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UNITED STATES
SECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549

FORM 10-K

Mark Oneý

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934For The Fiscal Year Ended December 31, 2008ORo

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934For the Transition Period from            to


Commission File Number 001-33521

INFOLOGIX, INC.(Exact name of registrant as specified in its charter)

Delaware(State or other jurisdiction of incorporation or organization)

20-1983837(IRS Employer Identification Number)101 E. County Line Road
Hatboro, PA(Address of principal executive offices)

19040(Zip code)


(215) 604-0691(Registrant's telephone number, including area code)

Securities
registered pursuant to Section 12(b) of the Act:

Title of each class

Names of each exchange on which registeredCommon Stock, par value $0.00001

The NASDAQ Stock Market, LLC


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

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

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

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 ý    No o

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

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

Large accelerated filer o

Accelerated filer o

Non-accelerated filer o (Do not check if a smaller reporting company)

Smaller reporting company ý


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

As of June 30, 2008, the aggregate market value of the registrant's common stock held by non-affiliates of the registrant was $31,997,187 based
on the closing price as reported on the NASDAQ Capital Market. (In determining the market value of the Common Stock held by any non-affiliates, shares of Common Stock of the Registrant
beneficially owned by directors, officers and holders of more than 10% of the outstanding shares of Common Stock of the Registrant have been excluded. This determination of affiliate status is not
necessarily a conclusive determination for other purposes.)

The
number of shares outstanding of each of the issuer's classes of common stock as of the latest practicable date,

Class

Outstanding at March 26, 2009Common Stock, $.00001 par value per share

25,602,267 Shares


DOCUMENTS INCORPORATED BY REFERENCE

None.



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PART IItem 1.

Business


4Item 1A.

Risk Factors


18Item 1B.

Unresolved Staff Comments


31Item 2.

Properties


31Item 3.

Legal Proceedings


31Item 4.

Submission of Matters to a Vote of Security Holders


31PART IIItem 5.

Market for the Company's Common Equity, Related Stockholder Matters, and Issuer Purchases of Equity Securities


32Item 6.

Selected Financial Data


32Item 7.

Management's Discussion and Analysis of Financial Condition and Results of Operations


33Item 7A.

Quantitative and Qualitative Disclosures About Market Risk


50Item 8.

Financial Statements and Supplementary Data


51Item 9.

Changes in and Disagreements with Accountants on Accounting and Financial Disclosure


87Item 9A(T).

Controls and Procedures


87Item 9B.

Other Information


88PART IIIItem 10.

Directors, Executive Officers and Corporate Governance


89Item 11.

Executive Compensation


92Item 12.

Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters


99Item 13.

Certain Relationships, Related Transactions, and Director Independence


101Item 14.

Principal Accountant Fees and Services


103PART IVItem 15.

Exhibits and Financial Statement Schedules


104Schedule II

Valuation and Qualifying Account


105Signatures


109


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CAUTIONARY LANGUAGE REGARDING FORWARD-LOOKING STATEMENTS

This report contains "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995 that
involve risks and uncertainties, many of which are beyond our control. Our actual results could differ materially and adversely from those anticipated in such forward-looking statements as a result of
certain factors, including those set forth under Item 1A "Risk Factors" included in Part I of this report. Important factors that may cause actual results to differ from projections
include, but are not limited to, for example:



All
statements, other than statements of historical facts, included in this report regarding our strategy, future operations, financial position, estimated revenue or losses, projected
costs, prospects, current expectations, forecasts, and plans and objectives of management are forward-looking statements. When used in this report, the words "will," "may," "believe," "anticipate,"
"intend," "estimate," "expect," "should," "project," "plan" and similar expressions are intended to identify forward-looking statements, although not all forward-looking statements contain such
identifying words. All forward-looking statements speak only as of the date of this report. We do not undertake any obligation to update any forward-looking statements or other information contained
herein, except as required by federal securities laws. You should not place undue reliance on these forward-looking statements. Although we believe that our plans, intentions and expectations
reflected in or suggested by the forward-looking statements in this report are reasonable, we cannot assure you that these plans, intentions or expectations will be achieved. We have disclosed
important factors that could cause our actual results to differ materially from our expectations under Item 1A "Risk Factors" in Part I of this report. These cautionary statements
qualify all forward-looking statements attributable to us or persons acting on our behalf.

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PART I

Item 1.    Business

General

InfoLogix, Inc. is a Delaware corporation that was organized under the laws of the State of Nevada on November 22, 2004
and subsequently merged with and into a corporation organized under the laws of the State of Delaware on November 22, 2006. On November 29, 2006, InfoLogix Systems Corporation (formed in
2001), a Delaware corporation, merged with and into a wholly-owned subsidiary of InfoLogix, Inc. As a result, InfoLogix, Inc. is a holding company for, and conducts substantially all of
its operations through, its wholly-owned subsidiary InfoLogix Systems Corporation. References throughout this report to "we", "us", "our", "the Company" and "InfoLogix" are references to
InfoLogix, Inc. and its wholly-owned direct and indirect subsidiaries unless otherwise indicated. Many of the amounts and percentages presented in Part I have been rounded for
convenience of presentation, and all dollar amounts are presented in thousands.

Overview

InfoLogix is a provider of enterprise mobility solutions for the healthcare and commercial industries. We provide these solutions to
our customers by utilizing a combination of products and services, including consulting, business software applications, mobile managed services, mobile workstations and devices, and wireless
infrastructure. Our solutions are designed to allow the real time usage of data throughout a customer's enterprise in order to enhance workflow, improve customer service, increase revenue and reduce
costs. We sell wireless communication and computing devices, including mobile workstations that connect to a customer's wireless network so that information can be accessed from any location within
the enterprise. We also implement customized and third-party software applications and provide radio frequency identification (RFID) technology, a data-exchange method using transponders
that store and remotely send or retrieve information, to enable the transmission and processing of that information between the customer's information system and its wireless communication and
computing devices. We also offer professional services that support and complement a customer's wireless computing systems and enterprise-wide software implementations, including
consulting, mobile managed services, training, engineering, technical support and network monitoring.

Historically,
the sale of mobile workstations and other wireless devices has represented a majority of our net revenues. In the past three years, we have been transitioning our business
to offer higher margin software applications, consulting and other professional services. With our focus on selling software and services, we believe that we can provide more comprehensive enterprise
mobility solutions to our customers. These solutions involve:



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We
have incurred significant net losses from 2006 through 2008, including net losses of $13,184 for the year ended December 31, 2008. We have substantial liquidity requirements
related to the repayment of our revolving line of credit that comes due on November 1, 2009 and to earn out payments for past acquisitions. As a result, our independent registered public
accounting firm has included an explanatory paragraph with respect to our ability to continue as a going concern in its report on our consolidated financial statements for the year ended
December 31, 2008. We have undertaken a series of actions to reduce costs and are pursuing various initiatives to continue as a going concern and to provide for our future success. Our plans
regarding these initiatives are discussed in "Item 7. Management's Discussion and Analysis of Financial Condition and Results of OperationsGoing Concern," and may include
additional financing, one or more strategic transactions, restructuring our debt, and further cost control initiatives. Our continued operations are dependent on our ability to implement those plans
successfully. If we fail to do so, we may not be able to continue as a going concern.

Despite
our history of losses and the difficult economic climate, we believe that we are well positioned to capitalize on the development, proliferation and convergence of enterprise
mobility solutions in the marketplace. We believe that the application of our knowledge and experience in combining industry leading wireless infrastructure with proprietary and third-party software
creates solutions that address our customers' critical needs. Because we do not depend on any particular technology or network carrier, we believe that we can provide tailored solutions in a rapidly
changing technological landscape. Also, as market conditions continue to evolve, we believe that our solutions are adaptable to customers in any industry and scalable to customers of varying size or
technological sophistication.

Services and Products

Our implementation and support organization provides solutions that include consulting, business software applications, mobile managed
services, mobile workstations and devices, and wireless infrastructure. Our services and products are designed to help our customers enhance workflow, improve customer service, increase revenue and
reduce costs. We believe our services and products address several functional applications including, for example, in enterprises in the following industries:



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Our
service and product offerings can be sold to a customer separately or together, in each case in a manner tailored to that particular customer. We offer the following services and
products:

Consulting and Professional Services

Our sales and implementation process takes a consultative approach, rather than the taking and filling of product orders. We work
closely with our customers to assess their operations and identify the stress points in their organization where work processes and information management can be improved through the implementation of
our solutions. Our professionals are
experienced in providing strategic planning and guidance in the areas of information technology systems engineering, clinical systems, financial systems, operational systems and software development.

Through
our recent acquisitions of the businesses of Healthcare Informatics Associates, Inc., or HIA, and Delta Health Systems, Inc., or Delta, we have established
capabilities as a national management and clinical systems consulting company for the healthcare industry. Through the recent acquisition of the business of Aware Interweave, Inc., or Aware, we
have established capabilities with expertise as a software and services partner within the SAP® supply chain execution and mobility business. Through the recent formation of our
SAP® Global Services Group, we aim to bring increased efficiency to SAP® customers in multiple industries, including pharmaceutical, retail, consumer packaged goods,
third-party logistics, wholesale distribution, and utilities.

Our
professional services and solutions expertise in the healthcare market includes:



Our
professional services and solutions expertise in commercial markets includes designing and implementing solutions using SAP® logistics applications, developing customized
software applications, and also designing, developing, and improving wireless networks.

We
can provide the following professional services through the project development and deployment process of a complete mobile system implementation or on a discrete individual basis
based on the needs of our customers:



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Training
modules developed and implemented to date include HIPAA privacy and security training, clinical application training templates (Epic electronic medical records systems, MEDITECH
computerized physician order entry and electronic medical record systems, Siemens AG Medication Administration Checker training, McKesson Corporation's Horizon Expert Documentation clinical
documentation training and Medical Information Technology, Inc.'s nursing training) and an assessment and certification module, designed to test, certify, provide feedback, and report on
clinical courseware retention. We have several other e-Learning software modules currently under development.

Products and Software

Mobile Workstations and Devices

We develop, implement and sell wireless mobile workstations and devices. Our mobile workstations provide the basis for hardware and
software solutions that create a gateway into a customer's information

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technology
systems. Mobile workstations can be configured to address a broad continuum of a customer's mobile computing needs. Customers are provided the option to mount on our workstations our
proprietary form-factor PCS, RFID medication administration solutions, proprietary power solutions, liquid crystal display flat panel monitors, laptop computers, tablet PCs, keyboards,
bar-code data collection devices and other mobility-enabled equipment. As a result, users can gain ready access to the most current information required to complete tasks in an efficient
manner.

Our
mobile workstations and devices include:



Our
mobility solutions also include bar-code data collection devices, form-factor PCs, secure wireless networks, handheld devices, tablet PCs, mobile wireless
bar-code and label printers, vehicle-mounted computers, wearable computers, wireless connectivity and interconnectivity devices, and proprietary power solutions.

Software

We have dedicated significant resources and capital to developing, acquiring and partnering with leading software firms to deliver a
full range of software applications. These software applications are designed to facilitate and integrate tracking and delivery solutions for our customers. We continue to focus on developing our
mobility solutions to include robust software applications that have changed our

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business
model to include recurring revenue from software licensing and support service. Our proprietary software applications include the following:





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Mobile Managed Services

Our mobile managed services are designed to provide our customers with external asset management and system monitoring and support that
enable their mobile technology to operate without interruption and at peak performance levels. We offer mobile managed services to our customers through a dedicated in-house support staff
that can monitor and maintain as much of a customer's information technology systems as the customer desires. We take a proactive approach to identifying and solving problems within a customer's
wireless network systems, which we believe is an attractive alternative to the typical reactive approach to information technology support.

In
general, we provide mobile managed services through an ongoing contracted arrangement that is budgeted and invoiced periodically as opposed to our professional services, which are
typically one-time engagements that run through product deployment. Examples of our managed services include:



Our
mobile managed services are generally offered through service level agreements that range from two to five years.

Sales and Marketing

We employ several methods to sell our services and products, including direct selling, an inside sales approach and channel partner
programs. Our direct selling and inside sales approach aims to align the compensation paid to our sales representatives with our business strategy. Sales representatives are paid largely on a
commission basis based on revenue for services and gross profits for products sold.

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Our direct sales force is primarily geographically based to support a regional strategy focused on one-to-one selling. In addition, many
of our sales representatives specialize in a particular industry or industries, which we believe makes them more effective in understanding the needs of our customers and ultimately generating more
sales. Over the past year we have approximately doubled the size of our sales force. We currently employ approximately 45 direct sales representatives located across the United States, including our
inside sales staff. In general, new sales representatives take approximately six to nine months to generate leads, initiate contacts and become integrated into the purchasing cycle of our customers.

Our
inside sales strategy focuses on telephonic and email communications. These sales representatives work from within our offices and are responsible for handling inbound sales orders
and for following up with customers. To support this sales approach, we use a sales force automation system that integrates our inside and outside sales force, customer service representatives,
marketing support staff and management through our email system.

We
also sell and market our services and products through a network of key relationships, including channel partners. These relationships are synergisticwe refer business to
our key relationships from our existing customers and, in exchange, we receive preferential pricing and referrals from these key relationships. Our business development and channel management staff
develop relationships with our channel partners both at the management level and, we believe more importantly, at the field sales level. We provide incentives to our channel partners to actively
pursue opportunities to market and sell our services and products with our support. In addition, we intend to continue to leverage our key relationships and channel partners by increasing the amount
of business, in particular that portion of our business surrounding hardware and wireless device sales, done through these partners while directing our direct sales team to focus on selling our higher
margin consulting and other professional services.

We
market our services and products through a variety of other methods, including industry trade shows and professional conferences, public relations and targeted marketing campaigns,
our corporate website, and search engine optimization and marketing.

Customers

We have delivered enterprise mobility solutions to over 2,200 customers in North America, including over 1,400 hospitals and 800
commercial enterprises since we began operations in 2001. As a percentage of total net revenue, our five largest customers accounted for, in the aggregate, approximately 38%, 34%, and 24% of our net
revenues for the years ended December 31, 2008, 2007 and 2006, respectively. During 2008, 2007 and 2006, we had one, two and one, respectively, customers that individually comprised 10% or more
of revenue. Management does not believe that the loss of any single customer will have a material adverse effect on our business or results of operations.

We
generated net revenues from customers located in the United States of $100,216, $75,474 and $61,913 in the years ended December 31, 2008, 2007 and 2006, respectively. We
generated net revenues from customers located outside of the United States of $500, $3,300 and $200 in the years ended December 31, 2008, 2007, and 2006, respectively.

Strategic Acquisitions in 2008

Acquisition of Assets of Delta Health Systems, Inc.

In May 2008, we acquired substantially all of the assets of Delta Health Systems, Inc., or Delta. The assets acquired relate to
Delta's business of providing strategic cost management consulting services and web-based management data collection and work-flow analytics to the healthcare industry. We
expect this acquisition to further our strategic plans by enabling us to combine our existing solutions with higher margin professional services. We believe the Delta acquisition will allow us to
reach further into our healthcare customer organization's to bring critical workflow and human resource utilization efficiencies

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that
support our mobile solutions. During 2008, we began to realize economies of scale through selling combined solutions to mutual clients of Delta.

The
purchase price was $1,673, which consisted of $1,465 in cash and $208 in acquisition costs. We also entered into an earn out agreement pursuant to which Delta is eligible to earn
additional consideration in the subsequent two-year period (each year, an "Earn Out Period") after the closing of the transaction. Delta can earn up to $500 in the first Earn Out Period
and up to $500 in the second Earn Out Period upon achievement of gross revenue targets described in the Earn Out Agreement. At the end of the two year period, if Delta has not already earned the
$1,000 of additional consideration in respect of each of the two Earn Out Periods, Delta may earn an amount equal to the $1,000 of additional consideration less any amounts previously paid in respect
of the two Earn Out Periods upon the achievement of certain cumulative financial milestones during the two-year earn out period.

Acquisition of Assets of Aware Interweave, Inc.

In May 2008, we acquired substantially all of the assets of Aware Interweave, Inc., or Aware. The assets acquired relate to
Aware's business of providing mobile software solutions to a variety of customers including federal government agencies, fortune 1000 companies and healthcare and life science organizations. The
acquisition is consistent with our strategic plan to add intellectual property and higher-margin services and application software licensing, while allowing us to provide our customers with access to
new solutions. The acquisition of Aware allowed us the opportunity to enable users of SAP® software and applications to significantly improve their visibility, response time, and revenues
by providing access to business-critical applications without being tied to the office or desktop computer. Aware has developed a mobile product solution suite, the Co-Pilot series, which
is tailored specifically for users of SAP® software, and also adaptable to other back-end systems.

The
purchase price was $2,479, which consisted of 500,000 shares of our common stock, valued at $1,030, cash net of cash acquired of $1,318, and $131 of acquisition costs. The issuance
of the shares of common stock was unregistered and the shares are initially subject to a two-year lockup. We have placed 105,820 shares of the common stock in an escrow account for a
period of eighteen months as security for indemnification obligations under the asset purchase agreement.

Strategic Acquisitions in 2007

Acquisition of DDMS Holdings, LLC

On April 9, 2007, we acquired all of the assets of DDMS Holdings, LLC. The acquired assets consist of five patents issued
in the U.S., and four patents issued in foreign countries, along with one published U.S. patent application and five pending foreign patent applications. The patents and patent applications relate to
a system for managing the delivery of pharmaceutical drugs through the use of RFID technology. The purchase price consisted of $200 in cash and 400,000 shares of our common stock. The shares of common
stock are unregistered. Both of the former shareholders of DDMS Holdings, LLC were granted options to acquire 30,000 shares of our common stock. We believe this acquisition has provided us with
protections related to our on-going sale and development of RFID technologies and mobility solutions across our business.

We
also entered into a ten-year consulting agreement with LM Consulting LLC, an entity wholly owned by the former shareholders of DDMS. Under the consulting agreement,
LM Consulting will provide up to 20 hours of consulting services per month. The consulting services will be rendered by the former owners of DDMS, who are the original inventors of the patented
technologies, and will consist of services related to the commercialization and development of the patents and other intellectual property acquired from DDMS. LM Consulting is entitled to receive a
consulting fee during the term of the consulting agreement equal to 36% of the revenue generated by the patents after deducting (i) certain expenses

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related
to the generation of those revenues and (ii) a portion of the funds expended by us in maintaining and expanding the patents.

Acquisition of Certain Assets of AMTSystems, Inc.

On May 10, 2007, we acquired certain assets of AMTSystems, Inc., including the rights to existing relationships with
customers, vendors and partners, and the intellectual property rights behind AMTSystems' clinical and financial mobility solutions for healthcare. The purchase price consisted of $100 in cash and
138,160 shares of our common stock at closing, and $500 in cash payable in 72 equal monthly installments, plus interest. The shares of common stock issued in the transaction are unregistered and are
subject to a two-year lock-up.

The
addition of professional staff from AMT has enabled us to enhance our software development capabilities and our barcode and RFID technology offerings. The focus of this acquisition
has been on the integration of clinical and financial systems through software applications that operate on mobile computing devices enabling materials management, patient charge capture, and a full
line of proof positive patient identification solutions.

In
connection with the acquisition, we entered into a two-year employment agreement with Todd D. Stewart. Under the employment agreement, Mr. Stewart was appointed to
the position of Director, Healthcare Technology Sales, is entitled to receive an annual base salary of $125 plus related sales incentive commissions, and received options to purchase 30,000 shares of
our common stock, pursuant to our 2006 Equity Compensation Plan.

Acquisition of Healthcare Informatics Associates, Inc.

On September 30, 2007, we acquired substantially all of the assets of Healthcare Informatics Associates, Inc., or HIA,
including all of HIA's cash and cash equivalents and certain bank accounts, accounts receivable, the rights to existing relationships with customers, vendors and partners, certain tangible personal
property and certain intangible rights and property. The consideration paid for the acquired assets was composed of cash, shares of our common stock, a convertible promissory note and additional
contingent consideration under an earn out agreement, each as discussed in more detail below. We believe that the acquisition of HIA and its combination of IT and clinical experience has enabled us to
expand the strategic value of our current and future customer relationships.

The
cash purchase price payable at closing was $5,500 (subject to a post-closing working capital adjustment) of which $900 was placed into escrow to fund a portion of certain
employee retention payments to be made to HIA's employees over a three-year period after the closing. In addition, $1,557 from HIA's cash account was deposited into an escrow account to be
used
to fund any working capital adjustment payable to the Company, all of which was subsequently released back to HIA in January 2008. We also deposited approximately $83 into escrow representing certain
outstanding customer invoices due to HIA. We have collected the amounts due under those invoices so we released an equivalent amount to HIA from the escrow in January 2008.

In
addition to the cash consideration described above, the purchase price for the assets of HIA included 755,478 unregistered shares of our common stock and a $3,500 convertible
subordinated promissory note issued by our wholly-owned subsidiary, InfoLogix Systems Corporation. The note bears interest at a rate of 9% per annum, compounding annually until the principal amount is
paid in full. The principal amount of the note and all accrued interest are payable in full on September 30, 2010. The outstanding unpaid principal amount of the note is convertible at the
option of HIA into unregistered shares of our common stock at a conversion price of $5.50 per share. We may also require HIA to convert all or any portion of the outstanding unpaid principal of the
note into our unregistered common stock at a conversion price of $5.50 per share if the closing bid price of our common stock for at least 45 consecutive trading days equals or exceeds $8.00 per
share. Any accrued but unpaid interest on the note at the time of

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any
conversion will be paid, at our option, either in cash or in additional shares of our common stock at a conversion price of $5.50 per share. HIA may also, at its option, declare the note payable
in full upon the occurrence of a change of control (as defined in the note) of InfoLogix Systems. The note also contains customary events of default that would allow HIA to accelerate the amounts
payable under the note, including any default on our senior debt. The note is subject to a subordination agreement with Hercules Technology Growth Capital, Inc., our senior lender. The note
also grants HIA the right to require us to redeem a portion of the unpaid and outstanding principal of the note if we engage in an offering of our equity securities, the primary purpose of which is to
raise capital.

In
addition, we entered into an earn out agreement pursuant to which HIA is eligible to earn additional consideration in respect of the two years after the closing of the acquisition. In
August 2008, we entered into an amendment to the earn out agreement that extended the first earn out period from twelve months to fifteen months ending December 31, 2008, and amended certain
financial calculations used to determine our earn out liability. Based on satisfaction of certain financial milestones described in the earn out agreement, we have recorded an adjustment of
approximately $1,958 to the purchase price as an increase to goodwill, which reflects the amount that HIA earned under the earn out for the first year following closing and is also the maximum amount
HIA could have earned. We have not yet made any payment in connection with this earn out obligation, and are currently in discussions with HIA regarding this payment. Please see "Item 7.
Management's Discussion and Analysis of Financial Condition and Results of OperationsLiquidity and Capital Resources" for further discussion regarding payment of the HIA earn out. HIA can
earn up to $2,500 in the second year following closing upon satisfaction of certain financial milestones described in the amended earn out agreement. To the extent HIA exceeds those milestones it may
earn additional consideration equal to 25% of such excess.

In
connection with the acquisition, we entered into a two-year employment agreement with Gerald E. Bartley, a 50% stockholder of HIA. Under the employment agreement,
Mr. Bartley was
appointed to the position of Executive Vice President and Managing Director of our Healthcare Consulting Group and is entitled to receive an annual base salary of $250. In addition, Mr. Bartley
is entitled to participate in such incentive compensation plans and equity plans that we provide to employees from time to time. Mary Ann Bartley, the other 50% stockholder of HIA, also entered into a
one-year employment agreement with us in connection with the acquisition, which has since expired.

Patents and Proprietary Technology

We file patent applications to protect technology, innovations and improvements that we consider important to the development of our
business. Throughout our history, we have proactively invested in and acquired intellectual property assets. We continue to partner and invest to develop, capture and deliver unique,
high-quality, differentiated and cost-effective mobile workforce technology solutions for our customers. We have 19 issued patents in the U.S. related to wearable computers and
surrounding RFID technology that manages proper medication delivery and administration. We also have 15 patent applications pending with the U.S. Patent and Trademark Office related to medication
delivery and administration and a proprietary power solution specifically designed for mobile workstations, a system and method for live interactive distance learning, and related mobile wireless
computer systems. The patents for which we have received a final issuance have remaining legal lives that vary from 4 to 16 years.

We
have also developed other proprietary solutions, including form-factor PC technologies designed specifically for low power consumption, handheld and kiosk
point-of-sale devices and several customized software applications. We seek to protect our proprietary information and technology through licensing agreements, third-party
nondisclosure agreements and other contractual provisions, as well as through patent, trademark, copyright and trade secret laws in the U.S. and similar laws in other countries.

We
also rely on trade secrets and proprietary know-how that we seek to protect, in part, through confidentiality agreements with our employees, consultants, customers,
business partners, and other third

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parties.
As a condition of employment, we require that all full-time and part-time employees enter into an inventor assignment and non-disclosure agreement.

We
intend to continue to broaden the scope of our intellectual property portfolio, which we consider critical to our future product development and an important source of potential
value. We might
choose to acquire additional intellectual property through selective acquisitions, as we did through our acquisitions of Delta, Aware and DDMS Holdings LLC, as well as to develop our own
propriety solutions. If we are unable to protect our patents and proprietary rights, our reputation and competitiveness in the marketplace could be materially damaged.

Litigation
may be necessary in order to enforce any patents that we now hold or any patents that are issued to us or acquired by us in the future.

Competition

We operate in a fragmented marketplace, competing with a variety of participants in the wireless mobility market including companies
that design systems, provide hardware and software applications, integrate software and hardware applications, provide consulting services and offer management and maintenance services. Our primary
competition comes from regional and local firms that are similar to us in terms of revenue and numbers of employees.

We
sell and support mobile point of care workstations with over 60,000 of our units currently in use in the U.S. healthcare market. In this business, we compete with a variety of
companies, including furniture and fixture distributors and several nationally known mobile cart manufacturers and distributors. The larger competitors include Stinger Medical (in business for over
ten years and the first company to provide mobile carts to the healthcare industry), Flo Healthcare (the holder of several patents on mobile computing and now owned by Emerson Storage Solutions),
Ergotron, Rioux Vision (now owned by Omnicell), Rubbermaid, NAware, Lionville (also owned by Emerson Storage Solutions), Howard Computer, Artomick and EnovateIT.

In
the healthcare market, we also compete with device manufacturers, service providers and software platform companies that offer unique, specialty use products. For example, Palm and
Dictaphone compete for market share in the sales of devices to physicians and other providers, Microsoft and Intel are positioning for wireless IP platform adoption, while companies like MedQuist and
Scribe vie for customers of specialty use software applications and services. While we maintain our focus on enterprise mobility solutions, we will encounter these companies in the marketplace while
competing for a portion of the work-flow and voice-over-IP solution sets.

We
encounter the very large consulting firms such as IBM Global Services, Accenture, Deloitte Consulting, EDS, Computer Sciences Corporation/First Consulting Group, and Affiliated
Computer Services in both our commercial and healthcare groups. Many of these national and international consulting firms focus on design and architecture of wireless networks, and
work-flow or process improvement. We believe there are also many small, local and regional consulting firms offering services similar to the larger firms, as well as
site-surveys, infrastructure support and
information technology outsourcing. Each of these participants will continue to compete with us for our core services around enterprise mobility solutions and mobile managed services.

We
compete with handheld mobile computer products companies in our supply-chain solutions business, including Symbol/Motorola, Intermec, LXE and other makers of tablet computers such as
Dell, Hewlett-Packard, Sony and Fujitsu. Symbol/Motorola is a global leader in mobile data management systems and services with innovative customer solutions based on wireless local area networking
for voice and data, application-specific mobile computing and bar-code data capture.

We
also compete with a smaller group of companies that are more solutions oriented, but operate in the sectors in which we operate, including healthcare, transportation, manufacturing,
distribution and

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retail.
These companies include Wavelink Corporation, Ennovative, Inc., ID Systems, and OAT (a recognized RFID framework provider). This group of companies competes for business that delivers
RFID software and solutions. Solution sets include data and content management, materials management, e-commerce, e-Learning, custom application and web interface development,
and infrastructure management.

In
addition to the foregoing, there are hundreds of firms that operate in a variety of vertical-specific or technology-centric groupings. Due to the increasing level of market activity
related to these two general areas, an increasing number of companies are claiming capabilities.

When
evaluating our competitive landscape, we consider:



Product Development

To ensure our ability to identify and develop new technologies and applications for our mobile workforce technology solution platforms,
we have organized a software and technology engineering group to provide identification, design, programming, testing, quality assurance and implementation support. We have experienced managers and
engineering staff that provide the necessary expertise required to position us for future growth in our business.

Manufacturing

We engage third parties to produce our mobile point of care and point of activity workstations, form factor and tablet computers, and
wireless kiosk products. We currently do not have a long-term contract with the company providing us with the majority of these products. Most of the manufactured products are shipped
directly from the manufacturing facility to our customer site. Our employees provide on-site customized assembly and installation, upon request of our customers.

Employees

As of December 31, 2008, we had 206 employees of which 45 were in sales and marketing, 94 were in professional consulting
services and e-Learning, 32 were in software engineering, quality assurance, and field services, 19 were in operations and customer support, and 16 were in finance, executive and
administrative capacities. We are not subject to any collective bargaining agreements, and we believe that our relationship with our employees is good.

In
addition to full-time employees, we utilize the services of various independent contractors, primarily for certain product development and foreign sales, marketing and
administrative activity.

Our
principal executive offices are located at 101 East County Line Road, Suite 210, Hatboro, Pennsylvania 19040. Our telephone number is (215) 604-0691. Our
website address iswww.infologix.com.

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Item 1A.    Risk Factors

An investment in our common stock involves a number of risks. Before deciding to invest in us or to maintain or
increase your investment, you should carefully consider the risks described below, in addition to the other information contained in this report and other reports we have filed with the Securities and
Exchange Commission. The risks and uncertainties described below are not the only risks we face. Additional risks and uncertainties not presently known to us or that we currently deem immaterial may
also affect our business operations. If any of these risks are realized, our business, financial condition or results of operations could be harmed. In that event, the market price for our common
stock could decline and you may lose all or part of your investment.

Risk Relating to Our Ability to Continue as a Going Concern

Our independent registered public accounting firm has expressed doubt about our ability to continue as a going concern.

As
discussed in "Item 7. Management's Discussion and Analysis of Financial Condition and Results of OperationsGoing Concern," based on our history of losses and
substantial liquidity requirements related to the repayment of our revolving line of credit that comes due on November 1, 2009 and to earn out payment obligations, our independent registered
public accounting firm has included an explanatory paragraph with respect to our ability to continue as a going concern in its report on our consolidated financial statements for the year ended
December 31, 2008. The presence of this explanatory paragraph may have an adverse impact on our relationship with third parties with whom we do business, including our customers, vendors and
employees and could make it more challenging for us to raise additional financing or refinance our existing indebtedness.

We
have undertaken a series of actions to reduce costs and are pursuing various initiatives to continue as a going concern and provide for our future success. Future initiatives may
include additional financing, one or more strategic transactions and further cost control initiatives. Our continued operations are dependent on our ability to implement those plans successfully. If
we fail to do so, we may not be able to continue as a going concern.

Risks Relating to Our Indebtedness

We have violated certain financial covenants to our senior credit facility and while we are in discussions to amend the facility, including a waiver of those violations, there
can be no assurance that we will obtain any such amendment or waiver.

We
have entered into a loan and security agreement that provides us with a $9.0 million line of credit as well as a term loan facility with a principal amount of
$12.0 million. The line of credit must be repaid by November 1, 2009. The term loan is repayable in monthly installments with a final payment due on May 1, 2012. The loan and
security agreement contains restrictions and covenants and requires us to maintain specified financial ratios and tests. For example, the loan and security agreement restricts our
ability, among other things, to incur additional indebtedness, to acquire other companies or the assets of other companies, to sell or license our assets and to pay dividends without the lender's
consent. If we fail to meet or satisfy any of the restrictions, covenants, financial ratios or financial tests, we would be in default under the loan and security agreement. The loans are secured by
all of our assets and the assets of our subsidiaries, as well as a pledge of the common stock of InfoLogix Systems Corporation (which is the entity through which we conduct substantially all of our
operations). An event of default under the loan and security agreement, including failure to comply with the covenants, would give the lender the right to declare all amounts outstanding under the
credit facility due and payable and enforce its rights to foreclose on the collateral securing the loans.

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As
of December 31, 2008, we were not in compliance with the minimum adjusted EBITDA required under our loan and security agreement and we were not in compliance with the minimum
consolidated EBITDA for the three-month periods ended January 31, and February 28, 2009. As a result of the covenant violation, we currently are not permitted to borrow additional funds
under our revolving facility. Also as a result of the covenant violation and because our total leverage ratio exceeds 3.00 to 1.00, we are prohibited from satisfying our earn out obligations related
to our acquisition of the assets of Healthcare Informatics Associates, Inc. ("HIA"). Due to our inability to comply with these covenants, we are in discussions with our lender, Hercules
Technology Growth Capital, Inc. ("Hercules"), to amend our loan and security agreement to restructure its terms, including to waive past violations and to revise the financial covenants and the
amortization related to the term loan portion of the facility. While we remain in discussions with Hercules regarding an amendment, we have not obtained, and there can be no assurance that we will
obtain, any such amendment. We have incurred, and will continue to incur, additional costs in connection with our negotiations of an amendment.

Further,
on March 12, 2009, Hercules sent us a letter serving as a notice of events of default and reservation of rights (the "First Notice Letter"). Pursuant to the First Notice
Letter, Hercules informed us that it believed certain events of default existed under our loan and security agreement, namely that, commencing on February 26, 2009 and through March 11,
2009, we had failed to reduce the aggregate Revolving Loan Advances to an amount less than or equal to the lesser of (x) the Borrowing Base or (y) the Maximum Revolving Loan Amount (as
those terms are defined in the loan and security agreement). Hercules further asserted that we failed to promptly notify it of the alleged event of default because we did not inform Hercules of the
overadvance until March 6, 2009. Hercules elected to charge us increased interest and a late fee of approximately $45 for the period of the overadvance. Furthermore, Hercules asserted
additional events of default for our failure to deliver certain unaudited monthly financial statements and securities account control agreements. We have disputed both the amount of the interest and
late fee charged to us for the overadvance as well as the assertion that we have failed to provide the required securities account control agreements, however we paid the default interest and fees. In
addition, on March 25, 2009, Hercules sent us a second letter notifying us of an event of default for failure to comply with the financial covenant as of January 31, 2009 and charging us
default interest of $78 for the period from February 1, 2009 through March 31, 2009, except the overadvance period for which default rate interest had already been paid. Hercules also
informed us that, for periods subsequent to March 31, 2009, default rate interest will be payable monthly on the same date as regular interest unless Hercules chooses to demand payment of
default interest on
another date. Under the terms of our loan agreement with Hercules, late fees are equal to 5% of the past due amount and the default rate interest is equal to the applicable regular interest rate plus
3%.

Hercules
has not chosen to accelerate our obligations under the loan and security agreement, and has expressly not waived any events of default or any of its remedies under the loan and
security agreement. We do not have adequate liquidity to repay all outstanding amounts under the credit facility and payment acceleration would have a material adverse effect on our liquidity,
business, financial condition and results of operations.

We require significant cash flows to satisfy our debt obligations and earn out payment obligations and do not currently have sufficient cash flow or financing alternatives to
meet those obligations.

Our
indebtedness under our loan and security agreement and under our earn out agreement related to the acquisition of the assets of HIA involve significant payment obligations. Due to
our violations of the financial covenants under our indebtedness with Hercules, we are prohibited from making payments on the HIA obligation. In addition, we do not have sufficient cash flow or
financing alternatives to make these payments. This inability to make all required payments has forced us to seek waivers of our obligations and amendments of our agreements. We remain in discussions
with Hercules regarding an amendment to restructure the terms of our loan and security agreement and with HIA regarding the earn out payment, but there can be no assurance that we will be able to
obtain the resolutions we seek.

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We will need additional financing to fund our operations and finance our growth; we may be unable to obtain financing on terms acceptable to us.

We
will be required to raise additional capital through either equity or debt financing to fund our operations, including any operating losses, and to implement our current or future
strategies, including strategic acquisitions. Factors that could increase our need to seek additional financing include decreased demand and market acceptance for our products and services, the
inability to successfully develop new products and services, competitive pressures resulting in lower pricing, new products and services offered by our competitors, and acquisition opportunities. In
addition, if Hercules accelerates our obligations under the loan and security agreement or when our existing credit facilities expire, we would likely need to obtain replacement debt financing. The
capital and credit markets in the United States have recently experienced extreme volatility and disruptions, and the current turmoil affecting the financial markets and the banking system, as well as
the possibility that financial institutions may consolidate or go out of business, have resulted in a tightening in the credit markets and a low level of liquidity in many financial markets. These
developments have made financing terms materially less attractive and, in some cases, made financing unavailable. As a result, we may be unable to obtain any
financing, including both new and replacement financing, that we might require to operate our business. In particular, in this environment, it will be extremely difficult to obtain additional debt
financing or to refinance or replace our existing indebtedness.

There
can be no assurance that additional or replacement debt financing will be available to us on commercially reasonable terms or at all. If we incur additional debt, our interest
expense would increase. If we raise capital through the sale of equity securities, the percentage ownership of our existing stockholders would be diluted. Any new equity securities also may have
rights, preferences or privileges senior to those of our common stock, including liquidation preferences, dividend rights, board representation, and blocking rights for certain transactions and other
matters. If we are unable to obtain additional or replacement financing when we need it, our ability to fund our operations and meet our plans for expansion would be materially adversely affected.

The covenants in our credit facility may restrict our operations, which could inhibit our growth strategy and have a negative effect on our results of
operations.

Even
without payment acceleration, restrictions contained in the loan and security agreement could inhibit our ability to obtain financing and engage in other business activities that
are important to our business and growth strategies, which could inhibit our ability to operate our business and increase our revenues.

Our indebtedness could adversely impact our financial condition.

As
of December 31, 2008, we had approximately $25.6 million of total indebtedness, including short-term debt and approximately $9.0 million under our
revolving credit facility. We may increase the amount of our indebtedness in the future, which could have an important impact on our stockholders. An increase in our indebtedness
could:



If
any of the foregoing were to occur, our ability to execute our growth strategy would be impaired and our results of operations could be harmed.

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Risks Relating to our Business and Industry

We have incurred losses in the past and our ability to operate profitably in the future is uncertain.

For
the year ended December 31, 2008 we generated net revenues of $100,716 and incurred net losses of $13,184. We have incurred net losses in each of the last three years and we
may incur additional losses in the future. Even if we achieve profitability, we may not be able to sustain or increase profitability on a quarterly or annual basis. If our business and revenues grow
more slowly than we anticipate, our operating expenses exceed our expectations, we are unable to sell our products and services at acceptable prices relative to our costs, or we fail to develop and
introduce on a timely basis new products and services from which we can derive additional revenues, our financial results will suffer.

Our revenues and profitability may be adversely affected by deterioration in economic, business or industry conditions.

If
the economic climate in the U.S. or abroad continues to deteriorate or suffers a prolonged downturn, customers or potential customers could reduce or delay their technology
investments. Reduced or delayed technology investments could decrease our sales and profitability. In such an environment, our customers may experience financial difficulty, cease operations or fail
to budget or reduce budgets for the purchase of our products and professional services. This may lead to longer sales cycles, delays in purchase decisions, payment and collection, and may also result
in downward price pressures, causing our sales and profitability to decline. In addition, general economic uncertainty and general declines in capital spending in the information technology sector
make it difficult to predict changes in the purchasing requirements of our customers and the markets we serve. There are many other factors that could affect our revenues and profitability,
including:



In
particular, we serve the healthcare and commercial industries, which are experiencing significant challenges, primarily due to deteriorating macroeconomic conditions that have
resulted in a decreased demand for their products and services. Some of our customers are facing constraints on their information technology budgets and are seeking more flexibility in the timing of
their purchases from us. As a result of this macroeconomic downturn, some of our customers may face financial challenges in fiscal 2009. It is unclear when the general economic climate will improve
and when our customers may benefit from improved conditions. These factors could adversely affect our business, profitability and financial condition and diminish our ability to achieve our strategic
objectives.

Increasing our profitability and managing our growth are necessary to achieve our strategic objectives.

The
industries in which we operate are highly competitive. To meet our growth objectives, we believe that we need to continue to add and increasingly emphasize higher-value, proprietary
solutions, including mobile managed services, software applications and consulting services. There can be no assurance that we will effectively deploy our initiatives or be successful in obtaining
customer acceptance of our current and anticipated higher margin products and services or developing new products and services with higher margins, and if we do not, we would not meet our strategic
objectives.

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In
addition, the implementation of our strategic initiatives to improve profitability may have the unintended effect of straining our operations, increasing operating expenses, and
adversely affecting our profitability, even if the initiatives are successful. The difficulties associated with implementing these initiatives may place a significant burden on our management and our
operational and financial resources. If we fail to successfully implement these initiatives, or encounter unexpected difficulties in that process, our business and results of operations could be
adversely affected.

Also,
to manage any future growth of our business, we will need to hire, integrate and retain highly skilled and motivated employees. We will also need to continue to improve our
financial and management controls, reporting and operational systems and procedures. If we do not effectively manage our growth we may not be able to meet our customers' needs, thereby adversely
affecting our results of operations, or be able to meet our strategic objectives.

We may engage in acquisitions that could disrupt our business, could be difficult to integrate with our existing operations, cause dilution to our stockholders and harm our
business, operating results and financial condition, or we may be unable to find suitable acquisition candidates consistent with our strategic objectives.

As
part of our acquisition strategy, we acquired the businesses and certain assets of DDMS Holdings, LLC, AMTSystems, Inc., Healthcare Informatics Associates, Inc.,
Delta Health Systems, Inc. and Aware Interweave, Inc. during 2007 and 2008. While these acquisitions and any future acquisitions may present us with growth opportunities, they involve
numerous risks, including:



We
have limited historical experience with the integration of acquired companies and there can be no assurance that we will be able to manage the integration of acquired businesses
effectively or be able to retain and motivate key personnel from these businesses. Any difficulties we encounter in the
integration process could divert management from day-to-day responsibilities, increase our expenses and have a material adverse effect on our business, financial condition and
results of operations.

For
future acquisitions, we may not be able to find suitable acquisition candidates, and we may not be able to complete acquisitions on favorable terms, if at all, and we may not be able
to finance acquisitions on favorable terms, if at all. If we do complete acquisitions, we may not maintain or may weaken our competitive position or may not achieve our goals, or may be viewed
negatively by customers, financial commentators or investors. Acquisitions may disrupt our ongoing operations, divert management from day-to-day responsibilities, increase our
expenses and adversely impact our business, operating results and financial condition. Future acquisitions may reduce our cash available for operations and other uses and could result in an increase
in amortization expense related to identifiable assets acquired, potentially dilutive issuances of equity securities or the incurrence of debt.

We depend on retaining our existing senior management team and recruiting and retaining additional senior managers in order to be successful, and the loss of or failure to
recruit key executives could materially and adversely affect our business.

Our
current and future performance depends, in significant part, upon retaining our existing senior management team, whose knowledge, leadership and technical abilities would be
difficult to replace and

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recruiting
and retaining qualified senior managers. Our success also depends in part upon the ability of our executives to work effectively together and with the rest of our employees to continue to
develop our technologies and services and to manage the operation and potential growth of our business. We also must continue to develop and retain a strong core group of senior executives in order to
realize our goal of growing our business and sustaining profitability. We cannot assure you that we will be successful in our efforts. The unplanned loss of the services of one or more of our
executives could have an adverse effect on our business and profitability.

We are dependent on our allied customers and key industry relationships.

We
maintain important relationships with hardware and software technology leaders. We regard these relationships as more than traditional customer/supplier relationships and believe they
represent an important lead referral source and sales channel for us.

There
can be no assurance that we or our key relationships can continue to be successful in maintaining relationships with customers or that we or our allied customers could find
adequate replacements if needed. The loss of any of these allied customers or key relationships could result in the temporary or permanent cessation of a group of products or solutions and result in
the loss of a portion of our existing and anticipated customer base and related revenue.

We depend on third-party suppliers and manufacturers to manufacture our infrastructure products. If these third parties experience any delay, disruption or quality control
problems in their operations, or cease manufacturing our products, we could lose market share and revenues, and our reputation may be harmed.

A
substantial portion of our products are manufactured, assembled, tested and packaged by third parties. We rely on several suppliers and manufacturers to procure components and various
products that we sell and, in some cases, subcontract engineering work. Some of our products are manufactured by a single manufacturer and, if we were to lose the services of this manufacturer,
finding a suitable replacement could prove particularly difficult. In most cases, we do not have long-term contracts with these third parties. If our suppliers and manufacturers encounter
financial or other business difficulties, if their strategic objectives change, or if they perceive us to no longer be an attractive customer, they may cease to manufacture our products and our
business could be harmed.

The
loss of the services of any of our primary manufacturers or a material change in the terms on which we do business with them could cause a significant disruption in operations and
delays in product shipments, which could adversely impact our cash flow. Qualifying a new manufacturer and commencing volume production is expensive and time consuming.

Our
reliance on third-party suppliers and manufacturers also exposes us to the following risks over which we have limited control:



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If we are unable to provide our third-party suppliers and manufacturers with an accurate and timely forecast of our component and material requirements,
we may experience delays in the manufacturing of our products and the costs of our products may increase.

We
provide our third-party suppliers and manufacturers with forecasts of our demand that they use to determine their material and component requirements. Lead times for ordering
materials and components vary significantly and depend on various factors, such as the specific supplier, contract terms and demand and supply for a component at a given time. Some of our components
require substantial lead times. If our forecasts are less than our actual requirements, or are not delivered in a timely manner, our manufacturers may not be able to manufacture enough products to
meet our needs. If our forecasts are too high, our suppliers and manufacturers may be unable to use all of the components they have purchased on our behalf. Therefore, the cost per unit of producing
products for us may be higher and those costs may be passed through to us, which could reduce our margins or raise our product prices relative to our competitors. Moreover, if they are unable to use
certain components, we may be required to reimburse them for any losses they incur.

Our industry is highly competitive, and competitive pressures from existing and new companies may have a material adverse effect on our business, revenues, growth rates, market
share, and profitability.

Our
industry is highly competitive and is influenced by many factors, including the following:



If
we do not keep pace with product and technology advances, our products and services could be rendered obsolete, which would have a material adverse effect on our competitive position,
revenues and prospects for growth. There is also likely to be continued pricing pressure as competitors attempt to maintain or increase market share.

The
products manufactured and marketed by us and our competitors are becoming more complex. As the technological and functional capabilities of our products increase, these products may
begin to compete with products being offered by companies that have substantially greater financial, technical, marketing and manufacturing resources than we do. We may not be able to compete
successfully against these competitors, and competitive pressures may result in a material adverse effect on our business, revenues, growth rates, market share and profitability.

We
also compete with certain of our key relationships from time to time. If we are unable to maintain our relationships with them, we may be forced to compete directly with them for
customers that we previously had served through our relationships. We may also lose our key relationships as customers. Our

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key
relationships generally have substantially greater financial, technical, marketing and manufacturing resources than we do and may be able to directly offer their customers solutions similar to
those we offer.

If we fail to continue to introduce new products and services that achieve sufficient market acceptance on a timely basis, we will not be able to compete effectively and we
will be unable to increase or maintain revenues and profitability.

Our
future success depends on our ability to develop and introduce new products, services and technology enhancements that achieve sufficient market acceptance. If we are unable to
develop and introduce new products and services that respond to emerging technological trends and customers' critical needs, our profitability and market share may suffer. The process of developing
new technology and related services is complex and uncertain, and if we fail to accurately predict customers' changing needs or emerging technological trends, our business could be harmed. We must
commit resources to developing new products before knowing whether our investments will result in products the market will accept. We may also have difficulty obtaining the capital resources necessary
to develop and introduce new products. We may encounter delays in deploying new or improved products or offering new or improved services. If we expend a significant amount of resources and our
efforts do not lead to the successful introduction of new or improved products or services, there could be a material adverse effect on our business, profitability, financial condition and market
share. We may encounter delays in manufacturing and producing new products and our new products may not be commercially successful.

Demand
for existing products may decrease following the announcement of new or improved products. Further, since products under development are often announced before introduction, these
announcements may cause customers to delay purchases of our products, even if newly introduced, until new or improved versions of those products are available. If customer orders decrease or are
delayed during a product transition, we may experience a decline in revenue. Our profitability might decrease if customers, who may otherwise choose to purchase existing products, instead choose to
purchase lower priced models of new products. Delays or deficiencies in the development, manufacturing, and delivery of, or demand for, our new or improved products could have a negative effect on our
business and profitability.

If we are unsuccessful in expanding our professional services, we may fail to achieve our objectives.

We
have been expanding our professional services and enhancing our technical knowledge in order to broaden our service offerings. To do so, we have been increasing our
in-house talent pool and introducing new models for support and professional services, including through acquisitions of businesses that we believe complement our existing services. We
look to leverage new employees that are skilled in our business to reduce our dependence on outside assistance. Our initiatives have included reducing dependence on outside service providers,
determining specific methodologies and processes for meeting customer needs, conducting in-house training sessions, and leveraging business partnerships to increase professional services
opportunities. These initiatives have required, and will continue to require, significant investment by us, including expenses relating to the recruiting and training of these new employees. There is
no assurance that the expansion will improve the sales and profitability of our professional services.

Any failure in our ability to offer high-quality support and other services could have a material adverse effect on our sales and results of
operations.

Once
our products are integrated within our customers' hardware and software systems, our customers may depend on our support organization to manage those systems and resolve any issues
that may arise. A high level of support is critical for the successful marketing and sale of our solutions. If we do not effectively assist our customers in deploying our products, succeed in helping
our customers quickly resolve post-deployment issues, and provide effective ongoing support, our ability to sell our solutions to existing customers could be adversely affected, and our
reputation with potential customers could be harmed. In addition, as we expand our operations internationally, our support organization will face

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additional
challenges, including those associated with delivering support, training and documentation in languages other than English. Our failure to maintain high-quality support and
services, or to adequately assist our key relationships in providing high-quality support and services, could result in customers choosing to use our competitors' products and services
instead of ours.

The success of our business depends on the continuing development, maintenance and operation of our information technology systems. If we fail to maintain and upgrade our
information technology systems to meet the demands of our customers and protect our information technology systems against risks that we cannot control, our business may be adversely
affected.

We
compete for customers based in part on the flexibility and sophistication of our information technology systems. The failure of the hardware or software that supports these systems,
the loss of data contained in the systems or the inability to access or interact with our website or connect with our customers electronically, could significantly disrupt our operations, prevent
customers from placing orders with us or cause us to lose customers. Although we have redundant systems at a separate location to back up our primary application systems, there can be no assurance
that these redundant systems will operate properly if and when required. If our information technology systems are unable to handle additional volume as our business and scope of professional services
grows, our service levels and operating efficiency will likely decline. In addition, we expect that our customers will continue to demand increasingly sophisticated information technology systems from
us. If we fail to hire or retain qualified persons to implement, maintain and protect our information technology systems, or if we fail to upgrade or replace these systems to handle increased volumes
and levels of complexity and meet the increased demands of our customers, our business and profitability may be adversely affected.

Our
information technology systems are dependent upon global communications providers, web browsers, telephone systems and other aspects of Internet infrastructure which are vulnerable
to a variety of threats, including computer viruses and natural disasters. There can be no guarantee that the steps we have taken to protect against those threats will be effective. Any disruption to
or infiltration of our information technology systems could significantly harm our business and profitability.

If we are unable to protect our intellectual property rights or if third parties assert we are in violation of their intellectual property rights, we could be prevented from
selling our products, the time and attention of management could be diverted from operating our business and our ability to attract new customers and retain current customers could be hampered, any of
which could have a material adverse effect on our business, financial condition and results of operations.

We
have 19 issued patents in the U.S. and four foreign patents issued related to wearable computers and RFID technology that manages medication delivery and administration. We also have
15 patent applications pending with the U.S. Patent and Trademark Office and five foreign patent applications related to medication delivery and administration and a proprietary power solution
specifically designed for mobile workstations, a system and method for live interactive distance learning, and related mobile wireless computer systems. The patents for which we have received a final
issuance have remaining legal lives that vary from 4 to 16 years.

We
have also developed other proprietary solutions, including form-factor PC technologies designed specifically for low power consumption, handheld and kiosk point of sale
devices and several customized software applications. We seek to protect our proprietary information and technology through licensing agreements, third-party nondisclosure agreements and other
contractual provisions, as well as through patent, trademark, copyright and trade secret laws in the U.S. and similar laws in other countries. There can be no assurance that these protections will be
available in all cases or will be adequate to prevent our competitors from copying, reverse engineering or otherwise obtaining and using our technology, proprietary rights or products.

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There
can be no assurance that our competitors will not independently develop technologies that are substantially equivalent or superior to our technology or design around our
proprietary rights. In each case, our ability to compete and to receive licensing revenues could be significantly impaired. To prevent substantial unauthorized use of our intellectual property rights,
it may be necessary to prosecute actions for infringement and/or misappropriation of our proprietary rights against third parties. Any such action could result in significant costs and diversion of
our resources and management's attention, and there can be no assurance that we will be successful in any such action. In addition, third parties may seek to challenge, invalidate or circumvent our
patents, trademarks, copyrights and trade secrets, or applications for any of the foregoing. Furthermore, the laws of certain countries in which our products are or may be licensed do not protect our
proprietary rights to the same extent as the laws of the U.S.

Third
parties may assert claims of infringement of intellectual property rights against us or against our partners for which we may be liable under certain indemnification arrangements.
The failure to obtain
a license on commercially reasonable terms or the entry of an injunction that impairs our ability to market certain products or services could have a material adverse effect on our business,
reputation, profitability or financial condition. Any litigation regarding patent and other intellectual property rights could have a material adverse effect on our business and our ability to
compete.

We
may also be subject to claims from customers for indemnification. Any resulting litigation, regardless of its resolution, could result in substantial costs and diversion of resources.
If it were determined that our products infringe upon the intellectual property rights of others, we would need to obtain licenses from these parties or reengineer our products in order to avoid
infringement. We might not be able to obtain the necessary licenses on acceptable terms or at all, or to reengineer our products successfully. Moreover, if we are sued for infringement and lose the
suit, we could be required to pay substantial damages or be enjoined from licensing or using the infringing products or technology, or both. Any of these events could cause us to incur significant
costs and prevent us from selling our products and could have material adverse effect on our business and our ability to compete.

We rely upon third parties for technology that is critical to our products, and if we are unable to continue to use this technology and future technology our ability to offer
competitive products could be harmed and our costs of production could increase.

We
obtain non-exclusive software license rights to technologies from third parties that are incorporated into and necessary for the operation and functionality of certain of
our products. Because the intellectual property for which we have obtained licenses is available from third parties, barriers to entry for our competitors may be lower than if we owned exclusive
rights to these technologies. On the other hand, if a competitor enters into an exclusive arrangement with any of our third-party technology providers, our ability to develop and sell products
containing that technology could be severely limited. Our success depends in part on our continued ability to have access to these technologies on commercially reasonable terms. If we do not continue
to hold or obtain licenses to use necessary technologies, we may be forced to acquire or develop alternative technology that may be of lower quality or performance standards. This could limit and
delay our ability to offer competitive products and increase our costs of production. As a result, our profitability and market share could be harmed.

Our products are complex and may contain undetected and unexpected defects, errors or failures.

Substantial
product defects could result in product recalls, repairs or an increased amount of product returns, loss of market acceptance and damage to our reputation, which in turn
could increase our costs, cause us to lose sales and have a material adverse effect on our profitability. Product defects might also result in claims against us by our customers or others. In
addition, the occurrence of any defects or errors in these products could result in cancellation of orders, difficulty in collecting accounts receivable, increased service and warranty costs in excess
of our estimates, diversion of resources, and increased insurance costs and other losses to our business or to end-users.

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Incompatibilities,
defects or bugs in our products may not be detected until our customers begin to install the products or later. We may need to modify the design of our new or improved
products if they have incompatibilities, defects or bugs, which could result in significant expenditures, delays in product purchases or canceled orders.

Because we often sell our products on a purchase order basis, we are subject to uncertainties and variability in demand from our customers.

We
sell our mobile workstations and other devices on a purchase order basis rather than pursuant to long-term contracts or contracts with minimum purchase requirements.
Consequently, the level and timing of our sales are subject to variations in demand from our customers. Orders can be cancelled, reduced or delayed due to customer budget cycles, the introduction or
anticipated introduction of new products or technologies or general economic conditions. Generally, sales are sequentially down in the first quarter from the fourth quarter, higher in the second
quarter, flat or slightly higher or lower in the third quarter, and strongest in the fourth quarter. If we are unable to anticipate and respond to the demands of our customers, our business, financial
position and operating results may be adversely affected.

Our products are subject to certain government regulations and noncompliance with, or a change in, those regulations could have a material adverse effect on our business,
financial condition, and results of operations.

Our
products are subject to regulation by federal, state and local agencies in the U.S. and agencies in certain foreign countries where our products are manufactured or sold. There can
be no assurance that we will be able to maintain compliance with these regulations, particularly if they were to change. Regulatory changes may require us to make modifications to certain of our
products in order for us to continue to be able to manufacture and market our products, which could result in unanticipated costs and delays. Our failure to comply with these regulations, or delays
resulting from modifications in order to come into compliance, could have a material adverse effect on our business, financial condition and results of operations.

Our growth objectives may depend on our ability to manage successfully potential international expansion.

We
intend to expand our geographic presence to non-U.S. markets, including Europe, the Middle East, Asia, and other emerging centers of healthcare and commercial activity.
This expansion will require significant management attention and financial resources. We currently have limited experience in marketing and distributing our products internationally and in developing
versions of products that comply with local standards and languages. We may also not be able to maintain or increase international market demand for our products. International operations are subject
to other inherent risks, including foreign government regulation of technology or unexpected changes in regulatory and customs requirements, difficulty and delays in accounts receivable collection,
difficulties and costs of staffing and managing foreign operations, reduced protection for intellectual property rights, foreign currency exchange rate fluctuations, and tax consequences.

Armed hostilities, terrorism, natural disasters, or public health issues could harm our business.

Armed
hostilities, terrorism, natural disasters, or public health issues, whether in the U.S. or abroad, could cause damage or disruption to us, our suppliers or customers, or could
create political or economic instability, any of which could harm our business. Any such events could, among other things, cause further instability in financial markets and could directly, or
indirectly through reduced demand, negatively affect our facilities and operations or those of our customers or suppliers. If our customers experience any disruptions in the solutions that we provide
to them as a result of any such events, we may not be successful in alleviating the disruptions, particularly if many customers are affected by any of these events.

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Our directors and executive officers beneficially own a substantial number of shares of our common stock, which give them significant control over certain major
decisions.

As
of March 31, 2009, our directors and executive officers beneficially own, in the aggregate, approximately 48.5% of our outstanding common stock. The interests of these
stockholders may differ from the interests of other stockholders. As a result of their significant ownership, these stockholders will have significant control over all corporate actions requiring
stockholder approval, irrespective of how our other stockholders may vote, including the following actions:



The
stock ownership of our directors and executive officers may discourage a potential acquiror from making a tender offer or otherwise attempting to obtain control of us, which in turn
could reduce our stock price or prevent our stockholders from realizing a premium over the market price of our stock.

Risks Relating to our Common Stock

Our stock may be delisted from the NASDAQ Capital Market if the closing bid price for our common stock is not maintained at $1.00 per share or higher.

Our
common stock is listed on the NASDAQ Capital Market ("NASDAQ"), which imposes, among other requirements, a minimum bid requirement. The price of our common stock must trade at or
above $1.00 to comply with NASDAQ's minimum bid requirement for continued listing. Our common stock has been trading below $1.00 per since October 28, 2008. On October 16, 2008, NASDAQ
announced the immediate suspension of its enforcement of the rules requiring a minimum $1.00 closing bid price and that it will not take any action to delist any security that fails to comply with the
minimum $1.00 closing bid price requirement until January 19, 2009 and, on March 23, 2009, NASDAQ extended the rule suspension until July 19, 2009. Consequently, for as long as
NASDAQ's rule suspension remains in effect, NASDAQ will not delist our stock if the closing bid price for our common stock remains below $1.00 per share during the rule suspension period. If the
closing bid price of our common stock continues to fail to meet NASDAQ's minimum closing bid price requirement at any time on or after July 20, 2009, or if we otherwise fail to meet all other
applicable NASDAQ requirements, NASDAQ may make a determination to delist our common stock. Any such delisting could adversely affect the market liquidity of our common stock and the market price of
our common stock could decrease and could also adversely affect our ability to obtain financing for the continuation
of our operations and/or result in the loss of confidence by investors, customers, suppliers and employees.

Applicable SEC rules governing the trading of "penny stocks" may limit the liquidity of our common stock which may affect its trading price.

Our
common stock may be considered a "penny stock" and be subject to SEC rules and regulations that impose limitations upon the manner in which our shares may be publicly traded. These
regulations require the delivery, before any transaction involving a penny stock, of a disclosure schedule explaining the penny stock market and the associated risks. Under these regulations, certain
brokers who recommend penny stocks to persons other than established customers or certain accredited investors must make a special written suitability determination regarding the purchaser and receive
the purchaser's written agreement to a transaction before a sale. These regulations could have the effect of limiting the trading activity of our common stock and reducing the liquidity of an
investment in our common stock. Therefore, our stockholders may find it difficult to obtain accurate quotations of our common stock and/or to sell their shares.

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The market price of our common stock may continue to be highly volatile and continue to be subject to wide fluctuations.

The
market price of our common stock is likely to be highly volatile and could be subject to wide fluctuations in response to a number of factors that are beyond our control,
including:



If a substantial number of our shares of common stock are sold in a short period of time, the market price of our shares of common stock could decline
significantly.

Although
our common stock is listed on NASDAQ, it does not have a high average trading volume. For example, throughout 2008 our average daily trading volume was approximately 17,000
shares. Our low trading volume may continue to cause the price of our common stock to be volatile. The last reported sale price of our common stock on NASDAQ on March 26, 2009 was $0.49.

A
decline in the price of shares of our common stock might impede our ability to raise capital through the issuance of additional shares of our common stock or other equity securities.

There may be a limited public market for our securities.

Although
we are listed on NASDAQ, there can be no assurance that the trading of our common stock will be sustained. If our common stock fails to qualify for continued listing on NASDAQ
or for listing on another registered stock exchange, trading, if any, in our common stock would be conducted on the OTC Bulletin Board or in what are commonly referred to as "pink sheets." As a
result, our stockholders may find it more difficult to dispose of, or to obtain accurate quotations as to the market value of our common stock, and our common stock would become substantially less
attractive for margin loans, for investment by financial institutions, as consideration in future capital raising transactions or other purposes. An active public market for shares of our common stock
may not develop, or if one should develop, it may not be sustained. Therefore, our stockholders may not be able to find purchasers for their shares of our common stock.

We do not expect to pay dividends for the foreseeable future.

We
currently intend to retain any future earnings to support the development and expansion of our business and do not anticipate paying cash dividends in the foreseeable future. Any
payment of future dividends will be at the discretion of our board of directors after taking into account various factors, including but not limited to our financial condition, operating results, cash
needs, growth plans and the terms of any credit agreements that we may be a party to at the time. Our loan and security agreement with Hercules Technology Growth Capital, Inc. currently
restricts our ability to pay dividends on our common stock. Accordingly, our stockholders must rely on sales of their common stock after price appreciation, which may never occur, as the only way to
make a positive return on their investment. Investors seeking cash dividends should not purchase our common stock.

Failure to achieve and maintain effective internal controls could have a material adverse effect on our business, operating results and stock price.

Effective
internal controls, particularly those related to revenue recognition, are necessary for us to produce reliable financial reports and are important in helping prevent financial
fraud. If we are unable to achieve and maintain adequate internal controls, our business and operating results could be harmed. We

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completed
our second year of documentation and testing of our internal control procedures to satisfy the requirements of Section 404 of the Sarbanes-Oxley Act of 2002 and the related rules of
the Securities and Exchange Commission, which require, among other things, our management to assess annually the effectiveness of our internal controls over financial reporting, beginning with our
annual report on Form 10-K for the year ended December 31, 2009, and our independent registered public accounting firm to issue a report on the effectiveness of our internal
controls. If our management or our registered public accounting firm were to conclude in their 2009 reports that our internal control over financial reporting was inadequate, our stockholders could
lose confidence in our reported financial information and the trading price of our stock could drop significantly.

Provisions in our organizational documents and under Delaware law may delay or prevent attempts by our stockholders to change our management and hinder efforts to acquire a
controlling interest in us.

Certain
provisions of our bylaws are intended to strengthen our board of director's position in the event of a hostile takeover attempt. These provisions have the effect of providing our
board of directors with the sole power to fill vacancies on our board of directors and providing that stockholders may only call a special meeting by the request, in writing, of stockholders owning
individually or together ten percent or more of our entire capital stock outstanding and entitled to vote.

In
addition, Section 203 of the Delaware General Corporation Law prohibits a publicly held Delaware corporation from engaging in a business combination with an interested
stockholder, generally a person which together with its affiliates owns or within the last three years has owned 15% of our voting stock, for a period of three years after the date of the transaction
in which the person became an interested stockholder, unless the business combination is approved in a prescribed manner. Accordingly, Section 203 may discourage, delay or prevent a change in
control of our company.

Item 1B.    Unresolved Staff Comments

Not applicable.

Item 2.    Properties

Our headquarters are located in Hatboro, Pennsylvania in approximately 40,000 square feet of leased space. This facility accommodates
our executive office, customer support, warehouse, development and shipping operations. On October 8, 2004, we entered into a lease agreement to rent approximately 25,000 square feet. The
initial annual base rent under the lease was approximately $167 and is increased 2% annually effective on the annual anniversary of the lease commencement date each year. The initial term of the lease
agreement is 85 months, with an option to extend the lease term for up to one additional period of five years. On May 1, 2007, we entered into a sub-lease agreement to rent
approximately 15,000 square feet of additional space. The initial annual base rent under the sub-lease is approximately $178, and is increased 4% annually effective on the annual
anniversary of the sub-lease commencement date each year. The sub-lease agreement expires on December 29, 2009. We are also responsible for payments of common area
operating expenses for the premises under the lease and sub-lease agreement.

On
May 10, 2007, we entered into a sub-lease agreement with AMTSystems, Inc., and share access to approximately 8,000 square feet in an office complex in Cheshire,
Connecticut. The monthly rent is fixed at $2,500 for the term of the sub-lease, which expires on September 30, 2009.

Item 3.    Legal Proceedings

We are not a party to any legal proceedings, the adverse outcome of which, individually or in the aggregate, management believes would
have a material adverse effect on our business, financial condition or results of operations.

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

None.

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PART II

Item 5.    Market for the Company's Common Equity, Related Stockholder Matters, and Issuer Purchases of Equity Securities

Market Information

Our common stock is listed on the NASDAQ Capital Market under the symbol "IFLG." The table below sets forth the high and low sale
prices of our common stock during 2007 and 2008:

Quarter EndedYear ended December 31, 2008

March 31

June 30

September 30

December 31Price range of common shares:High

$
2.20

$
2.75

$
2.25

$
1.48Low


1.59


1.50


1.30


0.48




Quarter EndedYear ended December 31, 2007

March 31

June 30

September 30

December 31Price range of common shares:High

$
5.17

$
4.11

$
4.20

$
3.70Low


3.45


3.35


3.60


1.91


Our
common stock commenced trading on the NASDAQ Capital Market on September 24, 2007. From the second quarter of 2006 until September 21, 2007, our common stock was quoted
on the Over-the-Counter Bulletin Board. The quotations set forth in the table
above for the period of time when our common stock was quoted on the Over-the-Counter Bulletin Board reflect inter-dealer prices, without retail mark-up,
mark-down or commission and may not necessarily represent actual transactions.

Holders of Common Stock

As of March 26, 2009, we had approximately 256 holders of record of common stock and 25,602,267 shares of common stock
outstanding.

Dividends

We have not paid cash dividends and do not anticipate paying cash dividends in the foreseeable future. The declaration and payment of
dividends is restricted in accordance with covenants related to our loan and security agreement with Hercules Technology Growth Capital, Inc. which we initially entered into in May 2008 and
which expires in May 2012. The restriction on dividends will remain during the term of the loan agreement. We expect to utilize any future earnings to finance our operations. The actual amount of any
dividends that may be paid in the future will be subject to the discretion of our board of directors and will depend on our operations, financial and business requirements and other factors.

Item 6.    Selected Financial Data

The following table presents selected financial data for the last five years of the operation of our business. This information should
be read in conjunction with the Consolidated Financial Statements and Notes thereto in Item 8 and "Management's Discussion and Analysis of Financial Condition and Results of Operations" in
Item 7. The selected financial data for fiscal years 2004, 2005, 2006, 2007 and 2008 have been derived from our financial statements which have been audited by independent registered public
accounting firm. The proforma data is derived from New Age Translation, Inc.'s (the predecessor to InfoLogix, Inc.) unaudited financial statements for the nine month period ended
August 31, 2006, and

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InfoLogix'
audited financial statements for the years ended December 31, 2006, 2007 and 2008. All dollar amounts are presented in thousands except per share data.

Year Ended December 31,2004

2005

2006

2007

2008Consolidated Statement of Operations Data:Net revenues

$
47,087

$
56,399

$
62,113

$
78,774

$
100,716Cost of revenues


35,765


43,532


47,163


58,049


74,176Gross profit


11,322


12,867


14,950


20,725


26,540Operating income (loss)


1,146


1,206


(2,948
)

(4,486
)

(5,703
)Income (loss) before income taxes


864


681


(3,557
)

(4,901
)

(9,749
)Consolidated Pro Forma Data (Unaudited):Provision (benefit) for income taxes(1)


372


313


(1,399
)

(1,712
)

3,435Net income (loss)

$
492

$
368

$
(2,158
)
$
(3,189
)
$
(13,184
)Net income (loss) per share(2)

$
0.02

$
0.02

$
(0.09
)
$
(0.13
)
$
(0.52
)Weighted average shares outstanding


23,596


23,596


23,596


24,173


25,277Other Data:Dividends(3)

$
20

$
170

$
740

$


$





As of December 31,2004

2005

2006

2007

2008Balance Sheet Data:Total assets

$
12,171

$
15,167

$
31,813

$
48,697

$
50,842Long-term debt


921


533


1,325


7,445


16,292Total stockholders' equity


235


745


15,888


18,476


7,478


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

The following discussion and analysis of our financial condition and results of operations is intended to assist you in understanding
our financial condition and results of operations. This discussion and analysis should be read in conjunction with our financial statements and the notes thereto included in Item 8 of this
report. Many of the amounts and percentages presented in this discussion and analysis have been rounded for convenience of presentation, and all dollar amounts are presented in thousands.

Overview

InfoLogix is a provider of enterprise mobility solutions for the healthcare and commercial industries. Our wholly owned operating
subsidiary, InfoLogix Systems Corporation, was formed in 2001. On

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November 29,
2006, InfoLogix Systems Corporation merged with New Age Translation, Inc., a public reporting company, and New Age Translation, Inc. changed its name to
InfoLogix, Inc. and became a holding company for InfoLogix Systems Corporation. Concurrent with the merger, InfoLogix, Inc. completed a private placement of shares of its common stock
that resulted in net proceeds of approximately $15.0 million. For more information with respect to the merger transaction, see Note A to our consolidated financial statements included
elsewhere in this report.

We
provide solutions to our customers by utilizing a combination of products and services, including consulting, application software, mobile managed services, mobile workstations and
devices, and wireless infrastructure. Our solutions are designed to allow the real time usage of data throughout a customer's enterprise in order to enhance workflow, improve customer service,
increase revenue and reduce costs. We sell wireless communication and computing devices, including mobile workstations that connect to a customer's wireless network so that information can be accessed
from any location within the enterprise. We also implement customized software applications and provide RFID technology, a data-exchange method using transponders that store and remotely
send or retrieve information, to enable the transmission and processing of that information between the customer's information system and its wireless communication and computing devices. We also
offer professional services that support and complement a customer's wireless computing systems and
enterprise-wide electronic software systems, including consulting, mobile managed services, training, engineering, technical support, and network monitoring.

Historically,
the sale of mobile workstations and other wireless devices has represented a majority of our net revenues. In the past two years, we have been transitioning our business to
provide more software applications and consulting and professional services. With our new focus on selling software and services, we believe that we can offer more comprehensive enterprise mobility
solutions that provide greater value to our customers and generate higher and more recurring revenue for our business.

We
conduct substantially all of our operations through our wholly-owned subsidiary, InfoLogix Systems Corporation. We own certain patents and patent applications through our wholly-owned
subsidiaries OPT Acquisition LLC, Embedded Technologies, LLC and InfoLogix-DDMS, Inc. We consolidate OPT Acquisition LLC, Embedded Technologies, LLC,
InfoLogix-DDMS, Inc. and InfoLogix Systems Corporation for financial reporting purposes.

We
serve the healthcare and commercial industries, which are experiencing significant challenges, primarily due to deteriorating macroeconomic conditions that have resulted in a
decreased demand for their products and services. As a result of this macroeconomic downturn, some of our customers may face financial challenges in 2009. Some of our customers are facing constraints
on their information technology budgets and are seeking more flexibility in the type of mobility solutions they implement and the timing of their purchases from us. It is unclear when the general
economic climate will improve and when our customers may benefit from improved conditions.

Going Concern

The current deteriorating macroeconomic conditions have had a major impact on the industries we serve. During the second half of 2008,
we experienced reduced sales and compressed margins, particularly in the infrastructure and hardware areas of our business. We have responded to the challenging times by undertaking a series of cost
reduction initiatives, including the elimination of executive bonuses, reduction of employee salaries and reduction in the number of employees. Economic conditions have not improved in 2009 and we
expect 2009 to be an extremely challenging year.

Our
financial statements for the year ended December 31, 2008 have been prepared on a going concern basis, which contemplates continuing operations, securing additional debt or
equity financing, selling certain assets, and realizing assets and liabilities in the ordinary course of business. However, we have incurred significant net losses from 2006 through 2008, including a
net loss of $13,184 for the year

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ended
December 31, 2008, in connection with our transition from being primarily a seller of workstations and devices to becoming a provider of comprehensive enterprise mobility solutions and
the write-off of certain non-realizable assets, and we have an accumulated deficit of $18,288 as of December 31, 2008. During this three-year transition
period, we have hired experienced management and staff to execute our business plans and made strategic acquisitions, and we have also managed our liquidity by incurring $21 million of senior
debt at high interest rates and other associated costs.

As
a result of our capital and debt structure and recurring losses, we have substantial liquidity requirements related to the repayment of our revolving line of credit that comes due on
November 1, 2009 and to earn out payments for past acquisitions. We do not currently expect to generate sufficient cash flow from operations to fund those obligations. As a result, our
independent registered public accounting firm has included an explanatory paragraph which raises substantial doubt as to our ability to continue as a going concern in its report on our consolidated
financial statements for the year ended December 31, 2008.

We
have undertaken a series of actions to reduce costs and are pursuing various initiatives to continue as a going concern and provide for our future success. Our plan to improve our
liquidity contemplates securing additional debt or equity financing, selling certain assets of the business, restructuring our debt and further evaluating our staffing model. We have been in
discussions with several strategic and institutional investors and lenders regarding securing additional financing. Our ability to implement these plans successfully is dependent on many circumstances
outside of our direct control, including general economic conditions and the financial strength of our customers. Any additional financing we are able to secure will likely be subject to a number of
conditions and involve additional costs. Given the current negative conditions in the economy generally and the credit markets in particular, there is uncertainty as to whether we will be able to
generate sufficient liquidity to repay our outstanding debt, to make our earn out payments and to meet working capital needs. If we are unable to improve our liquidity position, we may not be able to
continue as a going concern.

Acquisitions

We are transitioning our business model from being principally a reseller of third party and proprietary hardware to being a fully
integrated software and service solutions business. Acquiring businesses that allow us to improve and expand our software, consulting and other professional services offerings has been central to our
strategic plan. We expect that these acquisitions
will accelerate our growth, increase our overall gross margins, and help complete our transition to becoming a mobile solutions provider.

In
May 2008, we acquired substantially all of the assets of Delta Health Systems, Inc., or Delta. The assets acquired relate to Delta's business of providing strategic cost
management consulting services and web-based management data collection and work-flow analytics to the healthcare industry. This acquisition has enabled us to combine our
existing solutions with higher margin professional services. We believe the Delta acquisition has allowed us to reach further into our healthcare customer organization's to bring critical workflow and
human resource utilization efficiencies that support our mobile solutions. During 2008, we began to realize economies of scale through selling combined solutions to mutual clients of Delta.

In
May 2008, we acquired substantially all of the assets of Aware Interweave, Inc., or Aware. The assets acquired relate to Aware's business of providing mobile software solutions
to a variety of customers including federal government agencies, fortune 1000 companies and healthcare and life science organizations. The acquisition was part of our strategic plan to add
intellectual property and higher-margin services and application software licensing, while allowing us to provide our customers with access to new solutions. The acquisition of Aware has allowed us
the opportunity to enable users of SAP® software and applications to significantly improve their visibility, response time, and revenues by providing access to business-critical
applications without being tied to the office or desktop computer. Through our acquisition

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of
Aware, we have gained a mobile product solution suite that it developed, the Co-Pilot series, which is tailored specifically for users of SAP® software, and also adaptable
to other back-end systems.

In
April 2007, we acquired a portfolio of patents from DDMS Holdings, LLC, a privately held Florida company. The acquired assets consist of five U.S. patents issued, and four
patents issued in foreign countries, along with one published U.S. patent application and five pending foreign patent applications. We believe this acquisition has provided us with protections related
to our on-going sales and development of radio frequency identification, or RFID, technologies and mobility solutions across our business.

In
May 2007, we acquired certain assets of AMT Systems, Inc., or AMT. The acquired assets include the rights to existing relationships with customers, vendors and partners, and
the intellectual property rights behind AMT's clinical and financial mobility solutions for healthcare. The addition of professional staff from AMT has enabled us to enhance our software development
capabilities and overall software portfolio, as well as increase our barcode and RFID technology sales. We have also been able to integrate clinical and financial systems through software applications
that operate on mobile computing devices. As a result of the acquisition, our mobile solutions have been enhanced by supporting materials management, patient charge capture, and patient
identification. Since the third quarter of 2007, we have realized net revenue and gross profit as the result of our re-selling
third-party thermal wristbands and printers to existing and newly acquired healthcare customers, and we believe these sales opportunities will continue to expand as we further develop these offerings.

In
September 2007, we acquired certain assets and assumed certain liabilities of Healthcare Informatics Associates, Inc., or HIA. The acquired assets included the rights to
existing relationships with customers, vendors and partners. All of the employees of HIA were transitioned to us. The employees are a team of senior healthcare informatics consultants who are also
certified healthcare practitioners, and include registered nurses, pharmacists, ancillary clinicians, physician assistants, revenue cycle personnel, administrative systems personnel, technical
interface/report writing personnel, clinical transformation specialists, engineers specializing in return on investment, benefits realization, and work redesign and certified project managers. The
acquisition of HIA has allowed us to expand the products and services we offer to hospitals and other healthcare providers.

For
more information with respect to these transactions, see Notes N, O, P, Q and R to our audited consolidated financial statements included in Item 8 of this report.

Characteristics of our net revenues and expenses

We generate our net revenues through the resale of wireless and mobile hardware and systems, including mobile workstations, computers,
peripherals, and related products under which the revenue is recognized. Sales revenue on product is recognized when both the title and risk of loss transfer to the customer, generally upon shipment.
We also generate revenues from consulting and professional services on either a fixed fee or time and expense basis. Net revenues from our consulting and professional services are recognized on a time
and expense basis at the time the service is delivered and the expenses are incurred. Net revenues from the sale of our proprietary learning technologies and any professional consulting or engineering
services provided on a fixed-fee basis are recognized according to a proportionate method of accounting and is recognized ratably over the contract period based upon actual project hours
as compared to budgeted project hours.

We
also generate net revenues from the sale of extended warranties on wireless and mobile hardware and systems, including mobile workstations, computers, peripherals, and related
products. We record revenues derived from our third-party extended warranty programs on a gross basis and also record the related costs as cost of revenues.

Payments
received in advance of services performed are recorded as deferred revenue. Certain contract payment terms may result in customer billing occurring at a pace slower than revenue
recognition.

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The
resulting revenue recognized in excess of amounts billed and project cost is included in unbilled revenue on our consolidated balance sheet.

Cost
of revenues consists of all expenses that are directly attributable to the costs associated with the purchase, for resale, of wireless and mobile hardware and systems, including
computers, peripherals, and related products. Fluctuations in our gross margin may occur due to changes in our ability to obtain discounts on product sales or our ability to negotiate higher margins
on sales contracts with large customers. Cost of sales also consists of the direct costs associated with those employees or sub-contractors that perform our professional consulting
services on behalf of our customers.

Selling
expenses primarily consist of the salaries, benefits, travel and other costs of our regional and national account sales representatives, sales management and business development
expenses. General and administrative expenses primarily consist of the costs attributable to the support of our operations, such as: costs related to information systems, salaries, expenses and office
space costs for executive management, inside sales and customer support, warehousing, technical support, financial accounting, purchasing, administrative and human resources personnel, insurance,
recruiting fees, legal, accounting and other professional services.

Critical Accounting Estimates and Policies

Our consolidated financial statements are prepared in conformity with accounting principles generally accepted in the United States of
America (GAAP), which requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of net
revenues and expenses during the reporting periods. Critical accounting policies are those that require the application of management's most difficult, subjective, or complex judgments, often because
of the need to make estimates about the effect of matters that are inherently uncertain and that may change in subsequent periods. In preparing the consolidated financial statements, management has
made estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements, and the reported amounts of net revenues and expenses during the
reporting periods. In preparing the financial statements, management has utilized available information, including our past history, industry standards and the current economic environment, among
other factors, in forming its estimates and judgments, giving due consideration to materiality. Actual results may differ from these estimates. In addition, other companies may utilize different
estimates, which may impact the comparability of our results of operations to those of companies in similar businesses. We believe that of our significant accounting policies, the following may
involve a higher degree of judgment and estimation.

Accounts receivable

We grant credit, generally without collateral, to our customers, which are primarily in the healthcare and commercial markets.
Consequently, we are subject to potential customer credit risk related to changes in economic conditions within those markets. However, we believe that our billing and collection policies are adequate
to minimize the potential credit risk.

We
have a policy of reserving for uncollectible accounts based on our best estimate of the amount of probable credit losses in our existing accounts receivable. We periodically review
our accounts receivable to determine whether an allowance is necessary based on an analysis of past due accounts and other factors that may indicate that the realization of an account may be in doubt
including historical experience and current economic and market conditions. Account balances deemed to be uncollectible are charged to the allowance after all means of collection have been exhausted
and the potential for recovery is considered remote.

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Inventory

Inventory is stated at the lower of cost or market. Cost is determined using the first in, first out method.

We
periodically review our inventories and make provisions as necessary for estimated obsolete and slow-moving goods. We mark down inventory in an amount equal to the
difference between cost of inventory and the estimated market value based on assumptions about future demands, selling prices and market conditions. The creation of such provision results in a
write-down of inventory to net realizable value and a charge to cost of revenues.

Impairment of long-lived assets

We assess the potential impairment of long-lived assets whenever events or changes in circumstances indicate that the
carrying value may not be recoverable. An asset's value is impaired if management's estimate of the aggregate future cash flows, undiscounted and without interest charges, to be generated by the asset
are less than the carrying value of the asset. When estimating future cash flows, we consider factors such as expected future operating income and historical trends, as well as the effects of demand
and competition. To the extent impairment has occurred, the loss is measured as the excess of the carrying amount of the asset over the estimated fair value of the asset. Such estimates require the
use of judgment and numerous subjective assumptions, which, if actual experience varies, could result in material differences in the requirements for impairment charges.

Intangible assets

We account for intangible assets in accordance with Statement of Financial Accounting Standards (SFAS) 142, Goodwill and Other Intangible Assets. The costs of successful registrations for patents are amortized over the estimated useful lives of the assets,
which is generally sixteen years, using the straight-line method. The costs of unsuccessful registrations are charged to expense. Acquired technology is recorded at its estimated fair
value at the date of acquisition and amortized over the estimated useful lives of the assets, which averages four years, using the straight-line method. Developed technology is also
amortized using the straight-line method, generally over five years. License fees are amortized over the license period using the straight-line method. Customer lists are
amortized over a period of six to ten years.

Software capitalization

We capitalize the cost of internal use software in accordance with Statement of Position 98-1, Accounting for the Cost of Computer Software Developed or Obtained
for Internal Use("SOP 98-1"). SOP 98-1
provides guidance for the accounting for computer software developed or acquired for internal use, including the requirement to capitalize certain costs and the amortization of these costs. Costs for
preliminary stage projects are expensed as incurred while application stage projects are capitalized. We cease capitalizing costs and commence amortization of the software on a
straight-line basis over the estimated useful life, typically three to five years, when it is ready for its intended use.

We
capitalize certain costs related to the acquisition and development of software to be sold or licensed to our customers. In accordance with SFAS 86, Accounting for the Costs of Compute Software to be Sold, Leased or
Otherwise Marketed, we expense, as incurred, those costs incurred prior to achieving
technological feasibility and capitalize those arising after technological feasibility has been achieved. We amortize the capitalized costs using the straight-line method over the
developed product's estimated economic life. We cease capitalizing costs when the software is ready for general release. Potential impairment is determined by comparing the balance of unamortized
capitalized software costs to the net revenues projected for a capitalized software project. If efforts to sell that software project are terminated, or if the projected net revenues from that
software project drops below a level that is less than the unamortized balance, then an impairment charge would be recognized.

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Revenue recognition

Net revenues are generated through product sales, warranty and maintenance agreements, professional consulting, programming and
engineering services, long-term support services, and educational learning programs. Net revenues from product sales are recognized when both the title and risk of loss transfer to the
customer, generally upon shipment. We generate net revenues from the sale of extended warranties on wireless and mobile hardware and systems, including mobile workstations, computers, peripherals, and
related products. Revenue from the sale of component warranties is recognized upon execution of the warranty agreement. We do not bear associated warranty risk because it has contracted with a third
party to fully assume all risks and obligations.

We
also generate revenue from consulting and other professional services on either a fee-for service or fixed fee basis. Revenue from consulting and other professional
services that is contracted as fee-for-service is recognized in the period in which the services are performed. Direct costs for travel and accommodations are reimbursable in
accordance with the contract terms and are recognized as net revenue in the period the related expense is incurred. Revenue from the sale of proprietary learning technologies and those consulting and
other professional services provided on a fixed-fee basis is recognized according to a proportionate method of revenue recognition and is recognized ratably over the contract period based
upon actual project hours completed compared to total budgeted project hours.

Income taxes

We account for income taxes in accordance with SFAS 109,Accounting for Income
Taxes. Under SFAS 109, deferred tax assets and liabilities are determined based on the differences between the financial statement carrying amounts and the tax bases of
existing assets and liabilities, and are measured at the prevailing enacted tax rates that will be in effect when these differences are settled or realized. SFAS 109 also requires that deferred
tax assets be reduced by a valuation allowance if it is more likely than not that some portion or all of the deferred tax asset will not be realized. In assessing the realizability of deferred tax
assets, we considered whether it was more likely than not that some portion or all of the deferred tax assets will not be realized. The realization of deferred tax assets is dependent upon the
generation of future taxable income during the periods in which temporary differences become deductible. We consider the reversal of deferred tax liabilities, projected future income, and tax planning
strategies in making this assessment. Our evaluation of the realizability of deferred tax assets considers both positive and negative evidence. The weight given to the potential effects of positive
and negative evidence is based on the extent to which it can be objectively verified.

Stock based compensation

We account for share-based payments in accordance with SFAS No. 123(R),Share-Based
Payments(SFAS 123(R)). SFAS 123(R) requires companies to measure compensation cost for all share-based payments at fair value. In accordance with Securities and
Exchange Commission (SEC) Staff Accounting Bulletin (SAB) No. 107, we record share-based compensation within general and administrative expenses to correspond with the same line item as the
cash compensation paid to employees.

Non-employee stock based compensation

The cost of stock based compensation awards issued to non-employees for services are recorded at either the fair value of
the services rendered or the instruments issued in exchange for such services, whichever is more readily determinable, using the measurement date guidelines enumerated in Emerging Issues Task Force
(EITF) 96-18,Accounting for Equity Instruments That Are Issued to Other Than Employees for Acquiring, or in Conjunction with Selling, Goods or
Services.

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Results of Operations

Results of operations expressed as a percentage of net revenues were as follows:

Year Ended December 31,2008

2007

2006Net revenues


100.0
%

100.0
%

100.0
%Cost of revenues


73.6
%

73.7
%

75.9
%Gross profit


26.4
%

26.3
%

24.1
%Selling, general and administrative expenses


32.1
%

32.0
%

28.8
%Operating loss


(5.7)
%

(5.7)
%

(4.7)
%Interest expense


(2.7)
%

(1.1)
%

(1.1)
%Interest income


0.1
%

0.6
%

0.1
%Loss on extinguishment of debt


(1.5)
%




Loss before income tax benefits


(9.7)
%

(6.2)
%

(5.7)
%Income tax benefit


(3.4)
%

2.2
%

2.7
%Net loss


(13.1)
%

(4.0)
%

(3.0)
%


Year ended December 31, 2008 Compared with the Year ended December 31, 2007

Net revenues

Net revenues for the years ended December 31, 2008 and 2007 were as follows:

Year Ended December 31,Amount of
Change

Percentage
Change2008

2007Net revenues:Infrastructure and hardware

$
61,139

$
57,750

$
3,389


5.9
%Professional services


30,243


11,813


18,430


156.0
%Other


9,334


9,211


123


1.3
%Total net revenues

$
100,716

$
78,774

$
21,942


27.9
%


The
increase in net revenues was due primarily to the expansion of our consulting and other professional services across the organization, including revenue contributed as a result of
the acquisitions of the businesses of HIA, Delta and Aware, and an increase in infrastructure and hardware related revenue. The net revenues associated with HIA, Delta and Aware totaled $20,395 for
the year ended December 31, 2008. The net revenues associated with HIA totaled $3,217 from the date of acquisition through December 31, 2007. The reimbursable expense revenues included
in our professional services revenue totaled $2,412 and $332 for the years ended December 31, 2008 and 2007.

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Cost of revenue

Cost of revenues for the years ended December 31, 2008 and 2007 were as follows:

Year Ended December 31,Amount of
Change

Percentage
Change2008

2007Cost of revenues:Infrastructure and hardware

$
47,819

$
43,414

$
4,405


10.1
%Professional services


19,339


8,780


10,559


120.3
%Other


7,018


5,855


1,163


19.9
%Total cost of revenues

$
74,176

$
58,049

$
16,127


27.8
%


The
increase in our cost of revenues was the result of costs incurred as a result of higher sales of wireless infrastructure, mobile point-of-care workstations
and our expanded consulting and other professional services. The cost of revenues associated with HIA, Delta and Aware totaled $12,290 for the year ended December 31, 2008. The cost of revenues
associated with HIA totaled $1,978 from the date of acquisition through December 31, 2007. The reimbursable expenses included in our professional services cost of revenue totaled $2,412 and
$332 for the years ended December 31, 2008 and 2007.

Gross profit

Gross profit and gross profit percentage for years ended December 31, 2008 and 2007 were as follows:

Year Ended December 31,Amount of
Change

Percentage
Change2008

2007Gross profit:Infrastructure and hardware

$
13,320

$
14,336

$
(1,016
)

(7.1)
%Professional services


10,904


3,033


7,871


259.5
%Other


2,316


3,356


(1,040
)

(31.0)
%Total gross profit

$
26,540

$
20,725

$
5,815


28.1
%Gross profit percentage:Infrastructure and hardware


21.8
%

24.8
%

(3.0)
%

(12.2)
%Professional services


36.1
%

25.7
%

10.4
%

40.4
%Other


24.8
%

36.4
%

(11.6)
%

(31.9)
%Total gross profit percentage


26.4
%

26.3
%

0.1
%

0.4
%


Our
overall gross profit percentage increased slightly. The change in the makeup of our gross profit percentage is the result of increased sales of our more profitable consulting and
other professional services related to our mobile solutions and software implementation services, offset by sales of lower margin infrastructure and third-party hardware. We continue to experience
downward pressure on our gross margin from the sale of infrastructure and third-party hardware. Consistent with our overall strategic plan, we are migrating the business toward an overall greater mix
of consulting and other professional services.

Selling, general and administrative expenses

Our selling, general and administrative expenses were $32,243 for the year ended December 31, 2008, compared with $25,211 for
the year ended December 31, 2007, an increase of $7,032 or 27.9%. Selling expenses were $11,460 for the year ended December 31, 2008, compared with $10,215 for the year ended
December 31, 2007, an increase of $1,245 or 12.2%. The increase in our selling expenses for the comparable periods was primarily attributable to an increase in wages related to the expanded
sales staff

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Table of Contents

hired
during 2007, and sales support related costs attributable to HIA during the year ended December 31, 2008. General and administrative expenses were $17,291 for the year ended
December 31, 2008, compared with $12,500 for the year ended December 31, 2007, an increase of $4,791 or 38.3%. The increase in our general and administrative expenses for the comparable
periods was primarily attributable to an increase in salary expenses related to the addition of key members of our management and professional services staff hired during 2007, which includes staff
from acquisitions; an increase in our marketing campaigns; and an increase in outside services of non-capitalized costs associated with product development. During the year ended
December 31, 2008, we also incurred a loss of $1,340 in connection with the write-down
and disposal of property, equipment and certain intangible assets and non-cash charges for share-based compensation of approximately $1,000. Additionally, we wrote off $200 of previously capitalized
costs incurred in connection with an offering of common stock since we have chosen not to complete the offering.

Interest expense and interest income

Our interest expense, which arises in connection with our credit line and term loan, was $2,735 for the year ended December 31,
2008, compared to approximately $873 for the year ended December 31, 2007, an increase of $1,862 or 213.3%. The increase in interest expense is a result of higher interest costs and greater
amounts outstanding under our asset-based line of credit facility, term loans and notes payable issued in connection with our acquisitions.

Our
interest income was $140 for the year ended December 31, 2008, compared to $458 for the year ended December 31, 2007, a decrease of $318 or 69.4%. The decrease in
interest income is primarily the result of lower average cash and cash equivalents balance during the year ended December 31, 2008 when compared to the same period of 2007.

Depreciation and amortization

Our depreciation and amortization expense increased to $2,533 for the year ended December 31, 2008 from $1,667 for the year
ended December 31, 2007, an increase of $866 or 51.9% as the result of a greater number of demonstration units deployed to our expanded sales force and amortization expense related to our
recent acquisitions of intangible assets from AMTSystems, HIA, Delta and Aware.

Net loss

Our net loss was $13,184 for the year ended December 31, 2008 compared with a net loss of $3,189 for the year ended
December 31, 2007, an increase of $9,995 or 313.4%. Our net loss increased primarily due to additional overhead costs, including recruiting, salary and commissions expenses associated with
hiring experienced sales, administrative and operations personnel to support our organizational growth, write-down and disposal of property, equipment and certain intangible assets,
elimination of the tax benefit and the costs associated with our growth
through acquisitions. In addition, the increase in our net loss is due in part to a nonrecurring extinguishment of debt charge in 2008 of $1,451 related to amending the loan and security agreement
with Hercules during the fourth quarter.

As
of December 31, 2008, we had federal net operating losses ("NOLs") of approximately $11,245 which will be available to offset future taxable income. Our NOLs include losses of
$65 generated by New Age Translation, Inc., the predecessor to InfoLogix, Inc., which are subject to restrictions under Internal Revenue Code Section 382, due to the change in
ownership in that entity. Therefore, we have recorded a valuation allowance against the net operating losses generated by New Age Translation, Inc. During the fourth quarter of 2008, we
recorded a full valuation allowance related to the net operating loss carryforwards and other temporary items as we determined it is more likely than not that we will not be able to use the assets to
reduce future tax liabilities. If not used, the NOLs will expire beginning in the year 2024. Our state NOLs will also be subject to expiration in varying years starting in 2013 through 2027.

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Table of Contents

Year ended December 31, 2007 Compared with the Year ended December 31, 2006

Net Revenues

Year Ended December 31,Amount of
Change

Percentage
Change2007

2006Net revenues:Infrastructure and hardware

$
57,750

$
59,605

$
(1,855
)

(3.1)
%Professional services


11,813


1,182


10,631


899.4
%Other


9,211


1,326


7,885


594.6
%Total net revenues

$
78,774

$
62,113

$
16,661


26.8
%


The
increase in net revenues was due to the continued expansion of sales of our mobile point-of-care solutions and extended warranties in healthcare, an increase
in the resale of wireless hardware, extended warranties and related professional services in our commercial business, and revenues contributed through the acquisitions of the businesses from
AMTSystems, Inc. and Healthcare Informatics Associates, Inc. The reimbursable expense revenues included in our professional services revenue totaled $332 for the year ended
December 31, 2007. We did not have any reimbursable expense revenue during the year ended December 31, 2006.

Cost of Revenues

Year Ended December 31,Amount of
Change

Percentage
Change2007

2006Cost of revenues:Infrastructure and hardware

$
43,414

$
45,573

$
(2,159
)

(4.7)
%Professional services


8,780


116


8,664


7469.0
%Other


5,855


1,474


4,381


297.2
%Total cost of revenues

$
58,049

$
47,163

$
10,886


23.1
%


The
increase in our cost of revenues was the result of costs incurred as a result of higher sales of wireless infrastructure, mobile point-of-care workstations
and our expanded professional services. The cost of revenues associated with the acquisition of HIA totaled $1,978 for the year ended December 31, 2007. The reimbursable expenses included in
our professional services cost of revenue totaled $332 for the year ended December 31, 2007. We did not have any reimbursable expenses during the year ended December 31, 2006.

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Gross profit

Gross profit and gross profit percentages for years ended December 31, 2007 and 2006 were as follows:

Year Ended December 31,Amount of
Change

Percentage
Change2007

2006Gross Profit:Infrastructure and hardware

$
14,336

$
14,032

$
304


2.2
%Professional services


3,033


1,066


1,967


184.5
%Other


3,356


(148
)

3,504


(2,367.6)
%Total gross profit

$
20,725

$
14,950

$
5,775


38.6
%Gross profit percentage:Infrastructure and hardware


24.8
%

23.5
%

1.3
%

5.4
%Professional services


25.7
%

90.2
%

(64.5)
%

(71.5)
%Other


36.4
%

(11.2)
%

47.6
%

(426.4)
%Total gross profit percentage


26.3
%

24.1
%

2.2
%

9.3
%


The
increase in our gross profit percentages is the result of increased sales of our more profitable mobile workstation hardware and consulting services, partially offset by an increase
in sales of lower margin third-party hardware.

Selling, General and Administrative Expenses

Our selling, general and administrative expenses were $25,211 for the year ended December 31, 2007, compared with $17,898 for
the year ended December 31, 2006, an increase of $7,313, or 40.9%. The increase in our selling general and administrative for the comparable periods was primarily attributable to approximately
$3,300 increase in wages, commissions, and travel expenses related to an increase in the number of sales personnel hired in 2007; approximately $500 increase in salaries related to the addition of key
members of our management and professional services staff hired in 2007; an approximate $900 increase in professional fees related to legal and accounting expenses for Sarbanes-Oxley compliance; an
increase of $400 related to one-time expenses for recording certain write-offs at year end; the addition of $700 in administrative expenses in the fourth quarter of 2007 as the
result of the HIA acquisition; a decrease of $1,900 of FAS 123R compensation expenses incurred as the result of recording one-time expenses in 2006 as the result of issuing warrants
to executives related to bonuses due as the result of the reverse merger in 2006 and private placement transactions, warrants issued to certain of our advisors as the result of the reverse merger in
2006, and non-qualified stock options granted to members of our Board of Directors.

Interest Expense and Interest Income

Our net interest expense, which arises in connection with our credit line, term loans and stockholders' loans, and off-set
by interest earned on cash and cash equivalents was $415 for the year ended December 31, 2007, compared to $609 for the year ended December 31, 2006, a decrease of $194 or 31.9%. Net
interest expense is a result of amounts outstanding under our asset-based line of credit facility and term loans, partially offset by interest income as the result of our cash balance from a previous
financing.

Depreciation and Amortization

Our depreciation and amortization expense increased to $1,667 for the year ended December 31, 2007 from $1,320 for the year
ended December 31, 2006, an increase of $347 or 26.3% as the result of a greater

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number
of demonstration units deployed to our expanded sales force, and amortization expense related to our recent acquisitions of intangible assets from AMTSystems and HIA.

Net Loss

Our net loss was $3,189 for the year ended December 31, 2007, compared with net loss of $1,870 for the year ended
December 31, 2006, an increase of approximately $1,319 or 70.5%. Net loss increased primarily due to the increased salary, commission and travel expenses related to expanding our sales force,
and increased salaries as the result of increasing the number and experience level of our management team.

In
the year ended December 31, 2006 and through November 29, 2006, our operating subsidiary InfoLogix Systems Corporation elected to be taxed under the provisions of
Sub-Chapter S of the Internal Revenue Code whereby our individual stockholders reported their share of the corporate income on their personal federal and state income tax returns.
For the year ended December 31, 2007, we distributed $740 to our stockholders for the payment of taxes. As a result of the merger, InfoLogix Systems Corporation Sub-Chapter S
Corporation status was terminated on November 30, 2006. In accordance with SFAS 109, when a company changes its tax status from a nontaxable corporation to a taxable corporation,
deferred tax assets and liabilities are recognized for timing differences at the date that a nontaxable enterprise becomes a taxable enterprise. As a result, we recorded a net deferred tax asset of
$152 with the offset being recorded as an income tax benefit in the statement of operations for the year ended December 31, 2006.

Liquidity and Capital Resources

At December 31, 2008, we had cash and cash equivalents of $3,037, compared to $6,101 at December 31, 2007. Pursuant to a
covenant in a loan and security agreement with one of our lenders, we are required to maintain a minimum cash balance of $2,500. We have used, and plan to use, our unrestricted cash for general
corporate purposes, including working capital as well as acquisitions. We have funded our growth primarily through the private sale of equity securities and through current and long term debt and
working capital. At December 31, 2008, our total liabilities were $43,364 and were comprised mostly of term debt and borrowings outstanding under our credit line, and outstanding accounts
payable. Net cash used in operating activities for the year ended December 31, 2008 was $3,295 primarily the result of the net loss incurred. Net cash used in investing activities was $5,631
for the year ended December 31, 2008, primarily used to acquire the assets of Delta and Aware, to purchase demonstration equipment, office equipment, and third-party software and for loans made
pursuant to certain promissory note agreements entered into with potential acquisition targets. Net cash provided by financing activities was $5,862 for the year ended December 31, 2008,
primarily due to the increased borrowings under our Hercules Technology Loan Agreement described below.

Our
primary current and contingent cash obligations arise under our loan and security agreement with Hercules, our earn out agreements with Delta and HIA, and our note payable to HIA. As
more fully discussed below, we are currently in violation of certain of our financial covenants with respect to our loan and security agreement with Hercules. As a result of these covenant violations
and because our total leverage ratio exceeds 3.00 to 1.00, we currently are not permitted to borrow additional funds under our revolver facility or to make earn out payments under our agreements with
Delta and HIA. Due to our inability to comply with these covenants, we are in discussions with Hercules to amend our loan and security agreement to restructure its terms, including to waive past
violations and to revise the financial covenants and the amortization related to the term loan portion of the facility. While we remain in discussions with Hercules regarding an amendment, we have not
obtained, and there can be no assurance that we will obtain, any such amendment. We are also in discussions with HIA regarding the earn out payment.

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Given
the amount of our current unrestricted cash and cash equivalents, short-term investments and accounts receivable, and assuming we are able to agree to amended terms
with Hercules and HIA, we believe that we will have sufficient liquidity to meet our current capital requirements with respect to our operations. We have substantial liquidity requirements related to
our loan and security agreement with Hercules and our earn out agreements with HIA and Delta. We are currently identifying ways to optimize our capital structure and pursue strategic planning to
continue as a going concern and provide for our future success. Our initiatives include restructuring our debt, and pursuing additional debt and equity capital, one or more strategic transactions, and
further cost control actions. Our continued operations are dependent on our ability to implement those plans successfully. If we fail to do so, we may not be able to continue as a going concern. For a
discussion of our plans with respect to these matters, see "Going Concern."

Line of Credit and Term Loan

Hercules
Technology Loan Agreement

On
May 1, 2008, we entered into a loan and security agreement ("Loan and Security Agreement") with Hercules Technology Growth Capital, Inc. ("Hercules"). On
November 19, 2008, we entered into an amendment to the Loan and Security Agreement. Among other things, the amendment reduced the maximum commitment of the revolving credit facility, eliminated
the incremental term loan facility of $500, increased the interest rates on outstanding borrowings and amended certain financial covenants. The description of the revolving credit facility and term
loan facilities set forth below incorporates the new terms of the Loan and Security Agreement after giving effect to the amendment.

The
Loan and Security Agreement provides us with a revolving credit facility with a maximum commitment of up to $9,000 and a term loan facility of up to $12,000, subject to certain
limitations on the revolving line of credit. The proceeds of the loans were used, in part, to refinance our indebtedness owing to Sovereign Bank under a loan and security agreement that was entered
into in March 2006 and terminated on May 2, 2008. Borrowings under the agreement may be used for permitted acquisitions and for general corporate and working capital purposes. At
December 31, 2008, we had $12,000 of indebtedness outstanding under the Hercules term loan and $9,000 outstanding under the revolving credit facility.

The
amount that is available to be borrowed under the revolving credit facility is limited to the lesser of the maximum availability at such time and 85% of our eligible accounts.
Eligible accounts, as defined in the loan agreement, exclude certain account criteria that Hercules considers risky. Until such
time as our three-month consolidated EBITDA exceeds $1,500, the borrowings under the revolving credit facility may not exceed 85% of our eligible accounts minus $2,500.

The
term loan bears interest at an annual rate equal to the greater of 13.25% or the prime rate plus 8.75%, plus an additional 1.75% of interest that will be paid in kind and added to
the principal amount of the term loan. The interest rate for the revolving credit facility is the greater of 11.25% or the prime rate plus 6.75%. The interest rate on outstanding borrowings under the
revolving credit facility and the term loan will increase by 1% on February 15, 2009 and by an additional 1% on May 15, 2009 unless prior to those dates we have executed a definitive
agreement to sell or merge the Company or we have raised $5,000 of additional equity or subordinated debt on terms acceptable to Hercules. We cannot guarantee that we can execute such an agreement of
sale or merger or raise additional equity or subordinated debt by those dates.

Interest
is payable on the first business day of each month. In the event that any payment is not timely made, a late fee equal to 5% of the past due amount is payable on the demand of
Hercules. Upon the occurrence and during the continuance of an event of default, all amounts then owing to Hercules under the agreement and the other loan documents will bear interest at the then
current rate plus 3%.

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The
term loan matures on May 1, 2012. The term loan payments are interest-only for the first nine months and then must be repaid monthly based on the following
principal repayment schedule thereafter: February 2, 2009 to May 1, 20095%; June 1, 2009 to May 1, 201015%; June 1, 2010 to May 1,
201125% and June 1, 2011 to the maturity date55%. In addition, we are required to apply 25% of its excess cash flow, as defined by the agreement, toward prepayments of
the term loan. Voluntary prepayments of the term loan are subject to a prepayment charge equal to a percentage of the term loan being prepaid. The revolving loans mature on November 1, 2009.
Upon the earliest to occur of (i) demand from Hercules at any time between November 1, 2009 and May 1, 2012, (ii) the acceleration of our obligations under the agreement,
(iii) the term loan maturity date, and (iv) prepayment in full of our obligations under the agreement, we will be required to pay to Hercules an amount equal to the greater, as of such
date of determination, of (x) $900, and (y) an amount equal to 3.0% of the amount by which our market capitalization exceeds $50,000. Our obligations under the agreement are secured by
all of its personal property, including all of the equity interests in its subsidiaries.

The
agreement contains various affirmative and negative covenants, including covenants that require us to maintain a minimum cash balance, restrict our ability to incur indebtedness,
make investments, make payments in respect of our capital stock, including dividends and repurchases of common stock, sell or license our assets, and engage in acquisitions without the prior
satisfaction of certain conditions. The agreement also requires us to maintain a minimum consolidated EBITDA measured on a trailing three month basis as of the last day of each month during the period
from October 2008 through December
2010, a minimum consolidated EBITDA measured on a rolling four quarter basis as of the last day of each quarter commencing with the quarter ending March 31, 2009, a maximum leverage ratio
measured as of the last day of each month during the period from December 2009 through December 2010 and a maximum leverage ratio measured as of the end of any fiscal quarter. The amended monthly
minimum EBITDA test is as follows:

The
amended monthly minimum EBITDA test is follows:

Period Ending

Consolidated
Adjusted
EBITDADecember 31, 2008 to April 30, 2009

$
100,000May 31, 2009 to July 31, 2009


250,000August 31, 2009


500,000September 30, 2009


1,000,000October 31, 2009 and November 30, 2009


2,500,000For each Three Month Measurement Period ending during any fiscal month commencing with the month ending on December 31, 2009 to and including the
month ending April 30, 2012


3,000,000


The
first monthly maximum leverage ratio test is as of December 31, 2009, at which time it may not exceed 3.00 to 1.00.

Upon
an event of default under the agreement Hercules may opt to accelerate and demand payment of all or any part of our obligations under the agreement.

As
of December 31, 2008, we were not in compliance with the minimum adjusted EBITDA required under our loan and security agreement and we were not in compliance with the minimum
consolidated EBITDA for the three-month periods ended January 31, and February 28, 2009. As a result of the covenant violation, we currently are not permitted to borrow additional funds
under our revolving facility. Also as a result of the covenant violation and because our total leverage ratio exceeds 3.00 to 1.00, we are prohibited from satisfying our earn out obligations related
to our acquisition of the assets of HIA. Due to our inability to comply with these covenants, we are in discussions with Hercules to amend our loan and security agreement to restructure its terms,
including to including to waive past violations and to revise the

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financial
covenants and the amortization related to the term loan portion of the facility. While we remain in discussions with Hercules regarding an amendment, we have not obtained, and there can be
no assurance that we will obtain, any such amendment. We have incurred and will continue to incur additional costs in connection with our negotiations of an amendment.

Further,
on March 12, 2009, Hercules sent us a letter serving as a notice of events of default and reservation of rights (the "First Notice Letter"). Pursuant to the First Notice
Letter, Hercules informed us that it believed certain events of default existed under our loan and security agreement, namely that, commencing on February 26, 2009 and through March 11,
2009, we had failed to reduce the aggregate Revolving Loan Advances to an amount less than or equal to the lesser of (x) the Borrowing Base or (y) the Maximum Revolving Loan Amount (as
those terms are defined in the loan and security agreement). Hercules further asserted that we failed to promptly notify it of the alleged event of default because we did not inform Hercules of the
overadvance until March 6, 2009. Hercules elected to charge us increased interest and a late fee of approximately $45 for the period of the overadvance. Furthermore, Hercules asserted
additional events of default for our failure to deliver certain unaudited monthly financial statements and securities account control agreements. We have disputed both the amount of the interest and
late fee charged to us for the overadvance as well as the assertion that we have failed to provide the required securities account control agreements, however we have paid the default interest and
fees. In addition, on March 25, 2009, Hercules sent us a second letter notifying us of an event of default for failure to comply with the financial covenant as of January 31, 2009 and
charging us default interest of $78 for the period from February 1, 2009 through March 31, 2009, except the overadvance period for which default rate interest had already been paid,
Hercules also informed us that, for periods subsequent to March 31, 2009, default rate interest will be payable monthly on the same date as regular interest unless Hercules chooses to demand
payment of default interest on another date. Under the terms of our loan agreement with Hercules, late fees are equal to 5% of the past due amount and default rate interest is equal to the applicable
regular interest rate plus 3%.

Hercules
has not chosen to accelerate our obligations under the loan and security agreement, and has expressly not waived any events of default or any of its remedies under the loan and
security agreement. We do not have adequate liquidity to repay all outstanding amounts under the credit facility and payment acceleration would have a material adverse effect on our liquidity,
business, financial condition and results of operations.

Under
the terms of the loan and security agreement, we are not permitted to pay any amounts owing under the earn out agreements that we entered into in connection with our acquisitions
of HIA or Delta if our total leverage after giving effect to such payment is greater than 3.00 to 1.00. We are currently seeking the consent to these payment restrictions from the counterparties to
these earn out agreements. There can be no assurance that we will be able to obtain these consents on terms favorable to us or at all.

We
entered into an earn out agreement (the "Earn Out Agreement") with HIA pursuant to which HIA is eligible to earn additional consideration in respect of the two years (each year, an
"Earn Out Period") after the closing of the transaction. We entered into an amendment to the Earn Out Agreement in August 2008 that extended the first Earn Out Period from twelve months to fifteen
months ending December 31, 2008, and amended certain financial calculations used to determine our earn out liability. Based on satisfaction of certain milestones described in the Earn Out
Agreement, we recorded an adjustment of $1,958 to the purchase price as an increase to goodwill, which reflects the amount that HIA earned under the earn out for the first year following closing and
is also the maximum amount HIA could have earned.

Due
to the restrictions in our loan and security agreement and due to our lack of available cash flow, we are prohibited from making the earn out payment to HIA that would otherwise be
currently due and payable. We are currently in discussions with HIA regarding this payment.

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Significant Contractual Obligations

As of December 31, 2008, our significant contractual obligations were as follows:

Payments Due by PeriodTotal

Less Than
1 Year

1 - 3 Years

3 - 5 Years

More Than
5 YearsLong-term debt obligations

$
16,292

$
12,077

$
4,074

$
141

$
Capital lease obligations


272


86


115


71


Operating lease obligations


1,317


628


689





Vendor obligations


7,500


1,500


6,000








Inflation

To date, the effects of inflation on our financial results have not been significant; however, we cannot be certain that inflation will
not affect us materially in the future.

Off Balance Sheet Arrangements

We do not currently have any off-balance sheet arrangements.

New Accounting Standards

Several new accounting standards have been issued and are being evaluated. None of these standards are expected to have a material
impact on our financial position, results of operations, or liquidity.

In
September 2006, the FASB issued Statement of Financial Accounting Standards No. 157,Fair Value Measurements(SFAS 157),
which defines fair value, establishes a framework for measuring fair value and expands disclosures about fair value measurements. In February 2008, the FASB issued FASB Staff Position (FSP)
157-2 which delays the effective date of SFAS 157 for one year, for all nonfinancial assets and nonfinancial liabilities, except those that are recognized or disclosed at fair value
in the financial statements on a recurring basis (at least annually). SFAS 157 and FSP 157-2 are effective for financial statements issued for fiscal years beginning after
November 15, 2007. We elected a partial deferral of SFAS 157 under the provisions of FSP 157-2 related to the measurement of fair value used when evaluating goodwill, other
intangible assets and other long-lived assets for impairment. The impact of partially adopting SFAS 157 effective January 1, 2008 did not have a material impact on our
financial statements. We do not presently have any assets or liabilities that are to be measured at their fair value on either a recurring or nonrecurring basis.

In
December 2007, the SEC issued SAB No. 110,Share-Based Payment(SAB 110). SAB 110 establishes the continued use of
the simplified method for estimating the expected term of equity based compensation. The simplified method was intended to be eliminated for any equity based compensation arrangements granted after
December 31, 2007. SAB 110 was issued to help companies that may not have adequate exercise history to estimate expected terms for future grants. We do not expect the adoption of
SAB 110 to have a material effect on our consolidated financial statements.

In
December 2007, FASB issued SFAS No. 141(R)Business Combinations(SFAS 141(R)). This Statement replaces the original FASB
Statement No. 141. This Statement retains the fundamental requirements in Statement 141 that the acquisition method of accounting (which Statement 141 called the purchase method) be used for all
business combinations and for an acquirer to be identified for each business combination. The objective of this
SFAS 141(R) is to improve the relevance, and comparability of the information that a reporting entity provides in its financial reports about a business combination and its effects. To
accomplish that, SFAS 141(R) establishes principles and requirements for how the acquirer recognizes and measures in its financial statements the identifiable assets acquired, the liabilities
assumed, and any non-controlling interest in the acquiree, recognizes and measures the goodwill acquired in the

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business
combination or a gain from a bargain purchase and determines what information to disclose to enable users of the financial statements to evaluate the nature and financial effects of the
business combination. This Statement applies prospectively to business combinations for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or
after December 15, 2008 and may not be applied before that date.

In
December 2007, FASB issued SFAS No. 160Noncontrolling Interests in Consolidated Financial Statementsan amendment of ARB
No. 51(SFAS 160). This Statement amends the original Accounting Review Board (ARB) No. 51 "Consolidated Financial Statements" to establish accounting and
reporting standards for the noncontrolling interest in a subsidiary and for the deconsolidation of a subsidiary. It clarifies that a noncontrolling interest in a subsidiary is an ownership interest in
the consolidated entity that should be reported as equity in the consolidated financial statements. This Statement is effective for fiscal years and interim periods beginning on or after
December 15, 2008 and may not be applied before that date. We do not expect the adoption of SFAS 160 to have a material effect on our consolidated financial statements.

In
March 2008, the FASB issued SFAS No. 161,Disclosures about Derivative Instruments and Hedging Activities(SFAS 161).
SFAS 161 requires enhanced disclosure about an entity's derivative and hedging activities. The objective of the guidance is to provide users of financial statements with an enhanced
understanding of how and why an entity uses derivative instruments: how an entity accounts for derivative instruments and related hedged items and how derivative instruments and related hedged items
affect an entity's financial position, financial performance, and cash flows. SFAS 161 is effective for fiscal years beginning after November 15, 2008. We do not expect the adoption of
SFAS 161 to have a material effect on our consolidated financial statement disclosure.

In
May 2008, the FASB issued SFAS No. 162,The Hierarchy of Generally Accepted Accounting Principles(SFAS 162).
SFAS 162 identifies the sources of accounting principles and the framework for selecting the principles to be used in the preparation of financial statements of nongovernmental entities that
are presented in conformity with GAAP. SFAS 162 is effective 60 days following the SEC's approval of the Public Company Accounting Oversight Board amendments to AU Section 411, The Meaning of Present Fairly in
Conformity With Generally Accepted Accounting Principles.We do not expect the adoption of SFAS 162 to have a
material effect on our consolidated financial statements.

In
June 2008, the FASB ratified EITF Issue No. 07-5, "Determining Whether an Instrument (or an Embedded Feature) is indexed to an Entity's Own Stock"
(EITF 07-5), which supersedes EITF Issue No. 01-6, "The Meaning of 'Indexed to a Company's Own Stock"'. SFAS No. 133 specifies that a contract issued or
held by a company that is both indexed to its own stock and classified in stockholders' equity is not considered a derivative instrument for purposes of applying SFAS No. 133.
EITF 07-5 provides guidance for applying the requirements of SFAS No. 133, requiring that both an instrument's contingent exercise provisions and its settlement provisions be
evaluated to determine whether the instrument (or embedded feature) is indexed solely to an entity's own stock. EITF 07-5 will be effective for any outstanding or new arrangements
as of January 1, 2009. We have yet to complete its analysis of the impact of adoption and application of this standard.

Item 7A.    Quantitative and Qualitative Disclosures About Market Risk

Not required.

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Item 8.    Financial Statements and Supplementary Data

INFOLOGIX, INC.

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS



Reports of Independent Registered Public Accounting Firms

52Consolidated Balance Sheets as of December 31, 2008 and 2007

54Consolidated Statements of Operations for the Years Ended December 31, 2008, 2007 and
2006

55Consolidated Statements of Stockholders' Equity for the Years Ended December 31, 2008, 2007 and
2006

56Consolidated Statements of Cash Flows for the Years Ended December 31, 2008, 2007 and
2006

57Notes to Consolidated Financial Statements

58


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Report of Independent Registered Public Accounting Firm

To
the Board of Directors and Stockholders
InfoLogix, Inc.

We
have audited the accompanying consolidated balance sheets of InfoLogix, Inc. and subsidiaries as of December 31, 2008 and 2007, and the related consolidated statements
of operations, stockholders' equity and cash flows for the years then ended. Our audits also included the financial statement
schedule of InfoLogix, Inc. listed in Item 15(a). These financial statements and financial statement schedule are the responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements based on our audits.

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

In
our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of InfoLogix, Inc. and subsidiaries as of
December 31, 2008 and 2007, and the results of their operations and their cash flows for the years then ended, in conformity with U.S. generally accepted accounting principles. Also, in our
opinion, the related financial statement schedule, when considered in relation to the basic consolidated financial statements taken as a whole, presents fairly in all material respects the information
set forth therein.

We
were not engaged to examine management's assessment of the effectiveness of InfoLogix, Inc.'s internal control over financial reporting as of December 31, 2008 included
in the accompanyingManagement's Report on Internal Control Over Financial Reportingand, accordingly, we do not express an opinion thereon.

The
accompanying consolidated financial statements have been prepared assuming the Company continues as a going concern. As discussed in Note A to the consolidated financial
statements, the Company has been unable to restructure its credit facility on a long-term basis, has suffered recurring losses from operations, and is not able to generate sufficient cash flow to meet
its obligations which raises substantial doubt about the Company's ability to continue as a going concern. Management's plans in regard to these matters are also described in Note A. The
consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.

/s/
MCGLADREY & PULLEN, LLP

Blue
Bell, Pennsylvania
April 15, 2009

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Report of Independent Registered Public Accounting Firm

The
Board of Directors
InfoLogix, Inc
Hatboro, Pennsylvania

We
have audited the accompanying consolidated statements of operations and stockholders' equity and cash flows of InfoLogix, Inc. (the "Company") for year ended
December 31, 2006. These consolidated
financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements based on our audit.

We
conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its 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 purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining,
on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation. We believe that our audit provide a reasonable basis for our opinion.

In
our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated results of operations and cash flows of
InfoLogix, Inc. for the year ended December 31, 2006 are in conformity with accounting principles generally accepted in the United States of America. Also, in our opinion, the financial
statement schedule, when considered in relation to the basic consolidated financial statements taken as a whole, presents fairly, in all material respects, the information set forth therein for the
year ended December 31, 2006.

/s/
ASHER & COMPANY, Ltd.

Philadelphia,
Pennsylvania
March 23, 2007, except for the
classification of certain amounts
in net revenues and cost of revenues,
which date is March 27, 2008

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INFOLOGIX, INC.        CONSOLIDATED BALANCE SHEETS        (in thousands, except share amounts)

December 31,2008

2007ASSETSCurrents assets:Cash and cash equivalents

$
3,037

$
6,101Accounts and other receivables (net of allowance for doubtful accounts in the amount of $352 and $409 as of December 30, 2008 and 2007,
respectively)


22,610


20,301Unbilled revenue


1,498


1,052Inventory, net


1,775


1,899Prepaid expenses and other current assets


1,228


603Deferred tax assetscurrent





451Total current assets


30,148


30,407Property and equipment, net


944


1,247Intangible assets, net


8,709


8,362Goodwill


10,540


5,668Deferred tax assetslong-term





2,956Deferred financing costs


501


57Total assets

$
50,842

$
48,697LIABILITIES AND STOCKHOLDERS' EQUITYCurrent liabilities:Accounts payable

$
11,389

$
8,650Line of credit


9,000


9,959Current portion of notes payable


12,077


627Current portion of capital lease obligations


86


139Sales tax payable


477


299Accrued expenses


2,800


3,560Accrued earn out payable


1,958


Other liabilities


900


Deferred revenue


276


75Total current liabilities


38,963


23,309Notes payable, net of current maturities


4,215


6,818Capital lease obligations, net of current maturities


186


94Total liabilities


43,364


30,221Commitments and ContingenciesStockholders' equity:Preferred stock, par value $.00001; authorized 10,000,000 shares; none issued or outstanding





Common stock, par value $.00001; authorized 100,000,000 shares; issued and outstanding 25,602,267 shares and 24,909,301 shares at December 31, 2008
and 2007, respectively





Additional paid in capital


25,766


23,580Accumulated deficit


(18,288
)

(5,104
)Total stockholders' equity


7,478


18,476Total liabilities and stockholders' equity

$
50,842

$
48,697


The
accompanying notes are an integral part of these financial statements

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INFOLOGIX, INC.        CONSOLIDATED STATEMENTS OF OPERATIONS        (in thousands, except share and per share amounts)

Year Ended December 31,2008

2007

2006Net revenues

$
100,716

$
78,774

$
62,113Cost of revenues


74,176


58,049


47,163Gross profit


26,540


20,725


14,950Selling, general and adminstrative expenses


32,243


25,211


17,898Operating loss


(5,703
)

(4,486
)

(2,948
)Interest expense


(2,735
)

(873
)

(665
)Interest income


140


458


56Loss on extinguishment of debt


(1,451
)




Loss before income tax (expense) benefit


(9,749
)

(4,901
)

(3,557
)Income tax (expense) benefit


(3,435
)

1,712


1,687Net loss

$
(13,184
)
$
(3,189
)
$
(1,870
)Loss per sharebasic and diluted

$
(0.52
)
$
(0.13
)
$
(0.14
)Weighted average shares outstandingbasic and diluted


25,277,039


24,173,182


13,503,170


The
accompanying notes are an integral part of these financial statements

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INFOLOGIX, INC.        CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY        (in thousands, except share and per share amounts)

Common StockAdditional
Paid-in
Capital

Retained
Earnings
(Deficit)

Total
Stockholders'
EquityShares

AmountBalance, January 1, 2006


12,500,000

$


$
50

$
695

$
745Common stock issuedreverse merger


2,595,663











Common stock issued for cash


8,500,000





14,979





14,979Stock based compensation expense








2,254





2,254Issuance of warrants for services








520





520Dividends paid to Stockholders











(740
)

(740
)Net loss











(1,870
)

(1,870
)Balance, December 31, 2006


23,595,663





17,803


(1,915
)

15,888Common stock issuedacquisitions


1,293,638





4,883





4,883Common stock issued to advisor


20,000





66





66Stock-based compensation








828





828Net loss











(3,189
)

(3,189
)Balance, December 31, 2007


24,909,301





23,580


(5,104
)

18,476Stock-based compensation








960





960Common stock issued to advisor


20,000





38





38Common stock issuedemployee stock purchase plan


172,966





158





158Common stock issuedacquisition


500,000





1,030





1,030Net loss











(13,184
)

(13,184
)Balance, December 31, 2008


25,602,267

$


$
25,766

$
(18,288
)
$
7,478


The
accompanying notes are an integral part of these financial statements.

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INFOLOGIX, INC.        CONSOLIDATED STATEMENTS OF CASH FLOWS        (in thousands, except share and per share amounts)

December 31,2008

2007

2006Operating activities:Net loss

$
(13,184
)
$
(3,189
)
$
(1,870
)Adjustments to reconcile net loss to operating cash flow:Depreciation and amortization


2,533


1,667


1,320Allowance for doubtful accounts receivable


(57
)

91


20Loss on write-down and disposal of property, equipment and intangible assets


1,340


274


Inventory obsolescence


(64
)

286


124Loss on extinguishment of debt


1,451





Amortization of deferred financing costs


720


11


Accrued interest expense added to note payable


322





Accrued interest income added to note receivable


(5
)




Share based compensation and other share based payments


998


894


2,773Deferred income tax benefit


3,407


(1,720
)

(1,687
)Changes in:Accounts receivable


(2,020
)

(8,519
)

(1,594
)Unbilled revenue


(446
)

(1,052
)

Inventory


188


107


(504
)Prepaid expenses and other current assets


(613
)

239


(507
)Accounts payable


2,571


1,893


(552
)Sales tax payable


178


(43
)

71Accrued expenses


(815
)

2,133


119Deferred revenue


201


75


(186
)Net cash used in operating activities


(3,295
)

(6,853
)

(2,473
)Investing activities:Acquisitions, net of cash acquired


(2,967
)

(3,159
)

Acquisition of property, software and equipment


(2,559
)

(1,904
)

(1,383
)Proceeds from disposal of property and equipment


45





Promissory notes issued


(200
)




Repayment of promissory notes


50





Net cash used in investing activities


(5,631
)

(5,063
)

(1,383
)Financing activities:Payments received from employee stock purchase plan


158


0


Payment of deferred financing costs


(1,715
)

(68
)

Issuance of Hercules note payable


12,000





Issuance of Herules line of credit


7,500





Final repayment of Sovereign notes payable


(3,292
)




Final repayment of Sovereign line of credit


(9,334
)




Proceeds from long-term debt





2,000


2,500Repayment of long-term debt and capital leases


(330
)

(801
)

(1,160
)Net borrowings from line of credit


875


4,004


1,511Repayment of notes payablestockholders








(800
)Common stock issued for cash, net of offering costs








14,979Dividends paid to stockholders








(740
)Net cash provided by financing activities


5,862


5,135


16,290Net change in cash and cash equivalents


(3,064
)

(6,781
)

12,434Cash and cash equivalents at beginning of year


6,101


12,882


448Cash and cash equivalents at end of year

$
3,037

$
6,101

$
12,882Supplemental disclosure of cash flow information:Cash paid for interest

$
2,253

$
873

$
665Non-cash investing and financing activities:Capital lease obligations incurred for new equipment

$
186

$
125

$
Issuance of common shares in connection with acquisitions


1,030


3,363


Issuance of long-term debt in connection with acquisitions





4,000


Issuance of common shares to advisor for services rendered


38


66


Liability for financing cost


900








The accompanying notes are an integral part of these financial statements.

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INFOLOGIX, INC.        NOTES TO CONSOLIDATED FINANCIAL STATEMENTS        (in thousands, except share information)

NOTE ASUMMARY OF SIGNIFICANT ACCOUNTING POLICIES



InfoLogix, Inc. (the "Company") provides mobile workforce technology solutions by enabling real time data communications
anywhere in an enterprise. The Company provides wireless network design, hardware, software, consulting, system integration and network and device management solutions.

On
November 29, 2006, New Age Translation, Inc. ("New Age") entered into an Agreement and Plan of Merger (the "Merger Agreement") with InfoLogix, Inc., a privately
held Delaware corporation ("InfoLogix"). Pursuant to the terms and conditions of the Merger Agreement, each share of InfoLogix common stock prior to the closing of the Merger was converted into the
right to receive 25,000 shares of New Age common stock. As a result, 12,500,000 shares of common stock were issued to the shareholders of InfoLogix. Immediately after closing of the Merger on
November 29, 2006, there were 15,095,663 shares of New Age common stock issued and outstanding, approximately 82.8% of which shares are currently held by the former stockholders of InfoLogix.
Upon the closing of the merger, New Age changed its name to InfoLogix, Inc. and InfoLogix changed its name to InfoLogix Systems Corporation.

On
November 29, 2006, concurrent with the Merger, the Company closed on a private placement of 8,500,000 shares of its common stock to accredited investors. The shares were sold
for an aggregate purchase price of $17,000 before costs associated with the private placement of $2,021. The private placement was exempt from registration under the Securities Act of 1933 as amended.
In connection with the closing of the merger, the Company made grants of 1.5 million warrants to purchase common stock to certain executives pursuant to their employment agreements with the
Company, and approximately 1.2 million warrants to purchase common stock to certain advisors pursuant to their advisory agreements with the Company. The warrants to purchase the Company's
common stock were granted at an exercise price of $2.00 per share.

The
Merger was accounted for under the purchase method of accounting as a reverse acquisition in accordance with accounting principles generally accepted in the United States of America.
Under this method of accounting, New Age was treated as the "acquired" company for financial reporting purposes. In accordance with guidance applicable to these circumstances, this merger was
considered to be a capital transaction in substance. Accordingly, for accounting purposes, the Merger was treated as the equivalent of InfoLogix issuing stock for the net monetary assets of New Age,
accompanied by a recapitalization. All historical share and per share amounts have been retroactively adjusted to give effect to the reverse acquisition of InfoLogix and related recapitalization.

The
Company operates in a single reportable segment.



The accompanying consolidated financial statements include the accounts of InfoLogix, Inc. and its wholly-owned subsidiaries:
InfoLogix Systems Corporation, OPT Acquisition, LLC, Embedded Technologies, LLC, and InfoLogixDDMS, Inc. All significant intercompany balances and transactions have
been eliminated in consolidation.

The
accompanying consolidated financial statements for the year ended December 31, 2008 have been prepared on a going concern basis, which contemplates continuing operations,
securing additional debt or equity financing, selling certain assets, and realizing assets and liabilities in the ordinary course of business. However, the Company has incurred significant net losses
from 2006 through 2008, including net losses of

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INFOLOGIX, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(in thousands, except share information)

NOTE ASUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

$13,184
for the year ended December 31, 2008, primarily in connection with its transition from being a seller of workstations and devices to becoming a provider of comprehensive enterprise
mobility solutions, and the write-off of certain non-realizable assets, and it has an accumulated deficit of $18,288 as of December 31, 2008. During this three-year transition
period, the Company has hired experienced management and staff to execute its business plans and made strategic acquisitions, and the Company also incurred $21 million of senior debt at high
interest rates and other associated costs.

As
a result of the Company's capital structure and recurring losses, it has substantial liquidity requirements related to the repayment of its revolving line of credit that comes due on
November 1, 2009 and to earn out payments for past acquisitions. The Company does not currently expect to generate sufficient cash flow from operations to fund those obligations. As a result,
the independent registered public accounting firm's report on the Company's consolidated financial statements for the year ended December 31, 2008 includes an explanatory paragraph which raises
substantial doubt as to the Company's ability to continue as a going concern.

The
Company has undertaken a series of actions to reduce costs and is pursuing various initiatives to continue as a going concern and provide for its future success. The Company's plan
to improve its liquidity contemplates securing additional debt or equity financing, selling certain assets of the business, and further evaluating its staffing model to achieve improved efficiencies.
The Company has been in discussions with several investors and lenders regarding securing additional financing and has been actively marketing certain assets for possible sale. Its ability to
implement these plans successfully is dependent on many circumstances outside of the Company's direct control, including general economic conditions and the financial strength of its customers. Any
additional financing the Company is able to secure will likely be subject to a number of conditions and involve additional costs. Given the current negative conditions in the economy generally and the
credit markets in particular, there is substantial uncertainty as to whether the Company will be able to generate sufficient liquidity to repay its
outstanding debt, to make its earn out payments and to meet working capital needs. If the Company is unable to improve its liquidity position, it may not be able to continue as a going concern.

The
purchase price of an acquired company is allocated between tangible and intangible assets acquired and liabilities assumed from the acquired business based on their estimated fair
values, with the residual of the purchase price recorded as goodwill. The results of operations of the acquired businesses are included in the Company's results from the dates of acquisition.



The preparation of financial statements in conformity with U.S. Generally Accepted Accounting Principles 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 net revenues and expenses during the reporting period.

In
preparing the financial statements, management has utilized available information, including our past history, industry standards and the current economic environment, among other
factors, in forming its estimates and judgments. Actual results may differ from these estimates. In addition, other companies may utilize different estimates, which may impact the comparability of our
results of operations to those of companies in similar businesses.

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INFOLOGIX, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(in thousands, except share information)

NOTE ASUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Many
of the amounts and percentages presented in these notes to the consolidated financial statements have been rounded, and all dollar amounts are presented in thousands, except share
and per share information.



The Company determines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly
transaction between market participants at the measurement date. The Company uses valuation techniques that maximize the use of quoted market prices and inputs other than quoted prices that are
observable, and inputs that are not directly observable, but that are corroborated by observable market data. In situations where observable markets are not directly or indirectly available, the
Company uses inputs that reflect its assumption about the assumptions a market participant would use to value the asset or liability based on the best information available in the circumstances. The
Company generally applies a market approach to determine fair value of its assets and liabilities. This method uses pricing and other information generated by market transactions for identical or
comparable assets and liabilities. In the absence of comparable transactions, the Company will use an income approach, whereby it estimates the value based on current market expectations.

Financial
Accounting Standards No. 157,Fair Value Measurements(SFAS 157), defines fair value, establishes a framework for
measuring fair value and mandates disclosures about fair value measurements. In February 2008, the Financial Accounting Standards Board issued FASB Staff Position (FSP) 157-2 delaying the
effective date of SFAS 157 for the Company until January 1, 2009, for all nonfinancial assets and nonfinancial liabilities, except those that are recognized or disclosed at fair value in
the financial statements on a recurring basis (at least annually). Management is in the process of evaluating the financial statement impact of applying SFAS 157 to its nonfinancial assets and
nonfinancial liabilities as of January 1, 2009.



The Company considers all highly liquid investments with original maturities of three months or less to be cash equivalents. The
carrying value of cash and cash equivalents approximates fair value. Pursuant to a covenant in a loan and security agreement with one of its lenders (Note F), the Company is required to
maintain a minimum cash balance of $2,500.



The recorded amounts of the Company's cash and cash equivalents, accounts receivable, unbilled revenues, accrued expenses, accrued earn
out payable and accounts payable at December 31, 2008 and 2007 approximate fair value due to their short maturities. The fair
values of the Company's debt instruments approximate fair value because the underlying interest rates approximate market rates that the Company could obtain for similar instruments at the balance
sheet date.



Financial instruments that subject the Company to credit risk consist of cash equivalents and accounts receivable.

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INFOLOGIX, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(in thousands, except share information)

NOTE ASUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

The
Company grants credit, generally without collateral, to its customers, which are primarily in the healthcare and commercial markets. Consequently, the Company is subject to potential
credit risk related to changes in economic conditions within those markets. However, management believes that its billing and collection policies are adequate to minimize the potential credit risk.

The
Company has a policy of reserving for uncollectible accounts based on its best estimate of the amount of probable credit losses in its existing accounts receivable. The Company
periodically reviews its accounts receivable to determine whether an allowance is necessary based on an analysis of past due accounts and other factors that may indicate that the realization of an
account may be in doubt including historical experience and current economic and market conditions. Account balances deemed to be uncollectible are charged to the allowance after all means of
collection have been exhausted and the potential for recovery is considered remote.



Inventory is stated at the lower of cost or market. Cost is determined using the first in, first out method.

The
Company periodically reviews its inventories and makes provisions as necessary for estimated obsolete and slow-moving goods. The Company marks down inventory to an amount
equal to the difference between cost of inventory and the estimated market value based upon assumptions about future demands, selling prices and market conditions. The creation of such provisions
results in a write-down of inventory to net realizable value and a charge to cost of revenues.



Property and equipment are recorded at cost less accumulated depreciation. Depreciation is computed over the lesser of the estimated
useful lives or the lease term of the related assets using the straight line method. Maintenance and repairs that neither add to the value of the asset nor appreciably prolong its useful life are
charged to expense as incurred. Gains or losses on the disposal of property and equipment are included in the determination of income in the period the asset is disposed. Useful lives of property and
equipment are as follows:

Equipment

3 to 5 yearsFurniture and fixtures

5 yearsLeasehold improvements

Lease term or 5 years




Goodwill is the excess of the purchase price paid over the fair value of the net assets of the acquired business. The Company accounts
for goodwill in accordance with SFAS No. 142,Goodwill and Other Intangible Assets(SFAS 142). SFAS 142 establishes standards for
the accounting of intangible assets that are acquired individually or with a group of other assets and the accounting for goodwill and other intangible assets after they have been initially recognized
in the financial statements. In accordance with SFAS 142, amortization of goodwill is not permitted. Goodwill is tested at least annually for impairment by comparing the fair value of the
recorded assets to their carrying amount. If the carrying amount of the

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INFOLOGIX, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(in thousands, except share information)

NOTE ASUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

intangible
asset exceeds its fair value, an impairment loss is recognized. The annual evaluation of intangible assets require the use of estimates about future operating results of each reporting unit
to determine their estimated fair value. Changes in forecasted operations can affect these estimates. Once an impairment of an intangible asset has been recorded, it cannot be reversed.

The
Company accounts for its other intangible assets in accordance with SFAS 142. Other intangible assets consist primarily of non-contractual customer relationships,
sales contracts, patents and technology. In accordance with SFAS 142, intangible assets that have a definite-life are amortized on a straight-line basis over their
estimated useful lives. The Company reviews the carrying value of all intangible assets for possible impairment whenever events or changes in circumstances indicate that their carrying value may not
be recoverable. If the carrying amounts of the intangible assets that have a definite-life exceed their fair value, an impairment loss is recognized.

The
weighted average remaining useful lives for financial reporting and tax purposes are as follows:

Weighted average
remaining useful lifeBook

TaxPatents

11


10Computer software

2


2Developed technology

0


1Customer lists

6


14Noncompete agreements

2


14Trademarks and trade names

Indefinite


14




Deferred financing costs that are incurred by the Company in connection with the issuance of debt are deferred and amortized to
interest expense in the consolidated statement of operations over the life of the underlying indebtedness, adjusted to reflect any early repayments.



The Company assesses the potential impairment of long-lived assets whenever events or changes in circumstances indicate
that the carrying value may not be recoverable. An asset's value is impaired if management's estimate of the aggregate future cash flows, undiscounted and without interest charges, to be generated by
the asset are less than the carrying value of the asset. Such cash flows consider factors such as expected future operating income and historical trends, as well as the effects of demand and
competition. To the extent impairment has occurred, the loss is measured as the excess of the carrying amount of the asset over the estimated fair value of the asset. Such estimates require the use of
judgment and numerous subjective assumptions, which, if actual experience varies, could result in material differences in the requirements for impairment charges.

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INFOLOGIX, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(in thousands, except share information)

NOTE ASUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)



The Company capitalizes the cost of internal use software in accordance with Statement of Position 98-1, Accounting for the Cost of Computer Software Developed or
Obtained for Internal Use(SOP 98-1). SOP 98-1 provides
guidance for the accounting for computer software developed or acquired for internal use, including the requirement to capitalize certain costs and the amortization of these costs. Costs for
preliminary stage projects are expensed as incurred while application stage projects are capitalized. The Company ceases capitalizing costs and commences amortization of the software on a
straight-line basis over the estimated useful life, typically three to five years, when it is ready for intended use.

The
Company capitalizes certain costs related to the acquisition and development of software to be sold or licensed to its customers. In accordance with SFAS 86, Accounting for the Costs of Compute Software to be Sold, Leased
or Otherwise Marketed,the Company expenses as incurred those costs incurred prior to
achieving technological feasibility and capitalizes those arising after technological feasibility has been achieved. The Company amortizes the capitalized costs using the straight-line
method over the developed product's estimated economic life. The Company ceases capitalizing costs when the software applications are ready for general release.



Net revenues are generated through product sales, warranty and maintenance agreements, professional consulting, programming and
engineering services, long-term support services, and educational learning programs. Net revenues from product sales are recognized when both the title and risk of loss transfer to the
customer, generally upon shipment. The Company generates net revenues from the sale of extended warranties on wireless and mobile hardware and systems, including mobile workstations, computers,
peripherals, and related products. Revenue from the sale of component warranties is recognized upon execution of the warranty agreement. The Company does not bear associated warranty risk because it
hascontracted with a third party to fully assume all risks and obligations.

The
Company also generates revenue from consulting and other professional services on either a fee-for service or fixed fee basis. Revenue from consulting and other
professional services that is contracted as fee-for-service is recognized in the period in which the services are performed. Direct costs for travel and accommodations are
reimbursable in accordance with the contract terms and are recognized as net revenue in the period the related expense is incurred. Revenue from the sale of proprietary learning technologies and those
consulting and other professional services provided on a fixed-fee basis is recognized according to a proportionate method of revenue recognition and is recognized ratably over the
contract period based upon actual project hours completed compared to total budgeted project hours.

The
Company records amounts billed to its customers for shipping and handling fees as revenue in accordance with EITF 00-10,Accounting for
Shipping and Handling Fees and Costs.The EITF provides that all amounts billed in a sale transaction related to shipping and handling represents revenues earned for the goods
provided and requires such amounts to be classified as revenue. Shipping and handling costs are recorded in general and administrative expenses in the consolidated statement of operations.

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INFOLOGIX, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(in thousands, except share information)

NOTE ASUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)



Advertising costs are expensed when incurred and approximated $858, $914 and $367 for the years ended December 31, 2008, 2007
and 2006, respectively.

In
accordance with Emerging Issues Task Force (EITF) 02-16,Accounting by a Customer (Including a Reseller) for Certain Consideration Received from a
Vendor,certain cooperative advertising reimbursements are netted against specific, identifiable costs incurred in connection with the selling of the vendor's product.
Cooperative advertising reimbursements of approximately $121, $86, and $92 for the years ended December 31, 2008, 2007 and 2006, respectively, were recorded as a reduction of advertising
expense with the net amount included in selling, general and administrative expense in the consolidated statement of operations.



The Company accounts for income taxes using the asset and liability method in accordance with SFAS 109, Accounting for Income Taxes.Under SFAS 109, deferred tax assets and liabilities are determined based on the differences between the financial
reporting bases and the tax bases of existing assets and liabilities, and are measured at the prevailing enacted tax rates that will be in effect when these differences are settled or realized.
SFAS 109 also requires that deferred tax assets be reduced by a valuation allowance if it is more likely than not that some portion or all of the deferred tax asset will not be realized.

The
Company adopted the provisions of Financial Accounting Standards Board (FASB) Interpretation No. 48,Accounting for Uncertainty in Income Taxes,on January 1, 2007. FIN 48 prescribes a
recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position
taken or expected to be taken in a tax return. As a result of the implementation of FIN 48, the Company determined that there were no material liabilities for tax benefits for past years and
the current period. The Company has determined that any future interest accrued, related to unrecognized tax benefits, will be included in interest expense. In the event the Company must accrue for
penalties as a result of FIN 48, they will be included as an operating expense.

Prior
to the Merger discussed in Note A, the Company filed its Federal and State Income Tax Returns as a Sub-Chapter S Corporation. Therefore, any income tax
liability from its operations was payable directly by its shareholders. The Company's Sub-Chapter S Corporation status was terminated on November 29, 2006, the date of the
Merger.



The Company accounts for share-based payments in accordance with SFAS No. 123(R), "Share-Based
Payments" (SFAS 123(R)). SFAS 123(R) requires companies to measure compensation cost for all share-based payments at fair value. The fair value of share-based
payments made to employees is recognized as compensation expense, on a straight-line basis, over the applicable service period. In accordance with Securities and Exchange Commission
("SEC") Staff Accounting Bulletin ("SAB") No. 107, the Company records share-based compensation within general and administrative expenses to correspond with the same line item as the cash
compensation paid to employees.

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INFOLOGIX, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(in thousands, except share information)

NOTE ASUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)



The cost of stock based compensation awards issued to non-employees for services are recorded at either the fair value of
the services rendered or the instruments issued in exchange for such services, whichever is more readily determinable, using the measurement date guidelines enumerated in
EITF 96-18,Accounting for Equity Instruments That Are Issued to Other Than Employees for Acquiring, or in Conjunction with Selling, Goods or
Services.



The Company accounts for earnings per share based on the provisions of SFAS 128,Earnings per Share.Basic earnings per share is
computed by dividing income or loss available to common stockholders by the weighted average number of common shares outstanding during the period.
SFAS 128 also requires a dual presentation of basic and diluted earnings per share on the face of the statement of operations for all companies with complex capital structures. Diluted earnings
per share reflects the amount of earnings for the period available to each share of common stock outstanding during the reporting period, while giving effect to all dilutive potential common shares
that were outstanding during the period, such as common share equivalents that could result from the potential exercise into common stock. The computation of diluted earnings per share does not assume
exercise of securities that would have an anti-dilutive effect on per share amounts (i.e., increasing earnings per share or reducing loss
per share). The dilutive effect of outstanding options are reflected in dilutive earnings per share by the application of the treasury stock method which recognizes the use of proceeds that could be
obtained upon the exercise of options and warrants in computing diluted earnings per share. It assumes that any proceeds would be used to purchase common stock at the average market price during the
period. Options will have a dilutive effect only when the average market price of the common stock during the period exceeds the exercise price of the options.



In December 2007, the SEC issued SAB No. 110,Share-Based Payment(SAB 110). SAB 110 establishes the continued use of the
simplified method for estimating the expected term of equity based compensation. The simplified method was
intended to be eliminated for any equity based compensation arrangements granted after December 31, 2007. SAB 110 was issued to help companies that may not have adequate exercise history
to estimate expected terms for future grants. The Company does not expect the adoption of SAB 110 to have a material effect on its consolidated financial statements.

In
December 2007, the Financial Accounting Standards Board (FASB) issued SFAS No. 141(R)Business Combinations(SFAS 141(R)). SFAS 141(R) establishes principles and requirements for how the
acquirer recognizes and measures in its financial statements the identifiable
assets acquired, the liabilities assumed, and any noncontrolling interest in the acquiree, recognizes and measures the goodwill acquired in the business combination or a gain from a bargain purchase
and determines what information to disclose to enable users of the financial statements to evaluate the nature and financial effects of the business combination. This Statement applies prospectively
to business combinations for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after December 15, 2008 and may not be applied before
that date. The Company is in the process of evaluating the impact of this pronouncement on its consolidated financial statements.

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INFOLOGIX, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(in thousands, except share information)

NOTE ASUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

In
December 2007, the FASB issued SFAS No. 160,Noncontrolling Interests in Consolidated Financial Statementsan amendment of ARB No. 51(SFAS 160). This Statement amends the original
Accounting Review Board (ARB) No. 51Consolidated Financial Statementsto establish accounting and reporting standards for the noncontrolling interest in a subsidiary and for the deconsolidation of a subsidiary. It clarifies that a noncontrolling
interest in a subsidiary is an ownership interest in the consolidated entity that should be reported as equity in the consolidated financial statements. This Statement is effective for fiscal years
and interim periods beginning on or after December 15, 2008 and may not be applied before that date. The Company does not expect the adoption of SFAS 160 to have a material effect on its
consolidated financial statements.

In
March 2008, the FASB issued SFAS No. 161,Disclosures about Derivative Instruments and Hedging Activities(SFAS 161).
SFAS 161 requires enhanced disclosures about an entity's derivative and hedging activities. The objective of the guidance is to provide users of financial statements with an enhanced
understanding of how and why an entity uses derivative instruments: how an entity accounts for derivative instruments and related hedged items and how derivative instruments and related hedged items
affect an entity's financial position, financial performance, and cash flows. SFAS 161 is effective
for fiscal years beginning after November 15, 2008. Management has evaluated SFAS 161 and has determined that it will have no impact on the Company's consolidated financial statement
disclosures.

In
May 2008, the FASB issued SFAS No. 162,The Hierarchy of Generally Accepted Accounting Principles(SFAS 162).
SFAS 162 identifies the sources of accounting principles and the framework for selecting the principles to be used in the preparation of financial statements of nongovernmental entities that
are presented in conformity with GAAP. SFAS 162 is effective 60 days following the SEC's approval of the Public Company Accounting Oversight Board amendments to AU Section 411,
"The Meaning of Present Fairly in Conformity With Generally Accepted Accounting Principles." The adoption of this statement is not expected to have a
material effect on the Company's financial statements.

In
June 2008, the FASB ratified EITF Issue No. 07-5, "Determining Whether an Instrument (or an Embedded Feature) is indexed to an Entity's Own Stock"
(EITF 07-5), which supersedes EITF Issue No. 01-6, "The Meaning of 'Indexed to a Company's Own Stock"'. SFAS No. 133 specifies that a contract issued or
held by a company that is both indexed to its own stock and classified in stockholders' equity is not considered a derivative instrument for purposes of applying SFAS No. 133.
EITF 07-5 provides guidance for applying the requirements of SFAS No. 133, requiring that both an instrument's contingent exercise provisions and its settlement provisions be
evaluated to determine whether the instrument (or embedded feature) is indexed solely to an entity's own stock. EITF 07-5 will be effective for any outstanding or new arrangements
as of January 1, 2009. The Company has yet to complete its analysis of the impact of adoption and application of this standard.

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INFOLOGIX, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(in thousands, except share information)

NOTE BINVENTORY

Inventory consists of the following:

December 31,2008

2007Finished goods

$
2,111

$
2,373Work in progress


85


11Less: allowance for slow moving and obsolete inventory


(421
)

(485
)Total inventory, net

$
1,775

$
1,899


NOTE CSECURED PROMISSORY NOTES RECEIVABLE

On February 8, 2008, the Company made a $150 secured loan to Aware Interweave, Inc. (Aware), for which it received a Secured Promissory Note bearing interest at 12% per
annum, payable on a monthly basis commencing March 1, 2008. The outstanding principal balance of the note plus accrued and unpaid interest were applied to and set-off against
amounts due to Aware in connection with its acquisition by the Company as discussed in Note O.

NOTE DPROPERTY AND EQUIPMENT

Property and equipment consists of the following:

December 31,2008

2007Equipment

$
1,080

$
1,835Furniture and fixtures


917


434Leasehold improvements


63


582,060


2,327Less: accumulated depreciation


(1,116
)

(1,080
)$
944

$
1,247


Depreciation
expense was $817, $688, and $796 for the years ended December 31, 2008, 2007 and 2006, respectively. During the year ended December 31, 2008, the Company
recorded a loss of $910 in connection with the write-off and disposal of equipment.

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INFOLOGIX, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(in thousands, except share information)

NOTE EINTANGIBLE ASSETS

Intangible assets consist of the following:

December 31,2008

2007Patents

$
2,746

$
2,563Computer software


1,820


1,691Developed technology


1,157


457License fees





515Customer Lists


4,285


3,708Noncompete agreements


289


173Trademarks and trade names


1,469


1,400Other





12611,766


10,633Less accumulated amortization


(3,057
)

(2,271
)Total net intangible assets

$
8,709

$
8,362


Amortization
expense related to intangible assets was $1,716, $979, and $524 for the years ended December 31, 2008, 2007 and 2006, respectively. During the year ended
December 31, 2008, the Company recognized a loss of $430 in connection with the write-off of intangible assets.

Amortization
expense subsequent to the year ended December 31, 2008 is expected to be as follows:

Years ended December 31:

Amount2009

$
1,4382010


1,2082011


9382012


7402013


620


NOTE FDEBT

On May 1, 2008, the Company entered into a loan and security agreement (the "Loan and Security Agreement") with Hercules Technology Growth Capital, Inc. (Lender). On
November 19, 2008, the Company entered into an amendment to the Loan and Security Agreement. Among other things, the amendment reduced the maximum commitment of the revolving credit facility,
eliminated the incremental term loan facility of $500, increased the interest rates on outstanding borrowings and amended certain financial covenants. The description of the revolving credit facility
and term loan facilities set forth below incorporates the new terms of the Loan and Security Agreement after giving effect to the amendment.

The
Loan and Security Agreement provides the Company with a revolving credit facility with a maximum commitment of up to $9,000 and a term loan facility of up to $12,000. The amount that
is available to be borrowed under the revolving credit facility is limited to the lesser of the maximum availability at such time and 85% of eligible accounts, as defined. The proceeds of the loans
were used, in part, to refinance the Company's indebtedness owing to Sovereign Bank. Borrowings under the agreement may be used for permitted acquisitions and for general corporate and working capital
purposes. At

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INFOLOGIX, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(in thousands, except share information)

NOTE FDEBT (Continued)

December 31,
2008, the Company had $12,000 of indebtedness outstanding under the Hercules term loan and $9,000 outstanding under the revolving credit facility.

The
term loan bears interest at an annual rate equal to the greater of 13.25% (10.5% prior to the amendment) or the prime rate plus 8.75% (4.5% prior to the amendment), plus an
additional 1.75% of interest that will be paid in kind and added to the principal amount of the term loan. The interest rate for the revolving credit facility is the greater of 11.25% (8.5% prior to
the amendment) or the prime rate plus 6.75% (2.5% prior to the amendment). The interest rate on outstanding borrowings under the revolving credit facility and the term loan increased by 1% on
February 15, 2009 and will increase by an additional 1% on May 15, 2009 unless prior to that date the Company has executed a definitive agreement to sell or merge the Company or has
raised $5,000 of additional equity or subordinated debt on terms acceptable to the Lender. Interest is payable on the first business day of each month. In the event that any payment is not timely
made, a late fee equal to 5% of the past due amount is payable on the demand of the Lender. Upon the occurrence and during the continuance of an event of default, all amounts then owing to the Lender
under the agreement and the other loan documents will bear interest at the then current rate plus 3%.

The
term loan matures on May 1, 2012. The term loan payments are interest-only for the first nine months and then must be repaid monthly based on the following
principal repayment schedule thereafter: February 2, 2009 to May 1, 20095%; June 1, 2009 to May 1, 201015%; June 1, 2010 to May 1,
201125% and June 1, 2011 to the maturity date55%. In addition, the Company is required to apply 25% of its excess cash flow, as defined by the agreement, toward
prepayments of the term loan. Voluntary prepayments of the term loan are subject to a prepayment charge equal to a percentage of the term loan being prepaid. Revolving loans mature on
November 1, 2009. Upon the earliest to occur of (i) demand from the Lender at any time between November 1, 2009 and May 1, 2012, (ii) the acceleration of the
Company's obligations under the agreement, (iii) the term loan maturity date, and (iv) prepayment in full of the Company's obligations under the agreement, the Company will be required
to pay to the Lender an amount equal to the greater, as of such date of determination, of (x) $900 (increased from $625 prior to the amendment), and (y) an amount equal to 3.0% of the
amount by which the Company's market capitalization exceeds $50,000 (decreased from $100,000 prior to the amendment). The Company's obligations under the agreement are secured by all of its personal
property, including all of the equity interests in its subsidiaries.

The
agreement contains various affirmative and negative covenants, including covenants that require us to maintain a minimum cash balance and restrict the Company's ability to incur
indebtedness, make investments, make payments in respect of its capital stock, including dividends and repurchases of common stock, sell or license its assets, and engage in acquisitions without the
prior satisfaction of certain conditions. Additional covenants require compliance with certain financial tests, including leverage ratios.

Upon
an event of default under the agreement the Lender may opt to accelerate and demand payment of all or any part of the Company's obligations under the agreement.

Under
the amended terms, the Company is not permitted to pay any amounts owing under the earn out agreements that were entered into in connection with the acquisitions of Healthcare
Informatics Associates, Inc. or Delta Health, Inc. if the Company's total leverage exceeds the predefined maximum.

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INFOLOGIX, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(in thousands, except share information)

NOTE FDEBT (Continued)

As
of December 31, 2008, the Company was not in compliance with certain minimum adjusted EBITDA covenants, and, the Company was not in compliance with the minimum adjusted EBITDA
for the three-month periods ended January 31, and February 28, 2009. As a result of these covenant violations, the Company is not permitted to borrow additional funds under its revolving
facility. Also as a result of the covenant violation and because the Company's total leverage ratio exceeds 3.00 to 1.00, the Company is prohibited from satisfying its earn out obligations related to
the Company's acquisition of the assets of HIA. Due to its inability to comply with these covenants, the Company is in discussions with its Lender to amend the loan and security agreement to
restructure its terms, including to waive past violations and to revise the financial covenants and the amortization related to the term loan portion of the facility. The Company remains in
discussions with the Lender regarding an amendment, but it has not obtained, and there can be no assurance that it will obtain, such an amendment. The Company is also in discussions with HIA regarding
the earn out payment.

On
March 12, 2009, the Company received a letter serving as a notice of events of default and reservation of rights (the "First Notice Letter") under the loan and security
agreement from the Lender. Pursuant to the First Notice Letter, the Company was notified that certain events of default existed under the loan and security agreement. The Company is disputing certain
of those events, however has paid the default interest and fees in response to the First Notice Letter. In addition, on March 25, 2009, the Lender sent the Company a second letter serving as
notice of an event of default for failure to comply with the financial covenant as of January 31, 2009 and charging the Company default interest of $78 for the period from February 1,
2009 through March 31, 2009, except for the period for which default rate interest had already been paid in response to the First Notice Letter. The Lender also informed the Company that, for
periods subsequent to March 31, 2009, default rate interest will be payable monthly on the same date as regular interest unless the Lender chooses to demand payment of default interest on
another date. Under the terms of the loan and security agreement, late fees are equal to 5% of the past due amount and default rate interest is equal to the applicable regular interest rate plus 3%.
The Lender has not chosen to accelerate the obligations under the loan and security agreement, but, it has expressly not waived any events of default or any of its remedies under the loan and security
agreement.

Management
determined that the November 19, 2008 amendment resulted in a significant modification of the original loan and security agreement dated May 1, 2008.
Accordingly, the Company recorded a charge of $1,451 for a loss on extinguishment of debt in the 2008 statement of operations. The loss is comprised primarily of fees paid the Lender in connection
with the amendment and unamortized deferred financing costs related to the original loan and security agreement with the Lender.

70

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Table of Contents

INFOLOGIX, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(in thousands, except share information)

NOTE FDEBT (Continued)

Notes
payable consist of the following:

December 31,2008

2007Note payable, bank, principal payable $42 monthly over thirty-five months commencing March 2006. Interest was payable monthly at the prime rate plus
1.0%. The note was paid in full May 2008

$


$
708Note payable, bank, principal payable $28 monthly over thirty-five months commencing December 2006. Interest was payable monthly at the prime rate
plus 1.0%. The note was paid in full May 2008





695Convertible note payable pursuant to the asset purchase agreement with Healthcare Informatics Associates, Inc. Principal and interest payable at
9.0% is due September 30, 2010


3,901


3,579Amounts payable pursuant to the asset purchase agreement with AMT Systems, Inc. in monthly installments of $9 interest included, at a rate of 7.84%,
maturing May 31, 2013


391


463Note payable, Hercules, principal payable $150 monthly over sixteen months commencing February 2009, payable $250 over twelve months, commencing
June 2010, payable $550 over twelve months commencing June 2011


12,000


Note payable, bank, principal payable $56 monthly over thirty-six months commencing March 2008; interest payable monthly, at prime rate plus 1.5%
(8.75% at December 31, 2007), maturing March 16, 2011. The note was paid in full May 2008





2,000Total notes payable


16,292


7,445Less: current maturities


(12,077
)

(627
)$
4,215

$
6,818


Aggregate
maturities of notes payable are as follows at December 31, 2008:

Years ended December 31:

Amount2009

$
12,0772010


3,9842011


902012


982013


42




In April 2007, the Company issued a letter of credit to a vendor for $350. At both December 31, 2008 and 2007 the Company had
contingent liabilities under the letter of credit of $350. The letter of credit expires in April 2009. The letter of credit is collateralized by a $350 certificate of deposit.

71

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Table of Contents

INFOLOGIX, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(in thousands, except share information)

NOTE GCAPITAL LEASE OBLIGATION

Equipment acquired under capital lease obligations is classified as property and equipment in the accompanying consolidated financial statements and consisted of the following:

December 31,2008

2007Equipment

$
492

$
565Less: accumulated depreciation


(220
)

(296
)$
272

$
269


Amortization
of equipment under capital lease obligations is included with depreciation and amortization in the consolidated statement of cash flows.

The
capital lease obligations expire in 2013 and bear interest at 5.1% and 9.4% imputed based on the lessor's implicit rate of return. Future minimum capital lease payments are as
follows:

2009

$
1012010


862011


422012


422013


32Total


303Less: amount representing interest


(31
)Net present value of minimum lease payments


272Less: current portion


(86
)$
186


NOTE HLEASE COMMITMENTS

The Company leases its facilities in Pennsylvania and Connecticut under operating lease agreements expiring between 2009 and 2011. Total rent expense for all operating leases was
approximately $574, $468, and $271 for the years ended December 31, 2008, 2007, and 2006, respectively.

Future
minimum lease payments required under the operating leases in effect subsequent to December 31, 2008 are approximately as follows:

Years ended December 31:

Amount2009

$
6282010


3472011


3222012


20


72

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Table of Contents

INFOLOGIX, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(in thousands, except share information)

NOTE IRELATED PARTY TRANSACTIONS



The Company was indebted to certain stockholders, considered related parties that were fully repaid in 2006. Interest paid to the
stockholders was approximately $71 for the year ended December 31, 2006.



In 2004, the Company entered into an agreement with an entity owned by a stockholder and former officer of the Company whereby that
entity provides extended warranties and technical support services to certain customers of the Company. Under the agreement, the Company was charged $2,694, $1,915 and $1,196 for the years ended
December 31, 2008, 2007 and 2006, respectively, and made payments under this agreement of $2,672, $1,903 and $1,331 for the for the years ended December 31, 2008, 2007 and 2006,
respectively.

In
May 2006, the Company entered into an agreement with the same entity to provide the Company with consulting services with respect to software development. Under the agreement, the
Company was charged $1,721, $812 and $345 for the years ended December 31, 2008, 2007 and 2006, respectively, and made payments under this agreement of $1,582, $809 and $332 for the for the
years ended December 31, 2008, 2007 and 2006, respectively. On March 3, 2009, the agreement was amended to extend the term of the arrangement through December 31, 2013. Pursuant
to the terms of the amended agreement, the Company has a minimum annual commitment to purchase services in an aggregate amount of $1,500 per year through 2013.

During
the year ended December 31, 2006, a stockholder considered a related party for the year ended December 31, 2006 performed legal services for the Company at costs
approximating $36.



During the years ended December 31, 2008, 2007 and 2006, the Company maintained a business relationship with Gulian &
Associates, which is owned by the wife of David T. Gulian, the President and Chief Executive Officer and director and stockholder. Under the terms of the arrangement, Gulian & Associates
provides the Company with retainer-based professional recruiting services, on a non-exclusive basis. Gulian & Associates is paid a success fee of 20% of a newly hired person's
annual base salary for employees introduced to the Company by Gulian & Associates; one-third of the fee is invoiced at the time the hiring request is made, the remainder is invoiced
only upon successful placement of a candidate into the role. In 2008, 2007 and 2006, the Company paid Gulian & Associates approximately $225, $159 and $106 respectively in success fees.

NOTE JEMPLOYEE BENEFIT PLAN

The Company has a defined contribution plan covering substantially all employees. As allowed under Section 401(K) of the Internal Revenue Code, the plan provides tax deferred
salary deductions for eligible employees. Company contributions are at the discretion of the board of directors. The Company did not make a contribution to the plan for the years ended
December 31, 2008, 2007 or 2006.

73

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Table of Contents

INFOLOGIX, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(in thousands, except share information)

NOTE KCONCENTRATIONS OF CREDIT RISK

For the years ended December 31, 2008, 2007 and 2006, purchases from the Company's significant
vendor are as follows:

Years Ended December 31,2008

2007

2006Vendor A


22.2
%

31.2
%

26.5
%


For
the years ended December 31, 2008, 2007 and 2006, the Company had sales to significant customers as follows:

Years Ended December 31,2008

2007

2006Customer A


11.0
%

12.9
%

13
%Customer B


8.9
%

12.0
%

0
%


NOTE LCOMMITMENTS AND CONTINGENCIES



The Company is involved in disputes or legal actions arising in the ordinary course of business. Management does not believe the
outcome of such legal actions will have a material adverse effect on the Company's financial position, results of operations or cash flows.



The Company entered into employment agreements with executives of the Company. Certain of the employment contracts expired on
December 31, 2008 and the others expire during 2009. In addition to the payment of total annual salaries of approximately $1.3 million, in the aggregate, the employment agreements allow
for the granting of 1.5 million options and 1.5 million warrants to purchase the Company's common stock at an exercise prices $2.00 and $4.04 per share, respectively; which the company
granted on November 29, 2006 and December 18, 2007 respectively. The agreements also call for the payment of discretionary bonuses based upon revenue and net income targets that are set
by the compensation committee of the board of directors.

The
Company's employment agreements with its Chief Executive Officer and President, Chief Financial Officer, Executive Vice President, Healthcare, and Executive Vice President, EMS
(collectively "Executives") expired on December 31, 2008. Each Executive will remain employed with the Company on an "at will" basis, and on March 13, 2009 the Company entered into
severance agreements with each Executive. The severance agreements provide, in the event of termination of the Executive's employment, for predefined payments based on the Executive's then current
wage base in exchange for non-compete and non-solicitation agreements.

NOTE MINCOME TAXES

The Company accounts for income taxes in accordance with SFAS No. 109. Accordingly deferred income tax assets and liabilities are recognized for the estimated future tax
consequences attributable to temporary differences between the financial statement carrying amounts of existing assets and liabilities

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Table of Contents

INFOLOGIX, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(in thousands, except share information)

NOTE MINCOME TAXES (Continued)

and
their respective tax bases. These assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which the temporary differences are expected to
reverse.

The
Company has net operating loss carryforwards available in certain jurisdictions to reduce future taxable income. Future tax benefits for net operating loss carryforwards are
recognized to the extent that realization of these benefits is considered more likely than not. This determination is based on the expectation that related operations will be sufficiently profitable
or various tax business and other planning strategies will enable us to utilize the operating loss carryforwards. The Company's evaluation of the realizability of deferred tax assets considers both
positive and negative evidence. The weight given to the potential effects of positive and negative evidence is based on the extent to which it can be objectively verified. During the fourth quarter of
2008, the Company recorded a full valuation allowance related to the net operating loss carryforwards and other temporary items as it was determined it is more likely than not that the Company will
not be able to use the assets to reduce future tax liabilities.

As
of December 31, 2008, the Company has federal net operating losses (NOLs) of approximately $12,776 which will be available to offset future taxable income. Included in the NOLs
are losses of $65 generated by New Age Translation, Inc. which are subject to restrictions under Internal Revenue Code Section 382, due to change in ownership in that entity. Therefore,
the Company has recorded a full valuation allowance against the net operating losses generated by New Age Translation, Inc. If not used, the NOLs will expire beginning after 2024. The Company's
state NOLs will also be subject to expiration in varying years starting in 2013 through 2027.

The
provision for income taxes for the years ended December 31, 2008, 2007 and 2006 is as follows:

Years Ended December 31,2008

2007

2006Current income tax expense (benefit):Federal

$


$


$
State


28


8


28


8


Deferred income tax expense (benefit):Federal


2,939


(1,487
)

(1,452
)State


468


(233
)

(235
)3,407


(1,720
)

(1,687
)Income tax expense (benefit)

$
3,435

$
(1,712
)
$
(1,687
)


75

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Table of Contents

INFOLOGIX, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(in thousands, except share information)

NOTE MINCOME TAXES (Continued)

The
Company's deferred tax assets and liabilities are as follows:

December 31,2008

2007Allowance for doubtful accounts

$
153

$
162Inventory reserve and uniform capitalization


198


236Accrued expenses


170


53Valuation allowance


(521
)

Deferred tax assetscurrent





451Property and equipment


(127
)

Intangible assets


(37
)

15Operating loss carry forwards


4,885


1,548Stock based compensation


1,729


1,418Valuation allowance


(6,450
)

(26
)Net deferred tax assetslong-term





2,956Total net deferred tax asset

$


$
3,407


A
reconciliation of the United States statutory income tax rate to the effective income tax rate for the years ended December 31, 2008, 2007, and 2006 is as
follows:

Years Ended December 31,2008

2007

2006Amount

Rate

Amount

Rate

Amount

RateTax at the Federal statutory rate

$
(3,315
)

34.0
%
$
(1,656
)

34.0
%
$
(1,428
)

34.0
%State taxes


(243
)

2.5
%

(225
)

4.6
%

(213
)

5.1
%Permanent differences


38


(0.5
)%

11


(0.2
)%

197


(4.7
)%Other


(17
)

0.2
%

158


(3.3
)%




0.0
%Valuation allowance


6,972


(71.5
)%










Income taxable to S Corp. period





0.0
%




0.0
%

(91
)

2.2
%Impact of change from S to C Corporate tax status





0.0
%




0.0
%

(152
)

3.6
%Effective tax rate

$
3,435


(35.3
)%
$
(1,712
)

35.10
%
$
(1,687
)

40.20
%


The
following unaudited pro-forma tax provision was prepared as if the Company was a taxable entity for the period ended December 31, 2006.

Amount

RateTax at the Federal statutory rate

$
(1,428
)

34.0
%Permanent differences


224


(5.3
)%Federal tax provision


(1,204
)

28.7
%State & local tax provision (Net of Federal benefit)


(195
)

4.6
%Total tax provision

$
(1,399
)

33.3
%


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Table of Contents

INFOLOGIX, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(in thousands, except share information)

NOTE MINCOME TAXES (Continued)

Prior
to the Merger discussed in Note A, the Company filed its Federal and State income tax returns as a Sub-Chapter S Corporation. Therefore, any income tax
liability from its operations was payable directly by its shareholders. As a result of the Merger, the Company's Sub-Chapter S Corporation status was terminated on
November 30, 2006. In accordance with SFAS 109, when the Company changes its tax status from a nontaxable Sub-Chapter S Corporation to a taxable C Corporation,
deferred tax assets and liabilities shall be recognized for timing differences at the date that a nontaxable enterprise becomes a taxable enterprise. As a result, the Company recorded a net deferred
tax asset of $152 with the offset being recorded as an income tax benefit in the statement of operations for the year ended December 31, 2006.

NOTE NACQUISITION OF ASSETS OF DELTA HEALTH SYSTEMS, INC.

On May 2, 2008, the Company, through its wholly-owned subsidiary InfoLogix Systems Corporation, acquired substantially all of the assets and assumed certain liabilities of Delta
Health Systems, Inc. (Delta) pursuant to an asset purchase agreement. The assets acquired relate to Delta's business of providing strategic cost management consulting services and
web-based management
data collection and work-flow analytics to the healthcare industry, and included cash, accounts receivables, the rights to existing relationships with customers, vendors and partners,
certain tangible personal property and certain intangible rights and property. The liabilities assumed related to customer contracts and accrued expenses.

The
purchase price paid by the Company was $1,673, which consisted of $1,465 in cash and $208 in acquisition costs. The Company and Delta also entered into an earn out agreement pursuant
to which Delta is eligible to earn additional consideration in the subsequent two year period (each year, an "Earn Out Period") after the closing of the transaction. Delta can earn up to $500 in the
first Earn Out Period and up to $500 in the second Earn Out Period upon achievement of gross revenue targets described in the Earn Out Agreement. The additional cash consideration will not be
accounted for by the Company until such time as payment of this additional consideration is considered probable, if any pursuant to the terms of the agreement. At the end of the two year period, if
Delta has not already earned the $1,000 of additional consideration in respect of each of the two Earn Out Periods, Delta may earn an amount equal to the $1,000 of additional consideration less any
amounts previously paid in respect of the two Earn Out Periods upon the achievement of certain cumulative financial milestones during the two-year earn-out period. At the point
the consideration is considered probable, the Company will record it as an adjustment to the purchase price.

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Table of Contents

INFOLOGIX, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(in thousands, except share information)

NOTE NACQUISITION OF ASSETS OF DELTA HEALTH SYSTEMS, INC. (Continued)

The
purchase price was allocated to the assets acquired and liabilities assumed on a preliminary basis based on their estimated fair values on the date of acquisition, as follows:

Assets acquired:Accounts receivable

$
28Property and equipment


2Goodwill


1,179Customer relationships


402Noncompete agreements


62Trademarks/trade names


43Total assets acquired


1,716Liabilities assumed:Current liabilities


43Net assets acquired

$
1,673


The
customer relationships are being amortized on a straight-line basis over an eight year period, which is the average expected life of the underlying customer contracts.
The non-compete agreements are amortized on a straight-line basis over a three year period, which corresponds with the expiration date of the non-compete provisions
contained within the asset purchase agreement. Goodwill and the trademarks/trade names have indefinite lives and therefore are not amortized, however, they will be evaluated annually for impairment.

NOTE OACQUISITION OF ASSETS OF AWARE INTERWEAVE, INC.

On May 16, 2008, the Company, through its wholly-owned subsidiary InfoLogix Systems Corporation, acquired substantially all of the operating assets and assumed certain liabilities
of Aware Interweave, Inc. (Aware) pursuant to an asset purchase agreement. The assets acquired relate to Aware's business of providing mobile solutions to a variety of industries including the
healthcare and life sciences industries, and included cash, accounts receivable, the rights to existing relationships with
customers, vendors and partners, certain tangible personal property and certain intangible rights and property. The liabilities assumed consist of current accounts payable and accrued expenses.

The
purchase price paid by the Company consisted of cash and shares of the Company's common stock. The total purchase price paid by the Company is as follows:

Cash paid, net of cash received

$
1,318Common stock issued


1,030Acquisition costs


131$
2,479


The
cash portion of the purchase price was partially set-off against the amounts due from Aware in connection with its Secured Promissory Note (See Note C).

At
closing, the Company issued 500,000 shares of common stock, which was valued at $1,030 based on the average closing market price of the Company's common stock from May 13, 2008
through May 21, 2008. The issuance of the shares of common stock was unregistered and the shares are initially subject to a

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Table of Contents

INFOLOGIX, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(in thousands, except share information)

NOTE OACQUISITION OF ASSETS OF AWARE INTERWEAVE, INC. (Continued)

two-year
lockup. The Company has placed 105,820 shares of the common stock in an escrow account for a period of eighteen months as security for indemnification obligations under the asset
purchase agreement.

The
purchase price was allocated to the assets acquired and liabilities assumed on a preliminary basis based on their estimated fair values on the date of acquisition, as follows:

Assets acquired, excluding cash:Accounts receivable

$
204Prepaid expenses


12Property and equipment


11Goodwill


1,697Customer relationships


175Software


500Trademarks/trade names


18Noncompete agreements


54Total assets acquired


2,671Liabilities assumed:Current liabilities


192Net assets acquired

$
2,479


The
customer relationships are being amortized on a straight-line basis over a two year period, which corresponds with the expected life of the underlying customer contracts.
Amortization of the software will not commence until such time as the software is available for sale. The non-compete agreements are amortized on a straight-line basis over a
three year period, which corresponds with the expiration date of the non-compete provisions contained within the asset purchase agreement. Goodwill and the trademarks/trade names have
indefinite lives and therefore are not amortized, however, they will be evaluated annually for impairment.

NOTE PACQUISITION OF DDMS PATENTS

On April 9, 2007, the Company acquired DDMS Holdings, LLC, a privately held Florida company, through a merger of DDMS Holdings, LLC with the Company's newly formed
wholly-owned subsidiary InfoLogix-DDMS, Inc. After the merger, InfoLogix-DDMS, Inc. was the surviving wholly-owned subsidiary of the Company. The acquired assets
consisted of five US patents, along with one published US patent application and four foreign patents issued and five foreign patents that are currently pending. Consideration given for all of the
shares of DDMS Holdings, LLC included $200 in cash and the issuance of 400,000 shares of the Company's common stock. The 400,000 shares of common stock are subject to a one-year
lock-up period.

Cash paid

$
200Common stock issued (400,000 shares)


1,520Acquisition costs


95$
1,815


The
value of the common stock issued above was based on the average closing market price of the Company's common stock for the period three days before and three days after the date of
issuance of the common stock.

The
purchase price was allocated to patents and patent applications and based on their fair values on the date of acquisition of $1,815.

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Table of Contents

INFOLOGIX, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(in thousands, except share information)

NOTE QACQUISITION OF CERTAIN ASSETS OF AMTSYSTEMS, INC.

On May 10, 2007, the Company, through its wholly-owned subsidiary InfoLogix Systems Corporation,
acquired certain assets of AMTSystems, Inc. (AMT) pursuant to an asset purchase agreement. The acquired assets include the rights to existing relationships with customers, vendors and partners,
and the intellectual property rights behind AMT's clinical and financial mobility solutions for healthcare. The purchase price paid by the Company consisted of $100 in cash, 138,160 shares of the
Company's common stock at closing, and $500 installment payments, payable in 72 equal monthly installments of $9 plus interest. The issuance of the shares of common stock was unregistered and the
shares are subject to a two-year lock-up.

Cash paid

$
100Common stock issued (138,160 shares)


500Installment payments


500Acquisition costs


208$
1,308


The
value of the common stock issued above was based on the average closing market price of the Company's common stock for the ten trading days prior to the closing date per the asset
purchase agreement.

The
acquired assets consisted primarily of software and customer lists. The purchase price was allocated to the assets and based on their estimated fair values on the date of acquisition
as follows:

Furniture and fixtures

$
4Technology


100Customer relationships


957Noncompete agreement


75Goodwill


172$
1,308


The
Company increased the value of goodwill by approximately $73 in the fourth quarter for 2007, as the result of adjustments made to the purchase price allocation.

NOTE RACQUISITION OF ASSETS OF HEALTHCARE INFORMATICS ASSOCIATES, INC.

On September 30, 2007, the Company, through its wholly-owned subsidiary, InfoLogix Systems
Corporation, acquired substantially all of the operating assets and assumed certain liabilities of Healthcare Informatics Associates, Inc. (HIA) pursuant to an asset purchase agreement. The
assets acquired relate to HIA's business of providing software implementation and consulting services, and included cash, accounts receivable, the rights to existing relationships with customers,
vendors and partners, certain tangible personal property and certain intangible rights and property. The liabilities assumed consist of current accounts payable and accrued expenses.

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Table of Contents

INFOLOGIX, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(in thousands, except share information)

NOTE RACQUISITION OF ASSETS OF HEALTHCARE INFORMATICS ASSOCIATES, INC. (Continued)

The
purchase price paid by the Company consisted of cash, shares of the Company's common stock, and a convertible promissory note. In addition, HIA is eligible to receive additional
contingent consideration under an earn-out agreement. The total purchase price paid by the Company is as follows:

Cash paid

$
4,584Common stock issued (755,478 shares)


2,863Convertible note payable


3,500Acquisition costs


683$
11,630


In
addition to the cash paid at closing, HIA and the Company deposited $900 into an escrow account to fund a portion of certain employee retention payments to be made to HIA's employees
over a three year period after the closing. In addition, the parties deposited $1,557 from the HIA cash account into an escrow account to be used to fund any working capital adjustment payable under
the asset purchase agreement, of which $1,481and $75 was released to HIA and the Company, respectively, on January 31, 2008. The Company also deposited $84 into an escrow account, which was
payable to HIA upon the collection of certain outstanding customer invoices due to HIA within 60 days after the closing and remittance of those amounts to the Company. The full amount of this
escrow was released to HIA on January 31, 2008.

At
closing, the Company issued 755,478 shares of common stock, which was valued at $2,863 for accounting purposes. This value of the common stock was based on the average closing market
price of the Company's common stock from September 26, 2007 through October 3, 2007. The issuance of the shares of common stock was unregistered and the shares are subject to a
one-year lockup.

In
addition, the Company issued a convertible promissory note (the "Note") to HIA with a principal amount of $3,500. The Note bears interest at a rate of 9% per annum, compounding
annually, from the date of the Note until the principal amount is paid in full. The principal amount of the Note and all accrued interest are payable in full on September 30, 2010. The
outstanding unpaid principal amount of the Note is convertible at the option of HIA into unregistered shares of the Company's common stock at a conversion price of $5.50 per share.

The
Company may require HIA to convert all or any portion of the outstanding unpaid principal of the Note into the Company's common stock at a conversion price of $5.50 per share if the
closing bid price of the Company's common stock for at least 45 consecutive trading days equals or exceeds $8.00 per share. Any accrued but unpaid interest on the Note at the time of any conversion
will be paid, at the Company's option, either in cash or in additional shares of the Company's common stock at a conversion price of $5.50 per share.

The
Note grants HIA the right to require the Company to redeem a portion of the unpaid and outstanding principal of the Note if the Company engages in an offering of its equity
securities, the primary purpose of which is to raise capital. HIA may also, at its option, declare the Note payable in full upon the occurrence of a Change of Control (as defined in the Note) of
InfoLogix Systems Corporation. The Note also contains customary events of default that would allow HIA to accelerate the amounts payable under the Note, including any default that results in the
acceleration of payment obligations on the Company's senior debt. The Note is subject to a subordination agreement with the Company's senior lender.

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Table of Contents

INFOLOGIX, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(in thousands, except share information)

NOTE RACQUISITION OF ASSETS OF HEALTHCARE INFORMATICS ASSOCIATES, INC. (Continued)

The
Company and HIA entered into an earn out agreement (the "Earn Out Agreement") pursuant to which HIA is eligible to earn additional consideration in respect of the two years (each
year, an "Earn Out Period") after the closing of the transaction. The Company and HIA entered into an amendment to the Earn Out Agreement in August 2008 which extended the first Earn Out Period from
twelve months to fifteen months ending December 31, 2008, and amended certain financial calculations used to determine the Company's earn out liability. Based on satisfaction of certain
milestones described in the Earn Out Agreement, the Company has recorded an adjustment of $1,958 to the purchase price as an increase to goodwill, which reflects the amount that HIA earned for the
first Earn Out Period and is also the maximum amount HIA could have earned. HIA can earn up to $2,500 in the second Earn Out Period upon satisfaction of certain financial milestones described in the
Earn Out Agreement. The additional cash consideration will not be accounted for by the Company until such time as the consideration, if any, is earned pursuant to the terms of the Earn Out Agreement.
At the point the consideration is earned, the Company will record the cash paid as an adjustment to the purchase price.

The
purchase price was allocated to the assets acquired and liabilities based on their fair values on the date of acquisition, as follows:

Assets acquired, excluding cash:Accounts receivable

$
2,667Computer equipment


44Goodwill


5,496Customer relationships


2,751Trademarks/trade names


1,400Noncompete agreement


98Total assets acquired


12,456Liabilities assumed:Current liabilities


826Net assets acquired

$
11,630


The
following unaudited pro forma financial information assumes the acquisition had occurred at the beginning of the periods presented. The unaudited pro forma information is provided
for informational purposes only. These pro forma results are based upon the respective historical financial statements of the respective companies, and do not incorporate, nor do they assume any
benefits from cost savings or synergies of operations of the combined company. The pro forma results of operations do not necessarily reflect the results that would have occurred had the acquisition
occurred at the beginning of the periods presented or the results that may occur in the future. The pro forma adjustments principally reflect the preliminary allocation of the purchase price to the
difference between the fair value and book value of property and equipment, resulting in increases or decreases to historical depreciation expense, and the allocation to identifiable intangible assets
discussed above, resulting in increased amortization expense. In

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INFOLOGIX, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(in thousands, except share information)

NOTE RACQUISITION OF ASSETS OF HEALTHCARE INFORMATICS ASSOCIATES, INC. (Continued)

addition
the pro forma adjustments also reflect the additional debt issued in connection with the acquisition resulting in increased interest expense.

Year Ended December 31,2007

2006Revenue

$
85,996

$
71,680Net loss

$
(2,732
)
$
(838
)Loss per share:Basic

$
(0.11
)
$
(0.06
)Diluted

$
(0.11
)
$
(0.06
)


NOTE SEQUITY

On November 29, 2006, concurrent with the merger with New Age discussed in Note A, the Company closed a private placement of 8,500,000 shares of its common stock to
accredited investors. The shares were sold for an aggregate purchase price of $17,000 before costs associated with the private placement of $2,021. The private placement was exempt from registration
under the Securities Act of 1933 as amended (Securities Act), and Regulation D promulgated thereunder.

NOTE T2008 EMPLOYEE STOCK PURCHASE PLAN

On January 1, 2008, the Company established the 2008 Employee Stock Purchase Plan (ESPP). The purpose of the ESPP is to provide the Company's employees the opportunity to purchase
common stock through accumulated payroll deductions. The ESPP is administered by the Board of Directors. The Company has reserved 1,000,000 shares for use in the ESPP. The purchase price of the common
stock is at an amount equal to 85% of the fair market value of a share of common stock on the enrollment date or the exercise date, whichever is lower. The ESPP has consecutive three month offering
periods commencing on the first trading day of each calendar quarter. An eligible employee may become a participant in the ESPP by completing a subscription agreement authorizing payroll deductions
not to exceed 10% of the employee's compensation. These payroll deductions commence on the first payroll date following the enrollment date and end on the last payroll date in the offering period.

On
the enrollment date of each offering period, each eligible participating employee is granted an option to purchase on the exercise date of such offering period up to a number of
shares of the common stock determined by dividing the employee's payroll deductions accumulated prior to such exercise date by the applicable purchase price. Employees are not permitted to purchase
more than 2,500 shares during each offering period. The option for the purchase of shares is exercised automatically and purchases of shares are effective on the last day of each quarter. The maximum
number of full shares subject to the option are purchased for such participant at the applicable purchase price with the accumulated payroll deductions in his or her account. The Company issued
172,966 shares during 2008, in connection with the ESPP for 2008, for which it received $158 in cash.

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INFOLOGIX, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(in thousands, except share information)

NOTE USTOCK BASED COMPENSATION EXPENSE

In November 2006, the Company's board of directors approved the 2006 Equity Compensation Plan (Plan). In accordance with the plan, the board of directors may grant options to purchase
shares of the Company's common stock to employees, officers, consultants and non-employee directors. The Plan provides for the issuance of options to purchase up to 3,860,000 shares of the
Company's common stock. On November 29, 2006, the Company granted 617,000 incentive stock options to purchase common stock to employees at $2.00 per share. In addition, on November 29,
2006, the Company granted 1,495,000 nonqualified stock options to purchase the Company's common stock to executive officers, directors and a consultant of the Company at $2.00 per share. The incentive
stock options and the non-qualified options expire November 29, 2016.

The
Plan also provides that employees, consultants and non-employee directors are eligible to receive nonqualified stock options, while only employees are eligible to receive
incentive stock options. The incentive stock options offer employees certain tax advantages that are not available under nonqualified stock options. The board of directors, or a committee thereof
whose members are appointed by the Board, administers the Plan, and has discretion in setting the terms of options granted to employees, consultants and non-employee directors.

Upon
the closing of the merger and the private placement as discussed in Notes A and S, the Company granted 2,650,000 warrants to purchase shares of the Company's common stock at
$2.00 per share to certain officers, directors and consultants to the Company. The warrants vest 100% on the grant date and are exercisable 25% on the first anniversary and the remainder ratably on a
monthly basis over the following three years.

Under
SFAS 123(R), the Company estimated the fair value of stock options and warrants granted using the Black-Scholes valuation model and straight-line amortization.
This model utilizes the estimated fair value of common stock and requires that, at the date of grant, we use the expected term of the option, the expected volatility of the price of our common stock,
risk free interest rates and expected dividend yield of our common stock. This fair value is then amortized on a straight-line basis over the requisite service periods of the awards, which
is generally the vesting period. Employee options typically vest with respect to 25% of the shares one year after the
options' grant date and the remainder ratably on an annual basis over the following three years. Director options typically vest with respect to 50% of the shares six months after the options' grant
date and the remainder ratably on a monthly basis over the following three years. Fully-vested warrants that become exercisable ratably on a monthly basis over the following four years were granted to
employees and non-employee consultants. These fully-vested warrants were fully expensed as of December 31, 2006.

Years Ended December 31,2008

2007

2006Employee and Non-employee Stock Options and WarrantsExpected life in years

5.00

5.00


5.00Risk-free interest rate

2.5% - 3.3%

3.5% - 4.0%


4.41
%Volatility

64.3% - 81.2%

57.9% - 61.4%


66.6
%Dividend yield

0.00

0.0%


0.0
%Fair value of grants

$0.61 - $1.45

$1.21 to $1.37

$
1.47Number of Shares

811,000

635,000


2,112,000


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INFOLOGIX, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(in thousands, except share information)

NOTE USTOCK BASED COMPENSATION EXPENSE (Continued)

The
expected term represents the period that stock-based awards are expected to be outstanding, giving consideration to the contractual terms of the stock-based awards, vesting schedules
and expectations of future employee behavior as influenced by changes to the terms of our stock-based awards. For the year ended December 31, 2006, the simplified method of determining the
expected term was elected as permitted by SEC Staff Accounting Bulletin 107. The computation of expected volatility for the year ended December 31, 2006 is based on the historical volatility of
comparable companies from a representative peer group selected based on industry and market capitalization data. As required by
SFAS 123(R), management estimates expected forfeitures and is recognizing compensation costs only for those equity awards expected to vest.

For
the years ended December 31, 2008, 2007 and 2006 the recognized compensation cost for stock options and warrants granted to employees was approximately $960, $828 and $2,253,
respectively. At December 31, 2008 and 2007 the total compensation cost related to stock options granted under SFAS 123(R) to employees and directors but not yet recognized was
approximately $2,001 and $2,661, net of estimated forfeitures, respectively. This cost will be amortized on a straight-line basis over the vesting period, which is typically
4 years. For the years ended December 31, 2008, 2007 and 2006 the recognized compensation cost for warrants issued to consultants was $-0-, $-0- and $520,
respectively. In addition, the Company has recorded a total income tax benefit for 2007 and 2006 of approximately $1,418 and $1,337, respectively related to the granting of the nonqualified options
and warrants. The Company did not record an income tax benefit for these options and warrants during 2008.

Shares

Weighted
Average
Exercise Price

Weighted
Average
Remaining
Life (years)

Aggregate
Intrinsic ValueOptions:Outstanding at January 1, 2007


2,112,000

$
2.00


9.92

$
6,653Granted


635,000


2.73Forfeited


(36,500
)

2.00Expired





Exercised





Outstanding at December 31, 2007


2,710,500


2.26


9.27


415Granted


811,000


1.47Forfeited


(229,000
)

2.08Expired





Exercised





Outstanding at December 31, 2008


3,292,500

$
2.00


8.49

$
Exercisable at December 31, 2008


1,301,250

$
2.05


8.01

$



The
intrinsic value of stock options is the amount by which the market price of the stock on a given date, such as at the end of the period or on the day of exercise,
exceeded the market price of stock on the date of grant.

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INFOLOGIX, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(in thousands, except share information)

NOTE VSELECTED CONSOLIDATED QUARTERLY FINANCIAL DATA (UNAUDITED)

2008 Quarter Ended

December 31

September 30

June 30

March 31Revenues

$
26,759

$
23,824

$
26,347

$
23,786Gross profit


6,837


6,210


7,288


6,205Net loss


(9,133
)

(2,520
)

(540
)

(991
)Loss per sharebasic and diluted

$
(0.36
)
$
(0.10
)
$
(0.02
)
$
(0.04
)Weighted average shares outstanding


25,518,422


25,477,308


25,193,700


24,918,441




2007 Quarter Ended

December 31

September 30

June 30

March 31Revenues

$
23,333

$
20,455

$
21,812

$
13,174Gross profit


6,267


5,463


5,654


3,341Net loss


(1,256
)

(466
)

(367
)

(1,100
)Loss per sharebasic and diluted

$
(0.05
)
$
(0.02
)
$
(0.02
)
$
(0.05
)Weighted average shares outstanding


24,902,000


24,152,217


24,039,991


23,595,663


Note:
Net loss per share for year ended December 31, 2007 is $0.13; a calculation of each individual quarter results in the sum equal to a net loss per share of $0.14.

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

None

Item 9A(T).    Controls and Procedures

We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our reports
filed under the Securities Exchange Act of 1934, as amended (Exchange Act), is recorded, processed, summarized and reported within the time periods specified in the SEC's rules and forms and that such
information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow for timely decisions regarding required
disclosure. In designing and evaluating the disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only
reasonable assurance of achieving the desired control objectives, and management is required to apply its judgment in evaluating the cost-benefit relationship of possible controls and
procedures.

Our
Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e)
under the Exchange Act) were (a) designed to ensure that the information we are required to disclose in our reports under the Exchange Act is recorded, processed and reported in an accurate
manner and on a timely basis and the information that we are required to disclose in our Exchange Act reports is accumulated and communicated to management to permit timely decisions with respect to
required disclosure and (b) operating in an effective manner.

Management's Report on Internal Control Over Financial Reporting

Our management is responsible for establishing and maintaining internal control over financial reporting. As required by SEC
Rule 15d-15(b), we carried out an evaluation under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer,
of the effectiveness of the design and operation of our disclosure controls and procedures as of December 31, 2008. As defined in the rules of the Securities and Exchange Commission, internal
control over financial reporting is a process designed by, or under the supervision of, our principal executive and principal financial officers and effected by our Board of Directors, management and
other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of consolidated financial statements for external purposes in accordance with U.S.
generally accepted accounting principles.

Our
internal control over financial reporting includes those policies and procedures that:



Because
of its inherent limitations, a system of internal control over financial reporting can provide only reasonable assurance with respect to financial statement preparation and
presentation and 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.

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In
connection with the preparation of our annual consolidated financial statements, management has conducted an assessment of the effectiveness of our internal control over financial
reporting based on the framework set forth inInternal ControlIntegrated Frameworkissued by the Committee of Sponsoring Organizations of
the Treadway Commission (COSO). Management's assessment included an evaluation of the design of our internal control over financial reporting and testing of the operational effectiveness of those
controls. Based on this evaluation, we have concluded that, as of December 31, 2008, our internal control over financial reporting was effective to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of financial statements for external purposes in accordance with U.S. generally accepted accounting principles.

This
annual report does not include an attestation report of the Company's independent registered public accounting firm regarding internal control over financial reporting. Management's
report was not
subject to attestation by the Company's independent registered public accounting firm pursuant to temporary rules of the Securities and Exchange Commission that permit the Company to provide only
management's report in this annual report.

Changes in internal controls over financial reporting

We continually seek ways to improve the effectiveness and efficiency of the Company's internal controls over financial reporting,
resulting in frequent process refinement. However, there have been no changes in our internal control over financial reporting that occurred during our last fiscal period to which this Annual Report
on Form 10-K relates that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Item 9B.    Other Information

None.

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PART III

Item 10.    Directors, Executive Officers and Corporate Governance

Directors

Each of our directors serves a one-year term until his successor has been duly elected and qualified. Set forth below is
biographical information for the directors of InfoLogix, Inc.:

David T. Gulian,44, co-founded InfoLogix in 2001 and serves as our President and Chief Executive Officer. Mr. Gulian
has served as a member of our board of directors since November 2006 and as a member of the board of directors of InfoLogix Systems Corporation, our wholly-owned subsidiary, since 2001.
Mr. Gulian has over 20 years of industry experience with leading information technology and enterprise mobility firms. Prior to the formation of InfoLogix, Mr. Gulian
co-founded, and from 1996 to 2001 served as President of, Prologix, a provider of mobility systems and wireless platforms. Prologix merged with Datavision in 1999. Prior to Prologix,
Mr. Gulian was the Vice President of RF Mobile Solutions from 1994 to 1996. He earned a Bachelor of Science degree in Information Systems from the Rochester Institute of Technology.

Wayne D. Hoch,53, joined our board of directors in November 2006 and is Chairman of the Audit Committee of our board of directors. He is
currently a partner of Witmer Partners, LLC, a private investment and management advisory firm that focuses on the real estate financial services industry. Mr. Hoch has over
25 years of domestic and international financial management experience focusing on such areas as U.S. and international accounting standards, financial controls, risk management, internal
audit, taxation, financial analysis, and mergers and acquisitions. From 1995 to 2006, Mr. Hoch was Executive Vice President and Chief Financial Officer of GMAC Commercial Holding Corp, now
known as Capmark Financial Group, a global commercial real estate financial services firm specializing in lending, mortgage banking, investment and funds management, and servicing. As one of the
original members of GMAC Commercial's executive team, he served as a member of the firm's board of directors, its Executive Committee and as co-chair of its Enterprise Risk Management
Committee. From 1986 to 1995, Mr. Hoch held various senior level corporate accounting and financial management positions at GMAC Residential Mortgage. Prior to joining GMAC Residential
Mortgage, he spent seven years (1979-1986) at AmSouth Mortgage Company holding positions in corporate accounting, information technology and internal audit.

Richard D. Hodge,44, co-founded InfoLogix in 2001 and serves as an Executive Vice President. Mr. Hodge has served as a
member of our board of directors since November 2006 and as a member of the board of directors of InfoLogix Systems Corporation, our wholly-owned subsidiary, since 2001. Mr. Hodge has an
extensive background in executive sales management and development focused on wireless mobility. Prior to the formation of InfoLogix, Mr. Hodge co-founded Prologix, a provider of
mobility systems and wireless platforms, in 1996 and, from 1996 to 2001, served as an Executive Vice President. Prologix merged with Datavision in 1999. From 1988 to 1995, Mr. Hodge managed the
Eastern sales division for Norand Corporation, a wireless mobility device manufacturer. Mr. Hodge attended Kean College with a concentration in Business Management.

Thomas C. Lynch, 66, joined our board of directors in November 2006. He has served as a Senior Vice President of The Staubach Company, a
real estate advisory firm, since 2001. From 1995 to 2000, Mr. Lynch served as a Senior Vice President for Safeguard Scientifics, Inc., a public investment firm specializing in expansion
financing, management buyout, recapitalization, industry consolidation, and early-stage transactions. While at Safeguard, he served from 1998 to 2000 as President and Chief Operating Officer at
CompuCom Systems, a subsidiary of Safeguard. Following a 31 year career of Naval service after graduating from the U.S. Naval Academy, he retired with the rank of Rear Admiral in 1995.
Mr. Lynch's Naval service included Chief, Navy Legislative Affairs, command of the Eisenhower Battle Group during Operation Desert Shield, Superintendent of the U.S. Naval Academy from 1991 to
1994 and Director of the Navy Staff in the Pentagon from 1994 to 1995. Mr. Lynch serves as a director on the following boards:

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Pennsylvania
Eastern Technology Council, Epitome Systems, Mikros Communications, Telkonet, and USO World Board of Governors. He also serves as a trustee of the U.S. Naval Academy Foundation.
Mr. Lynch is a former President of the Valley Forge Historical Society and a former Chairman of the Cradle of Liberty Council, Boy Scouts of America.

Thomas O. Miller, 57, joined our board of directors in November 2006. He is currently a partner in The SAGE Company, which assists small
to mid-size companies by providing consulting services to build increased levels of company performance and value. Mr. Miller was President of Intermec Technologies, a supply chain
information systems provider, from 2004 to 2005 and a corporate officer in UNOVA Corporation, Intermec's parent company, from 2001 to 2006. Mr. Miller also served as Intermec's Executive Vice
President, Global Sales and Marketing from 2001 to 2003 and Senior Vice President, Sales Americas and as Senior Vice President of System and Solutions from 1999 to 2001. From 1982 to 1999, he served
in various positions with Norand Corporation including President and Senior Vice President of Sales, Marketing and Operations, helping in the development of Norand's
point-of-sale, wireless and direct story delivery automation businesses and in its 1997 sale to Western Atlas Corporation. Mr. Miller serves on the board of directors
for Socket Mobility, Inc. From 1996 to 2001, Mr. Miller was a member of the board of directors of Eagle Point Software, a NASDAQ listed architecture, civil engineering, and landscaping software
company.

Warren V. "Pete" Musser, 82, joined InfoLogix as the Chairman of our board of directors in November 2006. Mr. Musser is the founder
and CEO of The Musser Group LLC, a strategy consulting firm based in Wayne, Pennsylvania which he started in 2001. Mr. Musser is the founder and former Chairman and
CEO and present Chairman Emeritus of Safeguard Scientifics, Inc., a company that builds value in high-growth, revenue-stage information technology and life sciences businesses. He
was a founding investor of QVC, Novell, CompuCom Systems, Cambridge Technology Partners, and Internet Capital Group, among other companies. Mr. Musser currently serves on the board of directors
of Nutrisystems, Inc., Internet Capital Group, Inc., and serves as Vice Chairman of Health Benefits Direct Corporation and Chairman of Telkonet, Inc. Mr. Musser serves on a
variety of civic and charitable boards, including as Chairman of the Eastern Technology Council, Chairman of Economics PA and Vice Chairman of the National Center for the American Revolution.

Jake Steinfeld,51, joined our board of directors in November 2006. Since 1983, Mr. Steinfeld has served as the Chairman of Body by
Jake Global LLC. He is the founder of FiT TV, the first 24-hour fitness television network, which was sold to News Corporation in 1998, and, in 2006, founded Exercise TV, the first
on-demand fitness television network in partnership with Comcast, Time Warner, and New Balance. Mr. Steinfeld is the Chairman of the California Governor's Council on Physical
Fitness and Sports. He is also the founder of Major League Lacrosse (MLL), the first professional outdoor lacrosse league, and the "Don't Quit! Foundation," a non-profit organization that
places fitness centers in inner-city middle schools across the country.

Richard A. Vermeil, 72, joined our board of directors in November 2006. He is the former head coach of the Kansas City Chiefs
(2001-2005), St. Louis Rams (1997-1999) and Philadelphia Eagles (1976-1982) of the National Football League. Mr. Vermeil coached the St. Louis
Rams to victory in Super Bowl XXXIV, is one of just four coaches in NFL history to lead two different teams to the Super Bowl and was twice named NFL Coach of the Year. He also served as an assistant
coach of the Los Angeles Rams from 1969 to 1974 and as the head coach of UCLA from 1974 to 1975. His 1975 UCLA team won the 1976 Rose Bowl. Mr. Vermeil is the only head coach to have won both
the Rose Bowl and the Super Bowl. From 1982 to 1997, Mr. Vermeil was a television broadcaster for CBS and ABC. He also is a motivational speaker.

Craig A. Wilensky,45, co-founded InfoLogix in 2001 and serves as an Executive Vice President. Mr. Wilensky has served
as a member of our board of directors since November 2006 and as a member of the board of directors of InfoLogix Systems Corporation, our wholly-owned subsidiary, since 2001. Prior to the formation of
InfoLogix, Mr. Wilensky co-founded Prologix, a provider of mobility systems and wireless

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platforms,
in 1996 and, from 1996 to 2001, served as an Executive Vice President. Prologix merged with Datavision in 1999. From 1990 to 1996, Mr. Wilensky led the efforts of developing new
markets for Intermec and Norand Corporation, a pioneer in developing wireless data networks and handheld computers. Mr. Wilensky started his career in engineering and sales at Prime
Computer/Computervision in 1986. Mr. Wilensky has a Bachelors Degree in Computer Science from Marist College, Poughkeepsie, NY.

Executive Officers

Set forth below is biographical information concerning the non-director executive officers of InfoLogix, Inc.:

John A. Roberts, 50, has served as our Chief Financial Officer since September 2006 and our Secretary since November 2006.
Mr. Roberts served as Acting Chief Financial Officer and Secretary of Clarient, Inc., a publicly-traded provider of diagnostic laboratory services, from February 2006 until August 2006.
Mr. Roberts served as Chief Financial Officer and Secretary of Daou Systems, Inc., a publicly-traded professional services consulting business specializing in healthcare information
technology, from 2003 to 2006. From 2001 to 2002, Mr. Roberts served as the Vice President of Business Development for MEDecision, Inc., a software products company providing medical
management solutions for managed care organizations. From 1999 to 2001, Mr. Roberts held the position of Senior Vice President of Corporate Development and Chief Financial Officer for
HealthOnline, Inc., a provider of web-based community hosting services. Mr. Roberts earned a Bachelor of Science and a Master's degree in Business Administration from the
University of Maine.

Eric N. Rubino, 50, has served as our Chief Operating Officer since November 2007. Before joining InfoLogix, Mr. Rubino served as
the Chief Operating Officer of Neoware, a publicly-traded provider of thin client computing devices, software and services, where he was responsible for overseeing operations, customer service,
engineering, information technology, administration and human resources from 2002 to September 2007. Before joining Neoware, Mr. Rubino worked for SAP Americas, a subsidiary of business
software company SAP AG, from 1991 to 2002 and served as its Senior Vice President, General Counsel and Corporate Secretary from 1995 to 1999 and Chief Operating Officer from 1999 to 2002.
Mr. Rubino earned a Bachelor of Science in Marketing from Rider University, a Master's degree in Business Administration from St. Joseph's University, and a Juris Doctor from Widener
University School of Law.

Gerald E. Bartley, 66, has served as Executive Vice President and as Managing Director of our HIA Consulting group since September 2007.
Mr. Bartley served as President and Chief Executive Officer of Healthcare Informatics Associates, Inc., a specialized healthcare consulting business, from 1996 to September 2007. Before
joining Healthcare Informatics Associates, Inc., Mr. Bartley served as Vice President for BRC Healthcare, a hospital IT outsourcing firm from 1994 to 1996. In addition,
Mr. Bartley served in various management capacities for the Healthcare Division of Alltel/TDS Healthcare Systems, an HIS software and outsourcing corporation, from 1982 to 1994,
Mr. Bartley served a Chief Information Officer of Washoe Medical Center, Reno Nevada and Kettering Medical Center, Kettering, Ohio. Mr. Bartley earned his Medical Technology degree and
was a pre-med student for Veterinary Medicine.

Audit Committee

The board of directors has a standing Audit Committee which is comprised of Wayne D. Hoch (Chairman), Thomas O. Miller, and Thomas C.
Lynch. The principal duties of the Audit Committee are to oversee management's conduct of our accounting and financial reporting processes, the audit of our financial statements and our compliance
with applicable legal and regulatory requirements, to select and retain our independent registered public accounting firm, to review with management and the independent registered public accounting
firm our annual financial statements and related footnotes, to review our internal audit activities, to review with the independent registered public accounting firm the planned scope and results of
the annual audit and their reports and recommendations, and to oversee

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management's
maintenance of, and review with the independent registered public accounting firm matters relating to, our system of internal controls. Our board of directors has determined that
Mr. Hoch is an "audit committee financial expert" in accordance with the definition of "audit committee financial expert" set forth in Item 407(d)(5)(ii) of
Regulation S-K, as adopted by the Securities and Exchange Commission.

Code of Ethics

InfoLogix maintains a code of business conduct and ethics for directors, officers and employees, including its Chief Executive Officer
and Chief Financial Officer. The code is available free of charge on our website atwww.infologix.com, as well as in print to any stockholder upon
request by writing to InfoLogix at 101 E. County Line Road, Suite 210, Hatboro, Pennsylvania, 19040 or by calling 215-604-0691. Our board of directors and Nominating and
Governance Committee regularly reviews corporate governance developments and modifies the code as warranted. Any modifications are reflected on our website. We intend to satisfy the disclosure
requirements under Item 10 of Form 8-K regarding an amendment to, or waiver from, a provision of our code by posting such information on our website.

Section 16(a) Beneficial Ownership Reporting Compliance

Section 16(a) of the Securities Exchange Act of 1934 requires our executive officers and directors and persons who own more than
ten percent of a registered class of our
equity securities (collectively, the "reporting persons") to file reports of ownership and changes in ownership with the Securities and Exchange Commission and to furnish InfoLogix with copies of
these reports. Based on our review of the copies of the reports we have received, and written representations received from certain reporting persons with respect to the filing of reports on
Forms 3, 4 and 5, InfoLogix believes that all filings required to be made under Section 16(a) by the reporting persons since our common stock became registered pursuant to
Section 12 of the Exchange Act were made on a timely basis, except that (i) John A. Roberts was inadvertently late in filing a Form 4 relating to an acquisition of InfoLogix's
common stock and (ii) David T. Gulian was inadvertently late in filing a Form 4 related to an acquisition of InfoLogix's common stock.

Item 11.    Executive Compensation

Executive Compensation

Compensation Committee

The Compensation Committee of our board of directors is comprised of Thomas O. Miller (Chairman), Wayne D. Hoch, and Richard A.
Vermeil. The principal duties of the Compensation Committee are to review and approve goals and objectives relevant to the compensation and benefits of our Chief Executive Officer, to recommend to the
independent directors the annual and long term compensation of our Chief Executive Officer in accordance with those goals and objectives and in light of existing agreements, to review, approve and
recommend to the independent directors the annual compensation for all executive officers, to make recommendations to our board of directors regarding incentive compensation and stock incentive plans,
and to administer stock incentive plans. The Compensation Committee may form, and delegate all or any portion of its functions to, a subcommittee consisting of one or more of its members.

The
Compensation Committee met twice during 2008. Meeting agendas are set by the Chairman. The Compensation Committee approves all employment or severance agreements entered into with
the Chief Executive Officer and other executives. In the absence of a formal agreement, base salaries for the Chief Executive Officer and the other executive officers are set annually by the
Compensation Committee and our board of directors, typically in March of each year after our financial results are known. In determining whether to recommend to the independent directors for approval
merit based increases to the base salaries of the Chief Executive Officer and our other executive officers, the Compensation Committee considers our overall performance compared to our stated
strategic plan, including objective performance criteria

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such
as the levels of net income, EBITDA and revenues that we achieved from year to year and over longer time periods. In accordance with our statement on corporate governance, the Compensation
Committee also considers the following criteria when evaluating the performance of our Chief Executive Officer for potential merit based salary increases and other compensation awards: (i) the
creation of our vision and strategy; (ii) the execution of our vision and strategy; (iii) the development of sound long term and annual business plans in support of the approved
strategy; (iv) maintenance of consistent values and exemplary conduct; and (v) the development, retention and motivation of an effective executive management team and succession plans
for our executive management team.

The
Compensation Committee considers the recommendations of our Chief Executive Officer in establishing compensation for other executive officers and invited our Chief Executive Officer
to participate in its meetings to discuss the compensation of our other executive officers. When considering whether to award stock options to the Chief Executive Officer and other executive officers,
and the size of any such award, the Compensation Committee considers previous equity awards made to the Chief Executive Officer and other executive officers, the size of their equity interest in
InfoLogix, their job duties and responsibilities, and the overall contribution made to InfoLogix. The Compensation Committee also considers conditions in the market for executive talent in which it
competes when determining the size of any option award to be made to a candidate for a position as an executive officer. To date, the Compensation Committee has made grants of stock options to
executive officers upon the consummation of the merger with New Age Translation, Inc. or in connection with the officer's initial hiring and subsequent incentive awards granted in 2008.

The
Compensation Committee has the exclusive authority to retain and terminate executive compensation consultants that assist in the evaluation of executive officer or director
compensation. To date, the Compensation Committee has not engaged a compensation consultant to assist it in setting executive officer or director compensation.

Summary Compensation Table2008 and 2007

The following table shows information concerning the compensation that we recorded for the two most recent fiscal years paid to our
Chief Executive Officer and our two other most highly compensated officers.

Name and Principal Position

Year

Salary($)

Bonus($)

Option
Awards($)(1)

All Other
Compensation($)

Total($)David T. Gulian(2)


2008


335,452


118,731


102,634


38,016


594,833President and Chief Executive Officer


2007


340,266


147,000


99,225


34,779


621,270Richard D. Hodge(3)


2008


295,524


96,923


99,225


43,130


552,802Executive Vice President


2007


298,408


120,000


99,225


36,999


554,032Craig A. Wilensky(4)


2008


295,512


96,923


99,225


39,931


549,591Executive Vice President


2007


302,722


120,000


99,225


36,183


558,130


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Employment Arrangements

David T. Gulian.We entered into an employment agreement with David T. Gulian in July 2006. Under this agreement, Mr. Gulian
agreed to
continue acting as our President and Chief Executive Officer, under the supervision of our board of directors, and to perform such duties and to have such authority consistent with his position as may
from time to time be specified by our board of directors. As compensation for his services pursuant to the employment agreement, we paid Mr. Gulian a base salary of $335,000 per year. In
addition, Mr. Gulian was entitled to receive an annual bonus of a minimum of $147,000. The Compensation Committee did not set targets for the fiscal year ending December 31, 2008 and the
bonus was paid monthly in accordance with our normal payroll procedures, however the bonus amount was reduced by 50% on August 1, 2008. During 2008, the Compensation Committee awarded
Mr Gulian options to purchase 150,000 shares of common stock at $0.92 per share. As a result of the consummation of the merger with New Age Translation, Inc. in 2006, Mr. Gulian
received a one-time bonus of $115,000 under his employment agreement and 750,000 warrants to purchase our common stock at an exercise price of $2.00 per share. Pursuant to
Mr. Gulian's employment agreement, we obtained a long-term disability insurance policy for Mr. Gulian and paid all premiums on this policy. In 2006, Mr. Gulian was
also granted options to purchase 300,000 shares of our common stock at an exercise price of $2.00 per share.

Mr. Gulian's
employment agreement expired on December 31, 2008. On March 13, 2009, we entered into a severance agreement with Mr. Gulian. Under the severance
agreement, Mr. Gulian agreed to continue as our President and Chief Executive Officer, under the supervision of our board of directors, and to perform such duties and to have such authority
consistent with his position as may from time to time be specified by our board of directors. As compensation for his services pursuant to the severance agreement, we pay Mr. Gulian a base
salary of $361,000 per year beginning January 1, 2009 and terminating on December 31, 2010. Thereafter, the term of the agreement will automatically extend an additional year on each
anniversary date unless our board of directors, at its discretion, elects not to continue the severance agreement. Under the terms of his severance agreement, Mr. Gulian has agreed to standard
confidentiality restrictions. He is also subject to a noncompetition covenant that generally restricts his ability to compete with us in the United States for a period of one year following the
termination of his employment for any reason. Mr. Gulian has also agreed to a nonsolicitation covenant that is applicable during the term of his employment and for a period of one year
following the termination of employment.

Richard D. Hodge.We entered into an employment agreement with Richard D. Hodge in July 2006. Under this agreement,
Mr. Hodge agreed to
continue acting as Executive Vice President, under the supervision of our Chief Executive Officer, and to perform such duties and to have such authority consistent with his position as may from time
to time be specified by our Chief Executive Officer. As compensation for his services pursuant to the employment agreement, we paid Mr. Hodge a salary of $295,000 per year. In addition,
Mr. Hodge was entitled to receive an annual bonus of up to $120,000. The Compensation Committee did not set targets for the fiscal year ending December 31, 2008 and the bonus

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was
paid monthly in accordance with the our normal payroll procedures, however the bonus amount was reduced by 50% on August 1, 2008. As a result of the consummation of the merger with New Age
Translation, Inc. in 2006, Mr. Hodge received a one-time bonus of $80,000 under his employment agreement and 375,000 warrants to purchase our common stock at an exercise
price of $2.00 per share. Pursuant to Mr. Hodge's employment agreement, we obtained a long-term disability insurance policy for Mr. Hodge and paid all premiums on this
policy. In 2006, Mr. Hodge was also granted options to purchase 300,000 shares of our common stock at an exercise price of $2.00 per share.

Mr. Hodge's
employment agreement expired on December 31, 2008. On March 13, 2009, we entered into a severance agreement with Mr. Hodge. Under the severance
agreement, Mr. Hodge agreed to continue as our Executive Vice President, under the supervision of our Chief Executive Officer, and to perform such duties and to have such authority consistent
with his position as may from time to time be specified by our Chief Executive Officer. As compensation for his services pursuant to the severance agreement, we pay Mr. Hodge a salary of
$295,000 per year beginning January 1, 2009 and terminating on December 31, 2010. Thereafter, the term of the agreement will automatically extend an additional year on each anniversary
date unless our board of directors, at its discretion, elects not to continue the severance agreement. Under the terms of his severance agreement, Mr. Hodge has agreed to standard
confidentiality restrictions. He is also subject to a noncompetition covenant that generally restricts his ability to compete with us in the United States for a period of one year following the
termination of his employment for any reason. Mr. Hodge has also agreed to a nonsolicitation covenant that is applicable during the term of his employment and for a period of one year following
the termination of employment.

Craig A. Wilensky.We entered into an employment agreement with Craig A. Wilensky in July 2006. Under this agreement,
Mr. Wilensky agreed to
continue acting as an Executive Vice President, under the supervision of our Chief Executive Officer, and to perform such duties and to have such authority consistent with his position as may from
time to time be specified by our Chief Executive Officer. As compensation for his services pursuant to the employment agreement, we paid Mr. Wilensky a base salary of $295,000 per year. In
addition, Mr. Wilensky was entitled to receive an annual bonus of up to $120,000. The Compensation Committee did not set targets for the fiscal year ending December 31, 2008 and the
bonus was paid monthly in accordance with our normal payroll procedures, however the bonus amount was reduced by 50% on August 1, 2008. As a result of the consummation of the merger
with New Age Translation, Inc. in 2006, Mr. Wilensky received a one-time bonus of $80,000 under his employment agreement and 375,000 warrants to purchase our common stock at
an exercise price of $2.00 per share. Pursuant to Mr. Wilensky's employment agreement, we obtained a long-term disability insurance policy for Mr. Wilensky and paid all
premiums on this policy. In 2006, Mr. Wilensky was also granted options to purchase 300,000 shares of our common stock at an exercise price of $2.00 per share.

Mr. Wilensky's
employment agreement expired on December 31, 2008. On March 13, 2009, we entered into a severance agreement with Mr. Wilensky. Under the
severance agreement, Mr. Wilensky agreed to continue as an Executive Vice President, under the supervision of our Chief Executive Officer, and to perform such duties and to have such authority
consistent with his position as may from time to time be specified by our Chief Executive Officer. As compensation for his services pursuant to the severance agreement, we pay Mr. Wilensky a
base salary of $295,000 per year beginning January 1, 2009 and terminating on December 31, 2010. Thereafter, the term of the agreement will automatically extend an additional year on
each anniversary date unless our board of directors, at its discretion, elects not to continue the severance agreement. Under the terms of his severance agreement, Mr. Wilensky has agreed to
standard confidentiality restrictions. He is also subject to a noncompetition covenant that generally restricts his ability to compete with us in the United States for a period of one year following
the termination of his employment for any reason. Mr. Wilensky has also agreed to a nonsolicitation covenant that is applicable during the term of his employment and for a period of one year
following the termination of employment.

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Equity Plans2008 Outstanding Equity Awards at Fiscal Year End

The following table shows information concerning outstanding equity awards at December 31, 2008 made by InfoLogix to our Chief
Executive Officer and our two other most highly compensated officers.

Equity AwardsName

Number of securities
underlying
Unexercised Awards
(#) exercisable

Number of
Securities
Underlying
Unexercised Awards
Unexercisable (#)

Award Exercise
Price($)

Award
Expiration DateDavid T. Gulian


-0-
150,000
390,625


150,000
150,000
359,375
(4)(1)(2)

0.92
2.00
2.00


11/06/2018
11/29/2016
11/29/2011Richard D. Hodge


150,000
195,313


150,000
179,687
(1)(3)

2.00
2.00


11/29/2016
11/29/2011Craig A. Wilensky


150,000
195,313


150,000
179,687
(1)(3)

2.00
2.00


11/29/2016
11/29/2011


---

Potential Payments Upon Termination or Change of Control

As described under "Employment Arrangements" in this Item 11, on March 13, 2009, we entered into severance agreements
with our named executive officers. The following is a summary of the arrangements that provide for payment to our Chief Executive Officer and our two other most highly compensated officers, following
or in connection with any Change of Control of InfoLogix or change in their responsibilities or other event that results in termination, including resignation, severance, retirement or constructive
termination. Under the severance agreements, a "Change of Control" is defined as a merger or consolidation of InfoLogix, a sale, lease, exchange or transfer of all or substantially all of our assets,
a dissolution and liquidation of InfoLogix, any person or group becoming the beneficial owner of a majority of our voting securities or, during any twelve-month period, the current directors no longer
constitute a majority of our board of directors, unless the election of at least 75% of the new directors was approved by two-thirds of the directors in office at the time.

David T. Gulian, Richard D. Hodge, and Craig A. Wilensky (each, an "Executive")

Termination by Us following a Change of Control of InfoLogix.If, following the occurrence of a Change of Control of InfoLogix,



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and,
provided that the Executive signs a full release in our favor, then:



Termination Other than following a Change of Control of InfoLogix.If the Executive's employment with us
is terminated prior to a Change in Control other than by us for Cause, by the Executive or due to Executive's disability and, provided the Executive signs a full release in our favor, then:



If
the Executive's employment is terminated for any other reason, or if he fails to execute a release in our favor, he would only be entitled to receive a payment equal to his accrued
but unpaid salary and vacation.

2008 Director Compensation

The Chairman of our board of directors and the Chairman of the Audit Committee of our board of directors each receive an annual
retainer of $30,000, and each other non-employee director receives an annual retainer of $20,000. Each director who is not an officer of InfoLogix received $1,000 per board of directors or
board committee meeting in which the director participated attended in person. Upon first becoming a director, each non-employee director received a grant of an option to purchase 50,000
shares. Fifty percent of the options vested on the six month anniversary of the date of grant. The remaining 50% vested pro rata over the subsequent 18 month period. Our employee directors do
not receive compensation for their services as directors.

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The
following table summarizes the fees and other compensation earned by our directors for their service on our board of directors and any committees of our board of directors during
2008.

Name

Fees Earned or
Paid in Cash($)

Option
Awards($)(1)

Total ($)Warren V. Musser


29,500


21,335


50,835Wayne D. Hoch


35,500


21,335


56,835Thomas C. Lynch


26,000


21,335


47,335Thomas O. Miller


29,000


21,335


50,335Jake Steinfeld


19,000


21,335


40,335Richard A. Vermeil


20,000


21,335


41,335






The
following table sets forth the aggregate number of options held by each InfoLogix director as of December 31, 2008:

Name

Exercisable
OptionsWarren V. Musser


50,000
(a)Wayne D. Hoch


50,000Thomas C. Lynch


50,000Thomas O. Miller


50,000Jake Steinfeld


50,000Richard A. Vermeil


50,000






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

Equity Compensation Plans

The following table summarizes our equity compensation plans as of December 31, 2008:

Plan category

Number of shares to be
issued upon exercise of
outstanding options,
warrants
and rights

Weighted average
exercise price of
outstanding options,
warrants and rights

Number of shares
remaining available for
future issuance under
equity compensation
plans(1)Equity compensation plans approved by stockholders


3,268,000

$
2.00


592,000Equity compensation plans not approved by stockholders


2,650,000
(2)
$
2.00


Total


5,918,000

$
2.00


592,000


---

Principal Stockholders and Security Ownership of Management

The following table shows the beneficial ownership of InfoLogix, Inc. common stock for each of our executive officers and
directors, each person known to us to beneficially own more than 5% of our common stock and all directors and executive officers as a group as of March 31, 2009.

Name

Shares
Beneficially Owned(1)(2)

%(3)David T. Gulian(4)


2,946,279


11.2
%Richard D. Hodge(5)


2,623,849


10.1
%Craig A. Wilensky(6)


2,613,959


10.1
%IL Venture Capital(7)


2,033,333


7.8
%Warren V. Musser(7)(8)


2,003,333


7.6
%Gerald E. Bartley(9)


755,478


3.0
%Wayne D. Hoch(10)


141,600


*Jake Steinfeld(11)


100,000


*John A. Roberts(12)


161,200


*Thomas C. Lynch(13)


84,000


*Richard A. Vermeil(14)


75,000


*Thomas O. Miller(15)


55,000


*Eric N. Rubino(16)


80,000


*All directors and executive officers as a group (consists of 13 persons)(17)


13,643,031


48.5
%


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

Director Independence

More than half of the members of our board of directors are independent directors. For a director to be considered independent, our
board of directors must determine that the director does not have any direct or indirect material relationship with us. Our board of directors has established guidelines to assist it in determining
director independence. The guidelines that our board
of directors uses to determine whether a director is independent specify that:



Our
board of directors has determined that the following five members of our nine member board of directors satisfy our independence guidelines and the independence requirements set
forth in the NASDAQ Marketplace Rules: Wayne D. Hoch, Thomas C. Lynch, Thomas O. Miller, Jake Steinfeld, and Richard A. Vermeil.

All
members of the Compensation Committee, Audit Committee, and Nominating and Governance Committee of our board of directors are independent directors. Members of the Audit Committee
must also satisfy additional Securities and Exchange Commission and NASDAQ independence requirements.

Related Party Transactions

Corrugated Service Corp., d/b/a Amtech

In July 2006, we entered into a consulting agreement with Corrugated Service Corp. which does business as Amtech and is owned by Cosmo
T. DeNicola, an officer and director of InfoLogix prior to our

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merger
with New Age Translation, Inc., and a stockholder of InfoLogix. The consulting agreement became effective upon consummation of the merger between InfoLogix and New Age
Translation, Inc. on November 29, 2006 and continued until December 31, 2008.

Pursuant
to the consulting agreement, Amtech provided certain software development consulting services to us for our products, projects and customer deliverables. In consideration of
Amtech's services, we paid Amtech a monthly fee equal to $16,500 per month for calendar year 2007 and $16,500 per month for calendar year 2008. In 2007 and 2008, we paid Amtech approximately $186,000
and $197,000, respectively, for services provided under the consulting agreement.

Futura Services, Inc.

In July 2006, we entered into a services agreement with Futura Services, Inc., which is owned by the wife of Cosmo T. DeNicola,
an officer and director of InfoLogix prior to our merger with New Age Translation, Inc., and a stockholder of InfoLogix. The agreement was amended in August 2007. The services agreement granted
Futura the exclusive right to provide certain outsourcing services and functions to support certain equipment that is used in our business until the earlier of the termination of the agreement or the
fulfillment by Futura of purchase orders in the amount of $1,500,000 for any calendar year during the term of the agreement, after which point, we were permitted to use other providers to perform the
services for the balance of such calendar year. In consideration of the services provided by Futura, we paid Futura either a fixed fee or a fee based on a percentage of the revenue generated by the
equipment for which Futura was providing support services.
The type of fee (fixed or percentage) depended on the equipment for which Futura was providing its services. Fees based on a percentage of revenue typically ranged from 40% to 55% of revenue collected
by us from such equipment. In 2007 and 2008, we paid Futura approximately $1.9 million and $2.7 million, respectively, for services provided under this agreement.

Futura's
liability for damages was limited to the aggregate compensation actually received by Futura under any applicable purchase order, except in the event of any liability arising
from a breach of Futura's confidentiality obligations, Futura's gross negligence or willful misconduct or to the extent contrary to the laws of any applicable jurisdiction.

The
term of the services agreement commenced upon the consummation of our merger with New Age Translation, Inc. on November 29, 2006 and was terminated on March 2,
2009. On March 2, 2009, we entered into a master services agreement, which supersedes and replaces our services agreement with Futura. The term of the master services agreement commenced on
March 2, 2009 and will continue until December 31, 2013, unless terminated earlier. The master services agreement may be terminated by (i) either party if the other party
materially breaches the master services agreement and fails to cure the breach within 60 days of receipt of notice thereof, (ii) either party upon the insolvency or bankruptcy of the
other party or (iii) either party if an amount from the other party in excess of $100,000 remains due and unpaid or if any amount from the other party remains due and unpaid for 90 days
or more. We may also terminate the master services agreement for any reason or no reason upon 45 days notice to Futura. If Futura terminates the master services agreement as a result of our
breach, or we terminate the master services agreement as a result of Futura's breach or for no reason, we will be required to (x) pay Futura a termination fee of $750,000 and
(y) sublease at Futura's option up to 10,000 square feet of Futura's office space in Fort Washington, Pennsylvania for the remaining term of Futura's lease with the landlord. The rental term of
Futura's lease is 66 months and began on October 15, 2006. The current minimum monthly rent under the lease is $37,173.10 for 22,215 square feet of office space and increases
approximately $925 on October 15 of each year of the rental term.

Pursuant
to the master services agreement, Futura is granted the exclusive right to provide certain outsourcing services and functions to support the equipment that is used in our
business. We will issue purchase orders for specified services to be provided by Futura and the services will be set forth in

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mutually
agreed statements of work. Futura will maintain its exclusive right to provide services until the earlier of the termination of the master services agreement or the fulfillment by Futura of
services under statements of work in the amount of $1,500,000 for any calendar year during the term of the master services agreement, after which point we may use other providers to perform the
services for the balance of that calendar year, provided that Futura is given the right to perform the services on the same terms and conditions as the other providers with our consent not to be
unreasonably withheld. The fees payable to Futura for services will be specified in the applicable statement of work.

Pursuant
to the master services agreement, Futura agreed to certain confidentiality, non-solicitation and warranty provisions and we agreed to certain confidentiality and
non-solicitation provisions as well. Futura will bear the risk of loss for the services rendered under the master services agreement and statements of work, including, but not limited to
all costs (subject to certain exclusions) related to warranty, extended warranty and call center services that are sold by us to our customers and to post- and pre-production
of kitting (assembly and packaging), imaging and shipments to our customers, in each case as such services are specified in an applicable statement of work. Futura's liability for damages is limited
to the aggregate compensation actually received by Futura under any applicable statement of work, except in the event of any liability arising from a breach of Futura's confidentiality and
non-solicitation obligations or from its gross negligence or willful misconduct, or to the extent contrary to the laws of any applicable jurisdiction.

Gulian & Associates

During 2007 and 2008, we maintained a business relationship with Gulian & Associates, which is owned by the wife of David T.
Gulian, the President and Chief Executive Officer and director and stockholder. Under the terms of the arrangement, Gulian & Associates provides us with retainer-based professional recruiting
services, on a non-exclusive basis. Gulian & Associates is paid a success fee of 20% of a newly hired person's annual base salary for employees it introduces to us;
one-third of the fee is invoiced at the time of the engagement, the remainder is invoiced only upon successful placement of a candidate into the role. In 2007 and 2008, we paid
Gulian & Associates approximately $159,000 and $225,000, respectively, in success fees.

Item 14.    Principal Accounting Fees and Services

We retained McGladrey & Pullen to audit our consolidated financial statements for the years ended December 31, 2008 and
2007. We had retained Asher & Company, Ltd. ("Asher") to audit our consolidated financial statements for the year ended December 31, 2006. We understand the need for our
independent registered public accounting firm to maintain objectivity and independence in its audit of our financial statements. To minimize relationships that could appear to impair the objectivity
of our independent registered public accounting firm, the Audit Committee of our board of directors has adopted and approved a policy related to the pre-approval of all
non-audit work to be performed by our independent registered public accounting firm.

Consistent
with the rules established by the Securities and Exchange Commission (SEC), proposed services to be provided by our independent registered public accounting firm are evaluated
by grouping the service fees under one of the following four categories:Audit Services, Audit-Related Services,Tax
ServicesandAll Other Services. All proposed services are discussed and approved by the Audit Committee. In order to render
approval, the Audit Committee has available a schedule of services and fees approved by category for the current year for reference and specific details are provided. The Audit Committee does not
pre-approve services related only to the broad categories noted above.

The
Audit Committee has delegated pre-approval authority to its chairman for cases where services must be expedited. Our management provides the Audit Committee with reports
of all pre-approved

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services
and related fees by category incurred during the current fiscal year with forecasts of additional services anticipated during the upcoming year.

All
of the services related to fees disclosed below were pre-approved by the Audit Committee.

The
aggregate fees paid for professional services by McGladrey & Pullen and Asher in 2007 and 2008 for their services were:

Type of Fees

2007

2008Audit Fees

$
188,715

$
271,000Total

$
188,715

$
271,000


In
the table above, in accordance with the SEC definitions and rules, "audit fees" are fees we paid or were billed by McGladrey & Pullen for professional services for the audit of
our consolidated financial statements included in our Forms 10-K, and for services that are normally provided by the accountant in connection with the review of SEC registration
statements and other filings, comfort letters and consents.

We
did not engage McGladrey & Pullen to provide any audit related services, tax services or other services during 2008.

PART IV

Item 15.    Exhibits and Financial Statement Schedules

(a)   Financial Statements and Schedules

The following financial statements and schedules listed below are included in this Form 10-K.

Financial
Statements (See Item 8)
Report of Independent Registered Public Accounting Firm
Consolidated Balance Sheets as of December 31, 2008 and 2007
Consolidated Statements of Operations for the Years Ended December 31, 2008, 2007, and 2006
Consolidated Statements of Stockholders' Equity for the Years Ended December 31, 2008, 2007, and 2006
Consolidated Statements of Cash Flows for the Years Ended December 31, 2008, 2007, and 2006
Notes to Consolidated Financial Statements
Financial Statement Schedules
Schedule IIValuation and Qualifying Account

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INFOLOGIX, INC.    SCHEDULE IIVALUATION AND QUALIFYING ACCOUNTS

Allowance for
Doubtful
Receivables and
Sales Returns

Reserve for Excess
and Obsolete
InventoryBalance at December 31, 2005

$
100

$
75Charges to operations


20


124Deductions





Balance at December 31, 2006


120


199Charges to operations


100


286Asset purchase


198


Deductions


(9
)

Balance at December 31, 2007


409


485Charges to operations


6


189Asset purchase


34


Deductions


(97
)

(253
)Balance at December 31, 2008

$
352

$
421


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(b) Exhibits

Exhibit No.

Description2.1

Agreement and Plan of Merger between New Age Translation, Inc., INFLX Acquisition Corp. and InfoLogix, Inc. dated as of November 29, 2006 (incorporated herein by reference to Exhibit 2.1 of our Current
Report on Form 8-K filed December 5, 2006).2.2

Asset Purchase Agreement by and among InfoLogix, Inc., InfoLogix Systems Corporation, Healthcare Informatics Associates, Inc. and the stockholders of Healthcare Informatics Associates, Inc. dated as of
September 30, 2007 (incorporated herein by reference to Exhibit 2.1 of our Current Report on Form 8-K filed October 4, 2007).2.3

Asset Purchase Agreement by and among InfoLogix, Inc., InfoLogix Systems Corporation, Delta Health Systems, Inc. and the stockholders of Delta Health Systems, Inc. dated as of May 2, 2008
(incorporated by reference to Exhibit 2.1 of our Current Report on Form 8-K filed May 8, 2008).3.1

Certificate of Incorporation of New Age Translation, Inc. (incorporated herein by reference to Exhibit 3.1 of our Current Report on Form 8-K filed November 28, 2006).3.2

Certificate of Amendment of New Age Translation, Inc. changing corporate name to InfoLogix, Inc (incorporated herein by reference to Exhibit 3.2 of our Current Report on Form 8-K filed December 5,
2006).3.3

By-laws of New Age Translation, Inc. (incorporated herein by reference to Exhibit 3.2 of our Current Report on Form 8-K filed November 28, 2006).4.1

Warrant dated as of November 29, 2006 between InfoLogix, Inc. and Warren V. Musser (incorporated herein by reference to Exhibit 4.1 of our Current Report on Form 8-K filed December 5,
2006).4.2

Warrant dated as of November 29, 2006 between InfoLogix, Inc. and Michael M. Carter (incorporated herein by reference to Exhibit 4.2 of our Current Report on Form 8-K filed December 5,
2006).4.3

Warrant dated as of November 29, 2006 between InfoLogix, Inc. and Karen Keating Mara (incorporated herein by reference to Exhibit 4.3 of our Current Report on Form 8-K filed December 5,
2006).4.4

Warrant dated as of November 29, 2006 between InfoLogix, Inc. and David T. Gulian (incorporated herein by reference to Exhibit 4.4 of our Current Report on Form 8-K filed December 5,
2006).4.5

Warrant dated as of November 29, 2006 between InfoLogix, Inc. and Richard D. Hodge (incorporated herein by reference to Exhibit 4.5 of our Current Report on Form 8-K filed December 5,
2006).4.6

Warrant dated as of November 29, 2006 between InfoLogix, Inc. and Craig A. Wilensky (incorporated herein by reference to Exhibit 4.6 of our Current Report on Form 8-K filed December 5,
2006).4.7

Warrant dated as of November 29, 2006 between InfoLogix, Inc. and Fairmount Partners LP (incorporated herein by reference to Exhibit 4.7 of our Current Report on Form 8-K filed December 5,
 2006).


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Exhibit No.

Description10.1

Registration Rights Agreement dated as of November 29, 2006 by and among InfoLogix, Inc. and the investors set forth on the signature pages thereto (incorporated herein by reference to Exhibit 10.1 of our
Current Report on Form 8-K filed December 5, 2006).10.2

Employment Agreement dated as of November 29, 2007 by and between Eric N. Rubino and InfoLogix, Inc. (incorporated by reference to Exhibit 10.6 of our Annual Report on Form 10-K filed
March 28, 2008).10.3

New Age Translation, Inc. 2006 Equity Compensation Plan (incorporated herein by reference to Exhibit 10.1 of our Current Report on Form 8-K filed November 28, 2006).10.4

Consulting Agreement effective as of July 17, 2006 by and between Corrugated Service Corp. d/b/a Amtech and InfoLogix, Inc (incorporated herein by reference to Exhibit 10.7 of our Current Report on
Form 8-K filed December 5, 2006).10.5

Advisory Agreement dated as of July 17, 2006 by and between Warren V. Musser and InfoLogix, Inc (incorporated herein by reference to Exhibit 10.10 of our Current Report on Form 8-K filed
December 5, 2006).10.6

Form of Lock-up Agreement between the former stockholders of InfoLogix, Inc. and InfoLogix, Inc (incorporated herein by reference to Exhibit 10.11 of our Current Report on Form 8-K filed December 5,
 2006).10.7

Employment Agreement by and between InfoLogix Systems Corporation and Gerry Bartley dated as of September 30, 2007 (incorporated herein by reference to Exhibit 10.1 of our Current Report on Form 8-K
filed October 4, 2007).10.8

Earn Out Agreement by and between InfoLogix Systems Corporation and Healthcare Informatics Associates, Inc. dated as of September 30, 2007 (incorporated herein by reference to Exhibit 10.2 of our
Current Report on Form 8-K filed October 4, 2007).10.9

First Amendment to Earn Out Agreement by and between InfoLogix Systems Corporation and Healthcare Informatics Associates, Inc. dated as of August 23, 2008 (incorporated by reference to Exhibit 10.2 of
our Quarterly Report on Form 10-Q filed November 19, 2008).10.10

Promissory Note executed in favor of Healthcare Informatics Associates, Inc. by InfoLogix Systems Corporation dated as of September 30, 2007 (incorporated herein by reference to Exhibit 10.3 of our
Current Report on Form 8-K filed October 4, 2007).10.11

Loan and Security Agreement by and among InfoLogix, Inc., InfoLogix Systems Corporation, Embedded Technologies, LLC, Opt Acquisition LLC, InfoLogix-DDMS, Inc., as Borrowers, and Hercules Technology
Growth Capital, Inc., as Lender, dated May 1, 2008 (incorporated by reference to Exhibit 10.1 of our Current Report on Form 8-K filed May 7, 2008).10.12

First Amendment to Loan and Security Agreement by and between InfoLogix, Inc., InfoLogix Systems Corporation, Embedded Technologies, LLC, Opt Acquisition LLC, and InfoLogix-DDMS, Inc., as Borrowers,
 and Hercules Technology Growth Capital, Inc., as Lender, dated November 19, 2008 (incorporated by reference to Exhibit 10.1 of our Quarterly Report on Form 10-Q filed November 19, 2008).10.13

Earn Out Agreement by and between InfoLogix Systems Corporation and Delta Health Systems, Inc. dated as of May 2, 2008 (incorporated by reference to Exhibit 10.1 of our Current Report on Form 8-K
filed May 8, 2008).


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Exhibit No.

Description10.14

Master Services Agreement by and between Futura Services, Inc. and InfoLogix, Inc. dated March 2, 2009 (incorporated by reference to Exhibit 10.1 of our Current Report on Form 8-K filed
March 6, 2009).10.15

Severance Agreement dated March 13, 2009 by and between InfoLogix, Inc. and David T. Gulian (incorporated by reference to Exhibit 10.1 our Current Report on Form 8-K filed March 17,
2009).10.16

Severance Agreement dated March 13, 2009 by and between InfoLogix, Inc. and John A. Roberts (incorporated by reference to Exhibit 10.2 our Current Report on Form 8-K filed March 17,
2009).10.17

Severance Agreement dated March 13, 2009 by and between InfoLogix, Inc. and Richard Hodge (incorporated by reference to Exhibit 10.3 our Current Report on Form 8-K filed March 17,
2009).10.18

Severance Agreement dated March 13, 2009 by and between InfoLogix, Inc. and Craig A. Wilensky (incorporated by reference to Exhibit 10.4 our Current Report on Form 8-K filed March 17,
2009).21

Direct and Indirect Subsidiaries of the Registrant.*23.1

Consent of McGladrey & Pullen LLP, Independent Registered Public Accounting Firm.*23.2

Consent of Asher & Company Ltd., Independent Registered Public Accounting Firm.*31.1

Certification pursuant to Exchange Act Rules 13a-14(a)/15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.*31.2

Certification pursuant to Exchange Act Rules 13a-14(a)/15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.*32.1

Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.*32.2

Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.*


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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; thereunto duly authorized, in Hatboro, Pennsylvania on April 15, 2009.

INFOLOGIX, INC.By:

/s/ DAVID T. GULIAN David T. Gulian President and Chief Executive Officer


Pursuant
to the requirements of the Securities Exchange Act of 1934, this report has been signed by the following persons in the capacities indicated on April 15, 2009.

Signatures

Title(s)/s/ WARREN V. MUSSER Warren V. Musser

Chairman of the Board of Directors/s/ DAVID T. GULIAN David T. Gulian

President, Chief Executive Officer and Director (Principal Executive Officer)/s/ JOHN A. ROBERTS John A. Roberts

Chief Financial Officer (Principal Financial and Accounting Officer)/s/ WAYNE D. HOCH Wayne D. Hoch

Director/s/ RICHARD D. HODGE Richard D. Hodge

Director/s/ THOMAS C. LYNCH Thomas C. Lynch

Director/s/ THOMAS O. MILLER Thomas O. Miller

Director/s/ JAKE STEINFELD Jake Steinfeld

Director/s/ CRAIG A. WILENSKY Craig A. Wilensky

Director/s/ RICHARD A. VERMEIL Richard A. Vermeil

Director


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