UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON D.C. 20549

FORM 10-K

(Mark One)


(Mark One)

x	ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
	SECURITIES EXCHANGE ACT OF 1934

	For the fiscal year ended March 31, 2009

	OR

o	TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE
	SECURITIES EXCHANGE ACT OF 1934

	For the transition period from to

	Commission file number: 0-22122

x	ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
	SECURITIES EXCHANGE ACT OF 1934
	For the fiscal year ended March 31, 2008
	OR
o	TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE
	SECURITIES EXCHANGE ACT OF 1934
	For the transition period from to
	Commission file number: 0-22122

MTM TECHNOLOGIES, INC.

(Exact name of registrant as specified in its charter)


New York	13-3354896
(State or other jurisdiction of	(I.R.S. Employer Identification No.)
incorporation or organization)

1200 High Ridge Road	06905
Stamford, CT	(Zip Code)
(Address of principal executive offices)

Registrant’s telephone number, including area code: (203) 975-3700

Securities registered ~~under~~pursuant to Section 12(b) ~~or 12(g)~~ of the ~~Exchange~~ Act: ~~Common stock, par value $0.001 per share~~

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes o No x Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes o No x


Title of Each Class		Name of Each Exchange on Which Registered

Common stock, par value $0.001 per share		Nasdaq Capital Market

Securities registered under Section 12(g) of the Act:
None

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

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

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

Indicate by check mark if ~~disclosure~~ disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not ~~contained~~ contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. ox

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer”, “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):


Large Accelerated Filer o	Accelerated Filer o	Non-Accelerated Filer o	Smaller Reporting Company x

		(Do not check if a smaller reporting company)

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

The aggregate market value of the voting and non-voting common equity held by non-affiliates of the registrant as of the last business day of the registrant’s most recently completed second fiscal quarter, at September 2830, ~~2007~~2008, was $~~10.~~1.3 million based on the closing sale price of the registrant’s common stock on such date of $1.0445 per share, as reported by The NASDAQ Stock Market, Inc.

There were a total of 13 914,~~462,514~~005 shares of the registrant’s common stock outstanding as of May 31, ~~2008~~2009.

Documents Incorporated by Reference:
None

MTM TECHNOLOGIES, INC.

ANNUAL REPORT ON FORM 10-K For the Fiscal Year Ended March 31, ~~2008~~ 2009

		Page
	Introductory Comment—Terminology	i
	Introductory Comment—Forward-Looking Statements	i
	PART I
Item 1.	Business	1
Item 1A.	Risk Factors	5
Item 2.	Properties	9
Item 3.	Legal Proceedings	9
Item 4.	Submission of Matters to a Vote of Security Holders	9
	PART II
Item 5.	Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	10
Item 6.	Selected Financial Data	11
Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	12
Item 7A.	Quantitative and Qualitative Disclosure about Market Risk	2021
Item 8.	Financial Statements and Supplementary Data	2021
Item 9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	2122
Item 9A.	Controls and Procedures	2122
Item 9A(T).	Controls and Procedures	2122
Item 9B.	Other Information	22
	PART III
Item 10.	Directors, Executive Officers of the Registrant and Corporate Governance Matters	2223
Item 11.	Executive Compensation	2526
Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholders Matters	31
Item 13.	Certain Relationships and Related Transactions, and Director Independence	35
Item 14.	Principal Accountant Fees and Services	36
	PART IV
Item 15.	Exhibits and Financial Statement Schedules	37

Introductory Comment—Terminology

Throughout this Annual Report on Form 10-K, the terms “we”, “us”, “our” and “Company” refers to MTM Technologies, Inc. (“MTM”) and, unless the context indicates otherwise, our subsidiaries on a consolidated basis.

Effective ~~“Pequot~~June ~~Fund” refers to Pequot Private Equity Fund III~~25, ~~L.P.~~2008, ~~“Pequot~~the ~~Partners”~~Company ~~refers~~implemented toa ~~Pequot~~one ~~Offshore~~for ~~Private~~fifteen ~~Equity~~reverse ~~Partners~~stock ~~III, L.P., and collectively with Pequot~~split ~~Fund,~~ (“~~Pequot”.~~Reverse ~~“Constellation~~Stock ~~Venture~~Split”) ~~refers~~of toits ~~Constellation~~common ~~Venture Capital II, L~~stock.~~P.,~~ ~~“Constellation~~All ~~Offshore”~~common ~~refers~~stock tonumbers ~~Constellation~~set ~~Venture Capital Offshore II, L.P., “BSC” refers to The BSC Employee~~forth ~~Fund~~in ~~VI,~~this ~~L.P.,~~Annual ~~“CVC”~~Report ~~refers~~on toForm ~~CVC~~10-K II(including ~~Partners,~~the ~~LLC,~~tables and ~~collectively with Constellation Venture~~footnotes), ~~Constellation~~have been ~~Offshore~~retroactively ~~and~~adjusted ~~BSC,~~to ~~“Constellation”,~~reflect ~~and~~the ~~together~~Reverse ~~with~~Stock ~~Pequot, the “Investors~~Split.”

Effective August 20, 2008, FirstMark Capital, L.L.C., a Delaware limited liability company (“FirstMark Capital”), became the investment manager of certain funds formerly managed by Pequot Capital Management Inc. (“Pequot”). These funds included Pequot Private Equity Fund III, L.P. and Pequot Offshore Private Equity Partners III, L.P., now known as FirstMark III L.P. (“FirstMark Fund”) and FirstMark III Offshore Partners, L.P. (“FirstMark Offshore Partners” together with FirstMark Fund, “FirstMark”), respectively. “Constellation Venture” refers to Constellation Venture Capital II, L.P., “Constellation Offshore” refers to Constellation Venture Capital Offshore II, L.P., “BSC” refers to The BSC Employee Fund VI, L.P., “CVC” refers to CVC II Partners, LLC, and collectively with Constellation Venture, Constellation Offshore and BSC, “Constellation”, and together with FirstMark, the “Investors”.

Introductory Comment—Forward-Looking Statements

Statements contained in this Annual Report on Form 10-K include “forward-looking statements” within the meaning of such term in Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Forward-looking statements involve known and unknown risks, uncertainties and other factors which could cause actual financial or operating results, performances or achievements expressed or implied by such forward-looking statements not to occur or be realized. Forward-looking statements made in this Form 10-K generally are based on our best estimates of future results, performances or achievements, predicated upon current conditions and the most recent results of the companies involved and their respective industries. Forward-looking statements may be identified by the use of forward-looking terminology such as “may”, “will”, “could”, “should”, “project”, “expect”, “believe”, “estimate”, “anticipate”, “intend”, “continue”, “potential”, “opportunity” or similar terms, variations of those terms or the negative of those terms or other variations of those terms or comparable words or expressions.

Readers are urged to carefully review and consider the various disclosures made by us in this Annual Report on Form 10-K including the factors discussed in Part I, Item 1A. Risk Factors and our other filings with the Securities Exchange Commission (“SEC”). These reports attempt to advise interested parties of the risks and factors that may affect our business, financial condition and results of operations and prospects. The forward-looking statements made in this Form 10-K speak only as of the date hereof and we disclaim any obligation to provide updates, revisions or amendments to any forward-looking statements to reflect changes in our expectations or future events.

PART I

Item 1. Business ~~Overview~~

WeOverview are a leading national provider of innovative information technology (“IT”) solutions including Access, Unified Communications, Virtualization, and Managed Services. We enable our clients to achieve improved operational efficiency and to focus on growth, while mitigating the risk of implementing complex IT systems. We achieve these results by providing systems, networking, IP telephony, storage, security and data center infrastructure services that address the full life cycle of a client’s IT requirements from needs analysis, through planning, development, deployment, and testing, to on-going maintenance and support. We combine these services with technology from leading software and hardware manufacturers delivering strategic IT solutions that solve many of today’s business challenges.

We are a leading national provider of innovative information technology (“IT”) solutions including Application Delivery, Unified Communications, Virtualization, and Managed Services. With specialization in these advanced technologies we enable our clients to achieve improved operational efficiency and to focus on growth, while mitigating the risk of implementing complex IT systems. We achieve these results by providing solutions that address the full life cycle of a client’s IT requirements from needs analysis, through planning, development, deployment, and testing, to on-going maintenance and support. We combine these services with technology from leading software and hardware manufacturers delivering strategic IT solutions that solve many of today’s business challenges.

Our clients consist of middle market corporations (generally those with $50 million to $1 billion in revenues), divisions of Global 2000 corporations, municipal, state and federal government agencies, and educational, financial and health-care institutions. We serve clients in most major US metropolitan markets.

History

The certificate of incorporation of MTM was filed by the New York Department of State on May 12, 1986 under the original name of Micros To Mainframes, Inc. On May 21, 2004 we changed the name of our Company to MTM Technologies, Inc.

Since July 2004, we have acquired the following six companies, either through the purchase of operating assets or the acquisition of capital stock:


	•	DataVox Technologies, Inc., a Cisco AVVID (Architecture for Voice, Video and Integrated Data) authorized partner, offering advanced technology solutions, including IP telephony, security, storage, networking and wireless technologies solutions, as well as network facilities engineering and data center technology consulting and services.

	•	Network Catalyst, Inc., a provider of advanced technology solutions in the VOIP (Voice Over Internet Protocol), infrastructure and security fields to clients located throughout the Southern California region.

	•	Vector ESP, Inc. and Vector ESP Management, Inc., providers of secure access, consulting services, information technology products, technology solutions, applications, messaging and collaboration products and services, remote connectivity and workforce mobility products and services.

	•	Info Systems, Inc., a provider of VOIP, security and storage solutions, as well as telecommunications and structured cabling services, outsourced IT, staff augmentation and remote network monitoring, management and support services through its network operations center.

	•	Nexl, Inc., a provider of enterprise storage, network infrastructure, security, IP telephony, and managed services to clients primarily located in the Northeast.

	•	Axcent Solutions, Inc., a provider of access, infrastructure and availability solutions based on technologies from Citrix, Microsoft, Network Appliance, VMware and Cisco.

~~Business~~Fiscal ~~Strategy~~2009 – In review

For ~~Our~~fiscal ~~strategy~~2009 iscomparable torevenues befor both product and service declined each quarter with product revenue down 28.8% over the ~~national~~prior ~~leader~~year and service revenue in ~~providing~~fiscal IT2009 ~~solutions~~down toover 26.2% from the ~~middle~~prior ~~market~~year. ~~The~~We ~~most~~believe ~~recent~~that ofthe ~~our~~slowdown in ~~acquisitions~~product ~~was~~sales ~~completed~~and the related decrease in ~~April~~service ~~2006.~~revenue ~~Since~~are ~~that~~in ~~time~~a welarge part ~~have~~due ~~focused~~to the downturn in the economy, whereby customers are experiencing a freeze in capital spending and large infrastructure deals are being put on hold ~~integrating~~or ~~the~~delayed. ~~operations~~The unprecedented deterioration of the ~~acquired~~global ~~companies~~financial insystem ~~order~~and capital markets have all contributed to ~~improve~~the ~~our~~sharp ~~earnings~~decline in customer confidence, and ~~cash~~as ~~flow.~~a ~~Although~~result wehave ~~currently~~deterred ~~are~~any ~~not~~discretionary ~~actively~~spending. ~~seeking~~As ~~acquisition~~a highly ~~candidates~~leveraged Company with significant fixed costs, wethe ~~believe~~decrease ~~that~~in ~~growth~~revenue pressured ~~through~~margins, ~~acquisition~~and ~~may~~operating beexpenses anas ~~important~~a ~~component~~percentage of revenues was ~~our~~significantly ~~long-term~~higher ~~strategy~~even though there was substantial cost savings year over year. ~~The~~Our ~~following~~business ~~are~~requires ~~key~~significant ~~components~~levels of ~~our~~working ~~strategy~~capital to ~~improve~~fund future ~~our~~revenue ~~earnings~~growth and ~~cash~~current ~~flow~~operations. Working capital at March 31, 2009 was a deficit of $(5.8) million as compared to a working capital deficit of $(3.3) million at March 31, 2008.

We ~~Focus~~exited the year under tremendous financial pressure as we had increased restrictions on ~~strategic~~our ~~service~~current ~~offerings~~credit facilities and ~~increase~~ our ~~overall~~borrowing ~~percentage~~capacity was severely reduced in large part because of ~~services~~lower levels of revenue in the second half of fiscal 2009. Net of the impact of a goodwill impairment charge of $19.6 million in fiscal 2009, operating results were approximately 43% lower than the prior year. We have taken steps to address the deterioration in our revenue and its impact on our Company as well as our current financing arrangements. These include the implementation of several strategic initiatives during fiscal 2010. These significant actions have been designed to structure our business for profitable growth.

Our goal is to increase our service revenue, which generates superior gross margin contributions, as a percentage of overall revenue. This will include focusing on those product sales that are typically coupled with the highest percentages of service revenue, a concept we refer to as “pull-through”. We believe that our offerings in Access and Unified Communications provide the greatest opportunity in these areas. Additionally, we strive to attach Managed Services to each sales opportunity, further increasing margins. Our national footprint enables us to more effectively execute this strategy.

Focus in key industry verticals

We intend to increase our focus on selling our solutions to selected industry segments or industry “verticals” that we believe have the greatest potential for revenue growth and gross margin improvement. This effort will include greater alignment of our sales and services resources in those selected verticals.

Rationalize product sales

We believe that we can improve the overall profitability of our product resale business by focusing on selling the products of certain vendors, typically those for whom we sell the largest volume of products, and eliminating or deemphasizing smaller and less profitable vendors. We believe that by properly rationalizing our product sales we will reduce the extra cost burden associated with supporting a large number of smaller vendors.

~~Leverage~~Business ~~our~~Strategy ~~current~~– ~~customer~~in ~~base~~Fiscal 2010

The Wefollowing ~~have an existing customer base of over 5,000 clients. Many of our clients~~ are ~~currently utilizing~~key ~~only~~components ~~a small portion~~ of our ~~overall~~strategy ~~solutions.~~to ~~Our~~improve ~~sales professionals are actively revisiting~~ our ~~existing~~liquidity ~~client base~~ and ~~introducing them to~~ our ~~complete set of offerings with the goal of having those clients purchase additional offerings thereby gaining an increased percentage of such client’s total IT spending~~earnings.

Get ~~Leverage~~funding ~~our~~in ~~centralized~~place ~~infrastructure~~that ~~and~~will ~~processes~~enable us to ~~support~~better ~~our~~weather ~~national~~the ITcurrent ~~solutions~~financial crisis. ~~platform~~

In WeJune ~~have~~2009 ~~made~~we asuccessfully ~~significant~~negotiated ~~investment~~an inadditional ~~building~~$7.0 anmillion ~~infrastructure~~in ~~that~~borrowing capacity ~~supports~~under our ~~current~~existing ~~business~~Credit ~~operations~~Facilities ~~and~~Agreement ~~enhances~~with ~~our~~GE ~~ability~~Commercial Distribution toFinance ~~support~~Corporation ~~substantial~~(“CDF”). ~~future~~In ~~growth.~~addition ~~Centralized~~the maturity date of the ~~technology~~Credit ~~infrastructure~~Facilities Agreement was extended to March 31, ~~back-office~~2010 from August 21, 2009, ~~purchasing~~the line was reduced to a maximum of $25 million from $34 million, but most financial covenants were eliminated and ~~human~~other ~~resources~~borrowing ~~functions~~restrictions ~~have~~were relaxed. ~~all~~Our ~~contributed~~other toSenior Lenders and our ~~ability~~Investors entered into agreements as well, confirming their commitment to ~~deliver~~the ~~our~~Company ~~services~~in onthe aform ~~national~~of ~~basis~~guarantees and letters ~~improve~~of credit totaling $8.5 million securing the ~~operating~~additional ~~margins~~financing from CDF. Lastly, the Investors entered into an amendment which extended the maturity date of ~~our~~all ~~acquired~~the ~~businesses~~Investors Notes to November 30, 2010 from December 15, 2009. See Note 12 Subsequent Events to the Consolidated Financial Statements, for a further discussion of all of the relevant agreements.

Refocus ~~Implementing~~our ~~and~~“go ~~maintaining~~to ~~aggressive~~market” ~~cost~~strategy ~~control~~with ~~initiatives~~a torevenue ~~right~~plan ~~size~~that ~~the~~builds ~~business~~on our regional core competencies.

Our Westrategy ~~have~~is ~~made~~to abe ~~commitment over~~ the ~~past~~national ~~few~~leader ~~quarters~~in toproviding ~~continue~~IT solutions to ~~monitor~~the ~~and~~middle market, ~~implement~~focusing ~~cost~~on ~~control~~our ~~initiatives~~core ~~including~~competencies ~~reducing~~of ~~the~~Application ~~number~~Delivery, ofUnified Communications, ~~associates~~Virtualization ~~from~~and ~~636~~Managed inServices. ~~fiscal~~We ~~2007~~intend to ~~554~~build atour ~~March~~revenue ~~31,~~through ~~2008~~regional sales strengths that focus on core products. We ~~continue~~plan to significantly reduce low margin business and we intend to ~~seek~~increase ~~opportunities~~our focus on selling our solutions to ~~improve~~selected ~~operating~~industry ~~results~~segments ~~and~~or ~~generate~~industry ~~cash~~“verticals” that ~~flow~~we believe have the greatest potential for revenue growth and gross margin improvement.

We believe ~~our~~that ~~strategy~~we iscan ~~aimed~~improve atthe overall profitability of our product resale business by focusing on ~~profitable~~selling ~~revenue~~the ~~growth~~products of certain vendors, ~~expanding~~typically those ~~our~~for ~~market~~whom ~~share,~~we ~~reducing~~sell ~~our~~the ~~structural~~largest ~~costs~~volume of products, and ~~generating~~eliminating ~~positive~~or deemphasizing ~~cash~~smaller ~~flow~~and less profitable vendors. We believe that by properly rationalizing our product sales we will ~~continue~~reduce tothe ~~work~~extra cost burden associated towith ~~grow~~supporting ~~our~~a ~~net~~large ~~revenue~~number ~~and~~of ~~profitability~~smaller vendors.

Institute a comprehensive sales training program to better fulfill the expectations of our “go to market” strategy.

We are in the process of launching a sales apprenticeship program designed to better train the entire sales force. Our training program will include the use of a national virtual training platform, a stronger sales support network, an improved uniform forecasting process and an aggressively managed lead follow-up process.

Engage a restructuring firm to execute a plan of significantly reducing our fixed costs.

In addition to realigning our headcount with our future revenue projections, we are planning on taking a hard look at exiting and consolidating facilities, negotiating current leases, utilizing increased virtual space and significantly reducing our IT infrastructure and public company costs.

We expect that results for fiscal 2010 will continue to be impacted by a very difficult economic environment in the U.S. and a potentially widening global recession. We believe, however, that the combination of adequate immediate financing, a focused “go to market” strategy and strong cost controls will enable us to lay a foundation for improved future operating results and the ability to generate cash flow.

Business Services

Our approach to the market aligns our solutions and professional services with strategic manufacturer and supply chain relationships to deliver an end-to-end solution for our clients.

Solutions

We have developed our IT solutions to deliver immediate business value and return on investment for our clients. Our solutions consist of the following:

Application ~~Access~~Delivery. Our ~~Access~~Application Delivery solutions offer our clients secure, on-demand access to all of their corporate applications and information from remote locations using both wired and wireless technologies. These solutions combine system, network, and security technologies to create a cohesive infrastructure that improves the efficiency, mobility and agility of clients’ businesses.

Unified ~~Convergence~~Communications. Our Unified ~~Convergence~~Communications solutions provide our clients the ability to combine voice, data and video content on a common network, offering a feature-rich, cost-effective and flexible platform for business communications. By using a single converged network rather than multiple networks, clients are able to lower their total cost of ownership and simplify network management and deployment.

Consolidation. Our Consolidation solutions provide our clients the ability to streamline their IT infrastructure by consolidating operating systems, applications, and storage into high-performance, scalable systems thereby improving efficiency, control and manageability. These solutions combine server and storage consolidation, application centralization, data management and migration and disaster recovery services.

Virtualization. Our Virtualization solutions provide our clients the ability to separate applications, operating systems, and storage from physical hardware enabling a more flexible, scalable, fault-tolerant and cost-effective IT infrastructure. Virtualization allows clients to lower their total cost of ownership, maximize the utilization of their infrastructure resources and achieve operational efficiencies.

Professional Services

Our staff of experienced and certified technology professionals provide our clients with a full suite of IT professional services. The services range from advanced configurations and complex project management to project logistics and planning. We provide design, consulting, implementation and support services in our six areas of core competence. These are systems, networks, IP telephony, storage, security, and facilities and cabling.

• Our systems practice includes Windows servers, open system servers, directories, messaging, fax and server-based computing. • Our networks practice includes wide-area networks, local-area networks, wireless, intelligent switching and routing. • Our IP telephony practice includes voice, video and data integration on IP network. • Our storage practice includes enterprise storage and data management. • Our security practice includes essential systems and tools to secure, monitor and defend data and networks from unauthorized access. • Our facilities and cabling practice includes design and installation of data centers and physical infrastructure.

Professional Our capability to address all phases of technology projects, from needs analysis and definition through implementation and support, allows us to offer our customers a single point of accountability for a broad range of technology projects. As technology infrastructure becomes progressively more sophisticated and complex, our clients demand total project accountability from a single vendor. With our national presence, engineering expertise, and high-level relationships with top-tier vendors, we are able to undertake most technology infrastructure projects for our clients and provide them that critical single point of accountability. Services


	•	Our systems practice includes Windows servers, open system servers, directories, messaging, fax and server-based computing.

	•	Our networks practice includes wide-area networks, local-area networks, wireless, intelligent switching and routing.

	•	Our IP telephony practice includes voice, video and data integration on IP network.

	•	Our storage practice includes enterprise storage and data management.

	•	Our security practice includes essential systems and tools to secure, monitor and defend data and networks from unauthorized access.

Our capability to address all phases of technology projects, from needs analysis and definition through implementation and support, allows us to offer our customers a single point of accountability for a broad range of technology projects. As technology infrastructure becomes progressively more sophisticated and complex, our clients demand total project accountability from a single vendor. With our national presence, engineering expertise, and high-level relationships with top tier vendors, we are able to undertake most technology infrastructure projects for our clients and provide them that critical single point of accountability.

Many of our clients require a guaranteed response to their system outages. Through our national staff of certified technicians and related field resources, we provide service level guarantees to our customers in response to problems with their infrastructure technology outages that are communicated to us, or that are detected through our automated remote monitoring systems as part of a managed services solution. We offer our clients various degrees of guaranteed response depending on the severity of the outage or the client’s specific response requirements.

Technology Partners

We ~~maintain~~ maintain strategic relationships with many of today’s leading hardware and software technology manufacturers enabling us to deliver to our clients advanced and comprehensive solutions at competitive prices. For example, we are a Cisco Gold partner, a Citrix Platinum Solutions Advisor, a Hewlett Packard Gold partner, a Microsoft Gold partner, an EMC Velocity Premier partner, aand a Sun Advantage partner~~, an Avaya Platinum partner, and a Captaris Platinum partner~~. For those manufacturers that we believe are critical to our client’s technology infrastructure we generally hold the highest levels of ~~certification~~ certification granted by such manufacturers. We work with our strategic partners to develop national training programs to ensure consistent service delivery methodologies across our entire national footprint. With over 200 technical professionals nationwide, we train and certify our service professionals to maintain the highest levels of manufacturer certifications and authorizations. We often times work in conjunction with our partners to utilize our own accredited professional training service centers to train and deliver technical content to our service professionals.

We provide all aspects of infrastructure technology product delivery to our clients. Through our relationships as a certified partner with most of the key top tier infrastructure technology product manufacturers and with key infrastructure technology distributors, we are able to provide our clients with cost-effective product sourcing solutions to meet their requirements for managed, timely and competitive product procurement.

We offer an on-line, Web-based, secure product purchasing option for those clients who prefer a self-service alternative. Our e-commerce portal allows our clients to obtain product pricing, place unit or volume orders, and track the delivery process of their orders on line.

For clients who require their purchased products to be staged, pre-configured, field tested, assembled or integrated, we provide these services in one of two staging facilities (located in California and Delaware). Staging can be provided with or without the client’s participation, as directed by the client.

Managed Services

Our automated remote management system and proactive support services monitor, manage, and protect our clients’ business-critical infrastructure and applications from down time and failure.

Remote Monitoring & Management. Our automated remote management system provides our clients with real-time monitoring of their computing and storage systems, IP telephony systems and network infrastructure to immediately detect component failures, critical security events (such as hacking attempts), and deteriorating performance, with reporting on key operating metrics of these systems. The system is a combination of our proprietary network management and monitoring software and third party licensed software. Monitoring of our clients’ networks is performed by our certified engineering staff operating on a 24x7x365 basis from our network operations ~~centers (“NOC”)~~center. ~~Our NOCs are located on the east and west coasts.~~

Hosting. In addition to monitoring, our managed services include managed hosting. We offer our customers a choice of two collocation facilities to host their computing systems. Our field engineering resources are available in each of our regions to provide field support and technical resources in connection with our managed services.

Remote Support. Our remote phone support service is a virtual extension of our clients’ IT staff. We provide support for a wide range of technologies including Microsoft, Citrix, Sun, Cisco and Captaris.

Remote Helpdesk. Our ~~helpdesk~~ helpdesk services provide end-user support customized to meet our clients’ specific application requirements. ~~All~~Virtually all helpdesk analysts are HDI (Help Desk International) certified and available 24x7.

IT Outsourcing. Many of our clients and potential clients have adopted an approach to technology of focusing on their core business competencies, while outsourcing non-core technology systems. These clients, however, often find it more cost-effective to outsource than to fund the cost of a full-time internal IT staff to operate the sophisticated technology systems necessary to support their core business. Additionally, some clients are faced with extensive legal and regulatory compliance mandates that require sophisticated technology solutions. Again, for some of these clients, maintaining a full-time internal staff to operate those systems is not feasible. Our IT outsourcing solutions provide a cost effective solution to such clients by providing targeted support to fill gaps in their technology staffing on a project basis.

Industry

The IT solution and service provider industry is a multi-billion dollar industry that is focused on providing services to clients in building and maintaining IT infrastructures, safeguarding data and systems, optimizing applications and ensuring regulatory compliance. Industry participants face intense competition, the challenge of constant technological advancement and the ongoing need for business process optimization. The outsourcing of computer solutions is a rapidly growing trend in which a client company obtains all or a portion of its data processing requirements from an IT solutions provider, such as us, that specializes in the computer service, product or application required by the client.

We believe the strongest demand for our IT solutions is amongst companies which typically lack the time and technical resources to satisfy all of their IT needs internally. These companies typically require sophisticated, experienced IT assistance to achieve their business objectives and often rely on IT service providers to help implement and manage their systems. However, many of these companies rely on multiple providers for their IT needs. Generally, we believe that this reliance on multiple providers results from the fact that larger IT service providers do not target these companies, while smaller IT service providers lack sufficient breadth of services or industry knowledge to satisfy all of these companies’ needs.

Companies have recognized the importance of IT systems in supporting their business processes and are turning to IT solutions to compete more effectively. At the same time the process of designing, developing and implementing IT solutions has become increasingly complex. The accelerated rate of development of new technologies is placing increasing demand on our clients to understand the opportunity and impact that these technologies can have on their business. IT services organizations like ours are faced with an increasing demand to keep up with these developments so as to effectively serve as consultants and advisors to our clients.

Consolidation of clients’ voice and data communications to IP-based networks and advances of virtualization at the device and application level are indicative of a trend toward a more centralized computing model. This cycle, which started with mainframes, then workgroup mini-computers, then highly distributed applications running on micro-computers and PCs, may now be returning to a model where an increasing portion of business applications are implemented in a centralized computing model, using increasingly sophisticated terminal services to access these applications. This shift may be one of the most significant developments driving the re-definition by IT providers of product and service solutions for the foreseeable future.

Sales and Marketing

Our primary target market for acquiring new clients consists of middle market corporations (generally those worth $50 million to $1 billion in revenues), divisions of Global 2000 corporations, municipal, state and federal government agencies, and educational, financial and health-care institutions. We further define our target market as organizations with 100 to 3,000 technology seats in a single or in multiple US locations.

Sales. We have a direct sales force in the United States consisting of account executives, sales assistants, and subject matter expert sales personnel located in four areas (Northeast, Mid-Atlantic, Central, and West), each of whom report to an area vice president of sales. Account executives have the direct responsibility for selling and account management and the adoption of our technology at customer sites. A subject matter expert sales specialist is a quota-carrying, outbound sales professional with generally ten-plus years of relevant experience and with advanced knowledge of a specific technology that drives specific vendor and solution sales.

Indirect Sales. Through our partnership organization, we seek to build a set of relationships with strategic partners and value added resellers, in order to establish, and then expand an indirect channel of sales for our products.

Marketing. Our marketing strategy is to position ourselves as the premier IT solutions provider to the middle market. We do this primarily through demand generation activities, and by identifying new business opportunities. Demand generation activities are targeted to both vertical markets (e.g. industry-specific markets such as financial services, healthcare, government, and retail) and horizontal markets, consisting primarily of national and regional events, trade shows, and advertising. Event and trade show attendance is driven by targeted mass email campaigns, telemarketing and ~~telemarketing~~the local sales organization. Most marketing initiatives involve participation by one or more of our technology partners, which both enhances our visibility and resources, and significantly defrays our out-of- pocket marketing costs. We also identify business opportunities through new and existing contacts generated by our sales force.

Suppliers

We ~~purchase~~ purchase software, computers and related products directly from numerous suppliers as either an authorized dealer or a value added reseller. We have entered into authorization agreements with our major suppliers including Cisco Systems, Inc., Citrix Systems, Inc., Hewlett-Packard Company, Microsoft Corporation, EMC Corporation, and Sun Microsystems, Inc., ~~Avaya Inc., and Captaris, Inc.~~ Typically, ~~these~~ these agreements provide that we have been appointed, on a non-exclusive basis, as an authorized dealer and systems integrator of specified products of the ~~supplier~~ supplier at specified locations. Most of the authorization agreements provide that the supplier may terminate the agreement with or without cause upon 30 to 90 days notice or immediately upon the occurrence of certain events. If ~~these~~ these agreements are terminated, we may have difficulty in obtaining inventory at a sufficiently low cost to allow for resale at a competitive price. The sales of products from the Company’s two largest suppliers accounted for 29 27% and 1926% of all product sales for the year ended March 31, ~~2008~~2009.

We receive certain discretionary cost subsidies, typical for the industry, from certain major suppliers to promote sales and support activities relating to their products. We have used these funds to subsidize marketing, advertising and our connectivity and communication laboratory.

Our suppliers generally permit us to pass through to clients all warranties and return policies applicable to the suppliers’ products. To date, we have experienced few returns of product and have generally been reimbursed by the suppliers for most warranty work done for clients. All service work after the expiration of the warranty period is at the client’s expense. We offer service contracts of varying lengths under which we agree to be responsible for all service costs for a fixed term in exchange for a set fee paid by the client.

Software and other related products are purchased from numerous industry suppliers. As is customary, we do not have any long-term agreements or commitments with these suppliers, because competitive sources of supply are generally available for such products.

Competition

The ~~markets~~ markets in which we operate are highly competitive with respect to performance, ~~quality~~ quality and price. In our professional services business our competition ranges ~~from~~ from small, specialty integrators, to other service providers of comparable ~~size~~ size and profile to us, as well as large national and global professional ~~services~~ services firms and integrators. Our smaller competitors generally are highly ~~focused~~ focused on their immediate market segment ~~and can respond more quickly to changes in customer needs~~. Our larger competitors generally have greater financial resources and may be able to compete more effectively than we can on prices and payment terms offered to potential clients. In our product provisioning business we directly compete with local, regional and national distributors and mail order providers of computer and IT products and services, including network integrators and corporate divisions of retail superstores. OnOur ~~the national level our~~ product competitors include Verizon, AT&T ~~and Dimension Data. On the regional level our competitors include CDW~~, ~~Right Systems~~Dell, ~~Entysis,~~and ~~Gotham,~~local market ~~IPM~~niche ~~and Dell~~companies.

In addition, ~~the~~some ~~computer and IT products and services industries have each experienced a significant amount~~ of ~~consolidation through mergers and acquisitions. In the future, we may face further competition from new market entrants and possible alliances between existing competitors. Some of~~ our competitors have, or may have, greater financial, marketing and other resources than us. As a result, they may be able to respond more quickly to new or emerging technologies and changes in customer requirements, benefit from greater purchasing economies, offer more aggressive hardware and service pricing to customers, or devote greater resources to the promotion of their products and services. We also compete with manufacturers, including those serving as our vendors, which market through direct sales forces and distributors. More aggressive competition by principal manufacturers of computer and IT products, such as offering a full range of services in addition to products, could have a material adverse effect on our operations and financial results. We believe that our backlog of unfilled customer orders is not material.

Proprietary Information

We do not hold any patents, but have several trademarks and service marks. We also may affix copyright notices on our support service, training and service manuals. While such protection may become important to use, it is not considered essential to the success of our business. We rely on the know-how, experience and capabilities of our management, sales and service personnel. We generally require our employees to sign confidentiality or non-solicitation agreements.

Employees

As of March 31, ~~2008~~2009 we employed approximately ~~554~~416 associates (as measured on a full-time equivalent basis) in the United States. Of these associates, 3126 were in management, ~~133~~ 92 were in sales and marketing, ~~296~~214 were in technical support, and 9484 were in operations, finance and administration. At fiscal year end none of our personnel was represented by a union.

Item 1A. Risk Factors

The statements in this Section describe the major risks to our business and should be considered carefully. We provide the following cautionary discussion of risks, uncertainties and possibly inaccurate assumptions relevant to our business. These are factors that, individually or in the aggregate, we think could cause our actual results to differ materially from expected and historical results. We note these factors for investors as permitted by the Private Securities Litigation Reform Act of 1995. It is not possible to predict or identify all such factors. Consequently, you should not consider the following to be a complete discussion of all potential risks or uncertainties.

Risks Relating to our Business

We have incurred losses in our last three fiscal years and our losses may continue.

We ~~incurred~~ incurred a net loss of approximately $1439.46 million for our fiscal year ended March 31, ~~2008~~2009, $3214.04 million for our fiscal year ended March 31, ~~2007~~2008 and $832.5 0 million for our fiscal year ended March 31, ~~2006~~2007. Our net losses may ~~continue~~ continue and our ability to achieve and sustain profitability will be impacted by the following:

• Our access to sufficient working capital and vendor credit to fund our sales and other operating activities. • Our revenue may not increase or even remain at its current level. • Our operating expenses may increase as wea ~~continue~~percentage toof ~~develop our business~~revenue. If our expenses increase more rapidly than our revenue, or if revenue and expense levels remain the same, we may never become profitable. • ~~If we fail to reach profitability or sustain or grow our profits within the time frame expected by investors, the market price of our common stock may be adversely impacted. •~~ Our ability to ~~increase~~successfully ~~our~~execute ~~Access, IP Telephony, Networking solution revenue and~~ our ~~Managed~~“go ~~Services revenue~~ to ~~improve~~market” ~~overall service margins, as well as our ability to leverage our current customer base and sell to selected industry segments or industry “verticals~~strategy.” • Our ability to keep pace with rapidly changing technology and frequent introductions of new IT products, services, and product and service enhancements, and our ability to fulfill increasingly sophisticated client requirements. • Our ability to attract, train, retain and motivate qualified IT, sales and senior management personnel in a market place where competition for qualified personnel is significant. There is a shortage of qualified personnel in these fields and we compete with other companies for this limited pool of IT professionals and sales and senior management personnel.

There is no assurance that we will be able to successfully implement our new strategic initiatives or improve future operating results. Failure to do so may adversely affect our business and our financial results.

Increased Weleverage ~~require~~and/or ~~access~~increases toin ~~significant~~interest ~~working~~rates ~~capital~~may ~~and~~harm ~~vendor credit to fund~~ our ~~day-to-day operations. Our failure to comply with the~~ financial ~~and other covenants under our working capital~~condition ~~facility~~ and ~~other~~results ~~credit arrangements could lead to a termination~~ of ~~those agreements and an acceleration of our outstanding debt~~operations.

At WeMarch ~~require~~31, ~~access to significant working capital and vendor credit to fund our day-to-day operations~~2009, ~~particularly~~we athad ~~the~~outstanding ~~end~~approximately ~~of our fiscal quarters when demand for our products and services increases substantially~~$15. ~~Our credit facilities agreement (described in Part II, Item~~ 7) ~~with~~million GEon ~~Commercial Distribution Finance Corporation, as Administrative Agent, and~~ our credit ~~agreement (described in Part II~~ facilities, ~~Item 7) with Columbia Partners, L~~$6.~~L.C.~~8 ~~Investment~~million ~~Management,~~of asrelated ~~Investment~~party ~~Manager,~~notes payable and ~~National Electric Benefit Fund, as Lender, contain~~ a ~~number~~long-term ofsecured promissory ~~financial~~note ~~and other covenants,~~ including ~~minimum~~long-term ~~consolidated~~accrued ~~earnings before~~ interest, ~~taxes, depreciation and amortization, minimum consolidated liquidity multiples and maximum consolidated leverage ratios. A breach~~ of ~~these~~approximately ~~financial or other covenants, unless waived, would be a default under each facility~~$41. ~~Upon an event of default, each of these lenders may terminate~~6 ~~their~~million. ~~respective~~Future ~~facilities~~increases ~~and/or~~in ~~declare~~our ~~all~~level ~~amounts outstanding under such facilities immediately due and payable and exercise other remedies including foreclosure~~ of ~~the~~financial ~~security for the~~ obligations ~~under~~or ~~such~~in ~~facilities. The acceleration of our~~the ~~debt~~related ~~would~~interest ~~have~~rates acould ~~material~~significantly ~~adverse~~impact ~~effect on~~ our ~~financial~~ability ~~condition and liquidity. Additionally, the amount of working capital available~~ to ussatisfy ~~under~~said obligations ~~the~~including ~~credit facilities agreement is dependent upon~~ the ~~amount and quality of our accounts receivable. Significant defaults, or~~ payment ~~delays,~~ of ~~our~~periodic ~~accounts~~interest ~~receivable~~as ~~could~~they ~~materially~~become ~~adversely affect our borrowing base and our access to sufficient working capital~~due.

If we are unable to generate sufficient cash flow from operations in the future to satisfy our obligations or if we are unable to refinance or restructure our indebtedness our financial condition could be materially and adversely affected.

We require access to significant working capital and vendor credit to fund our day-to-day operations. Our failure to comply with the covenants under our working capital facility and other credit arrangements could lead to a termination of those agreements and an acceleration of our outstanding debt.

We require access to significant working capital and vendor credit to fund our day-to-day operations, particularly at the end of our fiscal quarters when demand for our products and services increases substantially. Our Credit Facilities Agreement (described in Part II, Item 7) with CDF, as Administrative Agent, and our CP/NEBF Credit Agreement (described in Part II, Item 7) with Columbia Partners, L.L.C. Investment Management, as Investment Manager (“CP Investment Management”), and National Electric Benefit Fund (“NEBF”), as Lender, contain a number of covenants. A breach of these covenants, unless waived, would be a default under each facility. Upon an event of default, each of these lenders may terminate their respective facilities and/or declare all amounts outstanding under such facilities immediately due and payable and exercise other remedies including foreclosure of the security for the obligations under such facilities. The acceleration of our debt would have a material adverse effect on our financial condition and liquidity. Additionally, the amount of working capital available to us under the credit facilities agreement is dependent upon the amount and quality of our accounts receivable. Significant defaults, or payment delays, of our accounts receivable could materially adversely affect our borrowing base and our access to sufficient working capital.

Our vendor agreements and lines of credit are generally terminable by the vendor at any time. Any significant termination of these arrangements would adversely impact our ability to deliver our IT solutions and reduce our working capital availability.

Our Weauditors ~~may~~have ~~need~~qualified ~~additional~~their ~~funds~~report toon ~~support~~ our ~~current~~financial ~~and~~statements ~~future~~to ~~operations~~indicate that ~~which,~~there ifis ~~available,~~substantial ~~could~~doubt ~~result~~as into ~~an increase in~~ our ~~interest~~ability ~~expense~~to ~~and/~~continue oras ~~dilution~~a ~~of your shareholdings. If~~going ~~these~~concern, ~~funds~~which ~~are~~could ~~not~~adversely ~~available,~~affect our ~~business~~ability ~~could~~to beobtain ~~adversely~~third ~~affected~~party financing.

Our Weauditors, ~~may~~McGladrey ~~raise~~& ~~funds~~Pullen, ~~through~~LLP ~~public~~(“McGladrey or& ~~private~~Pullen”), ~~debt~~have orincluded an ~~equity~~explanatory ~~financing.~~paragraph Ifin ~~funds~~their ~~are~~report ~~raised~~on ~~through~~ the ~~issuance~~current offinancial ~~equity~~statements ~~securities, the percentage ownership of our then current shareholders~~to ~~may~~indicate bethat ~~reduced~~there ~~and~~is ~~such~~“substantial ~~securities~~doubt” ~~may~~about ~~have~~our ~~rights,~~ability ~~preferences or privileges senior~~ to ~~those~~continue ofas ~~the~~a going ~~holders of our common stock~~concern. IfThe ~~additional~~existence ~~funds~~of ~~are raised through~~ the ~~issuance~~going ofconcern ~~debt securities, such securities~~ could ~~have rights, preferences~~affect ~~and~~our ~~privileges~~ability ~~senior~~ to ~~those~~obtain offinancing ~~the~~from ~~holders~~third ofparties ~~our~~or ~~common~~could ~~stock~~result ~~and~~in ~~the~~increased cost ~~terms~~ of such ~~debt could impose restrictions on our operations~~financing. IfThe ~~additional~~accompanying ~~funds~~consolidated ~~become~~financial ~~necessary,~~statements ~~additional financing may not be available on terms favorable to us, or at~~do ~~all. If adequate funds are~~ not ~~available~~include onany ~~acceptable~~adjustments ~~terms,~~that wemight ~~may~~result ~~not~~from bethe ~~able~~outcome toof ~~continue to fund our current operations or expand our business~~these uncertainties.

A prolonged downturn in economic conditions may impact our revenues and negatively affect our business in the future.

The recent economic slowdown in particular within the lending industry may negatively affect our business. As the financial crisis broadens or intensifies it may impact our ability to raise additional capital or obtain additional financing, if needed. Customers may cancel or delay orders for our products or services, and we could fall short of our revenue projections for ~~2009~~2010 and beyond. Slower growth and budget tightening among our customers and other general economic factors all have had, and could in the future have a materially adverse effect on our revenue, capital resources, financial condition and results of operations.

We may be required to record additional goodwill impairment charges, which could result in an additional significant charge to earnings.

Under generally accepted accounting principles, we test goodwill for impairment at least annually. During fiscal 2009, we recorded a goodwill impairment charge of $19.6 million. The goodwill impairment charge resulted from a decline in our stock price and market capitalization, reduced estimates of our future cash flows, and slower industry growth rates. Further declines in our stock price, the markets or reductions in our future cash flow estimates and future operating results may require us to record significant additional goodwill impairment charges in our financial statements in future periods, negatively impacting our financial results.

We may need additional funds to support our current and future operations which, if available, could result in a dilution of your shareholdings. If these funds are not available, our business could be adversely affected.

We may raise funds through public or private debt or equity financing. If funds are raised through the issuance of equity securities, the percentage ownership of our then current shareholders may be reduced and such securities may have rights, preferences or privileges senior to those of the holders of our common stock. If additional funds are raised through the issuance of debt securities, such securities could have rights, preferences and privileges senior to those of the holders of our common stock and the terms of such debt could impose restrictions on our operations. If additional funds become necessary, additional financing may not be available on terms favorable to us, or at all. If adequate funds are not available on acceptable terms, we may not be able to continue to fund our current operations.

The failure to maintain our status as an authorized reseller/service provider of IT products or a significant change in the terms of our supplier agreements could have a material adverse effect on our business and operations.

We are materially dependent on our continued status as an approved reseller of IT products and our continued authorization as an IT service provider. We would be unable to provide the range of products and services we currently offer, including warranty services, without such authorization. Our resale agreements with manufacturers generally are terminable by manufacturers on short notice. The sales of products from our two largest suppliers accounted for 2927% and 1926% of all product sales for the year ended March 31, ~~2008~~2009. The loss of one or more of such authorizations could have a material adverse effect on our business and results of operations.

In addition, our professional services revenues depend in large part on our accreditations with other vendors such as Citrix, Cisco, and Microsoft. Most of our major vendors require that we maintain specifically trained and accredited staff at each of our offices in order to resell and provide services associated with such products. Furthermore, certain such vendors require that we make annual purchases of their products for use in our labs and for marketing purposes. Each vendor independently determines these requirements for those organizations which it authorizes to provide services in connection with their products. If these requirements should become substantially more burdensome, they could affect our business in either of two ways: (1) we would elect not to continue our accreditation with such vendor and forgo the revenues associated with the resale of such vendor’s products and associated services, or (2) we would incur the additional expense associated with additional staff training or equipment purchase requirements. In either case, this could have a negative impact on our operating results.

We are subject to substantial competition which could adversely affect our operating results.

The markets in which we operate are highly competitive with respect to performance, quality and price. In our professional services business our competition ranges from small, specialty integrators, to other service providers of comparable size and profile to us, as well as large national and global professional services firms and integrators. Our smaller competitors generally are highly focused on their immediate market segment ~~and can respond more quickly to changes in client needs~~. Our larger competitors generally have greater financial resources and may be able to compete more effectively than we can on prices and payment terms offered to potential clients. This ~~competition~~ competition impacts our ability to acquire and retain clients and reduces the prices we can charge for our offering.

~~In addition, the computer and IT products and services industries have each experienced a significant amount of consolidation through mergers and acquisitions.~~ We also compete with manufacturers, including those serving as our vendors, which market through direct sales forces and distributors. More aggressive competition by principal manufacturers of computer and IT products, such as offering a full range of services in addition to products, could have a material adverse effect on our operations and financial results.

The 6loss of key personnel or difficulties recruiting and retaining qualified personnel could jeopardize the Company’s ability to remain competitive.

The success ~~loss~~of the Company’s efforts to grow its business and remain viable depends on the contributions and abilities of key executive and operating officers and other personnel. orWe ~~difficulties~~must continue to recruit, retain and motivate management ~~recruiting~~and operating personnel sufficient to maintain our current business and ~~retaining~~support our ~~qualified~~projected growth. We may have difficulty attracting or retaining highly-skilled personnel ~~could~~during ~~jeopardize~~periods of poor operating performance, and as a result of recent actions to suspend the Company’s 401(k) contributions to participant accounts, eliminate merit increases and increase benefit costs to the employee. A shortage or loss of these key employees might jeopardize the Company’s ability to meet its ~~growth~~strategic targets.

The success of the Company’s efforts to grow its business depends on the contributions and abilities of key executive and operating officers and other personnel. We must continue to recruit, retain and motivate management and operating personnel sufficient to maintain its current business and support its projected growth. A shortage or loss of these key employees might jeopardize the Company’s ability to meet its growth targets.

If we are unable to protect our trade secrets, our financial condition could be materially adversely affected.

We rely upon a combination of nondisclosure and other contractual arrangements and trade secret, copyright, and trademark laws to protect our proprietary rights and the proprietary rights of third parties from whom we license intellectual property. We enter into confidentiality agreements with our employees and limit distribution of proprietary information. However, we cannot assure that the steps taken in this regard will be adequate to deter misappropriation of proprietary information or that we will be able to detect unauthorized use and take appropriate steps to enforce our intellectual property rights. We also are subject to the risk of litigation alleging infringement of third-party intellectual property rights. Any such claims could require us to spend significant sums in litigation, pay damages, develop non-infringing intellectual property, or acquire licenses to the intellectual property that is the subject of the alleged infringement. Our inability or failure to establish rights or to protect our rights may have a material adverse effect on our business, results of operations, and financial condition.

Our dependence on third party licenses could have adverse affects.

We rely on certain software, technology and content that we license or have licensed from third parties, including software, technology and content that is integrated with internally developed software and used in our products to perform key functions. These third-party licenses may not continue to be available to us on commercially reasonable terms. Also, the licensed software, technology and content may not be appropriately supported, maintained or enhanced by the licensors such that the license would not continue to provide the necessary commercial benefits to us. In addition, we may not be able to license additional software, technology and content on terms advantageous to us. The loss of or inability to obtain or replace licenses to, or inability to support, maintain and enhance, any of such licensed software, could result in increased costs, including the expense of internally developing the required software, technology and/or content, as well as delays or reductions in product shipments.

In certain parts of our managed services business we utilize software obtained as open-source. Such software is supported through various informal developer communities and may be more susceptible to internal vulnerabilities than commercial grade products. In the event that any of these software products would need to be replaced by an equivalent commercial product (because of discovered flaws or difficulty in obtaining support), we could incur significant costs associated with licensing equivalent commercial products, possibly rendering the services provided to clients based on these products unprofitable.

We have and may continue to have fluctuations in our quarterly operating results.

Our quarterly operating results have and, in the future, may fluctuate significantly, depending on a variety of factors, many of which are outside of our control. Factors that may affect our quarterly results include:

• changes in the level of our operating expenses; • the demand for our products and services; • timing and amount of vendor and manufacturer incentive programs; • the size, timing and timely fulfillment of orders for our products and services; • the financial impact of and possible business interruptions caused by restructuring efforts; • the level of product, price and service competition; • changes in our sales incentive strategy, as well as sales personnel changes; ~~• the timing~~ and ~~impact of acquisitions; and~~ • general economic conditions and economic conditions specific to the IT market.

Our operating expenses and capital expenditures are expected to be based in large part on our expectations of future revenues. Therefore, if revenue levels are below expectations, operating results are likely to be adversely affected. Operating results may be disproportionately affected negatively by an unanticipated decline in revenue for a particular quarter because a relatively small amount of our expenses will vary with our revenue in the short term. As a result, we believe that period-to-period comparisons of our results of operations are not and will not necessarily be meaningful and should not be relied upon as any indication of future performance.

MTM may be delisted by NASDAQ which could affect the ability to trade MTM stock, and which may be deemed an event of default pursuant to our credit arrangements.

Our common stock (“Common Stock”) currently trades on The NASDAQ Capital Market (“NASDAQ”). In order for our Common Stock to continue to be quoted on NASDAQ, it must satisfy certain listing maintenance standards of the NASDAQ. On November 12, 2007, we received a notice from the Listing Qualifications Staff of The NASDAQ Stock Market stating that for the last 30 consecutive business days, the bid price of our Common Stock had closed below the minimum $1.00 per share requirement for continued inclusion under NASDAQ Marketplace Rule 4310(c)(4). Pursuant to NASDAQ Marketplace Rule 4310(c)(8)(D), we were provided 180 calendar days or until May 12, 2008 to regain compliance.

On May 14, 2008, we received notice from The NASDAQ Stock Market stating that our Common Stock will be delisted from NASDAQ due to our failure to evidence a closing bid price of $1.00 per share, prior to the expiration of the 180 day grace period. The notice from NASDAQ provided that our Common Stock will be delisted from NASDAQ at the opening of business on May 23, 2008, unless we request a hearing before the NASDAQ Listing Qualifications Panel. We have requested such a hearing to seek continued listing of our Common Stock on NASDAQ. Our hearing request stays the delisting of our Common Stock until the Listing Qualifications Panel renders a determination after the hearing. The hearing is scheduled for July 10, 2008.

In April 2008, the Independent Committee of the Board of Directors and the Board of Directors authorized a reverse stock split of our Common Stock at a reverse stock split ratio of 1-for-15 (the “Reverse Stock Split”), At the hearing, we will request an opportunity to implement the Reverse Stock Split and allow the post-split shares to trade for a sufficient time to meet the $1.00 minimum bid price listing standard. In order to demonstrate compliance with the NASDAQ bid price requirement, we will be required to evidence a closing bid price of at least $1.00 per share for a minimum of ten consecutive business days (NASDAQ in its discretion may monitor the bid price for as long as twenty business days). There can be no assurance that the Listing Qualification Panel will grant our request for continued listing on NASDAQ.

In the event the NASDAQ panel determines not to grant our request or in the event the reverse stock split fails to bring us back into compliance with the $1.00 per share bid price requirement, our Common Stock would be delisted from NASDAQ and our Common Stock would trade on the OTC Bulletin Board or in the “pink sheets” maintained by the National Quotation Bureau, Inc. Such alternative markets are generally considered to be less efficient than, and not as liquid as NASDAQ. Consequently, broker-dealers may be less willing or able to sell and/or make a market in MTM common stock. Additionally, an investor would find it more difficult to dispose of, or to obtain accurate quotations for the price of, MTM common stock. As a result of a delisting, it may become more difficult for MTM to raise funds through the sale of its securities.

A delisting of our common stock may be deemed an event of default or breach of a covenant by our lenders pursuant to our facilities and credit agreements which could lead to the termination of these agreements and an acceleration of our outstanding debt. The acceleration of our debt would have a material adverse effect on our financial condition and liquidity. Delisting could also adversely affect MTM’s ability to obtain financing for the continuation of its operations or to use its common stock in acquisitions. Delisting could result in the loss of confidence by suppliers, customers and employees.

Risks Relating to our Reverse Stock Split

If the Reverse Stock Split is implemented, the resulting per share price may not attract institutional investors; and any decline in share price would be a greater percentage decline than prior to the Reverse Stock Split.

While our Board of Directors believes that a higher stock price may help generate investor interest in our Common Stock, the Reverse Stock Split may not result in a stock price that will attract institutional investors or investment funds or satisfy the investing guidelines of institutional investors or investment funds. If the Reverse Split is implemented and the market price of our Common Stock declines, the percentage decline may be greater than would occur in the absence of the split. The market price of our Common Stock is also based on the Company’s performance and other factors, which are unrelated to the number of shares of Common Stock issued.

Our total market capitalization immediately after the proposed Reverse Stock Split may be lower than immediately before the proposed Reverse Stock Split.

There are numerous factors and contingencies that could affect our stock price following the proposed Reverse Stock Split, including the status of the market for our stock at the time, our reported results of operations in future periods, and general economic, market and industry conditions. Accordingly, the market price of our Common Stock may not be sustainable at the bid price following the Reverse Stock Split. If the market price of our Common Stock declines after the Reverse Stock Split, our total market capitalization (the aggregate value of all of our Common Stock at the then existing market price) after the Reverse Stock Split will be lower than before the Reverse Stock Split.

The Reverse Stock Split may result in some stockholders owning “odd lots” that may be more difficult to sell.

The Reverse Stock Split may result in some stockholders owning “odd lots” of less than 100 shares of our Common Stock on a post-split basis. Odd lots may be more difficult to sell, or require greater transaction costs per share to sell, than shares in “board lots” of even multiples of 100 shares.

Risks Relating to Ownership of our Common Stock

FirstMark ~~Pequot~~ can be deemed our controlling shareholder and ~~Pequot~~FirstMark’s interests may not be the same as our other shareholders.

FirstMark ~~Pequot~~ currently holds approximately 57% of the voting power of our outstanding securities and has the right to acquire up to 6062% of our voting securities. FirstMark ~~Pequot~~Capital also has the power to nominate two directors to our Board of Directors. ~~Pequot~~FirstMark will receive additional voting power when we pay dividends on outstanding Series A Preferred Stock in the form of additional shares of Series A Preferred Stock. As a result, ~~Pequot~~FirstMark may be deemed in ~~control~~ control because ~~Pequot is in a position to approve, and~~ the approval of ~~Pequot~~FirstMark is effectively required to ~~approve,~~consummate any transaction requiring the approval of shareholders. These transactions could include mergers, consolidations, dissolutions or sales of assets. These transactions could benefit ~~Pequot~~FirstMark at the expense of our other shareholders or benefit ~~Pequot~~FirstMark disproportionately when compared to our other shareholders.

There is significant potential volatility in our stock price.

The market for our common stock is highly volatile and we have a limited average daily trading volume when compared to the total number of shares of our common stock outstanding. Consequently, even moderate selling pressure on our common stock could have a depressive effect on its market price.

We may issue substantial amounts of additional shares of our common and preferred stock without shareholder approval, which could dilute the equity interests of our shareholders.

As of May 31, ~~2008~~2009, we had outstanding an aggregate of 13914,~~462,514~~005 shares of our common stock and an aggregate of 3032,~~843~~303,~~626~~332 shares of Series A Preferred Stock which are subsequently convertible into a total of 453,~~012~~979,~~649~~280 shares of our common stock. As of May 31, ~~2008~~2009, the Investors hold warrants to purchase 6 260,~~566,093~~799 shares of our common stock and ~~392~~1,~~157~~456,969 shares of preferred stock. We also have an additional 912,~~436~~446,~~374~~668 shares of Series A Preferred Stock authorized but unissued, all of which shares are not reserved for specific purposes, other than pursuant to the anti-dilution provisions of the Series A Preferred Stock or for issuance in lieu of cash dividends on the Series A Preferred Stock, an additional 73,~~720~~250,000 shares of serial preferred that are not designated as Series A Preferred Stock and an additional (a) 5377,~~747,457~~694 shares of our common stock issuable upon the exercise of stock options or restricted stock ~~units~~ units granted or available for grant under our various stock plans and (b) aggregate of approximately 193,~~400,000~~332 shares of our common stock issuable upon exercise of other warrants previously granted and outstanding, all as of May 31, ~~2008~~2009. All of such shares may be issued without any action or approval by our shareholders, except as may be limited under NASDAQ Marketplace Rules. Any shares issued by us in the future would further dilute the percentage ownership held by our shareholders.

Our stock may lose access to a viable trading market.

Given the increasing cost and resource demands of being a public company, the Company has decided to deregister its common stock currently registered under the Securities Exchange Act of 1934, as amended, and “go dark.” By going dark, our obligations to file reports (including periodic reports, proxy statements, and tender offer statements) with the SEC would cease and there would be a substantial decrease in disclosure by the Company of its operations and prospects. Additionally, by going dark, our common stock would no longer trade on the NASDAQ Stock Market (the “NASDAQ”) but may continue to trade on the Pink Sheets, which would likely lead to a substantial decrease in the liquidity in the Company’s common stock. The market’s interpretation of a company’s motivation for “going dark” varies from cost savings, to negative changes in the firm’s prospects, to serving insider interests, all of which may affect the overall price and liquidity of a company’s securities.

Item 2. Properties

Our principal executive offices are located at 1200 High Ridge Road, Stamford, Connecticut. We lease approximately 20,000 square feet of office space at this location. The Company additionally leases approximately ~~184~~158,000 square feet of space in another 2420 locations throughout the United States for regional and administrative offices. The Company currently occupies 2015 of these offices, ~~and~~ subleases ~~the~~office ~~balance~~space consisting of ~~the~~approximately ~~office~~21,000 ~~space~~square ~~consisting~~feet ofand maintains leases on approximately 2517,000 square feet of abandoned space that the Company is trying to sublet.

Item 3. Legal Proceedings

From Ontime ~~December 4,~~to ~~2007 a lawsuit styled Amanda Mhanna v. MTM Technologies~~time, ~~Inc, et al., was filed~~ in the ~~Superior~~normal ~~Court~~course of ~~the State of California. The plaintiff~~business, avarious ~~former Company~~claims ~~employee,~~are ~~alleges~~made ~~discrimination, harassment, retaliation and other causes of action~~ against the ~~defendants~~Company. ~~The~~Except ~~plaintiff~~for ~~seeks~~the anproceedings ~~unstated~~described ~~amount of compensatory and punitive damages~~below, ~~attorney’s~~there ~~fee’s,~~are ~~and~~no ~~costs.~~material Onproceedings ~~January~~to ~~28,~~which ~~2008,~~ the Company ~~served an answer to the complaint denying the allegations and asserting affirmative defenses. This matter~~ is ~~now~~a ~~in the discovery stage~~party. ~~The trial has been scheduled for May 2009.~~

On January ~~March~~22, 142009, ~~2008~~ the parties entered into a Confidential Settlement Agreement and Release of Claims (“Mhanna Confidential Settlement”) with the plaintiff in the lawsuit styled ~~Sonal~~Amanda ~~Patel~~Mhanna v. MTM Technologies, Inc, et al., ~~was~~ filed on December 4, 2007 in the Superior Court of the State of California. The plaintiff, a former Company employee, ~~alleges~~alleged ~~hostile work environment~~discrimination, harassment, retaliation and ~~intentional~~other ~~infliction~~ causes of ~~emotional~~action ~~distress~~ against the defendants., ~~The~~and ~~plaintiff~~sought ~~seeks~~ an unstated amount of compensatory and punitive damages, ~~attorney~~attorneys’s fees, and costs. Under Onthe ~~May~~terms 2,of ~~2008,~~ the ~~Company~~Mhanna ~~served~~Confidential anSettlement ~~answer~~all toclaims against Company and the ~~complaint~~individual ~~denying~~defendant ~~the~~have ~~allegations~~ been dismissed with prejudice and ~~asserting~~without admission ~~affirmative~~of ~~defenses~~liability or wrongdoing.

On ~~While~~May ~~management believes~~18, ~~that~~2009, the ~~Company~~parties ~~has~~entered ~~meritorious~~into ~~defenses~~a inConfidential ~~the~~Settlement ~~foregoing~~Agreement ~~pending~~and ~~matters~~Release ~~and~~of ~~the~~Claims ~~Company~~(“Patel ~~intends~~Confidential toSettlement”) ~~pursue~~with ~~its~~the ~~positions~~plaintiff ~~vigorously,~~in ~~litigation~~the islawsuit ~~inherently~~styled ~~subject~~Sonal toPatel ~~many~~v. ~~uncertainties~~MTM Technologies, Inc, et al., ~~Thus~~filed on March 14, 2008 in the ~~outcome~~Superior Court of ~~these~~the ~~matters is~~State ~~uncertain~~of ~~and~~California. ~~could~~The beplaintiff, ~~adverse~~a toformer Company ~~the~~employee, ~~Company.~~alleged ~~Depending~~hostile onwork ~~the~~environment, ~~amount~~harassment, and intentional ~~timing~~infliction of anemotional ~~unfavorable~~distress ~~resolution~~against of the ~~contingencies,~~defendants itand issought ~~possible~~an ~~that~~unstated ~~the~~amount ~~Company~~of compensatory and punitive damages, attorneys’s ~~financial position~~fees, ~~future~~and ~~results~~costs. Under the terms of ~~operations~~the orPatel ~~cash~~Confidential ~~flows~~Settlement ~~could~~all beclaims ~~materially~~against ~~affected~~Company and inthe aindividual ~~particular~~defendant ~~reporting~~have ~~period(s)~~been dismissed with prejudice and without admission of liability or wrongdoing.

As ~~permitted~~ permitted under New York law, the Company has agreements under which it indemnifies its officers, directors and certain employees for certain events or ~~occurrences~~ occurrences while the officer or director is or was serving at the Company’s ~~request~~ request in such capacity. The maximum potential amount of future payments the ~~Company~~ Company could be required to make under these indemnification agreements is unlimited. The Company has a director and officer insurance policy that limits its exposure and enables it to recover a portion of any future amounts paid. Given the insurance coverage in effect, the Company believes the estimated fair value of these indemnification agreements is minimal. The Company has no liabilities recorded for these agreements as of March 31, ~~2008~~2009.

The WeCompany ~~are~~is ~~involved~~a inparty to other various claims and legal actions arising in the ordinary course of its business. WeThe ~~believe~~Company believes that the ultimate outcome of these matters would not have a material adverse impact on the Company'’s financial condition or the results of its operations.

Item 4. Submission of Matters to a Vote of Security Holders

No matters were submitted to a vote of security holders during the fourth quarter of fiscal ~~2008~~2009.

PART II

Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.

Market for Our Common Stock

Our ~~common~~ common stock is traded on The NASDAQ Capital Market under the symbol “MTMC.” ~~Set~~ Set forth in the following table is the closing high and low sales prices for our common stock for each of the quarters during our last two fiscal years, based upon data provided by ~~The~~the NASDAQ ~~Stock Market, Inc.~~:

Fiscal Year Ended March 31, 2008	High		Low
Fiscal Year Ended March 31, 2009	High		Low
Quarter ended June 30, 2007	$	1.30	$	0.80
Quarter ended June 30, 2008	$	7.20	$	2.25
Quarter ended September 30, 2007		1.15		0.90
Quarter ended September 30, 2008		2.99		1.26
Quarter ended December 31, 2007		0.99		0.53
Quarter ended December 31, 2008		1.98		0.23
Quarter ended March 31, 2008		0.75		0.39
Quarter ended March 31, 2009		0.74		0.33
Fiscal Year Ended March 31, 2007	High		Low
Quarter ended June 30, 2006	$	3.98	$	2.50
Quarter ended September 30, 2006		4.50		2.03
Quarter ended December 31, 2006		3.90		1.35
Quarter ended March 31, 2007		2.19		1.10
Record Holders
As of May 31, 2008 there were 166 record holders of our common stock and approximately 1,400 beneficial holders of our common stock.
Dividends

We have never declared or paid any dividends to the holders of our common stock and we do not expect to pay cash dividends in the foreseeable future. Our Board of Directors will have the sole discretion in determining whether to declare and pay dividends in the future. The declaration of dividends will depend on our profitability, financial condition, cash requirements, future prospects and other factors deemed relevant by our Board of Directors. In addition, provisions contained in our certificate of incorporation governing the terms of our Series A Preferred Stock, provisions contained in our credit facilities agreement (described in Part II, Item 7) with GE Commercial Distribution Finance Corporation and in our credit agreement (described in Part II, Item 7) with Columbia Partners, L.L.C. Investment Management and National Electric Benefit Fund, as Lender, place restrictions on our ability to declare or make any cash dividends on our common stock. In addition, our ability to pay cash dividends on our common stock in the future could be further limited or prohibited by the terms of future financing agreements that we may enter into or by the terms of any preferred stock that we may authorize and issue.


Fiscal Year Ended March 31, 2008	High		Low


Quarter ended June 30, 2007	$	1.30	$	0.80
Quarter ended September 30, 2007		1.15		0.90
Quarter ended December 31, 2007		0.99		0.53
Quarter ended March 31, 2008		0.75		0.39

Record Holders

As of May 31, 2009 there were 159 record holders of our common stock and approximately 1,300 beneficial holders of our common stock.

Dividends

We have never declared or paid any dividends to the holders of our common stock and we do not expect to pay cash dividends in the foreseeable future. Our Board of Directors will have the sole discretion in determining whether to declare and pay dividends in the future. The declaration of dividends will depend on our profitability, financial condition, cash requirements, future prospects and other factors deemed relevant by our Board of Directors. In addition, provisions contained in our Certificate of Incorporation governing the terms of our Series A Preferred Stock, provisions contained in our Credit Facilities Agreement (described in Part II, Item 7) with CDF, as Administrative Agent, and in our CP/NEBF Credit Agreement (described in Part II, Item 7) with CP Investment Management and NEBF, as Lender, place restrictions on our ability to declare or make any cash dividends on our common stock. In addition, our ability to pay cash dividends on our common stock in the future could be further limited or prohibited by the terms of future financing agreements that we may enter into or by the terms of any preferred stock that we may authorize and issue.

Equity Compensation Plan Information ~~The following table sets forth, as of March 31, 2008:~~

The following table sets forth, as of March 31, 2009:


	•	the number of shares of our common stock issuable upon exercise of outstanding options, warrants and rights, separately identified by those granted under equity compensation plans approved by our shareholders and those granted under plans, including individual compensation contracts, not approved by our shareholders (column A),

	•	the weighted average exercise price of such options, warrants and rights, also as separately identified (column B), and

	•	the number of shares remaining available for future issuance under such plans, other than those shares issuable upon exercise of outstanding options, warrants and rights (column C).

	Column A		Column B		~~Column C~~	Column C
					Number of shares
	Number of shares to be issued upon exercise of outstanding options, warrants and rights		Weighted average exercise price of outstanding options warrants and rights			Number of shares remaining available for future issuance under equity compensation plans (excluding shares reflected in column A)
					remaining
Equity compensation plans approved by shareholders		195,566	$	31.71			173,068
					available for
Equity compensation plans not approved by shareholders		—					—
	Number of shares				future issuance
Totals		195,566	$	31.71			173,068
	to be issued		Weighted average		under equity
	upon exercise of		exercise price of		compensation
	outstanding		outstanding		plans (excluding
	options, warrants		options warrants		shares reflected
	and rights		and rights		in column A)
Equity compensation plans approved by shareholders	3,399,119		$2.15		2,258,231
Equity compensation plans not approved by
shareholders	—				—
Totals	3,399,119		$2.15		2,258,231

Equity ~~Compensation~~ Compensation Plan Information excludes, for the purposes of Columns A and B, ~~225~~ 8,~~107~~561 Restricted Stock Units with a weighted-average fair value of $127.8130.

Item 6. Selected Financial Data

Not applicable.

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

The following discussion and analysis of our results of operations and financial condition should be read in conjunction with our audited consolidated financial statements and related notes included elsewhere in this Annual Report on Form 10-K.

Overview

We are a leading national provider of innovative IT solutions, including ~~Access~~Application Delivery, Unified Communications, Virtualization, and Managed Services. WeWith specialization in these advanced technologies we enable our clients to achieve improved operational efficiency and to focus on growth, while mitigating the risk of implementing complex IT systems. We achieve these results by providing ~~systems, networking, IP telephony,~~ ~~storage,~~solutions ~~security and data center infrastructure services~~ that address the full life cycle of a client’s IT requirements from needs analysis, through planning, development, deployment, and testing, to on-going maintenance and support. We combine these services with technology from leading software and hardware manufacturers delivering strategic IT solutions that solve many of today’s business challenges.

In the first Asquarter of ~~March~~fiscal 312009, ~~2008~~ the ~~Pequot~~Company ~~and~~affected ~~Constellation investment~~a ~~has~~1-for-15 ~~totaled~~reverse ~~approximately~~stock ~~$73~~split ~~million.~~of its ~~The~~common ~~Company~~stock ~~has~~(“Reverse ~~used these~~Stock ~~funds~~Split”) towhich ~~execute~~occurred aon ~~growth~~June ~~strategy~~25, as2008. ~~well~~The Reverse asStock ~~for~~Split ~~working~~was ~~capital~~implemented ~~needs.~~to avoid being delisted from the NASDAQ due ~~The~~to ~~Company~~the ~~has~~failure ~~executed~~to ~~its~~comply ~~growth~~with ~~strategy~~the ~~since~~minimum ~~July~~bid ~~2004~~price byrequirement. ~~completing~~Following a ~~six~~hearing ~~strategic~~held ~~acquisitions~~on ofJuly ~~providers~~10, of2008, ~~advanced~~the ~~technology~~NASDAQ ~~solutions~~Listing ~~and~~Qualifications Panel (the ~~products.~~“Panel”), ~~The~~by ~~most~~letter ~~recent~~dated ofJuly ~~these~~16, ~~acquisitions~~2008, ~~was~~indicated ~~completed~~that inMTM ~~April~~had ~~2006.~~regained ~~Currently~~compliance wewith ~~are~~the ~~not~~continued ~~actively~~listing ~~seeking~~standards ~~acquisition~~of ~~candidates,~~the ~~but~~NASDAQ. weAccordingly, ~~believe~~the ~~that~~Panel ~~growth~~determined ~~through~~to ~~acquisition~~continue ~~may~~the belisting anof ~~important~~the ~~component~~Company’s ofshares ~~our~~on ~~long-term strategy.~~the NASDAQ.

~~During~~In ~~fiscal 2007~~ the ~~Company focused on integrating~~fourth ~~the~~quarter ~~operations~~ of ~~the~~fiscal ~~acquired companies~~2009, ~~centralizing~~we ~~operations~~conducted ~~and~~our ~~restructuring its~~annual ~~organization~~assessment inof angoodwill ~~effort~~for impairment. toWe ~~provide~~performed ~~our~~extensive ~~customers~~valuation ~~with~~analyses, autilizing ~~national~~both ~~strategy~~income and tomarket ~~improve~~approaches in our ~~earnings~~goodwill ~~and~~assessment ~~cash flow~~process. ~~During~~Over ~~fiscal~~the ~~2008~~past ~~we have remained~~few ~~steadfast~~quarters inthe ~~our~~Company ~~commitment~~has toexperienced ~~cut~~a ~~costs~~significant ~~and~~decline ~~to focus on profitable revenue growth and continued improvements~~ in ~~margin,~~its ~~while~~stock ~~building on efficiencies~~price ~~within our existing resources. Results~~ for ~~the~~both ~~year~~common ~~ended~~and ~~March~~preferred ~~31,~~stock ~~2008~~resulting ~~included~~ in a ~~return~~lower toestimated ~~positive~~fair ~~EBITDA for not only year end but for each~~ value of the ~~respective quarters~~Company. InThe ~~August~~decline ~~2007,~~in the ~~Company~~fair ~~successfully~~value ~~refinanced its working capital lines~~ of ~~credit~~the ~~with~~Company ~~a $34~~below ~~million~~its ~~credit facilities agreement with GE Commercial Distribution Finance Corporation (“CDF”)~~book asvalue ~~Administrative~~is ~~Agent,~~also ~~which~~attributable ~~provided~~to the ~~Company~~current ~~with~~economic ~~additional~~crisis ~~capital~~ and ~~increased~~ ~~purchasing~~lower ~~flexibility.~~than expected ~~Our~~revenues ~~business~~and ~~requires~~cash ~~significant~~flows, ~~levels~~and ~~of working~~the ~~capital~~uncertainty related to ~~fund~~ future ~~revenue growth and current operations~~cash flows. WeAs ~~have historically~~a ~~relied~~result, onfor ~~and~~the ~~continue~~year toended ~~rely~~March ~~heavily~~31, on2009, ~~trade~~we ~~credit~~recorded ~~from~~a ~~vendors~~pretax ~~and~~impairment ~~our~~charge ~~credit~~of ~~facilities for our working capital needs~~$19.6 Wemillion ~~are focused on looking at avenues~~ to ~~secure~~reduce ~~additional~~the ~~open~~carrying ~~lines~~value of ~~credit with vendors and have recently~~the ~~negotiated~~Company’s ~~additional flexibility in borrowing restrictions and reserves under our credit facilities~~goodwill. WeAdditional ~~continue~~impairment tocharges ~~drive~~could ~~collection~~be ofrecognized ~~accounts~~in ~~receivable~~the ~~and~~near ~~are~~term ~~actively~~if ~~managing~~current ~~our~~conditions ~~expenses~~continue to ~~achieve~~decline. ~~greater~~No ~~economies~~goodwill ~~of scale.~~impairment ~~All~~charge ofwas ~~which~~required wefor ~~believe~~the ~~will~~year ~~serve~~ended toMarch ~~improve~~31, ~~our working capital position and purchasing ability~~2008.

As of March 31, 2009 the FirstMark and Constellation investment totaled approximately $73 million. We had used these funds, dating back to July 2004, to acquire six strategic providers of advanced technology solutions and products, as well as for working capital needs.

The Company sustained net losses during the fiscal years ended March 31, 2009 and 2008. Our decline in performance in during fiscal 2009 continued to be impacted by a weaker US economy and reduced access to business credit. Our business requires significant levels of working capital to fund future revenue growth and current operations. Working capital at March 31, 2009 was a deficit of $(5.8) million as compared to a working capital deficit of $(3.3) million at March 31, 2008. We have historically relied on and continue to rely heavily on, trade credit from vendors and our credit facilities for our working capital needs. We have made a concerted effort to improve our working capital position over the past few years and during fiscal 2009 had taken significant measures to further reduce headcount, streamline operations, consolidate facilities and manage costs in response to the impact of the economic downturn. We have also significantly reduced our infrastructure investment by limiting future capital expenditures including the internal development of purchased and developed software. We continue to drive accounts receivable and have made strong progress in collecting overdue accounts.

We continue to actively pursue additional financing arrangements including the successful negotiation in June of fiscal 2010 of an additional $7.0 million in borrowing capacity under our existing Credit Facilities Agreement with CDF. Most recently prior to that we were able to secure an additional $2.0 million in financing during the fourth quarter of fiscal 2009; $1.0 million from the Investors and an increase of $1.0 million under the CP/NEBF Credit Agreement. We were also able to complete several other financing arrangements with the Investors over the past two years amounting to $6.0 million, we secured an additional $3.0 million in financing under our Secured Promissory Note with CP Investment Management and NEBF during the first quarter of fiscal 2009, and issued additional shares of Series A Preferred Stock raising over $9.0 million in the prior fiscal year alone.

The Company’s ability to continue as a going concern, however, is contingent upon its ability to obtain debt and or capital financing in order to meet obligations that mature in fiscal 2010; including the Company’s current Credit Facilities Agreement with CDF, which matures in March 2010, as well as the Company’s ability to restructure its operations in order to improve future operating results and to generate cash flow.

Critical Accounting Policies

Our consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”). The preparation of these financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements, as well as the reported amounts of revenues and expenses during the reporting period. The methods, estimates, and judgments we use in applying our most critical accounting policies have a significant impact on the results we report in our financial statements. Actual results may differ from these estimates under different assumptions or conditions. The ~~Securities~~SEC ~~and Exchange Commission~~ has defined ~~critical~~ critical accounting policies as policies that involve critical accounting ~~estimates~~ estimates that require (a) management to make assumptions that are highly uncertain at the time the estimate is made and (b) different estimates that could have been reasonably used for the current period, or changes in the estimates that are reasonably likely to occur from period to period, which would have a material impact on the presentation of our financial condition, changes in financial condition or in results of operations. Based on this definition, our most critical policies include: revenue recognition, ~~allowance for doubtful accounts, stock-based compensation,~~ the assessment of recoverability of long-lived assets, ~~and~~allowance ~~the~~for doubtful ~~assessment~~accounts, accrual of ~~recoverability~~unreported ofmedical ~~goodwill~~claims, and ~~intangible~~stock-based ~~assets~~compensation.

Revenue Recognition

We recognize revenue in accordance with Staff Accounting Bulletin No. 104. We recognize revenue from the sales of hardware when the rights and risks of ownership have passed to the client, upon shipment or receipt by the client, depending on the terms of the sales contract with the client. Revenue from the sales of software not requiring significant modification or customization is recognized upon delivery or installation. Revenue from services is recognized upon performance and acceptance after consideration of all of the terms and conditions of the client contract. Service contracts generally do not extend over one year, and are billed when persuasive evidence of an arrangement exists, the sales price is fixed and determinable, and collection of the resulting receivable is reasonably assured. Revenue arrangements generally do not include specific client acceptance criteria. For arrangements with multiple deliverables, delivered items are accounted for separately, provided that the delivered item has value to the client on a stand-alone basis and there is objective and reliable evidence of the fair value of the undelivered items. Revenue billed on retainer is recognized as services are performed and amounts not recognized are recorded as deferred revenue.

Impairment of Long-lived Assets

When facts and circumstances indicate that the carrying values of long-lived assets may be impaired, an evaluation of recoverability is performed by comparing the carrying values of the assets to projected future cash flows, in addition to other quantitative and qualitative analyses. For goodwill and other intangible assets, we test for impairment on a consolidated basis at least annually or more frequently if we believe indicators of impairment exist. Upon indication that the carrying values of such assets may not be recoverable, the Company recognizes an impairment loss as a charge against current operations. Property and equipment assets are grouped at the lowest level for which there are identifiable cash flows when assessing impairment. Factors that may cause a goodwill, intangible asset or other long-lived asset impairment include negative industry or economic trends and significant underperformance relative to historical or projected future operating results. Our valuation methodologies include, but are not limited to, estimating the net present value of the projected cash flows of our Company. If actual results are substantially lower than our projections underlying these assumptions, or if market discount rates substantially increase, our future valuations could be adversely affected, potentially resulting in future impairment charges.

Allowance for Doubtful Accounts

We estimate the allowance for doubtful accounts based on historical experience, customer credit risk and application of the specific identification method. The Company writes off accounts receivable against the allowance when a balance is determined to be uncollectible. If actual customer performance were to deteriorate to an extent not expected by us, additional allowances may be required which could have an adverse effect on our consolidated financial results. Conversely, if actual customer performance were to improve to an extent not expected by us, a reduction in allowances may be required which could have a favorable effect on our consolidated financial results.

Stock-based Compensation

We account for stock-based compensation in accordance with the fair value recognition provisions of Statement of Financial Accounting Standards No. 123 (revised 2004), “Share-Based Payment” (“SFAS No. 123(R)”). The Company uses the Black-Scholes option pricing model which requires the input of highly subjective assumptions. These assumptions include estimating the length of time employees will retain their stock options before exercising them, the estimated volatility of the Company’s common stock price over the expected term and the number of options that will ultimately not complete their vesting requirements. Changes in the subjective assumptions can materially affect the estimate of fair value stock-based compensation and consequently, the related amount recognized on the consolidated statement of operations. RSUs issued by the Company are equivalent to nonvested shares, as defined by SFAS No. 123(R). No stock-based compensation expense was recognized in the consolidated financial statements related to the Associate Stock Purchase Plan, since the related purchase discounts did not exceed the amount allowed under SFAS No. 123(R) for non-compensatory treatment.

~~Impairment of Long-lived Assets~~13

Consolidated Results of Operations

The following table sets forth for the periods presented information derived from our audited consolidated statement of operations expressed as a percentage of net revenues, unless otherwise noted:

	Year Ended March 31,
	2008			2007
	2009			2008
Net revenues:
Products	~~70.8~~	%70.1	%	~~75.2~~	%70.8	%
Services	~~29.2~~	29.9		~~24.8~~	29.2
Total net revenues	~~100.0~~	100.0		~~100.0~~	100.0
Gross Profit – products (a)	~~15.8~~	16.7		~~14.8~~	15.8
Gross Profit – services (a)	~~40.2~~	37.2		~~36.1~~	40.2
Gross Profit – total	~~22.9~~	22.8		~~20.1~~	22.9
Selling, general and administrative expenses	~~25.7~~	28.3		~~27.3~~	25.7
Restructuring	0.0			2.2
Goodwill Impairment		11.2			0.0
Operating loss	~~(2.8~~	)(16.8	)	~~(9.5~~	)(2.8	)
Interest expense	2.8			1.9
Interest expense and other, net		6.0			2.7
Net loss	~~(5.9~~	)%(22.7	)%	~~(11.6~~	)%(5.9	)%
(a) Expressed as a percentage of the applicable product or service revenue.

~~Fiscal~~(a) ~~2008~~Expressed ~~Compared~~as toa ~~Fiscal~~percentage ~~2007~~of the applicable product or service revenue.

Fiscal 2009 Compared to Fiscal 2008

Net Revenue

Net revenues for the year ended March 31, ~~2008~~2009 decreased $3268.30 million, or 1128.70% from the comparable prior year, to $~~242~~174.7 million. The decrease in net revenues for the year ended March 31, ~~2008~~2009 was primarily due to a 28.8% decrease in product revenue of nearly $3549.05 million over the prior year. During the second half of fiscal ~~2008~~2009 the Company experienced a slow down in product sales to customers, primarily due to the ~~result~~downturn in the economy, whereby customers are experiencing a freeze on capital spending and large infrastructure deals are being put on hold or delayed. Despite this decrease, the Company has also seen sustained revenue growth in product lines that offer greater efficiencies of scale ~~external~~to ~~economic~~customers ~~factors~~related to security and access. Overall the decrease in ~~product~~ product revenue for the year ended March 31, ~~2008~~2009 has been impacted by ~~the~~reduced demand ~~general~~for ~~economic~~IT ~~slowdown~~products ~~and~~as ~~the~~a ~~Company’s~~result ~~shift~~of inthe ~~business~~downturn ~~practice~~in tothe ~~focus~~economic onenvironment as ~~more~~customers ~~profitable~~either ~~arrangements,~~freeze ~~with~~or andelay ~~emphasis~~non on– ~~business~~essential ~~solutions~~purchases ~~such as Access, Virtualization~~ and ~~Unified~~due ~~Communications. The decrease is also attributable~~ to a the change in the mix and volume of the type of deals the Company is currently closing versus that in the prior year. The decrease in product revenue has directly impacted the volume of professional services revenue by limiting the Company in ~~offering~~its ability to offer add-on professional services solutions. ~~Despite the decrease in~~ to product revenue,. ~~service~~Service revenue for the fiscal year ended March 31, ~~2008~~2009 decreased ~~remained~~26.2% ~~solid,~~or ~~increasing~~ $218.75 million over the comparable prior year. ~~The improvement in service revenue is a direct result of the Company’s efforts to deploy billable resources more effectively across markets and customers.~~

Gross Profit

Gross profit for the year ended March 31, ~~2008~~2009 ~~increased~~decreased $015.48 million, or 028.74% from the comparable prior year ~~period~~, to $5539.68 million. Product gross margin was 1516.87% for the year ended March 31, ~~2008~~2009 ~~and~~as 14compared with 15.8% for the year ended March 31, ~~2007~~ 2008. ~~Service~~Overall the decrease in product gross ~~margin~~profit was ~~40.2%~~directly ~~for~~related to the decrease ~~year~~in ~~ended~~product ~~March~~revenue. 31However, ~~2008~~the ~~and~~product ~~36.1%~~gross ~~for~~margin percentage increased over the year ended March 31, ~~2007~~2009 by almost 1.0% Asdue ~~noted~~to ~~above,~~the ~~while~~mix ~~product~~in the ~~revenue~~type ~~decreased~~of ~~$35.0~~deals ~~million~~the Company is currently closing versus that in the prior year. ~~over~~Service ~~the~~gross ~~prior~~margin ~~year~~was ~~period,~~ 37.2% for the ~~resulting~~year ~~decrease~~ended inMarch ~~product~~31, ~~gross~~2009 ~~margins~~as compared with 40.2% for the ~~period~~year ~~was~~ended ~~only~~March ~~$3.5~~31, ~~million~~2008. The ~~Company’s shift~~overall decrease in service ~~business~~gross ~~practice~~profit toprimarily ~~focus~~related onto ~~more~~the ~~profitable~~decrease ~~arrangements~~in ~~pushed~~service ~~average~~revenue. The ~~product~~service ~~profit~~gross ~~margins~~margin 1%percentage ~~higher~~for ~~compared~~the ~~with~~year ~~the~~ended ~~prior~~March ~~year.~~31, ~~The~~2009 ~~increase~~was inalso ~~service~~negatively ~~gross~~impacted ~~margin~~because ~~contribution~~fixed ~~was~~expenses did not decrease proportionately with the ~~result~~revenue ofdecline ~~our~~and ~~national~~the ~~services~~Company ~~infrastructure~~experienced ~~investment~~ inlower ~~the~~utilization ~~prior~~in ~~fiscal~~certain ~~year~~regions ~~which~~as ~~has~~well ~~enabled~~as usan toincrease ~~better~~in ~~manage~~the ~~our~~use of ~~people~~outside ~~and~~contractors ~~our~~with ~~resources~~specialized expertise.

Selling, General and Administrative

Selling, general and administrative expenses (“S,G&A”) for the year ended March 31, 2009 ~~2008~~ decreased by $12.8 million, or 1720.16% from the comparable prior year, to $6249.35 million. S,G&A net of non-cash charges for depreciation, amortization and stock-based compensation expense expressed as a percentage of revenue increased ~~decreased~~ to 2123.36% for the year ended March 31, ~~2008~~2009 compared with 2321.13% for the year ended March 31, ~~2007~~2008. ~~The~~Many ~~decrease~~of the Company’s operating expenses are fixed in nature. Although net S,G&A ofincreased ~~$11.8~~as ~~million~~a orpercentage ~~18.5%~~of ~~for~~revenue, due ~~the~~to ~~year~~lower ~~ended~~sales ~~March~~year 31over year, ~~2008~~it ~~includes~~decreased aby ~~non-recurring charge of~~ $110.36 million, inor 20.4%, from the comparable prior year ~~related~~period, to ~~integration~~$41.2 ~~and~~million. ~~personnel~~Overall, ~~costs~~the $10.6 million ~~The~~decrease ~~balance~~in ofnet ~~the~~S,G&A ~~decrease~~ was due primarily to a reduction in personnel costs over the prior year, ~~the~~with ~~result~~headcount ofdecreasing ~~the~~over ~~Company’s~~138 ~~2007~~full ~~Restructuring~~time equivalents ~~Plan,~~over athe ~~reduction~~prior inyear ~~operating~~period ~~expenses~~and ~~over~~due to the ~~corresponding~~impact ~~prior~~of ~~year~~mandatory asdays off aand ~~result~~periodic salary reductions during the second half of fiscal 2009. The Company also realized significant cost ~~saving~~savings from several initiatives including revised compensation programs of the sales force, its self insurance plan for health coverage and ~~initiatives~~increased health contributions by employees, reductions ain operating costs for non-essential services and reduced travel expense programs. The decrease was also due to a reduction over the corresponding prior year in ~~business~~professional fees related to outside consultants ~~expenses~~and overall cost reduction efforts, and lower selling expenses as a result of the decrease in revenue in the year ended March 31, ~~2008~~2009, as compared towith the ~~prior~~ year ended March 31, 2008. ~~Depreciation~~Intangible amortization decreased $1.1 million, the impact of fully amortized intangible assets on current year results, and depreciation for the year ended March 31, ~~2008~~2009 ~~increased~~decreased $01.70 million ~~related~~over tothe prior year, the ~~Company’s investments~~impact inof ~~capital~~a ~~assets.~~decrease ~~This~~in ~~increase~~the ~~was~~level ~~offset~~of bycapital aspending ~~$1.7~~over ~~million~~the ~~decrease~~past intwo ~~stock~~years. Stock-based compensation costs ~~and~~decreased ~~intangible~~$0.2 ~~amortization,~~million in the periods as a result of an increase in the rate of actual forfeitures of unvested options from employee ~~terminations~~ ~~and the impact of fully amortized intangible assets on current year results~~terminations.

~~Restructuring~~14

~~Results~~Goodwill for the year ended March 31, 2007 include restructuring charges of $6.0 million primarily related to a reduction in workforce of $4.5 million in accordance with the Company’s 2007 Restructuring Plan, a charge for unused or underutilized facility costs of $0.8 million, and other related restructuring charges of $0.7 million. There were no comparable charges for the year ended March 31, 2008. See Note 5 to the Consolidated Financial Statements for a discussion of these cost savings initiatives. Impairment

In the fourth quarter of fiscal 2009, the Company conducted its annual assessment of goodwill for impairment. The Company performed extensive valuation analyses, utilizing both income and market approaches, in its goodwill assessment process. As a result, for the year ended March 31, 2009, the Company recorded a pretax impairment charge of $19.6 million to reduce the carrying value of the Company’s goodwill. No goodwill impairment charge was required for the year ended March 31, 2008. See Note 1 to the Consolidated Financial Statements for a discussion of goodwill.

EBITDA

Earnings before interest, income taxes, depreciation, amortization, stock-based compensation cost and other (income) expense (“EBITDA”) amounted to negative $321.81 million for the year ended March 31, ~~2008~~2009, as compared to ~~negative~~ $143.58 million for the year ended March 31, ~~2007~~2008. EBITDA results for fiscal ~~2007~~2009 include a $719.56 million ofnon-cash ~~restructuring~~charge ~~costs~~related ~~and~~to ~~non-recurring~~the ~~S,G&A~~impairment ~~expenses~~of goodwill, which charges ~~are~~were not expenses in the ~~current~~prior period. ~~Overall~~Net ~~the improvement~~of inthis charge EBITDA for year ended March 31, ~~2008~~2009 ~~was~~decreased ~~primarily the result of i} an improvement in gross margin of~~ $05.42 million, ~~ii}~~over athe ~~reduction~~year inended ~~personnel~~March ~~costs~~31, 2008, ~~and~~the ~~operating~~overall ~~expenses~~decline in ~~S,G&A~~EBITDA inresults ~~excess~~was ofthe ~~$5.0 million as a~~ result of ~~cost~~a ~~saving~~decline ~~programs and restructuring activities initiated~~ in gross ~~the~~margin ~~prior~~of ~~fiscal~~both ~~year~~product and, ~~iii}~~service ~~lower~~revenue ~~selling~~of ~~expenses~~$15.8 asmillion aoffset ~~result~~by of the ~~decrease~~reduction in ~~revenue~~S,G&A inexpenses ~~the~~of ~~current~~$10.6 ~~year~~million as noted above.

The following table sets forth a reconciliation of EBITDA to net loss for the periods presented.

	Year Ended March 31,
(in thousands)	2009	~~2008~~		2008	~~2007~~
EBITDA	$	3(21,~~763~~055	)	$	~~(14~~3,~~457~~763	)
Depreciation and amortization		97,~~294~~250			9,~~361~~294
Interest expense, net		6,757			5,108
Interest expense and other, net		10,442			6,628
Stock-based compensation cost		~~1,224~~997			21,~~218~~224
Other (income) expense		(129	)		446
Income taxes		(100	)		1,022
Income taxes		1,022			427
Net loss	$	(39,644	)	$	(14,405	)
Net loss	$	(14,405	)	$	(32,017	)

We believe that EBITDA, which is not a recognized measure for financial presentation under GAAP, provides investors and management with a useful supplemental measure of our operating performance because it more closely approximates the cash generating ability of the Company as compared to operating income (loss). Operating income (loss) includes charges for depreciation and amortization of intangible assets as well as stock-based compensation cost. These non-GAAP results should be evaluated in light of our financial results prepared in accordance with GAAP. EBITDA is not a recognized measure for financial statement presentation under GAAP. Non-GAAP earnings measures do not have any standardized definition and are therefore unlikely to be comparable to similar measures presented by other reporting companies. This non-GAAP measure is provided to assist readers in evaluating our operating performance. Readers are encouraged to consider this non-GAAP measure in conjunction with our GAAP results.

14Interest Expense and Other, net

Interest expense ~~Expense~~and other, net was $10.4 million for the year ended March 31, 2009 compared to $6.6 million for the year ended March 31, 2008, an increase of $3.8 million or 57.5%. The increase in interest expense for the year ended March 31, 2009 is primarily due to the impact of the amendment entered into by the Company in June 2008, whereby the principal amount of the Secured Promissory Note under the CP/NEBF Credit Agreement (the “CP/NEBF Note”) with CP Investment Management and NEBF was increased by $3,000,000 to $28,000,000 and higher interest rates were imposed on the CP/NEBF Note as a result of the amendments entered into since the second quarter of fiscal 2008. The current internal rate of return is 15% compared with a blended rate of 13.5% for the comparable prior year. In accordance with Amendment No. 5 to the secured promissory note entered into during the first quarter of fiscal 2009, results for the year ended March 31, 2009 include a retroactive adjustment since the inception of the CP/NEBF Note that amends the IRR to 15% for all periods since the Closing Date, November 23, 2005. The increase in interest expense for the year ended March 31, 2009 was also attributable to the impact of the interest due on the unsecured subordinated promissory notes payable to the Investors.

~~Interest~~Liquidity ~~expense,~~and ~~net~~Capital was $6.7 million for the year ended March 31, 2008 compared to $5.1 million for the year ended March 31, 2007, an increase of $1.6 million or 32.3% . The increase in interest expense for the year ended March 31, 2008 is primarily due to higher interest rates imposed on the secured promissory note as a result of the amendments entered into during the second quarter of fiscal 2008. The current internal rate of return is 15% compared with 11% for the comparable prior year period. Included in fiscal 2008 results was also a non-cash charge of approximately $0.3 million incurred in the second quarter of fiscal 2008 related to the write off of the remaining debt issuance costs in connection with our secured financing agreement facility with The CIT Group/Business Credit, Inc. (“CIT”), as agent, as a result of the refinancing of our working capital lines of credit with CDF.Resources

Liquidity and Capital Resources
The Company measures its liquidity in a number of ways, including the following:
		March 31,
(In thousands)		2008			2007
Cash	$	3,210		$	4,439
Working capital(deficit)	$	(3,326	)	$	(12,438	)
Current ratio		0.94:1			0.82:1
Related party note payable	$	2,431		$	—
Secured financing facilities	$	23,901		$	22,050
Secured promissory notes	$	23,578		$	23,507

The Company measures its liquidity in a number of ways, including the following:

We require access to significant working capital and vendor credit to fund our day-to-day operations, particularly at the end of our fiscal quarters when demand for our products and services increases substantially. Our primary source of day-to-day working capital is from our secured credit facilities agreement with CDF (described below in this Item) and vendor lines of credit.


	March 31,

*(In thousands)*	2009			2008

Cash	$	2,150		$	3,210
Working capital(deficit)	$	(5,782	)	$	(3,326	)
Current ratio		0.86:1			0.94:1
Related party notes payable	$	6,833		$	2,431
Secured financing facilities	$	15,667		$	23,901
Secured promissory note and related interest	$	41,640		$	30,116

We require ~~For~~access ~~the~~to ~~year~~significant ~~ended~~working ~~March~~capital ~~31,~~and ~~2008~~vendor ~~cash~~credit ~~decreased~~to ~~$1.2~~fund ~~million~~our day-to-day operations, ~~$3.2~~particularly ~~million compared with $4.4 million~~ at ~~March~~the ~~31,~~end ~~2007.~~of ~~Working~~our ~~capital~~fiscal atquarters ~~March~~when ~~31,~~demand ~~2008~~for ~~was~~our products aand ~~deficit~~services ofincreases $3substantially.3 ~~million~~Our asprimary ~~compared~~source toof aday-to-day working capital ~~deficit~~is offrom ~~$12.4~~our ~~million~~Credit atFacilities ~~March~~Agreement ~~31,~~with ~~2007.~~CDF ~~Included~~(described below in ~~current~~this ~~liabilities~~Item) atand ~~March~~vendor ~~31,~~lines ~~2008 are obligations~~ of ~~$23~~credit.9 ~~million~~We ~~relating~~have tomade ~~the~~a ~~Company’s~~concerted ~~secured~~effort ~~financing facilities, described below. The use of cash~~to ~~during~~improve ~~fiscal~~our ~~2008~~working ~~related~~capital ~~primarily~~position toover the ~~payment~~past offew ~~trade~~years ~~accounts payable~~ and ~~accrued~~during ~~restructuring~~fiscal 2009 ~~costs.~~had ~~We have~~ taken ~~a number of~~ significant ~~steps~~measures to further reduce ~~our~~headcount, ~~use~~streamline operations, ofconsolidate ~~cash~~facilities and ~~improve~~manage ~~our~~costs ~~working~~in ~~capital~~response ~~position,~~to ~~including,~~the ~~during fiscal~~impact ~~2008~~of ~~and~~the ~~2007,~~economic wedownturn. ~~implemented~~We ~~cost~~have ~~reduction~~also ~~plans~~significantly ~~designed~~reduced toour ~~improve~~infrastructure investment ~~operating~~by ~~income~~limiting ~~through~~future ~~reductions~~capital ofexpenditures ~~S,G&A and~~including ~~enhancements~~the ininternal development ~~gross~~of ~~margin;~~purchased and wedeveloped ~~have~~software. ~~significantly~~We ~~reduced~~continue ~~our capital expenditures in the current year related~~ to ~~software~~drive ~~development~~accounts receivable and ~~infrastructure investment~~have asmade ~~well~~strong asprogress ~~general~~in ~~capital~~collecting ~~spending~~overdue accounts.

As of March 31, 2008 the Pequot and Constellation investment has totaled approximately $73 million. The Company has used these funds to execute a growth strategy, as well as for working capital needs. The Company has executed its growth strategy since July 2004 by completing six strategic acquisitions of providers of advanced technology solutions and products. The most recent of these acquisitions was completed in April 2006. During fiscal 2007 the Company focused on integrating the operations of the acquired companies, centralizing operations and restructuring its organization in an effort to provide our customers with a national strategy and to improve our earnings and cash flow. During fiscal 2008 we have remained steadfast in our commitment to cut costs and to focus on profitable revenue growth and continued improvements in margin, while building on efficiencies within our existing resources. Results for the year ended March 31, 2008 included a return to positive EBITDA for not only year end but for each of the respective quarters.

A detailed review of the financing arrangements entered into by the Company during fiscal year 2008, as well as several related arrangements which have been entered since the beginning of fiscal year 2009 follows.

Pequot Notes and Warrants

On February 28, 2008, the Company issued and sold to (1) Pequot Fund a promissory note in the principal amount of $2,191,123 (the “PPEF Note”), (2) Pequot Partners a promissory note in the principal amount of $308,877 (the “POPEP Note” and collectively with the PPEF Note, the “February Pequot Notes”), (3) Pequot Fund warrants entitling Pequot Fund to purchase 343,705 shares of the Company’s next designated series of preferred stock at an exercise price of $.6375, (the “PPEF Warrants”) and (4) Pequot Partners warrants entitling Pequot Partners to purchase 48,452 shares of the Company’s Series A-9 Preferred Stock at an exercise price of $.6375, (the “POPEP Warrants”, and collectively with the PPEF Warrants, the “February Pequot Warrants”). The Company’s Series A-9 Preferred Stock have been authorized by the Board of Directors and will become effective upon filing of an Amendment to the Company’s Restated Certificate of Incorporation setting forth the provisions for the Series A-9 Preferred Stock.

The February Pequot Notes were due and payable in full on the later of (a) March 29, 2008, or (b) the date that the Company has obtained all necessary consents from its lenders. On March 28, 2008 the Company and Pequot amended the February Pequot Notes (the “Amended Pequot Notes”) to change the Maturity Date as follows: thirty percent (30%) of the principal amount of the Amended Pequot Notes ($750,000) is due and payable on December 28, 2008, and the remaining principal balance and all interest accrued from February 28, 2008 to the date of payment of the principal amount is due on March 28, 2009. The Amended Pequot Notes bear interest at a rate per annum equal to 8.5% . Interest on the Amended Pequot Notes shall be due and payable in cash or, at the option of the Company, in shares of the Company’s next designated series of preferred stock at a price per share of $.561.

The right of repayment of principal and interest on the Amended Pequot Notes is subordinated to the rights and security interest of (i) CDF in connection with the August 21, 2007, secured Credit Facilities Agreement (described below in this Item), and (ii) Columbia Partners, L.L.C. Investment Management, as Investment Manager (“CP Investment Manager”) and National Electric Benefit Fund (“NEBF”) in connection with the CP/NEBF Credit Agreement (CDF and NEBF collectively, the “Senior Lenders” and the Credit Facilities Agreement and the CP/NEBF Credit Agreement collectively the “Senior Debt”). While any default or event of default has occurred and is continuing with respect to any Senior Debt, the Company is prohibited from making any payments or distribution in respect of the Amended Pequot Notes.

~~Upon~~For anthe ~~event~~year ended ofMarch ~~default~~31, as2009 ~~set~~cash ~~forth~~decreased in$1.1 ~~the~~million ~~Amended~~to ~~Pequot~~$2.1 ~~Notes~~million compared with $3.2 million at March 31, ~~the~~2008. ~~holders~~Working capital at March 31, 2009 was a deficit of ~~the~~$(5.8) ~~Amended~~million ~~Pequot~~as ~~Notes~~compared ~~may~~to ~~declare~~a ~~all~~working ~~amounts~~capital ~~outstanding~~deficit ~~under~~of ~~the~~$(3.3) ~~Amended~~million ~~Pequot~~at March ~~Notes~~31, ~~immediately~~2008. ~~due~~Included ~~and~~in ~~payable~~current ~~and~~liabilities ~~exercise~~at ~~other remedies~~March ~~permitted~~31, by2009 ~~the~~are obligations ~~Amended~~of ~~Pequot~~$6.8 ~~Notes~~million orof atrelated ~~law~~party ornotes inpayable ~~equity,~~and ~~subject~~$15.7 million relating to the ~~above~~Company’s ~~mentioned~~secured ~~subordination~~financing facilities, described below.

~~The~~As ~~February~~of ~~Pequot Warrants expire on~~ March ~~29,~~ ~~2012.~~31, ~~The~~2009 ~~holders of~~ the ~~February~~FirstMark ~~Pequot~~and ~~Warrants~~Constellation ~~may~~investment ~~exercise~~totaled ~~the~~approximately ~~purchase~~$73 ~~rights~~million. ~~represented~~We byhad ~~the~~used ~~February~~these ~~Pequot~~funds, ~~Warrants~~dating atback ~~any~~to ~~time~~July ~~after~~2004, ~~the~~to ~~Company’s~~acquire six ~~designation~~strategic ofproviders ~~the series~~ of ~~preferred~~advanced ~~stock~~technology ~~for~~solutions ~~which~~and ~~they~~products, ~~are~~as ~~exercisable.~~well ~~Cashless exercise is permitted. The purchase price per share at which the holders of the February Pequot Warrants can purchase the Company’s shares of its next~~as ~~designated~~for ~~series~~working ofcapital ~~preferred stock is $~~needs.~~6375~~ ~~per share.~~ The Company ~~allocated~~successfully ~~and~~raised ~~charged~~an ~~approximately~~additional $06.1 5 million toin ~~debt~~financing ~~discount,~~during ~~which~~the ~~will~~first befiscal ~~amortized~~quarter ~~over~~of 2009, the ~~life~~proceeds of which ~~the~~were ~~Amended~~primarily ~~Pequot~~used ~~Notes~~ to ~~interest~~pay ~~expense,~~trade ~~and~~accounts ~~assigned~~payable and ~~credited~~ toraised ~~additional~~another ~~paid in capital approximately~~ $02.1 0 million ~~for~~in ~~the fair~~financing ~~value~~in of the ~~February~~fourth ~~Pequot~~quarter ~~Warrants.~~of ~~The~~fiscal ~~values~~2009 ~~attributed~~which toproceeds ~~the February Pequot Warrants~~ were ~~determined utilizing the Black-Scholes model. The foregoing~~ ~~description~~used ~~of the February Pequot Warrants does not purport~~ to befund ~~complete, and~~working iscapital ~~qualified in its entirety by reference to the full text of such document~~needs.

A detailed Asreview of ~~March~~the ~~31,~~financing ~~2008,~~arrangements entered into by the Company ~~was~~during infiscal year ~~compliance~~2009, ~~with~~as ~~all~~well ~~covenants~~as ~~prescribed~~several ~~under~~related ~~the~~arrangements ~~Amended~~which ~~Pequot~~have ~~Notes~~been ~~and~~entered since the ~~Pequot~~beginning ~~Warrants.~~of fiscal year 2010 follows.

~~Since~~Letter ~~the commencement~~ of ~~the~~Credit ~~Company’s fiscal year 2009, the Company entered in the following further agreements with Pequot.~~ Agreement

On June 11, 2009, ~~2008~~ the Company entered into a Letter of Credit Commitment and ~~Pequot~~Reimbursement Agreement ~~further~~with ~~amended~~NEBF, ~~the~~CP ~~Amended~~Investment ~~Pequot~~Management, ~~Notes~~FirstMark toand ~~change~~Constellation (collectively, the ~~maturity~~“L/C Guarantors”) and ~~payment~~CP ~~terms~~Investment ~~such~~Management, ~~that~~as Investment ~~all~~Manager ~~principal~~for ~~and~~the ~~all~~L/C ~~interest~~Guarantors ~~accrued~~(the on“L/C ~~such~~Agreement”). ~~notes~~As ~~from~~a condition of CDF continuing to make advances under the ~~date~~Credit Facilities Agreement, CDF required that one or more of ~~original~~the ~~issuance~~L/C Guarantors provide letters of credit in ~~February~~the 28aggregate amount of $8,500,000 ~~2008~~to ~~through~~provide credit support and additional collateral to secure the ~~date~~Companies’ ofobligations ~~payment~~under the CDF Credit Facilities Agreement. The terms of the ~~principal~~L/C ~~amount~~Agreement provide that the letters of credit shall beexpire ~~due~~no onlater ~~December~~than 15May 31, ~~2009~~2010.

The Company is Onobligated ~~June~~to ~~11,~~reimburse ~~2008,~~the L/C Guarantors for any drawing made on a letter of credit immediately following any payment made by the issuing bank of such letter of credit. The Company ~~also~~is ~~issued~~required ~~and~~to ~~sold~~pay a drawing fee equal to the amount required to ~~Pequot~~provide the ~~following~~L/C ~~Promissory~~Guarantors ~~Notes~~with ~~(the~~a ~~“June~~15% 11rate ~~Pequot~~of ~~Notes”)~~return ~~(1)~~on drawings ~~Pequot~~made ~~Fund~~on athe ~~promissory~~letters ~~note~~of credit. Additionally, in the ~~principal~~event ~~amount~~of a Change of $2Control,~~410,235,~~ ~~and~~Event of Default or Liquidity Event (2)as ~~Pequot~~such terms are defined in ~~Partners~~the L/C Agreement), the Company is required to pay to the L/C Guarantors a Success ~~promissory~~Fee ~~note~~payable in ~~the~~cash ~~principal~~in the amount of $~~339~~34,~~765~~000,000.

OnTo ~~June~~secure ~~11,~~the repayment ~~2008,~~obligations of the Company ~~also~~under ~~issued~~the ~~and~~L/C ~~sold~~Agreement (including the obligation to ~~Pequot~~pay the ~~following~~Success ~~Warrants~~Fee), (the ~~“June~~Company 11has ~~Pequot~~granted ~~Warrants”)~~to CP Investment Management, as investment manager, a security interests in: (1i) ~~Pequot~~all ~~Fund~~of ~~warrants~~the Companies’ ~~entitling~~rights, ~~Pequot~~title ~~Fund~~and tointerest ~~purchase~~in ~~642,729~~and ~~shares~~to certain property of the Company’s ~~next~~pursuant ~~designated~~to ~~series~~a ofSecurity ~~preferred~~Agreement ~~stock~~between atthe anCompany ~~exercise~~and ~~price~~the ofL/C ~~$0.375 and~~ Guarantors; (2ii) ~~Pequot~~certain ~~Partners~~trademarks ~~warrants~~of ~~entitling~~the ~~Pequot~~Company ~~Partners~~pursuant to ~~purchase~~an ~~90,604~~Intellectual ~~shares~~Property Security ofAgreement between the Company’s ~~next~~and ~~designated~~the ~~series~~L/C Guarantors; and (iii) 100% of the ~~preferred~~capital stock atof anthe ~~exercise~~Company ~~price~~pursuant ofto a Stock Pledge Agreement between $0the Company and the L/C Guarantors.~~375.~~

OnFirstMark ~~June 16, 2008, the Company issued~~ and ~~sold~~Constellation ~~to Pequot the following Promissory~~ Notes ~~(the “June 16 Pequot Notes”): (1) Pequot Fund a promissory note in the principal amount of $219,112,~~ and ~~(2) Pequot~~ Partners a promissory note in the principal amount of $30,888. The June 11 Pequot Notes together with the June 16 Pequot Notes are sometimes referred herein as the “June Pequot Notes”, and collectively with the Amended Pequot Notes as the “Pequot Notes.” Warrants

On ~~June 16~~February 28, 2008, the Company ~~also~~ issued and sold to ~~Pequot~~FirstMark promissory notes in the principal ~~following~~amount ~~Warrants~~of $2,500,000 (the “~~June~~FirstMark ~~16 Pequot Warrants~~Notes”): ~~(1)~~and ~~Pequot Fund~~ warrants entitling FirstMark ~~Pequot Fund~~ to purchase 56392,~~545~~157 shares of the Company’s ~~designated~~ ~~series~~Series ofA-9 ~~preferred~~Preferred Stock ~~stock designated after the next series of preferred stock~~ at an exercise price of $0.~~3875,~~6375 ~~and~~per share (2)the ~~Pequot~~“FirstMark ~~Partners~~A-9 ~~warrants~~Warrants”). The ~~entitling~~FirstMark ~~Pequot~~Notes ~~Partners~~bear tointerest ~~purchase~~at ~~7,971~~a ~~shares~~rate ofper ~~the~~annum ~~Company’s~~equal ~~designated~~to ~~series~~8.5%. Interest ofon ~~preferred~~the ~~stock~~FirstMark ~~designated~~Notes ~~after~~shall ~~the~~be ~~next~~due ~~series~~and ofpayable ~~preferred~~in ~~stock~~cash or, at anthe ~~exercise~~option ~~price~~ of the ~~$0.3875.~~Company, ~~The~~in ~~June~~shares 11of ~~Pequot Warrants together with~~ the ~~June~~Company’s 16Series ~~Pequot~~A-9 ~~Warrants~~Preferred ~~are~~Stock ~~sometimes~~at ~~referred~~a ~~herein~~price per asshare ~~the~~of ~~“June~~$0.561. ~~Pequot~~Proceeds ~~Warrants”, and~~from ~~collectively with~~ the ~~February~~FirstMark ~~Pequot~~Notes ~~Warrants~~were asused ~~the~~to ~~“Pequot~~fund working ~~Warrants.”~~capital needs.

~~The~~On ~~June~~March ~~Pequot Notes are due and payable in full~~28, ~~on December 15~~2008, ~~2009~~the Company and ~~bear~~FirstMark ~~interest~~amended atthe aFirstMark ~~rate~~Notes ~~per~~(the ~~annum~~“Amended FirstMark ~~equal~~Notes”) to ~~8.5%~~change ~~. Interest on~~ the ~~June~~maturity 11as ~~Pequot~~follows: ~~Notes~~thirty ispercent ~~due~~(30%) ~~and payable in cash or, at the option~~ of the ~~Company,~~principal inamount ~~shares~~ of the ~~Company’s~~Amended ~~next~~FirstMark ~~designated~~Notes ~~series of preferred stock at a price per share of~~ ($~~0.33.~~750,000) ~~Interest~~was ~~on the June 16 Pequot Notes is~~ due and payable inon ~~cash~~December or28, at2008, ~~the~~and ~~option of~~ the ~~Company,~~remaining inprincipal ~~shares~~balance ofand ~~the Company’s designated~~all ~~series~~interest ofaccrued ~~preferred~~from ~~stock~~February ~~designated~~28, ~~after~~2008 to the ~~next~~date ~~series~~ of ~~preferred~~payment ~~stock~~of atthe aprincipal amount ~~price~~is ~~per~~due ~~share~~on ofMarch $028, 2009.~~341.~~

~~The~~On ~~right~~June of11, 2008, ~~repayment~~the ofCompany ~~principal~~ and ~~interest~~FirstMark onfurther amended the ~~Pequot~~Amended FirstMark Notes ~~is subordinated~~ to change the ~~rights~~maturity and ~~security~~payment ~~interest~~terms ofsuch ~~the~~that ~~Senior~~all ~~Debt.~~principal ~~While~~and ~~any~~all ~~default~~interest accrued oron ~~event~~such ofnotes ~~default~~from ~~has~~the ~~occurred~~date ~~and~~of isoriginal ~~continuing~~issuance ~~with respect to any~~ of ~~the~~February ~~Senior~~28, ~~Debt~~2008 through the ~~Company~~date isof ~~prohibited~~payment ~~from~~of ~~making~~the ~~any~~principal ~~payments~~amount orshall ~~distribution~~be indue ~~respect~~on ofDecember 15, 2009 (the ~~above~~“Second ~~mentioned~~Amended ~~notes.~~FirstMark Notes”).

The ~~June 11 Pequot Warrants expire on June 11, 2012.~~FirstMark ~~The~~A-9 ~~June 16 Pequot~~ Warrants expire on ~~June~~March 1629, 2012. The holders of ~~such~~the ~~warrants~~FirstMark A-9 Warrants may exercise the purchase rights represented by ~~such~~the ~~warrants~~FirstMark A-9 Warrants at any time ~~after the Company’s designation of the series of preferred stock for which they are exercisable~~. Cashless exercise is permitted. The ~~purchase~~Company ~~price~~allocated ~~per~~and charged ~~share~~approximately at$0.1 million to debt discount, which ~~the~~will ~~holders~~be ofamortized over the ~~June~~life 11of ~~Pequot~~the ~~Warrants~~Second ~~can~~Amended ~~purchase~~FirstMark ~~the~~Notes ~~Company’s~~to ~~shares~~interest ofexpense, and ~~its~~assigned ~~next~~and ~~designated~~credited ~~series~~to ofadditional ~~preferred~~paid ~~stock~~in iscapital approximately $0.~~375~~1 ~~per~~million for ~~share.~~the ~~The~~fair ~~purchase~~value ~~price~~of ~~per~~the ~~share~~FirstMark atA-9 ~~which~~Warrants. ~~the~~A ~~holders~~more complete description of the ~~June~~FirstMark 16A-9 ~~Pequot~~ Warrants can ~~purchase~~be ~~the~~found ~~Company’s~~in ~~designated~~its ~~series~~entirety ofby ~~preferred~~reference ~~stock~~to ~~designated after~~ the ~~next~~ ~~series~~full text of ~~preferred~~such ~~stock is $0~~document.~~3875~~ ~~per share.~~

On June 11, ~~Constellation~~2008 and June 16, 2008, the Company issued and sold to FirstMark promissory notes in the aggregate principal amount of $3,000,000 (the “June FirstMark Notes”) and warrants entitling FirstMark to purchase 733,333 shares of the Company’s Series A-10 Preferred Stock at an exercise price of $0.375 per share and 64,516 shares of the Company’s Series A-11 Preferred Stock at an exercise price of $0.3875 per share, at June 11, 2008 and June 16, 2008, respectively (the “FirstMark A-10 and A-11 Warrants”). Proceeds from the June FirstMark Notes were used to fund working capital needs.

On June 16, 2008, the Company issued and sold to ~~(1)~~ Constellation ~~Venture a~~ promissory ~~note~~notes in the ~~principal~~ ~~amount~~aggregate ~~of $249,617.80, (2) Constellation Offshore a promissory note in the~~ principal ~~amount~~ ~~of $132,834.65, (3) BSC a promissory note in the principal~~ amount of $~~111~~500,~~313.95,~~000 (~~4) CVC a promissory note in~~ the ~~principal amount of $6,233.60, (5)~~ “Constellation Venture warrants entitling Constellation Venture to purchase 64,417 shares of the Company’s designated series of preferred stock designated after the next series of preferred stock at an exercise price of $0.3875, (6Notes”) ~~Constellation~~and ~~Offshore~~ warrants entitling Constellation ~~Offshore~~ to purchase 34129,~~280 shares~~032 ~~of the Company’s designated series of preferred stock designated after the next series of preferred stock at an exercise price of $0.3875, (7) BSC warrants entitling BSC to purchase 28,726~~ shares of the Company’s ~~designated~~Series A-11 ~~series~~Preferred ofStock ~~preferred stock designated after the next series of preferred stock~~ at an exercise price of $0. 3875, ~~(8)~~per ~~CVC~~share ~~warrants entitling CVC to purchase 1,609 shares of~~ (the ~~Company’s designated series of preferred stock designated after~~“Constellation ~~the~~A-11 ~~next series of preferred stock at an exercise price of $0~~Warrants”). ~~3875.~~Proceeds ~~The~~from ~~aforementioned promissory notes together, and~~ the ~~warrants~~Constellation ~~together,~~Notes ~~respectively,~~were ~~are~~used ~~sometimes referred~~ to ~~herein as the “Constellation Notes,” and the~~fund ~~“Constellation~~working ~~Warrants.”~~capital needs.

The June FirstMark Notes and the Constellation Notes ~~have~~are due and payable in full on December 15, 2009 and bear interest at a rate per annum equal to 8.5%. Interest on the ~~identical~~June ~~terms~~11 asFirstMark Notes is due and payable in cash or, at the option of the Company, in shares of the Company’s Series A-10 Preferred Stock at a price per share of $0.33. Interest on the June 16 ~~Pequot~~FirstMark Notes. ~~The~~and the Constellation ~~Warrants~~Notes ~~have~~is due and payable in cash or, at the ~~identical~~option ~~terms~~of asthe Company, in shares of the ~~June~~Company’s 16Series ~~Pequot~~A-11 ~~Warrants~~Preferred Stock at a price per share of $0.341.

The holders of ~~Credit~~the ~~Facilities~~FirstMark ~~Agreement~~A-10 and A-11 Warrants and the Constellation A-11 Warrants, collectively (the “June Warrants”) may exercise the purchase rights represented by the June Warrants at any time. Cashless exercise is permitted. The June Warrants expire four years after the issue date. The Company allocated and charged approximately $0.2 million to debt discount, which will be amortized over the life of the June FirstMark Notes and the Constellation Notes to interest expense, and assigned and credited to additional paid in capital approximately $0.2 million for the fair value of the June Warrants. A more complete description of the June Warrants can be found in its entirety by reference to the full text of the respective documents.

On ~~August~~January 2129, ~~2007~~ 2009, the Company ~~entered~~issued ~~into~~and asold ~~secured~~to FirstMark the following Promissory Notes ~~Credit~~(the ~~Facilities~~“FirstMark ~~Agreement~~09 Notes”): (1) a promissory note in the ~~"Credit~~principal ~~Facilities~~amount ~~Agreement"~~of $876,449 to FirstMark III L.P., and (2) ~~with~~a ~~CDF~~promissory asnote in the principal ~~Administrative~~amount ~~Agent~~of $123,551 ~~GECC~~to ~~Capital~~FirstMark ~~Markets~~III ~~Group~~Offshore Partners, ~~Inc~~L.P. asThe ~~Sole~~FirstMark ~~Lead Arranger~~09 ~~and~~Notes ~~Sole Bookrunner,~~bear ~~and~~interest ~~CDF~~at ~~and~~a rate per annum equal to 15%. Interest on the ~~other~~FirstMark 09 ~~Lenders~~Notes ~~listed~~shall be due and payable in cash or, at the ~~Credit~~option ~~Facilities~~of the Company, in ~~Agreement~~shares asof (the ~~“ Lenders”),~~Company’s ~~providing~~Series A-12 Preferred Stock at a ~~combined~~price ~~maximum~~per ~~availability~~ share of $0.638. upProceeds from the FirstMark 09 Notes were used to ~~$34~~fund working capital ~~million~~needs.

On February ~~The~~11, ~~Credit~~2009, ~~Facilities Agreement refinances~~ the Company’s ~~prior senior lender facilities~~ and isFirstMark ~~secured~~amended bythe aFirstMark ~~first~~09 ~~priority~~Notes ~~lien~~(the “Amended onFirstMark ~~and~~09 ~~security~~Notes”) ~~interest~~to in(i) ~~substantially~~change ~~all of~~ the ~~present~~maturity ~~and~~date ~~future~~from ~~assets~~February ~~of the Company~~13, 2009 ~~including~~(or the ~~issued~~date ~~and~~on ~~outstanding~~which ~~stock of~~ the Company ~~(other~~obtained ~~than~~all ~~MTM~~necessary ~~Technologies,~~consents ~~Inc.),~~from ~~except~~its Senior ~~for~~Lenders ~~permitted~~to ~~encumbrances.~~such ~~Credit~~payment ~~and~~if ~~advances~~later) to ~~the~~December ~~Company~~15, ~~pursuant~~2009, to(ii) ~~the~~change ~~Credit Facilities Agreement are used to fund working~~the ~~capital~~interest ~~and~~rate ~~floor-planning~~on ~~needs,~~overdue ~~and~~unpaid ~~for~~principal ~~general~~or ~~corporate~~interest ~~purposes~~from 10.5% ~~The initial advances were used~~ to ~~prepay~~16.5% ~~all~~and (iii) ~~outstanding~~change ~~obligations~~the priority of ~~the~~payments ~~Company~~if ~~under~~ the Company’s ~~secured~~is ~~financing~~not ~~agreement~~able ~~facility~~to ~~with~~pay ~~CIT,~~the full asamounts ~~agent,~~due ~~and~~under ~~secured floor~~all ~~planning~~of ~~facility~~its ~~with~~Subordinated ~~Textron~~Promissory ~~Financial Corporation (“Textron”)~~Notes, ~~which~~ ~~facilities were terminated upon~~ such ~~prepayments~~that payments into ~~accordance~~FirstMark with ~~separate termination~~respect ~~agreements~~to ~~with~~all ~~CIT~~Subordinated ~~and~~Promissory ~~Textron,~~Notes ~~each~~held ~~of which dated August 21, 2007.~~by ~~Terms~~it ~~not~~(the ~~otherwise~~“FirstMark ~~defined~~Notes”) ~~in this discussion~~ have ~~the~~first ~~meaning~~preference ~~ascribed~~over ~~to them in~~ the ~~Credit~~Constellation ~~Facilities Agreement~~Notes.

AOn ~~Revolving Credit Facility under the Credit Facilities~~February ~~Agreement~~11, ~~encompasses a two year revolving credit facility~~2009, ~~unless earlier terminated by~~ the Company oralso ~~the~~issued ~~Lenders,~~warrants ~~for up~~ to ~~$20~~FirstMark ~~million,~~(the ~~subject~~“FirstMark A-12 toWarrants”) aentitling: ~~borrowing~~(i) ~~base~~FirstMark ~~based~~III onL.P. ~~eligible~~to ~~accounts~~purchase ~~receivable~~120,889 ~~minus~~shares ~~the sum~~ of the ~~any~~Company’s ~~outstanding~~Series ~~Swingline~~A-12 ~~Loan,~~Preferred ~~Floorplan~~Stock ~~Shortfall, Letter of Credit Exposure,~~ and ~~Bid~~(ii) ~~Bonds,~~FirstMark ~~and~~III ~~certain~~Offshore ~~other limitations~~Partners, L.P. ~~All~~warrants ~~amounts~~to ~~under~~purchase ~~the~~17,042 ~~Credit Facilities~~shares ~~Agreement~~of ~~are due upon~~ the ~~termination~~Company’s ~~thereof,~~Series ~~subject~~A-12 ~~to optional~~Preferred ~~prepayment~~Stock, inboth ~~accordance~~at ~~with~~an ~~the~~exercise ~~terms~~price of ~~the~~$0.725 ~~Credit~~per ~~Facilities~~share. ~~Agreement, and~~The ~~mandatory~~holders ~~repayment~~ of ~~any~~the FirstMark ~~Swingline~~A-12 ~~Loan~~Warrants inmay exercise the ~~event~~purchase ~~that~~rights ~~any~~represented ofby the ~~Lenders~~FirstMark ~~fails~~A-12 toWarrants ~~pay~~at ~~its~~any ~~allocated~~time. ~~portion~~Cashless ~~thereof.~~exercise ~~Amounts~~is ~~borrowed~~permitted. ~~under~~The ~~the~~FirstMark ~~Revolving~~A-12 ~~Credit~~Warrants ~~Facility~~expire ~~bear~~on ~~interest~~February at11, ~~LIBOR plus 3%~~2013.

The Second AAmended ~~Floorplan~~FirstMark ~~Loan~~Notes ~~Facility~~together ~~under~~with the ~~Credit~~June ~~Facilities Agreement~~FirstMark ~~is not a commitment to lend or advance funds but is a discretionary facility~~Notes, ~~for up to $14 million, unless terminated by~~ the ~~Company or the~~ ~~Lenders,~~Constellation ~~which~~Notes ~~allows~~and the ~~Company~~Amended toFirstMark ~~finance~~09 ~~inventory~~Notes, ~~purchases~~collectively ~~from vendors~~are assometimes ~~may~~referred beto ~~approved~~herein byas the ~~Administrative~~“Investors ~~Agent, on an up to 45-day interest-free basis in many cases~~Notes”. ~~Interest~~At ~~accrues~~March ~~after~~31, ~~expiration~~2009 ~~of any applicable interest~~the ~~free~~balance ~~period at a rate to be determined under each Transaction Statement, and not to exceed a maximum rate~~ of ~~16% per annum in~~ the ~~event~~Investors ~~the~~Notes ~~Company~~was ~~objects to~~approximately ~~the terms under any Transaction Statement~~$6.8 ~~Generally~~million, ~~the~~net ~~Company would receive at least 60 days advance notice~~ of adebt ~~termination~~discounts. ofAt ~~the~~March ~~Floorplan Facility~~31, ~~during~~2009, ~~which~~approximately ~~period~~$0.5 ~~the~~million ~~Company~~in ~~would~~interest ~~continue~~has tobeen beaccrued ~~able~~on tothe ~~finance inventory~~Investors ~~purchases~~Notes ~~under~~and ~~the~~is ~~facility~~payable at maturity.

The Company Aentered ~~Letter~~into ofan ~~Credit~~amendment ~~Facility~~to ~~under~~the Investors Notes (the ~~Credit~~“Amendment”) ~~Facilities~~on February ~~Agreement~~11, ~~allows~~2009. ~~the~~The ~~Company~~Amendment to(i) ~~request~~amends ~~standby~~all ~~letters~~Subordinated ofPromissory ~~credit~~Notes ~~and~~issued ~~commercial~~to ~~letters~~FirstMark of(or ~~credit~~its ~~for~~predecessors) or Constellation to change the ~~account~~priority of payments if the Company ~~from~~is ~~time~~not able to ~~time~~pay upthe full amounts due under all of its Subordinated Promissory Notes, such that payments to FirstMark with respect to the FirstMark Notes have first preference over the Constellation Notes; (ii) ~~lesser~~amends the Constellation Notes to provide that the rights of Constellation to $2the ~~million~~payment orof ~~then~~principal ~~applicable~~and ~~availability~~interest ~~limits~~with ~~less~~respect ~~certain~~to ~~outstanding~~such Constellation Notes ~~obligations~~are ofsubordinated to the ~~Company~~payment ~~under~~rights of FirstMark in connection with the FirstMark ~~Credit~~Notes ~~Facilities~~(as ~~Agreement.~~well Asas the payment rights of ~~March~~the Senior Lenders with ~~31,~~respect ~~2008,~~to the ~~Company~~Senior ~~had~~Debt); noand ~~outstanding~~(iii) ~~letters~~provides for the express subordination of ~~credit.~~the payment of the Constellation Notes to the prior payment in full of the FirstMark Notes.

The ~~Credit~~foregoing description ~~Facilities~~of ~~Agreement~~the ~~also~~Investors ~~gives~~Notes and the ~~Company~~related warrants as well as the ~~access~~Amendment todoes ~~further~~not ~~potential~~purport ~~purchase~~to ~~order~~be ~~financing~~complete, ~~through~~and ~~CDF's~~is ~~own~~qualified ~~“Star”~~in ~~(Short~~its entirety by ~~Term~~reference ~~Accounts~~to ~~Receivable)~~the ~~program~~full text of such documents, which are incorporated by reference herein.

The ~~Company~~right ~~is required to pay (i) on a monthly basis,~~of anrepayment ~~Unused Revolving Fee~~ of 15principal ~~basis~~and ~~points~~interest on the ~~difference~~Investors ~~between~~Notes ~~$20~~is ~~million~~subordinated ~~and~~ to the ~~outstanding~~rights ~~daily~~and ~~balance~~security interest of ~~the~~(i) ~~Revolving~~CDF ~~Loans~~in ~~(unless~~connection with the ~~Aggregate Revolving~~August ~~Loan~~21, 2007 ~~Swingline Loan and Letter of~~ Credit ~~Exposure~~Facilities isAgreement ~~greater~~(described ~~than~~below ~~67%~~in ofthis ~~$20 million~~Item), and (ii) onCP Investment anManagement ~~annual~~and ~~basis,~~NEBF anin ~~Annual~~connection ~~Facility~~with ~~Fee~~the ofCP/NEBF 20Credit ~~basis points~~Agreement of(described ~~the~~below ~~then-Aggregate~~in ~~Revolving~~this ~~Loan Commitment~~Item), (~~iii)~~CDF ~~letter~~and ofNEBF ~~credit~~collectively, ~~fees~~the “Senior ~~for~~Lenders” ~~each~~and ~~letter~~the ofCredit ~~credit~~Facilities ~~issued~~Agreement ~~pursuant~~and to the ~~Letter~~CP/NEBF of Credit ~~Facility of~~Agreement 3%collectively, ~~per~~the ~~annum~~“Senior ofDebt”). ~~the~~While ~~undrawn~~any ~~amount~~default ofor ~~such~~event ~~letter~~ of ~~credit~~default ~~plus a fronting fee~~has ofoccurred ~~0.125%~~and ofis ~~the~~continuing ~~face~~with ~~amount~~respect ofto ~~each~~any ~~letter~~Senior ~~of credit~~Debt, ~~(iv)~~the aCompany ~~closing fee to~~is ~~the~~prohibited ~~Administrative~~from ~~Agent~~making onany ~~the~~payments ~~Credit~~or ~~Facilities~~distribution ~~Agreement,~~in ~~and~~respect ~~(v)~~of ~~an annual management fee to~~ the ~~Administrative Agent~~Investors Notes.

~~The~~Upon ~~Company~~an ~~also~~event of ~~entered~~default, ~~into~~as aset ~~First~~forth ~~Amendment~~in to the ~~Credit~~Investors ~~Facilities Agreement with CDF~~Notes, ~~effective~~the ~~August~~holders ~~21,~~of ~~2007,~~the ~~which~~Investors ~~provided~~Notes ~~that~~may asdeclare toall ~~inventory~~amounts ~~acquired~~outstanding byunder the ~~Company~~Investors ~~other~~Notes ~~than pursuant to~~immediately ~~the~~due ~~Floorplan~~and ~~Loan~~payable ~~Facility,~~and ~~there~~exercise ~~will~~other beremedies apermitted ~~maximum~~by ~~invoice~~the ~~amount~~Investors ofNotes ~~$1.5~~or ~~million~~ at ~~any~~law ~~time~~or ~~against~~in ~~which~~equity, ~~the~~subject ~~Company~~to ~~may seek financing under~~ the ~~Credit~~ ~~Facilities~~above ~~Agreement~~mentioned ~~and~~subordination. ~~for~~A ~~certain~~more complete ~~modifications~~description toof the ~~definitions regarding~~Investors ~~certain~~Notes ~~covenant~~can ~~calculations~~be ~~and~~found ~~floor~~in ~~plan~~its ~~inventory~~entirety ~~value~~by reference to ~~reflect~~ the ~~intent~~full text of the ~~parties~~applicable ~~when they entered in the Credit Facilities Agreement~~documents.

~~Effective~~Since ~~as of February 4, 2008,~~ the ~~Company entered~~ ~~into~~commencement aof ~~Second Amendment to~~ the ~~Credit Facilities Agreement with CDF, which has given the~~ Company ~~additional flexibility whereby the Company is allowed to borrow against certain other receivables. The initial impact increased the Company~~’s ~~availability~~fiscal byyear ~~$0.5 million. On February 28~~2010, ~~2008,~~ the Company entered ~~into a Third Amendment to the Credit Facilities Agreement~~ in ~~order~~ ~~to (a) accommodate~~ the ~~February Pequot Notes and the February Pequot~~ ~~Warrants,~~following ~~since~~further ~~the~~amendment terms and conditions of the Credit Facilities Agreement gives CDF the right to consent to and approve of various indebtedness incurred by the Company, (b) modify certain financial covenants contained in the Credit Facilities Agreement by reducing required minimum EBITDA amounts for the fiscal quarters ending on March 31, 2008 and on June 30, 2008, and (c) update the disclosures with ~~respect~~FirstMark ~~to the representations~~ and ~~warranties in the Credit Facilities Agreement~~Constellation.

The ~~Credit Facilities Agreement, as amended through~~Company ~~March~~entered ~~31,~~into ~~2008~~a ~~requires,~~Second ~~among~~Amendment ~~other~~to ~~things, that~~ the ~~Company~~Investors ~~maintain~~Notes ~~certain financial~~(the ~~covenants~~“Second ~~including Maximum Total Funded Indebtedness to EBITDA of~~Amendment”) ~~not~~on ~~greater~~June ~~than~~11, 42009.00 toThe ~~1.00~~Second ~~for~~Amendment ~~the~~(i) ~~preceding~~amends ~~four~~all ~~fiscal~~of ~~quarters then ended, beginning with~~ the ~~period~~Investors ~~ended~~Notes ~~March~~to extend ~~31, 2008; Minimum EBITDA for~~ the ~~fiscal quarter~~maturity ~~ending~~dates onto ~~March~~November ~~31, 2008 of $440,000, on June~~ 30, ~~2008~~2010 offrom ~~$1,365,000 and~~December ~~for each quarter thereafter to June 30~~15, 2009~~, $2,000,000~~; ~~Minimum~~(ii) ~~Excess~~amends ~~Cash/Marketable Securities plus Availability of $1,500,000 on~~ the ~~last~~ ~~day~~FirstMark ofNotes ~~each calendar month; and Minimum Liquidation Multiple of 1.20~~ to ~~1.00~~ asprovide ofthat the ~~last~~rights ~~day~~ of ~~each fiscal~~FirstMark ~~month;~~to ~~restriction on~~ the ~~Company’s~~ ~~ability~~payment toof ~~incur~~principal ~~certain additional indebtedness,~~ and ~~various~~interest ~~customary~~with ~~provisions, including~~respect ~~affirmative~~to ~~and~~such ~~negative~~FirstMark ~~covenants,~~Notes ~~representations and warranties~~are ~~and~~subordinated ~~events~~to ofthe ~~default.~~payment ~~Upon~~rights ~~a breach or an event~~ of ~~default~~CP byInvestment ~~the~~Manager, ~~Company~~as Investment ~~with~~Manager ~~respect~~for to the ~~Amended~~L/C ~~Pequot~~Guarantors ~~Notes,~~under the ~~Pequot Warrants, the CP~~L/~~NEBF Credit~~C ~~Facility~~Agreement; ~~(described~~and ~~below in this Item~~(iii), ~~the~~amends ~~Constellation Notes,~~ the Constellation ~~Warrants~~Notes orto ~~otherwise~~provide ~~under~~that the ~~Credit~~rights ~~Facilities~~of ~~Agreement~~Constellation ~~that is~~to ~~not cured by~~ the ~~Company within any applicable grace period, any~~ payment of ~~the Lenders~~principal ~~may~~and ~~terminate~~interest ~~the~~with ~~Credit~~respect ~~Facilities~~to ~~Agreement~~such ~~and/or~~Constellation ~~declare~~Notes ~~all amounts~~are ~~outstanding~~subordinated ~~under~~to the ~~Credit~~payment ~~Facilities~~rights ~~Agreement~~of ~~immediately~~CP ~~due~~Investment ~~and~~Manager, ~~payable~~as Investment ~~and~~Manager ~~exercise~~for ~~other remedies including foreclosure of~~ the ~~security~~L/C ~~for~~Guarantors ~~the obligations~~ under the ~~Credit~~L/C ~~Facilities~~ Agreement.

AsNEBF ~~of March 31, 2008, the Company was in compliance with all covenants prescribed under the Credit Facilities Agreement.~~ Guarantee

On May 29, ~~Available~~2009, ~~funds~~the Company received a $1,900,000 advance from CDF under the Credit Facilities Agreement as. As a condition of ~~March~~such 31advance, ~~2008,~~CDF ~~net~~required ofNEBF to enter into a Limited Guarantee for the ~~minimum~~benefit ~~excess~~of ~~cash/marketable~~CDF, ~~securities~~whereby NEBF guaranteed ~~plus~~the ~~availability~~repayment ~~covenant~~obligations of the $1~~.5 million~~,900,000 ~~amounted~~advance to ~~approximately~~the ~~$4.3~~Company (the “NEBF ~~million~~Guarantee”).

Since the commencement of the Company’s fiscal year 2009, the Company entered in the following amendments of the Credit Facilities Agreement.

~~As of May 16, 2008, the Company entered into a Fourth Amendment to the~~ Credit Facilities Agreement which amended the definition of “Eligible Account” in order to give the Company added flexibility to borrow against certain Accounts which are customarily paid within 120 days, rather than 90 days.

AsOn ofAugust ~~June 11~~21, ~~2008~~ 2007, the Company entered into a ~~Fifth Amendment~~secured ~~to the~~ Credit Facilities Agreement ~~in order to obtain various consents and to modify certain financial covenants contained in~~ (the “Credit Facilities Agreement”) bywith ~~(i)~~CDF ~~reducing~~as ~~minimum~~Administrative ~~EBITDA~~Agent, toGECC $0Capital Markets ~~for~~Group, ~~the~~Inc. ~~fiscal~~as ~~quarter~~Sole ~~ending~~Lead onArranger ~~June~~and ~~30,~~Sole ~~2008~~Bookrunner, and ~~(ii)~~CDF ~~reducing~~and the other ~~excess~~lenders ~~cash/marketable~~listed ~~securities~~in ~~plus~~the ~~availability~~Credit ~~covenant~~Facilities ~~for~~Agreement ~~each~~as of (the ~~fiscal months ending on June 30~~“Lenders”), providing ~~2008,~~a ~~July~~combined ~~31,~~maximum ~~2008~~availability ~~and August~~of ~~30,~~up ~~2008,~~ to $~~750,000~~34 ~~from $1,500,000~~million.

The Credit ~~CP/NEBF~~Facilities Agreement refinanced the Company’s prior senior lender facilities and is secured by a first priority lien on and security interest in substantially all of the present and future assets of the Company, including the issued and outstanding stock of the Company (other than MTM Technologies, Inc.), except for permitted encumbrances. Credit and advances to the Company pursuant to the Credit Facilities Agreement will be used to fund working capital and floor-planning needs, and for general corporate purposes. Terms not otherwise defined in this discussion have the meaning ascribed to them in the Credit Facilities Agreement.

The Revolving AsCredit ofFacility ~~July~~under ~~31,~~the ~~2007~~Credit Facilities Agreement encompasses a two year revolving credit facility, unless earlier terminated by the Company ~~entered~~or ~~into Amendment~~the ~~No.~~Lenders, 1for up to ~~its~~$15 ~~secured~~million, pursuant to the Sixth Amendment to the Credit Facilities Agreement (the “~~CP/NEBF~~Sixth ~~Credit Agreement~~Amendment”), ~~dated~~subject asto a borrowing base based on eligible accounts receivable, minus the sum of ~~November~~any 23outstanding Swingline Loan, ~~2005~~Floorplan Shortfall, Letter of Credit Exposure, and ~~accompanying~~Bid ~~promissory~~Bonds, ~~note~~and certain inother limitations. All amounts under the ~~principal~~Credit Facilities ~~amount~~Agreement ofare ~~$25~~due ~~million~~upon (the ~~“Note”)~~termination thereof, subject to optional prepayment in accordance with CPthe ~~Investment~~terms ~~Management~~of ~~NEBF~~the Credit Facilities Agreement, and ~~the~~mandatory repayment ~~Company~~of ~~issued~~any ~~and~~Swingline ~~sold~~Loan toin the ~~Lender~~event athat ~~warrant~~any ~~entitling~~of the ~~Lender~~Lenders fails to pay ~~purchase~~its ~~700~~allocated portion thereof. Amounts borrowed under the Revolving Credit Facility,~~000~~ ~~shares~~pursuant ofto the ~~Company’s~~Sixth ~~Common~~Amendment, ~~Stock~~bear interest at anLIBOR ~~exercise~~plus 3.5% ~~price~~or ~~of $~~LIBOR plus 4.065% ~~per~~during ~~share~~any ~~(the~~default ~~“Lender Warrant”)~~period.

AsThe ~~an inducement to CP Investment Management and~~Floorplan ~~NEBF~~Loan ~~(collectively,~~Facility ~~the “Junior Creditor”) to enter into a Subordination Agreement dated as of August 21, 2007 (the "Subordination Agreement") with CDF, for itself and agent to the Lenders~~ under the Credit Facilities Agreement, ~~the~~is ~~Company~~not ~~entered~~a ~~into~~commitment ~~Amendment No. 2~~ to ~~the~~lend or ~~CP/NEBF~~advance ~~Credit~~funds ~~Agreement.~~but ~~Pursuant~~is toa ~~Amendment~~discretionary ~~No. 2~~facility, ~~the~~for ~~CP/NEBF~~up ~~Credit~~to ~~Agreement~~$20 ~~was extended until November 23~~million, ~~2010. Mandatory~~ ~~principal~~pursuant ~~prepayments~~to ~~are also due upon~~ the ~~occurrence~~Sixth ~~of a Liquidity Event or Partial Liquidity Event~~Amendment, ~~generally~~unless ~~involving~~terminated ~~a Change of Control or the issuance~~ by the Company ofor ~~securities~~the Lenders, ~~the proceeds of~~ which ~~exceed~~allows ~~$25,000,000. The amount outstanding on~~ the ~~Note~~Company ~~bears interest equal~~ to ~~4.52%;~~finance ofinventory ~~which~~purchases ~~the Applicable Current Cash Rate of interest was reduced~~ from 2%vendors toas may 1%be ~~per~~approved ~~annum~~by ~~through~~ the ~~first~~Administrative ~~anniversary of the Second Amendment Date~~Agent, ~~and~~on ~~then~~an ~~will~~up ~~increase back~~ to 2%45-day ~~per annum~~interest-free ~~through~~basis ~~November~~in ~~22,~~many ~~2009, and then will increase to 8% per annum thereafter~~cases. Interest ~~The~~accrues ~~Applicable~~after ~~Current~~expiration ~~Cash~~of ~~Rate~~any ~~is payable quarterly in cash and all remaining~~ applicable interest ~~will~~free ~~accrue~~period ~~and only become due~~ at ~~maturity.~~a ~~Upon~~rate ~~maturity~~to orbe indetermined ~~the~~under ~~event~~each ofTransaction ~~acceleration or upon the occurrence of certain liquidity events~~Statement, ~~the~~and ~~Company~~not ~~will~~to ~~pay~~exceed a ~~payment~~maximum ~~premium in respect of the Note equal to an amount which, when combined with previous payments made, will yield an internal~~ rate of ~~return to the Lender of 11~~16% per annum ~~from~~in the ~~Closing~~event ~~Date through and including July 31, 2007,~~ the Company ~~First~~objects ~~Amendment~~to ~~Date. For~~ the ~~period~~terms ~~from~~under ~~August~~any 1,Transaction ~~2007 through and including August 21~~Statement. Generally, ~~2007,~~ the ~~Second~~Company ~~Amendment~~would ~~Date,~~receive ~~the~~at ~~amount~~least ~~required~~60 ~~will~~days ~~provide~~advance ~~the~~notice ~~Lender with an internal rate~~ of ~~return~~a ~~during~~termination ~~such time period~~ of ~~13.5% per annum. At all times thereafter, until~~ the ~~date~~Floorplan ~~on which all Obligations have been paid in full~~Facility, ~~the amount required will provide the Lender with an internal rate of return~~ during ~~such~~ ~~time~~which period ~~of 15% per annum, except during any period in which an Event of Default shall have occurred and be continuing, in which case~~ the ~~internal~~Company ~~rate~~would ofcontinue ~~return for such period shall be adjusted~~ to ~~17% per annum. At March 31, 2008, $6.6~~be ~~million~~able in interest has been accrued on the Note, $0.1 million is accrued and payable within the next quarter, and $6.5 million is accrued and is payable at maturity. As discussed below in this Item, the payment premium to ~~the~~finance ~~Lender~~inventory ~~has~~purchases ~~been further amended~~ under ~~Amendment No. 5 to~~ the ~~CP/NEBF Credit Agreement entered into by the Company as of June 16, 2006~~facility.

~~Pursuant~~The toLetter ~~the Subordination Agreement, the Junior Creditor is entitled to receive (a) fee payments due at closing~~ of ~~Amendment~~ ~~No.~~Credit 2,Facility ~~(b)~~under ~~regularly scheduled cash interest payments as and when due, and (c) mandatory principal prepayments due upon~~ the ~~occurrence~~Credit ofFacilities aAgreement ~~Liquidity Event~~will orallow ~~Partial Liquidity Event, subject to prior notice thereof to~~ the ~~senior lenders~~Company ~~and the failure by the senior lenders~~ to ~~issue a blockage notice. Notwithstanding~~ ~~the~~request ~~foregoing,~~standby ~~payments~~letters ~~described~~of incredit ~~(b)~~ and ~~(c)~~commercial ~~above~~letters ~~may~~of ~~not~~credit ~~be received by the Junior Creditor during any payment blockage period following a payment default or a non-payment default under the Senior Loan Documents. Blockage periods~~ for ~~non-payment defaults may not exceed 180 days in any year. Under~~ the ~~Subordination Agreement, the Junior Creditor also agrees not to exercise~~ ~~remedies~~account ~~under the CP/NEFB Credit Agreement until the earliest~~ of the ~~date that~~Company isfrom 10time ~~days~~to ~~following~~time ~~the~~up ~~date~~to ~~on which~~ the ~~senior~~lesser ~~lenders accelerate the senior debt, the date~~ of ~~commencement~~$2 ofmillion ~~a bankruptcy case against any Company~~ or, ~~in the case of acceleration payments under the CP/NEFB Credit Agreement,~~then ~~120~~applicable ~~days~~availability ~~and~~limits inless ~~the~~certain ~~case~~outstanding ofobligations ~~other remedies, 180 days after notice~~ of ~~default from~~ the ~~Lenders to the senior lenders. Terms not otherwise defined in this~~ ~~discussion~~Company ~~have~~under the ~~meaning~~Credit ~~ascribed~~Facilities ~~to them in the Subordination~~ Agreement. ~~The~~ ~~Company~~As ~~paid a one-time modification fee~~ of ~~$250,000,~~March ~~which was advanced under the Credit Facilities Agreement~~31, ~~and issued a second Warrant to the NEBF for the right to purchase up to the maximum number of 700~~2009,~~000~~ ~~shares of~~ the Company ~~Common~~has ~~Stock~~no ofoutstanding ~~MTM~~letters ~~Technologies at a price per share~~ of $1credit.~~17 per share.~~

During fiscal As2008 ofand ~~February 28~~2009, ~~2008,~~ the Company entered into ~~Amendment~~ ~~No.~~several 3amendments to the ~~CP/NEBF~~ Credit Facilities Agreement with CDF in order to ~~(i)~~waive ~~accommodate the~~compliance ~~February~~with ~~Pequot Notes~~ and ~~the~~or ~~February~~modify certain ~~Pequot~~financial ~~Warrants~~covenants, ~~since~~modify ~~the~~certain terms ~~and~~ ~~conditions~~including of the ~~CP/NEBF Credit Agreement gives the Lender the right to~~definitions ~~consent~~regarding tocertain ~~and~~covenant ~~approve~~calculations, ofeligible ~~various~~accounts ~~indebtedness incurred by the Company~~receivable, ~~(ii)~~cash ~~modify~~reserves ~~certain~~applicable ~~financial~~to ~~covenants contained in~~ the ~~CP/NEBF~~Borrowing ~~Credit Agreement by (a) reducing minimum EBITDA amounts as follows: (1) $396~~Base,~~000~~ ~~for~~and ~~the~~floor ~~fiscal~~plan ~~quarter~~inventory ~~ended on March 31~~value, ~~2008,~~ and ~~(2) $1,228,500~~ ~~for~~to ~~the~~consent ~~fiscal~~to ~~quarter ending on June 30, 2008,~~ and ~~(iii)~~approve ~~update~~various ~~the~~indebtedness ~~disclosures with~~incurred ~~respect~~by to the ~~representations~~Company and ~~warranties~~to update ~~in the CP/NEBF Credit Agreement~~disclosures.

~~Required~~The ~~financial covenants were also modified to coincide substantially with those under the~~ Credit Facilities Agreement., ~~Amendments No.~~as 2amended ~~and~~through ~~No.~~March 331, to2009 ~~the CP/NEBF Credit Agreement~~ requires, among other things, ~~that~~ that the Company maintain certain financial covenants including Maximum Total ~~Funded~~ Funded Indebtedness to EBITDA, as defined, of not greater than 4.4000 to 1.00 for the ~~preceding~~ preceding four fiscal quarters then ended, beginning with the period ended March 31, 2008; Minimum EBITDA, as defined, for the fiscal quarter ending on March 31, ~~2008~~2009 of $~~396~~800,000, ~~on June 30, 2008 of $1,228,500~~ and for ~~each~~the fiscal quarter ~~thereafter~~ending toon June 30, 2009, of $12,~~800~~000,000; Minimum Excess Cash/Marketable Securities plus Availability of $1,~~350~~500,000 on the last day of each calendar month; and Minimum Liquidation Multiple of 1.0820 to 1.00 as of the last day of each fiscal month.; ~~Subject~~as towell ~~the terms~~as ofrestrictions on the ~~Subordination~~Company’s ~~Agreement,~~ability ~~upon~~to anincur ~~event~~certain ofadditional ~~default~~indebtedness, ~~the lenders under~~ ~~the CP/NEFB Credit Agreement may terminate such Credit Agreement~~ and~~/or~~ ~~declare all~~various ~~amounts~~customary ~~outstanding~~provisions, ~~immediately~~including ~~due~~affirmative and ~~payable~~negative ~~and exercise other remedies including foreclosure of the security for the obligations under the CP/NEFB Credit Agreement~~covenants, ~~as amended. Terms not otherwise defined in this discussion~~ ~~have~~representations ~~the~~and ~~meaning~~warranties ~~ascribed~~and toevents ~~them in the CP/NEFB Credit Agreement, as amended or in the Subordination Agreement. As~~ of ~~March 31, 2008, the Company was in compliance with all covenants prescribed under the CP/NEFB Credit Agreement~~default.

Upon a breach ~~Since~~or ~~the~~an ~~commencement~~event of default by the Company’s ~~fiscal~~with respect to any of the Investors ~~year~~Notes ~~2009,~~or the ~~Company~~Senior ~~entered~~Debt innot cured by the ~~following~~Company ~~amendments~~within any applicable grace period, any of the CPLenders may terminate the Credit Facilities Agreement and/~~NEBF~~or declare all amounts outstanding under the Credit Facilities Agreement immediately due and payable and exercise other remedies including foreclosure of the security for the obligations under the Credit Facilities Agreement.

OnAs ~~June~~of 11March 31, ~~2008 and June 17~~2009, ~~2008,~~ the Company ~~entered into~~was ~~Amendments~~not ~~No.~~in 4compliance ~~and~~with 5all tocovenants ~~the~~and ~~CP/NEBF~~was ~~Credit Agreement to obtain various~~in ~~consents~~default ~~and~~of ~~to modify~~ certain ~~financial~~other ~~covenants~~provisions ~~contained~~prescribed inunder the ~~CP/NEBF~~ Credit ~~Agreement~~Facility. ~~by (i) reducing required minimum EBITDA amounts for the fiscal~~On ~~quarter ending on~~ June 302, ~~2008~~2009, ~~and (ii) lowering~~ the ~~cash~~Company ~~requirement~~entered ~~for the~~into ~~June 30, 2008, July 31, 2008 and August 31, 2008 calculation dates to $675,000 from $1,350,000 in consideration for an increase of~~ the ~~payment~~Eighth ~~premium that is due upon the earlier of the maturity date or the other specific occurrences as described in~~ Amendment ~~No.~~to ~~5 and~~ the ~~CP/NEBF~~ Credit Facilities Agreement ~~equal to an amount which, when combined~~ with ~~previous payments made~~CDF, ~~will yield an internal rate of return of 15% per annum from~~ (the ~~Closing~~“Eighth ~~Date. (ii~~Amendment”), ~~increase~~whereby ~~the~~CDF ~~borrowings~~waived ~~under~~all existing ~~such~~defaults. ~~CP/NEBF~~In ~~Credit~~consideration ~~Agreement~~of byCDF ~~$3,000,000;~~agreeing into ~~particular,~~ the ~~Companies~~Eighth ~~issued~~Amendment and ~~sold~~ ~~to NEBF an amended and restated secured promissory note in~~ the ~~principal~~waivers ~~amount~~contained oftherein ~~$28,000,000, which replaces~~ the ~~secured~~Company ~~promissory~~agreed ~~note issued and sold~~ to ~~NEBF~~pay inan ~~the~~Eighth ~~principal~~Amendment ~~amount~~ fee of $25250,000~~,000 dated November 23, 2005~~.

Available funds under the Credit Facilities Agreement as of March 31, 2009, net of the $1,750,000 cash reserve, amounted to approximately $2,400,000.

Since the commencement of the Company’s fiscal year 2010, the Company entered in the following amendments of the Credit Facilities Agreement.

On June 2, 2009 and June 11, 2009, the Company entered into, respectively, the Eighth and Ninth Amendments to the Credit Facilities Agreement with CDF. The Eighth Amendment provides for, among other things, (a) an acknowledgement of the NEBF Guarantee; (b) the waiver by CDF of the Companies’ existing defaults as of June 2, 2009 under the Credit Facilities Agreement; (c) the termination of all existing Commitments and replacement with new Facilities comprised of a $15,000,000 Revolving Loan Facility and a $15,000,000 Floorplan Loan Facility, with the aggregate limit of such Facilities not to exceed $25,000,000; and (d) amendments to certain definitions and the elimination of most financial covenants, including Maximum Total Funded Indebtedness to EBITDA, Minimum EBITDA and the Minimum Liquidation Multiple. The Ninth Amendment provides for, among other things, (a) consent to the incurrence by the Company of the indebtedness provided for in the L/C Agreement, (b) amendments relating to the L/C Agreement, (c) consent to the sale by the Company of its facilities business, (d) a change in the maturity date of the Revolving Loan Facility under the Credit Facilities Agreement to March 31, 2010 from August 21, 2009, and (e) amendments to certain definitions including the computation of the Borrowing Base and (f) amendments to representations and warranties.

On June 29, 2009 CDF consented to certain extensions to the compliance provisions under the Credit Facilities Agreement to July 14, 2009 and agreed to modify certain other qualification provisions related to the issuance of the 2009 annual financial statements.

~~Subject to the terms of the Subordination Agreement between the Junior Creditor and CDF, upon an event of default, the Lender under the~~ CP/NEBF Credit Agreement may terminate the CP/NEBF Credit Agreement and/or declare all amounts outstanding immediately due and payable and exercise other remedies including foreclosure of the security for the obligations under the CP/NEBF Credit Agreement, as amended.

~~For~~On ~~the year ended March 31~~November 23, ~~2008~~2005, the Company ~~used cash~~entered ofinto ~~$11.9~~a ~~million~~secured inCredit ~~operating~~Agreement ~~activities.~~(the ~~The~~“CP/NEBF Credit ~~cash~~Agreement”) ~~used~~and isaccompanying ~~derived~~promissory ~~from~~note ~~a net loss of $14.4 million plus a decrease~~ in ~~net~~the ~~operating~~principal ~~liabilities~~amount of ~~$13.5~~ ~~million offset by non-cash charges of~~ $~~16.0~~25 million. ~~The~~(the ~~decrease~~“CP/NEBF inNote”), ~~net~~with ~~operating~~CP ~~liabilities~~Investment ~~relates~~Management ~~primarily to a decrease in accounts receivable~~ and ~~in payables. Accounts receivable at March 31~~NEBF, ~~2008 includes a $3.6 million receivable~~as ofLender ~~which~~(the $3“Lender”).5 ~~million~~During ~~was~~fiscal ~~subsequently collected in June~~ 2008. ~~Accounts~~and ~~receivable~~2009, ~~net of~~ the ~~above~~Company ~~decreased~~entered ~~over $8.5~~into ~~million~~several ~~from~~amendments ~~March 31, 2007 as a result of a strong collection effort especially with regard~~ to ~~past due accounts coupled with~~ the ~~impact~~CP/NEBF ofCredit aAgreement ~~new~~in ~~compensation plan~~order ~~whereby the commission structure was modified~~ to ~~include~~modify ~~payments based~~certain onterms ~~collected~~including ~~receivables~~extending ~~and~~the amaturity ~~lower~~date, ~~overall~~subordinating ~~receivable~~the ~~base.~~CP/NEBF ~~Additionally~~Note, ~~accounts~~ ~~payable~~modifying ~~decreased as proceeds from the equity funding~~ and ~~from~~or ~~the~~waiving ~~working~~compliance ~~capital line~~ with ~~CDF~~certain ~~were~~financial ~~used~~covenants, consenting to ~~pay~~and ~~vendors.~~approving ~~Accrued~~various ~~expenses~~indebtedness ~~decreased~~incurred ~~primarily due~~by to the ~~payout~~Company ~~of accrued restructuring costs~~ and ~~payments related~~ to ~~acquired~~ ~~businesses~~update ~~coupled with lower operating costs as a result of cost cutting initiatives~~disclosures.

Pursuant to ~~Cash~~the ~~used~~Subordination inAgreement ~~investing~~dated ~~activities~~as ~~was~~of ~~$2.4~~August ~~million~~21, ~~for~~2007 (the ~~year~~“Subordination Agreement”) ~~ended~~with ~~March 31~~CDF, ~~2008~~for ~~related~~itself toand ~~additions~~agent to ~~capital~~the ~~expenditures~~Lenders ~~compared~~under ~~with $6.6 million for~~ the ~~comparable prior year which consisted of~~Credit ~~capitalized~~Facilities ~~costs~~Agreement, ~~related to~~ the ~~internal~~CP/NEBF ~~development~~Credit ofAgreement ~~purchased~~was ~~and~~extended ~~developed~~until ~~software and infrastructure investment of $3.2~~November ~~million.~~23, ~~The Company has no plans for any material purchases of property and equipment including capital software projects for fiscal 2009~~2010.

On June 11, ~~Cash~~2008 ~~provided~~and byJune ~~financing~~17, ~~activities~~2008, ~~was~~the ~~$13~~Company entered into Amendments No.1 ~~million~~4 ~~for~~and 5 to the CP/NEBF ~~year~~Credit ~~ended~~Agreement ~~March~~with ~~31,~~CP ~~2008,~~Investment ~~which~~Management ~~was~~and ~~primarily~~the Lender whereby each (a) consented to and approved the ~~result~~Second ofAmended ~~net~~Notes, ~~cash~~the ~~proceeds~~June ~~received~~FirstMark Notes ~~from~~and the ~~issuance~~Constellation ofNotes ~~shares~~in the principal amount of ~~Series~~up A-to $6,000,000, (b) ~~A-7~~modified ~~and~~certain ~~A-8~~financial ~~Preferred Stock~~covenants ofcontained ~~$9.2~~in ~~million~~the ~~and~~CP/NEBF ~~cash~~Credit Agreement, ~~proceeds~~(c) ofamended ~~$2.5~~the ~~million~~existing ~~from~~CP/NEBF ~~our~~Note ~~issuance~~to ofincrease the ~~February~~principal amount ~~Pequot~~by ~~Notes~~$3,000,000 ~~for~~to $28,000,000 (the ~~purpose~~“CP/NEBF ofAmended ~~funding~~Note”), ~~working~~and ~~capital~~(d) amended ~~needs,~~the ~~and~~payment ~~increased~~premium ~~borrowings~~in onrespect ~~our~~of ~~working~~the ~~capital~~CP/NEBF ~~lines~~Amended ~~under~~Note ~~our~~equal ~~Credit~~to ~~Facilities~~an ~~Agreement~~amount ~~with~~which, ~~CDF.~~when ~~The~~combined ~~Company~~with ~~had~~previous ~~net~~payments ~~borrowings~~made, ~~under~~will ~~its~~yield ~~Credit~~an ~~Facilities~~internal rate ~~Agreement~~of return of ~~$1.8~~15% ~~million~~per ~~during~~annum ~~fiscal~~from ~~2008,~~the ~~which~~Closing ~~consisted~~Date. ofProceeds from the additional ~~gross~~funding ~~borrowings~~ of $~~317.0~~3,000,000 ~~million~~were ~~offset~~used byto ~~gross~~fund ~~repayments~~working ofcapital ~~$315~~needs.~~2 million.~~

The amount outstanding on the CP/NEBF Amended Note bears interest equal to 4.52%; of which the Applicable Current Cash Rate of interest was 1% per annum through August 21, 2008, which rate was increased to 2% per annum through November 22, 2009, and then will increase to 8% per annum thereafter. The Applicable Current Cash Rate is payable quarterly in cash and all remaining interest will accrue and only become due at maturity. Pursuant to Amendment No. 5, upon maturity or in the event of acceleration or upon the occurrence of certain liquidity events, the Company will pay a payment premium in respect of the Note equal to an amount which, when combined with previous payments made, will yield an internal rate of return to the Lender of 15% per annum from the Closing Date, except during any period in which an Event of Default shall have occurred and be continuing, in which case the internal rate of return for such period shall be adjusted to 17% per annum. At March 31, 2009, $13.7 million in interest has been accrued on the Note, $0.2 million is accrued and payable within the next quarter, and $13.5 million is accrued and is payable at maturity.

Required financial covenants under the CP/NEBF Agreement are less restrictive in nature and coincide substantially with those under the Credit Facilities Agreement. The CP/NEBF Credit Agreement requires, among other things, that the Company maintain certain financial covenants including Maximum Total Funded Indebtedness to EBITDA, as defined, of not greater than 4.40 to 1.00 for the preceding four fiscal quarters then ended, beginning with the period ended March 31, 2008.

On January 29, 2009, the Company entered into Amendment No. 7 to the CP/NEBF Credit Agreement with CP Investment Management and the Lender, whereby each of Investment Manager and Lender (a) consented to and approved the incurrence by the Company of certain unsecured subordinated indebtedness to FirstMark in the principal amount up to $1,000,000, and the issuance of warrants in connection therewith, (b) obtained a waiver of certain terms of the CP/NEBF Credit Agreement in relation to the foregoing request, (c) modified effective December 1, 2008 certain financial covenants and financial covenant definitions and waived compliance with the Maximum Total Funded Indebtedness to EBITDA covenant for the period ended December 31, 2008, and (d) amended the existing CP/NEBF Note to increase the principal amount by $1,000,000 to $29,000,000. Proceeds from the additional funding of $1,000,000 were used to fund working capital needs.

Subject to the terms of the Subordination Agreement, upon an event of default, the lenders under the CP/NEFB Credit Agreement may terminate such Credit Agreement and/or declare all amounts outstanding immediately due and payable and exercise other remedies including foreclosure of the security for the obligations under the CP/NEFB Credit Agreement, as amended. Terms not otherwise defined in this discussion have the meaning ascribed to them in the CP/NEFB Credit Agreement, as amended or in the Subordination Agreement.

As of March 31, 2009, the Company was not in compliance with all covenants and was in default of certain other provisions prescribed under the CP/NEBF Credit Agreement. On June 2, 2009, the Company entered into Amendment No. 8, with CP Investment Management and the Lender, to the CP/NEBF Credit Agreement (“Amendment No. 8”), whereby CP Investment Management and the Lender waived all existing defaults.

Since the commencement of the Company’s fiscal year 2010, the Company entered in the following amendments of the CP/NEBF Credit Agreement.

On June 2, 2009 and June 11, 2009, the Company entered into Amendments No. 8 and 9, respectively, to the CP/NEBF Credit Agreement with CP Investment Management, as Investment Manager and NEBF, as Lender. Amendment No. 8 provides for, among other things, (a) the waiver by CP Investment Management and NEBF of the Companies’ existing defaults as of June 2, 2009 under the terms of the CP/NEBF Credit Agreement; (b) the Companies’ guarantee of reimbursement of payments made by NEBF under the NEBF Guarantee; (c) setting the interest rate equal to (i) 4.52% per annum for the term between the date of issuance and June 30, 2010, and (ii) 8.00% per annum thereafter; with (iii) the Current Cash Rate for April 1, 2009 through June 30, 2010 reduced to 0% on an annualized basis, and then the rate will increase to 8% per annum thereafter; (d) an amendment to the definition of “Senior Indebtedness” and the elimination of all financial covenants; and (e) the waiver by the Company of any claims it may have against CP Investment Management and NEBF existing or occurring on or prior to the date of Amendment No. 8. Amendment No. 9 provides for, among other things, (a) consent to the incurrence by the Company of the indebtedness provided for in the L/C Agreement, (b) amendments relating to the L/C Agreement, (c) consent to the sale by the Company of its facilities business; and (d) amendments to certain definitions and rights of CP Investment Management and NEBF.

For the year ended March 31, 2009, the Company generated cash of $1.4 million in operating activities. The cash generated is derived from a net loss of $39.6 million offset by a decrease in net operating assets of $4.4 million and non-cash charges of $36.6 million. The decrease in net operating assets relates primarily to a decrease in accounts receivable and in payables. Accounts receivable at March 31, 2008 includes a $3.6 million receivable of which $3.5 million was subsequently collected in June 2008. The decrease in accounts receivable is also directly related to approximately 32% lower billings in the second half of fiscal 2009 as compared to the prior year. The Company also had strong cash collections in fiscal 2009 especially with regard to past due accounts. Accounts payable decreased as proceeds from the promissory notes with FirstMark and Constellation received in the first quarter of fiscal 2009 were used to pay vendors. The decrease in accrued expenses and in deferred revenue is due to lower operating costs over the prior year, primarily the result of cost cutting initiatives and the impact of lower revenues. Prepaid expenses also decreased over the prior year, primarily as a function of less rebates and deal commissions earned by the Company in the current year due to lower volumes of product sold and due to the timing of expenses.

Cash used in investing activities was $2.2 million for the year ended March 31, 2009 related to additions to capital expenditures. The level of investment was comparable to the prior year period. The Company has no plans for any material purchases of property and equipment including capital software projects for fiscal 2010.

Cash used in financing activities was $0.3 million for the year ended March 31, 2009, which was primarily the result of net cash proceeds received of $4.3 million from our issuance of promissory notes to the Investors during fiscal 2009 amounting to $4.5 million, and an additional $3.9 million of net cash proceeds received under the CP/NEBF Credit Agreement which increased the principal amount by $4.0 million, both for the purpose of funding working capital needs. The increase in cash generated from financing activities was offset by the increase in cash collections used to repay a portion of the borrowings on our working capital lines under our Credit Facilities Agreement with CDF. The Company had net borrowings under its Credit Facilities Agreement of a decrease of $8.2 million during fiscal 2009, which consisted of additional gross borrowings of $289.3 million offset by gross repayments of $297.5 million.

Contractual Obligations

The following table sets forth, as of March 31, ~~2008~~2009, the Company’s known contractual obligations and borrowings, and the timing and effect that such commitments are expected to have on the Company’s liquidity and capital requirements in future periods (in thousands).

	Payment Due by Period	~~Payment Due by Period~~
				Less than	1-3			3-5		More than
Contractual Obligations	Total		Less than 1 year		1-3 years		3-5 years		More than 5 years
Contractual Obligations		Total		1 year	years			years		5 years
	(In thousands of dollars)
		(In thousands of dollars)
Secured revolving credit facilities	$	5,898	$	5,898		—		—		—
Secured revolving credit facilities	$	8,100	$	8,100		—		—		—
Inventory financing agreements		9,769		9,769		—		—		—
Inventory financing agreements		15,807		15,807		—		—		—
Related party notes payable (1)		7,966		7,966		—		—		—
Related party note payable (1)		2,729		2,729		—		—		—
Secured promissory note (1)		54,168		1,194	$	52,974		—		—
Secured promissory note (1)		45,668		313	$	45,355		—		—
Capital lease obligations		122		116		6		—		—
Capital lease obligations		468		401		67		—		—
Operating lease obligations		11,151		3,363		4,148	$	2,005	$	1,635
Operating lease obligations		14,768		3,679		5,855	$	2,812	$	2,422
Total	$	89,074	$	28,306	$	57,128	$	2,005	$	1,635
Total	$	87,540	$	31,029	$	51,277	$	2,812	$	2,422


(1)	Amounts include the principal maturities and expected interest payments.

The Company sustained net losses during the fiscal years ended March 31, ~~2008~~2009 and ~~2007~~2008. ~~Working~~Our decline ~~capital~~in atperformance ~~March~~during ~~31,~~fiscal ~~2008~~2009 ~~was~~continued ato ~~deficit of~~be ~~$3.3~~impacted ~~million~~by ~~as compared to~~ a ~~working~~weaker US ~~capital~~economy ~~deficit~~and ofreduced ~~$12.4 million~~access atto ~~March~~business ~~31, 2007~~credit. ~~The~~Our ~~Company~~business ~~has~~requires significant ~~made~~levels aof ~~concerted effort in the past two years to improve its~~ working capital ~~position,~~to ~~including~~fund ~~issuing~~future ~~additional~~revenue ~~shares~~growth ofand ~~preferred stock raising over $9.0 million in the~~ current ~~fiscal year alone,~~ ~~a $6~~operations.0 ~~million~~We ~~restructuring~~have inhistorically ~~fiscal~~relied ~~2007,~~on and ~~instituting~~continue ~~other~~to ~~cost~~rely ~~control~~heavily ~~initiatives and programs. Capital expenditures for the year ended March 31~~on, trade ~~2008~~credit ~~were~~from ~~$2.4~~vendors ~~million~~and ~~compared~~our ~~with~~credit ~~$6.6~~facilities ~~million~~ for ~~the~~our ~~comparable~~working ~~prior year~~capital ~~period~~needs. The Company ~~currently~~ has nomade ~~commitments~~a ~~for~~concerted ~~material~~effort ~~capital~~to ~~expenditures.~~improve ~~In August 2007, the Company successfully refinanced~~ its working capital position ~~lines~~over ofthe ~~credit~~past ~~with~~few ayears ~~$34 million~~and ~~credit~~during ~~facilities~~fiscal ~~agreement~~2009 ~~with~~had ~~CDF~~taken ~~which provided the Company with~~significant ~~additional~~measures ~~capital~~to ~~and~~further ~~increased~~reduce ~~purchasing~~headcount, ~~flexibility.~~streamline ~~Our~~operations, ~~business~~consolidate ~~requires~~facilities ~~significant~~and ~~levels~~manage ofcosts ~~working~~in ~~capital~~response to ~~fund~~the ~~future~~impact ~~revenue~~of ~~growth~~the ~~and~~economic ~~current operations~~downturn. We have also ~~historically~~significantly ~~relied~~reduced onour ~~and~~infrastructure ~~continue~~investment toby ~~rely~~limiting ~~heavily on, trade~~future ~~credit~~capital ~~from~~expenditures ~~vendors~~including, ~~and~~the ~~our~~internal ~~credit~~development ~~facilities~~of ~~for~~purchased ~~our~~and developed ~~working capital needs~~software. We ~~are~~continue ~~focused on looking at avenues~~ to ~~secure~~drive ~~additional~~accounts ~~open~~receivable ~~lines~~and ofhave ~~credit~~made ~~with~~strong ~~vendors~~progress ~~and~~in ~~have~~collecting ~~recently~~overdue ~~negotiated~~accounts. ~~additional~~The ~~flexibility~~Company incontinues ~~borrowing~~to ~~restrictions~~actively ~~and~~pursue ~~reserves~~additional ~~under~~financing ~~our~~arrangements ~~credit~~including ~~facilities.~~the Wesuccessful negotiation ~~continue~~in toJune ~~drive~~of ~~collection~~ fiscal 2010 of ~~accounts~~an ~~receivable~~additional ~~and~~$7.0 ~~are~~million ~~actively~~in ~~managing~~borrowing capacity under our ~~expenses~~existing toCredit ~~achieve~~Facilities ~~greater economies~~Agreement ofwith ~~scale~~CDF.

AsWe ofexpect ~~June 17, 2008 we have successfully completed~~that ~~several~~results ~~financing~~for ~~arrangements~~fiscal ~~which~~2010 ~~generated~~will ~~net~~continue ~~proceeds~~to ofbe ~~$9.0~~impacted ~~million,~~by ~~including~~a ~~$2.5~~very ~~million~~difficult economic environment in ~~February 2008 from~~ the ~~Pequot Notes, another $3~~U.5S. ~~million~~and ~~from~~a ~~the~~potentially ~~Pequot~~widening ~~June~~global 11recession. ~~Notes~~We believe, ~~the Pequot June 16 Notes~~however, ~~and~~that the ~~Constellation~~combination ~~Notes,~~of ~~and~~adequate ~~$3.0 million~~immediate ~~in additional~~ financing, ~~under the CP/NEBF Credit Agreement. The proceeds~~a offocused ~~which~~“go ~~will be used~~ to ~~fund~~market” ~~working~~strategy ~~capital~~and ~~needs.~~strong ~~Additionally,~~cost ~~the~~controls ~~Company has~~will ~~negotiated~~enable ~~additional~~us ~~flexibility~~to ~~in availability under the Credit Facilities~~lay ~~Agreement~~a ~~with~~foundation ~~CDF and has received relaxed covenant restrictions~~ for ~~the~~improved ~~first quarter~~future ofoperating ~~fiscal~~results ~~2009 from both CDF~~ and CPthe ~~Investment~~ability ~~Management~~to ~~and~~generate cash ~~NEBF~~flow.

Our ability to 19continue as a going concern, however, is contingent upon our ability to obtain debt and or capital financing in order to meet obligations that mature in fiscal 2010; including the Company’s current Credit Facilities Agreement with CDF, which matures in March 2010, as well as our ability to restructure our operations in order to improve future operating results and to generate cash flow.

Our ~~future~~ immediate liquidity and capital requirements going forward will depend on numerous factors, including, general economic conditions and conditions in the financial services, government and technology industry in particular; the ~~cost~~ability ~~effectiveness~~to extend ofor refinance our ~~product~~current maturities; the ability to negotiate additional flexibility in borrowing restrictions and reserves under our current financing ~~service~~facilities ~~development~~and ~~activities~~vendor lines of credit; our dependence on third party licenses and our ability to maintain our status as an authorized reseller/service provider of IT products,; ~~and~~the ~~our~~cost ~~ability~~effectiveness toof ~~leverage~~ our ~~centralized~~product ~~infrastructure,~~and ~~all~~service ~~of which may~~development ~~impact~~activities and our ability to ~~achieve~~reduce and ~~maintain~~leverage ~~profitability.~~our ~~The~~centralized infrastructure, ~~Company~~all ~~anticipates that its available cash including the proceeds received from the financing arrangements described above in the first quarter~~ of ~~fiscal~~which ~~2009~~may ~~together~~impact ~~with~~our ~~its~~ability ~~available credit facilities should be adequate~~ to fund our operations in for the foreseeable future. The Company currently has no commitments for material capital expenditures. To the extent that our existing capital resources are insufficient to meet our working capital requirements, we may seek to raise additional funds ~~from the Investors~~ or seek additional financing arrangements. However, no assurance can be given that such financing may be obtained on terms attractive to us, or at all. Furthermore, any additional debt or equity financing arrangements may be dilutive to shareholders, and debt financing, if available, may involve restrictive covenants. Our failure to raise capital when needed could have a material adverse effect on our business, operating results and financial condition.

~~Recently Issued Accounting Pronouncements~~20

~~Effective~~Recent ~~April 1, 2007, the Company adopted the provisions of the Financial~~ Accounting ~~Standards Board (“FASB”) Interpretation~~ No. 48, “Accounting for Uncertainty in Income Taxes, an interpretation of FASB Statement No. 109” (“FIN 48”), which provides criteria for the recognition, measurement, presentation and disclosure of uncertain tax positions. A tax benefit from an uncertain position may be recognized only if it is “more likely than not” that the position is sustainable based on its technical merits. Upon the adoption of FIN 48, the Company had no unrecognized tax benefits. The application of FIN 48 did not have any impact on the Company’s consolidated balance sheets, statements of operations, or statements of cash flows during the year ended March 31, 2008. Pronouncements

InSee ~~September~~Note ~~2006,~~1 to the ~~FASB~~Consolidated ~~issued~~Financial ~~Statement~~Statements ~~No.~~in ~~157,~~this ~~“Fair Value~~Annual ~~Measurements”~~Report ~~(“SFAS~~on ~~No.~~Form ~~157”). SFAS~~10-K ~~No. 157 defines fair value, establishes a framework~~ for ~~measuring fair~~a ~~value~~discussion ~~and~~of expands fair value measurement disclosures. SFAS No. 157 is effective for financial statements issued for fiscal years beginning after November 15, 2007, and interim periods within those fiscal years. In February 2008, the ~~FASB~~ ~~deferred~~accounting ~~the~~standards ~~effective~~adopted ~~date~~in for one year for certain nonfinancial assets and nonfinancial liabilities and removed certain leasing transactions from its scope. The Company must adopt these new requirements no later than its first fiscal ~~quarter of~~ 2009 and ~~is currently evaluating whether the adoption~~recent ofaccounting ~~SFAS~~standards ~~No.~~not ~~157~~yet ~~will have an impact on our consolidated financial statements~~adopted.

In February 2007, the FASB issued Statement No. 159, “The Fair Value Option for Financial Assets and Financial Liabilities” (“SFAS No. 159”). SFAS No. 159 permits entities to choose to measure many financial instruments and certain other items at fair value. Most of the provisions of SFAS No. 159 apply only to entities that elect the fair value option. SFAS No. 159 is effective for financial statements issued for fiscal years beginning after November 15, 2007, or the Company’s first quarter of fiscal 2009. The Company does not expect that the adoption of this standard will have a material impact on its future consolidated financial statements.

In December 2007, the FASB issued SFAS No. 141(Revised), “Business Combinations” (“SFAS No. 141(R)), which replaces SFAS No. 141, “Business Combinations”, and requires an acquirer to recognize the assets acquired, the liabilities assumed, and any non-controlling interest in the acquiree at the acquisition date, measured at fair values as of that date, with limited exceptions. SFAS No. 141(R) requires the acquirer to record contingent consideration at the estimated fair value at the time of purchase and establishes principles for treating subsequent changes in such estimates which could affect earnings in those periods. SFAS 141(R) also requires additional disclosures designed to enable users of the financial statements to evaluate the nature and financial effects of the business combination and disallows the capitalization of acquisition costs. This statement applies prospectively to business combinations for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after December 15, 2008. The Company will implement the provisions of SFAS No. 141(R) for any acquisitions made by the Company on or subsequent to April 1, 2009.

Subsequent Events

Subsequent events which relate to the financial arrangements entered into by the Company during the Company’s fiscal year ~~2008~~2009 have been included within the discussion hereinabove set forth in this Item 7.

Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Not applicable

Item 8. Financial Statements and Supplementary Data

Set forth below is a list of our audited consolidated financial statements included in this Annual Report on Form 10-K and their location.

Item		Page*
Report of McGladrey & Pullen, LLP		F-1
Report of Goldstein Golub Kessler LLP		F-2
MTM Technologies, Inc. and subsidiaries Consolidated Balance Sheets at March 31, 2009 and 2008		F-2
MTM Technologies, Inc. and subsidiaries consolidated balance sheet at March 31, 2008 and 2007		F-3
MTM Technologies, Inc. and subsidiaries Consolidated Statements of Operations for the years ended March 31, 2009 and 2008		F-3
MTM Technologies, Inc. and subsidiaries consolidated statements of operations for the years ended March 31, 2008 and 2007		F-4
MTM Technologies, Inc. and subsidiaries Consolidated Statements of Shareholders’ Equity for the years ended March 31, 2009 and 2008		F-4
MTM Technologies, Inc. and subsidiaries consolidated statements of shareholders’ equity for the years ended March 31, 2008 and 2007		F-5
MTM Technologies, Inc. and subsidiaries Consolidated Statements of Cash Flows for the years ended March 31, 2009 and 2008		F-5
MTM Technologies, Inc. and subsidiaries consolidated statements of cash flows for the years ended March 31, 2008 and 2007		F-6
MTM Technologies, Inc. and subsidiaries Notes to Consolidated Financial Statements		F-6
MTM Technologies, Inc. and subsidiaries notes to consolidated financial statements		F-7
* Page F-1 follows Part III to this Annual Report on Form 10-K.

20* Page F-1 follows Part III to this Annual Report on Form 10-K.

Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.

On November 15, 2007, we were notified that certain of the partners of Goldstein Golub Kessler LLP (“GGK”) became partners of McGladrey & Pullen, LLP (“M&P”) in a limited asset purchase agreement effective October 3, 2007. As a result, GGK resigned as our independent registered public accounting firm effective as of November 15, 2007 and M&P was appointed by our audit committee as our new independent registered public accounting firm for the Company’s annual financial statements for the year ended March 31, 2008.

The audit reports of GGK on the consolidated financial statements of MTM Technologies, Inc. and Subsidiaries, as of and for the year ended March 31, 2007 did not contain an adverse opinion or a disclaimer of opinion, and were not qualified or modified as to uncertainty, audit scope or accounting principles.

During the two most recent fiscal years, the Company did not consult with either GGK or M&P regarding either: (i) the application of accounting principles to a specified transaction, either completed or proposed, or the type of audit opinion that might be rendered on the Company’s financial statements; or (ii) any matter that was either the subject of a disagreement or reportable event identified in paragraph (a)(1)(iv) of Item 304 of Regulation S-K. Prior to the Company’s appointment of both M&P and GGK as its independent auditor, the Company had not consulted GGK or M&P regarding any accounting or auditing matters.

Item 9A. Controls and Procedures.

Not applicable.

Item 9A~~(T)~~. Controls and Procedures ~~(a) Evaluation of disclosure controls and procedures.~~

Not As of the end of the period covered by this Annual Report on Form 10-K, we conducted under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, an evaluation of the effectiveness of our "disclosure controls and procedures" (as that term is defined under the Rule 13a-15(e) under the Securities Exchange Act of 1934, as amended, or the Exchange Act)applicable. Based on that evaluation, our principal executive officer and principal financial officer concluded as of the period covered by this report that our disclosure controls and procedures were effective in recording, processing, summarizing and reporting information required to be disclosed within the time periods specified in the Securities and Exchange Commissions rules and forms.

Item 9A(bT). ~~Management's~~Controls ~~report~~and ~~on internal control over financial reporting.~~Procedures

~~Management of the Company is responsible for establishing and maintaining adequate internal control over financial reporting. The Company's internal control over financial reporting is~~ (a) ~~process~~Evaluation ~~designed to provide reasonable assurance regarding the reliability~~ of ~~financial~~disclosure ~~reporting~~controls and ~~the preparation of financial statements for external reporting purposes in accordance with U~~ procedures.S. ~~generally accepted accounting principles.~~

As ~~Our~~of ~~internal~~the ~~control~~end ~~over~~of ~~financial~~the ~~reporting~~period ~~includes~~covered ~~those~~by ~~policies~~this ~~and~~Annual ~~procedures~~Report ~~that~~on ~~(i)~~Form ~~pertain~~10-K, towe conducted under the ~~maintenance~~supervision and with the participation of ~~records~~our ~~that~~management, inincluding our ~~reasonable~~principal ~~detail,~~executive ~~accurately~~officer and ~~fairly~~principal ~~reflect~~financial ~~transactions~~officer, ~~and~~an ~~dispositions of~~evaluation ~~assets;~~of ~~(ii)~~the ~~provide~~effectiveness ~~reasonable~~of ~~assurances~~our ~~that~~“disclosure ~~transactions~~controls ~~are~~and ~~recorded~~procedures” (as ~~necessary~~that toterm is ~~permit~~defined ~~preparation~~under ofthe ~~financial~~Rule 13a-15(e) ~~statements~~under inthe ~~accordance~~Securities ~~with~~Exchange ~~U.S.~~Act ~~generally~~of 1934, ~~accepted~~as ~~accounting principles~~amended, ~~and~~or ~~that~~the ~~receipts~~Exchange ~~and~~Act). ~~expenditures~~Based ~~are~~on ~~being~~that ~~made only~~evaluation, inour ~~accordance~~principal executive ~~with~~officer ~~authorizations~~and ofprincipal ~~management~~financial ~~and~~officer ~~the~~concluded ~~directors~~as of the ~~Company;~~period covered ~~and~~by ~~(iii)~~this ~~provide~~report ~~reasonable~~that ~~assurance~~our ~~regarding~~disclosure ~~prevention~~controls orand ~~timely~~procedures ~~detection~~were effective ofin ~~unauthorized~~recording, ~~acquisition~~processing, ~~use~~summarizing orand ~~disposition~~reporting ~~of the Company's assets that could~~information ~~have~~required ato ~~material~~be ~~effect~~disclosed onwithin ~~our~~the ~~financial~~time ~~statements.~~periods ~~Because~~specified ofin ~~its~~the ~~inherent~~Securities and ~~limitations,~~Exchange ~~internal~~Commissions ~~control~~rules ~~over~~and ~~financial reporting may not prevent or detect misstatements~~forms.

~~Management~~(b) ~~assessed the effectiveness of the Company'~~Management’s ~~internal~~report ~~control over financial reporting as of March 31, 2008 based~~ on the framework established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Based on that assessment, management concluded that, as of March 31, 2008, the Company's internal control over financial reporting ~~was effective based on the criteria established in Internal Control—Integrated Framework~~.

Management ~~This~~of ~~Annual~~the ~~Report~~Company onis ~~Form~~responsible ~~10-K~~for ~~does~~establishing ~~not~~and ~~include~~maintaining anadequate internal ~~attestation~~control ~~report~~over offinancial ~~the~~reporting. The Company'’s ~~registered~~internal ~~public~~control ~~accounting~~over financial ~~firm~~reporting ~~regarding~~is ~~internal~~a ~~control~~process ~~over~~designed ~~financial~~to ~~reporting~~provide ~~since~~reasonable ~~temporary~~assurance regarding ~~rules~~the reliability of ~~the~~financial ~~SEC~~reporting ~~permit~~and the preparation of ~~Company~~financial tostatements ~~provide~~for ~~only~~external ~~management's~~reporting ~~report~~purposes onin ~~this~~accordance ~~Annual~~with ~~Report~~U.S. generally onaccepted ~~Form~~accounting ~~10-K~~principles.

Our internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect transactions and dispositions of assets; (ii) provide reasonable assurances that transactions are recorded as necessary to permit preparation of financial statements in accordance with U.S. generally accepted accounting principles, and that receipts and expenditures are being made only in accordance with authorizations of management and the directors of the Company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Company’s assets that could have a material effect on our financial statements. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements.

Management assessed the effectiveness of the Company’s internal control over financial reporting as of March 31, 2009 based on the framework established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Based on that assessment, management concluded that, as of March 31, 2009, the Company’s internal control over financial reporting was effective based on the criteria established in Internal Control—Integrated Framework.

This Annual Report on Form 10-K does not include an attestation report of the Company’s registered public accounting firm regarding internal control over financial reporting since temporary rules of the SEC permit the Company to provide only management’s report on this Annual Report on Form 10-K.

(c) Changes in internal control over financial reporting.

As of the end of the period covered by this report, there have been no changes in our internal controls over financial reporting (as defined in Rule 13a-15(f) under the Exchange Act) during the quarter ended March 31, ~~2008~~ 2009 that materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting.

Limitations on the Effectiveness of Controls

We believe that a control system, no matter how well designed and operated, cannot provide absolute assurance that the objectives of the control system are met, and no evaluation of controls can provide absolute assurance that all controls issues and instances of fraud, if any, within a company have been detected. Our disclosure controls and procedures are designed to provide a reasonable assurance of achieving their objectives and our principal executive officer and principal financial officer have concluded that the controls and procedures evaluated are effective at the “reasonable assurance” level.

21Item 9B. Other Information

None.

PART III

Item 10. Directors, Executive Officers of the Registrant and Corporate Governance Matters

Directors and Executive Officers

Set forth below is a brief description of the background of each of our directors and current executive officers as of May 31, ~~2008~~ 2009, based on information provided to us by them. Each director currently serving has been elected to a term that expires at the next Annual Meeting of shareholders.

		Principal Positions and	Director
Name	Age	Principal Positions and Offices with our Company	Director Since
Name	Age	Offices with our Company	Since
Gerald A. Poch	62	Non-executive Chairman of the Board of Directors	2004
Gerald A. Poch	61	Non-executive Chairman of the Board of Directors	2004
Keith B. Hall	55	Director	2008
Keith B. Hall	54	Director	2008
William Lerner	74	Director	1995
William Lerner	73	Director	1995
Alvin E. Nashman	82	Director	1998
Alvin E. Nashman	81	Director	1998
Sterling Phillips	62	Director	2008
Sterling Phillips	61	Director	2008
Arnold J. Wasserman	71	Director	1998
Arnold J. Wasserman	70	Director	1998
Thomas Wasserman	34	Director	2005
Thomas Wasserman	33	Director	2005
Steven Stringer	54	President and Chief Executive Officer	N/A
Steven Stringer	53	President and Chief Operating Officer	N/A
J.W. Braukman III	55	Senior Vice President and Chief Financial Officer	N/A
J.W. Braukman III	54	Senior Vice President and Chief Financial Officer	N/A
Frank Carlucci	45	Senior Vice President of Sales	N/A
Stephen Hicks	49	Senior Vice President and General Counsel	N/A

Gerald A. Poch has served as Managing Director of FirstMark Capital, L.L.C. (“FirstMark Capital”) since August 2008. FirstMark is the investment manager of certain funds formerly managed by Pequot Capital Management, Inc. (“Pequot”). These funds included, ~~the~~among ~~investment~~other securities, all of Pequot’s ~~manager/advisor~~interests ~~for~~in the Pequot Private Equity Fund III, L.P. ~~and~~(“Pequot Fund”) and Pequot Offshore Private Equity Partners III, L.P. (“Pequot Partners”) now known as FirstMark III L.P. (“FirstMark Fund”) and FirstMark III Offshore Partners, L.P. (“FirstMark Offshore Partners”) respectively. Previously Mr. Poch served as Managing Director of Pequot, since 1999. Mr. Poch also served as a Managing General Partner of both Pequot Fund and Pequot Partners. From August 1998 ~~through~~ through January 2000, he was a principal of Pequot ~~Capital Management, Inc.~~ and co-leader of Pequot Fund’s and Pequot Partners’ venture capital team. From August 1996 to June 1998 he was the Chairman, President and Chief Executive Officer of GE Capital Information Technology Solutions, Inc., a technology solutions provider. Prior to that, he was a founder, and served as Co-Chairman and Co-President, of AmeriData Technologies, Inc., a value-added reseller and systems integrator of hardware and software systems. Mr. Poch is a director of a number of private companies.

Keith B. Hall has served as a director since February 2008. Mr. Hall was Senior Vice President and Chief Financial Officer of LendingTree, Inc., (TREE) from 1999 to 2007, a public company and subsequently a division of ~~InterActive~~ InterActive Corp., (IACI)~~, from 1999 to 2007~~. Prior to LendingTree, Mr. Hall served as Vice President and Chief Financial Officer for three other publicly traded companies that were subsequently acquired (Broadway & Seymour, Inc., from 1997 to 1999; Loctite Corporation from 1996 to 1997; and, Legent in 1995). Mr. Hall also served in the financial organization of United Technologies (UTX) from 1983-1995. Mr. Hall serves as a member of the board of directors of the ~~following~~ following companies: Polymer Group, Inc. (NASDAQ: POLGA), a one billion global leader of non-woven materials (since 2009; and Chairman of its Capital Expenditures & Investment Committee); Tectura, one of the world’s leading providers, implementers and integrators of Microsoft business management solutions (since 2008; and Chairman of its Corporate Governance Committee); ~~NewRiver~~CoreLogic, ~~Inc.,~~ a ~~private~~leading ~~Internet~~provider ~~company serving~~of ~~the~~technological ~~mutual~~solutions ~~fund~~to ~~industry~~the ~~(since~~home ~~2004),~~mortgage ~~and Blue Holdings, Inc. a NASDAQ~~risk ~~listed~~management ~~designer, manufacturer~~ and ~~distributor~~property ofvaluation ~~high-end~~industries ~~fashion jeans~~ (since 2008).; ~~Until~~and ~~its~~Chairman ~~acquisition~~of ~~earlier~~its Audit ~~this~~Committee); ~~year~~and NewRiver, MrInc., ~~Hall~~a ~~served~~private ~~since~~company ~~2007~~that asprovides atechnology ~~member~~solutions ofthat ~~the~~enable ~~board~~financial ofservices ~~directors~~companies ~~and~~to ~~Chairman~~ensure ~~of the Audit Committee for Electronic~~mutual ~~Clearing~~fund ~~House,~~and ~~Inc.,~~variable ainsurance ~~provider~~product ofsales ~~electronic~~are ~~payment~~compliant ~~and~~with ~~transaction processing~~federal ~~services~~regulations (since 2004). Mr. Hall is also on the Board of Trustees of Coe College in Cedar Rapids, Iowa and is Chairman of its Budget & Accounting Committee.

William Lerner has served as chairman of our Corporate Governance and Nominating Committee since November 2003. Mr. Lerner has been engaged in the private practice of corporate and securities law in New York since 1961 and in Pennsylvania since 1990. Mr. Lerner is a director/trustee of the Reich & Tang Family of Money Market Mutual Funds including The Daily Income Fund, and several state tax free money market funds including California, Connecticut, New Jersey and New York. Until December 2007 he was a director of Coach Industries, Group, Inc. a public company engaged in providing specialized business services to companies in the Courier, Limousine and Transportation industries that utilize independent contractors in the performance of their services.

Alvin E. Nashman has been an independent consultant in the field of computer service for the past ten years. Dr. Nashman is a director of Freedom Bank of Virginia.

Sterling Phillips is a Venture Partner with ~~Pequot~~FirstMark ~~Ventures, the venture capital arm of Pequot~~ Capital ~~Management, Inc~~. ~~Pequot Capital Management, Inc. is the Investment Manager for Pequot Private Equity Fund III, L.P. and Pequot Offshore Private Equity Partners III, L.P.~~ Mr. Phillips joined ~~Pequot~~FirstMark ~~Ventures~~Capital in 2007. Prior to joining ~~Pequot~~FirstMark ~~Ventures~~Capital, Mr. Phillips served for six years as Chairman and Chief Executive Officer of Analex Corporation, a publicly traded federal professional services firm that was acquired in March 2007 by QinetiQ North America. Prior to joining Analex Corporation, Mr. Phillips was Senior Vice President of Federal Data ~~Corporation~~ Corporation (now part of Northrop Grumman).

Arnold J. Wasserman has served as chairman of our Audit Committee since March 1999 ~~and Standing Committee of Independent Directors since September 2004~~. Mr. Wasserman has been a principal of Panda Financial Associates, Inc., a leasing/consulting firm, for the past 3540 years. He iswas a director of Stratasys, Inc., a NASDAQ National Market listed company which manufactures rapid prototyping systems and materials, and ~~serves~~served as ~~chairman~~Chairman of its ~~audit~~Audit ~~committee.~~Committee for the past fifteen years.

Thomas Wasserman has served as Managing Director at Constellation Ventures which he joined in June 2001 as an associate before becoming a Vice President. From March 2000 to June 2001, he served as a senior manager of corporate development for 360Networks, a global telecommunications service provider. Prior to 360Networks Mr. Wasserman worked at Charterhouse Group International, a private equity firm, and at the investment banking firm of Donaldson, Lufkin and Jenrette. Mr. Wasserman is a director of a number of private companies including Bridgevine, Inc., One Phone AB and Crispy Gamer, Inc.

2223

Steven Stringer has served as our President since June 2005 and as our Chief ~~Operating~~Executive Officer since ~~October~~August 112, ~~2004~~2008. From June through September 2004 he was employed by Pequot as a consultant and was made available by Pequot to us to assist with the selection, evaluation and integration of acquisitions. From January 2002 through May 2004, Mr. Stringer pursued private investment opportunities. Prior to that time he served in a number of senior executive roles with Rhythms NetConnections Inc. (“Rhythms”), including as Chief Executive Officer and President from July through December 2001, Chief Executive Officer, President and Chief Operating Officer from April through July 2001, and President and Chief Operating Officer from April 1999 through March 2001. Rhythms was a national provider of digital subscriber line services and operated one of the largest DSL networks in the United States, serving 60 major markets with 67,000 digital subscriber lines in service.

J.W. (Jay) Braukman III has served as a Senior Vice President, as well as our Chief Financial Officer, since September 2006. Mr. Braukman’s ~~experience~~ experience includes 23 years with The General Electric Company (“GE”), where he held numerous executive positions, including Chief Financial Officer of several divisions. In addition to his experience at GE, Mr. Braukman served during 2006 as Chief Financial Officer of Cleartel Communications, Inc., a CLEC. His prior experience also includes serving from 2004 until 2005 as Chief Financial Officer of Chiquita Brands International, Inc., a publicly traded company in the New York Stock Exchange, as Chief Operating Officer from 2002 until 2004 of of ITC ^Deltacom, Inc., a publicly held company, and as Chief Financial Officer from 2000 until 2001 of Rhythms, a publicly traded company in the NASDAQ stock market. In late May 2009, the Company was advised that Mr. Braukman would be taking a leave of absence for medical reasons.

~~Frank~~Under ~~Carlucci~~the ~~has~~terms ~~served~~of asthe ~~our~~Restated ~~Senior~~Shareholders Agreement, ~~Vice~~each ~~President~~ of ~~Sales since January 2008~~Mr. ~~Prior~~Poch toand ~~joining MTM,~~ Mr. ~~Carlucci~~Phillips ~~served~~are asdirectors ~~Senior~~designated ~~Vice President,~~by ~~Worldwide~~FirstMark ~~Sales~~Capital ~~for~~and ~~Extreme~~Mr. ~~Networks, Inc~~T. aWasserman ~~publicly~~is ~~traded~~a ~~provider~~director ofdesignated ~~data~~by ~~networking solutions from July 2004 to July 2007~~Constellation. See ~~From~~Item ~~August 1998 to July 2004~~12, ~~Mr.~~“Security ~~Carlucci~~Ownership ~~was~~of ~~Vice~~Certain ~~President~~Beneficial ~~for~~Owners ~~Avaya Inc. Mr. Carlucci resigned from the Company on~~and ~~June~~Management—Restated 6,Shareholders’ ~~2008~~Agreement. ”

Stephen Hicks has served as our Senior Vice President, as well as General Counsel and Corporate Secretary, since January 2008. From November 2006 to December 2007 Mr. Hicks served as Vice President, General Counsel & Corporate Secretary at OutlookSoft Corp. in Stamford, an international provider of performance management and business intelligence software acquired by SAP in 2007. From August 2000 to November 2006, Mr. Hicks was Vice President, General Counsel & Corporate Secretary at AMICAS, Inc. (formerly VitalWorks Inc.) in Boston, a healthcare information technology company. Mr. Hicks was also a member of the executive staff of the New York State Attorney General’s office from 1995 to 1998.

Under the terms of the Restated Shareholders Agreement, each of Mr. Poch and Mr. Phillips are directors designated by Pequot Capital Management, Inc. and Mr. T. Wasserman is a director designated by Constellation. See Item 12, “Security Ownership of Certain Beneficial Owners and Management—Restated Shareholders’ Agreement.”

Compliance with Section 16(a) of the Exchange Act

Based solely upon a review of Forms 3, 4 and 5 and amendments to these forms furnished to us, ~~except as provided below,~~ all parties subject to the reporting requirements of Section 16(a) of the Exchange Act filed on a timely basis all such required reports during and with respect to our ~~2008~~2009 fiscal year.

Frank Carlucci was hired by the Company as an executive officer on January 7, 2008 and Keith B Hall was appointed to the Board of Directors on February 8, 2008. In both cases the required Form 3’s were filed late during our fiscal year ended March 31, 2008. A Form 4 with regard to the March 28, 2008 Amended Pequot Notes was filed late in April 2008.

Code of Ethics

Our Board of Directors has established a code of ~~business~~ business conduct and ethics (“Code”) that applies to all employees and our principal executive, financial and accounting officer(s). On April 2, 2008, the Board of Directors modified the Code. A copy of our Code is filed as Exhibit 14.1 to ~~this~~ our Annual Report on Form 10-K for the fiscal year ended March 31, 2008. The Code is posted on the Company’s website at http://www.mtm.com/investorrelations/codeofbusinessconductethics.asp.

Committees of our Board of Directors

Our Board of Directors currently has four standing committees, consisting of an Audit Committee, a Compensation Committee, a Corporate Governance and Nominating Committee and an Independent Directors Committee.

Audit Committee

Our Audit Committee currently is composed of Keith B. Hall, William Lerner, Alvin E. Nashman and Arnold J. Wasserman, with Mr. Wasserman serving as its chairman. We believe that each of these committee members is “independent,” within the meaning of such term under applicable law and the Marketplace Rules of The NASDAQ Stock Market, Inc. Our Board of Directors has determined that Mr. Hall and Mr. Wasserman are each an “audit committee financial expert,” as such term is defined by the SEC. The Audit Committee is primarily concerned with the accuracy and effectiveness of the audits of our financial statements by our independent auditors. Its duties include:


	•	selecting and retaining the independent auditors, as well as ascertaining the auditors’ independence;

	•	reviewing the scope of the audits to be conducted, as well as the results of their audits;

	•	approving non-audit services provided to our Company by the independent auditors;

	•	reviewing the organization and scope of our internal system of audit, financial and disclosure controls;

	•	appraising our financial reporting activities, including our Annual Report on Form 10-K, and the accounting standards and principles followed; and

	•	conducting other reviews relating to compliance by employees with our internal policies and applicable laws.

Our Board of Directors adopted a charter for its Audit Committee in 2001. We amended the Audit Committee Charter in June 2003 in order to comply with rules mandated by the SEC. The Audit Committee charter is posted on the Company’s website at http://www.mtm.com/InvestorRelations/AuditCommitteeCharter.asp.

Compensation Committee

Our Compensation Committee currently is composed of William Lerner, Alvin E. Nashman and Sterling Phillips, each of whom is an “independent” director, within the meaning of the current NASDAQ rules, with Mr. Phillips serving as its chairman. The duties of our Compensation Committee include recommending to the full Board of Directors remuneration to be paid our executive officers, determining the number of and conditions related to the exercise of options and other equity incentives granted pursuant to our various stock plans and recommending the establishment and monitoring of a compensation and incentive program for all of our executive officers.

The Compensation Committee charter is posted on the Company’s website at http://www.mtm.com/InvestorRelations/CompensationCommitteeCharter.asp.

Corporate Governance and Nominating Committee

Our Corporate Governance and Nominating Committee currently is composed of William Lerner, Sterling Phillips, Arnold J. Wasserman and Thomas Wasserman, with Mr. Lerner serving as its chairman. The duties of our Corporate Governance and Nominating Committee include overseeing our board’s policies, reviewing director compensation, as well as ensuring that we are in compliance with all applicable federal and state securities laws and the NASDAQ rules, and determining our Board of Directors’ slate of director-nominees for each shareholder election of directors.

The Corporate Governance and Nominating Committee charter is attached as Appendix A to the Proxy Statement contained as a part of our definitive Schedule 14A filed with the Securities Exchange Commission on October 20, 2004, and can be found on our website at http://www.mtm.com/InvestorRelations/CorporateGovernanceCommitteeCharter.asp.

In identifying and evaluating nominees for director, including nominees recommended by shareholders, the Corporate Governance and Nominating Committee shall take into consideration any criteria approved by the board, which may include:


	•	judgment, skill, diversity, experience with business and other organizations in related industries and of comparable size;

	•	the interplay of the candidate’s experience with the experience of the other board members; and

	•	the extent to which the candidate would be a desirable addition to the board and any committees of the board

Other than the foregoing, and the independence requirements discussed above, there are no stated minimum criteria for director nominees.

Nominating Process

The Corporate Governance and Nominating Committee will consider all candidates recommended by shareholders in accordance with the procedures set forth below. Shareholders who wish to recommend a nominee for election as director at an annual shareholders meeting must submit their recommendations at least 120 calendar days before the date that our Proxy Statement is released to shareholders in connection with the previous year’s annual meeting of shareholders. Shareholders may recommend candidates for consideration by the Board by writing to Investor Relations, at our corporate offices, 1200 High Ridge Road, Stamford, Connecticut 06905, giving the candidate’s name, business and residence contact information, biographical data, including the principal occupation or employment of the candidate, qualifications, the class and number of our shares, if any, beneficially owned by such candidate, a description of all arrangements or understandings between the shareholder and the candidate and any other person or persons (naming them) pursuant to which the nominations are to be made by the shareholder and any other information relating to the candidate that is required to be disclosed in solicitations of proxies for election of directors, or as otherwise required, pursuant to Regulation 14A under the Exchange Act of 1934. A written statement from the candidate consenting to be named as a candidate and, if nominated and elected, to serve as a director must accompany any shareholder recommendation. Any shareholder who wishes to recommend a nominee for election as director also must provide his, her or its name and address, as they appear in our books, the number and class of shares beneficially owned by such shareholder and any other information that is required to be provided by the shareholder pursuant to Regulation 14A under the Exchange Act of 1934.

Independent Directors Committee

Our Independent Directors Committee was formed by our Board of Directors in September 2004. It consists only of directors who are neither members of management nor associated with ~~Pequot~~FirstMark Capital or Constellation ~~and~~ and is to consider, review and provide guidance and oversight regarding transactions or other situations in which other board members, who are either members of management or employees of ~~Pequot~~FirstMark Capital or Constellation, have interests that may be in addition to, or different from, the interests of the shareholders in general. This committee currently is composed of Keith B. Hall, William Lerner, Alvin E. Nashman and Arnold J. Wasserman~~, with Mr~~. ~~Wasserman serving as its chairman.~~

Meetings of Our Board of Directors and its Committees

Our Board of Directors held ~~seven~~eight formal meetings during our fiscal year ended March 31, ~~2008~~2009 and acted ~~five~~nine times by unanimous written consent. During our ~~2008~~2009 fiscal year: (i) Our Audit Committee held ~~six~~ twelve formal meetings, (ii) our Compensation Committee held ~~one~~two formal ~~meeting and acted one time by unanimous written consent~~ meetings, (iii) our Corporate Governance and Nominating Committee ~~did~~held ~~not~~four formal ~~hold~~meetings aand ~~formal~~acted ~~meeting~~one time by unanimous written consent, and (iv) our Independent Directors Committee held ~~one~~two formal ~~meeting~~meetings and acted ~~one~~six ~~time~~times by unanimous written consent. Each member of our Board of Directors attended, in person or telephonically, at least 75% of the total number of meetings of our board and each committee of the board on which the director serves.

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Item 11. Executive Compensation

The compensation of the Company’s executive officers is determined by the Compensation Committee of the Board. The Committee has three members, each of whom is independent of management. None of the members of the Committee has any insider or interlocking relationship with the Company, and each of them is a non-employee director, as these terms are defined in applicable rules and regulations of the ~~Securities and Exchange Commission (“~~SEC”).

The Company’s executive compensation philosophy is to align the interests of executive management with shareholder interests and with the Company’s business strategy and success, through an integrated executive compensation program that considers performance against specific business objectives and growth in total shareholder value. The key elements of executive compensation are competitive base salary, quarterly and annual incentives, and equity participation. The aggregate compensation package is designed to attract and retain individuals critical to the long-term success of the Company, to motivate these persons to perform at their highest levels, and to reward exceptional performance.

The Company has entered into agreements with its current named executive officers and certain other key employees. The purpose of these agreements is to ensure predictability in determining the executives’ terms and conditions of employment, to provide the executives with some security so that they are able to devote their full attention to providing superior performance, and to provide a reasonable level of protection, based on their relative position in the organization, in the event they are terminated without cause. Each named executive officer’s employment or severance agreement provides for certain severance payments and benefits in the event that his employment is terminated by the Company without “cause”, or by the executive with “good reason”, or upon the executive’s death or total disability. These payments and benefits are more fully described below.

Summary Compensation Table for Fiscal Year ~~2008~~2009

The following table sets forth, with respect to our fiscal year ended March 31, ~~2008~~2009 and ~~2007~~2008, all compensation earned by our ~~Principal~~ Principal Executive Officer (“PEO”), and one other of our most highly ~~compensated~~ compensated “named executive officers” other than our PEO who was serving as an executive officer at the end of our ~~2008~~2009 fiscal year and whose total compensation exceeded $100,000, and one other individual who would have been among the most highly compensated executive officers except for the fact that such person was not serving as an executive officer at the end of our ~~2008~~2009 fiscal year.

	Fiscal					Stock				Option				All Other
Name and Principal Position(s)	Fiscal Year			Salary(1)			Stock Awards(2)			Option Awards(3)			All Other Compensation			Total
Name and Principal Position(s)	Year		Salary			Awards(1)			Awards(1)					Compensation				Total
Steven Stringer (4)		2009		$	336,057		$	28,354		$	165,068					$	529,479
Francis J. Alfano (2)	2008													$	806,850		$	806,850
President and Chief Executive Officer		2008		$	335,000		$	28,354		$	212,286					$	575,640
Former Chief Executive Officer	2007		$	350,000		$	17,395	(3)		$	805,393	(3)					$	1,172,788
J.W. Braukman III (5)		2009		$	276,730		$	13,125		$	89,375					$	379,230
Steven Stringer(4)	2008		$	335,000		$	28,354			$	212,286						$	575,640
Senior Vice President and Chief Financial Officer		2008		$	260,000		$	13,125		$	89,375					$	362,500
President and Chief Operating Officer	2007		$	335,000		$	24,638			$	193,018						$	552,656
Stephen Hicks (6)		2009		$	179,644					$	6,407		$	8,994	(7)	$	195,045
J.W. Braukman III (5)	2008		$	260,000		$	13,125			$	89,375						$	362,500
Senior Vice President and General Counsel		2008		$	51,826					$	1,281					$	53,107
Senior Vice President and Chief Financial Officer	2007		$	133,000		$	6,563			$	44,688			$	47,728		$	231,979

(1) ~~See~~Amounts ~~Footnote~~shown 7as to“Salary” ~~the~~include ~~Company’s~~gross ~~Consolidated~~salary ~~Financial~~earned ~~Statements contained herein~~ for ~~a discussion of~~ the ~~assumptions~~fiscal ~~made in~~year ~~the~~ended ~~valuation~~March ~~of Stock Awards and Option Awards for financial reporting purposes~~31.

(2) ~~Mr.~~The ~~Alfano~~“Stock ~~served~~Awards” ascolumn ~~our~~reports ~~PEO~~the ~~from~~dollar amount ~~May~~recognized 21for financial statement reporting purposes in accordance with SFAS No. 123(R), ~~2004~~for restricted stock units held, excluding the impact of estimated forfeitures related to ~~April~~service based vesting conditions. See Note 6 of ~~26,~~the ~~2007~~Notes to Consolidated Financial Statements contained herein for a discussion of the assumptions made in the valuation of Stock Awards for financial reporting purposes. Amounts shown in the Stock Awards column do not reflect compensation actually received by the named executive officer.

(3) InThe ~~connection~~“Option ~~with~~Awards” ~~the~~column ~~termination~~reports ofthe ~~Mr.~~dollar ~~Alfano’s~~amount ~~employment~~recognized ~~with~~for ~~the~~financial ~~Company,~~statement ~~the~~reporting ~~vesting~~purposes ofin ~~all~~accordance ofwith SFAS MrNo. ~~Alfano’s unvested~~123(R), ~~stock~~for options ~~and~~held, ~~restricted~~excluding ~~stock~~the ~~units~~impact ~~was~~of ~~accelerated~~estimated forfeitures ~~and~~related ~~the~~to ~~Company~~service ~~recorded~~based vesting conditions. See Note 6 of the ~~associated~~Notes ~~compensation~~to ~~expense~~Consolidated ~~during~~Financial ~~the~~Statements ~~2007~~contained ~~fiscal~~herein ~~year.~~for ~~The~~a ~~impact~~discussion of ~~this~~the ~~transaction~~assumptions ismade ~~reported~~in ~~under~~ the ~~“Stock~~valuation ~~Award”~~of ~~and “~~Option Awards for financial reporting ~~Award”~~purposes. ~~columns,~~Amounts ~~since~~shown in the ~~associated~~Option ~~expense~~Awards ~~was~~column ~~recorded~~do innot ~~fiscal~~reflect ~~2007~~compensation actually received by the named executive officer.

(4) Mr. Stringer has served as our PEO since April 27, 2007. Mr. Stringer was named Chief Executive Officer on August 12, 2008.

(5) Mr. Braukman has served as our Senior Vice President and Chief Financial Officer since September 28, 2006.

(6) Mr. Hicks served as our Senior Vice President and ~~Summary~~General ~~Compensation~~Counsel ~~Table~~from ~~Narrative~~January 2, 2008 to February 16, 2009. In connection with the voluntary termination of Mr. Hick’s employment with the Company, all of his unvested stock options were forfeited.

~~Amounts~~(7) ~~shown~~The asamount reported for Mr. Hicks in “~~Salary~~All Other Compensation” ~~include~~consists ~~gross salary~~of ~~earned~~accrued ~~for~~paid time off paid by the Company during fiscal ~~year~~2009 ~~ended~~in ~~March~~connection 31with the termination of Mr. Hick’s employment with the Company.

~~The~~Essential ~~“Stock~~to ~~Awards”~~an ~~column~~understanding ~~reports~~of the ~~dollar~~Summary ~~amount~~Compensation ~~recognized~~Table ~~for~~is ~~financial~~an ~~statement~~understanding ~~reporting purposes in accordance with SFAS No. 123(R), for restricted stock units held, excluding the impact~~ of ~~estimated forfeitures related to service based vesting conditions. The Company adopted SFAS No. 123(R) effective April 1, 2006 using~~ the ~~modified~~Employment ~~prospective transition~~and ~~method.~~Termination ~~Amounts shown in the Stock Awards column do not reflect~~of ~~compensation~~Employment ~~actually~~Arrangements ~~received~~of by the named executive ~~officer~~officers.

Summary ~~The “Option Awards” column reports the dollar amount recognized for financial statement reporting purposes in accordance with SFAS No. 123(R), for options held, excluding the impact~~ of ~~estimated~~Employment forfeitures related to service based vesting conditions. The Company adopted SFAS No. 123(R) effective April 1, 2006 using the modified prospective transition method. Amounts shown in the Option Awards column do not reflect compensation actually received by the named executive officer.Agreements

Named 25Executive Officers who Terminated Employment During 2009.

Stephen Hicks. ~~The~~Effective ~~amount~~February ~~reported~~16, ~~for~~2009, Mr. ~~Alfano~~Hicks interminated ~~“All~~his ~~Other~~employment ~~Compensation”~~with ~~consists~~the Company ofvoluntarily. ~~post-termination~~Mr. ~~consulting~~Hicks ~~fees~~vested ofoptions ~~$758,333,~~remain aexercisable ~~one-time~~until ~~fee~~May ~~for entering into a severance and release agreement of $29~~16,~~167,~~ ~~post-termination~~2009 ~~health~~in ~~benefits~~accordance ~~funded~~with by the ~~company~~termination ofprovisions ~~$14,350, and legal fee reimbursements~~ of ~~$5,000, in each case accrued by~~ the ~~Company~~2004 ~~during~~Equity ~~fiscal~~Incentive Plan ~~2007 in connection with~~ (the ~~termination~~“2004 ofPlan”). Mr. ~~Alfano’s~~Hicks ~~employment~~forfeited inall ~~April 2007.~~equity ~~The~~awards ~~Company~~that ~~reported~~were ~~this amount in Mr. Alfano’s 2007 total compensation~~not invested ~~the~~on ~~2007~~his ~~Annual~~termination ~~Report~~date, onand ~~Form~~did ~~10-K.~~not ~~All~~receive ~~amounts~~any ~~shown~~other ~~are~~payments ~~the~~or ~~actual costs~~benefits ~~the~~in ~~Company~~connection ~~incurred~~with ~~and~~his ~~paid during fiscal year 2008~~termination.

The amount reported for Mr. Braukman in “All Other Compensation” consists of reimbursed relocation expenses in connection with Mr. Braukman’s hiring of $47,728.

Essential to an understanding of the Summary Compensation Table is an understanding of the Employment and Severance Agreements of the named executive officers.

Summary of Employment Agreements Named Executive Officers who Terminated Employment During 2008.

Frank Alfano. We entered into an employment agreement, dated June 28, 2006, with Francis J. Alfano (as amended, the “Alfano Employment Agreement”) to employ Mr. Alfano as our Chief Executive Officer (“CEO”). The Alfano Employment Agreement had an initial term of three (3) years (the “Initial Term”). Mr. Alfano was paid a base salary of $350,000 per annum and was eligible to receive an annual bonus based upon the achievement of performance targets established under the Company’s Management Bonus Plan of up to 75% of his base salary payable 67% in cash and 33% in common stock consisting of 35,000 shares of common stock, subject to certain limitations on the number of shares to be issued. Payment of the annual bonus is subject to the achievement of performance targets established under the Company’s management bonus plan. Mr. Alfano did not receive a bonus in fiscal year 2007 because the Compensation Committee did not approve performance targets. In March, 2007, the Company and Mr. Alfano reached an agreement in principle regarding Mr. Alfano’s departure as CEO of the Company. On April 12, 2007 the Company reported, among other things, that Mr. Alfano would be departing to pursue other opportunities and that simultaneous with his departure as CEO, Mr. Alfano would also resign from the Board of Directors. On April 26, 2007 we entered into a definitive Consulting Service Agreement (the “Alfano Consulting Service Agreement”) with Mr. Alfano and Tory Ventures LLC (the “Consultant”). Mr. Alfano is the sole member of the Consultant. The Alfano Consulting Service Agreement commenced on April 26, 2007 and terminates on June 30, 2009. For services rendered under the Alfano Consulting Service Agreement, the Company paid or will pay Consultant, among other things (i) a signing bonus of $58,333.33 on May 15, 2007 in accordance with the normal payroll practices of the Company and (ii) fees at the rate of $29,166.67 per month, payable in arrears in twice monthly payments with the initial payment on May 15, 2007 in accordance with the normal payroll practices of the Company, provided that a lump sum payment on March 31, 2008 shall be made which shall include fees from April 1, 2008 through March 31, 2009. We are providing Mr. Alfano health benefits at no cost for the term of the Alfano Service Consulting Agreement. Upon a change of control of the Company all compensation under the Alfano Consulting Service Agreement shall become immediately due and payable.

Additionally, in connection with these agreements the vesting of Mr. Alfano’s unvested stock options and restricted stock units were accelerated and became fully vested and immediately exercisable.

In connection with these arrangements, Mr. Alfano and the Company executed mutual releases and Mr. Alfano agreed that for a period ending on the earlier of (i) April 26, 2009 or (ii) the date of a valid termination of the Alfano Consulting Service Agreement by him, that he will be prohibited from engaging in any Business Activities on behalf of any person, firm or corporation, and, subject to certain limitations, he shall not acquire any financial interest in any entity which engages in Business Activities within 200 miles of any of the Company’s offices in operation on the commencement date of the Alfano Employment Agreement and within 100 miles of any office of the Company established after such commencement date. During the period that the foregoing non-competition restriction applies, Mr. Alfano shall not, without the written consent of the Company: (i) solicit any employee of the Company or any of the Company’s affiliates to terminate his employment, or (ii) solicit any customers, partners, resellers, vendors or suppliers of the Company on behalf of any individual or entity other than the Company or its affiliates. “Business Activities” means conduct of business as a computer and communications technology management and/or consulting business providing information technology networking and data center services, including secure access, VOIP storage, security, messaging solutions, network and mainframe connectivity consulting, remote network monitoring and management, network and system diagnostics, product maintenance and support, training, and product procurement solutions.

All Other Named Executive Officers.

Steve Stringer. We entered into an employment agreement dated October 1, 2004 with Mr. Stringer which agreement was superseded by an agreement dated August 10, 2006 (the “Stringer Employment Agreement”), to employ Mr. Stringer as our President and Chief Operating Officer. The Stringer Employment Agreement has an initial term ending December 31, 2009 (the “Initial Term Date”). On the Initial Term Date and each subsequent anniversary of the Initial Term Date, the term of the agreement shall automatically be extended for an additional period of twelve (12) months; provided, however, that either party may elect not to extend the agreement by giving written notice to the other party at least twelve (12) months prior to the Initial Term Date or any anniversary date thereof. Mr. Stringer is paid a base salary of $335,000 per annum and is eligible to receive an annual bonus based upon the achievement of performance targets of up to 75% of his base salary payable 67% in cash and 33% in common stock consisting of 25,000 shares of common stock, subject to certain limitations on the number of shares to be issued. Payment of the annual bonus is subject to the achievement of performance targets established under the Company’s management bonus plan. Mr. Stringer did not receive a bonus in fiscal years 2008 and 2007 because the Compensation Committee did not approve performance targets. Concurrent with the execution of the Stringer Employment Agreement, Mr. Stringer was granted 107,000 options to purchase shares of Company stock and a grant of 20,000 restricted stock units. The Stringer Employment Agreement’s termination related clauses and benefits are described below.

The tables below provide an estimate of the payments that would be made to Mr. Stringer under various termination scenarios. These include voluntary termination, termination by the Company without “cause” or by the executive with “good reason,” and “for cause” termination by the Company. The amounts shown are estimates assuming that such termination was effective as of March 31, 2008. The actual amounts to be paid can only be determined at the time of such executive’s termination of employment from the Company.

			Involuntary
Steven Stringer - Executive			Termination
Benefits and Payments on	Voluntary		Without Cause or		For Cause
Termination	Termination		for Good Reason		Termination
Severance Payments	$	0	$	586,250	$	0
Post Termination Employee Benefits		0		35,844		0
Acceleration of Equity Awards (1)		0		306,855		0
	$	0	$	928,949	$	0

All Other Named Executive Officers.

Steve Stringer. We entered into an employment agreement dated October 1, 2004 with Mr. Stringer which agreement was superseded by an agreement dated August 10, 2006 (the “Stringer Employment Agreement”), to employ Mr. Stringer as our President and Chief Operating Officer. The Stringer Employment Agreement has an initial term ending December 31, 2009 (the “Initial Term Date”). On the Initial Term Date and each subsequent anniversary of the Initial Term Date, the term of the agreement shall automatically be extended for an additional period of twelve (12) months; provided, however, that either party may elect not to extend the agreement by giving written notice to the other party at least twelve (12) months prior to the Initial Term Date or any anniversary date thereof. The Stringer Employment Agreement as amended provided that Mr. Stringer be paid a base salary of $335,000 per annum and he was eligible to receive an annual bonus based upon the achievement of performance targets of up to 75% of his base salary payable 67% in cash and 33% in common stock consisting of 1,666 shares of common stock, subject to certain limitations on the number of shares to be issued. Payment of the annual bonus is subject to the achievement of performance targets established under the Company’s management bonus plan. Concurrent with the execution of the Stringer Employment Agreement, Mr. Stringer was granted 7,133 options to purchase shares of Company stock and a grant of 1,333 restricted stock units. On June 30, 2008, the Compensation Committee approved an amendment to the Stringer Employment Agreement whereby Mr. Stringer is to be paid (i) an annual salary of $400,000 effective July 1, 2008 and (ii) cash bonuses of up to $200,000 provided the Company achieves certain EBITDA targets in the 2009 fiscal year. Mr. Stringer did not receive a bonus in fiscal years 2009 and 2008 because the Company did not achieve its performance targets. Mr. Stringer was named Chief Executive Officer of the Company on August 12, 2008 and was appointed Principal Financial Officer of the Company on June 15, 2009.

The Stringer Employment Agreement’s termination related clauses and benefits are described below. The tables below provide an estimate of the payments that would be made to Mr. Stringer under various termination scenarios. These include voluntary termination, termination by the Company without “cause” or by the executive with “good reason,” and “for cause” termination by the Company. The amounts shown are estimates assuming that such termination was effective as of March 31, 2009. The actual amounts to be paid can only be determined at the time of such executive’s termination of employment from the Company.


Steven Stringer - Executive Benefits and Payments on Termination	Voluntary Termination		Involuntary Termination Without Cause, due to Death or Disability, or for Good Reason		For Cause Termination

Severance Payments	$	0	$	400,000	$	0
Post Termination Employee Benefits		0		20,520		0
Acceleration of Equity Awards (1)		0		102,310		0

	$	0	$	522,830	$	0

(1) Represents the dollar amount recognized for financial statement reporting purposes in accordance with SFAS No. 123(R).

In the event of a termination of Mr. Stringer’s employment during the term of the Stringer Employment Agreement by the Company without “cause” or by Mr. Stringer for “good reason” or as a result of his death or permanent and total disability, the Company agreed to provide to Mr. Stringer (or his legal representative):

A continuance of his salary at one hundred percent (100%) of his then current base salary, for a period equal to the greater of (i) one year from the date of termination of Mr. Stringer’s employment or (ii) the period ending on the Initial Term Date (the “Severance Period”).


	•	A continuance of his salary at one hundred percent (100%) of his then current base salary, for a period equal to the greater of (i) one year from the date of termination of Mr. Stringer’s employment or (ii) the period ending on the Initial Term Date (the “Severance Period”).

	•	Subject to certain limitations, during the Severance Period, Mr. Stringer will be entitled to a continuance of coverage under all health, life, disability and similar employee benefit plans and programs on the same basis as he was entitled to participate immediately prior to the commencement of the Severance Period.

Subject to certain limitations, during the Severance Period, Mr. Stringer will be entitled to a continuance of coverage under all health, life, disability and similar employee benefit plans and programs on the same basis as he was entitled to participate immediately prior to the commencement of the Severance Period.

Additionally, the impact of Mr. Stringer’s termination of employment on the stock options or other equity incentives held by him (including the maximum period that any such option or other equity incentive shall remain exercisable) shall be governed by the applicable equity incentive plan and agreement. All stock options and other equity incentives granted to Mr. Stringer provide that, upon termination of his employment by the Company other than for “cause” or by him for “good reason”, any unvested shares subject to such options or other equity incentives shall become fully vested and immediately exercisable in connection with such termination.

In connection with any termination by the Company other than for “cause” or by Mr. Stringer for “good reason” or as a result of his death or permanent and total disability the Company is required to execute a release and waiver of claims in favor of Mr. Stringer, as consideration for the execution and non-revocation by Mr. Stringer of a release agreement in favor of the Company and its shareholders and their respective directors, officers and employees. The foregoing payments shall be in lieu of any other severance benefits to which Mr. Stringer is entitled pursuant to any other severance plans, programs, arrangements, or policies of the Company.

In the event that Mr. Stringer’s employment with the Company is terminated during the term of the Stringer Employment Agreement by the Company for “cause”, or by Mr. Stringer other than for “good reason”, the Company will pay to him (or his legal representative) any earned but unpaid salary amounts and any unreimbursed expenses through his final date of employment with the Company, and the Company shall have no further obligations to him.

The foregoing payments are in lieu of any other severance benefits to which Mr. Stringer is entitled pursuant to any other severance plans, programs, arrangements, or policies of the Company.

During the term of the Stringer Employment Agreement and for a period of: (i) two years thereafter upon Mr. Stringer’s non-renewal of that agreement, (ii) one year thereafter upon the Company’s non-renewal of that agreement, or (iii) two years thereafter upon termination of employment by either Mr. Stringer or the Company for any reason other than non-renewal, Mr. Stringer is prohibited from engaging in any Business Activities on behalf of any person, firm or corporation, and, subject to certain limitations, he shall not acquire any financial interest in any entity which engages in Business Activities within 200 miles of any of the Company’s offices in operation on the commencement date of the Stringer Employment Agreement and within 100 miles of any office of the Company established after such commencement date. During the period that the foregoing non-competition restriction applies, Mr. Stringer shall not, without the written consent of the Company: (i) solicit any employee of the Company or any of the Company’s affiliates to terminate his employment, or (ii) solicit any customers, partners, resellers, vendors or suppliers of the Company on behalf of any individual or entity other than the Company or its affiliates. “Business Activities” means conduct of business as a computer and communications technology management and/or consulting business providing information technology networking and data center services, including secure access, VOIP, storage, security, messaging solutions, network and mainframe connectivity consulting, remote network monitoring and management, network and system diagnostics, product maintenance and support, training, and product procurement solutions.

~~J.W.~~During ~~Braukman~~the ~~III.~~term Weof ~~entered~~the ~~into~~Stringer Employment Agreement and for a ~~letter~~period ~~agreement~~of: ~~with~~(i) two years thereafter upon Mr. ~~Braukman~~Stringer’s ~~dated~~non-renewal of ~~September~~that 12agreement, ~~2006,~~(ii) ~~which~~one ~~was~~year ~~amended~~thereafter byupon anthe ~~agreement~~Company’s ~~dated~~non-renewal ~~September~~of that 28agreement, ~~2006~~or (~~the~~iii) ~~“Braukman~~two ~~Agreement”),~~years tothereafter ~~employ~~upon termination of employment by either Mr. ~~Braukman~~Stringer asor ~~our~~the ~~Senior~~Company ~~Vice~~for ~~President~~any ~~and~~reason ~~Chief~~other ~~Financial~~than ~~Officer~~non-renewal, atMr. Stringer ais ~~base~~prohibited ~~salary~~from engaging in any Business Activities on behalf of any ~~$260~~person,~~000~~ ~~per~~firm ~~annum.~~or ~~Mr.~~corporation, ~~Braukman~~and, issubject ~~eligible~~ to ~~receive~~certain alimitations, ~~bonus~~he toshall not beacquire ~~determined~~any byfinancial interest in any entity which engages in Business Activities within 200 miles of any of the ~~Board~~Company’s offices in operation on the commencement date of ~~Directors~~the Stringer Employment Agreement and ~~the~~within ~~Compensation~~100 ~~Committee~~miles ~~consistent~~of any ~~with~~office ~~our~~of ~~management~~the ~~bonus~~Company ~~plan~~established after such commencement date. During the period that the foregoing non-competition restriction applies, Mr. ~~Braukman~~Stringer shall ~~did~~ not, ~~receive~~without athe ~~bonus~~written inconsent ~~fiscal~~of ~~years~~the ~~2008~~Company: ~~and~~(i) ~~2007.~~solicit ~~Concurrent~~any ~~with~~employee of the ~~execution~~Company or any of the ~~Braukmant~~Company’s ~~Agreement~~affiliates to terminate his employment, or ~~Mr.~~(ii) ~~Braukman~~solicit ~~was~~any ~~granted~~customers, ~~250~~partners,~~000~~ ~~options~~resellers, tovendors ~~purchase~~or ~~shares~~suppliers of the Company ~~stock~~on ~~and~~behalf aof ~~grant~~any individual or entity other than the Company or its affiliates. “Business Activities” means conduct of 35business as a computer and communications technology management and/or consulting business providing information technology networking and data center services,~~000~~ ~~restricted~~including ~~stock~~secure access, ~~units.~~VOIP, ~~The~~storage, ~~Braukman~~security, ~~Agreement’s~~messaging ~~termination~~solutions, ~~related~~network ~~clauses~~and mainframe connectivity consulting, remote network monitoring and ~~benefits~~management, ~~are~~network ~~described~~and system ~~below.~~diagnostics, product maintenance and support, training, and product procurement solutions.

~~The~~J.W. ~~tables~~Braukman ~~below~~III. We ~~provide~~entered aninto ~~estimate~~a ofletter ~~the~~agreement ~~payments~~with ~~that~~Mr. ~~would~~Braukman bedated ~~made~~September 12, 2006, which was amended by an agreement dated September 28, 2006 (the “Braukman Agreement”), to employ Mr. Braukman ~~under~~as ~~various~~our ~~termination~~Senior ~~scenarios.~~Vice ~~These~~President ~~include~~and ~~voluntary~~Chief Financial ~~termination~~Officer at a base salary of $260,000 ~~termination~~per byannum. ~~the~~Mr. ~~Company~~Braukman ~~without~~is eligible ~~“cause”~~to orreceive a bonus to be determined by the ~~executive~~Board of Directors and the Compensation Committee consistent with ~~“good~~our ~~reason,”~~management ~~and~~bonus ~~“for~~plan. ~~cause”~~Concurrent with ~~termination~~the byexecution of the ~~Company~~Braukman Agreement, Mr. ~~The~~Braukman ~~amounts~~was ~~shown~~granted ~~are~~16,666 options ~~estimates~~to ~~assuming~~purchase ~~that~~shares ~~such~~of ~~termination~~Company ~~was~~stock ~~effective~~and asa grant of ~~March~~2,333 31restricted stock units. On June 30, 2008., ~~The~~the ~~actual~~Compensation ~~amounts~~Committee approved an amendment to bethe ~~paid~~Braukman ~~can~~Agreement ~~only~~whereby Mr. Braukman is to be ~~determined~~paid at(i) ~~the~~an ~~time~~annual salary of ~~such~~$300,000 ~~executive’s~~effective ~~termination~~July 1, 2008 and (ii) cash bonuses of ~~employment~~up ~~from~~$50,000 provided the Company achieves certain EBITDA targets in the 2009 fiscal year. Mr. Braukman did not receive a bonus in fiscal years 2009 and 2008 because the Company did not achieve its performance targets. In late May 2009, the Company was advised that Mr. Braukman would be taking a leave of absence for medical reasons.

			Involuntary
Jay Braukman - Executive			Termination
Benefits and Payments on	Voluntary		Without Cause or		For Cause
Termination	Termination		for Good Reason		Termination
Severance Payments	$	0	$	260,000	$	0
Post Termination Employee Benefits		0		15,363		0
Acceleration of Equity Awards (1)		0		259,443		0
	$	0	$	534,806	$	0

The Braukman Agreement’s termination related clauses and benefits are described below. The tables below provide an estimate of the payments that would be made to Mr. Braukman under various termination scenarios. These include voluntary termination, termination by the Company without “cause” or by the executive with “good reason,” and “for cause” termination by the Company. The amounts shown are estimates assuming that such termination was effective as of March 31, 2009. The actual amounts to be paid can only be determined at the time of such executive’s termination of employment from the Company.

(1) Represents the dollar amount recognized for financial statement reporting purposes in accordance with SFAS 123R.


Jay Braukman - Executive Benefits and Payments on Termination	Voluntary Termination		Involuntary Termination Without Cause, due to Death or Disability, or for Good Reason		For Cause Termination

Severance Payments	$	0	$	300,000	$	0
Post Termination Employee Benefits		0		14,208		0
Acceleration of Equity Awards (1)		0		155,671		0

	$	0	$	469,879	$	0

(1) Represents the dollar amount recognized for financial statement reporting purposes in accordance with SFAS No. 123(R).

In the event of a termination of Mr. Braukman’s employment on or before the fourth anniversary date of the Braukman Agreement by the Company without “cause” or by Mr. Braukman for “good reason” or as a result of his death or permanent and total disability, the Company agreed to provide to Mr. Braukman (or his legal representative):

A continuance of his salary at one hundred percent (100%) of his then current base salary, for a period equal to one year from the date of termination of Mr. Braukman’s employment (the “Severance Period”).


	•	A continuance of his salary at one hundred percent (100%) of his then current base salary, for a period equal to one year from the date of termination of Mr. Braukman’s employment (the “Severance Period”).

	•	Subject to certain limitations, during the Severance Period, Mr. Braukman will be entitled to a continuance of coverage under all health, life, disability and similar employee benefit plans and programs on the same basis as he was entitled to participate immediately prior to the commencement of the Severance Period.

Subject to certain limitations, during the Severance Period, Mr. Braukman will be entitled to a continuance of coverage under all health, life, disability and similar employee benefit plans and programs on the same basis as he was entitled to participate immediately prior to the commencement of the Severance Period.

Additionally, the impact of Mr. Braukman’s termination of employment on the stock options or other equity incentives held by him (including the maximum period that any such option or other equity incentive shall remain exercisable) shall be governed by the applicable equity incentive plan and agreement. All stock options and other equity incentives granted to Mr. Braukman provide that, upon termination of his employment by the Company other than for “cause” or by him for “good reason”, any unvested shares subject to such options or other equity incentives shall become fully vested and immediately exercisable in connection with such termination.

In connection with any termination by the Company other than for “cause” or by Mr. Braukman for “good reason” or as a result of his death or permanent and total disability the Company is required to execute a release and waiver of claims in favor of Mr. Braukman, as consideration for the execution and non-revocation by Mr. Braukman of a release agreement in favor of the Company and its shareholders and their respective directors, officers and employees. The foregoing payments shall be in lieu of any other severance benefits to which Mr. Braukman is entitled pursuant to any other severance plans, programs, arrangements, or policies of the Company.

In the event that Mr. Braukman’s employment with the Company is terminated by the Company for “cause”, or by Mr. Braukman other than for “good reason”, the Company shall pay to him (or his legal representative) any earned but unpaid salary amounts and any unreimbursed expenses through his final date of employment with the Company, and the Company shall have no further obligations to him.

The foregoing payments are in lieu of any other severance benefits to which Mr. ~~Stringer~~Braukman is entitled pursuant to any other severance plans, programs, arrangements, or policies of the Company.

During the term of Mr. Braukman’s employment and for a period of: (i) two years following Mr. Braukman’s termination of his employment or (ii) one year following the Company’s termination of his employment, Mr. Braukman is prohibited from engaging in any Business Activities on behalf of any person, firm or corporation, and, subject to certain limitations, he shall not acquire any financial interest in any entity which engages in Business Activities within 200 miles of any of the Company’s offices in operation on the commencement date of the Braukman Employment Agreement and within 100 miles of any office of the Company established after such commencement date. During the period that the foregoing non-competition restriction applies, Mr. Braukman shall not, without the written consent of the Company: (i) solicit any employee of the Company or any of the Company’s affiliates to terminate his employment, or (ii) solicit any customers, partners, rese llers, vendors or suppliers of the Company on behalf of any individual or entity other than the Company or its affiliates. “Business Activities” means conduct of business as a computer and communications technology management and/or consulting business providing information technology networking and data center services, including secure access, VOIP, storage, security, messaging solutions, network and mainframe connectivity consulting, remote network monitoring and management, network and system diagnostics, product maintenance and support, training, and product procurement solutions.

~~Outstanding~~During ~~Equity~~the ~~Awards~~term atof ~~Fiscal~~Mr. ~~2008~~Braukman’s ~~Year~~employment ~~End~~ and for a period of: (i) two years following Mr. Braukman’s termination of his employment or (ii) one year following the Company’s termination of his employment, Mr. Braukman is prohibited from engaging in any Business Activities on behalf of any person, firm or corporation, and, subject to certain limitations, he shall not acquire any financial interest in any entity which engages in Business Activities within 200 miles of any of the Company’s offices in operation on the commencement date of the Braukman Employment Agreement and within 100 miles of any office of the Company established after such commencement date. During the period that the foregoing non-competition restriction applies, Mr. Braukman shall not, without the written consent of the Company: (i) solicit any employee of the Company or any of the Company’s affiliates to terminate his employment, or (ii) solicit any customers, partners, resellers, vendors or suppliers of the Company on behalf of any individual or entity other than the Company or its affiliates. “Business Activities” means conduct of business as a computer and communications technology management and/or consulting business providing information technology networking and data center services, including secure access, VOIP, storage, security, messaging solutions, network and mainframe connectivity consulting, remote network monitoring and management, network and system diagnostics, product maintenance and support, training, and product procurement solutions.

	Option Awards						Stock Awards
									Market
									Value
									of Shares or
							Number of		Units of
				Option			Shares or Units of		Stock
				Exercise		Option	Stock That		That Have
	Number of Securities Underlying			Price		Expiration	Have Not Vested		Not
	Unexercised Options (#)			($)		Date	(#)		Vested (1)
Name	Exercisable	Unexercisable
Francis J. Alfano (2)	400,000	0		$	2.15	5/20/2014
	64,000	0		$	4.05	4/15/2015
	200,000	0		$	3.54	6/28/2016
Steven Stringer	170,208	44,792	(3)	$	2.87	11/2/2014	40,000	(4)	$	16,800
	23,600	23,600	(5)	$	4.05	4/15/2015	5,900	(6)	$	2,478
	26,750	80,250	(7)	$	3.03	8/10/2016	15,000	(8)	$	6,300
J.W. Braukman III	62,500	187,500	(9)	$	2.20	9/28/2016	26,250	(10)	$	11,025

Outstanding Equity Awards at Fiscal 2009 Year End

(1)	Market value is calculated by multiplying the closing market price of the Company’s common stock as of March 31, 2008 by the number of unvested restricted stock units.
		Option Awards									Stock Awards
(2)	The vesting and exercisability of all options and restricted stock units held by Mr. Alfano was accelerated in connection with the termination of his employment with the Company in April 2007.
		Number of Securities Underlying Unexercised Options (#)					Option Exercise Price ($)		Option Expiration Date		Number of Shares or Units of Stock That Have Not Vested (#)			Market Value of Shares or Units of Stock That Have Not Vested (1)
(3)	The remaining options vest on November 2, 2008.
Name		Exercisable		Unexercisable
(4)	All restricted stock units vest on November 2, 2009, provided that vesting will accelerate in the event that the Company’s common stock trades at $10 or higher for any thirty trading days within a sixty trading day period.
Steven Stringer			14,333				$	43.05		11/2/2014
(5)	11,800 options vest on April 15, 2008, and 2009, respectively.
			2,360		786	(2)	$	60.75		4/15/2015
(6)	All restricted stock units vest on April 15, 2010, provided that vesting will accelerate in the event that the Company’s common stock trades at $10 or higher for any thirty trading days within a sixty trading day period.
			3,566		3,567	(3)	$	45.45		8/10/2016
(7)	26,750 options vest on August 10, 2008, 2009 and 2010, respectively.
												2,666	(4)	$	1,466
(8)	5,000 restricted stock units vest on August 10, 2008, 2009 and 2010, respectively.
												393	(5)	$	216
(9)	62,500 options vest on September 28, 2008, 2009, 2010, respectively.
												667	(6)	$	367
(10)	8,750 restricted stock units vest on September 28, 2008, 2009, 2010, respectively
J.W. Braukman III			8,332		8,334	(7)	$	33.00
										9/28/2016		1,167	(8)	$	642
Stephen Hicks (9)			1,250



(1)	Market value is calculated by multiplying the adjusted closing market price of the Company’s common stock as of March 31, 2009 by the number of unvested restricted stock units.

(2)	The remaining 786 options vest on April 15, 2009.

(3)	1,783 options vest on August 10, 2009 and 1,784 options vest on August 10, 2010.

(4)	All restricted stock units vest on November 2, 2009, provided that vesting will accelerate in the event that the Company’s common stock trades at $150 or higher for any thirty trading days within a sixty trading day period.

(5)	All restricted stock units vest on April 15, 2010, provided that vesting will accelerate in the event that the Company’s common stock trades at $150 or higher for any thirty trading days within a sixty trading day period.

(6)	333 restricted stock units vest on August 10, 2009 and 334 restricted stock units vest on August 10, 2010.

(7)	4,166 options vest on September 28, 2009 and 4,168 options vest on September 28, 2010.

(8)	583 restricted stock units vest on September 28, 2009 and 584 restricted stock units vest on September 28, 2010.

(9)	3,750 unvested options were cancelled upon Mr. Hick’s resignation with the Company, effective February 16, 2009. Mr. Hicks 1,250 vested options remain exercisable until May 16, 2009 in accordance with the termination provisions of the 2004 Plan.

Outstanding Equity Awards at Fiscal Year End Table Narrative.

The outstanding options listed under “Option Awards” primarily relate to options granted under the 2004 Equity Incentive Plan pursuant to option agreements, the principal terms of which are disclosed in the table.

The outstanding awards listed under “Stock Awards” primarily relate to restricted stock units under the 2004 Equity Incentive Plan pursuant to restricted stock unit agreements, the principal terms of which are disclosed in the table.

Accelerated Vesting of Equity Awards.

The applicable award agreement governing the outstanding equity awards may accelerate vesting in connection with a termination of employment, change in control, or other specified events.

~~Options~~Director ~~Exercised~~Compensation ~~and~~for ~~Stock Vested Table During~~ Fiscal ~~year~~Year ~~2008~~ 2009

	Stock Awards
	Number of Shares
	Acquired on	Value Realized
Name	Vesting #	on Vesting ($)(1)
Francis J. Alfano (2)	8,000	$	9,440
Steven Stringer	5,000	$	4,600
J.W. Braukman III	8,750	$	9,100

The following table shows the cash paid to each non-employee director for services rendered in that capacity during the fiscal year ended March 31, 2009.

Options Exercised and Stock Vested Table Narrative.


Name	Fees Earned or Cash Paid		Stock Awards(5)		Option Awards		Total

Arnold J. Wasserman (1)	$	32,500		6,150		N/A	$	38,650
Alvin E. Nashman (2)	$	30,000		6,150			$	36,150
William Lerner (3)	$	33,500		6,150			$	39,650
Keith B. Hall (4)	$	27,500		16,400			$	43,900

(1)	Represents the market value of a share of our common stock the date of vesting multiplied by the number of shares that have vested.
(2)	The vesting of all 414,667 unvested stock options and 8,000 restricted stock units held by Mr. Alfano were accelerated following the end of the 2007 fiscal year in connection with the termination of his employment with the Company. Mr. Alfano realized $9,440 in income on April 26, 2007 in connection with the vesting of his restricted stock units.

(1) As of March 31, 2009, Mr. Wasserman held options to purchase 6,532 shares of common stock. These options were fully vested prior to fiscal 2009.

~~Director~~(2) ~~Compensation~~As ~~for~~of March ~~Fiscal~~31, ~~Year~~2009, ~~2008~~Dr. Nashman held options to purchase 5,032 shares of common stock. These options were fully vested prior to fiscal 2009.

~~The~~(3) ~~following~~As ~~table~~of March ~~shows~~31, ~~the~~2009, ~~cash~~Mr. ~~paid~~Lerner toheld ~~each~~options ~~non-employee~~to ~~director~~purchase ~~for~~5,032 ~~services~~shares ~~rendered~~of incommon stock. ~~that~~These ~~capacity~~options ~~during~~were ~~the~~fully ~~fiscal~~vested ~~year~~prior ~~ended~~to ~~March~~fiscal ~~31, 2008~~2009.

	Fees
	Earned
	or Cash		Stock	Option
Name	Paid		Awards	Awards	Total
Arnold J. Wasserman (1)	$	32,500	N/A	N/A	$	32,500
Alvin E. Nashman (2)	$	30,000			$	30,000
William Lerner (3)	$	33,500			$	33,500
Keith B. Hall (4)	$	4,583			$	4,583

(4) Mr. Hall became a director on February 8, 2008.

(1)	As of March 31, 2008, Mr. Wasserman held options to purchase 98,000 shares of common stock. These options were fully vested prior to fiscal 2008.
(2)	As of March 31, 2008, Dr. Nashman held options to purchase 85,500 shares of common stock. These options were fully vested prior to fiscal 2008.
(3)	As of March 31, 2008, Mr. Lerner held options to purchase 75,500 shares of common stock. These options were fully vested prior to fiscal 2008.
(4)	Mr. Hall became a director on February 8, 2008.

(5) On April 2, 2008 each non-employee director was awarded 1,000 shares of common stock. Mr. Hall was awarded an additional 1,666 shares of common stock upon his initial appointment to the Board of Directors. The shares were fully vested at the date of grant.

Director Compensation Table Narrative

The “Fees Earned or Cash Paid” column includes the aggregate of all fees earned or paid in cash for services as a director, including annual retainer fees, committee and/or chairman fees, and meeting fees.

~~Directors~~The ~~who~~“Stock Awards” ~~are~~column ~~employees~~reports of the ~~Company~~dollar oramount ~~who~~recognized ~~are~~for ~~designated~~financial asstatement reporting apurposes ~~director by Pequot or Constellation, receive no compensation~~ for ~~their~~the ~~service~~applicable asfiscal ~~directors. As a result~~year, wein ~~did~~accordance ~~not~~with ~~pay~~SFAS ~~any compensation to Mr~~No. ~~Poch~~ 123(R), ~~Mr. Phillips, or Mr. Thomas Wasserman~~ for ~~serving~~common onstock ~~our~~awards ~~Board~~in offiscal ~~Directors~~2009.

Directors who are employees of the Company or who are designated as a director by FirstMark Capital or Constellation, receive no compensation for their service as directors. As a result, we did not pay any compensation to Mr. Poch, Mr. Phillips, or Mr. Thomas Wasserman for serving on our Board of Directors.

Director Fees

Each director who is not an employee of our Company or who is not appointed to the Board of Directors by either ~~Pequot~~FirstMark Capital or Constellation receives an annual fee of $25,000 as compensation for serving on our Board of Directors. Each such member of the board’s Audit, Compensation and Corporate Governance and Nominating Committees receives $2,500 per year, and each chairman of the committees receives $3,500 (except the chairman of the Audit Committee who receives $5,000), as compensation for serving on such committees. Effective April 2, 2008, non-employee directors who are not appointed to the Board of Directors by either ~~Pequot~~FirstMark Capital or Constellation are also granted stock awards of 251,~~000~~666 shares of common stock on their initial appointment or election to the Board of Directors. Beginning in January 2009 and each year thereafter these directors will be granted a stock award of shares of common stock in an amount to be determined by the Board. The Board of Directors waived its right to make such an award for January 2009.

The Company does not provide non-equity plan compensation or pension benefits to directors; nor does it provide any deferred compensation programs for directors.

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholders Matters

Our Current Beneficial Owners

Our Series A-1 Preferred Stock, Series A-2 Preferred Stock, Series A-3 Preferred Stock, Series A-4 Preferred Stock, Series A-5 Preferred Stock, Series A-6 Preferred Stock, Series A-7 Preferred Stock, ~~and~~ Series A-8 Preferred Stock, Series A-9 Preferred Stock, Series A-10 Preferred Stock, Series A-11 Preferred Stock and Series A-12 Preferred Stock (collectively referred to as the “Series A Preferred Stock”) and common ~~Common~~stock ~~Stock~~ are the only classes of our voting securities presently outstanding. The Series A Preferred Stock votes on an as converted basis, such that the holder of each share of Series A Preferred Stock is entitled to ~~that~~ a number of votes asequal ~~equals~~to the number of shares of ~~Common~~common ~~Stock~~stock that the holder of such share of Series A Preferred Stock would receive upon conversion of the share of Series A Preferred Stock, provided that (i) for the shares of the Series A-1, A-2, and A-3 Preferred Stock, such number of votes shall not exceed such number of shares of ~~Common~~common ~~Stock~~stock which would be received ~~based~~if onthe a conversion price ofwere $128.459425 per preferred share (subject to appropriate adjustment for stock splits, stock dividends, combinations and other similar recapitalizations affecting such shares), (ii) for the shares of the Series A-4, A-5, A-6, and A-7 Preferred Stock, such number of votes shall not exceed one-fifteenth vote per share, ~~and~~ (iii) for the shares of the Series A-8 Preferred Stock, such number of votes shall be one vote ~~per~~for each share of ~~Common~~common stock which would be received if the conversion price were $17.655 per share (subject to appropriate adjustment for stock splits, stock dividends, combinations and other similar recapitalizations affecting such shares), (iv) for the shares of the Series A-9 Preferred Stock, ~~into~~such number of votes shall be one vote for each share of common stock which would be received if the conversion price were $8.415 per share (subject to appropriate adjustment for stock splits, stock dividends, combinations and other similar recapitalizations affecting such shares), (v) for the shares of the Series A-810 Preferred Stock, ~~held~~such bynumber ~~such~~of ~~holder~~votes shall be one vote for each share of common stock which would be ~~converted~~received if the conversion price were $4.95 per share (subject to appropriate adjustment for stock splits, stock dividends, combinations and other similar recapitalizations affecting such shares), (vi) for the shares of the Series A-811 Preferred Stock, such number of votes shall be one vote for each share of common stock which would be received if the conversion price were $15.~~177~~115 per share (subject to appropriate adjustment for stock splits, stock dividends, combinations and other similar recapitalizations affecting such shares), and (vii) for the shares of the Series A-12 Preferred Stock, such number of votes shall be one vote for each share of common stock which would be received if the conversion price were $0.638 per share (subject to appropriate adjustment for stock splits, stock dividends, combinations and other similar recapitalizations affecting such shares).

The ~~following~~Company has ~~table~~authorized ~~sets~~and ~~forth~~designated asSeries A-9, Series A-10, Series A-11 and Series A-12 Preferred Stock. No Preferred Stock from Series A-9 through Series A-12 is outstanding, but the Company has issued Preferred Stock warrants for each of these ~~May~~Series 31of Preferred Stock. Series A-9 Preferred Stock became effective and the warrants exercisable upon the filing of the Fourth Restated Certificate of Incorporation on June 25, 2008. In addition, the ~~beneficial~~Series ~~ownership~~A-10, A-11 and A-12 Preferred Stock became effective, and the warrants exercisable, upon the filing of the ~~following~~Fifth ~~persons:~~Restated Certificate of Incorporation on February 17, 2009.

~~each~~The ~~person~~following table ~~known~~sets byforth usas ~~to beneficially own 5% or more~~ of ~~our~~May ~~Series A Preferred Stock and/or our common stock~~31, ~~based~~2009 ~~on filings with~~ the ~~SEC~~beneficial ~~and~~ownership ~~certain~~of ~~other~~the ~~information;~~following persons:

• each person known by us to beneficially own 5% or more of our Series A Preferred Stock and/or our common stock, based on filings with the SEC and certain other information; • each of our “named executive officers” and directors; and • all of our executive officers and directors as a group.

~~all~~Beneficial ownership is determined in accordance with the rules of ~~our~~the SEC and includes voting and investment power. In addition, under SEC rules, a person is deemed to be the beneficial owner of securities which may be acquired by such person upon the exercise of options and warrants or the conversion of convertible securities within 60 days from the date on which beneficial ownership is to be determined. Our “named executive officers,” in accordance with SEC rules, are those executive officers who are required to be listed in the Summary Compensation Table provided in Item 11 of this Annual Report on Form 10-K. Except as otherwise indicated in the notes to the Beneficial Ownership Table, we believe that all shares are beneficially owned, and ~~directors~~investment and voting power is held by, the persons named as aowners; ~~group~~and the address for each beneficial owner listed in the table, except where otherwise noted, is MTM Technologies, Inc., 1200 High Ridge Road, Stamford, Connecticut 06905.

Beneficial ownership is determined in accordance with the rules of the SEC and includes voting and investment power. In addition, under SEC rules, a person is deemed to be the beneficial owner of securities which may be acquired by such person upon the exercise of options and warrants or the conversion of convertible securities within 60 days from the date on which beneficial ownership is to be determined. Our “named executive officers,” in accordance with SEC rules, are those executive officers who are required to be listed in the Summary Compensation Table provided in Item 11 of this Annual Report on Form 10-K. Except as otherwise indicated in the notes to the Beneficial Ownership Table, we believe that all shares are beneficially owned, and investment and voting power is held by, the persons named as owners; and the address for each beneficial owner listed in the table, except where otherwise noted, is MTM Technologies, Inc., 1200 High Ridge Road, Stamford, Connecticut 06905.


	Series A Preferred Stock				Common Stock

Name of Shareholder	Amount and Nature of Beneficial Ownership		Percentage of Outstanding Shares		Amount and Nature of Beneficial Ownership		Percentage of Outstanding Shares

FirstMark Capital (1)	26,451,323	(2)	78.4	%	3,820,423	(3)	71.2	%
Gerald A. Poch (4)	26,451,323	(5)	78.4	%	3,827,756	(6)	71.3	%
Constellation (7)	7,308,978	(8)	21.6	%	697,545	(9)	14.1	%
Arnold Wasserman	0		0.0	%	10,048	(10)	0.2	%
William Lerner	0		0.0	%	6,848	(11)	0.1	%
Alvin E. Nashman	0		0.0	%	7,815	(12)	0.2	%
Steven Stringer	0		0.0	%	21,711	(13)	0.4	%
J.W. Braukman III	0		0.0	%	9,498	(14)	0.2	%
Keith B. Hall	0		0.0	%	2,666		0.1	%
Sterling Phillips (15)	0	(16)	0.0	%	0	(17)	0.0	%
Thomas Wasserman (18)	0	(19)	0.0	%	0	(20)	0.0	%

All directors and executive officers as a group (9 persons)	26,451,323	(21)	78.4	%	3,886,342	(22)	71.7	%

~~The~~ ~~following~~(footnotes ~~table~~on ~~does not include~~ the ~~Series~~next A-9 Preferred Stock to be designated upon filing of a Restated Certificate that will be filed in connection with the our reverse stock split, however, the following table does include the anti-dilution effects of the issuance of the Series A-9 Preferred Stock. As of May 31, 2008, Pequot holds warrants to purchase 392,157 shares of our Series A-9 Preferred Stock that will become exercisable upon filing of a Restated Certificate.page)

		Series A Preferred Stock				Common Stock
(1)	According to a Schedule 13D filed with the SEC on August 25, 2008, effective August 20, 2008, FirstMark Capital, L.L.C., a Delaware limited liability company (“FirstMark Capital”), became the investment manager of certain funds formerly managed by Pequot Capital Management Inc. These funds included Pequot Private Equity Fund III, L.P. and Pequot Offshore Private Equity Partners III, L.P. now known as FirstMark III L.P. (“FirstMark Fund”) and FirstMark III Offshore Partners, L.P. (“FirstMark Offshore Partners” together with FirstMark Fund, “FirstMark”), respectively. Gerald Poch is Chairman & Managing Director of FirstMark and Sterling Phillips is a Venture Partner at FirstMark. Gerald A. Poch, the chairman of our Board of Directors since May 21, 2004, and Sterling Phillips, one of our directors since April 2, 2008, disclaim beneficial ownership over the shares held by FirstMark Capital, except to the extent of their pecuniary interest. The address for FirstMark, as well as the FirstMark Fund and FirstMark Offshore Partners, is 1221 Avenue of the Americas, New York, NY 10020.
		Amount and Nature		Percentage of		Amount and Nature		Percentage of
(2)	Represents (a) ownership of the following Series of Preferred Stock:
		of Beneficial		Outstanding		of Beneficial		Outstanding
Name of Shareholder		Ownership		Shares		Ownership		Shares
Pequot Capital Management, Inc. (1)		24,075,275	(2)	78.1	%	42,007,146	(3)	75.7	%
Gerald A. Poch (4)		24,075,275	(5)	78.1	%	42,117,146	(6)	75.9	%
Constellation Group (7)		6,768,351	(8)	21.9	%	9,571,596	(9)	41.6	%
Clifford Rucker (10)		0		0.0	%	3,377,566		25.1	%
Howard A. Pavony		0		0.0	%	795,656	(11)	5.9	%
Steven H. Rothman		0		0.0	%	853,303	(12)	6.3	%
Arnold Wasserman		0		0.0	%	150,750	(13)	1.1	%
William Lerner		0		0.0	%	102,250	(14)	0.8	%
Alvin E. Nashman		0		0.0	%	127,250	(15)	0.9	%
Steven Stringer		0		0.0	%	237,358	(16)	1.7	%
J.W. Braukman III		0		0.0	%	71,250	(17)	0.5	%
Keith B. Hall		0		0.0	%	40,000		0.0	%
Sterling Phillips (18)		0	(19)	0.0	%	0	(20)	0.3	%
Thomas Wasserman (21)		0	(22)	0.0	%	0	(23)	0.0	%
Stephen Hicks		0		0.0	%	0	(24)	0.0	%
All directors and executive officers as a group (persons)		30,843,626	(25)	100.0	%	52,417,599	(26)	79.9	%

(1)	According to a Schedule 13D/A filed with the SEC on February 4, 2004, as amended, Pequot Capital Management, Inc. (“Pequot Capital”) is the investment adviser/manager for both the Pequot Fund and Pequot Partners and holds voting and dispositive power over all shares held by such entities. Arthur J. Samberg is the executive officer, director and controlling shareholder of Pequot Capital. Gerald A. Poch, the chairman of our Board of Directors since May 21, 2004, and Sterling Phillips, one of our directors since April 2, 2008, are each employees of Pequot Capital and, along with Mr. Samberg, disclaim beneficial ownership of these securities except to the extent of their pecuniary interest. The address for Pequot Capital, as well as the Pequot Fund and Pequot Partners is 500 Nyala Farm Road, Westport, Connecticut 06880.
Record Holder		Series A-1		Series A-2		Series A-3		Series A-4		Series A-5		Series A-6		Series A-7		Series A-8
(2)	Represents (a) 3,211,188 shares of Series A-1 Preferred Stock owned of record by the Pequot Fund, (b) 452,671 shares of Series A-1 Preferred Stock owned of record by Pequot Partners, (c) 1,972,586 shares of Series A-2 Preferred Stock owned of record by the Pequot Fund, (d) 278,070 shares of Series A-2 Preferred Stock owned of record by Pequot Partners, (e) 1,896,718 shares of Series A-3 Preferred Stock owned of record by Pequot Fund, (f) 267,374 shares of Series A- 3 Preferred Stock owned of record by Pequot Partners, (g) 5,030,772 shares of Series A-4 Preferred Stock owned of record by Pequot Fund, (h) 709,173 shares of Series A-4 Preferred Stock owned of record by Pequot Partners, (i) 2,579,537 shares of Series A-5 Preferred Stock owned of record by Pequot Fund, (j) 363,628 shares of Series A-5 Preferred Stock owned of record by Pequot Partners, (k) 1,893,770 shares of Series A-6 Preferred Stock owned of record by Pequot Fund, (l) 266,959 shares of Series A-6 P referred Stock owned of record by Pequot Partners, (m) 3,488,359 shares of Series A-7 Preferred Stock owned of record by Pequot Fund, (n) 491,744 shares of Series A-7 Preferred Stock owned of record by Pequot Partners, (o) 684,131 shares of Series A-8 Preferred Stock owned of record by Pequot Fund, (p) 96,438 shares of Series A-8 Preferred Stock owned of record by Pequot Partners. Does not include any shares of Series A Preferred Stock that we may issue in lieu of cash dividends on the Series A Preferred Stock for any period after May 21, 2008. Accrual of dividends on the Series A Preferred Stock commenced on May 21, 2006.
FirstMark Fund			3,406,475		2,092,547		2,012,066		5,336,716		2,736,410		2,008,938		3,700,502		725,736
(3)	Represents (a) the maximum 36,713,001 shares of our Common Stock issuable upon conversion of all of the Series A Preferred Stock currently owned of record by Pequot Fund and Pequot Partners, as discussed in note (2) to this Beneficial Ownership Table, which shares are convertible within the 60 days following the date of the Beneficial Ownership Table, (b) 4,640,049 shares of our common stock issuable upon exercise of warrants held of record by the Pequot Fund, which shares are exercisable within the 60 days following the date of this Beneficial Ownership Table, (c) 654,095 shares of our common stock issuable upon exercise of warrants held of record by Pequot Partners, which shares are exercisable within the 60 days following the date of this Beneficial Ownership Table (d) 343,705 shares of our preferred stock issuable upon exercise of warrants held of record by Pequot Fund, which shares will become exercisable within the 60 days following the date of this Benefic ial Ownership Table and (e) 48,452 shares of our preferred stock issuable upon exercise of warrants held of record by Pequot Partners, which shares are exercisable within the 60 days following the date of this Beneficial Ownership Table.. The numbers of shares of our common stock issuable upon conversion of the Series A Preferred Stock and exercise of the warrants which the Pequot Fund and Pequot Partners own of record are subject to anti-dilution adjustment. Does not include any shares of Series A Preferred Stock that we may issue in lieu of cash dividends on the Series A Preferred Stock for any period after May 21, 2008. Accrual of dividends on the Series A Preferred Stock commenced May 21, 2006.
FirstMark Offshore Partners			480,199		294,980		283,634		752,300		385,741		283,193		521,648		102,301
(4)	The address for Mr. Poch is c/o Pequot Capital Management, Inc., 500 Nyala Farm Road, Westport, Connecticut 06880.
(5)	Includes the shares of Series A Preferred Stock beneficially owned by Pequot Capital Management, Inc. (see note (2) to this Beneficial Ownership Table), of which Mr. Poch is a Managing Director. Mr. Poch disclaims beneficial ownership to the Series A Preferred Stock beneficially owned by Pequot Capital Management, Inc., except to the extent of his pecuniary interest therein.
(6)	Represents 110,000 shares of our common stock held by Mr. Poch in his personal account plus the 42,007,146 shares of our common stock beneficially owned by Pequot Capital (see note (3) to this Beneficial Ownership Table), of which Mr. Poch is a Managing Director. Mr. Poch disclaims beneficial ownership to our common stock beneficially owned by Pequot Capital Management, Inc., except to the extent of his pecuniary interest therein.

and (~~footnotes~~b) ~~continued~~the onfollowing ~~next~~Series ~~page)~~A-9 through Series A-12 Preferred Stock warrants which are exercisable within the 60 days following the date of this Beneficial Ownership Table:


	Series A-9	Series A-10	Series A-11	Series A-12

FirstMark Fund	343,705	642,729	56,545	120,889

FirstMark Offshore Partners	48,452	90,604	7,971	17,042

Does not include any shares of Series A Preferred Stock that we may issue in lieu of cash dividends on the Series A Preferred Stock for any period after May 21, 2009. Accrual of dividends on the Series A Preferred Stock commenced on May 21, 2006. (~~footnotes~~3) ~~continued~~Represents ~~from~~(a) ~~previous~~the ~~page~~maximum 3,344,565 shares of our common stock issuable upon conversion of all of the Series A-1 through Series A-8 Preferred Stock currently owned of record by FirstMark Fund and FirstMark Offshore Partners, as discussed in note (2) to this Beneficial Ownership Table, which shares are convertible within the 60 days following the date of the Beneficial Ownership Table, and (b) the following shares of our common stock issuable upon exercise of common stock warrants which shares are exercisable within the 60 days following the date of this Beneficial Ownership Table:

(7)	According to Amendment No. 4 to Schedule 13D filed with the SEC on January 19, 2007 and information provided to us by Constellation, The Bear Stearns Companies Inc. (“BSCI”) is the sole managing member of Constellation Ventures Management II, LLC (“Management”) and the sole stockholder of Bear Stearns Asset Management Inc. (“BSAM”). Management is the sole managing general partner of BSC, the sole general partner of Constellation Venture and the sole general partner of Constellation Offshore. Mr. Clifford H. Friedman, who served on our board of directors from December 7, 2004 to August 9, 2005, is a member of Management and a senior managing director of BSAM. Mr. Thomas Wasserman, who has served as our director since August 9, 2005, is an employee of BSAM. BSAM is the sole managing member of CVC and investment adviser to BSC, Constellation Ventures, Constellation Offshore and CVC. Management, BSAM and Mr. Friedman share investment and voting control of shares beneficially owned by BSC, Constellation Ventures and Constellation Offshore. BSAM exercises sole investment and voting control of shares beneficially owned by CVC. BSCI, Management, BSAM and Mr. Friedman disclaim beneficial ownership over the shares held by BSC, Constellation Ventures, Constellation Offshore and CVC except to the extent of their pecuniary interests therein. The address for each entity and person in the Constellation Group is 383 Madison Avenue, New York, New York 10179.
Record Holder		Common Stock Warrants
(8)	Represents (a) 1,080,391 shares of Series A-3 Preferred Stock owned of record by Constellation Venture, (b) 574,993 shares of Series A-3 Preferred Stock owned of record by Constellation Offshore, (c) 481,786 shares of Series A-3 Preferred Stock owned of record by BSC, (d) 26,978 shares of Series A-3 Preferred Stock owned of record by CVC, (e) 1,542,295 shares of Series A-4 Preferred Stock owned of record by Constellation Venture, (f) 820,737shares of Series A-4 Preferred Stock owned of record by Constellation Offshore, (g) 687,765 shares of Series A-4 Preferred Stock owned of record by BSC, (h) 38,511 shares of Series A-4 Preferred Stock owned of record by CVC, (i) 259,292 shares of Series A-5 Preferred Stock owned of record by Constellation Venture (j) 137,982 shares of Series A-5 Preferred Stock owned of record by Constellation Offshore, (k) 115,626 shares of Series A-5 Preferred Stock owned of record by BSC, (l) 6,473 shares of Series A-5 Preferred Stock owned of record by CVC, (m) 276,465 shares of Series A-6 Preferred Stock owned of record by Constellation Venture, (n) 147,122 shares of Series A-6 Preferred Stock owned of record by Constellation Offshore, (o) 123,285 shares of Series A-6 Preferred Stock owned of record by BSC, (p) 6,902 shares of Series A-6 Preferred Stock owned of record by CVC, (q) 220,568 shares of Series A-7 Preferred Stock owned of record by Constellation Venture, (r) 117,375 shares of Series A-7 Preferred Stock owned of record by Constellation Offshore, (s) 98,358 shares of Series A-7 Preferred Stock owned of record by BSC, and (t) 5,507 shares of Series A-7 Preferred Stock owned of record by CVC. Does not include any shares of Series A Preferred Stock that we may issue in lieu of cash dividends on the Series A Preferred Stock for any period after May 21, 2008. Accrual of dividends on the Series A Preferred Stock commenced May 21, 2006.
FirstMark Fund		195,620
(9)	Represents (a) the maximum 8,299,646 shares of our common stock issuable upon conversion of all of the Series A Preferred Stock currently owned of record by the Constellation Group, as discussed in note (8) to this Beneficial Ownership Table, which shares are convertible within the 60 days following the date of the Beneficial Ownership Table, (b) 635,002 shares of our common stock issuable upon exercise of warrants held of record by Constellation Venture, which shares are exercisable within the 60 days following the date of this Beneficial Ownership Table, (c) 337,918 shares of our common stock issuable upon exercise of warrants held of record by Constellation Offshore, which shares are exercisable within the 60 days following the date of this Beneficial Ownership Table, (d) 283,171 shares of our common stock issuable upon exercise of warrants held of record by BSC, which shares are exercisable within the 60 days following the date of this Beneficial Ownership Table, and (e) 15,858 shares of our common stock issuable upon exercise of warrants held of record by CVC, which shares are exercisable within the 60 days following the date of this Beneficial Ownership Table. The numbers of shares of our common stock issuable upon conversion of the Series A Preferred Stock and exercise of the warrants which the Constellation Group owns of record are subject to anti-dilution adjustment. Does not include any shares of Series A Preferred Stock that we may issue in lieu of cash dividends on the Series A Preferred Stock for any period after May 21, 2008. Accrual of dividends on the Series A Preferred Stock commenced May 21, 2006.
FirstMark Offshore Partners		27,573
(10)	The address for Mr. Rucker is c/o Pappas and Lenzo, 114 Union Wharf, Boston, MA 02109.
(11)	Includes 5,200 shares of our common stock issuable upon exercise of options granted to Mr. Pavony, which are exercisable within the 60 days following the date of this Beneficial Ownership Table.
(12)	Includes 65,200 shares of our common stock issuable upon exercise of options granted to Mr. Rothman, which shares are exercisable within the 60 days following the date of this Beneficial Ownership Table. Does not include 1,125 shares of our common stock held by Mr. Rothman’s spouse.
(13)	Includes 98,000 shares of our common stock issuable upon exercise of options granted to Mr. Wasserman, which are exercisable within the 60 days following the date of this Beneficial Ownership Table.
(14)	Includes 75,500 shares of our common stock issuable upon exercise of options granted to Mr. Lerner, which are exercisable within the 60 days following the date of this Beneficial Ownership Table.
(15)	Includes 85,500 shares of our common stock issuable upon exercise of options granted to Dr. Nashman, which are exercisable within the 60 days following the date of this Beneficial Ownership Table.
(16)	Includes 232,358 shares of our common stock issuable upon exercise of options granted to Mr. Stringer, which are exercisable within 60 days following the date of this Beneficial Ownership Table. Does not include 136,842 shares of our common stock issuable upon exercise of options, which are not exercisable within the 60 days following the date of this Beneficial Ownership Table nor does it include 60,900 restricted stock units which do not vest within the 60 days following the date of the Beneficial Ownership Table.
(17)	Includes 62,500 shares of our common stock issuable upon exercise of options granted to Mr. Braukman which are exercisable within 60 days following the date of this Beneficial Ownership Table. Does not include 187,500 shares of our common stock issuable upon exercise of options granted to Mr. Braukman, which are not exercisable within 60 days following the date of the Beneficial Ownership Table nor does it include 26,250 units which do not vest within 60 days following the date of the Benefit Ownership Table.

and (~~footnotes~~c) ~~continued~~the onfollowing ~~next~~shares ~~page)~~of common stock issuable upon the conversion of Series A-9 through Series A-12 Preferred Stock issuable upon exercise of the Series A-9 through Series A-12 Preferred Stock warrants, which shares are exercisable within the 60 days following the date of this Beneficial Ownership Table:


Record Holder		Series A-9 to Series A-12 Preferred Stock Warrants as converted to Common Stock


FirstMark Fund		221,449

FirstMark Offshore Partners		31,216

(footnotes continued from previous page)


	The number of shares of our common stock issuable upon conversion of the Series A Preferred Stock and the exercise of the warrants which the FirstMark Fund and FirstMark Offshore Partners own of record are subject to an anti-dilution adjustment. Amounts do not include (i) Series A-1 common stock warrants that expired on May 21, 2008; (ii) Series A-2 common stock warrants that expired on September 16, 2008; (iii) Series A-3 common stock warrants that expired on December 7, 2008; and (iv) Series A-4 common stock warrants that expired on December 10, 2008 and on March 11, 2009. Amounts also do not include any shares of Series A Preferred Stock that we may issue in lieu of cash dividends on the Series A Preferred Stock for any period after May 21, 2009. Accrual of dividends on the Series A Preferred Stock commenced May 21, 2006.

(4)	The address for Mr. Poch is c/o FirstMark Capital, 1221 Avenue of the Americas, New York, NY 10020.

(5)	Includes the shares of Series A Preferred Stock beneficially owned by FirstMark Capital (see note (2) to this Beneficial Ownership Table), of which Mr. Poch is a Managing Director. Mr. Poch disclaims beneficial ownership to the Series A Preferred Stock beneficially owned by FirstMark Capital, except to the extent of his pecuniary interest therein.

(6)	Represents 7,333 shares of our common stock held by Mr. Poch in his personal account plus the 3,820,423 shares of our common stock beneficially owned by FirstMark Capital (see note (3) to this Beneficial Ownership Table), of which Mr. Poch is a Managing Director. Mr. Poch disclaims beneficial ownership to our common stock beneficially owned by FirstMark Capital, except to the extent of his pecuniary interest therein.

(18)	The address for Mr. Phillips is c/o Pequot Capital Management, Inc., 500 Nyala Farm Road, Westport, Connecticut 06880.
(19)	Does not include the shares of Series A Preferred Stock beneficially owned by Pequot Capital (see note (2) to this Beneficial Ownership Table), of which Mr. Phillips is a Venture Partner. Mr. Phillips does not have voting power nor investment power with respect to the Series A Preferred Stock beneficially owned by Pequot Capital.
(20)	Does not include the shares of our common stock beneficially owned by Pequot Capital (see note (3) to this Beneficial Ownership Table), of which Mr. Phillips is a Venture Partner. Mr. Phillips does not have voting power nor investment power with respect to our common stock beneficially owned by Pequot Capital.
(21)	The address for Mr. Wasserman is c/o Bear Stearns Asset Management Inc., 383 Madison Avenue, New York, New York 10179.
(22)	Does not include the shares of our Series A Preferred Stock beneficially owned by Constellation Venture, Constellation Offshore, BSC and CVC (see note (8) to this Beneficial Ownership Table). Mr. Wasserman is a Vice President of Constellation Ventures. Mr. Wasserman does not have voting power nor investment power with respect to the Series A Preferred Stock beneficially owned by Constellation Venture, Constellation Offshore, BSC or CVC.
(23)	Does not include the shares of our common stock beneficially owned by Constellation Venture, Constellation Offshore, BSC and CVC (see note (9) to this Beneficial Ownership Table). Mr. Wasserman is a Vice President of Constellation Ventures. Mr. Wasserman does not have voting power nor investment power with respect to the common stock beneficially owned by Constellation Venture, Constellation Offshore, BSC or CVC.
(24)	Does not include 75,000 shares of our common stock issuable upon exercise of options granted to Mr. Hicks, which are not exercisable within 60 days following the date of the Beneficial Ownership Table.
(25)	Includes those Series A Preferred Stock beneficially owned by our current executives officers and directors, as set forth in notes to this Beneficial Ownership Table.
(26)	Includes those common shares beneficially owned by our current executives officers and directors, as set forth in notes to this Beneficial Ownership Table.

(footnotes continued on next page)

~~Restated Shareholders’ Agreement~~32

~~On August 1, 2005 we entered into an Amended and Restated Shareholders’ Agreement~~ (asfootnotes ~~amended,~~continued ~~the~~from ~~“Restated~~previous ~~Shareholders Agreement”~~page) ~~with Pequot, Constellation, Howard A. Pavony and Steven H. Rothman. The~~ Restated Shareholders Agreement reflected certain amendments to the original Shareholders’ Agreement entered into by the parties on May 21, 2004, as a condition to the consummation of our sale to the Pequot Fund and Pequot Partners of our Series A-1 Preferred Stock.

The Restated Shareholders Agreement provides that parties agree to vote, or cause to be voted, all securities of the Company owned by such party or over which such party has voting control so that the number of directors will consist of: (i) the Company’s CEO; (ii) two directors designated by Pequot Capital, or its assignee; (iii) one director designated by Constellation or its assignee; (iv) Mr. Rothman; (v) three “independent” directors, within the meaning of “independent” under the current rules of NASDAQ, selected by the Company’s nominating and corporate governance committee; and (vi) two additional independent directors to be selected by the CEO and reasonably acceptable to the Company’s nominating and corporate governance committee. Under certain circumstances where Pequot holds less than 25% of the securities Pequot purchased pursuant to the Purchase Agreement, the right to designate two directors in (ii) above will be reduced to one director and the above voting provisions will be adjusted in the manner described in the Restated Shareholders’ Agreement. On July 7, 2006, in connection with the termination of his employment with the Company, Mr. Rothman waived the obligation that Pequot and Constellation vote in favor of his appointment.


(7)	According to Amendment No. 7 to Schedule 13D filed with the SEC on August 17, 2007 and information provided to us by Constellation, The Bear Stearns Companies LLC, a JP Morgan Chase company (“BSCL”) is the sole managing member of Constellation Ventures Management II, LLC (“Management”) and the sole stockholder of Bear Stearns Asset Management Inc. (“BSAM”). Management is the sole managing general partner of BSC, the sole general partner of Constellation Venture and the sole general partner of Constellation Offshore. Mr. Clifford H. Friedman, who served on our Board of Directors from December 7, 2004 to August 9, 2005, is a member of Management and a senior managing director of BSAM. Mr. Thomas Wasserman, who has served as our director since August 9, 2005, is an employee of BSAM. BSAM is the sole managing member of CVC and investment adviser to BSC, Constellation Ventures, Constellation Offshore and CVC. Management, BSAM and Mr. Friedman share investment and voting control of shares beneficially owned by BSC, Constellation Ventures and Constellation Offshore. BSAM exercises sole investment and voting control of shares beneficially owned by CVC. BSCL, Management, BSAM and Mr. Friedman disclaim beneficial ownership over the shares held by BSC, Constellation Ventures, Constellation Offshore and CVC except to the extent of their pecuniary interests therein. The address for each entity in Constellation and each individual referenced in this footnote is 40 West 57^th Street, 30^th Floor, New York, New York 10019.

(8)	Represents (a) ownership of the following Series of Preferred Stock:

The obligation of the parties under the Restated Shareholders’ Agreement will expire upon the earliest to occur of (i) the completion of any voluntary or involuntary liquidation or dissolution of the Company, (ii) the sale of all or substantially all of the Company’s assets or of a majority of the outstanding equity of the Company to any person that is not a party to the Restated Shareholders’ Agreement, or (iii) December 10, 2009. Messrs. Rothman and Pavony’s obligation to vote for (i) two directors designated by Pequot Capital, and (ii) one director designated by Constellation or its assignee, shall terminate if (a) Pequot or their assignees own less than 10% of the outstanding Series A Preferred Stock (or shares of our common stock issuable upon conversion thereof) issued to Pequot, (b) Constellation or its assignees own less than 10% of the Series A-3 Preferred Stock (or shares of our common stock issuable upon conversion thereof) issued to Constellation, or (c) any other shareholders that are introduced to the company by Pequot own less than 10% of the shares acquired by such shareholders from the company in a transaction not including a public offering or (ii) if Messrs. Pavony and Rothman individually own less than 10% of the number of shares of common stock owned by such person on December 10, 2004.


Record Holder	Series A-3		Series A-4		Series A-5		Series A-6		Series A-7

Constellation Venture		1,146,093		1,636,088		275,060		293,277		233,981
Constellation Offshore		609,897		870,649		146,373		156,068		124,512
BSC		511,085		729,590		122,657		130,781		104,338
CVC		28,617		40,852		6,866		7,321		5,841

~~The Restated Shareholders Agreement also contains provisions (i) restricting the transfer of any securities by shareholders party to the Restated Shareholders Agreement in certain circumstances~~ and (iib) ~~granting~~ the ~~Investors~~ ~~certain~~following ~~rights~~Series ~~of first refusal and tag~~A-~~along~~11 ~~rights~~Preferred ~~with~~Stock ~~respect~~warrants towhich ~~any~~are ~~dispositions~~exercisable bywithin ~~Messrs.~~the ~~Pavony~~60 ~~and~~days ~~Rothman~~following ofthe ~~their~~date ~~shares~~ of ~~common~~this ~~stock.~~Beneficial Ownership Table:


Record Holder		Series A-11

Constellation Venture		64,417
Constellation Offshore		34,280
BSC		28,726
CVC		1,609

~~Item~~Does 13not include any shares of Series A Preferred Stock that we may issue in lieu of cash dividends on the Series A Preferred Stock for any period after May 21, 2009. ~~Certain~~Accrual ~~Relationships~~of ~~and~~dividends ~~Related~~on ~~Party~~the ~~Transactions~~Series A Preferred Stock commenced May 21, 2006. (9) Represents (a) the maximum 634,715 shares of our common stock issuable upon conversion of all of the Series A Preferred Stock currently owned of record by Constellation, as discussed in note (8) to this Beneficial Ownership Table, which shares are convertible within the 60 days following the date of the Beneficial Ownership Table, and ~~Director~~(b) ~~Independence~~the following shares of our common stock issuable upon exercise of common stock warrants which shares are exercisable within the 60 days following the date of this Beneficial Ownership Table:

During fiscal 2008 and 2007 the Company paid approximately $152,000 and $123,000, respectively in fees to Tectura Corporation (“Tectura”) for certain consulting services related to the customization and management of the Company’s accounting systems. Funds controlled by Pequot Capital hold more than 10% of the equity securities of Tectura and Gerald A. Poch, Non-executive Chairman of the Board of the Company, is a director of Tectura.


Record Holder		Common Stock Warrants

Constellation Venture		9,991
Constellation Offshore		18,776
BSC		8,372
CVC		467

~~During fiscal 2008~~ and ~~2007 the Company paid approximately $1,200,000 and $970,000, respectively in fees to Savvis, Inc.~~ (~~“Savvis”~~c) ~~for~~the ~~certain~~following ~~technology~~shares ~~and~~of ~~data~~common ~~center~~stock ~~services.~~issuable ~~Members~~upon of the ~~Constellation~~ ~~Group~~conversion orof ~~funds~~Series ~~affiliated~~A-11 ~~with~~Preferred ~~them~~Stock ~~held,~~issuable ~~during~~upon ~~fiscal~~exercise ~~2008 and 2007, more than 10%~~ of the ~~preferred~~Series ~~equity~~A-11 ~~securities~~Preferred ofStock ~~Savvis and Clifford Friedman~~warrants, ~~who~~which isshares aare ~~member~~exercisable ofwithin ~~Constellation~~the ~~Ventures~~60 ~~Management~~days ~~II,~~following ~~LLC~~the ~~and~~date ~~a senior managing director~~ of ~~Bear~~this ~~Stearns~~Beneficial ~~Asset~~Ownership ~~Management Inc., was a director of Savvis.~~ Table:

We are a party to a lease agreement, dated December 31, 2004, for our facility located in Peabody, MA. We became a party to this lease as part of the December 2005 acquisition of Nexl. The landlord for this facility is C&S Realty Peabody Trust, a nominee trust controlled by Clifford Rucker and his affiliates. Mr. Rucker owns approximately 25% of our outstanding common stock and was formerly the president of our Northeast region. The lease covers approximately 31,000 square feet, has a monthly rent of approximately $35,000 and terminates in February 2010.


Record Holder		Series A-11 Preferred Stock Warrants as converted to Common Stock

Constellation Venture		12,593
Constellation Offshore		6,701
BSC		5,616
CVC		314

On July 7, 2006, we entered into a consulting agreement with Steven Rothman in connection with the termination of his employment with the Company. This agreement provides that Mr. Rothman will perform certain consulting services for us until March 31, 2008. We will pay Mr. Rothman an annual consulting fee of $265,000, plus health benefits through December 31, 2007. Thereafter, we will pay Mr. Rothman certain transaction fees in the event we complete an acquisition introduced to the Company by Mr. Rothman. Mr. Rothman beneficially owns approximately 6% of our outstanding common stock.


	The number of shares of our common stock issuable upon conversion of the Series A Preferred Stock and the exercise of the warrants which Constellation owns of record are subject to an anti-dilution adjustment. Amounts do not include (i) Series A-3 common stock warrants that expired on December 7, 2008; and (ii) Series A-4 common stock warrants that expired on December 10, 2008 and on March 11, 2009. Amounts do not include any shares of Series A Preferred Stock that we may issue in lieu of cash dividends on the Series A Preferred Stock for any period after May 21, 2009. Accrual of dividends on the Series A Preferred Stock commenced May 21, 2006.

(10)	Includes 6,532 shares of our common stock issuable upon exercise of options granted to Mr. Wasserman, which are exercisable within the 60 days following the date of this Beneficial Ownership Table.

(11)	Includes 5,032 shares of our common stock issuable upon exercise of options granted to Mr. Lerner, which are exercisable within the 60 days following the date of this Beneficial Ownership Table.

(12)	Includes 5,032 shares of our common stock issuable upon exercise of options granted to Dr. Nashman, which are exercisable within the 60 days following the date of this Beneficial Ownership Table.

On April 26, 2007, in connection with the termination of his employment with the Company, we entered into a consulting agreement with Francis J. Alfano and Consultant. Mr. Alfano is the sole member of the Consultant. This agreement provides that Consultant will perform certain consulting services for us until June 30, 2009. For services rendered under the Alfano Consulting Service Agreement, the Company paid or will pay Consultant (i)footnotes acontinued ~~signing bonus of $58,333.33~~ on ~~May~~next ~~15, 2007 in accordance with the normal payroll practices of the Company and (ii~~page) fees at the rate of $29,166.67 per month, payable in arrears in twice monthly payments with the initial payment on May 15, 2007 in accordance with the normal payroll practices of the Company, provided that a lump sum payment on March 31, 2008 shall be made which shall include fees from April 1, 2008 through March 31, 2009. At the time of this transaction Mr. Alfano was Chief Executive Officer and a Director of the Company. As a condition to entering into this Agreement, Mr. Alfano resigned from the Board of Directors.

~~Director Independence~~33

We(footnotes ~~undertook~~continued afrom ~~review~~previous ~~of the independence of our directors and, using the definitions and independence standards for directors provided in the rules of The NASDAQ Stock Market, we determined that all of our directors are~~page) ~~"independent directors" as defined under the rules of The NASDAQ Stock Market.~~

In determining director independence for 2008, the board of directors considered the following transactions or relationships:


(13)	Includes 21,045 shares of our common stock issuable upon exercise of options granted to Mr. Stringer and 666 shares of our common stock issuable upon vesting of restricted stock units granted to Mr. Stringer, which are exercisable in the case of options or vest in the case of restricted stock units within 60 days following the date of this Beneficial Ownership Table. Does not include 3,567 shares of our common stock issuable upon exercise of options, which are not exercisable within the 60 days following the date of this Beneficial Ownership Table nor does it include 3,726 restricted stock units which do not vest within the 60 days following the date of this Beneficial Ownership Table.

(14)	Includes 8,332 shares of our common stock issuable upon exercise of options granted to Mr. Braukman and 1,166 shares of our common stock issuable upon vesting of restricted stock units granted to Mr. Braukman, which are exercisable in the case of options or vest in the case of restricted stock units within 60 days following the date of this Beneficial Ownership Table. Does not include 8,334 shares of our common stock issuable upon exercise of options granted to Mr. Braukman, which are not exercisable within 60 days following the date of this Beneficial Ownership Table nor does it include 1,167 units which do not vest within 60 days following the date of this Benefit Ownership Table.

(15)	The address for Mr. Phillips is c/o FirstMark Capital, Inc., 1221 Avenue of the Americas, New York, NY 10020.

(16)	Does not include the shares of Series A Preferred Stock beneficially owned by FirstMark Capital (see note (2) to this Beneficial Ownership Table), of which Mr. Phillips is a Venture Partner. Mr. Phillips does not have voting power nor investment power with respect to the Series A Preferred Stock beneficially owned by FirstMark Capital.

(17)	Does not include the shares of our common stock beneficially owned by FirstMark Capital (see note (3) to this Beneficial Ownership Table), of which Mr. Phillips is a Venture Partner. Mr. Phillips does not have voting power nor investment power with respect to our common stock beneficially owned by FirstMark Capital.

(18)	The address for Mr. Wasserman is c/o Constellation Growth Capital, 40 West 57^th Street, 30^th Floor, New York, New York 10019.

(19)	Does not include the shares of our Series A Preferred Stock beneficially owned by Constellation Venture, Constellation Offshore, BSC and CVC (see note (8) to this Beneficial Ownership Table). Mr. Wasserman is a Vice President of Constellation Ventures. Mr. Wasserman does not have voting power nor investment power with respect to the Series A Preferred Stock beneficially owned by Constellation Venture, Constellation Offshore, BSC or CVC.

(20)	Does not include the shares of our common stock beneficially owned by Constellation Venture, Constellation Offshore, BSC and CVC (see note (9) to this Beneficial Ownership Table). Mr. Wasserman is a Vice President of Constellation Ventures. Mr. Wasserman does not have voting power nor investment power with respect to the common stock beneficially owned by Constellation Venture, Constellation Offshore, BSC or CVC.

(21)	Includes those Series A Preferred Stock beneficially owned by our current executives officers and directors, as set forth in notes to this Beneficial Ownership Table.

(22)	Includes those common shares beneficially owned by our current executives officers and directors, as set forth in notes to this Beneficial Ownership Table.

~~• Any~~Restated ~~indirect payments Mr. Poch and Mr. Phillips have received from us from their affiliation with Pequot arose solely from Pequot~~Shareholders’s ~~investments~~Agreement in our securities. Further, while Pequot has to date loaned us $5.5 million, this amount does not exceed 5% of our gross revenues for such fiscal year. Pequot has not loaned us any other amounts in the past three fiscal years.

On August 1, ~~• Any~~2005 ~~indirect~~we ~~payments~~entered ~~Mr.~~into ~~Thomas~~an ~~Wasserman~~Amended ~~has~~and ~~received~~Restated ~~from~~Shareholders’ usAgreement ~~from~~(as amended, ~~his~~the ~~affiliation~~“Restated ~~with~~Shareholders ~~Constellation~~Agreement”) ~~arose~~with ~~solely~~Pequot ~~from~~(now “FirstMark Capital”), Constellation’s, ~~investments~~Howard inA. ~~our~~Pavony ~~securities~~and Steven H. ~~Further,~~Rothman. ~~while~~The ~~Constellation~~Restated Shareholders ~~has~~Agreement reflected certain amendments to ~~date~~the original ~~loaned~~Shareholders’ usAgreement ~~$500,000,~~entered ~~this~~into ~~amount~~by ~~does~~the ~~not~~parties ~~exceed~~on 5%May of21, ~~our~~2004, ~~gross~~as ~~revenues~~a condition ~~for~~to ~~such~~the ~~fiscal~~consummation ~~year.~~of ~~Constellation~~our ~~has~~sale ~~not~~to ~~loaned~~the usFirstMark ~~any~~Fund ~~other~~and ~~amounts~~FirstMark Offshore inPartners ~~the~~of ~~past~~our ~~three~~Series ~~fiscal~~A-1 ~~years~~Preferred Stock.

The Restated 35Shareholders Agreement provides that parties agree to vote, or cause to be voted, all securities of the Company owned by such party or over which such party has voting control so that the number of directors will consist of: (i) the Company’s CEO; (ii) two directors designated by FirstMark Capital, or its assignee; (iii) one director designated by Constellation or its assignee; (iv) Mr. Rothman; (v) three “independent” directors, within the meaning of “independent” under the current rules of NASDAQ, selected by the Company’s nominating and corporate governance committee; and (vi) two additional independent directors to be selected by the CEO and reasonably acceptable to the Company’s nominating and corporate governance committee. Under certain circumstances where FirstMark Capital holds less than 25% of the securities FirstMark Capital purchased pursuant to the Purchase Agreement, the right to designate two directors in (ii) above will be reduced to one director and the above voting provisions will be adjusted in the manner described in the Restated Shareholders’ Agreement. On July 7, 2006, in connection with the termination of his employment with the Company, Mr. Rothman waived the obligation that FirstMark Capital and Constellation vote in favor of his appointment.

~~Item~~The 14obligation of the parties under the Restated Shareholders’ Agreement will expire upon the earliest to occur of (i) the completion of any voluntary or involuntary liquidation or dissolution of the Company, (ii) the sale of all or substantially all of the Company’s assets or of a majority of the outstanding equity of the Company to any person that is not a party to the Restated Shareholders’ Agreement, or (iii) December 10, 2009. ~~Principal~~Messrs. ~~Accountant~~Rothman ~~Fees~~and Pavony’s obligation to vote for (i) two directors designated by FirstMark Capital, and ~~Services~~(ii) ~~Principal~~one ~~Accounting~~director ~~Fees~~designated by Constellation or its assignee, shall terminate if (a) FirstMark Capital or their assignees own less than 10% of the outstanding Series A Preferred Stock (or shares of our common stock issuable upon conversion thereof) issued to FirstMark Capital, (b) Constellation or its assignees own less than 10% of the Series A-3 Preferred Stock (or shares of our common stock issuable upon conversion thereof) issued to Constellation, or (c) any other shareholders that are introduced to the Company by FirstMark Capital own less than 10% of the shares acquired by such shareholders from the Company in a transaction not including a public offering or (ii) if Messrs. Pavony and Rothman ~~Services~~individually own less than 10% of the number of shares of common stock owned by such person on December 10, 2004.

OnThe ~~November~~Restated Shareholders ~~15,~~Agreement ~~2007,~~also wecontains ~~were~~a ~~notified~~provision ~~that~~restricting ~~certain of~~ the ~~partners~~transfer of any ~~GGK~~securities ~~became partners of M&P in a limited asset purchase agreement. As a result, GGK resigned as our independent registered public accounting firm effective as of November 15, 2007 and M&P was appointed~~ by ~~our~~shareholders ~~audit~~party ~~committee~~to ~~as our new independent registered public accounting firm for~~ the ~~Company’s~~Restated ~~annual~~Shareholders ~~financial~~Agreement ~~statements~~in certain ~~for the year ended March 31, 2008~~circumstances.

Through November 15, 2007, GGK had a continuing relationship with RSM McGladrey, Inc. (“RSM”) from which it leased auditing staff who were full time, permanent employees of RSM and through which its partners provided non-audit services. Subsequent to November 15, 2007, this relationship ceased and M&P established, and maintains, a similar relationship with RSM. M&P has no full time employees and, therefore, none of the audit services performed were provided permanent full-time employees of M&P. M&P manages and supervises the audit and audit staff and is exclusively responsible for the opinion rendered in connection with its examination. 34

~~The~~Item ~~following~~13. ~~table~~Certain Relationships ~~sets~~and ~~forth~~Related ~~the~~Transactions, ~~fees~~and ~~billed~~Director byIndependence ~~our independent accountants for each of our last two fiscal years for the categories of services indicated.~~

	2008		2007
Audit fees(1)	$	327,000	$	320,000
Audit-related fees(2)		—		—
Tax fees(3)		—		—
All other fees(4)		—		3,003

Thomas Wasserman a director of the Company, became an employee of JP Morgan Chase & Co. as a result of its merger with Bear Stearns Companies Inc. on May 29, 2008. Since 1999, the Company has maintained a banking relationship with JP Morgan Chase. The amount the Company maintained on deposit averaged approximately $3,500,000 during fiscal 2009 and $4,415,000 during fiscal 2008. The Company paid approximately $51,000 and $19,800 in fees to JP Morgan Chase during fiscal 2009 and 2008, respectively.

(1)	Consists of fees billed 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.
(2)	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 “audit fees” in this table. The services provided by our accountants within this category consisted of advice relating to SEC matters and employee benefit matters.
(3)	Consists of professional services rendered by a company aligned with our principal accountant for tax compliance, tax advice and tax planning.
(4)	The services provided by our accountants within this category consisted of advice and other services relating to our transaction with the Pequot entities and other matters.
	Such fees have been pre-approved by our audit committee.

During fiscal 2009 and 2008 the Company paid approximately $248,000 and $152,000, respectively in fees to Tectura Corporation (“Tectura”) for certain consulting services related to the customization and management of the Company’s accounting systems. Funds controlled by FirstMark Capital hold more than 10% of the equity securities of Tectura and Gerald A. Poch, Non-executive Chairman of the Board of the Company, is a director of Tectura.

~~Audit~~During ~~Committee~~fiscal 2009 ~~Pre-Approval~~and ~~Policy~~2008 the Company paid approximately $1,000,000 and $1,200,000, respectively in fees to Savvis, Inc. (“Savvis”) for certain technology and data center services. Members of the Constellation Group or funds affiliated with them held, during fiscal 2009 and 2008, more than 10% of the preferred equity securities of Savvis and Clifford Friedman, who is a member of Constellation Ventures Management II, LLC and a senior managing director of Bear Stearns Asset Management Inc., was a director of Savvis.

WeDirector ~~understand~~Independence the need for M&P to maintain objectivity and independence in its audit of our financial statements. To minimize relationships that could appear to impair the objectivity of M&P, our Audit Committee has restricted the non-audit services that M&P may provide to us primarily to merger and acquisition due diligence and audit services, and valuation services and has determined that we would obtain even these non-audit services from M&P only when the services offered by M&P are more effective or economical than services available from other service providers.

~~The~~Our Independent ~~Audit~~Directors Committee, ~~also~~which ~~has~~consists ~~adopted~~only ~~policies~~of ~~and~~directors ~~procedures~~who ~~for~~are neither ~~pre-approving~~members ~~all~~of ~~non-audit~~the ~~work~~management ~~performed~~nor byassociated ~~M&P~~with ~~and~~FirstMark ~~any~~or Constellation (or other ~~accounting~~similar ~~firms~~investors) weconsiders, ~~may~~reviews ~~retain.~~and ~~Specifically,~~provides guidance ~~the~~and ~~Audit~~oversight ~~Committee~~regarding ~~has~~transactions ~~pre-approved~~or ~~the~~other ~~use~~situations ofin ~~M&P~~which other ~~for~~Board ~~detailed~~members, ~~specific~~who ~~types~~are ofeither ~~services~~members ~~within~~of ~~the~~management ~~following~~or ~~categories~~employees of FirstMark ~~non-audit~~or ~~services:~~Constellation ~~merger~~(or ~~and~~other ~~acquisition~~similar ~~due~~investors), ~~diligence~~have ~~and~~interests ~~audit~~that may ~~services;~~be ~~valuation~~in ~~services;~~addition ~~internal~~to, ~~control~~or ~~reviews;~~different ~~and~~from, ~~reviews~~the ~~and~~interests ~~procedures~~of ~~that~~the shareholders in general. Additionally, we ~~request~~have ~~M&P~~adopted toa ~~undertake~~Code toof ~~provide~~Business ~~assurances~~Conduct and Ethics which mandates that directors, officers and employees of ~~accuracy~~the onCompany ~~matters~~must ~~not~~avoid any ~~required~~conflicts byof ~~laws~~interest orbetween ~~regulations.~~their Inpersonal ~~each~~interests ~~case,~~and the ~~Audit~~Company’s interests. ~~Committee~~Other ~~has~~than ~~also~~as set aforth ~~specific~~above, ~~annual~~our ~~limit~~Board ondoes ~~the~~not ~~amount~~have a specific policy regarding review of ~~such~~transactions ~~services~~involving ~~which~~directors, wemanagement ~~would~~or other ~~obtain~~related ~~from~~parties. ~~M&P~~However, ~~and~~we ~~has~~discourage ~~required~~such ~~management~~transactions toand ~~report~~have historically limited the ~~specific~~approval ~~engagements~~of such transactions to ~~the~~specific ~~committee~~and onrare instances awith ~~quarterly~~the ~~basis~~full ~~and~~disclosure to, ~~obtain~~and ~~specific pre-~~approval ~~from~~of, the ~~Audit~~disinterested members ~~Committee~~of ~~for~~our ~~all engagements~~Board.

36We undertook a review of the independence of our directors and, using the definitions and independence standards for directors provided in the rules of the NASDAQ, we determined that all of our directors are “independent directors” as defined under the rules of the NASDAQ.

In ~~PART~~determining director IV independence for fiscal 2009, the Board of Directors considered the following transactions or relationships:

~~Item~~ • Any 15indirect payments Mr. ~~Exhibits,~~Poch ~~Financial~~and ~~Statements Schedules~~Mr. ~~(a)~~Phillips ~~Exhibits~~have ~~Set~~received ~~forth~~from ~~below~~us isfrom atheir ~~list~~affiliation with ofFirstMark arose solely from FirstMark’s investments in our securities. Further, while through the ~~exhibits~~end toof fiscal 2009, FirstMark has loaned us $6.5 million, this ~~Annual~~amount ~~Report~~does onnot ~~Form~~exceed ~~10-K~~5% of our gross revenues for such fiscal year. FirstMark has not loaned us any other amounts in the past three fiscal years.

Exhibit
Number		Description
2.1	Asset Purchase Agreement, dated September 17, 2004, among Network Catalyst, Inc., William Corbin, Rocci J. Della Maggiore and MTM Technologies, Inc. *
2.2	Asset Purchase Agreement, dated December 1, 2004, by and among Vector ESP, Inc., Vector ESP Management, Inc. and Vector Global Services, Inc. and MTM Technologies, Inc. *
2.3	Stock Purchase Agreement, dated January 27, 2005, among Info Systems, Inc., Mark Stellini, Emidio F. Stellini, Jr., Jay Foggy, Richard Roux, Jennifer McKenzie and MTM Technologies, Inc. *
2.4	Merger Agreement, dated August 16, 2005, among NEXL, Inc., MTM Technologies (Massachusetts), LLC, MTM Technologies, Inc. and Clifford L. Rucker *
3.1	Restated Certificate of Incorporation dated December 21, 2007 *
3.2	Certificate of Amendment to Restated Certificate of Incorporation dated July 25, 2007 *
3.3	Amended and Restated By-Laws *
4.1	Purchase Agreement, dated January 29, 2004, among Micros-to-Mainframes, Inc., Pequot Private Equity Fund III, L.P. and Pequot Offshore Private Equity Partners III, L.P. *
4.2	Purchase Agreement, dated December 7, 2004, among MTM Technologies, Inc., Pequot Private Equity Fund III, L.P., Pequot Offshore Private Equity Partners III, L.P., Constellation Venture Capital II, L.P., Constellation Venture Capital Offshore II, L.P., The BSC Employee Fund VI, L.P. and CVC II Partners, LLC *
4.3	Amendment No. 1 to the Purchase Agreement, dated December 7, 2004, among MTM Technologies, Inc., Pequot Private Equity Fund III, L.P., Pequot Offshore Private Equity Partners III, L.P., Constellation Venture Capital II, L.P., Constellation Venture Capital Offshore II, L.P., The BSC Employee Fund VI, L.P. and CVC II Partners, LLC *
4.4	Amendment No. 2 to the Purchase Agreement, dated December 7, 2004, among MTM Technologies, Inc., Pequot Private Equity Fund III, L.P., Pequot Offshore Private Equity Partners III, L.P., Constellation Venture Capital II, L.P., Constellation Venture Capital Offshore II, L.P., The BSC Employee Fund VI, L.P. and CVC II Partners, LLC *
4.5	Waiver Letter dated December 9, 2005, by Pequot Private Equity Fund III, L.P., Pequot Offshore Private Equity Partners III, L.P., Constellation Venture Capital II, L.P., Constellation Venture Capital Offshore II, L.P., The BSC Employee Fund VI, L.P. and CVC II Partners, LLC *
4.6	Purchase Agreement, dated March 29, 2007, among MTM Technologies, Inc., Pequot Private Equity Fund III, L.P., Pequot Offshore Private Equity Partners III, L.P., Constellation Venture Capital II, L.P., Constellation Venture Capital Offshore II, L.P., The BSC Employee Fund VI, L.P. and CVC II Partners, LLC *
4.7	Purchase Agreement, dated May 24, 2007, among MTM Technologies, Inc., Pequot Private Equity Fund III, L.P., Pequot Offshore Private Equity Partners III, L.P., Constellation Venture Capital II, L.P., Constellation Venture Capital Offshore II, L.P., The BSC Employee Fund VI, L.P. and CVC II Partners, LLC *
4.8	Purchase Agreement, dated July 25, 2007, among MTM Technologies, Inc., Pequot Private Equity Fund III, L.P., and Pequot Offshore Private Equity Partners III, L.P. *
4.9	Amended and Restated Shareholders’ Agreement, dated August 1, 2005, among MTM Technologies, Inc., Steven Rothman, Howard Pavony, Pequot Private Equity Fund III, L.P., Pequot Offshore Private Equity Partners III, L.P., Constellation Venture Capital II, L.P., Constellation Venture Capital Offshore II, L.P., The BSC Employee Fund VI, L.P. and CVC II Partners, LLC *
4.10	Amended and Restated Registration Rights Agreement, dated August 1, 2005, among MTM Technologies, Inc., Steven Rothman, Howard Pavony, Pequot Private Equity Fund III, L.P., Pequot Offshore Private Equity Partners III, L.P., Constellation Venture Capital II, L.P., Constellation Venture Capital Offshore II, L.P., The BSC Employee Fund VI, L.P. and CVC II Partners, LLC *
4.11	Amendment No. 1 to the Amended and Restated Registration Rights Agreement, dated November 23, 2005, among MTM Technologies, Inc., Steven Rothman, Howard Pavony, Pequot Private Equity Fund III, L.P., Pequot Offshore Private Equity Partners III, L.P., Constellation Venture Capital II, L.P., Constellation Venture Capital Offshore II, L.P., The BSC Employee Fund VI, L.P. and CVC II Partners, LLC *
4.12	Amendment No. 2 to the Amended and Restated Registration Rights Agreement, dated March 29, 2007, among MTM Technologies, Inc., Steven Rothman, Howard Pavony, Pequot Private Equity Fund III, L.P., Pequot Offshore Private Equity Partners III, L.P., Constellation Venture Capital II, L.P., Constellation Venture Capital Offshore II, L.P., The BSC Employee Fund VI, L.P. and CVC II Partners, LLC *

• Any indirect payments Mr. Thomas Wasserman has received from us from his affiliation with Constellation arose solely from Constellation’s investments in our securities. Further, while through the end of fiscal 2009, Constellation has loaned us $500,000, this amount does not exceed 5% of our gross revenues for such fiscal year. Constellation has not loaned us any other amounts in the past three fiscal years.

3735

4.13	Amendment No. 3 to the Amended and Restated Registration Rights Agreement, dated April 9, 2007, among MTM Technologies, Inc., Steven Rothman, Howard Pavony, Pequot Private Equity Fund III, L.P., Pequot Offshore Private Equity Partners III, L.P., Constellation Venture Capital II, L.P., Constellation Venture Capital Offshore II, L.P., The BSC Employee Fund VI, L.P. and CVC II Partners, LLC*
4.14	Amendment No. 4 to the Amended and Restated Registration Rights Agreement, dated May 24, 2007, among MTM Technologies, Inc., Steven Rothman, Howard Pavony, Pequot Private Equity Fund III, L.P., Pequot Offshore Private Equity Partners III, L.P., Constellation Venture Capital II, L.P., Constellation Venture Capital Offshore II, L.P., The BSC Employee Fund VI, L.P. and CVC II Partners, LLC*
4.15	Amendment No. 5 to the Amended and Restated Registration Rights Agreement, dated July 25, 2007, among MTM Technologies, Inc., Steven Rothman, Howard Pavony, Pequot Private Equity Fund III, L.P., Pequot Offshore Private Equity Partners III, L.P., Constellation Venture Capital II, L.P., Constellation Venture Capital Offshore II, L.P., The BSC Employee Fund VI, L.P. and CVC II Partners, LLC *
4.16	Columbia Voting Agreement, dated November 4, 2005 *
4.17	Series A-5 Voting Agreement, dated November 23, 2005 *
4.18	Warrant Certificate, evidencing 438,225 warrants registered in the name of Pequot Private Equity Fund III, LLP*
4.19	Warrant Certificate, evidencing 61,775 warrants registered in the name of Pequot Offshore Private Equity Partners III, L.P. *
4.20	Warrant Certificate, evidencing 350,580 warrants registered in the name of Pequot Private Equity Fund III, L.P. *
4.21	Warrant Certificate, evidencing 49,420 warrants registered in the name of Pequot Offshore Private Equity Partners III, L.P. *
4.22	Form of the Series A-3 Warrant Certificate *
4.23	Form of the Series A-4 Warrant Certificate *
4.24	Form of the Series A-5 Warrant Certificate *
4.25	Warrant Certificate issued to National Electrical Benefit Fund (2005) *
4.26	Form of the Series A-6 Warrant Certificate *
4.27	Form of the Series A-7 Warrant Certificate *
4.28	Form of the Series A-8 Warrant Certificate *
4.29	Warrant Certificate issued to National Electrical Benefit Fund (2007) *
4.30	Warrant Certificate, evidencing 343,705 warrants registered in the name of Pequot Private Equity Fund III, LLP *
4.31	Warrant Certificate, evidencing 48,452 warrants registered in the name of Pequot Offshore Private Equity Partners III, L.P. *
4.32	Form of June 11, 2008 Warrant Certificate *
4.33	Form of June 16, 2008 Warrant Certificate *
10.1	Financing Agreement dated as of June 8, 2005, among MTM Technologies, Inc. and its subsidiaries from time to time party thereto as the Borrowers, the financial institutions from time to time party thereto as lenders, and the CIT Group/Business Credit, Inc. *
10.2	Waiver Letter, dated February 14, 2007 between MTM Technologies, Inc. and the CIT Group/Business Credit, Inc. *
10.3	Waiver and Amendment Letter, dated June 21, 2007 between MTM Technologies, Inc. and the CIT Group/Business Credit, Inc. *
10.4	Termination, Release and Indemnification Agreement, dated as of August 21, 2007 executed in connection with the Financing Agreement dated as of June 8, 2005, among MTM Technologies, Inc. and it subsidiaries from time to time party thereto as the Borrowers, the financial institutions from time to time party thereto as lenders, and the CIT Group/Business Credit, Inc. *
10.5	Loan and Security Agreement among Textron Financial Corporation, MTM Technologies, Inc., MTM Technologies (California) Inc., MTM Technologies (Texas) Inc., MTM Technologies (US), Inc., and Info Systems, Inc., dated as of June 8, 2005 *
10.6	Waiver and Amendment Letter, dated June 21, 2007 between MTM Technologies, Inc. and the Textron Financial Corporation *
10.7	Acknowledgement of Payment and Termination Agreement dated August 21, 2007 between Textron Financial Corporation and GE Commercial Distribution Finance and acknowledged by MTM Technologies, Inc., MTM Technologies (Massachusetts) LLC, MTM Technologies (US) Inc., and Inform Systems, Inc. *
10.8	Credit Agreement, dated November 23, 2005, among MTM Technologies, Inc., MTM Technologies (California), Inc., MTM Technologies (Texas), Inc., MTM Technologies (US), Inc., MTM Technologies (Massachusetts), LLC, and Info Systems, Inc. as borrowers and Columbia Partners, LLC Investment Management as Investment Manager and National Electrical Benefit Fund as Lender *

Item 14. Principal Accountant Fees and Services

38Principal Accounting Fees and Services

10.9	Amendment No.1 dated July 31, 2007, to the Credit Agreement, dated November 23, 2005, among MTM Technologies, Inc., MTM Technologies (California), Inc., MTM Technologies (Texas), Inc., MTM Technologies (US), Inc., MTM Technologies (Massachusetts), LLC, and Info Systems, Inc. as borrowers and Columbia Partners, L.L.C. Investment Management, as Investment Manager and National Electrical Benefit Fund, as Lender *
10.10	Amendment No.2 dated August 21, 2007, to the Credit Agreement, dated November 23, 2005, among MTM Technologies, Inc., MTM Technologies (California), Inc., MTM Technologies (Texas), Inc., MTM Technologies (US), Inc., MTM Technologies (Massachusetts), LLC, and Info Systems, Inc. as borrowers and Columbia Partners, L.L.C. Investment Management, as Investment Manager and National Electrical Benefit Fund, as Lender*
10.11	Amendment No.3 dated February 28, 2008, to the Credit Agreement, dated November 23, 2005, among MTM Technologies, Inc., MTM Technologies (California), Inc., MTM Technologies (Texas), Inc., MTM Technologies (US), Inc., MTM Technologies (Massachusetts), LLC, and Info Systems, Inc. as borrowers and Columbia Partners, L.L.C. Investment Management, as Investment Manager and National Electrical Benefit Fund, as Lender *
10.12	Amendment No.4 dated June 11, 2008, to the Credit Agreement, dated November 23, 2005, among MTM Technologies, Inc., MTM Technologies (California), Inc., MTM Technologies (Texas), Inc., MTM Technologies (US), Inc., MTM Technologies (Massachusetts), LLC, and Info Systems, Inc. as borrowers and Columbia Partners, L.L.C. Investment Management, as Investment Manager and National Electrical Benefit Fund, as Lender *
10.13	Amendment No.5 dated June 17, 2008, to the Credit Agreement, dated November 23, 2005, among MTM Technologies, Inc., MTM Technologies (California), Inc., MTM Technologies (Texas), Inc., MTM Technologies (US), Inc., MTM Technologies (Massachusetts), LLC, and Info Systems, Inc. as borrowers and Columbia Partners, L.L.C. Investment Management, as Investment Manager and National Electrical Benefit Fund, as Lender *
10.14	Subordination Agreement dated as of August 21, 2007, among GE Commercial Distribution Finance Corporation, and National Electrical Benefit Fund and Columbia Partners, L.L.C. Investment Management *
10.15	Credit Facilities Agreement dated August 21, 2007 among MTM Technologies, Inc, MTM Technologies (US), Inc., MTM Technologies (Massachusetts), LLC, and Info Systems, Inc. as Borrowers, and GE Commercial Distribution Finance Corporation (“CDF”), as Administrative Agent, and CDF and the other lenders listed therein, as Lenders *
10.16	First Amendment dated August 21, 2007 to Credit Facilities entered into as of August 21, 2007 among MTM Technologies, Inc, MTM Technologies (US), Inc., MTM Technologies (Massachusetts), LLC, and Info Systems, Inc., as Borrowers, and GE Commercial Distribution Finance Corporation as Administrative Agent and the sole lender *
10.17	Second Amendment dated February 4, 2008 to Credit Facilities entered into as of August 21, 2007 among MTM Technologies, Inc, MTM Technologies (US), Inc., MTM Technologies (Massachusetts), LLC, and Info Systems, Inc., as Borrowers, and GE Commercial Distribution Finance Corporation as Administrative Agent and the sole lender *
10.18	Third Amendment dated February 28, 2008 to Credit Facilities entered into as of August 21, 2007 among MTM Technologies, Inc, MTM Technologies (US), Inc., MTM Technologies (Massachusetts), LLC, and Info Systems, Inc., as Borrowers, and GE Commercial Distribution Finance Corporation as Administrative Agent and the sole lender *
10.19	Fourth Amendment dated May 16, 2008 but effective as of May 1, 2008 to Credit Facilities entered into as of August 21, 2007 among MTM Technologies, Inc, MTM Technologies (US), Inc., MTM Technologies (Massachusetts), LLC, and Info Systems, Inc., as Borrowers, and GE Commercial Distribution Finance Corporation as Administrative Agent and the sole lender
10.20	Fifth Amendment dated June 16, 2008 to Credit Facilities entered into as of August 21, 2007 among MTM Technologies, Inc, MTM Technologies (US), Inc., MTM Technologies (Massachusetts), LLC, and Info Systems, Inc., as Borrowers, and GE Commercial Distribution Finance Corporation as Administrative Agent and the sole lender *
10.21	Consent to Credit Facilities Agreement dated June 16, 2008 among MTM Technologies, Inc., MTM Technologies (US), Inc., MTM Technologies (Massachusetts), LLC and Info Systems, Inc., as borrowers and GE Commercial Distribution Finance Corporation as Administrative Agent and the sole lender *
10.22	Subordinated Promissory Note dated February 28, 2008 issued by MTM Technologies, Inc. in favor of Pequot Private Equity Fund III, L.P. in the amount of $2,191,123 *
10.23	Amended Subordinated Promissory Note dated March 28, 2008 issued by MTM Technologies, Inc. in favor of Pequot Private Equity Fund III, L.P. in the amount of $2,191,123 *
10.24	Second Amended Subordinated Promissory Note dated June 11, 2008 issued by MTM Technologies, Inc. in favor of Pequot Private Equity Fund III, L.P. in the amount of $2,191,123 *
10.25	Subordinated Promissory Note dated June 11, 2008 issued by MTM Technologies, Inc. in favor of Pequot Private Equity Fund III, L.P. in the amount of $2,410,235 *
10.26	Subordinated Promissory Note dated June 16, 2008 issued by MTM Technologies, Inc. in favor of Pequot Private Equity Fund III, L.P. in the amount of $219,112 *
10.27	Amended Subordinated Promissory Note dated March 28, 2008 issued by MTM Technologies, Inc. in favor of Pequot Offshore Private Equity Partners III, L.P. in the amount of $308,87 *
10.28	Subordinated Promissory Note dated February 28, 2008 issued by MTM Technologies, Inc. in favor of Pequot Offshore Private Equity Partners III, L.P. in the amount of $308,87 *

On November 15, 2007, we were notified that certain of the partners of Goldstein Golub & Kessler LLP (“GGK”) became partners of McGladrey & Pullen in a limited asset purchase agreement. As a result, GGK resigned as our independent registered public accounting firm effective as of November 15, 2007 and McGladrey & Pullen was appointed by our Audit Committee as our new independent registered public accounting firm for the Company’s annual financial statements for the year ended March 31, 2008. Our Board of Directors has approved the selection of McGladrey & Pullen to audit our financial statements for the year ending March 31, 2009, and such appointment was ratified by the shareholders.

Through 39November 15, 2007, GGK had a continuing relationship with RSM McGladrey, Inc. (“RSM”) from which it leased auditing staff who were full time, permanent employees of RSM and through which its partners provided non-audit services. Subsequent to November 15, 2007, this relationship ceased and McGladrey & Pullen established, and maintains, a similar relationship with RSM. McGladrey & Pullen has no full time employees and, therefore, none of the audit services were provided by permanent full-time employees of McGladrey & Pullen. McGladrey & Pullen manages and supervises the audit and audit staff and is exclusively responsible for the opinion rendered in connection with its examination.

10.29	Second Amended Subordinated Promissory Note dated June 11, 2008 issued by MTM Technologies, Inc. in favor of Pequot Offshore Private Equity Partners III, L.P. in the amount of $308,87 *
10.30	Subordinated Promissory Note dated June 11, 2008 issued by MTM Technologies, Inc. in favor of Pequot Offshore Private Equity Partners III, L.P. in the amount of $339,765 *
10.31	Subordinated Promissory Note dated June 16, 2008 issued by MTM Technologies, Inc. in favor of Pequot Offshore Private Equity Partners III, L.P. in the amount of $30,888 *
10.32	Subordinated Promissory Note dated June 16, 2008 issued by MTM Technologies, Inc. in favor of Constellation Venture Capital II, L.P. in the amount of $249,617.80 *
10.33	Subordinated Promissory Note dated June 16, 2008 issued by MTM Technologies, Inc. in favor of Constellation Venture Capital Offshore II, L.P. in the amount of $132,834.65 *
10.34	Subordinated Promissory Note dated June 16, 2008 issued by MTM Technologies, Inc. in favor of The BSC Employee Fund VI, L.P. in the amount of $111,313.95 *
10.35	Subordinated Promissory Note dated June 16, 2008 issued by MTM Technologies, Inc. in favor of CVC Partners II, LLC in the amount of $6,233.60 *
10.36	Micros-to-Mainframes, Inc. 1993 Employee Stock Option Plan *
10.37	Micros-to-Mainframes, Inc. 1996 Stock Option Plan *
10.38	Micros-to-Mainframes, Inc. 1998 Stock Option Plan *
10.39	Micros-to-Mainframes, Inc. 2000 Long-Term Performance Plan *
10.40	Micros-to-Mainframes, Inc. 2002 Long-Term Performance Plan *
10.41	Micros-to-Mainframes, Inc. 2004 Equity Incentive Plan *
10.42	Form of Employee Stock Option Agreement *
10.43	MTM Technologies, Inc. Associates Stock Purchase Plan *
10.44	Form of Employee Restricted Stock Unit Agreement *
10.45	Form of Executive Stock Option Agreement *
10.46	Form of Executive Restricted Stock Unit Agreement *
10.47	Severance Letter, dated December 12, 2005 between MTM Technologies, Inc. and Michael El-Hillow *
10.48	Employment Agreement, dated June 28, 2006 between MTM Technologies, Inc. and Francis J. Alfano *
10.49	Letter Agreement, dated July 7, 2006 between MTM Technologies, Inc. and Steven Rothman *
10.50	Consulting Agreement, dated July 7, 2006 between MTM Technologies, Inc. and Steven Rothman *
10.51	Employment Agreement, dated August 10, 2006 between MTM Technologies, Inc. and Steven Stringer*
10.52	Consulting Service Agreement, dated September 13, 2006 between MTM Technologies, Inc. and Michael El-Hillow *
10.53	Letter Agreement, dated September 28, 2006 between MTM Technologies, Inc. and J.W. Braukman, III*
10.54	Consulting Agreement, dated April 26, 2007 between MTM Technologies, Inc. and Francis J. Alfano and Tory Ventures LLC *
10.55	Agreement and General Release, dated April 26, 2007 between MTM Technologies, Inc. and Francis J. Alfano *
10.56	Lease Agreement, dated August 15, 2005 between 1200 High Ridge Company, LLC and MTM Technologies, Inc. *
14.1	Code of Ethics
16.1	Letter dated November 15, 2007 from Goldstein Golub Kessler LLP (“GGK”) to MTM Technologies, Inc. notifying MTM that certain of the partners of GGK became partners of McGladrey & Pullen, LLP in a limited asset purchase agreement *
16.2	Goldstein Golub Kessler LLP Letter to the Securities and Exchange Commission dated November 15, 2007 *
21.1	Subsidiaries of MTM Technologies, Inc.
23.1	Consent from McGladrey & Pullen, LLP
23.2	Consent from Goldstein Golub Kessler LLP

The following table sets forth the fees billed by our independent accountants for each of our last two fiscal years for the categories of services indicated.


	2009		2008


Audit fees(1)	$	317,500	$	327,000
Audit-related fees(2)		—		—
Tax fees(3)		—		—
All other fees(4)		—		—

31.1	Certification pursuant to Exchange Act Rule 13a-14(a) of Steven Stringer
(1)	Consists of fees billed 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.
31.2	Certification pursuant to Exchange Act Rule 13a-14(a) of J.W. Braukman III
(2)	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 “audit fees” in this table. The services provided by our accountants within this category consisted of advice relating to SEC matters and employee benefit matters.
32.1	Certification pursuant to Section 1350 of the Sarbanes-Oxley Act of 2002 of Steven Stringer
(3)	Consists of professional services rendered by a company aligned with our principal accountant for tax compliance, tax advice and tax planning.
32.2	Certification pursuant to Section 1350 of the Sarbanes-Oxley Act of 2002 of J.W. Braukman, III
(4)	Not applicable.
	Such fees have been pre-approved by our audit committee.

*Audit ~~Incorporated~~Committee byPre-Approval ~~Reference.~~Policy ~~See Exhibit Index. Financial Statements and Schedules~~

We ~~have~~understand the ~~provided~~need infor ~~Item~~McGladrey 8& Pullen to ~~this~~maintain ~~Annual~~objectivity ~~Report~~and onindependence ~~Form~~in its ~~10-K~~audit aof ~~complete~~our ~~list~~financial ofstatements. To minimize relationships that could appear to impair the ~~financial~~objectivity ~~statements~~of ~~being~~McGladrey ~~filed~~& ~~with~~Pullen, ~~this~~our ~~Form~~Audit 10Committee has restricted the non-K.audit ~~There~~services ~~are~~that noMcGladrey ~~financial~~& ~~statement~~Pullen ~~schedules~~may ~~applicable~~provide to us primarily to ~~this~~merger ~~Form~~and 10acquisition due diligence and audit services, and valuation services and has determined that we would obtain even these non-Kaudit services from McGladrey & Pullen only when the services offered by McGladrey & Pullen are more effective or economical than services available from other service providers.

The Audit 41Committee also has adopted policies and procedures for pre-approving all non-audit work performed by McGladrey & Pullen and any other accounting firms we may retain. Specifically, the Audit Committee has pre-approved the use of McGladrey & Pullen for detailed, specific types of services within the following categories of non-audit services: merger and acquisition due diligence and audit services; valuation services; internal control reviews; and reviews and procedures that we request McGladrey & Pullen to undertake to provide assurances of accuracy on matters not required by laws or regulations. In each case, the Audit Committee has also set a specific annual limit on the amount of such services which we would obtain from McGladrey & Pullen, and has required management to report the specific engagements to the committee on a quarterly basis and to obtain specific pre-approval from the Audit Committee for all engagements.

~~REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM~~36

ToPART ~~the Board of Directors and Shareholders MTM TECHNOLOGIES, INC.~~ IV

WeItem ~~have audited the accompanying consolidated balance sheet of MTM Technologies, Inc~~15. ~~and Subsidiaries as of March 31~~ Exhibits, ~~2008~~Financial ~~and~~Statements ~~the related consolidated statements of operations, shareholders’ equity and cash flows for the year then ended~~Schedules. ~~These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audit.~~

~~We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board~~ (~~United States~~a)~~. Those standards require that we plan and perform the audit to obtain~~ reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.Exhibits

InSet ~~our~~forth ~~opinion,~~below ~~the~~is ~~consolidated~~a ~~financial~~list ~~statements~~of ~~referred to above present fairly, in all material respects,~~ the ~~financial~~exhibits ~~position~~to ~~of MTM Technologies, Inc. and Subsidiaries as of March~~this ~~31,~~Annual ~~2008~~Report ~~and~~on ~~the~~Form ~~results of their operations and their cash flows for the year then ended, in conformity with U~~10-K.~~S. generally accepted accounting principles.~~

We were not engaged to examine management’s assertion about the effectiveness of MTM Technologies, Inc.’s internal control over financial reporting as of March 31, 2008 included in the accompanying Management’s Annual Report on Internal Control over Financial Reporting and, accordingly, we do not express an opinion thereon.


Exhibit Number		Description


2.1		Asset Purchase Agreement, dated September 17, 2004, among Network Catalyst, Inc., William Corbin, Rocci J. Della Maggiore and MTM Technologies, Inc. *

2.2		Asset Purchase Agreement, dated December 1, 2004, by and among Vector ESP, Inc., Vector ESP Management, Inc. and Vector Global Services, Inc. and MTM Technologies, Inc. *

2.3		Stock Purchase Agreement, dated January 27, 2005, among Info Systems, Inc., Mark Stellini, Emidio F. Stellini, Jr., Jay Foggy, Richard Roux, Jennifer McKenzie and MTM Technologies, Inc. *

2.4		Merger Agreement, dated August 16, 2005, among NEXL, Inc., MTM Technologies (Massachusetts), LLC, MTM Technologies, Inc. and Clifford L. Rucker *

3.1		Fifth Restated Certificate of Incorporation dated March 5, 2009 *

3.2		Amended and Restated By-Laws *

4.1		Purchase Agreement, dated January 29, 2004, among Micros-to-Mainframes, Inc., Pequot Private Equity Fund III, L.P. and Pequot Offshore Private Equity Partners III, L.P. *

4.2		Purchase Agreement, dated December 7, 2004, among MTM Technologies, Inc., Pequot Private Equity Fund III, L.P., Pequot Offshore Private Equity Partners III, L.P., Constellation Venture Capital II, L.P., Constellation Venture Capital Offshore II, L.P., The BSC Employee Fund VI, L.P. and CVC II Partners, LLC *

4.3		Amendment No. 1 to the Purchase Agreement, dated December 7, 2004, among MTM Technologies, Inc., Pequot Private Equity Fund III, L.P., Pequot Offshore Private Equity Partners III, L.P., Constellation Venture Capital II, L.P., Constellation Venture Capital Offshore II, L.P., The BSC Employee Fund VI, L.P. and CVC II Partners, LLC *

4.4		Amendment No. 2 to the Purchase Agreement, dated December 7, 2004, among MTM Technologies, Inc., Pequot Private Equity Fund III, L.P., Pequot Offshore Private Equity Partners III, L.P., Constellation Venture Capital II, L.P., Constellation Venture Capital Offshore II, L.P., The BSC Employee Fund VI, L.P. and CVC II Partners, LLC *

4.5		Waiver Letter dated December 9, 2005, by Pequot Private Equity Fund III, L.P., Pequot Offshore Private Equity Partners III, L.P., Constellation Venture Capital II, L.P., Constellation Venture Capital Offshore II, L.P., The BSC Employee Fund VI, L.P. and CVC II Partners, LLC *

4.6		Purchase Agreement, dated March 29, 2007, among MTM Technologies, Inc., Pequot Private Equity Fund III, L.P., Pequot Offshore Private Equity Partners III, L.P., Constellation Venture Capital II, L.P., Constellation Venture Capital Offshore II, L.P., The BSC Employee Fund VI, L.P. and CVC II Partners, LLC *

4.7		Purchase Agreement, dated May 24, 2007, among MTM Technologies, Inc., Pequot Private Equity Fund III, L.P., Pequot Offshore Private Equity Partners III, L.P., Constellation Venture Capital II, L.P., Constellation Venture Capital Offshore II, L.P., The BSC Employee Fund VI, L.P. and CVC II Partners, LLC *

4.8		Purchase Agreement, dated July 25, 2007, among MTM Technologies, Inc., Pequot Private Equity Fund III, L.P., and Pequot Offshore Private Equity Partners III, L.P. *

4.9		Amended and Restated Shareholders’ Agreement, dated August 1, 2005, among MTM Technologies, Inc., Steven Rothman, Howard Pavony, Pequot Private Equity Fund III, L.P., Pequot Offshore Private Equity Partners III, L.P., Constellation Venture Capital II, L.P., Constellation Venture Capital Offshore II, L.P., The BSC Employee Fund VI, L.P. and CVC II Partners, LLC *

4.10		Amended and Restated Registration Rights Agreement, dated August 1, 2005, among MTM Technologies, Inc., Steven Rothman, Howard Pavony, Pequot Private Equity Fund III, L.P., Pequot Offshore Private Equity Partners III, L.P., Constellation Venture Capital II, L.P., Constellation Venture Capital Offshore II, L.P., The BSC Employee Fund VI, L.P. and CVC II Partners, LLC *

4.11		Amendment No. 1 to the Amended and Restated Registration Rights Agreement, dated November 23, 2005, among MTM Technologies, Inc., Steven Rothman, Howard Pavony, Pequot Private Equity Fund III, L.P., Pequot Offshore Private Equity Partners III, L.P., Constellation Venture Capital II, L.P., Constellation Venture Capital Offshore II, L.P., The BSC Employee Fund VI, L.P. and CVC II Partners, LLC *

4.12		Amendment No. 2 to the Amended and Restated Registration Rights Agreement, dated March 29, 2007, among MTM Technologies, Inc., Steven Rothman, Howard Pavony, Pequot Private Equity Fund III, L.P., Pequot Offshore Private Equity Partners III, L.P., Constellation Venture Capital II, L.P., Constellation Venture Capital Offshore II, L.P., The BSC Employee Fund VI, L.P. and CVC II Partners, LLC *

~~MCGLADREY & PULLEN, LLP New York, New York June 23, 2008~~ 37

F-1


4.13		Amendment No. 3 to the Amended and Restated Registration Rights Agreement, dated April 9, 2007, among MTM Technologies, Inc., Steven Rothman, Howard Pavony, Pequot Private Equity Fund III, L.P., Pequot Offshore Private Equity Partners III, L.P., Constellation Venture Capital II, L.P., Constellation Venture Capital Offshore II, L.P., The BSC Employee Fund VI, L.P. and CVC II Partners, LLC *

4.14		Amendment No. 4 to the Amended and Restated Registration Rights Agreement, dated May 24, 2007, among MTM Technologies, Inc., Steven Rothman, Howard Pavony, Pequot Private Equity Fund III, L.P., Pequot Offshore Private Equity Partners III, L.P., Constellation Venture Capital II, L.P., Constellation Venture Capital Offshore II, L.P., The BSC Employee Fund VI, L.P. and CVC II Partners, LLC *

4.15		Amendment No. 5 to the Amended and Restated Registration Rights Agreement, dated July 25, 2007, among MTM Technologies, Inc., Steven Rothman, Howard Pavony, Pequot Private Equity Fund III, L.P., Pequot Offshore Private Equity Partners III, L.P., Constellation Venture Capital II, L.P., Constellation Venture Capital Offshore II, L.P., The BSC Employee Fund VI, L.P. and CVC II Partners, LLC *

4.16		Amendment No. 6 to the Amended and Restated Registration Rights Agreement, dated February 13, 2009, among MTM Technologies, Inc., Steven Rothman, Howard Pavony, FirstMark III, L.P., FirstMark III Offshore Partners, L.P., as successors-in-interest to Pequot Private Equity Fund III, L.P., Pequot Offshore Private Equity Partners III, L.P., Constellation Venture Capital II, L.P., Constellation Venture Capital Offshore II, L.P., The BSC Employee Fund VI, L.P. and CVC II Partners, LLC *

4.17		Columbia Voting Agreement, dated November 4, 2005 *

4.18		Series A-5 Voting Agreement, dated November 23, 2005 *

4.19		Form of the Series A-4 Warrant Certificate *

4.20		Form of the Series A-5 Warrant Certificate *

4.21		Warrant Certificate issued to National Electrical Benefit Fund (2005) *

4.22		Form of the Series A-6 Warrant Certificate *

4.23		Form of the Series A-7 Warrant Certificate *

4.24		Form of the Series A-8 Warrant Certificate *

4.25		Warrant Certificate issued to National Electrical Benefit Fund (2007) *

4.26		Warrant Certificate, evidencing 343,705 warrants registered in the name of Pequot Private Equity Fund III, LLP *

4.27		Warrant Certificate, evidencing 48,452 warrants registered in the name of Pequot Offshore Private Equity Partners III, L.P. *

4.28		Form of June 11, 2008 Warrant Certificate *

4.29		Form of June 16, 2008 Warrant Certificate *

4.30		Warrant Certificate, evidencing 120,889 warrants registered in the name FirstMark III, L.P. *

4.31		Warrant Certificate, evidencing 17,042 warrants registered in the name FirstMark III Offshore Partners, L.P. *

10.1		Credit Agreement, dated November 23, 2005, among MTM Technologies, Inc., MTM Technologies (California), Inc., MTM Technologies (Texas), Inc., MTM Technologies (US), Inc., MTM Technologies (Massachusetts), LLC, and Info Systems, Inc. as borrowers and Columbia Partners, LLC Investment Management as Investment Manager and National Electrical Benefit Fund as Lender *

10.2		Amendment No.1 dated July 31, 2007, to the Credit Agreement, dated November 23, 2005, among MTM Technologies, Inc., MTM Technologies (California), Inc., MTM Technologies (Texas), Inc., MTM Technologies (US), Inc., MTM Technologies (Massachusetts), LLC, and Info Systems, Inc. as borrowers and Columbia Partners, L.L.C. Investment Management, as Investment Manager and National Electrical Benefit Fund, as Lender *

10.3		Amendment No.2 dated August 21, 2007, to the Credit Agreement, dated November 23, 2005, among MTM Technologies, Inc., MTM Technologies (California), Inc., MTM Technologies (Texas), Inc., MTM Technologies (US), Inc., MTM Technologies (Massachusetts), LLC, and Info Systems, Inc. as borrowers and Columbia Partners, L.L.C. Investment Management, as Investment Manager and National Electrical Benefit Fund, as Lender*

10.4		Amendment No.3 dated February 28, 2008, to the Credit Agreement, dated November 23, 2005, among MTM Technologies, Inc., MTM Technologies (California), Inc., MTM Technologies (Texas), Inc., MTM Technologies (US), Inc., MTM Technologies (Massachusetts), LLC, and Info Systems, Inc. as borrowers and Columbia Partners, L.L.C. Investment Management, as Investment Manager and National Electrical Benefit Fund, as Lender *

10.5		Amendment No.4 dated June 11, 2008, to the Credit Agreement, dated November 23, 2005, among MTM Technologies, Inc., MTM Technologies (California), Inc., MTM Technologies (Texas), Inc., MTM Technologies (US), Inc., MTM Technologies (Massachusetts), LLC, and Info Systems, Inc. as borrowers and Columbia Partners, L.L.C. Investment Management, as Investment Manager and National Electrical Benefit Fund, as Lender *

10.6		Amendment No.5 dated June 17, 2008, to the Credit Agreement, dated November 23, 2005, among MTM Technologies, Inc., MTM Technologies (California), Inc., MTM Technologies (Texas), Inc., MTM Technologies (US), Inc., MTM Technologies (Massachusetts), LLC, and Info Systems, Inc. as borrowers and Columbia Partners, L.L.C. Investment Management, as Investment Manager and National Electrical Benefit Fund, as Lender *

~~REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM~~38

To the Board of Directors and Shareholders MTM TECHNOLOGIES, INC.


10.7		Amendment No.6 dated November 11, 2008, to the Credit Agreement, dated November 23, 2005, among MTM Technologies, Inc., MTM Technologies (California), Inc., MTM Technologies (Texas), Inc., MTM Technologies (US), Inc., MTM Technologies (Massachusetts), LLC, and Info Systems, Inc. as borrowers and Columbia Partners, L.L.C. Investment Management, as Investment Manager and National Electrical Benefit Fund, as Lender *

10.8		Amendment No.7 dated January 29, 2009, to the Credit Agreement, dated November 23, 2005, among MTM Technologies, Inc., MTM Technologies (California), Inc., MTM Technologies (Texas), Inc., MTM Technologies (US), Inc., MTM Technologies (Massachusetts), LLC, and Info Systems, Inc. as borrowers and Columbia Partners, L.L.C. Investment Management, as Investment Manager and National Electrical Benefit Fund, as Lender *

10.9		Amendment No.8 dated June 2, 2009, to the Credit Agreement, dated November 23, 2005, among MTM Technologies, Inc., MTM Technologies (California), Inc., MTM Technologies (Texas), Inc., MTM Technologies (US), Inc., MTM Technologies (Massachusetts), LLC, and Info Systems, Inc. as borrowers and Columbia Partners, L.L.C. Investment Management, as Investment Manager and National Electrical Benefit Fund, as Lender *

10.10		Amendment No.9 dated June 11, 2009, to the Credit Agreement, dated November 23, 2005, among MTM Technologies, Inc., MTM Technologies (California), Inc., MTM Technologies (Texas), Inc., MTM Technologies (US), Inc., MTM Technologies (Massachusetts), LLC, and Info Systems, Inc. as borrowers and Columbia Partners, L.L.C. Investment Management, as Investment Manager and National Electrical Benefit Fund, as Lender *

10.11		Subordination Agreement dated as of August 21, 2007, among GE Commercial Distribution Finance Corporation, and National Electrical Benefit Fund and Columbia Partners, L.L.C. Investment Management *

10.12		Credit Facilities Agreement dated August 21, 2007 among MTM Technologies, Inc, MTM Technologies (US), Inc., MTM Technologies (Massachusetts), LLC, and Info Systems, Inc. as Borrowers, and GE Commercial Distribution Finance Corporation (“CDF”), as Administrative Agent, and CDF and the other lenders listed therein, as Lenders *

10.13		First Amendment dated August 21, 2007 to Credit Facilities entered into as of August 21, 2007 among MTM Technologies, Inc, MTM Technologies (US), Inc., MTM Technologies (Massachusetts), LLC, and Info Systems, Inc., as Borrowers, and GE Commercial Distribution Finance Corporation as Administrative Agent and the sole lender *

10.14		Second Amendment dated February 4, 2008 to Credit Facilities entered into as of August 21, 2007 among MTM Technologies, Inc, MTM Technologies (US), Inc., MTM Technologies (Massachusetts), LLC, and Info Systems, Inc., as Borrowers, and GE Commercial Distribution Finance Corporation as Administrative Agent and the sole lender *

10.15		Third Amendment dated February 28, 2008 to Credit Facilities entered into as of August 21, 2007 among MTM Technologies, Inc, MTM Technologies (US), Inc., MTM Technologies (Massachusetts), LLC, and Info Systems, Inc., as Borrowers, and GE Commercial Distribution Finance Corporation as Administrative Agent and the sole lender *

10.16		Fourth Amendment dated May 16, 2008 but effective as of May 1, 2008 to Credit Facilities entered into as of August 21, 2007 among MTM Technologies, Inc, MTM Technologies (US), Inc., MTM Technologies (Massachusetts), LLC, and Info Systems, Inc., as Borrowers, and GE Commercial Distribution Finance Corporation as Administrative Agent and the sole lender *

10.17		Fifth Amendment dated June 16, 2008 to Credit Facilities entered into as of August 21, 2007 among MTM Technologies, Inc, MTM Technologies (US), Inc., MTM Technologies (Massachusetts), LLC, and Info Systems, Inc., as Borrowers, and GE Commercial Distribution Finance Corporation as Administrative Agent and the sole lender *

10.18		Sixth Amendment dated November 11, 2008 to Credit Facilities entered into as of August 21, 2007 among MTM Technologies, Inc, MTM Technologies (US), Inc., MTM Technologies (Massachusetts), LLC, and Info Systems, Inc., as Borrowers, and GE Commercial Distribution Finance Corporation as Administrative Agent and the sole lender *

10.19		Seventh Amendment dated January 29, 2009 to Credit Facilities entered into as of August 21, 2007 among MTM Technologies, Inc, MTM Technologies (US), Inc., MTM Technologies (Massachusetts), LLC, and Info Systems, Inc., as Borrowers, and GE Commercial Distribution Finance Corporation as Administrative Agent and the sole lender *

10.20		Eighth Amendment dated June 2, 2009 to Credit Facilities entered into as of August 21, 2007 among MTM Technologies, Inc, MTM Technologies (US), Inc., MTM Technologies (Massachusetts), LLC, and Info Systems, Inc., as Borrowers, and GE Commercial Distribution Finance Corporation as Administrative Agent and the sole lender *

10.21		Ninth Amendment dated June 11, 2009 to Credit Facilities entered into as of August 21, 2007 among MTM Technologies, Inc, MTM Technologies (US), Inc., MTM Technologies (Massachusetts), LLC, and Info Systems, Inc., as Borrowers, and GE Commercial Distribution Finance Corporation as Administrative Agent and the sole lender *

10.22		Consent to Credit Facilities Agreement dated June 16, 2008 among MTM Technologies, Inc., MTM Technologies (US), Inc., MTM Technologies (Massachusetts), LLC and Info Systems, Inc., as borrowers and GE Commercial Distribution Finance Corporation as Administrative Agent and the sole lender *

10.23		Letter of Credit Commitment and Repayment Agreement dated June 11, 2009 among MTM Technologies, Inc., MTM Technologies (US), Inc., MTM Technologies (Massachusetts), LLC and Info Systems, Inc., as borrowers, and National Electrical Benefit Fund, FirstMark III L.P., FirstMark III Offshore Partners, L.P., Constellation Venture Capital II, L.P., Constellation Venture Capital Offshore II, L.P., CVC II Partners LLC, BSC Employee Fund VI, L.P. and Columbia Partners, L.L.C. Investment Management as Investment Manager *

10.24		Security Agreement dated June 11, 2009 by and among MTM Technologies, Inc., MTM Technologies (US), Inc., MTM Technologies (Massachusetts), LLC and Info Systems, Inc., as borrowers, and Columbia Partners, L.L.C. Investment Management as Investment Manager, for the benefit of itself and National Electrical Benefit Fund, FirstMark III L.P., FirstMark III Offshore Partners, L.P., Constellation Venture Capital II, L.P., Constellation Venture Capital Offshore II, L.P., CVC II Partners LLC, and the BSC Employee Fund VI, L.P. *

We have audited the accompanying consolidated balance sheet of MTM Technologies, Inc. and Subsidiaries as of March 31, 2007, and the related consolidated statements of operation, shareholders’ equity and cash flow for the year then ended. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audit. 39

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.


10.25		Intellectual Property Security Agreement dated June 11, 2009 by and among MTM Technologies, Inc., MTM Technologies (US), Inc., MTM Technologies (Massachusetts), LLC and Info Systems, Inc., as borrowers, and Columbia Partners, L.L.C. Investment Management as Investment Manager, for the benefit of itself and National Electrical Benefit Fund, FirstMark III L.P., FirstMark III Offshore Partners, L.P., Constellation Venture Capital II, L.P., Constellation Venture Capital Offshore II, L.P., CVC II Partners LLC, and the BSC Employee Fund VI, L.P. *

10.26		Stock Pledge Agreement dated June 11, 2009 by and among MTM Technologies, Inc., MTM Technologies (US), Inc., MTM Technologies (Massachusetts), LLC and Info Systems, Inc., as borrowers, and Columbia Partners, L.L.C. Investment Management as Investment Manager, for the benefit of itself and National Electrical Benefit Fund, FirstMark III L.P., FirstMark III Offshore Partners, L.P., Constellation Venture Capital II, L.P., Constellation Venture Capital Offshore II, L.P., CVC II Partners LLC, and the BSC Employee Fund VI, L.P. *

10.27		Third Amended and Restated Subordinated Promissory Note dated June 11, 2009 issued by MTM Technologies, Inc. in favor of FirstMark III, L.P. in the amount of $2,191,123 *

10.28		Amended and Restated Subordinated Promissory Note dated June 11, 2009 issued by MTM Technologies, Inc. in favor of FirstMark III, L.P. in the amount of $2,410,235 *

10.29		Amended and Restated Subordinated Promissory Note dated June 11, 2009 issued by MTM Technologies, Inc. in favor of FirstMark III, L.P. in the amount of $219,112 *

10.30		Second Amended and Restated Subordinated Promissory Note dated June 11, 2009 issued by MTM Technologies, Inc. in favor of FirstMark III, L.P. in the amount of $876,449 *

10.31		Third Amended and Restated Subordinated Promissory Note dated June 11, 2009 issued by MTM Technologies, Inc. in favor of FirstMark III Offshore Partners, L.P. in the amount of $308,877 *

10.32		Amended and Restated Subordinated Promissory Note dated June 11, 2009 issued by MTM Technologies, Inc. in favor of FirstMark III Offshore Partners, L.P. in the amount of $339,765 *

10.33		Amended and Restated Subordinated Promissory Note dated June 11, 2009 issued by MTM Technologies, Inc. in favor of FirstMark III Offshore Partners, L.P. in the amount of $30,888 *

10.34		Second Amended and Restated Subordinated Promissory Note dated June 11, 2009 issued by MTM Technologies, Inc. in favor of FirstMark III Offshore Partners, L.P. in the amount of $123,551 *

10.35		Amended and Restated Subordinated Promissory Note dated June 11, 2009 issued by MTM Technologies, Inc. in favor of Constellation Venture Capital II, L.P. in the amount of $249,617.80 *

10.36		Amended and Restated Subordinated Promissory Note dated June 11, 2009 issued by MTM Technologies, Inc. in favor of Constellation Venture Capital Offshore II, L.P. in the amount of $132,834.65 *

10.37		Amended and Restated Subordinated Promissory Note dated June 11, 2009 issued by MTM Technologies, Inc. in favor of The BSC Employee Fund VI, L.P. in the amount of $111,313.95 *

10.38		Amended and Restated Subordinated Promissory Note dated June 11, 2009 issued by MTM Technologies, Inc. in favor of CVC Partners II, LLC in the amount of $6,233.60 *

10.39		Micros-to-Mainframes, Inc. 1993 Employee Stock Option Plan *

10.40		Micros-to-Mainframes, Inc. 1996 Stock Option Plan *

10.41		Micros-to-Mainframes, Inc. 1998 Stock Option Plan *

10.42		Micros-to-Mainframes, Inc. 2000 Long-Term Performance Plan *

10.43		Micros-to-Mainframes, Inc. 2002 Long-Term Performance Plan *

10.44		Micros-to-Mainframes, Inc. 2004 Equity Incentive Plan *

10.45		Form of Employee Stock Option Agreement *

10.46		MTM Technologies, Inc. Associates Stock Purchase Plan *

10.47		Form of Employee Restricted Stock Unit Agreement *

10.48		Form of Executive Stock Option Agreement *

10.49		Form of Executive Restricted Stock Unit Agreement *

10.50		Employment Agreement, dated August 10, 2006 between MTM Technologies, Inc. and Steven Stringer*

10.51		Letter Agreement, dated September 28, 2006 between MTM Technologies, Inc. and J.W. Braukman, III*

10.52		Lease Agreement, dated August 15, 2005 between 1200 High Ridge Company, LLC and MTM Technologies, Inc. *

14.1		Code of Ethics*

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of MTM Technologies, Inc. and Subsidiaries as of March 31, 2007 and the results of their operations and their cash flows for the year ended, in conformity with U. S. generally accepted accounting principles. 40

As discussed in Note 1 to the financial statements, effective April 1, 2006, the Company changed its method of accounting for share-based payments to adopt Statement of Financial Accounting Standards No. 123(R), Share-Based Payments.


	16.1				Letter dated November 15, 2007 from Goldstein Golub Kessler LLP (“GGK”) to MTM Technologies, Inc. notifying MTM that certain of the partners of GGK became partners of McGladrey & Pullen, LLP in a limited asset purchase agreement *

	16.2				Goldstein Golub Kessler LLP Letter to the Securities and Exchange Commission dated November 15, 2007 *

	21.1				Subsidiaries of MTM Technologies, Inc.

	31.1				Certification pursuant to Exchange Act Rule 13a-14(a) of Steven Stringer, as PEO and PFO

	32.1				Certification pursuant to Section 1350 of the Sarbanes-Oxley Act of 2002 of Steven Stringer, as PEO and PFO

~~GOLDSTEIN~~* ~~GOLUB~~Incorporated ~~KESSLER~~by ~~LLP New~~Reference. ~~York,~~See ~~New~~Exhibit ~~York~~ Index.

Financial ~~June~~Statements ~~27,~~and ~~2007~~Schedules

We have provided in Item 8 to this Annual Report on FForm 10-2K a complete list of the financial statements being filed with this Form 10-K. There are no financial statement schedules applicable to this Form 10-K.

~~MTM TECHNOLOGIES, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (In thousands, except share data)~~ 41

	March 31,
	2008			2007
ASSETS
Current assets:
Cash	$	3,210		$	4,439
Accounts receivable-trade, net of allowance of $974 and $1,552, respectively		42,207			46,543
Inventories		576			2,210
Prepaid expenses and other current assets		5,958			5,389
Total current assets		51,951			58,581
Property and equipment, net		10,813			16,005
Goodwill		69,960			69,987
Identified intangible assets, net of amortization		1,783			3,809
Other assets		968			1,079
Total assets	$	135,475		$	149,461
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Secured revolving credit facilities	$	8,100		$	10,692
Inventory financing agreements		15,801			11,358
Related party note payable		2,431			—
Accounts payable		18,603			30,737
Accrued expenses		4,225			11,207
Deferred revenue		5,734			6,477
Current portion of capital lease obligations		383			548
Total current liabilities		55,277			71,019
Secured promissory note		23,578			23,507
Other long-term liabilities		9,673			5,616
Total liabilities		88,528			100,142
Shareholders’ equity:
Series A preferred stock, $.001 par value; 39,300,000 and 33,500,000 shares authorized; issued and outstanding
29,569,259 and 22,645,766 shares at March 31, 2008 and March 31, 2007, respectively		66,515			54,307
Common stock, $.001 par value; 150,000,000 and 80,000,000 shares authorized; issued and outstanding 13,354,549
and 11,920,919 shares, respectively		13			12
Additional paid-in capital		54,139			54,315
Accumulated deficit		(73,720	)		(59,315	)
Total shareholders’ equity		46,947			49,319
Total liabilities and shareholders’ equity	$	135,475		$	149,461

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

~~See~~To ~~Notes~~the toBoard ~~Consolidated~~of ~~Financial~~Directors ~~Statements.~~and Shareholders MTM TECHNOLOGIES, INC.

~~F-3~~ We have audited the accompanying consolidated balance sheets of MTM Technologies, Inc. and Subsidiaries as of March 31, 2009 and 2008, and the related consolidated statements of operations, shareholders’ equity and cash flows for the years then ended. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.

~~MTM~~ We conducted ~~TECHNOLOGIES,~~our ~~INC~~audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). ~~AND~~Those ~~SUBSIDIARIES~~standards require that we ~~CONSOLIDATED~~plan ~~STATEMENTS~~and OFperform ~~OPERATIONS~~the audit to obtain reasonable assurance about whether the ~~(In~~financial ~~thousands~~statements are free of material misstatement. An audit includes examining, ~~except~~on ~~per~~a ~~share~~test ~~data)~~basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

	Year Ended March 31,
	2008			2007
Net revenues:
Products	$	171,940		$	206,917
Services		70,745			68,061
Total net revenues		242,685			274,978
Costs and expenses:
Cost of products sold		144,831			176,284
Cost of services provided		42,283			43,507
Selling, general and administrative expenses		62,326			75,167
Restructuring		-			6,056
Total costs and expenses		249,440			301,014
Operating loss		(6,755	)		(26,036	)
Other income(expense):
Interest expense, net of interest income		(6,757	)		(5,108	)
Other income (expenses)		129			(446	)
Loss before income tax provision		(13,383	)		(31,590	)
Provision for income taxes		1,022			427
Net loss	$	(14,405	)	$	(32,017	)
Preferred stock dividend		(4,509	)		(3,168	)
Net loss available to common shareholders	$	(18,914	)	$	(35,185	)
Net loss per common share:
Basic and Diluted	$	(1.45	)	$	(3.00	)
Weighted average number of common shares outstanding:
Basic and Diluted		13,021			11,741

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of MTM Technologies, Inc. and Subsidiaries as of March 31, 2009 and 2008, and the results of their operations and their cash flows for the years then ended, in conformity with accounting principles generally accepted in the United States of America.

~~See~~ The accompanying ~~Notes~~consolidated financial statements have been prepared assuming the Company will continue as a going concern. As discussed in Note 1, Liquidity, the Company has recurring losses from operations and a working capital deficiency at March 31, 2009. These conditions raise substantial doubt about the Company’s ability to ~~Consolidated~~continue ~~Financial~~as ~~Statements~~a going concern. Management’s plans concerning these matters are also discussed in Note 1. The consolidated financial statements do not include any adjustments that might result from the outcome of these uncertainties.

~~F-4~~ We were not engaged to examine management’s assertion about the effectiveness of MTM Technologies, Inc.’s internal control over financial reporting as of March 31, 2009 included in the accompanying Management’s Annual Report on Internal Control over Financial Reporting and, accordingly, we do not express an opinion thereon.

~~MTM~~/S/ ~~TECHNOLOGIES~~MCGLADREY & PULLEN, ~~INC.~~LLP ~~AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY (In thousands)~~

	Preferred Stock			Common Stock
								Additional
	Number of			Number of				Paid-in				Accumulated
	Shares	Amount		Shares			Amount	Capital				Deficit		Total
Balance at March 31, 2006	20,025	$	49,883	11,491		$	12	$	54,121		$	(27,298	)	$	76,718
Issuance of preferred stock	2,020		2,610						390						3,000
Dividends on Series A preferred stock	601		1,814						(3,168	)					(1,354	)
Repurchase of common stock				(145	)		—		(362	)					(362	)
Issuance of common stock to employees
pursuant to employee stock purchase plan				67			—		162						162
Issuance of common stock to employees
pursuant to exercise of options				295			—		387						387
Issuance of common stock in connection with
acquisition				62			—		232						232
Issuance of common stock for promissory
note payment				106					335						335
Stock-based compensation expense									2,218						2,218
Issuance of common stock to Board				45			—								—
Net loss												(32,017	)		(32,017	)
Balance at March 31, 2007	22,646		54,307	11,921			12		54,315			(59,315	)		49,319
Issuance of preferred stock	5,431		8,051						1,131						9,182
Additional warrants issued for secured
promissory note									476						476
Warrants issued with related party note
payable									75						75
Dividends on Series A preferred stock	1,492		4,157						(4,510	)					(353	)
Issuance of common stock to employees
pursuant to employee stock purchase plan				77			—		69						69
Issuance of common stock to employees
pursuant to exercise of options				80			—		2						2
Issuance of common stock in connection with
Nexl acquisition				1,277			1		1,357						1,358
Stock-based compensation expense									1,224						1,224
Net loss												(14,405	)		(14,405	)
Balance at March 31, 2008	29,569	$	66,515	13,355		$	13	$	54,139		$	(73,720	)	$	46,947

New York, New York
July 13, 2009

~~See Notes to Consolidated Financial Statements.~~ F-1

~~F-5~~MTM TECHNOLOGIES, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (In thousands, except share data)

MTM TECHNOLOGIES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands)


	March 31,

	2009			2008

ASSETS
Current assets:
Cash	$	2,150		$	3,210
Accounts receivable-trade, net of allowance of $867 and $974, respectively		31,193			42,207
Inventories		149			576
Prepaid expenses and other current assets		3,248			5,958

Total current assets		36,740			51,951
Property and equipment, net		6,648			10,813
Goodwill		50,346			69,960
Intangible assets, net		844			1,783
Other assets		666			968

Total assets	$	95,244		$	135,475


LIABILITIES AND SHAREHOLDERS’ EQUITY

Current liabilities:
Secured revolving credit facilities	$	5,898		$	8,100
Inventory financing agreements		9,769			15,801
Related party notes payable		6,833			2,431
Accounts payable		12,712			18,603
Accrued expenses		2,633			4,225
Deferred revenue		4,564			5,734
Current portion of capital lease obligations		113			383

Total current liabilities		42,522			55,277

Secured promissory note		28,117			23,578
Long-term accrued interest on secured promissory note		13,523			6,538
Other long-term liabilities		2,591			3,135

Total liabilities		86,753			88,528


Shareholders’ equity:
Series A preferred stock, $.001 par value; 44,750,000 and 39,300,000 shares authorized; 31,369,986 and 29,569,259 shares issued and outstanding at March 31, 2009 and March 31, 2008, respectively		71,311			66,515
Common stock, $.001 par value; 150,000,000 shares authorized, 912,511 and 890,228 shares issued and outstanding at March 31, 2009 and March 31, 2008, respectively		1			1
Additional paid-in capital		50,543			54,151
Accumulated deficit		(113,364	)		(73,720	)

Total shareholders’ equity		8,491			46,947

Total liabilities and shareholders’ equity	$	95,244		$	135,475

	Year Ended March 31,
	2008			2007
OPERATING ACTIVITIES:
Net loss	$	(14,405	)	$	(32,017	)
Adjustments to reconcile net loss to net cash used in operating activities:
Provision for uncollectible accounts		(168	)		828
Depreciation		7,268			6,596
Amortization of intangibles		2,026			2,765
Provision for deferred income taxes		772			—
Amortization of debt discount		553			560
Non-cash interest on secured subordinated promissory note		3,723			2,120
Amortization of debt issuance costs		590			534
Stock-based compensation		1,224			2,218
Non-cash restructuring costs		—			450
Non-cash interest on note payable		17			—
Changes in operating assets and liabilities net of effects of acquisitions:
(Increase)decrease in assets:
Accounts receivable		3,927			1,557
Inventories		1,634			1,252
Prepaid expenses and other current assets	(1,159		)		(1,197	)
Other assets		111			(55	)
Increase(decrease) in liabilities:
Accounts payable and accrued expenses	(17,310		)		3,084
Deferred revenue		(743	)		1,005
Net cash used in operating activities		(11,940	)		(10,300	)
INVESTING ACTIVITIES:
Acquisition of businesses, net of cash acquired		—			(520	)
Additions to property and equipment	(2,368		)		(6,644	)
Net cash used in investing activities	(2,368		)		(7,164	)
FINANCING ACTIVITIES:
Repayment on secured revolving credit facility	(2,592		)		(4,223	)
Borrowings on inventory financing		4,443			5,717
Proceeds from issuance of preferred stock, net		9,182			3,000
Proceeds from issuance of related party note payable		2,500			—
Repurchase of common stock		—			(362	)
Common stock issued from stock options exercised		2			387
Common stock issued under associate stock purchase plan		69			162
Principal payments on capital lease obligations		(525	)		(599	)
Principal payments on promissory note		—			(333	)
Net cash provided by financing activities	13,079				3,749
Net decrease in cash	(1,229		)		(13,715	)
Cash at beginning of period		4,439			18,154
Cash at end of period	$	3,210		$	4,439
Supplemental disclosures of cash flow information:
Cash paid during the year for:
Interest	$	1,937		$	2,358
Income taxes	$	181		$	288
Supplemental disclosure of non-cash financing activities:
Series A Preferred Stock dividend accrued	$	1,705		$	1,354
Warrants issued in connection with secured promissory note	$	476		$	—
Warrants issued in connection with note payable	$	75		$	—
Supplemental disclosure of non-cash investing activities:
Common stock issued for promissory note payment	$	—		$	335
Common stock issued in acquisition	$	—		$	232
Non-cash adjustments to goodwill	$	27		$	2,333
Additional liability incurred to settle contingent consideration relative to acquisition	$	—		$	1,385
Common stock issued to settle contingent consideration relative to acquisition	$	1,358		$	—

See Notes to Consolidated Financial Statements.

~~See Notes to Consolidated Financial Statements.~~ F-2

~~F-6~~MTM TECHNOLOGIES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (In thousands, except per share data)

MTM TECHNOLOGIES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


	Year Ended March 31,

	2009			2008


Net revenues:
Products	$	122,485		$	171,940
Services		52,220			70,745

Total net revenues		174,705			242,685

Costs and expenses:
Cost of products sold		102,085			144,831
Cost of services provided		32,814			42,283
Selling, general and administrative expenses		49,494			62,326
Goodwill impairment		19,614			—


Total costs and expenses		204,007			249,440

Operating loss		(29,302	)		(6,755	)

Interest (expense) and other, net		(10,442	)		(6,628	)

Loss before income tax provision		(39,744	)		(13,383	)

(Benefit from) provision for income taxes		(100	)		1,022


Net loss	$	(39,644	)	$	(14,405	)


Preferred stock dividend		(4,890	)		(4,509	)


Net loss available to common shareholders	$	(44,534	)	$	(18,914	)

Net loss per common share:
Basic and Diluted	$	(49.31	)	$	(21.79	)

Weighted average number of common shares outstanding:
Basic and Diluted		903			868

~~Note~~See 1.Notes ~~Business~~to ~~and~~Consolidated ~~Summary of Significant Accounting Policies~~Financial ~~Principles~~Statements. ~~of Consolidation and Nature of Operations~~

The accompanying consolidated financial statements include the accounts of MTM Technologies, Inc. and its wholly owned subsidiaries, MTM Technologies (US), Inc., Info Systems, Inc. and MTM Technologies (Massachusetts) LLC, collectively referred to as (the “Company”). All significant intercompany accounts and transactions have been eliminated. The Company operates on a fiscal year that ends on March 31. F-3

~~The~~MTM ~~Company is a leading national provider of sophisticated information technology solutions services including information technology networking~~TECHNOLOGIES, ~~communications,~~INC. ~~software~~AND ~~applications and data center services, including~~SUBSIDIARIES ~~secure~~CONSOLIDATED ~~access,~~STATEMENTS ~~voice~~OF ~~over internet protocol, storage, security and messaging solutions. The Company serves as a single source provider of advanced technology solutions to support its clients~~SHAREHOLDERS’ ~~mission-critical business processes. The~~EQUITY ~~Company’s clients consist of divisions of Global 2000 corporations, middle market corporations~~ (~~generally~~In ~~those with $50 million to $1 billion in revenues~~thousands)~~, municipal, state and federal government agencies, and educational, financial and health-care institutions. The Company serves clients in most major metropolitan markets in the United States.~~

The Company purchases software, computers and related products directly from suppliers as either an authorized dealer or a value-added reseller. The Company has entered into authorization agreements with major suppliers, which can be terminated by the suppliers, with or without cause, upon short notice, or immediately upon the occurrence of certain events. The sales of products from the Company’s two largest suppliers accounted for 29% and 19% of all product sales for the year ended March 31, 2008. The Company believes that it has excellent relationships with its major suppliers; however, there can be no assurance that the aforementioned agreements will be renewed. If these agreements are not renewed, the Company may have difficulty in obtaining inventory at an amount to allow for profitable resale at a competitive market price.


	Preferred Stock				Common Stock				Additional Paid-in Capital			Accumulated Deficit

	Number of Shares		Amount		Number of Shares		Amount								Total

Balance at March 31, 2007		22,646	$	54,307		795	$	1	$	54,326		$	(59,315	)	$	49,319
Issuance of preferred stock		5,431		8,051						1,131						9,182
Dividends on Series A preferred stock		1,492		4,157						(4,510	)					(353	)
Additional warrants issued for secured promissory note										476						476
Issuance of common stock to employees pursuant to employee stock plans						10		—		71						71
Issuance of common stock in connection with Nexl acquisition						85		—		1,358						1,358
Warrants issued with related party notes payable										75						75
Stock-based compensation expense										1,224						1,224
Net loss													(14,405	)		(14,405	)

Balance at March 31, 2008		29,569		66,515		890		1		54,151			(73,720	)		46,947
Dividends on Series A preferred stock		1,801		4,796						(4,890	)					(94	)
Issuance of common stock to Board						6		—		35						35
Issuance of common stock to employees pursuant to employee stock plans						17		—		20						20
Warrants issued with related party notes payable										265						265
Stock-based compensation expense										962						962
Net loss													(39,644	)		(39,644	)

Balance at March 31, 2009		31,370	$	71,311		913	$	1	$	50,543		$	(113,364	)	$	8,491

~~Liquidity~~See Notes to Consolidated Financial Statements.

~~The Company sustained net losses during the years ended March 31, 2008 and 2007. Working capital at March 31, 2008 was a deficit of $3.3 million as compared to a working capital deficit of $12.~~F-4 million at March 31, 2007. The Company has made a concerted effort in the past two years to improve its working capital position, including issuing additional shares of preferred stock raising over $9.0 million in the current fiscal year alone, a $6.0 million restructuring in fiscal 2007, and instituting other cost control initiatives and programs. Capital expenditures for the year ended March 31, 2008 were $2.4 million compared with $6.6 million for the comparable prior year period. The Company currently has no commitments for material capital expenditures. In August 2007, the Company successfully refinanced its working capital lines of credit with a $34 million credit facilities agreement with GE Commercial Distribution Finance Corporation (“CDF”) as Administratvie Agent, which provided the Company with additional capital and increased purchasing flexibility, see Note 2 Credit Facilities. Our business requires significant levels of working capital to fund future revenue growth and current operations. MTM has historically relied on and continues to rely heavily on, trade credit from vendors and the credit facilities for working capital needs. The Company is focused on looking at avenues to secure additional open lines of credit with vendors and has recently negotiated additional flexibility in borrowing restrictions and reserves under our credit facilities. We continue to drive collection of accounts receivable and are actively managing our expenses to achieve greater economies of scale.

AsMTM ~~of June 17~~TECHNOLOGIES, ~~2008 the Company has successfully completed several financing arrangements which generated net proceeds of $9~~INC.0 ~~million, including~~AND ~~$2.5 million in February 2008 from the Pequot Notes, see Note 3~~SUBSIDIARIES ~~Related~~CONSOLIDATED ~~Party~~STATEMENTS ~~Note~~OF ~~Payable,~~CASH ~~another $3.5~~FLOWS ~~million from the Pequot June 11 Notes, the Pequot June 16 Notes, and the Constellation~~(In Notes, and $3.0 million in additional financing under the CP/NEBF Credit Agreement, see Note 14 Subsequent Events. The proceeds of which will be used to fund working capital needs. Additionally, the Company has negotiated additional flexibility in availability under the Credit Facilities Agreement with CDF and has received relaxed covenant restrictions for the first quarter of fiscal 2009 from both CDF and CP Investment Management and NEBF, see Note 14 Subsequent Events. thousands)

Our future liquidity and capital requirements will depend on numerous factors, including, general economic conditions and conditions in the technology industry in particular; the cost effectiveness of our product and service development activities; our dependence on third party licenses and our ability to maintain our status as an authorized reseller/service provider of IT products, and our ability to leverage our centralized infrastructure, all of which may impact our ability to achieve and maintain profitability. The Company anticipates that its available cash including the proceeds received from the financing arrangements described above in the first quarter of fiscal 2009 together with its available credit facilities should be adequate to fund our operations in the foreseeable future. The Company currently has no commitments for material capital expenditures. To the extent that our existing capital resources are insufficient to meet our working capital requirements we may seek to raise additional funds from the Investors or seek additional financing arrangements. However, no assurance can be given that such financing may be obtained on terms attractive to us, or at all. Furthermore, any additional debt or equity financing arrangements may be dilutive to shareholders, and debt financing, if available, may involve restrictive covenants. Our failure to raise capital when needed could have a material adverse effect on our business, operating results and financial condition.


	Year Ended March 31,

	2009			2008

OPERATING ACTIVITIES:
Net loss	$	(39,644	)	$	(14,405	)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
Goodwill impairment		19,614			—
Provision for uncollectible accounts		148			(168	)
Depreciation		6,311			7,268
Amortization of intangibles		939			2,026
Provision for deferred income taxes		(219	)		772
Amortization of debt discount		706			553
Non-cash interest on secured subordinated promissory note		6,985			3,723
Amortization of debt issuance costs		589			590
Stock-based compensation		997			1,224
Non-cash interest on note payable		479			17
Loss on disposal of fixed assets		47			—
Cash provided/(used) by changes in operating assets and liabilities:
(Increase)decrease in assets:
Accounts receivable		10,713			3,927
Inventories		427			1,634
Prepaid expenses and other current assets		2,348			(1,159	)
Other assets		302			111
Increase(decrease) in liabilities:
Accounts payable and accrued expenses		(8,169	)		(17,310	)
Deferred revenue		(1,170	)		(743	)

Net cash provided by (used in) operating activities		1,403			(11,940	)


INVESTING ACTIVITIES:
Additions to property and equipment		(2,193	)		(2,368	)

Net cash used in investing activities		(2,193	)		(2,368	)


FINANCING ACTIVITIES:
Repayments on secured revolving credit facility		(2,202	)		(2,592	)
(Repayments) borrowings on inventory financing		(6,032	)		4,443
Proceeds from issuance of preferred stock, net		—			9,182
Proceeds from issuance of related party notes payable		4,344			2,500
Proceeds from issuance of secured promissory note		3,929			—
Common stock issued under stock plans		20			71
Principal payments on capital lease obligations		(329	)		(525	)

Net cash(used in) provided by financing activities		(270	)		13,079

Net decrease in cash		(1,060	)		(1,229	)
Cash at beginning of year		3,210			4,439

Cash at end of year	$	2,150		$	3,210

Supplemental disclosures of cash flow information:
Cash paid during the year for:
Interest	$	1,621		$	1,937
Income taxes	$	101		$	181
Supplemental disclosure of non-cash financing activities:
Series A Preferred Stock dividend accrued	$	4,890		$	4,509
Series A Preferred Stock dividend settled with preferred stock	$	4,796		$	4,157
Warrants issued in connection with notes payable	$	265		$	75
Warrants issued in connection with secured promissory note	$	—		$	476
Supplemental disclosure of non-cash investing activities:
Common stock issued to settle contingent consideration relative to acquisition	$	—		$	1,358
Non-cash adjustments to goodwill	$	—		$	27

See Notes to Consolidated Financial ~~Estimates~~Statements.

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements, as well as the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from these estimates. F-5

MTM TECHNOLOGIES, INC. AND SUBSIDIARIES ~~Concentrations~~NOTES ofTO ~~Credit~~CONSOLIDATED ~~Risk~~FINANCIAL STATEMENTS

~~Financial~~Note ~~instruments that potentially subject the Company to concentrations of credit risk consist principally of cash and trade accounts receivable~~1. ~~The~~Business ~~Company places its cash with high credit quality institutions. At times, such amounts may be in excess of the FDIC insurance limits. Credit risk is limited due to the large number of customers~~ and ~~their~~Summary ~~dispersion across geographic areas. The Company did not have any customer at March 31, 2008 or 2007 which accounted for more than 10%~~ of its total accounts receivable. At March 31, 2008 the combined top two customer balances accounted for approximately 13% of the Company’s total accounts receivable. Credit is extended to customers based on anSignificant ~~evaluation~~Accounting ~~of their financial condition in an effort to reduce the risk of loss. Collateral is generally not required.~~Policies

Principles of ~~F-7~~Consolidation and Nature of Operations

~~MTM~~The accompanying ~~TECHNOLOGIES~~consolidated financial statements include the accounts of MTM Technologies, ~~INC~~Inc. ~~AND~~and ~~SUBSIDIARIES~~its wholly owned subsidiaries, MTM Technologies (US), ~~NOTES~~Inc., TOInfo ~~CONSOLIDATED~~Systems, ~~FINANCIAL~~Inc. ~~STATEMENTS~~and –MTM Technologies (~~Continued~~Massachusetts) LLC, collectively referred to as (the “Company”). All significant intercompany accounts and transactions have been eliminated. The Company operates on a fiscal year that ends on March 31.

~~Accounts~~The ~~Receivable~~Company is a leading national provider of sophisticated information technology solutions services including information technology networking, communications, software applications and data center services, including secure access, voice over internet protocol, storage, security and messaging solutions. The Company serves as a single source provider of advanced technology solutions to support its clients’ mission-critical business processes. The Company’s clients consist of divisions of Global 2000 corporations, middle market corporations (generally those with $50 million to $1 billion in revenues), municipal, state and federal government agencies, and educational, financial and health-care institutions. The Company serves clients in most major metropolitan markets in the United States.

~~Accounts~~The ~~receivable~~Company purchases ~~are~~software, ~~reported~~computers atand ~~their~~related ~~outstanding~~products ~~unpaid~~directly ~~principal~~from ~~balances~~suppliers ~~reduced~~as either by an ~~allowance~~authorized ~~for~~dealer ~~doubtful~~or ~~accounts~~a value-added reseller. The Company ~~estimates~~has entered into authorization agreements with major suppliers, which can be terminated by the ~~allowance~~suppliers, ~~for~~with ~~doubtful~~or ~~accounts~~without ~~based~~cause, onupon ~~historical~~short ~~experience~~notice, ~~customer~~or ~~credit~~immediately ~~risk~~upon the occurrence of certain events. The sales of products from the Company’s two largest suppliers accounted for 27% and ~~application~~26% of all product sales for the ~~specific~~year ended ~~identification~~March ~~method~~31, 2009. The Company ~~writes~~believes ~~off~~that ~~accounts~~it ~~receivable~~has ~~against~~excellent ~~the~~relationships with ~~allowance~~its ~~when~~major asuppliers; ~~balance~~however, isthere ~~determined~~can tobe no assurance that the aforementioned agreements will be ~~uncollectible~~renewed. If these agreements are not renewed, the Company may have difficulty in obtaining inventory at an amount to allow for profitable resale at a competitive market price.

~~Information~~Certain ~~relating~~prior year’s tobalances ~~the~~have ~~allowance~~been ~~for~~reclassified ~~doubtful~~to ~~accounts~~conform isto asthe ~~follows~~current ~~(in thousands):~~ format.

	Beginning of
	Year		Additions (a)		Deductions (b)		End of Year
Year ended March 31,
2007	$	977	$	828	$	253	$	1,552
2008	$	1,552	$	—	$	578	$	974

(The consolidated financial statements have been prepared by the Company under the assumption that it will continue as a) ~~Includes~~going ~~bad~~concern, ~~debt~~which ~~provisions~~contemplates the realization of assets and the satisfaction of liabilities during the normal course of business. ~~(b)~~In ~~Includes~~preparing ~~write-offs~~these ~~for~~consolidated ~~uncollectible~~financial ~~accounts~~statements ~~receivables~~the Company ~~and~~has ~~net~~considered ~~changes~~the liquidity issues below which may raise substantial doubt about its ability to ~~allowance~~continue ~~estimates~~as a going concern. The consolidated financial statements do not include any adjustments that might result from the outcome of these uncertainties.

~~Inventories~~Liquidity

~~Inventories~~The Company sustained net losses during the fiscal years ended March 31, ~~comprised~~2009 ~~principally~~and 2008. The Company’s decline in performance during fiscal 2009 continued to be impacted by a weaker US economy and reduced access to business credit. The Company’s business requires significant levels of ~~computer~~working ~~hardware~~capital to fund future revenue growth and ~~software~~current operations. Working capital at March 31, ~~are~~2009 ~~stated~~was a deficit of $(5.8) million as compared to a working capital deficit of $(3.3) million at March 31, 2008. The Company has historically relied on and continues to rely heavily on, trade credit from vendors and its credit facilities for its working capital needs. The Company has made a concerted effort to improve its working capital position over the ~~lower~~past few years and during fiscal 2009 had taken significant measures to further reduce headcount, streamline operations, consolidate facilities and manage costs in response to the impact of ~~cost~~the economic ordownturn. ~~market~~The ~~using~~Company has also significantly reduced its infrastructure investment by limiting future capital expenditures including, the ~~first-~~internal development of purchased and developed software. The Company continues to drive accounts receivable and has made strong progress in collecting overdue accounts. The Company continues to actively pursue additional financing arrangements including the successful negotiation in June of fiscal 2010 of an additional $7.0 million in borrowing capacity under our existing Credit Facilities Agreement with GE Commercial Distribution Finance Corporation (“CDF”), See Note 12 Subsequent Events and most recently prior to that the Company was able to secure an additional $2.0 million in financing during the fourth quarter of fiscal 2009; $1.0 million from the Investors and an increase of $1.0 million under the CP/NEBF Credit Agreement. We were also able to complete several other financing arrangements with the Investors over the past two years amounting to $6.0 million, we secured an additional $3.0 million in financing under our Secured Promissory Note with CP Investment Management and NEBF during the first~~-out~~ ~~method~~quarter of fiscal 2009, and issued additional shares of Series A Preferred Stock raising over $9.0 million in the prior fiscal year alone.

~~Fair~~The ~~Value~~Company’s ability ofto ~~Financial~~continue ~~Instruments~~as a going concern, however, is contingent upon its ability to obtain debt and or capital financing in order to meet obligations that mature in fiscal 2010; including the Company’s current Credit Facilities Agreement with CDF, which matures in March 2010, See Note 12 Subsequent Events as well as the Company’s ability to restructure its operations in order to improve future operating results and to generate cash flow.

The ~~estimated~~Company’s immediate ~~fair~~liquidity ~~value~~and ofcapital ~~amounts~~requirements ~~reported~~going forward will depend on numerous factors, including general economic conditions and conditions in the financial ~~consolidated~~services, ~~financial~~government ~~statements~~and ~~has~~technology ~~been~~industry ~~determined~~in byparticular; ~~using~~the ability ~~available~~to ~~market~~extend ~~information~~or ~~and~~refinance ~~appropriate~~its ~~valuation~~current ~~methodologies.~~maturities; ~~All~~the ability to negotiate additional flexibility in borrowing restrictions and reserves under its current financing ~~assets~~facilities ~~are~~and ~~carried~~vendor atlines ~~their~~of credit; the Company’s dependence on third party licenses and the Company’s ability to maintain its status as an authorized reseller/service provider of IT products; the cost effectiveness of our product and ~~current~~service ~~liabilities~~development ~~are~~activities ~~recorded~~and atour ~~their~~ability ~~contract~~to ~~amount~~reduce and leverage our centralized infrastructure, all of which ~~approximates~~may ~~fair~~impact ~~value~~the ~~because~~Company’s ability ofto ~~their~~fund ~~short~~its ~~term~~operations ~~nature~~for the foreseeable future. The ~~carrying~~Company currently ~~value~~has ofno ~~short-term~~commitments for material capital expenditures. To the extent that the Company’s existing capital resources are insufficient to meet its working capital requirements, the Company will seek to raise additional funds or seek additional financing arrangements. ~~and~~However, ~~long-term~~no ~~debt~~assurance ~~obligations~~can ~~approximates~~be ~~fair~~given that ~~value~~such ~~because~~financing ~~interest~~may ~~rates~~be ~~over~~obtained on terms attractive to the ~~relative~~Company, ~~term~~or ofat all. ~~these~~Furthermore, ~~instruments~~any ~~approximate~~additional ~~current~~debt ~~market~~or ~~interest~~equity ~~rates~~financing arrangements may be dilutive to shareholders, and debt financing, if available, may involve restrictive covenants. The Company’s failure to raise capital when needed could have a material adverse effect on its business, operating results and financial condition.

~~Property and Equipment~~F-6

~~Property~~MTM ~~and equipment~~TECHNOLOGIES, ~~which includes assets under capital leases, are stated at cost and are depreciated using the straight-line method over estimated useful lives, generally ranging from three to seven years~~INC. ~~Leasehold~~AND ~~improvements~~SUBSIDIARIES NOTES ~~are~~TO ~~amortized~~CONSOLIDATED ~~over~~FINANCIAL ~~the~~STATEMENTS ~~shorter~~– of the lease term or economic life of the related improvement. Expenditures which extend the useful lives of the existing assets are capitalized. The cost of maintenance and repairs are charged to operations as incurred. (Continued)

~~The Company incurred approximately $7.3 million and $6.6 million of depreciation and amortization expense for the years ended March 31, 2008 and 2007, respectively.~~ Estimates

The preparation ~~following~~of isfinancial astatements ~~summary~~in conformity with accounting principles generally accepted in the United States of ~~property~~America requires management to make estimates and ~~equipment~~assumptions ~~held~~that byaffect the ~~Company~~reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at: the date of the financial statements, as well as the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from these estimates.

	March 31,
(in thousands)	2008			2007
Furniture, fixtures and office equipment	$	16,662		$	15,832
Software and software development costs		17,276			16,366
Capitalized lease equipment		1,650			1,650
Leasehold Improvements		2,532			2,410
Vehicles		783			790
		38,903			37,048
Less: accumulated depreciation and amortization		(28,090	)		(21,043	)
Property and equipment, net	$	10,813		$	16,005

Concentrations of Credit Risk

~~F-8~~Financial instruments that potentially subject the Company to concentrations of credit risk consist principally of cash and trade accounts receivable. The Company places its cash with high credit quality institutions. At times, such amounts may be in excess of the FDIC insurance limits. Credit risk related to trade accounts receivable is limited due to the large number of customers and their dispersion across geographic areas. The Company did not have any customer at March 31, 2009 or 2008 which accounted for more than 10% of its total accounts receivable. At March 31, 2009 the combined top four customer balances accounted for approximately 11% of the Company’s total accounts receivable. Credit is extended to customers based on an evaluation of their financial condition in an effort to reduce the risk of loss. Collateral is generally not required.

~~MTM~~Accounts ~~TECHNOLOGIES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)~~Receivable

~~Software~~Accounts receivable ~~Development~~are ~~Costs~~reported at their outstanding unpaid principal balances reduced by an allowance for doubtful accounts. The Company estimates the allowance for doubtful accounts based on historical experience, customer credit risk and application of the specific identification method. The Company writes off accounts receivable against the allowance when a balance is determined to be uncollectible.

~~The~~Information relating ~~cost~~to ofthe ~~software~~allowance ~~developed~~ for ~~internal~~doubtful ~~use~~accounts ~~incurred during the preliminary project stage~~ is ~~expensed~~ as ~~incurred.~~follows ~~Direct~~(in costs incurred during the application development stage are capitalized. Costs incurred during the post implementation/operation stage are expensed as incurred. Capitalized software development costs are amortized on a straight-line basis over their estimated useful lives, generally three years. thousands):

Goodwill


	Beginning of Year		Additions (a)		Deductions (b)		End of Year

Year ended March 31,
2008	$	1,552	$	—	$	578	$	974
2009	$	974	$	148	$	255	$	867

~~Goodwill~~(a) isIncludes ~~tested~~bad ~~for~~debt ~~impairment on an annual basis and more frequently if facts and circumstances indicate goodwill carrying values exceed estimated fair values~~provisions. ~~Because~~(b) ~~the~~Includes ~~Company~~write-offs ~~has fully integrated its acquisitions, it has determined that it has only one reporting unit~~ for ~~purposes~~uncollectible ofaccounts ~~testing~~receivables ~~for~~and ~~goodwill~~net ~~impairment.~~changes ~~Based~~to onallowance ~~the impairment tests performed, there was no impairment of goodwill in fiscal 2008 and 2007~~estimates.

~~The change in goodwill during the years ended March 31, 2007 and 2008, respectively, was as follows (in thousands):~~ Inventories

Balance at March 31, 2006	$	67,134
Purchase of Axcent		1,270
Earnout payment for Nexl		1,385
Other		198
Balance at March 31, 2007		69,987
Purchase price adjustment of previous acquisition		(27	)
Balance at March 31, 2008	$	69,960

Inventories, comprised principally of computer hardware and software, are stated at the lower of cost or market using the first-in, first-out method.

~~Intangible~~Fair ~~Assets~~Value of Financial Instruments

~~Definite-lived~~The ~~intangibles~~estimated fair value of amounts reported in the consolidated financial statements has been determined by using available market information and appropriate valuation methodologies. All current assets are carried at their cost and current liabilities are recorded at their contract amount, which ~~mainly~~approximates ~~consist~~fair value because of ~~client~~their ~~relationships,~~short ~~are~~term ~~amortized~~nature. The carrying value of short-term financing arrangements approximates fair value because interest rates over ~~their~~the relative term of these instruments approximate current market interest rates. The fair value of the Company’s long-term debt obligations is estimated ~~useful~~based ~~lives,~~on the ~~three~~current rates offered to ~~five~~the ~~years~~Company for debt of the same remaining maturities.

~~Intangible~~Software ~~assets consist of the following at:~~Development Costs

	March 31,
(in thousands)	2008			2007
Client relationships	$	8,915		$	8,915
Know-how		710			710
Non-compete agreements		250			250
		9,875			9,875
Less: accumulated amortization		(8,092	)		(6,066	)
Identified Intangible assets, net	$	1,783		$	3,809

The cost of software developed for internal use incurred during the preliminary project stage is expensed as incurred. Direct costs incurred during the application development stage are capitalized. Costs incurred during the post implementation/operation stage are expensed as incurred. Capitalized software development costs are amortized on a straight-line basis over their estimated useful lives, generally three years.

Amortization expense amounted to approximately $2.0 million and $2.8 million for the years ended March 31, 2008 and 2007, respectively. Estimated amortization expense for each of the next few fiscal years is as follows (in thousands): F-7

Year ending March 31,
2009	$	939
2010		506
2011		338
Total	$	1,783

MTM TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

~~F-9~~Property and Equipment

Property and ~~MTM~~equipment, ~~TECHNOLOGIES~~which includes assets under capital leases, ~~INC~~are stated at cost and are depreciated using the straight-line method over estimated useful lives, generally ranging from three to seven years. ~~AND~~Leasehold ~~SUBSIDIARIES~~improvements are ~~NOTES~~amortized TOover ~~CONSOLIDATED~~the ~~FINANCIAL~~shorter ~~STATEMENTS~~of –the ~~(Continued)~~lease term or economic life of the related improvement. Expenditures which extend the useful lives of the existing assets are capitalized. The cost of maintenance and repairs are charged to operations as incurred. When assets are retired or sold, the asset cost and related accumulated depreciation are eliminated with any remaining gain or loss reflected in net earnings.

The Company ~~Impairment~~incurred approximately $6.3 million and $7.3 million of ~~Long-Lived~~depreciation ~~Assets~~and amortization expense for the years ended March 31, 2009 and 2008, respectively.

The ~~Company~~following is ~~reviews long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of~~ a ~~long-lived~~summary ~~asset may not be recoverable. An asset is considered to be impaired when its carrying amount exceeds the sum~~ of ~~the undiscounted future net cash flows expected to result from the use of the asset and its eventual disposition. Long-lived assets include~~ property and equipment. ~~The~~held ~~amount of impairment loss, if any, is charged~~ by the Company ~~to current operations. For each of the fiscal years ended March 31, 2008 and 2007, no such impairment existed.~~ at:

Revenue Recognition


	March 31,

*(in thousands)*	2009			2008


Furniture, fixtures and office equipment	$	17,544		$	16,662
Software and software development costs		18,904			17,276
Capitalized lease equipment		708			1,650
Leasehold Improvements		2,567			2,532
Vehicles		97			783

		39,820			38,903
Less: accumulated depreciation and amortization		(33,172	)		(28,090	)

Property and equipment, net	$	6,648		$	10,813

The Company recognizes revenue from the sales of hardware when the rights and risks of ownership have passed to the client, upon shipment or receipt by the client, depending on the terms of the sales contract with the client. Revenue from the sales of software not requiring significant modification or customization is recognized upon delivery or installation. Revenue from services is recognized upon performance and acceptance after consideration of all of the terms and conditions of the client contract. Service contracts generally do not extend over one year, and are recognized when persuasive evidence of an arrangement exists, the sales price is fixed and determinable, and collection of the resulting receivables is reasonably assured. Revenue is recognized as services are performed or over the contracted period, as specified in the agreement. For arrangements with multiple deliverables, delivered items are accounted for separately, provided that the delivered item has value to the client on a stand-alone basis and there is objective and reliable evidence of the fair value of the undelivered items. Revenue billed on retainer is recognized as services are performed and amounts not recognized are recorded as deferred revenue. Goodwill

Goodwill is ~~Shipping~~recorded when the purchase price paid for an acquisition exceeds the estimated fair value of net identified tangible and ~~handling~~intangible ~~costs~~assets ~~are~~acquired. ~~included~~Goodwill is intested for impairment on an annual basis and more frequently if facts and circumstances indicate goodwill carrying values exceed estimated fair values. Because the ~~cost~~Company has fully integrated its acquisitions, it has determined that it has only one reporting unit for purposes of ~~sales~~testing for goodwill impairment.

In the fourth ~~Vendor~~quarter ~~Programs~~of fiscal 2009, the Company conducted its annual assessment of goodwill for impairment. The Company performed extensive valuation analyses, utilizing both income and market approaches, in its goodwill assessment process. Over the past few quarters the Company has experienced a significant decline in its stock price for both common and preferred stock resulting in a lower estimated fair value of the Company. The decline in the fair value of the Company below its book value is also attributable to the current economic crisis and lower than expected revenues and cash flows, and the uncertainty related to future cash flows. As a result, for the year ended March 31, 2009, the Company recorded a pretax impairment charge of $19.6 million to reduce the carrying value of the Company’s goodwill. Additional impairment charges could be recognized in the near term if current conditions continue to decline. No goodwill impairment charge was required for the year ended March 31, 2008.

The change in ~~Funds~~goodwill ~~received~~during ~~from~~the ~~vendors~~years ~~for~~ended ~~product~~March ~~rebates~~31, ~~commissions~~2008 and ~~marketing programs are recorded as adjustments to product costs~~2009, ~~revenue~~respectively, orwas ~~selling, general and administrative expenses according to the nature of the~~as ~~program.~~follows Some of these programs may extend over one or more quarterly reporting periods. The Company accrues rebates or other vendor incentives as earned based on sales of qualifying products or as services are provided (in ~~accordance with the terms of the related program.~~ thousands):

Operating Leases


Balance at March 31, 2007	$	69,987

Purchase price adjustment of previous acquisition		(27	)

Balance at March 31, 2008		69,960

Goodwill impairment		(19,614	)

Balance at March 31, 2009	$	50,346

The Company leases office space and distribution facilities under operating leases. Most lease agreements contain rent escalation clauses and/or contingent rent provisions. For purposes of recognizing minimum rental expenses on a straightF-~~line basis over the terms of the leases, the Company uses the date of initial possession to begin amortization, which is generally when the Company enters the space.~~ 8

MTM TECHNOLOGIES, INC. AND SUBSIDIARIES ~~Accounting~~NOTES ~~for~~TO ~~Stock-Based~~CONSOLIDATED ~~Compensation~~FINANCIAL STATEMENTS – (Continued)

~~The~~Intangible Company maintains several stock equity incentive plans under which incentive stock options, non-qualified stock options, and restricted stock units (“RSUs”) may be granted to employees (including officers), consultants, independent contractors, and non-employee directors. The Company also has an Associate Stock Purchase Plan (“ASPP”). Effective April 1, 2006, the Company adopted the fair value recognition provisions of Statement of Financial Accounting Standards (“SFAS”) No. 123, “Share-Based Payment” (“SFAS No. 123(R)”), which replaced SFAS No. 123, “Accounting for Stock-Based Compensation” (“SFAS No. 123”) and superseded Accounting Principles Board Opinion No. 25, “Accounting for Stock Issued to Employees”, and related interpretations. Stock-based compensation expense represents the cost related to stock-based awards granted by the Company. RSUs issued by the Company are equivalent to nonvested shares, as defined by SFAS No. 123(R). No stock-based compensation expense was recognized in the consolidated financial statements related to the ASPP, since the related purchase discounts did not exceed the amount allowed under SFAS No. 123(R) for non-compensatory treatment. See Note 7 Stock and Benefit Plans for additional details.Assets

Definite-lived ~~Per~~intangibles, ~~Share~~which ~~Data~~mainly consist of client relationships, are amortized over their estimated useful lives, three to five years.

Intangible ~~Basic~~assets ~~net~~consist ~~loss per share is calculated using the weighted-average number~~ of ~~common shares outstanding during~~ the ~~period.~~following Diluted net income per share is calculated using the weighted-average number of common shares plus dilutive potential common shares outstanding during the period. Dilutive securities, which are convertible into 37.6 million and 24.1 million common shares as of March 31, 2008 and 2007, respectively, have not been included in the weighted-average shares used for the calculation of earnings per share for the years then ended since the effect of such securities would be anti-dilutive. at:

Income Taxes


	March 31,

*(in thousands)*		2009			2008


Client relationships	$	8,915		$	8,915
Know-how		710			710
Non-compete agreements		250			250

		9,875			9,875
Less: accumulated amortization		(9,031	)		(8,092	)

Intangible assets, net	$	844		$	1,783

Amortization ~~Deferred~~expense ~~income~~amounted ~~taxes~~to ~~are~~approximately ~~provided,~~$0.9 ~~using~~million ~~the asset~~ and ~~liability~~$2.0 ~~method,~~million for ~~temporary differences between financial and tax reporting purposes which arise principally from~~ the ~~deductions related to the allowances for~~years ~~doubtful~~ended ~~accounts,~~March ~~certain capitalized software costs~~31, ~~the~~2009 ~~basis of inventory~~ and ~~differences~~2008, ~~arising from book versus tax depreciation methods~~respectively. AEstimated ~~valuation~~amortization ~~allowance~~expense for ~~deferred tax assets will be established if it is more likely than not that~~ ~~these~~each ~~items~~of ~~will either expire before~~ the ~~Company~~next isfew ~~able~~fiscal toyears ~~realize their benefits, or that future deductibility~~ is ~~uncertain. We have recorded a 100% valuation allowance against the deferred tax assets~~ as offollows ~~March~~(in ~~31, 2008 and 2007.~~ thousands):

F-10


Year ending March 31,


2010	$	506
2011		338

Total	$	844

~~MTM~~Impairment ~~TECHNOLOGIES, INC. AND SUBSIDIARIES~~ of ~~NOTES~~Long-Lived ~~TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)~~Assets

The Company ~~Recently~~reviews ~~Issued~~long-lived ~~Accounting~~assets ~~Pronouncements~~for impairment whenever events or changes in circumstances indicate that the carrying amount of a long-lived asset may not be recoverable. An asset is considered to be impaired when its carrying amount exceeds the sum of the undiscounted future net cash flows expected to result from the use of the asset and its eventual disposition. Long-lived assets include property and equipment. The amount of impairment loss, if any, is charged by the Company to current operations. For each of the fiscal years ended March 31, 2009 and 2008, no such impairment existed.

InRevenue September 2006, the FASB issued Statement No. 157, “Fair Value Measurements” (“SFAS No. 157”). SFAS No. 157 defines fair value, establishes a framework for measuring fair value and expands fair value measurement disclosures. SFAS No. 157 is effective for financial statements issued for fiscal years beginning after November 15, 2007, and interim periods within those fiscal years. In February 2008, the FASB deferred the effective date for one year for certain nonfinancial assets and nonfinancial liabilities and removed certain leasing transactions from its scope. The Company must adopt these new requirements no later than its first fiscal quarter of 2009 and is currently evaluating whether the adoption of SFAS No. 157 will have an impact on our consolidated financial statements. Recognition

The Company Inrecognizes ~~February~~revenue ~~2007,~~from the ~~FASB~~sales ~~issued~~of ~~Statement~~hardware ~~No.~~when ~~159~~the rights and risks of ownership have passed to the client, ~~“The~~upon ~~Fair~~shipment ~~Value~~or ~~Option~~receipt ~~for~~by ~~Financial~~the ~~Assets~~client, depending ~~and~~on ~~Financial~~the ~~Liabilities”~~terms ~~(“SFAS~~of Nothe sales contract with the client. Revenue from the ~~159”).~~sales ~~SFAS~~of ~~No.~~software ~~159~~not ~~permits~~requiring ~~entities~~significant tomodification ~~choose~~or tocustomization ~~measure~~is recognized ~~many~~upon ~~financial~~delivery ~~instruments~~or ~~and~~installation. ~~certain~~Revenue ~~other~~from ~~items~~services atis ~~fair~~recognized upon ~~value.~~performance ~~Most~~and acceptance after consideration of all of the ~~provisions~~terms and conditions of ~~SFAS~~the Noclient contract. ~~159~~Service ~~apply~~contracts ~~only~~generally todo ~~entities~~not ~~that~~extend over ~~elect~~one year, and are recognized when persuasive evidence of an arrangement exists, the ~~fair~~sales ~~value~~price ~~option.~~is ~~SFAS~~fixed Noand determinable, and collection of the resulting receivables is reasonably assured. ~~159~~Revenue is recognized as services ~~effective~~are ~~for~~performed ~~financial~~or ~~statements~~over ~~issued~~the ~~for~~contracted ~~fiscal~~period, ~~years~~as ~~beginning~~specified ~~after~~in ~~November~~the 15agreement. For arrangements with multiple deliverables, ~~2007~~delivered items are accounted for separately, orprovided that the ~~Company’s~~delivered ~~first~~item ~~quarter~~has ofvalue ~~fiscal~~to ~~2009.~~the ~~The~~client ~~Company~~on ~~does~~a stand-alone ~~not~~basis ~~expect~~and ~~that~~there ~~the~~is ~~adoption~~objective and reliable evidence of ~~this~~the ~~standard~~fair value ~~will~~of ~~have~~the aundelivered ~~material~~items. ~~impact~~Revenue billed on ~~its~~retainer is recognized as ~~future~~services ~~consolidated~~are ~~financial~~performed ~~statements~~and amounts not recognized are recorded as deferred revenue. Shipping and handling costs are included in the cost of sales.

InVendor December 2007, the FASB issued SFAS No. 141(Revised), “Business Combinations” (“SFAS No. 141(R)), which replaces SFAS No. 141, “Business Combinations”, and requires an acquirer to recognize the assets acquired, the liabilities assumed, and any non-controlling interest in the acquiree at the acquisition date, measured at fair values as of that date, with limited exceptions. SFAS No. 141(R) requires the acquirer to record contingent consideration at the estimated fair value at the time of purchase and establishes principles for treating subsequent changes in such estimates which could affect earnings in those periods. SFAS 141(R) also requires additional disclosures designed to enable users of the financial statements to evaluate the nature and financial effects of the business combination and disallows the capitalization of acquisition costs. This statement applies prospectively to business combinations for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after December 15, 2008. The Company will implement the provisions of SFAS No. 141(R) for any acquisitions made by the Company on or subsequent to April 1, 2009. Programs

Funds received ~~F-11~~from vendors for product rebates, commissions and marketing programs are recorded as adjustments to product costs, revenue, or selling, general and administrative expenses according to the nature of the program. Some of these programs may extend over one or more quarterly reporting periods. The Company accrues rebates or other vendor incentives as earned based on sales of qualifying products or as services are provided in accordance with the terms of the related program.

~~MTM~~Accrual ~~TECHNOLOGIES, INC. AND SUBSIDIARIES~~ of ~~NOTES~~Unreported TOMedical ~~CONSOLIDATED FINANCIAL STATEMENTS – (Continued)~~Claims

The Company adopted a self-funded medical insurance plan effective May ~~Note~~1, 22008 covering all enrolled employees with regard to medical, dental, vision and prescription benefits. ~~Credit~~Beginning ~~Facilities~~in the first quarter of fiscal 2009, the Company established an estimate of an amount to accrue for medical costs incurred but not yet reported under these self-funded employee medical insurance plans. The Company estimates the reserve based on an evaluation of past rates of claim payouts and trends in the amount of payouts. To mitigate a portion of the claim risk, the Company maintains a stop loss policy for individual and aggregate claims.

On August 21, 2007, the Company entered into a secured Credit Facilities Agreement (the "Credit Facilities Agreement") with CDF as Administrative Agent, GECC Capital Markets Group, Inc. as Sole Lead Arranger and Sole Bookrunner, and CDF and the other lenders listed in the Credit Facilities Agreement and the signature pages thereto as (the “Lenders”), providing a combined maximum availability of up to $34 million.F-9

The Credit Facilities Agreement refinances the Company’s prior senior lender facilities and is secured by a first priority lien on and security interest in substantially all of the present and future assets of the Company, including the issued and outstanding stock of the Company (other than MTM ~~Technologies~~TECHNOLOGIES, ~~Inc~~INC.), ~~except~~AND ~~for permitted encumbrances. Credit and advances to the Company pursuant to the Credit Facilities Agreement will be used to fund working~~SUBSIDIARIES ~~capital~~NOTES ~~and~~TO ~~floor-planning~~CONSOLIDATED ~~needs,~~FINANCIAL ~~and~~STATEMENTS ~~for~~– general corporate purposes. The initial advances were used to prepay all outstanding obligations of the Company under the Company’s existing revolving credit facility with CIT Group/Business Credit, Inc., as agent (~~“CIT”~~Continued) and floor planning facility with Textron Financial Corporation (“Textron”), which facilities were terminated upon such prepayments in accordance with separate termination agreements, each dated August 21, 2007, which the Company entered into with CIT with respect to the CIT facility and Textron with respect to the Textron facility. Terms not otherwise defined in this discussion have the meaning ascribed to them in the Credit Facilities Agreement.

~~The~~Operating Revolving Credit Facility under the Credit Facilities Agreement encompasses a two year revolving credit facility, unless earlier terminated by the Company or the Lenders, for up to $20 million, subject to a borrowing base based on eligible accounts receivable, minus the sum of any outstanding Swingline Loan, Floorplan Shortfall, Letter of Credit Exposure, and Bid Bonds, and certain other limitations. All amounts under the Credit Facilities Agreement are due upon the termination thereof, subject to optional prepayment in accordance with the terms of the Credit Facilities Agreement, and mandatory repayment of any Swingline Loan in the event that any Lender fails to pay its allocated portion thereof. Amounts borrowed under the Revolving Credit Facility bear interest at LIBOR plus 3%. Leases

The ~~Floorplan~~Company leases ~~Loan~~office ~~Facility~~space under ~~the~~operating ~~Credit~~leases. ~~Facilities~~Most ~~Agreement~~lease isagreements ~~not~~contain arent escalation ~~commitment~~clauses ~~to lend~~ and/or ~~advance~~contingent ~~funds~~rent ~~but~~provisions. isFor apurposes ~~discretionary facility, for up to $14 million, unless terminated by the Company or the Lenders,~~of ~~which~~recognizing ~~allows~~minimum ~~the~~rental ~~Company~~expenses ~~to finance inventory purchases from vendors as may be approved by the Administrative Agent,~~ on ana ~~up to 45~~straight-~~day~~line ~~interest-free~~ basis inover ~~many~~the ~~cases.~~terms ~~Interest accrues after expiration~~ of ~~any applicable interest free period at a~~ ~~rate~~the ~~to be determined under each Transaction Statement~~leases, ~~and not to exceed a maximum rate of 16% per annum in~~ the ~~event the~~ Company ~~objects~~uses to the ~~terms~~date ~~under~~of ~~any~~initial ~~Transaction~~possession ~~Statement.~~to ~~Generally~~begin amortization, ~~the~~which ~~Company~~is ~~would~~generally ~~receive~~when ~~at least 60 days advance notice of a termination of~~ the ~~Floorplan Facility, during which period the~~ Company ~~would~~enters ~~continue to be able to finance inventory purchases under~~ the ~~facility~~space.

~~The~~Accounting ~~Letter of Credit Facility under the Credit Facilities Agreement will allow the Company to request standby letters of credit and commercial letters of credit~~ for ~~the account of the Company from time to time up to the~~ ~~lesser~~Stock-Based of $2 million or then applicable availability limits less certain outstanding obligations of the Company under the Credit Facilities Agreement. As of March 31, 2008, the Company has no outstanding letters of credit. Compensation

The ~~Credit~~Company maintains ~~Facilities~~several ~~Agreement~~stock ~~will~~equity incentive plans under which incentive stock options, non-qualified stock options, and restricted stock units (“RSUs”) may be granted to employees (including officers), consultants, independent contractors, and non-employee directors. The Company also ~~give~~has an Associate Stock Purchase Plan (“ASPP”). Effective April 1, 2006, the Company adopted ~~access~~the tofair ~~further~~value ~~potential~~recognition ~~purchase~~provisions ~~order~~of ~~financing~~Statement ~~through~~of ~~CDF's~~Financial ~~own~~Accounting Standards (“~~Star~~SFAS”) No. 123, “Share-Based Payment” (~~Short~~“SFAS No. ~~Term~~123(R)”), ~~Accounts~~which ~~Receivable~~replaced SFAS No. 123, “Accounting for Stock-Based Compensation” (“SFAS No. 123”) ~~program~~and superseded Accounting Principles Board Opinion No. 25, “Accounting for Stock Issued to Employees”, and related interpretations. Stock-based compensation expense represents the cost related to stock-based awards granted by the Company. RSUs issued by the Company are equivalent to nonvested shares, as defined by SFAS No. 123(R). No stock-based compensation expense was recognized in the consolidated financial statements related to the ASPP, since the related purchase discounts did not exceed the amount allowed under SFAS No. 123(R) for non-compensatory treatment. See Note 6 Stock and Benefit Plans for additional details.

Reverse ~~The~~Stock Company will pay (i) on a monthly basis, an Unused Revolving Fee of 15 basis points on the difference between $20 million and the outstanding daily balance of the Revolving Loans (unless the Aggregate Revolving Loan, Swingline Loan and Letter of Credit Exposure is greater than 67% of $20 million), (ii) on an annual basis, an Annual Facility Fee of 20 basis points of the then-Aggregate Revolving Loan Commitment, (iii) letter of credit fees for each letter of credit issued pursuant to the Letter of Credit Facility of 3% per annum of the undrawn amount of such letter of credit plus a fronting fee of 0.125% of the face amount of each letter of credit, (iv) a closing fee to the Administrative Agent on the Credit Facilities Agreement, and (v) an annual management fee to the Administrative Agent. Split

~~The~~On ~~Company~~June ~~entered into a First Amendment to the Credit Facilities Agreement with CDF~~25, ~~effective August 21~~ 2008, ~~2007, which provided that as to inventory acquired by~~ the Company ~~other~~affected ~~than~~a ~~pursuant~~reverse tostock ~~the~~split ~~Floorplan~~of ~~Loan Facility,~~its ~~there~~Common ~~will~~Stock beat a ~~maximum~~split ratio ~~invoice amount~~ of $1

Filing Compare · MTM Technologies, Inc.