<table>
            <tbody><tr style="FONT-SIZE: 1px">
                <td valign="top" width="5%">
                    <p>&nbsp;</p>
                </td>

                <td valign="top" width="95%">
                    <p>&nbsp;</p>
                </td>
            </tr>

            <tr>
                <td valign="top">
                    <p>&nbsp;</p>
                </td>

                <td valign="top">
                    <p align="justify"><font size="2">As of June 30, 2008, the Company was not in compliance with these financial covenants. In addition, as a result of a restatement of the Company’s financial statements as of and for the year ended March 31, 2008 and the quarter ended June 30, 2008, the Company breached its financial reporting obligations under the Credit Agreement. In May 2009, the Company entered into an amendment and waiver to the Credit Agreement under which
                    Sovereign Bank (i) waived existing defaults, (ii) indefinitely suspended the revolving credit facility including testing of financial covenants, and (iii) required the Company to maintain deposits with Sovereign Bank at all times in an amount not less than the outstanding balance of the term loan as cash-collateral therefor. As a result of the amendment and factors described above, the Company did not have the ability to borrow under the Credit Agreement and therefore
                    terminated the Credit agreement in August 2009 and paid off the term loan by applying the cash collateral against the outstanding loan balance. At June 30, 2009 the current and non-current portions of term loan were $675,000 and $1,150,000, respectively.</font></p>
                </td>
            </tr>

            <tr>
                <td valign="top">
                    <p>&nbsp;</p>
                </td>

                <td valign="top">
                    <p align="justify">&nbsp;</p>
                </td>
            </tr>

            <tr>
                <td valign="top">
                    <p><font size="2">(5)</font></p>
                </td>

                <td valign="top">
                    <p align="justify"><font size="2"><u>Accounting for Stock-Based Compensation</u></font></p>
                </td>
            </tr>

            <tr>
                <td valign="top">
                    <p>&nbsp;</p>
                </td>

                <td valign="top">
                    <p align="justify">&nbsp;</p>
                </td>
            </tr>

            <tr>
                <td valign="top">
                    <p>&nbsp;</p>
                </td>

                <td valign="top">
                    <p align="justify"><font size="2"><i><u>Stock Options</u></i></font></p>
                </td>
            </tr>

            <tr>
                <td valign="top">
                    <p>&nbsp;</p>
                </td>

                <td valign="top">
                    <p align="justify">&nbsp;</p>
                </td>
            </tr>

            <tr>
                <td valign="top">
                    <p>&nbsp;</p>
                </td>

                <td valign="top">
                    <p align="justify"><font size="2">Under the Company’s 1992 Stock Option Plan (the “1992 Plan”), employees of the Company and its affiliates and members of the Board of Directors were granted options to purchase shares of Common Stock of the Company. The 1992 Plan was amended on May 11, 1999 to increase the maximum number of shares of Common Stock for which options may be granted to 1,500,000 shares. The 1992 Plan terminated in 2002, although options issued
                    thereunder remain exercisable until the termination dates provided in such options. Options granted under the 1992 Plan were either intended to qualify as incentive stock options under the Internal Revenue Code of 1986, or non-qualified options. Grants under the 1992 Plan were awarded by a Committee of the Board of Directors, and are exercisable over periods not exceeding ten years from date of grant. The option price for incentive stock options granted under the 1992 Plan
                    must be at least 100% of the fair market value of the shares on the date of grant, while the price for non-qualified options granted to employees and employee directors is determined by the Committee of the Board of Directors. At June 30, 2009, there were 13,750 options issued under the 1992 Plan, expiring from April 2010 through April 2011 that remain outstanding.</font></p>
                </td>
            </tr>

            <tr>
                <td valign="top">
                    <p>&nbsp;</p>
                </td>

                <td valign="top">
                    <p align="justify">&nbsp;</p>
                </td>
            </tr>

            <tr>
                <td valign="top">
                    <p>&nbsp;</p>
                </td>

                <td valign="top">
                    <p align="justify"><font size="2">On July 1, 2002, the Company established the 2002 Long-Term Incentive Plan (the “2002 Plan”) providing for the grant of options or other awards, including stock grants, to employees, officers or directors of, or consultants to, the Company or its subsidiaries to acquire up to an aggregate of 750,000 shares of Common Stock. In September 2005, the 2002 Plan was amended to increase the number of shares of Common Stock available
                    under the plan to 1,250,000. In September 2008, the 2002 Plan was amended to increase the number of shares of Common Stock available under the plan to 1,650,000. Options granted under the 2002 Plan may either be intended to qualify as incentive stock options under the Internal Revenue Code of 1986, or may be non-qualified options. Grants under the 2002 Plan are awarded by a Committee of the Board of Directors, and are exercisable over periods not exceeding ten years from
                    date of grant. The option price for incentive stock options granted under the 2002 Plan must be at least 100% of the fair market value of the shares on the date of grant, while the price for non-qualified options granted is determined by the Committee of the Board of Directors. At June 30, 2009, there were 297,500 options issued under the 2002 Plan, expiring from April 2011 through September 2017 that remain outstanding. Any option under the 2002 Plan that is not exercised
                    by an option holder prior to its expiration may be available for re-issuance by the Company. As of June 30, 2009, the Company had 407,313 shares of Common Stock available for grant of awards under the 2002 Plan.</font></p>
                </td>
            </tr>

            <tr>
                <td valign="top">
                    <p>&nbsp;</p>
                </td>

                <td valign="top">
                    <p align="justify">&nbsp;</p>
                </td>
            </tr>

            <tr>
                <td valign="top">
                    <p>&nbsp;</p>
                </td>

                <td valign="top">
                    <p align="justify"><font size="2">Stock option compensation expense in the three month periods ended June 30, 2009 and 2008 represent the estimated fair value of options and warrants outstanding which are being amortized on a straight-line basis over the requisite vesting period of the entire award.</font></p>
                </td>
            </tr>
        </tbody></table>
<table>
<tbody><tr>
<td>
<p> </p>
</td>
<td>
<p> </p>
</td>
</tr>
<tr>
<td>
<p> </p>
</td>
<td>
<p><font>As of June 30, 2008, the Company was not in compliance with these financial covenants. In addition, as a result of a restatement of the Company’s financial statements as of and for the year ended March 31, 2008 and the quarter ended June 30, 2008, the Company breached its financial reporting obligations under the Credit Agreement. In May 2009, the Company entered into an amendment and waiver to the Credit Agreement under which
                    Sovereign Bank (i) waived existing defaults, (ii) indefinitely suspended the revolving credit facility including testing of financial covenants, and (iii) required the Company to maintain deposits with Sovereign Bank at all times in an amount not less than the outstanding balance of the term loan as cash-collateral therefor. As a result of the amendment and factors described above, the Company did not have the ability to borrow under the Credit Agreement and therefore
                    terminated the Credit agreement in August 2009 and paid off the term loan by applying the cash collateral against the outstanding loan balance. At June 30, 2009 the current and non-current portions of term loan were $675,000 and $1,150,000, respectively.</font></p>
</td>
</tr>
<tr>
<td>
<p> </p>
</td>
<td>
<p> </p>
</td>
</tr>
<tr>
<td>
<p><font>(5)</font></p>
</td>
<td>
<p><font><u>Accounting for Stock-Based Compensation</u></font></p>
</td>
</tr>
<tr>
<td>
<p> </p>
</td>
<td>
<p> </p>
</td>
</tr>
<tr>
<td>
<p> </p>
</td>
<td>
<p><font><i><u>Stock Options</u></i></font></p>
</td>
</tr>
<tr>
<td>
<p> </p>
</td>
<td>
<p> </p>
</td>
</tr>
<tr>
<td>
<p> </p>
</td>
<td>
<p><font>Under the Company’s 1992 Stock Option Plan (the “1992 Plan”), employees of the Company and its affiliates and members of the Board of Directors were granted options to purchase shares of Common Stock of the Company. The 1992 Plan was amended on May 11, 1999 to increase the maximum number of shares of Common Stock for which options may be granted to 1,500,000 shares. The 1992 Plan terminated in 2002, although options issued
                    thereunder remain exercisable until the termination dates provided in such options. Options granted under the 1992 Plan were either intended to qualify as incentive stock options under the Internal Revenue Code of 1986, or non-qualified options. Grants under the 1992 Plan were awarded by a Committee of the Board of Directors, and are exercisable over periods not exceeding ten years from date of grant. The option price for incentive stock options granted under the 1992 Plan
                    must be at least 100% of the fair market value of the shares on the date of grant, while the price for non-qualified options granted to employees and employee directors is determined by the Committee of the Board of Directors. At June 30, 2009, there were 13,750 options issued under the 1992 Plan, expiring from April 2010 through April 2011 that remain outstanding.</font></p>
</td>
</tr>
<tr>
<td>
<p> </p>
</td>
<td>
<p> </p>
</td>
</tr>
<tr>
<td>
<p> </p>
</td>
<td>
<p><font>On July 1, 2002, the Company established the 2002 Long-Term Incentive Plan (the “2002 Plan”) providing for the grant of options or other awards, including stock grants, to employees, officers or directors of, or consultants to, the Company or its subsidiaries to acquire up to an aggregate of 750,000 shares of Common Stock. In September 2005, the 2002 Plan was amended to increase the number of shares of Common Stock available
                    under the plan to 1,250,000. In September 2008, the 2002 Plan was amended to increase the number of shares of Common Stock available under the plan to 1,650,000. Options granted under the 2002 Plan may either be intended to qualify as incentive stock options under the Internal Revenue Code of 1986, or may be non-qualified options. Grants under the 2002 Plan are awarded by a Committee of the Board of Directors, and are exercisable over periods not exceeding ten years from
                    date of grant. The option price for incentive stock options granted under the 2002 Plan must be at least 100% of the fair market value of the shares on the date of grant, while the price for non-qualified options granted is determined by the Committee of the Board of Directors. At June 30, 2009, there were 297,500 options issued under the 2002 Plan, expiring from April 2011 through September 2017 that remain outstanding. Any option under the 2002 Plan that is not exercised
                    by an option holder prior to its expiration may be available for re-issuance by the Company. As of June 30, 2009, the Company had 407,313 shares of Common Stock available for grant of awards under the 2002 Plan.</font></p>
</td>
</tr>
<tr>
<td>
<p> </p>
</td>
<td>
<p> </p>
</td>
</tr>
<tr>
<td>
<p> </p>
</td>
<td>
<p><font>Stock option compensation expense in the three month periods ended June 30, 2009 and 2008 represent the estimated fair value of options and warrants outstanding which are being amortized on a straight-line basis over the requisite vesting period of the entire award.</font></p>
</td>
</tr>
</tbody></table>