10.

FULLSCOPE EMBEZZLEMENT:

During the second quarter of 2010, the Company discovered embezzlement activities at Fullscope, one of our wholly-owned subsidiaries, which was acquired by the Company in December 2009 (the “Fullscope Embezzlement Issue”). Based upon the results of forensic accounting procedures, we identified that the embezzlement activities occurred for an extended period prior to our acquisition of Fullscope and also during the first and second quarter of 2010. Additionally, based upon the procedures performed, we concluded that the embezzlement activities that occurred during the first and second quarter of 2010 did not have a material impact upon our previously issued financial statements.

We have completed our investigation as it relates to the embezzlement activities that occurred during 2010. In total, we identified approximately $116 thousand of embezzlement during the nine-month period ended September 30, 2010.

The Company incurred approximately $126 thousand and $361 thousand in non-routine operating expenses during the nine months ended September 30, 2011 and 2010, respectively. The impact on the three-month periods ended September 30, 2011 and 2010 was insignificant. The Company also incurred a sales and use tax liability of $950 thousand in connection with the Embezzlement Issue, which was recorded as selling, general, and administrative expense during the year ended December 31, 2010. The expenses incurred during the respective three- and nine-month periods of 2011 and 2010 related to the expensing of embezzled receivables and accounting- and legal-related professional service fees.

We incurred a majority of our embezzlement expenses during fiscal 2010 in connection with our identification and investigation of the embezzlement activity. While embezzlement-related expenses decreased in the three- and nine-month periods of 2011, we anticipate that we may continue to incur additional expenses associated with the Fullscope Embezzlement Issue as we intend to aggressively pursue recovery through all possible avenues, including a claim against the escrow account established in connection with the Fullscope Acquisition and reimbursement under insurance policies. We anticipate that we will be able to recover some, if not all, of the receivable amounts embezzled during 2010, the professional service expenses we have incurred to-date, or will incur in the future, addressing this situation, and any amounts paid to settle any of the identified sales and use tax liability amounts. Amounts recovered, if any, will be recorded during the period in which settlement is determined to be certain.

In connection with the Fullscope Acquisition, an escrow account was established with $1.3 million, or 10% of the initial upfront purchase price consideration. Subsequent to that time, the Company transferred an additional $700 thousand to the escrow account in connection with the release of a pre-acquisition Fullscope escrow account that was established in June 2009 in connection with Fullscope’s sale of Dynamics AX add-on software modules to Microsoft. As of September 30, 2011, the Company recorded contingent earnout consideration, which will be paid to a second escrow account, of $2.7 million. We currently anticipate that this payment will occur during the fourth quarter of 2011. The escrow accounts, as per the merger agreements, were established to ensure the satisfactory resolution of all potential claims during the earnout period. These amounts will remain unsettled until our claim of recovery for the above matters is resolved.