procedures
            17Item
                9B.
            Other
                Information
            17**PART
                III**Item
                10.
            Directors,
                Executive Officers and Corporate Governance
            17-18Item
                11.
            Executive
                Compensation
            18Item
                12.
            Security
                Ownership of Certain Beneficial Owners and Management
                and Related Shareholder Matters
            18-19Item
                13.
            Certain
                Relationships and Related Transactions and Director
                Independence
            19-20Item
                14.
            Principal
                Accounting Fees and Services
            20Item
                15.
            Exhibits,
                Financial Statement Schedules
            20-21Signatures
            21







**Form
      10-K Page 2**




**PART
      I**




**ITEM
      1. DESCRIPTION OF BUSINESS**




**Overview**




In
      August
      of 2005, Kingston Systems Inc. ("Kingston" or the "Company") purchased all
      of
      the issued and outstanding common stock of Parallel Robotics Systems Corporation
      ("Robotics"). Since that time, the sole business of Kingston has been the
      operation of Robotics (see Note 2 to the consolidated financial statements
      appearing elsewhere herein).




**Description
      of the Parallel Robotics business and products**





Robotics
      is a New Hampshire corporation headquartered in Hampton, New Hampshire. Robotics
      was formed in February 2002 when Robotics obtained a licensing agreement from
      Hexel Corporation to utilize their intellectual property to build parallel
      robots. Robotics is engaged in the development, manufacture and marketing,
      directly or through collaborations with one or more third parties, of
      proprietary materials handling and machine technology, and hardware and software
      based upon such technology, which is generally referred to as hexapod
      technology.





Robotics
      is engaged in the development of technology, consisting of software and robotic
      hardware, which is based upon mathematical models. These models enable the
      creation of machinery and integrated computer software, known as a hexapod,
      that
      can, unlike any other apparatus presently available in the marketplace or,
      to
      Robotics’ knowledge, under development, handle, manipulate and machine materials
      of all sizes (from microchips to airplane parts) at high speed and with great
      precision, potentially resulting in significant efficiencies and cost savings
      to
      a wide array of manufacturers. This level of speed and precision is made
      possible by the models' ability to solve the problems of moving and positioning
      objects quickly, precisely and in the presence of considerable stresses and
      forces often associated with the manufacturing environment, along the six axes
      of three-dimensional space (i.e. X, Y, Z, Yaw, Pitch and Roll-also collectively
      known as the “six degrees of freedom”), and the technology's expected ability to
      translate those solutions into physical reality. In contrast, other technology
      available in the marketplace offers only a multi-step sequential process to
      achieve the six degrees of freedom which, management believes, is considerably
      less efficient and effective than Robotics’ technology, which operates in
      parallel, and not in sequential steps.





Hexapod
      robots are made up of six legs (or actuators) that cause the movements of a
      motion platform to occur with respect to an immobile base. For the motion
      platform to move, these legs are mounted into twelve joints (ball joints in
      the
      Company’s current machines) that allow the six legs to change the distance
      between the two platforms. The six legs are generally arranged into three
      triangular pairs, with the top end of the three triangles, where the two legs
      are mounted next to each other, attached at the movable surface, i.e. the
      working part of the robot. If the two legs next to each other are not attached
      at a single joint, but to two separate joints, then there are 12 joints in
      the
      robot, with six joints (i.e. three pairs) at the top and six joints at the
      bottom (the Company uses ball joints for all of its current robots). The Company
      refers to this as a “12 node” hexapod. If, on the other hand, the two legs next
      to each other are attached to a single joint, then there would only be 9 nodes
      in this machine, with three at the top and six at the bottom. These joints
      (both
      single and paired) are also called “gimbals.” The Company licenses patented
      technology that includes a device that allows the two top legs in each pair
      on a
      nine-node robot to share a single joint, called a “triangular gimbal” or a
“bi-ball” joint. The movement of the robot’s top surface can be accomplished in
      one of two ways in the Company’s machines: the length of the legs can change
      (i.e. this type of leg is called an “actuator” and is used in the “P” series);
      or the bottom joints of each leg can be mounted on a carriage that rotates
      around a circular base, thereby changing the distance between the bottom joints
      (used in the “R” series).





Robotics’
      two different platforms (or models) use a programmable robotic device and the
      same proprietary software. The P Series, which is a conventional parallel
      mechanism where each of the six servo driven actuators, or legs, changes in
      length to create motion, comes in three sizes: small; large; and extra
      large, referred to as the P 1000, P 2000 and P 3000, respectively. The largest
      unit was created for use in the water jet cutting industry. The R Series, which
      has rigid fixed length legs and derives its movement from the precise
      servo-driven actuation of the lower trucks around a fixed rotary track, comes
      in
      two sizes: medium; and large, which are referred to as the R 1000 and R
      2000, respectively.





**Form
      10-K Page 3**





The
      P
      Series device provides precise positioning combined with an ability to provide
      superior stiffness compared to conventional robots which typically have only one
      arm. The main uses, for customers doing either testing or simulation, are to
      provide motion using the Company’s base for either repetitive motion under heavy
      loads or 6 degrees of freedom testing (i.e. X, Y, Z, Yaw, Pitch and Roll
      movements are all being tested), where force measurement is required and an
      experiment cannot allow for a platform that will deflect. Examples of these
      uses
      would include, but not be limited to: force feedback and repetitive motion
      on
      footwear; positioning of medical devices for testing; and failure testing of
      new
      products for the defense and oil industry.





For
      industrial applications, the P Series provides 6 degrees of freedom of motion
      with superior accuracy and an ability to deal with variety or inconsistencies
      in
      the parts, the environment, or the setup of the pieces. Examples of these would
      include: finding light bulbs that are in various locations and positioning
      them
      in a housing according to the orientation of the filaments prior to laser
      welding; compensating for variation in the size and taper of a water jet cutting
      stream, allowing for greater accuracy in the process; and moving a plastic
      part
      under a laser tool to remove flash after molding.





The
      R
      Series provides precise positioning combined with an ability to provide superior
      stiffness, as compared to conventional “one armed” serial (or “sequential”)
      robots. In addition, the R Series also has one rotary axis with the ability
      to
      provide a much greater range of motion around this axis. The R Series product
      has the theoretical ability to spin infinitely around its “yaw” axis, depending
      on how it is built. (The P Series provides more X, Y & Z motions in a
      similar-sized package than the R Series. Therefore this is an
      application-specific choice when the customer is deciding on which of these
      two
      robot types to purchase from the Company).





Much
      like
      the P Series, the R Series provides motion using its base for either repetitive
      motion under heavy loads or 6 degrees of freedom testing where force measurement
      is required (and experiments cannot allow for a platform that will deflect).
      The
      ability to spin simulates, for example, the motion of an elbow or knee, which
      requires motion in one axis. A company can develop an experiment that will
      include an entire range of motion and still have the needed stiffness to provide
      accurate results. Examples of these would include, but not be limited to: force
      feedback and repetitive motion for prosthetics; and a motion base for ride
      or
      flight simulation.





Robotics’
      continued success is heavily dependent upon proprietary technology. Robotics
      relies on a combination of patent, trade secret, copyright and trademark law,
      non-disclosure agreements and technical measures to protect its rights
      pertaining to such products (Robotics co-owns patents on a Triangular Gimbal,
      Patent No: US 6,240,799 B1 and Systems and Methods Employing a Rotary Track,
      Patent No: US 6,196,081 B1 for machining and manufacturing, key components
      of
      its robots). Such protection may not preclude competitors from developing
      products with similar features. Robotics’ success will depend in part on its
      ability to obtain and defend United States and foreign patent protection for
      its
      products and to preserve its trade secrets. In addition to seeking patent
      protection, Robotics does (and will continue to) rely on contractual
      arrangements and trade secrets to protect proprietary technology.





Robotics
      holds a non-exclusive license on patents for hexapod technology. This license
      is
      irrevocable, for so long as Robotics continues to honor its payment obligations.
      The Company will continue to seek patent protection as new products are
      developed. Although patenting of Robotics’ core technology is important,
      Robotics’ largest technological advantage continues to be the interrelationship
      of this hardware with Robotics’ proprietary software, which management believes
      is unique. For example, the large spherical joints provide the Company’s
      products a much stiffer platform than the other hexapods. The Company is the
      first to employ these types of joints in this type of robotic technology. Also,
      they allow the Company’s products to very accurately define where the exact
      pivotal locations of the nodes are in relation to the software’s understanding
      of those points. To management’s knowledge, the Company’s competitors use
      gimbals or universal joints that are not able to accurately define the exact
      location of the nodes. Degree of accuracy is one of the most critical selling
      points for the Company’s type of robotics products.




Management
      believes that even if a competitor could lawfully reproduce any of the Robotics’
hardware devices, the absence of lawful access to Robotics’ proprietary software
      would make it extremely difficult or prohibitively expensive to render any
      of
      such devices functional at levels of performance comparable to those achieved
      by
      Robotics’ devices. Management believes that the hardware devices themselves are
      not readily susceptible to duplication, and that the software is replete with
      subtleties that would be difficult to develop independently. Management believes
      that most parties in the market would conclude that it would be preferable
      simply to license Robotics’ technology on a consensual basis.





The
      software interface continues to evolve and yield refinements. Robotics has
      chosen not to patent this interface, but to hold it as a "trade secret" (similar
      to the formula for Coca-Cola). By patenting or copyrighting this product,
      Robotics would reveal how it has accomplished many of its product advantages.
      By
      protecting this information as a non-public trade secret, management believes
      Robotics will more effectively create and preserve technical, financial and
      timing barriers to replicating Robotics’ technological innovations. Access to
      the software source code is granted only to selected individuals. This code
      is
      maintained in the corporate offices and off-site for redundancy. No source
      code
      is made available to the Company’s customers. Only executable application data
      is distributed, with the exception of small amounts of user-accessible interface
      modules. Copyright notices are included in the executables. This software is
      co-owned with the Hexel Corporation, the corporation that previously developed
      the robotic patents and licensed the robotic technology to Robotics.





**Form
      10-K Page 4**




Robotics
      is currently assembling its platforms at its Hampton, NH facilities. These
      machines are manufactured and assembled with many standard parts and components.
      In areas where specialty parts are required, Robotics identifies three or more
      sources for creating these specialty parts. The purpose of three sources is
      to
      avoid sole source urgent delivery issues, as well as to have the standard
      purchasing practice of target pricing for best price and delivery from qualified
      suppliers.




Robotics
      currently supports its machines with company-employed engineers. It is
      anticipated that, over time, distributors will provide service support to
      customers. Service will be performed on site and will include both hardware
      and
      software assistance. As more products are sold, service will be outsourced
      to
      existing firms that currently perform this service for today's machinery. As
      Robotics licenses technology, it is anticipated that buyers would use their
      existing service channels to maintain future products.





Research
      and development will continue to be a priority of Robotics, with the aim of
      providing both standardized and custom advanced hardware and software solutions
      to its customers in a wide variety of machine tooling, manufacturing and other
      commercial settings (see subsequent section on "Research and Development" and
      Item 7, "Plan of Operations").





During
      the fiscal year ended March 31, 2008, the Company has sought to develop new
      machinery and innovative robotic applications in the “green” areas of wind
      turbine electrical generator manufacturing and the recycling of used rubber
      tires (see “Markets and Business Strategy”).





The
      Company’s sales of robots are not a seasonal business.





The
      practices of the Company related to working capital items are to: purchase
      inventory required for a robot order as close to the beginning of the final
      assembly of the robot as possible, i.e. “just in time’; collect pre-shipment
      payments from the customer based upon reaching the payment-related
      work-in-process milestones established in the purchase contract for the robot;
      and to minimize the investment in production machinery fixed assets through
      in-house engineering and the purchase of virtually all fabricated and machined
      parts from third parties.





**Markets
      and Business Strategy**





The
      Company's Robotics subsidiary sells its products in a number of markets,
      including the bio-medical, automotive assembly, defense, education, water-jet,
      wind turbine manufacturing and tire recycling markets.





In
      the
      biomedical market, a number of companies and universities in the United States,
      Canada and Germany use the Company’s P and R Series equipment to manipulate and
      simulate cadaver or prosthetic body parts for motion studies and force feedback
      analysis. In the automotive market, Osram Sylvania uses the Company’s P Series
      robots in conjunction with a vision system to position light bulbs in a high
      speed laser welding operation for their automotive line. In the defense market,
      BAE Systems and Astronics, Inc. use the Company’s P and R Series products for
      testing functionality during rapid motion on some of their defense related
      products. In the water-jet market, a customer named TSM Inc. uses one of the
      Company’s P Series units to remove the flashing from metal casings. In the
      wind-turbine manufacturing market, the Company has developed robotic processes
      to improve the through-put in manufacturing. In the rubber tire recycling
      markets, the Company has developed a high through-put, yet economical crumb
      rubber production system using water-jet technology that will be capable of
      recycling non-biodegradable used tires. Lastly, in the educational market,
      MIT
      uses the Company’s P Series product to provide motion to test some of their new
      control schemes for damping vibration and motion on conventional robots during
      travel.





The
      percentage of the Company’s revenues derived from each of the aforementioned
      markets for the year ended March 31, 2008 is as follows: Automotive - 60.9%;
      and
      Defense - 31.6%. The remaining 7.5% of revenue was from repairs, special
      projects and service agreements.





Robotics’
      primary marketing medium is its small, experienced sales staff. Robotics
      competes against established products that employ older technology and,
      therefore, cannot perform the range of movement which the Robotics’ products can
      perform. In the machine tool market, the Company competes against 3 axis and
      5 axis machines, as well as conventional robotics, which each have their disadvantages
      in relation to the C ompany’s
      products. Serial Link 3 Axis machines are made by numerous companies such as
      Haas Automation, Inc., Fadal Machining Centers, LLC and many others. These
      are
      price competitive machines, but are limited in their ability to move in relation
      to linear motions of X, Y & Z. The rotational axes (Yaw, Pitch &
Roll)  are
      ignored. Along with limited travel, these products are built for specialized
      applications like milling or other machining tasks and, unlike the Robotics’
unit, these three axis machines cannot also do laser or water jet cutting with
      essentially the same machine. Also, due to the nature of a serial link system,
      the customer’s application has to be placed very specifically in relation to the
      manufacturer’s equipment. If these serial link systems are used as the
      manufacturer has intended, then the customer is able to efficiently and
      effectively utilize the manufacturer’s equipment. If the application is not
      conventional in the way intended by the manufacturer, it is extremely costly
      and
      difficult for the customer to integrate their application into the serial link
      equipment.







**Form
      10-K Page 5**





Serial
      Link 5 Axis products are also made by numerous companies such as Mori Sieki,
      DMG
      and Cincinnati Milacron. These products are very expensive and, although they
      provide for two of the rotations, they do not possess the ability to provide
      a
      sixth degree of freedom. Some of these are configured to provide Pitch and
      Yaw
      and some Pitch and Roll. All of the Company’s robotics devices provide all three
      rotations-Yaw, Pitch and Roll. Similar to the 3 axis offerings, these devices
      are very difficult to integrate or program into the wide variety of tasks that
      are outside the scope of the specific applications these devices were built
      to
      perform.





Conventional
      (anthropomorphic) robots are made by numerous companies such as Fanuc Robotics,
      ABB, and Motoman, as well as many others. These products provide a wide range
      of
      capabilities, are usually priced competitively but, for some of the more capable
      offerings, are very expensive. However, this type of product is not able to
      compete with the Company’s product in terms of stiffness. This limitation
      virtually eliminates its ability to compete in the manufacturing applications
      that require accuracy and speed under a varying load. Along with their
      deficiencies in stiffness  and
      limited range of movement , these
      products are usually intended to move a tool through a specified work space.
      A
      customer who wishes to move their product or switch between moving the product
      and a tool has a very difficult time utilizing this equipment.




Robotics
      intends to focus on the biomedical markets. Management believes that there
      are
      no other products available in this market that can effectively perform 6 axis
      simultaneous movement of an end attachment or positioning platform with the
      same
      degree of reliability, repeatability and accuracy. Ongoing projects in which
      Robotics is also currently involved include further penetrating the automotive
      parts assembly markets, as well as precise positioning for defense related
      applications and contractors. Robotics will continue to identify, develop and
      deliver other innovative and cost-efficient machine hardware and software
      enhancements, adaptations and customized solutions utilizing its proprietary
      hexapod technology.





Robotics
      has two major revenue sources: 1. assembling and selling two standard products
      (the R and P Series machines) and; 2. creating custom "engineered to order"
      products where customers are willing to pay for the engineering and development
      costs. The engineered to order products are usually variations of the R and
      P
      series devices, but can also be custom devices for a customer interested in
      utilizing the Company’s engineering expertise. The percentage of revenue from
      the R and P Series machines for the year ended March 31, 2008 was 65.8%. The
      percentage of revenue from engineered to order products for that same period
      was
      34.2%.





Although
      Robotics has chosen to develop these two platforms as its initial hexapod
      applications, its core technology allows the development of many different
      types
      of hexapods. In addition, each of the two platforms are scalable over a very
      wide range of applications with the smallest standard unit in use approximately
      the size of a basketball and with the largest approximately the size of a large
      refrigerator. Robotics’ technology is valuable in a wide variety of industries.
      Management believes that the technology can be used to develop very large
      machines capable of performing operations on structures such as aircraft, or
      much smaller machines for use in such industries as silicon wafer handling
      and
      testing. Due to the complex mathematical problems inherent in developing the
      software to effectively operate a hexapod, management believes that no other
      existing or aspiring hexapod or machine tool manufacturer has achieved workable
      solutions to such mathematical problems and translated such solutions into
      viable hexapod software.




While
      Robotics will most likely continue to manufacture and market biomedical testing
      machines, Robotics also intends to adopt a strategy of pursuing the licensing
      of
      its core technology to strategic alliance partners. These partners may
      manufacture and distribute entire machines, or Robotics may elect to provide
      only the core components. This is a strategy comparable to that of Intel
      Corporation, whereby Intel manufactures the chips used in most IBM compatible
      personal computers. Much like the "Intel Inside" concept, Robotics hopes to
      be
      the provider of 6 degree of freedom robots to various applications. By
      establishing such strategic relationships and leveraging the manufacturing
      and
      marketing strengths of such strategic partners, Robotics hopes to gain rapid
      worldwide recognition. At this time, Robotics has no strategic
      partnerships.




**Customers**





Through
      its Robotics subsidiary, the Company sold robots to 2 major customers during
      the
      year ended March 31, 2008 accounting for 92.5% of the year’s total sales: Osram
      Sylvania, which manufactures automotive light bulbs and; Jet Edge, which is
      a
      defense company. 60.9% of the Company’s sales were to Osram Sylvania and 31.6%
      of the Company’s sales were to Jet Edge. As a note, manufacturers that use the
      Company’s robots are Osram Sylvania, Adidas, TSM (water-jet cutting in a machine
      shop environment) and Jet Edge.





The
      Company is not dependent upon these customers for future sales, in that it
      is
      unlikely that any customer in these markets (i.e. primarily research and
      development applications) will place a succession of repeat orders.
      Occasionally, one of these types of customers will buy a second or third
      machine, but significant additional purchases are unlikely. There are no robot
      order contracts in production with any of these customers at this time. There
      is
      an order from Netherlands Institute for Neuroscience that was received and
      went
      into production during the fourth quarter of the Company’s 2008 fiscal year.







**Form
      10-K Page 6**





In
      addition to the sale of robots, Robotics also receives revenue from the service
      of existing systems. For the year ended March 31, 2008, the Company derived
      7.5%
      of its revenue from service of existing systems and 92.5% of its revenue from
      sales of its robotic products.





The
      Company’s order backlog as of March 31, 2008 was $158,420. That amount relates
      primarily to the Netherlands Institute for Neuroscience order, expected to
      be
      completed in the Company’s 2009 fiscal second quarter.





**Competition**





Robotics’
      products compete against established products that employ older technology.
      While Robotics is not aware of any products that incorporate technology which
      is
      equivalent to that of Robotics’ products, it is conceivable that, in the future,
      other competitors could develop products based on different technology that
      does
      not infringe on Robotics’ patent or other rights, and that may provide
      capabilities similar or superior to Robotics’ products.




In
      the
      hexapod market, there are two companies producing products that compete in
      similar markets to Robotics. One company from Japan, Fanuc Robotics, has a
      product similar to Robotics’ P 2000 product, called the F200IB, and a German
      company named PI Instruments, produces a product similar to Robotics’ P 1000
      product. In regard to the F200IB, the Robotics’ product is able to publish and
      achieve accuracies and forces not offered by the Japanese manufacturer. In
      regard to the German product, the Robotics’ device offers a larger range of
      motion in a similar work space. In both cases, Robotics is competitive from
      a
      pricing standpoint and able to offer customization that competitors are unlikely
      able to offer.




Along
      with hexapod manufacturers, Robotics frequently competes against traditional
      robot manufacturers. Robotics offers a robot that is much more accurate than
      these traditional robotic devices. Due to the mechanical advantages of Robotics’
equipment over these standard devices, it is unlikely that they will be able
      to
      compete with the Robotics’ devices in terms of accuracy or
      stiffness.





Although
      the size of the hexapod robotic market is not known, it is likely that PI
      Instruments and Fanuc Robotics are selling more robots than Robotics per
      year.  Robotics is likely third in this market. However, Robotics believes
      that its product provides for capabilities previously not available from any
      hexapod manufacturers in its targeted markets. The Company is seeking to
      introduce its products to potential customers that are not aware that there
      is a
      product that can provide a better solution. The Company’s initial efforts are
      focused on introducing the products to the various industries’ “Early Adapters”.
      The Company then intends to expand its service and sales capability to meet
      the
      demands of the mainstream market. The three targets the Company is focused
      on
      are as follows:





·
            Custom
                or Flexible Manufacturing





The
      Company provides an accurate and stiff motion platform that can be easily
      integrated to move a tool or a platform under a stationary tool. This product
      can be sized to fit a particular application and its accuracy, stiffness and
      cost can be scaled based on the application. By giving this type of flexibility
      to developers introducing new products, the Company can greatly decrease their
      time to market and the cost of integration. Currently this is a multi-billion
      dollar industry and the Company’s product will allow for new players to enter
      the markets with competitive or improved products. The P 3000 Water-Jet Cutter
      “Hex-a-Jet” that Robotics helped introduce in 2006 is such a product. This
      water-jet system may begin to play a role in increasing the production of
      cast wind-turbine parts in the United States in fiscal 2009.





·
            Biomedical
                Testing





The
      Company’s product allows researchers to perform real life tests to prove or
      model their experiments and achieve the verification needed to prove their
      theories or perform life cycle testing. Currently, the Company believes that
      this is one of the fastest growing markets for new equipment.





·
            Simulation





The
      Company offers a unique simulator in our R 2000 platform. This patented device
      allows the person to spin as well as experience acceleration and inertia in
      their virtual experience. Along with its ability to provide extra motion, the
      Company’s product also provides a very low cost and compact platform for
      testing. Currently, many of the airline companies’ pilot training schools and
      military organizations employ simulators for training. Comparatively, the
      Company’s device will be a very low cost, easy to integrate positioner for
      applications that require extensive training on a flight simulator but don’t
      warrant the cost of the multi-million dollar systems employed
      today.





**Suppliers**





Robotics
      relies on outside suppliers for substantially all of its parts, components,
      and
      manufacturing supplies. While Robotics has deliberately followed a policy of
      designing products with "off-the-shelf" components which are available from
      a
      number of suppliers, there can be no assurance that Robotics’ existing suppliers
      will be able to meet all of Robotics’ needs on terms favorable or acceptable to
      Robotics. Currently, the Company does not have any material contracts for the
      future purchase of parts or materials for inventory.





**Form
      10-K Page 7**




Robotics’
      products use a small amount of custom components that are critical to the
      performance of its products. Next Move Controllers and MEI Controllers are
      both
      plug-in cards for PC's which allow the Robotics’ robots to process the math and
      control each of the 6 axes in a coordinated fashion. Two suppliers are used
      and
      the Robotics’ product is tested and developed for both. Another control
      manufacturer (of which there are several) could be used, but the process for
      porting to a new card is a significant effort. This is because each original
      equipment manufacturer’s motion control system has to be evaluated both in terms
      of the availability of a very wide range of physical movements on the mechanical
      side, as well as the software effort on the Company’s part to add the third or
      fourth control system to the Company’s existing control software system. This
      software effort also includes the job of incorporating proprietary software
      movements the Company’s customers have typically come to expect in the Company’s
      systems. The Company is continuously evaluating alternative systems and the
      Company is in the process of expanding robot controls from two manufacturers
      to
      three. These cards are both supplied by Target Electronic Supply Inc., a local
      electronics and electro-mechanical components distributor.




E-Drive
      Actuators are provided by a manufacturer who Robotics has taught to make the
      actuators for the precise P Series machines. To date, the best result Robotics
      has achieved has been with their product. That does not preclude Robotics from
      developing an additional supplier in the future, should that be necessary.
      The
      E-Drive legs are provided by Automation Solutions Inc., a local distributor
      of
      these types of equipment. Robotics has used two other leg manufacturers for
      its
      less precise applications. The suppliers of these legs are Tolo-Matic Inc.
      and
      Ultra-Motion LLC.




Lastly,
      there is a manufacturer that produces the ring gear with an integrated guide
      rail which is used for guiding the movable tracks on the R Series robot. To
      date, Robotics has single sourced this activity because its source's standard
      product fits the Robotics application perfectly. The name of this supplier
      is
      the Bishop-Wisecarver Company. However, if this product becomes scarce or too
      expensive, Robotics could purchase the gear and the rail system separately
      from
      a number of manufacturers.




**Research
      and Development**




Over
      the
      last two years, Robotics has spent approximately $455,582 on research and
      development, primarily on engineering salaries and compensation. Robotics
      employs four full-time engineers, whose time is spent primarily on modifications
      requested by customers to Robotics’ standard products.




One
      of
      the manufacturing systems developed by the Company can remove the flash from
      cast wind-turbine parts (flash is the excess metal that penetrates between
      or
      through casting encasing materials in thin or irregular shapes that must be
      removed as soon as the castings harden). These wind turbine parts can weigh
      20
      to 30 tons each and flash removal using the old cutting tool methods have been
      difficult.




The
      Company has also developed a tire recycling crumb rubber production system
      that
      utilizes water jet technology and automation systems to economically convert
      large quantities of tires into crumb rubber.




Another
      area of research and development on which Robotics is focused is perfecting
      the
      software and hardware capabilities of the R Series line for Robotics’
bio-medical opportunities. The main focus has been implementing a dual encoder
      set-up on the motors to allow for precise motion under heavy and varied load,
      coupled with a software interface that allows communication directly with Math
      Lab and the Lab View products (which are standard in this
      industry).




On
      the P
      Series line, Robotics has focused on improving the joint retaining rings and
      sockets for improved accuracy, manufacturability and ease of
      assembly.




Robotics
      has continued to enhance its software product and capabilities. The
      concentration has been focused on addressing the applications which customers
      are bringing to Robotics’ attention. Along with this, Robotics has continued to
      monitor, track and release versions for bug fixes, as well as customer specific
      applications.




Currently,
      Robotics has produced a special R 2000 machine for Holo-Dek Gaming, Inc., a
      related party through common ownership/management. With this machine, Robotics
      is working on the perfection of a package that will allow Holo-Dek Gaming,
      Inc.
      to integrate the simulator platform with different video games for the amusement
      of its customers. Robotics hopes to offer a similar product to companies working
      on flight training for small aircraft.




There
      are
      other research and development projects that Robotics is investigating, some
      resulting from customer requests.





**Segments**





The
      Company manages its business in a single reportable business segment. That
      segment is robotics. The Company uses similar product, distribution and
      marketing for each robot sale, regardless of whether the robot is sold to a
      domestic or international customer and regardless of the differing end uses
      of
      the robot.





**Form
      10-K Page 8**





**Geographic
      Sales**





The
      Company’s geographic revenues for the last two fiscal years were as
      follows:





Years ended March 31,
            
            Domestic
            
            International2008
            
            $
            516,583
            
            $
            7,3402007
            
            
            491,635
            
            
            112,586




**Employees**




The
      Company currently employs six people, all in its Robotics subsidiary: 4
      full-time engineers; one part-time engineer; and one sales person. The
      CEO and CFO of Kingston are employed by Holo-Dek Gaming, Inc. ("Holo-Dek").
      Any services that the CEO and CFO provide to the Company
      are charged to the Company through related party payables on the Company’s
      consolidated balance sheets (see "Recent Developments").





**Government
      Regulations**





The
      Company holds all licenses and permits necessary for the Company to operate
      and
      meet applicable United States Environmental Protection Agency standards for
      air
      and water discharge and Occupational Safety and Health Administration standards.
      The Company does not do any manufacturing at its facility in Hampton, New
      Hampshire (only assembly). The Company purchases all of the components for
      its
      products from suppliers, therefore, the Company has suffered no costs or effects
      as a result of environmental regulations.





**Other**





The
      audit
      firm of Hansen, Barnett & Maxwell, P.C., the Company's Independent
      Registered Public Accounting Firm, has raised substantial doubt about the
      Company's ability to continue as a going concern.





**Available
      Information**





The
      Company’s annual report on Form 10-K, quarterly reports on Form 10-Q,
      current reports on Form 8-K, exhibits and amendments to those reports that
      are filed with or furnished to the Securities and Exchange Commission ("SEC")
      are made available free of charge through the Company’s website,
      www.kingstonsystems.com, as soon as reasonably practicable after the Company
      electronically files them with, or furnishes them to, the SEC. The Company’s
      Code of Ethics and other corporate information are available free of charge
      through the Company’s website. A reader may request a copy of any of the above
      documents by writing to Kingston Systems, Inc, 8 Merrill Industrial Drive,
      Unit
      12, Hampton, New Hampshire 03842.




**Recent
      Developments**




The
      Company, through Robotics, has a relationship with Holo-Dek. Ralph McKittrick,
      the CEO of Kingston, is also the CEO of Holo-Dek (Ralph McKittrick is the
      largest shareholder, directly or indirectly, of Kingston and the second largest
      shareholder of Holo-Dek). Holo-Dek is a startup company that intends to open
      and
      operate a number of theaters (two theaters are currently open) for video gamers.
      Robotics and Holo-Dek share office facilities, a number of employees and certain
      expenses. The Flood Trust (the "Trust"), a shareholder of the Company which
      has
      and continues to provide loans to the Company necessary to keep it in business
      (which loans aggregated $208,800 at March 31, 2008), is also a significant
      lender of working capital to Holo-Dek (which has advanced $1,561,075 to the
      Company as of March 31, 2008). The Company is considering acquiring Holo-Dek.
      The Company views Holo-Dek as both an excellent prospect for purchasing a large
      number of robotic machines from Robotics (to be used as motion simulators)
      and
      as a viable entry vehicle into the multi-billion dollar video game entertainment
      market (source-Electronic Software Association), as a theater chain to be built
      exclusively for the use of video gamers.




**ITEM
      2. DESCRIPTION OF PROPERTIES**




The
      Company owned no real property during the periods ended March 31, 2008 and
      March
      31, 2007.




Robotics
      has a lease for office space and an assembly/research and development facility
      in Hampton, New Hampshire. The lease was executed in 2002 and the original
      term
      of the lease was 6 years, with a 3 year renewal which was exercised in April
      2008 and extended the lease term to March 31, 2011.




**ITEM
      3. LEGAL PROCEEDINGS**




There
      are
      no pending legal proceedings against the Company.







**Form
      10-K Page 9**





**ITEM
      4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS**





There was
      one matter submitted for shareholders' vote during the 2008 and 2007 fiscal
      years. In the 2008 fiscal year, the shareholders voted to increase the
      authorized shares from 10 million to 50 million. That increase has not yet
      been executed.





**PART
      II**





**ITEM
      5. MARKET FOR COMMON EQUITY, RELATED SHAREHOLDER MATTERS AND ISSUER
      PURCHASES OF EQUITY SECURITIES**




As
      of
      June 30, 2008, the majority and controlling shareholders of the Company are
      the
      following:





Name
            
            Shares
            
            CommentsKingston
                Associates
            
            
            105,902
            
            
            Limited
                Partnership 60% controlled by Ralph McKittrick, CEO
                of Kingston SystemsRalph
                McKittrick
            
            
            32,453Thor
                Corporation
            
            
            2,332,133
            
            
            Thor
                Corporation is 100% controlled by Ralph McKittrickAll
                others
            
            
            2,518,4014,988,889Flood
                Trust
            
            
            612,251
            
            
            See
                Note 2 to the Company’s consolidated financial statements appearing
                elsewhere hereinTotal
            
            
            5,601,140




On
      August
      18, 2005, Kingston acquired 100% of the issued and outstanding common stock
      of
      Robotics for one dollar, as a result of which acquisition Robotics became a
      wholly-owned subsidiary of Kingston. In addition, an Exchange Agreement was
      signed between Kingston, Robotics and the Trust. The Trust, as payee, was issued
      a promissory note (the "Note") by Robotics. The Trust acquired shares in
      Kingston by assigning to Kingston, as consideration, its rights as payee under
      the Note, in exchange for 612,251 newly issued shares of Kingston's common
      stock
      (the shares were physically issued in June, 2006). Kingston, as the new payee
      under the Note, then cancelled the Note, and any obligations of Robotics under
      the Note.




Currently,
      the Company's common stock is publicly traded on the pink sheets. The Company’s
      stock symbol is KSYT.




The
      high
      and low bids on the Company’s stock for each quarterly period for the past two
      fiscal years are approximately as follows (per pink sheets.com):





High Bid
            
            Low Bid
            
            
            
            High Bid
            
            Low Bid**2008**
            
            
            
            
            
            **2007**Fourth
                Quarter
            
            $
            0.90
            
            $
            0.41
            
            Fourth
              Quarter
            
            $
            1.02
            
            $
            0.75Third
                Quarter
            
            
            0.98
            
            
            0.71
            
            Third
              Quarter
            
            
            1.02
            
            
            .01Second
                Quarter
            
            
            1.00
            
            
            0.50
            
            Second
              Quarter
            
            
            1.00
            
            
            .01First
                Quarter
            
            
            1.25
            
            
            0.75
            
            First
              Quarter
            
            
            N/A
            
            
            N/A





T he
      Company currently has no compensation plans. The Company does not have any
      employee benefit plans other than the Company’s contribution toward employee
      health insurance.





**ITEM
      6. SELECTED FINANCIAL DATA**





The
      following selected financial data should be read in conjunction with the
      Company’s consolidated financial statements and related notes, included in
      Item 8 of this Annual Report on Form 10-K.




**Selected
      Statements of Income Data**





Years ended March 31,
            
            2008
            
            2007**
            
            2006*Revenue
            
            $
            523,923
            
            $
            604,221
            
            $
            630,575Net
                Income (loss)
            
            
            (863,081
            )
            
            223,247
            
            
            (1,844,396
            )Earnings
                (loss) per share
            
            
            (0.15
            )
            
            0.04
            
            
            (0.34
            )







**Form
      10-K Page 10**





**Selected
      Consolidated Balance Sheet Data**





March 31,
            
            2008
            
            2007**
            
            2006*Total
                Assets
            
            $
            567,109
            
            $
            562,791
            
            $
            689,249Related
                Party Advances
            
            
            1,561,075
            
            
            854,848
            
            
            62,549Long-term
                Debt
            
            
            64,000
            
            
            48,000
            
            
            64,000Capital
                Leases
            
            
            99,719
            
            
            95,216
            
            
            70,304





*On
      August 18, 2005, the Company acquired all of the issued and outstanding common
      stock of Robotics. Prior to that date, Kingston Systems was a dormant company.
      The 2006 fiscal year data reflects the accounting entries related to that
      acquisition.





**In
      March 2007, the Company recognized a gain of $921,439 upon the settlement of
      a
      judgment payable.




**ITEM
      7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
      OF
      OPERATIONS**




**General**




The
      following discussion and analysis should be read in conjunction with the
      consolidated financial statements and notes thereto appearing elsewhere in
      this
      report. In addition, at March 31, 2008, the Company's auditors, Hansen, Barnett
      & Maxwell P.C., the Company's Independent Registered Public Accounting Firm,
      raised substantial doubt about the Company's ability to continue as a going
      concern.




The
      Company's fiscal year is from April 1 through March 31.




**Critical
      Accounting Policies**




The
      Company's discussion and analysis of its financial condition and results of
      operations is based upon Kingston's consolidated financial statements, which
      have been prepared in accordance with accounting principles generally accepted
      in the United States. The preparation of these consolidated financial statements
      requires the use of estimates that affect the reported amounts of assets,
      liabilities and expenses. The Company evaluates its estimates on an ongoing
      basis, including estimates for income tax assets and liabilities and the
      impairment of the value of investments. The Company bases its estimates on
      historical experience and on actual information and assumptions that are
      believed to be reasonable under the circumstances at that time. Actual results
      may differ from these estimates under different assumptions or conditions.
      The
      Company believes that the following critical accounting policies affect its
      more
      significant estimates used in the preparation of its consolidated financial
      statements:




o
      Accounting for Income Taxes - The Company records a full valuation allowance
      against the deferred tax benefit for net operating losses ("NOL") generated,
      since in management's opinion, the net operating losses do not meet the more
      likely than not criteria for future realization.




o
      Impairment of Investments - The Company reviews estimates of the value of its
      investments each reporting period and will record an impairment loss to the
      extent that management believes that there has been an impairment to the
      carrying value.




o
      Inventory Valuation - Inventory is stated at the lower of cost (first-in,
      first-out) or market. Market value is estimated based upon assumptions made
      about future demand and market conditions. If the Company determines that the
      actual market value is less than the carrying value of the inventory, the
      Company will make an adjustment to reduce the value of the inventory.




**Overview**





Management’s
      plan of operations for the next twelve months is to seek to expand Robotics’
business, increasing revenue volume and improving operating margins, in order
      to
      reduce, and eventually eliminate, its historical net losses. There are current
      activities that are critical to successfully achieving that plan. The Company
      is
      working to sell a newer robot application, consisting of a hexapod-mounted
      water
      jet cutter, into markets that have been previously untapped for robot sales.
      For
      example, TSM Inc. uses one of the Company's P Series units to remove flashing
      from metal casings. Another
      newer product in production is a simulator, which can be used in the video
      game
      theater business. This is an application where the Company has identified an
      opportunity to become a significant supplier of robots to Holo-Dek, which will
      use those robots if they succeed in building-out their video gaming centers.
      The
      Company has been considering acquiring Holo-Dek as part of its business
      expansion plan.





The
      Company is also evaluating its cost structure in order to minimize cost of
      sales
      for each robot sale. A good portion of that cost reduction is expected to come
      from cost savings related to volume purchases of fabrications and purchased
      parts. An additional component of cost reduction may result from research and
      development, as the Company continues to focus on standardization, in order
      to
      reduce or eliminate non-recurring engineering and design costs, and to develop
      new applications and additional markets for existing robot designs.







**Form
      10-K Page 11**





The
      Company is currently dependent upon working capital loans that originate
      primarily from the Trust through its investments and loans to Holo-Dek which,
      in
      turn, are provided to the Company to fund research and development and to offset
      the Company’s operating income deficit. Although the Trust has proven to be a
      reliable source of funds in the past, there is no guarantee that the Trust
      will
      continue to provide funding, or that other sources will be available during
      the
      next twelve months.




**Plan
      of Operations**




As
      discussed in Item 1 and below in the Management's Discussion and Analysis,
      Kingston acquired Robotics in August 2005 (see Note 2 to the consolidated
      financials statements appearing elsewhere herein). Robotics’ business, although
      not yet profitable or cash flow self-sufficient, presents opportunities for
      expansion. Robotics’ robot products are unique in the industry and more
      technologically advanced than competitor products. Additionally, Robotics has
      a
      relationship with Holo-Dek, a startup gaming business, which could provide
      another market for Robotics’ products (see Item 1, "Recent Developments"). The
      Company views Holo-Dek as both an excellent prospect for purchasing a large
      number of robotic machines from Robotics (to be used as motion simulators)
      and
      as a viable entry vehicle into the multi-billion dollar video game entertainment
      market (source-Electronic Software Association), as a theater chain to be built
      exclusively for the use of video gamers.




Ongoing
      research and development is a priority of the Company, with the aim of providing
      both standardized and custom advanced hardware and software solutions to its
      customers in a wide variety of machine tooling, manufacturing and other
      commercial settings. Currently the Company is planning to expand the
      wind-turbine manufacturing through-put improvements already developed during
      the
      fiscal year ended March 31, 2008, utilizing its robotic and water-jet
      technologies. In addition, the Company is continuing to conduct research and
      development in three different areas of robotic research and development. First,
      the Company will continue to work on the software algorithms to improve upon
      the
      actuators purchased from manufacturing partners. This will allow the Company's
      machines to achieve greater accuracy and allow the Company to purchase lower
      cost components from a larger group of vendors. Second, the Company is planning
      to use its R Series platform as a simulator for both the small aircraft flight
      industry, as well as an interactive ride for video game entertainment. The
      research and development effort will seek to create the tools necessary for
      game
      developers and flight schools to integrate their current or future software
      products with the Company's simulator. Third, the Company plans to develop
      a
      standard, in-house actuator that can be used for low cost
      applications.





The
      Company’s head of sales is focused on selling robots into a number of
      industries. In the Company’s existing markets, such as universities (using the
      Company’s robots for bio-medical research) and in the automotive industry (using
      the Company’s robots for parts assembly), the Company is approaching existing
      customers for additional orders and exploring opportunities to sell products
      to
      other such universities and automotive companies. The Company’s P 3000 Water-Jet
      Cutter (the water jet cutter is an accurate and rapid metal cutting device
      that,
      when coupled with the Company’s robot, can perform multi axis cutting, which is
      currently rare for flash removal in the casting industry), is being
      direct-marketed at this time primarily to the automotive, heavy equipment,
      wind
      turbine and defense industries and to the metal casting companies serving those
      industries. Robotics has produced a special R 2000 machine for Holo-Dek. With
      this machine, Robotics is working on the perfection of a package that will
      allow
      Holo-Dek to integrate its robotic simulator platform with different video games
      for amusement and educational training. Robotics also intends to pursue channel
      sales through machine tool integrators and distributors.





The
      Company currently uses its head of sales, its web site and business contacts
      to
      market its products. The Company plans to develop more extensive use of print
      advertising and substantially increase the display of its products at numerous
      industry tradeshows and conferences once improved sales provides additional
      funding.





In
      regards to the Company’s Robotics business, given the current sales volumes, the
      Company does not expect to acquire or dispose of any significant amount of
      capital assets, nor does it expect to significantly expand or contract its
      current number of employees. The Company does anticipate that if a number of
      the
      above noted opportunities are realized, it will have to expand resources. Until
      sales improve, the Company is reliant upon working capital advances from
      Holo-Dek (through the Trust’s investments in Holo-Dek) to maintain its liquidity
      and continue operations. The Company is investigating new loan programs that
      will give it the ability to finance purchase orders.





The
      Company’s business plan calls for sales to improve significantly during the
      twelve month period ending March 31, 2009, when compared to the year-ended
      March
      31, 2008. The costs of goods sold percentage of revenue associated with those
      sales is planned to be at or better than the Company’s percentage for the year
      ended March 31, 2008. The Company does not know that the improved sales will
      ever be realized. The Company may also find that the cost of materials and
      services to produce the futures sales will exceed the estimates now in the
      plan.
      As a result of both of these uncertainties, the estimated future sales could
      be
      lower than planned and the estimated future costs higher than planned, or both
      -
      perhaps by significant amounts.




Although
      there has been a stable funding base for Robotics through the Trust, along
      with
      revenue from the sales of its robots, management believes that it is necessary
      to obtain additional capital investment, through either the public or private
      markets, in order to allow the Company to expand its robotics business, invest
      in strategic opportunities, achieve overall profitability and provide cash
      flow
      self-sufficiency. Management is striving to obtain additional funding, but
      there
      can be no assurance that management will succeed in a timely fashion. If
      additional funding is not obtained, the Company may need to curtail operations
      (the Company is, has been ,
      and is
      currently reliant upon the Trust for the majority of its working capital
      financing).







**Form
      10-K Page 12**




**Results
      of Operations**




**Summary**




In
      August
      of 2005, Kingston purchased all of the issued and outstanding common stock
      of
      Robotics. Since that time, the sole business of Kingston has been the operation
      of Robotics.




The
      Year
      Ended March 31, 2008 as compared to the year ended March 31, 2007




Revenues
      for the 2008 fiscal year were $523,923. During the period, the Company completed
      five major projects and recognized $484,546 in sales for those projects. The
      Company had an additional $19,330 in revenues for smaller projects and $20,047
      in revenues from repairs/maintenance and service contract revenue amortization.
      Revenues for the 2007 fiscal year were $604,221, reflecting solely the revenues
      of Robotics. During the period, the Company completed four major projects and
      recognized $486,053 in sales for those projects. The Company had an additional
      $100,195 in revenues for smaller projects and $17,973 in revenues from
      repairs/maintenance and service contract revenue amortization.




The
      Company categorizes all pre-shipment progress payments from the customers on
      the
      balance sheet as "deferred revenue" (combined with service contract revenue
      amortization on the Company's balance sheet, which was $27,500 as of March
      31,
      2008). Upon shipment of the robot, the Company releases those liabilities to
      revenue, along with the related cost of sales. As of March 31, 2008, that
      liability was $63,368.




Cost
      of
      sales was $373,191 and $473,021 for the 2008 and 2007 fiscal years,
      respectively, which reflects costs related to Robotic’s sales orders shipped in
      that period, of which $263,532 and $347,349 was for materials used in the
      production of the robots. The remainder was primarily labor and overhead used
      in
      the production of the robots. The decrease in the cost of sales year over year,
      as a percentage of revenue, was primarily due to better utilization of direct
      materials and labor in the production of the Company’s robots.




The
      Company capitalizes direct material, direct labor and overhead costs that apply
      to Robotics’ customer orders in progress. That inventory is reclassified to cost
      of sales at the time the product is completed or shipped. As of March 31, 2008
      and 2007, the Company's inventory was $98,796 and $89,391, respectively, which
      reflects $71,402 and $66,128 of customer order related inventory. The March
      31,
      2008 order related inventory is comprised of capitalized labor related to the
      development of a robot for Holo-Dek and parts purchased for a potential order
      that was not realized (those parts will be used for future orders).




The
      Company’s selling expenses were $122,557 and $83,903 in the 2008 and 2007 fiscal
      years, respectively, which was comprised primarily of salaries related to the
      selling of Robotics’ products. The increase over the prior year period was
      primarily due to an increase in staff to improve sales.




General
      and administrative expenses were $537,263 and $537,540 in the 2008 and 2007
      fiscal years, respectively. That amount consisted of professional fees (legal,
      audit, accounting and shareholder relations) of $139,817 and $150,017,
      engineering related expenses of $121,452 and $137,072, $142,357 and $94,806
      of
      other payroll related and professional services expenses, rent and utility
      expenses of $36,652 and $55,473 and insurance expenses of $49,981 and $45,682,
      respectively. The remaining expenses of $47,004 and $54,490 were for travel,
      depreciation and other costs, respectively. In the category of payroll related
      and professional services, the increase over the prior year period was primarily
      due to an addition to the administrative staff.




Research
      and development expenses were $310,478 and $145,104 for the 2008 and 2007 fiscal
      years, respectively. Those costs were primarily engineering salary costs related
      to the continuing development of Robotics’ products. The increase over the prior
      year was primarily due to both increased research and development activities
      to
      enhance the software product and robotic capabilities and research and
      development to address potential customer specific applications, including
      increased through-put in the wind-turbine manufacturing industry, achieved
      by
      utilization of the Company’s robotic and water-jet technologies. In addition, to
      a lesser degree, the increase in fiscal 2008 over fiscal 2007 was due to a
      re-evaluation of costs from engineering salaries to research and development
      in
      fiscal 2008.




Other
      income (expense) was $(43,515) and $858,594 for the years ended March 31, 2008
      and 2007, respectively. Interest expense for the 2008 and 2007 fiscal years
      was
      $32,711 and $62,845, respectively. In fiscal 2008, the interest expense was
      comprised of finance charges and interest on the loan payable, related party
      (Flood Trust) and the notes payable, related parties (Flood Trust and George
      Coupe). The remaining expense was the interest (factoring fees) related to
      the
      sale of the Company’s receivables to factoring companies (all reflected in the
      Company's March 31, 2008 balance sheet). In fiscal 2007, the interest expense
      was primarily related to the judgment payable and
      , to a lesser degree, finance charges and interest on the loans
      and notes payable. This was offset by the Company’s gain from the settlement of
      a judgment payable of $921,439 in its 2007 fiscal year. The gain was recorded
      by
      eliminating the $353,883 principal and $667,556 accrued interest at the date
      of
      the settlement, less a $100,000 cash payment.




The
      Company's net loss for the 2008 fiscal year was $863,081, which resulted in
      a
      loss per share of $0.15. The Company's net income for the 2007 fiscal year
      was
      $223,247. This was comprised of a $635,347 loss from operations and $62,845
      in
      interest expense, offset by the gain on settlement of the judgment of $921,439,
      discussed above. The net resulted in an earnings per share of $ 0.04.









**Form
      10-K Page 13**




**Liquidity
      and Capital Resources**





On
      an
      ongoing basis, the Company's primary needs for liquidity and capital resources
      are for the funding of salaries and other administrative expenses related to
      the
      management of the Company, for payment of the cost of products sold and
      inventory (to the extent that these expenditures are not covered by customer
      pre-shipment deposits) and, to a lesser degree, for research and development.





During
      fiscal 2008, net cash used by operations was $741,301, compared with $638,367
      in
      the prior year period The cash used was a result of the Company’s loss from
      operations, discussed above, partially offset by an increase in deferred
      revenue, accounts payable and accrued expenses. The cash used in fiscal 2007
      (which excludes the impact of the settlement of a judgment payable, discussed
      in
      more detail in the Summary above and in Footnote 4 to the notes to the
      consolidated financial statements appearing elsewhere herein) was primarily
      a
      result of the Company’s loss from operations along with a reduction in orders in
      the fiscal fourth quarter. This was partially offset by a reduction in
      inventory, also due to the reduction in orders.




Net
      cash
      used by investing activities was $4,636 and $17,895 for the 2008 and 2007 fiscal
      years, respectively. The use of funds in both years was for the purchase of
      equipment and software.





Cash
      provided by financing activities for fiscal 2008 was $705,310. The source of
      cash was working capital loans from Holo-Dek. Cash provided by financing
      activities for fiscal 2007 was $678,734. The source of cash was working capital
      loans from Holo-Dek, partially offset by the cash payment made to settle a
      judgment payable (see the Summary above and Note 4 to the consolidated financial
      statements appearing elsewhere herein). In 2006, the Company negotiated the
      terms of sale for segments of the Company’s accounts receivable with LSQ Funding
      Group, L.C. In fiscal 2008, the Company negotiated a new agreement with
      Coastline Financial Services Group (see Note 1 to the Company’s consolidated
      financial statements appearing elsewhere herein).





Regarding
      working capital advances from Holo-Dek, until October 31, 2004, the Trust
      invested directly into Robotics, with the funding being in the form of debt
      that
      was converted to Kingston stock in June 2006. The debt and accumulated interest
      totaled $1,836,752 as of October 31, 2004 on the books of Robotics. As of
      October 31, 2004, the accrual of interest on the debt ceased. After October
      31,
      2004, the Trust made non-interest bearing cash advances to Holo-Dek which in
      turn made non-interest bearing cash advances to Robotics on an as-needed basis,
      through the working capital advance account, which cash advances aggregated
      $1,561,075 at March 31, 2008 and $854,848 at March 31, 2007. In addition, the
      Trust made a short-term loan of $100,000 to the Company in March of 2006, which
      is evidenced by a note payable on demand on or after March 17, 2007, at the
      discretion of the Trust. The loan bears an annual interest rate of 8.0%. These
      relationships are discussed in Note 3 to the consolidated financial statements
      included elsewhere herein.




The
      Company's cash and cash equivalents of $1,567 as of March 31, 2008, along with
      presently-anticipated future sales revenue, is not presently sufficient to
      support current levels of operations for the next twelve months and it is
      therefore necessary for the Company to continue to seek additional financing.
      Such financing has been obtained in the past primarily from the Trust, along
      with the sale of the Company's robots. In addition, the Company is continuing
      to
      pursue its interest in Holo-Dek, along with a focus on increasing revenue
      through an increased level of sales of robotic products. As mentioned
      previously, the Company is actively pursuing additional sources of
      funding,




Given
      the
      aforementioned discussion, there is no assurance that the level of funding
      ultimately received by the Company will be sufficient to sustain the Company's
      future operations. Should that occur, the Company may need to curtail its
      operations.




**Aggregate
      Contractual Obligations**




At
      March
      31, 2008, the Company had the following contractual obligations due by
      period:





Total
            
            Less than 1 year
            
            1-3 years
            
            3-5 years
            
            More than 5 yearsDebt
                obligations
            
            $
            209,032
            
            $
            144,800
            
            $
            64,232
            
            $
            0
            
            $
            0Capital
                leases - Robotics
            
            
            32,839
            
            
            16,366
            
            
            16,473
            
            
            0
            
            
            0Operating
                lease - Robotics allocation
            
            
            162,871
            
            
            53,033
            
            
            109,838
            
            
            0
            
            
            0Wages
                payable
            
            
            46,300
            
            
            46,300
            
            
            0
            
            
            0
            
            
            0Holo-Dek
                capital leases
              under
                Robotic's name
            
            
            93,850
            
            
            45,793
            
            
            43,284
            
            
            4,774
            
            
            0Holo-Dek
                  share of operating
                lease
                  under Robotic's name
            
            
            346,101
            
            
            112,695
            
            
            233,406
            
            
            0
            
            
            0




**Off
        Balance Sheet Arrangements**




As
      of
      March 31, 2008 and 2007, the Company had no off balance sheet arrangements
      with
      any parties.







**Form
      10-K Page 14**




**Legal
      Contingencies**




The
      Company may be subject to proceedings, lawsuits and other claims, including
      proceedings under laws and government regulations related to the environment,
      labor, product liability and other matters. The Company is required to assess
      the likelihood of any adverse judgments or outcomes to these matters, as well
      as
      potential ranges of probable losses. A determination of the amount of reserves
      required, if any, for these contingencies is based on a careful analysis of
      each
      individual issue with the assistance of outside legal counsel. The required
      reserves may change in the future due to new developments in each matter or
      changes in approach such as a change in settlement strategy in dealing with
      these matters. At March 31, 2008 there are no outstanding legal proceedings,
      nor
      are there any reserves established.





**Recent
      Accounting Pronouncements**




In
      September 2006, the Financial Accounting Standards Board ("FASB") issued
      Statement of Financial Accounting Standards ("SFAS") No. 157, “Fair Value
      Measurements.” This Statement defines fair value, establishes a framework for
      measuring fair value in generally accepted accounting principles (“GAAP”), and
      expands disclosures about fair value measurements. This Statement applies under
      other accounting pronouncements that require or permit fair value measurements,
      the Board having previously concluded in those accounting pronouncements that
      fair value is the relevant measurement attribute. This Statement is effective
      for financial statements issued for the fiscal years beginning after November
      15, 2007. The Company is evaluating the effect of this statement.




In
        February 2008, the FASB issued FASB Staff Position No. 157-2 which extended
        the
        effective date for certain non-financial assets and non-financial liabilities
        to
        fiscal years beginning after November 15, 2008.


In
      February 2007, the FASB issued SFAS No. 159, “The Fair Value Option for
      Financial Assets and Financial Liabilities—Including an amendment of FASB
      Statement No. 115.” This Statement permits entities to choose to measure many
      financial instruments and certain other items at fair value. The objective
      is to
      improve financial reporting by providing entities with the opportunity to
      mitigate volatility in reported earnings caused by measuring related assets
      and
      liabilities differently without having to apply complex hedge accounting
      provisions. This Statement is expected to expand the use of fair value
      measurement, which is consistent with the Board’s long-term measurement
      objectives for accounting for financial instruments. This Statement is effective
      for financial statements issued for the fiscal years beginning after November
      15, 2007. The Company is evaluating the effect of this Statement.




In
      December 2007, the FASB issued SFAS No. 141
      (revised 2007), "Business Combinations" and SFAS No. 160, “Non-controlling
      Interests in Consolidated Financial Statements.” SFAS No. 141R is a revision to
      SFAS No. 141 and includes substantial changes to the acquisition method used
      to
      account for business combinations (formerly the "purchase accounting" method),
      including broadening the definition of a business, as well as revisions to
      accounting methods for contingent consideration and other contingencies related
      to the acquired business, accounting for transaction costs, and accounting
      for
      adjustments to provisional amounts recorded in connection with acquisitions.
      SFAS No. 141R retains the fundamental requirement of SFAS No. 141 that the
      acquisition method of accounting be used for all business combinations and
      for
      an acquirer to be identified for each business combination. SFAS No. 160
      clarifies that: a non-controlling interest in a subsidiary should be reported
      as
      equity in the consolidated financial statements; consolidated net income shall
      be adjusted to include the net income attributed to the non-controlling
      interest; and consolidated comprehensive income shall be adjusted to include
      the
      comprehensive income attributed to the non-controlling interest. The calculation
      of earnings per share will continue to be based on income amounts attributable
      to the parent. SFAS No. 141R and SFAS No. 160is effective for periods beginning
      on or after December 15, 2008, and will apply to all business combinations
      occurring after the effective date. The Company is currently evaluating the
      requirements of SFAS No. 141R and SFAS No. 160.




In
      March 2008, the FASB issued SFAS No. 161, “Disclosures about
      Derivative Instruments and Hedging Activities.” The new Standard is intended to
      improve financial reporting about derivative instruments and hedging activities
      by requiring enhanced disclosures to enable investors to better understand
      their
      effects on an entity’s financial position, financial performance, and cash
      flows. It is effective for financial statements issued for fiscal years and
      interim periods beginning after November 15, 2008, with early application
      encouraged. The Company is currently evaluating the impact of adopting SFAS
      No. 161 on the Company's consolidated financial
      statements.





**Form
      10-K Page 15**





**Forward
      Looking Statements**





The
      Company is including the following cautionary statement in this Annual Report
      on
      Form 10-K. Forward-looking statements include statements concerning plans,
      objectives, goals, strategies, future events or performance and underlying
      assumptions and other statements which are other than statements of historical
      facts. Certain statements contained herein are forward-looking statements and
      accordingly involve risks and uncertainties which could cause actual results
      or
      outcomes to differ materially from those expressed in the forward-looking
      statements. The Company's expectations, beliefs and projections are expressed
      in
      good faith and are believed by the Company to have a reasonable basis, including
      without limitation, management's examination of historical operating trends,
      data contained in the Company's records and other data available from third
      parties, but there can be no assurance that management's expectation, beliefs
      or
      projections will result or be achieved or accomplished. In addition to other
      factors and matters discussed elsewhere herein, the following are important
      factors that, in the view of the Company, could cause actual results to differ
      materially from those discussed in the forward-looking statements: the Company's
      losses from period to period; the Company's current dependence on a limited
      number of key suppliers and investors; the Company's ability to successfully
      market and sell its products in view of changing trends, acceptance of products
      and other factors affecting market conditions; technological advances by the
      Company's competitors; capital needs to fund operations and development
      programs; delays in the manufacture of new and existing products by the Company
      or third party contractors; the loss of any key employees; the outcome of any
      litigations; changes in governmental regulations; and availability of capital
      on
      terms satisfactory to the Company. The Company disclaims any obligation to
      update any forward-looking statements to reflect events or circumstances after
      the date hereof.





**ITEM
      7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET
      RISK**




In
      the
      normal course of business, the Company’s financial position and results of
      operations are routinely subject to a variety of risks. In the case of the
      Company, those risks are primarily related to expected sales that may fail
      to
      materialize and to continued funding from the Trust. The Company does not
      utilize any credit lines or financial instruments for borrowing or investments
      (the Company does utilize a receivables factoring arrangement, which has
      contractual fees - see Note 1 to the consolidated financial statements included
      elsewhere herein) and does not have any transactions valued in a foreign
      currency. All advances from the Trust are at a stated interest rate of 8.0%
      per
      year. Therefore, as of March 31, 2008, the Company does not experience any
      material effects from market risk.




**ITEM
      8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA**




The
      Financial Statements are included after the Exhibit Index.




**KINGSTON
      SYSTEMS INC.**


**INDEX**




Page NumberReport of
                Independent Registered Public Accounting Firm
            
            23Consolidated
                Balance Sheets as of March 31, 2008 and March 31, 2007
            
            24Consolidated
                Statements of Operations for the Years Ended March 31, 2008 and March
                31,
                2007
            
            25Consolidated
                Statements of Shareholders' Deficit for the years ended March 31,
                2008 and
                March 31, 2007
            
            26Consolidated
                Statements of Cash Flows for the Years Ended March 31, 2008 and March
                31,
                2007
            
            27Notes
                to the Consolidated Financial Statements
            
            28-36










**Form
      10-K Page 16**





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





None




**ITEM
      9A. CONTROLS AND PROCEDURES**




**Evaluation
      of Disclosure Controls and Procedures**




The
      Company maintains disclosure controls and procedures designed to ensure that
      information required to be disclosed in the Company's reports filed under the
      Securities Exchange Act of 1934, as amended (the "Exchange Act"), is recorded,
      processed, summarized, and reported within the required time periods, and that
      such information is accumulated and communicated to the Company's management,
      including the Chief Executive Officer and Chief Financial Officer, as
      appropriate, to allow for timely decisions regarding disclosure.




As
      required by Rule 13a-15 under the Exchange Act, the Company has completed an
      evaluation, under the supervision and with the participation of management,
      including the Chief Executive Officer and Principal Financial Officer, of the
      effectiveness and the design and operation of the Company's disclosure controls
      and procedures as of March 31, 2008. Based upon this evaluation, management,
      including the Chief Executive Officer and Principal Financial Officer, have
      concluded that the Company's disclosure controls and procedures were effective
      as of March 31, 2008 to ensure that material information relating to the Company
      are recorded, processed, summarized and reported within the time periods in
      which this Annual Report has been prepared. Management has concluded that the
      consolidated financial statements included in this Form 10-K present fairly,
      in
      all material respects, the results of the Company's operations and its financial
      position for the periods presented, in conformity with generally accepted
      accounting principles.





**Management’s
      Report on Internal Control over Financial Reporting**





The
      Company’s management is responsible for establishing and maintaining adequate
      internal control over financial reporting (as defined in Rule 13a-15(f) under
      the Securities Exchange Act, as amended). Management has assessed the
      effectiveness of the Company’s internal control over financial
      reporting as of March 31, 2008. In making this assessment, management used
      the
      criteria set forth by the Committee of Sponsoring Organizations of the Treadway
      Commission (“COSO”) in *Internal
      Control-Integrated Framework* .
      Management has concluded that, as of March 31, 2008, internal controls over
      financial reporting are effective based on these criteria.





**Changes
      in Internal Control over Financial Reporting**





The
      Company's principal executive officer and principal financial officer have
      concluded that there were no significant changes in the Company's internal
      controls or in other factors that could significantly affect these controls
      for
      the year ended March 31, 2008, the date of their most recent evaluation of
      such
      controls, and that there were no significant deficiencies or material weaknesses
      in the Company's internal controls.




**Limitations
      on Effectiveness of Controls**




A
      system
      of controls, however well designed and operated, can provide only reasonable,
      and not absolute, assurance that the system will meet its objectives. The design
      of a control system is based, in part, upon the benefits of the control system
      relative to its costs. Control systems can be circumvented by the individual
      acts of some persons, by collusion of two or more people, or by management
      override of the control. In addition, over time, controls may become inadequate
      because of changes in conditions, or the degree of compliance with the policies
      or procedures may deteriorate. In addition, the design of any control system
      is
      based in part upon assumptions about the likelihood of future events.





**Form
      10-K Page 1** **7**




**ITEM
      9A(T). CONTROLS AND PROCEDURES**





**Section
      404 Assessment**





Section
      404 of the Sarbanes-Oxley Act of 2002 requires management's annual review and
      evaluation of the Company's internal controls, and an attestation of the
      effectiveness of these controls by the Company's independent registered public
      accountants, beginning with the Company's Form 10-K for the fiscal year ending
      on March 31, 2010. Therefore, this annual report does not include an attestation
      report of the Company's registered public accounting firm regarding internal
      control over financial reporting. Management's report was not subject to
      attestation by the Company's registered public accounting firm, pursuant to
      temporary rules of the SEC that permit the Company to provide only management's
      report in this annual report.





**ITEM
      9B. OTHER INFORMATION**





None.





**PART
      III**





**ITEM
      10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE**




**Directors
      and Executive Officers**




As
      of
      June 30, 2008 the Directors and executive officers of the Company are presented
      below.





NAME
            
            AGE
            
            TITLERalph
                E. McKittrick
            
            
            58
            
            
            Chairman,
                CEO, and DirectorGeorge
                J. Coupe
            
            
            67
            
            
            Chief
                Financial Officer and DirectorJames
                W. Byrne
            
            
            51
            
            
            Director




The
      principal occupations and brief summary of the background of each Director
      and
      executive officer of Kingston during the past five years is as
      follows:




**Ralph
      E. McKittrick - Founder/CEO, and Chairman of the Board of Directors since
      January 1987**




Ralph
      McKittrick is the founder, Chairman of the Board and Chief Executive Officer
      of
      the Company and will serve as a director until the next annual meeting of
      shareholders or until the next consent of a majority of shareholders (in lieu
      of
      a meeting) and will serve as CEO until a successor is elected by the board
      and
      qualified. In 2004, he co-founded Holo-Dek and he has been the CEO of Holo-Dek
      since its founding. In 2003, Mr. McKittrick co-founded Cargo Force, Inc., a
      commercial airlift/airfreight startup company whose mission is to support US
      industry, especially the heavy manufacturers. He has been the CEO of Cargo
      Force
      since its founding. From December 15, 1999 to November 15, 2002, Mr. McKittrick
      was a consultant to CNC Systems, Inc., a machine tool distributor in Maine,
      where he helped turn around the company.




**George
      J. Coupe - Chief Financial Officer and Director since March
      2006**




George
      Coupe is a member of the Company’s Board of Directors and the Chief Financial
      Officer of the Company and will serve as a director until the next annual
      meeting of shareholders or until the next consent of a majority of shareholders
      (in lieu of a meeting) and will serve as CFO until a successor is elected by
      the
      board and qualified. In 2004, he co-founded Holo-Dek and has been the President
      of Holo-Dek since its founding. Mr. Coupe founded Robotics in 2002 and he has
      also been the President of Robotics since its founding. Prior to founding
      Robotics, and beginning with his departure from Ford Finance Staff in 1975,
      Mr.
      Coupe was engaged in turning around companies in financial difficulty, typically
      either as the CFO or as a financial control consultant. Mr. Coupe also was
      one
      of the founders at two startup companies during this period. Prior to founding
      Robotics, Mr. Coupe was a financial consultant (from to March 2000 to February
      2002) and before that he was the CFO of Northland Tool, Inc., (from January
      1,
      1995 to March 15, 2000) a spindle repair company.




**James
      W. Byrne - Director since May 1989**





Mr.
      Byrne
      is a member of the Company’s Board of Directors and will serve as a director
      until the next annual meeting of shareholders or until the next consent of
      a
      majority of shareholders (in lieu of a meeting). Mr. Byrne is the operations
      manager for Holo-Dek, a position he has held since March 31, 2004. Prior to
      joining Holo-Dek, Mr. Byrne spent 27 months renovating his 18 th century
      home in New Hampshire. From July 17, 1998 to August 1, 2002, he was the Director
      of Engineering for Advanced Digital Internet ("ADI"). ADI provided internet
      service to high-end multi-dwelling units in Manhattan. Mr. Byrne's specialty
      was
      designing the infrastructure and overseeing the installation of each system.





**Form
      10-K Page 18**




There
      are
      no significant (critical) employees of the Company, other than the directors
      and
      officers noted above.




**Audit
      Committee Financial Expert**




The
      Company does not currently have independent directors. The Company intends
      to
      establish independent directors, along with an Audit and Compensation Committee,
      in its 2009 fiscal year.




**Compensation
      of Directors**




Directors
      who are employees of the Company are not paid any other fees or additional
      compensation for services as members of the Company's Board of Directors or
      any
      committee thereof.




**Section
      16(A) Beneficial Ownership Reporting Compliance**




Section
      16(a) of the Securities Exchange Act of 1934 requires the Company's directors,
      executive officers and any person who owns more than 10% of the Company's common
      stock (the "Reporting Persons") to file with the SEC reports of ownership and
      reports of changes in ownership of the Company's common stock. Under Securities
      and Exchange Commission rules, the Company receives copies of all Section 16(a)
      forms that these Reporting Persons file. The Company has determined that all
      shareholders required to file are in compliance with Section 16(a).




**Code
      of Ethics**




The
      Company has adopted a Code of Ethics within the meaning of Item 406(b) of
      Regulation S-B. This Code of Ethics applies to the Company's principal executive
      officer, the Company's principal financial officer and principal accounting
      officer, as well as all other employees, and is incorporated by reference.
      If
      the Company makes substantive amendments to this Code of Ethics or grants any
      waiver, including any implicit waiver, the Company will disclose the nature
      of
      such amendment or waiver on the Company's website or in a report on Form 8-K
      within five days of such amendment or waiver.




The
      Company’s code of ethics is posted on its website
      www.kingstonsystems.com.




**ITEM
      11. EXECUTIVE COMPENSATION**




The
      following table sets forth the aggregate cash compensation paid by the Company
      to: (i) its Chief Executive Officer, Chairman; and (ii) its most highly
      compensated officers whose cash compensation exceeded $100,000 for services
      performed during the year ended March 31, 200 8.




Non-equity
            
            NonqualifiedName and Principal
              Position
            
            Year
            
            Salary ($)
            
            Bonus ($)
            
            Stock
              Awards ($)
            
            Option
              Awards ($)
            
            Incentive
              Plan
                Compensation ($)
            
            Deferred
              Compensation
              Earnings ($)
            
            All other
              Compensation ($)
            
            Total $Ralph
                McKittrick,
            
            
            2008
            
            
            0
            
            
            0
            
            
            0
            
            
            0
            
            
            0
            
            
            0
            
            
            0
            
            
            0CEO
            
            
            2007
            
            
            0
            
            
            0
            
            
            0
            
            
            0
            
            
            0
            
            
            0
            
            
            0
            
            
            02006
            
            
            0
            
            
            0
            
            
            0
            
            
            0
            
            
            0
            
            
            0
            
            
            0
            
            
            0




The
      Company does not currently have a policy regarding compensation for serving
      on
      the Board of Directors. The Company does not have any employment
      agreements.




The
      Company does not have any annuity, retirement, pension or deferred compensation
      plan or other arrangements under which an executive officer is entitled to
      participate without similar participation by other employees.




The
      Company does not currently have a stock option plan.




**ITEM
      12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED
      SHAREHOLDER MATTERS.**




As
      of
      June 30, 2008, there were 5,601,140 shares of common stock issued and 5,576,234
      shares of common stock outstanding .





**Form
      10-K Page 19**




The
      following table sets forth certain information as of March 31, 2008, regarding
      each person known by the Company to be the beneficial owner of more than 5%
      of
      the outstanding shares of our common stock, each director, and named executive
      officer of the Company, and all officers and directors as a group:





Name/Address of Beneficial
              Owner*
            
            Position with
              Company
            
            Amount and Nature
              of Beneficial
              Ownership of
              Common Stock
              (1)
            
            Percentage of
              Securities (1)Ralph E.
                McKittrick (2)
            
            
            Chairman,
                CEO
            
            
            2,470,488
            
            
            44.3
            %James
                W. Byrne
            
            
            Director
            
            
            0
            
            
            0.0
            %George
                J. Coupe
            
            
            Chief
                Financial Officer
            
            
            0
            
            
            0.0
            %Flood
                Trust (3)
            
            
            N/A
            
            
            612,251
            
            
            11.0
            %All
                executive officers and Directors as a group
                (3 people)
            
            
            
            
            
            2,470,488
            
            
            44.3
            %




*
      Address
      of all holders is c/o Kingston Systems, Inc., 8 Merrill Industrial Drive, Unit
      12, Hampton, NH 03842.





(1)
      Pursuant to the rules of the Securities and Exchange Commission, a person is
      deemed to "beneficially own" shares of common stock over which the person has
      or
      shares investment or voting power, or has the right to acquire such power within
      60 days. The percentage of common stock owned is calculated based on the number
      of shares of common stock outstanding, plus, in the case of each person, the
      number of shares of common stock issuable only to such person upon the exercise
      of options or warrants and the conversion of convertible debt
      securities.


(2)
      The
      ownership noted is comprised of the following: Thor Corporation owns 2,332,133
      shares of common stock and is 100% controlled by Ralph McKittrick; Kingston
      Associates owns 105,902 shares of common stock and is a Limited Partnership,
      60%
      controlled by Ralph McKittrick; and Ralph McKittrick owns 32,453 shares of
      common stock directly.




(3)
      Mr.
      Larry Flood has sole control over the shares held by the Flood Trust.




**ITEM
      13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR
      INDEPENDENCE**




**Certain
      Relationships and Related Transactions**




As
      of
      March 31, 2008, the Company was involved in the following related party
      transactions:





o
      The
      Company has certain credit card advances from George Coupe, President of
      Robotics, in the amount of $81,418. These advances are for the financing of
      operations and certain capital asset purchases. These advances consist of the
      balances on personal credit cards of George Coupe that were and are being used
      exclusively for the Company's expenditures. The monthly payments on these cards
      include all of the monthly interest being charged by the credit card company
      and
      a portion of the "principal." The interest rates being paid to the credit card
      companies vary between 5.0% and 23.0%. The average balance was $76,773
      for the period from April 1, 2007 through March 31, 2008. The weighted average
      interest rates on the March 31, 2008 and 2007 credit card balances were 10.5%
      and 11.3%, respectively.





o
      The
      Company has an additional note payable to George Coupe in the amount of $200.
      This demand note was issued in 2002 as part of the initial capitalization of
      Robotics and is due March 31, 2011. The note was non-interest bearing through
      April 1, 2006. Subsequent to that date, the note bears interest at the rate
      of
      8.0% per year (accrued interest of $32 as of March 31, 2008). This note is
      reflected in notes payable, related parties on the Company's balance
      sheet.





o
      The
      Company has a debt payable to Ralph McKittrick in the amount of $46,300 for
      unpaid wages prior to December 31, 1988. The debt is non-interest bearing.
      The
      amount of the debt has not changed since it was incurred.





o
      The
      Company, through its Robotics subsidiary, has a relationship with Holo-Dek.
      Ralph McKittrick, the CEO of Kingston, is also the CEO of Holo-Dek (Ralph
      McKittrick is the largest shareholder, directly or indirectly, in Kingston
      and
      the second largest shareholder in Holo-Dek). Robotics and Holo-Dek share office
      facilities, a number of employees and certain expenses. The Trust, an investor
      in Kingston and Robotics, is also a significant lender of working capital to
      Holo-Dek. As of March 31, 2008, Holo-Dek has provided working capital advances
      to Kingston in the amount of $1,561,075, shown in current liabilities on the
      Company's balance sheet. Until October 31, 2004, the Trust made loans directly
      to Robotics, with the funding being in the form of debt that was converted
      to
      stock. The debt and accumulated interest totaled $1,836,752 at October 31,
      2004.
      The accrual of interest on the debt was temporarily delayed from October 31,
      2004 until October 31, 2005, at which time interest accrued at the rate of
      8%
      per year. Interest accrued from October 31, 2005 until June, 2006, when the
      debt
      (including accrued interest) was converted to stock. After October 31, 2004,
      the
      Trust made loans to Holo-Dek, which in turn made cash advances to Robotics
      on an
      as needed basis, through the working capital advance account.





o
      The
      Company’s Robotics subsidiary is the named owner on a number of credit cards
      used by Holo-Dek. As of March 31, 2008, the balances on those credit cards
      totaled $83,630 and are recorded as a related party asset and credit card
      liability on the Company’s balance sheets. Additionally, there is approximately
      $177,000 of total credit limit available on all Robotics credit cards, whether
      used by Robotics or Holo-Dek. The amount of credit line that was unused as
      of
      March 31, 2008 was approximately $74,000.





**Form
      10-K Page 20**





o
      The
      Company has a licensing and royalty agreement in connection with the
      co-ownership of certain technology. The Hexel Corporation ("Hexel") originally
      developed the robotics technology. That corporation is still in existence,
      with
      limited operations. There are two current employees of Robotics who are
      shareholders in Hexel. In addition, its major shareholder in the Company (who
      is
      not an employee or a member of management) also owns a minor interest in Hexel.
      Hexel has licensed the use of all intellectual property to Robotics. Under
      the
      agreement, Robotics is required to pay to Hexel by March 31, 2009 2% of gross
      sales, less shipping, tax, and other customary costs normally born by the
      seller, on products sold which incorporate that certain licensed software and
      intellectual property. Any enhancements/developments by Robotics to the robot
      technology, including software, are co-owned with Hexel through the licensing
      agreement. At March 31, 2008 and 2007, $32,496 and $23,291 was owed to Hexel
      with $9,205 and $9,156 recorded as an expense during the years ended March
      31,
      2008 and 2007, respectively.





o
      The
      Company has a related party note and loan payable to the Trust, discussed in
      Note 4 to the consolidated financial statements appearing elsewhere herein,
      and
      the Company is the lessee on eight related party capital leases, discussed
      in
      Note 8 to the consolidated financial statements contained elsewhere
      herein.





**Director
      Independence**





As
      discussed previously, Kit McKittrick, George Coupe and Wes Byrne are the
      directors of Kingston. Mr. McKittrick is the CEO of Kingston and holds the
      majority of the common stock of the Company. Mr. Coupe is the CFO of Kingston
      and is also a lender to Robotics. Mr. Byrne is employed by Holo-Dek, which
      is a
      significant lender to Robotics. The Company intends to add independent directors
      to its Board of Directors during the Company’s 2009 fiscal year.




**ITEM
      14. PRINCIPAL ACCOUNTING FEES AND SERVICES**





As of March 31,
            
            
            2008
            
            
            2007Audit
                Fees
            
            $
            37,227
            
            $
            63,346Audit
                Related Fees
            
            
            —
            
            
            —Tax
                Fees
            
            
            —
            
            
            —Other
                Fees
            
            
            —
            
            
            —Total
                Fees
            
            $
            37,227
            
            $
            63,346




**ITEM
      15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES**





(a)
      The
      following consolidated financial statements are included in Item 8 of this
      Annual Report on Form 10-K and appear on the pages shown
      below:




Page NumberReport
                of Independent Registered Public Accounting Firm
            
            
            23Consolidated
                Balance Sheets as of March 31, 2008 and March 31, 2007
            
            
            24Consolidated
                Statements of Operations for the Years Ended March 31, 2008 and March
                31,
                2007
            
            
            25Consolidated
                Statements of Shareholders' Equity Deficit for the years ended March
                31,
                2008 and March 31, 2007
            
            
            26Consolidated
                Statements of Cash Flows for the Years Ended March 31, 2008 and March
                31,
                2007
            
            
            27Notes
                to the Consolidated Financial Statements
            
            
            28-36





**Form
      10-K Page 21**





(b)
      Listed below are the Exhibits filed or furnished as part of this report, some
      of
      which are incorporated by reference from documents previously filed by us with
      the Securities and Exchange Commission in accordance with the provisions of
      Rule 12b-32 of the Exchange Act.





Exhibit No.
            
            Document
            
            Page Number3.1
            
            
            The
                Certificate of Incorporation of the Registrant, filed as Exhibit
                3(a) to
                Registrant's Registration Statement on Form S-1 (File No. 33-12019),
                filed
                on February 17, 1987, as amended by Amendment Nos. 1,2 and 3 filed
                on
                March 25, April 3 and April 7, 1987, respectively (the "S-1 Registration
                Statement"), is incorporated herein by reference.3.2
            
            
            The
                By-Laws of the Registrant, filed as Exhibit 3(b) to the Registrant's
                S-1
                Registration Statement, is incorporated herein by reference.14
            
            
            The
                Code of Ethics of the Registrant, filed as Exhibit 14 to the Registrant's
                March 31, 2005 Form 10-KSB, is incorporated herein by
                reference.15
            
            
            Triangular
                Gimbal, Patent No: US 6,240,799 B1 and Systems and Methods Employing
                a
                Rotary Track, Patent No: US 6,196,081 B1, incorporated herein by
                reference.21*
            
            
            List
                of Company's subsidiaries
            
            
            3731.1,
                31.2*
            
            
            Rule
                13a-14(a)/15d-14(a) Certification
            
            
            38-3932.1,
                32.2*
            
            
            Section
                1350 - Certification
            
            
            40-4110.1*
            
            
            Agreement
                with Coastline Financial Services
            
            
            42-51




*
      Filed
      herewith




**SIGNATURES**




Pursuant
      to the requirements of Section 13 or 15(d) of the Securities Exchange Act of
      1934, as amended, the Company has duly caused this report to be signed on its
      behalf by the undersigned, thereunto duly authorized on the 15th day of July,
      2008.





**KINGSTON
                SYSTEMS INC.**By:
            /s/
                Ralph E. McKittrickRalph
                E. McKittrickChief
                Executive Officer




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





Signature
            
            Title
            
            Date/s/
                Ralph E. McKittrick
            
            Chairman,
              Chief Executive Officer,Ralph
              E. McKittrick
            
            Principal
                Executive
            
            July
                15, 2008/s/
                George J. CoupeGeorge
                J. Coupe
            
            Chief
                Financial Officer
            
            July
                15, 2008/s/
                James W. ByrneJames
                W. Byrne
            
            Director
            
            July
                15, 2008








**Form
      10-K Page 22**





**KINGSTON
      SYSTEMS INC.**





PageNumberReport
                of Independent Registered Public Accounting Firm
            
            23Consolidated
                Balance Sheets as of March 31, 2008 and March 31, 2007
            
            24Consolidated
                Statements of Operations for the Years Ended March 31, 2008 and March
                31,
                2007
            
            25Consolidated
                Statements of Shareholders' Deficit for the Period from April 1,
                2006 to
                March 31, 2008
            
            26Consolidated
                Statements of Cash Flows for the Years Ended March 31, 2008 and March
                31,
                2007
            
            27Notes
                to the Consolidated Financial Statements
            
            28-36





**Form
      10-K Page 23**









**REPORT
      OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM**





To
      the
      Board of Directors and Shareholders of Kingston Systems Inc.


Hampton,
      New Hampshire




We
      have
      audited the consolidated balance sheets of Kingston Systems Inc. and subsidiary,
      as of March 31, 2008 and 2007, and the related consolidated statements of
      operations, shareholders' deficit and cash flows for the years then ended.
      These
      consolidated financial statements are the responsibility of the Company's
      management. Our responsibility is to express an opinion on these consolidated
      financial statements based on our audits.




We
      conducted our audits in accordance with the standards of the Public Company
      Accounting Oversight Board (United States). Those standards require that we
      plan
      and perform the audit to obtain reasonable assurance about whether the financial
      statements are free of material misstatement. The company is not required to
      have, nor were we engaged to perform, an audit of its internal control over
      financial reporting. Our audit included consideration of internal control over
      financial reporting as a basis for designing audit procedures that are
      appropriate in the circumstances, but not for the purpose of expressing an
      opinion on the effectiveness of the company’s internal control over financial
      reporting. Accordingly, we express no such opinion. An audit also includes
      examining, on a test basis, evidence supporting the amounts and disclosures
      in
      the financial statements, assessing the accounting principles used and
      significant estimates made by management, as well as evaluating the overall
      financial statement presentation. We believe that our audits provide a
      reasonable basis for our opinion.




In
      our
      opinion the consolidated financial statements referred to above present fairly,
      in all material respects, the consolidated financial position of Kingston
      Systems Inc. and subsidiary as of March 31, 2008 and 2007, and the results
      of
      its operations and its cash flows for the years then ended, in conformity with
      U.S. generally accepted accounting principles.




The
      accompanying consolidated financial statements have been prepared assuming
      that
      the Company will continue as a going concern. The Company has incurred losses,
      is in an equity deficit position and has a current ratio deficit. These
      conditions raise substantial doubt about the Company’s ability to continue as a
      going concern. Management's plans concerning these matters are described in
      Note
      1. The consolidated financial statements do not include any adjustments that
      might result from the outcome of this uncertainty.




**HANSEN,
      BARNETT & MAXWELL,
      P.C.**




Salt
      Lake
      City, Utah


July
      14,
      200 8





**Form
      10-K Page 24**




**KINGSTON
      SYSTEMS INC.**


**CONSOLIDATED
      BALANCE SHEETS**




**March
                  31, 2008**
              
              **March
                  31, 2007****ASSETS****CURRENT
                  ASSETS:****Cash
                  and cash equivalents**
              
              **$**
              **1,567**
              
              **$**
              **42,194****Accounts
                  receivable, net of allowance for doubtful accounts of $2,474 and
                  $0**
              
              
              **137,158**
              
              
              **110,749****as
                  of March 31, 2008 and 2007, respectively****Inventory**
              
              
              **98,796**
              
              
              **89,391****Related
                  party leases, current portion**
              
              
              **33,714**
              
              
              **25,841****Related
                  party receivable**
              
              
              **83,630**
              
              
              **60,378****Other
                  current assets**
              
              
              **7,074**
              
              
              **5,444****TOTAL
                  CURRENT ASSETS**
              
              
              **361,939**
              
              
              **333,997****OTHER
                  ASSETS:****Property
                  and equipment, net of accumulated depreciation of
                  $25,899**
              
              
              **35,537**
              
              
              **40,598****and
                  $16,202 as of March 31, 2008 and 2007,
                  respectively****Software,
                  net of accumulated amortization of $8,411 and
                  $2,315**
              
              
              **11,464**
              
              
              **17,559****as
                  of March 31, 2008 and 2007, respectively****Software
                  development costs, net of accumulated amortization of
                  $48,311**
              
              
              **107,375**
              
              
              **126,681****and
                  $29,006 as of March 31, 2008 and 2007,
                  respectively****Security
                  deposits**
              
              
              **12,000**
              
              
              **12,000****Related
                  party leases, non-current portion**
              
              
              **38,794**
              
              
              **31,956****TOTAL
                  ASSETS**
              
              **$**
              **567,109**
              
              **$**
              **562,791****LIABILITIES
                  AND SHAREHOLDERS' DEFICIT****CURRENT
                  LIABILITIES:****Accounts
                  payable**
              
              **$**
              **59,539**
              
              **$**
              **41,613****Related
                  party advances**
              
              
              **1,561,075**
              
              
              **854,848****Accrued
                  expenses**
              
              
              **89,463**
              
              
              **63,964****Deferred
                  revenue**
              
              
              **90,868**
              
              
              **24,582****Capitalized
                  lease obligations, current portion**
              
              
              **46,038**
              
              
              **36,048****Credit
                  card advances, related party**
              
              
              **81,418**
              
              
              **72,128****Credit
                  card liability**
              
              
              **83,630**
              
              
              **60,378****Wages
                  payable, related party**
              
              
              **46,300**
              
              
              **46,300****Notes
                  payable, related parties, current portion including accrued
                  interest****of
                  $12,832 and $6,416 as of March 31, 2008 and 2007,
                  respectively**
              
              
              **29,032**
              
              
              **38,616****Loan
                  payable, Flood Trust, related party, including accrued interest
                  of
                  $16,000****and
                  $8,000 as of March 31, 2008 and 2007,
                  respectively**
              
              
              **116,000**
              
              
              **108,000****TOTAL
                  CURRENT LIABILITIES**
              
              
              **2,203,363**
              
              
              **1,346,477****LONG
                  TERM LIABILITIES:****Note
                  payable, related party, non-current portion**
              
              
              **64,000**
              
              
              **48,000****Capitalized
                  lease obligations, non-current portion**
              
              
              **53,681**
              
              
              **59,168****TOTAL
                  LIABILITIES**
              
              
              **2,321,044**
              
              
              **1,453,645****SHAREHOLDERS'
                  DEFICIT:****Common
                  Stock: $0.01 par value; 10,000,000 shares authorized;
                  5,601,140****shares
                  issued and 5,576,234 shares outstanding as of March 31,
                  2008****and
                  2007, respectively**
              
              
              **56,012**
              
              
              **56,012****Additional
                  paid-in capital**
              
              
              **11,838,230**
              
              
              **11,838,230****Accumulated
                  deficit**
              
              
              **(13,607,421**
              **)**
              
              **(12,744,340**
              **)****Treasury
                  stock at cost; 24,906 shares**
              
              
              **(40,756**
              **)**
              
              **(40,756**
              **)****Total
                  shareholders’ deficit**
              
              
              **(1,753,935**
              **)**
              
              **(890,854**
              **)****TOTAL
                  LIABILITIES AND SHAREHOLDERS' DEFICIT**
              
              **$**
              **567,109**
              
              **$**
              **562,791**




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





**Form
      10-K Page 25**




**KINGSTON
      SYSTEMS INC.**


**CONSOLIDATED
      STATEMENTS OF OPERATIONS**




**THE
                  YEARS ENDED****March
                  31, 2008**
              
              **March
                  31, 2007****Revenue**
              
              **$**
              **523,923**
              
              **$**
              **604,221****Cost
                  of sales**
              
              
              **373,191**
              
              
              **473,021****Gross
                  profit**
              
              
              **150,732**
              
              
              **131,200****Operating
                  expense:****Selling**
              
              
              **122,557**
              
              
              **83,903****General
                  and administrative**
              
              
              **537,263**
              
              
              **537,540****Research
                  and development**
              
              
              **310,478**
              
              
              **145,104****Total
                  operating expense**
              
              
              **970,298**
              
              
              **766,547****Operating
                  loss**
              
              
              **(819,566**
              **)**
              
              **(635,347**
              **)****Other
                  income (expense):****Gain
                  on settlement of judgment payable**
              
              
              —
              
              
              **921,439****Interest
                  expense and financing fees**
              
              
              **(43,515**
              **)**
              
              **(62,845**
              **)****Total
                  other income (expense)**
              
              
              **(43,515**
              **)**
              
              **858,594****Net
                  income (loss) before provision/benefit****for
                  income taxes**
              
              
              **(863,081**
              **)**
              
              **223,247****Provision/benefit
                  for income taxes**
              
              
              —
              
              
              —**Net
                  income (loss)**
              
              **$**
              **(863,081**
              **)**
              **$**
              **223,247****Basic
                  and diluted income (loss)****per
                  share**
              
              **$**
              **(0.15**
              **)**
              **$**
              **0.04****Weighted-average
                  number of****common
                  shares outstanding**
              
              
              **5,576,234**
              
              
              **5,576,234**




**The
      accompanying notes are integral part of these consolidated financial
      statements.**







**Form
      10-K Page 26**




**KINGSTON
      SYSTEMS INC.**


**CONSOLIDATED
      STATEMENTS OF SHAREHOLDERS' DEFICIT**


**FOR
      THE PERIOD FROM APRIL 1, 2006 TO MARCH 31, 2008**





Additional
            
            
            
            
            
            TotalCommon Stock
            
            Paid-in
            
            Treasury
            
            Accumulated
            
            Shareholders’Shares
            
            Amount
            
            Capital
            
            Stock
            
            Deficit
            
            DeficitBalance at March 31, 2006
            
            
            4,988,889
            
            $
            49,889
            
            $
            10,007,601
            
            $
            (40,756
            )
            $
            (12,967,587
            )
            $
            (2,950,853
            )Shares
                issued in settlement of promissory note
            
            
            612,251
            
            
            6,123
            
            
            1,830,629
            
            
            —
            
            
            —
            
            
            1,836,752Net
                income for the year
            
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            
            223,247
            
            
            223,247Balance
                at March 31, 2007
            
            
            5,601,140
            
            
            56,012
            
            
            11,838,230
            
            
            (40,756
            )
            
            (12,744,340
            )
            
            (890,854
            )Net
                loss for the year
            
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            
            (863,081
            )
            
            (863,081
            )Balance
                at March 31, 2008
            
            
            5,601,140
            
            $
            56,012
            
            $
            11,838,230
            
            $
            (40,756
            )
            $
            (13,607,421
            )
            $
            (1,753,935
            )





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





**Form
      10-K Page 27**




**KINGSTON
      SYSTEMS INC.**


**CONSOLIDATED
      STATEMENTS OF CASH FLOWS**




**THE
                  YEARS ENDED****March
                  31, 2008**
              
              **March
                  31, 2007****CASH
                  FLOWS FROM OPERATING ACTIVITIES:****Net
                  income (loss)**
              
              **$**
              **(863,081**
              **)**
              **$**
              **223,247****Adjustments
                  to reconcile net income (loss) to net cash****from
                  operating activities:****Depreciation
                  and amortization**
              
              
              **35,097**
              
              
              **30,504****Gain
                  on judgment payable, including accrued interest**
              
              
              **—**
              
              
              **(921,439**
              **)****Changes
                  in assets and liabilities:****Accounts
                  receivable**
              
              
              **(26,409**
              **)**
              
              **27,793****Inventory**
              
              
              **(9,405**
              **)**
              
              **202,000****Other
                  current assets**
              
              
              **(1,630**
              **)**
              
              **(2,752**
              **)****Accounts
                  payable**
              
              
              **17,926**
              
              
              **(107,899**
              **)****Deferred
                  revenue**
              
              
              **66,286**
              
              
              **(154,897**
              **)****Accrued
                  expenses**
              
              
              **25,499**
              
              
              **21,227****Accrued
                  interest on loans payable**
              
              
              **14,416**
              
              
              **43,849****NET
                  CASH FROM OPERATING ACTIVITIES**
              
              
              **(741,301**
              **)**
              
              **(638,367**
              **)****CASH
                  FLOWS FROM INVESTING ACTIVITIES:****Purchases
                  of equipment and software**
              
              
              **(4,636**
              **)**
              
              **(17,895**
              **)****NET
                  CASH FROM INVESTING ACTIVITIES**
              
              
              **(4,636**
              **)**
              
              **(17,895**
              **)****CASH
                  FLOWS FROM FINANCING ACTIVITIES:****Related
                  party working capital advances**
              
              
              **1,079,626**
              
              
              **2,433,889****Payment
                  of related party advances**
              
              
              **(373,398**
              **)**
              
              **(1,656,185**
              **)****Borrowings
                  (payments) on credit card advances, related party**
              
              
              **9,290**
              
              
              **(8,135**
              **)****Proceeds
                  from capital lease obligation**
              
              
              **—**
              
              
              **14,848****Payments
                  on capital lease**
              
              
              **(10,208**
              **)**
              
              **(5,683**
              **)****Payment
                  made upon settlement of judgment**
              
              
              **—**
              
              
              **(100,000**
              **)****NET
                  CASH FROM FINANCING ACTIVITIES**
              
              
              **705,310**
              
              
              **678,734****Net
                  increase (decrease) in cash**
              
              
              **(40,627**
              **)**
              
              **22,472****Cash
                  and cash equivalents, beginning**
              
              
              **42,194**
              
              
              **19,722****Cash
                  and cash equivalents, ending**
              
              **$**
              **1,567**
              
              **$**
              **42,194****Supplemental
                  disclosure of cash flow information:****Non-cash
                  investing and financing activities:****Shares
                  issued in acquisition of Robotics**
              
              **$**
              **—**
              
              **$**
              **1,797,754****Capital
                  lease for equipment**
              
              
              **—**
              
              
              **24,681****Assumption
                  of credit card liability from related party**
              
              
              **83,630**
              
              
              **60,378****Assumption
                  of capital lease from related party**
              
              
              **49,260**
              
              
              **9,386****Reduction
                  in capital lease liability from related party**
              
              
              **(34,550**
              **)**
              
              **(18,573**
              **)****Cash
                  paid for interest**
              
              **$**
              **18,295**
              
              **$**
              **13,798****Cash
                  paid for income taxes**
              
              
              **—**
              
              
              **—**




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





**Form
      10-K Page 28**





**KINGSTON
      SYSTEMS INC.**


**NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS**


**MARCH
      31, 2008 AND 2007**




**NOTE
      1 — ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES**




**Organization
      and Controlling Shareholder —** In
      August of 2005, Kingston Systems Inc. ("Kingston" or the "Company") purchased
      all of the issued and outstanding common stock of Parallel Robotics Systems
      Corporation (“Robotics”). Since that time, the sole business of Kingston has
      been the operation of Robotics."




The
      majority and controlling shareholders of the Company are the following:





Name
            
            Shares
            
            CommentsKingston
                Associates
            
            105,902
            
            Limited
                Partnership 60% controlled by Ralph McKittrick, CEO of Kingston
                SystemsRalph
                McKittrick
            
            32,453Thor
                Corporation
            
            2,332,133
            
            Thor
                Corporation is 100% controlled by Ralph McKittrickAll
                others
            
            2,518,4014,988,889Flood
                Trust
            
            612,251
            
            See
                Note 2Total
            
            5,601,140




**Nature
      of Business** —
The
      Company's revenue generating subsidiary, Robotics, is in the business of
      building robots, called rotopods and hexapods. These robots are similar to
      the
      type of apparatus used to move flight simulators. The robots allow movement
      in
      all planes of motion and are primarily purchased by companies for product
      development and testing, although some robots are used in manufacturing. A
      significant component of the robot package is the customized software program
      that operates the robot's motions. On average, it takes three to six months
      to
      build a robot. Although many of the components of a robot are standard from
      contract to contract, each contract typically requires certain modifications
      to
      the standard product. A single contract generally generates revenue of
      approximately $125,000. The Company's geographic revenues for the last two
      years
      were as follows:




Years ended March 31,
              
              Domestic
              
              International2008
              
              $
              516,583
              
              $
              7,3402007
              
              
              491,635
              
              
              112,586




**Basis
      of Presentation** —
The
      consolidated financial statements have been prepared in accordance with
      generally accepted accounting principles ("GAAP"). The Company's fiscal year
      is
      from April 1 through March 31.




**Consolidation** —
The
      accompanying consolidated financial statements include the accounts of Kingston
      Systems, Inc. and its wholly owned subsidiary, Parallel Robotics Systems, Inc.
      Intercompany accounts and transactions have been eliminated in
      consolidation.




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




**Revenue
      Recognition** —
      Revenues are recognized when the robot is shipped under an agreement with a
      customer, risk of loss and title have passed to the customer, and collection
      is
      reasonably assured. The Company categorizes all pre-shipment progress payments
      from the customers and service agreement revenues as "deferred revenue" on
      the
      balance sheet. Upon shipment of the robot, the Company releases the prepayment
      liabilities to revenue, along with the related cost of sales. The Company
      recognizes any deferred service agreement revenue over the life of the
      agreement. Costs are recognized as incurred .





**Form
      10-K Page 29**




**KINGSTON
      SYSTEMS INC.**


**NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS**




**Business
      Condition** —
The
      accompanying consolidated financial statements have been prepared on a going
      concern basis, which contemplates the realization of assets and the satisfaction
      of liabilities in the normal course of business. As shown in the consolidated
      financial statements for the year ended March 31, 2008, the Company incurred
      an
      operating loss of $819,566 and has a working capital deficit of $1,841,424.
      The
      losses from operations and the working capital deficit raise substantial doubt
      about the Company's ability to continue as a going concern for a reasonable
      period of time. The consolidated financial statements do not include any
      adjustments relating to the recoverability and classification of recorded assets
      or the amount and classification of liabilities which might be necessary should
      the Company be unable to continue as a going concern. The Company's continuation
      as a going concern is dependent upon its ability to generate sufficient cash
      flows to meet its obligations on a timely basis, to obtain additional financing
      as may be required (the Company is, has been, and is currently, reliant upon
      a
      single major investor, the Flood Trust, for the majority of its working capital
      financing), and ultimately to attain successful operations for an extended
      period of time. Should the Company not succeed in its pursuit of equity
      financing, debt financing, or significant sales improvements, the Company may
      not be able to continue as a going concern and may need to curtail
      operations.




**Cash
      and Cash Equivalents** —
Cash
      equivalents include highly liquid, short-term investments with original
      maturities of three months or less, readily convertible to known amounts of
      cash.





**Accounts
      Receivable** —
      Accounts receivable are recorded at the invoiced amount. An allowance for
      doubtful accounts would be the Company's best estimate of the amount of probable
      credit losses in the Company's existing accounts receivable. Management
      regularly analyzes accounts receivable, including any historical write-off
      experience, customer creditworthiness and current economic trends to determine
      a
      need, if any, for an allowance for doubtful accounts. As of March 31, 2008
      and
      2007, management has estimated an allowance for doubtful accounts of $2,474
      and
      $0, respectively.





In
      November, 2006 the Company negotiated the terms of sale for segments of the
      Company’s accounts receivable to LSQ Funding Group, L.C. (“LSQ”) located in
      Orlando, Florida. The terms include the provisions that the initial payment
      to
      the Company will be approximately 80% of the approved receivables purchased
      and
      that the Company is to receive the balance of 20% of the total receivable,
      less
      applicable initial finance fees of 2% (per month) of the receivable balance
      factored and less additional finance and administrative fees when the customer
      pays the total receivable to LSQ.  In
      the
      Company’s 2008 fiscal year, the Company had $264,630 in new factoring
      transactions and received $277,532 in payment of receivables from previous
      transactions, less applicable fees of $10,804 (shown as a component of interest
      expense in the Company's statement of operations). In fiscal 2007, the Company
      had $184,000 in new factoring transactions and received $123,000 in payment
      of
      receivables from previous transactions, less applicable fees of $5,200. The
      factoring agreement provides for a lien on all assets as collateral for any
      and
      all outstanding advances by the factor.





As
      of
      February 12, 2008, the Company terminated its relationship with LSQ Funding
      Group. Effective February 2, 2008, the Company entered into an agreement with
      Coastline Financial Services Group (“Coastline”) for the sale of segments of the
      Company’s accounts receivables. The terms of the agreement are essentially the
      same as the terms the Company had with LSQ. The Company can sell up to $400,000
      of its receivables to Coastline. As of March 31, 2008, the Company had $400,000
      of availability which could be used to sell its receivables to Coastline.





**Inventory** —
      Inventory is stated at the lower of cost (first-in, first-out) or market. Market
      value is estimated based upon assumptions made about future demand and market
      conditions. If the Company determines that the actual market value is less
      than
      the carrying value of the inventory, the Company will make an adjustment to
      reduce the value of the inventory. At March 31, 2008 and 2007, inventory
      consisted of work in process materials, capitalized labor and spare parts (at
      the time a robot is completed, the product is shipped-the Company does not
      have
      finished goods inventory). Those amounts were:





March 31, 2008
            
            March 31, 2007Inventory as of:Work
                in Process
            
            $
            26,802
            
            $
            26,414Capitalized
                Labor
            
            
            45,347
            
            
            40,526Spare
                Parts
            
            
            26,647
            
            
            22,451Total
            
            $
            98,796
            
            $
            89,391




**Property
      and Equipment** —
Assets
      are recorded at cost and depreciation is computed using the straight-line method
      over the assets' estimated useful lives, which range from three to seven years.
      Expenditures for maintenance, repairs, and renewals are charged to expense
      as
      incurred. Expenditures for major renewals and betterments, that extend the
      useful lives of existing equipment, are capitalized and depreciated. On
      retirement or disposition of property and equipment, the cost and accumulated
      depreciation are removed and any resulting gain or loss is recognized in the
      statement of operations. Depreciation expense for the years ended March 31,
      2008
      and 2007 was $9,696 and $9,981, respectively. As of March 31, 2008 and 2007,
      the
      Company’s property and equipment amounts were:





**Form
      10-K Page 30**




**KINGSTON
      SYSTEMS INC.**


**NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS**





March 31, 2008
            
            March 31, 2007Property
                and Equipment as of:Vehicles
            
            $
            5,558
            
            $
            5,558Computer
                Equipment
            
            
            14,965
            
            
            13,415Machinery
                and Equipment
            
            
            40,913
            
            
            37,828Subtotal
            
            $
            61,436
            
            $
            56,800Less
                accumulated depreciation
            
            
            (25,899
            )
            
            (16,202
            )Net
                Book Value
            
            $
            35,537
            
            $
            40,598




**Software** —
      Software is composed of engineering and administrative software. Software is
      recorded at cost and amortization is computed using the straight-line method
      over the software’s estimated useful life, which is three years. On retirement
      or disposition of software, the cost and accumulated amortization are removed
      and any resulting gain or loss is recognized in the statement of operations.
      Amortization expense for the years ended March 31, 2008 and 2007 was $6,096
      and
      $1,218, respectively.




**Long-lived
      Assets** —
      Long-lived assets are reviewed for impairment when situations arise that
      indicate the asset could be impaired. Recoverability of assets to be held and
      used is measured by comparison of the carrying amount of an asset to future
      net
      cash flows expected to be generated by the asset. If such assets are considered
      to be impaired, the impairment to be recognized is measured by the amount that
      the carrying amount of the assets exceeds the fair value of the assets. Assets
      to be disposed of are reported at the lower of the carrying amount or the fair
      value less costs to sell.





**Income
      Taxes —** The
      Company records income taxes using the asset and liability method. Deferred
      income tax assets and liabilities are recognized for the future tax consequences
      attributable to differences between the financial statement carrying amounts
      of
      existing assets and liabilities and their respective income tax carrying amount,
      and operating loss and tax credit carry forwards. The Company’s consolidated
      financial statements contain certain deferred tax assets which have arisen
      primarily as a result of operating losses incurred since March 1988 (the Company
      had a period of dormancy between March 1988 and its SEC filing for the year
      ended March 31, 2005), as well as other temporary differences between book
      and
      tax accounting. Financial Accounting Standards Board (“FASB”) Statement of
      Financial Accounting Standards ("SFAS") No. 109, "Accounting for Income Taxes,"
      requires the establishment of a valuation allowance to reflect the likelihood
      of
      realization of deferred tax assets.





Significant
      management judgment is required in determining the provision for income taxes,
      deferred tax assets and liabilities and any valuation allowance recorded against
      net deferred tax assets. The Company evaluates the weight of all available
      evidence to determine whether it is more likely than not that some portion
      or
      all of the deferred income tax assets will not be realized in the future.
      Management considered the recent historical operating losses and the inherent
      uncertainty in the extent and timing of future profitability in determining
      the
      appropriate valuation allowance. Based upon this assessment, the Company
      recorded approximately $1,173,721 of valuation allowance against gross deferred
      tax assets of $1,173,721 through March 31, 2008. The decision to record the
      valuation allowance required significant judgment, including estimating the
      various factors impacting future taxable income. Footnote 7 to the financial
      statements calculates an income tax provision of zero. The table identifies
      that
      there are tax loss carry-forwards caused by losses dating back between 15 and
      20
      years. The Company determined that, more likely than not, it will not be
      profitable enough in the coming years to utilize the loss carry-forwards, and
      as
      a result, has recorded a valuation allowance equal to the gross deferred tax
      asset. Had the Company not recorded this allowance, the Company would have
      reported materially different results. If the realization of all deferred tax
      assets in the future is considered more likely than not, a decrease in the
      valuation allowance would be made, resulting in an increase to the net carrying
      value of deferred tax assets and increase net income in the period of such
      determination by approximately $1,173,721. The amount of the deferred tax asset
      considered realizable is based on significant estimates, and it is at least
      reasonably possible that changes in these estimates in the near term could
      materially affect the Company’s financial condition and results of operations.
      The Company’s effective tax rate may vary from period to period based on changes
      in estimated taxable income or loss, changes to the valuation allowance, changes
      to federal, state or foreign tax laws, future expansion into areas with varying
      country, state, and local income tax rates and deductibility of certain costs
      and expenses by jurisdiction.







**Form
      10-K Page 31**




**KINGSTON
      SYSTEMS INC.**


**NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS**





**Research
      and Product Development Costs** —
The
      Company is focusing its research and development on perfecting the software
      and
      hardware capabilities of the R Series line, improving the joint retaining rings
      and sockets on the P Series line, and exploring other uses for its products.
      The
      Company expenses research and product development costs as incurred.




**Basic
      Earnings (Loss) Per Share** —
Basic
      earnings (loss) per share is calculated by dividing the income or loss available
      to common shareholders by the weighted-average number of common shares
      outstanding during each period. Diluted earnings (loss) per share is identical
      to basic earnings (loss) per share, as the Company has no dilutive securities
      at
      this time.





**Fair
      Values of Financial Instruments** —
The
      carrying amounts reported in the balance sheets for accounts receivables and
      debt obligations approximate their fair values. The following methods and
      assumptions were used by the Company in estimating its fair values:





·
            Cash
                and cash equivalents – The carrying amount reported in the balance sheet
                approximates fair value due to the short maturity of these
                instruments.


·
            Related
                party receivable – The carrying amount reported in the balance sheet
                approximates fair value as the average interest rate on this receivable
                (credit card advances) approximates current interest rates on similar
                receivables.


·
            Notes
                and loans payable – The carrying amount reported in the balance sheet
                approximates fair value as the interest rates approximate current
                interest
                rates on similar notes/loans.





**Intangible
      Assets** —
The
      Company has an intangible asset, identified as "Software development" reflected
      on its consolidated balance sheet as of March 31, 2008. This robotic software
      is
      a long-term asset and is the Company-built control system software for operating
      the machines that Robotics has been manufacturing and selling, and continues
      to
      sell to various industries. The amortization periods for the software
      development asset have been determined to be five and ten years. The five year
      amortization period applies to the portion of the asset that was developed
      to
      support additional generic motion control systems. The ten year amortization
      period applies to the portion of the asset that was developed as additions
      to
      the core application programming, essential to the basic operation of the
      robot.





The
      carrying value of the software development asset is compared to its net
      realizable value at each balance sheet date, with any impairment


recognized
      immediately. No material changes to management’s net realizable value estimate
      occurred in the period ended March 31, 2008.




**Shipping
      Costs** —
Costs
      to ship products to customers are charged to operations as incurred. During
      the
      years ended March 31, 2008 and March 31, 2007, the Company recognized shipping
      costs of $5,543 and $11,378, respectively, in cost of sales.





**Recent
      Accounting Pronouncements —** In
      September 2006, the FASB issued SFAS No. 157, “Fair Value Measurements.”
This Statement defines fair value, establishes a framework for measuring fair
      value in generally accepted accounting principles (“GAAP”), and expands
      disclosures about fair value measurements. This Statement applies under other
      accounting pronouncements that require or permit fair value measurements, the
      Board having previously concluded in those accounting pronouncements that fair
      value is the relevant measurement attribute. This Statement is effective for
      financial statements issued for the fiscal years beginning after November 15,
      2007. The Company is evaluating the effect of this statement but does not expect
      the adoption of SFAS No. 157 to have a material impact on the Company’s
      consolidated financial statements.





In
      February 2008, the FASB issued FASB Staff Position No. 157-2, which extended
      the
      effective date for certain non-financial assets and non-financial liabilities
      to
      fiscal years beginning after November 15, 2008.





In
      February 2007, the FASB issued Statement No. 159, “The Fair Value Option for
      Financial Assets and Financial Liabilities—Including an amendment of FASB
      Statement No. 115.” This Statement permits entities to choose to measure many
      financial instruments and certain other items at fair value. The objective
      is to
      improve financial reporting by providing entities with the opportunity to
      mitigate volatility in reported earnings caused by measuring related assets
      and
      liabilities differently without having to apply complex hedge accounting
      provisions. This Statement is expected to expand the use of fair value
      measurement, which is consistent with the Board’s long-term measurement
      objectives for accounting for financial instruments. This Statement is effective
      for financial statements issued for the fiscal years beginning after November
      15, 2007. The Company is evaluating the effect of this
      Statement.





**Form
      10-K Page 32**




**KINGSTON
      SYSTEMS INC.**


**NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS**




In
      December 2007, the FASB issued SFAS No. 141 (revised 2007), "Business
      Combinations" and SFAS No. 160, “Non-controlling Interests in Consolidated
      Financial Statements.” SFAS No. 141R is a revision to SFAS No. 141 and includes
      substantial changes to the acquisition method used to account for business
      combinations (formerly the "purchase accounting" method), including broadening
      the definition of a business, as well as revisions to accounting methods for
      contingent consideration and other contingencies related to the acquired
      business, accounting for transaction costs, and accounting for adjustments
      to
      provisional amounts recorded in connection with acquisitions. SFAS No. 141R
      retains the fundamental requirement of SFAS No. 141 that the acquisition method
      of accounting be used for all business combinations and for an acquirer to
      be
      identified for each business combination. SFAS No. 160 clarifies that: a
      non-controlling interest in a subsidiary should be reported as equity in the
      consolidated financial statements; consolidated net income shall be adjusted
      to
      include the net income attributed to the non-controlling interest; and
      consolidated comprehensive income shall be adjusted to include the comprehensive
      income attributed to the non-controlling interest. The calculation of earnings
      per share will continue to be based on income amounts attributable to the
      parent. SFAS No. 141R and SFAS No. 160is effective for periods beginning on
      or
      after December 15, 2008, and will apply to all business combinations
      occurring after the effective date. The Company is currently evaluating the
      requirements of SFAS No. 141R and SFAS No. 160.




In
      March 2008, the FASB issued SFAS 161, “Disclosures about Derivative
      Instruments and Hedging Activities.” The new Standard is intended to improve
      financial reporting about derivative instruments and hedging activities by
      requiring enhanced disclosures to enable investors to better understand their
      effects on an entity’s financial position, financial performance, and cash
      flows. It is effective for financial statements issued for fiscal years and
      interim periods beginning after November 15, 2008, with early application
      encouraged. The Company is currently evaluating the impact of adopting SFAS
      161.




**NOTE
      2 — ACQUISITION OF PARALLEL ROBOTICS SYSTEMS**




On
      August
      18, 2005, the Company acquired all of the issued and outstanding common stock
      of
      Robotics for $1.00 (Robotics had issued no stock at that time and one share
      of
      common stock was issued to Kingston to effect the acquisition), making Robotics
      a wholly-owned subsidiary. At the time of the acquisition, Robotics was indebted
      to the Flood Trust (the “Trust”) in the amount of $1,836,752, so the total
      purchase price for Robotics was $1,836,753. Shortly after the acquisition,
      an
      Exchange Agreement was signed between Kingston, Robotics and the Trust, pursuant
      to which the Trust was issued a $1,836,752 promissory note (the “Note”) by
      Robotics. The Trust then assigned to Kingston its rights as payee under the
      Note
      in exchange for Kingston’s agreement to issue 612,251 shares of Kingston’s
      common stock to the Trust. Kingston, as the new payee under the Note, then
      cancelled the Note. The shares were issued in June, 2006 (shown as issuable
      as
      of March 31, 2006 and included in earnings per share calculations) and the
      Company's obligation in the amount of $1,836,752 to the Trust was deemed to
      be
      the total outstanding indebtedness until that time.




**NOTE
      3 — RELATED PARTY TRANSACTIONS**




As
      of
      March 31, 2008, the Company was involved in the following related party
      transactions:





o
      The
      Company has credit card advances, related party, of $81,418 and $72,128 in
      current liabilities on its March 31, 2008 and 2007 balance sheets. Those
      advances are from George Coupe, President of Robotics. Those advances are for
      the financing of operations and certain capital asset purchases. Those advances
      consist of the balances on personal credit cards of George Coupe that were
      and
      are being used exclusively for the Company's expenditures. The monthly payments
      on these cards include all of the monthly interest being charged by the credit
      card company and a portion of the "principal." The interest rates being paid
      to
      the credit card companies vary between 5.0% and 23.0%. The average balance
      was $76,773 for the period from April 1, 2007 through March 31, 2008. The
      weighted average interest rates on the March 31, 2008 and 2007 credit card
      balances were 10.5% and 11.3%, respectively.





**Form
      10-K Page 33**




**KINGSTON
      SYSTEMS INC.**


**NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS**





o
      The
      Company has a note payable, related party, to George Coupe in the amount of
      $200. This demand note was issued in 2002 as part of the initial capitalization
      of Robotics and is due March 31, 2011. The note was non-interest bearing through
      April 1, 2006. Subsequent to that date, the note bears interest at the rate
      of
      8.0% per year (accrued interest of $32 as of March 31, 2008).





o
      The
      Company has a note payable, related party, non-interest bearing to Ralph
      McKittrick in the amount of $46,300 for unpaid wages prior to December 31,
      1988.
      The amount of the debt has not changed since it was incurred. It is reflected
      in
      current liabilities on the Company's balance sheet.





o
      The
      Company, through its Robotics subsidiary, has a relationship with a privately
      owned company named Holo-Dek Gaming Inc. ("Holo-Dek"). Ralph McKittrick, the
      CEO
      of Kingston, is also the CEO of Holo-Dek (Ralph McKittrick is the largest
      shareholder, directly or indirectly, in Kingston and the second largest
      shareholder in Holo-Dek). Robotics and Holo-Dek share office facilities, a
      number of employees and certain expenses. The Trust, an investor in Kingston
      and
      Robotics, is also a significant lender of working capital to Holo-Dek. Until
      October 31, 2004, the Trust made loans directly to Robotics, with the funding
      being in the form of debt that was later converted to stock. The debt and
      accumulated interest totaled $1,836,752 at October 31, 2004. The accrual of
      interest on the debt was temporarily delayed from October 31, 2004 until October
      31, 2005, at which time interest accrued at the rate of 8% per year. Interest
      accrued from October 31, 2005 until June, 2006, when the debt (including accrued
      interest) was converted to stock. After October 31, 2004, the Trust made loans
      to Holo-Dek, which in turn made cash advances to Robotics on an as needed basis
      through the working capital advance account, which advances aggregated
      $1,561,075 at March 31, 2008 and $854,848 at March 31, 2007 (shown in current
      liabilities on the Company’s balance sheets).





o
      The
      Company has a licensing and royalty agreement in connection with the
      co-ownership of certain technology. The Hexel Corporation ("Hexel") originally
      developed the robotics technology. That corporation is still in existence,
      however, with limited operations. Two current employees of Robotics are
      shareholders in Hexel. In addition, a major shareholder in the Company also
      owns
      a minor interest in Hexel. Hexel has licensed the use of all intellectual
      property to Robotics. Under the agreement, Robotics is required to pay to Hexel,
      by March 31, 2009, 2% of gross sales, less shipping, tax, and other customary
      costs normally born by the seller, on products sold which incorporate that
      certain licensed software and intellectual property. Any
      enhancements/developments by Robotics to the robot technology, including
      software, are co-owned with Hexel through the licensing agreement. At March
      31,
      2008 and 2007, $32,496 and $23,291 was owed to Hexel, respectively, with $9,205
      and $9,156 recorded as an expense during the year ended March 31, 2008 and
      2007,
      respectively.





o
      The
      Company’s Robotics subsidiary is the named owner on a number of credit cards
      used by Holo-Dek. As of March 31, 2008, the balances on those credit cards
      totaled $83,630 and are recorded as a related party asset and credit card
      liability on the Company’s balance sheets. Additionally, there is approximately
      $177,000 of total credit limit available on all Robotics credit cards, whether
      used by Robotics or Holo-Dek. The amount of credit line that was unused as
      of
      March 31, 2008 was approximately $74,000.





o
      The
      Company has a related party note and loan payable to the Trust, discussed in
      Note 4, and the Company is the lessee on eight related party capital leases,
      discussed in Note 8.




**NOTE
      4 — JUDGMENT, NOTE AND LOAN PAYABLE**




In
      April
      1988, a judgment was entered against the Company in the amount of $353,883.
      On
      April 6, 2006, the Company agreed to settle this judgment for a payment of
      $100,000. On February 21, 2007 and March 6, 2007, the Company made $50,000
      payments and satisfactions of the judgment were filed shortly thereafter. As
      of
      March 31, 2007, the judgment was removed from current liabilities and a $921,439
      debt forgiveness gain, resulting from the settlement of the judgment, was
      reflected in the Company’s statement of operations.





**Form
      10-K Page 34**




**KINGSTON
      SYSTEMS INC.**


**NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS**




The
      Company has a note payable to the Trust for $80,000 principal and $12,800
      accrued interest. Of that amount, $28,800 is a current liability and $64,000
      is
      a long term liability on the Company’s March 31, 2008 balance sheet. This note
      was issued in 2002 as part of the initial capitalization of Robotics and
      requires five yearly principal payments of $16,000 plus accrued interest
      beginning upon demand by the Trust. The note was non-interest bearing through
      April 1, 2006, and now bears interest at the rate of 8.0% per year (unpaid
      interest will be compounded annually). The Company has not yet made a payment
      on
      this note because the Trust has not made a demand that annual payments
      begin.




The
      Company has a loan payable to the Trust in the amount of $100,000 principal
      and
      $16,000 accrued interest, shown in current liabilities on the Company's balance
      sheet. This loan was made in March of 2006 and is payable on demand on or after
      September 10, 2006, at the discretion of the Trust. The loan bears an annual
      interest rate of 8.0%. There has been no demand for payment by the Trust and
      therefore no payments have been made by the Company.




See
      Note
      8 regarding detail on the Company's capital lease obligations.




**NOTE
      5 — INTANGIBLE ASSETS**





The
      Company has an intangible asset, identified as "Software development" reflected
      on its consolidated balance sheets. This robotic software is a long-term asset
      and is the Robotics-built control system software for operating the machines
      that Robotics has been manufacturing and selling, and continues to sell to
      various industries. The software is used to drive the motion simulation robots
      that have been sold for bio medical research, positioning system robots for
      automotive production and motion testing robots for oil pipelines. An analysis
      of the new robotic capability or features that each new software project
      supports is conducted after the software project is completed and after the
      new
      capability is tested functionally in the robot. The results of this analysis
      are
      used to determine the expected life of the software for this new capability
      in
      terms of future revenues, and with a view toward not overstating this asset
      at
      any time over its useful life on a reasonable and consistent basis. This
      software is co-owned with the Hexel Corporation (see Note 3), the corporation
      that patented the robotic technology and licensed the robotic technology to
      Robotics. The carrying value of this software development asset is compared
      to
      its net realizable value at each balance sheet date, with any impairment
      recognized immediately. No material changes to management’s net realizable value
      estimate occurred in the year ended March 31, 2008 and management believes
      that
      the value of the software is not impaired at March 31, 2008. The amortization
      periods for the software development asset have been determined to be five
      and
      ten years. The five year amortization period applies to the portion of the
      asset
      that was developed to support additional generic motion control systems. The
      ten
      year amortization period applies to the portion of the asset that was developed
      as additions to the core application programming, essential to the basic
      operation of the robot. Amortization expense for the years ended March 31,
      2008
      and 2007 was $19,305.




The
      following is the anticipated amortization expense for the next five years for
      the software development asset as of March 31, 2008:





For the yearended March 31,
            
            Amortization Expense2009
            
            $
            19,3052010
            
            
            19,3052011
            
            
            15,6202012
            
            
            11,8322013
            
            
            11,832Thereafter
            
            
            29,481Total
            
            $
            107,375




**NOTE
      6 — SHAREHOLDERS' DEFICIT**




At
      March
      31, 2008 and 2007, the Company had 5,601,140 shares of common stock issued
      and
      5,576,234 shares of common stock outstanding. At March 31, 2008 and 2007, there
      were 10,000,000 shares authorized (during fiscal 2008, the Board of Directors
      authorized an increase to 50,000,000 shares) with a par value of $0.01. At
      March
      31, 2008 and 2007, the Company had $11,838,230 in additional paid-in capital
      and
      an accumulated deficit of $13,607,421 and $12,744,340, respectively. At March
      31, 2008 and 2007, the Company had 24,906 shares of treasury stock, valued
      at
      cost of $40,756.





**Form
      10-K Page 35**




**KINGSTON
      SYSTEMS INC.**


**NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS**




**NOTE
      7 — INCOME TAXES**




The
      Company had net operating loss ("NOL") carry-forwards up to March 1988. The
      Company has had net operating losses since March 1988. These net operating
      losses expire after 15 years for losses incurred through March 1997 and 20
      years
      for losses incurred beginning with the March 1998 year-end. Control of Robotics
      changed with the acquisition by the Company. In accordance with the internal
      revenue code, the accumulated losses of Robotics incurred prior to the Company's
      acquisition is limited to an annual amount of approximately $79,531 and a total
      limit of approximately $1,590,627 over a 20-year period. As of March 31, 2008,
      the Company had consolidated net operating loss carry-forwards for federal
      income tax reporting purposes of approximately $3,123,060 which, if unused,
      will
      expire between 2009 through 2028.




The
      deferred tax asset and the provision for income taxes for the years ended March
      31, 2008 and 2007 were:





For
                the years ended March 31,
            
            2008
            
            2007Operating
                loss carry-forwards
            
            $
            1,212,953
            
            $
            874,848Deferred
                tax liability-software development costs
            
            
            (39,232
            )
            
            (42,257
            )Valuation
                allowance
            
            
            (1,173,721
            )
            
            (832,591
            )Total Deferred
                Tax Asset
            
            $
            —
            
            $
            —





For
                the years ended March 31,
            
            2008
            
            2007Tax
                at federal statutory rate (34%)
            
            $
            (293,448
            )
            $
            76,701Non-deductible
                expenses
            
            
            1,407
            
            
            298State
                tax benefit
            
            
            (49,239
            )
            
            12,656Change
                in valuation allowance
            
            
            341,280
            
            
            (89,555
            )Provision
                for Income Taxes
            
            $
            —
            
            $
            —




**NOTE
      8 — COMMITMENTS AND CONTINGENCIES**




**Operating
      Lease**


The
      Company's Robotics subsidiary has a lease for office space and an
      assembly/research and development facility in Hampton, New Hampshire, which
      is
      accounted for as an operating lease. The original term of the lease was for
      6
      years commencing in 2002, with a 3 year renewal which was exercised in April
      2008 to extend the lease to March 31, 2011. The lease includes a base rent
      and
      common area/maintenance payment. The payment for the fiscal year 2008-2009
      is
      expected to be $165,728. As discussed earlier, Robotics shares office space
      with
      Holo-Dek. The costs of leasing the facility in Hampton, New Hampshire are
      allocated between the two companies based upon average square footage
      utilization. Total lease expense for Robotics for the years ended March 31,
      2008
      and 2007 was $ 51,824
      and $33,876, respectively. The following are the expected total lease and common
      area payments for the next three years of the lease (Robotics is the lessee
      of record on the lease):





Year
                Ending March 31,
            
            Operating Lease2009
            
            $
            165,7282010
            
            
            169,6182011
            
            
            173,626Total
            
            $
            508,972





**Form
      10-K Page 36**




**KINGSTON
      SYSTEMS INC.**


**NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS**





**Capital
      Leases**


The
      Company has executed capital leases for manufacturing equipment and software
      in
      the amount of $44,447. As of March 31, 2008, accumulated depreciation and
      amortization on the equipment was $15,972 and the net book value was $28,475.
      The following are the expected minimum lease payments for the next three
      years:





Year
                Ending March 31,
            
            Capital Lease2009
            
            $
            16,3662010
            
            
            13,6952011
            
            
            2,778Total
            
            
            32,839Less:
                Interest Included
            
            
            (5,629
            )Total
                Obligations under Capital Lease
            
            
            27,210Current
                Portion Due
            
            
            (12,324
            )Long-Term
                Portion
            
            $
            14,886




The
      Company's Robotics subsidiary is the named lessee on eight leases used to
      acquire equipment for Holo-Dek. The Company has ultimate responsibility to
      make
      all payments regarding the leases. A total of $129,177 of equipment was
      acquired. The leases are shown on the Company's balance sheet as a related
      party
      lease asset and a capitalized lease obligation. The following are the expected
      minimum lease payments for the next four years.





Year
                Ending March 31,
            
            Capital Leases2009
            
            $
            45,7932010
            
            
            26,1462011
            
            
            17,1382012
            
            
            4,774Total
            
            
            93,851Less:
                Interest Included
            
            
            (21,342
            )Total
                Obligation under Capital Leases
            
            
            72,509Current
                Portion Due
            
            
            (33,714
            )Long-Term
                Portion
            
            $
            38,795




**NOTE
      9 - CONCENTRATIONS**





Through
      its Robotics subsidiary, the Company sold robots to 2 major customers for the
      year ended March 31, 2008. 60.9% of the Company’s sales were to Osram Sylvania
      and 31.6% of the Company’s sales were to Jet Edge. Those companies are in the
      automotive and defense industries, respectively.





Manufacturers
      that use the Company’s robots are Osram-Sylvania, (manufacture automotive light
      bulbs), Adidas and TSM (water-jet cutting in a machine shop
      environment).





The
      Company is currently, and has been in the past, reliant upon a single major
      investor, the Trust, for the majority of its working capital needs (see Note
      3).