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|                                                  
|--------------------------------------------------
|UNITED STATES
  SECURITIES AND EXCHANGE COMMISSION
|WASHINGTON
  D.C. 20549                           
|                                                  
|                                                  

|                                              |                                                     
|--------------------------------------------- | ----------------------------------------------------
|FORM10-K                                     
|                                              |                                                     
|(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, 2007            
|                                              | 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(State or other jurisdiction of
  incorporation or organization)      |  | 13-3354896(I.R.S. Employer Identification No.) | 
|                                                                     |                                                                               |  |                                                | 
|                                                                     | 1200 High Ridge Road
  Stamford, CT(Address
  of principal executive offices) |  | 06905(Zip
  Code)                              | 
|                                                                     |                                                                               |  |                                                | 
|Registrants telephone number, including area code: (203)
  975-3700

|
|
|
|

|                                                                     
|---------------------------------------------------------------------
|Securities registered under Section 12(b) of the Exchange
  Act: None
|                                                                     
|Securities registered under Section 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

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 past 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 of delinquent filers pursuant to Item 405 of Regulation S-K is not
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. o

Indicate by check mark
whether the registrant is a large accelerated filer, an accelerated filer, or a
non-accelerated filer.


|                          |                     |                        
|------------------------- | ------------------- | -----------------------
|Large Accelerated Filer o | Accelerated Filer o | Non-Accelerated Filer x

Indicate by check mark
whether registrant is a shell company. Yes o No x

The aggregate market value
of the voting and non-voting common equity stock 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 30, 2006, was $22.7 million based
on the closing sale price of the registrants common stock on such date of
$2.09 per share, as reported by The NASDAQ Stock Market, Inc.

There were a total of
13,225,837 shares of the registrants common stock outstanding as of June 20,
2007.

Documents Incorporated by Reference:
None

---

---



MTM TECHNOLOGIES, INC.

ANNUAL REPORT ON FORM 10-K
For the Fiscal Year Ended March 31, 2007

|         |                                                                                                                  |     
|-------- | ---------------------------------------------------------------------------------------------------------------- | ----
|         |                                                                                                                  | Page
|         |                                                                                                                  |     
|         |                                                                                                                  |     
|         | Introductory
  CommentTerminology                                                                               | i   
|         | Introductory
  CommentForward-Looking Statements                                                                | i   
|         |                                                                                                                  |     
|         | PART I                                                                                                           |     
|         |                                                                                                                  |     
|Item 1.  | Business                                                                                                         | 1   
|Item 1A. | Risk
  Factors                                                                                                   | 7   
|Item 2.  | Properties                                                                                                       | 12  
|Item 3.  | Legal
  Proceedings                                                                                              | 12  
|Item 4.  | Submission
  of Matters to a Vote of Security Holders                                                            | 12  
|         |                                                                                                                  |     
|         | PART II                                                                                                          |     
|         |                                                                                                                  |     
|Item 5.  | Market for
  Registrants Common Equity, Related Stockholder Matters and Issuer Purchases
  of Equity Securities | 12  
|Item 6.  | Selected
  Financial Data                                                                                        | 14  
|Item 7.  | Managements
  Discussion and Analysis of Financial Condition and Results of Operations                          | 15  
|Item 7A. | Quantitative
  and Qualitative Disclosures about Market Risk                                                     | 24  
|Item 8.  | Financial
  Statements and Supplementary Data                                                                    | 25  
|Item 9.  | Changes in
  and Disagreements with Accountants on Accounting and Financial Disclosure                           | 25  
|Item 9A. | Controls
  and Procedures                                                                                        | 25  
|         |                                                                                                                  |     
|         | PART III                                                                                                         |     
|         |                                                                                                                  |     
|Item 10. | Directors,
  Executive Officers of the Registrant and Corporate Governance Matters                               | 26  
|Item 11. | Executive
  Compensation                                                                                         | 29  
|Item 12. | Security
  Ownership of Certain Beneficial Owners and Management and Related
  Stockholders Matters              | 44  
|Item 13. | Certain
  Relationships and Related Transactions and Director Independence                                       | 49  
|Item 14. | Principal
  Accountant Fees and Services                                                                         | 50  
|         |                                                                                                                  |     
|         | PART IV                                                                                                          |     
|         |                                                                                                                  |     
|Item 15. | Exhibits
  and Financial Statement Schedules                                                                     | 52  

---



Introductory CommentTerminology

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

Pequot
Fund refers to Pequot Private Equity Fund III, L.P., Pequot Partners refers
to Pequot Offshore Private Equity Partners III, L.P., and collectively with
Pequot Fund, Pequot, 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 Pequot, 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. Potential risks and
uncertainties include, among other things, such factors as:

| |   |                                                                                                                                                                                                                   
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | we require
  access to significant working capital and vendor credit to fund our
  day-to-day operations;                                                                                                         
| |   |                                                                                                                                                                                                                   
| |  | we have
  incurred losses in our last three fiscal years and our losses may continue;                                                                                                                             
| |   |                                                                                                                                                                                                                   
| |  | our
  dependence on third party licenses and the failure to maintain our status as
  an authorized reseller/service provider of IT products could have a material
  adverse effect on our business and operations;
| |   |                                                                                                                                                                                                                   
| |  | our ability
  to successfully integrate the companies we have acquired into our operations;                                                                                                                       
| |   |                                                                                                                                                                                                                   
| |  | our ability
  to raise additional capital, if and as needed;                                                                                                                                                      
| |   |                                                                                                                                                                                                                   
| |  | the
  competitive environments within the industries in which we operate;                                                                                                                                         
| |   |                                                                                                                                                                                                                   
| |  | the
  cost-effectiveness of our product and service development activities;                                                                                                                                       
| |   |                                                                                                                                                                                                                   
| |  | the extent
  that our sales network and marketing programs achieve satisfactory response
  rates;                                                                                                                 
| |   |                                                                                                                                                                                                                   
| |  | general
  economic conditions in the United States and elsewhere, as well as the
  economic conditions affecting the industries in which we operate; and                                                          
| |   |                                                                                                                                                                                                                   
| |  | the other
  risks detailed in this Annual Report on Form 10-K and, from time to time, in
  our other filings with the Securities and Exchange Commission.                                                         

Readers
are urged to carefully review and consider the various disclosures made by us
in this Annual Report on Form 10-K and our other filings with the 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.

i

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PART I

Item 1. Business

We
are a leading national provider of innovative information technology (IT)
solutions, including Access, Convergence, Consolidation, 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.

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.

Business Strategy

Our
strategy is to be the national leader in providing IT solutions to the middle
market. Since July 2004, we have grown significantly, acquiring six companies
and increasing our annual revenue 426% from fiscal 2004 to fiscal 2007. The
most recent of these acquisitions was completed in April 2006. Since that time
we have focused on integrating the operations of the acquired companies in
order to improve our earnings and cash flow. Although we currently are not
actively seeking acquisition candidates, we believe that growth through
acquisition will continue to be an important component of our long-term
strategy. The following are key components of our strategy to improve our
earnings and cash flow.

Focus
on strategic service offerings and increase our overall percentage of services
revenue

We
intend 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, as well as
adjusting the compensation plans of our direct sales force to emphasize the
sale of solutions and managed services. We believe that our offerings in
Access, IP telephony, and Networking offer the greatest opportunity in these
areas. Additionally, we believe that our national footprint will allow 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
our current customer base

We
have an existing customer base of over 6,000 clients. Many of our clients are
currently utilizing only a small portion of our overall solutions. Our sales
professionals are actively revisiting our existing 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.

1

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Leverage
our centralized infrastructure and processes to support our national IT
solutions platform

We
have made a significant investment in building an infrastructure that supports
our current business operations and enhances our ability to support substantial
future growth. Centralized technology infrastructure, back-office, purchasing
and human resources functions have all contributed to our ability to deliver
our services on a national basis and improve the operating margins of our
acquired businesses.

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:

Access.Our Access 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.

Convergence.Our Convergence 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.                   

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

2

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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 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, 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 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 our approximately 350 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). 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.

3

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

IT
Outsourcing. Many of our 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. These companies 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 six areas (New York City Metro, New England, Mid-Atlantic, Central, and Pacific Southwest and
Northwest), 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 or solution.

4

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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 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 and telemarketing. 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.

Acquisitions

Since
July 2004, we have acquired 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.                                                                                                                                                                            

The
most recent of these acquisitions was completed in April 2006 and since that
time we have focused on integrating and improving the operations of our
acquired companies.  Although we
currently are not actively seeking acquisition candidates, we believe that
growth through acquisition will continue to be an important component of our
long term strategy.

Suppliers

We
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. Typically,
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 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 agreements
are terminated, we may have difficulty in obtaining inventory at a
sufficiently low cost to allow for resale at a competitive price.

5

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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 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 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.

In
addition, the 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
require our employees to sign confidentiality or non-solicitation agreements.

Employees

As
of March 31, 2007 we employed approximately 636 associates (as measured on a
full-time equivalent basis) in the United States.  Of these associates, 37 were in management, 125 were in sales and
marketing, 329 were in technical support, and 145 were in operations, finance
and administration. At fiscal year end none of our personnel was represented by
a union.

6

---



Item 1A. Risk
Factors

Risks Relating to Our Business

We
have incurred losses in our last 3 fiscal years and our losses may continue.

We
incurred a net loss of approximately $32.0 million for our fiscal year ended
March 31, 2007, $8.5 million for our fiscal year ended March 31, 2006 and $8.6
million for our fiscal year ended March 31, 2005. Our net losses may 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 we continue to develop our business.  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 our Access, IP Telephony, Networking solution revenue and our Managed Services revenue
  to improve overall service margins, as well as our ability to leverage our current customer base and sell to selected industry segments or industry verticals.                                                                                                
| |   |                                                                                                                                                                                                                                                                                                                                                                                    
| |   |                                                                                                                                                                                                                                                                                                                                                                                    
| |  | 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.

We
require access to significant working capital and vendor credit to fund our
day-to-day operations. Our failure to comply with the financial and other
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 secured
revolving credit facility (the CIT Facility) with CIT Group/Business Credit,
Inc. (CIT), our amended and restated loan and security agreement (the New Textron Facility) with Textron Financial Corporation (Textron), and our
secured credit agreement (the Columbia Facility) with Columbia Partners, L.L.C. Investment Management, (Columbia Partners) and National Electric Benefit Fund, (the Lender) contain a
number of financial and other covenants, including with respect to the CIT Facility and the New Textron Facility minimum consolidated earnings
before interest, taxes, depreciation and amortization, consolidated fixed
charge coverage ratios, minimum consolidated liquidity and maximum consolidated
fixed charges and with respect to the Columbia Facility consolidated senior leverage ratios and  consolidated fixed charge coverage ratios.  A breach of these
financial or other 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 could have a material adverse effect on our financial

7

---



condition and
liquidity. Additionally, the amount of working capital available to us under
the CIT Facility 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.

The Company received a waiver letter in November 2006 from Columbia Partners which included a waiver of the consolidated senior leverage ratio and the consolidated fixed charge coverage ratio through and including the four fiscal quarters ending March 31, 2008.

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

We
may need additional funds to execute our internal growth programs which, if
available, could result in an increase in our interest expense or 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 growth.

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 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
failure to maintain our status as an authorized reseller/service provider of IT
products 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 three largest suppliers accounted for 26%, 14%
and 11% of all product sales for the year ended March 31, 2007. 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

8

---



training or
equipment purchase requirements. In either case, this could have a negative
impact on our operating results.

The
loss of key personnel or difficulties recruiting and retaining qualified
personnel could jeopardize the Companys ability to meet its growth 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.

The
success of our business depends on the continued integration of acquisitions.

We
completed several acquisitions and may make additional acquisitions of
businesses as part of our long-term strategic growth strategy. Our future
performance will depend in large part on our ability to integrate those
businesses with our existing operations successfully and to do so profitably.
To integrate acquired businesses, it is often necessary or desirable to
accomplish one or more of the following:

| |   |                                                                                                                                     
| | - | ------------------------------------------------------------------------------------------------------------------------------------
| |  | consolidate
  their billing and accounting systems into our systems and implement financial
  and other control systems;            
| |   |                                                                                                                                     
| |  | relocate the
  servers and other equipment of acquired companies to one of our facilities;                                          
| |   |                                                                                                                                     
| |  | migrate the
  operations of acquired companies onto our technology platforms;                                                       
| |   |                                                                                                                                     
| |  | integrate
  the client accounts of acquired companies into our client service system;                                               
| |   |                                                                                                                                     
| |  | integrate
  the service offerings of acquired companies into our service offerings; and                                             
| |   |                                                                                                                                     
| |  | identify
  resellers and referral partners of the services of acquired companies and
  migrate them to our business partner program.

We
may not be able to successfully integrate acquired businesses with existing
operations without substantial costs, delays or other problems. As
we integrate acquired businesses:

| |   |                                                                                                                                                                                                                                                                                                         
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | we may lose
  clients of acquired companies due to difficulties during the integration
  process;                                                                                                                                                                                                       
| |   |                                                                                                                                                                                                                                                                                                         
| |  | we may not
  be able to bill clients of the acquired companies accurately due to potential
  deficiencies in the internal controls of the acquired companies, such as
  inadequate back-office systems of the acquired companies and potential
  difficulties in migrating records onto our own systems;
| |   |                                                                                                                                                                                                                                                                                                         
| |  | we may
  experience difficulty in collecting bills rendered by acquired companies due
  to inaccurate record keeping of the acquired companies;                                                                                                                                                         
| |   |                                                                                                                                                                                                                                                                                                         
| |  | key
  employees of the acquired companies whom we wish to retain may resign;                                                                                                                                                                                                                            
| |   |                                                                                                                                                                                                                                                                                                         
| |  | managements
  attention and resources could be diverted from our ongoing business concerns;                                                                                                                                                                                                            
| |   |                                                                                                                                                                                                                                                                                                         
| |  | we may not
  be able to integrate newly acquired technologies with our existing
  technologies; and                                                                                                                                                                                                     
| |   |                                                                                                                                                                                                                                                                                                         
| |  | we may not
  be able to train, retain and motivate executives and employees of the
  acquired companies.                                                                                                                                                                                                

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

9

---



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:

| |   |                                                                                   
| | - | ----------------------------------------------------------------------------------
| |  | the timing and impact of acquisitions;                                            
| |   |                                                                                   
| |  | 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 level of
  product, price and service competition;                            
| |   |                                                                                   
| |  | changes in
  our sales incentive strategy, as well as sales personnel changes; 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.

Any
future acquisitions may entail significant risks.

We
may pursue opportunities to expand our business through the acquisition of
selected companies in targeted markets. The acquisition candidates we review
can be large, and their acquisition by us could have a significant and lasting
impact on our business. Acquisitions
involve numerous risks, including:

| |   |                                                 
| | - | ------------------------------------------------
| |  | adverse effects
  on our operating results;     
| |   |                                                 
| |  | an inability
  to integrate acquired businesses;
| |   |                                                 
| |  | unanticipated
  liabilities and expenses;       

10

---



| |   |                                                                                                                                                                                
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | costs
  associated with incomplete acquisitions;                                                                                                                               
| |   |                                                                                                                                                                                
| |  | expenses,
  delays and difficulties of integrating acquired companies into our existing
  organization;                                                                        
| |   |                                                                                                                                                                                
| |  | dilution of
  the interest of existing shareholders if we issue our securities in making
  acquisitions or if we sell our securities in order to raise cash for
  acquisitions;
| |   |                                                                                                                                                                                
| |  | diversion of
  managements attention;                                                                                                                                         
| |   |                                                                                                                                                                                
| |  | expenses of
  amortizing the acquired companies intangible assets;                                                                                                            
| |   |                                                                                                                                                                                
| |  | increases in
  our expenses in order to advertise and promote acquired companies; and                                                                                          
| |   |                                                                                                                                                                                
| |  | expenses of
  any undisclosed or potential legal liabilities of an acquired company.                                                                                           

In
addition, we cannot guarantee that we will realize the benefits or strategic
objectives we are seeking to obtain by acquiring any particular company and any
acquired company could significantly underperform relative to our expectations.
In particular, acquired companies often experience modest revenue declines
immediately following the closing of their acquisition.

Risks Involving Our Common Stock

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

Pequot
currently holds approximately 53% of the voting power of our outstanding
securities and has the right to acquire up to 57% of our voting securities.
Pequot also has the power to nominate two directors to our Board of Directors.
Pequot also may receive additional voting power if we were to elect to pay
dividends on outstanding Series A Preferred Stock in the form of additional
shares of Series A Preferred Stock. As a result, Pequot may be deemed in control
because Pequot is in a position to approve, and the approval of Pequot is
effectively required to approve any transaction requiring approval of
shareholders. These transactions could include mergers, consolidations,
dissolutions or sales of assets. These transactions could benefit Pequot at the
expense of our other shareholders or benefit Pequot 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
have no history of paying dividends.

We
have never paid any cash dividends on our common stock and we do not anticipate
paying any dividends in the foreseeable future. In addition, our ability to pay
dividends to the holders of our common stock is limited under our certificate
of incorporation and secured lending facilities.

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

As
of June 20, 2007, we had outstanding an aggregate of 13,225,837 shares of our
common stock and an aggregate of 27,967,857 shares of Series A Preferred Stock
which are subsequently convertible into a total of 30,262,971 shares of our
common stock. The Investors currently hold warrants to purchase 5,673,995
shares of our common stock. We also have an additional 10,532,143 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 1,500,000 shares of
serial preferred that are not designated as Series A Preferred Stock and an
additional (a) 4,386,450 shares of our common stock issuable upon the exercise
of stock options or restricted stock units granted or available for grant under
our various stock plans and (b) aggregate of approximately 700,000 shares of
our common stock issuable upon exercise of other warrants previously granted and outstanding, all as of June 20,
2007. All of such shares may be issued without any action or approval by our

11

---



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.

Item 2. Properties

Our
principal executive offices are located at 1200 High Ridge Road, Stamford,
Connecticut. We lease approximately 20,000 square feet at this location. The
Company additionally leases approximately 196,000 square feet of space in
another 28 locations throughout the United States for regional and
administrative offices.

Item 3. Legal
Proceedings

None.

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 2007.

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 stock is traded on The NASDAQ Capital Market under the symbol MTMC.
Set forth in the following table is the 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 NASDAQ Stock Market, Inc.:

|                                   |  |      |      |     |   |      | 
|---------------------------------- |  | ---- | ---- | --- | - | ---- | 
|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 | 

|                                   |  |      |      |     |   |      | 
|---------------------------------- |  | ---- | ---- | --- | - | ---- | 
|Fiscal Year Ended March 31, 2006   |  | High |      | Low |  
|                                   |  |      |      |     |  
|                                   |  |      |      |     |   |      | 
|Quarter
  ended June 30, 2005      |  | $    | 4.46 |     | $ | 2.75 | 
|Quarter
  ended September 30, 2005 |  |      | 3.93 |     |   | 2.75 | 
|Quarter
  ended December 31, 2005  |  |      | 4.59 |     |   | 2.53 | 
|Quarter
  ended March 31, 2006     |  |      | 4.90 |     |   | 3.51 | 

Record Holders

As
of June 20, 2007 there were 176 record holders of our common stock. We believe
that there are approximately 1,500 beneficial holders of our common stock,
based on information gathered in connection with the most recent annual meeting
of our shareholders.

12

---



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. We
currently intend to retain all earnings for use in connection with the further
development of our business and for general corporate purposes. 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, as well as our financing agreements
with CIT and Textron, and our financing agreement with Columbia Partners and the 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, 2007:

| |   |                                                                                                                                                                                                                                                                                                                                                 
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | the number
  of shares of our common stock issuable upon exercise of outstanding options,
  warrants and rights, separately identified by those granted under equity
  incentive 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                                                                                                                                          | 
|                                                    |  |                                                                                                     |           |                                                                                      |       |                                                                                                                                                     | 
|                                                    |  | 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) | 
|                                                    |  |                                                                                                     |           |                                                                                      |       |                                                                                                                                                     | 
|                                                   
|Equity
  incentive plans approved by shareholders   |  |                                                                                                     | 3,145,753 |                                                                                      | $2.95 |                                                                                                                                                     |  | 585,797 |  
|Equity incentive plans not approved by shareholders |  |                                                                                                     |          |                                                                                      |       |                                                                                                                                                     |  |         |  | 
|                                                    |  |                                                                                                     |           |                                                                                      |       |                                                                                                                                                     |  |         |   | 
|Totals                                              |  |                                                                                                     | 3,145,753 |                                                                                      | $2.95 |                                                                                                                                                     |  | 585,797 |  

Equity
Compensation Plan Information excludes, for the purposes of Columns A and B,
412,900 Restricted Stock Units with a weighted-average fair value of $1.96.

On
June 6, 2007, the Compensation Committee of the Board of Directors approved an
increase in the number of shares available for issuance under the Companys
2004 Equity Incentive Plan from 4,000,000 to 4,350,000 shares. Column C as
presented above does not reflect that increase.

Sales of Unregistered Securities

Reference
is made to the disclosures contained in Item 3.02 of our Current Report on Form
8-K (Date of Report: March 29, 2007), filed with the Securities and Exchange
Commission on April 2, 2007 for information concerning unregistered sales of
equity securities and the use of proceeds thereof.

13

---



Item 6. Selected Financial Data

The following
selected financial data have been derived from our consolidated financial
statements. This data should be read in conjunction with the consolidated
financial statements and related notes thereto included elsewhere in this
Annual Report.

Statement of Operations Data:

|                                                        |  |                                                       |         |      |   |         |   |      |         |      |   |        |   |   |        |  
|------------------------------------------------------- |  | ----------------------------------------------------- | ------- | ---- | - | ------- | - | ---- | ------- | ---- | - | ------ | - | - | ------ | -
|                                                        |  | Year
  Ended March 31,                                |        
|                                                        |  |                                                       |        
|                                                        |  | 2007                                                  |         | 2006 |   | 2005    |   | 2004 |         | 2003 |  
|                                                        |  |                                                       |         |      |   |         |   |      |         |      |  
|                                                        |  | (In
  thousands of dollars, except per share amounts) |        
|Net
  revenues:                                         |  |                                                       |         |      |   |         |   |      |         |      |   |        |   |   |        |  
|Products                                                |  | $                                                     | 206,917 |      | $ | 175,851 |   | $    | 73,161  |      | $ | 38,976 |   | $ | 34,471 |  
|Services                                                |  |                                                       | 68,061  |      |   | 60,868  |   |      | 28,033  |      |   | 13,288 |   |   | 20,985 |  
|Total net revenues                                      |  |                                                       | 274,978 |      |   | 236,719 |   |      | 101,194 |      |   | 52,264 |   |   | 55,456 |  
|Gross
  profitproducts                                 |  |                                                       | 30,633  |      |   | 25,068  |   |      | 8,915   |      |   | 1,219  |   |   | 2,332  |  
|Gross
  profitservices                                 |  |                                                       | 24,554  |      |   | 24,288  |   |      | 9,873   |      |   | 1,185  |   |   | 7,713  |  
|Gross
  profittotal                                    |  |                                                       | 55,187  |      |   | 49,356  |   |      | 18,788  |      |   | 2,404  |   |   | 10,045 |  
|Selling,
  general and administrative expenses (a)      |  |                                                       | 75,167  |      |   | 52,164  |   |      | 22,708  |      |   | 10,025 |   |   | 11,484 |  
|Operating
  loss (b)                                    |  |                                                       | (26,036 | )    |   | (2,808  | ) |      | (3,920  | )    |   | (7,621 | ) |   | (1,439 | )
|Interest
  expense and other expenses (c)               |  |                                                       | (5,554  | )    |   | (5,425  | ) |      | (4,686  | )    |   | (488   | ) |   | (188   | )
|Pre-tax loss                                            |  |                                                       | (31,590 | )    |   | (8,233  | ) |      | (8,606  | )    |   | (8,109 | ) |   | (1,627 | )
|Net loss                                                |  |                                                       | (32,017 | )    |   | (8,474  | ) |      | (8,619  | )    |   | (8,109 | ) |   | (1,211 | )
|Net loss
  available to common shareholders             |  |                                                       | (35,185 | )    |   | (8,474  | ) |      | (8,619  | )    |   | (8,109 | ) |   | (1,211 | )
|Net loss per
  common share:                            |  |                                                       |         |      |   |         |   |      |         |      |   |        |   |   |        |  
|Basic and
  Diluted                                     |  |                                                       | (3.00   | )    |   | (0.99   | ) |      | (1.51   | )    |   | (1.72  | ) |   | (0.26  | )
|Weighted
  average number of common shares outstanding: |  |                                                       |         |      |   |         |   |      |         |      |   |        |   |   |        |  
|Basic and
  Diluted                                     |  |                                                       | 11,741  |      |   | 8,542   |   |      | 5,714   |      |   | 4,723  |   |   | 4,734  |  

|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|(a) | Fiscal 2007
  includes $1.9 million of stock-based compensation expense resulting from the
  adoption of SFAS No. 123(R). Included in the year ended March 31, 2006
  is $1.2 million of expense incurred in the first quarter of fiscal 2006 for
  the settlement of certain executive arrangements and deferred payments
  relating to the May 2004 Pequot investment. Includes $1.1 million of expenses
  in the year ended March 31, 2005, for payments made to two officers of the
  Company in connection with the Pequot investment.
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|(b) | Fiscal 2007
  includes a restructuring charge of $6.0 million.                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|(c) | Included in the year ended
  March 31, 2006 is $3.2 million of non cash interest expense and amortization
  of debt discount incurred during the first fiscal quarter of 2006 related to
  the convertible subordinated notes which converted to equity in June 2005.
  Includes $4.1 million of non cash interest related to convertible debt in the
  year ended March 31, 2005.                                                                                                                                                         

Balance Sheet Data:

|                                                   |  |                             |         |      |   |         |   |      |         |      |   |         |   |   |        |  
|-------------------------------------------------- |  | --------------------------- | ------- | ---- | - | ------- | - | ---- | ------- | ---- | - | ------- | - | - | ------ | -
|                                                   |  | As of
  March 31,           |        
|                                                   |  |                             |        
|                                                   |  | 2007                        |         | 2006 |   | 2005    |   | 2004 |         | 2003 |  
|                                                   |  |                             |         |      |   |         |   |      |         |      |  
|                                                   |  | (In
  thousands of dollars) |        
|                                                   |  |                             |        
|Total assets                                       |  | $                           | 149,461 |      | $ | 166,253 |   | $    | 91,169  |      | $ | 19,475  |   | $ | 22,954 |  
|Short-term
  borrowings                            |  |                             | 22,050  |      |   | 20,557  |   |      | 29,865  |      |   | 9,375   |   |   | 7,099  |  
|Long term
  obligations(including current portion) |  |                             | 24,480  |      |   | 25,186  |   |      | 1,499   |      |   | 100     |   |   | 476    |  
|Working
  capital (deficit)                        |  |                             | (12,438 | )    |   | 10,704  |   |      | (11,350 | )    |   | (1,277  | ) |   | 6,256  |  
|Accumulated
  deficit                              |  |                             | (59,315 | )    |   | (27,298 | ) |      | (18,824 | )    |   | (10,205 | ) |   | (2,096 | )
|Shareholders
  equity                             |  |                             | 49,319  |      |   | 76,718  |   |      | 27,578  |      |   | 5,164   |   |   | 13,242 |  

14

---



|                                                                                                 | 
|------------------------------------------------------------------------------------------------ | 
|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, Convergence, Consolidation, 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.

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.

As of June 20, 2007 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. Since that time we have focused on integrating the
operations of the acquired companies in order to improve our earnings and cash
flow. Although we currently are not actively seeking acquisition candidates, we
believe that growth through acquisition will continue to be an important
component of our long-term strategy.

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 and Exchange
Commission has defined critical accounting policies as policies that involve
critical accounting 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 the assessment of recoverability of
goodwill and intangible assets.

15

---



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.

We
periodically receive discretionary cost reimbursements from suppliers. These
reimbursements are accounted for as reductions to the cost of product sales,
when estimable.

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.

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.

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.

16

---



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,
|                                                   |  |                        |      
|                                                   |  | 2007                   |       | 2006 |  | 2005  |   
|                                                   |  |                        |       |      |  |       |   
|Net
  revenues:                                    |  |                        |       |      |  |       |    |  |       |   
|Products                                           |  |                        | 75.2  | %    |  | 74.3  | %  |  | 72.3  | % 
|Services                                           |  |                        | 24.8  |      |  | 25.7  |    |  | 27.7  |   
|                                                   |  |                        |       |      |  |       |    |  |       |   
|Total
  net revenues                               |  |                        | 100.0 |      |  | 100.0 |    |  | 100.0 |   
|                                                   |  |                        |       |      |  |       |    |  |       |   
|Gross
  Profit  products (a)                      |  |                        | 14.8  |      |  | 14.3  |    |  | 12.2  |   
|Gross
  Profit  services (a)                      |  |                        | 36.1  |      |  | 39.9  |    |  | 35.2  |   
|Gross
  Profit  total                             |  |                        | 20.1  |      |  | 20.9  |    |  | 18.6  |   
|Selling,
  general and administrative expenses (b) |  |                        | 27.3  |      |  | 22.0  |    |  | 22.4  |   
|Restructuring                                      |  |                        | 2.2   |      |  | 0.0   |    |  | 0.0   |   
|                                                   |  |                        |       |      |  |       |    |  |       |   
|Operating
  loss                                   |  |                        | (9.5  | )    |  | (1.2  | )  |  | (3.9  | ) 
|Interest
  expense (c)                             |  |                        | 1.9   |      |  | 2.3   |    |  | 4.6   |   
|                                                   |  |                        |       |      |  |       |    |  |       |   
|Net
  loss                                         |  |                        | (11.6 | )%   |  | (3.6  | )% |  | (8.5  | )%
|                                                   |  |                        |       |      |  |       |    |  |       |   

| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| | --- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | (a) | Expressed as a percentage
  of the applicable product or service revenue.                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| | (b) | Fiscal 2007 includes $1.9
  million of stock-based compensation expense resulting from the adoption of
  SFAS No. 123(R). Included in the year ended March 31, 2006 is $1.2 million of
  expense incurred in the first quarter of fiscal 2006 for the settlement of
  certain executive arrangements and deferred payments relating to the May 2004
  Pequot investment. Includes $1.1 million of expenses in the year ended March
  31, 2005, for payments made to two officers of the Company in connection with
  the Pequot investment.
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| | (c) | Included in the year ended
  March 31, 2006 is $3.2 million of non-cash interest expense and amortization
  of debt discount incurred during the first fiscal quarter of 2006 related to
  the convertible subordinated notes which converted to equity in June 2005.
  Includes $4.1 million of non-cash interest related to convertible debt in the
  year ended March 31, 2005.                                                                                                                                                         

Fiscal 2007 Compared to Fiscal 2006

Net Revenue

Net revenues for the year
ended March 31, 2007 increased $38.3 million, or 16.2%, to $275.0 million. The
increase in revenue is primarily due to the acquisition of Nexl, Inc. (Nexl),
which was acquired in December 2005. Service revenue over the prior year
increased $7.2 million and product revenue increased $31.1 million over the
same period. The increase in service revenue was attributable to the inclusion
in the current year of a full period of Nexls service revenue, as well as
success in the leveraging of the rollout of new practices into existing
customer accounts. Product revenue was higher than the prior year due primarily
to the acquisition of Nexl. Product revenues were negatively impacted in the
current year due to the Companys strategy of not pursuing lower margin product
business, as well as a change to a referral fee program by one of the Companys
software vendor partners. Under the old program, MTM recognized the gross
revenue and cost related to certain products sales. Under the new program, MTM
is paid a referral fee for these product sales. The referral fee is typically
equal to the net gross margin that would have been recognized under the prior
program.

Gross Profit

Gross profit for the year
ended March 31, 2007 increased $5.8 million, or 11.8%, to $55.2 million. Product
gross margin was 14.8% for the year ended March 31, 2007 and 14.3% for the year
ended March 31, 2006. Included in product costs for the year ended March 31,
2007 were one time charges of $0.5 million related to a write-off of obsolete inventory purchased
as part of prior business acquisitions. Service gross margin was 36.1%
for the year ended March 31, 2007 as compared with 39.9% for the comparable
prior year period.

17

---



Overall the increase in
gross profit for the periods was primarily attributable to the inclusion of the
results of Nexl, a business acquired in December 2005. The decrease in service
gross margin was the result of early stage investments in our
professional services business in anticipation of future acquisitions and the dilutive impact of the acquisition of Nexl,
which had lower service gross margins than our historical businesses.

Selling, General and Administrative

Selling, general and
administrative expenses (S,G&A) for the year ended March 31, 2007
increased by $23.0 million, or 44.1%, to $75.1 million. The increase in
S,G&A was due primarily to the inclusion of a full period of operating
expenses for Nexl, increased operating expenses attributable to the expansion
of corporate administration necessary to support the Companys expanded
business and expected future growth and transition costs related to the integration
of our national infrastructure. For fiscal 2007 the Company recognized $1.5
million of non-recurring charges in S,G&A including integration costs and
personnel redundancy costs related to the restructuring plan noted below.
Additionally, results for fiscal 2007 include the impact of adopting SFAS No.
123(R). Stock-based compensation cost recognized in the consolidated statement
of earnings for the year ended March 31, 2007 was approximately $1.9 million.
Results for fiscal 2007 also include higher depreciation expenses related to
recent investments in capital assets to support our expanded business.

Restructuring

Results 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 our integration and cost reduction plans, 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, 2006. See Note 2 to the Consolidated Financial Statements for
a discussion of these cost savings initiatives.

EBITDA

Earnings before interest,
income taxes, depreciation, amortization, stock-based compensation cost and
other expense (EBITDA) amounted to negative $14.5 million for the year ended
March 31, 2007, as compared to a positive $3.5 million for the comparable
fiscal 2006 period. EBITDA results for fiscal 2007 includes $1.5 million of
non-recurring S,G&A expenses, which are not expenses in the corresponding
prior year period and an overall increase in S,G& A expenses primarily
related to a full period of expenses for Nexl as well as increased corporate
expenses as noted above. The reduction in EBITDA for the year ended
March 31, 2007 was further impacted as a result of the $6.0 million of
restructuring charges which were also not an expense in the corresponding prior
period. The following table sets
forth a reconciliation of EBITDA to the net loss for the years presented.

|                                    |  |                      |         |      |   |        |  
|----------------------------------- |  | -------------------- | ------- | ---- | - | ------ | -
|                                    |  | Year Ended March 31, |        
|                                    |  |                      |        
|(in thousands)                      |  | 2007                 |         | 2006 |  
|                                    |  |                      |         |      |  
|EBITDA                              |  | $                    | (14,457 | )    | $ | 3,472  |  
|Depreciation
  and amortization     |  |                      | 9,361   |      |   | 6,047  |  
|Interest
  expense (a)              |  |                      | 5,108   |      |   | 5,425  |  
|Stock-based
  compensation cost (b) |  |                      | 2,218   |      |   | 233    |  
|Other
  expense                     |  |                      | 446     |      |   |       |  
|Income
  taxes                      |  |                      | 427     |      |   | 241    |  
|                                    |  |                      |         |      |   |        |  
|Net
  loss                          |  | $                    | (32,017 | )    | $ | (8,474 | )
|                                    |  |                      |         |      |   |        |  

| |     |                                                                                                                                                                                                                                                                      
| | --- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |     |                                                                                                                                                                                                                                                                      
| | (a) | Included in the year ended
  March 31, 2006 is $3.2 million of non-cash interest expense and amortization
  of debt discount incurred during the first fiscal quarter of 2006 related to
  the convertible subordinated notes which converted to equity in June 2005.
| |     |                                                                                                                                                                                                                                                                      
| | (b) | Fiscal 2007 includes $1.9
  million of stock-based compensation expense resulting from the adoption of
  SFAS No. 123(R).                                                                                                                                            

18

---



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.

Interest Expense

Interest
expense was $5.1 million for the year ended March 31, 2007 compared to $5.4
million for the year ended March 31, 2006, a decrease of $0.3 million or 5.8%.
Included in the year ended March 31, 2006 is $3.2 million of non-cash
interest expense and amortization of debt discount incurred during the first
fiscal quarter of 2006 related to the convertible subordinated notes which
converted to equity in June 2005. This decrease was partially offset in
the current year by the impact of a full period of interest on the secured promisory note held by the Lender combined with higher average borrowings and related interest costs on our
working capital lines.

Fiscal 2006 Compared to Fiscal 2005

Net Revenue

Net revenue
was $236.7 million for the fiscal year ended March 31, 2006 compared to $101.2
million for the fiscal year ended March 31, 2005. Product revenue was $175.9
million in fiscal year 2006 and $73.1 million in fiscal year 2005, representing
74.3% of consolidated revenue in 2006 and 72.3% in 2005. Service revenue was
$60.9 million in fiscal year 2006 and $28.0 million in 2005 representing 25.7%
of consolidated revenue in 2006 and 27.7% in 2005.

The revenue
increase in fiscal year 2006 over 2005 was principally due to the acquisition
of Nexl in December 2005 and the inclusion of a full period of revenue for the
acquisitions of Info Systems, Inc.; March 2005, Vector Global ESP Inc.;
December 2004 and Network Catalyst; September 2004. Our product revenue as a
percentage of consolidated revenue increased in 2006 due to the acquisition of
Nexl.

Gross Profit

Gross profit
was $49.4 million for the fiscal year ended March 31, 2006 compared to $18.8
million in fiscal year 2005. Blended gross margin was 20.9% in fiscal year 2006
and 18.6% in fiscal year 2005. Product gross margin was 14.3% in fiscal year
2006 and 12.2% in fiscal year 2005. Service gross margin was 39.9% in fiscal
year 2006 and 35.2% in fiscal year 2005. Improved gross margins resulted
primarily from the impact of our acquisitions.

Selling, General and Administrative

S,G&A increased to $52.1
million in fiscal year 2006 from $22.7 million in fiscal year 2005 due to costs
associated with our acquisitions and transitional integration and national
program costs.

19

---



EBITDA

EBITDA
amounted to $3.5 million in fiscal year 2006, compared to a negative $1.3
million in fiscal year 2005. The EBITDA improvements resulted from both
increased net revenue and improved gross margins discussed above, partially
offset by the increased S,G&A expenses. The following table sets forth a
reconciliation of EBITDA to the net loss for the years presented.

|                              |  |                        |        |      |   |        |  
|----------------------------- |  | ---------------------- | ------ | ---- | - | ------ | -
|                              |  | Year
  Ended March 31, |       
|                              |  |                        |       
|                              |  | 2006                   |        | 2005 |  
|                              |  |                        |        |      |  
|(in thousands)                |  |                        |        |      |   |        |  
|                              |  |                        |        |      |   |        |  
|EBITDA                        |  | $                      | 3,472  |      | $ | (1,351 | )
|Depreciation and amortization |  |                        | 6,047  |      |   | 2,558  |  
|Interest expense (a)          |  |                        | 5,425  |      |   | 4,686  |  
|Stock-based compensation cost |  |                        | 233    |      |   | 11     |  
|Other expense                 |  |                        |       |      |   |       |  
|Income taxes                  |  |                        | 241    |      |   | 13     |  
|                              |  |                        |        |      |   |        |  
|Net loss                      |  | $                      | (8,474 | )    | $ | (8,619 | )
|                              |  |                        |        |      |   |        |  

| |     |                                                                                                                                                                                                                                                                                                                                                                                   
| | --- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | (a) | Included in the year ended
  March 31, 2006 is $3.2 million of non-cash interest expense and amortization
  of debt discount incurred during the first fiscal quarter of 2006 related to
  the convertible subordinated notes which converted to equity in June 2005.
  Includes $4.1 million of non-cash interest related to convertible debt in the
  year ended March 31, 2005.

Interest
Expense

Interest
expense was $5.4 million in fiscal year 2006 and $4.7 million in fiscal year
2005. The increase in 2006 was due to higher average interest rates, the
issuance of a $25 million secured promissory note in November 2005, bearing 2%
annual cash interest, paid quarterly and an overall 11% internal rate of return
to be paid at maturity and $3.4 million related to the convertible notes and a
secured promissory note. In 2005, the Company had non-cash interest expense of
$4.1 million related to the convertible subordinated notes issued in December
2004 and March 2005. On June 23, 2005 the convertible notes were converted into
Series A-4 Preferred Stock.

Liquidity and Capital Resources

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

|                               |  |             |         |      |   |        | 
|------------------------------ |  | ----------- | ------- | ---- | - | ------ | 
|                               |  | March
  31, |        
|                               |  |             |        
|(In thousands)                 |  | 2007        |         | 2006 |  
|                               |  |             |         |      |  
|                              
|Cash                           |  | $           | 4,439   |      | $ | 18,154 | 
|Working
  capital(deficit)     |  | $           | (12,438 | )    | $ | 10,704 | 
|Current
  ratio                |  |             | .82:1   |      |   | 1.16:1 | 
|Secured
  financing facilities |  | $           | 22,050  |      | $ | 20,557 | 
|Secured
  promissory note      |  | $           | 23,507  |      | $ | 22,947 | 

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 revolving credit facility with CIT,
our inventory financing agreement with Textron, vendor lines of credit, and
our cash on hand.

For the year
ended March 31, 2007 cash decreased $13.7 million to $4.4 million compared with
$18.1 million at March 31, 2006. Working capital at March 31, 2007 was a
deficit of $12.4 million as compared to working capital of $10.7 million at
March 31, 2006. Included in current liabilities at March 31, 2007 are
obligations of $22.0 million relating to the Companys secured financing
facilities, described below. The use of cash during the 2007 fiscal year
related primarily to the loss incurred during the period, the increased use of
our cash (as opposed to borrowing under the CIT Facility) to fund working
capital needs and the cost of capitalization of internal costs

20

---



relating to
software development and infrastructure investment. We have taken a number of
significant steps to address these issues and reduce our use of cash and improve our working capital position, including
the following.

|  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | We incurred
  a net loss of approximately $32.0 million for our fiscal year ended March 31,
  2007. During fiscal 2007 we implemented a cost reduction plan (the
  Restructuring Plan) designed to improve operating income through reductions
  of S,G&A and enhancements in gross margin. The Restructuring Plan
  included significant headcount reductions associated with the final stages of
  integrating our acquired companies, facility consolidations, as well as other
  cost reductions. See Note 2 Restructuring and Other Charges to the
  Companys Consolidated Financial Statements for a discussion of the
  Restructuring Plan.                                                                                                                                                                                                                                                                                                                                                                                                       
|  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| | Effective in the second
  quarter of fiscal 2007, CIT effectively reduced the amount the Company could
  borrow under the CIT Facility by increasing the required availability reserve
  to $3 million from $0.5 million. This required us to fund a greater portion of
  our working capital needs through our vendor lines of credit and with our
  cash as opposed to borrowings under the CIT Facility. Additionally, in the
  fourth quarter of fiscal 2007, the CIT Facility was amended to require that
  we maintain at all times consolidated liquidity (defined as cash on hand plus
  net availability under the CIT Facility) of $2.5 million until March 31, 2007
  and $3.0 million thereafter. This further limited our ability to meet our
  working capital requirements. Since March 2007 we have raised an additional
  $8.8 million from Pequot and Constellation. We are reviewing other sources of
  debt and equity financing, however there can be no assurance that additional
  financing can be obtained on terms acceptable to us.
|  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| | During fiscal 2007, we
  invested approximately $6.7 million in software development and
  infrastructure investment. Those projects are substantially complete and we
  anticipate that the level of investment in these areas will be significantly
  reduced for the near term.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            

As of June 20, 2007 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. Since that time we have focused on integrating the
operations of the acquired companies in order to improve our earnings and cash
flow. Although we currently are not actively seeking acquisition candidates, we
believe that growth through acquisition will continue to be an important
component of our long-term strategy.

On November
23, 2005 the Company entered into the Columbia
Facility with Columbia Partners and the Lender, whereby the Company issued and sold to the Lender a promissory
note in the principal amount of $25 million (the Note) and the Company issued
and sold to the Lender a warrant entitling the Lender to purchase 700,000
shares of the Companys Common Stock at an exercise price of $4.06 per share
(the Lender Warrant). The Company used a portion of the funds to finance the
acquisition of Nexl, Inc. on December 1, 2005.

The Note is a
four year $25 million secured subordinated term loan with the Note coming due
at the earlier of maturity or the occurrence of certain fund raisings or other
liquidity events. The amount outstanding on the Note bears interest equal to
4.52 %, of which 2% per annum is payable quarterly in cash and all remaining
interest will accrue and only become due at maturity. Upon maturity 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 11%. As of
March 31, 2007, $3.5 million in interest has been accrued on the Note, of which
$0.6 million has been paid in cash, $0.1 million is accrued and payable within
the next quarter, and $2.8 million is accrued and is payable at maturity. The
Note is secured by a subordinated lien on the assets of the Company. In
connection with the issuance of the Note and the related Lender Warrant, the
Company allocated and charged $2.2 million to debt discount, which will be
amortized over the life of the Note to interest expense, and assigned and
credited to additional paid in capital $2.2 million for the fair value of the
Lender Warrant. The Company is permitted to settle the warrants with
unregistered shares. The value attributed to the Lender Warrant was determined
by independent valuation utilizing the Black-Scholes model.

The Columbia
Facility requires, among other things, that the Company maintain certain
financial covenants including that the Company maintain Consolidated Senior
Leverage of not greater than 4.40 to 1.00 as of and for the four quarters ended
    March 31, 2007 and that the Company maintain a Consolidated Fixed Charge
    Coverage Ratio of not less than .90 to 1.00 for the four quarters ended March
    31, 2007. It also restricts the Companys ability to incur certain additional
    indebtedness, and contains various customary provisions, including affirmative
    and negative covenants, representations and warranties and events of default.
    The Company received a waiver letter in November 2006 from Columbia Partners,
    which included a waiver of the Consolidated Senior Leverage ratio and the
    Consolidated Fixed Charge Coverage Ratio through and including the period
ended March 31, 2008.

21

---



In June 2005, the Company entered into the CIT Facility with
CIT and the New Textron Facility with Textron, which provide a combined availability
of $40 million.

The CIT Facility is a three
year revolving credit facility for up to $25 million, subject to a borrowing
base consisting of eligible accounts receivable, eligible in-transit inventory
(up to $0.5 million) and eligible finished goods inventory (up to $0.5
million). The amounts available to the Company from CIT are also reduced by
amounts borrowed under the New Textron Facility. Effective in the second
quarter of fiscal 2007, CIT effectively reduced the amount the Company can
borrow under the CIT Facility by increasing the required availability reserve
to $3 million from $0.5 million. The
CIT Facility required, among other things, that the Company maintain certain
financial covenants including that the Company maintain Consolidated Liquidity
of not less than $3 million measured on a daily basis beginning in May 2007,
Consolidated Senior Leverage of not greater than 4.00 to 1.00 for the trailing
four quarters and that the Company maintain a Consolidated Fixed Charge
Coverage Ratio of not less than 1.00 to 1.00 for the trailing four quarters (collectively, the Old CIT Financial Covenants). It
also restricts the Companys ability to incur certain additional indebtedness,
and contains various customary provisions, including affirmative and negative
covenants, representations and warranties and events of default. Amounts
borrowed under the CIT Facility bear interest at either the prime rate or at
LIBOR plus 3%, in each case at the Companys option. On June 21,
2007, the CIT Facility was amended to provide for new financial covenants (collectively, the New CIT Financial Covenants) as follows.

|  |                                                                                                                                            
|- | -------------------------------------------------------------------------------------------------------------------------------------------
| | Consolidated EBITDA for each measuring period set forth below of not less than the
  amount set forth below opposite such measuring period:

| |  |       |                                                              |  |                            
| |  | ----- | ------------------------------------------------------------ |  | ---------------------------
| |  |       | measuring period                                             |  | minimum Consolidated
EBITDA
| |  |       |                                                              |  |                            
| |  |       |                                                              |  |                            
| |  | (i)   | fiscal quarter ending on
  or about June 30, 2007            |  | $   424,000                
| |  |       |                                                              |  |                            
| |  | (ii)  | two fiscal quarters ending
  on or about September 30, 2007  |  | 1,358,000                  
| |  |       |                                                              |  |                            
| |  | (iii) | three fiscal quarters
  ending on or about December 31, 2007 |  | 3,227,000                  
| |  |       |                                                              |  |                            
| |  | (iv)  | four fiscal quarters
  ending on or about March 31, 2008     |  | 5,096,000                  

|  |                                                                                                                                                                    
|- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Consolidated Fixed Charge
  Coverage Ratio for
  each measuring period set forth below of not less than the ratio set forth
  below opposite such measuring period:

| |  |       |                                                              |  |                                                 
| |  | ----- | ------------------------------------------------------------ |  | ------------------------------------------------
| |  |       | measuring period                                             |  | minimum Consolidated Fixed
Charge Coverage Ratio
| |  |       |                                                              |  |                                                 
| |  |       |                                                              |  |                                                 
| |  | (i)   | fiscal quarter ending on
  or about June 30, 2007            |  | .17 to 1.00                                     
| |  |       |                                                              |  |                                                 
| |  | (ii)  | two fiscal quarters ending
  on or about September 30, 2007  |  | .34 to 1.00                                     
| |  |       |                                                              |  |                                                 
| |  | (iii) | three fiscal quarters
  ending on or about December 31, 2007 |  | .57 to 1.00                                     
| |  |       |                                                              |  |                                                 
| |  | (iv)  | four fiscal quarters
  ending on or about March 31, 2008     |  | .68 to 1.00                                     

|  |                                                                                                                                                                        
|- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Consolidated Fixed Charges for each fiscal quarter set forth below in
  an aggregate amount not greater than the amount set forth below opposite such
  fiscal quarter:

| |  |       |                                   |  |                                   
| |  | ----- | --------------------------------- |  | ----------------------------------
| |  |       | fiscal quarter ending on
or about |  | maximum Consolidated Fixed
Charges
| |  |       |                                   |  |                                   
| |  |       |                                   |  |                                   
| |  | (i)   | June 30, 2007                     |  | $  2,455,000                      
| |  |       |                                   |  |                                   
| |  | (ii)  | September 30, 2007                |  | 1,539,000                         
| |  |       |                                   |  |                                   
| |  | (iii) | December 31, 2007                 |  | 1,682,000                         
| |  |       |                                   |  |                                   
| |  | (iv)  | March 31, 2008                    |  | 1,808,000                         

|  |                                                                 
|- | ----------------------------------------------------------------
| | Consolidated Liquidity at all times of not less than $3,000,000.

The New Textron Facility allows
the Company to finance inventory purchases up to $15 million from approved
vendors on a 45-day interest-free basis in most cases. Interest accrues after
expiration of the applicable interest free period at the rate equal to a
specified prime rate plus 4%. The financial and other covenants in the New
Textron Facility are substantially the same as the New CIT Financial Covenants. The
facilities include a first priority secured interest in all of our assets.

22

---



As of March
31, 2007, the Company was not in compliance with all covenants prescribed under
the CIT Facility and the New Textron Facility; however, the Company received
waiver letters from both CIT and Textron.

Available
funds under both the CIT Facility and the New Textron Facility amounted to $7.3
million at March 31, 2007.

Cash used in
operating activities was $10.3 million for the year ended March 31, 2007,
derived from a net loss of $32.0 million plus a decrease in net operating
assets of $1.5 million, an increase in net operating liabilities of $4.1
million and non-cash charges of $16.1 million. The increase in net operating
liabilities related primarily to an increase in accounts payable due to the
timing of vendor payments and an increase in accrued expenses as a result of
the restructuring and integration plans. The decrease in net operating assets
was primarily due to a reduction in inventory related to the relief of a build
up of inventory in the prior year related to the needs of one large client and
the write-off of obsolete inventory in the current year. This reduction was
further impacted by an increase in receivables as a result of strong product
revenues in March offset by strong collections in the fourth fiscal quarter.

Cash used in
investing activities was $7.2 million for the year ended March 31, 2007 as a
result of the acquisition of Axcent for $0.5 million and the additions to
capital expenditures which approximated $6.7 million including capitalized
costs related to the internal development of purchased and developed software
and infrastructure investment of $3.2 million. The Company has no plans for any
material purchases of property and equipment including capital software
projects for fiscal 2008.

Cash provided
by financing activities was $3.7 million for the year ended March 31, 2007,
primarily the result of higher net borrowings on our working capital lines of
$1.5 million plus cash proceeds received from the issuance of shares of Series
A-6 Preferred Stock of $3.0 million and from the issuance of common stock
related to the exercise of stock options of $0.4 million offset by principal
payments made on our long-term debt obligations of $0.9 million. The Company
had net borrowings under its credit facilities of $1.5 million during fiscal
2007, which consisted of additional gross borrowings of $357.6 million offset
by gross principal payments of $356.1 million.

Contractual Obligations

The following
table sets forth, as of March 31, 2007, 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     |       
|                                      |  |                             |       
|Contractual
  Obligations             |  | Total                       |        | Less
  than
  1 year |   | 1-3
  years |  | 3-5
  years |        | More
  than
  5 years |  
|                                      |  |                             |        |                      |   |             |  |             |        |                       |  
|                                      |  | (In
  thousands of dollars) |       
|                                      |  |                             |        |                      |   |             |  |             |        |                       |   |       |  |   |       | 
|Secured
  revolving credit facilities |  | $                           | 10,692 |                      | $ | 10,692      |  |             |       |                       |   |      |  |   |      | 
|Inventory
  financing agreements      |  |                             | 11,358 |                      |   | 11,358      |  |             |       |                       |   |      |  |   |      | 
|Secured
  promissory note (1)         |  |                             | 34,926 |                      |   | 500         |  | $           | 34,426 |                       |   |      |  |   |      | 
|Capital
  lease obligations           |  |                             | 1,044  |                      |   | 601         |  |             | 443    |                       |   |      |  |   |      | 
|Operating
  lease obligations         |  |                             | 16,591 |                      |   | 3,556       |  |             | 6,204  |                       | $ | 3,397 |  | $ | 3,434 | 
|                                      |  |                             |        |                      |   |             |  |             |        |                       |   |       |  |   |       | 
|Total                                 |  | $                           | 74,611 |                      | $ | 26,707      |  | $           | 41,074 |                       | $ | 3,397 |  | $ | 3,434 | 
|                                      |  |                             |        |                      |   |             |  |             |        |                       |   |       |  |   |       | 

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

The Company sustained net
losses during the years ended March 31, 2007, 2006, and 2005 and had a net
working capital deficit of $12.4 million for the year ended March 31, 2007. Net
of the Companys secured credit facilities, working capital was $9.6 million.
The Company has made a concerted effort in the current fiscal year to improve
its working capital position. These have included issuing additional shares of
preferred stock, a $6.0 million restructuring, other cost control initiatives,
and the discontinuation of certain sales of low margin products. The Company
anticipates that its available cash including the proceeds received from the
issuance of preferred stock in the first quarter of fiscal 2008 together with
its credit facilities, will provide the Company with the capital necessary to
meet its obligations as they come due in the foreseeable future. The Company currently has no commitments for
material capital expenditures. The Company intends to continue to capitalize on
the infrastructure investments made in fiscal 2007 by offering customers a
complete set of IT solutions and by focusing on improving overall

23

---



profitability
by driving higher margin business and reducing the number of current suppliers
to leverage resources in a more effective manner. Our future liquidity and
capital requirements will depend on numerous factors, including, general
economic conditions and conditions in the technology industry in particular;
the extent that our sales network and marketing programs achieve satisfactory
response rates; 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 may seek additional
capital or financing arrangements to consummate future acquisitions or meet
working capital needs, 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

In July 2006, the Financial
Accounting Standards Board (FASB) issued 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. The provisions of
FIN 48 are effective for fiscal years beginning after December 15, 2006. We do
not expect FIN 48 will have a material effect on our consolidated financial
condition or results of operations.

In 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. We are currently evaluating whether adoption of SFAS No. 157 will have an
impact on our financial statements.

In September 2006, the SEC
issued Staff Accounting Bulletin No. 108, Considering the Effects of Prior Year Misstatements
when Quantifying Misstatements in Current Year Financial Statements
(SAB 108). SAB 108 addresses the diversity in practice in quantifying
financial statement misstatements and establishes an approach that requires
quantification of financial statement misstatements based on the effects of the
misstatements on each of the Companys financial statements and the related
disclosures. SAB 108 is effective for fiscal years ending after November 15,
2006. The application of SAB 108 did not have any impact on our consolidated
balance sheets, statements of operations, or statements of equity for fiscal
2007.

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. We do not believe the adoption of this
standard will have a material impact on our consolidated financial statements.
This standard will become effective for us in the first quarter of fiscal 2008.

Item 7A. Quantitative
and Qualitative Disclosures about Market Risk

Our risk
investments only consisted of cash deposited in a money market fund. We do not
use interest rate derivative instruments to manage our exposure to interest
rate changes. Due to the limited investment risks involving money market funds,
we do not anticipate any material loss in connection with such investments.

Interest on our financing
arrangements are based on the prime rate, consequently, any changes in that
rate will impact our interest expense. Based on the average current level of
borrowings of approximately $21.5 million, a 0.25% increase in the prime rate
would translate to an approximate $53,750 increase in our annual interest
expense. The Company does not currently hedge interest rate exposures.

24

---



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 Goldstein Golub Kessler LLP                                                                                                         |  | F-1  
|MTM Technologies, Inc. and subsidiaries
  consolidated balance sheet at March 31, 2007 and 2006                                               |  | F-2  
|MTM Technologies, Inc. and subsidiaries
  consolidated statements of operations for the years ended March 31, 2007,
  2006 and 2005           |  | F-3  
|MTM Technologies, Inc. and subsidiaries
  consolidated statements of shareholders equity for the years ended March 31,
  2007, 2006 and 2005 |  | F-4  
|MTM Technologies, Inc. and subsidiaries
  consolidated statements of cash flows for the years ended March 31, 2007,
  2006 and 2005           |  | F-5  
|MTM Technologies, Inc. and subsidiaries
  notes to consolidated financial statements                                                          |  | F-6  

---

* 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.

Not
applicable.

Item 9A. Controls
and Procedures

An evaluation was performed,
as of March 31, 2007, under the supervision and with the participation of our
management, including our principal executive officer and principal financial
officer, of the effectiveness of the design and operation of our disclosure
controls and procedures pursuant to Rules 13a-15(e) and 15d-15(e) under the
Securities Exchange Act of 1934, as amended. Based on such evaluation, our
management, including such principal officers have concluded that our
disclosure controls and procedures were effective as of March 31, 2007.

Changes in Internal Control

There have been no changes
made in our internal controls over financial reporting identified in connection
with our evaluation as of the end of our most recent fiscal quarter that have
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.

25

---



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 current directors
and executive officers, 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.

|                       |  |     |  |                                                      |  |                 
|---------------------- |  | --- |  | ---------------------------------------------------- |  | ----------------
|Name                   |  | Age |  | Principal
  Positions and
  Offices with our Company |  | Director
  Since
|                       |  |     |  |                                                      |  |                 
|                      
|Gerald A.
  Poch       |  | 60  |  | Non-executive
  Chairman of the Board of Directors   |  | 2004            
|Richard R.
  Heitzmann |  | 35  |  | Director                                             |  | 2004            
|William
  Lerner       |  | 72  |  | Director                                             |  | 1995            
|Alvin E.
  Nashman     |  | 80  |  | Director                                             |  | 1998            
|Arnold J.
  Wasserman  |  | 69  |  | Director                                             |  | 1998            
|Thomas
  Wasserman     |  | 32  |  | Director                                             |  | 2005            
|Steven
  Stringer      |  | 52  |  | President
  and Chief Operating Officer              |  | N/A             
|J.W.
  Braukman III    |  | 53  |  | Senior Vice
  President and Chief Financial Officer  |  | N/A             
|John F.
  Kohler       |  | 43  |  | Senior Vice
  President and General Counsel          |  | N/A             

Gerald
A. Pochhas served as Managing Director of Pequot
Capital Management, Inc., the investment manager/advisor for Pequot Private Equity
Fund III, L.P. and Pequot Offshore Private Equity Partners III L.P., since
1999. Mr. Poch also served as a Managing General Partner of both Pequot Fund
and Pequot Partners. From August 1998 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 also Non-executive Chariman and a director
of Andrew Corporation, a publicly-traded company. In addition, Mr. Poch is a
director of a number of private companies.

Richard
R. Heitzmannhas served as a Senior Vice President at
Pequot Capital Management, Inc., focusing on software and services investments,
since January 2004. From June 2003 to January 2004, Mr. Heitzmann was Vice
President of Corporate Development with First Advantage Corp., a public company
involved in the risk mitigation industry. From November 2001 to June 2003, Mr.
Heitzmann was the Senior Vice President of Corporate Development and a member
of the board of directors of US Search.Com, Inc. From August 1999 to November
2001, Mr. Heitzmann served as a Vice President of Pequot Capital Management,
Inc. Mr. Heitzmann served as an executive with Nationsbanc Montgomery
Securities in its private equity group from July 1998 to August 1998 and with
Booz-Allen and Hamilton in its Financial Services and Healthcare Group from
September 1997 to December 1997. Mr. Heitzmann was a financial analyst and
associate at Houlihan Lokey Howard and Zukin from July 1994 to September 1997. Mr. Heitzmann is also a director of a number of private companies.

William
Lernerhas 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 of
Rent-way, Inc., a New York Stock Exchange listed company engaged in the
rental-purchase industry; and Cortland Trust, Inc., a money market mutual fund
distributed primarily through securities brokerage firms and commercial banks.

Alvin
E. Nashmanhas been an independent consultant in the
field of computer service for the past ten years. Dr. Nashman is a director of
James Monroe Bancorp Inc.

Arnold
J. Wassermanhas 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 35 years. He is a director of Stratasys,
Inc., a NASDAQ National Market listed company which manufactures rapid prototyping
systems and materials, and serves as chairman of its audit committee.

26

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Thomas
Wassermanhas served as a Vice President with
Constellation Ventures since June of 2001. From March of 2000 to June of 2001,
he served as a senior manager of corporate development for 360Networks, a
global telecommunications service provider. Earlier, 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
Broadband National, a private company.

Steven
Stringerhas served as our President since June 2005
and as our Chief Operating Officer since October 1, 2004. 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 IIIhas served as a Senior Vice President, as well as our Chief Financial
Officer, since September 2006. Mr. Braukmans 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 most recently served from 2005 until 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 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.

John
F. Kohlerhas served as a Senior Vice President, as
well as our General Counsel and Corporate Secretary, since May 2004. From May
2000 to January 2003, he served as Vice PresidentMergers and Acquisitions for
Interliant, Inc., a technology solutions provider, primarily responsible for
Interliants acquisition and restructuring activities. From May 1995 to April
2000, he was a corporate lawyer with Weil, Gotshal & Manges LLP, a law firm
in New York, and from September 1993 to April 1995, he was a corporate lawyer
with Jenkens & Gilchrist, P.C., a law firm in Dallas. Mr. Kohler served as
an officer in the United States Army from May 1986 to September 1990.

Under the
terms of the Restated Shareholders Agreement, each of Mr. Poch and Mr.
Heitzmann 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.

Board Committees

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.

Our Audit
Committee currently is composed of 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. Wasserman is 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

27

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

Our Compensation
Committee currently is composed of Richard Heitzmann, William Lerner and Alvin E. Nashman,
with Mr. Heitzmann 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.

Our Corporate
Governance and Nominating Committee currently is composed of Richard Heitzmann,
William Lerner, 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, 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.

Our
Independent Directors Committee was formed by our Board of Directors in
September 2004. It consists only of directors who are neither members of the
management nor associated with Pequot or Constellation (or other similar
investors) 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 or Constellation (or
other similar investors), have interests that may be in addition to, or
different from, the interests of the shareholders in general. This committee
currently is composed of 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 11 formal meetings during our fiscal year ended March 31, 2007.
Our Audit Committee held 12 formal meetings, our Compensation Committee held
seven formal meetings, our Corporate Governance and Nominating Committee held
one formal meeting, and our Independent Directors Committee held three formal
meetings, during our 2007 fiscal year. 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.

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 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.

Audit Committee Charter

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 Securities and Exchange Commission. A copy of the revised charter was made
Appendix A to the proxy statement we issued in connection with the annual
meeting of our shareholders held on November 7, 2003.

Section 16(a) Beneficial Ownership Reporting
Compliance

Based solely
upon a review of Forms 3, 4 and 5 and amendments to these forms furnished to
us, together with representations received by us from applicable parties that
no Form 5 was required to be filed by such parties, 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 2007 fiscal year.

Constellation, as well as
The Bear Stearns Companies Inc. (BSCI), Constellation Ventures Management II,
LLC (Management), Bear Stearns Asset Management Inc. (BSAM), and Clifford
H. Friedman filed a Form 4 late on one occasion relating to one transaction
occurring during our fiscal year ended March 31, 2007. See Footnote 7 to Item 12. Security
Ownership of Certain Beneficial Owners and Management and Related Stockholders
Matters for a discussion of
the relationship between these parties.

28

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Code of Ethics

Our board of
directors has established a code of ethics that applies to our principal
executive, financial and accounting officer(s). A copy of our code of ethics
was filed as exhibit 14.1 to our Annual Report on Form 10-K for fiscal year
2004.

Item 11. Executive
Compensation

Compensation Discussion and
Analysis

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 Chief Executive Officer (CEO) will make recommendations to the
Committee with respect to the compensation levels of those members of senior
management whose compensation is determined by the Committee. The Compensation Committee charter is posted
on the Companys website at http://www.mtm.com/InvestorRelations/CompensationCommitteeCharter.asp.

Compensation Philosophy

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 short-term
performance, the achievement of long-range strategic goals 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.

In the fall of 2004, based
on the recommendation of a member of the Board of Directors, the Compensation
Committee retained the services of Compensation Strategies, Inc.,
(Compensation Strategies) a nationally recognized compensation consulting
firm. Compensation Strategies conducted a market based study of the total cash
compensation (TCC) levels and compensation structures of executives working
in companies with size and industry characteristics similar to the Company.
This included benchmarking compensation levels against industry peers. The benchmarking consisted of comparing the Companys base salary and cash and non-cash incentive compensation programs and levels for specifically identified senior managers against market medians for companies of similar revenue levels. In
December 2004 , the Committee established a TTC for the Company based on ranges
of base salaries for the Chief Executive Officer and senior executive
management. Compensation Strategies subsequently updated their original 2004
report in August, 2006. Based on that update, the Compensation Committee
reviewed and substantially reaffirmed the compensation structure previously
recommended, making only minor adjustments to the December, 2004 structure.

With the TCC structure used
by the Compensation Committee, the percentage of a years TCC earnings paid
based on specific predetermined target bonus objectives (and therefore the
amount of TCC at risk) increases significantly from lower level executives to
the CEO. Specifically, over 40% of the CEOs TCC is at risk
while only 20% of lower level executives the TCC is at risk . These risk levels
reflect the increasing levels of responsibility and ability to impact results
at higher levels of the Company. Executives target bonuses generally required
performance in two principal areas, achieving preset financial objectives as
reflected in EBITDA targets and achieving preidentified strategic objectives
linked to the Companys strategy and budget. Typically 75% of an executives
target bonus depends on making very specific financial objectives that are
determined in advance. The strategic objectives are specifically identified,
for example, to consolidate disparate systems or to roll out a certain program
allowing for an objective performance assessment. To avoid a conflict of
interest in financial reporting, which largely drives the bonus levels of other
executives, the Chief Financial Officers bonus is solely determined based on
non-financial objectives. The Compensation Committee retains the discretion to
adjust the financial objectives of individuals as necessary to reflect changes
in financial practices or standards that may impact bonus targets in a way not
intended or known when the performance targets were set. The Compensation
Committee also has the right under the Bonus Plan to seek repayment of any
prior period bonus payments should audit results for the period determine that
the performance levels were not actually as reported. The Committee continues
to use outside compensation specialists to assist with ongoing issues
pertaining to compensation.

29

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Base Salary

Base salary levels for
executive officers are determined not only on the basis of the Committees
assessment of individual performance, but also on the total compensation,
including salaries paid by companies engaged in similar businesses to persons
holding equivalent positions. As noted above, those surveys, as well as related
data analyses, were conducted by Compensation Strategies. The Compensation
Committee believes that any increases in base salary should be based upon a
favorable evaluation of individual performance relative to individual goals,
the functioning of the executives team within the corporate structure, success
in furthering the corporate strategy and goals, and individual management
skills, responsibilities and anticipated workload.

Apart from contractual
commitments, the Committee also considers demonstrated loyalty and
commitment and the competitive salaries offered by similar companies to attract
and retain executives. Merit increases for executives are to be subject to the
same budgetary guidelines as apply to any other employees. In those cases where
an executive has entered into an employment agreement, the base salary is
determined pursuant to the terms of the agreement, and renewals of contracts
will be considered on the basis of the performance of the individual, the
performance of the Company and the compensation philosophy of the Company.
During 2006, for example, the amount of the CEOs pay at risk was increased
from 33% to a level of 41% to tie the CEOs TCC more closely to
predefined performances objectives. In light of the performance of the Company
during fiscal 2007, the Compensation Committee did not increase base salaries
for any senior executives.

Quarterly and Annual Bonuses

The Companys Management
Bonus Plan which was adopted during the 2006 fiscal year is designed to provide
an incentive to executives and to reward executives based on the overall
performance of the Company, as well as on the performance of each executive
officers area of responsibility or operating group. Measures of performance
are both financial and strategic. Financial elements are based on achieving
quarterly and annual EDITDA targets and strategic elements include, but are not
limited to, technological or quality improvements, improvements in operations and
contributions to business success. The goals are also structured to provide the
kinds of objectivity and checks and balances required to ensure compliance with
SEC regulations and the Sarbanes-Oxley Act. The Committee reviewed the levels
of bonus payments with an external consultant and compared those levels to an
analysis of publicly available compensation information. During fiscal 2006,
the Compensation Committee made bonus awards to a number of
members of senior management. These awards included quarterly and annual
incentive targets, a portion of which were achieved and partial bonuses were
paid. In light of the performance of the Company during fiscal 2007, the
Compensation Committee made no awards during fiscal 2007 and does not anticipate
making any awards for fiscal 2008.

Equity Awards

In 2005 the Compensation
Committee approved a plan to expand the number of employees eligible for equity
awards so as to award equity more broadly and deeply throughout the
organization and thus provide additional incentive to employees to maximize
shareholder value.

Executives are eligible for
equity awards in the form of stock options and restricted stock units under the
Companys equity plans. Awards are made at the discretion of the Compensation
Committee. The number of shares awarded to any individual depends on individual
performance, salary level and competitive data, and the impact that such
employees productivity may make to shareholder value over time. In addition,
in determining the number of stock options or restricted stock units granted to
each executive, the Compensation Committee reviews the unvested options and
units of each executive to determine the future benefits potentially available
to the executive. The number of options or units granted will depend in part on
the total number of unvested options and units deemed necessary to provide an
incentive to that individual to make a long term commitment to remain with the
Company. By giving to executives an equity interest in our Company, the value
of which depends upon stock performance, the policy seeks to further align
management and shareholder interests. The Company does not permit the back
dating or timing of options or other equity awards. The Committee currently sets the exercise price of

30

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stock options at the closing
price of the Companys stock as reported on the NASDAQ Small Cap Market on the
date of the grant.

Termination Payments and Benefits

The Company has entered into
agreements with its current named executive officers and certain other key
employees virtually all of whom are new to the Company in the last two to three
years. 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. Termination and change in control
payments and benefits are more fully described in the section of the Annual
Report on Form 10-K entitled Executive Compensation - Payments Upon
Termination.

Compensation Committee Interlocks
and Insider Participation

No member of our Compensation Committee is or
was an officer or employee of our Company, nor had any relationship requiring
disclosure under Item 13 of this Annual Report on Form 10-K. In addition, to
our knowledge, none of our executive officers:

| |   |                                                                                                                                                                                                                                                                                   
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | served as a member of a
  compensation committee (or other board committee performing equivalent
  functions or, in the absence of any such committee, the entire board of
  directors) of another entity, one of whose executive officers served on our
  Compensation Committee;
| |   |                                                                                                                                                                                                                                                                                   
| |  | served as a director of
  another entity, one of whose executive officers served on our Compensation
  Committee; nor                                                                                                                                                             
| |   |                                                                                                                                                                                                                                                                                   
| |  | served as a member of a
  compensation committee (or other board committee performing equivalent
  functions or, in the absence of any such committee, the entire board of
  directors) of another entity, one of whose executive officers served as a
  director of our Company. 

Compensation Committee Report

The Compensation Committee
has reviewed and discussed with management the Compensation Discussion and
Analysis required by Item 402(b) of Regulation S-K. Based on such review and
discussions, the Compensation Committee recommended to the Board that the
Compensation Discussion and Analysis be included in the Companys Annual Report
on Form 10-K and the Companys 2007 Proxy Statement. This report is provided by
the following independent directors, who comprise the Compensation Committee:

Richard Heitzmann, Chairman
Alvin E. Nashman
William Lerner

31

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Summary Compensation Table

The following
table sets forth, with respect to our fiscal year ended March 31, 2007, all
compensation earned by our CEO, and the five most highly
compensated persons who were serving as executive officers at the end of our
2007 fiscal year or who would have been among the most highly compensated
officers except for the fact that such person was not serving as an executive
officer at the end of our 2007 fiscal year, in each case other than with
respect to our CEO.

|                                                  |  |               |      |        |   |                    |  |                    |         |                          |   |         |  |   |         |  |   |           | 
|------------------------------------------------- |  | ------------- | ---- | ------ | - | ------------------ |  | ------------------ | ------- | ------------------------ | - | ------- |  | - | ------- |  | - | --------- | 
|Name and
  Principal Position(s)                  |  | Fiscal
  Year |      | Salary |   | Stock 
  Awards(1) |  | Option
  Awards(1) |         | All Other
  Compensation |   | Total   | 
|                                                  |  |               |      |        |   |                    |  |                    |         |                          |   |         | 
|Francis J. Alfano (2)                             |  |               | 2007 |        | $ | 350,000            |  | $                  | 17,395  |                          | $ | 805,393 |  | $ | 836,017 |  | $ | 2,008,805 | 
|Former Chief Executive Officer                    |  |               |      |        |   |                    |  |                    |         |                          |   |         |  |   |         |  |   |           | 
|                                                  |  |               |      |        |   |                    |  |                    |         |                          |   |         |  |   |         |  |   |           | 
|Steven Stringer                                   |  |               | 2007 |        | $ | 335,000            |  | $                  | 24,638  |                          | $ | 193,018 |  |   |         |  | $ | 552,656   | 
|President and Chief Operating Officer             |  |               |      |        |   |                    |  |                    |         |                          |   |         |  |   |         |  |   |           | 
|                                                  |  |               |      |        |   |                    |  |                    |         |                          |   |         |  |   |         |  |   |           | 
|J.W. Braukman III (3)                             |  |               | 2007 |        | $ | 133,000            |  | $                  | 6,563   |                          | $ | 44,688  |  | $ | 47,728  |  | $ | 231,979   | 
|Senior Vice President and Chief Financial Officer |  |               |      |        |   |                    |  |                    |         |                          |   |         |  |   |         |  |   |           | 
|                                                  |  |               |      |        |   |                    |  |                    |         |                          |   |         |  |   |         |  |   |           | 
|Michael El-Hillow (4)                             |  |               | 2007 |        | $ | 157,083            |  | $                  | 104,738 |                          |   |         |  | $ | 265,039 |  | $ | 526,860   | 
|Former Chief Financial Officer                    |  |               |      |        |   |                    |  |                    |         |                          |   |         |  |   |         |  |   |           | 
|                                                  |  |               |      |        |   |                    |  |                    |         |                          |   |         |  |   |         |  |   |           | 
|John F. Kohler                                    |  |               | 2007 |        | $ | 200,000            |  | $                  | 807     |                          | $ | 33,990  |  |   |         |  | $ | 234,797   | 
|Senior Vice President and General Counsel         |  |               |      |        |   |                    |  |                    |         |                          |   |         |  |   |         |  |   |           | 
|                                                  |  |               |      |        |   |                    |  |                    |         |                          |   |         |  |   |         |  |   |           | 
|Steven H. Rothman (5)                             |  |               | 2007 |        | $ | 55,285             |  | $                  | 1,076   |                          | $ | 7,660   |  | $ | 463,577 |  | $ | 527,598   | 
|Former Executive Vice President                   |  |               |      |        |   |                    |  |                    |         |                          |   |         |  |   |         |  |   |           | 

---

(1) See Footnote 1 to the Companys Consolidated
Financial Statements contained herein for a discussion of the assumptions made
in the valuation of Stock Awards and Option Awards for financial reporting
purposes.


(2) Chief Executive Officer from May 21, 2004 to April
26, 2007. In connection with the termination of Mr. Alfanos employment with
the Company, the vesting of all of his stock options and restricted stock units
was accelerated and the Company recorded the associated expense during the 2007
fiscal year. The impact of this transaction is reported under the Stock Award
and Option Award columns, since the associated expense was recorded in fiscal
2007.

(3) Senior Vice President and Chief Financial Officer
since September 28, 2006.

(4) Senior Vice President and Chief Financial Officer
from January 1, 2006 to September 13, 2006. In connection with the termination
of Mr. El-Hillows employment with the Company, the vesting of all of his
restricted stock units was accelerated and all of his stock options were
forfeited.

(5) Chairman of the Board and Chief Financial Officer
until May 21, 2004, and Executive Vice President until July 7, 2006.

Summary Compensation Table Narrative.

Amounts shown
as Salary include gross salary earned for the year ended March 31, 2007.

The Stock
Awards column reports the dollar amount recognized for financial statement
reporting purposes in fiscal 2007, 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 prospective transition method.

The Option
Awards column reports the dollar amount recognized for financial statement
reporting purposes in fiscal 2007, in accordance with SFAS No. 123(R), for options 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 prospective transition method.

32

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The amount
reported for Mr. Alfano in All Other Compensation consists of
post-termination consulting fees of $787,500, a one-time fee for entering into
a severance and release agreement of $29,167, post-termination health benefits
funded by the company of $14,350, and legal fee reimbursements of $5,000, in
each case paid or accrued by the Company during fiscal 2007 in connection with
the termination of Mr. Alfanos employment.

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.

The amount
reported for Mr. El-Hillow in All Other Compensation includes
post-termination consulting fees and accrued paid time off of $217,500
and post-termination health benefits funded by the company of $2,251, in each
case paid or accrued by the Company during fiscal 2007 in connection with the
termination of Mr. El-Hillows employment. It also includes reimbursed relocation
expenses in connection with Mr. El-Hillows hiring of $45,288.

The amount
reported for Mr. Rothman in All Other Compensation includes
post-termination consulting fees of $447,500, a
one-time fee for entering into a severance and release agreement of $3,500, and
post-termination health benefits funded by the company of $10,045, in each case
paid or accrued by the Company during fiscal 2007 in connection with the
termination of Mr. Rothmans employment. Also includes the payment by the
Company of certain disability insurance payments for the benefit of Mr. Rothman
of $2,532.

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

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 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 was subject to
the establishment of performance targets established under the Companys
Management Bonus Plan. For 2007 no performance targets were approved under the
Management Bonus Plan and no award grants were made.

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 in
the near term to pursue other opportunities and that simultaneous with his
departure as CEO, Mr. Alfano would also resign from the
Board of Directors. In furtherance of these transactions, we entered into a
definitive Consulting Service Agreement on April 26, 2007 (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. Upon a change of control of the Company
all compensation under the Alfano Consulting Service Agreement shall become
immediately due and payable; provided, however, that the March 31, 2008 payment
shall, in no event be paid to Consultant prior to the date that is six months
following the date of the Alfano Consulting Service Agreement. Additionally, in
connection with these agreements the vesting of Mr. Alfanos stock options and
restricted stock units were accelerated. Termination and change in control
payments and benefits are more fully described in the section of the Annual
Report on Form 10-K entitled Executive Compensation - Payments Upon
Termination.

Steve Stringer. We entered into an employment
agreement, dated August 10, 2006, with Mr. Stringer (as amended, 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

33

---



automatically
be extended for an additional period of 12 months; provided, however, that
either party may elect not to extend the agreement by giving written notice to
the other party at least 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
was subject to the establishment of performance targets established under the
Companys Management Bonus Plan. For 2007 no performance targets were approved
under the Management Bonus Plan and no award grants were made.

Other Agreements. The Company entered into a
severance agreement, dated September 28, 2006, with Mr. Braukman (the Braukman
Severance Agreement) and severance agreement, dated May 21, 2004, with Mr.
Kohler (as amended the Kohler Severance Agreement and together with the
Braukman Severance Agreement the Severance Agreements) to employ Mr. Braukman
as our Senior Vice President and Chief Financial Officer, and Mr. Kohler as our
Senior Vice President and General Counsel. In the event of a termination of Mr.
Braukmans or Mr. Kohlers employment during the first four years of his
agreement by the Company other than for cause or by such executive for good
reason or as a result of his death or permanent and total disability we shall
provide such executive, among other things, a continuance of his then current
base salary for a period equal to one year. Mr. Braukman is paid a base salary
of $260,000 per annum, and Mr. Kohler is paid a base salary of $200,000.

The Company
entered into a severance agreement, dated December 12, 2005, with Mr. El-Hillow
(the El-Hillow Severance Agreement) to employ Mr. El-Hillow as our Senior
Vice President and Chief Financial Officer. In the event of a termination of
Mr. El-Hillows, employment during the first four years of his agreement by the
Company other than for cause or by such executive for good reason or as a
result of his death or permanent and total disability we were required to
provide such executive, among other things, a continuance of his then current
base salary for a period equal to one year. Mr. El-Hillow was paid a base
salary of $290,000 per annum. Additionally, in the event of termination of the
executive for other than cause or for good reason, any unvested stock
options or restricted stock units shall become fully vested and immediately
exercisable and shall remain exercisable for the remainder of their term.
Effective September 12, 2006, Mr. El-Hillows employment with the Company was
terminated and the parties entered into a Consulting Services Agreement (the
El-Hillow Consulting Services Agreement). For services rendered under the
El-Hillow Consulting Service Agreement, the Company will pay Mr. El-Hillow fees
at the rate of $24,166.66 per month, payable in arrears in twice monthly
payments with the final payment ending June 13, 2007 in accordance with the
normal payroll practices of the Company. Additionally, in connection with these
agreements the vesting of Mr. El-Hillows 35,000 restricted stock units was
accelerated and he forfeited his 250,000 stock options. Termination and change
in control payments and benefits are more fully described in the section of the
Annual Report on Form 10-K entitled Executive Compensation - Payments Upon
Termination.

The Company
entered into an employment agreement, dated May 21, 2004, with Steven H.
Rothman (the Rothman Employment Agreement) to employ Mr. Rothman as an
Executive Vice President. The Rothman Employment Agreement had an initial term
of three (3) years (the Rothman Initial Term). In the event of a termination
of Mr. Rothmans employment during the term of the agreement by the Company
other than for cause or by Mr. Rothman for good reason or as a result of
his death or permanent and total disability we were required to provide him,
among other things, a continuance of his then current base salary for a period
equal to the greater of (i) one year from the date of termination or (ii) the
period ending on the last day of the Rothman Initial Term. Additionally, in the
event of termination for other than cause or for good reason, any unvested
stock options or restricted stock units shall become fully vested and
immediately exercisable and shall remain exercisable for the remainder of their
term. Mr. Rothman was paid a base salary of $265,000 per annum. Effective July
7, 2006, Mr. Rothmans employment with the Company was terminated and the
parties entered into a Consulting Service Agreement dated as of July 7, 2006
(the Rothman Consulting Service Agreement). The Rothman Consulting Service
Agreement has a term commencing on July 7, 2006 and ending March 31, 2008. For
services rendered under the Rothman Consulting Service Agreement, the Company
will, during the period July 1, 2006 to December 31, 2007, pay Mr. Rothman
consulting fees at the rate of $265,000 per annum, payable quarterly. In
addition, the Company paid Rothman a one-time fee of $50,000. The Company also
agreed to pay Mr. Rothman, in certain circumstances set forth in the Consulting
Service Agreement, a transaction fee, subject to certain limitations and
offsets, in an amount equal to one percent (1%) of the Aggregate Purchase Price
(as defined) paid by the Company for certain acquisitions

34

---



by the
Company. Termination and change in control payments and benefits are more fully
described in the section of the Annual Report on Form 10-K entitled Executive
Compensation - Payments Upon Termination.

Grants of Plan Based Awards

|                  |  |              |         |                                      |  |                                                                          |  |                                                                              |        |                                                      |  |                                                          |  |  |   |      |  |  |  |   |         |  | 
|----------------- |  | ------------ | ------- | ------------------------------------ |  | ------------------------------------------------------------------------ |  | ---------------------------------------------------------------------------- | ------ | ---------------------------------------------------- |  | -------------------------------------------------------- |  |  | - | ---- |  |  |  | - | ------- |  | 
|Name              |  | Grant
  Date |         | Comp.
  Committee.
  Approval
  Date |  | All Other
  Stock
  Awards;
  Number of
  Shares of Stock
  or Units (#) |  | All Other
  Option
  Awards; Number of
  Securities Underlying
  Options (#) |        | Exercise or
  Base Price of
  Option
  Awards ($/Sh) |  | Grant Date
  Fair Value
  of Stock
  and Option
  Awards | 
|                  |  |              |         |                                      |  |                                                                          |  |                                                                              |        |                                                      |  |                                                          | 
|Francis J. Alfano |  |              | 6/28/06 |                                      |  | 6/28/06                                                                  |  |                                                                              |        |                                                      |  | 200,000                                                  |  |  | $ | 3.54 |  |  |  | $ | 325,800 |  | 
|Steven Stringer   |  |              | 8/10/06 |                                      |  | 8/10/06                                                                  |  |                                                                              |        |                                                      |  | 107,000                                                  |  |  | $ | 3.03 |  |  |  | $ | 193,563 |  | 
|                  |  |              | 8/10/06 |                                      |  | 8/10/06                                                                  |  |                                                                              | 20,000 |                                                      |  |                                                          |  |  |   |      |  |  |  | $ | 41,200  |  | 
|J.W. Braukman III |  |              | 9/28/06 |                                      |  | 9/12/06                                                                  |  |                                                                              |        |                                                      |  | 250,000                                                  |  |  | $ | 2.20 |  |  |  | $ | 321,750 |  | 
|                  |  |              | 9/28/06 |                                      |  | 9/12/06                                                                  |  |                                                                              | 35,000 |                                                      |  |                                                          |  |  |   |      |  |  |  | $ | 52,500  |  | 

Grants of Plan Based Awards Table Narrative.

The Grant
Date Fair Value of Stock and Options Awards column reports the dollar amount to be
recognized over the applicable requisite service period for financial statement reporting purposes in accordance with
SFAS No. 123(R), for the applicable grant.

Under the
Companys Management Bonus Plan, no non-equity incentive awards were granted
for the fiscal year ended March 31, 2007. Additionally, no equity incentive awards
were granted under the equity incentive provisions of the employment agreements
with Mr. Alfano or Mr. Stringer for fiscal 2007.

The grant made
June 28, 2006 to Mr. Alfano reflected under All Other Option Awards; Number
of Securities Underlying Options (#) was made in connection with the Company
entering into a new employment agreement with Mr. Alfano. The award agreement
for this award provides, among other things, that in the event of termination
of Mr. Alfanos employment with the Company for other than cause or
for good
reason, any unvested stock options shall become
fully vested and immediately exercisable and shall remain exercisable for the
remainder of its term.

The grants
made August 10, 2006 to Mr. Stringer reflected under All Other Option Awards;
Number of Securities Underlying Options (#) and All Other Option
Awards; Number of Securities Underlying Options (#) were made in connection
with the Company entering into a new employment agreement with Mr. Stringer.
The award agreements for these awards provide, among other things, that in the
event of termination of Mr. Stringers employment with the Company for other
than
cause or for good reason, any unvested stock options
or restricted stock units shall become fully vested and the options shall become
immediately exercisable and shall remain exercisable for the remainder of their
term.

The grants made September 28,
2006 to Mr. Braukman reflected under All Other Option Awards; Number of
Securities Underlying Options (#) and All Other Option Awards; Number
of Securities Underlying Options (#) were made in connection with Mr. Braukmans
hiring as Chief Financial Officer. The award
agreements for these awards provide, among other things, that in the event of
termination of Mr. Braukmans employment with the Company for other than
cause or for good reason, any unvested stock options
or restricted stock units shall become fully vested and the options shall become
immediately exercisable and shall remain exercisable for the remainder of their
term.

35

---



Outstanding Equity Awards at Fiscal Year End

|                      |  |                                                             |  |                |  |                                 |     |                            |  |                                                               |      |  |  |                                                                             |  |  |  |        |  |  |     |   |   |        | 
|--------------------- |  | ----------------------------------------------------------- |  | -------------- |  | ------------------------------- | --- | -------------------------- |  | ------------------------------------------------------------- | ---- |  |  | --------------------------------------------------------------------------- |  |  |  | ------ |  |  | --- | - | - | ------ | 
|                      |  | Option
  Awards                                             |  | Stock
  Awards | 
|                      |  |                                                             |  |                | 
|                      |  | 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) | 
|                      |  |                                                             |  |                |  |                                 |     |                            |  |                                                               |     
|Name                  |  | Exercisable                                                 |  | Unexercisable  |  |                                 |     |                            |  |                                                               |      |  |  |                                                                             |  |  |  |        |  |  |     |  
|                      |  |                                                             |  |                |  |                                 |     |                            |  |                                                               |      |  |  |                                                                             |  |  |  |        |  |  |     |  
|Francis J. Alfano (2) |  | 233,333                                                     |  | 166,667        |  |                                 |     |                            |  | $                                                             | 2.15 |  |  | 5/20/2014                                                                   |  |  |  | 8,000  |  |  |     |   | $ | 9,920  | 
|                      |  | 16,000                                                      |  | 48,000         |  |                                 |     |                            |  | $                                                             | 4.05 |  |  | 4/15/2015                                                                   |  |  |  |        |  |  |     |   |   |        | 
|                      |  | 0                                                           |  | 200,000        |  |                                 |     |                            |  | $                                                             | 3.54 |  |  | 6/28/2016                                                                   |  |  |  |        |  |  |     |   |   |        | 
|                      |  |                                                             |  |                |  |                                 |     |                            |  |                                                               |      |  |  |                                                                             |  |  |  |        |  |  |     |   |   |        | 
|Steven Stringer       |  | 125,416                                                     |  | 89,584         |  |                                 | (3  | )                          |  | $                                                             | 2.87 |  |  | 11/2/2014                                                                   |  |  |  | 40,000 |  |  | (4  | ) | $ | 49,600 | 
|                      |  | 11,800                                                      |  | 35,400         |  |                                 | (5  | )                          |  | $                                                             | 4.05 |  |  | 4/15/2015                                                                   |  |  |  | 5,900  |  |  | (6  | ) | $ | 7,316  | 
|                      |  | 0                                                           |  | 107,000        |  |                                 | (7  | )                          |  | $                                                             | 3.03 |  |  | 8/10/2016                                                                   |  |  |  | 20,000 |  |  | (8  | ) | $ | 24,800 | 
|                      |  |                                                             |  |                |  |                                 |     |                            |  |                                                               |      |  |  |                                                                             |  |  |  |        |  |  |     |   |   |        | 
|J.W. Braukman III     |  | 0                                                           |  | 250,000        |  |                                 | (9  | )                          |  | $                                                             | 2.20 |  |  | 9/28/2016                                                                   |  |  |  | 35,000 |  |  | (10 | ) | $ | 43,400 | 
|                      |  |                                                             |  |                |  |                                 |     |                            |  |                                                               |      |  |  |                                                                             |  |  |  |        |  |  |     |   |   |        | 
|John F. Kohler        |  | 43,750                                                      |  | 31,250         |  |                                 | (11 | )                          |  | $                                                             | 2.15 |  |  | 5/20/2014                                                                   |  |  |  | 1,500  |  |  | (12 | ) | $ | 1,860  | 
|                      |  | 3,000                                                       |  | 9,000          |  |                                 | (13 | )                          |  | $                                                             | 4.05 |  |  | 4/15/2015                                                                   |  |  |  |        |  |  |     |   |   |        | 
|                      |  |                                                             |  |                |  |                                 |     |                            |  |                                                               |      |  |  |                                                                             |  |  |  |        |  |  |     |   |   |        | 
|Steven H. Rothman     |  | 50,000                                                      |  | 0              |  |                                 |     |                            |  | $                                                             | 2.25 |  |  | 7/12/2008                                                                   |  |  |  | 2,000  |  |  | (14 | ) | $ | 2,480  | 
|                      |  | 5,200                                                       |  | 0              |  |                                 |     |                            |  | $                                                             | 2.69 |  |  | 10/11/2009                                                                  |  |  |  |        |  |  |     |   |   |        | 
|                      |  | 50,000                                                      |  | 0              |  |                                 |     |                            |  | $                                                             | 1.29 |  |  | 9/10/2011                                                                   |  |  |  |        |  |  |     |   |   |        | 
|                      |  | 2,000                                                       |  | 6,000          |  |                                 | (15 | )                          |  | $                                                             | 4.05 |  |  | 4/15/2015                                                                   |  |  |  |        |  |  |     |   |   |        | 

|     |                                                                                                                                                                                                                                     
|---- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    
|(1)  | Market value is calculated by multiplying the closing
  market price of the Companys common stock as of March 31, 2007 by the number
  of unvested restricted stock units.                                                         
|     |                                                                                                                                                                                                                                     
|(2)  | The vesting and exercisability of all options and
  restricted stock units awards held by Mr. Alfano were subsequently
  accelerated in connection with the termination of his employment with the
  Company.                       
|     |                                                                                                                                                                                                                                     
|(3)  | 44,792 options vest on November 2, 2007 and 2008,
  respectively.                                                                                                                                                                   
|     |                                                                                                                                                                                                                                     
|(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.
|     |                                                                                                                                                                                                                                     
|(5)  | 11,800 options vest on April 15, 2007, 2008, and
  2009, respectively.                                                                                                                                                              
|     |                                                                                                                                                                                                                                     
|(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.  
|     |                                                                                                                                                                                                                                     
|(7)  | 26,750 options vest on August 10, 2007, 2008, 2009
  and 2010, respectively.                                                                                                                                                        
|     |                                                                                                                                                                                                                                     
|(8)  | 5,000 restricted stock units awards vest on August
  10, 2007, 2008, 2009 and 2010, respectively.                                                                                                                                   
|     |                                                                                                                                                                                                                                     
|(9)  | 62,500 options vest on September 28, 2007, 2008,
  2009, 2010, respectively.                                                                                                                                                        
|     |                                                                                                                                                                                                                                     
|(10) | 8,750 restricted stock units awards vest on September
  28, 2007, 2008, 2009, 2010, respectively                                                                                                                                    
|     |                                                                                                                                                                                                                                     
|(11) | 15,625 options vest on May 21, 2007 and 2008,
  respectively.                                                                                                                                                                       
|     |                                                                                                                                                                                                                                     
|(12) | 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.  
|     |                                                                                                                                                                                                                                     
|(13) | 3,000 options vest on April 15, 2007, 2008 and 2009,
  respectively.                                                                                                                                                                
|     |                                                                                                                                                                                                                                     
|(14) | 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.  
|     |                                                                                                                                                                                                                                     
|(15) | 2,000 options vest on April 15, 2007, 2008 and 2009,
  respectively.                                                                                                                                                                

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.

36

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Options Exercised and Stock Vested Table

|                  |  |                                            |  |                                 |        | 
|----------------- |  | ------------------------------------------ |  | ------------------------------- | ------ | 
|                  |  | Stock Awards                               | 
|                  |  |                                            | 
|Name              |  | Number of Shares
  Acquired on
  Vesting # |  | Value Realized
  on Vesting ($) |       
|                  |  |                                            |  |                                 |       
|Francis J. Alfano |  |                                            |  |                                 |        | 
|Steven Stringer   |  |                                            |  |                                 |        | 
|J.W. Braukman III |  |                                            |  |                                 |        | 
|Michael El-Hillow |  | 35,000                                     |  | $                               | 80,500 | 
|John F. Kohler    |  |                                            |  |                                 |        | 
|Steven H. Rothman |  |                                            |  |                                 |        | 

Options Exercised and Stock Vested Table
Narrative.

The vesting of
all 414,667 unvested stock options and 8,000 restricted stock units awards 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.

The vesting of
all 35,000 restricted stock units held by Mr. El-Hillow were accelerated during
the 2007 fiscal year in connection with the termination of his employment with
the Company. In connection with the termination of his employment Mr. El-Hillow
forfeited all of his 250,000 stock options.

Payments Upon Termination

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.

Named Executive Officers who Terminated
Employment During 2007.

In March,
2007, the Company and Mr. Alfano reached an agreement in principle regarding
Mr. Alfanos departure as Chief Executive Officer of the Company. On April
12, 2007 the Company reported, among other things, that Mr. Alfano would be
departing in the near term to pursue other opportunities and that simultaneous
with his departure as CEO, Mr. Alfano would also resign
from the Board of Directors. In furtherance of these transactions, we entered
into the Alfano Consulting Service Agreement on April 26, 2007 with Mr. Alfano
and 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 (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. Upon a change of
control of the Company all compensation under the Alfano Consulting Service
Agreement shall become immediately due and payable; provided, however, that the
March 31, 2008 payment shall, in no event be paid to Consultant prior to the
date that is six months following the date of the Alfano Consulting Service
Agreement. In addition to the other payments, we are providing Mr. Alfano
health benefits at no cost for the term of the Alfano Service Consulting
Agreement. 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

37

---



affiliates. As used
herein, the term Business Activities shall mean 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.

Effective
September 12, 2006, Mr. El-Hillows employment with the Company was terminated
and the parties entered into a Consulting Services Agreement (the El-Hillow
Consulting Services Agreement). For services rendered under the El-Hillow
Consulting Service Agreement, the Company will pay Mr. El-Hillow fees at the
rate of $24,166.66 per month, payable in arrears in twice monthly payments with
the final payment ending June 13, 2007 in accordance with the normal payroll
practices of the Company. Additionally, in connection with these agreements the
vesting of Mr. El-Hillows 35,000 restricted stock units were accelerated and
he forfeited his 250,000 stock options. In connection with these arrangements,
Mr. El-Hillow and the Company executed mutual releases and Mr. El-Hillow agreed
that for a period of two years 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 El-Hillow
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. El-Hillow 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.As used herein, the term Business
Activities shall mean conduct of business as a computer and communications
technology management company providing IT networking and data center services,
including VOIP, storage, security, collaboration, and messaging solutions..

Effective July
7, 2006, Mr. Rothmans employment with the Company was terminated and the
parties entered into a Consulting Service Agreement dated as of July 7, 2006
(the Rothman Consulting Service Agreement). The Rothman Consulting Service
Agreement has a term of two years, commencing on July 7, 2006 and ending March
31, 2008. For services rendered under the Rothman Consulting Service Agreement,
the Company will, during the period July 1, 2006 to December 31, 2007, pay Mr.
Rothman consulting fees at the rate of $265,000 per annum, payable quarterly.
In addition, the Company paid Rothman a one-time fee of $50,000. The Company
also agreed to pay Mr. Rothman, in certain circumstances set forth in the
Consulting Service Agreement, a transaction fee, subject to certain limitations
and offsets, in an amount equal to one percent (1%) of the Aggregate Purchase
Price (as defined) paid by the Company for certain acquisitions by the Company.
In connection with these arrangements, Mr. Rothman and the Company executed
mutual releases and Mr. Rothman agreed that for a period ending on November 30,
2007 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 Rothman Employment Agreement and within 100
miles of any office of the Company established after such commencement date.
Additionally, until November 20, 2008 Mr. Rothman 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. As used
herein, the term Business Activities shall mean conduct of business as a
middle market information technology service provider focused on network
management and monitoring, LAN-WAN broadband, security, storage, and messaging.

38

---



Termination Benefits for All Other Named
Executive Officers.

The tables
below provide an estimate of the payments that would be made to each of the
named executive officers other than Messrs. Alfano, El-Hillow and Rothman 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, 2007. 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 or
  for Good Reason |   | For
  Cause
  Termination | 
|                                                                     |  |                         |   |                                                                |   |                           | 
|Severance Payments                                                   |  | $                       | 0 |                                                                | $ | 921,250                   |  | $ | 0 | 
|Post Termination Employee
  Benefits                                 |  |                         | 0 |                                                                |   | 56,327                    |  |   | 0 | 
|Acceleration of Equity
  Awards (1)                                  |  |                         | 0 |                                                                |   | 565,818                   |  |   | 0 | 
|                                                                     |  |                         |   |                                                                |   |                           |  |   |   | 
|                                                                     |  | $                       | 0 |                                                                | $ | 1,543,395                 |  | $ | 0 | 

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

We entered
into an employment agreement, dated August 10, 2006, with Mr. Stringer (as
amended, 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).

In the event
of a termination of Mr. Stringers employment during the term of the Stringer
Employment Agreement 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 shall provide to Mr. Stringer (or his legal
representative):

|  |                                                                                                                                                                                                                                                                                                                                                       
|- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | A
  continuance of his salary at one hundred percent (100%) of his then current
  base salary, as a severance payment, 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 of the Company 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 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.

39

---



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. As used
herein, the term Business Activities shall mean 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.

|                                                                  |  |                         |   |                                                                |   |                           |  |   |   | 
|----------------------------------------------------------------- |  | ----------------------- | - | -------------------------------------------------------------- | - | ------------------------- |  | - | - | 
|Jay Braukman - Executive
  Benefits and Payments on
  Termination |  | Voluntary
  Termination |   | Involuntary
  Termination
  Without Cause or
  for Good Reason |   | For
  Cause
  Termination | 
|                                                                  |  |                         |   |                                                                |   |                           | 
|Severance Payments                                                |  | $                       | 0 |                                                                | $ | 260,000                   |  | $ | 0 | 
|Post Termination Employee
  Benefits                              |  |                         | 0 |                                                                |   | 15,363                    |  |   | 0 | 
|Acceleration of Equity
  Awards (1)                               |  |                         | 0 |                                                                |   | 363,218                   |  |   | 0 | 
|                                                                  |  |                         |   |                                                                |   |                           |  |   |   | 
|                                                                  |  | $                       | 0 |                                                                | $ | 638,581                   |  | $ | 0 | 

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

The Company
entered into a severance agreement, dated September 28, 2006, with Mr. Braukman
(the Braukman Severance Agreement) to employ Mr. Braukman as our Senior Vice
President and Chief Financial Officer.

In the event
of a termination of Mr. Braukmans employment on or before the fourth
anniversary date of the Braukman Severance Agreement 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, in each case the Company shall provide to Mr.
Braukman (or his legal representative):

|  |                                                                                                                                                                                                                                                                                                                                                       
|- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | A
  continuance of his salary at one hundred percent (100%) of his then current
  base salary, as a severance payment, 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 of the Company 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.

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.

40

---



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.

During the
term of Mr. Braukmans employment and for a period of: (i) two years following
Mr. Braukmans termination of his employment, (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. As
used herein, the term Business Activities shall mean 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.

|                                                                 |  |                         |   |                                                                |   |                           |  |   |   | 
|---------------------------------------------------------------- |  | ----------------------- | - | -------------------------------------------------------------- | - | ------------------------- |  | - | - | 
|John Kohler  Executive
  Benefits and Payments on
  Termination |  | Voluntary
  Termination |   | Involuntary
  Termination
  Without Cause or
  for Good Reason |   | For
  Cause
  Termination | 
|                                                                 |  |                         |   |                                                                |   |                           | 
|Severance Payments                                               |  | $                       | 0 |                                                                | $ | 200,000                   |  | $ | 0 | 
|Post Termination Employee
  Benefits                             |  |                         | 0 |                                                                |   | 19,080                    |  |   | 0 | 
|Acceleration of Equity
  Awards (1)                              |  |                         | 0 |                                                                |   | 51,602                    |  |   | 0 | 
|                                                                 |  |                         |   |                                                                |   |                           |  |   |   | 
|                                                                 |  | $                       | 0 |                                                                | $ | 270,682                   |  | $ | 0 | 

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

The Company
entered into a severance agreement, dated May 21, 2004, with Mr. Kohler (as
amended the Kohler Severance Agreement) to employ Mr. Kohler as our Senior
Vice President and General Counsel.

In the event
of a termination of Mr. Kohlers employment on or before the fourth anniversary
date of the Kohler Severance Agreement by the Company other than for cause or
by Mr. Kohler for good reason or as a result of his death or permanent and
total disability, in each case the Company shall provide to Mr. Kohler (or his
legal representative):

| |   |                                                                                                                                                                                                                                                                                                                                                     
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | A
  continuance of his salary at one hundred percent (100%) of his then current
  base salary, as a severance payment, for a period equal to one year from the
  date of termination of Mr. Kohlers employment (the Severance Period).                                                                                                           
| |   |                                                                                                                                                                                                                                                                                                                                                     
| |  | Subject to
  certain limitations, during the Severance Period, Mr. Kohler will be entitled
  to a continuance of coverage under all health, life, disability and similar
  employee benefit plans and programs of the Company on the same basis as he
  was entitled to participate immediately prior to the commencement of the
  Severance Period.

Additionally,
the impact of Mr. Kohler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.

In connection
with any termination by the Company other than for cause or by Mr. Kohler 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.
Kohler, as consideration for the execution and non-revocation by Mr. Kohler of
a release agreement in favor of the Company and its shareholders and their
respective directors, officers and employees. The

41

---



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

In the event
that Mr. Kohlers employment with the Company is terminated by the Company for
cause, or by Mr. Kohler 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.

During the
term of Mr. Kohlers employment and for a period of: (i) two years following
Mr. Kohlers termination of his employment, (ii) one year following the
Companys termination of his employment, Mr. Kohler 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 Kohler
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. Kohler 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. As used
herein, the term Business Activities shall mean 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.

Director Compensation

The following
table shows the compensation of each Director for services rendered in that
capacity during the year ended March 31, 2007.

|                     |  |                               |        |                |   |                 |  |                                            |  |                                                                                      |     |                           |  |       |  |  |     |  |  |   |        | 
|-------------------- |  | ----------------------------- | ------ | -------------- | - | --------------- |  | ------------------------------------------ |  | ------------------------------------------------------------------------------------ | --- | ------------------------- |  | ----- |  |  | --- |  |  | - | ------ | 
|Name                 |  | Fees 
  Earned
  or Cash Paid |        | Stock
  Awards |   | Option
  Awards |  | Non-Equity
  Incentive Plan
  Compensation |  | Change in
  Pension Value
  and 
  Nonqualified
  Deferred
  Compensation
  Earnings |     | All Other 
  Compensation |  | Total | 
|                     |  |                               |        |                |   |                 |  |                                            |  |                                                                                      |     |                           |  |       | 
|Arnold Wasserman (1) |  | $                             | 57,375 |                | $ | 22,800          |  | N/A                                        |  |                                                                                      | N/A |                           |  | N/A   |  |  | N/A |  |  | $ | 80,175 | 
|Alvin Nashman (2)    |  | $                             | 44,000 |                | $ | 22,800          |  |                                            |  |                                                                                      |     |                           |  |       |  |  |     |  |  | $ | 66,800 | 
|William Lerner (3)   |  | $                             | 50,000 |                | $ | 22,800          |  |                                            |  |                                                                                      |     |                           |  |       |  |  |     |  |  | $ | 72,800 | 
|                     |  |                               |        |                |   |                 |  |                                            |  |                                                                                      |     |                           |  |       |  |  |     |  |  |   |        | 

---

(1) As of June 20, 2007, Mr. Wasserman held
options to purchase 108,000 shares of common stock.

(2) As of June 20, 2007, Dr. Nashman held
options to purchase 85,500 shares of common stock.

(3) As of June 20, 2007, Mr. Lerner held
options to purchase 85,500 shares of common stock.

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

For the first
three fiscal quarters of 2007, the Company provided the following cash
compensation to directors: each director received an annual fee of $16,000 as
compensation for serving on our Board of Directors, plus an additional $1,500
for each board meeting attended in person and $750 for each board meeting
attended by telephonic conference call. Each 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, as well as an additional $1,000 for each committee
meeting attended in person and $500 for each committee meeting attended by
telephonic conference call, in each case if the committee meeting is held on
a day other than a day on which the board itself is meeting.

42

---



On February
16, 2007 the Company established new director compensation effective from and
after January 1, 2007 as follows: each director 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.

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

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.

The Stock
Awards column reports the dollar amount recognized for financial statement
reporting purposes for the applicable fiscal year, in accordance with SFAS
No. 123(R), for common stock grants in 2007.

Performance Graph

The
following graph and table sets forth the annual changes for the five-year
period indicated in a theoretical cumulative total shareholder return of an
investment of $100 in our common stock and each comparison indices, assuming
reinvestment of dividends, if any.

COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL
RETURN

(PERFORMANCE GRAPH)

---

Assumes $100
invested at the close of trading on 3/31/02 in MTM Technologies, Inc. common
stock, Standard & Poors Small Cap and Peer Group.

43

---



Cumulative
total return assumes reinvestment of dividends.

|                             |  |           |  |           |  |           |  |           |  |           |  |           |  |  |  |  |  |  | 
|---------------------------- |  | --------- |  | --------- |  | --------- |  | --------- |  | --------- |  | --------- |  |  |  |  |  |  | 
|                             |  | 3/31/2002 |  | 3/31/2003 |  | 3/31/2004 |  | 3/31/2005 |  | 3/31/2006 |  | 3/31/2007 | 
|                             |  |           |  |           |  |           |  |           |  |           |  |           | 
|                             |  |           |  |           |  |           |  |           |  |           |  |           |  |  |  |  |  |  | 
|MTM
  Technologies, Inc.     |  | 100       |  | 42.34     |  | 105.84    |  | 325.56    |  | 279.57    |  | 90.51     | 
|Standard
  & Poors Small Cap |  | 100       |  | 74.53     |  | 115.63    |  | 129.58    |  | 159.26    |  | 166.15   
|Peer Group                   |  | 100       |  | 69.99     |  | 93.60     |  | 77.66     |  | 85.19     |  | 88.86     | 

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

Our Current Beneficial Owners

Our
Series A Preferred Stock and common stock are the only classes of
our voting securities presently outstanding. The Series A Preferred Stock votes
on an as converted basis, such that each share of Series A Preferred Stock is
entitled to that number of votes as equals the number of shares of common 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 for the
Series A-1, A-2, and A-3 shares, such number of votes shall not exceed such
number of shares of common stock which would be received based on a conversion
price of $1.45 per preferred share and for the Series A-4, A-5, A-6, and A-7
shares shall not exceed one vote per share.

The
following table sets forth as of June 20, 2007 the beneficial ownership of the
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.                                                                                                                         

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.

44

---



|                                                          |  |                                               |      |                                      |       |                                               |  |                                      |      |  |      |   | 
|--------------------------------------------------------- |  | --------------------------------------------- | ---- | ------------------------------------ | ----- | --------------------------------------------- |  | ------------------------------------ | ---- |  | ---- | - | 
|                                                          |  | 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 |     
|                                                          |  |                                               |      |                                      |       |                                               |  |                                      |     
|                                                          |  |                                               |      |                                      |       |                                               |  |                                      |      |  |      |   | 
|Pequot Capital Management,
  Inc. (1)                     |  | 21,587,928                                    | (2)  |                                      | 77.2  | %                                             |  | 27,652,137                           | (3)  |  | 67.6 | % | 
|Gerald A. Poch (4)                                        |  | 21,587,928                                    | (5)  |                                      | 77.2  | %                                             |  | 27,712,137                           | (6)  |  | 67.8 | % | 
|Constellation Group (7)                                   |  | 6,379,929                                     | (8)  |                                      | 22.8  | %                                             |  | 8,284,829                            | (9)  |  | 38.5 | % | 
|Clifford Rucker (10)                                      |  | 0                                             |      |                                      | 0.0   | %                                             |  | 3,377,566                            |      |  | 25.5 | % | 
|Howard A. Pavony                                          |  | 0                                             |      |                                      | 0.0   | %                                             |  | 795,656                              | (11) |  | 6.0  | % | 
|Steven H. Rothman                                         |  | 0                                             |      |                                      | 0.0   | %                                             |  | 897,303                              | (12) |  | 6.7  | % | 
|Arnold Wasserman                                          |  | 0                                             |      |                                      | 0.0   | %                                             |  | 145,750                              | (13) |  | 1.1  | % | 
|William Lerner                                            |  | 0                                             |      |                                      | 0.0   | %                                             |  | 112,250                              | (14) |  | 0.8  | % | 
|Alvin E. Nashman                                          |  | 0                                             |      |                                      | 0.0   | %                                             |  | 112,250                              | (15) |  | 0.8  | % | 
|Steven Stringer                                           |  | 0                                             |      |                                      | 0.0   | %                                             |  | 180,766                              | (16) |  | 1.3  | % | 
|J.W. Braukman III                                         |  | 0                                             |      |                                      | 0.0   | %                                             |  | 0                                    | (17) |  | 0.0  | % | 
|John F. Kohler                                            |  | 0                                             |      |                                      | 0.0   | %                                             |  | 65,375                               | (18) |  | 0.5  | % | 
|Richard R. Heitzmann (19)                                 |  | 0                                             | (20) |                                      | 0.0   | %                                             |  | 0                                    | (21) |  | 0.0  | % | 
|Thomas Wasserman (22)                                     |  | 0                                             | (23) |                                      | 0.0   | %                                             |  | 0                                    | (24) |  | 0.0  | % | 
|All directors and executive officers as a group (persons) |  | 27,967,857                                    | (25) |                                      | 100.0 | %                                             |  | 36,613,357                           | (26) |  | 73.7 | % | 

|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|(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 advisor/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 Richard R. Heitzmann, one of our directors since May 21, 2004, 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.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|(2) | Represents (a) 3,026,611
  shares of Series A-1 Preferred Stock owned of record by the Pequot Fund, (b)
  426,653 shares of Series A-1 Preferred Stock owned of record by Pequot
  Partners, (c) 1,859,203 shares of Series A-2 Preferred Stock owned of record
  by the Pequot Fund, (d) 262,087 shares of Series A-2 Preferred Stock owned of
  record by Pequot Partners, (e) 1,787,696 shares of Series A-3 Preferred Stock
  owned of record by Pequot Fund, (f) 252,006 shares of Series A-3 Preferred
  Stock owned of record by Pequot Partners, (g) 4,741,606 shares of Series A-4
  Preferred Stock owned of record by Pequot Fund, (h) 668,411 shares of Series
  A-4 Preferred Stock owned of record by Pequot Partners, (i) 2,431,267 shares
  of Series A-5 Preferred Stock owned of record by Pequot Fund, (j) 342,728 shares
  of Series A-5 Preferred Stock owned of record by Pequot Partners, (k)
  1,784,918 shares of Series A-6 Preferred Stock owned of record by Pequot
  Fund, (l) 251,615 shares of Series A-6 Preferred Stock owned of record by
  Pequot Partners, (m) 3,289,425 shares of Series A-7 Preferred Stock owned of
  record by Pequot Fund, and (n) 463,702 shares of Series A-7 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, 2007. Accrual of dividends on
  the Series A Preferred Stock commenced on May 21, 2006.
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45

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|                                         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
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|(3)                                      | Represents (a) the maximum
  23,250,091 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) 3,858,170 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) 543,876 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. 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, 2007. Accrual of dividends on the Series A
  Preferred Stock commenced May 21, 2006.                                                                                         
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|(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 60,000 shares
  of our common stock held by Mr. Poch in his personal account plus the
  27,652,137 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.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|                                         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|(7)                                      | The Constellation Group
  consists of (i) Constellation Venture, Constellation Offshore, BSC and CVC
  (collectively, Constellation), (ii) Constellation Ventures Management II,
  LLC, which is the sole general partner of Constellation Venture, the sole
  general partner of Constellation Offshore and the sole managing general
  partner of BSC, (iii) Bear Stearns Asset Management Inc., which is the
  managing member of CVC and the investment adviser to each Constellation fund,
  (iv) Clifford Friedman, who is a member of Constellation Ventures Management
  II, LLC and a senior managing director of Bear Stearns Asset Management Inc.,
  and (v) Bear Stearns Companies Inc., which is the sole managing member of
  Constellation Ventures Management II, LLC and the parent corporation of Bear
  Stearns Asset Management Inc. Constellation Ventures Management II, LLC, Bear
  Stearns Asset Management Inc. and Mr. Friedman share investment and voting
  control of shares beneficially owned by Constellation Venture, Constellation
  Offshore and BSC. Bear Stearns Asset Management Inc. exercises sole
  investment and voting control of the shares beneficially owned by CVC. The
  address for each entity and person in the Constellation Group is 383 Madison
  Avenue, New York, New York 10179.                                                                              
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|(8)                                      | Represents (a) 1,018,292
  shares of Series A-3 Preferred Stock owned of record by Constellation
  Venture, (b) 541,887 shares of Series A-3 Preferred Stock owned of record by
  Constellation Offshore, (c) 454,094 shares of Series A-3 Preferred Stock
  owned of record by BSC, (d) 25,428 shares of Series A-3 Preferred Stock owned
  of record by CVC, (e) 1,453,646 shares of Series A-4 Preferred Stock owned of
  record by Constellation Venture, (f) 773,562 shares of Series A-4 Preferred
  Stock owned of record by Constellation Offshore, (g) 648,234 shares of Series
  A-4 Preferred Stock owned of record by BSC, (h) 36,299 shares of Series A-4
  Preferred Stock owned of record by CVC, (i) 244,389 shares of Series A-5
  Preferred Stock owned of record by Constellation Venture (j) 130,052 shares
  of Series A-5 Preferred Stock owned of record by Constellation Offshore, (k)
  108,981 shares of Series A-5 Preferred Stock owned of record by BSC, (l)
  6,102 shares of Series A-5 Preferred Stock owned of record by CVC, (m)
  260,575 shares of Series A-6 Preferred Stock owned of record by Constellation
  Venture, (n) 138,666 shares of Series A-6 Preferred Stock owned of record by
  Constellation Offshore, (o) 116,200 shares of Series A-6 Preferred Stock
  owned of record by BSC, (p) 6,507 shares of Series A-6 Preferred Stock owned
  of record by CVC, (q) 208,189
|                                         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
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46

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|                                        
|                                         | shares of Series A-7
  Preferred Stock owned of record by Constellation Venture, (r) 110,788 shares
  of Series A-7 Preferred Stock owned of record by Constellation Offshore, (s)
  92,839 shares of Series A-7 Preferred Stock owned of record by BSC, and (t)
  5,199 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,
  2007. Accrual of dividends on the Series A Preferred Stock commenced May 21,
  2006.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
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|(9)                                      | Represents (a) the maximum
  7,012,880 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, 2007. Accrual of dividends on
  the Series A Preferred Stock commenced May 21, 2006.
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|(10)                                     | The address for Mr. Rucker
  is c/o Pappas and Lenzo, 114 Union Wharf, Boston, MA 02109.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|                                         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|(11)                                     | Included 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 109,200 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 4,000 shares of our common stock
  issuable upon exercise of options, which shares are not exercisable within
  the 60 days following the date of this Beneficial Ownership table nor does it
  include 2,000 restricted share units which do not vest within the 60 days
  following the date of this Beneficial Ownership table, or 1,125 shares of our
  common stock held by Mr. Rothmans spouse.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|                                         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|(13)                                     | Includes 108,000 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 85,500 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)                                     | Represents 175,766 shares
  of our common stock issuable upon exercise of options granted to Mr. Stringer
  and 5,000 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
  193,434 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.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|                                         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
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|                                        
|(17)                                     | Does not include 250,000
  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 35,000 units which do not vest
  with 60 days following the date of the Benefit Ownership Table.                                                                                                                                                                                                                                    
|                                         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|(18)                                     | Represents 65,375 shares
  of our common stock issuable upon exercise of options granted to Mr. Kohler,
  which shares are exercisable within the 60 days following the date of this
  Beneficial Ownership Table. Does not include 21,625 shares of our common
  stock issuable upon exercise of options, which shares are not exercisable
  within the 60 days following the date of this Beneficial Ownership Table nor
  does it include the 1,500 restricted stock units which do not vest within the
  60 days following the date of this Beneficial Ownership Table.
|                                         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|(19)                                     | The address for Mr.
  Heitzmann is c/o Pequot Capital Management, Inc., 500 Nyala Farm Road,
  Westport, Connecticut 06880.                                                                                                                                                                                                                                                                                                                                                                                                                                                
|                                         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|(20)                                     | 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. Heitzmann is a
  Senior Vice President. Mr. Heitzmann does not have voting power nor
  investment power with respect to the Series A Preferred Stock beneficially
  owned by Pequot Capital.                                                                                                                                                                                                              
|                                         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|(21)                                     | 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. Heitzmann is a Senior Vice
  President. Mr. Heitzmann does not have voting power nor investment power with
  respect to our common stock beneficially owned by Pequot Capital.                                                                                                                                                                                                                                    
|                                         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|(22)                                     | The address for Mr.
  Wasserman is c/o Bear Stearns Asset Management Inc., 383 Madison Avenue, New
  York, New York 10179.                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|                                         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|(23)                                     | 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.                                                                                                       
|                                         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|(24)                                     | 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.                                                                                                                               
|                                         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|(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.                                                                                                                                                                                                                                                                                                                                                                                                            

Restated Shareholders Agreement

On
August 1, 2005 we entered into an Amended and Restated Shareholders Agreement
(as amended, the Restated Shareholders Agreement) 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.

48

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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 as a
director and Mr. Rothman did not stand for reelection to the Board of Directors
at the Companys 2006 Annual Meeting of Shareholders.

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.

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 (ii) granting the Investors certain
rights of first refusal and tag-along rights with respect to any dispositions
by Messrs. Pavony and Rothman of their shares of common stock.

Item 13. Certain
Relationships and Related Party Transactions and Director Independence

During
fiscal 2007 the Company paid approximately $123,000 in fees to Tectura
Corporation (Tectura) for certain consulting services related to the implementation 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.

During
fiscal 2007 the Company paid approximately $970,000 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 2007, 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.

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 26% of our outstanding common stock
and was formerly the president of our Northeast region. The lease covers
approximately 38,000 square feet, has a monthly rent of approximately $35,000,
terminates in December 2009, and is subject to our option to renew for an
additional five year term.

Mr.
Rucker also operates a lease financing company called Nexl Financial Services,
Inc. (Nexl Financial). From time to time, Nexl Financial has provided lease
financing to certain of our clients. During the year ended March 31, 2007 Nexl
Financial provided equipment leasing to our clients on one occasion for
equipment having a purchase price of approximately of $85,000.

49

---



On
August 1, 2005, we entered into a consulting agreement with Howard Pavony in
connection with the termination of his employment with the Company. This
agreement provides that Mr. Pavony will perform certain consulting services for
us until May 21, 2007 in exchange for an annual consulting fee of $265,000,
plus an automobile allowance and health benefits. Mr. Pavony beneficially owns approximately
6% of our outstanding common stock.

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 7% of our outstanding common stock.

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) 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. 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.

Our
independent directors committee, which consists only of directors who are
neither members of the management nor associated with Pequot or Constellation
(or other similar investors) considers, reviews and provides guidance and
oversight regarding transactions or other situations in which other board
members, who are either members of management or employees of Pequot or
Constellation (or other similar investors), have interests that may be in
addition to, or different from, the interests of the shareholders in general.
Additionally, we have adopted a Code of Business Conduct and Ethics which
mandates that directors, officers and employees of the Company must avoid any
conflicts of interest between their personal interests and the Companys
interests. Other than as set forth above, our Board does not have a specific
policy regarding review of transactions involving directors, management or
other related parties. However, we discourage such transactions and have
historically limited the approval of such transactions to specific and rare
instances with the full disclosure to, and approval of, the disinterested members
of our board.

Item 14. Principal
Accountant Fees and Services

Principal Accounting Fees and Services

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.

|                        |  |      |         |      |   |         | 
|----------------------- |  | ---- | ------- | ---- | - | ------- | 
|                        |  | 2007 |         | 2006 |  
|                        |  |      |         |      |  
|                       
|Audit
  fees(1)         |  | $    | 320,000 |      | $ | 300,000 | 
|Audit-related
  fees(2) |  |      |        |      |   |        | 
|Tax fees(3)             |  |      |        |      |   |        | 
|All other
  fees(4)     |  |      | 3,003   |      |   | 68,200  | 



---

|    |                                                                                                                                                                                                                                                                                                                                                     
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(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.

50

---



|    |                                                                                                                                                                                   
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(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.                                                                                                                        

Audit Committee Pre-Approval Policy

In
addition to retaining Goldstein Golub Kessler LLP to audit our consolidated
financial statements for the years ended March 31, 2007 and 2006, we retained
Goldstein Golub Kessler to provide other auditing and advisory services to us
in our 2007 and 2006 fiscal years. We understand the need for Goldstein Golub
Kessler to maintain objectivity and independence in its audit of our financial
statements. To minimize relationships that could appear to impair the
objectivity of Goldstein Golub Kessler, our audit committee has restricted the
non-audit services that Goldstein Golub Kessler and its aligned company may
provide to us primarily to tax services and merger and acquisition due
diligence and audit services, and has determined that we would obtain even
these non-audit services from Goldstein Golub Kessler and/or its aligned
company only when the services offered by Goldstein Golub Kessler and its
aligned company are more effective or economical than services available from
other service providers.

The
audit committee also has adopted policies and procedures for pre-approving all
non-audit work performed by Goldstein Golub Kessler and any other accounting
firms we may retain. Specifically, the audit committee has pre-approved the use
of Goldstein Golub Kessler and its aligned company for detailed, specific types
of services within the following categories of non-audit services: merger and
acquisition due diligence and audit services; tax services; internal control
reviews; and reviews and procedures that we request Goldstein Golub Kessler 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 Goldstein Golub
Kessler, 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.

51

---



PART IV

Item 15. Exhibits,
Financial Statements Schedules.

(a) Exhibits

Set forth
below is a list of the exhibits to this Annual Report on Form 10-K.

|                 |   |                                                                                                                                                                                                                                                                                                                                                                                                                      
|---------------- | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit
  Number |   | Description                                                                                                                                                                                                                                                                                                                                                                                                          
|                 |   |                                                                                                                                                                                                                                                                                                                                                                                                                      
|                 |   |                                                                                                                                                                                                                                                                                                                                                                                                                      
|2.1              |  | Merger
  Agreement, dated August 16, 2005, among NEXL, Inc., a Massachusetts
  corporation, MTM Technologies (Massachusetts), LLC, a Delaware limited
  liability company, MTM Technologies, Inc., a New York corporation and the
  sole shareholder of Merger Subsidiary, and Clifford L. Rucker*                                                                                                                   
|                 |   |                                                                                                                                                                                                                                                                                                                                                                                                                      
|2.2              |  | Stock
  Purchase Agreement, dated January 27, 2005, by and among Info Systems, Inc.,
  Mark Stellini, Emidio F. Stellini, Jr., Jay Foggy, Richard Roux, Jennifer
  McKenzie and MTM Technologies, Inc.*                                                                                                                                                                                                              
|                 |   |                                                                                                                                                                                                                                                                                                                                                                                                                      
|2.3              |  | 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.*                                                                                                                                                                                                                                      
|                 |   |                                                                                                                                                                                                                                                                                                                                                                                                                      
|2.4              |  | Asset
  Purchase Agreement, dated September 17, 2004 by and among Network Catalyst,
  Inc., William Corbin, Rocci J. Della Maggiore and MTM Technologies, Inc.*                                                                                                                                                                                                                                                      
|                 |   |                                                                                                                                                                                                                                                                                                                                                                                                                      
|3.1              |  | Restated
  Certificate of Incorporation, as amended                                                                                                                                                                                                                                                                                                                                                                  
|                 |   |                                                                                                                                                                                                                                                                                                                                                                                                                      
|3.2              |  | Amended and
  Restated By-Laws*                                                                                                                                                                                                                                                                                                                                                                                      
|                 |   |                                                                                                                                                                                                                                                                                                                                                                                                                      
|4.1              |  | 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*                                                                                             
|                 |   |                                                                                                                                                                                                                                                                                                                                                                                                                      
|4.2              |  | 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*                                                                                           
|                 |   |                                                                                                                                                                                                                                                                                                                                                                                                                      
|4.3              |  | 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*                                
|                 |   |                                                                                                                                                                                                                                                                                                                                                                                                                      
|4.4              |  | 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*                          
|                 |   |                                                                                                                                                                                                                                                                                                                                                                                                                      
|4.5              |  | 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*
|                 |   |                                                                                                                                                                                                                                                                                                                                                                                                                      
|4.6              |  | 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*   
|                 |   |                                                                                                                                                                                                                                                                                                                                                                                                                      
|4.7              |  | 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*    

52

---



|     |   |                                                                                                                                                                                                                                                                                                                                                                                                                 
|---- | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|4.8  |  | 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*
|     |   |                                                                                                                                                                                                                                                                                                                                                                                                                 
|4.9  |  | 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.*                                                                                                                                                                                                                                 
|     |   |                                                                                                                                                                                                                                                                                                                                                                                                                 
|4.10 |  | 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*                                                                                    
|     |   |                                                                                                                                                                                                                                                                                                                                                                                                                 
|4.11 |  | 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, Partners II LLC*                                                           
|     |   |                                                                                                                                                                                                                                                                                                                                                                                                                 
|4.12 |  | 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*                                                           
|     |   |                                                                                                                                                                                                                                                                                                                                                                                                                 
|4.13 |  | Form of the
  Series A-7 Warrant Certificate*                                                                                                                                                                                                                                                                                                                                                                   
|     |   |                                                                                                                                                                                                                                                                                                                                                                                                                 
|4.14 |  | Form of the
  Series A-6 Warrant Certificate*                                                                                                                                                                                                                                                                                                                                                                   
|     |   |                                                                                                                                                                                                                                                                                                                                                                                                                 
|4.15 |  | Form of the
  Series A-5 Warrant Certificate*                                                                                                                                                                                                                                                                                                                                                                   
|     |   |                                                                                                                                                                                                                                                                                                                                                                                                                 
|4.16 |  | Form of the
  Series A-4 Warrant Certificate*                                                                                                                                                                                                                                                                                                                                                                   
|     |   |                                                                                                                                                                                                                                                                                                                                                                                                                 
|4.17 |  | Form of the
  Series A-3 Warrant Certificate*                                                                                                                                                                                                                                                                                                                                                                   
|     |   |                                                                                                                                                                                                                                                                                                                                                                                                                 
|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 |  | Warrant
  Certificate issued to National Electrical Benefit Fund*                                                                                                                                                                                                                                                                                                                                               
|     |   |                                                                                                                                                                                                                                                                                                                                                                                                                 
|4.23 |  | Series A-5
  Voting Agreement, dated November 23, 2005*                                                                                                                                                                                                                                                                                                                                                         
|     |   |                                                                                                                                                                                                                                                                                                                                                                                                                 
|4.24 |  | Columbia
  Voting Agreement, dated November 4, 2005*                                                                                                                                                                                                                                                                                                                                                            
|     |   |                                                                                                                                                                                                                                                                                                                                                                                                                 
|10.1 |  | Waiver
  Letter, dated February 14, 2007, between MTM Technologies, Inc. and the CIT
  Group/Business Credit, Inc.*                                                                                                                                                                                                                                                                                             
|     |   |                                                                                                                                                                                                                                                                                                                                                                                                                 
|10.2 |  | 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*                                                                                                                    
|     |   |                                                                                                                                                                                                                                                                                                                                                                                                                 
|10.3 |  | 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*                          
|     |   |                                                                                                                                                                                                                                                                                                                                                                                                                 
|10.4 |  | Financing
  Agreement among the CIT Group/Business Credit, Inc., the Lenders that are
  parties thereto, MTM Technologies, Inc., and its subsidiaries that are
  parties thereto, dated as of June 8, 2005*                                                                                                                                                                                                     

53

---



|      |   |                                                                                                                                                                                                                                                
|----- | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|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  |  | Micros-to-Mainframes,
  Inc. 2002 Long-Term Performance Plan*                                                                                                                                                                                  
|      |   |                                                                                                                                                                                                                                                
|10.7  |  | Micros-to-Mainframes,
  Inc. 2004 Equity Incentive Plan*                                                                                                                                                                                       
|      |   |                                                                                                                                                                                                                                                
|10.8  |  | Micros-to-Mainframes,
  Inc. 2000 Long-Term Performance Plan*                                                                                                                                                                                  
|      |   |                                                                                                                                                                                                                                                
|10.9  |  | Micros-to-Mainframes,
  Inc. 1998 Stock Option Plan*                                                                                                                                                                                           
|      |   |                                                                                                                                                                                                                                                
|10.10 |  | Micros-to-Mainframes,
  Inc. 1996 Stock Option Plan*                                                                                                                                                                                           
|      |   |                                                                                                                                                                                                                                                
|10.11 |  | Micros-to-Mainframes,
  Inc. 1993 Employee Stock Option Plan*                                                                                                                                                                                  
|      |   |                                                                                                                                                                                                                                                
|10.12 |  | MTM
  Technologies, Inc. Associates Stock Purchase Plan*                                                                                                                                                                                       
|      |   |                                                                                                                                                                                                                                                
|10.13 |  | Consulting
  Agreement, dated April 26, 2007, between MTM Technologies, Inc. and Francis
  J. Alfano and Tory Ventures LLC*                                                                                                                    
|      |   |                                                                                                                                                                                                                                                
|10.14 |  | Agreement
  and General Release, dated April 26, 2007, between MTM Technologies, Inc. and
  Francis J. Alfano*                                                                                                                                 
|      |   |                                                                                                                                                                                                                                                
|10.15 |  | Letter
  Agreement, dated September 28, 2006 between MTM Technologies, Inc. and J.W.
  Braukman, III*                                                                                                                                          
|      |   |                                                                                                                                                                                                                                                
|10.16 |  | Consulting
  Service Agreement, dated September 13, 2006 between MTM Technologies, Inc.
  and Michael El-Hillow*                                                                                                                               
|      |   |                                                                                                                                                                                                                                                
|10.17 |  | Employment
  Agreement, dated August 10, 2006 by and between MTM Technologies, Inc. and
  Steven Stringer*                                                                                                                                     
|      |   |                                                                                                                                                                                                                                                
|10.18 |  | Consulting
  Agreement, dated July 7, 2006 between MTM Technologies, Inc. and Steven
  Rothman*                                                                                                                                                
|      |   |                                                                                                                                                                                                                                                
|10.19 |  | Letter
  Agreement, dated July 7, 2006 between MTM Technologies, Inc. and Steven
  Rothman*                                                                                                                                                    
|      |   |                                                                                                                                                                                                                                                
|10.20 |  | Employment
  Agreement, dated June 28, 2006, between MTM Technologies, Inc. and Francis J.
  Alfano*                                                                                                                                           
|      |   |                                                                                                                                                                                                                                                
|10.21 |  | Severance
  Letter, dated December 12, 2005, between MTM Technologies, Inc. and Michael
  El-Hillow*                                                                                                                                           
|      |   |                                                                                                                                                                                                                                                
|10.22 |  | Waiver and Amendment Letter, dated June 21, 2007, between MTM Technologies, Inc. and the CIT Group/Business Credit, Inc.*                                                                                                                      
|      |   |                                                                                                                                                                                                                                                
|10.23 |  | Waiver and Amendment Letter, dated June 21, 2007, between MTM Technologies, Inc. and the Textron Financial Corporation.*                                                                                                                       
|      |   |                                                                                                                                                                                                                                                
|10.24 |  | Lease
  Agreement, dated August 15, 2005, between 1200 High Ridge Company, LLC and
  MTM Technologies, Inc. *                                                                                                                                  
|      |   |                                                                                                                                                                                                                                                
|10.25 |  | Form of
  Employee Stock Option Agreement*                                                                                                                                                                                                     
|      |   |                                                                                                                                                                                                                                                
|10.26 |  | Form of
  Employee Restricted Stock Unit Agreement*                                                                                                                                                                                            
|      |   |                                                                                                                                                                                                                                                
|10.27 |  | Form of
  Executive Stock Option Agreement*                                                                                                                                                                                                    
|      |   |                                                                                                                                                                                                                                                
|10.28 |  | Form of
  Executive Restricted Stock Unit Agreement*                                                                                                                                                                                           
|      |   |                                                                                                                                                                                                                                                
|14.1  |  | Code of
  Ethics*                                                                                                                                                                                                                              
|      |   |                                                                                                                                                                                                                                                
|21.1  |  | Subsidiaries
  of MTM Technologies, Inc.                                                                                                                                                                                                       
|      |   |                                                                                                                                                                                                                                                
|23.1  |  | Consent from
  Goldstein Golub Kessler LLP                                                                                                                                                                                                     
|      |   |                                                                                                                                                                                                                                                
|31.1  |  | Certification
  pursuant to Exchange Act Rule 13a-14(a) of Steven Stringer                                                                                                                                                                     
|      |   |                                                                                                                                                                                                                                                
|31.2  |  | Certification
  pursuant to Exchange Act Rule 13a-14(a) of J.W. Braukman III                                                                                                                                                                   
|      |   |                                                                                                                                                                                                                                                
|32.1  |  | Certification
  pursuant to Section 1350 of the Sarbanes-Oxley Act of 2002 of Steven Stringer                                                                                                                                                  
|      |   |                                                                                                                                                                                                                                                
|32.2  |  | Certification
  pursuant to Section 1350 of the Sarbanes-Oxley Act of 2002 of J.W. Braukman
  III                                                                                                                                              



---

* Incorporated
by Reference. See Exhibit Index.


54

---



Financial Statements and Schedules

We have
provided in Item 8 to this Annual Report on Form 10-K 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.

55

---



REPORT OF
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

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

We
have audited the accompanying consolidated balance sheets of MTM Technologies,
Inc. and Subsidiaries as of March 31, 2007 and 2006, and the related
consolidated statements of operations, shareholders equity and cash flows for
each of the three years in the period ended March 31, 2007. 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.

We
conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we
plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. 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
audits provide a reasonable basis for our opinion.

In
our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of MTM Technologies,
Inc. and Subsidiaries as of March 31, 2007 and 2006 and the results of their
operations and their cash flows for each of the three years in the period ended
March 31, 2007 in conformity with United States generally accepted accounting
principles.

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.

GOLDSTEIN GOLUB KESSLER LLP
New York, New York

June 27, 2007

F-1

---



MTM TECHNOLOGIES, INC. AND SUBSIDIARIESCONSOLIDATED BALANCE
SHEETS(In
thousands, except share data)

|                                                                                                                                                                                                       |  |             |         |      |   |         |  
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ |  | ----------- | ------- | ---- | - | ------- | -
|                                                                                                                                                                                                       |  | March
  31, |        
|                                                                                                                                                                                                       |  |             |        
|                                                                                                                                                                                                       |  | 2007        |         | 2006 |  
|                                                                                                                                                                                                       |  |             |         |      |  
|ASSETS                                                                                                                                                                                                 |  |             |         |      |   |         |  
|Current assets:                                                                                                                                                                                        |  |             |         |      |   |         |  
|Cash                                                                                                                                                                                                   |  | $           | 4,439   |      | $ | 18,154  |  
|Accounts receivable-trade, net of allowance of
$1,552 and $977,
  respectively                                                                                                                         |  |             | 46,543  |      |   | 48,930  |  
|Inventories                                                                                                                                                                                            |  |             | 2,210   |      |   | 3,762   |  
|Prepaid expenses and other current assets                                                                                                                                                              |  |             | 5,389   |      |   | 4,740   |  
|                                                                                                                                                                                                       |  |             |         |      |   |         |  
|Total current assets                                                                                                                                                                                   |  |             | 58,581  |      |   | 75,586  |  
|Property and equipment, net                                                                                                                                                                            |  |             | 16,005  |      |   | 15,942  |  
|Goodwill                                                                                                                                                                                               |  |             | 69,987  |      |   | 67,134  |  
|Identified intangible assets, net of amortization                                                                                                                                                      |  |             | 3,809   |      |   | 6,574   |  
|Other assets                                                                                                                                                                                           |  |             | 1,079   |      |   | 1,017   |  
|                                                                                                                                                                                                       |  |             |         |      |   |         |  
|Total assets                                                                                                                                                                                           |  | $           | 149,461 |      | $ | 166,253 |  
|                                                                                                                                                                                                       |  |             |         |      |   |         |  
|                                                                                                                                                                                                       |  |             |         |      |   |         |  
|LIABILITIES
  AND SHAREHOLDERS EQUITY                                                                                                                                                                 |  |             |         |      |   |         |  
|                                                                                                                                                                                                       |  |             |         |      |   |         |  
|Current liabilities:                                                                                                                                                                                   |  |             |         |      |   |         |  
|Secured revolving credit facilities                                                                                                                                                                    |  | $           | 10,692  |      | $ | 14,916  |  
|Inventory financing agreements                                                                                                                                                                         |  |             | 11,358  |      |   | 5,641   |  
|Current portion of promissory note                                                                                                                                                                     |  |             |        |      |   | 667     |  
|Accounts payable                                                                                                                                                                                       |  |             | 30,737  |      |   | 28,131  |  
|Accrued expenses                                                                                                                                                                                       |  |             | 11,207  |      |   | 9,596   |  
|Deferred revenue                                                                                                                                                                                       |  |             | 6,477   |      |   | 5,370   |  
|Current portion of capital lease
obligations                                                                                                                                                           |  |             | 548     |      |   | 561     |  
|                                                                                                                                                                                                       |  |             |         |      |   |         |  
|Total current liabilities                                                                                                                                                                              |  |             | 71,019  |      |   | 64,882  |  
|                                                                                                                                                                                                       |  |             |         |      |   |         |  
|Secured promissory note                                                                                                                                                                                |  |             | 23,507  |      |   | 22,947  |  
|Non-current portion of capital lease obligations                                                                                                                                                       |  |             | 425     |      |   | 1,011   |  
|Other long-term liabilities                                                                                                                                                                            |  |             | 5,191   |      |   | 695     |  
|                                                                                                                                                                                                       |  |             |         |      |   |         |  
|Total liabilities                                                                                                                                                                                      |  |             | 100,142 |      |   | 89,535  |  
|                                                                                                                                                                                                       |  |             |         |      |   |         |  
|                                                                                                                                                                                                       |  |             |         |      |   |         |  
|Shareholders equity:                                                                                                                                                                                  |  |             |         |      |   |         |  
|Series A preferred stock, $.001 par value;
33,500,000 and 31,000,000
  shares authorized; issued and outstanding 22,645,766 and 20,024,832 shares at
  March 31, 2007 and March 31, 2006, respectively |  |             | 54,307  |      |   | 49,883  |  
|Common stock, $.001 par value; 80,000,000 shares
authorized; issued
  and outstanding 11,920,919 and 11,490,537 shares, respectively                                                                   |  |             | 12      |      |   | 12      |  
|Additional paid-in capital                                                                                                                                                                             |  |             | 54,315  |      |   | 54,121  |  
|Accumulated deficit                                                                                                                                                                                    |  |             | (59,315 | )    |   | (27,298 | )
|                                                                                                                                                                                                       |  |             |         |      |   |         |  
|Total shareholders equity                                                                                                                                                                             |  |             | 49,319  |      |   | 76,718  |  
|                                                                                                                                                                                                       |  |             |         |      |   |         |  
|Total liabilities and shareholders
equity                                                                                                                                                             |  | $           | 149,461 |      | $ | 166,253 |  
|                                                                                                                                                                                                       |  |             |         |      |   |         |  

See Notes to Consolidated Financial Statements

F-2

---



MTM TECHNOLOGIES, INC. AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF OPERATIONS(In
thousands, except per share data)

|                                                      |  |                        |         |      |   |         |   |   |         |  
|----------------------------------------------------- |  | ---------------------- | ------- | ---- | - | ------- | - | - | ------- | -
|                                                      |  | Year
  Ended March 31, |        
|                                                      |  |                        |        
|                                                      |  | 2007                   |         | 2006 |   | 2005    |  
|                                                      |  |                        |         |      |   |         |  
|                                                      |  |                        |        
|Net revenues:                                         |  |                        |         |      |   |         |   |   |         |  
|Products                                              |  | $                      | 206,917 |      | $ | 175,851 |   | $ | 73,161  |  
|Services                                              |  |                        | 68,061  |      |   | 60,868  |   |   | 28,033  |  
|                                                      |  |                        |         |      |   |         |   |   |         |  
|Total net revenues                                    |  |                        | 274,978 |      |   | 236,719 |   |   | 101,194 |  
|                                                      |  |                        |         |      |   |         |   |   |         |  
|Costs and expenses:                                   |  |                        |         |      |   |         |   |   |         |  
|Cost of products sold                                 |  |                        | 176,284 |      |   | 150,783 |   |   | 64,246  |  
|Cost of services provided                             |  |                        | 43,507  |      |   | 36,580  |   |   | 18,160  |  
|Selling, general and administrative
expenses          |  |                        | 75,167  |      |   | 52,164  |   |   | 22,708  |  
|Restructuring                                         |  |                        | 6,056   |      |   |        |   |   |        |  
|                                                      |  |                        |         |      |   |         |   |   |         |  
|                                                      |  |                        |         |      |   |         |   |   |         |  
|Total costs and expenses                              |  |                        | 301,014 |      |   | 239,527 |   |   | 105,114 |  
|                                                      |  |                        |         |      |   |         |   |   |         |  
|Loss from operations                                  |  |                        | (26,036 | )    |   | (2,808  | ) |   | (3,920  | )
|                                                      |  |                        |         |      |   |         |   |   |         |  
|Other income(expense):                                |  |                        |         |      |   |         |   |   |         |  
|Interest expense, net of interest income              |  |                        | (5,108  | )    |   | (5,425  | ) |   | (4,686  | )
|Other expenses                                        |  |                        | (446    | )    |   |        |   |   |        |  
|                                                      |  |                        |         |      |   |         |   |   |         |  
|Loss before income tax provision                      |  |                        | (31,590 | )    |   | (8,233  | ) |   | (8,606  | )
|                                                      |  |                        |         |      |   |         |   |   |         |  
|Provision for income taxes                            |  |                        | 427     |      |   | 241     |   |   | 13      |  
|                                                      |  |                        |         |      |   |         |   |   |         |  
|                                                      |  |                        |         |      |   |         |   |   |         |  
|Net loss                                              |  | $                      | (32,017 | )    | $ | (8,474  | ) | $ | (8,619  | )
|                                                      |  |                        |         |      |   |         |   |   |         |  
|                                                      |  |                        |         |      |   |         |   |   |         |  
|Preferred stock dividend                              |  |                        | (3,168  | )    |   |        |   |   |        |  
|                                                      |  |                        |         |      |   |         |   |   |         |  
|                                                      |  |                        |         |      |   |         |   |   |         |  
|Net loss available to common shareholders             |  | $                      | (35,185 | )    | $ | (8,474  | ) | $ | (8,619  | )
|                                                      |  |                        |         |      |   |         |   |   |         |  
|Net loss per common share:                            |  |                        |         |      |   |         |   |   |         |  
|Basic and Diluted                                     |  | $                      | (3.00   | )    | $ | (0.99   | ) | $ | (1.51   | )
|                                                      |  |                        |         |      |   |         |   |   |         |  
|Weighted average number of common shares outstanding: |  |                        |         |      |   |         |   |   |         |  
|Basic and Diluted                                     |  |                        | 11,741  |      |   | 8,542   |   |   | 5,714   |  
|                                                      |  |                        |         |      |   |         |   |   |         |  

See Notes to Consolidated Financial Statements

F-3

---



MTM TECHNOLOGIES, INC. AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF
SHAREHOLDERS EQUITY(In
thousands)

|                                                                                 |  |                   |        |                |   |                                |  |                    |        |   |   |       |  |   |        |   |   |         |   |   |         |  
|-------------------------------------------------------------------------------- |  | ----------------- | ------ | -------------- | - | ------------------------------ |  | ------------------ | ------ | - | - | ----- |  | - | ------ | - | - | ------- | - | - | ------- | -
|                                                                                 |  | Preferred
  Stock |        | Common
  Stock |   | Additional
  Paid-in
  Capital |  | AccumulatedDeficit |        |   |  
|                                                                                 |  |                   |        |                |   |                                |  |                    |       
|                                                                                 |  | Number ofShares   |        | Amount         |   | Number
  of
  Shares           |  | Amount             |        |   |   | Total | 
|                                                                                 |  |                   |        |                |   |                                |  |                    |        |   |   |       |  |   |       
|Balance at March 31, 2004                                                        |  |                   |        |                |   |                                |  |                    | 4,723  |   | $ | 5     |  | $ | 15,364 |   | $ | (10,205 | ) | $ | 5,164   |  
|Issuance of preferred stock                                                      |  |                   | 9,102  |                | $ | 16,997                         |  |                    |        |   |   |       |  |   | 6,776  |   |   |         |   |   | 23,773  |  
|Issuance of common stock to employees pursuant to exercise of
options            |  |                   |        |                |   |                                |  |                    | 59     |   |   |      |  |   | 87     |   |   |         |   |   | 87      |  
|Issuance of common stock in connection with acquisitions                         |  |                   |        |                |   |                                |  |                    | 2,567  |   |   | 3     |  |   | 7,115  |   |   |         |   |   | 7,118   |  
|Stock-based compensation                                                         |  |                   |        |                |   |                                |  |                    |        |   |   |       |  |   | 10     |   |   |         |   |   | 10      |  
|Issuance of common stock for consulting services                                 |  |                   |        |                |   |                                |  |                    | 27     |   |   |      |  |   | 45     |   |   |         |   |   | 45      |  
|Net loss                                                                         |  |                   |        |                |   |                                |  |                    |        |   |   |       |  |   |        |   |   | (8,619  | ) |   | (8,619  | )
|                                                                                 |  |                   |        |                |   |                                |  |                    |        |   |   |       |  |   |        |   |   |         |   |   |         |  
|Balance at March 31, 2005                                                        |  |                   | 9,102  |                |   | 16,997                         |  |                    | 7,376  |   |   | 8     |  |   | 29,397 |   |   | (18,824 | ) |   | 27,578  |  
|Issuance of preferred stock                                                      |  |                   | 5,847  |                |   | 16,387                         |  |                    |        |   |   |       |  |   | 2,182  |   |   |         |   |   | 18,569  |  
|Series A notes converted to preferred stock                                      |  |                   | 5,076  |                |   | 16,499                         |  |                    |        |   |   |       |  |   |        |   |   |         |   |   | 16,499  |  
|Warrant and future rights liability converted to equity                          |  |                   |        |                |   |                                |  |                    |        |   |   |       |  |   | 5,043  |   |   |         |   |   | 5,043   |  
|Warrants issued with secured promissory note                                     |  |                   |        |                |   |                                |  |                    |        |   |   |       |  |   | 2,240  |   |   |         |   |   | 2,240   |  
|Issuance of common stock to employees pursuant to exercise of
options            |  |                   |        |                |   |                                |  |                    | 121    |   |   |      |  |   | 183    |   |   |         |   |   | 183     |  
|Issuance of common stock in connection with acquisitions                         |  |                   |        |                |   |                                |  |                    | 3,958  |   |   | 4     |  |   | 14,843 |   |   |         |   |   | 14,847  |  
|Stock-based compensation                                                         |  |                   |        |                |   |                                |  |                    |        |   |   |       |  |   | 139    |   |   |         |   |   | 139     |  
|Issuance of common stock to Board                                                |  |                   |        |                |   |                                |  |                    | 36     |   |   |      |  |   | 94     |   |   |         |   |   | 94      |  
|Net loss                                                                         |  |                   |        |                |   |                                |  |                    |        |   |   |       |  |   |        |   |   | (8,474  | ) |   | (8,474  | )
|                                                                                 |  |                   |        |                |   |                                |  |                    |        |   |   |       |  |   |        |   |   |         |   |   |         |  
|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                                                         |  |                   |        |                |   |                                |  |                    |        |   |   |       |  |   | 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  |  
|                                                                                 |  |                   |        |                |   |                                |  |                    |        |   |   |       |  |   |        |   |   |         |   |   |         |  

See Notes to Consolidated Financial Statements

F-4

---



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

|                                                                                            |  |                      |         |      |   |         |   |   |         |  
|------------------------------------------------------------------------------------------- |  | -------------------- | ------- | ---- | - | ------- | - | - | ------- | -
|                                                                                            |  | Year Ended March 31, |        
|                                                                                            |  |                      |        
|                                                                                            |  | 2007                 |         | 2006 |   | 2005    |  
|                                                                                            |  |                      |         |      |   |         |  
|OPERATING ACTIVITIES:                                                                       |  |                      |         |      |   |         |   |   |         |  
|Net loss                                                                                    |  | $                    | (32,017 | )    | $ | (8,474  | ) | $ | (8,619  | )
|Adjustments to reconcile net loss to net cash used
in operating
  activities:               |  |                      |         |      |   |         |   |   |         |  
|Provision for uncollectible accounts                                                        |  |                      | 828     |      |   | (222    | ) |   |        |  
|Depreciation                                                                                |  |                      | 6,596   |      |   | 3,573   |   |   | 1,731   |  
|Amortization of intangibles                                                                 |  |                      | 2,765   |      |   | 2,474   |   |   | 827     |  
|Amortization of debt discount                                                               |  |                      | 560     |      |   | 3,102   |   |   | 3,882   |  
|Non-cash interest on secured subordinated
promissory note                                   |  |                      | 2,120   |      |   | 263     |   |   |        |  
|Amortization of debt issuance costs                                                         |  |                      | 534     |      |   |        |   |   |        |  
|Stock-based compensation                                                                    |  |                      | 2,218   |      |   | 233     |   |   | 11      |  
|Non-cash restructuring costs                                                                |  |                      | 450     |      |   |        |   |   |        |  
|Gain on fair value of warrants                                                              |  |                      |        |      |   | (1,292  | ) |   | (462    | )
|Changes in operating assets and liabilities net of
effects of
  acquisitions:               |  |                      |         |      |   |         |   |   |         |  
|(Increase)decrease in assets:                                                               |  |                      |         |      |   |         |   |   |         |  
|Accounts receivable                                                                         |  |                      | 1,557   |      |   | (3,283  | ) |   | 923     |  
|Inventories                                                                                 |  |                      | 1,252   |      |   | (1,238  | ) |   | (431    | )
|Prepaid expenses and other current
assets                                                   |  |                      | (1,197  | )    |   | (551    | ) |   | (1,038  | )
|Other assets                                                                                |  |                      | (55     | )    |   | (630    | ) |   | 498     |  
|Increase(decrease) in liabilities:                                                          |  |                      |         |      |   |         |   |   |         |  
|Accounts payable and accrued expenses                                                       |  |                      | 3,084   |      |   | 293     |   |   | (8,316  | )
|Deferred revenue                                                                            |  |                      | 1,005   |      |   | (445    | ) |   | (1,422  | )
|                                                                                            |  |                      |         |      |   |         |   |   |         |  
|Net
  cash used in operating activities                                                     |  |                      | (10,300 | )    |   | (6,197  | ) |   | (12,416 | )
|                                                                                            |  |                      |         |      |   |         |   |   |         |  
|INVESTING ACTIVITIES:                                                                       |  |                      |         |      |   |         |   |   |         |  
|Acquisition of businesses, net of cash acquired of
$35                                      |  |                      | (520    | )    |   | (14,044 | ) |   | (27,857 | )
|Additions to property and equipment                                                         |  |                      | (6,644  | )    |   | (9,636  | ) |   | (1,624  | )
|Adjustment to purchase price related to acquisition
of businesses                           |  |                      |        |      |   | (2,942  | ) |   |        |  
|Decrease(Increase) in restricted cash                                                       |  |                      |        |      |   | 1,000   |   |   | (1,000  | )
|                                                                                            |  |                      |         |      |   |         |   |   |         |  
|Net
  cash used in investing activities                                                     |  |                      | (7,164  | )    |   | (25,622 | ) |   | (30,481 | )
|                                                                                            |  |                      |         |      |   |         |   |   |         |  
|FINANCING ACTIVITIES:                                                                       |  |                      |         |      |   |         |   |   |         |  
|(Repayment) borrowing on secured revolving credit
facility                                  |  |                      | (4,223  | )    |   | 540     |   |   | 7,695   |  
|Borrowing (repayment) on inventory
financing                                                |  |                      | 5,717   |      |   | 2,712   |   |   | (526    | )
|Proceeds from issuance of preferred stock,
net                                              |  |                      | 3,000   |      |   | 18,569  |   |   | 23,818  |  
|Proceeds from issuance of secured promissory
note                                           |  |                      |        |      |   | 24,319  |   |   |        |  
|Proceeds from issuance of subordinated promissory
notes                                     |  |                      |        |      |   |        |   |   | 16,000  |  
|Repurchase of common stock                                                                  |  |                      | (362    | )    |   |        |   |   |        |  
|Common stock issued from stock options
exercised                                            |  |                      | 387     |      |   | 183     |   |   | 87      |  
|Common stock issued under employee stock purchase
plan                                      |  |                      | 162     |      |   |        |   |   |        |  
|Principal payments on capital lease
obligations                                             |  |                      | (599    | )    |   | (318    | ) |   | (87     | )
|Principal payments on promissory note                                                       |  |                      | (333    | )    |   | (42     | ) |   | (450    | )
|                                                                                            |  |                      |         |      |   |         |   |   |         |  
|Net
  cash provided by financing activities                                                 |  |                      | 3,749   |      |   | 45,963  |   |   | 46,537  |  
|                                                                                            |  |                      |         |      |   |         |   |   |         |  
|Net (decrease) increase in cash                                                             |  |                      | (13,715 | )    |   | 14,144  |   |   | 3,640   |  
|Cash at beginning of period                                                                 |  |                      | 18,154  |      |   | 4,010   |   |   | 370     |  
|                                                                                            |  |                      |         |      |   |         |   |   |         |  
|Cash at end of period                                                                       |  | $                    | 4,439   |      | $ | 18,154  |   | $ | 4,010   |  
|                                                                                            |  |                      |         |      |   |         |   |   |         |  
|Supplemental disclosures of cash flow information:                                          |  |                      |         |      |   |         |   |   |         |  
|Cash paid during the year for:                                                              |  |                      |         |      |   |         |   |   |         |  
|Interest                                                                                    |  | $                    | 2,358   |      | $ | 1,443   |   | $ | 568     |  
|Income taxes                                                                                |  | $                    | 288     |      | $ | 18      |   | $ |        |  
|Supplemental disclosure of non-cash financing activities:                                   |  |                      |         |      |   |         |   |   |         |  
|Exchange of convertible subordinated promissory
notes for Series A
  Preferred Stock        |  | $                    |        |      | $ | 16,499  |   | $ |        |  
|Series A Preferred Stock dividend accrued                                                   |  | $                    | 1,354   |      | $ |        |   | $ |        |  
|Reclassification of warrant and future rights
liability to additional
  paid-in capital     |  | $                    |        |      | $ | 5,043   |   | $ |        |  
|Equipment acquired by capital lease                                                         |  | $                    |        |      | $ | 1,440   |   | $ |        |  
|Supplemental disclosure of non-cash investing activities:                                   |  |                      |         |      |   |         |   |   |         |  
|Adjustment to purchase price of subsidiary
consisting of common stock                       |  | $                    |        |      | $ | 4,107   |   | $ |        |  
|Common stock issued for promissory note
payment                                             |  | $                    | 335     |      | $ |        |   | $ |        |  
|Common stock issued in acquisition                                                          |  | $                    | 232     |      | $ | 10,740  |   | $ | 7,118   |  
|Non-cash adjustments to goodwill                                                            |  | $                    | 2,333   |      | $ | 15,958  |   | $ | 2,166   |  
|Additional liability incurred to settle contingent
consideration
  relative to acquisitions |  | $                    | 1,385   |      | $ |        |   | $ |        |  

See Notes to Consolidated Financial
Statements

F-5

---



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

Note 1. Summary of Significant Accounting
Policies

Principles 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 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 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
three largest suppliers accounted for 26%, 14% and 11% of all product sales for
the year ended March 31, 2007. The sales of products from the Companys two
largest suppliers accounted for 16% and 15% of all product sales for the year
ended March 31, 2006. The sales of products from the Companys four largest
suppliers accounted for 27%, 14%, 13% and 12% of all product sales for the year
ended March 31, 2005. 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.

Liquidity

The Company
sustained net losses during the years ended March 31, 2007, 2006, and 2005 and
had a net working capital deficit of $12.4 million for the year ended March 31,
2007. Net of the Companys secured credit facilities, working capital was $9.6
million. The Company has made a concerted effort in the current fiscal year to
improve its working capital position. These have included issuing additional
shares of preferred stock, a $6.0 million restructuring, other cost control
initiatives, and the discontinuation of certain sales of low margin products.
The Company anticipates that its available cash including the proceeds received
from the issuance of preferred stock in the first quarter of fiscal 2008
together with its credit facilities, will provide the Company with the capital
necessary to meet its obligations as they come due in the foreseeable future.

Estimates

The
preparation of financial statements in conformity with accounting principles
generally accepted in the United States of America requires management to make
estimates and assumptions that affect the amount 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 period. Actual results could differ from those estimates.

Financial Statement
Reclassification

Certain prior
years balances have been reclassified to conform to the March 31, 2007
presentation.

F-6

---



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

Accounts Receivable

Accounts
receivable are 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.

Information
relating to the allowance for doubtful accounts is as follows (in thousands):

|                       |  |                       |   |               |  |                  |  |               |     |  |  |  |   |     |  |  |  |   |       |  | 
|---------------------- |  | --------------------- | - | ------------- |  | ---------------- |  | ------------- | --- |  |  |  | - | --- |  |  |  | - | ----- |  | 
|                       |  | Beginning
  of
  Year |   | Additions (a) |  | Deductions
  (b) |  | End of
  Year |    
|                       |  |                       |   |               |  |                  |  |               |    
|                       |  |                       |   |               |  |                  |  |               |    
|Year ended
  March 31, |  |                       |   |               |  |                  |  |               |     |  |  |  |   |     |  |  |  |   |       |  | 
|2005                   |  |                       | $ | 233           |  |                  |  | $             | 615 |  |  |  | $ | 107 |  |  |  | $ | 741   |  | 
|2006                   |  |                       |   | 741           |  |                  |  |               | 788 |  |  |  |   | 552 |  |  |  |   | 977   |  | 
|2007                   |  |                       | $ | 977           |  |                  |  | $             | 828 |  |  |  | $ | 253 |  |  |  | $ | 1,552 |  | 

|    |                                                                                                       
|--- | ------------------------------------------------------------------------------------------------------
|   
|(a) | Includes bad
  debt provisions and allowance assumed through acquisitions.                            
|    |                                                                                                       
|(b) | Includes
  write-offs for uncollectible accounts receivables and net changes to
  allowance estimates.

Inventories

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

Fair Value of
Financial Instruments

The 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 approximates fair
value because of their short term nature. The carrying value of short-term
financing arrangements and long-term debt obligations approximates fair value
because interest rates over the relative term of these instruments approximate
current market interest rates.

Concentrations of
Credit Risk

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. The Company did not have any
customer at March 31, 2007 or 2006 which accounted for more than 10% of its
total accounts receivable. At March 31, 2007 the combined top two customer
balances accounted for approximately 12% 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.

Property and
Equipment

Property and
equipment, 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. Leasehold improvements are
amortized over the 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.

F-7

---



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

The Company
incurred approximately $6.6 million, $3.6 million and $1.7 million of
depreciation and amortization expense for the years ended March 31, 2007, 2006
and 2005, respectively.

The following
is a summary of property and equipment held by the Company at:

|                                                  |  |             |        |      |   |        | 
|------------------------------------------------- |  | ----------- | ------ | ---- | - | ------ | 
|                                                  |  | March
  31, |       
|                                                  |  |             |       
|(in thousands)                                    |  | 2007        |        | 2006 |  
|                                                  |  |             |        |      |  
|                                                  |  |             |        |      |   |        | 
|Furniture,
  fixtures and office equipment        |  | $           | 15,832 |      | $ | 14,069 | 
|Software and
  software development costs         |  |             | 16,366 |      |   | 12,425 | 
|Capitalized
  lease equipment                     |  |             | 1,650  |      |   | 2,036  | 
|Leasehold
  Improvements                          |  |             | 2,410  |      |   | 1,921  | 
|Vehicles                                          |  |             | 790    |      |   | 247    | 
|                                                  |  |             |        |      |   |        | 
|                                                  |  |             | 37,048 |      |   | 30,698 | 
|Less:
  accumulated depreciation and amortization |  |             | 21,043 |      |   | 14,756 | 
|                                                  |  |             |        |      |   |        | 
|Property and
  equipment, net                     |  | $           | 16,005 |      | $ | 15,942 | 
|                                                  |  |             |        |      |   |        | 

Software Development
Costs

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.

Goodwill

Goodwill is
tested for impairment on an annual basis and more frequently if facts and
circumstances indicate goodwill carrying values exceed estimated fair values.
Because the Company has fully integrated its acquisitions, it has determined
that it has only one reporting unit for purposes of testing for goodwill
impairment. Based on the impairment tests performed, there was no impairment of
goodwill in fiscal 2007, 2006 and 2005.

The change in
goodwill during the year ended March 31, 2006 and 2007, respectively was as
follows (in thousands):

|                            |  |  |        | 
|--------------------------- |  |  | ------ | 
|Balance at March
  31, 2005 |  |  | 34,190 | 
|Purchase of Nexl            |  |  | 24,759 | 
|Earn out payments:          |  |  |        | 
|Network Catalyst            |  |  | 1,197  | 
|Vector                      |  |  | 3,608  | 
|Infosys                     |  |  | 1,692  | 
|Other                       |  |  | 1,688  | 
|                            |  |  |        | 
|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 | 
|                            |  |  |        | 

F-8

---



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

Intangible Assets

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

Intangible
assets consist of the following at:

|                                    |  |             |       |      |   |       | 
|----------------------------------- |  | ----------- | ----- | ---- | - | ----- | 
|                                    |  | March
  31, |      
|                                    |  |             |      
|(in thousands)                      |  | 2007        |       | 2006 |  
|                                    |  |             |       |      |  
|                                    |  |             |       |      |  
|Client
  relationships              |  | $           | 8,915 |      | $ | 8,915 | 
|Know-how                            |  |             | 710   |      |   | 710   | 
|Non-compete
  agreements            |  |             | 250   |      |   | 250   | 
|                                    |  |             |       |      |   |       | 
|                                    |  |             | 9,875 |      |   | 9,875 | 
|Less:
  accumulated amortization    |  |             | 6,066 |      |   | 3,301 | 
|                                    |  |             |       |      |   |       | 
|Identified
  Intangible assets, net |  | $           | 3,809 |      | $ | 6,574 | 
|                                    |  |             |       |      |   |       | 

Amortization
expense amounted to approximately $2.8 million, $2.5 million, and $0.8 million
for the years ended March 31, 2007, 2006 and 2005, respectively. Estimated
amortization expense for each of the next five years is as follows (in
thousands):

|                      |  |   |       | 
|--------------------- |  | - | ----- | 
|Year ending March 31, |  |   |       | 
|                      |  |   |       | 
|2008                  |  | $ | 2,026 | 
|2009                  |  |   | 939   | 
|2010                  |  |   | 506   | 
|2011                  |  |   | 338   | 
|2012                  |  |   |      | 

Impairment of
Long-Lived Assets

The Company
reviews long-lived assets 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 three fiscal
years ended March 31, 2007, 2006 and 2005, no such impairment existed.

Revenue Recognition

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.

The Company
periodically receives discretionary cost reimbursements from suppliers. These
reimbursements are accounted for as reductions to the cost of sales products.

Shipping and
handling costs are included in the cost of sales.

F-9

---



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

Accounting for
Stock-Based Compensation

The 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).

Prior to April
1, 2006, the Company accounted for stock-based compensation under the
provisions of Accounting Principles Board Opinion No. 25, Accounting for Stock Issued to
Employees, and related interpretations (APB Opinion No. 25). APB
Opinion No. 25 required the use of the intrinsic value method, which measured
compensation cost as the excess, if any, of the quoted market price of the
stock at the measurement date over the amount an employee must pay to acquire
the stock. As the stock options granted under these plans typically had an
exercise price equal to the market value of the underlying common stock on the
date of grant, no compensation cost related to stock options was reflected in
the Companys results of operations. As permitted by SFAS No. 123, Accounting
for Stock-Based Compensation (SFAS No. 123), stock-based
compensation was included as a pro forma disclosure in the notes to the
consolidated financial statements.

The Company
adopted Statement of Financial Accounting Standards No. 123 (revised 2004), Share-Based
Payment (SFAS No. 123(R)) effective April 1, 2006 (the adoption
date) using the modified prospective transition method. Under this transition
method, stock-based compensation cost recognized in the Companys statement of
operations includes: (a) the estimated expense for stock options and RSUs
granted prior to, but not fully vested as of the adoption date, based on the
grant-date fair value estimated in accordance with the original provisions of
SFAS No. 123 and (b) the estimated expense for stock options and RSUs granted
subsequent to the adoption date, based on the grant-date fair value estimated
in accordance with the provisions of SFAS No. 123(R). The estimated fair value
of the Companys stock-based awards, less expected forfeitures, is amortized on
a straight-line basis over the awards requisite service period, typically the
vesting period. In determining whether an award is expected to vest, we
generally use an estimated forfeiture rate based on historical forfeiture
rates. The estimated forfeiture rate is updated for actual forfeitures
quarterly. Under the modified prospective transition method, results for prior
periods are not restated. 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.

Total
stock-based compensation expense recognized in the consolidated statement of
operations for fiscal 2007 was $2.2 million. Included in this amount were
expenses related to RSUs of approximately $0.3 million, which would have been
included in the Companys results of operations under the provisions of APB
Opinion No. 25. The expense related to RSUs is therefore excluded from the
impact of the adoption of SFAS No. 123(R). As a result of adopting SFAS No.
123(R), the Companys loss before income taxes for the year ended March 31,
2007 was increased by $1.9 million. No income tax benefit has been recognized
in the consolidated statement of operations related to stock-based compensation
expense, due to the Company fully reserving against the related deferred tax
assets. The implementation of SFAS No. 123(R) reduced basic and diluted
earnings per share by $0.16 for the year ended March 31, 2007. The
implementation of SFAS No. 123(R) did not have a significant impact on cash flows
from operations during the year ended March 31, 2007.

The Company estimates the fair
value of each option award on the date of grant using the Black-Scholes option
pricing model (Black-Scholes) based upon certain assumptions. Black-Scholes
was developed for use in estimating the fair value of publicly traded options
which have no vesting restrictions and are fully transferable. In addition,
Black-Scholes requires the input of highly subjective assumptions including the
expected stock price volatility. In managements opinion, the Companys
employee stock options have characteristics significantly different from those
of publicly traded options, and changes in the subjective input assumptions can
materially affect the fair value estimate.

F-10

---



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

For SFAS No. 123(R)
purposes, the fair value of each stock option grant was estimated on the date
of grant using Black-Scholes with the following weighted-average assumptions:

|                                                            |  |                  |   | 
|----------------------------------------------------------- |  | ---------------- | - | 
|                                                            |  | Year
  Ended     |  
|                                                            |  |                  |  
|                                                            |  | March
  31, 2007 |  
|                                                            |  |                  |  
|Expected term                                               |  | 5
  years        |   | 
|Expected stock price
  volatility                           |  | 76.1             | % | 
|Risk-free interest rate                                     |  | 4.8              | % | 
|Expected dividend yield                                     |  | 0                | % | 
|Weighted-average
  grant-date fair value of options granted |  | $1.57            |   | 

The expected term is based
on historical exercise patterns and post-vesting termination behavior, the
risk-free interest rate is based on United States Treasury instruments and
volatility is calculated based on historical volatility. We do not currently
pay cash dividends on our common stock and do not anticipate doing so in the
foreseeable future. Accordingly, our expected dividend yield is zero.

The modified prospective
transition method of SFAS No. 123(R) requires the presentation of pro forma
information for periods presented prior to the adoption of SFAS No. 123(R)
regarding net loss and loss per share as if the Company had accounted for its
stock plans under the fair value method. Had compensation expense for the
Companys stock plans been determined consistent with the fair value-based
method prescribed by the original provisions of SFAS No. 123, as amended
by SFAS No. 148 Accounting for Stock-Based Compensation  Transition and Disclosure,
the Companys net loss and loss per common share would have been the pro forma
amounts indicated below:

|                                                                                         |  |                        |         |      |   |         |  
|---------------------------------------------------------------------------------------- |  | ---------------------- | ------- | ---- | - | ------- | -
|                                                                                         |  | Year
  Ended March 31, |        
|                                                                                         |  |                        |        
|(in thousands, except per share data)                                                    |  | 2006                   |         | 2005 |  
|                                                                                         |  |                        |         |      |  
|                                                                                         |  |                        |         |      |   |         |  
|Net loss  as reported                                                                   |  | $                      | (8,474  | )    | $ | (8,619  | )
|Deduct: Total stock-based
  compensation cost using the fair value method for all awards |  |                        | (2,944  | )    |   | (1,564  | )
|                                                                                         |  |                        |         |      |   |         |  
|Net loss  pro forma                                                                     |  | $                      | (11,418 | )    | $ | (10,183 | )
|                                                                                         |  |                        |         |      |   |         |  
|                                                                                         |  |                        |         |      |   |         |  
|Basic and diluted net loss
  per common share  as reported                              |  | $                      | (0.99   | )    | $ | (1.51   | )
|                                                                                         |  |                        |         |      |   |         |  
|Basic and diluted net loss
  per common share  pro forma                                |  | $                      | (1.34   | )    | $ | (1.78   | )
|                                                                                         |  |                        |         |      |   |         |  

For pro forma purposes, the fair value of
stock awards was estimated at the date of grant using Black-Scholes with the
following weighted-average assumptions for stock options:

|                                                            |  |                        |   |      |            |   | 
|----------------------------------------------------------- |  | ---------------------- | - | ---- | ---------- | - | 
|                                                            |  | Year
  Ended March 31, |  
|                                                            |  |                        |  
|                                                            |  | 2006                   |   | 2005 |           
|                                                            |  |                        |   |      |           
|Expected term                                               |  | 10
  years             |   |      | 10
  years |   | 
|Expected stock price
  volatility                           |  | 86.6                   | % |      | 94.4       | % | 
|Risk-free interest rate                                     |  | 4.5                    | % |      | 4.4        | % | 
|Expected dividend yield                                     |  | 0                      | % |      | 0          | % | 
|Weighted-average
  grant-date fair value of options granted |  | $3.58                  |   |      | $2.71      |   | 

Per Share Data

Basic net loss per share is
calculated using the weighted-average number of common shares outstanding
during the period. 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
24.1 million, 26.9 million and 23 million common shares as of March 31, 2007,
2006 and 2005, 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.

F-11

---



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

Income Taxes

Deferred income taxes are
provided, using the asset and liability method, for temporary differences
between financial and tax reporting purposes which arise principally from the
deduction related to the allowances for doubtful accounts, certain capitalized
software costs, the basis of inventory and differences arising from book versus
tax depreciation methods.

Recently Issued Accounting Pronouncements

In July 2006, the
Financial Accounting Standards Board (FASB) issued 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. The provisions of FIN 48 are effective for fiscal years
beginning after December 15, 2006. The Company does not expect FIN 48 will
have a material effect on our consolidated financial condition or results of
operations.

In 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. The Company is currently evaluating whether adoption of SFAS No. 157 will
have an impact on our financial statements.

In September 2006, the SEC
issued Staff Accounting Bulletin No. 108, Considering the Effects of Prior Year Misstatements
when Quantifying Misstatements in Current Year Financial Statements
(SAB 108). SAB 108 addresses the diversity in practice in quantifying
financial statement misstatements and establishes an approach that requires
quantification of financial statement misstatements based on the effects of the
misstatements on each of the Companys financial statements and the related
disclosures. SAB 108 is effective for fiscal years ending after November 15,
2006. The application of SAB 108 did not have any impact on the Companys
consolidated balance sheets, statements of operations, or statements of equity
for fiscal 2007.

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. We do not believe the adoption of
this standard will have a material impact on the Companys consolidated
financial statements. This standard will become effective for us in the first
quarter of fiscal 2008.

F-12

---



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

Note 2. Restructuring and Other Charges

In fiscal 2007, the Company
implemented a cost reduction plan (the Restructuring Plan) designed to
improve operating income through reductions of selling, general and
administrative expenses (S,G&A) and enhancements in gross margin. The
Restructuring Plan was approved by senior management and included significant
headcount reductions associated with the final stages of integrating the
acquired companies, facility consolidations, as well as other cost reductions.
As part of the Restructuring Plan, the Company also restructured and consolidated
other job functions within all regions. This plan resulted in restructuring
charges for the year ended March 31, 2007 totaling $6.0 million; $3.1
million primarily related to a reduction in force of senior and middle
management, another $1.4 million related to employee terminations, a charge of
$0.8 million related to the closure and underutilization of certain facilities
and the remaining $0.7 million was for the write-off of other non-cash items.

The payment
activities and adjustments in fiscal 2007 and the remaining liability at March
31, 2007 related to the Restructuring Plan are summarized in the table below.

|                                |  |                                               |   |                |   |              |  |                     |        |                                             |   |      |   |   |       | 
|------------------------------- |  | --------------------------------------------- | - | -------------- | - | ------------ |  | ------------------- | ------ | ------------------------------------------- | - | ---- | - | - | ----- | 
|(in thousands)                  |  | Outstanding
  Liability at
  March 31,
  2006 |   | Costs Incurred |   | Amounts Paid |  | Non-cashAdjustments |        | Remaining
  Liability at
  March 31,
  2007 |  
|                                |  |                                               |   |                |   |              |  |                     |        |                                             |  
|Employee
  termination benefits |  |                                               |  |                | $ | 4,468        |  | $                   | (2,573 | )                                           | $ |     |   | $ | 1,895 | 
|Facility
  costs                |  |                                               |  |                |   | 839          |  |                     | (225   | )                                           |   |     |   |   | 614   | 
|Other costs                     |  |                                               |  |                |   | 749          |  |                     |       |                                             |   | (450 | ) |   | 299   | 
|                                |  |                                               |   |                |   |              |  |                     |        |                                             |   |      |   |   |       | 
|Total                           |  |                                               |  |                | $ | 6,056        |  | $                   | (2,798 | )                                           | $ | (450 | ) | $ | 2,808 | 
|                                |  |                                               |   |                |   |              |  |                     |        |                                             |   |      |   |   |       | 

For the year
ended March 31, 2007 the Company has paid out $2.8 million in cash related to
the restructuring and anticipates that the remaining employee termination
benefits will be paid by March 31, 2008 and payment of the facility costs will
continue until June, 2011.

Additionally, results for
the year ended March 31, 2007 include $2.0 million of non-recurring charges.
During the third quarter the Company recognized $0.6 million in integration costs
for plan implementation and personnel redundancy costs. This amount is included
in S,G&A. The balance of $1.4 million of other one-time charges incurred in
the second quarter consisted of $0.5 million of charges recorded in cost of
products sold for a write-off of obsolete inventory obtained as part of prior
business acquisitions and $0.9 million of charges to S,G&A.

Note 3. Credit Facilities

Since June 2005, the Company
has a secured revolving credit facility (the CIT Facility) with CIT
Group/Business Credit Inc. (CIT) and an Amended and Restated Loan and
Security Agreement (the New Textron Facility) with Textron Financial
Corporation (Textron), which provide a combined availability of $40 million.

The CIT Facility is a three
year revolving credit facility for up to $25 million, subject to a borrowing
base consisting of eligible accounts receivable, eligible in-transit inventory
(up to $0.5 million) and eligible finished goods inventory (up to $0.5
million). The amounts available to the Company from CIT are also reduced by
amounts borrowed under the New Textron Facility. Effective in the second
quarter of fiscal 2007, CIT effectively reduced the amount the Company can
borrow under the CIT Facility by increasing the required availability reserve to
$3 million.  The
CIT Facility required, among other things, that the Company maintain certain
financial covenants including that the Company maintain Consolidated Liquidity
of not less than $3 million measured on a weekly basis, Consolidated Senior
Leverage of not greater than 4.00 to 1.00 for the trailing four quarters and
that the Company maintain a Consolidated Fixed Charge Coverage Ratio of not
less than 1.00 to 1.00 for the trailing four quarters. It also restricts the
Companys ability to incur certain additional indebtedness, and contains
various customary provisions, including affirmative and negative covenants,
representations and warranties and events of default. Amounts borrowed under
the CIT Facility bear interest at either the prime rate or at LIBOR plus 3%, in
each case at the Companys option.

F-13

---



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

The New Textron Facility
allows the Company to finance inventory purchases up to $15 million from
approved vendors on a 45-day interest-free basis in most cases. Interest
accrues after expiration of the applicable interest free period at the rate
equal to a specified prime rate plus 4%. The financial and other covenants in
the New Textron Facility are substantially the same as those in the CIT
Facility. The facilities include a first priority secured interest in all of
our assets.

As of March
31, 2007, the Company was not in compliance with all covenants prescribed under
the CIT Facility and the New Textron Facility; however, the Company received
waiver letters from both CIT and Textron.

Available
funds under both the CIT Facility and the New Textron Facility amounted to $7.3
million at March 31, 2007.

Note 4. Accrued Expenses

Accrued expenses consisted
of the following (in thousands):

| |                            |  |             |        |      |   |       | 
| | -------------------------- |  | ----------- | ------ | ---- | - | ----- | 
| |                            |  | March
  31, |       
| |                            |  |             |       
| |                            |  | 2007        |        | 2006 |  
| |                            |  |             |        |      |  
|
| | Accrued restructuring      |  | $           | 2,515  |      | $ |      | 
| | Acquisition related costs  |  |             | 2,944  |      |   | 2,732 | 
| | Compensation related costs |  |             | 2,217  |      |   | 2,925 | 
| | Accrued sales tax          |  |             | 1,027  |      |   | 1,433 | 
| | Accrued other              |  |             | 2,504  |      |   | 2,506 | 
| |                            |  |             |        |      |   |       | 
| |                            |  | $           | 11,207 |      | $ | 9,596 | 
| |                            |  |             |        |      |   |       | 

Note 5. Long-Term Debt

Secured Promissory Note

On November
23, 2005 the Company entered into a secured credit agreement (the Columbia
Facility) with Columbia Partners, L.L.C. Investment Management, as Investment
Manager, (Columbia Partners) and National Electric Benefit Fund, as Lender
(the Lender), whereby the Company issued and sold to the Lender a promissory
note in the principal amount of $25 million (the Note) and the Company issued
and sold to the Lender a warrant entitling the Lender to purchase 700,000
shares of the Companys Common Stock at an exercise price of $4.06 per share
(the Lender Warrant).

The Note is a
four year $25 million secured subordinated term loan with the Note coming due
at the earlier of maturity or the occurrence of certain fund raisings or other
liquidity events. The amount outstanding on the Note bears interest equal to
4.52 %, of which 2% per annum is payable quarterly in cash and all remaining
interest will accrue and only become due at maturity. Upon maturity 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 11%. As
of March 31, 2007, $3.5 million in interest has been accrued on the Note, of
which $0.6 million has been paid in cash, $0.1 million is accrued and payable
within the next quarter, and $2.8 million is accrued and is payable at
maturity. The Note is secured by a subordinated lien on the assets of the
Company. In connection with the issuance of the Note and the related Lender
Warrant, the Company allocated and charged $2.2 million to debt discount, which
will be amortized over the life of the Note to interest expense, and assigned
and credited to additional paid in capital $2.2 million for the fair value of
the Lender Warrant. The Company is permitted to settle the warrants with
unregistered shares. The value attributed to the Lender Warrant was determined
by independent valuation utilizing the Black-Scholes model.

The Columbia
Facility required, among other things, that the Company maintain certain
financial covenants including that the Company maintain Consolidated Senior
Leverage of not greater than 4.40 to 1.00 as of the end of March 31, 2007,
and for the trailing four quarters and consecutive four quarters ending
thereafter and that the Company maintain a Consolidated Fixed Charge Coverage
Ratio of not less than .90 to 1.00 for the trailing four quarters ended
March 31, 2007 and consecutive four quarters ending thereafter. It also
restricts the Companys ability to incur certain additional indebtedness, and
contains various customary provisions, including affirmative and negative
covenants, representations and warranties and events of default. The Company
received a waiver letter in November 2006 from Columbia Partners, which
included a waiver of the Consolidated Senior Leverage Ratio and the
Consolidated Fixed Charge Coverage Ratio through and including the period ended
March 31, 2008.

F-14

---



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

Capital Leases

The Company maintains
capital leases for computer equipment and vehicles, with effective interest
rates ranging from 6.3% to 8.7%. The majority of the leases expire by May 2009.

The components of debt are
as follows (in thousands):

| |                           |  |           |        |      |   |        | 
| | ------------------------- |  | --------- | ------ | ---- | - | ------ | 
| |                           |  | March 31, |       
| |                           |  |           |       
| |                           |  | 2007      |        | 2006 |  
| |                           |  |           |        |      |  
| |                           |  |           |        |      |  
| | Secured promissory note   |  | $         | 23,507 |      | $ | 22,947 | 
| | Promissory note           |  |           |       |      |   | 667    | 
| | Capital lease obligations |  |           | 973    |      |   | 1,572  | 
| |                           |  |           |        |      |   |        | 
| | Total                     |  | $         | 24,480 |      | $ | 25,186 | 
| |                           |  |           |        |      |   |        | 
| |                           |  |           |        |      |   |        | 

The Companys future debt maturities at March
31, 2007 are summarized below (in thousands):

| |                               |  |  |  |  |   |        |  
| | ----------------------------- |  |  |  |  | - | ------ | -
| | Year ended                    |  |  |  |  |   |        |  
| |                               |  |  |  |  |   |        |  
| |                               |  |  |  |  |   |        |  
| | 2008                          |  |  |  |  | $ | 548    |  
| | 2009                          |  |  |  |  |   | 306    |  
| | 2010                          |  |  |  |  |   | 23,626 |  
| | 2011                          |  |  |  |  |   |       |  
| | 2012                          |  |  |  |  |   |       |  
| |                               |  |  |  |  |   |        |  
| | Total minimum debt
  payments |  |  |  |  | $ | 24,480 |  
| | Less current maturities       |  |  |  |  |   | (548   | )
| |                               |  |  |  |  |   |        |  
| | Total long-term debt          |  |  |  |  | $ | 23,932 |  
| |                               |  |  |  |  |   |        |  

Note 6. Stock and Benefit Plans

Stock Option Plans

We have adopted the
following stock plans:

|  |                                                                                                                                                                                                                                                                                                                   
|- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | a 1993 Employee Stock
  Option Plan, which provides for the grant of options to purchase an aggregate
  of 250,000 shares of our common stock, of which, as of March 31, 2007, 26,666
  shares have been issued upon exercise of options and 120,000 shares are
  subject to outstanding options;                 
|  |                                                                                                                                                                                                                                                                                                                   
| | a 1996 Stock Option Plan,
  which provides for the grant of options to purchase an aggregate of 350,000
  shares of our common stock, of which, as of March 31, 2007, 77,600 shares
  have been issued upon exercise of options and 24,000 shares are subject to
  outstanding options;                           
|  |                                                                                                                                                                                                                                                                                                                   
| | a 1998 Stock Option Plan,
  which provides for the grant of options to purchase an aggregate of 250,000
  shares of our common stock, of which, as of March 31, 2007, 6,000 shares have
  been issued upon exercise of options and 86,900 shares are subject to
  outstanding options;                            
|  |                                                                                                                                                                                                                                                                                                                   
| | a 2000 Long-Term
  Performance Plan, which provides for the award of an aggregate of 350,000
  shares of our common stock, of which, as of March 31, 2007, 89,800 shares
  have been issued upon the exercise of options and 230,000 shares are subject
  to outstanding awards;                                  
|  |                                                                                                                                                                                                                                                                                                                   
| | a 2002 Long-Term
  Performance Plan, which provides for the award of an aggregate of 250,000
  shares of our common stock, of which, as of March 31, 2007, 15,000 shares
  have been issued upon the exercise of options and 60,000 shares are subject
  to outstanding awards; and                               
|  |                                                                                                                                                                                                                                                                                                                   
| | a 2004
  Equity Incentive Plan (the 2004 Plan), which provides for the award of an
  aggregate of 4,350,000 shares of our common stock, of which, as of March 31,
  2007, 300,450 shares have been issued upon the exercise of options and vested
  RSUs and 3,037,753 shares are subject to outstanding awards.

F-15

---



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

The 1993 Stock
Option Plan and the 1996 Stock Option Plan have expired. Accordingly, we can no
longer grant new options under such plans.
The Company has chosen, with the approval of the Board of Directors, not
to grant future options from the 1998, 2000 and 2002 Plans.  Under the terms of the 2004 Plan, options to
purchase common stock generally are granted at not less than fair market value,
become exercisable as established by the Board of Directors (generally ratably
over four years) and generally expire ten years from the date of grant.  At March 31, 2007, we had outstanding
options and RSUs to purchase approximately 3.6 million shares of common stock
and approximately 586,000 shares of common stock are available for future
awards.  On June 6, 2007, the
Compensation Committee of the Board of Directors approved an increase in the
number of shares available for issuance under the 2004 Plan from 4,000,000 to
4,350,000 shares.

A summary of stock option
activity under these plans as of March 31, 2007, 2006 and 2005, and changes
during the years then ended, is presented below:

|                                        |  |                    |       |                                   |   |                                                          |  |                                                    |       |  |  |           | 
|--------------------------------------- |  | ------------------ | ----- | --------------------------------- | - | -------------------------------------------------------- |  | -------------------------------------------------- | ----- |  |  | --------- | 
|(in thousands, except exercise price)   |  | Number
  of Shares |       | Weighted-Average
  Exercise Price |   | (In
  the money options)
  Aggregate
  Intrinsic
  Value |  | Weighted-
  Average
  Remaining
  Contractual Term |      
|                                        |  |                    |       |                                   |   |                                                          |  |                                                    |      
|Outstanding at March 31,
  2004         |  |                    | 983   |                                   | $ | 2.19                                                     |  | $                                                  | 83    |  |  | 4.6 years | 
|Granted                                 |  |                    | 2,144 |                                   |   | 2.90                                                     |  |                                                    |       |  |  |           | 
|Canceled/Expired                        |  |                    | (116  | )                                 |   | 3.22                                                     |  |                                                    |       |  |  |           | 
|Exercised                               |  |                    | (59   | )                                 |   | 1.48                                                     |  |                                                    |       |  |  |           | 
|                                        |  |                    |       |                                   |   |                                                          |  |                                                    |       |  |  |           | 
|Outstanding at March 31,
  2005         |  |                    | 2,952 |                                   | $ | 2.93                                                     |  | $                                                  | 4,964 |  |  | 8.0 years | 
|Granted                                 |  |                    | 974   |                                   |   | 4.13                                                     |  |                                                    |       |  |  |           | 
|Canceled/Expired                        |  |                    | (336  | )                                 |   | 4.18                                                     |  |                                                    |       |  |  |           | 
|Exercised                               |  |                    | (121  | )                                 |   | 1.84                                                     |  |                                                    |       |  |  |           | 
|                                        |  |                    |       |                                   |   |                                                          |  |                                                    |       |  |  |           | 
|Outstanding at March 31,
  2006         |  |                    | 3,469 |                                   | $ | 3.21                                                     |  | $                                                  | 3,186 |  |  | 7.9 years | 
|Granted                                 |  |                    | 705   |                                   |   | 2.62                                                     |  |                                                    |       |  |  |           | 
|Canceled/Expired                        |  |                    | (841  | )                                 |   | 3.93                                                     |  |                                                    |       |  |  |           | 
|Exercised                               |  |                    | (187  | )                                 |   | 2.07                                                     |  |                                                    |       |  |  |           | 
|                                        |  |                    |       |                                   |   |                                                          |  |                                                    |       |  |  |           | 
|Outstanding at March 31,
  2007         |  |                    | 3,146 |                                   | $ | 2.95                                                     |  | $                                                  | 11    |  |  | 6.8 years | 
|                                        |  |                    |       |                                   |   |                                                          |  |                                                    |       |  |  |           | 
|Exercisable at March 31,
  2007         |  |                    | 1,957 |                                   | $ | 2.80                                                     |  | $                                                  | 11    |  |  | 5.7 years | 
|                                        |  |                    |       |                                   |   |                                                          |  |                                                    |       |  |  |           | 
|Expected to vest after
  March 31, 2007 |  |                    | 944   |                                   | $ | 3.04                                                     |  | $                                                  |      |  |  | 8.7 years | 
|                                        |  |                    |       |                                   |   |                                                          |  |                                                    |       |  |  |           | 
|                                        |  |                    |       |                                   |   |                                                          |  |                                                    |       |  |  |           | 

The aggregate intrinsic
value in the table above is before applicable income taxes and represents the
amount optionees would have received if all in the money options had been
exercised on the last business day of the period indicated, based on the
Companys closing stock price.

The total intrinsic value of
options exercised during the year ended March 31, 2007 was approximately
$78,600.  The unrecognized stock-based
compensation expense associated under the fair value method for shares expected
to vest (unvested shares net of expected forfeitures) as of March 31, 2007 was
approximately $2.6 million and is expected to be recognized over a weighted
average period of 2.8 years.
Approximately 0.2 million shares outstanding as of March 31, 2007 are
not expected to vest.

F-16

---



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

Additional information
regarding options outstanding as of March 31, 2007 is as follows:

|                         |  |                       |           |                                                               |  |                                            |  |        |      |                                            |  |           |  |   |      | 
|------------------------ |  | --------------------- | --------- | ------------------------------------------------------------- |  | ------------------------------------------ |  | ------ | ---- | ------------------------------------------ |  | --------- |  | - | ---- | 
|                         |  | OPTIONS
  OUTSTANDING |           | OPTIONS
  EXERCISABLE                                         | 
|                         |  |                       |           |                                                               | 
|Range of Exercise Prices |  | Shares                |           | Weighted
  Average
  Remaining 
  Contractual 
  Life (Years) |  | Weighted
  
  Average 
  Exercise 
  Price |  | Shares |      | Weighted
  
  Average 
  Exercise 
  Price | 
|                         |  |                       |           |                                                               |  |                                            |  |        |      |                                            | 
|$0.73-$1.45              |  |                       | 329,500   |                                                               |  | 3.64                                       |  | $      | 1.28 |                                            |  | 302,000   |  | $ | 1.27 | 
|$1.45-$2.18              |  |                       | 761,499   |                                                               |  | 6.54                                       |  | $      | 2.10 |                                            |  | 597,749   |  | $ | 2.14 | 
|$2.18-$2.90              |  |                       | 703,400   |                                                               |  | 6.48                                       |  | $      | 2.52 |                                            |  | 346,815   |  | $ | 2.64 | 
|$2.90-$3.63              |  |                       | 525,750   |                                                               |  | 8.26                                       |  | $      | 3.30 |                                            |  | 328,750   |  | $ | 3.40 | 
|$3.63-$4.35              |  |                       | 389,719   |                                                               |  | 7.99                                       |  | $      | 4.04 |                                            |  | 158,742   |  | $ | 4.04 | 
|$4.35-$5.08              |  |                       | 160,000   |                                                               |  | 8.35                                       |  | $      | 4.65 |                                            |  | 60,000    |  | $ | 4.68 | 
|$5.08-$5.80              |  |                       | 275,885   |                                                               |  | 6.10                                       |  | $      | 5.22 |                                            |  | 163,067   |  | $ | 5.22 | 
|                         |  |                       |           |                                                               |  |                                            |  |        |      |                                            |  |           |  |   |      | 
|                         |  |                       | 3,145,753 |                                                               |  | 6.74                                       |  | $      | 2.95 |                                            |  | 1,957,123 |  | $ | 2.80 | 
|                         |  |                       |           |                                                               |  |                                            |  |        |      |                                            |  |           |  |   |      | 
|                         |  |                       |           |                                                               |  |                                            |  |        |      |                                            |  |           |  |   |      | 

The 2004 Plan allows for the
issuance of RSUs which typically vest over four years.  A summary of the status of RSUs nonvested
shares as of March 31, 2007 and changes during the year then ended is presented
below:

|                                        |  |                    |  |                                          |   |  |  
|--------------------------------------- |  | ------------------ |  | ---------------------------------------- | - |  | -
|(in thousands, except fair value price) |  | Number of
  Shares |  | Weighted-Average
  Grant-Date Fair Value |  
|                                        |  |                    |  |                                          |  
|Nonvested at April 1, 2006              |  |                    |  | 420                                      |   |  | $
|Granted                                 |  |                    |  | 286                                      |   |  |  
|Vested                                  |  |                    |  | (111                                     | ) |  |  
|Forfeited                               |  |                    |  | (190                                     | ) |  |  
|                                        |  |                    |  |                                          |   |  |  
|Nonvested at March 31,
  2007           |  |                    |  | 405                                      |   |  | $
|                                        |  |                    |  |                                          |   |  |  

As of March 31, 2007 there
was $0.5 million of total unrecognized compensation cost related to nonvested
share-based compensation arrangements granted under the 2004 Plan for
RSUs.  That cost is expected to be
recognized over a weighted-average period of 2.2 years.  The total fair value of shares vested during
the year ended March 31, 2007 was $0.3 million.

Employee Stock Purchase Plan

Effective April 15, 2005,
the Company adopted the MTM Technologies, Inc. Associate Stock Purchase Plan
..  The ASPP allows eligible employees to
contribute up to 15% of their base earnings to a maximum annual contribution of
$25,000  toward the semi-annual purchase
of the Companys common stock.  The
employees purchase price is 95% of the fair market value of the stock on the
last business day of the offering period.
Employees may purchase shares up to a maximum of 3,500 shares per
offering period.  The total numbers of
shares issuable under the ASPP is 1.0 million.
There were approximately 67,000 shares issued under the ASPP during the
fiscal year ended March 31, 2007 at an average price of $2.59.  There were no stock purchases made under the
ASPP in fiscal 2006.  Of the 636
associates eligible to participate, approximately 36 were participants in the
ASPP as of March 31, 2007.

F-17

---



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

Employee Savings Plan

MTM maintains a voluntary
defined contribution savings plan (the MTM 401(k) Plan) covering eligible
employees as defined in the plan documents.
Participating employees may elect to defer and contribute a portion of
their compensation to the plan up to limits stated in the plan documents, not
to exceed the dollar amounts set by applicable laws.  Beginning April 1, 2006, MTM adopted a discretionary match
contribution of 25% for the first 6% of each employees eligible contribution,
senior management was excluded from receiving this match.  The Company contributed $419,000, $311,000
and $26,000 to the plans for the years ended March 31, 2007, 2006 and 2005,
respectively.

As a result of its
acquisitions, the Company had three employee savings plans which qualify under
Section 401-K of the Internal Revenue Code with essentially the same terms on
eligibility and deferral amounts.  The acquired
401k plans were merged during fiscal 2007 into the MTM 401(k) Plan.

Note 7. Shareholders Equity

Preferred Stock

As of March 31, 2007, the
Company had authorized 40 million shares of preferred stock, 33.5 million of
which are designated Series A Preferred Stock, par value $.001 per share and
6.5 million of which are blank check preferred stock, par value $.001 per
share. As of March 31, 2007, there were approximately 22.6 million shares of
Series A Preferred Stock issued.

As of March 31, 2006, the
Company had authorized 40 million shares of preferred stock, 31 million of
which were designated Series A Preferred Stock, par value $.001 per share and 9
million of which were blank check preferred stock, par value $.001 per share.
As of March 31, 2006, there were approximately 20 million shares of Series A
Preferred Stock issued.

Series A Preferred Stock
and Notes

Pequot Fund refers to
Pequot Private Equity Fund III, L.P., Pequot Partners refers to Pequot
Offshore Private Equity Partners III, L.P., and collectively with Pequot Fund,
Pequot, 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 the
CVC II Partners, LLC, and collectively with Constellation Venture,
Constellation Offshore and BSC, Constellation, and together with
Pequot, (the
Investors.)

On January 29, 2004, the
Company entered into a purchase agreement (the Pequot Agreement) to sell to
Pequot an aggregate of up to $25.0 million of Series A Convertible Preferred
Stock, together with warrants to purchase additional shares of common stock and
on December 7, 2004, the Company entered into an additional purchase agreement
(the Pequot/Constellation Purchase Agreement) with the Investors to sell to
the Investors up to an additional $40.0 million of Series A Convertible
Preferred Stock, together with warrants to purchase additional shares of common
stock.

During the
year ended March 31, 2005, the Investors received $41.0 million of Series A
Convertible Preferred Stock and associated common stock warrants.  During the year ended March 31, 2006, the
Investors purchased an additional $19.0 million of Series A Convertible
Preferred Stock, and associated common stock warrants.  The Company allocated and recorded $16.4
million to Series A Preferred Stock and assigned and credited to additional
paid in capital $2.6 million for the fair value of the warrants. The value
attributed to the warrants was determined by independent valuation utilizing
Black-Scholes.

On March 29, 2007, the
Company sold to the Investors 2,020,202 shares of Series A-6 Convertible
Preferred Stock and Series  A-6 Warrants
to purchase 610,000 shares of the Companys common stock for an aggregate purchase
price of $3.0 million  This transaction
resulted in an adjustment to the Series A conversion price of each of the
Series A-1 to Series A-5 Preferred Stock.
The Company allocated and recorded $2.6 million to Series A Preferred
Stock and assigned and credited to additional paid in capital $0.4 million for
the fair value of the warrants.  The value attributed to the warrants was determined by independent
valuation utilizing Black-Scholes.

F-18

---



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

The following table sets
forth the Series A Preferred Stock and associated warrants issued to the
Investors under the Pequot Agreement and the Pequot/Constellation Purchase
Agreement, including in-kind dividends paid.

|                                                |  |                                  |  |                    |  |  |  |            | 
|----------------------------------------------- |  | -------------------------------- |  | ------------------ |  |  |  | ---------- | 
|                                                |  | No. of
  Shares (in thousands)   |  | Conversion
  Price | 
|                                                |  |                                  |  |                    | 
|                                                |  |                                  |  |                    |  |  |  |            | 
|Series A-1 Convertible
  Preferred Stock        |  |                                  |  | 3,353              |  |  |  | $     2.15 | 
|Series A-2 Convertible
  Preferred Stock        |  |                                  |  | 2,060              |  |  |  | $     2.75 | 
|Series A-3 Convertible
  Preferred Stock        |  |                                  |  | 3,962              |  |  |  | $     3.25 | 
|Series A-4 Convertible
  Preferred Stock        |  |                                  |  | 8,081              |  |  |  | $     3.25 | 
|Series A-5 Convertible
  Preferred Stock        |  |                                  |  | 3,170              |  |  |  | $     3.25 | 
|Series A-6 Convertible
  Preferred Stock        |  |                                  |  | 2,020              |  |  |  | $     1.49 | 
|                                                |  |                                  |  |                    |  |  |  |            | 
|                                                |  |                                  |  | 22,646             |  |  |  |            | 
|                                                |  |                                  |  |                    |  |  |  |            | 
|                                                |  | No. of
  Warrants (in thousands) |  | Exercise Price     | 
|                                                |  |                                  |  |                    | 
|                                                |  |                                  |  |                    |  |  |  |            | 
|Series A-1 Common Stock
  Warrants              |  |                                  |  | 500                |  |  |  | $     2.46 | 
|Series A-2 Common Stock
  Warrants              |  |                                  |  | 400                |  |  |  | $     3.44 | 
|Series A-3, A-4 and A-5
  Common Stock Warrants |  |                                  |  | 2,758              |  |  |  | $     4.06 | 
|Series A-6 Common Stock
  Warrants              |  |                                  |  | 610                |  |  |  | $     1.63 | 
|                                                |  |                                  |  |                    |  |  |  |            | 
|                                                |  |                                  |  | 4,268              |  |  |  |            | 

The funds raised from the
sales of Series A Convertible Preferred Stock were used to fund the cash
portion of the purchase price for the Companys various acquisitions as
follows:

| |   |                                                              
| | - | -------------------------------------------------------------
| |  | DataVox Technologies,
  Inc.July 2004,                      
| |   |                                                              
| |  | Network Catalyst,
  Inc.September 2004,                     
| |   |                                                              
| |  | Vector ESP, Inc./Vector
  ESP Management, Inc.December 2004,
| |   |                                                              
| |  | Info Systems, Inc.March
  2005,                             
| |   |                                                              
| |  | Nexl, Inc.December 2005                                     

Under the terms of the
Pequot/Constellation Purchase Agreement, until shareholder approval was
received for the transaction, the Investors had the right to acquire Series A-4
Convertible Secured Subordinated Promissory Notes (Series A-4 Notes) in lieu
of Series A-4 Convertible Preferred Stock and Series A-5 Convertible Secured
Subordinated Promissory Notes (Series A-5 Notes) in lieu of Series A-5
Convertible Preferred Stock. As a result, the initial $16.0 million invested
under the Pequot/Constellation Purchase Agreement was in the form of Series A-4
Notes, together with warrants to purchase common stock. On June 23, 2005 the
shareholders approved the transaction and the outstanding Series A-4 Notes
converted into shares of Series A-4 Preferred Stock.

The Company originally
assigned a value of $6.8 million to the beneficial conversion feature of the
Series A-4 Notes and the common stock warrants issued in connection therewith
(the Series A-4 Warrants), and the Investors option to acquire additional
Series A-4 Notes and Series A-4 Warrants and to acquire Series A-5 Notes based
on the relative fair values using Black-Scholes at the date of issuance and
recorded this value as a discount to the Series A-4 Notes when issued. This
discount was accreted to interest expense over the term of the applicable
Series A-4 Notes. During the years ended March 31, 2006 and 2005 the discount
accreted to interest expense amounted to approximately $2.9 and $3.9 million,
respectively.

In accordance with Emerging
Issues Task Force Issue 00-19, Accounting for Derivative Financial Instruments
Indexed To, and Potentially Settled in, a Companys Own Stock, the Company had
initially accounted for the fair value of the Series A-4 Warrants issued in December
2004 and March 2005 and the Investors option to acquire additional Series A-4
Notes and Series A-4 Warrants and to acquire Series A-5 Notes as a liability
since the Company was required to file a Registration Statement with the
Securities and Exchange Commission for the resale by the Investors of the
underlying common stock and to use reasonable best efforts to have such
Registration Statement become effective or, in certain circumstances, pay cash
liquidated damages. Such process was completed

F-19

---



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

in December 2005 and the Company
has reclassified the remaining amount of the fair value to shareholders
equity. The fair value was calculated utilizing Black-Scholes.

Prior to the
reclassification, there was a change in the market value of the Companys common
stock, and therefore, the Company recorded a decrease in the carrying value of
the liability for the year ended March 31, 2006 of $1.3 million which is
included as a reduction in S,G&A.

Beginning May
21, 2006, the Series A Preferred Stock began to accrue dividends, payable
semi-annually in arrears, in an amount equal to 6% of the applicable Series A
purchase price.  As of March 31, 2007,
the Company has accrued $3.2 million in preferred dividends which was charged
to equity.  Until May 21, 2008 dividends
may at the option of the Company, be paid in cash or shares of the applicable
Series A Preferred Stock valued at the applicable Series A purchase price.  The Series A purchase prices range from
$1.49 to $3.25.  During the third
quarter of fiscal 2007 the Company paid $1.8 million in preferred dividends for
the period May 21, 2006 to November 20, 2006 in the form of 600,732 shares of
Series A Preferred Stock.  Dividends are
accrued as other long-term liabilities since the current intention of the
Company is to pay dividends in the form of equity.

In the event
of any liquidation of the Company the holders of the Series A Preferred Stock
shall be entitled to be paid in preference to any distribution to holders of
common stock, in an amount per share equal to the sum of the applicable Series
A Purchased Shares Purchase Price plus any accrued but unpaid dividends on the
Series A Preferred Stock.

Note 8. Income Taxes

The asset and liability
method is used in accounting for income taxes. Under this method, deferred tax
assets and liabilities are determined based on differences between financial
reporting and tax bases of assets and liabilities and are measured using the
enacted tax rates and laws that will be in effect when the differences are
expected to reverse.

The provision for (benefit
from) income taxes consisted of the following (in thousands):

|                           |  |                        |     |      |   |      |  |   |    | 
|-------------------------- |  | ---------------------- | --- | ---- | - | ---- |  | - | -- | 
|                           |  | Year
  Ended March 31, |    
|                           |  |                        |    
|                           |  | 2007                   |     | 2006 |   | 2005 | 
|                           |  |                        |     |      |   |      | 
|Federal:                   |  |                        |     |      |   |      |  |   |    | 
|Current                    |  | $                      |    |      | $ |     |  | $ |   | 
|Deferred                   |  |                        |    |      |   |     |  |   |   | 
|                           |  |                        |     |      |   |      |  |   |    | 
|                           |  |                        |    |      |   |     |  |   |   | 
|State:                     |  |                        |     |      |   |      |  |   |    | 
|Current                    |  |                        | 427 |      |   | 241  |  |   | 13 | 
|Deferred                   |  |                        |    |      |   |     |  |   |   | 
|                           |  |                        |     |      |   |      |  |   |    | 
|Provision for income taxes |  | $                      | 427 |      | $ | 241  |  | $ | 13 | 
|                           |  |                        |     |      |   |      |  |   |    | 

The reconciliations of
income tax provision (benefit) computed at the federal statutory tax rates to
actual income tax provision (benefit) are as follows (in thousands):

|                                                                  |  |                        |         |      |   |        |   |   |        |  
|----------------------------------------------------------------- |  | ---------------------- | ------- | ---- | - | ------ | - | - | ------ | -
|                                                                  |  |                        |        
|                                                                  |  | Year
  Ended March 31, |        
|                                                                  |  |                        |        
|                                                                  |  | 2007                   |         | 2006 |   | 2005   |  
|                                                                  |  |                        |         |      |   |        |  
|Tax benefit at federal statutory rates applied to
pretax earnings |  | $                      | (10,900 | )    | $ | (2,799 | ) | $ | (2,926 | )
|State income taxes, net of federal
benefit                        |  |                        | 427     |      |   | 241    |   |   | (391   | )
|Changes in valuation allowance                                    |  |                        | 10,445  |      |   | 2,539  |   |   | 3,075  |  
|Other permanent items                                             |  |                        | 190     |      |   | 260    |   |   | 255    |  
|Adjustments to prior provisions                                   |  |                        | 265     |      |   |       |   |   |       |  
|                                                                  |  |                        |         |      |   |        |   |   |        |  
|Provision for income taxes                                        |  | $                      | 427     |      | $ | 241    |   | $ | 13     |  
|                                                                  |  |                        |         |      |   |        |   |   |        |  

F-20

---



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

The tax effects of temporary
differences that give rise to the net short-term deferred income tax asset are
presented below (in thousands):

|                                           |  |             |      |      |   |      |  
|------------------------------------------ |  | ----------- | ---- | ---- | - | ---- | -
|                                           |  | March
  31, |     
|                                           |  |             |     
|                                           |  | 2007        |      | 2006 |  
|                                           |  |             |      |      |  
|                                           |  |             |      |      |   |      |  
|Reserve for bad debts                      |  | $           | 556  |      | $ | 303  |  
|Inventory                                  |  |             | (21  | )    |   | 240  |  
|Accrued compensation                       |  |             | (30  | )    |   | 366  |  
|                                           |  |             |      |      |   |      |  
|                                           |  |             | 505  |      |   | 909  |  
|Valuation allowance                        |  |             | (505 | )    |   | (909 | )
|                                           |  |             |      |      |   |      |  
|Total short-term deferred income tax
asset |  | $           |     |      | $ |     |  
|                                           |  |             |      |      |   |      |  
|                                           |  |             |      |      |   |      |  

The tax effects of temporary
differences that give rise to the net long-term deferred income tax asset
(liability) are presented below (in thousands):

|                                          |  |           |         |      |   |        |  
|----------------------------------------- |  | --------- | ------- | ---- | - | ------ | -
|                                          |  | March 31, |        
|                                          |  |           |        
|                                          |  | 2007      |         | 2006 |  
|                                          |  |           |         |      |  
|                                          |  |           |         |      |   |        |  
|Property and Equipment,
  net             |  | $         | (2,773  | )    | $ | (1,151 | )
|Goodwill                                  |  |           | (1,627  | )    |   | (871   | )
|Other                                     |  |           | 48      |      |   | 43     |  
|Net operating loss                        |  |           | 22,405  |      |   | 9,134  |  
|Research and development
  credit         |  |           | 190     |      |   | 190    |  
|                                          |  |           |         |      |   |        |  
|                                          |  |           | 18,243  |      |   | 7,345  |  
|Valuation allowance                       |  |           | (18,243 | )    |   | (7,345 | )
|                                          |  |           |         |      |   |        |  
|Net long-term deferred
  income tax asset |  | $         | 0       |      | $ | 0      |  
|                                          |  |           |         |      |   |        |  

At March 31, 2007, the
Company has net operating loss carry forwards of approximately $57 million to
offset taxable income through the year 2027. Realization of the benefit of the
carry forward losses depends on earning sufficient taxable income before
expiration of loss carry forwards. The utilization of the net operating loss
carry forwards may also be limited as a result of ownership changes. At March
31, 2007 and 2006, the Company has established a valuation allowance that offsets
the deferred tax assets.

Note 9. Commitments and
Contingencies

Lease Commitments

The Company leases 29
locations for its administrative and operational functions under operating
leases expiring at various dates through 2016. Certain leases are subject to
escalation based on the Companys share of increases in operating expenses for
the locations. In addition, the Company leases equipment, software and vehicles
used in operations under both operating and capital leases.

Future annual minimum lease
payments including estimated escalation amounts under non-cancelable operating
and capital leases as of March 31, 2007 are as follows (in thousands):

|                      |  |       |        |           |   |         |  |   |     | 
|--------------------- |  | ----- | ------ | --------- | - | ------- |  | - | --- | 
|                      |  | Total |        | Operating |   | Capital | 
|                      |  |       |        |           |   |         | 
|                      |  |       |        |           |   |         |  |   |     | 
|Year Ending March 31, |  |       |        |           |   |         |  |   |     | 
|2008                  |  | $     | 3,860  |           | $ | 3,312   |  |   | 548 | 
|2009                  |  |       | 3,569  |           |   | 3,263   |  |   | 306 | 
|2010                  |  |       | 3,061  |           |   | 2,942   |  |   | 119 | 
|2011                  |  |       | 2,191  |           |   | 2,191   |  |   |    | 
|2012                  |  |       | 1,205  |           |   | 1,205   |  |   |    | 
|Thereafter            |  |       | 3,434  |           |   | 3,434   |  |   |    | 
|                      |  |       |        |           |   |         |  |   |     | 
|                      |  | $     | 17,320 |           | $ | 16,347  |  | $ | 973 | 
|                      |  |       |        |           |   |         |  |   |     | 

F-21

---



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

Rental expense for operating
leases including amounts from non-cancelable leases approximated $2.9 million,
$2.6 million, and $1.1 million for the years ended March 31, 2007, 2006 and
2005, respectively.

Employment Agreements

The Company has entered into
an employment agreement, which requires the following payments (in thousands):

|                      |  |   |     | 
|--------------------- |  | - | --- | 
|Year ending March 31, |  |   |     | 
|2008                  |  | $ | 335 | 
|2009                  |  |   | 335 | 
|2010                  |  |   | 251 | 
|                      |  |   |     | 
|                      |  | $ | 921 | 
|                      |  |   |     | 

In addition, certain other
agreements provide for bonus compensation based on certain performance goals.

Litigation

The Company is involved in
various claims and legal actions arising in the ordinary course of business.
Management is of the opinion that the ultimate outcome of these matters would
not have a material adverse impact on the financial position of the Company or
the results of its operations.

Note 10. Acquisitions

On April 20, 2006, the
Company purchased the operating assets of Axcent Solutions, Inc. (Axcent), a
provider of access, infrastructure and availability solutions based in the
southern California area. The aggregate purchase price for Axcent was
approximately $0.7 million, consisting of $0.5 million in cash and 62,500
shares of stock (at $3.71 per share or $0.2 million). The purchase price was
allocated to assets acquired of $0.4 million and liabilities assumed of $0.3
million based on estimated fair values on the transaction date, resulting in
net assets acquired of $0.1 million. Goodwill related to the purchase was
recorded at approximately $1.3 million, including expected costs related to
employee severance and facility consolidations of $0.6 million and transactions
costs of $0.1 million.

On December 1, 2005, the
Company acquired all of the outstanding stock of Nexl, Inc. (Nexl). Nexl
provided complete infrastructure computing in the areas of enterprise computing
and storage, networking and security and managed services. Nexls practice and
service areas included enterprise storage, network infrastructure, security, IP
telephony, and managed services. The results of operations are included in the
Companys financial results beginning December 1, 2005. The aggregate purchase
price for the Nexl acquisition was $24.0 million consisting of $13.3 million in
cash and 2,999,998 shares (at $3.58 per share or $10.7 million) of MTM stock,
plus transaction costs of approximately $1.0 million. Following the preliminary
allocation of purchase price to the assets and liabilities acquired, goodwill
related to the purchase was recorded at approximately $25 million, including
expected costs related to employee severance, facilities consolidation and
asset valuations.

Included in the year ended
March 31, 2007 is an adjustment to goodwill of $1.6 million. The Nexl purchase
agreement provided for a potential additional purchase price payment (the
Earnout) of up to $1.0 million in cash and 250,000 shares of common stock if
certain EBITDA targets for the twelve months ended December 31, 2006 were
achieved. During the third quarter of fiscal 2007 the Company recognized the
full Earnout consisting of $1.0 million payable in cash and 250,000 shares of
MTM stock valued at $1.54 per share or $385,000, both of which were included in
goodwill and in accrued expenses at the end of the period. In the fourth
quarter the Company and the shareholders of Nexl agreed to adjust the form of
the cash payment of the Earnout to reflect $1.0 million payable in shares of
MTM common stock with a FMV determined using the 10 day trailing closing price
of the common stock immediately preceding signing of a definite agreement. The
agreement was signed on May 24, 2007 and the $1.0 million in shares of MTM
common stock was valued at $0.95 per share for a total of 1,052,632 shares. On
May 31, 2007 the Company issued 1,276,579 shares of common stock in
satisfaction of the Earnout. The Company is withholding the issuance of certain
of the shares to be issued pursuant to its right under the Nexl Merger
Agreement. The remaining adjustment to goodwill is related to a $0.2 million
decrease in the net realizable value recorded in the second quarter of assets
acquired.

The final fair value
assessment of the Nexl acquisition resulted in the recording of $26.5 million
of goodwill and $2.6 million of amortizable intangible assets related to
customer relationships and non-compete agreements.

F-22

---



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

In March 2005, the Company
acquired all of the stock of Info Systems, Inc. (Info Systems). Info Systems
conducted an information technology business and certain management and
consulting businesses consisting of providing connectivity (network
infrastructure), server architecture (applications, directory and computing
infrastructure), convergence (legacy and Voice Over Internet Protocol
(VOIP)), security (assessment, policy design)) and storage (SAN, data
migration) solutions, as well as telecommunications and structured cabling
services, outsourced information technology, staff augmentation and remote
network monitoring, management and support services through its Network
Operations Center. The initial purchase price of $11.1 million consisted of
$8.3 million in cash, an aggregate of 868,150 shares (at $3.25 per share or
$2.8 million total) of the Companys common stock, plus transaction costs of
$0.4 million. In the fourth quarter of fiscal 2006 the Company paid $0.3
million in cash and issued 124,109 shares of MTM common stock valued at $1.4
million related to the achievement of certain financial targets attributable to
the acquired business. In fiscal 2006 the Company adjusted goodwill by $1.7
million related to this earnout. The final fair value assessment of the Info
Systems acquisition resulted in the recording of $10.5 million of goodwill and
$1.4 million of amortizable intangible assets related to customer
relationships.

In December 2004, the
Company acquired the assets and business operations of Vector ESP, Inc. and
Vector ESP Management, Inc. (collectively, Vector). Vector provided advanced
technology solutions in application delivery and deployment, network
infrastructure, messaging and collaboration, remote office connectivity and
workforce mobility products and services. The initial purchase price of $19.8
million was paid in the form of cash in the amount of $16.8 million, promissory
notes in the amount of $0.7 million, and 433,840 shares (at $5.22 per share or
$2.3 million total) of the Companys common stock, plus transaction costs of
$0.7 million. In January 2006 the Company issued 731,587 shares of MTM common
stock to the Vector Shareholders upon the achievement of certain financial
targets attributable to the acquired business. Related to these earnout
achievements, the Company adjusted goodwill in fiscal 2006 by $3.6 million. The
final fair value assessment of the Vector acquisition resulted in the recording
of $20.6 million of goodwill and $3.9 million of amortizable intangible assets
related to customer relationships and know how.

In September 2004, the
Company acquired the assets and business operations of Network Catalyst Inc.
(Network Catalyst). Network Catalyst provided advanced technology solutions
in the VOIP, infrastructure and security fields to clients located throughout
the Southern California region. The initial purchase price of $4.8 million
consisted of a cash payment of $4.0 million, 500,000 shares (at $1.60 per
share, or $0.8 million total) of the Companys common stock, plus transaction
costs of $0.3 million. In July 2005 the Company paid an additional $1.0 million
in cash and 67,416 shares of MTM common stock upon the achievement of certain
financial targets attributable to the acquired business. In fiscal 2006 an
adjustment to goodwill of $1.2 million was made related to this earnout. The
final fair value assessment of the Network Catalyst acquisition resulted in the
recording of $6.2 million of goodwill and $1.8 million of amortizable
intangible assets related to customer relationships.

Unaudited Pro Forma Summary

The following unaudited pro
forma consolidated amounts give effect to the Companys Nexl, Info Systems,
Vector and Network Catalyst acquisitions as if they had occurred on April 1,
2004. The pro forma results of operations have been prepared for comparative
purposes only and are not necessarily indicative of the operating results that
would have been achieved had the acquisitions been consummated as of the above
date, nor are they necessarily indicative of future operating results.

|                                                |  |                                |         |      |   |         |  
|----------------------------------------------- |  | ------------------------------ | ------- | ---- | - | ------- | -
|                                                |  | For the Year Ended
  March 31, |        
|                                                |  |                                |        
|(In thousands,except per share
data)            |  | 2006                           |         | 2005 |  
|                                                |  |                                |         |      |  
|                                                |  |                                |         |      |   |         |  
|Net revenues:                                   |  |                                |         |      |   |         |  
|Products                                        |  | $                              | 218,004 |      | $ | 200,256 |  
|Services                                        |  |                                | 71,356  |      |   | 74,960  |  
|                                                |  |                                |         |      |   |         |  
|Total net revenues                              |  |                                | 289,360 |      |   | 275,216 |  
|                                                |  |                                |         |      |   |         |  
|Net loss                                        |  | $                              | (4,305  | )    | $ | (11,415 | )
|                                                |  |                                |         |      |   |         |  
|Net loss per common share
  (basic and diluted) |  | $                              | (0.38   | )    | $ | (1.01   | )
|                                                |  |                                |         |      |   |         |  

F-23

---



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

Note 11. Segment Information

The Company currently
operates only within the United States. Substantially, all of the Companys
revenue generating operations have similar economic characteristics, including
the nature of the products and services sold; the type and class of clients for
products and services; the methods used to deliver products and services and
regulatory environments.

Note 12. Quarterly Results of
Operations (Unaudited)

The following is a summary
of the quarterly results of operations for the fiscal years ended March 31,
2007 and 2006.

|                                                 |  |                                         |        |                      |   |                     |   |                  |        |   |   |         |  
|------------------------------------------------ |  | --------------------------------------- | ------ | -------------------- | - | ------------------- | - | ---------------- | ------ | - | - | ------- | -
|                                                 |  | June 30,
  2006                         |        | September 30,
  2006 |   | December 31,
  2006 |   | March 31,
  2007 |       
|                                                 |  |                                         |        |                      |   |                     |   |                  |       
|                                                 |  | (In thousands, except per share
  data) |       
|Fiscal 2007                                      |  |                                         |        |                      |   |                     |   |                  |        |   |   |         |  
|Net revenues                                     |  | $                                       | 75,231 |                      | $ | 67,724              |   | $                | 69,755 |   | $ | 62,268  |  
|Cost of products sold                            |  |                                         | 49,330 |                      |   | 43,519              |   |                  | 44,068 |   |   | 39,367  |  
|Cost of services provided                        |  |                                         | 10,796 |                      |   | 10,893              |   |                  | 10,966 |   |   | 10,852  |  
|Net loss available to
  common shareholders      |  |                                         | (6,795 | )                    |   | (11,578             | ) |                  | (5,469 | ) |   | (11,343 | )
|Net loss per common share
  (basic and diluted): |  | $                                       | (0.59  | )                    | $ | (0.99               | ) | $                | (0.46  | ) | $ | (0.95   | )
|                                                 |  |                                         |        |                      |   |                     |   |                  |        |   |   |         |  
|                                                 |  | June 30,
  2005                         |        | September 30,
  2005 |   | December 31,
  2005 |   | March 31,
  2006 |       
|                                                 |  |                                         |        |                      |   |                     |   |                  |       
|Fiscal 2006                                      |  |                                         |        |                      |   |                     |   |                  |        |   |   |         |  
|Net revenues                                     |  | $                                       | 49,560 |                      | $ | 47,039              |   | $                | 69,002 |   | $ | 71,118  |  
|Cost of products sold                            |  |                                         | 30,006 |                      |   | 27,371              |   |                  | 47,043 |   |   | 46,363  |  
|Cost of services provided                        |  |                                         | 8,692  |                      |   | 8,734               |   |                  | 8,730  |   |   | 10,424  |  
|Net loss                                         |  |                                         | (5,065 | )                    |   | (833                | ) |                  | (520   | ) |   | (2,056  | )
|Net loss per common share
  (basic and diluted): |  | $                                       | (0.68  | )                    | $ | (0.11               | ) | $                | (0.06  | ) | $ | (0.19   | )

Note 13. Subsequent Events

On
April 9, 2007, the Company sold to Pequot 517,526 shares of Series A-6 Preferred Stock and Series A-6
Warrants to purchase 155,258 shares of the Companys common stock for an
aggregate purchase price of $768,526. This transaction resulted in a further
adjustment to the Series A conversion price of each of the Series of Series A
Preferred Stock. The Company allocated and recorded during the first quarter of
fiscal 2008 $0.7 million to Series A Preferred Stock and assigned and credited
to additional paid in capital $0.1 million for the fair value of the warrants.
The value attributed to the Series A-6 warrants was determined by using
Black-Scholes.

On
May 24, 2007, the Company issued and sold to Pequot 3,753,127 shares of Series A-7 Preferred Stock and Series
A-7 Warrants to purchase up to 1,125,939 shares of the Companys common stock
for an aggregate purchase price of $4.5 million. At the same time the Company
also granted an option to Constellation to purchase up to 417,015 shares of
Series A-7 Preferred Stock and and Series A-7 Warrants to purchase up to
125,105 shares of the Companys common stock On May 30th,
Constellation exercised its rights under the foregoing options and the Company
issued and sold,to Constellation 417,015 shares of Series A-7 Preferred Stock
and 125,105 Series A-7 Warrants for an aggregate purchase price of $0.5
million. This transaction resulted in a further adjustment to the Series A
conversion price of each of the Series of Series A Preferred Stock. The Company
is in the process of obtaining a valuation with regard to the Series A-7
warrants.

F-24

---



SIGNATURES

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

|                       |                          |                                      
|---------------------- | ------------------------ | -------------------------------------
|                       | MTM TECHNOLOGIES,
  INC.
|Dated: June
  29, 2007 | By:                      | /S/ STEVEN STRINGER                  
|                       |                          |                                      
|                       |                          | Steven
  Stringer                    
|                       |                          | President and Chief Operating Officer

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

|                         |  |                                                     |  |                
|------------------------ |  | --------------------------------------------------- |  | ---------------
|/S/ GERALD A. POCH       |  | Chairman of
  the Board of Directors                |  | June 29, 2007  
|                         |  |                                                     |  |                
|Gerald A. Poch           |  |                                                     |  |                
|                         |  |                                                     |  |                
|/S/ STEVEN STRINGER      |  | President
  and Chief Operating Officer             |  | June 29, 2007  
|                         |  | (Principal
  Executive Officer)                     |  |                
|Steven Stringer          |  |                                                     |  |                
|                         |  |                                                     |  |                
|/S/ J.W. BRAUKMAN III    |  | Senior Vice
  President and Chief Financial Officer |  | June 29, 2007  
|                         |  | (Principal
  Financial and Accounting Officer)      |  |                
|J.W. Braukman III        |  |                                                     |  |                
|                         |  |                                                     |  |                
|/S/ RICHARD R. HEITZMANN |  | Director                                            |  | June 29, 2007  
|                         |  |                                                     |  |                
|Richard R. Heitzmann     |  |                                                     |  |                
|                         |  |                                                     |  |                
|/S/ WILLIAM LERNER       |  | Director                                            |  | June 29, 2007  
|                         |  |                                                     |  |                
|William Lerner           |  |                                                     |  |                
|                         |  |                                                     |  |                
|                         |  | Director                                            |  | June     , 2007
|                         |  |                                                     |  |                
|Alvin E. Nashman         |  |                                                     |  |                
|                         |  |                                                     |  |                
|/S/ ARNOLD J. WASSERMAN  |  | Director                                            |  | June 29, 2007  
|                         |  |                                                     |  |                
|Arnold J. Wasserman      |  |                                                     |  |                
|                         |  |                                                     |  |                
|/S/ THOMAS WASSERMAN     |  | Director                                            |  | June 29, 2007  
|                         |  |                                                     |  |                
|Thomas Wasserman         |  |                                                     |  |                



---



MTM
TECHNOLOGIES, INC.

ANNUAL REPORT ON FORM 10-K
Fiscal Year Ended March 31, 2007

EXHIBIT
INDEX

|                 |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|---------------- | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit
  Number |   | Description                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|                 |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|                
|2.1              |  | Merger
  Agreement, dated August 16, 2005, among NEXL, Inc., a Massachusetts
  corporation, MTM Technologies (Massachusetts), LLC, a Delaware limited
  liability company, MTM Technologies, Inc., a New York corporation and the
  sole shareholder of Merger Subsidiary, and Clifford L. Rucker [Incorporated
  by reference to Exhibit 2.1 to the registrants Current Report on Form 8-K
  (Date of Report: August 15, 2005), filed with the Securities and Exchange
  Commission on August 19, 2005.]                        
|                 |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|2.2              |   | Stock
  Purchase Agreement, dated January 27, 2005, by and among Info Systems, Inc.,
  Mark Stellini, Emidio F. Stellini, Jr., Jay Foggy, Richard Roux, Jennifer
  McKenzie and MTM Technologies, Inc. [Incorporated by reference to Exhibit 2.1
  to the registrants Current Report on Form 8-K (Date of Report: January 26,
  2005) filed with the Securities and Exchange Commission on February 1, 2005.]                                                                                                                    
|                 |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|2.3              |   | 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. [Incorporated by reference to Exhibit 2.1 to the
  registrants Current Report on Form 8-K (Date of Report: December 7, 2004),
  filed with the Securities and Exchange Commission on December 13, 2004.]                                                                                                                                          
|                 |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|2.4              |  | Asset
  Purchase Agreement, dated September 17, 2004 by and among Network Catalyst,
  Inc., William Corbin, Rocci J. Della Maggiore and MTM Technologies, Inc.
  [Incorporated by reference to Exhibit 10.1 to the registrants Current Report
  on Form 8-K (Date of Report: September 16, 2004), filed with the Securities
  and Exchange Commission on September 22, 2004.]                                                                                                                                                    
|                 |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|3.1              |  | Restated
  Certificate of Incorporation, as amended                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|                 |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|3.2              |  | Amended and
  Restated By-Laws. [Incorporated by reference to Exhibit 3.1 to the
  registrants Current Report on Form 8-K (Date of Report: August 5, 2004),
  filed with the Securities and Exchange Commission on August 13, 2004.]                                                                                                                                                                                                                                                                                             
|                 |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|4.1              |   | 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.
  [Incorporated by reference to Exhibit 10.1 to the registrants Current
  Report on Form 8-K, (Date of Report: May 24, 2007), filed with the Securities
  and Exchange Commission on May 31, 2007.]     
|                 |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|4.2              |   | 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.
  [Incorporated by reference to Exhibit 10.1 to the registrants Current
  Report on Form 8-K, (Date of Report: March 29, 2007), filed with the Securities
  and Exchange Commission on April 2, 2007.]
|                 |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|4.3              |   | 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.[Incorporated by reference to Exhibit 10.1 to the registrants
  Current Report on Form 8-K, (Date of Report: August 1, 2005), filed with the
  Securities and Exchange Commission on August 4, 2005.]                                                                                                                                                                                                                                                   
|     |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|4.4  |   | 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. [Incorporated by
  reference to Exhibit 10.2 to the registrants Current Report on Form 8-K,
  (Date of Report: August 1, 2005), filed with the Securities and Exchange
  Commission on August 4, 2005.]                                
|     |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|4.5  |   | 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. [Incorporated by reference to Exhibit 10.3 to the
  registrants Current Report on Form 8-K, (Date of Report: November 22,
  2005), filed with the Securities and Exchange Commission on November 29, 2005.]
|     |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|4.6  |   | 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.
  [Incorporated by reference to Exhibit 10.3 to the registrants Current
  Report on Form 8-K, (Date of Report: March 29, 2007), filed with the Securities
  and Exchange Commission on April 2, 2007.]          
|     |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|4.7  |   | 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.
  [Incorporated by reference to Exhibit 10.1 to the registrants Current
  Report on Form 8-K, (Date of Report: April 9, 2007), filed with the Securities
  and Exchange Commission on April 13, 2007.]           
|     |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|4.8  |   | 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.
  [Incorporated by reference to Exhibit 10.3 to the registrants Current
  Report on Form 8-K, (Date of Report: May 24, 2007), filed with the Securities
  and Exchange Commission on May 31, 2005.]               
|     |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|4.9  |  | 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. [Incorporated by reference to Appendix A to the proxy statement
  contained as part of the registrants definitive Schedule 14A, filed with the
  Securities and Exchange Commission on April 15, 2004.]                                                                                                                                                                                                                                             
|     |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|4.10 |  | 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.
  [Incorporated by reference to Exhibit 10.1 to the registrants Current
  Report on Form 8-K, (Date of Report: December 7, 2004), filed with the Securities
  and Exchange Commission on December 13, 2004.]                                                                                          

---



|     |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|---- | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|4.11 |  | 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. [Incorporated by reference to Exhibit 4.3
    to the registrants Quarterly Report on Form 8-K, (Date of Report: December
  31, 2005), filed with the Securities and Exchange Commission on February 14,
  2006.]
|     |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|4.12 |  | 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. [Incorporated by reference to Exhibit 10.1
    to the registrants Current Report on Form 8-K, (Date of Report: November
  22, 2005), filed with the Securities and Exchange Commission on November 29,
  2005.] 
|     |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|4.13 |  | Form of the
  Series A-7 Warrant Certificate [Incorporated by reference to Exhibit 10.2 to
  the registrants Current Report on Form 8-K (Date of Report: May 24, 2007),
  filed with the Securities and Exchange Commission on May 31, 2007.]                                                                                                                                                                                                                                                                                                                         
|     |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|4.14 |  | Form of the
  Series A-6 Warrant Certificate [Incorporated by reference to Exhibit 10.2 to
  the registrants Current Report on Form 8-K (Date of Report: March 29, 2007),
  filed with the Securities and Exchange Commission on April 2, 2007.]                                                                                                                                                                                                                                                                                                                      
|     |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|4.15 |  | Form of the
  Series A-5 Warrant Certificate [Incorporated by reference to Exhibit 10.2 to
  the registrants Current Report on Form 8-K (Date of Report: November 22,
  2005), filed with the Securities and Exchange Commission on November 29,
  2005.]                                                                                                                                                                                                                                                                                                             
|     |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|4.16 |  | Form of the
  Series A-4 Warrant Certificate [Incorporated by reference to Exhibit 10.3 to
  the registrants Current Report on Form 8-K (Date of Report: December 7,
  2004), filed with the Securities and Exchange Commission on December 13,
  2004.]                                                                                                                                                                                                                                                                                                              
|     |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|4.17 |  | Form of the
  Series A-3 Warrant Certificate [Incorporated by reference to Exhibit 10.7 of
  the registrants Current Report on Form 8-K (Date of Report: December 7,
  2004), filed with the Securities and Exchange Commission on December 13,
  2004.]                                                                                                                                                                                                                                                                                                              
|     |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|4.18 |  | Warrant
  Certificate, evidencing 438,225 warrants registered in the name of Pequot
  Private Equity Fund III, LLP. [Incorporated by reference to exhibit 10.6 to
  the registrants Current Report on Form 8-K (Date of Report: May 21, 2004),
  filed with the SEC on June 7, 2004.]                                                                                                                                                                                                                                                                                 
|     |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|4.19 |  | Warrant
  Certificate, evidencing 61,775 warrants registered in the name of Pequot
  Offshore Private Equity Partners III, L.P. [Incorporated by reference to
  exhibit 10.6 to the registrants Current Report on Form 8-K (Date of Report:
  May 21, 2004), filed with the SEC on June 7, 2004.]                                                                                                                                                                                                                                                                     
|     |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|4.20 |  | Warrant
  Certificate, evidencing 350,580 warrants registered in the name of Pequot
  Private Equity Fund III, L.P. [Incorporated by reference to exhibit 4.5 to
  the registrants Registration Statement on Form S-3 (Commission File No.
  333-117549) filed with the SEC on December 5, 2004.]                                                                                                                                                                                                                                                                     
|     |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|4.21 |   | Warrant
  Certificate, evidencing 49,420 warrants registered in the name of Pequot
  Offshore Private Equity Partners III, L.P. [Incorporated by reference to
  exhibit 4.5 to the registrants Registration Statement on Form S-3
  (Commission File No. 333-117549) filed with the SEC on October 5, 2004.]                                                                                                                                                                                                                                                          
|     |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|4.22 |  | Warrant Certificate
  issued to National Electrical Benefit Fund. [Incorporated by reference to
  Exhibit 10.5 to the registrants Current Report on Form 8-K (Date of Report:
  November 22, 2005), filed with the Securities and Exchange Commission on
  November 29, 2005.]                                                                                                                                                                                                                                                                                         
|     |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|4.23 |  | Series A-5
  Voting Agreement, dated November 23, 2005 [Incorporated by reference to
  Exhibit 99.2 to the registrants Current Report on Form 8-K (Date of Report:
  November 22, 2005), filed with the Securities                                                                                                                                                                                                                                                                                                                                                    

---



|      |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|----- | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|      |   | and Exchange
  Commission on November 29, 2005.]                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|      |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|4.24  |  | Columbia
  Voting Agreement, dated November 4, 2005 [Incorporated by reference to
  Exhibit 99.1 to the registrants Current Report on Form 8-K (Date of Report:
  November 4, 2005), filed with the Securities and Exchange Commission on
  November 4, 2005.]                                                                                                                                                                                                                                                                                                                                    
|      |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|10.1  |  | Waiver
  Letter, dated February 14, 2007, between MTM Technologies, Inc. and the CIT
  Group/Business Credit, Inc. [Incorporated by reference to Exhibit 10.1 to the
  registrants Current Report on Form 8-K (Date of Report: February 14, 2007),
  filed with the Securities and Exchange Commission on February 15, 2007.]                                                                                                                                                                                                                                                                     
|      |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|10.2  |  | 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 [Incorporated by reference
    to Exhibit 99.7 to the registrants Registration Statement on Form S-3,
    filed with the Securities and Exchange Commission on December 28, 2005.]                                                                                                                     
|      |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|10.3  |  | 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
  [Incorporated by reference to Exhibit 10.4 to the registrants Current Report
  on Form 8-K (Date of Report: November 22, 2005), filed with the Securities
  and Exchange Commission on November 29, 2005.]
|      |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|10.4  |  | Financing
  Agreement among the CIT Group/Business Credit, Inc., the Lenders that are
  parties thereto, MTM Technologies, Inc., and its subsidiaries that are
  parties thereto, dated as of June 8, 2005 [Incorporated by reference to
  exhibit 10.1 to the registrants Current Report on Form 8-K (Date of Report:
  June 8, 2005), filed with the Securities and Exchange Commission on June 14,
  2005.]                                                                                                                                                                                    
|      |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|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
  [Incorporated by reference to exhibit 10.2 to the registrants Current Report
  on Form 8-K (Date of Report: June 8, 2005), filed with the Securities and
  Exchange Commission on June 14, 2005.]                                                                                                                                                
|      |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|10.6  |  | Micros-to-Mainframes,
  Inc. 2002 Long-Term Performance Plan. [Incorporated by reference to Exhibit
  10.2 to the registrants Registration Statement on Form S-8, filed with the
  Securities and Exchange Commission on March 4, 2005.]                                                                                                                                                                                                                                                                                                                                                          
|      |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|10.7  |  | Micros-to-Mainframes,
  Inc. 2004 Equity Incentive Plan. [Incorporated by reference to Appendix L to
  the proxy statement contained as part of the Companys definitive Schedule
  14A, filed with the Securities and Exchange Commission on April 15, 2004.]                                                                                                                                                                                                                                                                                                                                     
|      |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|10.8  |  | Micros-to-Mainframes,
  Inc. 2000 Long-Term Performance Plan. [Incorporated by reference to exhibit
  99.B1 to the Companys definitive Schedule 14A, filed with the Securities and
  Exchange Commission on September 25, 2000.]                                                                                                                                                                                                                                                                                                                                                                  
|      |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|10.9  |  | Micros-to-Mainframes,
  Inc. 1998 Stock Option Plan. [Incorporated by reference to exhibit 4.2 to the
  registrants Quarterly Report on Form 10-Q for the quarter ended September
  30, 1998, filed with the Securities and Exchange Commission on November 2,
  1998.]                                                                                                                                                                                                                                                                                                                           
|      |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|10.10 |  | Micros-to-Mainframes,
  Inc. 1996 Stock Option Plan. [Incorporated by reference to exhibit 4.1 to the
  registrants Quarterly Report on Form 10-Q for the quarter ended September
  30, 1998, filed with the Securities and Exchange Commission on November 2,
  1998.]                                                                                                                                                                                                                                                                                                                           
|      |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|10.11 |  | Micros-to-Mainframes,
  Inc. 1993 Employee Stock Option Plan. [Incorporated by reference to exhibit
  10.2 to Amendment Number 2 to the registrants Registration Statement on Form
  S-2, filed with the Securities and Exchange Commission on July 14, 1993.]                                                                                                                                                                                                                                                                                                                                    

---



|      |   |                                                                                                                                                                                                                                                                                                                                         
|----- | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|10.12 |  | MTM
  Technologies, Inc. Associates Stock Purchase Plan [Incorporated by reference
  to exhibit 10.1 to the registrants Registration Statement on Form S-8, filed
  with the Securities and Exchange Commission on July 1, 2005.]                                                                                                      
|      |   |                                                                                                                                                                                                                                                                                                                                         
|10.13 |  | Consulting
  Agreement, dated April 26, 2007, between MTM Technologies, Inc. and Francis
  J. Alfano and Tory Ventures LLC [Incorporated by reference to exhibit 10.1 to
  the registrants Current Report on Form 8-K (Date of Report: April 26, 2007),
  filed with the Securities and Exchange Commission on May 1, 2007.]           
|      |   |                                                                                                                                                                                                                                                                                                                                         
|10.14 |  | Agreement
  and General Release, dated April 26, 2007, between MTM Technologies, Inc. and
  Francis J. Alfano [Incorporated by reference to exhibit 10.2 to the
  registrants Current Report on Form 8-K (Date of Report: April 26, 2007),
  filed with the Securities and Exchange Commission on May 1, 2007.]                        
|      |   |                                                                                                                                                                                                                                                                                                                                         
|10.15 |  | Letter
  Agreement, dated September 28, 2006 between MTM Technologies, Inc. and J.W.
  Braukman, III [Incorporated by reference to Exhibit 10.1 to the
  registrants Current Report on Form 8-K (Date of Report: September 28, 2006),
  filed with the Securities and Exchange Commission on October 3, 2006.]                         
|      |   |                                                                                                                                                                                                                                                                                                                                         
|10.16 |  | Consulting
  Service Agreement, dated September 13, 2006 between MTM Technologies, Inc.
  and Michael El-Hillow [Incorporated by reference to Exhibit 10.1 to the
  registrants Current Report on Form 8-K (Date of Report: September 13, 2006),
  filed with the Securities and Exchange Commission on September 19, 2006.]           
|      |   |                                                                                                                                                                                                                                                                                                                                         
|10.17 |  | Employment
  Agreement, dated August 10, 2006 by and between MTM Technologies, Inc. and
  Steven Stringer. [Incorporated by reference to exhibit 10.1 to the registrants
  Current Report on Form 8-K (Date of Report: August 10, 2006), filed with the
  Securities and Exchange Commission on August 14, 2006.]                      
|      |   |                                                                                                                                                                                                                                                                                                                                         
|10.18 |  | Consulting
  Agreement, dated July 7, 2006 between MTM Technologies, Inc. and Steven
  Rothman [Incorporated by reference to Exhibit 10.1 to the registrants
  Current Report on Form 8-K (Date of Report: July 7, 2006), filed with the
  Securities and Exchange Commission on July 11, 2006.]                                       
|      |   |                                                                                                                                                                                                                                                                                                                                         
|10.19 |  | Letter
  Agreement, dated July 7, 2006 between MTM Technologies, Inc. and Steven
  Rothman [Incorporated by reference to Exhibit 10.2 to the registrants
  Current Report on Form 8-K (Date of Report: July 7, 2006), filed with the
  Securities and Exchange Commission on July 11, 2006.]                                           
|      |   |                                                                                                                                                                                                                                                                                                                                         
|10.20 |  | Employment
  Agreement, dated June 28, 2006, between MTM Technologies, Inc. and Francis J.
  Alfano [Incorporated by reference to exhibit 10.1 to the registrants Current
  Report on Form 8-K (Date of Report: June 28, 2006), filed with the Securities
  and Exchange Commission on July 5, 2006.]                                  
|      |   |                                                                                                                                                                                                                                                                                                                                         
|10.21 |  | Severance
  Letter, dated December 12, 2005, between MTM Technologies, Inc. and Michael
  El-Hillow [Incorporated by reference to Exhibit 10.2 to the registrants
  Current Report on Form 8-K (Date of Report: December 12, 2005), filed with
  the Securities and Exchange Commission on December 15, 2005.]                         
|      |   |                                                                                                                                                                                                                                                                                                                                         
|10.22 |  | Waiver and Amendment Letter, dated June 21, 2007, between MTM
    Technologies, Inc. and the CIT Group/Business Credit, Inc. [Incorporated
    by reference to Exhibit 10.1 to the registrants
    Current Report on Form 8-K (Date of Report: June 21, 2007), filed with the
    Securities and Exchange Commission on June 27, 2007.]
|      |   |                                                                                                                                                                                                                                                                                                                                         
|10.23 |  | Waiver and Amendment Letter, dated June 21, 2007, between MTM Technologies, Inc. and the Textron Financial Corporation. [Incorporated by reference to Exhibit 10.2 to the registrants Current Report on Form 8-K (Date of Report: June 21, 2007), filed with the Securities and Exchange Commission on June 27, 2007.]                 
|      |   |                                                                                                                                                                                                                                                                                                                                         
|10.24 |  | Lease Agreement, dated August 15, 2005, between 1200 High Ridge
  Company, LLC and MTM Technologies, Inc. [Incorporated by reference to Exhibit
  10.1 to the registrants Current Report on Form 8-K (Date of Report: August
  15, 2005), filed with the Securities and Exchange Commission on August 19,
  2005.]                     
|      |   |                                                                                                                                                                                                                                                                                                                                         
|10.25 |  | Form of
  Employee Stock Option Agreement [Incorporated by reference to exhibit 10.4 to
  the registrants Quarterly Report on Form 10-Q for the Quarter ended
  September 30, 2004, filed with the Securities and                                                                                                                      

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|      |   |                                                                                                                                                                                                                                                              
|----- | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|      |   | Exchange
  Commission on November 15, 2004.]                                                                                                                                                                                                                 
|      |   |                                                                                                                                                                                                                                                              
|10.26 |  | Form of
  Employee Restricted Stock Unit Agreement. [Incorporated by reference to Exhibit 10.19 to the registrant's Annual Report on Form 10-K/A (Date of Report: March 31, 2006), filed with the Securities and Exchange Commission on September 12, 2006.] 
|      |   |                                                                                                                                                                                                                                                              
|10.27 |  | Form of
  Executive Stock Option Agreement. [Incorporated by reference to Exhibit 10.20 to the registrant's Annual Report on Form 10-K/A (Date of Report: March 31, 2006), filed with the Securities and Exchange Commission on September 12, 2006.]         
|      |   |                                                                                                                                                                                                                                                              
|10.28 |  | Form of
  Executive Restricted Stock Unit Agreement. [Incorporated by reference to Exhibit 10.21 to the registrant's Annual Report on Form 10-K/A (Date of Report: March 31, 2006), filed with the Securities and Exchange Commission on September 12, 2006.]
|      |   |                                                                                                                                                                                                                                                              
|14.1  |  | Code of
  ethics. [Incorporated by reference to Exhibit 14.1 to the registrants Annual
  Report on Form 10-K for the year ended March 31, 2004, filed with the
  Securities and Exchange Commission on June 29, 2004.]                                      
|      |   |                                                                                                                                                                                                                                                              
|21.1  |  | Subsidiaries
  of MTM Technologies, Inc.                                                                                                                                                                                                                     
|      |   |                                                                                                                                                                                                                                                              
|23.1  |  | Consent from
  Goldstein Golub Kessler LLP.                                                                                                                                                                                                                  
|      |   |                                                                                                                                                                                                                                                              
|31.1  |  | Certification
  pursuant to Exchange Act Rule 13a-14(a) of Steven Stringer.                                                                                                                                                                                  
|      |   |                                                                                                                                                                                                                                                              
|31.2  |  | Certification
  pursuant to Exchange Act Rule 13a-14(a) of J.W. Braukman III.                                                                                                                                                                                
|      |   |                                                                                                                                                                                                                                                              
|32.1  |  | Certification
  pursuant to Section 1350 of the Sarbanes-Oxley Act of 2002 of Steven
  Stringer.                                                                                                                                                             
|      |   |                                                                                                                                                                                                                                                              
|32.2  |  | Certification
  pursuant to Section 1350 of the Sarbanes-Oxley Act of 2002 of J.W. Braukman
  III.                                                                                                                                                           
|      |   |                                                                                                                                                                                                                                                              

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