<SUBMISSION>
<ACCESSION-NUMBER>0001157523-08-008994
<TYPE>DEF 14A
<PUBLIC-DOCUMENT-COUNT>1
<PERIOD>20081210
<FILING-DATE>20081106
<DATE-OF-FILING-DATE-CHANGE>20081106
<EFFECTIVENESS-DATE>20081106
<FILER>
<COMPANY-DATA>
<CONFORMED-NAME>AFP IMAGING CORP
<CIK>0000319126
<ASSIGNED-SIC>3861
<IRS-NUMBER>132956272
<STATE-OF-INCORPORATION>NY
<FISCAL-YEAR-END>1210
</COMPANY-DATA>
<FILING-VALUES>
<FORM-TYPE>DEF 14A
<ACT>34
<FILE-NUMBER>000-10832
<FILM-NUMBER>081166087
</FILING-VALUES>
<BUSINESS-ADDRESS>
<STREET1>250 CLEARBROOK RD
<CITY>ELMSFORD
<STATE>NY
<ZIP>10523
<PHONE>9145926100
</BUSINESS-ADDRESS>
<MAIL-ADDRESS>
<STREET1>250 CLEARBROOK RD
<CITY>ELMSFORD
<STATE>NY
<ZIP>10523
</MAIL-ADDRESS>
<FORMER-COMPANY>
<FORMER-CONFORMED-NAME>AUTOMATIC FILM PROCESSOR CORP
<DATE-CHANGED>19821122
</FORMER-COMPANY>
</FILER>
<DOCUMENT>
<TYPE>DEF 14A
<SEQUENCE>1
<FILENAME>a5823762.htm
<DESCRIPTION>AFP IMAGING CORP. DEF 14A
<TEXT>
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    <title>a5823762.htm</title>
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STATES</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 16pt; FONT-FAMILY: Times New Roman">SECURITIES
AND EXCHANGE COMMISSION</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman">WASHINGTON,
D.C. 20549</font></div>
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    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 16pt; FONT-FAMILY: Times New Roman">SCHEDULE
14A</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman">(Rule
14a-101)</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman">SCHEDULE
14A INFORMATION</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman">Proxy
Statement Pursuant to Section 14(a) of the Securities Exchange Act of
1934</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman">&#160;&#160;<font style="DISPLAY: inline; FONT-WEIGHT: bold">(Amendment
No.&#160;&#160;&#160;)</font></font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman">Filed by
the Registrant <font style="DISPLAY: inline;" face="Wingdings">x</font></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman">Filed by a
Party other than the Registrant <font style="DISPLAY: inline;" face="Wingdings">o</font></font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman">Check the
appropriate box:</font></div>
    <div align="left">
      <table cellpadding="0" cellspacing="0" width="100%">
          <tr>
            <td align="left" valign="top" width="4%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: wingdings">      </font>
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: wingdings">o</font></div>
              </div>
            </td>
            <td align="left" valign="top" width="96%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">Preliminary
      Proxy Statement</font></div>
            </td>
          </tr>
          <tr>
            <td align="left" valign="top" width="4%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: wingdings">o</font></div>
            </td>
            <td align="left" valign="top" width="96%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">Confidential,
      for Use of the Commission Only (as permitted by Rule
      14a-6(e)(2))</font></div>
            </td>
          </tr>
          <tr>
            <td align="left" valign="top" width="4%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: wingdings">      </font>
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: wingdings">x</font></div>
              </div>
            </td>
            <td align="left" valign="top" width="96%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">Definitive
      Proxy Statement</font></div>
            </td>
          </tr>
          <tr>
            <td align="left" valign="top" width="4%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: wingdings">o</font></div>
            </td>
            <td align="left" valign="top" width="96%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">Definitive
      Additional Materials</font></div>
            </td>
          </tr>
          <tr>
            <td align="left" valign="top" width="4%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: wingdings">o</font></div>
            </td>
            <td align="left" valign="top" width="96%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">Soliciting
      Material Pursuant to Section
240.14a-12</font></div>
            </td>
          </tr>
      </table>
    </div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 16pt; FONT-FAMILY: Times New Roman">AFP
Imaging Corporation</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman">(Name of
Registrant as Specified In Its Charter)</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman">Not
Applicable</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman">(Name of
Person(s) Filing Proxy Statement, if Other Than the Registrant)</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman">Payment of
Filing Fee (Check the appropriate box):</font></div>
    <div align="left">
      <table cellpadding="0" cellspacing="0" width="100%">
          <tr>
            <td align="left" valign="top" width="4%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: wingdings">x</font></div>
            </td>
            <td align="left" colspan="2" valign="top" width="96%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">No
      fee required.</font></div>
            </td>
          </tr>
          <tr>
            <td align="left" valign="top" width="4%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: wingdings">o</font></div>
            </td>
            <td align="left" colspan="2" valign="top" width="96%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">Fee
      computed on table below per Exchange Act Rules 14a-6(i) (1) and
      0-11.</font></div>
            </td>
          </tr>
          <tr>
            <td align="left" valign="top" width="4%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;
      </font></td>
            <td align="left" valign="top" width="4%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">(1)</font></div>
            </td>
            <td align="left" valign="top" width="92%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">Title
      of each class of securities to which transaction
  applies:</font></div>
            </td>
          </tr>
          <tr>
            <td align="left" valign="top" width="4%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;
      </font></td>
            <td align="left" valign="top" width="4%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">(2)</font></div>
            </td>
            <td align="left" valign="top" width="92%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">Aggregate
      number of securities to which transaction applies:</font></div>
            </td>
          </tr>
          <tr>
            <td align="left" valign="top" width="4%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;
      </font></td>
            <td align="left" valign="top" width="4%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">(3)</font></div>
            </td>
            <td align="left" valign="top" width="92%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">Per
      unit price or other underlying value of transaction computed pursuant to
      Exchange Act Rule 0-11 (set forth the amount on which the filing fee is
      calculated and state how it was determined):</font></div>
            </td>
          </tr>
          <tr>
            <td align="left" valign="top" width="4%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;
      </font></td>
            <td align="left" valign="top" width="4%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">(4)</font></div>
            </td>
            <td align="left" valign="top" width="92%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">Proposed
      maximum aggregate value of transaction:</font></div>
            </td>
          </tr>
          <tr>
            <td align="left" valign="top" width="4%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;
      </font></td>
            <td align="left" valign="top" width="4%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">(5)</font></div>
            </td>
            <td align="left" valign="top" width="92%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">Total
      fee paid:</font></div>
            </td>
          </tr>
          <tr>
            <td align="left" valign="top" width="4%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: wingdings">o</font></div>
            </td>
            <td align="left" colspan="2" valign="top" width="96%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">Fee
      paid previously with preliminary materials.</font></div>
            </td>
          </tr>
          <tr>
            <td align="left" valign="top" width="4%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: wingdings">o</font></div>
            </td>
            <td align="left" colspan="2" valign="top" width="96%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">Check
      box if any part of the fee is offset as provided by Exchange Act Rule
      0-11(a)(2) and identify the filing for which the offsetting fee was paid
      previously. Identify the previous filing by registration statement number,
      or the Form or Schedule, and the date of its filing.</font></div>
            </td>
          </tr>
          <tr>
            <td align="left" valign="top" width="4%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;
      </font></td>
            <td align="left" valign="top" width="4%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">(1)</font></div>
            </td>
            <td align="left" valign="top" width="92%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">Amount
      Previously Paid:</font></div>
            </td>
          </tr>
          <tr>
            <td align="left" valign="top" width="4%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;
      </font></td>
            <td align="left" valign="top" width="4%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">(2)</font></div>
            </td>
            <td align="left" valign="top" width="92%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">Form,
      Schedule or Registration Statement No.:</font></div>
            </td>
          </tr>
          <tr>
            <td align="left" valign="top" width="4%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;
      </font></td>
            <td align="left" valign="top" width="4%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">(3)</font></div>
            </td>
            <td align="left" valign="top" width="92%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">Filing
      Party:</font></div>
            </td>
          </tr>
          <tr>
            <td align="left" valign="top" width="4%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;
      </font></td>
            <td align="left" valign="top" width="4%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">(4)</font></div>
            </td>
            <td align="left" valign="top" width="92%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">Date
      Filed:</font></div>
            </td>
          </tr>
      </table>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt">&#160;</div>
    <div id="PGBRK" style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
      <div id="FTR">
        <div id="GLFTR" style="WIDTH: 100%" align="left">
        </div>
      </div>
      <div id="PN" style="PAGE-BREAK-AFTER: always">
        <div style="WIDTH: 100%; TEXT-ALIGN: center">
        </div>
        <div style="WIDTH: 100%; TEXT-ALIGN: center">
          <hr style="COLOR: black" noshade size="2">
        </div>
      </div>
      <div id="HDR">
        <div id="GLHDR" style="WIDTH: 100%" align="right">
        </div>
      </div>
    </div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt; TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman">AFP
Imaging Corporation</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman">Notice
of Annual Meeting of Shareholders</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman"><font style="DISPLAY: inline; FONT-WEIGHT: bold">December 10,
2008</font>&#160;</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman">To the
Shareholders of</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman">AFP
Imaging Corporation:</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman">NOTICE IS
HEREBY GIVEN that the Annual Meeting of Shareholders (the &#8220;Annual Meeting&#8221;) of
AFP Imaging Corporation (the &#8220;Company&#8221;) will be held at the offices of the
Company, located at 250 Clearbrook Road, Elmsford, New York, on Wednesday,
December 10, 2008, commencing at 9:00 a.m. (local time), for the following
purposes:</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div>
      <table cellpadding="0" cellspacing="0" width="100%">
          <tr>
            <td align="left" valign="top" width="4%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">1.</font></div>
            </td>
            <td align="left" valign="top" width="67%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">To
      elect four (4) nominees to the Board of Directors of the Company, each to
      serve until the next annual meeting of shareholders of the Company or
      until such persons shall resign, be removed or otherwise leave
      office;</font></div>
            </td>
          </tr>
          <tr>
            <td align="left" valign="top" width="4%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td align="left" valign="top" width="67%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
          </tr>
      </table>
    </div>
    <div>
      <table cellpadding="0" cellspacing="0" width="100%">
          <tr>
            <td align="left" valign="top" width="4%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">2.</font></div>
            </td>
            <td align="left" valign="top" width="67%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">To
      approve an amendment to the Company&#8217;s Certificate of Incorporation
      increasing the number of authorized shares of common stock from 30,000,000
      to 100,000,000; and</font></div>
            </td>
          </tr>
          <tr>
            <td valign="top" width="4%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;
      </font></td>
            <td valign="top" width="67%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;
      </font></td>
          </tr>
          <tr>
            <td align="left" valign="top" width="4%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">3.</font></div>
            </td>
            <td align="left" valign="top" width="67%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">To
      consider and act upon any other proposal as may properly come before the
      Annual Meeting.</font></div>
            </td>
          </tr>
      </table>
    </div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman">The
foregoing matters are more fully described in the Proxy Statement accompanying
this Notice, to which your attention is directed.</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman">Only
shareholders of record on the books of the Company at the close of business on
October 28, 2008 will be entitled to vote at the Annual Meeting. You are
requested to sign, date and return the enclosed proxy card at your earliest
convenience in order that your shares may be voted for you as
specified.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman">By Order
of the Board of Directors,</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman">David
Vozick, Secretary</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman">November
12, 2008</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman">Elmsford,
New York</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman">Each
shareholder is urged to complete, date, sign and return the
accompanying</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman">proxy
card to assure that the shareholder&#8217;s vote will be counted.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt">&#160;</div>
    <div id="PGBRK" style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
      <div id="FTR">
        <div id="GLFTR" style="WIDTH: 100%" align="left">
        </div>
      </div>
      <div id="PN" style="PAGE-BREAK-AFTER: always">
        <div style="WIDTH: 100%; TEXT-ALIGN: center">
        </div>
        <div style="WIDTH: 100%; TEXT-ALIGN: center">
          <hr style="COLOR: black" noshade size="2">
        </div>
      </div>
      <div id="HDR">
        <div id="GLHDR" style="WIDTH: 100%" align="right">
        </div>
      </div>
    </div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt; TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman">AFP
Imaging Corporation</font></div>
    <div align="center"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman">250
Clearbrook Road</font></div>
    <div align="center"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman">Elmsford,
New York 10523</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div align="center"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman">Proxy
Statement</font></div>
    <div align="center"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman">Annual
Meeting of Shareholders</font></div>
    <div align="center"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman">December
10, 2008</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div align="left"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman">The 2008
Annual Meeting of Shareholders of AFP Imaging Corporation, a New York
corporation, will be held on Wednesday, December 10, 2008, at our offices,
located at 250 Clearbrook Road, Elmsford, New York, commencing at 9:00 a.m.,
local time, for the purposes set forth in the accompanying Notice of Annual
Meeting of Shareholders.&#160;&#160;<font style="DISPLAY: inline; FONT-WEIGHT: bold">This proxy statement is being
furnished in connection with the solicitation of proxies by and on behalf of our
board of directors for use at the annual meeting, and at any adjournments and
postponements of the annual meeting.</font> We will bear the entire cost of such
solicitation. The approximate date on which this proxy statement and the
enclosed proxy card are being first mailed to our shareholders&#160;&#160;is
November 12, 2008.</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div align="left"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman">If the
proxy card in the accompanying form is duly completed, executed, dated and
returned, the shares represented by such proxy card will be voted as specified,
subject to any applicable voting or irrevocable proxy agreements. Any person
executing a proxy card may revoke it prior to its use. You are directed to the
section entitled &#8220;Procedure for Voting by Proxy&#8221; for further information
concerning a shareholder&#8217;s ability to vote by proxy and to revoke a proxy once
given.</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div align="left"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman">Throughout
this proxy statement, the terms &#8220;we,&#8221; &#8220;us,&#8221; &#8220;our&#8221; and &#8220;our company&#8221; refer to AFP
Imaging Corporation and, unless the context indicates otherwise, our
subsidiaries on a consolidated basis; and &#8220;you&#8221; and &#8220;your&#8221; refer to the
shareholders of our company.</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div align="left"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman">Record
Date</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div align="left"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman">We have
established October 28, 2008 as the record date for the annual
meeting.&#160;&#160;Only holders of record of our voting securities at the close
of business on such date will be eligible to vote at the annual
meeting.&#160;&#160;Our common stock currently is the only class of our
securities entitled to be voted at the annual meeting.&#160;&#160;A list of
shareholders entitled to vote at the annual meeting will be available for
examination by any shareholder, for any purpose relating to the annual meeting,
at our executive offices during ordinary business hours for the ten days
immediately prior to the annual meeting.&#160;&#160;The shareholder list also
will be available for examination at the annual meeting.</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div align="left"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman">Proposals
to be Considered at the Meeting</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div align="left"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman">You will
be asked to consider and vote at the annual meeting on the matters listed in the
accompanying Notice of Annual Meeting of Shareholders and described in this
proxy statement.</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div align="left"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman">We do not
expect that any other matter will be brought before the annual
meeting.&#160;&#160;If, however, other matters are properly presented, the
individuals named on your proxy card will vote on these other matters in
accordance with their judgment and to the extent permitted by applicable
law.</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div align="left"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman">Vote
Required to Approve the Proposals</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div align="left"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman">Holders of
our common stock are entitled to one vote per share on each of the proposals
scheduled for vote at the annual meeting. We had 17,928,800 issued and
outstanding shares of our common stock as of the record
date.&#160;&#160;Accordingly, there are 17,928,800 votes eligible to be cast at
the annual meeting.</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div align="left"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman">The
election of directors (proposal number 1) is by a plurality of votes
cast.&#160;&#160;Plurality means that the individuals who receive the largest
number of votes cast are elected as directors up to the maximum number of
directors to be chosen at the meeting.</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div id="PGBRK" style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
      <div id="FTR">
        <div id="GLFTR" style="WIDTH: 100%" align="left">
        </div>
      </div>
      <div id="PN" style="PAGE-BREAK-AFTER: always">
        <div style="WIDTH: 100%; TEXT-ALIGN: center">
        </div>
        <div style="WIDTH: 100%; TEXT-ALIGN: center">
          <hr style="COLOR: black" noshade size="2">
        </div>
      </div>
      <div id="HDR">
        <div id="GLHDR" style="WIDTH: 100%" align="right">
        </div>
      </div>
      <div>&#160;</div>
    </div>
    <div align="left"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman">Abstentions
and broker non-votes will be counted in the determination of whether a quorum
exists for the purposes of transacting business at the annual
meeting.&#160;&#160;Abstentions will not be included, however, in the vote
totals and, in instances where brokers are prohibited from exercising
discretionary authority for beneficial owners who have not returned a proxy card
to the brokers, so called &#8220;broker non-votes,&#8221; those votes will not be included
in the vote totals for purposes of determining whether proposals have received
the requisite number of affirmative votes cast.&#160;&#160;&#160;Therefore, with
respect to Proposal 1, abstentions and broker non-votes will have no effect on
the vote.&#160;&#160;However, with respect to Proposal 2, any broker non-votes
will have the same effect as a vote against the proposal.</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div align="left"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman">Our
directors, director-nominees and executive officers control approximately 19.36%
of the voting power entitled to be cast at the annual meeting. We anticipate
that these directors and executive officers will cast all of their votes in
favor of each of the director-nominees and company proposals being considered at
the annual meeting.</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div align="left"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman">&#160;<font style="DISPLAY: inline; FONT-WEIGHT: bold">Quorum</font></font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div align="left"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman">We must
have a quorum in order to carry on business at the annual meeting. Under our
bylaws, as amended through the record date, we must have present, in person or
by proxy, holders of at least a majority of the entire number of votes entitled
to be cast at the annual meeting in order for a quorum to
exist.&#160;&#160;Accordingly, we must have present, in person or by proxy,
holders owning of record at least 8,964,401 shares of our common stock in order
for any business to be conducted at the annual meeting.&#160;&#160;Abstentions
and broker non-votes will count for quorum purposes.</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div align="left"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman">Procedure
for Voting by Proxy</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div align="left"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman">A form of
proxy card is enclosed for your use. To vote without attending the annual
meeting in person, you should complete, sign, date and return the proxy card in
the accompanying envelope, which is postage-paid if mailed in the United
States.</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div align="left"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman">If you
properly fill in your proxy card in the accompanying form and send it to us in
time to be voted, your shares will be voted as you have directed on the proxy
card, subject to any applicable voting or irrevocable proxy agreements to which
you may be a party.&#160;&#160;If you sign the proxy card, but do not make
specific choices, the individuals named on your proxy card will vote your shares
FOR approval of each of the Company proposals scheduled for vote at the annual
meeting.</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman">You can
still vote in person at the annual meeting, even if you have completed and
returned a proxy card. You may revoke your proxy at any time before it is voted
by:</font></div>
    <div>
      <table cellpadding="0" cellspacing="0" width="100%">
          <tr>
            <td align="left" valign="top" width="4%" style="PADDING-LEFT: 0pt">
              <div style="DISPLAY: block; MARGIN-LEFT: 27pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#8226;</font></div>
            </td>
            <td align="left" valign="top" width="67%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">submitting
      a new proxy with a later date;</font></div>
            </td>
          </tr>
          <tr>
            <td align="left" valign="top" width="4%" style="PADDING-LEFT: 0pt">
              <div style="DISPLAY: block; MARGIN-LEFT: 27pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#8226;</font></div>
            </td>
            <td align="left" valign="top" width="67%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">by
      voting in person at the annual meeting;
or</font></div>
            </td>
          </tr>
      </table>
    </div>
    <div>
      <table cellpadding="0" cellspacing="0" width="100%">
          <tr>
            <td align="left" valign="top" width="4%" style="PADDING-LEFT: 0pt">
              <div style="DISPLAY: block; MARGIN-LEFT: 27pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#8226;</font></div>
            </td>
            <td align="left" valign="top" width="67%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">by
      filing with our corporate secretary a written revocation of the
      proxy.</font></div>
            </td>
          </tr>
      </table>
    </div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div align="left"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman">Attendance
at the annual meeting will not of itself constitute revocation of a
proxy.&#160;&#160;You must note your appearance with the inspector(s) of
election, tell the inspector(s) that you previously granted a proxy with respect
to the annual meeting, which you are revoking and request a ballot in order to
personally vote at the annual meeting.</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div align="left"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman">If you
hold shares through a broker, you should contact your broker to determine the
procedures through which you can vote your shares in person.</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div align="center"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman">PROPOSAL
1</font></div>
    <div align="center"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman">ELECTION
OF DIRECTORS</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div align="left"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman">Director
- Nominees for the 2008 Annual Meeting</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div align="left"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman">The first
proposal is for the election of four (4) directors of our company, each to hold
office until the next annual meeting of shareholders, unless he shall resign,
become disqualified, disabled or shall otherwise be removed from
office.&#160;&#160;The independent directors, as such term is defined in the
Marketplace Rules of the Nasdaq Stock Market, of our board of directors, have
nominated each of the following persons for election as directors at the annual
meeting:</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div>
      <table cellpadding="0" cellspacing="0" width="100%">
          <tr>
            <td align="left" valign="middle" width="36%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">Robert
      A. Blatt&#160;&#160;&#160;&#160;</font></div>
            </td>
            <td align="left" valign="middle" width="36%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">Jack
      Becker</font></div>
            </td>
          </tr>
          <tr>
            <td align="left" valign="middle" width="36%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">Donald
      Rabinovitch</font></div>
            </td>
            <td align="left" valign="middle" width="36%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">David
      Vozick</font></div>
            </td>
          </tr>
      </table>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman">&#160;&#160;&#160;</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
    <div id="PGBRK" style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
      <div id="FTR">
        <div id="GLFTR" style="WIDTH: 100%" align="left">
        </div>
      </div>
      <div id="PN" style="PAGE-BREAK-AFTER: always">
        <div style="WIDTH: 100%; TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman">2</font></div>
        <div style="WIDTH: 100%; TEXT-ALIGN: center">
          <hr style="COLOR: black" noshade size="2">
        </div>
      </div>
      <div id="HDR">
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        </div>
      </div>
      <div>&#160;</div>
    </div>
    <div align="left"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman">Shares
represented by executed proxy cards in the form enclosed will be voted, if
authority to do so is not withheld, for the election as directors of each of the
above-stated nominees, unless such nominee shall be unavailable, in which case
such shares will be voted for the substitute nominee designated by our board of
directors.&#160;&#160;Our board of directors has no reason to believe that any
of these nominees will be unavailable or, if elected, will decline to
serve.&#160;&#160;Only a plurality of votes cast are necessary for the election
of directors.</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div align="left"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman">Our board
of directors has not established a nominating committee, nor did it adopt a
nominating committee charter.&#160;&#160;Our board believes that its size
negates the need for establishing a separate nominating
committee.&#160;&#160;However, all of our board&#8217;s nominees for election as
directors are approved by our directors who meet the definition of &#8220;independent
directors&#8221; under the Marketplace Rules of The Nasdaq Stock
Market.&#160;&#160;Those independent directors consist of Jack Becker and Robert
A. Blatt.</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div align="left"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman">Our
independent directors will consider recommendations for election as directors
submitted by our shareholders.&#160;&#160;These recommendations will be
discussed at board meetings and appropriate candidates will be invited to meet
with our independent directors and entire board to discuss their qualifications
for serving on our board.&#160;&#160;Our board has not established minimum
qualifications for candidates recommended by our shareholders.&#160;&#160;Any
determination to include a shareholder-recommended candidate as a board nominee
remains a subjective determination to be made by our independent
directors.</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div align="left"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman">Information
Concerning Director-Nominees and Executive Officers</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div align="left"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman">Set forth
below is a brief description of the background of each of our director-nominees
and executive officers, based on information provided to us by
them.</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div align="left">
      <table cellpadding="0" cellspacing="0" width="100%">
          <tr>
            <td align="left" valign="top" width="14%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;
      </font></td>
            <td align="left" valign="top" width="8%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;
      </font></td>
            <td align="left" valign="top" width="45%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">Principal
      Positions and</font></div>
            </td>
            <td valign="top" width="25%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">Principal
      Position</font></div>
            </td>
            <td valign="top" width="8%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">Director</font></div>
            </td>
          </tr>
          <tr>
            <td align="left" valign="top" width="14%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman"><font style="DISPLAY: inline; TEXT-DECORATION: underline">Name</font></font></div>
            </td>
            <td valign="top" width="8%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman"><font style="DISPLAY: inline; TEXT-DECORATION: underline">Age</font></font></div>
            </td>
            <td align="left" valign="top" width="45%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman"><font style="DISPLAY: inline; TEXT-DECORATION: underline">Offices with our
      Company</font></font></div>
            </td>
            <td valign="top" width="25%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman"><font style="DISPLAY: inline; TEXT-DECORATION: underline">Outside our
      Company</font></font></div>
            </td>
            <td valign="top" width="8%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman"><font style="DISPLAY: inline; TEXT-DECORATION: underline">Since</font></font></div>
            </td>
          </tr>
          <tr>
            <td align="left" valign="top" width="14%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">Robert
      A. Blatt</font></div>
            </td>
            <td valign="top" width="8%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">68</font></div>
            </td>
            <td align="left" valign="top" width="45%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">Director</font></div>
            </td>
            <td align="left" valign="top" width="25%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt; TEXT-ALIGN: center" align="left"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">Chairman
      and majority </font></div>
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt; TEXT-ALIGN: center" align="left"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">owner
      of CRC Group, Inc.</font></div>
            </td>
            <td valign="top" width="8%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">1995</font></div>
            </td>
          </tr>
          <tr>
            <td align="left" valign="top" width="14%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">Jack
      Becker</font></div>
            </td>
            <td valign="top" width="8%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">73</font></div>
            </td>
            <td align="left" valign="top" width="45%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">Director</font></div>
            </td>
            <td align="left" valign="top" width="25%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt; TEXT-ALIGN: center" align="left"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">Managing
      Partner of Snow </font></div>
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt; TEXT-ALIGN: center" align="left"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">Becker
      Krauss</font></div>
            </td>
            <td valign="top" width="8%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">1997</font></div>
            </td>
          </tr>
          <tr>
            <td align="left" valign="top" width="14%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">Daniel
      Fields</font></div>
            </td>
            <td valign="top" width="8%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">59</font></div>
            </td>
            <td align="left" valign="top" width="45%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">Executive
      Vice-President of NewTom Sales</font></div>
            </td>
            <td valign="top" width="25%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">N/A</font></div>
            </td>
            <td valign="top" width="8%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">N/A</font></div>
            </td>
          </tr>
          <tr>
            <td align="left" valign="top" width="14%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">Brian
      Jaffe</font></div>
            </td>
            <td valign="top" width="8%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">48</font></div>
            </td>
            <td align="left" valign="top" width="45%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">Executive
      Vice-President of Sales and Marketing</font></div>
            </td>
            <td valign="top" width="25%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">N/A</font></div>
            </td>
            <td valign="top" width="8%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">N/A</font></div>
            </td>
          </tr>
          <tr>
            <td align="left" valign="top" width="14%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">Aida
      McKinney</font></div>
            </td>
            <td valign="top" width="8%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">52</font></div>
            </td>
            <td align="left" valign="top" width="45%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">Executive
      Vice-President of Administration</font></div>
            </td>
            <td valign="top" width="25%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">N/A</font></div>
            </td>
            <td valign="top" width="8%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">N/A</font></div>
            </td>
          </tr>
          <tr>
            <td align="left" valign="top" width="14%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">Roberto
      Molteni</font></div>
            </td>
            <td valign="top" width="8%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">58</font></div>
            </td>
            <td align="left" valign="top" width="45%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">Executive
      Vice-President of Technology</font></div>
            </td>
            <td valign="top" width="25%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">N/A</font></div>
            </td>
            <td valign="top" width="8%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">N/A</font></div>
            </td>
          </tr>
          <tr>
            <td align="left" valign="top" width="14%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">Elise
      Nissen</font></div>
            </td>
            <td valign="top" width="8%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">54</font></div>
            </td>
            <td align="left" valign="top" width="45%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">Executive
      Vice-President of Finance, Chief Financial Officer</font></div>
            </td>
            <td valign="top" width="25%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">N/A</font></div>
            </td>
            <td valign="top" width="8%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">N/A</font></div>
            </td>
          </tr>
          <tr>
            <td align="left" valign="top" width="14%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">Donald
      Rabinovitch</font></div>
            </td>
            <td valign="top" width="8%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">62</font></div>
            </td>
            <td align="left" valign="top" width="45%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">President,
      Co-Chief Executive Officer</font></div>
            </td>
            <td valign="top" width="25%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">N/A</font></div>
            </td>
            <td valign="top" width="8%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">1978</font></div>
            </td>
          </tr>
          <tr>
            <td align="left" valign="top" width="14%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">David
      Vozick</font></div>
            </td>
            <td valign="top" width="8%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">68</font></div>
            </td>
            <td align="left" valign="top" width="45%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">Chairman
      of the Board, Co-Chief Executive Officer, Secretary and
      Treasurer</font></div>
            </td>
            <td valign="top" width="25%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">N/A</font></div>
            </td>
            <td valign="top" width="8%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">1978</font></div>
            </td>
          </tr>
      </table>
    </div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div align="left"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman"><font style="DISPLAY: inline; FONT-WEIGHT: bold">Robert A. Blatt </font>is the
chairman and majority owner of CRC Group, Inc., a developer, owner and operator
of commercial real estate.&#160;&#160;Mr. Blatt is a director and vice-chairman,
chairman of the finance committee and chairman of the succession committee of
MTR Gaming Group, Inc., a Nasdaq-listed company (NASDAQ: MNTG).&#160;&#160;Mr.
Blatt has been a shareholder (formerly a seat-holder) of the New York Stock
Exchange, Inc., since 1985. He is a member of the State Bar of
California.</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div align="left"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman"><font style="DISPLAY: inline; FONT-WEIGHT: bold">Jack Becker</font> has been a
practicing attorney in New York State since 1960 and is a principal of Snow
Becker Krauss P.C., our outside general counsel.</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div align="left"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman"><font style="DISPLAY: inline; FONT-WEIGHT: bold">Daniel Fields </font>has served as
our executive vice-president of NewTom Sales since April 2007.&#160;&#160;From
2005 to 2007 he was vice-president for Syneron Medical, and from 2000 to 2005 he
was president of OpusDent, a subsidiary of Lumenis.</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div id="PGBRK" style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
      <div id="FTR">
        <div id="GLFTR" style="WIDTH: 100%" align="left">
        </div>
      </div>
      <div id="PN" style="PAGE-BREAK-AFTER: always">
        <div style="WIDTH: 100%; TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman">3</font></div>
        <div style="WIDTH: 100%; TEXT-ALIGN: center">
          <hr style="COLOR: black" noshade size="2">
        </div>
      </div>
      <div id="HDR">
        <div id="GLHDR" style="WIDTH: 100%" align="right">
        </div>
      </div>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt; TEXT-ALIGN: left" align="left">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt; TEXT-ALIGN: left" align="left"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman"><font style="DISPLAY: inline; FONT-WEIGHT: bold">Brian&#160;&#160;Jaffe </font>has
served as our executive vice-president of sales and marketing since July
2008.&#160;&#160;From 2005 to 2008 he was senior vice-president strategic
marketing at Suni Medical Imaging, and from 2003 to 2005 he was vice-president
product marketing at Experian.</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman"><font style="DISPLAY: inline; FONT-WEIGHT: bold">Aida McKinney</font> has served as
our executive vice-president of administration since 2007.&#160;&#160;From 1980
to 2007, she served as our vice-president of administration and our
administrative manager.</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman"><font style="DISPLAY: inline; FONT-WEIGHT: bold">Roberto Molteni</font> has served as
our executive vice-president of technology since 2005.&#160;&#160;From 1998 to
2005, he was director, research and development at Gendex Dental
Systems.</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman"><font style="DISPLAY: inline; FONT-WEIGHT: bold">Elise Nissen</font> has served as our
executive vice-president of finance and chief financial officer since
2007.&#160;&#160;From 1982 to 2007, she served as our vice president of finance,
chief financial officer and controller.</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman"><font style="DISPLAY: inline; FONT-WEIGHT: bold">Donald Rabinovitch </font>has served
as our president and co-chief executive officer, as well as one of our
directors, since our formation in 1978.&#160;&#160;He is one of our original
co-founders.&#160;&#160;Mr. Rabinovitch is a cousin of David
Vozick.</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman"><font style="DISPLAY: inline; FONT-WEIGHT: bold">David Vozick</font> has served as
chairman of our board of directors, secretary, treasurer and co-chief executive
officer, as well as one of our directors, since our formation in
1978.&#160;&#160;He is one of our original co-founders.&#160;&#160;Mr. Vozick is
a cousin of Donald Rabinovitch.</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman">Committees
of Our Board of Directors</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman">Our board
of directors has not established standing audit, nominating or compensation
committees, or committees performing similar functions, to assist it in the
discharge of the board&#8217;s duties.</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman">Shareholder
Communications</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman">Shareholders
wishing to communicate to our board, other than to submit proposals for action
at meetings of our shareholders pursuant to SEC Rule 14a-8, should do so in
writing, addressed to David Vozick, c/o AFP Imaging Corporation, 250 Clearbrook
Road, Elmsford, New York 10523. The envelope delivering such written
communications should be marked &#8220;Shareholder Communication.&#8221;</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman">Meetings
of the Board of Directors</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman">Our board
of directors held eight formal meetings during our fiscal year ended June 30,
2008.&#160;&#160;Each member of our board of directors attended all meetings of
our board held during our fiscal year ended June 30, 2008.</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman">Our board
has not established any procedure with respect to director attendance at our
annual meetings of shareholders. All of our directors were present at our annual
meeting of shareholders held on December 12, 2007.</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman">SECURITY
OWNERSHIP OF CERTAIN</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman">BENEFICIAL
OWNERS AND MANAGEMENT</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: -27pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
    <div align="left"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman">The
following table sets forth the number of shares of our common stock beneficially
owned, directly or indirectly, by (i) each person known by us to be the owner of
more than 5% of the outstanding shares of our common stock based on filings with
the SEC, (ii) each director, (iii) each of our current executive officers
identifiable as &#8220;Named Executive Officers&#8221; as defined by the SEC and (iv) all of
our directors and executive officers as a &#8220;group&#8221; (as that term is used in
Section 13(d)(3) of the Securities Exchange Act of 1934, as amended (the
&#8220;Exchange Act&#8221;) as of October 28, 2008.</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div align="left"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman">The number
and percentage of shares beneficially owned is determined in accordance with
Rule 13d-3 of the Exchange Act, and is not necessarily indicative of beneficial
ownership for any other purpose.&#160;&#160;Shares of our common stock that a
person has a right to acquire within 60 days are deemed outstanding for purposes
of computing the percentage ownership of that person, but are not deemed
outstanding for purposes of computing the percentage ownership of any other
person, except with respect to the percentage ownership of all directors and
executive officers as a group.&#160;&#160;We based our calculations of the
percentage owned of the 17,928,800 shares outstanding on October 28,
2008.</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div id="PGBRK" style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
      <div id="FTR">
        <div id="GLFTR" style="WIDTH: 100%" align="left">
        </div>
      </div>
      <div id="PN" style="PAGE-BREAK-AFTER: always">
        <div style="WIDTH: 100%; TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman">4</font></div>
        <div style="WIDTH: 100%; TEXT-ALIGN: center">
          <hr style="COLOR: black" noshade size="2">
        </div>
      </div>
      <div id="HDR">
        <div id="GLHDR" style="WIDTH: 100%" align="right">
        </div>
      </div>
      <div>&#160;</div>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman">Except as
otherwise indicated in the notes to the following table,</font></div>
    <div>
      <table align="center" border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%">
          <tr valign="top">
            <td style="WIDTH: 18pt">
              <div><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman">&#160;
      </font></div>
            </td>
            <td style="WIDTH: 18pt">
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman"><font style="DISPLAY: inline;" face="Wingdings">&#167;</font></font></div>
            </td>
            <td>
              <div align="justify"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman">All
      shares are beneficially owned, and investment and voting power is held by,
      the persons named as owners and/or voting power with that individual&#8217;s
      spouse.</font></div>
            </td>
          </tr>
      </table>
    </div>
    <div>
      <table align="center" border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%">
          <tr valign="top">
            <td style="WIDTH: 18pt">
              <div><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman">&#160;
      </font></div>
            </td>
            <td style="WIDTH: 18pt">
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman"><font style="DISPLAY: inline;" face="Wingdings">&#167;</font></font></div>
            </td>
            <td>
              <div align="justify"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman">The
      address of each director and Named Executive Officer listed in the table
      below is c/o AFP Imaging Corporation, 250 Clearbrook Road, Elmsford, New
      York 10523.</font></div>
            </td>
          </tr>
      </table>
    </div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div align="left">
      <table cellpadding="0" cellspacing="0" width="100%">
          <tr>
            <td align="left" valign="bottom" width="62%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
            </td>
            <td colspan="2" valign="bottom" width="18%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">Amount
      and Nature of</font></div>
            </td>
            <td valign="bottom" width="20%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">Percentage
      of</font></div>
            </td>
          </tr>
          <tr>
            <td align="left" valign="top" width="62%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">Name
      of Beneficial Owner</font></div>
            </td>
            <td colspan="2" valign="top" width="18%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman"><font style="DISPLAY: inline; TEXT-DECORATION: underline">Beneficial
      Ownership</font></font></div>
            </td>
            <td valign="top" width="20%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman"><font style="DISPLAY: inline; TEXT-DECORATION: underline">Outstanding
      Shares</font></font></div>
            </td>
          </tr>
          <tr>
            <td align="left" valign="top" width="62%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-STYLE: italic; FONT-FAMILY: times new roman">Directors
      and Officers</font></div>
            </td>
            <td valign="top" width="10%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;
      </font></td>
            <td valign="top" width="8%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;
      </font></td>
            <td valign="top" width="20%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;
      </font></td>
          </tr>
          <tr>
            <td align="left" valign="top" width="62%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">David
      Vozick (1)</font></div>
            </td>
            <td align="right" valign="top" width="10%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">1,526,603</font></div>
            </td>
            <td valign="top" width="8%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">(2)</font></div>
            </td>
            <td valign="top" width="20%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">8.4</font></div>
            </td>
          </tr>
          <tr>
            <td align="left" valign="top" width="62%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">Donald
      Rabinovitch (3)</font></div>
            </td>
            <td align="right" valign="top" width="10%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">1,407,803</font></div>
            </td>
            <td valign="top" width="8%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">(4)</font></div>
            </td>
            <td valign="top" width="20%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">7.8</font></div>
            </td>
          </tr>
          <tr>
            <td align="left" valign="top" width="62%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">Robert
      A. Blatt (5)</font></div>
            </td>
            <td align="right" valign="top" width="10%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">819,963</font></div>
            </td>
            <td valign="top" width="8%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">(6)</font></div>
            </td>
            <td valign="top" width="20%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">4.5</font></div>
            </td>
          </tr>
          <tr>
            <td align="left" valign="top" width="62%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">Jack
      Becker (7)</font></div>
            </td>
            <td align="right" valign="top" width="10%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">148,022</font></div>
            </td>
            <td valign="top" width="8%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">(8)</font></div>
            </td>
            <td valign="top" width="20%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">*</font></div>
            </td>
          </tr>
          <tr>
            <td align="left" valign="top" width="62%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">Elise
      Nissen (9)</font></div>
            </td>
            <td align="right" valign="top" width="10%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">106,000</font></div>
            </td>
            <td valign="top" width="8%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">(10)</font></div>
            </td>
            <td valign="top" width="20%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">*</font></div>
            </td>
          </tr>
          <tr>
            <td align="left" valign="top" width="62%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">Aida
      McKinney (11)</font></div>
            </td>
            <td align="right" valign="top" width="10%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">85,000</font></div>
            </td>
            <td valign="top" width="8%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">(12)</font></div>
            </td>
            <td valign="top" width="20%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">*</font></div>
            </td>
          </tr>
          <tr>
            <td align="left" valign="top" width="62%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">Roberto
      Molteni (13)</font></div>
            </td>
            <td align="right" valign="top" width="10%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">100,000</font></div>
            </td>
            <td valign="top" width="8%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">(14)</font></div>
            </td>
            <td valign="top" width="20%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">*</font></div>
            </td>
          </tr>
          <tr>
            <td align="left" valign="top" width="62%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">Daniel
      Fields&#160;&#160;(15)</font></div>
            </td>
            <td valign="top" width="10%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt; TEXT-ALIGN: right" align="center"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;50,000</font></div>
            </td>
            <td valign="top" width="8%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">(16)</font></div>
            </td>
            <td valign="top" width="20%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">*</font></div>
            </td>
          </tr>
          <tr>
            <td align="left" valign="top" width="62%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;
      </font></td>
            <td align="left" colspan="2" valign="top" width="18%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;
      </font></td>
            <td align="left" valign="top" width="20%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;
      </font></td>
          </tr>
          <tr>
            <td align="left" valign="top" width="62%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">All
      executive officers and directors as a group (eight
persons)</font></div>
            </td>
            <td align="right" valign="top" width="10%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">4,218,391</font></div>
            </td>
            <td valign="top" width="8%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">(17)</font></div>
            </td>
            <td valign="top" width="20%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">22.7</font></div>
            </td>
          </tr>
          <tr>
            <td align="left" valign="top" width="62%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-STYLE: italic; FONT-FAMILY: times new roman">Beneficial
      owner of more than 5%</font></div>
            </td>
            <td valign="top" width="10%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;
      </font></td>
            <td valign="top" width="8%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;
      </font></td>
            <td valign="top" width="20%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;
      </font></td>
          </tr>
          <tr>
            <td align="left" valign="top" width="62%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">ComVest
      Capital LLC (18)</font></div>
            </td>
            <td valign="top" width="10%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt; TEXT-ALIGN: right" align="center"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;&#160;&#160;&#160;&#160;2,909,705</font></div>
            </td>
            <td valign="top" width="8%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">(19)</font></div>
            </td>
            <td valign="top" width="20%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">14.0</font></div>
            </td>
          </tr>
      </table>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman">__________</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman">*
Represents less than 1% of our outstanding common stock.</font></div>
    <div>
      <table cellpadding="0" cellspacing="0" width="100%">
          <tr>
            <td align="left" valign="top" width="4%" style="PADDING-LEFT: 0pt">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">(1)</font></div>
            </td>
            <td align="left" valign="top" width="67%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">Mr.
      Vozick is our chairman of the board, co-chief executive officer, secretary
      and treasurer.</font></div>
            </td>
          </tr>
          <tr>
            <td align="left" valign="top" width="4%" style="PADDING-LEFT: 0pt">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">(2)</font></div>
            </td>
            <td align="left" valign="top" width="67%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">Includes
      (a) 180,000 shares which are issuable upon exercise of options granted to
      Mr. Vozick, which shares are exercisable within the 60 days following the
      date of this proxy statement and (b) 140,000 shares of our common stock
      owned of record by Mr. Vozick&#8217;s family foundation, of which Mr. Vozick has
      shared voting and dispositive powers with his spouse.&#160;&#160;Mr.
      Vozick disclaims beneficial ownership to the shares owned by Mr. Vozick&#8217;s
      family foundation.</font></div>
            </td>
          </tr>
          <tr>
            <td align="left" valign="top" width="4%" style="PADDING-LEFT: 0pt">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">(3)</font></div>
            </td>
            <td align="left" valign="top" width="67%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">Mr.
      Rabinovitch is our president, co-chief executive officer and one of our
      directors.</font></div>
            </td>
          </tr>
          <tr>
            <td align="left" valign="top" width="4%" style="PADDING-LEFT: 0pt">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">(4)</font></div>
            </td>
            <td align="left" valign="top" width="67%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">Includes
      (a) 180,000 shares which are issuable upon exercise of options granted to
      Mr. Rabinovitch, which shares are exercisable within the 60 days following
      the date of this proxy statement and (b) 125,000 shares of our common
      stock owned of record by Mr. Rabinovitch&#8217;s family foundation, of which Mr.
      Rabinovitch has shared voting and dispositive powers with his
      spouse.&#160;&#160;Mr. Rabinovitch disclaims beneficial ownership to the
      shares owned by Mr. Rabinovitch&#8217;s family foundation.</font></div>
            </td>
          </tr>
          <tr>
            <td align="left" valign="top" width="4%" style="PADDING-LEFT: 0pt">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">(5)</font></div>
            </td>
            <td align="left" valign="top" width="67%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">Mr.
      Blatt is one of our directors.&#160;&#160;The address for Mr. Blatt is
      1890 Palmer Avenue, Larchmont, New York 10538.</font></div>
            </td>
          </tr>
          <tr>
            <td align="left" valign="top" width="4%" style="PADDING-LEFT: 0pt">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">(6)</font></div>
            </td>
            <td align="left" valign="top" width="67%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">Includes
      116,000 shares which are issuable upon exercise of options granted to Mr.
      Blatt, which shares are exercisable within the 60 days following the date
      of this proxy statement.</font></div>
            </td>
          </tr>
          <tr>
            <td align="left" valign="top" width="4%" style="PADDING-LEFT: 0pt">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">(7)</font></div>
            </td>
            <td align="left" valign="top" width="67%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">Mr.
      Becker is one of our directors.&#160;&#160;The address for Mr. Becker c/o
      Snow Becker Krauss P.C., 605 Third Avenue, 25<font style="DISPLAY: inline; FONT-SIZE: 70%; VERTICAL-ALIGN: super">th</font>
      Floor, New York, New York 10158.</font></div>
            </td>
          </tr>
          <tr>
            <td align="left" valign="top" width="4%" style="PADDING-LEFT: 0pt">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">(8)</font></div>
            </td>
            <td align="left" valign="top" width="67%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">Includes
      (a) 25,000 shares owned of record by Snow Becker Krauss P.C., a law firm
      which acts as our outside general counsel and of which Mr. Becker is a
      principal, and (b) 116,000 shares of our common stock issuable upon
      exercise of options granted to Mr. Becker, which shares are exercisable
      within the 60 days following the date of this proxy
    statement.</font></div>
            </td>
          </tr>
          <tr>
            <td align="left" valign="top" width="4%" style="PADDING-LEFT: 0pt">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">(9)</font></div>
            </td>
            <td align="left" valign="top" width="67%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">Ms.
      Nissen is our executive vice-president of finance and chief financial
      officer.</font></div>
            </td>
          </tr>
          <tr>
            <td align="left" valign="top" width="4%" style="PADDING-LEFT: 0pt">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">(10)</font></div>
            </td>
            <td align="left" valign="top" width="67%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">Includes
      15,000 shares which are issuable upon exercise of options granted to Ms.
      Nissen, which shares are exercisable within the 60 days following the date
      of this proxy statement.</font></div>
            </td>
          </tr>
          <tr>
            <td align="left" valign="top" width="4%" style="PADDING-LEFT: 0pt">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">(11)</font></div>
            </td>
            <td align="left" valign="top" width="67%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">Ms.
      McKinney is our executive vice-president of
  administration.</font></div>
            </td>
          </tr>
          <tr>
            <td align="left" valign="top" width="4%" style="PADDING-LEFT: 0pt">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">(12)</font></div>
            </td>
            <td align="left" valign="top" width="67%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">Includes
      15,000 shares of our common stock issuable upon exercise of options
      granted to Ms. McKinney, which shares are exercisable within the 60 days
      following the date of this proxy
statement.</font></div>
            </td>
          </tr>
      </table>
    </div>
    <div>&#160;</div>
    <div id="PGBRK" style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
      <div id="FTR">
        <div id="GLFTR" style="WIDTH: 100%" align="left">
        </div>
      </div>
      <div id="PN" style="PAGE-BREAK-AFTER: always">
        <div style="WIDTH: 100%; TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman">5</font></div>
        <div style="WIDTH: 100%; TEXT-ALIGN: center">
          <hr style="COLOR: black" noshade size="2">
        </div>
      </div>
      <div id="HDR">
        <div id="GLHDR" style="WIDTH: 100%" align="right">
        </div>
      </div>
    </div>
    <div>&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left">
      <table border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%">
          <tr valign="top">
            <td align="right" style="WIDTH: 54pt">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman">(13)</font></div>
            </td>
            <td align="left">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman">Dr.
      Molteni is our executive vice-president of
  technology.</font></div>
            </td>
          </tr>
      </table>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left">
      <table border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%">
          <tr valign="top">
            <td align="right" style="WIDTH: 54pt">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman">(14)</font></div>
            </td>
            <td align="left">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman">Includes
      100,000 shares of our common stock issuable upon exercise of options
      granted to Dr.</font></div>
            </td>
          </tr>
      </table>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left">
      <table border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%">
          <tr valign="top">
            <td align="right" style="WIDTH: 54pt">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;</font></div>
            </td>
            <td align="left">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman">Molteni,
      which shares are exercisable within the 60 days following the date of this
      proxy statement.</font></div>
            </td>
          </tr>
      </table>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left">
      <table border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%">
          <tr valign="top">
            <td align="right" style="WIDTH: 54pt">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman">(15)</font></div>
            </td>
            <td align="left">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman">Mr.
      Fields is our executive vice-president of NewTom
  sales.</font></div>
            </td>
          </tr>
      </table>
    </div>
    <div>
      <table align="center" border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%">
          <tr valign="top">
            <td style="WIDTH: 54pt">
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman">(16)</font></div>
            </td>
            <td>
              <div align="left"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman">Includes
      50,000 shares of our common stock issuable upon exercise of options
      granted to Mr. Fields, which shares are exercisable within the 60 days
      following the date of this proxy
statement.</font></div>
            </td>
          </tr>
      </table>
    </div>
    <div>
      <table align="center" border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%">
          <tr valign="top">
            <td style="WIDTH: 54pt">
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman">(17)</font></div>
            </td>
            <td>
              <div align="left"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman">Includes
      those shares of our common stock owned by our current executive officers
      and directors, as set forth in notes (2), (4), (6), (8), (10), (12), (14)
      and (16).</font></div>
            </td>
          </tr>
      </table>
    </div>
    <div>
      <table align="center" border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%">
          <tr valign="top">
            <td style="WIDTH: 54pt">
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman">(18)</font></div>
            </td>
            <td>
              <div align="left"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman">The
      address of ComVest Capital, LLC is One North Clematis Street, Suite 300,
      West Palm Beach, Florida 33401</font></div>
            </td>
          </tr>
      </table>
    </div>
    <div>
      <table align="center" border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%">
          <tr valign="top">
            <td style="WIDTH: 54pt">
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman">(19)</font></div>
            </td>
            <td>
              <div align="left"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman">Represents
      shares of our common stock beneficially owned as of April 20, 2007 as
      indicated on the report on Schedule 13G filed by ComVest Capital,
      LLC.&#160;&#160;Includes 800,000 shares of our common stock which are
      issuable upon exercise of currently exercisable warrants and 2,109,705
      shares of our common stock which are issuable upon the conversion of the
      initial principal amount of a currently exercisable convertible term
      note.</font></div>
            </td>
          </tr>
      </table>
    </div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div>
      <table align="center" border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%">
          <tr valign="top">
            <td style="WIDTH: 18pt">
              <div><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman">&#160;
      </font></div>
            </td>
            <td>
              <div align="center"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman">SECTION
      16(a) BENEFICIAL OWNERSHIP REPORTING
COMPLIANCE</font></div>
            </td>
          </tr>
      </table>
    </div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div align="left"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman">Section&#160;16(a)
of the Exchange Act requires our executive officers and directors, and persons
who own more than 10% of a registered class of our equity securities to file
reports of ownership and changes in ownership with the SEC.&#160;&#160;SEC
regulations also require us to identify in this proxy statement any person
subject to this requirement who failed to file any such report on a timely
basis.</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div align="left"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman">Based
solely upon a review of copies of Forms 3, 4 and 5 and amendments to these forms
furnished to us, together with written representations received by us from
applicable parties that no Form 5 was required to be filed by such parties, we
believe that all parties subject to the reporting requirements of Section 16(a)
of the Exchange Act filed all such required reports during and with respect to
our fiscal year ended June 30, 2008 on a timely basis.</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman">EXECUTIVE
COMPENSATION</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div align="left"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman">Our board
of directors does not have a compensation committee.&#160;&#160;Our board
believes that its size negates the need for establishing a separate compensation
committee.&#160;&#160;Worldwide executive compensation, including compensation
for our co-chief executive officers, is determined by our board in its entirety,
based on each executive&#8217;s responsibilities and the executive compensation
philosophy determined by our board.&#160;&#160;Donald Rabinovitch and David
Vozick, our co-chief executive officers who each serve on our board,
participated in the deliberations of our board concerning executive officer
compensation.&#160;&#160;&#160;In addition, our board rewards our executives for
long-term company performance.&#160;&#160;The objectives of our compensation
program are:</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div>
      <table align="center" border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%">
          <tr valign="top">
            <td style="WIDTH: 20.25pt">
              <div><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman">&#160;
      </font></div>
            </td>
            <td style="WIDTH: 18pt">
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman"><font style="DISPLAY: inline;" face="Wingdings">&#167;</font></font></div>
            </td>
            <td>
              <div align="left"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman">To
      attract, retain, motivate and incentivize our employees to help us achieve
      our business objectives,</font></div>
            </td>
          </tr>
      </table>
    </div>
    <div>
      <table align="center" border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%">
          <tr valign="top">
            <td style="WIDTH: 20.25pt">
              <div><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman">&#160;
      </font></div>
            </td>
            <td style="WIDTH: 18pt">
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman"><font style="DISPLAY: inline;" face="Wingdings">&#167;</font></font></div>
            </td>
            <td>
              <div align="left"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman">To
      encourage and reward superior individual
  performance,</font></div>
            </td>
          </tr>
      </table>
    </div>
    <div>
      <table align="center" border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%">
          <tr valign="top">
            <td style="WIDTH: 20.25pt">
              <div><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman">&#160;
      </font></div>
            </td>
            <td style="WIDTH: 18pt">
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman"><font style="DISPLAY: inline;" face="Wingdings">&#167;</font></font></div>
            </td>
            <td>
              <div align="left"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman">To
      encourage teamwork, and</font></div>
            </td>
          </tr>
      </table>
    </div>
    <div>
      <table align="center" border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%">
          <tr valign="top">
            <td style="WIDTH: 20.25pt">
              <div><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman">&#160;
      </font></div>
            </td>
            <td style="WIDTH: 18pt">
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman"><font style="DISPLAY: inline;" face="Wingdings">&#167;</font></font></div>
            </td>
            <td>
              <div align="left"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman">To
      align the interest of our executives with those of our shareholders by
      incentivizing increases in the long-term value of our
    company</font></div>
            </td>
          </tr>
      </table>
    </div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div align="left"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman"><font style="DISPLAY: inline; FONT-WEIGHT: bold">Design of Our Compensation</font>
<font style="DISPLAY: inline; FONT-WEIGHT: bold">Program</font></font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div align="left"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman">Our
executive compensation philosophy is to provide competitive levels of
compensation by recognizing the need for multi-discipline management
responsibilities, achievement of our overall performance goals, individual
initiative and achievement, and allowance of our company to attract and retain
management with the skills critical to its long-term
success.&#160;&#160;Management compensation is intended to be set at levels that
we believe are consistent with compensation in comparable
companies.&#160;&#160;Our compensation programs are designed to motivate
executive officers to meet annual corporate performance goals and to enhance
long-term shareholder value.&#160;&#160;In connection with the development of
our annual business and financial plan each May, our executive management team
establishes company and individual goals for the ensuing
year.&#160;&#160;Executive management reviews these goals with the board of
directors, which adopts a final compensation program to be implemented for the
next year.</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div id="PGBRK" style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
      <div id="FTR">
        <div id="GLFTR" style="WIDTH: 100%" align="left">
        </div>
      </div>
      <div id="PN" style="PAGE-BREAK-AFTER: always">
        <div style="WIDTH: 100%; TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman">6</font></div>
        <div style="WIDTH: 100%; TEXT-ALIGN: center">
          <hr style="COLOR: black" noshade size="2">
        </div>
      </div>
      <div id="HDR">
        <div id="GLHDR" style="WIDTH: 100%" align="right">
        </div>
      </div>
    </div>
    <div align="left">&#160;</div>
    <div align="left"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman">In
finalizing the annual compensation program, the objective of the board of
directors is to make sure that our executives&#8217; salaries are competitive and
comparable to those of executives at other manufacturing/distribution companies
similar to our size and geographic location.&#160;&#160;Our executive
compensation contains fixed and performance-based elements, with four major
components: base salary, performance incentive, incentive stock options and
benefits and other compensation.</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div align="left"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman"><font style="DISPLAY: inline; FONT-WEIGHT: bold">The components of our executive
compensation program are</font>:</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div align="left"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman"><font style="DISPLAY: inline; TEXT-DECORATION: underline">Executive Base
Salaries</font></font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div align="left"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman">Base
salaries are determined by evaluating the various responsibilities for the
position held and the experience of the individual as well as comparing
compensation levels for similar positions at companies within our principal
industry. We review our executives&#8217; base salaries and determine increases based
upon an executive&#8217;s contribution to corporate performance, current economic
trends, and competitive market conditions.</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div align="left"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman"><font style="DISPLAY: inline; TEXT-DECORATION: underline">Performance
Incentives</font></font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div align="left"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman">We utilize
performance incentives based upon criteria relating to performance in special
projects undertaken during the past fiscal year, contribution to the development
of new products, marketing and technology strategies, manufacturing
efficiencies, revenues, income, and other operating and financial goals to
augment the base salaries received by executive officers.&#160;&#160;The annual
incentive compensation is based on each executive&#8217;s specific individual
goals.&#160;&#160;The amount of any incentive bonus is at the board&#8217;s
discretion.&#160;&#160;The performance incentive portion of compensation for the
named executive officers is principally based on certain specific non-financial
benchmarks, and projected revenue and pre-tax earnings benchmarks, which are
usually decided in May of the previous fiscal year.&#160;&#160;The non-financial
benchmarks can vary from year to year based on specific corporate goals, the
evolving marketplace and current technological
developments.&#160;&#160;Nevertheless, the board retains the discretionary right
to award performance incentive compensation notwithstanding the achievement of
such benchmarks.</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div align="left"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman">In fiscal
year 2008, we did not meet several of the financial benchmarks which had been
projected in May 2007, including revenue and operating
income.&#160;&#160;Therefore, in fiscal year 2008 our board did not award any
bonus payments to any named executive officers.</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div align="left"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman"><font style="DISPLAY: inline; TEXT-DECORATION: underline">Incentive Stock
Options</font></font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div align="left"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman">We use
incentive stock options granted under our stock option plans as a means to
attract, retain and encourage management and to align the interests of executive
officers with the long-term interest of our shareholders.&#160;&#160;Incentive
stock options are typically granted at the commencement of employment of key
personnel and have been augmented by subsequent periodic
grants.&#160;&#160;Management recommends all stock option awards to the board of
directors, which authorizes all awards.&#160;&#160;The board sets the exercise
price of our stock options at the closing price of our common stock on the OTC
Bulletin Board on the date of grant.&#160;&#160;Options generally have a term of
ten years, with a specific vesting schedule.&#160;&#160;The board generally
awards stock options when it approves the annual business and financial
plan.&#160;&#160;The board makes interim awards of stock options to new
executive hires as those executives join us.&#160;&#160;The number of options to
be granted is based on (1) the overall annual compensation plan for executives
and (2) the Black-Scholes estimate of the value of the options
granted.&#160;&#160;All of our stock option plans have been approved by our
shareholders.</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div align="left"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman">In light
of the impact that the grant of stock options has on our earnings per share
under FAS 123(R), the board of directors is continuing to evaluate the long-term
equity component of our compensation program, and accordingly, made no
recommendations or other awards of long-term equity compensation for
2008.</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div align="left"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman"><font style="DISPLAY: inline; TEXT-DECORATION: underline">Benefits and Other
Compensation</font></font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div align="left"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman">We offer
life, health and disability benefits, paid vacation, and a 3% contribution of
salary to a Safe Harbor 401(k) plan (up to $6,750 per employee) to our executive
officers, which are similar to the benefits offered to all of our
employees.&#160;&#160;We also provide supplemental life and/or disability
insurance coverage as well as an automobile expense allowance to our senior
executive officers as additional compensation.&#160;&#160;We believe that our
benefits are comparable to those of comparable companies.</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div id="PGBRK" style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
      <div id="FTR">
        <div id="GLFTR" style="WIDTH: 100%" align="left">
        </div>
      </div>
      <div id="PN" style="PAGE-BREAK-AFTER: always">
        <div style="WIDTH: 100%; TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman">7</font></div>
        <div style="WIDTH: 100%; TEXT-ALIGN: center">
          <hr style="COLOR: black" noshade size="2">
        </div>
      </div>
      <div id="HDR">
        <div id="GLHDR" style="WIDTH: 100%" align="right">
        </div>
      </div>
    </div>
    <div align="left">&#160;</div>
    <div align="left"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman"><font style="DISPLAY: inline; TEXT-DECORATION: underline">Retirement and Post
Retirement Benefits</font></font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div align="left"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman">We do not
offer a post-retirement health plan to our executive officers or
employees.&#160;&#160;However, we do offer a Section 401(k) retirement savings
plan to our executive officers, which is the same plan offered to all
employees.&#160;&#160;In Fiscal 2006, we established a Safe Harbor 401(k)
defined contribution plan for all eligible employees, which requires either a
specific matching contribution or a 3% contribution to all
participants.&#160;&#160;We also maintain a profit sharing plan and trust
pursuant to which participants receive certain benefits upon retirement, death,
and disability and, to a limited extent, upon termination of employment for
other reasons. This defined contribution plan requires no minimum contribution
by us. Allocation among participants&#8217; interests, including officers and
directors who are employees, is in accordance with current Internal Revenue
Service regulations for both of these plans. The aggregate amount we contribute
towards the Safe Harbor 401(k) Plan is determined by us in advance of the
following fiscal year, based on a review of financial and market information
available at that time. The aggregate amount contributed by us towards the
profit sharing plan is determined by us following a review of the operating
results and other financial information with respect to such fiscal
year.&#160;&#160;We contributed $145,190 and $143,112, respectively, to the Safe
Harbor 401(k) Plan for the fiscal years ended June 30, 2008 and June 30,
2007.&#160;&#160;There have been no contributions to the profit sharing plan for
the past two fiscal years.</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div align="left"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman">Summary
Compensation Table</font></div>
    <div align="left"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman">The
following table and accompanying footnotes summarize the compensation of our
Chief Executive Officers and our two other highest compensated executive
officers in 2008 and 2007.&#160;&#160;We refer to these officers as our Named
Executive Officers:</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div align="left">
      <table cellpadding="0" cellspacing="0" width="100%">
          <tr>
            <td valign="bottom" style="BORDER-BOTTOM: black 2px solid">
              <div style="DISPLAY: block; TEXT-INDENT: 0pt">&#160;</div>
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">Name
      and principal position</font></div>
              <div style="DISPLAY: block; TEXT-INDENT: 0pt">&#160;</div>
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">(a)</font></div>
            </td>
            <td valign="bottom" style="BORDER-BOTTOM: black 2px solid"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td colspan="2" valign="bottom" style="BORDER-BOTTOM: black 2px solid">
              <div style="DISPLAY: block; TEXT-INDENT: 0pt">
              </div>
              <div style="DISPLAY: block; TEXT-INDENT: 0pt">&#160;</div>
              <div style="DISPLAY: block; TEXT-INDENT: 0pt">&#160;</div>
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">Year</font></div>
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">(b)</font></div>
            </td>
            <td align="left" nowrap valign="bottom" style="BORDER-BOTTOM: black 2px solid"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td valign="bottom" style="BORDER-BOTTOM: black 2px solid"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td colspan="2" valign="bottom" style="BORDER-BOTTOM: black 2px solid">
              <div style="DISPLAY: block; TEXT-INDENT: 0pt">
              </div>
              <div style="DISPLAY: block; TEXT-INDENT: 0pt; TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">Salary</font></div>
              <div style="DISPLAY: block; TEXT-INDENT: 0pt">&#160;</div>
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">($)</font></div>
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">(c)</font></div>
            </td>
            <td align="left" nowrap valign="bottom" style="BORDER-BOTTOM: black 2px solid"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td valign="bottom" style="BORDER-BOTTOM: black 2px solid"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td colspan="2" valign="bottom" style="BORDER-BOTTOM: black 2px solid">
              <div style="DISPLAY: block; TEXT-INDENT: 0pt">
              </div>
              <div style="DISPLAY: block; TEXT-INDENT: 0pt">&#160;</div>
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">Bonus</font></div>
              <div style="DISPLAY: block; TEXT-INDENT: 0pt">&#160;</div>
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">($)
      (1)</font></div>
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">(d)</font></div>
            </td>
            <td align="left" nowrap valign="bottom" style="BORDER-BOTTOM: black 2px solid"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td valign="bottom" style="BORDER-BOTTOM: black 2px solid"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td colspan="2" valign="bottom" style="BORDER-BOTTOM: black 2px solid">
              <div style="DISPLAY: block; TEXT-INDENT: 0pt">
              </div>
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">Option
      </font></div>
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">Awards</font></div>
              <div style="DISPLAY: block; TEXT-INDENT: 0pt">&#160;</div>
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">($)
      (2)</font></div>
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">(f)</font></div>
            </td>
            <td align="left" nowrap valign="bottom" style="BORDER-BOTTOM: black 2px solid"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td valign="bottom" style="BORDER-BOTTOM: black 2px solid"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td colspan="2" valign="bottom" style="BORDER-BOTTOM: black 2px solid">
              <div style="DISPLAY: block; TEXT-INDENT: 0pt">
              </div>
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">All
      Other </font></div>
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">Compensation</font></div>
              <div style="DISPLAY: block; TEXT-INDENT: 0pt">&#160;</div>
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">($)</font></div>
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">(i)</font></div>
            </td>
            <td align="left" nowrap valign="bottom" style="BORDER-BOTTOM: black 2px solid"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td valign="bottom" style="BORDER-BOTTOM: black 2px solid"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td colspan="2" valign="bottom" style="BORDER-BOTTOM: black 2px solid">
              <div style="DISPLAY: block; TEXT-INDENT: 0pt">
              </div>
              <div style="DISPLAY: block; TEXT-INDENT: 0pt; TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">Total</font></div>
              <div style="DISPLAY: block; TEXT-INDENT: 0pt">&#160;</div>
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">($)</font></div>
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">(j)</font></div>
            </td>
            <td align="left" nowrap valign="bottom" style="PADDING-BOTTOM: 2px"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
          </tr>
          <tr>
            <td align="left" valign="bottom" width="28%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td align="right" valign="bottom" width="9%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td align="left" nowrap valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td align="right" valign="bottom" width="9%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td align="left" nowrap valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td align="right" valign="bottom" width="9%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td align="left" nowrap valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
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            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td align="right" valign="bottom" width="9%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td align="left" nowrap valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
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            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td align="right" valign="bottom" width="9%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td align="left" nowrap valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
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            <td align="right" valign="bottom" width="9%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
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            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td align="right" valign="bottom" width="9%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
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            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td align="right" valign="bottom" width="9%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td align="left" nowrap valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
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              <div style="TEXT-ALIGN: center">&#160;</div>
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            <td align="left" nowrap valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
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            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
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            <td align="left" nowrap valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
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              <div style="TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">--</font></div>
              <div style="TEXT-ALIGN: center">&#160;</div>
              <div style="TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">--</font></div>
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            <td align="left" nowrap valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td align="right" valign="bottom" width="9%">
              <div style="TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">--</font></div>
              <div style="TEXT-ALIGN: center">&#160;</div>
              <div style="TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">--</font></div>
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            <td align="left" nowrap valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td align="right" valign="bottom" width="9%">
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            <td align="left" nowrap valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
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            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td align="right" valign="bottom" width="9%">
              <div style="TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">341,595</font></div>
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          <tr>
            <td align="left" valign="bottom" width="28%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td align="right" valign="bottom" width="9%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td align="left" nowrap valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td align="right" valign="bottom" width="9%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td align="left" nowrap valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td align="right" valign="bottom" width="9%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td align="left" nowrap valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td align="right" valign="bottom" width="9%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td align="left" nowrap valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td align="right" valign="bottom" width="9%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td align="left" nowrap valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td align="right" valign="bottom" width="9%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td align="left" nowrap valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
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          <tr>
            <td align="left" valign="bottom" width="28%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">Elise
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              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">Financial
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              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">Vice-President
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            <td valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td align="right" valign="bottom" width="9%">
              <div style="TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">2008</font></div>
              <div style="TEXT-ALIGN: center">&#160;</div>
              <div style="TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">2007</font></div>
            </td>
            <td align="left" nowrap valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td align="right" valign="bottom" width="9%">
              <div style="TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">150,000</font></div>
              <div style="TEXT-ALIGN: center">&#160;</div>
              <div style="TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">150,000</font></div>
            </td>
            <td align="left" nowrap valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td align="right" valign="bottom" width="9%">
              <div style="TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">--</font></div>
              <div style="TEXT-ALIGN: center">&#160;</div>
              <div style="TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">25,000</font></div>
            </td>
            <td align="left" nowrap valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td align="right" valign="bottom" width="9%">
              <div style="TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">--</font></div>
              <div style="TEXT-ALIGN: center">&#160;</div>
              <div style="TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">--</font></div>
            </td>
            <td align="left" nowrap valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td align="right" valign="bottom" width="9%">
              <div style="TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">20,388
      (7)</font></div>
              <div style="TEXT-ALIGN: center">&#160;</div>
              <div style="TEXT-ALIGN: center"><font size="2" style="FONT-SIZE: 8pt; FONT-FAMILY: times new roman">28,954
      (8)</font></div>
            </td>
            <td align="left" nowrap valign="bottom" width="1%">&#160;</td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td align="right" valign="bottom" width="9%">
              <div style="TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">170,390</font></div>
              <div style="TEXT-ALIGN: center">&#160;</div>
              <div style="TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">203,956</font></div>
            </td>
            <td align="left" nowrap valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
          </tr>
          <tr>
            <td align="left" valign="bottom" width="28%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td align="right" valign="bottom" width="9%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td align="left" nowrap valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td align="right" valign="bottom" width="9%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td align="left" nowrap valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td align="right" valign="bottom" width="9%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td align="left" nowrap valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td align="right" valign="bottom" width="9%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td align="left" nowrap valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td align="right" valign="bottom" width="9%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td align="left" nowrap valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td align="right" valign="bottom" width="9%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td align="left" nowrap valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
          </tr>
          <tr>
            <td align="left" valign="bottom" width="28%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">Daniel
      Fields,</font></div>
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">Executive
      Vice-President </font></div>
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">NewTom
      Sales (8)</font></div>
            </td>
            <td valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td align="right" valign="bottom" width="9%">
              <div style="TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">2008</font></div>
              <div style="TEXT-ALIGN: center">&#160;</div>
              <div style="TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">2007</font></div>
            </td>
            <td align="left" nowrap valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td align="right" valign="bottom" width="9%">
              <div style="TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">240,000</font></div>
              <div style="TEXT-ALIGN: center">&#160;</div>
              <div style="TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">46,154</font></div>
            </td>
            <td align="left" nowrap valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td align="right" valign="bottom" width="9%">
              <div style="TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">--</font></div>
              <div style="TEXT-ALIGN: center">&#160;</div>
              <div style="TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">--</font></div>
            </td>
            <td align="left" nowrap valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td align="right" valign="bottom" width="9%">
              <div style="TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">40,131</font></div>
              <div style="TEXT-ALIGN: center">&#160;</div>
              <div style="TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">40,132</font></div>
            </td>
            <td align="left" nowrap valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td align="right" valign="bottom" width="9%">
              <div style="TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">27,320
      (9)</font></div>
              <div style="TEXT-ALIGN: center">&#160;</div>
              <div style="TEXT-ALIGN: center"><font size="2" style="FONT-SIZE: 8pt; FONT-FAMILY: times new roman">1,828
      (9)</font></div>
            </td>
            <td align="left" nowrap valign="bottom" width="1%">&#160;</td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td align="right" valign="bottom" width="9%">
              <div style="TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">267,320</font></div>
              <div style="TEXT-ALIGN: center">&#160;</div>
              <div style="TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">88,114</font></div>
            </td>
            <td align="left" nowrap valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
          </tr>
      </table>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman">_____________</font></div>
    <div>
      <table align="center" border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%">
          <tr valign="top">
            <td style="WIDTH: 36pt">
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman">(1)</font></div>
            </td>
            <td>
              <div align="left"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman">There
      were no bonuses earned or accrued in fiscal year 2008.&#160;&#160;The
      bonus in fiscal year 2007 was accrued and earned in fiscal year 2007, and
      paid in fiscal year 2008.</font></div>
            </td>
          </tr>
      </table>
    </div>
    <div>
      <table align="center" border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%">
          <tr valign="top">
            <td style="WIDTH: 36pt">
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman">(2)</font></div>
            </td>
            <td>
              <div align="left"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman">The
      amounts in option awards reflect the dollar amount of expense recognized
      for financial statement reporting purposes for the fiscal years ended June
      30, 2008 and 2007, respectively, in accordance with FAS 123 (R) of option
      awards pursuant to the company&#8217;s 2004 Equity Incentive Plan and includes
      an amount from option awards granted in fiscal 2007.&#160;&#160;The
      assumptions used in the calculation of this amount are included in the
      footnotes to the company&#8217;s audited financial statements for the fiscal
      year ended June 30, 2008, included in the company&#8217;s Annual Report on Form
      10-K, filed with the Securities and Exchange
  Commission.</font></div>
            </td>
          </tr>
      </table>
    </div>
    <div>&#160;</div>
    <div>&#160;</div>
    <div id="PGBRK" style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
      <div id="FTR">
        <div id="GLFTR" style="WIDTH: 100%" align="left">
        </div>
      </div>
      <div id="PN" style="PAGE-BREAK-AFTER: always">
        <div style="WIDTH: 100%; TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman">8</font></div>
        <div style="WIDTH: 100%; TEXT-ALIGN: center">
          <hr style="COLOR: black" noshade size="2">
        </div>
      </div>
      <div id="HDR">
        <div id="GLHDR" style="WIDTH: 100%" align="right">
        </div>
      </div>
      <div>&#160;</div>
    </div>
    <div>
      <table align="center" border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%">
          <tr valign="top">
            <td style="WIDTH: 36pt">
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman">(3)</font></div>
            </td>
            <td>
              <div align="left"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman">This
      amount includes (i) $6,710 for a car allowance and related expenses, (ii)
      $6,731 for 401(k) Savings Plan matching contribution, (iii) $5,049 for
      life insurance and long-term disability insurance premiums, and (iv)
      $3,044 for certain other miscellaneous
expenses.</font></div>
            </td>
          </tr>
      </table>
    </div>
    <div>
      <table align="center" border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%">
          <tr valign="top">
            <td style="WIDTH: 36pt">
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman">(4)</font></div>
            </td>
            <td>
              <div align="left"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman">This
      amount includes (i) $8,448 for a car allowance and related expenses, (ii)
      $6,750 for 401(k) Savings Plan matching contribution, (iii) $5,049 for
      life insurance and long-term disability insurance premiums, and (iv)
      $1,048 for certain other miscellaneous
expenses.</font></div>
            </td>
          </tr>
      </table>
    </div>
    <div>
      <table align="center" border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%">
          <tr valign="top">
            <td style="WIDTH: 36pt">
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman">(5)</font></div>
            </td>
            <td>
              <div align="left"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman">This
      amount includes (i) $4,990 for a car allowance and related expenses, (ii)
      $6,731 for 401(k) Savings Plan matching contribution, (iii) $9,564 for
      life insurance and long-term disability insurance premiums, and (iv)
      $2,810 for certain other miscellaneous
expenses.</font></div>
            </td>
          </tr>
      </table>
    </div>
    <div>
      <table align="center" border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%">
          <tr valign="top">
            <td style="WIDTH: 36pt">
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman">(6)</font></div>
            </td>
            <td>
              <div align="left"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman">This
      amount includes (i) $8,118 for a car allowance and related expenses, (ii)
      $6,750 for 401(k) Savings Plan matching contribution, (iii) $9,647 for
      life insurance and long-term disability insurance premiums, and (iv) $536
      for certain other miscellaneous
expenses.</font></div>
            </td>
          </tr>
      </table>
    </div>
    <div>
      <table align="center" border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%">
          <tr valign="top">
            <td style="WIDTH: 36pt">
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman">(7)</font></div>
            </td>
            <td>
              <div align="left"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman">This
      amount includes (i) $4,520 for auto related expenses, (ii) $5,552 for
      401(k) Savings Plan matching contribution, (iii) $8,654 for payment in
      lieu of vacation, and (iv) $1,662 for life insurance and long-term
      disability insurance premiums.</font></div>
            </td>
          </tr>
      </table>
    </div>
    <div>
      <table align="center" border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%">
          <tr valign="top">
            <td style="WIDTH: 36pt">
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman">(8)</font></div>
            </td>
            <td>
              <div align="left"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman">This
      amount includes (i) $4,292 for auto related expenses, (ii) $5,421 for
      401(k) Savings Plan matching contribution, (iii) $17,308 for payment in
      lieu of vacation, and (iv) $1,933 for life insurance and long-term
      disability insurance premiums.</font></div>
            </td>
          </tr>
      </table>
    </div>
    <div>
      <table align="center" border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%">
          <tr valign="top">
            <td style="WIDTH: 36pt">
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman">(9)</font></div>
            </td>
            <td>
              <div align="left"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman">This
      named executive officer joined the company in April 2007.&#160;&#160;The
      amount&#160;&#160;in fiscal year 2008 includes (i) $8,100 for auto related
      expenses, (ii) $4,015 for 401(k) Savings Plan matching contribution, (iii)
      $13,846 for payment in lieu of vacation, and (iv) $1,358 for life
      insurance and long-term disability insurance
  premiums.</font></div>
            </td>
          </tr>
      </table>
    </div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div align="left"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman">Grants
of Plan-Based Awards</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div align="left"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman">There were
no stock awards or options granted to the Named Executive Officers during the
</font><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman">fiscal
year ended June 30, 2008.</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div align="left"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman">Outstanding
Equity Awards at Fiscal Year-End</font></div>
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    <div align="left"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman">The
following table and accompanying footnotes provide information concerning shares
of our common stock covered by exercisable and unexercisable options held by the
Named Executive Officers as of June 30, 2008:</font></div>
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          <tr>
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              <div style="DISPLAY: block; TEXT-INDENT: 0pt">&#160;</div>
              <div style="DISPLAY: block; TEXT-INDENT: 0pt">&#160;</div>
              <div style="DISPLAY: block; TEXT-INDENT: 0pt">&#160;</div>
              <div style="DISPLAY: block; TEXT-INDENT: 0pt">&#160;</div>
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            <td valign="top" width="20%" style="BORDER-BOTTOM: black 2px solid">
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              <div align="center"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">Number
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              <div align="center"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">Underlying
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              <div style="DISPLAY: block; TEXT-INDENT: 0pt">&#160;</div>
              <div align="center"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">Number
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              <div align="center"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">Underlying
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              <div align="center"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">Unexercised
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              <div align="center"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">(#)</font></div>
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            <td valign="top" width="20%" style="BORDER-BOTTOM: black 2px solid">
              <div style="DISPLAY: block; TEXT-INDENT: 0pt">&#160;</div>
              <div style="DISPLAY: block; TEXT-INDENT: 0pt">&#160;</div>
              <div align="center"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">Option
      </font></div>
              <div align="center"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">Exercise
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              <div align="center"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">Price</font></div>
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">($)</font></div>
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">(e)</font></div>
            </td>
            <td valign="top" width="20%" style="BORDER-BOTTOM: black 2px solid">
              <div style="DISPLAY: block; TEXT-INDENT: 0pt">&#160;</div>
              <div style="DISPLAY: block; TEXT-INDENT: 0pt">&#160;</div>
              <div style="DISPLAY: block; TEXT-INDENT: 0pt">&#160;</div>
              <div style="DISPLAY: block; TEXT-INDENT: 0pt; TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">Option
      Expiration </font></div>
              <div align="center"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">Date</font></div>
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            </td>
          </tr>
          <tr>
            <td align="left" valign="top" width="20%">
              <div style="DISPLAY: block; TEXT-INDENT: 0pt">&#160;</div>
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">David
      Vozick</font></div>
              <div style="DISPLAY: block; TEXT-INDENT: 0pt">&#160;</div>
            </td>
            <td align="left" valign="top" width="20%">
              <div style="DISPLAY: block; TEXT-INDENT: 0pt">&#160;</div>
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt; TEXT-ALIGN: center" align="left"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">150,000
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              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt; TEXT-ALIGN: center" align="left"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;&#160;30,000
      (1)</font></div>
            </td>
            <td valign="top" width="20%">
              <div style="DISPLAY: block; TEXT-INDENT: 0pt">&#160;</div>
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">--</font></div>
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">--</font></div>
            </td>
            <td valign="top" width="20%">
              <div style="DISPLAY: block; TEXT-INDENT: 0pt">&#160;</div>
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">.31</font></div>
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">1.265</font></div>
            </td>
            <td align="left" valign="top" width="20%">
              <div style="DISPLAY: block; TEXT-INDENT: 0pt">&#160;</div>
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt; TEXT-ALIGN: center" align="left"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">9/7/2009</font></div>
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt; TEXT-ALIGN: center" align="left"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">5/13/2009</font></div>
            </td>
          </tr>
          <tr>
            <td align="left" valign="top" width="20%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">Donald
      Rabinovitch</font></div>
              <div style="DISPLAY: block; TEXT-INDENT: 0pt">&#160;</div>
            </td>
            <td align="left" valign="top" width="20%">
              <div style="DISPLAY: block; TEXT-INDENT: 0pt">&#160;</div>
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt; TEXT-ALIGN: center" align="left"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">150,000
      (1)</font></div>
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt; TEXT-ALIGN: center" align="left"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;&#160;30,000
      (1)</font></div>
            </td>
            <td valign="top" width="20%">
              <div style="DISPLAY: block; TEXT-INDENT: 0pt">&#160;</div>
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">--</font></div>
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">--</font></div>
            </td>
            <td valign="top" width="20%">
              <div style="DISPLAY: block; TEXT-INDENT: 0pt">&#160;</div>
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">.31</font></div>
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">1.265</font></div>
            </td>
            <td align="left" valign="top" width="20%">
              <div style="DISPLAY: block; TEXT-INDENT: 0pt">&#160;</div>
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt; TEXT-ALIGN: center" align="left"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">9/7/2009</font></div>
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt; TEXT-ALIGN: center" align="left"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">5/13/2009</font></div>
            </td>
          </tr>
          <tr>
            <td align="left" valign="top" width="20%">
              <div style="DISPLAY: block; TEXT-INDENT: 0pt">&#160;</div>
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">Elise
      Nissen</font></div>
              <div style="DISPLAY: block; TEXT-INDENT: 0pt">&#160;</div>
            </td>
            <td align="left" valign="top" width="20%">
              <div style="DISPLAY: block; TEXT-INDENT: 0pt">&#160;</div>
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt; TEXT-ALIGN: center" align="left"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;15,000
      (1)</font></div>
            </td>
            <td valign="top" width="20%">
              <div style="DISPLAY: block; TEXT-INDENT: 0pt">&#160;</div>
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">--</font></div>
            </td>
            <td valign="top" width="20%">
              <div style="DISPLAY: block; TEXT-INDENT: 0pt">&#160;</div>
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">1.15</font></div>
            </td>
            <td align="left" valign="top" width="20%">
              <div style="DISPLAY: block; TEXT-INDENT: 0pt">&#160;</div>
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt; TEXT-ALIGN: center" align="left"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">5/13/2014</font></div>
              <div style="DISPLAY: block; TEXT-INDENT: 0pt">&#160;</div>
            </td>
          </tr>
          <tr>
            <td align="left" valign="top" width="20%">
              <div style="DISPLAY: block; TEXT-INDENT: 0pt">&#160;</div>
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">Daniel
      Fields</font></div>
              <div style="DISPLAY: block; TEXT-INDENT: 0pt">&#160;</div>
            </td>
            <td align="left" valign="top" width="20%">
              <div style="DISPLAY: block; TEXT-INDENT: 0pt">&#160;</div>
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt; TEXT-ALIGN: center" align="left"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;50,000
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            </td>
            <td valign="top" width="20%">
              <div style="DISPLAY: block; TEXT-INDENT: 0pt">&#160;</div>
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">--</font></div>
            </td>
            <td valign="top" width="20%">
              <div style="DISPLAY: block; TEXT-INDENT: 0pt">&#160;</div>
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">1.63</font></div>
            </td>
            <td align="left" valign="top" width="20%">
              <div style="DISPLAY: block; TEXT-INDENT: 0pt">&#160;</div>
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt; TEXT-ALIGN: center" align="left"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">4/15/2017</font></div>
            </td>
          </tr>
      </table>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman">_____________</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: -36pt; TEXT-INDENT: 36pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman">(1)&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;All
of the stock options granted to these Named Executive Officers are vested as of
June 30, 2008.</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div id="PGBRK" style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
      <div id="FTR">
        <div id="GLFTR" style="WIDTH: 100%" align="left">
        </div>
      </div>
      <div id="PN" style="PAGE-BREAK-AFTER: always">
        <div style="WIDTH: 100%; TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman">9</font></div>
        <div style="WIDTH: 100%; TEXT-ALIGN: center">
          <hr style="COLOR: black" noshade size="2">
        </div>
      </div>
      <div id="HDR">
        <div id="GLHDR" style="WIDTH: 100%" align="right">
        </div>
      </div>
      <div>&#160;</div>
    </div>
    <div align="left"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman">Option
Exercises and Stock Vested</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div align="left"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman">None of
the Named Executive Officers listed in the Summary Compensation Table exercised
any options during the fiscal year ended June 30, 2008.</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div align="left"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman">Director
Compensation</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div align="left"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman">The
following table and explanatory footnotes provide information with respect to
compensation for each of our non-employee directors for their service in fiscal
year ended June 30, 2008.</font></div>
    <div align="left">&#160;</div>
    <div align="left">
      <table cellpadding="0" cellspacing="0" width="100%">
          <tr>
            <td valign="top" width="20%" style="BORDER-BOTTOM: black 2px solid">
              <div style="DISPLAY: block; TEXT-INDENT: 0pt">&#160;</div>
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">Name</font></div>
              <div style="DISPLAY: block; TEXT-INDENT: 0pt">&#160;</div>
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">(a)</font></div>
            </td>
            <td valign="top" width="20%" style="BORDER-BOTTOM: black 2px solid">
              <div style="DISPLAY: block; TEXT-INDENT: 0pt">&#160;</div>
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">Fees
      earned or </font></div>
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">paid
      in cash</font></div>
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">($)</font></div>
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">(b)</font></div>
            </td>
            <td valign="top" width="20%" style="BORDER-BOTTOM: black 2px solid">
              <div style="DISPLAY: block; TEXT-INDENT: 0pt">&#160;</div>
              <div style="DISPLAY: block; TEXT-INDENT: 0pt">&#160;</div>
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">Option
      awards</font></div>
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">($)</font></div>
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">(d)</font></div>
            </td>
            <td valign="top" width="20%" style="BORDER-BOTTOM: black 2px solid">
              <div style="DISPLAY: block; TEXT-INDENT: 0pt">&#160;</div>
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">All
      other </font></div>
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">compensation</font></div>
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">($)</font></div>
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">(g)</font></div>
            </td>
            <td valign="top" width="20%" style="BORDER-BOTTOM: black 2px solid">
              <div style="DISPLAY: block; TEXT-INDENT: 0pt">&#160;</div>
              <div style="DISPLAY: block; TEXT-INDENT: 0pt">&#160;</div>
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">Total</font></div>
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">($)</font></div>
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">(h)</font></div>
            </td>
          </tr>
          <tr>
            <td valign="top" width="20%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;
      </font></td>
            <td valign="top" width="20%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;
      </font></td>
            <td valign="top" width="20%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;
      </font></td>
            <td valign="top" width="20%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;
      </font></td>
            <td valign="top" width="20%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;
      </font></td>
          </tr>
          <tr>
            <td align="left" valign="top" width="20%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">Robert
      Blatt (1)</font></div>
            </td>
            <td valign="top" width="20%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">18,000</font></div>
            </td>
            <td valign="top" width="20%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">--</font></div>
            </td>
            <td valign="top" width="20%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">48,000</font></div>
            </td>
            <td valign="top" width="20%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">66,000</font></div>
            </td>
          </tr>
          <tr>
            <td valign="top" width="20%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;
      </font></td>
            <td valign="top" width="20%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;
      </font></td>
            <td valign="top" width="20%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;
      </font></td>
            <td valign="top" width="20%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;
      </font></td>
            <td valign="top" width="20%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;
      </font></td>
          </tr>
          <tr>
            <td align="left" valign="top" width="20%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">Jack
      Becker&#160;&#160;(2)</font></div>
            </td>
            <td valign="top" width="20%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">18,000</font></div>
            </td>
            <td valign="top" width="20%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">--</font></div>
            </td>
            <td valign="top" width="20%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">--</font></div>
            </td>
            <td valign="top" width="20%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">18,000</font></div>
            </td>
          </tr>
          <tr>
            <td valign="top" width="20%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;
      </font></td>
            <td valign="top" width="20%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;
      </font></td>
            <td valign="top" width="20%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;
      </font></td>
            <td valign="top" width="20%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;
      </font></td>
            <td valign="top" width="20%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;
      </font></td>
          </tr>
      </table>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman">_____________</font></div>
    <div>
      <table align="center" border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%">
          <tr valign="top">
            <td style="WIDTH: 36pt">
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman">(1)</font></div>
            </td>
            <td>
              <div align="left"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman">Robert
      Blatt serves as a paid consultant to our company on various business
      matters.&#160;&#160;In our fiscal year ended June 30, 2008, he earned
      $48,000 in consulting fees.</font></div>
            </td>
          </tr>
      </table>
    </div>
    <div>
      <table align="center" border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%">
          <tr valign="top">
            <td style="WIDTH: 36pt">
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman">(2)</font></div>
            </td>
            <td>
              <div align="left"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman">Jack
      Becker is a principal of Snow Becker Krauss P.C.&#160;&#160;We paid Snow
      Becker Krauss P.C., our outside general counsel, approximately $94,945
      during our fiscal year ended June 30, 2008 for services rendered and
      reimbursement of expenses incurred on our
  behalf.</font></div>
            </td>
          </tr>
      </table>
    </div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div align="left"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman">Director
Compensation Policies</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div align="left"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman">We
compensate our non-employee directors on a per meeting basis. We do not
compensate our employee-directors in their capacities as
directors.&#160;&#160;Accordingly, our non-employee directors Robert Blatt and
Jack Becker each receive compensation based on each meeting of our board of
directors that they attend.&#160;&#160;We compensate each of our non-employee
directors with the payment of $4,500 per meeting, with a mandatory requirement
of four meetings per year.</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div align="left"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman">We also
reimburse our directors for their reasonable expenses that they may incur for
our benefit.</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div align="left"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman">Compensation
Committee Interlocks and Insider Participation</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div align="left"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman">Our board
of directors does not have a compensation committee. Executive compensation,
including compensation for our co-chief executive officers, is determined by our
board in its entirety, based on each executive&#8217;s responsibilities and the
executive compensation philosophy determined by our board. Donald Rabinovitch
and David Vozick, our co-chief executive officers who each serve on our board,
participated in the deliberations of our board concerning executive officer
compensation.&#160;&#160;During our fiscal year ended June 30, 2008, none of our
executive officers served at any time on the board of directors or compensation
committee (or committee performing equivalent functions) of any other entity one
of whose executive officers served on our board.</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div align="left"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman">Code
of Ethics</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div align="left"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman">Our board
of directors has established a code of ethics that applies to our principal
executive, financial and accounting officer(s).&#160;&#160;A copy of our code of
ethics was filed as Exhibit 14 to our Quarterly Report on Form 10-Q for the
quarter ended December 31, 2003.&#160;&#160;Upon the written request of a
shareholder, addressed to David Vozick, Secretary, AFP Imaging Corporation, 250
Clearbrook Road, Elmsford, New York, 10523, we will provide without charge to
such shareholder a copy of our code of ethics. A copy of our code of ethics can
also be obtained from the SEC&#8217;s EDGAR Database at <font style="DISPLAY: inline; TEXT-DECORATION: underline">www.sec.gov</font>.</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div id="PGBRK" style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
      <div id="FTR">
        <div id="GLFTR" style="WIDTH: 100%" align="left">
        </div>
      </div>
      <div id="PN" style="PAGE-BREAK-AFTER: always">
        <div style="WIDTH: 100%; TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman">10</font></div>
        <div style="WIDTH: 100%; TEXT-ALIGN: center">
          <hr style="COLOR: black" noshade size="2">
        </div>
      </div>
      <div id="HDR">
        <div id="GLHDR" style="WIDTH: 100%" align="right">
        </div>
      </div>
    </div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman">Recommendation
of Our Board of Directors</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div align="left"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman">Our board
of directors recommends that shareholders vote <font style="DISPLAY: inline; FONT-WEIGHT: bold">FOR</font> the election of directors
of the board&#8217;s nominees as listed above.</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div align="center"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman">PROPOSAL
2</font></div>
    <div align="center"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman">INCREASE
IN THE NUMBER OF AUTHORIZED SHARES OF COMMON STOCK</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div align="left"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman">The Board
of Directors has approved and has recommended that the shareholders of our
company approve an amendment to the Certificate of Incorporation providing for
an increase from 30,000,000 to 100,000,000 in the number of authorized shares of
Common Stock. As of October 10, 2008, the company had a total of 17,928,800
shares of Common Stock outstanding.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div align="left"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman">The Board
of Directors believes that the proposed increase in the authorized shares of
Common Stock is in the best interests of our company and our shareholders as the
Board believes it is advisable to have additional shares available in connection
with possible future transactions, such as financings, strategic alliances,
mergers, acquisitions, possible funding of new product programs or businesses
and other uses not presently determinable and as may be deemed feasible and in
our best interests.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div align="left"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman">Furthermore,
as previously disclosed, the company maintains a senior secured facility
(&#8220;Revolving Credit and Term Loan&#8220;) with ComVest Capital, LLC (&#8220;Senior Secured
Lender&#8221;) for an aggregate of up to $8 million in the form of a $5 million term
loan (the &#8220;Term Loan&#8221;) and a $3 million revolving loan facility.&#160;&#160;In
connection with the Term Loan, our company granted to the Senior Secured Lender
an aggregate of 800,000 warrants to purchase shares of our Common
Stock.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div align="left"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman">The
company&#8217;s aggregate outstanding advances under the revolver presently exceed the
maximum revolving credit commitment permissible under the Revolving Credit and
Term Loan Agreement.&#160; Accordingly, it may be necessary to amend the loan
agreements with the Senior Secured Lender, which amendments could include a
downward modification to the conversion price in the Term Loan.&#160;&#160;In
such event, a conversion by the Senior Secured Lender could result in the
obligation of our company to issue shares of Common Stock in excess of our
current authorized capitalization.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div align="left"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman">As a
result of the foregoing, we believe that we currently have insufficient
authorized Common Stock.&#160;&#160;If the amendment is approved, the additional
authorized shares of Common Stock would be available for issuance in the event
of the conversion of the Term Loan as well as the exercise of
warrants.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div align="left"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman">Although
we have no current commitments or plans for the issuance of Common Stock, an
increase in our authorized Common Stock would also provide greater flexibility
in the future for additional corporate purposes, including, without limitation,
stock splits, stock dividends and management incentive and employee benefit
plans, as the Board of Directors may deem advisable, without the necessity of
further shareholder action.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div align="center"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman">BOARD
RECOMMENDATION</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div align="left"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman">The Board
of Directors believes that the approval of the amendment increasing the number
of shares of authorized Common Stock is in the best interest of the Company and
its shareholders and therefore recommends a vote FOR this proposal.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div align="center"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman">RATIFICATION
OF SELECTION OF INDEPENDENT ACCOUNTANTS</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div align="left"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman">Goldstein
Golub Kessler LLP (&#8220;GGK&#8221;) previously served as our principal
accountant.&#160;&#160;In October 2007, certain partners of GGK became partners
of McGladrey &amp; Pullen, LLP (&#8220;M&amp;P&#8221;).&#160;&#160;As a consequence, GGK
resigned as our auditor on January 24, 2008 and M&amp;P was appointed on that
date as the Company&#8217;s new independent registered public accounting firm for the
year ended June 30, 2008.</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div id="PGBRK" style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
      <div id="FTR">
        <div id="GLFTR" style="WIDTH: 100%" align="left">
        </div>
      </div>
      <div id="PN" style="PAGE-BREAK-AFTER: always">
        <div style="WIDTH: 100%; TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman">11</font></div>
        <div style="WIDTH: 100%; TEXT-ALIGN: center">
          <hr style="COLOR: black" noshade size="2">
        </div>
      </div>
      <div id="HDR">
        <div id="GLHDR" style="WIDTH: 100%" align="right">
        </div>
      </div>
      <div>&#160;</div>
    </div>
    <div align="left"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman">GGK had a
continuing relationship with RSM McGladrey, Inc. (&#8220;RSM&#8221;), from which it leased
auditing staff who were full-time, permanent employees of RSM and through which
its partners provided non-audit services.&#160;&#160;GGK had no full-time
employees and therefore, none of the audit services performed were provided by
permanent full-time employees of GGK.&#160;&#160;GGK managed and supervised the
audit and the audit staff, and was exclusively responsible for the opinion
rendered in connection with this examination.&#160;&#160;GGK had served as our
independent registered public accounting firm since the fiscal year ended June
30, 2004.&#160;&#160;GGK had no direct or indirect financial interest in our
company.</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div align="left"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman">Our board
of directors intends to retain McGladrey &amp; Pullen, LLP as our independent
registered public accounting firm for the fiscal year ending June 30,
2009.&#160;&#160;&#160;McGladrey &amp; Pullen, LLP&#160;&#160;has no direct or
indirect financial interest in our company.</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div align="left"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman">One or
more representatives of McGladrey &amp; Pullen, LLP are expected to attend the
annual meeting, and will have an opportunity to make a statement and respond to
appropriate questions from our shareholders.</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div align="left"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman">Principal
Accountant Fees and Services</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div align="left"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman">The
following table sets forth the fees billed or incurred by our principal
accountants for our fiscal years ended June 30, 2008 and 2007 for the categories
of services indicated.</font><br></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div align="left">
      <table cellpadding="0" cellspacing="0" width="100%">
          <tr>
            <td align="left" valign="bottom" width="76%" style="BORDER-BOTTOM: black 2px solid">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman"><font style="DISPLAY: inline; TEXT-DECORATION: none">Category</font></font></div>
            </td>
            <td align="right" valign="bottom" width="1%" style="BORDER-BOTTOM: black 2px solid"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td align="right" colspan="2" valign="bottom" width="10%" style="BORDER-BOTTOM: black 2px solid">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt; TEXT-ALIGN: center" align="right"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman; TEXT-DECORATION: none">2008</font></div>
            </td>
            <td align="left" nowrap valign="bottom" width="1%" style="BORDER-BOTTOM: black 2px solid"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;
      </font></td>
            <td align="right" valign="bottom" width="1%" style="BORDER-BOTTOM: black 2px solid"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;&#160;</font></td>
            <td align="right" colspan="2" valign="bottom" width="10%" style="BORDER-BOTTOM: black 2px solid">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt; TEXT-ALIGN: center" align="right"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman; TEXT-DECORATION: none">2007</font></div>
            </td>
            <td align="left" nowrap valign="bottom" width="1%" style="PADDING-BOTTOM: 2px"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
          </tr>
          <tr>
            <td align="left" valign="bottom" width="76%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">Audit
      fees (1)</font></div>
            </td>
            <td align="right" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">$</font></td>
            <td align="right" valign="bottom" width="9%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">125,400</font></td>
            <td align="left" nowrap valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td align="right" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">$</font></td>
            <td align="right" valign="bottom" width="9%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">120,682</font></td>
            <td align="left" nowrap valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
          </tr>
          <tr>
            <td align="left" valign="bottom" width="76%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">Audit-related
      fees (2)</font></div>
            </td>
            <td align="right" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td align="right" valign="bottom" width="9%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">62,958</font></td>
            <td align="left" nowrap valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td align="right" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td align="right" valign="bottom" width="9%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">73,547</font></td>
            <td align="left" nowrap valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
          </tr>
          <tr>
            <td align="left" valign="bottom" width="76%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">Tax
      fees&#160;&#160;&#160;</font></div>
            </td>
            <td align="right" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td align="right" valign="bottom" width="9%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">0</font></td>
            <td align="left" nowrap valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td align="right" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td align="right" valign="bottom" width="9%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">0</font></td>
            <td align="left" nowrap valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
          </tr>
          <tr>
            <td align="left" valign="bottom" width="76%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">All
      other fees&#160;&#160;</font></div>
            </td>
            <td align="right" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td align="right" valign="bottom" width="9%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">0</font></td>
            <td align="left" nowrap valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td align="right" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
            <td align="right" valign="bottom" width="9%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">0</font></td>
            <td align="left" nowrap valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;</font></td>
          </tr>
      </table>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman">__________</font></div>
    <div>
      <table cellpadding="0" cellspacing="0" width="100%">
          <tr>
            <td align="left" valign="top" width="4%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">(1)</font></div>
            </td>
            <td align="left" valign="top" width="67%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">Consists
      of fees billed or incurred for the audit of our annual financial
      statements, review of financial statements included in our Quarterly
      Reports on Form 10-Q and services that are normally provided by the
      accountant in connection with statutory and regulatory filings or
      engagements.</font></div>
            </td>
          </tr>
          <tr>
            <td align="left" valign="top" width="4%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">(2)</font></div>
            </td>
            <td align="left" valign="top" width="67%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">Consists
      of assurance and related services that are reasonably related to the
      performance of the audit and reviews of our financial statements and are
      not included in &#8220;audit fees&#8221; in this table.&#160;&#160;Audit related fees
      for 2007 and 2008 include advisory&#160;&#160;services related to the
      acquisition of QR srl in April 2007 and specific consolidation
      matters.</font></div>
            </td>
          </tr>
      </table>
    </div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman">In
addition, we paid RSM McGladrey, Inc. $8,245 and $11,302 in the fiscal years
ended June 30, 2008 and 2007, respectively, for tax consulting services,
principally related to the acquisition of QR srl in April 2007 and ongoing
international tax matters.</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div align="left"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman">Audit
Committee</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div align="left"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman">We do not
have an audit committee of our board of directors.&#160;&#160;We are presently
evaluating the steps necessary to establish such committee within the next
fiscal year and to designate one of the members of such committee as an &#8220;audit
committee financial expert.&#8221;</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div align="left"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman">Pre-Approval
Policy</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div align="left"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman">In
addition to retaining McGladrey &amp; Pullen, LLP to audit our consolidated
financial statements for our fiscal year ended June 30, 2008, we retained
McGladrey &amp; Pullen, LLP to provide other auditing and advisory services to
us in our 2008 fiscal year. We understand the need for McGladrey &amp; Pullen
LLP to maintain objectivity and independence in its audit of our financial
statements.&#160;&#160;To minimize relationships that could appear to impair the
objectivity of McGladrey &amp; Pullen LLP, our board of directors has restricted
the non-audit services that McGladrey &amp; Pullen LLP may provide to us
primarily to tax services and merger and acquisition due diligence and audit
services, and has determined that we would obtain these non-audit services from
McGladrey &amp; Pullen LLP only when the services offered thereby are more
effective or economical than services available from other service
providers.</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div id="PGBRK" style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
      <div id="FTR">
        <div id="GLFTR" style="WIDTH: 100%" align="left">
        </div>
      </div>
      <div id="PN" style="PAGE-BREAK-AFTER: always">
        <div style="WIDTH: 100%; TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman">12</font></div>
        <div style="WIDTH: 100%; TEXT-ALIGN: center">
          <hr style="COLOR: black" noshade size="2">
        </div>
      </div>
      <div id="HDR">
        <div id="GLHDR" style="WIDTH: 100%" align="right">
        </div>
      </div>
    </div>
    <div align="left">&#160;</div>
    <div align="left"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman">Our board
of directors also has adopted policies and procedures for pre-approving all
non-audit work performed by McGladrey &amp; Pullen LLP and any other accounting
firms we may retain.&#160;&#160;Specifically, our board has pre-approved the use
of McGladrey &amp; Pullen LLP for detailed, specific types of services within
the following categories of non-audit services: merger and acquisition due
diligence and audit services; tax services; and reviews and procedures that we
request McGladrey &amp; Pullen LLP to undertake to provide assurances of
accuracy on matters not required by laws or regulations.&#160;&#160;In each
case, our board has also set a specific annual limit on the amount of such
services which we would obtain from McGladrey &amp; Pullen LLP, and has required
management to report the specific engagements to the board on a quarterly basis
and to obtain specific pre-approval from the board for all
engagements.</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div align="left"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman">Board
of Directors Approval of Audit-Related Activities</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div align="left"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman">Management
is responsible for the preparation and integrity of our financial statements, as
well as establishing appropriate internal controls and financial reporting
processes. McGladrey &amp; Pullen LLP is responsible for performing an
independent audit of our financial statements and issuing a report on such
financial statements. The board&#8217;s responsibility is to monitor and oversee these
processes.</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div align="left"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman">The board
reviewed the audited financial statements of our company for the year ended June
30, 2008 and met with both management and the independent auditors, separately
and together, to discuss such financial statements. Our non-employee directors
also were given the opportunity to meet separately with the independent
auditors. Management and the auditors have represented to us that the financial
statements were prepared in accordance with generally accepted accounting
principles in the United States. The board also received written disclosures and
a letter from our auditors regarding their independence from us, as required by
Independence Standards Board Standard No. 1, and discussed with the auditors
their independence with respect to all services that our auditors rendered to
us. The board also discussed with the auditors any matters required to be
discussed by Statement on Auditing Standards No. 61. Based upon these reviews
and discussions, the board authorized and directed that the audited financial
statements be included in our Annual Report on Form 10-K for the year ended June
30, 2008.</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div align="left"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman">The Board
of Directors,</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div align="left"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman">Jack
Becker</font></div>
    <div align="left"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman">Robert A.
Blatt</font></div>
    <div align="left"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman">Donald
Rabinovitch</font></div>
    <div align="left"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman">David
Vozick</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div align="center"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman">TRANSACTIONS
WITH RELATED PERSONS</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div align="left"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman">Management
did not engage in any related party transactions which exceeded $120,000 or one
percent of our total assets for the fiscal years ended June 30, 2008 and June
30, 2007.</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div align="center"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman">OTHER
MATTERS</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div align="left"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman">As of the
date of this proxy statement, our board of directors is not aware of any
business to be presented at the annual meeting, other than the matters set forth
in the notice of annual meeting and described in this proxy statement. If any
other business does lawfully come before the annual meeting, it is the intention
of the persons named in the enclosed proxy card to vote on such other business
in accordance with their judgment.</font></div>
    <div align="left">&#160;</div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div align="center"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman">EXPENSES
OF SOLICITATION</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div align="left"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman">We will
pay the cost of soliciting proxies for the annual meeting. In addition to
soliciting by mail, our directors, officers and other employees may solicit
proxies in person, or by telephone, facsimile transmission or other means of
electronic communication. We also will pay brokers, nominees, fiduciaries and
other custodians their reasonable fees and expenses for sending proxy materials
to beneficial owners and obtaining their voting instructions.</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div id="PGBRK" style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
      <div id="FTR">
        <div id="GLFTR" style="WIDTH: 100%" align="left">
        </div>
      </div>
      <div id="PN" style="PAGE-BREAK-AFTER: always">
        <div style="WIDTH: 100%; TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman">13</font></div>
        <div style="WIDTH: 100%; TEXT-ALIGN: center">
          <hr style="COLOR: black" noshade size="2">
        </div>
      </div>
      <div id="HDR">
        <div id="GLHDR" style="WIDTH: 100%" align="right">
        </div>
      </div>
    </div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman">SHAREHOLDER
PROPOSALS</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div align="left"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman">Shareholder
Proposals for Inclusion in Next Year&#8217;s Proxy Statement</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div align="left"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman">To be
considered for inclusion in our next year&#8217;s proxy statement, shareholder
proposals must be received at our principal executive offices no later than the
close of business on July 16, 2009, which is 120 days before the anniversary of
this proxy statement.&#160;&#160;Proposals should be addressed to David Vozick,
Secretary, AFP Imaging Corporation, 250 Clearbrook Road, Elmsford, New York
10523.</font></div>
    <div align="left">&#160;</div>
    <div align="left"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman">Other
Shareholder Proposals for Presentation at Next Year&#8217;s Annual
Meeting</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div align="left"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman">For any
proposal that is not submitted for inclusion in our next year&#8217;s proxy statement,
but is instead sought to be presented directly at next year&#8217;s annual meeting,
SEC rules will permit management to vote proxies in its discretion if
we:</font></div>
    <div>
      <table align="center" border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%">
          <tr valign="top">
            <td style="WIDTH: 27pt">
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 9pt; MARGIN-RIGHT: 0pt"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman"><font style="DISPLAY: inline;" face="Symbol, serif">&#183;</font></font></div>
            </td>
            <td>
              <div align="left"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman">receive
      notice of the proposal before the close of business on September 30, 2009
      and advise our shareholders in our proxy statement for next year&#8217;s annual
      meeting about the nature of the matter and how management intends to vote
      on such matter, or</font></div>
            </td>
          </tr>
      </table>
    </div>
    <div>
      <table align="center" border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%">
          <tr valign="top">
            <td style="WIDTH: 27pt">
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 9pt; MARGIN-RIGHT: 0pt"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman"><font style="DISPLAY: inline;" face="Symbol, serif">&#183;</font></font></div>
            </td>
            <td>
              <div align="left"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman">do
      not receive notice of the proposal prior to the close of business on
      September 30, 2009.</font></div>
            </td>
          </tr>
      </table>
    </div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div align="left"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman">Notices of
intention to present proposals at next year&#8217;s annual meeting should be addressed
to David Vozick, Secretary, AFP Imaging Corporation, 250 Clearbrook Road,
Elmsford, New York 10523.</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div align="left"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman">The notice
must set forth as to each matter the shareholder proposes to bring before the
annual meeting:</font></div>
    <div>
      <table align="center" border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%">
          <tr valign="top">
            <td style="WIDTH: 27pt">
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 9pt; MARGIN-RIGHT: 0pt"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman"><font style="DISPLAY: inline;" face="Symbol, serif">&#183;</font></font></div>
            </td>
            <td>
              <div align="left"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman">A
      brief description of the business desired to be brought before the annual
      meeting, the text of the proposal or business and the reasons for
      conducting such business at the annual meeting;
  and</font></div>
            </td>
          </tr>
      </table>
    </div>
    <div>
      <table align="center" border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%">
          <tr valign="top">
            <td style="WIDTH: 27pt">
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 9pt; MARGIN-RIGHT: 0pt"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman"><font style="DISPLAY: inline;" face="Symbol, serif">&#183;</font></font></div>
            </td>
            <td>
              <div align="left"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman">Any
      material interest of the shareholder in such
  business.</font></div>
            </td>
          </tr>
      </table>
    </div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div align="center"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman">AVAILABILITY
OF OUR FORM 10-K</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div align="left"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman">We will
provide without charge to any shareholder as of the record date, copies of our
Annual Report on Form 10-K, upon written request delivered to David Vozick,
Secretary, AFP Imaging Corporation, 250 Clearbrook Road, Elmsford, New York
10523.</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div align="left"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman">By order
of the Board of Directors,</font></div>
    <div align="left"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman">David
Vozick, Secretary</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div align="left"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman">Elmsford,
New York</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div id="PGBRK" style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
      <div id="FTR">
        <div id="GLFTR" style="WIDTH: 100%" align="left">
        </div>
      </div>
      <div id="PN" style="PAGE-BREAK-AFTER: always">
        <div style="WIDTH: 100%; TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman">14</font></div>
        <div style="WIDTH: 100%; TEXT-ALIGN: center">
          <hr style="COLOR: black" noshade size="2">
        </div>
      </div>
      <div id="HDR">
        <div id="GLHDR" style="WIDTH: 100%" align="right">
        </div>
      </div>
    </div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt">
      <div>
        <hr style="COLOR: black" align="left" noshade size="2" width="100%">
      </div>
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    <div style="DISPLAY: block; TEXT-INDENT: 0pt">
      <div style="DISPLAY: block; TEXT-INDENT: 0pt; TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman">ANNUAL
MEETING OF SHAREHOLDERS OF</font></div>
      <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 16pt; FONT-FAMILY: Times New Roman">AFP
IMAGING CORPORATION</font></div>
      <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman">December
10, 2008</font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman">Please
date, sign and mail your proxy card in the</font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman">envelope
provided as soon as possible.</font></div>
      <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman">Please
detach along perforated line and mail in the envelope provided.</font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman">--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------</font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman"><font style="DISPLAY: inline; TEXT-DECORATION: underline">PLEASE SIGN, DATE AND RETURN
PROMPTLY IN THE ENCLOSED ENVELOPE. PLEASE MARK YOUR VOTE IN BLUE OR BLACK INK AS
SHOWN HERE &#160;(X)</font></font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
      <div>
        <table cellpadding="0" cellspacing="0" width="100%">
            <tr>
              <td align="left" valign="middle" width="14%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;
      </font></td>
              <td align="left" valign="middle" width="57%">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">NOMINEES:</font></div>
              </td>
            </tr>
            <tr>
              <td align="left" valign="middle" width="14%">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">1.
      Election of Directors:</font></div>
              </td>
              <td align="left" valign="bottom" width="57%">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">o&#160;David
      Vozick</font></div>
              </td>
            </tr>
            <tr>
              <td align="left" valign="middle" width="14%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;
      </font></td>
              <td align="left" valign="middle" width="57%">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">o&#160;Donald
      Rabinovitch</font></div>
              </td>
            </tr>
            <tr>
              <td align="left" valign="middle" width="14%">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">(
      )FOR ALL NOMINEES&#160;</font></div>
              </td>
              <td align="left" valign="middle" width="57%">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">o&#160;Jack
      Becker</font></div>
              </td>
            </tr>
            <tr>
              <td align="left" valign="middle" width="14%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;
      </font></td>
              <td align="left" valign="middle" width="57%">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">o&#160;Robert
      A. Blatt</font></div>
              </td>
            </tr>
            <tr>
              <td align="left" valign="middle" width="14%">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">( )
      WITHHOLD AUTHORITY</font></div>
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">FOR
      ALL NOMINEES</font></div>
              </td>
              <td align="left" valign="middle" width="57%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;
      </font></td>
            </tr>
            <tr>
              <td align="left" valign="middle" width="14%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;
      </font></td>
              <td align="left" valign="middle" width="57%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;
      </font></td>
            </tr>
            <tr>
              <td align="left" valign="middle" width="14%">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">(
      )FOR ALL EXCEPT</font></div>
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">(See
      instructions below)</font></div>
              </td>
              <td align="left" valign="middle" width="57%"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: times new roman">&#160;
      </font></td>
            </tr>
        </table>
      </div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman"><font style="DISPLAY: inline; FONT-WEIGHT: bold; TEXT-DECORATION: underline">INSTRUCTION</font><font style="DISPLAY: inline; FONT-WEIGHT: bold">: </font>To withhold authority to
vote for any individual nominee(s), mark <font style="DISPLAY: inline; FONT-WEIGHT: bold">&#8220;FOR ALL EXCEPT&#8221;</font></font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman">and fill
in the circle next to each nominee you wish to withhold, as shown here:
(X)</font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman">2. To
approve an amendment to the Company&#8217;s Certificate of Incorporation increasing
the number of authorized shares of Common Stock from 30,000,000 to
100,000,000.</font></div>
      <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman">3. To
consider and act upon any other proposal as may properly come before the meeting
or any</font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman">adjournment
or adjournments thereof.</font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman">THIS
PROXY WILL BE VOTED AS DIRECTED, OR, IF NO CONTRARY DIRECTION IS INDICATED, WILL
BE VOTED FOR THE ELECTION OF DIRECTORS NOMINATED, FOR THE APPROVAL TO AMEND THE
COMPANY&#8217;S CERTIFICATE OF INCORPORATION AND AS SAID PROXIES DEEM ADVISABLE ON
SUCH OTHER MATTERS AS MAY COME BEFORE THE ANNUAL MEETING.</font></div>
      <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman">A majority
of such attorneys or substitutes as shall be present and shall act at
said</font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman">Annual
Meeting or any adjournment or adjournments thereof (or if only one shall
be</font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman">present
and act, then that one) shall have and may exercise all of the powers of
said</font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman">attorneys-in-fact,
hereunder.</font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
      <div id="PGBRK" style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
        <div id="FTR">
          <div id="GLFTR" style="WIDTH: 100%" align="left">
          </div>
        </div>
        <div id="PN" style="PAGE-BREAK-AFTER: always">
          <div style="WIDTH: 100%; TEXT-ALIGN: center">
          </div>
          <div style="WIDTH: 100%; TEXT-ALIGN: center">
            <hr style="COLOR: black" noshade size="2">
          </div>
        </div>
        <div id="HDR">
          <div id="GLHDR" style="WIDTH: 100%" align="right">
          </div>
        </div>
        <div>&#160;</div>
      </div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman">To change
the address on your account, please check the box at right
and&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;
<font style="DISPLAY: inline;" face="Wingdings">o</font></font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman">indicate
your new address in the address space above. Please note that</font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman">changes to
the registered name(s) on the account may not be submitted via</font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman">this
method.</font></div>
      <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman">Signature
of Shareholder __________________ Date: __________</font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman">Signature
of Shareholder __________________ Date: __________</font></div>
      <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman"><font style="DISPLAY: inline; FONT-WEIGHT: bold">Note: </font>Please sign exactly as
your name or names appear on this Proxy. When shares are held jointly, each
holder should sign. When signing as executor, administrator, attorney, trustee
or guardian, please give full title as such. If the signer is a corporation,
please sign full corporate name by duly authorized officer, giving full title as
such. If signer is a partnership, please sign in partnership name by authorized
person.</font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left">
        <div>
          <hr style="COLOR: black" align="left" noshade size="2" width="100%">
        </div>
      </div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center">&#160;</div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman">THIS PROXY
IS SOLICITED ON BEHALF OF</font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman">THE BOARD
OF DIRECTORS OF</font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman">AFP
IMAGING CORPORATION</font></div>
      <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman">The
undersigned shareholder of AFP Imaging Corporation, a New York corporation,
hereby acknowledges receipt of the Notice of Annual Meeting of Shareholders and
Proxy Statement, each dated November 12, 2008, and hereby appoints David Vozick
and Donald Rabinovitch, and each of them with full power of substitution,
proxies and attorneys-in-fact, on behalf and in the name of the undersigned, at
the 2008 Annual Meeting of Shareholders of AFP Imaging Corporation, to be held
on December 10, 2008 at 9:00 a.m., local time, at the Company&#8217;s offices, 250
Clearbrook Road, Elmsford, New York 10523, and at any adjournments thereof, and
to vote all shares of Common Stock which the undersigned would be entitled to
vote if then and there personally present, on the matters set forth on the
reverse:</font></div>
      <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
      <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman">(CONTINUED
AND TO BE SIGNED ON REVERSE SIDE)</font></div>
      <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
      <div style="DISPLAY: block; TEXT-INDENT: 0pt">
        <div>
          <hr style="COLOR: black" align="left" noshade size="2" width="100%">
        </div><br></div>
      <div style="DISPLAY: block; TEXT-INDENT: 0pt">&#160;</div>
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