13.

FULLSCOPE EMBEZZLEMENT:

During the second quarter of 2010, the Company discovered embezzlement activities at Fullscope, one of its 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.

Since 2010 we have incurred certain embezzlement-related expenses associated with non-routine professional services and sales and use tax obligations.

The Company incurred the majority of its embezzlement-related expenses during fiscal 2010 in connection with its identification and investigation of the embezzlement activity. Embezzlement-related expenses incurred in the three- and six-month periods ended June 30, 2014 were not material.

During the second quarter of 2014, the Company reached an agreement with the former Fullscope stockholders settling the Company’s outstanding escrow claims associated with the Fullscope acquisition (the “Settlement Agreement”). In connection with the Settlement Agreement, the Company received approximately $1.9 million in cash to satisfy the Company’s escrow claims. The settlement and collection of the escrow has been recorded within selling, general and administrative expense within the condensed consolidated statement of comprehensive income. As of June 30, 2014, the escrow account has a remaining balance of $250 thousand. This balance will remain in the escrow account for a period of twelve months and will be utilized to cover any potential future sales and use tax exposure that may arise from subsequent state inquiry or audit. If no exposure is identified, then the remaining balance will be remitted to the former Fullscope stockholders. Amounts recovered, if any, will be recorded during the period in which settlement is determined to be probable of recovery from escrow.