10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

x QUARTERLY REPORT PURSUANT TO THE SECTION 13 OR 15(d) OF THE SECURITIES AND EXCHANGE ACT OF 1934

For the quarterly period ended December 31, 2012

OR

¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission file number: 001-31265

Rand Worldwide, Inc.

(Exact Name of Registrant as Specified in its Charter)

Delaware	84-1035353
(State or Other Jurisdiction of Incorporation or Organization)	(IRS Employer Identification No.)

161 Worcester Road, Suite 401, Framingham, MA	01701
(Address of Principal Executive Offices)	(Zip Code)

(508) 663-1400

(Registrant’s telephone number, including area code)

Not applicable

(Former name, former address and former fiscal year, if changed since last report)

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  þ    No  ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes  þ    No  ¨

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. (Check one):

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

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

Indicate the number of shares outstanding of each of the issuer’s classes of common equity, as of the latest practicable date: as of February 8, 2013, there were 53,990,589 shares of common stock, par value $.01 per share, outstanding.

RAND WORLDWIDE, INC. AND SUBSIDIARIES

INDEX

		Page
PART I	FINANCIAL INFORMATION
ITEM 1.	Financial Statements
	Consolidated Balance Sheets – December 31, 2012 and June 30, 2012 (Unaudited)
	Consolidated Statements of Operations – Three months ended December 31, 2012 and 2011 (Unaudited)
	Consolidated Statements of Comprehensive Income – Three months ended December 31, 2012 and 2011 (Unaudited)
	Consolidated Statements of Operations – Six months ended December 31, 2012 and 2011 (Unaudited)
	Consolidated Statements of Comprehensive Income – Six months ended December 31, 2012 and 2011 (Unaudited)
	Consolidated Statements of Cash Flows – Six months ended December 31, 2012 and 2011 (Unaudited)
	Notes to Consolidated Financial Statements (Unaudited)
ITEM 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations
ITEM 4.	Controls and Procedures
PART II	OTHER INFORMATION
ITEM 5.	Other Information
ITEM 6.	Exhibits
SIGNATURES
EXHIBIT INDEX

PART I. FINANCIAL INFORMATION

Rand Worldwide, Inc. and Subsidiaries

Consolidated Balance Sheets

(unaudited)

	December 31, 2012			June 30, 2012
Assets
Current assets:
Cash	$	2,427,000		$	1,680,000
Accounts receivable, less allowance of $298,000 as of December 31, 2012 and $405,000 as of June 30, 2012		17,461,000			18,099,000
Income tax receivable		640,000			281,000
Other receivables		1,203,000			994,000
Inventory		124,000			107,000
Prepaid expenses and other current assets		2,483,000			2,084,000
Deferred tax assets		133,000			78,000
Total current assets		24,471,000			23,323,000
Property and equipment:
Computer software and equipment		8,923,000			8,231,000
Office furniture and equipment		2,038,000			1,974,000
Leasehold improvements		723,000			699,000
		11,684,000			10,904,000
Less accumulated depreciation and amortization		(8,687,000	)		(8,193,000	)
		2,997,000			2,711,000
Customer list, net of accumulated amortization of $6,370,000 as of December 31, 2012 and $6,105,000 as of June 30, 2012		3,865,000			3,290,000
Goodwill		17,815,000			15,954,000
Trade name, net of accumulated amortization of $1,096,000 as of December 31, 2012 and $945,000 as of June 30, 2012		2,835,000			2,986,000
Deferred income taxes		1,783,000			2,576,000
Other assets		324,000			370,000
Total assets	$	54,090,000		$	51,210,000

See accompanying notes.

Rand Worldwide, Inc. and Subsidiaries

Consolidated Balance Sheets (continued)

(unaudited)

	December 31, 2012			June 30, 2012
Liabilities and Stockholders’ Equity
Current liabilities:
Borrowings under line of credit	$	3,510,000		$	3,140,000
Accounts payable and accrued expenses		9,565,000			9,850,000
Accrued compensation and related benefits		1,613,000			1,804,000
Deferred revenue		4,992,000			4,666,000
Obligations under capital leases – current		294,000			290,000
Total current liabilities		19,974,000			19,750,000
Long-term liabilities:
Obligations under capital leases		466,000			614,000
Other long term liabilities		1,109,000			—
Total liabilities		21,549,000			20,364,000
Stockholders’ equity:
Convertible Preferred Stock, $0.01 par value; 1,300,537 shares authorized, 1,298,728 shares issued; 385,357 shares outstanding with an aggregate liquidation preference of $1,093,000 at December 31, 2012 and June 30, 2012, respectively (note 8)		4,000			4,000
Common stock, $0.01 par value; 80,000,000 shares authorized; issued and outstanding shares of 53,990,589 and 53,493,077 at December 31, 2012 and June 30, 2012, respectively		540,000			535,000
Additional paid-in capital		65,412,000			64,947,000
Accumulated deficit		(34,628,000	)		(35,700,000	)
Accumulated other comprehensive income		1,213,000			1,060,000
Total stockholders’ equity		32,541,000			30,846,000
Total liabilities and stockholders’ equity	$	54,090,000		$	51,210,000

See accompanying notes.

Rand Worldwide, Inc. and Subsidiaries

Consolidated Statements of Operations

(unaudited)

	Three Months Ended December 31,
	2012			2011
Revenues:
Product sales	$	10,540,000		$	12,771,000
Service revenue		5,505,000			5,255,000
Commission revenue		5,536,000			4,447,000
		21,581,000			22,473,000
Cost of revenue:
Cost of product sales		6,858,000			8,703,000
Cost of service revenue		3,816,000			3,198,000
		10,674,000			11,901,000
Gross margin		10,907,000			10,572,000
Other operating expenses:
Selling, general and administrative		9,250,000			8,829,000
Depreciation and amortization		522,000			400,000
		9,772,000			9,229,000
Operating income		1,135,000			1,343,000
Other expense, net		(84,000	)		(197,000	)
Income before income taxes		1,051,000			1,146,000
Income tax expense		555,000			107,000
Net income	$	496,000		$	1,039,000
Preferred stock dividends		(28,000	)		(39,000	)
Net income available to common stockholders	$	468,000		$	1,000,000
Income per common share, basic	$	0.01		$	0.02
Income per common share, diluted	$	0.01		$	0.02
Shares used in computing income per common share:
Weighted average shares used in computation - basic		53,990,589			52,223,307
Weighted average shares used in computation - diluted		55,040,285			55,694,749

See accompanying notes.

Rand Worldwide, Inc. and Subsidiaries

Consolidated Statements of Comprehensive Income

(unaudited)

	Three Months Ended December 31,
	2012			2011
Net income	$	496,000		$	1,039,000
Other comprehensive income, net of tax:
Net change in cumulative foreign currency translation gain (loss)		(42,000	)		80,000
Comprehensive income	$	454,000		$	1,119,000

See accompanying notes.

Rand Worldwide, Inc. and Subsidiaries

Consolidated Statements of Operations

(unaudited)

	Six Months Ended December 31,
	2012			2011
Revenues:
Product sales	$	22,055,000		$	26,046,000
Service revenue		10,878,000			10,059,000
Commission revenue		10,249,000			8,311,000
		43,182,000			44,416,000
Cost of revenue:
Cost of product sales		14,188,000			18,003,000
Cost of service revenue		7,510,000			6,332,000
		21,698,000			24,335,000
Gross margin		21,484,000			20,081,000
Other operating expenses:
Selling, general and administrative		18,449,000			17,348,000
Depreciation and amortization		955,000			795,000
		19,404,000			18,143,000
Operating income		2,080,000			1,938,000
Other expense, net		(104,000	)		(338,000	)
Income before income taxes		1,976,000			1,600,000
Income tax expense		904,000			159,000
Net income	$	1,072,000		$	1,441,000
Preferred stock dividends		(56,000	)		(78,000	)
Net income available to common stockholders	$	1,016,000		$	1,363,000
Income per common share, basic	$	0.02		$	0.03
Income per common share, diluted	$	0.02		$	0.03
Shares used in computing income per common share:
Weighted average shares used in computation - basic		53,906,012			52,072,435
Weighted average shares used in computation - diluted		54,955,708			55,563,059

See accompanying notes.

Rand Worldwide, Inc. and Subsidiaries

Consolidated Statements of Comprehensive Income

(unaudited)

	Six Months Ended December 31,
	2012		2011
Net income	$	1,072,000	$	1,441,000
Other comprehensive income, net of tax:
Net change in cumulative foreign currency translation gain (loss)		153,000		(300,000	)
Comprehensive income	$	1,225,000	$	1,141,000

See accompanying notes.

Rand Worldwide, Inc. and Subsidiaries

Consolidated Statements of Cash Flows

(unaudited)

	Six Months Ended December 31,
	2012			2011
Cash flows from operating activities
Net income	$	1,072,000		$	1,441,000
Adjustments to reconcile net income to net cash provided by operating activities:
Loss on sale of property and equipment		—			12,000
Bad debt recoveries		(10,000	)		(69,000	)
Depreciation and amortization		955,000			795,000
Stock-based compensation		126,000			83,000
Deferred income taxes		738,000			(2,000	)
Changes in operating assets and liabilities, net of those acquired:
Accounts receivable and other receivables		439,000			2,573,000
Income tax receivable		(359,000	)		(112,000	)
Inventory		(17,000	)		(17,000	)
Prepaid expenses and other current assets		(399,000	)		(353,000	)
Other assets		46,000			39,000
Accounts payable and accrued expenses		(923,000	)		(1,261,000	)
Accrued compensation and related benefits		(191,000	)		(985,000	)
Deferred revenue		326,000			218,000
Other long-term liabilities		64,000			—
Net cash provided by operating activities		1,867,000			2,362,000
Cash flows from investing activities
Purchase of Informative Design Partners, Inc.		(600,000	)		—
Net purchases of property and equipment		(786,000	)		(548,000	)
Net cash used in investing activities		(1,386,000	)		(548,000	)
Cash flows from financing activities
Proceeds from borrowings under line of credit		37,019,000			57,851,000
Repayment of borrowings under line of credit		(36,649,000	)		(59,644,000	)
Principal payment on capital lease obligations		(144,000	)		(116,000	)
Payment of preferred stock dividends		(56,000	)		(78,000	)
Proceeds from the issuance of common stock to employees		—			36,000
Net cash provided by (used in) financing activities		170,000			(1,951,000	)
Effect of exchange rate changes on cash		96,000			(208,000	)
Net change in cash		747,000			(345,000	)
Cash - beginning of period		1,680,000			2,631,000
Cash - end of period	$	2,427,000		$	2,286,000

See accompanying notes.

Rand Worldwide, Inc. and Subsidiaries

Notes to Consolidated Financial Statements (Unaudited)

1. Organization and Basis of Presentation

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

References in these Notes to “Rand Worldwide”, “the Company”, “us”, “we”, “our” are references to Rand Worldwide, Inc. and, unless the context clearly contemplated otherwise, its consolidated subsidiaries.

The Company is organized into three divisions: IMAGINiT Technologies (“IMAGINiT”), Enterprise Applications and ASCENT—Center for Technical Knowledge (“ASCENT”).

The IMAGINiT division is one of the largest value-added resellers of Autodesk, Inc. (“Autodesk”) products in the world, providing Autodesk solutions and value-added services to customers in the manufacturing, infrastructure, building, and media and entertainment industries. IMAGINiT also specializes in computational fluid dynamics analysis consulting and thermal simulation services and sells its own proprietary software products and related services, enhancing its total client solution offerings. IMAGINiT operates from locations across North America, Australia, and Singapore. In January 2013, the Company closed its office in Malaysia and consolidated those operations to Singapore. The closure of the Malaysian office will not have a material impact on the Company’s consolidated operations.

The Enterprise Applications division is the non-Autodesk component of the business and offers various products and services including data archiving solutions, facilities management solutions, as well as training for Dassault Systèmes and PTC (Parametric Technology Corporation) products including CATIA, ENOVIA and Pro/ENGINEER.

ASCENT is the courseware division of Rand Worldwide and is a leading developer of professional training materials and knowledge products for engineering software tools.

Executive management performs their primary analyses based upon geographic location and operations by geographic segment are disclosed within Note 9.

The accompanying unaudited consolidated financial statements have been prepared in accordance with U.S. GAAP for interim financial information and in accordance with the instructions to Article 8 of Regulation S-X. Accordingly, certain information and footnote disclosures normally included in annual financial statements prepared in accordance with U.S. GAAP have been condensed or omitted pursuant to those rules or regulations. The interim financial statements are unaudited, and reflect all adjustments (consisting of normal recurring accruals) which are, in management’s opinion, necessary to present a fair statement of results of the interim periods presented. These financial statements should be read in conjunction with the audited financial statements and the notes thereto in Rand Worldwide Inc.’s Annual Report on Form 10-K for the fiscal year ended June 30, 2012. Operating results for the three and six months ended December 31, 2012 are not necessarily indicative of results for the full fiscal year or any future interim period.

The books of the Company are maintained in United States dollars and this is the Company’s functional reporting currency. Transactions denominated in other than the United States dollar are translated as follows with the related transaction gains and losses being recorded in the Statement of Operations:

• Monetary items are recorded at the rate of exchange prevailing as of the balance sheet date;

• Non-monetary items including equity are recorded at the historical rate of exchange ; and

• Revenues and expenses are recorded at the period average in which the transaction occurred.

2. Supplemental Disclosure of Cash Flow Information

The Company paid interest of approximately $22,000 and $100,000 during the three months ended December 31, 2012 and 2011, respectively, and approximately $46,000 and $161,000 during the six months ended December 31, 2012 and 2011, respectively. The Company also paid federal and state income taxes of approximately $59,000 and $284,000 during the three months ended December 31, 2012 and 2011, respectively, and approximately $59,000 and $384,000 during the six months ended December 31, 2012 and 2011, respectively. Total purchases of property and equipment included non-cash purchases of $0 and $947,000 for the six months ended December 31, 2012 and December 31, 2011, respectively.

In connection with the acquisition of Informative Design Partners on July 31, 2012, the Company paid cash in the amount of $600,000 and issued 497,512 shares of its common stock valued at $400,000.

3. Employee Stock Compensation Plans

On November 7, 2012, the Company’s stockholders approved the Omnibus Equity Compensation Plan (the “Omnibus Plan”). The Compensation Committee of the Company’s Board of Directors administers the Omnibus Plan and, in that capacity, has the exclusive authority to grant various incentive awards under the Omnibus Plan in the form of stock options, stock awards, stock units, performance units, and other stock-based awards. Up to 2,000,000 shares of the Company’s common stock are available for issuance to participants under the Omnibus Plan. The Omnibus Plan is available to all employees of the Company and its subsidiaries, including employees who are officers or members of the Board, and all non-employee directors and consultants of the Company and its subsidiaries. Prior to the adoption of the Omnibus Plan, the Board of Directors granted options to purchase shares of the Company’s common stock at an exercise price of not less than the fair market value of the common stock on the date of grant, under the Avatech Solutions, Inc. 2002 Stock Option Plan (the “2002 Option Plan”). The 2002 Option Plan, which expired in August 2012, provided for the granting of either incentive or non-qualified stock options to purchase an aggregate of up to 7,800,000 shares of common stock to eligible employees, officers, and directors of the Company and its subsidiaries. For the six months ended December 31, 2012, total stock compensation expense charged against income for the 2002 Option Plan was $126,000. There were no awards granted during the six months ended December 31, 2012 or 2011.

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

A summary of stock option activity during the six months ended December 31, 2012 and related information is included in the table below:

	Options		Weighted- Average Exercise Price		Aggregate Intrinsic Value
Outstanding at July 1, 2012		3,481,900	$	0.76
Granted		—		—
Exercised		—		—
Forfeited		—		—
Expired		—		—
Outstanding at December 31, 2012		3,481,900	$	0.76	$	411,000
Exercisable at December 31, 2012		1,206,100	$	0.81	$	160,000
Weighted-average remaining contractual life		5.2 Years

All options granted have an exercise price equal to the fair market value of the Company’s common stock on the date of grant. Exercise prices for options outstanding as of December 31, 2012 ranged from $0.17 to $3.81 as follows:

Range of Exercise Prices	Options Outstanding		Weighted Average Exercise Prices of Options Outstanding		Weighted Average Remaining Contractual Life of Options Outstanding		Options Exercisable		Weighted Average Exercise Prices of Options Exercisable		Weighted Average Remaining Contractual Life of Options Exercisable
$    0.17 – 0.50		170,120	$	0.42		1.7 years		170,120	$	0.42		1.7 years
0.51 – 0.75		1,883,920		0.70		8.2 years		529,480		0.69		7.8 years
0.76 – 1.00		1,189,360		0.81		8.2 years		268,000		0.86		4.2 years
1.01 – 3.81		238,500		1.29		3.1 years		238,500		1.29		3.1 years
		3,481,900		0.76		7.5 years		1,206,100		0.81		5.2 years

Assuming that no additional share-based payments are granted after December 31, 2012, $660,000 of compensation expense will be recognized in the consolidated statement of operations over a weighted-average period of 2.8 years.

4. Borrowings Under Line of Credit

On February 29, 2012, the Company entered into an $8 million line of credit facility, including a $1,000,000 sublimit for the issuance of standby or trade letters of credit, with PNC Bank, National Association. The interest rate is the “Eurodollar Rate”, which is calculated by using the LIBOR rate, plus a margin of 2.0%. The interest rate as of December 31, 2012 was 2.2%. The Company had outstanding borrowings from the bank under its credit line of approximately $3.5 million as of December 31, 2012 and had $3.1 million outstanding as of June 30, 2012. The line expires on February 28, 2014.

5. Obligations Under Capital Leases

The Company has incurred various capital lease obligations for computer equipment. This capital lease obligation totaled $760,000 and $904,000 as of December 31, 2012 and June 30, 2012, respectively.

6. Income Taxes

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

During the fourth quarter of fiscal year 2012, the Company recognized the realizable portion of the Company’s U.S. net operating loss carryforwards as a deferred tax asset. The Company previously had created a valuation allowance against the entire amount of net operating loss carryforwards, recognizing no deferred tax asset because it did not have a sufficient history of profitable operations to support the recognition of the asset. Since the Company established a sufficient history of consecutive profitable quarters, and projects continuing profits, the valuation allowance against the U.S. net operating loss carryforwards was reduced in the fourth quarter of fiscal year 2012 by $4.3 million to recognize the portion of the net operating loss carryforwards projected to be utilized prior to expiration. The Company continues to maintain a valuation allowance on the entirety of its U.S. capital loss carryforwards and state net operating loss carryforwards due to uncertainty about its ability to utilize such carryforwards.

The Company believes that its income tax filing positions taken or expected to be taken in its tax returns will more likely than not be sustained if such returns were to be audited by the taxing authorities and, accordingly, does not anticipate that any adjustments to these positions in the event such returns were to be audited would have a material adverse impact on the Company’s financial condition, results of operations, or cash flow. Therefore, no reserves for uncertain income tax positions have been recorded. The Company’s income tax returns for the past three years are subject to examination by tax authorities, and may change upon examination.

The Company records interest related to taxes in other expense and records penalties in operating expenses.

7. Earnings Per Share

Basic earnings per common share is computed by dividing net earnings available to common stockholders by the weighted-average number of common shares outstanding for the period. Diluted earnings per common share include the potential dilution that would occur from common shares issuable upon the exercise of outstanding stock options and warrants and the conversion of preferred stock. As of December 31, 2012, 5,577,684 shares of common stock were issuable upon the conversion or exercise of options, warrants and preferred stock. For the three and six months ended December 31, 2012 and 2011, there were 2,724,011 and 535,900 shares of common stock equivalents, respectively, excluded from the computation of diluted earnings per share because their effect would have been antidilutive.

The following tables summarize the computations of basic and diluted earnings per common share for the three and six months ended December 31, 2012 and 2011:

	Three Months Ended December 31,
	2012			2011
Numerator for basic and diluted earnings per share:
Net income	$	496,000		$	1,039,000
Preferred stock dividends		(28,000	)		(39,000	)
Net income available to common stockholders	$	468,000		$	1,000,000
Weighted average shares used in computing basic net income per share:		53,990,589			52,223,307
Assumed conversion of preferred stock		769,630			3,295,406
Effect of outstanding stock options		280,066			176,036
Weighted average shares used in computing diluted net income per share:		55,040,285			55,694,749
Income per common share, basic	$	0.01		$	0.02
Income per common share, diluted	$	0.01		$	0.02

	Six Months Ended December 31,
	2012			2011
Numerator for basic and diluted earnings per share:
Net income	$	1,072,000		$	1,441,000
Preferred stock dividends		(56,000	)		(78,000	)
Net income available to common stockholders	$	1,016,000		$	1,363,000
Weighted average shares used in computing basic net income per share:		53,906,012			52,072,435
Assumed conversion of preferred stock		769,630			3,295,406

Effect of outstanding stock options		280,066		195,218
Weighted average shares used in computing diluted net income per share:		54,955,708		55,563,059
Income per common share, basic	$	0.02	$	0.03
Income per common share, diluted	$	0.02	$	0.03

8. Preferred Stock

Convertible Preferred Stock

At December 31, 2012, 384,495 shares of Series D Convertible Preferred Stock (the “Series D shares”) were outstanding with the following terms:

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

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

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

Conversion Feature- The Series D shares are convertible at any time beginning 120 days after the original issuance date at the option of the holder and automatically converts into common stock if the common stock trades for more than $2.25 per share for 60 consecutive trading days. Each Series D share is convertible into shares of common stock by multiplying the appropriate conversion rate in effect by the number of shares of preferred stock being converted. As of December 31, 2012, the conversion rate would yield two shares of common stock for each share of Series D share; however, this rate may be adjusted due to stock splits, dividends, and other events defined in the stock purchase agreement between the Company and the holders of the Series D shares.

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

At December 31, 2012, 862 shares of Series E Convertible Preferred Stock (the “Series E shares”) were outstanding with the following terms:

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

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

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

Conversion Feature- The Series E shares are convertible at any time beginning 120 days after the original issuance date at the option of the holder and automatically converts into common stock if the common stock trades for more than $2.25 per share for 60 consecutive trading days. Each Series E share is convertible into shares of common stock by multiplying the appropriate conversion rate in effect by the number of shares of preferred stock being converted. As of December 31, 2012 the conversion rate would yield 1,538.5 shares of common stock for each share of Series E; however, this rate may be adjusted due to stock splits, dividends, and other events defined in the stock purchase agreements between the Company and the holders of the Series E shares.

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

9. Segment Information

The Company’s operations for the three and six months ended December 31, 2012 included business in North America, Singapore, Malaysia and Australia. The Company closed its Malaysia office in January 2013. Revenue for any particular geographic region is determined by sales made by the Company to the customers in that particular region. The Company’s chief operating decision maker and CEO evaluates business results based primarily on these geographic regions. The following table illustrates certain financial information about these geographies in the corresponding fiscal periods:

Three Months Ended December 31, 2012

	North America		Singapore/Malaysia		Australia		Total
Revenue-
Product sales	$	9,569,000	$	571,000	$	400,000	$	10,540,000
Service revenue		5,191,000		59,000		255,000		5,505,000
Commission revenue		5,356,000		48,000		132,000		5,536,000
Total revenue		20,116,000		678,000		787,000		21,581,000
Cost of revenue-
Cost of product sales		6,113,000		462,000		283,000		6,858,000
Cost of service revenue		3,513,000		103,000		200,000		3,816,000
Total cost of revenue		9,626,000		565,000		483,000		10,674,000
Gross margin		10,490,000		113,000		304,000		10,907,000

Total operating expenses		8,967,000			262,000			543,000			9,772,000
Operating income (loss)		1,523,000			(149,000	)		(239,000	)		1,135,000
Other expense, net		(94,000	)		4,000			6,000			(84,000	)
Income (loss) before income taxes	$	1,429,000		$	(145,000	)	$	(233,000	)	$	1,051,000

Three Months Ended December 31, 2011

	North America			Singapore/Malaysia			Australia			Total
Revenue-
Product sales	$	11,529,000		$	889,000		$	353,000		$	12,771,000
Service revenue		4,845,000			144,000			266,000			5,255,000
Commission revenue		4,255,000			81,000			111,000			4,447,000
Total revenue		20,629,000			1,114,000			730,000			22,473,000
Cost of revenue-
Cost of product sales		7,918,000			591,000			194,000			8,703,000
Cost of service revenue		2,907,000			157,000			134,000			3,198,000
Total cost of revenue		10,825,000			748,000			328,000			11,901,000
Gross margin		9,804,000			366,000			402,000			10,572,000
Total operating expenses		8,500,000			282,000			447,000			9,229,000
Operating income (loss)		1,304,000			84,000			(45,000	)		1,343,000
Other expense, net		(194,000	)		(8,000	)		5,000			(197,000	)
Income (loss) before income taxes	$	1,110,000		$	76,000		$	(40,000	)	$	1,146,000

Six Months Ended December 31, 2012

	North America		Singapore/Malaysia		Australia		Total
Revenue-
Product sales	$	19,619,000	$	1,574,000	$	862,000	$	22,055,000
Service revenue		10,151,000		177,000		550,000		10,878,000
Commission revenue		9,698,000		102,000		449,000		10,249,000
Total revenue		39,468,000		1,853,000		1,861,000		43,182,000

Cost of revenue-
Cost of product sales		12,306,000			1,279,000			603,000			14,188,000
Cost of service revenue		6,958,000			182,000			370,000			7,510,000
Total cost of revenue		19,264,000			1,461,000			973,000			21,698,000
Gross margin		20,204,000			392,000			888,000			21,484,000
Total operating expenses		17,777,000			575,000			1,052,000			19,404,000
Operating income (loss)		2,427,000			(183,000	)		(164,000	)		2,080,000
Other expense, net		(123,000	)		6,000			13,000			(104,000	)
Income (loss) before income taxes	$	2,304,000		$	(177,000	)	$	(151,000	)	$	1,976,000

Six Months Ended December 31, 2011

	North America			Singapore/Malaysia			Australia		Total
Revenue-
Product sales	$	22,826,000		$	1,669,000		$	1,551,000	$	26,046,000
Service revenue		9,193,000			339,000			527,000		10,059,000
Commission revenue		7,890,000			101,000			320,000		8,311,000
Total revenue		39,909,000			2,109,000			2,398,000		44,416,000
Cost of revenue-
Cost of product sales		15,787,000			1,157,000			1,059,000		18,003,000
Cost of service revenue		5,787,000			278,000			267,000		6,332,000
Total cost of revenue		21,574,000			1,435,000			1,326,000		24,335,000
Gross margin		18,335,000			674,000			1,072,000		20,081,000
Total operating expenses		16,724,000			522,000			897,000		18,143,000
Operating income		1,611,000			152,000			175,000		1,938,000
Other expense, net		(325,000	)		(23,000	)		10,000		(338,000	)
Income before income taxes	$	1,286,000		$	129,000		$	185,000	$	1,600,000

	December 31, 2012		June 30, 2012
Long-lived assets
North America	$	2,931,000	$	2,633,000
Singapore/Malaysia		4,000		10,000
Australia		62,000		68,000
Total	$	2,997,000	$	2,711,000

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

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

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

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

Overview

Rand Worldwide is a leader in design, engineering, data archiving solutions, and facilities management technology solutions with expertise in computer aided design (“CAD”) software, computational fluid dynamics (“CFD”), data management, facilities management, and process optimization for the manufacturing, engineering, and building design industries. The Company specializes in software resale, technology consulting, implementation, integration, training, data archiving, CFD analysis consulting and thermal simulation services and technical support solutions that enable clients to more effectively design, develop, and manage projects, products, and facilities. The Company is globally diversified with offices in the United States, Canada, Australia, and Singapore. Rand Worldwide has over 25 years of industry experience and expertise, an extensive list of training and implementation services and longstanding relationships with design technology leaders including Autodesk, Archibus and Autonomy. The Company’s clients include businesses, government agencies, and educational institutions.

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

• Maintain and profitably grow its strong position in the Autodesk software market;

• Profitably grow its consulting and services business by leveraging its experts in design engineering; and

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

This strategy was designed to match the Company’s product and service offerings more precisely with the needs of its customers, while providing avenues of growth and diversification.

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

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

• Autodesk data management software;

• Archibus facilities management software for space planning, strategic planning, and lease/property administration;

• Leica 3D laser scanning equipment for the Architectural, Engineering and Construction sector;

• ASCENT internally developed courseware for a variety of engineering applications; and

• Autonomy data archiving solutions

Service Revenue- The Company provides services in the form of project-focused software implementations, training, consulting services, software development, software customization, data migration, supplemental design staffing, drawing digitization, symbol library development, custom courseware development, technical support and hosted data archiving solutions to its customers. The Company employs a technical staff of over 100 personnel associated with these types of services. The Company also offers support and implementation services to complement the data archive solutions provided and sold through its Rand Secure Archive Division.

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

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

The Company also generates commission revenue from the resale of Autodesk software to various customers, a number of which Autodesk considers major and government accounts. Autodesk designates customers as major accounts based on specific criteria, primarily sales volume, and typically gives these customers volume discounts. The Company is responsible for managing and reselling Autodesk products to a number of these major and government account customers; however, software products are shipped directly from Autodesk to the customers. The Company receives commissions upon shipment of the products from Autodesk to the customer based on a percentage of the sales price.

Cost of Product Sales-The cost of product sales consists of the cost of purchasing products from software suppliers or hardware manufacturers as well as the associated shipping and handling costs. The Company earns a volume incentive rebate from its primary supplier, Autodesk, paid monthly as a percentage of qualifying purchases. The rebate percentage is established based on quarterly purchasing volume. These rebates serve to reduce the cost of product sales. The Company accrues its rebates the month the underlying sales are posted, in accordance with ASC 605-50, Customer Payments and Incentives. The Company has generally been able to focus its sales efforts in a manner to achieve margins on its product sales that are within a relatively narrow range period to period.

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

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

Depreciation and Amortization Expense- Depreciation expense represents the period costs associated with our investment in property and equipment, consisting principally of computer equipment, software, furniture and fixtures, and leasehold improvements. Amortization expense represents the period costs of the acquired customer list and trade name intangible assets. The Company computes depreciation and amortization expenses using the straight-line method. The Company leases all of its facilities and depreciates leasehold improvements over the lesser of the lease term or the estimated useful life of the asset.

Interest Expense- Interest expense consists of interest on capital lease obligations and borrowings from lines of credit.

Three Months Ended December 31, 2012 Compared to the Three Months Ended December 31, 2011

The following tables set forth a comparison of the Company’s results of operations for the three-month period ended December 31, 2012 to the three-month period ended December 31, 2011. The amounts are derived from selected items reflected in the Company’s unaudited Consolidated Statements of Operations included elsewhere in this report. The three-month financial results are not necessarily indicative of future results.

Revenues

	Three Months Ended December 31,
	2012		2011		% change
Revenues:
Product sales	$	10,540,000	$	12,771,000		(17.5	)%
Service revenue		5,505,000		5,255,000		4.8	%
Commission revenue		5,536,000		4,447,000		24.5	%
Total revenues	$	21,581,000	$	22,473,000		(4.0	)%

Revenues. Total revenues for the three months ended December 31, 2012 decreased by $892,000, or 4.0%, when compared to the same period in the prior fiscal year.

Product sales decreased $2,231,000, or 17.5%, for the three months ended December 31, 2012 when compared to the same period in the prior fiscal year. Product sales were lower in all major market segments, with the exception of the architectural segment.

Service revenues increased $250,000, or 4.8%, for the three months ended December 31, 2012 when compared with the same period in the prior fiscal year. The increased service revenues were mainly the result of the newly-acquired CFD consulting business which the Company acquired in August 2012.

Commission revenues increased $1,089,000, or 24.5%, for the three months ended December 31, 2012 when compared with the same period in the prior fiscal year. Commission revenues increased primarily due to several large subscription renewals that occurred during the three months ended December 31, 2012.

Cost of Revenues and Gross Margin

	Three Months Ended December 31,
	2012		2011		% change
Cost of revenue:
Cost of product sales	$	6,858,000	$	8,703,000		(21.2	)%
Cost of service revenue		3,816,000		3,198,000		19.3	%
Total cost of revenue	$	10,674,000	$	11,901,000		(10.3	)%
Gross margin	$	10,907,000	$	10,572,000

Cost of revenue. The total cost of revenue decreased $1,227,000, or 10.3%, for the three months ended December 31, 2012 when compared to the same period in the prior fiscal year.

Cost of product sales decreased 21.2% during the three months ended December 31, 2012 when compared with the same period in the prior fiscal year, while product revenues decreased 17.5%. Cost of product sales decreased to a larger extent than did product revenues primarily due to increased sales rebates from the Company’s principal supplier, Autodesk. These rebates are recorded as a reduction of cost of product sales. Beginning February 1, 2012, Autodesk ended most of its target-based rebates and began a new volume-based rebate which resulted in larger rebates for the Company. In addition, sales of the Company’s proprietary products such as Revit Clarity and licenses for ASCENT courseware titles increased 46% over last year, resulting in decreased product cost relative to product revenue as the development costs for such proprietary products were expensed in prior quarters when they were incurred.

Cost of service revenue increased 19.3% for the three months ended December 31, 2012 when compared to the same period in the prior fiscal year, due to the fact that the Company hired additional technical staff, mainly those related to the Company’s recent acquisitions of Informative Design Partners (“IDP”) in July 2012 and Inlet Technology, LLC (“Inlet”) in February 2012 as well as the expansion of the Rand Secure Archive division. Cost of service revenue as a percentage of related revenue increased to 69.3% during the three months ended December 31, 2012 from 60.9% during the same period in the prior fiscal year as the Company’s overall services productivity decreased.

Gross margin. The Company’s overall gross margin percentage of 50.5% for the three months ended December 31, 2012 was higher than the 47.0% gross margin for the same period in the prior fiscal year due primarily to increased vendor rebates in the current quarter combined with a sales mix which included significantly higher commission revenue, which represents 100% margin because it is reported net of costs.

Other Operating Expenses

	Three Months Ended December 31,
	2012		2011		% change
Other operating expenses:
Selling, general and administrative	$	9,250,000	$	8,829,000		4.8	%
Depreciation and amortization		522,000		400,000		30.5	%
Total other operating expenses	$	9,772,000	$	9,229,000		5.9	%

Selling, General and Administrative Expense. Selling, general and administrative expenses increased $421,000, or 4.8%, for the three months ended December 31, 2012 when compared to the same period in the prior fiscal year. Selling, general and administrative expense as a percent of total revenues was 42.9% for the three months ended December 31, 2011, an increase from 39.3% for the same period in the prior fiscal year. The increase in these expenses was primarily the result of employees related to the Company’s recent acquisitions as well as additional hiring in the Rand Secure Archive division.

Depreciation and Amortization. Depreciation and amortization expenses increased $122,000, or 30.5%, for the three months ended December 31, 2012 when compared to the same period in the prior fiscal year. The increase was due primarily to the additional depreciation expense associated with hardware and software acquired for the Company’s data archiving division.

Other Expense, Net

	Three Months Ended December 31,
	2012			2011			% change
Other expense, net	$	(84,000	)	$	(197,000	)		(57.4	)%

Other Expense, Net. The Company incurred $84,000 in other expense, net, during the three months ended December 31, 2012, compared to $197,000 during the same period in the prior fiscal year. The majority of the decrease was due to decreased interest expense and lower foreign currency exchange losses.

Income Tax Expense

	Three Months Ended December 31,
	2012		2011		% change
Income tax expense	$	555,000	$	107,000		418.7	%

Income Tax Expense. The Company recorded $555,000 of income tax expense during the three months ended December 31, 2012, compared to $107,000 in income tax expense recorded for the same period in the prior fiscal year. The Company’s effective tax rate was 53% during the three months ended December 31, 2012, compared to 9% during the same period in the prior fiscal year.

In the prior fiscal year, the Company had a valuation allowance against its net operating loss carryforwards and was able to offset most of its income tax expense against its net operating loss carryforwards. During the quarter ended June 30, 2012, the Company recognized as an asset its U.S. net operating loss carryforwards that it expects will be realizable and, as a result, the Company’s income tax expense is no longer offset against large unrecognized U.S. net operating loss carryforwards. Consequently, income tax expense is significantly higher.

As of December 31, 2012, the Company had U.S. federal net operating loss carryforwards available to reduce future taxable income of approximately $38.0 million; however, $25.3 million of these carryforwards were not recognized because they are subject to annual limitations under Internal Revenue Code Section 382 and are expected to expire before being utilized. These carryforwards expire between 2013 and 2029. In addition, as of December 31, 2012, the Company had foreign net operating loss carryforwards of approximately $19.6 million available to reduce future taxable income, and net deferred tax assets of $6.8 million. The carryforwards expire between 2012 and 2029 for some jurisdictions and may be carried forward indefinitely for other jurisdictions. The Company maintains a valuation allowance on the entire amount of its foreign deferred tax assets due to insufficient history of profitable operations.

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

Six Months Ended December 31, 2012 Compared to the Six Months Ended December 31, 2011

The following tables set forth a comparison of the Company’s results of operations for the six-month period ended December 31, 2012 to the six-month period ended December 31, 2011. The amounts are derived from selected items reflected in the Company’s unaudited Consolidated Statements of Operations included elsewhere in this report. The six-month financial results are not necessarily indicative of future results.

Revenues

	Six Months Ended December 31,
	2012		2011		% change
Revenues:
Product sales	$	22,055,000	$	26,046,000		(15.3	)%
Service revenue		10,878,000		10,059,000		8.1	%
Commission revenue		10,249,000		8,311,000		23.3	%
Total revenues	$	43,182,000	$	44,416,000		(2.8	)%

Revenues. Total revenues for the six months ended December 31, 2012 decreased by $1,234,000, or 2.8%, when compared to the same period in the prior fiscal year.

Product sales decreased $3,991,000, or 15.3%, for the six months ended December 31, 2012 when compared to the same period in the prior fiscal year. During the prior fiscal year, product sales included a single sale of $700,000 from the Company’s Australian operations, and in addition, the production of the Company’s sales force was lower in the current fiscal year.

Service revenues increased $819,000, or 8.1%, for the six months ended December 31, 2012 when compared with the same period in the prior fiscal year. The increased service revenue included $338,000 from the newly-acquired CFD consulting business which the Company purchased in August 2012, $300,000 in increased data archiving services, and modest increases in training and consulting services.

Commission revenues increased $1,938,000, or 23.3%, for the six months ended December 31, 2012 when compared with the same period in the prior fiscal year. Commission revenues increased primarily due to several large subscription renewals that occurred during the six months ended December 31, 2012.

Cost of Revenues and Gross Margin

	Six Months Ended December 31,
	2012		2011		% change
Cost of revenue:
Cost of product sales	$	14,188,000	$	18,003,000		(21.2	)%
Cost of service revenue		7,510,000		6,332,000		18.6	%
Total cost of revenue	$	21,698,000	$	24,335,000		(10.8	)%
Gross margin	$	21,484,000	$	20,081,000

Cost of revenue. The total cost of revenue decreased $2,637,000, or 10.8%, for the six months ended December 31, 2012 when compared to the same period in the prior fiscal year.

Cost of product sales decreased 21.2% during the six months ended December 31, 2012 when compared with the same period in the prior fiscal year, while product revenue decreased 15.3%. Cost of product sales decreased to a larger extent than did product revenues primarily due to increased sales rebates from the Company’s principal supplier, Autodesk. Beginning February 1, 2012, Autodesk ended most of its target-based rebates and began a new volume-based rebate which resulted in larger rebates for the Company. Furthermore, sales of proprietary products such as Revit Clarity and licenses for ASCENT courseware titles increased 110% over last year, resulting in decreased product cost relative to product revenue as the development costs for such proprietary products were expensed in prior quarters when they were incurred.

Cost of service revenue increased 18.6% for the six months ended December 31, 2012 when compared to the same period in the prior fiscal year, while service revenues increased 8.1%, as the Company hired additional technical staff, mainly those related to the Company’s recent acquisitions as well as the expansion of the Rand Secure Archive division. Cost of service revenue as a percentage of related revenue increased to 69.0% during the six months ended December 31, 2011 from 62.9% during the same period in the prior fiscal year for the reasons explained above.

Gross margin. The Company’s overall gross margin percentage of 49.8% for the six months ended December 31, 2012 was higher than the 45.2% gross margin for the same period in the prior fiscal year due to increased vendor rebates in the current quarter combined with a sales mix which included significantly higher commission revenue, which represents 100% margin because it is reported net of costs.

Other Operating Expenses

	Six Months Ended December 31,
	2012		2011		% change
Other operating expenses:
Selling, general and administrative	$	18,449,000	$	17,348,000		6.3	%
Depreciation and amortization		955,000		795,000		20.1	%
Total other operating expenses	$	19,404,000	$	18,143,000		7.0	%

Selling, General and Administrative Expense. Selling, general and administrative expenses increased $1,101,000, or 6.3%, for the six months ended December 31, 2012 when compared to the same period in the prior fiscal year. Selling, general and administrative expense as a percent of total revenues was 42.7% for the six months ended December 31, 2012, an increase from 39.1% for the same period in the prior fiscal year. The increase in these expenses was primarily the result of new employees including those related to the Company’s recent acquisitions as well as the expansion of the Rand Secure Archive division and the team dedicated to selling training offerings.

Depreciation and Amortization. Depreciation and amortization expenses increased $160,000, or 20.1%, for the six months ended December 31, 2012 when compared to the same period in the prior fiscal year. The increase was due primarily to the additional depreciation expense associated with hardware and software acquired for its data archiving division.

Other Expense, Net

	Six Months Ended December 31,
	2012			2011			% change
Other expense, net	$	(104,000	)	$	(338,000	)		(69.2	)%

Other Expense, Net. The Company incurred $104,000 in other expense, net, during the six months ended December 31, 2012, compared to $338,000 during the same period in the prior fiscal year. The decrease was due to lower interest expense as well as foreign currency exchange gains of $44,000 during the current fiscal year compared to foreign currency exchange losses of $103,000 recorded in the prior fiscal year.

Income Tax Expense

	Six Months Ended December 31,
	2012		2011		% change
Income tax expense	$	904,000	$	159,000		468.6	%

Income Tax Expense. The Company recorded $904,000 of income tax expense during the six months ended December 31, 2012, compared to $159,000 in income tax expense recorded for the same period in the prior fiscal year. The Company’s effective tax rate was 46% during the six months ended December 31, 2012, compared to 10% during the same period in the prior fiscal year.

In the prior fiscal year, the Company had a valuation allowance against its net operating loss carryforwards and was able to offset most of its income tax expense against its net operating loss carryforwards. During the quarter ended June 30, 2012, the Company recognized as an asset its U.S. net operating loss carryforwards that it expects will be realizable and, as a result, the Company’s income tax expense is no longer offset against large unrecognized U.S. net operating loss carryforwards. Consequently, income tax expense is significantly higher.

As of December 31, 2012, the Company had U.S. federal net operating loss carryforwards available to reduce future taxable income of approximately $38.0 million; however, $25.3 million of these carryforwards were not recognized because they are subject to annual limitations under Internal Revenue Code Section 382 and are expected to expire before being utilized. These carryforwards expire between 2013 and 2029. In addition, as of December 31, 2012, the Company had foreign net operating loss carryforwards of approximately $19.6 million available to reduce future taxable income, and net deferred tax assets of $6.8 million. The carryforwards expire between 2012 and 2029 for some jurisdictions and may be carried forward indefinitely for other jurisdictions. The Company maintains a valuation allowance on the entire amount of its foreign deferred tax assets due to insufficient history of profitable operations.

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

Liquidity and Capital Resources

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

On February 29, 2012, the Company entered into an $8 million line of credit facility, including a $1,000,000 sublimit for the issuance of standby or trade letters of credit, with PNC Bank, National Association. The interest rate is the “Eurodollar Rate”, which is calculated by using the LIBOR rate, plus a margin of 2.0%. The interest rate as of December 31, 2012 was 2.2%. The Company had outstanding borrowings from the bank under its credit line of approximately $3.5 million as of December 31, 2012 and $3.1 million outstanding as of June 30, 2012. The line expires on February 28, 2014.

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

For the six months ended December 31, 2012, net cash provided by operating activities was $1,867,000, compared to net cash provided by operating activities of $2,362,000. The decrease between periods was due mainly to the decreased profitability of the Company, combined with some offsetting balance sheet changes detailed in the accompanying Consolidated Statements of Cash Flows.

The Company’s ongoing investing activities consist principally of investments in computer and office equipment. In July 2012, the Company acquired IDP for $600,000 in cash, $400,000 in common stock and potential future earnout payments. Purchases of equipment for the six months ended December 31, 2012 increased to $786,000 from $548,000 when compared to the six months ended December 31, 2011, mainly as the result of purchases of software and hardware for the Rand Secure Archive business and normal periodic replacement of computer equipment.

For the six months ended December 31, 2012, net cash provided by financing activities was $170,000 compared to net cash used in financing activities of $1,951,000 during the six months ended December 31, 2011. The difference resulted mainly from a larger net pay down of the line of credit during six months ended December 31, 2011.

The Company had a working capital surplus of $4,497,000 as of December 31, 2012.

Because the Company is one of the largest resellers of Autodesk software and because Autodesk has continued to state its intention to continue to strengthen its relationships with its resellers, the Company expects to continue to be a leading seller of Autodesk software. The Company is a party to a Value Added Reseller Agreement with Autodesk effective February 1, 2013. The agreement provides for an initial term of twelve months that, subject to certain requirements and termination rights of the parties, automatically renews on an annual basis for two additional twelve-month periods. The agreement designates the Company as an authorized reseller of Autodesk software and prescribes the authorized sales territories, authorized products and services, rebate and incentive program details and marketing support.

Operating Leases

The Company leases certain office space and equipment under noncancellable operating lease agreements that expire in various years through 2019 and that, generally, do not contain significant renewal options. Future minimum payments under all noncancellable operating leases with initial terms of one year or more consisted of the following at December 31, 2012:

Twelve months ending December 31:
2013	$	2,536,000
2014		2,153,000
2015		1,706,000
2016		1,064,000
2017		642,000
Thereafter		433,000
Total minimum lease payments	$	8,534,000

Capital Leases

The Company has various components of computer equipment that are used in its training facilities and by employees throughout its office locations, much of which is leased. These capital lease obligations totaled $760,000 as of December 31, 2012 with approximately $294,000 representing the short-term balance of the lease and shown as Obligations under capital leases in the accompanying balance sheets. Payments for the leases are made either monthly or quarterly through September 2016 and depreciation expense on this equipment was approximately $124,000 as of December 31, 2012. Future minimum payments consisted of the following at December 31, 2012:

Twelve months ending December 31:
2013	$	344,000
2014		303,000
2015		137,000
2016		91,000
Total minimum lease payments		875,000
Less:
Taxes		44,000
Imputed interest		71,000
Present value of future minimum lease payments	$	760,000

ITEM 4. CONTROLS AND PROCEDURES

Disclosure Controls and Procedures

The Company maintains disclosure controls and procedures that are designed to ensure that information required to be disclosed in the reports filed under the Securities Exchange Act of 1934 with the Securities and Exchange Commission, such as this Quarterly Report, is recorded, processed, summarized and reported within the periods specified in those rules and forms, and that such information is accumulated and communicated to management, including its principal executive officer (“CEO”) and its principal financial and accounting officer (“CFO”), as appropriate, to allow for timely decisions regarding required disclosure. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered

relative to their costs. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the control. The design of any system of controls is also based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Over time, controls may become inadequate because of changes in conditions, or the degree of compliance with the policies or procedures may deteriorate.

An evaluation of the effectiveness of these disclosure controls as of December 31, 2012 was carried out under the supervision and with the participation of management, including the CEO and the CFO. Based on that evaluation, management, including the CEO and the CFO, has concluded that, as of that date, the Company’s disclosure controls and procedures were, in fact, effective at the reasonable assurance level.

Changes in Internal Control over Financial Reporting

There were no changes in the Company’s internal control over financial reporting during the fiscal quarter covered by this report that have materially affected or are reasonably likely to materially affect our internal controls over financial reporting.

PART II - OTHER INFORMATION

ITEM 5. OTHER INFORMATION

At the Company’s Annual Meeting of Stockholders held on November 7, 2012, the stockholders voted on: (i) the election of seven director nominees (Proposal 1); and (ii) the approval of the Company’s Omnibus Equity Compensation Plan (Proposal 2). These matters were submitted to a vote through the solicitation of proxies. The results of the votes are set forth below:

Proposal 1 - To elect seven individuals to serve as directors of the Company for the ensuing year and until their successors are duly elected and qualified:

	For		Withheld		Abstain		Broker Non- Votes
Richard A. Charpie		47,092,579		242,055		0		0
George M. Davis		46,859,217		475,417		0		0
Marc L. Dulude		47,092,250		242,384		0		0
Peter H. Kamin		47,330,075		4,559		0		0
Suzanne E. MacCormack		47,092,549		242,085		0		0
Manu Parpia		47,330,105		4,529		0		0
Charles D. Yie		47,092,579		242,055		0		0

Proposal 2 - To approve the Omnibus Equity Compensation Plan:

For	Against		Abstain		Broker Non-Votes
46,262,040		784,556		288,038		0

A copy of the Omnibus Equity Compensation Plan, as approved, is filed with this report as Exhibit 10.1.

ITEM 6. EXHIBITS

The exhibits filed or furnished with this report are listed in the Exhibit Index that immediately follows the Signatures to this report, which list is incorporated herein by reference.

SIGNATURES

Pursuant to the requirements 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.

	RAND WORLDWIDE, INC.
Date: February 14, 2013	By: /s/ Marc L. Dulude
	Marc L. Dulude
	Chief Executive Officer
	(Principal Executive Officer)
Date: February 14, 2013	By: /s/ Lawrence Rychlak
	Lawrence Rychlak
	President and Chief Financial Officer
	(Principal Financial and Accounting Officer)

EXHIBIT INDEX

Exhibit	Description
10.1	Rand Worldwide, Inc. Omnibus Equity Compensation Plan†
31.1	Rule 15d-14(a) Certification of Principal Executive Officer†
31.2	Rule 15d-14(a) Certification of Principal Financial and Accounting Officer†
32.1	Section 1350 Certifications††
101.INS	XBRL Instance Document. ††
101.SCH	XBRL Taxonomy Extension Schema Document. ††
101.CAL	XBRL Taxonomy Calculation Linkbase Document. ††
101.DEF	XBRL Taxonomy Extension Definition Linkbase Document. ††
101.LAB	XBRL Taxonomy Label Linkbase Document. ††
101.PRE	XBRL Taxonomy Presentation Linkbase Document. ††

^†  Filed herewith.

^††  Furnished herewith.

EX-10.1

Exhibit 10.1

RAND WORLDWIDE, INC.

OMNIBUS EQUITY COMPENSATION PLAN

AUGUST 22, 2012

1. Purpose. The purpose of the Plan is to provide designated (a) Employees of the Company and its Affiliates and (b) Non-Employee Directors of the Company with the opportunity to receive grants of Options, Stock Units, Performance Units, Stock Awards and Other Stock-Based Awards. The Company believes that the Plan will encourage the Participants to contribute materially to the growth of the Company, thereby benefiting the Company’s stockholders, and will align the economic interests of the Participants with those of the stockholders.

All capitalized terms shall be as defined in Section 2 hereof.

2. Definitions. Whenever used in this Plan, the following terms will have the respective meanings set forth below:

(a) “Affiliate” means any “parent corporation” and any “subsidiary corporation” of the Company, as such terms are defined in Section 424 of the Code.

(b) “Board of Directors” or “Board” means the Company’s board of directors.

(c) “Cause” means, for purposes of a termination of a Participant’s employment or service with the Company or a Subsidiary for Cause, one or more of: (i) the Participant’s misappropriation of corporate funds; (ii) Participant’s conviction of a felony; (iii) the Participant’s conviction of any crime involving theft, dishonesty, or more turpitude; (iv) if the Participant is an employee, the Participant’s willful violation of directions of the board of directors of the Company or a Subsidiary which are consistent with Participant’s employment duties; (v) falsification of any material representation made by the Participant to the Company or a Subsidiary; (vi) verifiable evidence that the Participant has engaged in sexual harassment of a nature that could give rise to liability on the part of the Company or a Subsidiary; and/or (vii) if the Participant is a party to an employment agreement with the Company or a Subsidiary, any event that constitutes “cause” as defined in that employment agreement or, if no such definition is contained in that employment agreement, the Participant’s material breach of any of the terms of such employment agreement; provided, however, that any condition or occurrence specified in items (i), (iv), (v), (vi) or (vii) of this subsection (c) shall be deemed to exist only upon a finding by a majority vote of the entire board of directors of the Company or a Subsidiary, as applicable, after at least 10 days’ written notice to the Participant specifying the condition or occurrence proposed to be claimed and after an opportunity for the Participant to be heard at a meeting of such board of directors.

(d) “Change in Control” means the occurrence of any of the following events:

(i) Any “person” (as such term is used in Sections 13(d) and 14(d) of the Exchange Act) becomes, within the 12-month period ending on the date of such person’s most recent acquisition, a “beneficial owner” (as defined in Rule 13d-3 under the Exchange Act),

directly or indirectly, of securities of the Company representing more than 50% of the voting power of the then outstanding securities of the Company; provided that a Change in Control shall not be deemed to occur as a result of a transaction in which the Company becomes a subsidiary of another corporation and in which the stockholders of the Company, immediately prior to the transaction, will beneficially own, immediately after the transaction, securities entitling such stockholders to more than 50% of all votes to which all stockholders of the parent corporation would be entitled in the election of directors (without consideration of the rights of any class of stock to elect directors by a separate class vote); and provided further that ownership or control of the Company’s voting securities, individually or collectively, by any Affiliate that is a benefit plan sponsored by the Company or any Affiliate shall not constitute a Change in Control.

(ii) The consummation of (A) a merger, consolidation, or similar extraordinary event involving the Company and another entity where the stockholders of the Company, immediately prior to the merger, consolidation or similar extraordinary event, will not beneficially own, immediately after the merger, consolidation or similar extraordinary event, securities entitling such holders to more than 50% of all votes to which all stockholders of the surviving corporation would be entitled in the election of directors (without consideration of the rights of any class of stock to elect directors by a separate class vote), or (B) a sale or other disposition of all or substantially all of the assets of the Company; or

(iii) During any 12-month period after the Effective Date, individuals who at the beginning of such period constituted the Board of Directors cease for any reason to constitute a majority thereof, unless the election, or the nomination for election by the Company’s stockholders, of at least a majority of the directors who were not directors at the beginning of such period, was approved by a vote of at least two-thirds of the directors then in office at the time of such election or nomination who either (i) were directors at the beginning of such period or (ii) whose appointment, election or nomination for election was previously so approved.

Notwithstanding the foregoing, the Committee may modify the definition of a Change in Control for a particular Grant as the Committee deems appropriate to comply with Section 409A of the Code and any related regulations or other guidance promulgated with respect to such Section by the U.S. Department of the Treasury or the Internal Revenue Service.

(e) “Code” means the Internal Revenue Code of 1986, as amended.

(f) “Committee” means a committee of the Board of Directors comprised solely of two or more independent directors as the Board of Directors may appoint to administer the Plan, or, if such committee has not been appointed, the full Board of Directors. Notwithstanding the foregoing, with respect to Grants to Employees that are intended as “qualified performance-based compensation” (as defined under Section 162(m) of the Code), as well as to Employees who are officers of the Company, the Committee shall consist of two or more persons appointed by the Board, all of whom shall be “outside directors” (as defined under Section 162(m) of the Code and related U.S. Department of the Treasury regulations) and “non-employee directors” as defined under Rule 16b-3 promulgated under the Exchange Act.

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(g) “Company” means Rand Worldwide, Inc., a Delaware corporation, and any successor thereto.

(h) “Date of Grant” means the date a Grant is effective.

(i) “Director” means a member of the Board of Directors.

(j) “Effective Date” means August 22, 2012, subject to approval by the stockholders of the Company.

(k) “Eligible Person” has the meaning given such term in Section 6(a) of this Plan.

(l) “Employee” means an employee of the Company or of a Subsidiary (including an officer or director who is also an employee).

(m) “Exchange Act” means the Securities Exchange Act of 1934, as amended.

(n) “Fair Market Value” of a Share on any given date under this Plan shall be determined as follows:

(iv) If Shares are at the time listed or admitted to trading on any national securities exchange or national market system, then the Fair Market Value shall be the average of the closing sales prices per Share for the five (5) trading days immediately preceding the date of determination as reported on such exchange or system.

(v) If Shares are not at the time listed or admitted to trading on any national securities exchange or national market system but are traded in the over-the-counter market, then the Fair Market Value shall be the average of the high bid price and the low ask price per Share for the five (5) trading days immediately preceding the date of determination as reported through the over-the-counter market.

(vi) If Shares are not listed or admitted to trading on any national securities exchange or national market system or traded in the over-the-counter market, then the Fair Market Value shall be determined by the Committee pursuant to a reasonable method adopted by the Committee in good faith for such purpose in accordance with applicable law.

(o) “Grant” means an Option, Stock Unit, Performance Unit, Stock Award, or Other Stock-Based Award granted under the Plan.

(p) “Grant Agreement” means the written agreement that sets forth the terms and conditions of a Grant, including all amendments thereto.

(q) “Incentive Option” means an Option which by its terms is intended to be treated as an “incentive stock option” within the meaning of Section 422 of the Code, as described in Section 7.

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(r) “Non-Employee Director” means a Director who is not an officer or employee of the Company and who is (i) a “nonemployee director” within the meaning of Exchange Act Rule 16b-3, or any successor regulation, and (ii) an “outside director” within the meaning of Section 162(m) of the Code; provided, however, that item (ii) shall apply only with respect to grants of Options intended by the Committee to qualify as “performance-based compensation” under Section 162(m) of the Code.

(s) “Nonstatutory Option” means any Option that is not an Incentive Option, as described in Section 7.

(t) “Option” means an option to purchase Shares at an Option Price for a specified period of time under this Plan.

(u) “Option Period” shall have the meaning given such term in Section 7(d) of this Plan.

(v) “Option Price” means the price paid or to be paid by a Participant for a Share upon exercise of an Option.

(w) “Other Stock-Based Award” means any Grant based on, measured by or payable in Shares (other than Grants described in Sections 7, 8, 9, 10, 11 and 12), as described in Section 13.

(x) “Participant” means an Eligible Person designated by the Committee to receive a Grant under the Plan.

(y) “Performance Units” means an award of phantom units, representing one or more Shares, as described in Section 9 hereof.

(z) “Person” means as such term is defined in Section 3(a)(9) of the Exchange Act, as modified and used in Sections 13(d) and 14(d) thereof, except that such term shall not include (i) the Company or any of its affiliates (as defined under Rule 12b-2 of the Exchange Act), (ii) a trustee or other fiduciary holding securities under an employee benefit plan of the Company or any of its affiliates, (iii) an underwriter temporarily holding securities pursuant to an offering of such securities, or (iv) a corporation owned, directly or indirectly, by the stockholders of the Company in substantially the same proportions as their ownership of the Stock.

(aa) “Plan” means this 2012 Omnibus Equity Compensation Plan of the Company, as in effect from time to time.

(bb) “Share” means a share of Stock.

(cc) “Stock” means the common stock, par value $.01 per Share, of the Company or such other securities of the Company as may be substituted for Stock pursuant to Sections 5(d) or 16 hereof.

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(dd) “Stock Award” means an award of Shares, as described in Section 10 hereof.

(ee) “Stock Unit” means an award of a phantom unit, representing one or more Shares, as described in Section 8 hereof.

(ff) “Subsidiary” means any subsidiary of the Company as defined in Section 424(f) of the Code.

(gg) “Successor Participant” means the personal representative or other person entitled to succeed to the rights of the Participant in accordance with Section 15 hereof.

(hh) “Ten Percent Owner” means a Person who owns, or is deemed within the meaning of Section 422(b)(6) of the Code to own, securities possessing more than 10% of the total combined voting power of all classes of securities of the Company (or its parent or subsidiary corporations). Whether a person is a Ten Percent Owner shall be determined with respect to each Grant based on the facts existing on the Date of Grant of such Grant.

3. Administration.

(a) Committee. The Plan shall be administered and interpreted by the Committee. Day to day administrative functions may be performed by employees of the Company, as approved by the Committee.

(b) Committee Authority. The Committee shall have the sole authority to (i) determine the Employees and Non-Employee Directors to whom Grants shall be made under the Plan, (ii) determine the type, size and terms of the Grants to be made to each Participant, (iii) determine the time when the Grants will be made and the duration of any applicable exercise or restriction period, including the criteria for exercisability and the acceleration of exercisability, (iv) amend the terms of any previously issued Grant, subject to the provisions of Section 19 hereof, (v) adopt guidelines separate from the Plan that set forth the specific terms and conditions for Grants under the Plan, and (vi) deal with any other matters arising under the Plan.

(c) Committee Determinations. The Committee shall have full power and express discretionary authority to administer and interpret the Plan, to make factual determinations and to adopt or amend such rules, regulations, agreements and instruments for implementing the Plan and for the conduct of its business as it deems necessary or advisable, in its sole discretion. The Committee’s interpretations of the Plan and all determinations made by the Committee pursuant to the powers vested in it hereunder shall be conclusive and binding on all persons having any interest in the Plan or in any Grants awarded hereunder. All powers of the Committee shall be executed in its sole discretion, in the best interest of the Company, not as a fiduciary, and in keeping with the objectives of the Plan and need not be uniform as to similarly situated individuals. The majority of the members of the Committee shall constitute a quorum. The acts of a majority of the members present at any meeting at which a quorum is present or acts approved in writing by a majority of the Committee shall be deemed the acts of the Committee.

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4. Grants. Grants under the Plan may consist of Options, Stock Units, Performance Units, Stock Awards, and Other Stock-Based Awards. All Grants shall be subject to the terms and conditions set forth herein and to such other terms and conditions consistent with the Plan as the Committee deems appropriate and as are specified in writing by the Committee in separate guidelines or to the individual in the Grant Agreement or an amendment to the guidelines or Grant Agreement. The Committee shall approve the form and provisions of each Grant Agreement. Grants under a particular Section of the Plan need not be uniform as among the Participants. All Grants shall be made conditional upon the Participant’s acknowledgement, in writing or by acceptance of the Grant, that all decisions and determinations of the Committee shall be final and binding on the Participant, his or her beneficiaries, and any other person having or claiming an interest under such Grant. Notwithstanding any provision of the Plan to the contrary, the Committee may make Grants that are contingent on, and subject to, shareholder approval of the Plan or an amendment to the Plan.

5. Shares of Stock Subject to the Plan.

(a) Shares Authorized. Subject to adjustment as described below, the aggregate number of Shares that may be issued or transferred under the Plan is 2,000,000. The Shares may be authorized but unissued Shares or reacquired Shares, including Shares purchased by the Company on the open market for purposes of the Plan. Grants paid in cash shall not count against the foregoing Share limits.

(b) Share Counting. For administrative purposes, when the Committee makes a Grant payable in Shares, the Committee shall reserve Shares equal to the maximum number of Shares that may be payable under the Grant. If and to the extent Options granted under the Plan terminate, expire, or are canceled, forfeited, exchanged or surrendered after the Effective Date without having been exercised or if any Stock Awards, Stock Units, Performance Units, or Other Stock-Based Awards (or granted under the Prior Plans prior to the Effective Date) are forfeited or terminated, or otherwise not paid in full after the Effective Date, the Shares subject to such Grants shall again be available for purposes of the Plan. To the extent Grants are paid in cash, and not in Shares, any Shares previously reserved for issuance or transfer pursuant to such Grants shall again be available for issuance or transfer under the Plan.

(c) Individual Limits. All Grants under the Plan shall be expressed in Shares. The individual limits described in this subsection (c) shall apply without regard to whether the Grants are to be paid in Shares or in cash. All cash payments shall equal the Fair Market Value of the Shares to which the cash payment relates.

(d) Adjustments. If there is any change in the number or kind of Shares outstanding (i) by reason of a stock dividend, spinoff, recapitalization, stock split, or combination or exchange of shares, (ii) by reason of a merger, reorganization or consolidation, (iii) by reason of a reclassification or change in par value, or (iv) by reason of any other extraordinary or unusual event affecting the outstanding Stock as a class without the Company’s receipt of consideration, or if the value of outstanding Shares is substantially reduced as a result of a spinoff or the Company’s payment of an extraordinary dividend or distribution, the maximum number of Shares available for issuance under the Plan, the maximum number of

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Shares for which any individual may receive pursuant to Grants in any year, the number of Shares covered by outstanding Grants, the kind of Shares to be issued or transferred under the Plan, and the price per Share or the applicable market value of such Grants shall be appropriately adjusted by the Committee to reflect any increase or decrease in the number of, or change in the kind or value of, issued Shares to preclude, to the extent practicable, the enlargement or dilution of rights and benefits under such Grants; provided, however, that any fractional Shares resulting from such adjustment shall be eliminated by adjusting the number of Shares to the nearest smaller whole number of Shares. Any adjustment in Incentive Options under this Section 5(d) shall be made only to the extent not constituting a “modification” within the meaning of Section 424(h)(3) of the Code, and any adjustments under this Section 5(d) shall be made in a manner which does not adversely affect the exemption provided pursuant to Exchange Act Rule 16b-3. Further, with respect to Options intended to qualify as “performance-based compensation” under Section 162(m) of the Code, such adjustments or substitutions shall be made only to the extent that the Committee determines that such adjustments or substitutions may be made without a loss of deductibility for Options under Section 162(m) of the Code. The Company shall give each Participant notice of an adjustment hereunder and, upon notice, such adjustment shall be conclusive and binding for all purposes.

6. Eligibility for Participation.

(a) Eligible Persons. All Employees, including Employees who are officers or members of the Board, all Non-Employee Directors and consultants of the Company or of a Subsidiary (each an, “Eligible Person”) shall be eligible to participate in the Plan.

(b) Selection of Participants. The Committee shall select the Eligible Persons to receive Grants and shall determine the terms and conditions of the Grant and the number of Shares subject to each Grant.

7. Options.

(a) General Requirements. The Committee may grant Options to an Eligible Person upon such terms and conditions as the Committee deems appropriate under this Section 7 hereof.

(b) Number of Shares. The Committee shall determine the number of Shares that will be subject to each Grant of Options to Eligible Persons.

(c) Type of Option and Price.

(i) The Committee may grant Incentive Options or Nonstatutory Options or any combination of Incentive Options and Nonstatutory Options. Incentive Options may be granted only to Employees. Non-Employee Directors may be granted Nonstatutory Options only.

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(ii) The Option Price shall be set by the Committee at the time of grant but shall not be less than 100% of the Fair Market Value of the Shares subject to the Grant on the Date of Grant. In addition, an Incentive Stock Option granted to an Eligible Person who, at the time of grant, is a Ten Percent Owner shall have an Option Price per Share which is at least equal to 110% of the Fair Market Value of a Share on the Date of Grant.

(d) Vesting; Option Period. An Option shall vest and become exercisable in such manner and on such date or dates as are determined by the Committee, which need not be the same for all Participants. The term of each Option (the “Option Period”) shall expire at such time as the Committee shall determine; provided, however, that no Option shall be exercisable after the expiration of ten (10) years from its Date of Grant. In addition, an Incentive Option granted to an Eligible Person who, at the time of grant, is a Ten Percent Owner shall not have an Option Period that is longer than the date that is five (5) years after its Grant Date. Notwithstanding any vesting date or dates set by the Committee in a Grant Agreement, the Committee may, in its sole discretion, accelerate the exercisability of any Option, which acceleration shall not affect the terms and conditions of the Option other than with respect to exercisability. If an Option is exercisable in installments, then such installments or portions thereof which become exercisable shall remain exercisable until the expiration of the Option Period.

(e) Termination of Employment or Service. If a Participant’s employment or service with the Company or a Subsidiary terminates for any reason other than because the Participant becomes disabled (as defined in Section 22(e)(3) of the Code) or dies or is terminated by the Company or a Subsidiary for Cause, then any Option held by the Participant may be exercised by the Participant at any time within the shorter of the Option Period or 45 days after the date of such termination, but only to the extent that the Option was exercisable at the time of such termination. If a Participant’s employment or service with the Company or a Subsidiary terminates because the Participant becomes disabled (as defined in Section 22(e)(3) of the Code) or dies, then any Option held by that Participant may be exercised by the Participant or the Participant’s trustee, executor or administrator, as applicable, at any time within the shorter of the Option Period or twelve (12) months after the date of such termination, but only to the extent the Option was exercisable at the time of such termination. If a Participant’s employment or service with the Company or a Subsidiary is terminated by the Company or a Subsidiary for Cause, then any Option held by that Participant, whether vested or unvested, shall immediately lapse and be forfeited as of the date of termination. In all cases, any Option (or portion thereof) that is not exercisable at the time of a Participant’s termination of employment or service or which is exercisable but is not exercised within the time periods described above shall terminate. Military or sick leave shall not be deemed a termination under this Section 7(e), provided that such leave does not exceed the longer of three (3) months or the period during which the reemployment rights of the absent employee are guaranteed by statute or by contract. Notwithstanding anything to the contrary, a Participant whose employment or service terminates because of retirement may exercise the Participant’s Nonstatutory Options within twelve (12) months after the date of retirement but only to the extent such Nonstatutory Options were exercisable on the date of retirement and in no event after the Option Period.

(f) Exercise of Options. The Options shall be exercised by delivering written notice to the Company stating the number of Shares to be purchased, the person or persons in whose name the Shares are to be registered and each such person’s address and social security number. Such notice shall not be effective unless accompanied by the aggregate Option Price for

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all Shares to be purchased, and any applicable withholding taxes (as described in Section 14 hereof). Such aggregate Option Price and applicable withholding taxes shall be payable in cash or by certified, cashier’s or personal check; provided, however, that if payment is made by personal check, then the written notice of exercise shall not be effective, and the Shares payable upon exercise shall not be issued to the Participant, until the date on which the Company receives confirmation from its financial institution that the personal check has been paid in full.

(g) Annual Limit on Incentive Options. To the extent that the aggregate Fair Market Value (determined at the time the Option is granted) of Shares with respect to which any Participant may first exercise Incentive Options (granted under this Plan and all other equity compensation plans of the Company) during any calendar year exceeds $100,000 or such other amount as shall be specified in Section 422 of the Code and rules and regulations thereunder, such excess Incentive Options shall be treated as Nonstatutory Options.

8. Stock Units.

(a) General Requirements. The Committee may grant Stock Units to any Eligible Person, upon such terms and conditions as the Committee deems appropriate under this Section 8. Each Stock Unit shall represent the right of the Participant to receive a Share or an amount based on the value of a Share. All Stock Units shall be credited to accounts on the Company’s records for purposes of the Plan.

(b) Terms of Stock Units. The Committee may grant Stock Units that are payable if specified performance goals or other conditions are met, or under other circumstances. Stock Units may be paid at the end of a specified period, or payment may be deferred to a date authorized by the Committee. The Committee shall determine the number of Stock Units to be granted and the requirements applicable to such Stock Units.

(c) Payment with Respect to Stock Units. Payment with respect to Stock Units shall be made in cash, in Shares, or in a combination of the two, as determined by the Committee. The Grant Agreement shall specify the maximum number of Shares that shall be paid under the Stock Units.

(d) Requirement of Employment or Service. The Committee shall determine in the Grant Agreement under what circumstances a Participant may retain Stock Units after termination of the Participant’s employment or service, and the circumstances under which Stock Units may be forfeited.

9. Performance Units.

(a) General Requirements. The Committee may grant Performance Units to an Eligible Person, upon such terms and conditions as the Committee deems appropriate under this Section 9. Each Performance Unit shall represent the right of the Participant to receive a Share or an amount based on the value of a Share, if specified performance goals are met. All Performance Units shall be credited to accounts on the Company’s records for purposes of the Plan.

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(b) Terms of Performance Units. The Committee shall establish the performance goals and other conditions for payment of Performance Units. Performance Units may be paid at the end of a specified performance or other period, or payment may be deferred to a date authorized by the Committee. The Committee shall determine the number of Performance Units to be granted and the requirements applicable to such Performance Units.

(c) Payment with Respect to Performance Units. Payment with respect to Performance Units shall be made in cash, in Shares, or in a combination of the two, as determined by the Committee. The Committee shall establish in the Grant Agreement a target amount to be paid under a Performance Unit based on achievement of the performance goals.

(d) Requirement of Employment or Service. The Committee shall determine in the Grant Agreement under what circumstances a Participant may retain Performance Units after termination of the Participant’s employment or service, and the circumstances under which Performance Units may be forfeited.

10. Stock Awards

(a) General Requirements. The Committee may issue or transfer Shares to an Eligible Person under a Stock Award, upon such terms and conditions as the Committee deems appropriate under this Section 10. Shares issued or transferred pursuant to Stock Awards may be issued or transferred for cash consideration or for no cash consideration, and subject to restrictions or no restrictions, as determined by the Committee. The Committee may establish conditions under which restrictions on Stock Awards shall lapse over a period of time or according to such other criteria as the Committee deems appropriate, including restrictions based upon the achievement of specific performance goals.

(b) Number of Shares. The Committee shall determine the number of Shares to be issued or transferred pursuant to a Stock Award and any restrictions applicable to such shares.

(c) Requirement of Employment or Service. The Committee shall determine in the Grant Agreement under what circumstances a Participant may retain Stock Awards after termination of the Participant’s employment or service, and the circumstances under which Stock Awards may be forfeited.

(d) Restrictions on Transfer. For so long as Stock Awards are subject to restrictions, a Participant may not sell, assign, transfer, pledge or otherwise dispose of the Shares granted thereby except upon death as described in Section 15 hereof. Each certificate, or electronic book entry equivalent, for a Share granted pursuant to a Stock Award shall contain a legend giving appropriate notice of the restrictions in the Grant. The Participant shall be entitled to have the legend removed when all restrictions on such Shares have lapsed. The Committee may retain possession of any stock certificates for Stock Awards until all restrictions on such Shares have lapsed.

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(e) Right to Vote and to Receive Dividends. The Committee shall determine to what extent, and under what conditions, the Participant shall have the right to vote Shares awarded pursuant to a Stock Award and to receive any dividends or other distributions paid on such Shares during the restriction period. The Committee may determine that a Participant’s entitlement to dividends or other distributions with respect to a Stock Award shall be subject to achievement of performance goals or other conditions.

11. Other Stock-Based Awards. The Committee may grant other awards that are cash-based or based on, measured by or payable in Shares to Eligible Persons, on such terms and conditions as the Committee deems appropriate under this Section 11. Other Stock-Based Awards may be granted subject to achievement of performance goals or other conditions and may be payable in Shares or cash, or in a combination of the two, as determined by the Committee in the Grant Agreement.

12. Qualified Performance-Based Compensation

(a) Designation as Qualified Performance-Based Compensation. The Committee may determine that Stock Units, Performance Units, Stock Awards, or Other Stock-Based Awards granted to an Employee shall be considered “qualified performance-based compensation” under Section 162(m) of the Code. The provisions of this Section 12 shall apply to any such Grants that are to be considered “qualified performance-based compensation” under Section 162(m) of the Code. To the extent that Grants of Stock Units, Performance Units, Stock Awards, or Other Stock-Based Awards designated as “qualified performance-based compensation” under Section 162(m) of the Code are made, no such Grant may be made as an alternative to another Grant that is not designated as “qualified performance based compensation” but instead must be separate and apart from all other Grants made.

(b) Performance Goals. When Stock Units, Performance Units, Stock Awards, or Other Stock-Based Awards that are to be considered “qualified performance-based compensation” are granted, the Committee shall establish in writing (i) the objective performance goals that must be met, (ii) the period during which performance will be measured, (iii) the maximum amounts that may be paid if the performance goals are met, and (iv) any other conditions that the Committee deems appropriate and consistent with the Plan and the requirements of Section 162(m) of the Code for “qualified performance-based compensation.” The performance goals shall satisfy the requirements for “qualified performance-based compensation,” including the requirement that the achievement of the goals be substantially uncertain at the time they are established and that the performance goals be established in such a way that a third party with knowledge of the relevant facts could determine whether and to what extent the performance goals have been met. The Committee shall not have discretion to increase the amount of compensation that is payable upon achievement of the designated performance goals, but the Committee may reduce the amount of compensation that is payable upon achievement of the designated performance goals.

(c) Criteria Used for Objective Performance Goals. The Committee shall use objectively determinable performance goals based on one or more of the following criteria: Stock price, earnings per Share, net earnings or profits, operating earnings, return on assets,

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shareholder return, return on equity, growth in assets, unit volume, sales, market share, or strategic business criteria consisting of one or more objectives based on meeting specific revenue goals, market penetration goals, geographic business expansion goals, cost targets, cash position or goals relating to acquisitions or divestitures. The performance goals may relate to the Participant’s business unit or the performance of the Company, an Affiliate, a Subsidiary or the Company and its Affiliates and Subsidiaries as a whole, or any combination of the foregoing. Performance goals need not be uniform as among Participants.

(d) Timing of Establishment of Goals. The Committee shall establish the performance goals in writing either before the beginning of the performance period or during a period ending no later than the earlier of (i) ninety (90) days after the beginning of the performance period or (ii) the date on which 25% of the performance period has been completed, or such other date as may be required or permitted under applicable regulations under Section 162(m) of the Code.

(e) Certification of Results. The Committee shall certify and announce the results for the performance period to all Participants after the Company announces the Company’s financial results for the performance period. The Committee shall determine the amount, if any, to be paid pursuant to each Grant based on the achievement of the performance goals and the terms of each Grant Agreement.

(f) Death, Disability or Other Circumstances. The Committee may provide in the Grant Agreement that Grants shall be payable, in whole or in part, in the event of the Participant’s death of disability, a Change in Control or under other circumstances consistent with the U.S. Department of the Treasury regulations and rulings under Section 162(m) and Section 409A of the Code.

13. Deferrals. To the extent permitted by applicable law, including Section 409A of the Code and the corresponding U.S. Department of the Treasury regulations and rulings, the Committee may permit or require a Participant to defer receipt of the payment of cash or the delivery of Shares that would otherwise be due to the Participant in connection with any Grant.

14. Withholding of Taxes.

(a) Required Withholding. All Grants under the Plan shall be subject to applicable federal (including FICA), state and local tax withholding requirements. The Company may (i) require that the Participant or other person receiving or exercising Grants pay to the Company the amount of any federal, state or local taxes that the Company is required to withhold with respect to such Grants, or (ii) to the extent permitted by law, deduct from other wages paid by the Company or a Subsidiary the amount of any withholding taxes due with respect to such Grants.

(b) Election to Withhold Shares. Unless the Committee determines otherwise, a Participant may elect to satisfy the Company’s tax withholding obligation with respect to Grants paid in Shares by having Shares withheld, at the time such Grants become taxable, up to an amount that does not exceed the minimum applicable withholding tax rate for federal

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(including FICA), state and local tax liabilities. Such election must be in a form and manner prescribed by the Committee and may be subject to the prior approval of the Committee. The value of the Shares to be withheld shall be based on the Fair Market Value of such Shares on the date that the amount of tax to be withheld is to be determined. All elections by a Participant shall be irrevocable and be made in writing and in such manner as determined by the Committee in advance of the day that the transaction becomes taxable.

15. Transferability of Grants.

(a) In General. Except as provided in this Section, only the Participant or his or her legal guardian or representative may exercise rights under a Grant during the Participant’s lifetime. Unless specifically allowed by the Committee and set forth in a Grant Agreement, a Participant may not sell, transfer, pledge, assign or otherwise alienate or hypothecate those rights except by will or by the laws of descent and distribution, or, with respect to Grants. When a Participant dies, the Successor Participant may exercise such rights in accordance with the terms of the Plan. A Successor Participant must furnish proof satisfactory to the Company of his or her right to receive the Grant under the Participant’s will or under the applicable laws of descent and distribution.

(b) Transfer of Nonstatutory Options. Notwithstanding the foregoing or any other provision of this Plan to the contrary, but subject to the consent of the Committee, to the extent permissible under Exchange Act Rule 16b-3, a Participant who is granted Nonstatutory Options pursuant to this Plan may transfer such Nonstatutory Options to his or her spouse, lineal ascendants, lineal descendants, or to trusts for their benefit, provided that the Nonstatutory Options so transferred may not again be transferred other than to the Participant originally receiving the grant of Nonstatutory Options or to an individual or trust to whom such Participant could have transferred Nonstatutory Options pursuant to this Section 15(b). Nonstatutory Options that are transferred pursuant to this Section 15(b) shall be exercisable by the transferee subject to the same terms and conditions as would have applied to such Nonstatutory Options in the hands of the Participant originally receiving the grant of such Nonstatutory Options.

16. Consequences of a Change in Control.

(a) Notice and Acceleration. Upon a Change in Control, (i) the Company shall provide each Participant with outstanding Grants written notice of such Change in Control, (ii) all outstanding Options shall automatically accelerate and become fully exercisable, (iii) the restrictions and conditions on all outstanding Stock Awards shall immediately lapse, (iv) Participants holding outstanding Performance Units shall receive payment in settlement of such Performance Units, in an amount determined by the Committee, based on the Participant’s target payment for the performance period and the portion of the performance period that precedes the Change in Control, (v) all outstanding Stock Units shall become payable in cash or Shares in an amount not less than their target amounts, as determined by the Committee, and (vi) Other Stock-Based Awards shall become fully payable in cash or Shares, in amounts determined by the Committee.

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(b) Assumption of Grants. Upon a Change in Control where the Company is not the surviving corporation (or survives only as a subsidiary of another corporation), all outstanding Options that are not exercised shall be assumed by, or replaced with comparable options and rights by, the surviving corporation (or a parent or subsidiary of the surviving corporation), and other Grants that remain outstanding shall be converted to similar grants of the surviving corporation (or a parent or subsidiary of the surviving corporation).

(c) Other Alternatives. Notwithstanding the foregoing, subject to subsection (d) below, in the event of a Change in Control, the Committee may take any of the following actions with respect to any or all outstanding Options, without the consent of any Participant: (i) the Committee may require that Participants surrender their outstanding Options in exchange for a payment by the Company, in cash or Stock as determined by the Committee, in an amount equal to the amount by which the then Fair Market Value subject to the Participant’s unexercised Options exceeds the Option Price of the Options, or (ii) after giving Participants an opportunity to exercise their outstanding Options, the Committee may terminate any or all unexercised Options at such time as the Committee deems appropriate. Such surrender, termination or settlement shall take place as of the date of the Change in Control or such other date as the Committee may specify.

(d) Committee. The Committee making the determinations under this Section 16 following a Change in Control must be comprised of the same members as those of the Committee immediately before the Change in Control. If the Committee members do not meet this requirement, the automatic provisions of subsections (a) and (b) of this Section shall apply, and the Committee shall not have discretion to vary them.

(e) Modifications. The terms of this Section 16 may be varied by the Committee in any particular Grant Agreement.

17. Requirements for Issuance of Shares. No Shares shall be issued or transferred in connection with any Grant hereunder unless and until all legal requirements applicable to the issuance of such Shares have been complied with to the satisfaction of the Committee. The Committee shall have the right to condition any Grant made to any Participant hereunder on such Participant’s undertaking in writing to comply with such restrictions on his or her subsequent disposition of such Shares as the Committee shall deem necessary or advisable, and certificates representing such Shares may be legended to reflect any such restrictions. The Committee may require each person acquiring Shares pursuant to a Grant to represent to and agree with the Company in writing that such person is acquiring the Shares for investment purposes and without a view to the distribution thereof. Certificates representing Shares issued or transferred under the Plan will be subject to such stop-transfer orders and other restrictions as may be required by applicable laws, regulations and interpretations, including any requirement that a restrictive or other legend be placed thereon.

18. Voluntary Surrender. The Committee may permit the voluntary surrender of all or any portion of any Nonstatutory Option granted under the Plan to be conditioned upon the granting to the Participant of a new Option for the same or a different number of Shares as the Option surrendered, subject to the aggregate maximum number of Shares available under the

14

Plan as set forth in Section 5(a) of this Plan, or require such voluntary surrender as a condition precedent to a grant of a new Option to such Participant. Such new Option shall be exercisable at an Option Price, during an Option Period, and in accordance with any other terms or conditions specified by the Committee at the time the new Option is granted, all determined in accordance with the provisions of the Plan without regard to the Option Price, Option Period, or any other terms and conditions of the Nonstatutory Option surrendered.

19. Amendment and Termination of the Plan.

(a) Amendment. The Board may amend or terminate the Plan at any time; provided, however, that the Board shall not amend the Plan without approval of the stockholders of the Company if such approval is required to comply with the Code or applicable laws, or to comply with applicable stock exchange requirements. In addition, the Committee may at any time, in its sole discretion, alter or amend any or all of the outstanding Grant Agreements to the extent not prohibited by law. Notwithstanding the foregoing, however, no amendment, alteration, or termination of this Plan or of any Grant Agreement shall, without the consent of the Participant, impair any rights or obligations under any Grant previously made to the Participant, unless such right has been reserved in the Plan or the Grant Agreement, or except as provided in Section 20(b) hereof.

(b) No Repricing Without Shareholder Approval. Notwithstanding anything in the Plan to the contrary, without the prior approval of the Company’s stockholders, no Grant under the Plan may be repriced, replaced, regranted through cancellation or modified if the effect would be to reduce the exercise price for the shares underlying such Grant; provided, however, that the foregoing shall not apply to any adjustment made to a Grant pursuant to Section 5(d) hereof. In addition, without the prior approval of the Company’s stockholders, the Committee may not cancel an outstanding Grant that is underwater for the purpose of granting a replacement Grant of a different type.

(c) Shareholder Approval for “Qualified Performance-Based Compensation”. If Stock Units, Performance Units, Stock Awards, or Other Stock-Based Awards are granted as “qualified performance-based compensation” under Section 12 hereof, the Plan must be reapproved by the Company’s stockholders no later than the first stockholders meeting that occurs in the fifth year following the year in which the stockholders previously approved the provisions of Section 12 hereof, if additional Grants are to be made under Section 12 hereof and if required by Section 162(m) of the Code or the regulations thereunder.

(d) Termination of Plan. The Plan shall terminate on the day immediately preceding the 10^th anniversary of its Effective Date, unless the Plan is terminated earlier by the Board or is extended by the Board with the approval of the stockholders. The termination of the Plan shall not impair the power and authority of the Committee with respect to an outstanding Grant.

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20. Miscellaneous.

(a) Grants in Connection with Corporate Transactions and Otherwise. Nothing contained in this Plan shall be construed to (i) limit the right of the Committee to make Grants under this Plan in connection with the acquisition, by purchase, lease, merger, consolidation or otherwise, of the business or assets of any corporation, firm or association, including Grants to employees thereof who become Employees, or for other proper corporate purposes, or (ii) limit the right of the Company to grant stock options or make other awards outside of this Plan. Without limiting the foregoing, the Committee may make a Grant to an employee of another corporation who becomes an Employee by reason of a corporate merger, consolidation, acquisition of stock or property, reorganization or liquidation involving the Company in substitution for a grant made by such corporation. The terms and conditions of the substitute Grants may vary from the terms and conditions required by the Plan and from those of the substituted stock incentives. The Committee shall prescribe the provisions of the substitute Grants.

(b) Compliance with Law. The Plan, the exercise of Options and the obligations of the Company to issue or transfer Shares under Grants shall be subject to all applicable laws and to approvals by any governmental or regulatory agency as may be required. With respect to persons subject to Section 16 of the Exchange Act, it is the intent of the Company that the Plan and all transactions under the Plan comply with all applicable provisions of Rule 16b-3 or its successors under the Exchange Act. In addition, it is the intent of the Company that the Plan and applicable Grants comply with the applicable provisions of Sections 162(m), 409A and 422 of the Code, and this Plan and all Grants shall be administered in a manner which complies with, and all interpretations, decisions and determinations by the Committee shall be construed as though intended to comply with, such sections. To the extent that any legal requirement of Section 16 of the Exchange Act or Sections 162(m), 409A or 422 of the Code as set forth in the Plan ceases to be required under Section 16 of the Exchange Act or Sections 162(m), 409A or 422 of the Code, that Plan provision shall cease to apply. Notwithstanding anything to the contrary contained in this Plan, or in any Grant Agreement, but subject to any stockholder approval requirements imposed by applicable law, the Board may amend the Plan and the Committee may amend or cancel any Grant, to take effect retroactively or otherwise, without the consent of the holders of outstanding Grants as deemed necessary or advisable for the purpose of conforming the Plan and/or a Grant to, or exempting the Plan and /or any Grant from, Sections 162(m), 409A and/or 422 of the Code and/or any other present or future law relating to plans of this or similar nature and to the administrative regulations and rulings promulgated thereunder. The Committee may also adopt rules regarding the withholding of taxes on payments to Participants. The Committee may, in its sole discretion, agree to limit its authority under this Section.

(c) Enforceability. The Plan shall be binding upon and enforceable against the Company and its successors and assigns.

(d) Funding of the Plan; Limitation on Rights. This Plan shall be unfunded. Neither the Company nor any other company shall be required to establish any special or separate fund or to make any other segregation of assets to assure the payment of any Grants under this Plan. Nothing contained in the Plan and no action taken pursuant hereto shall create or be construed to create a fiduciary relationship between the Company or any other company

16

and any Participant or any other person. No Participant or any other person shall under any circumstances acquire any property interest in any specific assets of the Company or any other company. To the extent that any person acquires a right to receive payment from the Company hereunder, such right shall be no greater than the right of any unsecured general creditor of the Company.

(e) Other Compensation Arrangements; Claim to Options; Employment Rights. Nothing contained in this Plan shall prevent the Board from adopting other or additional compensation arrangements, including trusts, and such arrangements may be either generally applicable or applicable only in specific cases. Nothing in this Plan shall entitle any Eligible Person or other person to any claim or right to receive a Grant under this Plan. Neither this Plan nor any action taken hereunder shall be construed as giving any individual any rights to be retained by or in the employment or service of the Company.

(f) No Liability of Committee Members. No member of the Committee shall be personally liable by reason of any contract or other instrument executed by such member or on his behalf in his capacity as a member of the Committee nor for any mistake of judgment made in good faith, and the Company shall indemnify and hold harmless each member of the Committee and each other employee, officer or Director of the Company to whom any duty or power relating to the administration or interpretation of the Plan may be allocated or delegated, against any cost or expense (including counsel fees) or liability (including any sum paid in settlement of a claim) arising out of any act or omission to act in connection with the Plan unless arising out of such person’s own fraud or willful bad faith; provided, however, that approval of the Board shall be required for the payment of any amount in settlement of a claim against any such person. The foregoing right of indemnification shall not be exclusive of any other rights of indemnification to which such persons may be entitled under the Company’s Articles of Incorporation or By-Laws, as a matter of law, or otherwise, or any power that the Company may have to indemnify them or hold them harmless.

(g) No Fractional Shares. No fractional Shares shall be issued or delivered pursuant to the Plan or any Grant. The Committee shall determine whether cash, other awards or other property shall be issued or paid in lieu of such fractional shares or whether such fractional shares or any rights thereto shall be forfeited or otherwise eliminated.

(h) Employees Subject to Taxation Outside the United States. With respect to Participants who are subject to taxation in countries other than the United States, the Committee may make Grants on such terms and conditions as the Committee deems appropriate to comply with the laws of the applicable countries, and the Committee may create such procedures, addenda and subplans and make such modifications as may be necessary or advisable to comply with such laws.

(i) Governing Law. The validity, construction, interpretation and effect of the Plan and Grant Agreements issued under the Plan shall be governed and construed by and determined in accordance with the laws of the State of Delaware, without giving effect to the conflict of laws provisions thereof that would apply the law of a another state.

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(j) Relationship to Other Benefits. No payment under the Plan shall be taken into account in determining any benefits under any pension, retirement, profit sharing, group insurance or other benefit plan of the Company or any Subsidiary except as otherwise specifically provided in such other plan.

(k) Expenses. The expenses of administering the Plan shall be borne by the Company and its Affiliates and Subsidiaries.

(l) Pronouns. Masculine pronouns and other words of masculine gender shall refer to both men and women.

(m) Titles and Headings. The titles and headings of the sections in the Plan are for convenience of reference only, and in the event of any conflict, the text of the Plan, rather than such titles or headings shall control.

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EX-31.1

Exhibit 31.1

Certifications of the Principal Executive Officer

Pursuant to Securities Exchange Act Rules 13a-1 and 15d-14

As adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

I, Marc L. Dulude, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of Rand Worldwide, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent function):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: February 14, 2013	/s/ Marc L. Dulude
	Marc L. Dulude
	Chief Executive Officer
	(Principal Executive Officer)

EX-31.2

Exhibit 31.2

Certifications of the Principal Financial and Accounting Officer

Pursuant to Securities Exchange Act Rules 13a-1 and 15d-14

As adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

I, Lawrence Rychlak, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of Rand Worldwide, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent function):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: February 14, 2013	/s/ Lawrence Rychlak
	Lawrence Rychlak
	President and Chief Financial Officer
	(Principal Accounting Officer)

EX-32.1

Exhibit 32.1

Certifications of Periodic Report by the Chief Executive Officer and Chief Financial Officer

Pursuant to 18 U.S.C. Section 1350

As adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

In connection with the Quarterly Report of Rand Worldwide, Inc. (the “Company”) on Form 10-Q for the period ended December 31, 2012 as filed with the Securities and Exchange Commission and to which this Certification is an exhibit (the “Report”), the undersigned hereby certify, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

(1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company for the periods reflected therein.

Date: February 14, 2013	/s/ Marc L. Dulude
	Marc L. Dulude
	Chief Executive Officer
	(Principal Executive Officer)
	/s/ Lawrence Rychlak
	Lawrence Rychlak
	President and Chief Financial Officer
	(Principal Financial and Accounting Officer)

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Note 5 - Obligations Under Capital Lease (Detail) (Computer Equipment [Member], USD $)	Dec. 31, 2012	Jun. 30, 2012
Computer Equipment [Member]
Capital Lease Obligations	$ 760,000	$ 904,000

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Note 3 - Employee Stock Compensation Plans

6 Months Ended

Dec. 31, 2012

Disclosure of Compensation Related Costs, Share-based Payments [Text Block]

3.  Employee Stock Compensation Plans

On November 7, 2012, the Company’s stockholders approved the Omnibus Equity Compensation Plan (the “Omnibus Plan”).  The Compensation Committee of the Company’s Board of Directors administers the Omnibus Plan and, in that capacity, has the exclusive authority to grant various incentive awards under the Omnibus Plan in the form of stock options, stock awards, stock units, performance units, and other stock-based awards.  Up to 2,000,000 shares of the Company’s common stock are available for issuance to participants under the Omnibus Plan.  The Omnibus Plan is available to all employees of the Company and its subsidiaries, including employees who are officers or members of the Board, and all non-employee directors and consultants of the Company and its subsidiaries.  Prior to the adoption of the Omnibus Plan, the Board of Directors granted options to purchase shares of the Company’s common stock at an exercise price of not less than the fair market value of the common stock on the date of grant, under the Avatech Solutions, Inc. 2002 Stock Option Plan (the “2002 Option Plan”).  The 2002 Option Plan, which expired in August 2012, provided for the granting of either incentive or non-qualified stock options to purchase an aggregate of up to 7,800,000 shares of common stock to eligible employees, officers, and directors of the Company and its subsidiaries.  For the six months ended December 31, 2012, total stock compensation expense charged against income for the 2002 Option Plan was $126,000.  There were no awards granted during the six months ended December 31, 2012 or 2011.

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

A summary of stock option activity during the six months ended December 31, 2012 and related information is included in the table below:

	Options		Weighted-Average Exercise Price		Aggregate Intrinsic Value
Outstanding at July 1, 2012		3,481,900	$	0.76
Granted		—		—
Exercised		—		—
Forfeited		—		—
Expired		—		—
Outstanding at December 31, 2012		3,481,900	$	0.76	$	411,000
Exercisable at December 31, 2012		1,206,100	$	0.81	$	160,000
Weighted-average remaining contractual life	5.2 Years

All options granted have an exercise price equal to the fair market value of the Company’s common stock on the date of grant.  Exercise prices for options outstanding as of December 31, 2012 ranged from $0.17 to $3.81 as follows:

Range of Exercise Prices			Options Outstanding		Weighted Average Exercise Prices of Options Outstanding		Weighted Average Remaining Contractual Life of Options Outstanding	Options Exercisable		Weighted Average Exercise Prices of Options Exercisable		Weighted Average Remaining Contractual Life of Options Exercisable
$    0.17	–	0.50		170,120	$	0.42	1.7 years		170,120	$	0.42	1.7 years
0.51	–	0.75		1,883,920		0.70	8.2 years		529,480		0.69	7.8 years
0.76	–	1.00		1,189,360		0.81	8.2 years		268,000		0.86	4.2 years
1.01	–	3.81		238,500		1.29	3.1 years		238,500		1.29	3.1 years
				3,481,900		0.76	7.5 years		1,206,100		0.81	5.2 years

Assuming that no additional share-based payments are granted after December 31, 2012, $660,000 of compensation expense will be recognized in the consolidated statement of operations over a weighted-average period of 2.8 years.

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Note 8 - Preferred Stock (Detail) (USD $)	6 Months Ended
	Dec. 31, 2012
Series D Preferred Stock [Member]
Preferred Stock, Shares Outstanding (in Shares)	384,495
Preferred Stock, Redemption Price Per Share	$ 0.30
Preferred Stock, Dividend Rate, Percentage	10.00%
Preferred Stock, Conversion Feature, Common Stock Share Price, Trigger	$ 2.25
Convertible Preferred Stock, Shares Issued upon Conversion (in Shares)	2
Preferred Stock, Liquidation Preference Per Share	$ 0.60
Series E Preferred Stock [Member]
Preferred Stock, Shares Outstanding (in Shares)	862
Preferred Stock, Redemption Price Per Share	$ 0.65
Preferred Stock, Dividend Rate, Percentage	10.00%
Preferred Stock, Conversion Feature, Common Stock Share Price, Trigger	$ 2.25
Convertible Preferred Stock, Shares Issued upon Conversion (in Shares)	1,538.5
Preferred Stock, Liquidation Preference Per Share	$ 0.65

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Note 7 - Earnings Per Share (Detail) - Computations of basic and diluted loss per common share: (USD $)	3 Months Ended		6 Months Ended
	Dec. 31, 2012	Dec. 31, 2011	Dec. 31, 2012	Dec. 31, 2011
Net income (in Dollars)	$ 496,000	$ 1,039,000	$ 1,072,000	$ 1,441,000
Preferred stock dividends (in Dollars)	(28,000)	(39,000)	(56,000)	(78,000)
Net income available to common stockholders (in Dollars)	$ 468,000	$ 1,000,000	$ 1,016,000	$ 1,363,000
Weighted average shares used in computing basic net income per share:	53,990,589	52,223,307	53,906,012	52,072,435
Assumed conversion of preferred stock	769,630	3,295,406	769,630	3,295,406
Effect of outstanding stock options	280,066	176,036	280,066	195,218
Weighted average shares used in computing diluted net income per share:	55,040,285	55,694,749	54,955,708	55,563,059
Income per common share, basic (in Dollars per share)	$ 0.01	$ 0.02	$ 0.02	$ 0.03
Income per common share, diluted (in Dollars per share)	$ 0.01	$ 0.02	$ 0.02	$ 0.03

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Note 9 - Segment Information (Detail) - Financial Information by Geographic Segment: (USD $)	3 Months Ended		6 Months Ended
	Dec. 31, 2012	Dec. 31, 2011	Dec. 31, 2012	Dec. 31, 2011
Revenue-
Product sales	$ 10,540,000	$ 12,771,000	$ 22,055,000	$ 26,046,000
Service revenue	5,505,000	5,255,000	10,878,000	10,059,000
Commission revenue	5,536,000	4,447,000	10,249,000	8,311,000
Total revenue	21,581,000	22,473,000	43,182,000	44,416,000
Cost of revenue-
Cost of product sales	6,858,000	8,703,000	14,188,000	18,003,000
Cost of service revenue	3,816,000	3,198,000	7,510,000	6,332,000
Total cost of revenue	10,674,000	11,901,000	21,698,000	24,335,000
Gross margin	10,907,000	10,572,000	21,484,000	20,081,000
Total operating expenses	9,772,000	9,229,000	19,404,000	18,143,000
Operating income (loss)	1,135,000	1,343,000	2,080,000	1,938,000
Other expense, net	(84,000)	(197,000)	(104,000)	(338,000)
Income (loss) before income taxes	1,051,000	1,146,000	1,976,000	1,600,000
North America [Member]
Revenue-
Product sales	9,569,000	11,529,000	19,619,000	22,826,000
Service revenue	5,191,000	4,845,000	10,151,000	9,193,000
Commission revenue	5,356,000	4,255,000	9,698,000	7,890,000
Total revenue	20,116,000	20,629,000	39,468,000	39,909,000
Cost of revenue-
Cost of product sales	6,113,000	7,918,000	12,306,000	15,787,000
Cost of service revenue	3,513,000	2,907,000	6,958,000	5,787,000
Total cost of revenue	9,626,000	10,825,000	19,264,000	21,574,000
Gross margin	10,490,000	9,804,000	20,204,000	18,335,000
Total operating expenses	8,967,000	8,500,000	17,777,000	16,724,000
Operating income (loss)	1,523,000	1,304,000	2,427,000	1,611,000
Other expense, net	(94,000)	(194,000)	(123,000)	(325,000)
Income (loss) before income taxes	1,429,000	1,110,000	2,304,000	1,286,000
Singapore/Malaysia [Member]
Revenue-
Product sales	571,000	889,000	1,574,000	1,669,000
Service revenue	59,000	144,000	177,000	339,000
Commission revenue	48,000	81,000	102,000	101,000
Total revenue	678,000	1,114,000	1,853,000	2,109,000
Cost of revenue-
Cost of product sales	462,000	591,000	1,279,000	1,157,000
Cost of service revenue	103,000	157,000	182,000	278,000
Total cost of revenue	565,000	748,000	1,461,000	1,435,000
Gross margin	113,000	366,000	392,000	674,000
Total operating expenses	262,000	282,000	575,000	522,000
Operating income (loss)	(149,000)	84,000	(183,000)	152,000
Other expense, net	4,000	(8,000)	6,000	(23,000)
Income (loss) before income taxes	(145,000)	76,000	(177,000)	129,000
Australia [Member]
Revenue-
Product sales	400,000	353,000	862,000	1,551,000
Service revenue	255,000	266,000	550,000	527,000
Commission revenue	132,000	111,000	449,000	320,000
Total revenue	787,000	730,000	1,861,000	2,398,000
Cost of revenue-
Cost of product sales	283,000	194,000	603,000	1,059,000
Cost of service revenue	200,000	134,000	370,000	267,000
Total cost of revenue	483,000	328,000	973,000	1,326,000
Gross margin	304,000	402,000	888,000	1,072,000
Total operating expenses	543,000	447,000	1,052,000	897,000
Operating income (loss)	(239,000)	(45,000)	(164,000)	175,000
Other expense, net	6,000	5,000	13,000	10,000
Income (loss) before income taxes	$ (233,000)	$ (40,000)	$ (151,000)	$ 185,000

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Note 9 - Segment Information (Detail) - Long lived assets by geographic area: (USD $)	Dec. 31, 2012	Jun. 30, 2012
Long-lived assets
Long-lived assets	$ 2,997,000	$ 2,711,000
North America [Member]
Long-lived assets
Long-lived assets	2,931,000	2,633,000
Singapore/Malaysia [Member]
Long-lived assets
Long-lived assets	4,000	10,000
Australia [Member]
Long-lived assets
Long-lived assets	$ 62,000	$ 68,000

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Note 2 - Supplemental Disclosure of Cash Flow Information

6 Months Ended

Dec. 31, 2012

Cash Flow, Supplemental Disclosures [Text Block]

2.  Supplemental Disclosure of Cash Flow Information

The Company paid interest of approximately $22,000 and $100,000 during the three months ended December 31, 2012 and 2011, respectively, and approximately $46,000 and $161,000 during the six months ended December 31, 2012 and 2011, respectively. The Company also paid federal and state income taxes of approximately $59,000 and $284,000 during the three months ended December 31, 2012 and 2011, respectively, and approximately $59,000 and $384,000 during the six months ended December 31, 2012 and 2011, respectively. Total purchases of property and equipment included non-cash purchases of $0 and $947,000 for the six months ended December 31, 2012 and December 31, 2011, respectively.

In connection with the acquisition of Informative Design Partners on July 31, 2012, the Company paid cash in the amount of $600,000 and issued 497,512 shares of its common stock valued at $400,000.

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Consolidated Balance Sheets (unaudited) (USD $)	Dec. 31, 2012	Jun. 30, 2012
Assets
Cash	$ 2,427,000	$ 1,680,000
Accounts receivable, less allowance of $298,000 as of December 31, 2012 and $405,000 as of June 30, 2012	17,461,000	18,099,000
Income tax receivable	640,000	281,000
Other receivables	1,203,000	994,000
Inventory	124,000	107,000
Prepaid expenses and other current assets	2,483,000	2,084,000
Deferred tax assets	133,000	78,000
Total current assets	24,471,000	23,323,000
Computer software and equipment	8,923,000	8,231,000
Office furniture and equipment	2,038,000	1,974,000
Leasehold improvements	723,000	699,000
	11,684,000	10,904,000
Less accumulated depreciation and amortization	(8,687,000)	(8,193,000)
	2,997,000	2,711,000
Deferred income taxes	1,783,000	2,576,000
Other assets	324,000	370,000
Total assets	54,090,000	51,210,000
Goodwill	17,815,000	15,954,000
Liabilities and Stockholders’ Equity
Borrowings under line of credit	3,510,000	3,140,000
Accounts payable and accrued expenses	9,565,000	9,850,000
Accrued compensation and related benefits	1,613,000	1,804,000
Deferred revenue	4,992,000	4,666,000
Obligations under capital leases – current	294,000	290,000
Total current liabilities	19,974,000	19,750,000
Obligations under capital leases	466,000	614,000
Other long term liabilities	1,109,000
Total liabilities	21,549,000	20,364,000
Convertible Preferred Stock, $0.01 par value; 1,300,537 shares authorized, 1,298,728 shares issued; 385,357 shares outstanding with an aggregate liquidation preference of $1,093,000 at December 31, 2012 and June 30, 2012, respectively (note 8)	4,000	4,000
Common stock, $0.01 par value; 80,000,000 shares authorized; issued and outstanding shares of 53,990,589 and 53,493,077 at December 31, 2012 and June 30, 2012, respectively	540,000	535,000
Additional paid-in capital	65,412,000	64,947,000
Accumulated deficit	(34,628,000)	(35,700,000)
Accumulated other comprehensive income	1,213,000	1,060,000
Total stockholders’ equity	32,541,000	30,846,000
Total liabilities and stockholders’ equity	54,090,000	51,210,000
Customer Lists [Member]
Assets
Finite Lived Intangible Assets, Net	3,865,000	3,290,000
Trade Names [Member]
Assets
Finite Lived Intangible Assets, Net	$ 2,835,000	$ 2,986,000

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Consolidated Statements of Cash Flows (unaudited) (USD $)	6 Months Ended
	Dec. 31, 2012	Dec. 31, 2011
Cash flows from operating activities
Net income	$ 1,072,000	$ 1,441,000
Adjustments to reconcile net income to net cash provided by operating activities:
Loss on sale of property and equipment		12,000
Bad debt recoveries	(10,000)	(69,000)
Depreciation and amortization	955,000	795,000
Stock-based compensation	126,000	83,000
Deferred income taxes	738,000	(2,000)
Changes in operating assets and liabilities, net of those acquired:
Accounts receivable and other receivables	439,000	2,573,000
Income tax receivable	(359,000)	(112,000)
Inventory	(17,000)	(17,000)
Prepaid expenses and other current assets	(399,000)	(353,000)
Other assets	46,000	39,000
Accounts payable and accrued expenses	(923,000)	(1,261,000)
Accrued compensation and related benefits	(191,000)	(985,000)
Deferred revenue	326,000	218,000
Other long-term liabilities	64,000
Net cash provided by operating activities	1,867,000	2,362,000
Cash flows from investing activities
Purchase of Informative Design Partners, Inc.	(600,000)
Net purchases of property and equipment	(786,000)	(548,000)
Net cash used in investing activities	(1,386,000)	(548,000)
Cash flows from financing activities
Proceeds from borrowings under line of credit	37,019,000	57,851,000
Repayment of borrowings under line of credit	(36,649,000)	(59,644,000)
Principal payment on capital lease obligations	(144,000)	(116,000)
Payment of preferred stock dividends	(56,000)	(78,000)
Proceeds from the issuance of common stock to employees		36,000
Net cash provided by (used in) financing activities	170,000	(1,951,000)
Effect of exchange rate changes on cash	96,000	(208,000)
Net change in cash	747,000	(345,000)
Cash - beginning of period	1,680,000	2,631,000
Cash - end of period	$ 2,427,000	$ 2,286,000

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Note 3 - Employee Stock Compensation Plans (Detail) - Summary of stock option activity: (USD $)	6 Months Ended
	Dec. 31, 2012
Outstanding at July 1, 2012	3,481,900
Outstanding at July 1, 2012 (in Dollars per share)	$ 0.76
Outstanding at December 31, 2012	3,481,900
Outstanding at December 31, 2012 (in Dollars per share)	$ 0.76
Outstanding at December 31, 2012 (in Dollars)	$ 411,000
Exercisable at December 31, 2012	1,206,100
Exercisable at December 31, 2012 (in Dollars per share)	$ 0.81
Exercisable at December 31, 2012 (in Dollars)	$ 160,000
Weighted-average remaining contractual life	5 years 73 days

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Note 4 - Borrowings Under Line of Credit (Detail) (PNC Bank, National Association [Member], USD $)	Dec. 31, 2012	Jun. 30, 2012	Feb. 29, 2012
Line of Credit Facility, Maximum Borrowing Capacity			$ 8,000,000
Line of Credit Facility, Interest Rate at Period End	2.20%
Line of Credit Facility, Amount Outstanding	3,500,000	3,100,000
Sublimit For The Issuance of Standy Or Trade Letters Of Credit [Member]
Line of Credit Facility, Maximum Borrowing Capacity			$ 1,000,000
Credit Facility [Member]
Debt Instrument, Basis Spread on Variable Rate			2.00%

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Note 1 - Organization and Basis of Presentation

6 Months Ended

Dec. 31, 2012

Organization, Consolidation and Presentation of Financial Statements Disclosure [Text Block]

1.  Organization and Basis of Presentation

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

References in these Notes to “Rand Worldwide”, “the Company”, “us”, “we”, “our” are references to Rand Worldwide, Inc. and, unless the context clearly contemplated otherwise, its consolidated subsidiaries.

The Company is organized into three divisions: IMAGINiT Technologies (“IMAGINiT”), Enterprise Applications and ASCENT—Center for Technical Knowledge (“ASCENT”).

The IMAGINiT division is one of the largest value-added resellers of Autodesk, Inc. (“Autodesk”) products in the world, providing Autodesk solutions and value-added services to customers in the manufacturing, infrastructure, building, and media and entertainment industries.  IMAGINiT also specializes in computational fluid dynamics analysis consulting and thermal simulation services and sells its own proprietary software products and related services, enhancing its total client solution offerings. IMAGINiT operates from locations across North America, Australia, and Singapore.  In January 2013, the Company closed its office in Malaysia and consolidated those operations to Singapore.  The closure of the Malaysian office will not have a material impact on the Company’s consolidated operations.

The Enterprise Applications division is the non-Autodesk component of the business and offers various products and services including data archiving solutions, facilities management solutions, as well as training for Dassault Systèmes and PTC (Parametric Technology Corporation) products including CATIA, ENOVIA and Pro/ENGINEER.

ASCENT is the courseware division of Rand Worldwide and is a leading developer of professional training materials and knowledge products for engineering software tools.

Executive management performs their primary analyses based upon geographic location and operations by geographic segment are disclosed within Note 9.

The accompanying unaudited consolidated financial statements have been prepared in accordance with U.S. GAAP for interim financial information and in accordance with the instructions to Article 8 of Regulation S-X.  Accordingly, certain information and footnote disclosures normally included in annual financial statements prepared in accordance with U.S. GAAP have been condensed or omitted pursuant to those rules or regulations. The interim financial statements are unaudited, and reflect all adjustments (consisting of normal recurring accruals) which are, in management’s opinion, necessary to present a fair statement of results of the interim periods presented. These financial statements should be read in conjunction with the audited financial statements and the notes thereto in Rand Worldwide Inc.’s Annual Report on Form 10-K for the fiscal year ended June 30, 2012. Operating results for the three and six months ended December 31, 2012 are not necessarily indicative of results for the full fiscal year or any future interim period.

The books of the Company are maintained in United States dollars and this is the Company’s functional reporting currency.  Transactions denominated in other than the United States dollar are translated as follows with the related transaction gains and losses being recorded in the Statement of Operations:

· Monetary items are recorded at the rate of exchange prevailing as of the balance sheet date;

· Non-monetary items including equity are recorded at the historical rate of exchange ; and

· Revenues and expenses are recorded at the period average in which the transaction occurred.

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Consolidated Balance Sheets (unaudited) (Parentheticals) (USD $)	Dec. 31, 2012	Jun. 30, 2012
Accounts receivable, allowance (in Dollars)	$ 298,000	$ 405,000
Common stock, par value (in Dollars per share)	$ 0.01	$ 0.01
Common stock, shares authorized	80,000,000	80,000,000
Common stock, shares issued	53,990,589	53,493,077
Common stock, shares outstanding	53,990,589	53,493,077
Convertible Preferred Stock [Member]
Convertible Preferred Stock, shares authorized	1,300,537	1,300,537
Convertible Preferred Stock, par value (in Dollars per share)	$ 0.01	$ 0.01
Convertible Preferred Stock, shares issued	1,298,728	1,298,728
Convertible Preferred Stock, shares outstanding	385,357	385,357
Convertible Preferred Stock, aggregate liquidation preference (in Dollars)	1,093,000	1,093,000
Customer Lists [Member]
Accumulated Depreciation on Finite Lived Intangible Assets (in Dollars)	6,370,000	6,105,000
Trade Names [Member]
Accumulated Depreciation on Finite Lived Intangible Assets (in Dollars)	$ 1,096,000	$ 945,000

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Note 7 - Earnings Per Share (Tables)

6 Months Ended

Dec. 31, 2012

Schedule of Earnings Per Share, Basic and Diluted [Table Text Block]

	Three Months Ended December 31,
	2012			2011
Numerator for basic and diluted earnings per share:
Net income	$	496,000		$	1,039,000
Preferred stock dividends		(28,000	)		(39,000	)
Net income available to common stockholders	$	468,000		$	1,000,000
Weighted average shares used in computing basic net income per share:		53,990,589			52,223,307
Assumed conversion of preferred stock		769,630			3,295,406
Effect of outstanding stock options		280,066			176,036
Weighted average shares used in computing diluted net income per share:		55,040,285			55,694,749
Income per common share, basic	$	0.01		$	0.02
Income per common share, diluted	$	0.01		$	0.02

	Six Months Ended December 31,
	2012			2011
Numerator for basic and diluted earnings per share:
Net income	$	1,072,000		$	1,441,000
Preferred stock dividends		(56,000	)		(78,000	)
Net income available to common stockholders	$	1,016,000		$	1,363,000
Weighted average shares used in computing basic net income per share:		53,906,012			52,072,435
Assumed conversion of preferred stock		769,630			3,295,406
Effect of outstanding stock options		280,066			195,218
Weighted average shares used in computing diluted net income per share:		54,955,708			55,563,059
Income per common share, basic	$	0.02		$	0.03
Income per common share, diluted	$	0.02		$	0.03

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Document And Entity Information	6 Months Ended
	Dec. 31, 2012	Feb. 08, 2013
Document and Entity Information [Abstract]
Entity Registrant Name	RAND WORLDWIDE INC
Document Type	10-Q
Current Fiscal Year End Date	--06-30
Entity Common Stock, Shares Outstanding		53,990,589
Amendment Flag	false
Entity Central Index Key	0000852437
Entity Current Reporting Status	Yes
Entity Voluntary Filers	No
Entity Filer Category	Smaller Reporting Company
Entity Well-known Seasoned Issuer	No
Document Period End Date	Dec. 31, 2012
Document Fiscal Year Focus	2013
Document Fiscal Period Focus	Q2

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Note 9 - Segment Information (Tables)

6 Months Ended

Dec. 31, 2012

Schedule of Segment Reporting Information, by Segment [Table Text Block]

	North America			Singapore/Malaysia			Australia			Total
Revenue-
Product sales	$	9,569,000		$	571,000		$	400,000		$	10,540,000
Service revenue		5,191,000			59,000			255,000			5,505,000
Commission revenue		5,356,000			48,000			132,000			5,536,000
Total revenue		20,116,000			678,000			787,000			21,581,000
Cost of revenue-
Cost of product sales		6,113,000			462,000			283,000			6,858,000
Cost of service revenue		3,513,000			103,000			200,000			3,816,000
Total cost of revenue		9,626,000			565,000			483,000			10,674,000
Gross margin		10,490,000			113,000			304,000			10,907,000
Total operating expenses		8,967,000			262,000			543,000			9,772,000
Operating income (loss)		1,523,000			(149,000	)		(239,000	)		1,135,000
Other expense, net		(94,000	)		4,000			6,000			(84,000	)
Income (loss) before income taxes	$	1,429,000		$	(145,000	)	$	(233,000	)	$	1,051,000

	North America			Singapore/Malaysia			Australia			Total
Revenue-
Product sales	$	11,529,000		$	889,000		$	353,000		$	12,771,000
Service revenue		4,845,000			144,000			266,000			5,255,000
Commission revenue		4,255,000			81,000			111,000			4,447,000
Total revenue		20,629,000			1,114,000			730,000			22,473,000
Cost of revenue-
Cost of product sales		7,918,000			591,000			194,000			8,703,000
Cost of service revenue		2,907,000			157,000			134,000			3,198,000
Total cost of revenue		10,825,000			748,000			328,000			11,901,000
Gross margin		9,804,000			366,000			402,000			10,572,000
Total operating expenses		8,500,000			282,000			447,000			9,229,000
Operating income (loss)		1,304,000			84,000			(45,000	)		1,343,000
Other expense, net		(194,000	)		(8,000	)		5,000			(197,000	)
Income (loss) before income taxes	$	1,110,000		$	76,000		$	(40,000	)	$	1,146,000

	North America			Singapore/Malaysia			Australia			Total
Revenue-
Product sales	$	19,619,000		$	1,574,000		$	862,000		$	22,055,000
Service revenue		10,151,000			177,000			550,000			10,878,000
Commission revenue		9,698,000			102,000			449,000			10,249,000
Total revenue		39,468,000			1,853,000			1,861,000			43,182,000
Cost of revenue-
Cost of product sales		12,306,000			1,279,000			603,000			14,188,000
Cost of service revenue		6,958,000			182,000			370,000			7,510,000
Total cost of revenue		19,264,000			1,461,000			973,000			21,698,000
Gross margin		20,204,000			392,000			888,000			21,484,000
Total operating expenses		17,777,000			575,000			1,052,000			19,404,000
Operating income (loss)		2,427,000			(183,000	)		(164,000	)		2,080,000
Other expense, net		(123,000	)		6,000			13,000			(104,000	)
Income (loss) before income taxes	$	2,304,000		$	(177,000	)	$	(151,000	)	$	1,976,000

	North America			Singapore/Malaysia			Australia		Total
Revenue-
Product sales	$	22,826,000		$	1,669,000		$	1,551,000	$	26,046,000
Service revenue		9,193,000			339,000			527,000		10,059,000
Commission revenue		7,890,000			101,000			320,000		8,311,000
Total revenue		39,909,000			2,109,000			2,398,000		44,416,000
Cost of revenue-
Cost of product sales		15,787,000			1,157,000			1,059,000		18,003,000
Cost of service revenue		5,787,000			278,000			267,000		6,332,000
Total cost of revenue		21,574,000			1,435,000			1,326,000		24,335,000
Gross margin		18,335,000			674,000			1,072,000		20,081,000
Total operating expenses		16,724,000			522,000			897,000		18,143,000
Operating income		1,611,000			152,000			175,000		1,938,000
Other expense, net		(325,000	)		(23,000	)		10,000		(338,000	)
Income before income taxes	$	1,286,000		$	129,000		$	185,000	$	1,600,000

Schedule of Revenue from External Customers and Long-Lived Assets, by Geographical Areas [Table Text Block]

	December 31, 2012		June 30, 2012
Long-lived assets
North America	$	2,931,000	$	2,633,000
Singapore/Malaysia		4,000		10,000
Australia		62,000		68,000
Total	$	2,997,000	$	2,711,000

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Consolidated Statements of Operations (unaudited) (USD $)	3 Months Ended		6 Months Ended
	Dec. 31, 2012	Dec. 31, 2011	Dec. 31, 2012	Dec. 31, 2011
Revenues:
Product sales	$ 10,540,000	$ 12,771,000	$ 22,055,000	$ 26,046,000
Service revenue	5,505,000	5,255,000	10,878,000	10,059,000
Commission revenue	5,536,000	4,447,000	10,249,000	8,311,000
	21,581,000	22,473,000	43,182,000	44,416,000
Cost of revenue:
Cost of product sales	6,858,000	8,703,000	14,188,000	18,003,000
Cost of service revenue	3,816,000	3,198,000	7,510,000	6,332,000
	10,674,000	11,901,000	21,698,000	24,335,000
Gross margin	10,907,000	10,572,000	21,484,000	20,081,000
Other operating expenses:
Selling, general and administrative	9,250,000	8,829,000	18,449,000	17,348,000
Depreciation and amortization	522,000	400,000	955,000	795,000
	9,772,000	9,229,000	19,404,000	18,143,000
Operating income	1,135,000	1,343,000	2,080,000	1,938,000
Other expense, net	(84,000)	(197,000)	(104,000)	(338,000)
Income before income taxes	1,051,000	1,146,000	1,976,000	1,600,000
Income tax expense	555,000	107,000	904,000	159,000
Net income	496,000	1,039,000	1,072,000	1,441,000
Preferred stock dividends	(28,000)	(39,000)	(56,000)	(78,000)
Net income available to common stockholders	$ 468,000	$ 1,000,000	$ 1,016,000	$ 1,363,000
Income per common share, basic (in Dollars per share)	$ 0.01	$ 0.02	$ 0.02	$ 0.03
Income per common share, diluted (in Dollars per share)	$ 0.01	$ 0.02	$ 0.02	$ 0.03
Weighted average shares used in computation - basic (in Shares)	53,990,589	52,223,307	53,906,012	52,072,435
Weighted average shares used in computation - diluted (in Shares)	55,040,285	55,694,749	54,955,708	55,563,059

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Note 6 - Income Taxes

6 Months Ended

Dec. 31, 2012

Income Tax Disclosure [Text Block]

6.  Income Taxes

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

During the fourth quarter of fiscal year 2012, the Company recognized the realizable portion of the Company’s U.S. net operating loss carryforwards as a deferred tax asset. The Company previously had created a valuation allowance against the entire amount of net operating loss carryforwards, recognizing no deferred tax asset because it did not have a sufficient history of profitable operations to support the recognition of the asset. Since the Company established a sufficient history of consecutive profitable quarters, and projects continuing profits, the valuation allowance against the U.S. net operating loss carryforwards was reduced in the fourth quarter of fiscal year 2012 by $4.3 million to recognize the portion of the net operating loss carryforwards projected to be utilized prior to expiration. The Company continues to maintain a valuation allowance on the entirety of its U.S. capital loss carryforwards and state net operating loss carryforwards due to uncertainty about its ability to utilize such carryforwards.

The Company believes that its income tax filing positions taken or expected to be taken in its tax returns will more likely than not be sustained if such returns were to be audited by the taxing authorities and, accordingly, does not anticipate that any adjustments to these positions in the event such returns were to be audited would have a material adverse impact on the Company’s financial condition, results of operations, or cash flow.  Therefore, no reserves for uncertain income tax positions have been recorded.  The Company’s income tax returns for the past three years are subject to examination by tax authorities, and may change upon examination.

The Company records interest related to taxes in other expense and records penalties in operating expenses.

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Note 5 - Obligations Under Capital Lease

6 Months Ended

Dec. 31, 2012

Debt and Capital Leases Disclosures [Text Block]

5. Obligations Under Capital Leases

The Company has incurred various capital lease obligations for computer equipment.  This capital lease obligation totaled $760,000 and $904,000 as of December 31, 2012 and June 30, 2012, respectively.

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Note 3 - Employee Stock Compensation Plans (Detail) - Exercise prices for options outstanding and related information: (USD $)	6 Months Ended
	Dec. 31, 2012	Jun. 30, 2012
Range of Exercise Prices, lower limit	$ 0.17
Range of Exercise Prices, upper limit	$ 3.81
Options Outstanding (in Shares)	3,481,900	3,481,900
Weighted Average Exercise Prices of Options Outstanding	$ 0.76	$ 0.76
Weighted Average Remaining Contractual Life of Options Outstanding	7 years 6 months
Options Exercisable (in Shares)	1,206,100
Weighted Average Exercise Prices of Options Exercisable	$ 0.81
Weighted Average Remaining Contractual Life of Options Exercisable	5 years 73 days
$0.17 - 0.50 [Member]
Range of Exercise Prices, lower limit	$ 0.17
Range of Exercise Prices, upper limit	$ 0.50
Options Outstanding (in Shares)	170,120
Weighted Average Exercise Prices of Options Outstanding	$ 0.42
Weighted Average Remaining Contractual Life of Options Outstanding	1 year 255 days
Options Exercisable (in Shares)	170,120
Weighted Average Exercise Prices of Options Exercisable	$ 0.42
Weighted Average Remaining Contractual Life of Options Exercisable	1 year 255 days
$0.51 - 0.75 [Member]
Range of Exercise Prices, lower limit	$ 0.51
Range of Exercise Prices, upper limit	$ 0.75
Options Outstanding (in Shares)	1,883,920
Weighted Average Exercise Prices of Options Outstanding	$ 0.70
Weighted Average Remaining Contractual Life of Options Outstanding	8 years 73 days
Options Exercisable (in Shares)	529,480
Weighted Average Exercise Prices of Options Exercisable	$ 0.69
Weighted Average Remaining Contractual Life of Options Exercisable	7 years 292 days
$0.76 - 1.00 [Member]
Range of Exercise Prices, lower limit	$ 0.76
Range of Exercise Prices, upper limit	$ 1.00
Options Outstanding (in Shares)	1,189,360
Weighted Average Exercise Prices of Options Outstanding	$ 0.81
Weighted Average Remaining Contractual Life of Options Outstanding	8 years 73 days
Options Exercisable (in Shares)	268,000
Weighted Average Exercise Prices of Options Exercisable	$ 0.86
Weighted Average Remaining Contractual Life of Options Exercisable	4 years 73 days
$1.01 - 3.81 [Member]
Range of Exercise Prices, lower limit	$ 1.01
Range of Exercise Prices, upper limit	$ 3.81
Options Outstanding (in Shares)	238,500
Weighted Average Exercise Prices of Options Outstanding	$ 1.29
Weighted Average Remaining Contractual Life of Options Outstanding	3 years 36 days
Options Exercisable (in Shares)	238,500
Weighted Average Exercise Prices of Options Exercisable	$ 1.29
Weighted Average Remaining Contractual Life of Options Exercisable	3 years 36 days

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Note 1 - Organization and Basis of Presentation (Detail)	6 Months Ended
	Dec. 31, 2012
Number of Operating Segments	3

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Note 9 - Segment Information

6 Months Ended

Dec. 31, 2012

Segment Reporting Disclosure [Text Block]

9. Segment Information

The Company’s operations for the three and six months ended December 31, 2012 included business in North America, Singapore, Malaysia and Australia.  The Company closed its Malaysia office in January 2013. Revenue for any particular geographic region is determined by sales made by the Company to the customers in that particular region.  The Company’s chief operating decision maker and CEO evaluates business results based primarily on these geographic regions.  The following table illustrates certain financial information about these geographies in the corresponding fiscal periods:

Three Months Ended December 31, 2012

	North America			Singapore/Malaysia			Australia			Total
Revenue-
Product sales	$	9,569,000		$	571,000		$	400,000		$	10,540,000
Service revenue		5,191,000			59,000			255,000			5,505,000
Commission revenue		5,356,000			48,000			132,000			5,536,000
Total revenue		20,116,000			678,000			787,000			21,581,000
Cost of revenue-
Cost of product sales		6,113,000			462,000			283,000			6,858,000
Cost of service revenue		3,513,000			103,000			200,000			3,816,000
Total cost of revenue		9,626,000			565,000			483,000			10,674,000
Gross margin		10,490,000			113,000			304,000			10,907,000
Total operating expenses		8,967,000			262,000			543,000			9,772,000
Operating income (loss)		1,523,000			(149,000	)		(239,000	)		1,135,000
Other expense, net		(94,000	)		4,000			6,000			(84,000	)
Income (loss) before income taxes	$	1,429,000		$	(145,000	)	$	(233,000	)	$	1,051,000

Three Months Ended December 31, 2011

	North America			Singapore/Malaysia			Australia			Total
Revenue-
Product sales	$	11,529,000		$	889,000		$	353,000		$	12,771,000
Service revenue		4,845,000			144,000			266,000			5,255,000
Commission revenue		4,255,000			81,000			111,000			4,447,000
Total revenue		20,629,000			1,114,000			730,000			22,473,000
Cost of revenue-
Cost of product sales		7,918,000			591,000			194,000			8,703,000
Cost of service revenue		2,907,000			157,000			134,000			3,198,000
Total cost of revenue		10,825,000			748,000			328,000			11,901,000
Gross margin		9,804,000			366,000			402,000			10,572,000
Total operating expenses		8,500,000			282,000			447,000			9,229,000
Operating income (loss)		1,304,000			84,000			(45,000	)		1,343,000
Other expense, net		(194,000	)		(8,000	)		5,000			(197,000	)
Income (loss) before income taxes	$	1,110,000		$	76,000		$	(40,000	)	$	1,146,000

	North America			Singapore/Malaysia			Australia			Total
Revenue-
Product sales	$	19,619,000		$	1,574,000		$	862,000		$	22,055,000
Service revenue		10,151,000			177,000			550,000			10,878,000
Commission revenue		9,698,000			102,000			449,000			10,249,000
Total revenue		39,468,000			1,853,000			1,861,000			43,182,000
Cost of revenue-
Cost of product sales		12,306,000			1,279,000			603,000			14,188,000
Cost of service revenue		6,958,000			182,000			370,000			7,510,000
Total cost of revenue		19,264,000			1,461,000			973,000			21,698,000
Gross margin		20,204,000			392,000			888,000			21,484,000
Total operating expenses		17,777,000			575,000			1,052,000			19,404,000
Operating income (loss)		2,427,000			(183,000	)		(164,000	)		2,080,000
Other expense, net		(123,000	)		6,000			13,000			(104,000	)
Income (loss) before income taxes	$	2,304,000		$	(177,000	)	$	(151,000	)	$	1,976,000

	North America			Singapore/Malaysia			Australia		Total
Revenue-
Product sales	$	22,826,000		$	1,669,000		$	1,551,000	$	26,046,000
Service revenue		9,193,000			339,000			527,000		10,059,000
Commission revenue		7,890,000			101,000			320,000		8,311,000
Total revenue		39,909,000			2,109,000			2,398,000		44,416,000
Cost of revenue-
Cost of product sales		15,787,000			1,157,000			1,059,000		18,003,000
Cost of service revenue		5,787,000			278,000			267,000		6,332,000
Total cost of revenue		21,574,000			1,435,000			1,326,000		24,335,000
Gross margin		18,335,000			674,000			1,072,000		20,081,000
Total operating expenses		16,724,000			522,000			897,000		18,143,000
Operating income		1,611,000			152,000			175,000		1,938,000
Other expense, net		(325,000	)		(23,000	)		10,000		(338,000	)
Income before income taxes	$	1,286,000		$	129,000		$	185,000	$	1,600,000

	December 31, 2012		June 30, 2012
Long-lived assets
North America	$	2,931,000	$	2,633,000
Singapore/Malaysia		4,000		10,000
Australia		62,000		68,000
Total	$	2,997,000	$	2,711,000

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Note 7 - Earnings Per Share

6 Months Ended

Dec. 31, 2012

Earnings Per Share [Text Block]

7.  Earnings Per Share

Basic earnings per common share is computed by dividing net earnings available to common stockholders by the weighted-average number of common shares outstanding for the period. Diluted earnings per common share include the potential dilution that would occur from common shares issuable upon the exercise of outstanding stock options and warrants and the conversion of preferred stock.  As of December 31, 2012, 5,577,684 shares of common stock were issuable upon the conversion or exercise of options, warrants and preferred stock.  For the three and six months ended December 31, 2012 and 2011, there were 2,724,011 and 535,900 shares of common stock equivalents, respectively, excluded from the computation of diluted earnings per share because their effect would have been antidilutive.

The following tables summarize the computations of basic and diluted earnings per common share for the three and six months ended December 31, 2012 and 2011:

	Three Months Ended December 31,
	2012			2011
Numerator for basic and diluted earnings per share:
Net income	$	496,000		$	1,039,000
Preferred stock dividends		(28,000	)		(39,000	)
Net income available to common stockholders	$	468,000		$	1,000,000
Weighted average shares used in computing basic net income per share:		53,990,589			52,223,307
Assumed conversion of preferred stock		769,630			3,295,406
Effect of outstanding stock options		280,066			176,036
Weighted average shares used in computing diluted net income per share:		55,040,285			55,694,749
Income per common share, basic	$	0.01		$	0.02
Income per common share, diluted	$	0.01		$	0.02

	Six Months Ended December 31,
	2012			2011
Numerator for basic and diluted earnings per share:
Net income	$	1,072,000		$	1,441,000
Preferred stock dividends		(56,000	)		(78,000	)
Net income available to common stockholders	$	1,016,000		$	1,363,000
Weighted average shares used in computing basic net income per share:		53,906,012			52,072,435
Assumed conversion of preferred stock		769,630			3,295,406
Effect of outstanding stock options		280,066			195,218
Weighted average shares used in computing diluted net income per share:		54,955,708			55,563,059
Income per common share, basic	$	0.02		$	0.03
Income per common share, diluted	$	0.02		$	0.03

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Note 8 - Preferred Stock

6 Months Ended

Dec. 31, 2012

Preferred Stock [Text Block]

8.  Preferred Stock

Convertible Preferred Stock

At December 31, 2012, 384,495 shares of Series D Convertible Preferred Stock (the “Series D shares”) were outstanding with the following terms:

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

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

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

Conversion Feature- The Series D shares are convertible at any time beginning 120 days after the original issuance date at the option of the holder and automatically converts into common stock if the common stock trades for more than $2.25 per share for 60 consecutive trading days. Each Series D share is convertible into shares of common stock by multiplying the appropriate conversion rate in effect by the number of shares of preferred stock being converted. As of December 31, 2012, the conversion rate would yield two shares of common stock for each share of Series D share; however, this rate may be adjusted due to stock splits, dividends, and other events defined in the stock purchase agreement between the Company and the holders of the Series D shares.

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

At December 31, 2012, 862 shares of Series E Convertible Preferred Stock (the “Series E shares”) were outstanding with the following terms:

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

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

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

Conversion Feature- The Series E shares are convertible at any time beginning 120 days after the original issuance date at the option of the holder and automatically converts into common stock if the common stock trades for more than $2.25 per share for 60 consecutive trading days. Each Series E share is convertible into shares of common stock by multiplying the appropriate conversion rate in effect by the number of shares of preferred stock being converted. As of December 31, 2012 the conversion rate would yield 1,538.5 shares of common stock for each share of Series E; however, this rate may be adjusted due to stock splits, dividends, and other events defined in the stock purchase agreements between the Company and the holders of the Series E shares.

Liquidation Preference- In the event of a liquidation, dissolution or winding up of the Company, the holders of Series E shares are entitled to receive for each share, prior and in preference to any distribution of any of the assets or surplus funds to the holders of common stock, an amount equal to $0.65 per share (upon conversion) plus all accumulated but unpaid dividends. If upon the occurrence of such event, the

assets and funds thus distributed among the holders are insufficient to permit the payment of the preferential amount, then the entire assets and funds of the Company legally available for distribution shall be distributed ratably among the preferred stockholders.

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Note 3 - Employee Stock Compensation Plans (Tables)

6 Months Ended

Dec. 31, 2012

Schedule of Share-based Compensation, Stock Options, Activity [Table Text Block]

	Options		Weighted-Average Exercise Price		Aggregate Intrinsic Value
Outstanding at July 1, 2012		3,481,900	$	0.76
Granted		—		—
Exercised		—		—
Forfeited		—		—
Expired		—		—
Outstanding at December 31, 2012		3,481,900	$	0.76	$	411,000
Exercisable at December 31, 2012		1,206,100	$	0.81	$	160,000
Weighted-average remaining contractual life	5.2 Years

Schedule of Share-based Compensation, Shares Authorized under Stock Option Plans, by Exercise Price Range [Table Text Block]

Range of Exercise Prices			Options Outstanding		Weighted Average Exercise Prices of Options Outstanding		Weighted Average Remaining Contractual Life of Options Outstanding	Options Exercisable		Weighted Average Exercise Prices of Options Exercisable		Weighted Average Remaining Contractual Life of Options Exercisable
$    0.17	–	0.50		170,120	$	0.42	1.7 years		170,120	$	0.42	1.7 years
0.51	–	0.75		1,883,920		0.70	8.2 years		529,480		0.69	7.8 years
0.76	–	1.00		1,189,360		0.81	8.2 years		268,000		0.86	4.2 years
1.01	–	3.81		238,500		1.29	3.1 years		238,500		1.29	3.1 years
				3,481,900		0.76	7.5 years		1,206,100		0.81	5.2 years

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Note 3 - Employee Stock Compensation Plans (Detail) (USD $)	6 Months Ended
	Dec. 31, 2012
Share-based Compensation, Shares Authorized under Stock Option Plans, Exercise Price Range, Lower Range Limit (in Dollars per share)	$ 0.17
Share-based Compensation, Shares Authorized under Stock Option Plans, Exercise Price Range, Upper Range Limit (in Dollars per share)	$ 3.81
Employee Service Share-based Compensation, Nonvested Awards, Total Compensation Cost Not yet Recognized, Stock Options (in Dollars)	$ 660,000
Employee Service Share-based Compensation, Nonvested Awards, Total Compensation Cost Not yet Recognized, Period for Recognition	2 years 292 days
Omnibus Plan [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Number of Shares Authorized	2,000,000
Avatech Solutions, Inc. 2002 Stock Option Plan (the "Plan") [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Number of Shares Authorized	7,800,000
Allocated Share-based Compensation Expense (in Dollars)	$ 126,000

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Note 6 - Income Taxes (Detail) (Valuation Allowance, Operating Loss Carryforwards [Member], USD $) In Millions, unless otherwise specified	3 Months Ended
	Jun. 30, 2012
Valuation Allowance, Operating Loss Carryforwards [Member]
Valuation Allowance, Deferred Tax Asset, Change in Amount	$ (4.3)

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Consolidated Statements of Comprehensive Income (unaudited) (USD $)	3 Months Ended		6 Months Ended
	Dec. 31, 2012	Dec. 31, 2011	Dec. 31, 2012	Dec. 31, 2011
Net income	$ 496,000	$ 1,039,000	$ 1,072,000	$ 1,441,000
Other comprehensive income, net of tax:
Net change in cumulative foreign currency translation gain (loss)	(42,000)	80,000	153,000	(300,000)
Comprehensive income	$ 454,000	$ 1,119,000	$ 1,225,000	$ 1,141,000

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Note 4 - Borrowings Under Line of Credit

6 Months Ended

Dec. 31, 2012

Debt Disclosure [Text Block]

4.  Borrowings Under Line of Credit

On February 29, 2012, the Company entered into an $8 million line of credit facility, including a $1,000,000 sublimit for the issuance of standby or trade letters of credit, with PNC Bank, National Association. The interest rate is the “Eurodollar Rate”, which is calculated by using the LIBOR rate, plus a margin of 2.0%. The interest rate as of December 31, 2012 was 2.2%. The Company had outstanding borrowings from the bank under its credit line of approximately $3.5 million as of December 31, 2012 and had $3.1 million outstanding as of June 30, 2012. The line expires on February 28, 2014.

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Note 7 - Earnings Per Share (Detail)	3 Months Ended		6 Months Ended
	Dec. 31, 2012	Dec. 31, 2011	Dec. 31, 2012	Dec. 31, 2011
Number of Common Shares Issuable Upon the Conversion or Exercise of Options, Warrants, and Preferred Stock	5,577,684		5,577,684
Antidilutive Securities Excluded from Computation of Earnings Per Share, Amount	2,724,011	535,900	2,724,011	535,900

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Note 2 - Supplemental Disclosure of Cash Flow Information (Detail) (USD $)	1 Months Ended	3 Months Ended		6 Months Ended
	Jul. 31, 2012	Dec. 31, 2012	Dec. 31, 2011	Dec. 31, 2012	Dec. 31, 2011
Interest Paid		$ 22,000	$ 100,000	$ 46,000	$ 161,000
Income Taxes Paid		59,000	284,000	59,000	384,000
Noncash or Part Noncash Acquisition, Fixed Assets Acquired				0	947,000
Business Acquisition, Cost of Acquired Entity, Cash Paid	600,000
Business Acquisition, Equity Interest Issued or Issuable, Number of Shares (in Shares)	497,512
Business Acquisition, Equity Interest Issued or Issuable, Value Assigned	$ 400,000