The following discussion and analysis should be read in conjunction with the condensed consolidated financial statements and the notes to such financial statements.

Forward-Looking Statements

Certain statements contained in Management's Discussion and Analysis of Financial Condition and Results of Operations, including statements concerning the Company's future prospects and the Company's future cash flow requirements are forward looking statements, as defined in the Private Securities Litigation Reform Act of 1995. Actual results may differ materially from those projections in the forward looking statements which statements involve risks and uncertainties, including but not limited to the following: the impact of current adverse conditions in the credit markets and current adverse economic conditions on the Company's business; risks relating to the competitive nature of the markets for contract computer programming services; the extent to which market conditions for the Company's contract computer consulting services will continue to adversely affect the Company's business; the concentration of the Company's business with certain customers; uncertainty as to the Company's ability to maintain its relations with existing customers and expand its contract computer consulting services business; the impact of changes in the industry, such as the use of vendor management companies in connection with the consulting procurement process, the increase in customers moving IT operations offshore and other risks and uncertainties set forth in the Company's filings with the Securities and Exchange Commission. The Company is under no obligation to publicly update or revise forward looking statements.

Results of Operations

The following table sets forth, for the periods indicated, certain financial information derived from the Company's condensed consolidated statements of income. There can be no assurance that trends in operating results will continue in the future:

Three months ended August 31, 2008 compared with three months ended August 31,
------------------------------------------------------------------------------
2007
----
 <CAPTION>
                                                                       Three Months Ended
                                                                           August 31,
                                                                  (Dollar amounts in Thousands)

                                                              2008                              2007
                                                 -----------------------------     -----------------------------
                                                                     % of                              % of
                                                    Amount          Revenue           Amount          Revenue
                                                 ------------     ------------     ------------     ------------
Revenue, net                                     $     12,150            100.0     $     13,526            100.0
Cost of sales                                          10,028             82.5           11,017             81.4
                                                 ------------     ------------     ------------     ------------
Gross profit                                            2,122             17.5            2,509             18.6

Selling, general and administrative expenses            1,800             14.8            1,799             13.3
                                                 ------------     ------------     ------------     ------------
Income from operations                                    322              2.7              710              5.3

Other income, net                                          58              0.4               85              0.6
                                                 ------------     ------------     ------------     ------------
Income before income taxes                                380              3.1              795              5.9

Provision for income taxes                                165              1.3              348              2.6
                                                 ------------     ------------     ------------     ------------
Net income                                       $        215              1.8     $        447              3.3
                                                 ============     ============     ============     ============

Revenue

Revenue consists primarily of revenue from computer programming consulting services. Revenue for the quarter ended August 31, 2008 decreased $1,376,000 or 10.2% from the quarter ended August 31, 2007. The average number of consultants on billing with customers decreased from approximately 336 for the quarter ended August 31, 2007 to 299 for the quarter ended August 31, 2008. The decrease in revenue resulted primarily from the continued reduction in consultants placed with AT&T, additional reductions in consultants on billing with customers which the Company attributes to current economic conditions and decreases in revenue due to lower billing rates caused by discounts and other rate reductions instituted by customers.

As a result of the merger of AT&T with SBC Communications, Inc., Procurestaff, which had been the sole vendor management company for AT&T, is currently one of the many vendors to the new AT&T and no longer serves as the primary vendor manager. Due to these changes, the Company experienced a decrease in new placements with AT&T beginning in the second quarter of fiscal 2007. This has reduced the number of consultants on billing with AT&T from 100 at August 31, 2006 to 68 at August 31, 2007 and 35 at August 31, 2008. The Company expects this change in relationship will continue to impact the Company's business relationship with AT&T, resulting in fewer opportunities to place new consultants at AT&T.

As a result of the current economic downturn and, specifically, the impact of the adverse conditions in the credit markets on the financial services industry, the Company expects that IT spending will continue to decrease in the short term and that the impact is likely to be greater in the financial services industry. These economic conditions have reduced the opportunities to place new consultants on billing with clients. The Company derived approximately 20 percent of its revenue from banking and brokerage clients in fiscal 2008. The Company cannot predict the extent to which these conditions will affect the number of consultants on billing with customers.

The Company has provided services to Lehman Brothers Holdings, Inc. ("LBHI") through its contract with Beeline.com, Inc. ("Beeline"), a vendor management company. LBHI filed a petition under Chapter 11 of the U.S. Bankruptcy Code on September 15, 2008. As part of the bankruptcy proceedings, the Bankruptcy Court has approved a sale of Lehman Brothers, Inc. ("LBI"), a subsidiary of LBHI to Barclays Capital Inc. ("Barclays"). The Beeline contract has been assumed by LBI as part of the purchase agreement. The Company has received payment in full for amounts due for services rendered through the date of the bankruptcy filing and will not incur a charge against earnings as the result of the bankruptcy filing. LBHI and its subsidiaries constituted approximately 6% of the Company's revenue in fiscal 2008 and the Company cannot determine the impact that the bankruptcy filing and purchase of LBI by Barclays will have on the number of consultants on billing with LBI and its affiliates.

Cost of Sales

Cost of sales for the quarter ended August 31, 2008, decreased $989,000 or 9.0% to $10,028,000 from $11,017,000 in the prior year period. The decrease in cost of sales resulted primarily from the decrease in the number of consultants on billing with clients. Cost of sales as a percentage of revenue increased from 81.4% in the quarter ended August 31, 2007 to 82.5% in the quarter ended August 31, 2008. The increase in cost of sales percentage of revenue was primarily attributable to discount programs instituted or expanded by customers and other customer required rate reductions. These discount programs and other billing rate reduction initiatives decrease revenue without allowing offsetting cost reductions.

Selling, General and Administrative Expenses

Selling, general and administrative expenses consist primarily of expenses relating to account executives, technical recruiters, facilities costs, management and corporate overhead. These expenses increased $1,000 or 0.1% from $1,799,000 in the quarter ended August 31, 2007 to $1,800,000 in the quarter ended August 31, 2008. This increase was primarily attributable to the amounts paid to additional sales people offset by decreased legal and auditing expenses and the lower commissions paid to the existing sales and recruiting personnel due to the lower revenue. However, while selling, general and administrative expenses only increased slightly, these expenses as a percentage of revenue increased from 13.3% in the quarter ended August 31, 2007 to 14.8% in the quarter ended August 31, 2008.

Income from Operations

Income from operations decreased $388,000 or 54.6% from $710,000 in the quarter ended August 31, 2007 to $322,000 in the quarter ended August 31, 2008. The combination of reduced revenue, reduced gross margins and relatively flat selling, general and administrative expenses had a significant negative impact on income from operations.

Other Income

Other income for the quarter ended August 31, 2008 resulted primarily from interest and dividend income of $67,000, which decreased by $45,000 from the level realized in the quarter ended August 31, 2007 due to lower interest rates earned on the Company's US Treasury securities and money market accounts .

Income Taxes

The effective income tax rate of 43.4% for the quarter ended August 31, 2008 decreased from a rate of 43.7% in the quarter ended August 31, 2007.

Liquidity and Capital Resources

The Company expects that cash flow generated from operations together with its cash and marketable securities will be sufficient to provide the Company with adequate resources to meet its liquidity requirements for the foreseeable future.

At August 31, 2008, the Company had working capital of $12,440,000 including cash and cash equivalents of $748,000 as compared to working capital of $12,693,000 including cash and cash equivalents of $1,588,000 at May 31, 2008. The Company's working capital also included $6,467,000 and $6,460,000 of marketable securities with maturities of less than one year at August 31, 2008 and May 31, 2008, respectively.

For the three months ended August 31, 2008, net cash used in operating activities was $715,000 compared to cash used of $397,000 for the three months ended August 31, 2007, or a decrease of $318,000. The cash used in operating activities primarily resulted from an increase in accounts receivable of $719,000 and a decrease in accounts payable and accrued expenses of $271,000. The increase in accounts receivable resulted primarily from delayed payments from two clients with the same vendor manager. These amounts were collected after the end of the quarter. The cash used by operating activities in the three months ended August 31, 2007, resulted primarily from an increase in accounts receivable.

Net cash used in investing activities of $15,000 for the three months ended August 31, 2008 primarily resulted from reinvesting all of the proceeds of maturing US Treasury Securities with decreasing interest rates and the purchase of fixed assets.

Net cash used in financing activities resulted from the purchase of treasury stock amounting to $104,000 and distributions to the minority interest of $7,000.

The Company's capital resource commitments at August 31, 2008 consisted of lease obligations on its branch and corporate facilities. The Company intends to finance these lease commitments from cash flow provided by operations, available cash and short-term marketable securities.

The Company's cash and marketable securities were sufficient to enable it to meet its cash requirements during the three months ended August 31, 2008. The Company has available a revolving line of credit of $5,000,000 with a major money center bank through October 31, 2009. As of August 31, 2008, no amounts were outstanding under this line of credit.

                  Tabular Disclosure of Contractual Obligations
                  ---------------------------------------------
 <CAPTION>
                                                      Payments Due By Period
                                             Less than                                         More than
Contractual Obligations       Total           1 Year          1-3 Years        3-5 Years        5 Years
-----------------------   ------------     ------------     ------------     ------------     ------------
Operating Leases          $  1,482,000     $    359,000     $    680,000     $    443,000     $         --
Employment Agreements        1,380,000          749,000          531,000          100,000               --
                          ------------     ------------     ------------     ------------     ------------
Total                     $  2,862,000     $  1,108,000     $  1,211,000     $    543,000     $         --
                          ============     ============     ============     ============     ============

Recent Account Pronouncements

On September 15, 2006, the Financial Accounting Standards Board ("FASB") issued SFAS No. 157, "Fair Value Measurements" ("SFAS No. 157"). SFAS No. 157 is effective for fiscal years beginning after November 15, 2007, and interim periods within those fiscal years. SFAS No. 157 provides guidance related to estimating fair value and requires expanded disclosures. SFAS No. 157 applies whenever other standards require (or permit) assets or liabilities to be measured at fair value. SFAS No. 157 does not expand the use of fair value in any new circumstances. The adoption of SFAS No. 157 did not have a material impact on the Company's consolidated financial statements.

In February 2007, the FASB issued SFAS No. 159, "The Fair Value Option for Financial Assets and Financial Liabilities - including an amendment of FASB Statement No. 115" ("SFAS No. 159"). SFAS No. 159 permits entities to elect to measure many financial instruments and certain other items at fair value. Upon adoption of SFAS No. 159, an entity may elect the fair value option for eligible items that exist at the adoption date. Subsequent to the initial adoption, the election of the fair value option should only be made at initial recognition of the asset or liability or upon a re-measurement event that gives rise to new-basis accounting. SFAS No. 159 does not affect any existing accounting literature that requires certain assets and liabilities to be carried at fair value nor does it eliminate disclosure requirements included in other accounting standards. SFAS No. 159 is effective for fiscal years beginning after November 15, 2007. The adoption of SFAS No. 159 did not have a material impact on the Company's consolidated financial statements.

In December 2007, the FASB issued SFAS No. 141 (R), "Business Combinations" ("SFAS 141(R)"), and SFAS No. 160, "Noncontrolling Interests in Consolidated Financial Statements" ("SFAS 160"). SFAS 141 (R) requires an acquirer to measure the identifiable assets acquired, the liabilities assumed and any noncontrolling interest in the acquiree at their fair values on the acquisition date, with goodwill being the excess value over the net identifiable assets acquired. SFAS 160 clarifies that a noncontrolling interest in a subsidiary should be reported as equity in the consolidated financial statements. The calculation of earnings per share will continue to be based on income amounts attributable to the parent. SFAS 141 (R) and SFAS 160 are effective for financial statements issued for fiscal years beginning after December 15, 2008. Early adoption is prohibited. The Company does not expect the adoption of SFAS 141 (R) and SFAS 160 to have a material impact on its consolidated financial statements.

Critical Accounting Policies

The SEC defines "critical accounting policies" as those that require the application of management's most difficult subjective or complex judgments, often as a result of the need to make estimates about the effect of matters that are inherently uncertain and may change in subsequent periods.

The Company's significant accounting policies are described in Note 1 to the Company's consolidated financial statements, contained in its May 31, 2008 Annual Report on Form10-K, as filed with the SEC. The Company believes that those accounting policies require the application of management's most difficult, subjective or complex judgments. There have been no changes in the Company's significant accounting policies as of August 31, 2008.