##### Table of Contents



FORM 10-Q
 SECURITIES AND EXCHANGE COMMISSION
 WASHINGTON, D.C. 20549
 þ
    
    Quarterly Report Under Section 13 or 15 (d)
of the Securities Exchange Act of 1934
 or
 o
    
    Transition Report Pursuant to Section 13 or 15 (d)
of the Securities Exchange Act of 1934
 For Quarter Ended September 30, 2010
 Commission File Number 0-13898
 Veramark Technologies, Inc.
  Delaware
    
    16-1192368(State or other jurisdiction of Incorporation
    
    (IRS Employer Identification Number)or Organization)
 1565 Jefferson Road, Suite 120, Rochester, NY 14623
 (Registrants telephone number, including area code)
 (Former name, former address and former fiscal year, if changed since last report)
 þ o
 þ o
  Large accelerated filer o
    
    Accelerated filer o
    
    Non-accelerated filer o
    
    Smaller Reporting Company þ
 o þ




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##### 



INDEX
 PagePART I FINANCIAL INFORMATIONItem 1 Financial StatementsCondensed Balance Sheets 
September 30, 2010 (Unaudited) and December 31, 2009
    
    
    3Condensed Statements of Operations (Unaudited)
Three and Nine Months Ended September 30, 2010 and 2009
    
    
    4Condensed Statements of Cash Flows (Unaudited)
Nine Months Ended September 30, 2010 and 2009
    
    
    5Notes To Condensed Financial Statements (Unaudited)
    
    
    6  14Item 2 Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    15  22Item 3 Quantitative and Qualitative Disclosures About Market Risk
    
    
    23Item 4 Controls and Procedures
    
    
    23PART II OTHER INFORMATIONItem 1 Legal Proceedings
    
    
    24Item 1A Risk Factors
    
    
    24  25Item 5 Other Information
    
    
    26Item 6 Exhibits
    
    
    26  27Exhibit 31.1Exhibit 31.2Exhibit 32.1Exhibit 32.2
   2




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PART I FINANCIAL INFORMATION
 VERAMARK TECHNOLOGIES, INC.
 
 CONDENSED BALANCE SHEETS
 (Unaudited)September 30,
    
    
    December 31,2010
    
    
    2009ASSETSCURRENT ASSETS:Cash and cash equivalents
    
    $
    352,126
    
    
    $
    488,381Short-Term Investments
    
    
    267,167
    
    
    
    457,520Accounts receivable, trade (net of allowance for
doubtful accounts of $47,500 and $24,000, respectively)
    
    
    2,523,967
    
    
    
    1,314,986Inventories, net
    
    
    17,254
    
    
    
    13,510Prepaid expenses
    
    
    372,170
    
    
    
    389,267Other current assets
    
    
    182,889
    
    
    
    509,590Total Current Assets
    
    
    3,715,573
    
    
    
    3,173,254PROPERTY AND EQUIPMENTCost
    
    
    3,574,717
    
    
    
    3,520,903Less accumulated depreciation
    
    
    (3,245,372
    )
    
    
    (3,207,550
    )Property and Equipment (Net)
    
    
    329,345
    
    
    
    313,353OTHER ASSETS:Software development costs (net of accumulated amortization of $2,006,810 and $2,497,948, respectively)
    
    
    2,884,307
    
    
    
    2,906,505Pension assets
    
    
    3,094,555
    
    
    
    2,995,657Intagible assets, net
    
    
    885,000
    
    
    
    Goodwill
    
    
    336,219
    
    
    
    Deposits and other assets
    
    
    1,204,934
    
    
    
    995,766Total Other Assets
    
    
    8,405,015
    
    
    
    6,897,928TOTAL ASSETS
    
    $
    12,449,933
    
    
    $
    10,384,535LIABILITIES AND STOCKHOLDERS EQUITYCURRENT LIABILITIES:Accounts payable
    
    $
    502,567
    
    
    $
    325,204Accrued compensation
    
    
    715,105
    
    
    
    457,332Deferred revenue
    
    
    4,093,764
    
    
    
    3,790,856Bank debt  current portion
    
    
    300,000
    
    
    
    Pension obligation  current portion
    
    
    502,059
    
    
    
    502,059Contingent liabilities  current portion
    
    
    561,150
    
    
    
    Other accrued liabilities
    
    
    344,810
    
    
    
    632,061Total Current Liabilities
    
    
    7,019,455
    
    
    
    5,707,512Long-term portion of contingent liabilities  net of
current portion
    
    
    375,300
    
    
    
    Pension obligation
    
    
    4,593,226
    
    
    
    4,674,071Total Liabilities
    
    
    11,987,981
    
    
    
    10,381,583STOCKHOLDERS EQUITY:Common Stock, par value $.10; shares authorized,
40,000,000; shares issued and outstanding,
10,073,801 and 10,028,952
    
    
    1,007,380
    
    
    
    1,002,895Additional paid-in capital
    
    
    22,567,711
    
    
    
    22,398,110Accumulated deficit
    
    
    (22,776,664
    )
    
    
    (23,179,337
    )Treasury stock (80,225 shares, at cost)
    
    
    (385,757
    )
    
    
    (385,757
    )Accumulated other comprehensive income
    
    
    49,282
    
    
    
    167,041Total Stockholders Equity
    
    
    461,952
    
    
    
    2,952TOTAL LIABILITIES AND STOCKHOLDERS EQUITY
    
    $
    12,449,933
    
    
    $
    10,384,535
 The accompanying notes are an integral part of these financial statements.
  3




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VERAMARK TECHNOLOGIES, INC.
 
 CONDENSED STATEMENTS OF OPERATIONS 
(Unaudited)
 Three Months Ended
    
    
    Nine Months EndedSeptember 30,
    
    
    September 30,2010
    
    
    2009
    
    
    2010
    
    
    2009NET REVENUESProduct revenue
    
    $
    586,848
    
    
    $
    382,445
    
    
    $
    1,781,557
    
    
    $
    1,232,973Service revenue
    
    
    3,041,479
    
    
    
    2,128,070
    
    
    
    7,795,690
    
    
    
    6,279,611Total Net Revenue
    
    
    3,628,327
    
    
    
    2,510,515
    
    
    
    9,577,247
    
    
    
    7,512,584COSTS AND OPERATING EXPENSES:Cost of sales
    
    
    1,005,638
    
    
    
    720,212
    
    
    
    2,633,784
    
    
    
    2,042,082Engineering and software development
    
    
    385,292
    
    
    
    220,571
    
    
    
    1,080,083
    
    
    
    793,735Selling, general and administrative
    
    
    2,053,339
    
    
    
    1,936,556
    
    
    
    5,507,926
    
    
    
    5,759,288Total Costs and Operating Expenses
    
    
    3,444,269
    
    
    
    2,877,339
    
    
    
    9,221,793
    
    
    
    8,595,105INCOME (LOSS) FROM OPERATIONS
    
    
    184,058
    
    
    
    (366,824
    )
    
    
    355,454
    
    
    
    (1,082,521
    )NET INTEREST INCOME
    
    
    29,760
    
    
    
    16,499
    
    
    
    47,219
    
    
    
    10,145INCOME (LOSS) BEFORE INCOME TAXES
    
    
    213,818
    
    
    
    (350,325
    )
    
    
    402,673
    
    
    
    (1,072,376
    )INCOME TAXES
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    NET INCOME (LOSS)
    
    $
    213,818
    
    
    $
    (350,325
    )
    
    $
    402,673
    
    
    $
    (1,072,376
    )NET INCOME (LOSS) PER SHAREBasic
    
    $
    0.02
    
    
    $
    (0.04
    )
    
    $
    0.04
    
    
    $
    (0.11
    )Diluted
    
    $
    0.02
    
    
    $
    (0.04
    )
    
    $
    0.04
    
    
    $
    (0.11
    )
 The accompanying notes are an integral part of these financial statements.
  4




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VERAMARK TECHNOLOGIES, INC.
 
 CONDENSED STATEMENTS OF CASH FLOWS 
(Unaudited)
 Nine Months Ended September 30,2010
    
    
    2009OPERATING ACTIVITIES:Net Income (Loss)
    
    $
    402,673
    
    
    $
    (1,072,376
    )Adjustments to reconcile net income or loss to net cash flows
provided by operating activitiesDepreciation and amortization
    
    
    1,118,126
    
    
    
    1,096,417Bad debt expense
    
    
    23,500
    
    
    
    (9,000
    )Share based compensation expense
    
    
    103,804
    
    
    
    69,250Pension assets
    
    
    (98,898
    )
    
    
    (24,715
    )Loss on disposal of fixed assets
    
    
    2,347
    
    
    
    1,096Unrealized gain (losses) on investments
    
    
    (29,559
    )
    
    
    (6,376
    )Unrealized (gain) losses on pension liabilities
    
    
    (88,200
    )
    
    
    263,317Changes in assets and liabilities:Accounts receivable
    
    
    (1,232,481
    )
    
    
    (91,537
    )Inventories
    
    
    (3,744
    )
    
    
    9,824Prepaid expenses and other current assets
    
    
    343,798
    
    
    
    (193,810
    )Deposits and other assets
    
    
    (209,168
    )
    
    
    (90,005
    )Accounts payable
    
    
    177,363
    
    
    
    197,174Accrued compensation and related taxes
    
    
    257,773
    
    
    
    87,536Deferred revenue
    
    
    302,908
    
    
    
    (131,460
    )Other accrued liabilities
    
    
    (287,251
    )
    
    
    (8,278
    )Pension obligation
    
    
    (80,845
    )
    
    
    (183,861
    )Change in net liabilites  acquisition
    
    
    (47,730
    )
    
    
    Net cash provided (used) by operating activities
    
    
    654,416
    
    
    
    (86,804
    )INVESTING ACTIVITIES:Acquisitions  cash paid
    
    
    (300,000
    )
    
    
    (Purchase) sale of investments
    
    
    190,353
    
    
    
    537,177Capitalized software development costs
    
    
    (839,372
    )
    
    
    (1,040,423
    )Additions to property and equipment
    
    
    (154,934
    )
    
    
    (136,669
    )Net cash flows used by investing activities
    
    
    (1,103,953
    )
    
    
    (639,915
    )FINANCING ACTIVITIESBank borrowing
    
    
    300,000
    
    
    
    Transfer of surender values
    
    
    
    
    
    
    310,000Proceeds  employee stock purchase plan
    
    
    13,282
    
    
    
    14,281Net cash provided by financing activities
    
    
    313,282
    
    
    
    324,281NET DECREASE IN CASH AND CASH EQUIVALENTS
    
    
    (136,255
    )
    
    
    (402,438
    )CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD
    
    
    488,381
    
    
    
    1,014,669CASH AND CASH EQUIVALENTS, END OF PERIOD
    
    $
    352,126
    
    
    $
    612,2312010
    
    
    2009SUPPLEMENTAL CASH FLOW INFORMATIONCash Transactions:Income taxes paid, net
    
    
    2,873
    
    
    
    4,350Interest paid
    
    
    5,691
    
    
    
    1,462
  5




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NOTES TO CONDENSED FINANCIAL STATEMENTS
  (1)
    
    GENERAL
     6




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(2)
    
    PROPERTY AND EQUIPMENT
  September 30,
    
    
    December 31,2010
    
    
    2009Machinery and equipment
    
    $
    117,541
    
    
    $
    117,541Computer hardware and software
    
    
    1,210,371
    
    
    
    1,164,431Furniture and fixtures
    
    
    861,008
    
    
    
    853,134Leasehold improvements
    
    
    1,385,797
    
    
    
    1,385,797$
    3,574,717
    
    
    $
    3,520,903
  (3)
    
    STOCK-BASED COMPENSATION
   Average
    
    
    Average
    
    
    RemainingExercise
    
    
    Grant-Date
    
    
    Contractual
    
    
    IntrinsicShares
    
    
    Price
    
    
    Fair Value
    
    
    Term (Yrs)
    
    
    ValueOutstanding as of December 31, 2009
    
    
    1,740,793
    
    
    $
    0.94
    
    
    $
    0.84
    
    
    
    4.2
    
    
    $
    201,626Granted
    
    
    98,000
    
    
    $
    0.47
    
    
    
    
    
    
    
    
    
    
    
    Exercised
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Canceled
    
    
    (259,650
    )
    
    
    2.63
    
    
    
    
    
    
    
    
    
    
    
    (118,432
    )Outstanding as of September 30, 2010
    
    
    1,579,143
    
    
    $
    0.63
    
    
    $
    0.58
    
    
    
    4.3
    
    
    $
    83,194Options exercisable at September
30, 2010
    
    
    1,456,143
    
    
    $
    0.64
    
    
    $
    0.59
    
    
    
    3.9
    
    
    $
    83,194
   7




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(4)
    
    TOTAL COMPREHENSIVE INCOME (LOSS)
  Three Months Ended
    
    
    Nine Months EndedSeptember 30,
    
    
    September 30,2010
    
    
    2009
    
    
    2010
    
    
    2009Net income (loss)
    
    $
    213,818
    
    
    $
    (350,325
    )
    
    $
    402,673
    
    
    $
    (1,072,376
    )Unrealized change  pension
    
    
    (29,400
    )
    
    
    80,000
    
    
    
    (88,200
    )
    
    
    263,317Unrealized change on investments
    
    
    (25,212
    )
    
    
    (6,605
    )
    
    
    (29,559
    )
    
    
    (6,376
    )Total comprehensive income (loss)
    
    $
    159,206
    
    
    $
    (276,930
    )
    
    $
    284,914
    
    
    $
    (815,435
    )
 (5)
    
    NET INCOME (LOSS) PER SHARE (EPS)
   8




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Calculations of Earnings (Loss) Per Share
 Three Months Ended
    
    
    Nine Months EndedSeptember 30,
    
    
    September 30,2010
    
    
    2009
    
    
    2010
    
    
    2009BasicNet Income (Loss)
    
    $
    213,818
    
    
    $
    (350,325
    )
    
    $
    402,673
    
    
    $
    (1,072,376
    )Weighted average common shares outstanding
    
    
    9,945,611
    
    
    
    9,913,731
    
    
    
    9,909,703
    
    
    
    9,855,829Net Income (Loss) per common share
    
    $
    0.02
    
    
    $
    (0.04
    )
    
    $
    0.04
    
    
    $
    (0.11
    )DilutedNet Income (Loss)
    
    $
    213,818
    
    
    $
    (350,325
    )
    
    $
    402,673
    
    
    $
    (1,072,376
    )Weighted average common shares outstanding
    
    
    9,945,611
    
    
    
    9,913,731
    
    
    
    9,909,703
    
    
    
    9,855,829Additional dilutive effect of stock options and
warrants after application of treasury stock method
    
    
    180,947
    
    
    
    
    
    
    
    102,757
    
    
    
    Weighted average dilutive shares outstanding
    
    
    10,126,558
    
    
    
    9,913,731
    
    
    
    10,012,460
    
    
    
    9,855,829Net Income (Loss) per common share assuming full dilution
    
    $
    0.02
    
    
    $
    (0.04
    )
    
    $
    0.04
    
    
    $
    (0.11
    )
  (6)
    
    INDEMNIFICATION OF CUSTOMERS
  (7)
    
    BENEFIT PLANS
   9




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Three Months Ended
    
    
    Nine Months EndedSeptember 30,
    
    
    September 30,2010
    
    
    2009
    
    
    2010
    
    
    2009Interest Cost
    
    $
    161,899
    
    
    $
    130,000
    
    
    $
    295,699
    
    
    $
    176,683Unrealized Change-Pension
    
    
    (29,400
    )
    
    
    80,000
    
    
    
    (88,200
    )
    
    
    263,317Pension Expense
    
    $
    132,499
    
    
    $
    210,000
    
    
    $
    207,499
    
    
    $
    440,000
    Period Ending December 31, Unless Stated Otherwise,
 Q4 2010
    
    $
    125,5152011
    
    
    502,0592012
    
    
    502,0592013
    
    
    487,1662014
    
    
    487,1662015  2019
    
    
    2,329,859
  10




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##### Table of Contents



Three Months Ended
    
    
    Nine Months EndedSeptember 30,
    
    
    September 30,2010
    
    
    2009
    
    
    2010
    
    
    2009Current Service Cost
    
    $
    2,125
    
    
    $
    2,005
    
    
    $
    6,375
    
    
    $
    6,015Interest Cost
    
    
    1,288
    
    
    
    1,408
    
    
    
    3,862
    
    
    
    4,222PRHB Expense
    
    $
    3,413
    
    
    $
    3,413
    
    
    $
    10,237
    
    
    $
    10,237
  Period Ending December 31, Unless Stated Otherwise,
 Q4 2010
    
    $
    3,4122011
    
    
    13,6492012
    
    
    13,6492013
    
    
    13,6492014
    
    
    10,1492015  2019
    
    
    33,245
 (8)
    
    ACQUISITION
     11




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Three Months Ended
    
    
    Nine Months EndedSeptember 30,
    
    
    September 30,Unaudited (In 000s)
    
    2010
    
    
    2009
    
    
    2010
    
    
    2009Revenue
    
    $
    3,628
    
    
    $
    2,902
    
    
    $
    10,145
    
    
    $
    8,800Income (Loss)
    
    $
    214
    
    
    $
    (486
    )
    
    $
    367
    
    
    $
    (1,357
    )Earnings Per Share
    
    $
    0.02
    
    
    $
    (0.05
    )
    
    $
    0.04
    
    
    $
    (0.14
    )
  12




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(9)
    
    OTHER INTANGIBLE ASSETS AND GOODWILL
    Weighted
    
    
    FMV at
    
    
    Accumulated
    
    
    Net Value byAvg Life
    
    
    Acquisition
    
    
    Amortization
    
    
    Asset ClassIntangible Asset Class
    
    Years
    
    
    Date
    
    
    at 09/30/10
    
    
    at 09/30/10Customer Contracts
    
    
    3.1
    
    
    
    526
    
    
    
    44
    
    
    
    482Customer Relationships
    
    
    2.6
    
    
    
    260
    
    
    
    28
    
    
    
    232Key Employee Agreements
    
    
    1.4
    
    
    
    177
    
    
    
    28
    
    
    
    149Other
    
    
    0.7
    
    
    
    30
    
    
    
    8
    
    
    
    22Sub-Total Intangibles
Subject to Amortization
    
    
    2.6
    
    
    
    993
    
    
    
    108
    
    
    
    885Goodwill
    
    
    
    
    
    
    336Total Intangible Assets Acquired
    
    
    
    
    
    
    1,329
  Intangible Asset Class
    
    Q4 2010
    
    
    2011
    
    
    2012
    
    
    2013
    
    
    2014
    
    
    2015Customer Contracts
    
    
    34
    
    
    
    112
    
    
    
    88
    
    
    
    67
    
    
    
    60
    
    
    
    51Customer Relationships
    
    
    22
    
    
    
    73
    
    
    
    42
    
    
    
    31
    
    
    
    25
    
    
    
    19Key Employee Agreements
    
    
    22
    
    
    
    46
    
    
    
    42
    
    
    
    39
    
    
    
    
    
    
    
    Other
    
    
    5
    
    
    
    10
    
    
    
    5
    
    
    
    3
    
    
    
    1
    
    
    
    Sub-Total Intangibles
Subject to Amortization
    
    
    83
    
    
    
    241
    
    
    
    177
    
    
    
    140
    
    
    
    86
    
    
    
    70
    13




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(10)
    
    FACILITIES RELOCATION
  (11)
    
    SUBSEQUENT EVENTS
    14




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##### Table of Contents



Item 2 Managements Discussion and Analysis of Financial Condition and Results of Operations
 Results of Operations
  Overview
       15




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Revenues
   Gross Margin
  Operating Expenses
  Three Months Ended
    
    
    Six Months EndedJune 30,
    
    
    June 30,2010
    
    
    2009
    
    
    2010
    
    
    2009Gross expenditures for engineering & software
development
    
    $
    652,000
    
    
    $
    624,000
    
    
    $
    1,919,000
    
    
    $
    1,834,000Less: Software development costs capitalized
    
    
    (267,000
    )
    
    
    (403,000
    )
    
    
    (839,000
    )
    
    
    (1,040,000
    )Net expense for engineering and software
    
    $
    385,000
    
    
    $
    221,000
    
    
    $
    1,080,000
    
    
    $
    794,000
   16




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Liquidity and Capital Resources
        17




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18




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Accounting Pronouncements
 
    
    In October 2009, the FASB issued Accounting Standards Update No. 2009-13,
Multiple-Deliverable Revenue Arrangements,which amends existing revenue recognition
accounting pronouncements that are currently within the scope of FASB Codification Subtopic
605-25 (previously included within EITF Issue No. 00-21, Revenue Arrangements with Multiple
Deliverables, or EITF 00-21). The consensus to EITF Issue No. 08-01, Revenue Arrangements
with Multiple Deliverables, or EITF 08-01, provides accounting principles and application
guidance on whether multiple deliverables exist, how the arrangement should be separated,
and the consideration allocated. This guidance eliminates the requirement to establish the
fair value of undelivered products and services and instead provides for separate revenue
recognition based upon managements estimate of the selling price for an undelivered item
when there is no other means to determine the fair value of that undelivered item. EITF
00-21 previously required that the fair value of the undelivered item be the price of the
item either sold in a separate transaction between unrelated third parties or the price
charged for each item when the item is sold separately by the vendor. This was difficult to
determine when the product was not individually sold because of its unique features. Under
EITF 00-21, if the fair value of all of the elements in the arrangement was not
determinable, then revenue was deferred until all of the items were delivered or fair value
was determined. This new approach is effective prospectively for revenue arrangements
entered into or materially modified in fiscal years beginning on or after June 15, 2010.
The Company will have to evaluate the impact of this standard on future revenue
arrangements that we may enter into.
 
    
    In January 2010, the FASB issued Accounting Standards Update No. 2010-06, topic 820,
Fair Value Measurements and Disclosures, which amends existing fair value disclosure
pronouncements. This update provides amendments to Subtopic 820-10 that require new
disclosures as follows:
 1.
    
    Transfers in and out of Levels 1 and 2. A reporting entity should disclose
separately the amounts of significant transfers in and out of Level 1 and Level 2
fair value measurements and describe the reasons for the transfers.
 2.
    
    Activity in Level 3 fair value measurements. In the reconciliation for
fair value measurements using significant unobservable inputs (Level 3), a reporting
entity should present separately information about purchases, sales, issuances, and
settlements (that is, on a gross basis rather than as one net number).
  1.
    
    Level of disaggregation. A reporting entity should provide fair value
measurement disclosures for each class of assets and liabilities. A class is often a
subset of assets or liabilities within a line item in the statement of financial
position. A reporting entity needs to use judgment in determining the appropriate
classes of assets and liabilities.
 2.
    
    Disclosures about inputs and valuation techniques. A reporting entity
should provide disclosures about the valuation techniques and inputs used to measure
fair value for both recurring and nonrecurring fair value measurements. Those
disclosures are required for fair value measurements that fall in either Level 2 or
Level 3.
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major categories classes
  
    
    In April 2010, the FASB issued Accounting Standards Update No. 2010-13, topic 718,
Compensation  Stock Compensation, which adds clarification that an employee share-based
award with an exercise price denominated in the currency of a market in which a substantial
portion of the entitys equity securities trades should not be considered to contain a
condition that is not a market, performance, or service condition. Therefore, an entity
would not classify such an award as a liability if it otherwise qualifies as an equity.
This update is effective for fiscal years, and interim periods within those fiscal years
beginning on or after December 15, 2010. The Company does not expect this to have a
material effect on the Companys financial statements.
 
    
    In April 2010, the FASB issued Accounting Standards Update No. 2010-17, topic 605,
Revenue Recognition  Milestone Method, which provides guidance on the criteria that should
be met for determining whether the milestone method of revenue recognition is appropriate.
A vendor can recognize consideration that is contingent upon achievement of a milestone in
its entirety as revenue in the period in which the milestone is achieved only if the
milestone meets all criteria to be considered substantive. This update is effective on a
prospective basis for milestones achieved in fiscal years, and interim periods within those
years, beginning on or after June 15, 2010. The Company is currently evaluating the impact
this update may have on the Companys financial statements.
 
    
    In July 2010, the FASB issued Accounting Standards Update No. 2010-20, topic 310,
Receivables, which requires disclosures about the credit quality of financing receivables
and the allowance for credit losses. The disclosures as of the end of a reporting period
are effective for interim and annual reporting periods ending on or after December 15,
2010. The Company does not expect this to have a material effect on the Companys
financial statements.
 Critical Accounting Policies
  Revenue Recognition
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Capitalization of Software Development
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Allowance For Doubtful Accounts
  Pension Liability
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Item 3 Quantitative and Qualitative Disclosures About Market Risk
  
 Item 4 Controls and Procedures
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PART II  OTHER INFORMATION
 
 Item 1 Legal Proceedings
  
 Item 1A Risk Factors
  Intellectual Property Rights
  Existing Customer Base
  Product Development
 
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Declines in Demand for Software
  New Products and Services
  Competition
  Marketing and Sales
  Security and Privacy Breaches in the Company Systems May Damage Client Relations and Inhibit our
Growth
  Stock Price Volatility
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Item 5 Other Information
  
 Item 6 Exhibits
 (a)
    
    Financial Statements as set forth under Item 1 of this report on Form 10-Q(b)
    
    Exhibits required to be filed by Item 601 of Regulation S-K
 3.1
    
    
    Restated Certificate of Incorporation (incorporated by reference to
Exhibit 4.1 to the Companys Registration Statement on Form S-18
(File No. 2-96787) filed on March 22, 1985)3.2
    
    
    Bylaws (incorporated by reference to Exhibit 3 to the Companys
Registration Statement on Form S-8 filed on October 5, 1992)10.1
    
    
    Letter Agreement dated as of March 29, 2007 by and between the
Company and David G. Mazzella (incorporated by reference to Exhibit
10.1 to the Companys Current Report on Form 8-K filed on April 3,
2007)10.2
    *
    
    Amended and Restated Board of Directors Deferred Compensation Plan
(incorporated by reference to Exhibit 10.1 to the Companys Current
Report on Form 8-K filed on November 26, 2007)10.3
    *
    
    Employment Agreement dated as of December 17, 2007 by and between
the Company and Anthony C. Mazzullo (incorporated by reference to
Exhibit 10.1 to the Companys Current Report on Form 8-K filed on
December 19, 2007)10.4
    *
    
    Restricted Stock Award Agreement dated as of January 1, 2008 by and
between the Company and Anthony C. Mazzullo (incorporated by
reference to Exhibit 10.1 to the Companys Current Report on Form
8-K filed on March 25, 2008)10.5
    *
    
    2008 Incentive Plan for Management and Key Employees (incorporated
by reference to Exhibit 10.1 to the Companys Current Report on
Form 8-K filed on April 2, 2008)10.6
    *
    
    2008 Employee Stock Purchase Plan (incorporated by reference to
Exhibit F to the Companys Proxy Statement for its 2008 Annual
Meeting of Shareholders filed on April 29, 2008)10.7
    *
    
    Description of non-employee director compensation (incorporated by
reference to Exhibit 10.1 to the Companys Current Report on Form
8-K filed on August 18, 2008)10.8
    *
    
    Amended Salary Continuation Agreement dated as of October 10, 2008
by and between the Company and Ronald C. Lundy (incorporated by
reference to Exhibit 10.1 to the Companys Current Report on Form
8-K filed on October 17, 2008)10.9
    *
    
    Form of 2008 Employee Stock Purchase Plan Enrollment Agreement
(incorporated by reference to Exhibit 4.2 to the Companys
Registration Statement on Form S-8 (File No. 333-155286) filed on
November 12, 2008)
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10.10
    *
    
    2010 Bonus Compensation Plan dated as of March 1, 2010 by and
between the Company and Anthony C. Mazzullo (incorporated by
reference to Exhibit 10.1 to the Companys Current Report on Form
8-K filed on March 5, 2010)10.11
    *
    
    2010 Incentive Plan for Management and Key Employees (incorporated
by reference to Exhibit 10.2 to the Companys Current Report on
Form 8-K filed on March 5, 2010)14
    
    
    Code of Business Conduct and Ethics (incorporated by reference to
Exhibit E to the Companys Proxy Statement for its 2008 Annual
Meeting of Shareholders filed on April 29, 2008)31.1
    
    
    Certification of Chief Executive Officer Pursuant to Section 302 of
the Sarbanes-Oxley Act of 200231.2
    
    
    Certification of Chief Financial Officer Pursuant to Section 302 of
the Sarbanes-Oxley Act of 200232.1
    
    
    Certification of Chief Executive Officer Pursuant to Section 906 of
the Sarbanes-Oxley Act of 200232.2
    
    
    Certification of Chief Financial Officer Pursuant to Section 906 of
the Sarbanes-Oxley Act of 2002
 *
    
    Management contract or compensatory plan or arrangement (c)
    
    Schedules required to be filed by Regulation S-X
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/s/ Anthony C. MazzulloAnthony C. MazzulloPresident and CEODate: November 12, 2010/s/ Ronald C. LundyRonald C. LundyVice President of Finance and CFO
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