##### Table of Contents





UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549





FORM 10-K



|x | Annual report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
|- | ------------------------------------------------------------------------------------

For the fiscal year ended June 30, 2011

or



| ̈ | Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
|- | ----------------------------------------------------------------------------------------

For the transition period from to
.

Commission file number:
001-31265





RAND WORLDWIDE, INC.

(Exact name of registrant as specified in its charter)



|                                                               |  |                                     
|-------------------------------------------------------------- |  | ------------------------------------
|DELAWARE                                                       |  | 84-1035353                          
|(State or other jurisdiction of
incorporation or organization) |  | (I.R.S. Employer Identification No.)



|                                                         |  |           
|-------------------------------------------------------- |  | ----------
|161 Worcester Road, Suite 401,
Framingham, Massachusetts |  | 01701     
|(Address of principal executive offices)                 |  | (Zip Code)

Registrants telephone number, including area code (508) 663-1400

Securities registered pursuant to Section 12(b) of the Act: None

Securities registered pursuant to Section 12(g) of the Act: Common stock, par value $.01 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   ̈    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   ̈    No  x

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

Indicate by check mark whether the registrant has submitted electronically and posted on its
corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was
required to submit and post such files).    Yes   ̈    No   ̈ (Not applicable)

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§ 229.405) is not contained herein, and will
not be contained, to the best of registrants knowledge, in definitive proxy or information statement incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K  x

Indicate by check mark whether the registrant is a large
accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See definitions of large accelerated filer, accelerated filer and smaller reporting company in Rule 12b-2 of the
Exchange Act.



|                        |  |                                                  |  |                           |  |  
|----------------------- |  | ------------------------------------------------ |  | ------------------------- |  | -
|Large accelerated filer |  |  ̈                                                |  | Accelerated filer         |  |  ̈
|                        |  |                                                  | 
|Non-accelerated filer   |  |  ̈  (Do not check if a smaller reporting company) |  | Smaller reporting company |  | x

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

The aggregate market value of the voting and non-voting equity stock held by non-affiliates of the registrant as of September 12, 2011 was approximately $36,313,017.

The number of shares of common stock outstanding as of September 12, 2011 was 51,922,878.





DOCUMENTS INCORPORATED BY REFERENCE

Information required by Part III of this Form 10-K is incorporated therein by reference to the Registrants definitive proxy statement to be filed in connection with its 2011 Annual Meeting of
Stockholders.









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##### Table of Contents

TABLE OF CONTENTS



|              |  |                                                                                                              |    |  |    | 
|------------- |  | ------------------------------------------------------------------------------------------------------------ | -- |  | -- | 
|PART I        |  |                                                                                                              | 2  | 
|ITEM 1.       |  | Business                                                                                                     |    |  | 2  | 
|ITEM 1B.      |  | Unresolved Staff Comments                                                                                    |    |  | 7  | 
|ITEM 2.       |  | Properties                                                                                                   |    |  | 7  | 
|ITEM 3.       |  | Legal Proceedings                                                                                            |    |  | 8  | 
|ITEM 4.       |  | (Removed and Reserved)                                                                                       |    |  | 8  | 
|              | 
|PART II       |  |                                                                                                              | 9  | 
|ITEM 5.       |  | Market for Registrants Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities |    |  | 9  | 
|ITEM 7.       |  | Managements Discussion and Analysis of Financial Condition and Results of
Operations                        |    |  | 10 | 
|ITEM 8.       |  | Financial Statements and Supplementary Data                                                                  |    |  | 22 | 
|ITEM 9.       |  | Changes in and Disagreements with Accountants on Accounting and Financial
Disclosures                        |    |  | 22 | 
|ITEM 9A.      |  | Controls and Procedures                                                                                      |    |  | 22 | 
|ITEM 9B.      |  | Other Information                                                                                            |    |  | 22 | 
|              | 
|PART III      |  |                                                                                                              | 23 | 
|ITEM 10.      |  | Directors, Executive Officers and Corporate Governance                                                       |    |  | 23 | 
|ITEM 11.      |  | Executive Compensation                                                                                       |    |  | 23 | 
|ITEM 12.      |  | Security Ownership of Certain Beneficial Owners and Management and Related Stockholder
Matters               |    |  | 23 | 
|ITEM 13.      |  | Certain Relationships and Related Transactions, and Director Independence                                    |    |  | 23 | 
|ITEM 14.      |  | Principal Accounting Fees and Services                                                                       |    |  | 23 | 
|              | 
|PART IV       |  |                                                                                                              | 24 | 
|ITEM 15.      |  | Exhibits, Financial Statement Schedules                                                                      |    |  | 24 | 
|              | 
|SIGNATURES    |  |                                                                                                              | 26 | 
|             
|EXHIBIT INDEX | 



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This Annual Report of Rand Worldwide, Inc. on Form 10-K for the year ended June 30,
2011 may contain forward-looking statements within the meaning of The Private Securities Litigation Reform Act of 1995. Readers of this report should be aware of the speculative nature of forward-looking statements. Statements that are
not historical in nature, including those that include the words anticipate, estimate, should, expect, believe, intend, and similar expressions, are based on current
expectations, estimates and projections about, among other things, the industry and the markets in which Rand Worldwide, Inc. operates, and they are not guarantees of future performance. Whether actual results will conform to expectations and
predictions is subject to known and unknown risks and uncertainties, including risks and uncertainties discussed in this report; general economic, market, or business conditions; cost of capital, demand for products and services; changes in Rand
Worldwide, Inc.s competitive position or competitive actions by other companies; the ability to manage growth; changes in laws or regulations or policies of federal and state regulators and agencies; and other circumstances beyond the Rand
Worldwide, Inc.s control. Consequently, all of the forward-looking statements made in this document are qualified by these cautionary statements, and there can be no assurance that the actual results anticipated will be realized, or if
substantially realized, will have the expected consequences on the Rand Worldwide, Inc.s business or operations. Except as required by applicable laws, Rand Worldwide, Inc. does not intend to publish updates or revisions of forward-looking
statements it makes to reflect new information, future events or otherwise.

When used throughout this annual report, the
terms Rand Worldwide, the Company, we, us and our refer to Rand Worldwide, Inc. and, unless the context clearly indicates otherwise, its consolidated subsidiaries.

PART I



|ITEM 1. | BUSINESS
|------- | --------

Background

Rand Worldwide, Inc. was until January 1, 2011 known as Avatech Solutions, Inc. Avatech Solutions, Inc.
(Avatech) was formed as a Delaware corporation on September 9, 1996. During fiscal years 1997 through 1999, Avatech consummated business combinations with 10 companies that provided design automation software, training, technical
support, and professional services to corporations, government agencies, and educational institutions throughout the United States. In November 2002, Avatech completed a merger with PlanetCAD, Inc. (PlanetCad) and became a wholly owned
subsidiary of PlanetCAD, after which PlanetCAD changed its name to Avatech Solutions, Inc. and the original Avatech Solutions, Inc. changed its name to Avatech Solutions Subsidiary, Inc.

On August 17, 2010, Avatech acquired the Delaware corporation then known as Rand Worldwide, Inc. in a reverse merger
transaction that resulted in the pre-merger Rand Worldwide becoming a wholly owned subsidiary of Avatech. In connection with the merger, the pre-merger Rand Worldwides stockholders received shares of Avatech common stock representing
approximately 66% of the outstanding shares of Avatech common stock and Avatechs stockholders retained approximately 34% of the outstanding shares of Avatech common stock. When calculated based on the number of shares of common stock
outstanding on a fully diluted basis on August 17, 2010, the merger consideration was equal to 59.3% of the total common equivalent shares at closing. Although Avatech was the legal successor in the merger, the shares of Avatech common stock
issued to the pre-merger Rand Worldwides stockholders exceeded 50% of the outstanding shares of Avatech common stock outstanding immediately after the merger, so the pre-merger Rand Worldwide was deemed, for accounting and SEC reporting
purposes, to be the continuing reporting entity, and the assets and liabilities and the historical operations that will be reflected in our consolidated financial statements going forward will be those of Rand Worldwide. On January 1, 2011,
Avatech Solutions, Inc. changed its name to Rand Worldwide, Inc. and changed its official stock ticker symbol from AVSO.OB to RWWI.OB.





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The pre-merger Rand Worldwide, Inc. was formed in August 2007 for the purpose of allowing
certain US limited partnerships associated with a domestic private investment firm to acquire, in November 2007, all of the outstanding shares of Rand A Technology Corporation which had been a publicly traded Canadian corporation. Rand
Worldwide, through its subsidiary companies, carried on the business of Rand A Technology Corporation.

General

Rand Worldwide is a leader in design, engineering, and facilities management technology solutions with expertise in computer aided design
(CAD) software, data management, facilities management, and process optimization for the manufacturing, engineering, and building design industries. The Company specializes in software resale, technology consulting, implementation,
integration, training, and technical support solutions that enable clients to more effectively design, develop, and manage projects, products, and facilities. The Company is globally diversified with offices in the United States, Canada, Australia,
Malaysia and Singapore. Rand Worldwide has over 20 years of industry experience and expertise, an extensive list of training and implementation services and long standing relationships with design technology leader Autodesk, Inc. The
Companys clients include corporations, government agencies, and educational institutions.

The Company differentiates
itself from traditional product resellers through a wide range of value-added services, consisting primarily of training, technical support, professional services and courseware development. It also provides software customization, data migration,
computer-aided design standards consulting, process workflow analysis, and implementation assistance for complex design environments. Its strategic focus is to provide clients a competitive advantage with technology solutions that address broad,
enterprise-wide initiatives.

Rand Worldwides sales and service delivery network consists of approximately 249 employees
operating out of 51 business offices throughout the world. The Company has an extensive sales database that contains several hundred thousand point-of-contact names collected over its history and an active customer list of approximately 30,000
private firms, federal, state, and local agencies, and colleges and universities.

The Companys ongoing strategic plan
calls for it to leverage the solid core business base that has been established to profitably grow its product and services offerings in the design engineering market space. Concurrently, the Company plans to continue to identify and engage in
diverse software and services opportunities through strategic relationship development while taking advantage of its established brand, its geographic footprint and technical expertise to accomplish its objectives. Thus, the strategic plan calls for
the Company to target specific product lines that will maximize its Autodesk business, to leverage its market position and core competencies, and to grow the Services component of its business. This strategy remains unchanged after the August 2010
merger with the pre-merger Rand Worldwide except that management believes that the opportunities to execute its strategies have been greatly expanded by the combination of the two organizations.

Rand Worldwide has a software development team within its professional services group that is charged with the responsibility of
developing software-based solutions for customers that improve the customers design workflow processes. These may include sales-oriented configuration tools or engineering-oriented automation and integration tools. The solutions often involve
automating or enhancing the software products the Company sells. While focused on professional services, the team has developed a variety of small applications which are packaged and sold commercially to its customers. It is Rand Worldwides
intention to continue the development of software applications as well as to identify new areas for commercial software development. There can be no assurance that any future sale will result in a similar amount of income to the Company.

The Companys product sales are somewhat cyclical, and increase when the developer of a specific software product offers a new
version, promotions or discontinues support of an older product. As is common among software resellers, the Company purchases products from its suppliers with a combination of cash and credit. The Company allows returns in limited situations.



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Products

Substantially all of Rand Worldwides business consists of the sale of prepackaged software and associated services to customers. Sales are focused on the following five major product categories and
associated value-added services.

Design Automation. More than 94% of product revenues arise from the resale of design
software developed by Autodesk for the building design and land development, manufacturing, utilities, and telecommunications industries, and the delivery of related services from the sales of these products. These product sales are primarily
packaged software programs installed on a user workstation, on a local area network server, or in a hosted environment. The programs perform and support a wide variety of functions related to design, drafting, manufacturing, workflow automation, and
document management activities.

Rand Worldwide also provides 3D laser scanning products including hardware, software,
equipment rentals and training. This solution provides accurate as-builts of existing structures and facilities, resulting in a more accurate and cost effective design.

Data Management. Data management software products help businesses reduce costs, improve quality, strengthen relationships with customers and suppliers, and deliver more innovative products and
services to minimize product time-to-market by leveraging the value of existing data.

Facilities Management. Physical
assets, such as real estate, buildings, equipment, materials, and furniture are a significant percentage of an organizations total asset value. These assets are used by many different business units, departments, and individuals, and must be
accurately managed in order to extend asset life cycles and keep operating costs at a minimum.

Integrated Workplace
Management Systems (IWMS) and Computer Aided Facilities Management (CAFM) systems enable organizations to make informed strategic and business decisions that optimize return on investment, lower asset lifecycle costs, and
increase enterprise-wide productivity and profitability. Organizations of all sizes, spanning the financial, educational, governmental, healthcare, and manufacturing industries, use these solutions to deliver timely, relevant facilities information
as part of their strategic business plans.

Geographic Information Systems (GIS) permit users to link together
disparate data files (maps, aerial photos, tax records, marketing data, etc.) and provide the user with a unified image and knowledge base of a specific geographic location or building location. When combined with information from a facilities
management system, information from GIS applications provide an integrated facilities view that allows enhanced analysis in various spatial contexts for professionals responsible for asset tracking, maintenance, emergency preparedness, space
allocation, and construction planning.

The Company sells, customizes, and implements IWMS and CAFM solutions through its
dedicated salespeople, technical specialists, and a network of strategic partners. It also provides GIS database development services to facilities management customers, both through its employees and strategic partners.

The Company occasionally develops add-ons, utilities and other software complimentary to its resale products or otherwise beneficial to
its customer base. Such software is either offered for sale or provided at no cost to customers.

RAND Secure Archive.
From total cost of ownership and scalability, to security and compliance, digital data archiving has become a leading IT and legal department challenge. Companies are investing time, money and resources to implement and manage complex digital data
archiving systems to effectively handle massive amounts of electronic data. RAND Secure Archive offers data archiving and management solutions based on world-class technology. With RAND Secure Archive, companies can simplify the process to store,
manage and search data and electronic communications enabling internal compliance with regulatory and corporate governance.



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RAND Secure Archive is a fully-hosted, on-demand solution that allows for rapid eDiscovery
searches, governance, legal hold and data recovery. Data is hosted on secure servers with direct data access available at all times.

ASCENT Courseware. Through its ASCENT division, the Company is the leading developer and publisher of professional training and knowledge products for engineering software applications. ASCENT
courseware is distributed globally through outside distribution channels and its products are used to train thousands of people in the engineering and manufacturing fields around the world each year. ASCENTs courseware for the Autodesk
products has received Autodesk Official Training Guide (AOTG) designation.

Services

Professional services include project-focused software implementations, software customization, data migration, computer aided design
standards consulting, supplemental design staffing, drawing digitization, and symbol library development. The Company employs over 100 industry specialists who provide professional services to its design automation customers.

Rand Worldwide offers training courses in approximately 50 different subjects related to various software solutions offered at 51
training facilities and through mobile labs sent to customer sites or other off-site facilities. Training is led by 86 technical experts that have formal training or proven industry experience in the topics they teach. The Company also provides
training services that are highly tailored to meet the needs of a particular customer, including company-specific operational topics, customized product usage, and other general technology or process training. As part of the training offering, the
Company has developed and deployed an Internet-based assessment tool that allows its clients to test their employees knowledge and ability to use the software tools.

The Company provides end-user support services through its Solution Center which provides customers with access to highly-trained certified product-specific support engineers who accelerate issue
resolution, live telephone and desktop support, online case management, and the ProductivityNOW Online Portal. A staff of full-time technology consultants assists customers with questions about product features, functions, usability issues, and
configurations. The Solution Center offers services through multiple access levels including prepaid services, actual elapsed time, and annual support contracts.

Rand Worldwide also offers a consulting services division with a focus on using technology to fulfill strategic objectives. Typical projects target the automation and embedding of design rules, workflows,
and standards into technology tools to automate processes and eliminate bottlenecks.

Markets and Competition

Design Automation. In the design automation market, Rand Worldwide focuses on providing enterprise solutions to small- and
medium-sized businesses with under one billion dollars of annual revenue, primarily in the architecture, engineering, and construction (AEC) market and the mechanical design and manufacturing (MFG) market. The AEC market is
comprised of design services focused on the construction of large physical assets such as buildings, roads, factories, utility companies, and commercial infrastructure projects. The MFG market is primarily focused on the design, tooling, assembly,
and testing of instruments, electronic devices, machines, mechanical devices, and power-driven equipment.

While several local
and regional competitors exist in the various geographic territories where the Company conducts business, it believes that it has a competitive advantage in terms of geographic reach, comprehensive training and support, and the provision of other
products and services, and that it is one of the largest commercial Autodesk resellers in the United States. One national competitor that could be compared to Rand Worldwide in scale, size, geographical reach, and target markets for the resale of
Autodesk products is Tata Technologies Company (Tata).



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Tata is a systems integrator for design automation products with offices located in fourteen
countries and has headquarters in the United States, London, and India. While the Company believes that Tata has greater revenues than Rand Worldwide, the Company estimates that the Autodesk portion of Tatas business is less than its Autodesk
business.

Data Management. In this market, the Company faces similar competition from local and regional Autodesk
resellers in its design automation business.

Facilities Management. The Company provides IWMS and CAFM solutions to
organizations of all sizes, spanning the financial, educational, governmental, healthcare, and manufacturing industries. As a reseller of technology from ARCHIBUS and Idisis, the Company competes with not only competitive applications but also other
resellers of the products it represents.

Arrangements with Principal Suppliers

Revenues are primarily derived from the resale of vendor software products and services. These sales are made pursuant to channel sales
agreements whereby Rand Worldwide is granted the authority to purchase and resell the vendor products and services. Under these agreements, the Company both resells software directly to its customers and acts as a sales agent for various vendors and
receives commissions for its sales efforts.

On February 1, 2010, certain subsidiaries of Rand Worldwide entered into
renewable Value Added Reseller Agreements with Autodesk. The renewable agreements have a term of three years but provide targets for a one-year period. Under these agreements, Autodesk appointed the Company as a non-exclusive partner to market,
distribute, and support Autodesk software products and identifies targets for the upcoming year. The territories for such authorizations include the authorization to sell various Autodesk products in parts of the United States and Australia and in
all of Canada, Malaysia and Singapore. The Company must achieve yearly minimum purchase requirements from the sale of Autodesks various software products in order to be eligible to purchase such products directly from Autodesk. For the year
ended June 30, 2011, the Companys revenue from the sale of Autodesk software and subscriptions was approximately $58.4 million.

Customers

The Company
markets its products to private companies, public corporations, government agencies, and educational institutions throughout the United States, Canada, Australia, Malaysia and Singapore. In the fiscal year ended June 30, 2011, the revenues
generated by our top ten customers represented approximately ten percent of consolidated revenues, and no single customer accounted for five percent or more of our consolidated revenues.

Intellectual Property

The Company regards its technology and other
proprietary rights as essential to its business. As such, it relies on copyright, trade secret, confidentiality procedures, contract provisions, and trademark law to protect its technology and intellectual property. Rand Worldwide has
confidentiality agreements with its consultants and corporate partners and controls access to, and distribution of, its products, documentation, and other proprietary information.

Rand Worldwide owns several federally registered trademarks, and has other trademark applications pending, but has no patents or patent
applications pending. This Annual Report contains trademarks and trade names of Rand Worldwide and its affiliates as well as those of other companies. All trademarks and trade names appearing in this report are the property of their respective
holders.



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Employees

At June 30, 2011, the Company had 378 employees, of which 372 are full-time employees including 30 at our Owings Mills, Maryland office and 13 at our Framingham, Massachusetts office, which offices
constitute our corporate headquarters and house a training facility and some sales and technical personnel. Other employees are located in 49 other offices throughout the United States, Canada, Australia, Malaysia and Singapore. None of our
employees are represented by collective bargaining agreements, and we have never experienced a work stoppage. We believe that our employee relations are good.

Available Information

Rand Worldwide maintains an Internet site at
http://rand.com on which it makes available, free of charge, its Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and all amendments to the foregoing as soon as reasonably practicable after these
reports are electronically filed with, or furnished to, the Securities and Exchange Commission (the SEC). In addition, stockholders may access these reports and documents on the SECs web site at www.sec.gov. The
Companys executive offices are located at 161 Worcester Road, Suite 401, Framingham, Massachusetts 01701 and its telephone number is (508) 663-1400.



|ITEM 1B. | UNRESOLVED STAFF COMMENTS
|-------- | -------------------------

Not applicable to smaller reporting companies.



|ITEM 2. | PROPERTIES
|------- | ----------

The
Company has corporate offices in Framingham, Massachusetts and Owings Mills, Maryland with leases for 10,127 and 13,430 square feet that expire on October 31, 2015 and September 30, 2011, respectively. A five-year lease on a new
10,179 square foot office in Owings Mills will begin on October 1, 2011 at which time the current Owings Mills office will relocate. These facilities house executive and primary administrative offices as well as accounting, order processing
operations, IT, sales, and marketing. The Company also leases office space at the following locations:



|                           |  |                |       |  |      |  |            | 
|-------------------------- |  | -------------- | ----- |  | ---- |  | ---------- | 
|Domestic Locations         |  | Square Footage |       |  | Term | 
|CaliforniaNewport Beach   |  |                | 948   |  |      |  | 10/31/2013 | 
|ColoradoGreenwood Village |  |                | 7,462 |  |      |  | 12/31/2011 | 
|FloridaMaitland           |  |                | 3,425 |  |      |  | 10/31/2014 | 
|FloridaTampa              |  |                | 4,103 |  |      |  | 3/31/2014  | 
|IllinoisChicago           |  |                | 2,095 |  |      |  | 10/31/2017 | 
|IllinoisRolling Meadows   |  |                | 3,440 |  |      |  | 4/30/2015  | 
|IndianaIndianapolis       |  |                | 3,129 |  |      |  | 4/30/2013  | 
|IowaCedar Rapids          |  |                | 2,456 |  |      |  | 10/31/2014 | 
|IowaDes Moines            |  |                | 3,027 |  |      |  | 10/31/2014 | 
|MichiganGrandville        |  |                | 700   |  |      |  | 2/28/2012  | 
|MichiganTroy              |  |                | 5,090 |  |      |  | 3/31/2014  | 
|MinnesotaSt. Paul         |  |                | 2,725 |  |      |  | 3/31/2012  | 
|NebraskaOmaha             |  |                | 5,473 |  |      |  | 8/31/2013  | 
|New HampshireBedford      |  |                | 2,843 |  |      |  | 1/31/2016  | 
|New MexicoAlbuquerque     |  |                | 2,490 |  |      |  | 7/31/2012  | 
|New YorkAlbany            |  |                | 2,027 |  |      |  | 5/31/2015  | 
|New YorkBuffalo           |  |                | 1,875 |  |      |  | 9/30/2013  | 
|New YorkNew York          |  |                | 1,741 |  |      |  | 5/31/2012  | 
|New YorkSyracuse          |  |                | 1,280 |  |      |  | 11/30/2011 | 
|North CarolinaCharlotte   |  |                | 2,093 |  |      |  | 5/31/2016  | 



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|                                   |  |                |        |  |      |  |            | 
|---------------------------------- |  | -------------- | ------ |  | ---- |  | ---------- | 
|North CarolinaMorrisville         |  |                | 3,671  |  |      |  | 11/30/2011 | 
|OhioCleveland                     |  |                | 11,452 |  |      |  | 3/31/2012  | 
|OhioColumbus                      |  |                | 1,152  |  |      |  | 2/28/2013  | 
|OhioToledo                        |  |                | 435    |  |      |  | 4/30/2012  | 
|OhioVandalia                      |  |                | 1,567  |  |      |  | 10/31/2016 | 
|OregonPortland                    |  |                | 3,147  |  |      |  | 10/31/2015 | 
|TexasHouston                      |  |                | 3,384  |  |      |  | 12/31/2013 | 
|TexasIrving                       |  |                | 4,588  |  |      |  | 4/30/2013  | 
|UtahMurray City                   |  |                | 2,870  |  |      |  | 5/31/2015  | 
|VirginiaCharlottesville           |  |                | 984    |  |      |  | 2/28/2013  | 
|VirginiaRichmond                  |  |                | 1,832  |  |      |  | 9/30/2015  | 
|VirginiaVirginia Beach            |  |                | 5,887  |  |      |  | 10/31/2014 | 
|WashingtonSeattle                 |  |                | 3,621  |  |      |  | 10/31/2015 | 
|WisconsinMilwaukee                |  |                | 1,909  |  |      |  | 4/30/2016  | 
|                                   |  |               
|International Locations            |  | Square Footage |        |  | Term | 
|AlbertaCalgary, CA                |  |                | 4,239  |  |      |  | 4/30/2014  | 
|AlbertaEdmonton, CA               |  |                | 3,075  |  |      |  | 7/31/2012  | 
|British ColumbiaRichmond, CA      |  |                | 3,114  |  |      |  | 9/30/2011  | 
|ManitobaWinnipeg, CA              |  |                | 1,517  |  |      |  | 10/31/2012 | 
|Nova ScotiaHalifax, CA            |  |                | 1,850  |  |      |  | 12/31/2011 | 
|OntarioLondon, CA                 |  |                | 900    |  |      |  | 2/28/2013  | 
|OntarioMississauga, CA            |  |                | 12,063 |  |      |  | 9/30/2019  | 
|OntarioNepean, CA                 |  |                | 955    |  |      |  | 8/31/2014  | 
|QuebecMontreal, CA                |  |                | 3,785  |  |      |  | 12/31/2011 | 
|SaskatchewanRegina, CA            |  |                | 280    |  |      |  | 12/31/2013 | 
|SaskatchewanSaskatoon, CA         |  |                | 3,360  |  |      |  | 11/30/2015 | 
|Kuala LumpurBikit Jalil, MA       |  |                | 1,250  |  |      |  | 1/31/2013  | 
|SingaporeSingapore, SI            |  |                | 2,725  |  |      |  | 4/30/2013  | 
|South AustraliaNorth Adelaide, AU |  |                | 1,964  |  |      |  | 6/30/2012  | 
|VictoriaMount Waverley, AU        |  |                | 2,018  |  |      |  | 9/15/2011  | 

The commercial real estate market is volatile and unpredictable in terms of available space, rental fees,
and occupancy rates and preferred locations. The Company cannot be certain that additional space will be available when it is required, or that it will be affordable or in a preferred location.



|ITEM 3. | LEGAL PROCEEDINGS
|------- | -----------------

From time to time, the Company is involved in legal matters or named as a defendant in legal actions arising from normal operations, or is presented with claims for damages arising out of the conduct of
its business. Management believes that no pending matter, alone or together with other pending matters, is likely to have a material adverse effect on the Companys future financial condition or results of operations.



|ITEM 4. | (Removed and Reserved)
|------- | ----------------------



8



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PART II



|ITEM 5. | MARKET FOR REGISTRANTS COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
|------- | ------------------------------------------------------------------------------------------------------------

Market Price Data

Rand
Worldwides common stock is not heavily traded. Trades are affected in privately-negotiated transactions and by certain broker-dealers, who make a market in the common stock through the OTCQB Market operated by the OTC Markets Group, Inc.
Market information for the Companys common stock may be found at the OTC Markets Group, Inc.s Internet website, www.otcmarkets.com, under the symbol RWWI. The information contained in or accessed through that website
is not part of this Annual Report or incorporated herein by reference. The following table sets forth, to the best knowledge of the Company, the high and low bid quotations per share, rounded to the nearest whole cent, as available through the OTCQB
Market for each quarterly period within the two most recent fiscal years. These quotations represent prices between dealers and do not reflect retail mark-ups, mark-downs or commissions, and may not represent actual transactions. There may have been
additional transactions during these periods of which the Company is not aware.



|                                |  |      |      |  |     |   |      | 
|------------------------------- |  | ---- | ---- |  | --- | - | ---- | 
|Period                          |  | High |      |  | Low |  
|Fiscal Year Ended June 30, 2011 |  |      |      |  |     |   |      | 
|First Quarter                   |  | $    | 0.70 |  |     | $ | 0.26 | 
|Second Quarter                  |  |      | 0.75 |  |     |   | 0.26 | 
|Third Quarter                   |  |      | 0.60 |  |     |   | 0.44 | 
|Fourth Quarter                  |  |      | 0.85 |  |     |   | 0.26 | 
|                                |  |     
|Fiscal Year Ended June 30, 2010 |  |      |      |  |     |   |      | 
|First Quarter                   |  | $    | 0.60 |  |     | $ | 0.30 | 
|Second Quarter                  |  |      | 0.56 |  |     |   | 0.26 | 
|Third Quarter                   |  |      | 0.95 |  |     |   | 0.26 | 
|Fourth Quarter                  |  |      | 1.02 |  |     |   | 0.26 | 

Recent Closing Prices

On September 12, 2011, the closing price for our common stock as reported on the OTCQB Market was $0.75.

Dividend Information

The Company has never paid cash dividends on its
common stock and does not anticipate paying any cash dividends in the foreseeable future. Rather, management intends to continue its strategy of retaining earnings for the foreseeable future for use in the expansion and operation of our businesses.
The declaration and amount of any future cash dividends is at the discretion of the Companys Board of Directors. Moreover, without the consent of our senior lender, the Company is prohibited from declaring dividends on the Companys
common stock. Accordingly, there can be no guaranty that stockholders will receive any cash dividends on their common stock in the future.

The Company has outstanding shares of Series D Convertible Preferred Stock (Series D Stock) and Series E Convertible Preferred Stock (Series E Stock), which are eligible for 10%
annual, cumulative dividends. The dividends are payable quarterly as declared by the Board of Directors. These dividends have priority over any declaration or payment of any dividend or other distribution on the common stock.

For the year ended June 30, 2011, dividends totaling $145,000 were paid to the holders of the Series D Stock and Series E Stock.
There were no dividends paid for the year ended October 31, 2009 or the eight months ended June 30, 2010.



9



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##### Table of Contents

Number of Stockholders

As of September 12, 2011, there were 1,454 holders of record of the Companys common stock, 11 holders of Series D Stock, and 26 holders of Series E Stock.

Equity Compensation Plan Information

Pursuant to the SECs Regulation S-K Compliance and Disclosure Interpretation 106.01, the information regarding the Companys equity compensation plans required by this Item pursuant to
Item 201(d) of Regulation S-K is located in Item 12 of Part III of this annual report and is incorporated herein by reference.

Issuer Purchases of Equity Securities

During the fourth quarter of fiscal year 2011, the Company did not purchase any shares of its common stock.

Sales of Unregistered Equity Securities

On August 17, 2011, the
Company sold equity securities that were not registered under the Securities Act of 1933, as amended, and information about such sales was included in the Companys Current Report on Form 8-K that was filed with the SEC on that date. The
Company did not sell any other unregistered equity securities during fiscal year 2011.



|ITEM 7. | MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
|------- | -------------------------------------------------------------------------------------

THE FOLLOWING DISCUSSION AND ANALYSIS OF THE FINANCIAL CONDITION AND RESULTS OF OPERATIONS SHOULD BE READ IN CONJUNCTION WITH THE
CONSOLIDATED FINANCIAL STATEMENTS AND THE RELATED NOTES THERETO INCLUDED ELSEWHERE IN THIS REPORT.

Overview

Rand Worldwide is a leading provider of design automation and data management solutions for the manufacturing, building design,
engineering, infrastructure and facilities management markets. The Company also specializes in technical support, training, and consulting aimed at improving design and documentation efficiencies and the seamless integration of workflow processes.
This combination of technology solutions and services enables customers to enhance productivity, profitability, and competitive position.

The Companys business strategy is built on three core principles designed to leverage its existing strengths with expected market opportunities:



| | - |  | Maintain and profitably grow its strong position in the Autodesk software economy.
| | - |  | ----------------------------------------------------------------------------------



| | - |  | Profitably grow its consulting and services business by leveraging its experts in design engineering.
| | - |  | -----------------------------------------------------------------------------------------------------



| | - |  | Acquire or license and integrate diverse, yet complementary, software and services businesses to extend its product offerings to its large customer
base and expand its market potential.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Critical Accounting Policies

The consolidated financial statements are impacted by the accounting policies used and the estimates and assumptions made by management
during their preparation. Critical accounting policies and estimates that impact the consolidated financial statements are those that relate to software revenue recognition, estimates of bad debts, income taxes and recoverability of goodwill and
purchased intangible assets. All of these critical



10



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##### Table of Contents

accounting policies are discussed with and reviewed by the Companys Audit Committee on a periodic basis. Presented below is a description of the accounting policies that management believes
are most critical to an understanding of the consolidated financial statements.

Software Revenue Recognition- The
Company derives most of its revenue from the resale of packaged software products, and, historically, the Company has not experienced significant customer returns. Rand Worldwide earns service revenue from training and other professional services,
which often are related to the products that are sold but are not essential to the functionality of the software. Annual support contracts are also offered to customers for the software products that are sold, or the Company offers maintenance and
support services under hourly billing arrangements.

Revenue from software arrangements is recognized in accordance with the
provisions of ASC 985 (previously American Institution of Certified Public Accountants (AICPA) Statement of Position No. 97-2, Software Revenue Recognition, as amended by SOP No. 98-9, Modification of SOP 97-2,
Software Revenue Recognition, With Respect to Certain Transactions). Prior to recognizing any revenue under these arrangements, (1) persuasive evidence of an arrangement must exist, (2) delivery of the software or service must have
occurred, (3) all fees must be assessed as fixed or determinable, and (4) all fees must be probable of collection. The Company determines whether criteria (3) and (4) have been satisfied based on its judgment regarding the fixed
nature of the fee charged for services rendered and products delivered and the collectability of such fee. Revenue recognized in a reporting period could be adversely affected if future changes in conditions related to a transaction cause management
to determine these criteria are not met. In the past, it has not been necessary to adjust reported revenues due to changes in conditions, and the Company continues to evaluate current conditions that may affect the nature and timing of our revenue
recognition.

The Companys arrangements with its customers may involve the sale of one or more products and services at
the same time. The Company considers these to be multiple elements of a single arrangement. The Company adopted Accounting Standards Update (ASU) No. 2009-13, Multiple-Deliverable Revenue Arrangements (ASU
2009-13), on a prospective basis as of the beginning of fiscal 2011 for new and materially modified arrangements originating on or after July 1, 2010. Under the new standards, we allocate the total arrangement consideration to each
separable element based on the relative selling price of each element in accordance with selling price hierarchy, which includes: vendor specific objective evidence (VSOE) if available; third party evidence (TPE) if VSOE is not available; and
best estimate of selling price if neither VSOE nor TPE is available. In general, the Company uses VSOE to allocate the selling price to each element. Arrangement consideration allocated to undelivered elements is deferred until delivery of the
individual elements. The adoption of new guidance did not result in a material impact to the financial statements for fiscal year 2011.

Bad Debts- The Company maintains an allowance for doubtful accounts for estimated losses which may result from the inability of customers to pay for purchased products and services or for disputes
that affect the ability to fully collect accounts receivable. Rand Worldwide estimates this allowance by reviewing the status of past-due accounts and records general reserves based on historical bad debt expense. Accounts are considered past due
based on the payment terms as stated on the invoice. Actual experience has not varied significantly from estimates; however, if the financial condition of the Companys customers were to deteriorate, resulting in their inability to pay for
products or services, there may be a need to record additional allowances in future periods. To mitigate this risk, the Company performs ongoing credit evaluations of its customers.

Income Taxes- Income taxes are accounted for under the liability method, under which deferred tax assets and liabilities are
determined based on the differences between the financial statement and tax basis of assets and liabilities using enacted tax rates in effect in the years in which the differences are expected to reverse. A valuation allowance against the net
deferred tax assets is recorded if based upon the weight of available evidence it is more likely than not that some or all of the deferred tax assets will not be realized. The Company records liabilities for income tax contingencies if it is
probable that the Company has incurred a tax liability and the liability or range of loss can be reasonably estimated. The Company records liabilities for uncertain tax positions in accordance with ASC 740-10 Income Taxes(FIN 48).



11



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##### Table of Contents

Recoverability of goodwill and purchased intangible assets- The Company accounts for
goodwill and other intangibles under ASC 350 (previously Statement of Financial Accounting Standards (SFAS) No. 142, Goodwill and Other Intangible Assets). ASC 350 prescribes a two-phase process for impairment testing of
goodwill. The first phase screens for impairment; while the second phase, if necessary, measures the impairment. Management considers the Company to be a single reporting unit; accordingly, all of the goodwill is associated with the entire company.
The Company performs the required impairment analysis of goodwill annually or on an interim basis if circumstances dictate. Any reduction of the enterprise fair value below the recorded amount of equity could require the Company to write down the
value of goodwill and record an expense for an impairment loss. Managements analysis of the recoverability of goodwill as of June 30, 2011 determined that there was no need for any write downs of its assets.

Results of Operations

The following describes the components of each line item of our consolidated statement of operations.

Product Sales- Product sales consist primarily of the resale of packaged design software, including:



| |  |  | Autodesk 2D and 3D computer aided design software for customers in the mechanical, architectural and civil engineering sectors, as well as
visualization and animation technology to companies in the media and entertainment industry;
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Autodesk data management software;
| | - |  | ----------------------------------



| |  |  | Archibus facilities management software for space planning, strategic planning, and lease/property administration;
| | - |  | ------------------------------------------------------------------------------------------------------------------



| |  |  | Leica 3D laser scanning equipment for the Architectural, Engineering and Construction sector;
| | - |  | ---------------------------------------------------------------------------------------------



| |  |  | ASCENT internally developed courseware for a variety of engineering applications; and
| | - |  | -------------------------------------------------------------------------------------



| |  |  | Autonomy data archiving solutions
| | - |  | ---------------------------------

Service Revenue- Rand Worldwide provides services in the form of training, consulting services, software development, custom courseware development and technical support to its customers. Rand
Worldwide employs a technical staff of over 100 personnel associated with these types of services. The Company also offers support and implementation services to complement the data archive solutions provided and sold through its RAND Secure Archive
Division.

Commission Revenue- The Company offers Autodesks subscription programs, which entitle subscribers to
receive software upgrades, web support and eLearning lessons directly from Autodesk. Because Rand Worldwide does not participate in the delivery of these subscription products or the web support and eLearning lesson benefits, the Company records the
gross profit from the sale of Autodesk software subscriptions as commission revenue. In addition, the Company sells technology upgrades to existing Autodesk customers through the Autodesk Subscription program where the customers receive the latest
releases of Autodesk software, incremental product enhancements, and personalized web support direct from Autodesk.

Based on
its analysis of the Autodesk Subscription program, Rand Worldwide records the net proceeds that it receives from Autodesk for subscription sales in accordance with the provisions of Financial Accounting Standards Board (FASB) Accounting
Standards Codification (ASC) 605 (previously EITF 99-19, Reporting Revenue Gross as a Principal versus Net as an Agent).

Rand Worldwide also generates commission revenue from the resale of Autodesk software to various customers, a number of which Autodesk considers major accounts. Autodesk designates these
customers as major accounts based on specific criteria, primarily sales volume, and typically gives these customers volume



12



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##### Table of Contents

discounts. The Company is responsible for managing and reselling Autodesk products to a number of these major account customers; however, software products are shipped directly from Autodesk to
the customers. Rand Worldwide receives commissions upon shipment of the products from Autodesk to the customer based on the product sales price.

Cost of Product Sales- The cost of product sales consists of the cost of purchasing products from software suppliers or hardware manufacturers as well as the associated shipping and handling costs.
The Company earns incentives from its main supplier based upon the achievement of certain quarterly sales targets and these incentives, when achieved, serve to reduce the cost of product sales. The incentive targets are set annually and while the
targets have changed over time in amount and structure, the Company has generally been able to focus its sales efforts in a manner to achieve margins on its product sales that are within a relatively narrow range period to period.

Cost of Service Revenue- Cost of service revenue includes the direct costs associated with the implementation of software and
hardware solutions as well as training, support services, and professional services. These costs consist primarily of compensation, travel, literature, and the costs of third-party contractors engaged by the Company. The cost of service revenue does
not include an allocation of overhead costs.

Selling, General and Administrative Expenses- Selling, general and
administrative expenses consist primarily of compensation and other expenses associated with the Companys sales force, management, finance, human resources, and information systems. Advertising and public relations expenses and expenses for
facilities, such as rent and utilities, are also included in selling, general and administrative expenses.

Depreciation
and Amortization Expenses- Depreciation expense represents the period costs associated with our investment in property and equipment, consisting principally of computer equipment, software, furniture and fixtures, and leasehold improvements.
Amortization expense represents the period costs of the acquired customer list and trade name intangible assets. The Company computes depreciation and amortization expenses using the straight-line method. Rand Worldwide leases all of its facilities
and depreciates leasehold improvements over the lesser of the lease term or the estimated useful life of the asset. Total amortization expense for the year ended June 30, 2011 was $676,000. Total depreciation expense for the year ended
June 30, 2011 was $1,101,000.

Interest Expense- For the year ended June 30, 2011, interest expense consisted
of interest on capital lease obligations and borrowings from lines of credit.



13



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##### Table of Contents

Selected Revenue Information for Years Ended June 30, 2011 and October 31, 2009

The following table sets forth the percentages of total revenue represented by selected items reflected in our audited
Consolidated Statements of Operations included elsewhere in this report. The year-to-year comparisons of financial results are not necessarily indicative of future results.

As noted above, Avatech Solutions, Inc. merged with Rand Worldwide, Inc. on August 17, 2010 and changed its name to Rand Worldwide, Inc. on January 1, 2011. Although Avatech was the
legal successor in that merger, Rand Worldwide was considered to be the continuing entity for financial statement reporting purposes. Accordingly, the results discussed below for the year ended October 31, 2009 are those of the pre-merger Rand
Worldwide while the results for the year ended June 30, 2011 include Rand Worldwide for the full year and Avatech Solutions since August 17, 2010, the date of the merger.



|                                                             |  |               |       |    |                  |  |       |   
|------------------------------------------------------------ |  | ------------- | ----- | -- | ---------------- |  | ----- | --
|                                                             |  | Years ended   |      
|                                                             |  | June 30, 2011 |       |    | October 31, 2009 | 
|Revenue:                                                     |  |               |       |    |                  |  |       |   
|Product sales                                                |  |               | 55.7  | %  |                  |  | 47.9  | % 
|Service revenue                                              |  |               | 23.2  | %  |                  |  | 30.5  | % 
|Commission revenue                                           |  |               | 21.1  | %  |                  |  | 21.6  | % 
|                                                             |  |               |       |    |                  |  |       |   
|Total revenue                                                |  |               | 100.0 | %  |                  |  | 100.0 | % 
|                                                             |  |              
|Cost of revenue:                                             |  |               |       |    |                  |  |       |   
|Cost of product sales                                        |  |               | 37.4  | %  |                  |  | 32.3  | % 
|Cost of service revenue                                      |  |               | 15.9  | %  |                  |  | 25.9  | % 
|                                                             |  |               |       |    |                  |  |       |   
|Total cost of revenue                                        |  |               | 53.3  | %  |                  |  | 58.2  | % 
|                                                             |  |               |       |    |                  |  |       |   
|Gross margin                                                 |  |               | 46.7  | %  |                  |  | 41.8  | % 
|                                                             |  |              
|Other operating expenses:                                    |  |               |       |    |                  |  |       |   
|Selling, general and administrative                          |  |               | 41.5  | %  |                  |  | 43.1  | % 
|Depreciation and amortization                                |  |               | 2.0   | %  |                  |  | 2.5   | % 
|Restructuring charges                                        |  |               | 0.0   | %  |                  |  | 3.3   | % 
|                                                             |  |               |       |    |                  |  |       |   
|Total other operating expenses                               |  |               | 43.5  | %  |                  |  | 48.9  | % 
|                                                             |  |               |       |    |                  |  |       |   
|Operating income (loss)                                      |  |               | 3.2   | %  |                  |  | (7.1  | )%
|                                                             |  |              
|Other income (expense):                                      |  |               |       |    |                  |  |       |   
|Interest expense                                             |  |               | (0.6  | )% |                  |  | (3.9  | )%
|Currency exchange gains (losses)                             |  |               | (0.3  | )% |                  |  | 0.1   | % 
|Other income (expense)                                       |  |               | (0.1  | )% |                  |  | 0.0   | % 
|                                                             |  |               |       |    |                  |  |       |   
|Income (loss) from continuing operations before income taxes |  |               | 2.2   | %  |                  |  | (10.9 | )%
|                                                             |  |               |       |    |                  |  |       |   
|Income tax expense (benefit)                                 |  |               | 0.2   | %  |                  |  | (0.7  | )%
|                                                             |  |               |       |    |                  |  |       |   
|Income (loss) from continuing operations                     |  |               | 2.0   | %  |                  |  | (10.2 | )%
|                                                             |  |               |       |    |                  |  |       |   

Year Ended June 30, 2011 Compared to Year Ended October 31, 2009

Revenue



|                   |  |               |            |  |                  |   |            |  |  |  |      |  
|------------------ |  | ------------- | ---------- |  | ---------------- | - | ---------- |  |  |  | ---- | -
|                   |  | Years ended   |            |  | % change         |  
|                   |  | June 30, 2011 |            |  | October 31, 2009 |   |           
|Revenue:           |  |               |            |  |                  |   |            |  |  |  |      |  
|Product sales      |  | $             | 49,678,000 |  |                  | $ | 25,522,000 |  |  |  | 94.6 | %
|Service revenue    |  |               | 20,678,000 |  |                  |   | 16,236,000 |  |  |  | 27.4 | %
|Commission revenue |  |               | 18,836,000 |  |                  |   | 11,505,000 |  |  |  | 63.7 | %
|                   |  |               |            |  |                  |   |            |  |  |  |      |  
|Total Revenue:     |  | $             | 89,192,000 |  |                  | $ | 53,263,000 |  |  |  | 67.5 | %
|                   |  |               |            |  |                  |   |            |  |  |  |      |  



14



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##### Table of Contents

Revenue: Total revenue for the year ended June 30, 2011 increased by $35.9
million or 67.5% when compared to the year ended October 31, 2009.

Product sales increased by $24.2 million or 94.6% for
the year ended June 30, 2011 when compared to the year ended October 31, 2009. This increase resulted from the addition of Avatechs results, which contributed an estimated $16.4 million to product revenue. Additionally, Rand
Worldwides existing business increased approximately $7.7 million when compared to the year ended October 31, 2009 due in part to a single large sale of $2.1 million in product revenue, changes in the sales compensation plans which place
a greater sales emphasis on new product sales, combined with economic improvements in the markets served by the Company.

Service revenues increased $4.4 million or 27.4% for the year ended June 30, 2011 when compared to the year ended October 31,
2009. The addition of Avatechs results contributed an estimated $7.3 million in service revenue. Without the addition of Avatechs results, service revenues for Rand Worldwide would have decreased $2.8 million as a result of
Companys exit from the Product Life Cycle Management (PLM) consulting market combined with declines in e-mail archiving and data storage services.

Commission revenues increased $7.3 million or 63.7% for the year ended June 30, 2011 when compared to the year ended October 31, 2009. The addition of Avatechs results contributed an
estimated $8.5 million of commission revenue, while Rand Worldwides existing business decreased $1.2 million. The $1.2 million decrease in existing business was the result of decreased margin rates due to pricing changes instituted by the
Companys primary vendor, Autodesk, in February of 2010 whereby the cost of subscription renewal contracts increased relative to its list price. Additionally, the Company began a program to outsource many of the smaller subscription contract
renewal sales to a third party allowing the Company to focus its sales efforts on the more profitable new product business but also resulting in reduced gross margins on subscription renewals. The reduced gross margin on subscription contracts
resulted in lowered commission revenues because subscription contracts are reported net of cost.

Cost of Revenue



|                        |  |               |            |  |                  |   |            |  |  |  |      |  
|----------------------- |  | ------------- | ---------- |  | ---------------- | - | ---------- |  |  |  | ---- | -
|                        |  | Years ended   |            |  | % change         |  
|                        |  | June 30, 2011 |            |  | October 31, 2009 |   |           
|Cost of revenue:        |  |               |            |  |                  |   |            |  |  |  |      |  
|Cost of product sales   |  | $             | 33,361,000 |  |                  | $ | 17,199,000 |  |  |  | 94.0 | %
|Cost of service revenue |  |               | 14,152,000 |  |                  |   | 13,802,000 |  |  |  | 2.5  | %
|                        |  |               |            |  |                  |   |            |  |  |  |      |  
|Total cost of revenue   |  | $             | 47,513,000 |  |                  | $ | 31,001,000 |  |  |  | 53.3 | %
|                        |  |               |            |  |                  |   |            |  |  |  |      |  
|Gross margin            |  | $             | 41,679,000 |  |                  | $ | 22,262,000 |  |  |  | 87.2 | %
|                        |  |               |            |  |                  |   |            |  |  |  |      |  

Cost of Revenue: Total cost of revenue increased by $16.5 million or 53.3% for the year ended
June 30, 2011 when compared to the year ended October 31, 2009.

Cost of product sales increased 94.0% while product
sales increased 94.6% during the year ended June 30, 2011 when compared to the year ended October 31, 2009. Product costs increased at a lower rate than product revenues due to larger rebates received from vendors as a result of the
Company exceeding its sales targets.

Cost of service revenue increased by $350,000, or 2.5%, while service revenue increased
by 27.4% during the year ended June 30, 2011 when compared to the year ended October 31, 2009. The addition of Avatechs results contributed an estimated $5.1 million of additional service costs not incurred in the prior year. The
remaining portion of Rand Worldwides business had offsetting cost decreases of $4.8 million as a result of reductions in force relating to the Companys exit from the PLM consulting market and from targeted workforce reductions which were
part of the Companys efforts to reduce its costs and improve its margins. Thus, total cost of service revenue as a percentage of related revenue decreased to 68.4% during the year ended June 30, 2011 from 85.0% during the year ended
October 31, 2009.



15



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##### Table of Contents

Gross Margin: The Companys overall gross margin percentage of 46.7% for the
year ended June 30, 2011 was higher than the 41.8% gross margin for the year ended October 31, 2009 due to changes in revenue mix as the Company exited the underperforming PLM Consulting business and saw larger gains in product and
commission revenues than in services.

Other Operating Expenses



|                                    |  |               |            |  |                  |   |            |  |  |  |        |   
|----------------------------------- |  | ------------- | ---------- |  | ---------------- | - | ---------- |  |  |  | ------ | --
|                                    |  | Years ended   |            |  | % change         |  
|                                    |  | June 30, 2011 |            |  | October 31, 2009 |   |           
|Other operating expenses:           |  |               |            |  |                  |   |            |  |  |  |        |   
|Selling, general and administrative |  | $             | 37,022,000 |  |                  | $ | 22,942,000 |  |  |  | 61.4   | % 
|Depreciation and amortization       |  |               | 1,777,000  |  |                  |   | 1,333,000  |  |  |  | 33.3   | % 
|Restructuring charge                |  |               |           |  |                  |   | 1,740,000  |  |  |  | (100.0 | )%
|                                    |  |               |            |  |                  |   |            |  |  |  |        |   
|Total other operating expenses      |  | $             | 38,799,000 |  |                  | $ | 26,015,000 |  |  |  | 49.1   | % 
|                                    |  |               |            |  |                  |   |            |  |  |  |        |   

Selling, General and Administrative: Selling, general and administrative expenses for the year
ended June 30, 2011 were approximately $37.0 million, compared to $22.9 million for the year ended October 31, 2009, an increase of $14.1 million or 61.4%. The increase in selling, general and administrative expenses included $11.6 million
resulting from the additional operations of Avatech, $1.9 million in one-time costs associated with the merger and another $900,000 in increased costs primarily due to higher commissions and variable compensation as the result of higher revenues.

Depreciation and Amortization: Depreciation and amortization expenses for the year ended June 30, 2011 increased
$444,000 over the year ended October 31, 2009. Depreciation and amortization resulting from the addition of Avatech was approximately $590,000 for the period of August 17, 2010 to June 30, 2011, and included $260,000 of depreciation
of property and equipment and $330,000 in amortization of acquired intangible assets. Depreciation and amortization expense would have decreased by approximately $146,000 if the Company had not merged with Avatech.

Restructuring Charges: During the year ended October 31, 2009, the Company implemented a series of restructuring activities
to right-size operations, relocate corporate headquarters from Canada to the United States and reduce overall expenses. As a result of these actions, employee headcount was reduced by approximately 150 employees and the Company incurred significant
severance-related expenses. These expenses, along with a lesser amount of charges related to facility closures, have been classified as restructuring activities in the Companys statement of operations.

Other Income (Expense)



|                                 |  |               |          |   |                  |   |            |   |  |  |        |   
|-------------------------------- |  | ------------- | -------- | - | ---------------- | - | ---------- | - |  |  | ------ | --
|                                 |  | Years ended   |          |   | % change         |  
|                                 |  | June 30, 2011 |          |   | October 31, 2009 |   |           
|Other income (expense):          |  |               |          |   |                  |   |            |   |  |  |        |   
|Interest expense                 |  | $             | (522,000 | ) |                  | $ | (2,049,000 | ) |  |  | (78.3  | )%
|Currency exchange gains (losses) |  |               | (244,000 | ) |                  |   | 40,000     |   |  |  | (710.0 | )%
|Other expense                    |  |               | (95,000  | ) |                  |   |           |   |  |  | (100.0 | )%
|                                 |  |               |          |   |                  |   |            |   |  |  |        |   
|Total other income (expense)     |  | $             | (861,000 | ) |                  | $ | (2,009,000 | ) |  |  | (57.1  | )%
|                                 |  |               |          |   |                  |   |            |   |  |  |        |   

Other Income (Expense): Other income (expense) includes interest expense arising from the
Companys borrowings and recognized foreign exchange gains and losses. The addition of Avatech did not materially affect other income (expense). The decreases in other expense were due to the retirement of Rand Worldwides term notes.



16



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##### Table of Contents

Interest expense decreased $1.9 million or 78.3% for the twelve months ended June 30,
2011 compared with the twelve months ended October 31, 2009 due primarily to the August 2010 recapitalization which had the effect of exchanging the outstanding related-party term notes with common stock as described in Note 19.

The Company incurred $244,000 of currency exchange losses during the year ended June 30, 2011 compared with $40,000 of gains for the
twelve months ended October 31, 2009. The losses were mainly due to the Canadian Dollar gaining strength over the US Dollar, causing Canadian net assets to decrease in value as reported in US dollars.

Other expense for the twelve months ended June 30, 2011 consisted mainly of non-recurring adjustments, including a loss related to
the discontinuation of a subsidiary and an adjustment to the fair value of an intangible asset.

Income Tax Expense (Benefit)



|                             |  |               |         |  |                  |   |          |   |  |  |        |   
|---------------------------- |  | ------------- | ------- |  | ---------------- | - | -------- | - |  |  | ------ | --
|                             |  | Years ended   |         |  | % change         |  
|                             |  | June 30, 2011 |         |  | October 31, 2009 |   |         
|Income tax expense (benefit) |  | $             | 186,000 |  |                  | $ | (348,000 | ) |  |  | (153.4 | )%
|                             |  |               |         |  |                  |   |          |   |  |  |        |   

Income Tax Expense (Benefit): The Company recorded tax expense of $186,000 for the year ended
June 30, 2011 versus an income tax benefit of $348,000 for the year ended October 31, 2009.

As of June 30,
2011, the Company had US federal net operating loss carryforwards available to reduce future taxable income of approximately $22 million, a portion of which may be limited under Internal Revenue Code Section 382. Because of this limitation,
approximately $6.6 million net operating losses are expected to expire before being utilized. For the tax year ended June 30, 2011, approximately $3.8 million net operating loss carryforwards are projected to be utilized to offset taxable
income.

In addition, as of June 30, 2011, the Company had foreign net operating loss carryforwards of approximately
$19.6 million available to reduce future taxable income. These carryforwards expire between 2011 and 2029 for some jurisdictions and for other jurisdictions the losses may be carried forward indefinitely.

As of June 30, 2011, the Company has maintained the valuation allowance of its net deferred tax assets of approximately $17 million
in all jurisdictions including the United States, due to an insufficient history of profitable quarters. The valuation allowance is evaluated quarterly to determine the appropriate allowance amount.



17



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##### Table of Contents

Selected Revenue Information for Eight Months Ended June 30, 2010 and 2009
(unaudited)

The following table sets forth the percentages of total revenue represented by selected items reflected in
our audited Consolidated Statements of Operations included elsewhere in this report. The period-to-period comparisons of financial results are not necessarily indicative of future results.



|                                                    |  |                            |       |    |             |  |       |   
|--------------------------------------------------- |  | -------------------------- | ----- | -- | ----------- |  | ----- | --
|                                                    |  | Eight months endedJune 30, |      
|                                                    |  | 2010                       |       |    | 2009        | 
|                                                    |  |                            |       |    | (unaudited) | 
|Revenue:                                            |  |                            |       |    |             |  |       |   
|Product sales                                       |  |                            | 51.6  | %  |             |  | 52.4  | % 
|Service revenue                                     |  |                            | 30.7  | %  |             |  | 33.6  | % 
|Commission revenue                                  |  |                            | 17.7  | %  |             |  | 14.0  | % 
|                                                    |  |                            |       |    |             |  |       |   
|Total revenue                                       |  |                            | 100.0 | %  |             |  | 100.0 | % 
|                                                    |  |                           
|Cost of revenue:                                    |  |                            |       |    |             |  |       |   
|Cost of product sales                               |  |                            | 34.2  | %  |             |  | 32.5  | % 
|Cost of service revenue                             |  |                            | 23.2  | %  |             |  | 28.7  | % 
|                                                    |  |                            |       |    |             |  |       |   
|Total cost of revenue                               |  |                            | 57.4  | %  |             |  | 61.2  | % 
|                                                    |  |                            |       |    |             |  |       |   
|Gross margin                                        |  |                            | 42.6  | %  |             |  | 38.8  | % 
|                                                    |  |                           
|Other operating expenses:                           |  |                            |       |    |             |  |       |   
|Selling, general and administrative                 |  |                            | 47.5  | %  |             |  | 41.2  | % 
|Depreciation and amortization                       |  |                            | 2.2   | %  |             |  | 3.0   | % 
|Restructuring charges                               |  |                            | 2.0   | %  |             |  | 2.5   | % 
|                                                    |  |                            |       |    |             |  |       |   
|Total other operating expenses                      |  |                            | 51.7  | %  |             |  | 46.7  | % 
|                                                    |  |                            |       |    |             |  |       |   
|Operating loss                                      |  |                            | (9.1  | )% |             |  | (7.9  | )%
|                                                    |  |                           
|Other income (expense):                             |  |                            |       |    |             |  |       |   
|Interest expense                                    |  |                            | (3.9  | )% |             |  | (2.8  | )%
|Currency exchange gains (losses)                    |  |                            | (0.2  | )% |             |  | 0.0   | % 
|Other income (expense)                              |  |                            | 4.9   | %  |             |  | 0.0   | % 
|                                                    |  |                            |       |    |             |  |       |   
|Loss from continuing operations before income taxes |  |                            | (8.3  | )% |             |  | (10.7 | )%
|                                                    |  |                            |       |    |             |  |       |   
|Income tax expense                                  |  |                            | 0.0   | %  |             |  | 0.0   | % 
|                                                    |  |                            |       |    |             |  |       |   
|Loss from continuing operations                     |  |                            | (8.3  | )% |             |  | (10.7 | )%
|                                                    |  |                            |       |    |             |  |       |   

Eight Months Ended June 30, 2010 Compared to Eight Months Ended June 30, 2009

Revenue



|                   |  |                             |            |  |          |   |            |  |  |  |       |   
|------------------ |  | --------------------------- | ---------- |  | -------- | - | ---------- |  |  |  | ----- | --
|                   |  | Eight months ended
June 30, |            |  | % change |  
|                   |  | 2010                        |            |  | 2009     |   |           
|                   |  | (unaudited)                 |           
|Revenue:           |  |                             |            |  |          |   |            |  |  |  |       |   
|Product sales      |  | $                           | 16,869,000 |  |          | $ | 19,584,000 |  |  |  | (13.9 | )%
|Service revenue    |  |                             | 10,055,000 |  |          |   | 12,551,000 |  |  |  | (19.9 | )%
|Commission revenue |  |                             | 5,786,000  |  |          |   | 5,250,000  |  |  |  | 10.2  | % 
|                   |  |                             |            |  |          |   |            |  |  |  |       |   
|Total Revenue:     |  | $                           | 32,710,000 |  |          | $ | 37,385,000 |  |  |  | (12.5 | )%
|                   |  |                             |            |  |          |   |            |  |  |  |       |   



18



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##### Table of Contents

Revenue: Total revenue of the eight month period ended June 30, 2010 decreased
by $4.7 million, or 12.5%, as compared to the prior fiscal period. The markets served by the Companys offerings were impacted by the economic recession, which decreased both product and service revenue when compared to the same period of the
previous year. In addition, in conjunction with its restructuring activities, the Company exited certain aspects of its Rand Professional Services (RPS) consulting business, which reduced service revenue for the eight months ended
June 30, 2010. The Company experienced an increase in commission revenue as a result of various programs launched by Autodesk to entice the users of their software to update their previously purchased software.

Cost of Revenue



|                        |  |                             |            |  |             |   |            |  |  |  |       |   
|----------------------- |  | --------------------------- | ---------- |  | ----------- | - | ---------- |  |  |  | ----- | --
|                        |  | Eight months ended
June 30, |            |  | % change    |  
|                        |  | 2010                        |            |  | 2009        |   |           
|                        |  |                             |            |  | (unaudited) |   |            |  | 
|Cost of revenue:        |  |                             |            |  |             |   |            |  |  |  |       |   
|Cost of product sales   |  | $                           | 11,199,000 |  |             | $ | 12,130,000 |  |  |  | (7.7  | )%
|Cost of service revenue |  |                             | 7,592,000  |  |             |   | 10,746,000 |  |  |  | (29.4 | )%
|                        |  |                             |            |  |             |   |            |  |  |  |       |   
|Total cost of revenue   |  | $                           | 18,791,000 |  |             | $ | 22,876,000 |  |  |  | (17.9 | )%
|                        |  |                             |            |  |             |   |            |  |  |  |       |   
|Gross margin            |  | $                           | 13,919,000 |  |             | $ | 14,509,000 |  |  |  | (4.1  | )%
|                        |  |                             |            |  |             |   |            |  |  |  |       |   

Cost of Revenue: Total cost of revenue during the eight month period ended June 30, 2010
decreased by $4.1 million or 17.9% as compared to the same period of the prior fiscal year. Cost of product sales decreased by $931,000, or 7.7%, a result of the aforementioned decrease in product revenue, partially offset by increased sales
rebates received from Autodesk. Cost of service revenue decreased by $3.1 million, or 29.4%, primarily due to reductions in the technical workforce pursuant to the Companys restructuring activities.

Gross Margin: The Companys gross margin percentage for the eight months ended June 30, 2010, was 42.6%, compared to
38.8% in the same period of the prior fiscal year. The improved gross margin was primarily a result of the reduction of costs resulting from the Companys restructuring activities, which improved the gross margin on services revenue from 14.4%
to 24.5%. In addition, the Companys commission revenues represented a higher proportion of total revenues resulting in a favorable revenue mix and a higher gross margin.

Other Operating Expenses



|                                    |  |                             |            |  |             |   |            |  |  |  |       |   
|----------------------------------- |  | --------------------------- | ---------- |  | ----------- | - | ---------- |  |  |  | ----- | --
|                                    |  | Eight months ended
June 30, |            |  | % change    |  
|                                    |  | 2010                        |            |  | 2009        |   |           
|                                    |  |                             |            |  | (unaudited) |   |            |  | 
|Other operating expenses:           |  |                             |            |  |             |   |            |  |  |  |       |   
|Selling, general and administrative |  | $                           | 15,529,000 |  |             | $ | 15,401,000 |  |  |  | 0.8   | % 
|Depreciation and amortization       |  |                             | 733,000    |  |             |   | 1,105,000  |  |  |  | (33.7 | )%
|Restructuring charge                |  |                             | 665,000    |  |             |   | 957,000    |  |  |  | (30.5 | )%
|                                    |  |                             |            |  |             |   |            |  |  |  |       |   
|Total other operating expenses      |  | $                           | 16,927,000 |  |             | $ | 17,463,000 |  |  |  | (3.1  | )%
|                                    |  |                             |            |  |             |   |            |  |  |  |       |   

Selling, General and Administrative: Selling, general and administrative expenses during the eight
month period ended June 30, 2010 increased $128,000, or 0.8%, when compared to the same period of the previous year. For the eight months ended June 30, 2010, the Company incurred a $350,000 charge in relation to the settlement of an
outstanding legal matter, the impact of which was partially offset by reduced compensation expense, a result of savings realized from reductions in workforce pursuant to the Companys restructuring.



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##### Table of Contents

Depreciation and Amortization: Depreciation and amortization during the eight month
period ended June 30, 2010 decreased $372,000 (or 33.7%) when compared to the same period of the previous year. The decrease was a result of reduced amortization charges related to acquired customer relationships. The amortization methodology
for that intangible asset resulted in progressively lower charges over its useful life.

Restructuring Charge: The
Company implemented a series of restructuring activities to right-size operations, relocate corporate headquarters from Canada to the United States and to reduce overall expenses. As a result of these actions, the Company incurred significant
severance-related expenses in both fiscal periods. These expenses, along with a lesser amount of charges related to facility closures, have been classified as restructuring activities in the Companys statement of operations.

Other Income (Expense)



|                             |  |                             |            |   |             |   |            |   |  |  |          |   
|---------------------------- |  | --------------------------- | ---------- | - | ----------- | - | ---------- | - |  |  | -------- | --
|                             |  | Eight months ended
June 30, |            |   | % change    |  
|                             |  | 2010                        |            |   | 2009        |   |           
|                             |  |                             |            |   | (unaudited) |   |            |   | 
|Other income (expense):      |  |                             |            |   |             |   |            |   |  |  |          |   
|Interest expense             |  | $                           | (1,260,000 | ) |             | $ | (1,033,000 | ) |  |  | 22.0     | % 
|Currency exchange losses     |  |                             | (51,000    | ) |             |   | (6,000     | ) |  |  | 750.0    | % 
|Other income (expense)       |  |                             | 1,600,000  |   |             |   | (22,000    | ) |  |  | (7,372.7 | )%
|                             |  |                             |            |   |             |   |            |   |  |  |          |   
|Total other income (expense) |  | $                           | 289,000    |   |             | $ | (1,061,000 | ) |  |  | (127.2   | )%
|                             |  |                             |            |   |             |   |            |   |  |  |          |   

Other Income (Expense): Other income (expense) includes interest expense arising from the
Companys borrowings and recognized currency gains and losses and other income (expense). Interest expense during the eight month period ended June 30, 2010 increased compared to the prior year period as a result of an increase in the
interest rate on amounts outstanding under the Companys term loan agreements. The Companys term loan agreements included a clause that retroactively increased the interest rate of the loan from 10% to 12% if the loan remained unpaid as
of September 30, 2009. As the Company had approximately $11.2 million of principal outstanding under these term loans as of that date, the clause became effective, contributing to a significant increase in interest expense between the
fiscal periods. As a result of the merger with Avatech, the term loans and obligations to repay the principal and related interest are no longer outstanding. Interest expense related to the Companys revolving line of credit, which is still
outstanding subsequent to the Merger, was $173,000 and $0, in the eight months ended June 30, 2010 and 2009, respectively.

In the eight months ended June 30, 2010, the Company sold its 30% ownership interest in Rand North America (RNA) for
$1.6 million. RNA, a joint venture between the Company and Dassault Systems S. A., was established in 2004 and had no carrying value. The proceeds from the sale were recorded as other income and there were no associated disposal
costs.

Income Tax Expense



|                   |  |                             |        |  |             |   |        |  |  |  |      |  
|------------------ |  | --------------------------- | ------ |  | ----------- | - | ------ |  |  |  | ---- | -
|                   |  | Eight months ended
June 30, |        |  | % change    |  
|                   |  | 2010                        |        |  | 2009        |   |       
|                   |  |                             |        |  | (unaudited) |   |        |  | 
|Income tax expense |  | $                           | 35,000 |  |             | $ | 20,000 |  |  |  | 75.0 | %
|                   |  |                             |        |  |             |   |        |  |  |  |      |  

Income Tax Expense: The Company recorded tax expense of approximately $20,000 during the eight
months ended June 30, 2009, primarily related to state income taxes, representing an effective tax rate of less than 1%. In the eight months ended June 30, 2010, the Company recorded an expense of approximately $35,000, primarily related
to state income taxes, representing an effective tax rate of approximately 1%.



20



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##### Table of Contents

Liquidity and Capital Resources

Historically, the Company has financed its operations and met its capital expenditure requirements primarily through cash flows provided
by operations and borrowings under short-term and long-term debt arrangements.

On December 31, 2010, the Company entered
into a new line of credit with PNC Bank, National Association by amending the existing line of credit held by Rand Worldwide. The Companys new line of credit permits up to $9 million of borrowing limited to 85% of aggregate eligible accounts
receivable. The interest rate is, at the Companys option, either (i) the Eurodollar Rate, which is calculated by using the LIBOR rate plus an applicable margin ranging from 2.5% to 3.25% or (ii) the banks
Alternate Base Rate, which is calculated by using the base rate of the bank, the federal funds open rate, or the daily LIBOR rate plus an applicable margin ranging from 1.75% to 2.75%. The interest rate as of June 30, 2011 was 5%.
The Company had outstanding borrowings from the bank under its credit line of approximately $3.9 million as of June 30, 2011 and had $3.3 million outstanding as of June 30, 2010. The line expires on December 31, 2012 and is secured by
65% of the stock in one of its subsidiaries and 100% of the stock of a separate subsidiary.

The Companys operating
assets and liabilities consist primarily of accounts receivable, cash, borrowings under line of credit, accounts payable, and deferred revenue. Changes in these balances are affected principally by the timing of sales, collections and vendor
payments. The Company purchases approximately 97% of its product from one principal supplier that provides it with credit to finance those purchases.

For the year ended June 30, 2011, net cash used in operating activities from continuing operations was $955,000, compared with cash used in operating activities of $6,798,000 and $37,000 during the
year ended October 31, 2009 and the eight months ended June 30, 2010, respectively. The decrease in cash used in operating activities from the year ended October 31, 2009 to the year ended June 30, 2011 was due mainly to the
increased net income of the Company. There were some offsetting changes such as increased accounts receivable as a result of increased revenues.

The Companys investing activities consist principally of investments in computer and office equipment. Cash purchases of equipment for the year ended June 30, 2011 increased to $523,000 from
$498,000 when compared to the year ended October 31, 2009 and decreased from $902,000 when compared to the eight months ended June 30, 2010. The Company also acquired $2,123,000 cash as a result of the merger.

For the year ended June 30, 2011, cash provided by financing activities was $325,000 compared to $1,397,000 of cash provided by
financing activities during the year ended October 31, 2009 and $741,000 of cash used in financing activities during the eight months ended June 30, 2010. The year ended October 31, 2009 had a $1.4 million increase in borrowings as a
result of making a net pay down of $2,653,000 of related-party debt and net increased borrowings under line of credit of $4,026,000. The year ended June 30, 2011 had a $614,000 increase in borrowings under line of credit while the eight months
ended June 30, 2010 had a $701,000 decrease in borrowings under the line of credit.

Because the Company is one of the
largest resellers of Autodesk software and because Autodesk has continued to state its intention to continue to strengthen its relationships with its resellers, the Company expects to continue to be a leading seller of Autodesk software. The Company
is a party to a Value Added Reseller Agreement with Autodesk effective February 1, 2010. The agreement provides for an initial term of twelve months that, subject to certain requirements and termination rights of the parties, automatically
renews on an annual basis for two additional twelve month periods. The agreement designates the Company as an authorized reseller of Autodesk software and prescribes the authorized sales territories, authorized products and services, rebate and
incentive program details and marketing support.

Off Balance Sheet Transactions

The Company is not party to any off-balance sheet transactions as defined in Item 303 of the SECs Regulation S-K.



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##### Table of Contents

|ITEM 8. | FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
|------- | -------------------------------------------

The information required by this Item may be found immediately after the signatures to this report and is incorporated herein by reference.



|ITEM 9. | CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURES
|------- | -------------------------------------------------------------------------------------

None.



|ITEM 9A. | CONTROLS AND PROCEDURES
|-------- | -----------------------

The Company maintains a system of disclosure controls and procedures that is designed to provide reasonable assurance that information, which is required to be disclosed by the Company in the reports that
it files or submits under the Securities and Exchange Act of 1934, as amended, is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the Securities and Exchange Commission, and is accumulated and
communicated to management in a timely manner. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control
system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. These inherent limitations include the realities that judgments in decision-making can be faulty, and that
breakdowns can occur because of simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the control. The design of any system of
controls also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions; over time, control may
become inadequate because of changes in conditions, or the degree of compliance with the policies or procedures may deteriorate.

An evaluation of the effectiveness of these disclosure controls and procedures as of June 30, 2011 was carried out under the supervision and with the participation of the Companys management,
including the Chief Executive Officer and the Chief Financial Officer. Based on that evaluation, the Companys management, including the Chief Executive Officer and the Chief Financial Officer, has concluded that the Companys disclosure
controls and procedures are, in fact, effective at the reasonable assurance level.

During the fourth quarter of the
Companys last fiscal year, there was no change in the Companys internal control over financial reporting that has materially affected, or is reasonably likely to materially affect, the Companys internal control over financial
reporting.

As required by Section 404 of the Sarbanes-Oxley Act of 2002, management has performed an evaluation and
testing of the Companys internal control over financial reporting as of June 30, 2011. Managements report on the Companys internal control over financial reporting is included in Item 8 of this report and is incorporated
herein by reference.



|ITEM 9B. | OTHER INFORMATION
|-------- | -----------------

None.



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##### Table of Contents

PART III



|ITEM 10. | DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
|-------- | ------------------------------------------------------

The information required by this item is contained in the sections of the definitive Proxy Statement of the Company to be filed with the Securities and Exchange Commission in connection with the 2011
Annual Meeting of Stockholders (the Proxy Statement) entitled, ELECTION OF DIRECTORS (Proposal 1), EXECUTIVE OFFICERS, SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE, and CORPORATE
GOVERNANCE and is incorporated herein by reference.



|ITEM 11. | EXECUTIVE COMPENSATION
|-------- | ----------------------

The information required by this item is contained in the sections of the Proxy Statement entitled CORPORATE GOVERNANCE and EXECUTIVE COMPENSATION and is incorporated herein by
reference.



|ITEM 12. | SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
|-------- | ----------------------------------------------------------------------------------------------

The following table provides information, as of June 30, 2011, with respect to all compensation arrangements that we maintain under
which shares of common stock may be issued:



|                                                           |     |                                                                                         |           |     |                                                                          |   |        |                                                                                                                                       |  |  |         | 
|---------------------------------------------------------- | --- | --------------------------------------------------------------------------------------- | --------- | --- | ------------------------------------------------------------------------ | - | ------ | ------------------------------------------------------------------------------------------------------------------------------------- |  |  | ------- | 
|Plan Category                                              |     | Number of securitiesto be issued uponexercise ofoutstanding options,warrants and rights |           |     | Weighted-averageexercise price ofoutstanding options,warrants and rights |   |        | Number of securitiesremaining available forfuture issuance underequity compensationplans
(excludingsecurities reflected incolumn (a)) | 
|                                                           | (a) |                                                                                         |           | (b) |                                                                          |   | (c)(1) |                                                                                                                                      
|Equity compensation plans approved by security holders     |     |                                                                                         | 3,522,253 |     |                                                                          | $ | 0.81   |                                                                                                                                       |  |  | 193,921 | 
|Equity compensation plans not approved by security holders |     |                                                                                         | -0-       |     |                                                                          |   | -0-    |                                                                                                                                       |  |  | -0-     | 
|                                                           |     |                                                                                         |           |     |                                                                          |   |        |                                                                                                                                       |  |  |         | 
|Total                                                      |     |                                                                                         | 3,522,253 |     |                                                                          | $ | 0.81   |                                                                                                                                       |  |  | 193,921 | 



|(1) | This amount represents shares of stock that may be issued under the Avatech Solutions, Inc. Amended and Restated Restricted Stock Plan, which contemplates the grant of
shares of common stock upon such terms, including with respect to forfeiture and restrictions of resale and transfer, as the Board deems appropriate.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

All other information required by this item is contained in the section of the Proxy Statement entitled, BENEFICIAL OWNERSHIP OF VOTING SECURITIES OF RAND WORLDWIDE, INC. and is incorporated
herein by reference.



|ITEM 13. | CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
|-------- | -------------------------------------------------------------------------

The information required by this item is contained in the sections of the Proxy Statement entitled, CERTAIN RELATIONSHIPS AND
RELATED TRANSACTIONS and CORPORATE GOVERNANCE and is incorporated herein by reference.



|ITEM 14. | PRINCIPAL ACCOUNTANT FEES AND SERVICES
|-------- | --------------------------------------

The information required by this item is contained in the section of the Proxy Statement entitled, ACCOUNTING FEES AND SERVICES and is incorporated herein by reference.



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##### Table of Contents

PART IV



|ITEM 15. | EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
|-------- | ------------------------------------------

(a)(1) and (2).    List of Financial Statements and Schedules.



|                                                                                                                                                 |  |      |      | 
|------------------------------------------------------------------------------------------------------------------------------------------------ |  | ---- | ---- | 
|                                                                                                                                                 |  | Page |     
|Financial Statement Schedule IIRand Worldwide, Inc. and Subsidiaries Valuation and Qualifying Accounts                                          |  |      | 25   | 
|                                                                                                                                                 | 
|Managements Report on Internal Control over Financial Reporting                                                                                 |  |      | F-2  | 
|Reports of Independent Registered Public Accounting Firms                                                                                        |  |      | F-3  | 
|Consolidated Balance Sheets as of June 30, 2011 and 2010 and October 31,
2009                                                                    |  |      | F-5  | 
|Consolidated Statements of Operations for the Years Ended June 30, 2011 and October 
31, 2009 and the eight months ended June 30, 2010           |  |      | F-7  | 
|Consolidated Statements of Stockholders Equity for the Years Ended June 
30, 2011 and October 31, 2009 and the eight months ended June 30, 2010 |  |      | F-8  | 
|Consolidated Statements of Cash Flows for the Years Ended June 30, 2011 and October 
31, 2009 and the eight months ended June 30, 2010           |  |      | F-10 | 
|Notes to Consolidated Financial Statements                                                                                                       |  |      | F-11 | 



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(c). Financial Statement ScheduleSchedule II

Rand Worldwide, Inc. and Subsidiaries Valuation and Qualifying Accounts



|                                                |  |                              |            |  |                                     |   |          |                       |  |   |                         |      |  |   |          |      |  |   |            | 
|----------------------------------------------- |  | ---------------------------- | ---------- |  | ----------------------------------- | - | -------- | --------------------- |  | - | ----------------------- | ---- |  | - | -------- | ---- |  | - | ---------- | 
|Description                                     |  | Balance atbeginning ofperiod |            |  | Additions                           |   |          | Deductions  describe |  |   | Balance atend of period |     
|                                                |  | Charged tocosts andexpenses  |            |  | Charged to otheraccounts  describe |   |          |                      
|Year Ended June 30, 2011:                       |  |                              |            |  |                                     |   |          |                       |  |   |                         |      |  |   |          |      |  |   |            | 
|Deducted from assets accounts:                  |  |                              |            |  |                                     |   |          |                       |  |   |                         |      |  |   |          |      |  |   |            | 
|Allowance for doubtful accounts                 |  | $                            | 390,000    |  |                                     | $ | 205,000  |                       |  | $ | 146,000                 | (1)  |  | $ | (134,000 | )(2) |  | $ | 607,000    | 
|Valuation allowance for net deferred tax assets |  | $                            | 18,966,000 |  |                                     | $ | (439,000 | )                     |  | $ | (1,165,000              | )(3) |  | $ |         |      |  | $ | 17,362,000 | 
|                                                |  |                              |            |  |                                    
|Eight Months Ended June 30, 2010:               |  |                              |            |  |                                     |   |          |                       |  |   |                         |      |  |   |          |      |  |   |            | 
|Deducted from assets accounts:                  |  |                              |            |  |                                     |   |          |                       |  |   |                         |      |  |   |          |      |  |   |            | 
|Allowance for doubtful accounts                 |  | $                            | 215,000    |  |                                     | $ | 238,000  |                       |  | $ |                        |      |  | $ | (63,000  | )(2) |  | $ | 390,000    | 
|Valuation allowance for net deferred tax assets |  | $                            | 16,577,000 |  |                                     | $ |         |                       |  | $ | 2,389,000               | (4)  |  | $ |         |      |  | $ | 18,966,000 | 
|                                                |  |                              |            |  |                                    
|Year Ended October 31, 2009:                    |  |                              |            |  |                                     |   |          |                       |  |   |                         |      |  |   |          |      |  |   |            | 
|Deducted from assets accounts:                  |  |                              |            |  |                                     |   |          |                       |  |   |                         |      |  |   |          |      |  |   |            | 
|Allowance for doubtful accounts                 |  | $                            | 363,000    |  |                                     | $ | 14,000   |                       |  | $ |                        |      |  | $ | (162,000 | )(2) |  | $ | 215,000    | 
|Valuation allowance for net deferred tax assets |  | $                            | 16,751,000 |  |                                     | $ |         |                       |  | $ | (174,000                | )(4) |  | $ |         |      |  | $ | 16,577,000 | 



|(1) | Addition of Avatech of $145,000 and foreign currency translation adjustment of $1,000
|--- | -------------------------------------------------------------------------------------

|(2) | Uncollectible accounts written off, net of recoveries
|--- | -----------------------------------------------------

|(3) | Increase (decrease) in valuation allowance, net of temporary differences of $(1,262,000) and addition of Avatech of $97,000
|--- | ---------------------------------------------------------------------------------------------------------------------------

|(4) | Increase (decrease) in valuation allowance, net of temporary differences
|--- | ------------------------------------------------------------------------

(a)(3) and (b).    Exhibits required to be filed by Item 601 of Regulation S-K

The exhibits filed or furnished with this annual report are listed in the Exhibit List that immediately follows the Notes to the Consolidated Financial Statements presented elsewhere in this report, which
list is incorporated herein by reference.



25



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##### Table of Contents

SIGNATURES

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



|                         |  |  |  |                      |  |                              
|------------------------ |  |  |  | -------------------- |  | -----------------------------
|                         |  |  |  | RAND WORLDWIDE, INC.
|                         |  |  | 
|Date: September 28, 2011 |  |  |  | By:                  |  | /s/ Marc L. Dulude           
|                         |  |  |  |                      |  | Chief Executive Officer      
|                         |  |  |  |                      |  | (Principal Executive Officer)

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by
the following persons on behalf of the Registrant and in the capacities and on the dates indicated.



|    |  |                                                                                                       |  |  |  |     |  |                            
|--- |  | ----------------------------------------------------------------------------------------------------- |  |  |  | --- |  | ---------------------------
|By: |  | /s/ Richard A. Charpie                                                                                |  |  |  | By: |  | /s/ George M. Davis        
|    |  | Director September 28,
2011                                                                           |  |  |  |     |  | Director September 28,
2011
|    |  |                                                                                                       |  | 
|By: |  | /s/ Marc L. Dulude                                                                                    |  |  |  | By: |  | /s/ Eugene J. Fischer      
|    |  | Director and Chief Executive Officer (Principal Executive Officer) September 28, 2011                 |  |  |  |     |  | Director September 28,
2011
|    |  |                                                                                                       |  | 
|By: |  | /s/ Suzanne MacCormack                                                                                |  |  |  | By: |  | /s/ Manu Parpia            
|    |  | Director September 28,
2011                                                                           |  |  |  |     |  | Director September 28,
2011
|    |  |                                                                                                       |  | 
|By: |  | /s/ Lawrence Rychlak                                                                                  |  |  |  | By: |  | /s/ Charles D. Yie         
|    |  | President and Chief Financial Officer (Principal Financial and Accounting Officer) September 28, 2011 |  |  |  |     |  | Director September 28,
2011



26



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##### Table of Contents

FINANCIAL STATEMENTS

Rand Worldwide, Inc. and Subsidiaries

Index to Audited Consolidated Financial Statements



|                                                                 |  |      |      | 
|---------------------------------------------------------------- |  | ---- | ---- | 
|                                                                 |  | Page |     
|Managements Report on Internal Control Over Financial Reporting |  |      | F2  | 
|Reports of Independent Registered Public Accounting Firms        |  |      | F3  | 
|Consolidated Balance Sheets                                      |  |      | F5  | 
|Consolidated Statements of Operations                            |  |      | F7  | 
|Consolidated Statements of Stockholders Equity                  |  |      | F8  | 
|Consolidated Statements of Cash Flows                            |  |      | F10 | 
|Notes to Consolidated Financial Statements                       |  |      | F11 | 



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##### Table of Contents

MANAGEMENTS REPORT ON INTERNAL
CONTROL OVER FINANCIAL REPORTING

The management of the Company is responsible for establishing and maintaining adequate
internal control over financial reporting as defined in Rules 13a-15(f) and 15d-15(f) under the Securities Exchange Act of 1934, as amended. The Companys internal control over financial reporting is designed to provide reasonable assurance
regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles in the United States of America. The Companys internal control over
financial reporting includes those policies and procedures that: (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the Company;
(ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the Company are being
made only in accordance with authorizations of management and directors of the Company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Companys assets
that could have a material effect on the financial statements.

This Annual Report on Form 10-K does not include an
attestation report of the Companys registered public accounting firm regarding internal control over financial reporting because managements report was not subject to attestation pursuant to Section 989G(a) of the recently-enacted
Dodd-Frank Wall Street Reform and Consumer Protection Act, which permits the Company, as a smaller reporting company, to provide only this managements report.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections
of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. A control system, no
matter how well designed and operated can provide only reasonable, but not absolute, assurance that the control systems objectives will be met. The design of a control system must reflect the fact that there are resource constraints, and the
benefits of controls must be considered relative to their cost.

Management assessed the effectiveness of the Companys
internal control over financial reporting as of June 30, 2011 using the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission in Internal Control-Integrated Framework. Based on its assessment and the
foregoing criteria, management has concluded that, as of June 30, 2011, the Companys internal control over financial reporting is effective.

September 28, 2011



|                              |  |  |  |                                              |  | 
|----------------------------- |  |  |  | -------------------------------------------- |  | 
|/s/ Marc L. Dulude            |  |  |  | /s/ Lawrence Rychlak                         |  | 
|Chief Executive Officer       |  |  |  | President and Chief Financial Officer        |  | 
|(Principal Executive Officer) |  |  |  | (Principal Financial and Accounting Officer) |  | 



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##### Table of Contents

REPORT OF INDEPENDENT REGISTERED
PUBLIC ACCOUNTING FIRM

To the Stockholders and Board of Directors

Rand Worldwide, Inc.

We have audited the consolidated balance sheet of Rand
Worldwide, Inc. and Subsidiaries as of June 30, 2011 and the related consolidated statements of operations, stockholders equity and cash flows for the year ended June 30, 2011. These consolidated financial statements and the
financial statement schedule are the responsibility of the Companys management. Our responsibility is to express an opinion on these consolidated financial statements and the financial statement schedule based on our audit.

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 consolidated financial statements are free of material misstatement. Rand Worldwide, Inc. is not required to have, nor were we engaged to perform,
an audit of internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purposes of
expressing an opinion on the effectiveness of Rand Worldwide, Inc.s internal control over financial reporting. Accordingly, we express no such opinion. An audit includes examining, on a test basis, evidence supporting the amounts and
disclosures in the consolidated financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall consolidated financial statement presentation. We
believe that our audit provides 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 Rand Worldwide, Inc. and Subsidiaries as of June 30, 2011 and the consolidated results of their operations and their cash flows for the year ended
June 30, 2011, in conformity with accounting principles generally accepted in the United States of America.

/s/ Stegman & Company

Baltimore, Maryland

September 28, 2011



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##### Table of Contents

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Shareholders of Rand Worldwide, Inc.

In our opinion, the accompanying consolidated balance sheets and the related consolidated statements of operations, stockholders equity and cash flows present fairly, in all material respects, the
financial position of Rand Worldwide, Inc. and its subsidiaries at June 30, 2010 and October 31, 2009 and the results of their operations and their cash flows for the eight months ended June 30, 2010 and the year ended
October 31, 2009 in conformity with accounting principles generally accepted in the United States of America. 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 of these statements 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, assessing the
accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

/s/ PricewaterhouseCoopers LLP

Boston, Massachusetts

November 15, 2010, except for the segment information in Note 18, as
to which the date is March 24, 2011, and except for the effects of the reverse merger discussed in Note 2, as to which the date is September 28, 2011.



F-4



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##### Table of Contents

Rand Worldwide, Inc. and Subsidiaries

Consolidated Balance Sheets



|                                                                                                                                 |  |          |            |   |                  |   |            |   |  |   |            |  
|-------------------------------------------------------------------------------------------------------------------------------- |  | -------- | ---------- | - | ---------------- | - | ---------- | - |  | - | ---------- | -
|                                                                                                                                 |  | June 30, |            |   | October 
31,2009 |  
|                                                                                                                                 |  | 2011     |            |   | 2010             |   |           
|Assets                                                                                                                           |  |          |            |   |                  |   |            |   |  |   |            |  
|Current assets:                                                                                                                  |  |          |            |   |                  |   |            |   |  |   |            |  
|Cash                                                                                                                             |  | $        | 2,631,000  |   |                  | $ | 1,198,000  |   |  | $ | 1,168,000  |  
|Accounts receivable, less allowance of $607,000, $390,000 and $215,000 in 2011, 2010 and 2009, respectively                      |  |          | 20,112,000 |   |                  |   | 8,203,000  |   |  |   | 10,358,000 |  
|Accounts receivable from related parties                                                                                         |  |          |           |   |                  |   |           |   |  |   | 627,000    |  
|Income tax receivable                                                                                                            |  |          | 87,000     |   |                  |   |           |   |  |   |           |  
|Other receivables                                                                                                                |  |          | 816,000    |   |                  |   | 433,000    |   |  |   | 318,000    |  
|Inventory                                                                                                                        |  |          | 132,000    |   |                  |   | 152,000    |   |  |   | 106,000    |  
|Prepaid expenses and other current assets                                                                                        |  |          | 926,000    |   |                  |   | 1,030,000  |   |  |   | 1,129,000  |  
|                                                                                                                                 |  |          |            |   |                  |   |            |   |  |   |            |  
|Total current assets                                                                                                             |  |          | 24,704,000 |   |                  |   | 11,016,000 |   |  |   | 13,706,000 |  
|                                                                                                                                 |  |          |           
|Property and equipment:                                                                                                          |  |          |            |   |                  |   |            |   |  |   |            |  
|Computer software and equipment                                                                                                  |  |          | 6,918,000  |   |                  |   | 3,623,000  |   |  |   | 2,964,000  |  
|Office furniture and equipment                                                                                                   |  |          | 1,818,000  |   |                  |   | 430,000    |   |  |   | 349,000    |  
|Leasehold improvements                                                                                                           |  |          | 647,000    |   |                  |   | 380,000    |   |  |   | 201,000    |  
|                                                                                                                                 |  |          |            |   |                  |   |            |   |  |   |            |  
|                                                                                                                                 |  |          | 9,383,000  |   |                  |   | 4,433,000  |   |  |   | 3,514,000  |  
|Less accumulated depreciation and amortization                                                                                   |  |          | (7,628,000 | ) |                  |   | (2,610,000 | ) |  |   | (2,150,000 | )
|                                                                                                                                 |  |          |            |   |                  |   |            |   |  |   |            |  
|                                                                                                                                 |  |          | 1,755,000  |   |                  |   | 1,823,000  |   |  |   | 1,364,000  |  
|Customer list, net of accumulated amortization of $5,570,000, $5,335,000 and $5,145,000 in 2011, 2010 and 2009,
respectively     |  |          | 3,345,000  |   |                  |   | 569,000    |   |  |   | 759,000    |  
|Goodwill                                                                                                                         |  |          | 15,240,000 |   |                  |   | 7,232,000  |   |  |   | 7,201,000  |  
|Trade name, net of accumulated amortization of $802,000, $362,000 and $276,000 in 2011, 2010 and 2009,
respectively              |  |          | 3,129,000  |   |                  |   | 920,000    |   |  |   | 1,006,000  |  
|Intellectual assets, net of accumulated amortization of $1,324,000, $1,175,000 and $882,000 in 2011, 2010 and 2009,
respectively |  |          |           |   |                  |   | 149,000    |   |  |   | 442,000    |  
|Other assets                                                                                                                     |  |          | 403,000    |   |                  |   | 406,000    |   |  |   | 441,000    |  
|                                                                                                                                 |  |          |            |   |                  |   |            |   |  |   |            |  
|Total assets                                                                                                                     |  | $        | 48,576,000 |   |                  | $ | 22,115,000 |   |  | $ | 24,919,000 |  
|                                                                                                                                 |  |          |            |   |                  |   |            |   |  |   |            |  



F-5



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##### Table of Contents

Rand Worldwide, Inc. and Subsidiaries

Consolidated Balance Sheets (Continued)



|                                                                                                                                                                                                         |  |          |             |   |                  |   |             |   |  |   |             |  
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | -------- | ----------- | - | ---------------- | - | ----------- | - |  | - | ----------- | -
|                                                                                                                                                                                                         |  | June 30, |             |   | October 
31,2009 |  
|                                                                                                                                                                                                         |  | 2011     |             |   | 2010             |   |            
|Liabilities, redeemable preferred stock and stockholders equity                                                                                                                                         |  |          |             |   |                  |   |             |   |  |   |             |  
|Current liabilities:                                                                                                                                                                                     |  |          |             |   |                  |   |             |   |  |   |             |  
|Borrowings under line of credit                                                                                                                                                                          |  | $        | 3,939,000   |   |                  | $ | 3,325,000   |   |  | $ | 4,026,000   |  
|Accounts payable and accrued expenses                                                                                                                                                                    |  |          | 13,698,000  |   |                  |   | 8,772,000   |   |  |   | 7,814,000   |  
|Accrued compensation and related benefits                                                                                                                                                                |  |          | 2,455,000   |   |                  |   | 1,219,000   |   |  |   | 1,430,000   |  
|Deferred revenue                                                                                                                                                                                         |  |          | 4,017,000   |   |                  |   | 2,582,000   |   |  |   | 3,454,000   |  
|Income taxes payable                                                                                                                                                                                     |  |          |            |   |                  |   | 34,000      |   |  |   | 381,000     |  
|Obligations under capital leases                                                                                                                                                                         |  |          | 77,000      |   |                  |   | 55,000      |   |  |   | 50,000      |  
|Related party term notes                                                                                                                                                                                 |  |          |            |   |                  |   | 6,576,000   |   |  |   | 3,540,000   |  
|                                                                                                                                                                                                         |  |          |             |   |                  |   |             |   |  |   |             |  
|Total current liabilities                                                                                                                                                                                |  |          | 24,186,000  |   |                  |   | 22,563,000  |   |  |   | 20,695,000  |  
|                                                                                                                                                                                                         |  |          |            
|Long-term liabilities:                                                                                                                                                                                   |  |          |             |   |                  |   |             |   |  |   |             |  
|Deferred tax liability                                                                                                                                                                                   |  |          | 1,690,000   |   |                  |   |            |   |  |   |            |  
|Obligations under capital leases                                                                                                                                                                         |  |          | 28,000      |   |                  |   | 35,000      |   |  |   | 74,000      |  
|Related party term notes                                                                                                                                                                                 |  |          |            |   |                  |   | 6,061,000   |   |  |   | 8,066,000   |  
|Other long term liabilities                                                                                                                                                                              |  |          |            |   |                  |   | 114,000     |   |  |   | 160,000     |  
|                                                                                                                                                                                                         |  |          |             |   |                  |   |             |   |  |   |             |  
|Total liabilities                                                                                                                                                                                        |  |          | 25,904,000  |   |                  |   | 28,773,000  |   |  |   | 28,995,000  |  
|Commitments and contingencies (Note 13)                                                                                                                                                                  |  |          |             |   |                  |   |             |   |  |   |             |  
|                                                                                                                                                                                                         |  |          |            
|Series A redeemable preferred stock, $0.001 par value; 31,858,922 shares authorized; 31,000,000 shares issued and outstanding;
liquidation preference of $38,086 at June 30, 2010 (Note 5)               |  |          |            |   |                  |   | 38,086,000  |   |  |   | 36,158,000  |  
|                                                                                                                                                                                                         |  |          |            
|Stockholders equity (deficit):                                                                                                                                                                          |  |          |             |   |                  |   |             |   |  |   |             |  
|Convertible Preferred Stock, $0.01 par value; 1,300,537 shares authorized, 1,298,728 shares issued; 1,090,150 shares outstanding
with an aggregate liquidation preference of $1,591,000 at June 30, 2011 |  |          | 11,000      |   |                  |   |            |   |  |   |            |  
|Common stock, $0.01 par value; 80,000,000 shares authorized; issued and outstanding shares of 51,882,678 at June 30, 2011
and 34,232,682(1)at June 30, 2010 and
October 31, 2009                         |  |          | 519,000     |   |                  |   | 342,000     |   |  |   | 342,000     |  
|Additional paid-in capital                                                                                                                                                                               |  |          | 64,864,000  |   |                  |   |            |   |  |   |            |  
|Accumulated deficit                                                                                                                                                                                      |  |          | (44,065,000 | ) |                  |   | (45,860,000 | ) |  |   | (41,211,000 | )
|Accumulated other comprehensive income                                                                                                                                                                   |  |          | 1,343,000   |   |                  |   | 774,000     |   |  |   | 635,000     |  
|                                                                                                                                                                                                         |  |          |             |   |                  |   |             |   |  |   |             |  
|Total stockholders equity (deficit)                                                                                                                                                                     |  |          | 22,672,000  |   |                  |   | (44,744,000 | ) |  |   | (40,234,000 | )
|                                                                                                                                                                                                         |  |          |             |   |                  |   |             |   |  |   |             |  
|Total liabilities, redeemable preferred stock and stockholders equity (deficit)                                                                                                                         |  | $        | 48,576,000  |   |                  | $ | 22,115,000  |   |  | $ | 24,919,000  |  
|                                                                                                                                                                                                         |  |          |             |   |                  |   |             |   |  |   |             |  

See accompanying notes.



|(1) | The common stock shares for the year ended October 31, 2009 and the eight months ended June 30, 2010 have been restated to reflect the shares issued as
part of the merger.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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##### Table of Contents

Rand Worldwide, Inc. and Subsidiaries

Consolidated Statements of Operations



|                                                                              |  |               |            |   |                   |   |            |               |  |   |            |    
|----------------------------------------------------------------------------- |  | ------------- | ---------- | - | ----------------- | - | ---------- | ------------- |  | - | ---------- | ---
|                                                                              |  | Years ended   |            |   | Eight monthsended |  
|                                                                              |  | June 30, 2011 |            |   | October 31, 2009  |   |            | June 30, 2010 | 
|Revenues:                                                                     |  |               |            |   |                   |   |            |               |  |   |            |    
|Product sales                                                                 |  | $             | 49,678,000 |   |                   | $ | 25,522,000 |               |  | $ | 16,869,000 |    
|Service revenue                                                               |  |               | 20,678,000 |   |                   |   | 16,236,000 |               |  |   | 10,055,000 |    
|Commission revenue                                                            |  |               | 18,836,000 |   |                   |   | 11,505,000 |               |  |   | 5,786,000  |    
|                                                                              |  |               |            |   |                   |   |            |               |  |   |            |    
|Total revenue                                                                 |  |               | 89,192,000 |   |                   |   | 53,263,000 |               |  |   | 32,710,000 |    
|                                                                              |  |               |            |   |                   |   |            |               |  |   |            |    
|Cost of revenue:                                                              |  |               |            |   |                   |   |            |               |  |   |            |    
|Cost of product sales                                                         |  |               | 33,361,000 |   |                   |   | 17,199,000 |               |  |   | 11,199,000 |    
|Cost of service revenue                                                       |  |               | 14,152,000 |   |                   |   | 13,802,000 |               |  |   | 7,592,000  |    
|                                                                              |  |               |            |   |                   |   |            |               |  |   |            |    
|Total cost of revenue                                                         |  |               | 47,513,000 |   |                   |   | 31,001,000 |               |  |   | 18,791,000 |    
|                                                                              |  |               |            |   |                   |   |            |               |  |   |            |    
|Gross margin                                                                  |  |               | 41,679,000 |   |                   |   | 22,262,000 |               |  |   | 13,919,000 |    
|Other operating expenses:                                                     |  |               |            |   |                   |   |            |               |  |   |            |    
|Selling, general and administrative                                           |  |               | 37,022,000 |   |                   |   | 22,942,000 |               |  |   | 15,529,000 |    
|Depreciation and amortization                                                 |  |               | 1,777,000  |   |                   |   | 1,333,000  |               |  |   | 733,000    |    
|Restructuring charges                                                         |  |               |           |   |                   |   | 1,740,000  |               |  |   | 665,000    |    
|                                                                              |  |               |            |   |                   |   |            |               |  |   |            |    
|Total operating expenses                                                      |  |               | 38,799,000 |   |                   |   | 26,015,000 |               |  |   | 16,927,000 |    
|                                                                              |  |               |            |   |                   |   |            |               |  |   |            |    
|Operating income (loss)                                                       |  |               | 2,880,000  |   |                   |   | (3,753,000 | )             |  |   | (3,008,000 | )  
|Other income (expense):                                                       |  |               |            |   |                   |   |            |               |  |   |            |    
|Interest expense                                                              |  |               | (522,000   | ) |                   |   | (2,049,000 | )             |  |   | (1,260,000 | )  
|Currency exchange gains (losses)                                              |  |               | (244,000   | ) |                   |   | 40,000     |               |  |   | (51,000    | )  
|Other income (expense)                                                        |  |               | (95,000    | ) |                   |   |           |               |  |   | 1,600,000  |    
|                                                                              |  |               |            |   |                   |   |            |               |  |   |            |    
|                                                                              |  |               | (861,000   | ) |                   |   | (2,009,000 | )             |  |   | 289,000    |    
|                                                                              |  |               |            |   |                   |   |            |               |  |   |            |    
|Income (loss) from continuing operations before income taxes                  |  |               | 2,019,000  |   |                   |   | (5,762,000 | )             |  |   | (2,719,000 | )  
|Income tax expense (benefit)                                                  |  |               | 186,000    |   |                   |   | (348,000   | )             |  |   | 35,000     |    
|                                                                              |  |               |            |   |                   |   |            |               |  |   |            |    
|Income (loss) from continuing operations                                      |  |               | 1,833,000  |   |                   |   | (5,414,000 | )             |  |   | (2,754,000 | )  
|Loss from discontinued operations, net of tax                                 |  |               |           |   |                   |   | (860,000   | )             |  |   |           |    
|Gain on sale of discontinued operations, net of tax                           |  |               |           |   |                   |   | 2,914,000  |               |  |   |           |    
|                                                                              |  |               |            |   |                   |   |            |               |  |   |            |    
|Net income (loss)                                                             |  | $             | 1,833,000  |   |                   | $ | (3,360,000 | )             |  | $ | (2,754,000 | )  
|                                                                              |  |               |            |   |                   |   |            |               |  |   |            |    
|Net income (loss) from continuing operations                                  |  | $             | 1,833,000  |   |                   | $ | (5,414,000 | )             |  | $ | (2,754,000 | )  
|Preferred stock dividends                                                     |  |               | (515,000   | ) |                   |   | (2,678,000 | )             |  |   | (1,928,000 | )  
|                                                                              |  |               |            |   |                   |   |            |               |  |   |            |    
|Net income (loss) from continuing operations available to common stockholders |  | $             | 1,318,000  |   |                   | $ | (8,092,000 | )             |  | $ | (4,682,000 | )  
|                                                                              |  |               |            |   |                   |   |            |               |  |   |            |    
|Income (loss) per common share from continuing operations, basic              |  | $             | 0.03       |   |                   | $ | (0.24      | )             |  | $ | (0.14      | )  
|Income per common share from discontinued operations, basic                   |  |               |           |   |                   |   | 0.06       |               |  |   |           |    
|                                                                              |  |               |            |   |                   |   |            |               |  |   |            |    
|Income (loss) per common share, basic                                         |  | $             | 0.03       |   |                   | $ | (0.18      | )             |  | $ | (0.14      | )  
|                                                                              |  |               |            |   |                   |   |            |               |  |   |            |    
|Income (loss) per common share from continuing operations, diluted            |  | $             | 0.03       |   |                   | $ | (0.24      | )             |  | $ | (0.14      | )  
|Income per common share from discontinued operations, diluted                 |  |               |           |   |                   |   | 0.06       |               |  |   |           |    
|                                                                              |  |               |            |   |                   |   |            |               |  |   |            |    
|Income (loss) per common share, diluted                                       |  | $             | 0.03       |   |                   | $ | (0.18      | )             |  | $ | (0.14      | )  
|                                                                              |  |               |            |   |                   |   |            |               |  |   |            |    
|Shares used for computing income (loss) per common share                      |  |               |            |   |                   |   |            |               |  |   |            |    
|Weighted average shares used in computationbasic                             |  |               | 49,585,611 |   |                   |   | 34,232,682 | (1)           |  |   | 34,232,682 | (1)
|Weighted average shares used in computationdiluted                           |  |               | 49,696,443 |   |                   |   | 34,232,682 | (1)           |  |   | 34,232,682 | (1)

See accompanying notes.



|(1) | The weighted average shares for the year ended October 31, 2009 and the eight months ended June 30, 2010 have been restated to reflect the shares issued as
part of the merger.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



F-7



---

##### Table of Contents

Rand Worldwide, Inc. and Subsidiaries

Consolidated Statement of Stockholders Equity



|                                                         |  |                             |   |  |              |   |   |                          |  |  |                    |     |  |                                     |         |  |       |   |         |   |  |   |             |   |  |   |         |  |  |   |             |  
|-------------------------------------------------------- |  | --------------------------- | - |  | ------------ | - | - | ------------------------ |  |  | ------------------ | --- |  | ----------------------------------- | ------- |  | ----- | - | ------- | - |  | - | ----------- | - |  | - | ------- |  |  | - | ----------- | -
|                                                         |  | Convertible Preferred Stock |   |  | Common Stock |   |   | AdditionalPaid-InCapital |  |  | AccumulatedDeficit |     |  | AccumulatedOtherComprehensiveIncome |         |  | Total |  
|                                                         |  | Number ofShares             |   |  | Par Value    |   |   | Number ofShares          |  |  | Par Value          |     |  |                                     |         | 
|Balance at October 31, 2008                              |  |                             |  |  |              | $ |  |                          |  |  | 34,232,682         | (1) |  | $                                   | 342,000 |  |       | $ |        |   |  | $ | (35,212,000 | ) |  | $ | 126,000 |  |  | $ | 34,744,000  |  
|                                                         |  |                             |   |  |              |   |   |                         
|Share-based compensation for awards granted to employees |  |                             |  |  |              |   |  |                          |  |  |                   |     |  |                                     |        |  |       |   | 39,000  |   |  |   |            |   |  |   |        |  |  |   | 39,000      |  
|Accretion of dividends on Series A preferred stock       |  |                             |  |  |              |   |  |                          |  |  |                   |     |  |                                     |        |  |       |   | (39,000 | ) |  |   | (2,639,000  | ) |  |   |        |  |  |   | (2,678,000  | )
|Foreign currency translation adjustment                  |  |                             |  |  |              |   |  |                          |  |  |                   |     |  |                                     |        |  |       |   |        |   |  |   |            |   |  |   | 509,000 |  |  |   | 509,000     |  
|Net loss                                                 |  |                             |  |  |              |   |  |                          |  |  |                   |     |  |                                     |        |  |       |   |        |   |  |   | (3,360,000  | ) |  |   |        |  |  |   | (3,360,000  | )
|                                                         |  |                             |   |  |              |   |   |                          |  |  |                    |     |  |                                     |         |  |       |   |         |   |  |   |             |   |  |   |         |  |  |   |             |  
|Comprehensive loss                                       |  |                             |   |  |              |   |   |                          |  |  |                    |     |  |                                     |         |  |       |   |         |   |  |   |             |   |  |   |         |  |  |   | (2,851,000  | )
|                                                         |  |                             |   |  |              |   |   |                          |  |  |                    |     |  |                                     |         |  |       |   |         |   |  |   |             |   |  |   |         |  |  |   |             |  
|                                                         |  |                             |   |  |              |   |   |                          |  |  |                    |     |  |                                     |         |  |       |   |         |   |  |   |             |   |  |   |         |  |  |   |             |  
|                                                         |  |                             |   |  |              |   |   |                          |  |  |                    |     |  |                                     |         |  |       |   |         |   |  |   |             |   |  |   |         |  |  |   |             |  
|Balance at October 31, 2009                              |  |                             |  |  |              | $ |  |                          |  |  | 34,232,682         |     |  | $                                   | 342,000 |  |       | $ |        |   |  | $ | (41,211,000 | ) |  | $ | 635,000 |  |  | $ | (40,234,000 | )
|                                                         |  |                             |   |  |              |   |   |                          |  |  |                    |     |  |                                     |         |  |       |   |         |   |  |   |             |   |  |   |         |  |  |   |             |  
|Balance at November 1, 2009                              |  |                             |  |  |              | $ |  |                          |  |  | 34,232,682         |     |  | $                                   | 342,000 |  |       | $ |        |   |  | $ | (41,211,000 | ) |  | $ | 635,000 |  |  | $ | (40,234,000 | )
|                                                         |  |                             |   |  |              |   |   |                         
|Share-based compensation for awards granted to employees |  |                             |  |  |              |   |  |                          |  |  |                   |     |  |                                     |        |  |       |   | 33,000  |   |  |   |            |   |  |   |        |  |  |   | 33,000      |  
|Accretion of dividends on Series A preferred stock       |  |                             |  |  |              |   |  |                          |  |  |                   |     |  |                                     |        |  |       |   | (33,000 | ) |  |   | (1,895,000  | ) |  |   |        |  |  |   | (1,928,000  | )
|Foreign currency translation adjustment                  |  |                             |  |  |              |   |  |                          |  |  |                   |     |  |                                     |        |  |       |   |        |   |  |   |            |   |  |   | 139,000 |  |  |   | 139,000     |  
|Net loss for the eight months ended June 30, 2010        |  |                             |  |  |              |   |  |                          |  |  |                   |     |  |                                     |        |  |       |   |        |   |  |   | (2,754,000  | ) |  |   |        |  |  |   | (2,754,000  | )
|                                                         |  |                             |   |  |              |   |   |                          |  |  |                    |     |  |                                     |         |  |       |   |         |   |  |   |             |   |  |   |         |  |  |   |             |  
|Comprehensive loss                                       |  |                             |   |  |              |   |   |                          |  |  |                    |     |  |                                     |         |  |       |   |         |   |  |   |             |   |  |   |         |  |  |   | (2,615,000  | )
|                                                         |  |                             |   |  |              |   |   |                          |  |  |                    |     |  |                                     |         |  |       |   |         |   |  |   |             |   |  |   |         |  |  |   |             |  
|                                                         |  |                             |   |  |              |   |   |                          |  |  |                    |     |  |                                     |         |  |       |   |         |   |  |   |             |   |  |   |         |  |  |   |             |  
|                                                         |  |                             |   |  |              |   |   |                          |  |  |                    |     |  |                                     |         |  |       |   |         |   |  |   |             |   |  |   |         |  |  |   |             |  
|Balance at June 30, 2010                                 |  |                             |  |  |              | $ |  |                          |  |  | 34,232,682         |     |  | $                                   | 342,000 |  |       | $ |        |   |  | $ | (45,860,000 | ) |  | $ | 774,000 |  |  | $ | (44,744,000 | )
|                                                         |  |                             |   |  |              |   |   |                          |  |  |                    |     |  |                                     |         |  |       |   |         |   |  |   |             |   |  |   |         |  |  |   |             |  

See accompanying notes.



|(1) | The common stock shares for the year ended October 31, 2009 and the eight months ended June 30, 2010 have been restated to reflect the shares issued as
part of the merger.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------



F-8



---

##### Table of Contents

Rand Worldwide, Inc. and Subsidiaries

Consolidated Statement of Stockholders Equity (Continued)



|                                                                                             |  |                             |           |  |              |   |        |                          |  |  |                    |  |  |                                     |         |  |       |   |            |   |  |   |             |   |  |   |           |  |  |   |             |  
|-------------------------------------------------------------------------------------------- |  | --------------------------- | --------- |  | ------------ | - | ------ | ------------------------ |  |  | ------------------ |  |  | ----------------------------------- | ------- |  | ----- | - | ---------- | - |  | - | ----------- | - |  | - | --------- |  |  | - | ----------- | -
|                                                                                             |  | Convertible Preferred Stock |           |  | Common Stock |   |        | AdditionalPaid-InCapital |  |  | AccumulatedDeficit |  |  | AccumulatedOtherComprehensiveIncome |         |  | Total |  
|                                                                                             |  | Number ofShares             |           |  | Par Value    |   |        | Number ofShares          |  |  | Par Value          |  |  |                                     |         | 
|Balance at July 1, 2010                                                                      |  |                             |          |  |              | $ |       |                          |  |  | 34,232,682         |  |  | $                                   | 342,000 |  |       | $ |           |   |  | $ | (45,860,000 | ) |  | $ | 774,000   |  |  | $ | (44,744,000 | )
|                                                                                             |  |                             |           |  |              |   |        |                         
|Accretion of dividends on Series A preferred stock                                           |  |                             |          |  |              |   |       |                          |  |  |                   |  |  |                                     |        |  |       |   |           |   |  |   | (370,000    | ) |  |   |          |  |  |   | (370,000    | )
|Exchange of common stock for redeemable preferred stock and retirement of related-party debt |  |                             |          |  |              |   |       |                          |  |  |                   |  |  |                                     |        |  |       |   | 50,924,000 |   |  |   | 332,000     |   |  |   |          |  |  |   | 51,256,000  |  
|Merger considerationAvatech                                                                 |  |                             | 1,090,150 |  |              |   | 11,000 |                          |  |  | 17,643,057         |  |  |                                     | 177,000 |  |       |   | 14,038,000 |   |  |   |            |   |  |   |          |  |  |   | 14,226,000  |  
|Vesting of stock options granted to employees                                                |  |                             |          |  |              |   |       |                          |  |  |                   |  |  |                                     |        |  |       |   | 44,000     |   |  |   |            |   |  |   |          |  |  |   | 44,000      |  
|Issuance of common stock under employee stock purchase plan                                  |  |                             |          |  |              |   |       |                          |  |  | 6,939              |  |  |                                     |        |  |       |   | 3,000      |   |  |   |            |   |  |   |          |  |  |   | 3,000       |  
|Preferred stock dividends                                                                    |  |                             |          |  |              |   |       |                          |  |  |                   |  |  |                                     |        |  |       |   | (145,000   | ) |  |   |            |   |  |   |          |  |  |   | (145,000    | )
|Foreign currency translation adjustment                                                      |  |                             |          |  |              |   |       |                          |  |  |                   |  |  |                                     |        |  |       |   |           |   |  |   |            |   |  |   | 569,000   |  |  |   | 569,000     |  
|Net income                                                                                   |  |                             |          |  |              |   |       |                          |  |  |                   |  |  |                                     |        |  |       |   |           |   |  |   | 1,833,000   |   |  |   |          |  |  |   | 1,833,000   |  
|                                                                                             |  |                             |           |  |              |   |        |                          |  |  |                    |  |  |                                     |         |  |       |   |            |   |  |   |             |   |  |   |           |  |  |   |             |  
|Comprehensive income                                                                         |  |                             |           |  |              |   |        |                          |  |  |                    |  |  |                                     |         |  |       |   |            |   |  |   |             |   |  |   |           |  |  |   | 2,402,000   |  
|                                                                                             |  |                             |           |  |              |   |        |                          |  |  |                    |  |  |                                     |         |  |       |   |            |   |  |   |             |   |  |   |           |  |  |   |             |  
|                                                                                             |  |                             |           |  |              |   |        |                          |  |  |                    |  |  |                                     |         |  |       |   |            |   |  |   |             |   |  |   |           |  |  |   |             |  
|                                                                                             |  |                             |           |  |              |   |        |                          |  |  |                    |  |  |                                     |         |  |       |   |            |   |  |   |             |   |  |   |           |  |  |   |             |  
|Balance at June 30, 2011                                                                     |  |                             | 1,090,150 |  |              | $ | 11,000 |                          |  |  | 51,882,678         |  |  | $                                   | 519,000 |  |       | $ | 64,864,000 |   |  | $ | (44,065,000 | ) |  | $ | 1,343,000 |  |  | $ | 22,672,000  |  
|                                                                                             |  |                             |           |  |              |   |        |                          |  |  |                    |  |  |                                     |         |  |       |   |            |   |  |   |             |   |  |   |           |  |  |   |             |  

See accompanying notes.



F-9



---

##### Table of Contents

Rand Worldwide, Inc. and Subsidiaries

Consolidated Statements of Cash Flows



|                                                                                                   |  |               |             |   |                   |   |             |               |  |   |             |  
|-------------------------------------------------------------------------------------------------- |  | ------------- | ----------- | - | ----------------- | - | ----------- | ------------- |  | - | ----------- | -
|                                                                                                   |  | Years ended   |             |   | Eight monthsended |  
|                                                                                                   |  | June 30, 2011 |             |   | October 31, 2009  |   |             | June 30, 2010 | 
|Cash flows from operating activities                                                               |  |               |             |   |                   |   |             |               |  |   |             |  
|Net income (loss) from continuing operations                                                       |  | $             | 1,833,000   |   |                   | $ | (5,414,000  | )             |  | $ | (2,754,000  | )
|Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: |  |               |             |   |                   |   |             |               |  |   |             |  
|Provision for bad debts                                                                            |  |               | 205,000     |   |                   |   | 14,000      |               |  |   | 238,000     |  
|Depreciation and amortization                                                                      |  |               | 1,922,000   |   |                   |   | 1,774,000   |               |  |   | 1,026,000   |  
|Stock-based compensation                                                                           |  |               | 44,000      |   |                   |   | 39,000      |               |  |   | 33,000      |  
|Gain on sale of investment                                                                         |  |               |            |   |                   |   |            |               |  |   | (1,600,000  | )
|Deferred income taxes                                                                              |  |               | (141,000    | ) |                   |   |            |               |  |   |            |  
|Changes in operating assets and liabilities                                                        |  |               |             |   |                   |   |             |               |  |   |             |  
|Accounts receivable and other receivables                                                          |  |               | (7,202,000  | ) |                   |   | 1,648,000   |               |  |   | 2,475,000   |  
|Income tax receivable                                                                              |  |               | (87,000     | ) |                   |   |            |               |  |   |            |  
|Inventory                                                                                          |  |               | 153,000     |   |                   |   | 558,000     |               |  |   | (88,000     | )
|Prepaid expenses and other current assets                                                          |  |               | 457,000     |   |                   |   | (470,000    | )             |  |   | 245,000     |  
|Other assets                                                                                       |  |               | 106,000     |   |                   |   |            |               |  |   |            |  
|Accounts payable and accrued expenses                                                              |  |               | 292,000     |   |                   |   | (3,892,000  | )             |  |   | 558,000     |  
|Accrued compensation and related benefits                                                          |  |               | 1,085,000   |   |                   |   |            |               |  |   |            |  
|Deferred revenue                                                                                   |  |               | 411,000     |   |                   |   | (743,000    | )             |  |   | (842,000    | )
|Income taxes payable                                                                               |  |               | (34,000     | ) |                   |   | (208,000    | )             |  |   | (348,000    | )
|Due to related parties                                                                             |  |               |            |   |                   |   | (104,000    | )             |  |   | 1,020,000   |  
|Other long term liabilities                                                                        |  |               | (114,000    | ) |                   |   |            |               |  |   |            |  
|Net effect of recapitalization of Term Notes                                                       |  |               | 115,000     |   |                   |   |            |               |  |   |            |  
|                                                                                                   |  |               |             |   |                   |   |             |               |  |   |             |  
|Net cash used in operating activities of continuing operations                                     |  |               | (955,000    | ) |                   |   | (6,798,000  | )             |  |   | (37,000     | )
|                                                                                                   |  |               |             |   |                   |   |             |               |  |   |             |  
|Net cash used in operating activities of discontinued operations                                   |  |               |            |   |                   |   | (854,000    | )             |  |   |            |  
|                                                                                                   |  |               |             |   |                   |   |             |               |  |   |             |  
|Net cash used in operating activities                                                              |  |               | (955,000    | ) |                   |   | (7,652,000  | )             |  |   | (37,000     | )
|                                                                                                   |  |               |            
|Cash flows from investing activities                                                               |  |               |             |   |                   |   |             |               |  |   |             |  
|Cash acquired through reverse acquisition                                                          |  |               | 2,123,000   |   |                   |   |            |               |  |   |            |  
|Purchases of property and equipment                                                                |  |               | (523,000    | ) |                   |   | (498,000    | )             |  |   | (902,000    | )
|Proceeds from sale of investment                                                                   |  |               |            |   |                   |   |            |               |  |   | 1,600,000   |  
|                                                                                                   |  |               |             |   |                   |   |             |               |  |   |             |  
|Net cash provided by (used in) investing activities of continued operations                        |  |               | 1,600,000   |   |                   |   | (498,000    | )             |  |   | 698,000     |  
|                                                                                                   |  |               |             |   |                   |   |             |               |  |   |             |  
|Net cash provided by investing activities of discontinued operations                               |  |               |            |   |                   |   | 2,902,000   |               |  |   |            |  
|                                                                                                   |  |               |             |   |                   |   |             |               |  |   |             |  
|Net cash provided by investing activities                                                          |  |               | 1,600,000   |   |                   |   | 2,404,000   |               |  |   | 698,000     |  
|                                                                                                   | 
|Cash flows from financing activities                                                               |  |               |             |  
|Proceeds from borrowings under line of credit                                                      |  |               | 90,609,000  |   |                   |   | 16,967,000  |               |  |   | 31,549,000  |  
|Repayment of borrowings under line of credit                                                       |  |               | (89,995,000 | ) |                   |   | (12,941,000 | )             |  |   | (32,250,000 | )
|Proceeds from issuance of notes to related parties                                                 |  |               |            |   |                   |   | 2,000,000   |               |  |   |            |  
|Repayment of related party term notes                                                              |  |               |            |   |                   |   | (4,653,000  | )             |  |   |            |  
|Proceeds from issuance of common stock to employees                                                |  |               | 3,000       |   |                   |   |            |               |  |   |            |  
|Payment of preferred stock dividends                                                               |  |               | (145,000    | ) |                   |   |            |               |  |   |            |  
|Increase in (repayment of) obligations under capital leases                                        |  |               | (147,000    | ) |                   |   | 24,000      |               |  |   | (40,000     | )
|                                                                                                   |  |               |             |   |                   |   |             |               |  |   |             |  
|Net cash provided by (used in) financing activities                                                |  |               | 325,000     |   |                   |   | 1,397,000   |               |  |   | (741,000    | )
|Effect of exchange rate changes on cash from continuing operations                                 |  |               | 463,000     |   |                   |   | 267,000     |               |  |   | 110,000     |  
|Effect of exchange rate changes on cash from discontinued operations                               |  |               |            |   |                   |   | 16,000      |               |  |   |            |  
|                                                                                                   |  |               |             |   |                   |   |             |               |  |   |             |  
|Net change in cash                                                                                 |  |               | 1,433,000   |   |                   |   | (3,568,000  | )             |  |   | 30,000      |  
|Cashbeginning of year                                                                             |  |               | 1,198,000   |   |                   |   | 4,736,000   |               |  |   | 1,168,000   |  
|                                                                                                   |  |               |             |   |                   |   |             |               |  |   |             |  
|Cashend of year                                                                                   |  | $             | 2,631,000   |   |                   | $ | 1,168,000   |               |  | $ | 1,198,000   |  
|                                                                                                   |  |               |             |   |                   |   |             |               |  |   |             |  

See accompanying notes.



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##### Table of Contents

Rand Worldwide, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

1. Summary of Significant Accounting Policies

Nature of Business and Basis of
Presentation

Rand Worldwide, Inc. is a leading supplier in the design automation, facilities and data management software marketplace.
Rand Worldwide also provides value-added services, such as training, technical support and other consulting and professional services to corporations, government agencies and educational institutions worldwide.

Rand Worldwide was previously known as Avatech Solutions, Inc. On August 17, 2010, Avatech acquired all the outstanding common stock of Rand
Worldwide in a reverse merger and then changed its name to Rand Worldwide, Inc. on January 1, 2011. Even though Avatech was the legal successor in the merger, Rand Worldwide was considered to be the continuing entity for financial statement
reporting purposes. As a result of the merger and in accordance with accounting principles generally accepted in the United States of America (U.S. GAAP), the consolidated financial statements represent a continuation of Rand Worldwide
and thus include the results of Rand Worldwide for the full twelve months ended June 30, 2011 and the results of Avatech from the date of acquisition through June 30, 2011. Balances reported for prior periods reflect the accounts of
pre-merger Rand Worldwide only. All intercompany accounts and transactions between Avatech, Rand and its consolidated affiliated companies have been eliminated in consolidation. See Note 2 for further information regarding this transaction and basis
of presentation. All references to the consolidated entity of both Avatech and Rand Worldwide are identified herein as the Company.

Effective January 1, 2011, the Company changed its official stock ticker symbol from AVSO.OB to RWWI.OB.

The Company is organized into three divisions: IMAGINiT Technologies (IMAGINiT), Enterprise Applications and ASCENTCenter for Technical
Knowledge (ASCENT).

The IMAGINiT division is one of the largest value-added resellers of Autodesk, Inc. (Autodesk)
products in the world, providing Autodesk solutions and value-added services to customers in the manufacturing, infrastructure, building, and media and entertainment industries and also sells its own proprietary software products and related
services, enhancing its total client solution offerings. IMAGINiT operates from locations across North America, Australia, Singapore and Malaysia.

The Enterprise Applications division is the non-Autodesk component of the business and offers various products and services including data archiving solutions, facilities management solutions, as well as
training for customers using that use products other than those from Autodesk.

ASCENT is the courseware division of Rand Worldwide and is a
leading developer of professional training materials and knowledge products for engineering software tools. Executive management performs their primary analyses based upon geographic location and operations by geographic segment are disclosed within
Note 18.

Effective with the merger, the Company elected to change its fiscal year end from October 31 to June 30. References to
2009 mean the twelve month periods ended October 31, 2009. References to 2010 mean the eight month period ended June 30, 2010.

The
consolidated financial statements include the accounts of Rand Worldwide, Inc. and its subsidiaries (the Company or Rand Worldwide). All intercompany accounts and transactions between the Company and its subsidiaries have
been eliminated in consolidation.



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##### Table of Contents

Discontinued Operations

During 2009, the Company restructured certain of its operations, which included the sale or closure of several subsidiaries. The Company determined these disposed subsidiaries to be discontinued
operations under the provisions of ASC 360-10, Accounting for the Impairment or Disposal of Long-lived Assets. In accordance with ASC 360-10, the Company has determined that its subsidiaries are the lowest level for which the results of
operations and cash flows can be clearly distinguished. Any gain or loss resulting from disposal of a subsidiary, together with the results of its operations up to the date of disposal, is reported separately as a discontinued operation. The
financial information of a discontinued operation is excluded from the respective captions in the consolidated financial statements and related notes and is reported separately.

Use of Estimates

The preparation of financial statements in conformity with accounting
principles generally accepted in the United States 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 and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Inventory

Inventory consists of
packaged computer software and is stated at the lower of first-in, first-out cost, or market.

Property and Equipment

Property and equipment is stated at cost. Depreciation for computer software and equipment and office furniture and equipment is provided for by the
straight-line method over estimated useful lives ranging from three to seven years. Leasehold improvements are amortized over the lesser of the lease term or the useful life of the asset using the straight-line method. Repairs and maintenance costs
are expensed as incurred.

Impairment of Long-Lived Assets Excluding Goodwill

Long-lived assets, excluding goodwill, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset or group of assets may not be fully
recoverable. These events or changes in circumstances may include a significant deterioration of operating results, changes in business plans, or changes in anticipated future cash flows. If an impairment indicator is present, the Company evaluates
recoverability by a comparison of the carrying amount of the assets to future undiscounted net cash flows expected to be generated by the assets. Assets are grouped at the lowest levels for which there are identifiable cash flows that are largely
independent of the cash flows generated by other asset groups. If the assets are impaired, the impairment recognized is measured by the amount by which the carrying amount exceeds the fair value of the assets. Fair value is generally determined by
estimates of discounted cash flows. The discount rate used in any estimate of discounted cash flows would be the rate required for a similar investment of like risk.

Goodwill

Goodwill is the excess of the purchase price paid over the fair value of the
identifiable net assets acquired in purchase business combinations. The Company accounts for goodwill in accordance with ASC 350 Goodwill and Other Intangible Assets. Under ASC 350, goodwill is subject to annual impairment tests or more
frequently when events and circumstances occur indicating that recorded goodwill may be impaired. Impairment is the condition that exists when the carrying amount of goodwill exceeds its implied fair value. The implied fair value of goodwill is the
amount determined by deducting the estimated fair value of all tangible and identifiable intangible net assets of the reporting unit to which goodwill has been allocated from the estimated fair value of the reporting unit. If the recorded value of
goodwill exceeds its implied value, an impairment charge is recorded for the excess.



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##### Table of Contents

The carrying amount of goodwill was $15,240,000, $7,232,000 and $7,201,000 as of June 30, 2011 and 2010
and October 31, 2009, respectively.

Stock Options and Stock Granted to Employees

The Company applies ASC 718-10, Share-Based Payment, which requires companies to measure the cost of share-based awards to employees based on the
grant-date fair value of the award using an option pricing model, and to recognize that cost over the period during which an employee is required to provide service in exchange for the award. The Company uses the Black-Scholes option pricing model
to determine the fair value of stock options granted to employees and recognizes the compensation cost of employee share-based awards in its statement of operations using the straight-line method over the vesting period of the award, net of
estimated forfeitures.

The use of the Black-Scholes option pricing model to estimate the fair value of share-based awards requires that the
Company make certain assumptions and estimates for required inputs to the model, including (i) the fair value of the Companys common stock at each grant date, (ii) the expected volatility of the Companys common stock value
based on industry comparisons, (iii) the expected life of the share-based award, (iv) the risk-free interest rate, and (v) the dividend yield. The Company uses the Black-Scholes option pricing model. The Black-Scholes option pricing
model was developed for estimating the fair value of traded options which have no vesting restrictions and are fully transferable. In addition, option valuation models require the input of highly subjective assumptions, including the expected stock
price volatility.

Revenue Recognition and Accounts Receivable

The Companys revenue recognition policies are in accordance with ASC 985-685 SoftwareRevenue Recognition and ASC 605-20 Revenue Recognition.

Revenue from product sales and the sale of developed software is recognized when the following four criteria are met: (i) a signed purchase order
has been obtained; (ii) delivery of the software has occurred; (iii) the fee is fixed or determinable; and (iv) the fee is probable of collection. Software product sales billed and not recognized as revenue are included in deferred
revenue. The Company generally does not require collateral for accounts receivable. The Company allows returns from customers in limited situations. The Company has historically not experienced significant returns, and accordingly, allowances for
returned products are not recorded.

Product Sales

For revenue derived from license fees for packaged software products, the Company follows ASC 985-605 Software-Revenue Recognitionand ASC 605-10 Revenue Recognition. The Company recognizes
revenue from the sale of software licenses and training materials upon shipment of the products, provided that evidence of the arrangement exists, the arrangement fee is fixed or determinable, and collection of the related receivable is probable and
free of contingencies.

Service Revenue

Revenue from installation, training and consulting services is recognized upon completion of the requested service, which typically occurs within ninety days of receipt of an order. Revenue from telephone
support contracts and maintenance and support contracts is recognized ratably over the contract period, which is typically twelve months. Maintenance and support services typically include only telephone and internet-based support, but in limited
circumstances include software updates, when and if available, provided by the vendor of the software. Installation and consulting services provided by the Company are not considered essential to the functionality of any software products sold as
those services do not alter the functionality or capabilities of the product and could be performed by customers or other vendors.



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Commission Revenue

Fees earned from the resale of Autodesks software support agreements are reported as commission revenue and presented net of their related costs. For these transactions, the Company considers
Autodesk to be the primary obligor in the arrangement as Autodesk has the responsibility of providing the end-customer all the deliverables under the contract, including software upgrades and various support services. As a result, the Company
assumes an agency relationship in these transactions, and recognizes the net fee associated with serving as an agent in revenue.

Commissions
revenue also includes referral fees paid by Autodesk for certain types of customer transactions, determined based on specified percentages of the amount billed by Autodesk to the referred customer. These referral fees are recorded as revenue in the
period earned, based on reporting by Autodesk.

Multiple-Element Arrangements

The Companys arrangements with its customers may involve the sale of one or more products and services at the same time. The Company considers these to be multiple elements of a single
arrangement. The Company adopted ASU 2009-13, Multiple-Deliverable Revenue Arrangements, on a prospective basis as of the beginning of fiscal 2011 for new and materially modified arrangements originating on or after July 1,
2010. Under the new standards, we allocate the total arrangement consideration to each separable element based on the relative selling price of each element in accordance with selling price hierarchy, which includes: vendor specific
objective evidence (VSOE) if available; third party evidence (TPE) if VSOE is not available; and best estimate of selling price if neither VSOE nor TPE is available. In general, the Company uses VSOE to allocate the selling price to each
element. Arrangement consideration allocated to undelivered elements is deferred until delivery of the individual elements. The adoption of new guidance did not result in a material impact to the financial statements for fiscal year 2011.

Fixed or Determinable Fee

Management assesses whether the total fee payable to the Company for the order is fixed or determinable and free of contingencies at the time of delivery.
Management considers the payment terms of the transaction, including whether the terms are extended, and its collection experience in similar transactions that did not require concessions, among other factors. If the total consideration payable to
the Company is not fixed or determinable, revenue is recognized only as payments become due from the customer, provided that all other revenue recognition criteria are met.

Customer Acceptance Criteria

If an arrangement includes customer acceptance criteria, the
Company defers all revenue from the arrangement until acceptance is received or the acceptance period has lapsed, unless those acceptance criteria only require that the product perform in accordance with the software vendors standard published
product specifications. If a customers obligation to pay the Company is contingent upon a future event, such as installation or acceptance, the Company defers all revenue from the arrangement until that event has occurred.

Deferred Revenue

Deferred product
revenue is comprised of amounts that have been invoiced to customers upon delivery of a product, but are not yet recognizable as revenue because one or more of the conditions required for revenue recognition have not yet been met. Deferred service
revenue represents amounts invoiced to customers for telephone support contracts or maintenance and support contracts, which are recognized ratably as revenue over the term of the arrangements, or for installation or training services that have not
yet been provided.



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##### Table of Contents

Product Returns

The Companys arrangements with customers do not contain any rights of product return, other than those related to standard warranty provisions that permit replacement of defective goods. As of
June 30, 2011, June 30, 2010 and October 31, 2009, the Company had no reserve recorded for product returns because such returns have been insignificant.

Shipping and Handling Fees

The Company records as revenue any amounts billed to customers
for shipping and handling costs and records as cost of revenue its actual shipping costs incurred.

Allowance for Doubtful Accounts

The Company uses estimates to determine the amount of the allowance for doubtful accounts necessary to reduce accounts receivable to its
expected net realizable value. The Company estimates the amount of the required allowance by reviewing the status of past-due receivables and analyzing historical bad debt trends. Actual collection experience has not varied significantly from
estimates, due primarily to credit policies, collection experience, and a lack of concentration of accounts receivable. The Company charges-off receivables deemed to be uncollectible to the allowance for doubtful accounts. Accounts receivable
balances are not collateralized.

Cost of Product Sales

Cost of product sales includes the costs of purchasing software and hardware from suppliers and the associated shipping and handling costs.

Cost of Service Revenue

Cost of service revenue consists primarily of direct employee
compensation of all service personnel, the cost of subcontracted services and direct expenses billable to customers. Cost of service revenue does not include an allocation of overhead costs.

Advertising Costs

Costs incurred for producing and communicating advertisements are
expensed as incurred and included in selling, general and administrative expenses in the accompanying statements of operations. Advertising expenses, net of reimbursements from suppliers, were immaterial for the years ended June 30, 2011 and
October 31, 2009 and for the eight months ended June 30, 2010.

Comprehensive Income (Loss)

Comprehensive income (loss) is comprised of two components: net income (loss) and foreign currency translation adjustments. During the years ended
June 30, 2011 and October 31, 2009 and the eight month period ending June 30, 2010, unrealized currency translation gains of $569,000, $509,000 and $139,000 respectively, were recorded in accumulated other comprehensive income within
shareholders deficit.

Income Taxes

The Company uses the liability method to account for income taxes. Income tax expense includes income taxes currently payable and deferred taxes arising from temporary differences between financial
reporting and income tax bases of assets and liabilities. Deferred income taxes are measured using the enacted tax rates and laws that will be in effect when the differences are expected to reverse. Income tax expense, if any, consists of the taxes
payable for the current period. Valuation allowances are established when the realization of deferred tax assets are not considered more likely than not. The Company records liabilities from uncertain tax positions in accordance with ASC 740-10
Income Taxes. Interest and penalties related to unrecognized tax benefits are recorded as part of income tax expense.



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##### Table of Contents

Foreign Currency Translation

Assets and liabilities of the Companys foreign subsidiaries, whose functional currencies are the respective local currencies, are translated into U.S. dollars at the current rates of exchange in
effect at the balance sheet dates. Revenues and expenses are translated using the average exchange rates for the period. The resulting translation adjustments are included as a separate component of shareholders deficit in the consolidated
balance sheets within accumulated other comprehensive income. Foreign currency transaction gains or losses resulting from the re-measurement of monetary assets and liabilities stated in a currency other than the functional currency are included in
the Companys results of operations.

In addition, for the years ended June 30, 2011 and October 31, 2009 and for the eight
months ended June 30, 2010, realized currency transaction gains (losses) from continuing operations of ($244,000), $40,000 and ($51,000), respectively, were recorded in the statement of operations and realized currency translation gains from
discontinued operations of $0, $6,000 and $0 respectively, were recorded in the statement of operations within gain (loss) on sale or disposition of discontinued operations, net of tax.

Recent Accounting Pronouncements

In October 2009, the FASB issued a new accounting
standard which provides guidance for arrangements with multiple deliverables which are not within the scope of the current software revenue recognition guidance. Specifically, the new standard requires an entity to allocate consideration at the
inception of an arrangement to all of its deliverables based on their relative selling prices. In the absence of VSOE or third-party evidence of the selling prices, consideration must be allocated to the deliverables based on managements best
estimate of the selling prices. This standard was effective for revenue arrangements entered into or materially modified in fiscal years beginning on or after June 15, 2010 with early adoption permitted. The Companys adoption of the new
guidance did not have a material effect on the Companys consolidated financial statements.

In April 2010, the FASB issued an update
regarding the milestone method of revenue recognition under ASC 605. ASC 605 provides guidance on defining a milestone and determining when it may be appropriate to apply the milestone method of revenue recognition. The amendments in this update are
effective on a prospective basis for milestones achieved in fiscal years, and interim periods within those years, beginning on or after June 15, 2010. The Companys adoption of ASC 605 did not have a material effect on the Companys
consolidated financial statements.

In May 2011, the FASB issued guidance to amend the accounting and disclosure requirements on fair value
measurements. The new guidance limits the highest-and-best-use measure to nonfinancial assets, permits certain financial assets and liabilities with offsetting positions in market or counterparty credit risks to be measured on a net basis, and
provides guidance on the applicability of premiums and discounts. Additionally, the new guidance expands the disclosures on Level 3 inputs by requiring quantitative disclosure of the unobservable inputs and assumptions, as well as description of the
valuation processes and the sensitivity of the fair value to changes in unobservable inputs. The updated guidance is effective on a prospective basis for financial statements issued for fiscal years, and interim periods within those fiscal years,
beginning after December 15, 2011. We do not anticipate adoption to have a material impact on our consolidated financial statements.

In
June 2011, the FASB issued guidance on presentation of comprehensive income. The new guidance eliminates the current option to report other comprehensive income and its components in the statement of changes in equity. Instead, an entity will be
required to present either a continuous statement of net income and other comprehensive income or two separate but consecutive statements and will result in presentation changes for our consolidated financial statements. The updated guidance is
effective on a retrospective basis for financial statements issued for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2011. We do not anticipate adoption to have a material impact on our consolidated
financial statements.



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##### Table of Contents

Reclassifications

Certain prior year financial statement amounts have been reclassified to conform to the current year presentation.

2. Reverse Merger Transaction

On August 17, 2010, Avatech acquired all the
outstanding common stock of pre-merger Rand Worldwide as a result of a merger. Rand Worldwide is also a software reseller in the design automation marketplace. The Company believes the merger expanded its overall geographic presence and increased
its market share.

In consideration for the merger, Rand Worldwides stockholder received shares of Avatech common stock representing
approximately 66% of the outstanding shares of Avatech common stock and Avatechs stockholders retained approximately 34% of the outstanding shares of Avatech common stock. When calculated based on the number of shares of Avatech common stock
outstanding on a fully diluted basis, the common stock issued to the Rand Worldwide stockholder was equal to approximately 59% of the total common equivalent shares as of the date of the merger. As the Rand Worldwide stockholder acquired more than
50% of the outstanding shares of Avatech common stock, Rand Worldwide was deemed, for accounting and SEC reporting purposes to be the continuing reporting entity. As such, the consolidated financial statements include the accounts of Avatech from
the date of acquisition through June 30, 2011 and pre-merger Rand Worldwide for the full year ended June 30, 2011. Balances reported for prior periods reflect the accounts of pre-merger Rand Worldwide only. Additionally, the equity
structure of Rand Worldwide has been restated using the exchange ratio established in the acquisition agreement to reflect the number of shares of Avatech common stock issued in the merger.

RWWI Holdings, LLC (RWWI Holdings) was formed in the recapitalization by the stockholders of Rand Worldwide prior to the merger to hold their interests in Avatech. Accordingly, RWWI Holdings
holds 66% of the outstanding shares of Rand Worldwide. RWWI Holdings is not part of the Companys consolidated group.

Recognized
amounts of identifiable intangible assets acquired and liabilities assumed

The Company accounted for the transaction using the acquisition
method in accordance with ASC 805 Business Combinations.Accordingly, the consideration has been allocated to the tangible and intangible assets acquired and liabilities assumed based upon their respective estimated fair values on the
acquisition date. The Companys allocation of the total consideration transferred of $14,226,000 is summarized below:



|                                |  |   |            |  
|------------------------------- |  | - | ---------- | -
|Net tangible assets acquired    |  | $ | 2,449,000  |  
|Deferred income tax assets      |  |   | 392,000    |  
|Trade name                      |  |   | 2,649,000  |  
|Customer list                   |  |   | 3,010,000  |  
|Goodwill                        |  |   | 8,151,000  |  
|Deferred tax liability          |  |   | (2,425,000 | )
|                                |  |   |            |  
|Total consideration transferred |  | $ | 14,226,000 |  

Identifiable intangible assets

Fair values for the trade name and customer list were determined based on the income approach. The following table presents certain information on the acquired identifiable intangible assets:



|                 |  |                    |      |   |                       |  |          | 
|---------------- |  | ------------------ | ---- | - | --------------------- |  | -------- | 
|Intangible asset |  | Discount rate used |      |   | Estimated useful life | 
|Trade name       |  |                    | 19.0 | % |                       |  | 15 years | 
|Customer list    |  |                    | 21.0 | % |                       |  | 15 years | 



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##### Table of Contents

Goodwill

Goodwill is calculated as the excess of the consideration transferred over the net assets recognized and represents the future economic benefits arising from other assets acquired that could not be
individually identified and separately recognized. These benefits include expansion opportunities and increased presence in the design automation marketplace.

Pro FormaFinancial Information

The following reflects the unaudited pro forma
combined results of operations for the year ended June 30, 2011 of Avatech and Rand Worldwide as if the acquisition had taken place as of July 1, 2010:



|                                   |  |   |            | 
|---------------------------------- |  | - | ---------- | 
|Total revenue                      |  | $ | 93,201,000 | 
|Net income                         |  |   | 1,467,000  | 
|Earnings per common share, basic   |  |   | 0.03       | 
|Earnings per common share, diluted |  |   | 0.03       | 

In connection with the merger, during the year ended June 30, 2011, Avatech and Rand Worldwide incurred combined
non-recurring costs of $2,251,000, including $932,000 in professional fees, $873,000 in severance costs, $233,000 in accrued lease costs for office closings, $151,000 due to accelerated vesting of stock options, $30,000 for the corporate name change
and $32,000 in additional board fees. The $2,251,000 of non-recurring costs are included in the proforma results shown above, however only $1,893,000 of such costs are included in the consolidated statement of operations for the year ended
June 30, 2011, because $358,000 of these costs were incurred by Avatech prior to the merger.

3. Supplemental Disclosure of Cash Flow
Information

The Company paid interest of approximately $245,000, $2,316,000 and $240,000 for the full years ended June 30, 2011 and
October 31, 2009 and for the eight months ended June 30, 2010, respectively, and paid federal and state taxes of approximately $372,000, $208,000 and $357,000 for the full years ended June 30, 2011 and October 31, 2009 and for
the eight months ended June 30, 2010, respectively. Total purchases of property and equipment were approximately $566,000, $511,000 and $902,000 for the full years ended June 30, 2011 and October 31, 2009 and for the eight months
ended June 30, 2010, respectively. Total purchases of property and equipment included non-cash purchases of $43,000, $13,000 and $0 for the years ended June 30, 2011 and October 31, 2009 and for the eight months ended June 30,
2010, respectively.

4. Borrowings Under Line of Credit

On December 31, 2010, certain subsidiaries of the Company entered into a new line of credit facility which permits up to $9 million of borrowings limited to 85% of aggregate eligible accounts
receivable with PNC Bank, National Association. The interest rate is, at the Companys option, either (i) the Eurodollar Rate, which is calculated by using the LIBOR rate plus an applicable margin ranging from 2.5% to 3.25% or
(ii) the banks Alternate Base Rate, which is calculated by using the base rate of the bank, the federal funds open rate, or the daily LIBOR rate plus an applicable margin ranging from 1.75% to 2.75%. The interest rate as of
June 30, 2011 was 5%. The Company had outstanding borrowings from the bank under its credit line of approximately $3.9 million as of June 30, 2011 and had $3.3 million outstanding as of June 30, 2010. The line expires on
December 31, 2012 and is secured by 65% of the stock in one of its subsidiaries and 100% of the stock of a separate subsidiary.

See Note
19 for the Companys Related Party Term Notes.



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##### Table of Contents

5. Preferred Stock

The Companys preferred stock included in the equity section of the accompanying consolidated balance sheets consists of the following as of June 30, 2011 and 2010:



|                                                                                                                                                                                                                |  |         |        |  |                 |   |   |  |  |   |   | 
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ------- | ------ |  | --------------- | - | - |  |  | - | - | 
|                                                                                                                                                                                                                |  | June 30 |        |  | October 
312009 |  
|                                                                                                                                                                                                                |  | 2011    |        |  | 2010            |   |  
|Series D Convertible Preferred Stock, $0.01 par value; 1,297,537 shares authorized and issued; and 1,089,213 shares
outstanding at June 30, 2011; aggregate liquidation preference of $654,000 at June 30, 2011 |  | $       | 11,000 |  |                 | $ |  |  |  | $ |  | 
|                                                                                                                                                                                                                |  |         |       
|Series E Convertible Preferred Stock, $0.01 par value; 3,000 shares authorized; 1,191 shares issued; 937 shares outstanding at
June 30, 2011; aggregate liquidation preference of $937,000 at June 30, 2011     |  |         |       |  |                 |   |  |  |  |   |  | 
|                                                                                                                                                                                                                |  |         |        |  |                 |   |   |  |  |   |   | 
|Total Preferred Stock                                                                                                                                                                                           |  | $       | 11,000 |  |                 | $ |  |  |  | $ |  | 
|                                                                                                                                                                                                                |  |         |        |  |                 |   |   |  |  |   |   | 

Series A Redeemable Preferred Stock

On November 1, 2007, Rand Worldwide issued 31,000,000 shares of Series A redeemable preferred stock (Series A) for $1.00 per share. At June 30, 2010, 31,858,922 shares of Series A
were authorized and designated, of which 31,000,000 shares were issued and outstanding. The net proceeds from the issuance of the Series A Convertible Preferred Stock were classified as temporary equity in the accompanying consolidated balance
sheets as the terms of the issuance do not warrant classification as a liability nor as equity.

Immediately prior to and on the date of the
merger with Avatech, Rand Worldwide completed a recapitalization which had the effect of exchanging its preferred stock for common stock. Prior to the merger with Avatech, Rand Worldwide had outstanding term notes totaling approximately $12.6
million to its majority shareholder. Rand Worldwide completed a recapitalization which had the effect of converting its Series A Redeemable Preferred Stock, related-party notes payable, and accrued interest on the related-party notes payable into
common stock. As a result of the recapitalization, Rand Worldwide no longer has outstanding term notes and no longer has any outstanding Series A Preferred Stock.

Convertible Preferred Stock

At June 30, 2003, the Company had issued and outstanding
172,008 shares of Series C Convertible Preferred Stock (the Series C shares). On December 31, 2003, the Series C shares were converted into 484,487 shares of newly authorized Series D Convertible Preferred Stock (the Series D
shares). In 2004, the Company issued 813,050 shares of Series D Convertible Preferred Stock for cash proceeds totaling $330,000 and a reduction in notes payable to a related party of $98,000. In connection with the issuance of Series D shares,
1,730,043 warrants were granted to preferred shareholders. The warrants entitle the holder to purchase common stock at an exercise price of $0.45 per share up to one year after the date of grant. At June 30, 2011, 1,089,213 shares of Series D
Convertible Preferred Stock were outstanding, respectively, with the following terms:

Redemption Feature-The
Series D shares are redeemable in the event that the Company is engaged in a business combination that is approved by the Board of Directors and subsequently submitted and approved by a vote of the Companys stockholders. The terms of the
Merger with Rand Worldwide did not trigger any redemption provisions of the Series D shares. Any director who holds shares of Series D is not eligible to vote on the proposed business combination. The redemption price is $0.30 (upon conversion) per
share plus an amount equal to all declared and unpaid dividends accrued on such shares since the original issue date.

Voting Rights- Each holder of the Series D shares shall vote together with all other classes and series of stock of the Company as
a single class on all actions. Each share shall entitle the holder to one vote per share of common stock into which the preferred stock is then convertible on each such action. In addition,



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##### Table of Contents

these holders have special voting rights in connection with certain matters, including the issuance of senior stock or debentures, certain mergers, the dissolution of the Company and any
amendment to the charter or the terms of the securities that would impair their rights.

Dividend Rate- The holders of
the Series D shares are entitled to receive cumulative dividends at a rate of 10% per annum when and as declared by the Board of Directors. Dividends are paid quarterly to preferred stockholders.

Conversion Feature- The Series D shares are convertible at any time beginning 120 days after the original issuance date at the
option of the holder and automatically converts into common stock if the common stock trades for more than $2.25 per share for 60 consecutive trading days. Each Series D share is convertible into shares of common stock by multiplying the appropriate
conversion rate in effect by the number of shares of preferred stock being converted. As of June 30, 2011, the conversion rate would yield two shares of common stock for each share of Series D share; however, this rate may be adjusted due to
stock splits, dividends, and other events defined in the stock purchase agreement between the Company and the holders of the Series D shares.

Liquidation Preference- In the event of a liquidation, dissolution or winding up of the Company, the holders of Series D shares are entitled to receive for each share, prior and in preference to
any distribution of any of the assets or surplus funds to the holders of common stock, an amount equal to $0.60 per share plus all accumulated but unpaid dividends. If upon the occurrence of such event, the assets and funds thus distributed among
the holders are insufficient to permit the payment of the preferential amount, then the entire assets and funds of the Company legally available for distribution shall be distributed ratably among the preferred stockholders.

In July 2005, the Company issued 1,191 shares of Series E Convertible Preferred Stock which raised $1,191,000 for working capital purposes. In connection
with this issuance, the Company granted 366,475 warrants to purchase its common stock at an exercise price of $0.65 per share which expired on July 29, 2008. At June 30, 2011, 937 shares of Series E Convertible Preferred Stock (the
Series E shares) were outstanding, respectively, with the following terms:

Redemption Feature- The Series E
shares are redeemable in the event that the Company is engaged in a business combination that is approved by the Board of Directors and subsequently submitted and approved by a vote of the Companys stockholders. The terms of the Merger with
Rand Worldwide did not trigger any redemption provisions of the Series E shares. Any director who holds shares of Series E is not eligible to vote on the proposed business combination. The redemption price is $0.65 per share (upon conversion) plus
an amount equal to all declared and unpaid dividends accrued on such shares since the original issue date.

Voting
Rights- Each holder of the Series E shares shall vote together with all other classes and series of stock of the Company as a single class on all actions. Each share shall entitle the holder to one vote per share of common stock into which the
preferred stock is then convertible on each such action. In addition, these holders have special voting rights in connection with certain matters, including the issuance of senior stock or debentures, certain mergers, the dissolution of the Company
and any amendment to the charter or the terms of the securities that would impair their rights.

Dividend Rate- The
holders of the Series E shares are entitled to receive cumulative dividends at a rate of 10% per annum when and as declared by the Board of Directors. Dividends are paid quarterly to preferred stockholders.

Conversion Feature- The Series E shares are convertible at any time beginning 120 days after the original issuance date at the
option of the holder and automatically converts into common stock if the common stock trades for more than $2.25 per share for 60 consecutive trading days. Each Series E share is convertible into shares of common stock by multiplying the appropriate
conversion rate in effect by the number of shares of preferred stock being converted. As of June 30, 2011, the conversion rate would yield 1,538.5 shares of common stock for each share of Series E; however, this rate may be adjusted due to
stock splits, dividends, and other events defined in the stock purchase agreements between the Company and the holders of the Series E shares.



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##### Table of Contents

Common Stock Warrants- Each holder of Series E shares received common stock warrants
which give the holder the right to purchase 307.7 shares the Companys common stock for each Series E share held. The exercise price of the warrants was $0.65 per share and they expired on June 28, 2008.

Liquidation Preference- In the event of a liquidation, dissolution or winding up of the Company, the holders of Series E shares are
entitled to receive for each share, prior and in preference to any distribution of any of the assets or surplus funds to the holders of common stock, an amount equal to $0.65 per share (upon conversion) plus all accumulated but unpaid dividends. If
upon the occurrence of such event, the assets and funds thus distributed among the holders are insufficient to permit the payment of the preferential amount, then the entire assets and funds of the Company legally available for distribution shall be
distributed ratably among the preferred stockholders.

6. Earnings (Loss) Per Share

Basic earnings (loss) per common share is computed by dividing net earnings (loss) available to common stockholders by the weighted-average number of
common shares outstanding for the period. Such outstanding shares include those issued through Employee Stock Compensation Plans, Board compensation, and the exercise of stock warrants. Diluted earnings (loss) per common share include the potential
dilution that would occur from common shares issuable upon the exercise of outstanding stock options and warrants and the conversion of preferred stock. There is no dilutive effect on the earnings (loss) per common share during loss periods, and the
dilutive effects of the common stock derivatives were not included for fiscal year 2009 as these options would have an anti-dilutive effect due to the losses of the Company. As of June 30, 2011, 6,950,115 shares of common stock were issuable
upon the conversion or exercise of options, warrants and preferred stock. For the years ended June 30, 2011 and October 31, 2009 and for the eight months ended June 30, 2010, there were 6,620,768; 758,000; and 976,000, shares of
common stock equivalents, respectively, excluded from the computation of diluted earnings per share because their effect would have been antidilutive. The following summarizes the computations of basic and diluted loss per common share:



|                                                                               |  |               |            |   |                   |   |            |               |  |   |            |    
|------------------------------------------------------------------------------ |  | ------------- | ---------- | - | ----------------- | - | ---------- | ------------- |  | - | ---------- | ---
|                                                                               |  | Years ended   |            |   | Eight monthsended |  
|                                                                               |  | June 30, 2011 |            |   | October 31, 2009  |   |            | June 30, 2010 | 
|Numerator for basic and diluted earnings per share:                            |  |               |            |   |                   |   |            |               |  |   |            |    
|Net income (loss) from continuing operations                                   |  | $             | 1,833,000  |   |                   | $ | (5,414,000 | )             |  | $ | (2,754,000 | )  
|Loss from discontinued operations, net of tax                                  |  |               |           |   |                   |   | (860,000   | )             |  |   |           |    
|Gain on disposition of discontinued operations, net of tax                     |  |               |           |   |                   |   | 2,914,000  |               |  |   |           |    
|                                                                               |  |               |            |   |                   |   |            |               |  |   |            |    
|Net income (loss)                                                              |  |               | 1,833,000  |   |                   |   | (3,360,000 | )             |  |   | (2,754,000 | )  
|                                                                               |  |               |            |   |                   |   |            |               |  |   |            |    
|Net income (loss) from continuing operations                                   |  |               | 1,833,000  |   |                   |   | (5,414,000 | )             |  |   | (2,754,000 | )  
|Payment and/or accretion of preferred stock dividends                          |  |               | (515,000   | ) |                   |   | (2,678,000 | )             |  |   | (1,928,000 | )  
|                                                                               |  |               |            |   |                   |   |            |               |  |   |            |    
|Net income (loss) from continuing operations available to common stockholders  |  | $             | 1,318,000  |   |                   | $ | (8,092,000 | )             |  | $ | (4,682,000 | )  
|                                                                               |  |               |            |   |                   |   |            |               |  |   |            |    
|Weighted average shares used in computing basic net income (loss) per share:   |  |               | 49,585,611 |   |                   |   | 34,232,682 | (1)           |  |   | 34,232,682 | (1)
|Weighted average shares used in computing diluted net income (loss) per share: |  |               | 49,696,443 |   |                   |   | 34,232,682 | (1)           |  |   | 34,232,682 | (1)
|Income (loss) per common share from continuing operations, basic               |  | $             | 0.03       |   |                   | $ | (0.24      | )             |  | $ | (0.14      | )  
|Income per common share from discontinued operations, basic                    |  |               |           |   |                   |   | 0.06       |               |  |   |           |    
|                                                                               |  |               |            |   |                   |   |            |               |  |   |            |    
|Income (loss) per common share, basic                                          |  | $             | 0.03       |   |                   | $ | (0.18      | )             |  | $ | (0.14      | )  
|                                                                               |  |               |            |   |                   |   |            |               |  |   |            |    
|Income (loss) per common share from continuing operations, diluted             |  | $             | 0.03       |   |                   | $ | (0.24      | )             |  | $ | (0.14      | )  
|Income per common share from discontinued operations, diluted                  |  |               |           |   |                   |   | 0.06       |               |  |   |           |    
|                                                                               |  |               |            |   |                   |   |            |               |  |   |            |    
|Income (loss) per common share, diluted                                        |  | $             | 0.03       |   |                   | $ | (0.18      | )             |  | $ | (0.14      | )  
|                                                                               |  |               |            |   |                   |   |            |               |  |   |            |    



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##### Table of Contents

|(1) | The weighted average shares for the year ended October 31, 2009 and the eight months ended June 30, 2010 have been restated to reflect the shares issued as
part of the Merger.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

7. Intangible Assets

The following is a summary of the carrying amount, accumulated amortization and the resulting net book value of intangible assets:

June 30, 2011



|                        |  |                 |            |  |                         |   |           |                |  |   |           | 
|----------------------- |  | --------------- | ---------- |  | ----------------------- | - | --------- | -------------- |  | - | --------- | 
|                        |  | Carrying amount |            |  | Accumulatedamortization |   |           | Net book value | 
|Customer list           |  | $               | 8,915,000  |  |                         | $ | 5,570,000 |                |  | $ | 3,345,000 | 
|Trade name              |  |                 | 3,931,000  |  |                         |   | 802,000   |                |  |   | 3,129,000 | 
|Intellectual property   |  |                 | 1,324,000  |  |                         |   | 1,324,000 |                |  |   |          | 
|                        |  |                 |            |  |                         |   |           |                |  |   |           | 
|Total intangible assets |  | $               | 14,170,000 |  |                         | $ | 7,696,000 |                |  | $ | 6,474,000 | 
|                        |  |                 |            |  |                         |   |           |                |  |   |           | 

June 30, 2010



|                        |  |                 |           |  |                         |   |           |                |  |   |           | 
|----------------------- |  | --------------- | --------- |  | ----------------------- | - | --------- | -------------- |  | - | --------- | 
|                        |  | Carrying amount |           |  | Accumulatedamortization |   |           | Net book value | 
|Customer list           |  | $               | 5,904,000 |  |                         | $ | 5,335,000 |                |  | $ | 569,000   | 
|Trade name              |  |                 | 1,282,000 |  |                         |   | 362,000   |                |  |   | 920,000   | 
|Intellectual property   |  |                 | 1,324,000 |  |                         |   | 1,175,000 |                |  |   | 149,000   | 
|                        |  |                 |           |  |                         |   |           |                |  |   |           | 
|Total intangible assets |  | $               | 8,510,000 |  |                         | $ | 6,872,000 |                |  | $ | 1,638,000 | 
|                        |  |                 |           |  |                         |   |           |                |  |   |           | 

October 31, 2009



|                        |  |                 |           |  |                         |   |           |                |  |   |           | 
|----------------------- |  | --------------- | --------- |  | ----------------------- | - | --------- | -------------- |  | - | --------- | 
|                        |  | Carrying amount |           |  | Accumulatedamortization |   |           | Net book value | 
|Customer list           |  | $               | 5,904,000 |  |                         | $ | 5,145,000 |                |  | $ | 759,000   | 
|Trade name              |  |                 | 1,282,000 |  |                         |   | 276,000   |                |  |   | 1,006,000 | 
|Intellectual property   |  |                 | 1,324,000 |  |                         |   | 882,000   |                |  |   | 442,000   | 
|                        |  |                 |           |  |                         |   |           |                |  |   |           | 
|Total intangible assets |  | $               | 8,510,000 |  |                         | $ | 6,303,000 |                |  | $ | 2,207,000 | 
|                        |  |                 |           |  |                         |   |           |                |  |   |           | 

Amortization expense for intangible assets for the years ended June 30, 2011 and October 31, 2009 and for the
eight months ended June 30, 2010 were $824,000, $993,000 and $569,000, respectively. Future estimated amortization expense for intangibles assets is as follows: $645,000 in 2012, $595,000 in 2013, $564,000 in 2014, $543,000 in 2015, $514,000 in
2016 and $3,612,000 thereafter.

8. Restructuring Charges

The Company accounts for charges resulting from operational restructuring actions in accordance with ASC 420-10, Accounting for Costs Associated with Exit or Disposal Activities, which addresses
financial accounting reporting associated with certain exit or disposal activities. Under ASC 420-10, costs associated with certain exit or disposal activities are recognized and measured at their fair value in the period in which the liability is
incurred rather than at the date of a commitment to an exit or disposal plan. The determination of restructuring charges requires managements judgment and may include such costs and charges as those related to employee severance, termination
benefits, the write-off of assets, professional service fees and costs for future lease commitments on excess facilities, net of any estimated income from subleases. All such judgments and related estimates are reviewed and, if necessary, revised on
an annual basis, which may result in adjustments to previously recorded liability accruals.



F-22



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##### Table of Contents

For the year ended October 31, 2009, the Company implemented a series of restructuring actions to
right-size its operations, to relocate its corporate headquarters and to reduce expenses. As a result of these activities, the Company reduced its headcount by 126 employees and incurred severance-related expenses of approximately $1.7 million,
all of which expenses were allocated to the North America segment. As of October 31, 2009, there were $12,000 of workforce-related unpaid severance costs and $205,000 of accrued restructuring costs related to facility closures, primarily in the
North America segment.

For the eight month period ended June 30, 2010, the Company continued to implement certain actions to restructure
its operations. During the eight-month period, these actions resulted in the involuntary termination of 31 employees which resulted in severance-related expenses of $616,000 as well as $55,000 in facility lease terminations, all of which expenses
were allocated to the North America segment. As of June 30, 2010, there were no unpaid severance costs or accrued restructuring costs related to facility closures.

The Company did not incur any restructuring charges for the year ended June 30, 2011.

9.
Stock Purchase Warrants

As of June 30, 2010, Avatech had outstanding warrants to purchase 764,980 shares of common stock. A summary
of these warrants is as follows:



|                 |         |  |                |       |                 |                 
|---------------- | ------- |  | -------------- | ----- | --------------- | ----------------
|Number of
Shares |         |  | Exercise
Price |       | Expiration Date
|                 | 38,878  |  |                | $0.60 |                 | July 1, 2010    
|                 | 726,102 |  |                | $1.52 |                 | January 29, 2011
|                 |         |  |                |       |                 |                 
|                 | 764,980 |  |                |       |                 |                 
|                 |         |  |                |       |                 |                 

As previously discussed, the Company completed its acquisition of Rand Worldwide in August of 2010. On the closing date
of the acquisition, the Company and certain common stockholders amended and terminated the Common Stock and Warrant Purchase Agreements and related Investor Rights Agreements dated January 29, 2007 and June 12, 2006 pursuant to which those
common stockholders acquired their shares. Those agreements contained certain anti-dilution protections for those stockholders and continuing registration rights. In consideration of the amendments and terminations of these agreements, the Company
issued a total of 400,015 shares of common stock to these stockholders. In addition, with respect to those stockholders who invested in the January 29, 2007 offering, the Company amended the warrants to purchase 726,102 shares of common stock
by reducing the exercise price from $1.52 per share to $1.11 per share. There are no outstanding warrants as of June 30, 2011.

10.
Director and Employee Stock Compensation Plans

Employee Stock Option Plans

All common stock options outstanding for pre-merger Rand Worldwide were converted into options to purchase membership interests in RWWI Holdings, an entity which is not part of the Companys
consolidated group.

The Board of Directors may grant options under the Avatech Solutions, Inc. 2002 Stock Option Plan (the Plan)
to purchase shares of the Companys common stock at an exercise price of not less than the fair market value of the common stock on the date of grant. The Plan provides for the granting of either incentive or non-qualified stock options to
purchase an aggregate of up to 3,100,000 shares of common stock to eligible employees, officers, and directors of the Company. Stock options generally expire after 10 years. Options generally vest ratably over three or four years, depending on the
specific grant award. As of the date of the merger with Rand Worldwide, all of Avatechs outstanding stock options became fully vested in accordance with their respective option agreements.



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##### Table of Contents

The Company recorded and included in selling, general and administrative expenses, $44,000 and $39,000 of
stock compensation expense for the years ended June 30, 2011 and October 31, 2009, respectively, and $33,000 for the eight months ended June 30, 2010. Stock compensation expense for the year ended June 30, 2011 included $5,000 of
expense prior to the merger for the vesting of common stock options granted by pre-merger Rand Worldwide, and $39,000 of expense for stock options granted after the merger.

The following are the assumptions made in computing the fair value of stock-based awards:



|                                               |  |                         |  |                                |  |                          
|---------------------------------------------- |  | ----------------------- |  | ------------------------------ |  | -------------------------
|                                               |  | Year EndedJune 30 
2011 |  | Eight Months EndedJune 30
2010 |  | Year EndedOctober 31
2009
|Average risk-free interest rate                |  | 2.31%                   |  | 3.00% to 3.50%                 |  | 3.00% to 3.62%           
|Dividend yield                                 |  | 0 %                     |  | 0 %                            |  | 0 %                      
|Expected life                                  |  | 6.25 years              |  | 4 years                        |  | 4 years                  
|Expected volatility                            |  | .56                     |  | .50                            |  | .41                      
|Weighted average fair value of granted options |  | $ 0.38                  |  | $ 0.26                         |  | $ 0.26                   

Expected volatilities are based on historical volatility of the Companys common stock. The expected term of options
granted represents the period of time that options granted are expected to be outstanding. The Company uses historical data to estimate option exercise and employee termination within the valuation model. The risk-free rate for periods within the
contractual life of the option is based on the U.S. Treasury yield curve in effect at the time of grant.

A summary of stock option activity
during the year ended June 30, 2011 and related information is included in the table below:



|                                                                     |  |         |           |   |                                |   |      |                         |  |   |        | 
|-------------------------------------------------------------------- |  | ------- | --------- | - | ------------------------------ | - | ---- | ----------------------- |  | - | ------ | 
|                                                                     |  | Options |           |   | Weighted-AverageExercise Price |   |      | AggregateIntrinsicValue | 
|Outstanding at November 1, 2008                                      |  |         | 317,025   |   |                                | $ | 0.31 |                         |  |   |        | 
|Granted                                                              |  |         | 694,755   |   |                                |   | 0.31 |                         |  |   |        | 
|                                                                     |  |         |           |   |                                |   |      |                         |  |   |        | 
|Outstanding at October 31, 2009                                      |  |         | 1,011,780 |   |                                |   | 0.31 |                         |  |   |        | 
|Granted                                                              |  |         | 101,829   |   |                                |   | 0.26 |                         |  |   |        | 
|Forfeited                                                            |  |         | (130,000  | ) |                                |   | 0.31 |                         |  |   |        | 
|                                                                     |  |         |           |   |                                |   |      |                         |  |   |        | 
|Outstanding at July 1, 2010                                          |  |         | 983,609   |   |                                |   | 0.30 |                         |  |   |        | 
|Conversion of Rand Worldwide options into RWWI Holdings, LLC options |  |         | (983,609  | ) |                                |   | 0.30 |                         |  |   |        | 
|Avatech options assumed in Merger                                    |  |         | 1,605,177 |   |                                |   | 0.93 |                         |  |   |        | 
|Granted                                                              |  |         | 1,816,920 |   |                                |   | 0.70 |                         |  |   |        | 
|Forfeited                                                            |  |         | (93,010   | ) |                                |   | 0.75 |                         |  |   |        | 
|Expired                                                              |  |         | (755      | ) |                                |   | 7.07 |                         |  |   |        | 
|                                                                     |  |         |           |   |                                |   |      |                         |  |   |        | 
|Outstanding at June 30, 2011                                         |  |         | 3,328,332 |   |                                | $ | 0.81 |                         |  | $ | 99,000 | 
|                                                                     |  |         |           |   |                                |   |      |                         |  |   |        | 
|Exercisable at June 30, 2011                                         |  |         | 1,534,812 |   |                                | $ | 0.94 |                         |  | $ | 81,000 | 
|                                                                     |  |         |           |   |                                |   |      |                         |  |   |        | 
|Weighted-average remaining contractual life                          |  |         | 7.7 Years |   |                                |   |      |                         |  |   |        | 
|                                                                     |  |         |           |   |                                |   |      |                         |  |   |        | 



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##### Table of Contents

All options granted have an exercise price equal to the fair market value of the Companys common stock
on the date of grant. Exercise prices for options outstanding as of June 30, 2011 ranged from $0.17 to $3.81 as follows:



|                        |  |                    |           |  |                                                     |       |                                                               |           |                    |  |           |                                                     |  |                                                               |  |          
|----------------------- |  | ------------------ | --------- |  | --------------------------------------------------- | ----- | ------------------------------------------------------------- | --------- | ------------------ |  | --------- | --------------------------------------------------- |  | ------------------------------------------------------------- |  | ---------
|Range of ExercisePrices |  | OptionsOutstanding |           |  | WeightedAverageExercise Pricesof
OptionsOutstanding |       | WeightedAverageRemainingContractual Lifeof
OptionsOutstanding |           | OptionsExercisable |  |           | WeightedAverageExercise Pricesof
OptionsExercisable |  | WeightedAverageRemainingContractual Lifeof
OptionsExercisable
|$ 0.17  0.34           |  |                    | 94,547    |  |                                                     | $0.30 |                                                               | 2.5 years |                    |  | 94,547    |                                                     |  | $0.30                                                         |  | 2.5 years
|0.35  0.75             |  |                    | 2,125,520 |  |                                                     | 0.68  |                                                               | 9.2 years |                    |  | 332,000   |                                                     |  | 0.59                                                          |  | 5.5 years
|0.76  0.91             |  |                    | 663,000   |  |                                                     | 0.86  |                                                               | 5.5 years |                    |  | 663,000   |                                                     |  | 0.86                                                          |  | 5.5 years
|1.05  3.81             |  |                    | 445,265   |  |                                                     | 1.45  |                                                               | 4.8 years |                    |  | 445,265   |                                                     |  | 1.45                                                          |  | 4.8 years
|                        |  |                    |           |  |                                                     |       |                                                               |           |                    |  |           |                                                     |  |                                                               |  |          
|                        |  |                    | 3,328,332 |  |                                                     |       |                                                               |           |                    |  | 1,534,812 |                                                     |  |                                                               |  |          
|                        |  |                    |           |  |                                                     |       |                                                               |           |                    |  |           |                                                     |  |                                                               |  |          

Assuming that no additional share-based payments are granted after June 30, 2011, $625,000 of compensation expense
will be recognized in the consolidated statement of operations over a weighted-average period of 4.0 years.

Employee Stock Purchase Plan

Avatechs Board of Directors adopted, and its stockholders subsequently approved, the Employee Stock Purchase Plan (the
ESPP), under which, as amended, 2,000,000 shares of common stock are reserved for issuance. As of June 30, 2011, 790,555 shares were available for future issuance. Effective January 1, 2011, the plan has been suspended.

As of June 30, 2011, there was no liability for employees ESPP withholdings, as all shares of common stock purchased under the
ESPP for the year ended June 30, 2011 had been issued.

Restricted Stock Award Plan

In May 2003, the Companys Board of Directors adopted, and its stockholders subsequently approved, the Avatech Solutions, Inc. Restricted Stock Award
Plan, which was amended and restated on August 23, 2005 (the Stock Plan). Officers, directors, key employees and consultants of the Company are eligible to receive stock awards under the Stock Plan, but employees and consultants may
receive grants only if they already are stockholders or hold options to purchase shares of common stock at the time of grant. Vesting for restricted stock awards granted under the Stock Plan may vary, but awards will generally vest based on
continued service of the recipient or achievement of specific performance goals. The Company has reserved a total of 1,200,000 shares of common stock for issuance under the Stock Plan and 193,921 shares were available for future issuance as of
June 30, 2011.

11. Shares Reserved for Future Issuance

At June 30, 2011, the Company has reserved 6,950,115 shares of common stock for future issuance upon the exercise of stock options granted under the Stock Option Plan, the exercise of outstanding
common stock purchase warrants, the vesting of restricted stock awards, purchases under the ESPP and the conversion of Series D Stock, and Series E Stock.



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---

##### Table of Contents

12. Income Taxes

The components of losses from continuing operations before income taxes are as follows:



|         |  |               |            |   |                   |   |            |               |  |   |            |  
|-------- |  | ------------- | ---------- | - | ----------------- | - | ---------- | ------------- |  | - | ---------- | -
|         |  | Years ended   |            |   | Eight monthsended |  
|         |  | June 30, 2011 |            |   | October 31, 2009  |   |            | June 30, 2010 | 
|Domestic |  | $             | 3,439,000  |   |                   | $ | (7,023,000 | )             |  | $ | (2,732,000 | )
|Foreign  |  |               | (1,420,000 | ) |                   |   | 1,261,000  |               |  |   | 13,000     |  
|         |  |               |            |   |                   |   |            |               |  |   |            |  
|Total    |  | $             | 2,019,000  |   |                   | $ | (5,762,000 | )             |  | $ | (2,719,000 | )
|         |  |               |            |   |                   |   |            |               |  |   |            |  

The components of the income tax provision (benefit) are as follows:



|            |  |               |         |  |                   |   |          |               |  |   |        | 
|----------- |  | ------------- | ------- |  | ----------------- | - | -------- | ------------- |  | - | ------ | 
|            |  | Years ended   |         |  | Eight monthsended |  
|            |  | June 30, 2011 |         |  | October 31, 2009  |   |          | June 30, 2010 | 
|Federal tax |  | $             | 60,000  |  |                   | $ | (394,000 | )             |  | $ | 35,000 | 
|State tax   |  |               | 126,000 |  |                   |   | 32,000   |               |  |   |       | 
|Foreign tax |  |               |        |  |                   |   | 14,000   |               |  |   |       | 
|            |  |               |         |  |                   |   |          |               |  |   |        | 
|Total       |  | $             | 186,000 |  |                   | $ | (348,000 | )             |  | $ | 35,000 | 
|            |  |               |         |  |                   |   |          |               |  |   |        | 
|            |  |              
|            |  | Years ended   |         |  | Eight monthsended |  
|            |  | June 30, 2011 |         |  | October 31, 2009  |   |          | June 30, 2010 | 
|Current     |  | $             | 186,000 |  |                   | $ | (348,000 | )             |  | $ | 35,000 | 
|Deferred    |  |               |        |  |                   |   |         |               |  |   |       | 
|            |  |               |         |  |                   |   |          |               |  |   |        | 
|Total       |  | $             | 186,000 |  |                   | $ | (348,000 | )             |  | $ | 35,000 | 
|            |  |               |         |  |                   |   |          |               |  |   |        | 

Significant components of the Companys deferred tax assets and liabilities are as follows:



|                                        |  |               |             |   |                   |   |             |               |  |   |             |  
|--------------------------------------- |  | ------------- | ----------- | - | ----------------- | - | ----------- | ------------- |  | - | ----------- | -
|                                        |  | Years ended   |             |   | Eight monthsended |  
|                                        |  | June 30, 2011 |             |   | October 31, 2009  |   |             | June 30, 2010 | 
|Deferred tax assets:                    |  |               |             |   |                   |   |             |               |  |   |             |  
|Net operating loss carryforward         |  | $             | 15,611,000  |   |                   | $ | 15,848,000  |               |  | $ | 16,259,000  |  
|Capital loss carryforward               |  |               | 1,674,000   |   |                   |   |            |               |  |   | 1,610,000   |  
|Accrued expenses                        |  |               | 236,000     |   |                   |   | 504,000     |               |  |   | 85,000      |  
|Expenses not currently deductible       |  |               | 224,000     |   |                   |   | 311,000     |               |  |   | 363,000     |  
|Excess of book over tax depreciation    |  |               | 72,000      |   |                   |   | 346,000     |               |  |   | 442,000     |  
|Excess of book over tax amortization    |  |               | 446,000     |   |                   |   | 171,000     |               |  |   | 424,000     |  
|Deferred revenue                        |  |               |            |   |                   |   | 7,000       |               |  |   | 4,000       |  
|Translation effects                     |  |               |            |   |                   |   |            |               |  |   | 399,000     |  
|                                        |  |               |             |   |                   |   |             |               |  |   |             |  
|Total deferred tax assets               |  |               | 18,263,000  |   |                   |   | 17,187,000  |               |  |   | 19,586,000  |  
|                                        |  |               |             |   |                   |   |             |               |  |   |             |  
|Deferred tax liabilities:               |  |               |             |   |                   |   |             |               |  |   |             |  
|Customer list                           |  |               | 2,561,000   |   |                   |   | 610,000     |               |  |   | 620,000     |  
|Other liabilities                       |  |               | 30,000      |   |                   |   |            |               |  |   |            |  
|                                        |  |               |             |   |                   |   |             |               |  |   |             |  
|Total deferred tax liabilities          |  |               | 2,591,000   |   |                   |   | 610,000     |               |  |   | 620,000     |  
|                                        |  |               |             |   |                   |   |             |               |  |   |             |  
|Deferred tax assets, net of liabilities |  |               | 15,672,000  |   |                   |   | 16,577,000  |               |  |   | 18,966,000  |  
|Valuation allowance                     |  |               | (17,362,000 | ) |                   |   | (16,577,000 | )             |  |   | (18,966,000 | )
|                                        |  |               |             |   |                   |   |             |               |  |   |             |  
|Net deferred tax liability              |  | $             | (1,690,000  | ) |                   | $ |            |               |  | $ |            |  
|                                        |  |               |             |   |                   |   |             |               |  |   |             |  



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##### Table of Contents

The Companys provision for income taxes resulted in effective tax rates attributable to loss from
continuing operations that varied from the statutory federal income tax rate of 34%, as summarized in the table below.



|                                                                                |  |               |          |   |                   |   |            |               |  |   |           |  
|------------------------------------------------------------------------------- |  | ------------- | -------- | - | ----------------- | - | ---------- | ------------- |  | - | --------- | -
|                                                                                |  | Years ended   |          |   | Eight monthsended |  
|                                                                                |  | June 30, 2011 |          |   | October 31, 2009  |   |            | June 30, 2010 | 
|Expected federal income tax expense (benefit) from continuing operations at 34% |  | $             | 633,000  |   |                   | $ | (1,972,000 | )             |  | $ | (841,000  | )
|Expenses not deductible for income tax purposes                                 |  |               | 311,000  |   |                   |   | 1,479,000  |               |  |   | 32,000    |  
|Amendment of prior year return                                                  |  |               |         |   |                   |   |           |               |  |   | 35,000    |  
|Tax capital loss                                                                |  |               |         |   |                   |   |           |               |  |   | (544,000  | )
|State income taxes, net of federal benefit                                      |  |               | 135,000  |   |                   |   | (203,000   | )             |  |   | (155,000  | )
|Change in valuation allowance for deferred tax assets                           |  |               | (893,000 | ) |                   |   | 487,000    |               |  |   | 1,497,000 |  
|Liquidation adjustments                                                         |  |               |         |   |                   |   | (110,000   | )             |  |   |          |  
|Other                                                                           |  |               |         |   |                   |   | (29,000    | )             |  |   | 11,000    |  
|                                                                                |  |               |          |   |                   |   |            |               |  |   |           |  
|Income tax expense (benefit)                                                    |  | $             | 186,000  |   |                   | $ | (348,000   | )             |  | $ | 35,000    |  
|                                                                                |  |               |          |   |                   |   |            |               |  |   |           |  

The Company recorded tax expense of $186,000 and $35,000 for the year ended June 30, 2011 and the eight months ended
June 30, 2010, respectively, versus an income tax benefit of $348,000 for the year ended October 31, 2009.

At June 30, 2011,
the Company had US federal net operating loss carryforwards available to reduce future taxable income of approximately $26 million, a portion of which may be limited as to annual utilization under Internal Revenue Code Section 382. Because of
this limitation, approximately $6 million net operating losses are expected to expire before being utilized. For tax year June 30, 2011 it is projected that approximately $3.8 million net operating loss carryforwards will be utilized to offset
taxable income.

In addition, at June 30, 2011, the Company had foreign net operating loss carryforwards of approximately $19.6 million
available to reduce future taxable income. These carryforwards expire between 2011 and 2029 for some jurisdictions and for other jurisdictions the losses may be carried forward indefinitely.

As of June 30, 2011 the Company has maintained the valuation allowance of its net deferred tax assets of approximately $17 million in all jurisdictions including the United States, due to
insufficient history of profitable quarters. The valuation allowance is evaluated quarterly to determine the appropriate allowance amount.

The Canadian Subsidiary of Rand Worldwide, Rand A Technology Corporation, is currently being audited by the Canada Revenue Agency for tax years 2005
through 2009. Management believes that it has properly recorded the tax expense for the periods under review and expects no material adjustments to the respective returns or to its financial statements.



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##### Table of Contents

13. Commitments and Contingencies

Operating Leases

The Company leases certain office space and equipment under
noncancellable operating lease agreements that expire in various years through 2019, and generally do not contain significant renewal options. Rent expense under operating leases for the years ended June 30, 2011 and October 31, 2009 and
for the eight months ended June 30, 2010 was $1.6 million, $2.2 million and $1.3 million, respectively. Future minimum payments under all noncancellable operating leases with initial terms of one year or more consisted of the following at
June 30, 2011:



|                             |  |   |           | 
|---------------------------- |  | - | --------- | 
|Year ending June 30:         |  |   |           | 
|2012                         |  | $ | 2,625,000 | 
|2013                         |  |   | 2,008,000 | 
|2014                         |  |   | 1,701,000 | 
|2015                         |  |   | 1,291,000 | 
|2016                         |  |   | 709,000   | 
|Thereafter                   |  |   | 755,000   | 
|                             |  |   |           | 
|Total minimum lease payments |  | $ | 9,089,000 | 
|                             |  |   |           | 

There was no rent paid to a related party for the years ended June 30, 2011 and October 31, 2009 and for the
eight months ended June 30, 2010.

Capital Leases

The Company has various computer equipment used in training facilities and by employees throughout its office locations. These capital lease obligations totaled $105,000 as of June 30, 2011 with
approximately $77,000 representing the short-term balance of the lease and shown as Obligations under capital leases in the accompanying balance sheets. Payments for the leases are made either monthly or quarterly through April 2015 and depreciation
expense on this equipment was approximately $181,000 as of June 30, 2011. Future minimum payments consisted of the following at June 30, 2011:



|                                               |  |   |         | 
|---------------------------------------------- |  | - | ------- | 
|Year ending June 30:                           |  |   |         | 
|2012                                           |  | $ | 84,000  | 
|2013                                           |  |   | 21,000  | 
|2014                                           |  |   | 10,000  | 
|2015                                           |  |   | 2,000   | 
|                                               |  |   |         | 
|Total minimum lease payments                   |  |   | 117,000 | 
|Less:                                          |  |   |         | 
|Taxes                                          |  |   | 2,000   | 
|Imputed interest                               |  |   | 10,000  | 
|                                               |  |   |         | 
|Present value of future minimum lease payments |  | $ | 105,000 | 
|                                               |  |   |         | 

Litigation

The Company is party to various litigation matters that management considers routine and incidental to the Companys business. As of June 30, 2011 and October 31, 2009, the Company had
accrued no material amounts related to these matters.

In November 2010, the Company agreed to settle a lawsuit for $350,000 that alleged
it breached certain clauses of an asset purchase agreement entered in 2006. The full amount of the settlement was accrued as of June 30, 2010 and is included as a component of accrued professional fees.



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##### Table of Contents

Guarantees

In the normal course of business, the Company indemnifies third parties and enters into commitments and guarantees (Agreements) under which it may be required to make payments. These
Agreements include indemnities to the following parties: lenders in connection with the Term Loan; lessors in connection with facility leases; customers in relation to the performance of services; vendors in connection with guarantees of expenses
incurred by employees in the normal course of business; former employees in connection with their prior services as a director or officer of the Company or its subsidiary companies; vendors or principals in connection with performance under asset or
share purchase and sale agreements and performance under credit facilities and other agreements of the Companys subsidiaries. The duration of these Agreements varies, and in certain cases, is indefinite. Furthermore, the majority of these
Agreements do not limit the Companys maximum potential payment exposure. In addition, the Company is party to a guarantee with its largest vendor, Autodesk, Inc., in relation to all of the Companys subsidiaries obligations to
Autodesk. The Company has recorded no accrued liability related to these Agreements, based on its historical experience and information known as of June 30, 2011.

14. Employee Benefit and Incentive Compensation Plans

The Company has
a defined contribution savings plan under Section 401(k) of the Internal Revenue Code. The 401(k) Plan is a defined contribution plan, which covers substantially all employees of the Company, or its wholly-owned subsidiaries, who have completed
three months of service. Participants may elect a pre-tax payroll deduction up to $16,500 (if under age 50), or $22,000 (if age 50 or older by December 31stof any calendar year). As amended, the 401(k) Plan provides that the Company will match 100% of the participant salary
deferrals up to 3% of a participants compensation and 50% of the next 2% of a participants compensation, or a total possible maximum matching contribution of 4% of a participants compensation, for all participants. The Company may
also make discretionary profit-sharing contributions to the 401(k) Plan for all participants who are employed on the last day of the plan year but has not done so for the plan years ended December 31, 2010. The total amount recorded by the
Company as expense during the years ended June 30, 2011 and October 31, 2009 and the eight months ended June 30, 2010 was approximately $586,000, $163,000 and $132,000, respectively.

15. Significant Supplier

For the years
ended June 31, 2011 and 2010, no single customer or account receivable balance accounted for greater than 10% of the Companys total revenue. Approximately 97% of the Companys inventory purchases for the years ended June 30,
2011 and 2010 were from one vendor, and approximately 95% of accounts payable at June 30, 2011 and 2010 were due to this vendor. Approximately 95% of the Companys total product revenues are related to this suppliers products. The
Company is a party to a Value Added Reseller Agreement with Autodesk effective February 1, 2010. The agreement has a term of three years and designates the Company as an authorized reseller of Autodesk software and prescribes the authorized
sales territories, authorized products and services, rebate and incentive program details and marketing support.

16. Discontinued
Operations

On September 11, 2009, the Company completed the sale of its 80% ownership interest in Rand Singapore to an individual for
cash consideration of one Singapore dollar. The operating results through September 11, 2009 and the related gain on the sale of Rand Singapore have been presented as discontinued operations in the consolidated statements of operations.

On August 6, 2009, the Companys Belgium subsidiary, Axis S.A. (Belgium), filed for bankruptcy protection and was
closed. The operating results through the closure date and the loss on disposition of the entity have been presented as discontinued operations in the consolidated statements of operations.

On July 1, 2009, the Company sold its 60% ownership interest in Sigmetrix to Cybernet for cash consideration of $122,000 and repayment of intercompany accounts payable of $3.1 million. The cash
consideration of $122,000



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##### Table of Contents

to be received was subject to possible adjustment for qualified claims made by Cybernet through December 31, 2010 against indemnification guarantees made by the Company in the transaction.
The operating results through July 1, 2009 and the related gain on sale of Sigmetrix have been presented as discontinued operations in the consolidated statements of operations.

For the year ended October 31, 2009, revenue, loss before taxes, and the gain on dispositions, net of tax, of the dispositions, which have been presented as discontinued operations in the
consolidated statement of operations were $2,330,000, $860,000 and $2,914,000, respectively. There were no discontinued operations for the year ended June 30, 2011 or for the eight months ended June 30, 2010.

17. Liquidity and Capital Resources

The
Company currently has debt of $105,000 related to a capital lease at June 30, 2011. In addition, the Company had a working capital surplus of approximately $518,000.

18. Segment Information

The Companys continuing operations include business in North
America, Singapore/Malaysia and Australia. Revenue for any particular geographic region is determined by sales made by the Company to the customers in that particular region. The Companys chief operating decision maker, the Chief Executive
Officer, evaluates business results based primarily on these geographic regions. The following table illustrates certain financial information about these geographies in the corresponding fiscal periods:



|                         |  |                          |            |  |                    |   |           |           |  |   |           |  |  |   |            | 
|------------------------ |  | ------------------------ | ---------- |  | ------------------ | - | --------- | --------- |  | - | --------- |  |  | - | ---------- | 
|                         |  | Year Ended June 30, 2011 |           
|                         |  | North America            |            |  | Singapore/Malaysia |   |           | Australia |  |   | Total     | 
|Revenue-                 |  |                          |            |  |                    |   |           |           |  |   |           |  |  |   |            | 
|Product sales            |  | $                        | 44,667,000 |  |                    | $ | 2,948,000 |           |  | $ | 2,063,000 |  |  | $ | 49,678,000 | 
|Service revenue          |  |                          | 19,221,000 |  |                    |   | 552,000   |           |  |   | 905,000   |  |  |   | 20,678,000 | 
|Commission revenue       |  |                          | 18,030,000 |  |                    |   | 253,000   |           |  |   | 553,000   |  |  |   | 18,836,000 | 
|                         |  |                          |            |  |                    |   |           |           |  |   |           |  |  |   |            | 
|Total revenue            |  |                          | 81,918,000 |  |                    |   | 3,753,000 |           |  |   | 3,521,000 |  |  |   | 89,192,000 | 
|                         |  |                          |            |  |                    |   |           |           |  |   |           |  |  |   |            | 
|Cost of revenue-         |  |                          |            |  |                    |   |           |           |  |   |           |  |  |   |            | 
|Cost of product sales    |  |                          | 29,574,000 |  |                    |   | 2,316,000 |           |  |   | 1,471,000 |  |  |   | 33,361,000 | 
|Cost of service revenue  |  |                          | 13,287,000 |  |                    |   | 422,000   |           |  |   | 443,000   |  |  |   | 14,152,000 | 
|                         |  |                          |            |  |                    |   |           |           |  |   |           |  |  |   |            | 
|Total cost of revenue    |  |                          | 42,861,000 |  |                    |   | 2,738,000 |           |  |   | 1,914,000 |  |  |   | 47,513,000 | 
|                         |  |                          |            |  |                    |   |           |           |  |   |           |  |  |   |            | 
|Gross margin             |  |                          | 39,057,000 |  |                    |   | 1,015,000 |           |  |   | 1,607,000 |  |  |   | 41,679,000 | 
|Total operating expenses |  |                          | 36,579,000 |  |                    |   | 806,000   |           |  |   | 1,414,000 |  |  |   | 38,799,000 | 
|                         |  |                          |            |  |                    |   |           |           |  |   |           |  |  |   |            | 
|Income from operations   |  | $                        | 2,478,000  |  |                    | $ | 209,000   |           |  | $ | 193,000   |  |  | $ | 2,880,000  | 
|                         |  |                          |            |  |                    |   |           |           |  |   |           |  |  |   |            | 



|                              |  |                             |            |   |                    |   |           |           |  |   |           |   |  |   |            |  
|----------------------------- |  | --------------------------- | ---------- | - | ------------------ | - | --------- | --------- |  | - | --------- | - |  | - | ---------- | -
|                              |  | Year Ended October 31, 2009 |           
|                              |  | North America               |            |   | Singapore/Malaysia |   |           | Australia |  |   | Total     |  
|Revenue-                      |  |                             |            |   |                    |   |           |           |  |   |           |   |  |   |            |  
|Product sales                 |  | $                           | 21,706,000 |   |                    | $ | 2,519,000 |           |  | $ | 1,297,000 |   |  | $ | 25,522,000 |  
|Service revenue               |  |                             | 15,488,000 |   |                    |   | 157,000   |           |  |   | 591,000   |   |  |   | 16,236,000 |  
|Commission revenue            |  |                             | 10,951,000 |   |                    |   | 76,000    |           |  |   | 478,000   |   |  |   | 11,505,000 |  
|                              |  |                             |            |   |                    |   |           |           |  |   |           |   |  |   |            |  
|Total revenue                 |  |                             | 48,145,000 |   |                    |   | 2,752,000 |           |  |   | 2,366,000 |   |  |   | 53,263,000 |  
|                              |  |                             |            |   |                    |   |           |           |  |   |           |   |  |   |            |  
|Cost of revenue-              |  |                             |            |   |                    |   |           |           |  |   |           |   |  |   |            |  
|Cost of product sales         |  |                             | 14,395,000 |   |                    |   | 1,837,000 |           |  |   | 967,000   |   |  |   | 17,199,000 |  
|Cost of service revenue       |  |                             | 13,114,000 |   |                    |   | 193,000   |           |  |   | 495,000   |   |  |   | 13,802,000 |  
|                              |  |                             |            |   |                    |   |           |           |  |   |           |   |  |   |            |  
|Total cost of revenue         |  |                             | 27,509,000 |   |                    |   | 2,030,000 |           |  |   | 1,462,000 |   |  |   | 31,001,000 |  
|                              |  |                             |            |   |                    |   |           |           |  |   |           |   |  |   |            |  
|Gross margin                  |  |                             | 20,636,000 |   |                    |   | 722,000   |           |  |   | 904,000   |   |  |   | 22,262,000 |  
|Total operating expenses      |  |                             | 24,412,000 |   |                    |   | 625,000   |           |  |   | 978,000   |   |  |   | 26,015,000 |  
|                              |  |                             |            |   |                    |   |           |           |  |   |           |   |  |   |            |  
|Income (loss) from operations |  | $                           | (3,776,000 | ) |                    | $ | 97,000    |           |  | $ | (74,000   | ) |  | $ | (3,753,000 | )
|                              |  |                             |            |   |                    |   |           |           |  |   |           |   |  |   |            |  



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##### Table of Contents

|                              |  |                                  |            |   |                    |   |           |           |  |   |           |  |  |   |            |  
|----------------------------- |  | -------------------------------- | ---------- | - | ------------------ | - | --------- | --------- |  | - | --------- |  |  | - | ---------- | -
|                              |  | Eight Months Ended June 30, 2010 |           
|                              |  | North America                    |            |   | Singapore/Malaysia |   |           | Australia |  |   | Total     | 
|Revenue-                      |  |                                  |            |   |                    |   |           |           |  |   |           |  |  |   |            |  
|Product sales                 |  | $                                | 14,473,000 |   |                    | $ | 1,434,000 |           |  | $ | 962,000   |  |  | $ | 16,869,000 |  
|Service revenue               |  |                                  | 9,505,000  |   |                    |   | 129,000   |           |  |   | 421,000   |  |  |   | 10,055,000 |  
|Commission revenue            |  |                                  | 5,372,000  |   |                    |   | 104,000   |           |  |   | 310,000   |  |  |   | 5,786,000  |  
|                              |  |                                  |            |   |                    |   |           |           |  |   |           |  |  |   |            |  
|Total revenue                 |  |                                  | 29,350,000 |   |                    |   | 1,667,000 |           |  |   | 1,693,000 |  |  |   | 32,710,000 |  
|                              |  |                                  |            |   |                    |   |           |           |  |   |           |  |  |   |            |  
|Cost of revenue-              |  |                                  |            |   |                    |   |           |           |  |   |           |  |  |   |            |  
|Cost of product sales         |  |                                  | 9,436,000  |   |                    |   | 1,131,000 |           |  |   | 632,000   |  |  |   | 11,199,000 |  
|Cost of service revenue       |  |                                  | 7,210,000  |   |                    |   | 134,000   |           |  |   | 248,000   |  |  |   | 7,592,000  |  
|                              |  |                                  |            |   |                    |   |           |           |  |   |           |  |  |   |            |  
|Total cost of revenue         |  |                                  | 16,646,000 |   |                    |   | 1,265,000 |           |  |   | 880,000   |  |  |   | 18,791,000 |  
|                              |  |                                  |            |   |                    |   |           |           |  |   |           |  |  |   |            |  
|Gross margin                  |  |                                  | 12,704,000 |   |                    |   | 402,000   |           |  |   | 813,000   |  |  |   | 13,919,000 |  
|Total operating expenses      |  |                                  | 15,886,000 |   |                    |   | 413,000   |           |  |   | 628,000   |  |  |   | 16,927,000 |  
|                              |  |                                  |            |   |                    |   |           |           |  |   |           |  |  |   |            |  
|Income (loss) from operations |  | $                                | (3,182,000 | ) |                    | $ | (11,000   | )         |  | $ | 185,000   |  |  | $ | (3,008,000 | )
|                              |  |                                  |            |   |                    |   |           |           |  |   |           |  |  |   |            |  



|                   |  |               |           |  |               |   |           |                  |  |   |           | 
|------------------ |  | ------------- | --------- |  | ------------- | - | --------- | ---------------- |  | - | --------- | 
|                   |  | June 30, 2011 |           |  | June 30, 2010 |   |           | October 31, 2009 | 
|Long lived assets  |  |               |           |  |               |   |           |                  |  |   |           | 
|North America      |  | $             | 1,643,000 |  |               | $ | 1,713,000 |                  |  | $ | 1,234,000 | 
|Singapore/Malaysia |  |               | 26,000    |  |               |   | 36,000    |                  |  |   | 42,000    | 
|Australia          |  |               | 86,000    |  |               |   | 74,000    |                  |  |   | 88,000    | 
|                   |  |               |           |  |               |   |           |                  |  |   |           | 
|Total              |  | $             | 1,755,000 |  |               | $ | 1,823,000 |                  |  | $ | 1,364,000 | 
|                   |  |               |           |  |               |   |           |                  |  |   |           | 

19. Related Party Term Notes

On October 31, 2007, Rand Worldwide entered into a term loan agreement (the Term Notes) with Ampersand Capital Partners (Ampersand), which owned 100% of the outstanding
preferred stock and 89% of the outstanding common stock of Rand Worldwide as of October 31, 2009. The Term Notes consisted of two promissory notes: one for $10.0 million bearing interest of 10% or 12% per year based upon the timing of
repayments, and another for $3.5 million bearing interest of 10% or 14% per year based upon the timing of repayments. Per the original terms of the promissory notes, all principal and interest were to be fully repaid by November 1, 2012,
with scheduled principal and interest payments beginning in December 2007. As of June 30, 2010, these notes had an outstanding balance of $12,637,000.

As a result of a recapitalization prior to the merger, Rand Worldwides Term Notes are no longer outstanding and the Company has no remaining financial obligations relative to its Term Notes or the
related formerly-accruing interest. The Term Notes were subsequently transferred into equity and the net effects of the forgiveness of these Notes of $115,000 are disclosed within the Consolidated Statements of Cash Flows.



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##### Table of Contents

EXHIBIT INDEX



|          |  |                                                                                                                                                                                                                                                                                                                          
|--------- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit   |  | Description                                                                                                                                                                                                                                                                                                              
|2.1       |  | Agreement and Plan Merger dated as of August 17, 2010 by and among Avatech Solutions, Inc., ASRW Acquisition Sub, Inc., RAND Worldwide, Inc. and RWWI Holdings LLC (incorporated
by reference to Exhibit 2.1 of the Current Report on Form 8-K filed by Avatech Solutions, Inc. on August 17, 2010)                      
|          | 
|3.1(i)    |  | Restated Certificate of Incorporation of Spatial Technology, Inc. (incorporated by reference to Exhibit 3(i).1 to the Registration Statement on Form SB-2 filed by Spatial
Technology, Inc. on November 21, 2000, File No. 333-50426)                                                                                    
|          | 
|3.1(ii)   |  | Certificate of Amendment to the Restated Certificate of Incorporation of Spatial Technology, Inc., changing Spatial Technology, Inc.s name to PlanetCad, Inc. (incorporated by
reference to Exhibit 3(i).2 to the Registration Statement on Form SB-2 filed by PlanetCad, Inc. on November 21, 2000, File No. 333-50426)
|          | 
|3.1(iii)  |  | Certificate of Designation, Preferences and Rights of Series A Junior Participating Preferred Stock (incorporated by reference to Exhibit 4.2 of the Registration Statement on Form
8-A filed by PlanetCad, Inc. on March 11, 2002, File No. 001-31265)                                                                  
|          | 
|3.1(iv)   |  | Certificate of Designation, Preferences and Rights of Series B Convertible Preferred Stock (incorporated by reference to Exhibit 4.1 of the Current Report on Form 8-K filed by
PlanetCad, Inc. on May 28, 2002)                                                                                                         
|          | 
|3.1(v)    |  | Certificate of Amendment of Restated Certificate of Incorporation of PlanetCad, Inc. (incorporated by reference to Annex G of the Pre-Effective Amendment No. 2 on Form S-4/A filed
by PlanetCad, Inc. on September 13, 2002, File No. 333-89386)                                                                        
|          | 
|3.1(vi)   |  | Certificate of Amendment of Certificate of Incorporation, changing PlanetCad, Inc.s name to Avatech Solutions, Inc. (incorporated by reference to Annex G of the Pre-Effective
Amendment No. 2 on Form S-4/A filed by PlanetCad, Inc. on September 13, 2002, File No. 333-89386)                                        
|          | 
|3.1(vii)  |  | Certificate of DesignationsSeries C Convertible Preferred Stock (incorporated by reference to Exhibit 3.6A of the Pre-Effective Amendment No. 1 on Form S-1/A filed by Avatech
Solutions, Inc. on April 11, 2003, File No. 333-104035)                                                                                  
|          | 
|3.1(viii) |  | Certificate of Amendment to Certificate of DesignationsSeries C Convertible Preferred Stock (incorporated by reference to Exhibit 3.8 of the Quarterly Report on Form 10-Q
filed by Avatech Solutions, Inc. on February 13, 2004)                                                                                       
|          | 
|3.1(ix)   |  | Certificate of Designations of Series D Convertible Preferred Stock (incorporated by reference to Exhibit 3.9 of the Quarterly Report on Form 10-Q filed by Avatech Solutions, Inc.
on February 13, 2004)                                                                                                                
|          | 
|3.1(x)    |  | Certificate of Elimination of Series A Junior Participating Preferred Stock (incorporated by reference to Exhibit 3.10 of the Quarterly Report on Form 10-Q filed by Avatech
Solutions, Inc. on February 13, 2004                                                                                                        
|          | 
|3.1(xi)   |  | Certificate of Amendment to Certificate of Designation of Series D Convertible Preferred Stock (incorporated by reference to Exhibit 3.12 of the Quarterly Report on Form 10-Q filed
by Avatech Solutions, Inc. on February 13, 2004)                                                                                    
|          | 
|3.1(xii)  |  | Certificate of Elimination of Series C Convertible Preferred Stock (incorporated by reference to Exhibit 3.11 of the Quarterly Report on Form 10-Q filed by Avatech Solutions, Inc.
on February 13, 2004)                                                                                                                
|          | 
|3.1(xiii) |  | Certificate of Amendment to the Restated Certificate of Incorporation of Avatech Solutions, Inc. (incorporated by reference to Exhibit 3.13 of the Pre-Effective Amendment No. 1 on
Form S-1/A filed by Avatech Solutions, Inc. on July 19, 2004, File No. 333-114230)                                                   



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##### Table of Contents

|         |  |                                                                                                                                                                                                                                                                                                                                                                                       
|-------- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|         | 
|3.1(xiv) |  | Certificate of Designations of Series E Convertible Preferred Stock (incorporated by reference to Exhibit 3.1 of the Current Report on Form 8-K filed by Avatech Solutions, Inc. on
May 9, 2005)                                                                                                                                                                                      
|         | 
|3.1(xv)  |  | Certificate of Designation of the Powers, Preferences and Relative, Participating, Optional and Other Special Rights of Preferred Stock and Qualifications, Limitations and
Restrictions Thereof of Series F 10% Cumulative Convertible Preferred Stock (incorporated by reference to Exhibit 3.1 of the Current Report on Form 8-K filed by Avatech Solutions, Inc. on June 19, 2006)
|         | 
|3.1(xvi) |  | Certificate of Amendment of Restated Certificate of Incorporation of Avatech Solutions, Inc., changing Avatechs name to Rand Worldwide, Inc. (incorporated by reference to
Exhibit 3.1 of the Quarterly Report on Form 10-Q filed by Rand Worldwide, Inc. on May 16, 2011)                                                                                                           
|         | 
|3.2      |  | Bylaws (incorporated by reference to Exhibit 3(ii).1 to the Registration Statement on Form SB-2 filed by Spatial Technology, Inc. on November 21, 2000, File No.
333-50426)                                                                                                                                                                                                           
|         | 
|4.1      |  | Form of Amended and Restated Warrant (incorporated by reference to Exhibit 4.1 of the Current Report on Form 8-K filed by Avatech Solutions, Inc. on August 17,
2010)                                                                                                                                                                                                                 
|         | 
|4.2      |  | Registration Rights Agreement between Avatech Solutions, Inc. and RWWI Holdings LLC, dated August 17, 2010 (incorporated by reference to Exhibit 10.2 of the Current Report on Form
8-K of Avatech Solutions, Inc. filed on August 17, 2010)                                                                                                                                          
|         | 
|9.1      |  | Stockholders Agreement by and among Avatech Solutions, Inc., RWWI Holdings LLC and certain holders of common stock dated as of August 17, 2010 (incorporated by reference to
Exhibit 9.1 of the Current Report on Form 8-K filed by Avatech Solutions, Inc. on August 17, 2010)                                                                                                      
|         | 
|10.1     |  | Lease between Merritt-DM1, LLC and Avatech Solutions, Inc. effective June 1, 2004 (incorporated by reference to Exhibit 10.7 to the Pre-Effective Amendment No. 1 on Form S-1/A filed
by Avatech Solutions, Inc. on July 19, 2004, File No. 333-114230)                                                                                                                               
|         | 
|10.2     |  | Form of Preferred Stock Purchase Agreement for Series D Convertible Preferred Stock (incorporated by reference to Exhibit 10.13 of the Quarterly Report on Form 10-Q filed by Avatech
Solutions, Inc. on February 13, 2004)                                                                                                                                                           
|         | 
|10.3     |  | Form of Preferred Stock Purchase Agreement for Series E Convertible Preferred Stock (incorporated by reference to Exhibit 10.3 of the Annual Report on Form 10-K filed by
Avatech Solutions, Inc. on September 28, 2010)                                                                                                                                                              
|         | 
|10.4     |  | Avatech Solutions, Inc. 2002 Stock Option Plan (incorporated by reference to Annex F of the Registration Statement on Form S-4 filed by Avatech Solutions, Inc. on May 30, 2002,
File No. 333-89386)                                                                                                                                                                                  
|         | 
|10.5     |  | Form of First Amendment to Stock Option (incorporated by reference to Exhibit 10.4 of the Current Report on Form 8-K filed by Avatech Solutions, Inc. on August 17,
2010)                                                                                                                                                                                                             
|         | 
|10.6     |  | Avatech Solutions, Inc. Restricted Stock Award Plan, as amended (incorporated by reference to Exhibit 10.1 to the Registration Statement on Form S-8 filed by Avatech Solutions, Inc.
on February 10, 2006, File No. 333-131721)                                                                                                                                                      
|         | 
|10.7     |  | Form of Restricted Stock Award (incorporated by reference to Exhibit 10.1 of the Current Report on Form 8-K filed by Avatech Solutions, Inc. on January 12, 2009)                                                                                                                                                                                                                     
|         | 
|10.8     |  | Avatech Solutions, Inc. Employee Stock Purchase Plan, as amended (incorporated by reference to Exhibit 4 of the Registration Statement on Form S-8 filed by Avatech Solutions, Inc.
on December 4, 2007 File No. 333-147823)                                                                                                                                                          
|         | 
|10.9     |  | Employment Agreement between Avatech Solutions, Inc. and George Davis dated 28, 2010 (incorporated by reference to Exhibit 10.1 of the Current Report on Form 8-K filed by Avatech
Solutions, Inc. on June 29, 2010)                                                                                                                                                                  



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##### Table of Contents

|      |  |                                                                                                                                                                                                                                                                                                                                                                                                                            
|----- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|      | 
|10.10 |  | Employment Agreement between Marc L. Dulude and Rand Worldwide, Inc. dated March 30, 2011 (incorporated by reference to Exhibit 10.1 of the Current Report on Form 8-K filed by
Rand Worldwide, Inc. on April 4, 2011)                                                                                                                                                                                                     
|      | 
|10.11 |  | Amended and Restated Employment Agreement between Avatech Solutions, Inc. and Lawrence Rychlak dated August 17, 2010 (incorporated by reference to Exhibit 10.6 of the Current Report
on Form 8-K filed by Avatech Solutions, Inc. on August 17, 2010)                                                                                                                                                                     
|      | 
|10.12 |  | Form of Indemnification Agreement (incorporated by reference to Exhibit 10.1 of the Current Report on Form 8-K filed by Avatech Solutions, Inc. on August 17, 2010)                                                                                                                                                                                                                                                        
|      | 
|10.13 |  | Revolving Loan Promissory Note issued by Avatech Solutions Subsidiary, Inc. and Avatech Solutions Subsidiary, Inc. to Mercantile Safe-Deposit & Trust Co. dated January 27, 2006
(incorporated by reference to Exhibit 10.50 of the Registration Statement on Form S-1 filed by Avatech Solutions, Inc. on February 10, 2006, File No 333-131720)                                                                          
|      | 
|10.14 |  | Loan and Security Agreement among Avatech Solutions Subsidiary, Inc., Avatech Solutions Subsidiary, Inc. and Mercantile Safe-Deposit & Trust Co., dated January 27, 2006
(incorporated by reference to Exhibit 10.51 of the Registration Statement on Form S-1 filed by Avatech Solutions, Inc. on February 10, 2006, File No 333-131720)                                                                                  
|      | 
|10.15 |  | Modification Agreement among Avatech Solutions, Inc., Avatech Solutions Subsidiary, Inc. and Mercantile Safe-Deposit & Trust Co. dated May 30, 2006 (incorporated by reference to
Exhibit 10.57 of the Current Report on Form 8-K filed by Avatech Solutions, Inc. on June 8, 2006)                                                                                                                                        
|      | 
|10.16 |  | Second Modification Agreement among Avatech Solutions, Inc., Avatech Solutions Subsidiary, Inc and Mercantile Bank & Trust Co., dated December 31, 2006 (incorporated by
reference to Exhibit 10.16 of the Quarterly Report on Form 10-Q filed by Avatech Solutions, Inc. on November 14, 2007)                                                                                                                            
|      | 
|10.17 |  | Third Modification Agreement among Avatech Solutions, Inc., Avatech Solutions Subsidiary, Inc and PNC Bank, National Association, dated December 31, 2008 (incorporated by reference
to Exhibit 10.1 of the Current Report on Form 8-K filed by Avatech Solutions, Inc. on January 30, 2009)                                                                                                                               
|      | 
|10.18 |  | Fourth Modification Agreement among Avatech Solutions, Inc., Avatech Solutions Subsidiary, Inc and PNC Bank, National Association, dated December 23, 2009 (incorporated by reference
to Exhibit 10.1 of the Current Report on Form 8-K filed by Avatech Solutions, Inc. on December 30, 2009)                                                                                                                             
|      | 
|10.19 |  | Fifth Modification Agreement among Avatech Solutions, Inc., Avatech Solutions Subsidiary, Inc and PNC Bank, National Association, dated August 17, 2010 (incorporated by reference to
Exhibit 10.3 of the Current Report on Form 8-K filed by Avatech Solutions, Inc. on August 17, 2010)                                                                                                                                  
|      | 
|10.20 |  | Sixth Modification Agreement among Avatech Solutions, Inc., Avatech Solutions Subsidiary, Inc and PNC Bank, National Association, dated December 16, 2010 (incorporated by reference
to Exhibit 10.1 of the Current Report on Form 8-K filed by Avatech Solutions, Inc. on December 20, 2010)                                                                                                                              
|      | 
|10.21 |  | Revolving Credit and Security Agreement dated as of August 14, 2009 by and among PNC Bank, National Association and Rand Worldwide US Holdings, Inc., Rand A Technology Corporation,
Rand Technologies of Michigan, Inc. and Rand IMAGINiT Technologies, Inc. (incorporated by reference to Exhibit 10.25 of the Transition Report on Form 10-KT filed by Avatech Solutions, Inc. on November 15, 2010)                    
|      | 
|10.22 |  | First Amendment to Revolving Credit and Security Agreement dated as of January 22, 2010 by and among PNC Bank, National Association and Rand Worldwide US Holdings, Inc., Rand A
Technology Corporation, Rand Technologies of Michigan, Inc. and Rand IMAGINiT Technologies, Inc. (incorporated by reference to Exhibit 10.26 of the Transition Report on Form 10-KT filed by Avatech Solutions, Inc. on November 15,
2010)
|      | 
|10.23 |  | Second Amendment to Revolving Credit and Security Agreement dated as of July 23, 2010 by and among PNC Bank, National Association and Rand Worldwide US Holdings, Inc., Rand A
Technology Corporation, Rand Technologies of Michigan, Inc. and Rand IMAGINiT Technologies, Inc. (incorporated by reference to Exhibit 10.27 of the Transition Report on Form 10-KT filed by Avatech Solutions, Inc. on November 15,
2010)  



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##### Table of Contents

|      |  |                                                                                                                                                                                                                                                                                                                                                                                                                         
|----- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|      | 
|10.24 |  | Third Amendment to Revolving Credit and Security Agreement dated as of July 23, 2010 by and among PNC Bank, National Association and Rand Worldwide US Holdings, Inc., Rand A
Technology Corporation, Rand Technologies of Michigan, Inc. and Rand IMAGINiT Technologies, Inc. (incorporated by reference to Exhibit 10.28 of the Transition Report on Form 10-KT filed by Avatech Solutions, Inc. on November 15,
2010)
|      | 
|10.25 |  | Fourth Amendment to Revolving Credit and Security Agreement dated as of December 31, 2010 by and among PNC Bank, National Association, Rand A Technology Corporation and Rand
Worldwide Subsidiary, Inc. (incorporated by reference to Exhibit 10.1 of the Current Report on Form 8-K filed by Rand Worldwide, Inc. on January 5, 2011)                                                                                 
|      | 
|10.26 |  | Autodesk Authorized Value Added Reseller Agreement between Rand IMAGINiT Technologies, Inc. and Autodesk, Inc, dated February 1, 2010 (incorporated by reference to Exhibit 10.24 of
the Transition Report on Form 10-KT filed by Avatech Solutions, Inc. on November 15, 2010)                                                                                                                                         
|      | 
|10.27 |  | Omnibus Waiver and Termination Agreement among Avatech Solutions, Inc., Pacific Asset Partners and Sigma Opportunity Fund, LLC, dated August 17, 2010 (incorporated by reference to
Exhibit 10.22 of the Annual Report on Form 10-K of Avatech Solutions, Inc. filed on September 28, 2010)                                                                                                                             
|      | 
|10.28 |  | Omnibus Waiver and Termination Agreement among Avatech Solutions, Inc., Sigma Opportunity Fund, LLC, Garnett Y. Clark, Jr., Robert Post and George Davis, dated August 17, 2010
(incorporated by reference to Exhibit 10.23 of the Annual Report on Form 10-K of Avatech Solutions, Inc. filed on September 28, 2010)                                                                                                   
|      | 
|10.29 |  | Employment Agreement between Robert F. Heeg and Rand Worldwide, Inc. dated May 16, 2008 (filed herewith)                                                                                                                                                                                                                                                                                                                
|      | 
|21.1  |  | Subsidiaries of Avatech Solutions, Inc. (filed herewith)                                                                                                                                                                                                                                                                                                                                                                
|      | 
|23.1  |  | Consent of Stegman & Company (filed herewith)                                                                                                                                                                                                                                                                                                                                                                           
|      | 
|23.2  |  | Consent of PricewaterhouseCoopers LLP (filed herewith)                                                                                                                                                                                                                                                                                                                                                                  
|      | 
|31.1  |  | Rule 15d-14(a) Certifications by Chief Executive Officer (filed herewith)                                                                                                                                                                                                                                                                                                                                               
|      | 
|31.2  |  | Rule 15d-14(a) Certifications by Chief Financial Officer (filed herewith)                                                                                                                                                                                                                                                                                                                                               
|      | 
|32.1  |  | Section 1350 Certifications (furnished herewith)