The following discussion and analysis of our results of operations and financial condition should be read in conjunction with our audited consolidated financial statements and related notes included elsewhere in this Annual Report on Form 10-K.

Overview

We are a leading national provider of innovative IT solutions including Application Delivery, Unified Communications, Virtualization, and Managed Services. With specialization in these advanced technologies we enable our clients to achieve improved operational efficiency and to focus on growth, while mitigating the risk of implementing complex IT systems. We achieve these results by providing solutions that address the full life cycle of a client's IT requirements from needs analysis, through planning, development, deployment, and testing, to on-going maintenance and support. We combine these services with technology from leading software and hardware manufacturers delivering strategic IT solutions that solve many of today's business challenges.

Our clients consist of middle market corporations (generally those with $50 million to $1 billion in revenues), divisions of Global 2000 corporations, municipal, state and federal government agencies, and educational, financial and health-care institutions. We serve clients in most major US metropolitan markets.

In the first quarter of fiscal 2009, the Company affected a 1-for-15 reverse stock split of its common stock ("Reverse Stock Split") which occurred on June 25, 2008. The Reverse Stock Split was implemented to avoid being delisted from the NASDAQ due to the failure to comply with the minimum bid price requirement. Following a hearing held on July 10, 2008, the NASDAQ Listing Qualifications Panel (the "Panel"), by letter dated July 16, 2008, indicated that MTM had regained compliance with the continued listing standards of the NASDAQ. Accordingly, the Panel determined to continue the listing of the Company's shares on the NASDAQ.

In the fourth quarter of fiscal 2009, we conducted our annual assessment of goodwill for impairment. We performed extensive valuation analyses, utilizing both income and market approaches in our goodwill assessment process. Over the past few quarters the Company has experienced a significant decline in its stock price for both common and preferred stock resulting in a lower estimated fair value of the Company. The decline in the fair value of the Company below its book value is also attributable to the current economic crisis and lower than expected revenues and cash flows, and the uncertainty related to future cash flows. As a result, for the year ended March 31, 2009, we recorded a pretax impairment charge of $19.6 million to reduce the carrying value of the Company's goodwill. Additional impairment charges could be recognized in the near term if current conditions continue to decline. No goodwill impairment charge was required for the year ended March 31, 2008.

As of March 31, 2009 the FirstMark and Constellation investment totaled approximately $73 million. We had used these funds, dating back to July 2004, to acquire six strategic providers of advanced technology solutions and products, as well as for working capital needs.

The Company sustained net losses during the fiscal years ended March 31, 2009 and 2008. Our decline in performance in during fiscal 2009 continued to be impacted by a weaker US economy and reduced access to business credit. Our business requires significant levels of working capital to fund future revenue growth and current operations. Working capital at March 31, 2009 was a deficit of $(5.8) million as compared to a working capital deficit of $(3.3) million at March 31, 2008. We have historically relied on and continue to rely heavily on, trade credit from vendors and our credit facilities for our working capital needs. We have made a concerted effort to improve our working capital position over the past few years and during fiscal 2009 had taken significant measures to further reduce headcount, streamline operations, consolidate facilities and manage costs in response to the impact of the economic downturn. We have also significantly reduced our infrastructure investment by limiting future capital expenditures including the internal development of purchased and developed software. We continue to drive accounts receivable and have made strong progress in collecting overdue accounts.

We continue to actively pursue additional financing arrangements including the successful negotiation in June of fiscal 2010 of an additional $7.0 million in borrowing capacity under our existing Credit Facilities Agreement with CDF. Most recently prior to that we were able to secure an additional $2.0 million in financing during the fourth quarter of fiscal 2009; $1.0 million from the Investors and an increase of $1.0 million under the CP/NEBF Credit Agreement. We were also able to complete several other financing arrangements with the Investors over the past two years amounting to $6.0 million, we secured an additional $3.0 million in financing under our Secured Promissory Note with CP Investment Management and NEBF during the first quarter of fiscal 2009, and issued additional shares of Series A Preferred Stock raising over $9.0 million in the prior fiscal year alone.

The Company's ability to continue as a going concern, however, is contingent upon its ability to obtain debt and or capital financing in order to meet obligations that mature in fiscal 2010; including the Company's current Credit Facilities Agreement with CDF, which matures in March 2010, as well as the Company's ability to restructure its operations in order to improve future operating results and to generate cash flow.

Our consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States of America ("GAAP"). The preparation of these financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements, as well as the reported amounts of revenues and expenses during the reporting period. The methods, estimates, and judgments we use in applying our most critical accounting policies have a significant impact on the results we report in our financial statements. Actual results may differ from these estimates under different assumptions or conditions. The SEC has defined critical accounting policies as policies that involve critical accounting estimates that require (a) management to make assumptions that are highly uncertain at the time the estimate is made and (b) different estimates that could have been reasonably used for the current period, or changes in the estimates that are reasonably likely to occur from period to period, which would have a material impact on the presentation of our financial condition, changes in financial condition or in results of operations. Based on this definition, our most critical policies include: revenue recognition, the assessment of recoverability of long-lived assets, allowance for doubtful accounts, accrual of unreported medical claims, and stock-based compensation.

Revenue Recognition

We recognize revenue in accordance with Staff Accounting Bulletin No. 104. We recognize revenue from the sales of hardware when the rights and risks of ownership have passed to the client, upon shipment or receipt by the client, depending on the terms of the sales contract with the client. Revenue from the sales of software not requiring significant modification or customization is recognized upon delivery or installation. Revenue from services is recognized upon performance and acceptance after consideration of all of the terms and conditions of the client contract. Service contracts generally do not extend over one year, and are billed when persuasive evidence of an arrangement exists, the sales price is fixed and determinable, and collection of the resulting receivable is reasonably assured. Revenue arrangements generally do not include specific client acceptance criteria. For arrangements with multiple deliverables, delivered items are accounted for separately, provided that the delivered item has value to the client on a stand-alone basis and there is objective and reliable evidence of the fair value of the undelivered items. Revenue billed on retainer is recognized as services are performed and amounts not recognized are recorded as deferred revenue.

Impairment of Long-lived Assets

When facts and circumstances indicate that the carrying values of long-lived assets may be impaired, an evaluation of recoverability is performed by comparing the carrying values of the assets to projected future cash flows, in addition to other quantitative and qualitative analyses. For goodwill and other intangible assets, we test for impairment on a consolidated basis at least annually or more frequently if we believe indicators of impairment exist. Upon indication that the carrying values of such assets may not be recoverable, the Company recognizes an impairment loss as a charge against current operations. Property and equipment assets are grouped at the lowest level for which there are identifiable cash flows when assessing impairment. Factors that may cause a goodwill, intangible asset or other long-lived asset impairment include negative industry or economic trends and significant underperformance relative to historical or projected future operating results. Our valuation methodologies include, but are not limited to, estimating the net present value of the projected cash flows of our Company. If actual results are substantially lower than our projections underlying these assumptions, or if market discount rates substantially increase, our future valuations could be adversely affected, potentially resulting in future impairment charges.

Allowance for Doubtful Accounts

We estimate the allowance for doubtful accounts based on historical experience, customer credit risk and application of the specific identification method. The Company writes off accounts receivable against the allowance when a balance is determined to be uncollectible. If actual customer performance were to deteriorate to an extent not expected by us, additional allowances may be required which could have an adverse effect on our consolidated financial results. Conversely, if actual customer performance were to improve to an extent not expected by us, a reduction in allowances may be required which could have a favorable effect on our consolidated financial results.

Stock-based Compensation

We account for stock-based compensation in accordance with the fair value recognition provisions of Statement of Financial Accounting Standards No. 123 (revised 2004), "Share-Based Payment" ("SFAS No. 123(R)"). The Company uses the Black-Scholes option pricing model which requires the input of highly subjective assumptions. These assumptions include estimating the length of time employees will retain their stock options before exercising them, the estimated volatility of the Company's common stock price over the expected term and the number of options that will ultimately not complete their vesting requirements. Changes in the subjective assumptions can materially affect the estimate of fair value stock-based compensation and consequently, the related amount recognized on the consolidated statement of operations. RSUs issued by the Company are equivalent to nonvested shares, as defined by SFAS No. 123(R). No stock-based compensation expense was recognized in the consolidated financial statements related to the Associate Stock Purchase Plan, since the related purchase discounts did not exceed the amount allowed under SFAS No. 123(R) for non-compensatory treatment.

The following table sets forth for the periods presented information derived from our audited consolidated statement of operations expressed as a percentage of net revenues, unless otherwise noted:

                                                       Year Ended March 31,
                                                     ------------------------
                                                        2009           2008
                                                     -- --------     -- -----
      Net revenues:
      Products                                              70.1 %       70.8 %
      Services                                              29.9         29.2
                                                     -- --------     -- -----
      Total net revenues                                   100.0        100.0

      Gross Profit - products (a)                           16.7         15.8
      Gross Profit - services (a)                           37.2         40.2
      Gross Profit - total                                  22.8         22.9
      Selling, general and administrative expenses          28.3         25.7
      Goodwill Impairment                                   11.2          0.0
                                                     -- --------     -- -----
      Operating loss                                       (16.8 )       (2.8 )
      Interest expense and other, net                        6.0          2.7
                                                     -- --------     -- -----
      Net loss                                             (22.7 )%      (5.9 )%
                                                     -- --------     -- -----

Fiscal 2009 Compared to Fiscal 2008

Net Revenue

Net revenues for the year ended March 31, 2009 decreased $68.0 million, or 28.0% from the comparable prior year, to $174.7 million. The decrease in net revenues for the year ended March 31, 2009 was primarily due to a 28.8% decrease in product revenue of nearly $49.5 million over the prior year. During the second half of fiscal 2009 the Company experienced a slow down in product sales to customers, primarily due to the downturn in the economy, whereby customers are experiencing a freeze on capital spending and large infrastructure deals are being put on hold or delayed. Despite this decrease, the Company has also seen sustained revenue growth in product lines that offer greater efficiencies of scale to customers related to security and access. Overall the decrease in product revenue for the year ended March 31, 2009 has been impacted by reduced demand for IT products as a result of the downturn in the economic environment as customers either freeze or delay non - essential purchases and due to the change in the mix and volume of the type of deals the Company is currently closing versus that in the prior year. The decrease in product revenue has directly impacted the volume of professional services revenue by limiting the Company in its ability to offer add-on professional services solutions to product revenue. Service revenue for the fiscal year ended March 31, 2009 decreased 26.2% or $18.5 million over the comparable prior year.

Gross Profit

Gross profit for the year ended March 31, 2009 decreased $15.8 million, or 28.4% from the comparable prior year, to $39.8 million. Product gross margin was 16.7% for the year ended March 31, 2009 as compared with 15.8% for the year ended March 31, 2008. Overall the decrease in product gross profit was directly related to the decrease in product revenue. However, the product gross margin percentage increased over the year ended March 31, 2009 by almost 1.0% due to the mix in the type of deals the Company is currently closing versus that in the prior year. Service gross margin was 37.2% for the year ended March 31, 2009 as compared with 40.2% for the year ended March 31, 2008. The overall decrease in service gross profit primarily related to the decrease in service revenue. The service gross margin percentage for the year ended March 31, 2009 was also negatively impacted because fixed expenses did not decrease proportionately with the revenue decline and the Company experienced lower utilization in certain regions as well as an increase in the use of outside contractors with specialized expertise.

Selling, General and Administrative

Selling, general and administrative expenses ("S,G&A") for the year ended March 31, 2009 decreased by $12.8 million, or 20.6% from the comparable prior year, to $49.5 million. S,G&A net of non-cash charges for depreciation, amortization and stock-based compensation expense expressed as a percentage of revenue increased to 23.6% for the year ended March 31, 2009 compared with 21.3% for the year ended March 31, 2008. Many of the Company's operating expenses are fixed in nature. Although net S,G&A increased as a percentage of revenue, due to lower sales year over year, it decreased by $10.6 million, or 20.4%, from the comparable prior year period, to $41.2 million. Overall, the $10.6 million decrease in net S,G&A was due primarily to a reduction in personnel costs over the prior year, with headcount decreasing over 138 full time equivalents over the prior year period and due to the impact of mandatory days off and periodic salary reductions during the second half of fiscal 2009. The Company also realized significant cost savings from several initiatives including revised compensation programs of the sales force, its self insurance plan for health coverage and increased health contributions by employees, reductions in operating costs for non-essential services and reduced travel expense programs. The decrease was also due to a reduction over the corresponding prior year in professional fees related to outside consultants and overall cost reduction efforts, and lower selling expenses as a result of the decrease in revenue in the year ended March 31, 2009, as compared with the year ended March 31, 2008. Intangible amortization decreased $1.1 million, the impact of fully amortized intangible assets on current year results, and depreciation for the year ended March 31, 2009 decreased $1.0 million over the prior year, the impact of a decrease in the level of capital spending over the past two years. Stock-based compensation costs decreased $0.2 million in the periods as a result of an increase in the rate of actual forfeitures of unvested options from employee terminations.

In the fourth quarter of fiscal 2009, the Company conducted its annual assessment of goodwill for impairment. The Company performed extensive valuation analyses, utilizing both income and market approaches, in its goodwill assessment process. As a result, for the year ended March 31, 2009, the Company recorded a pretax impairment charge of $19.6 million to reduce the carrying value of the Company's goodwill. No goodwill impairment charge was required for the year ended March 31, 2008. See Note 1 to the Consolidated Financial Statements for a discussion of goodwill.

EBITDA

Earnings before interest, income taxes, depreciation, amortization, stock-based compensation cost and other (income) expense ("EBITDA") amounted to negative $21.1 million for the year ended March 31, 2009, as compared to $3.8 million for the year ended March 31, 2008. EBITDA results for fiscal 2009 include a $19.6 million non-cash charge related to the impairment of goodwill, which charges were not expenses in the prior period. Net of this charge EBITDA for year ended March 31, 2009 decreased $5.2 million over the year ended March 31, 2008, the overall decline in EBITDA results was the result of a decline in gross margin of both product and service revenue of $15.8 million offset by the reduction in S,G&A expenses of $10.6 million as noted above.

The following table sets forth a reconciliation of EBITDA to net loss for the periods presented.

                                                 Year Ended March 31,
                                               ------------------------
             (in thousands)                        2009         2008
                                               -- ---------   - -------
             EBITDA                            $    (21,055 ) $   3,763
             Depreciation and amortization            7,250       9,294
             Interest expense and other, net         10,442       6,628
             Stock-based compensation cost              997       1,224
             Income taxes                              (100 )     1,022
                                               -- ---------   - -------
             Net loss                          $    (39,644 ) $ (14,405 )
                                               -- ---------   - -------

We believe that EBITDA, which is not a recognized measure for financial presentation under GAAP, provides investors and management with a useful supplemental measure of our operating performance because it more closely approximates the cash generating ability of the Company as compared to operating income (loss). Operating income (loss) includes charges for depreciation and amortization of intangible assets as well as stock-based compensation cost. These non-GAAP results should be evaluated in light of our financial results prepared in accordance with GAAP. EBITDA is not a recognized measure for financial statement presentation under GAAP. Non-GAAP earnings measures do not have any standardized definition and are therefore unlikely to be comparable to similar measures presented by other reporting companies. This non-GAAP measure is provided to assist readers in evaluating our operating performance. Readers are encouraged to consider this non-GAAP measure in conjunction with our GAAP results.

Interest Expense and Other, net

Interest expense and other, net was $10.4 million for the year ended March 31, 2009 compared to $6.6 million for the year ended March 31, 2008, an increase of $3.8 million or 57.5%. The increase in interest expense for the year ended March 31, 2009 is primarily due to the impact of the amendment entered into by the Company in June 2008, whereby the principal amount of the Secured Promissory Note under the CP/NEBF Credit Agreement (the "CP/NEBF Note") with CP Investment Management and NEBF was increased by $3,000,000 to $28,000,000 and higher interest rates were imposed on the CP/NEBF Note as a result of the amendments entered into since the second quarter of fiscal 2008. The current internal rate of return is 15% compared with a blended rate of 13.5% for the comparable prior year. In accordance with Amendment No. 5 to the secured promissory note entered into during the first quarter of fiscal 2009, results for the year ended March 31, 2009 include a retroactive adjustment since the inception of the CP/NEBF Note that amends the IRR to 15% for all periods since the Closing Date, November 23, 2005. The increase in interest expense for the year ended March 31, 2009 was also attributable to the impact of the interest due on the unsecured subordinated promissory notes payable to the Investors.

Liquidity and Capital Resources

The Company measures its liquidity in a number of ways, including the following:

                                                             March 31,
                                                        -------------------
         (In thousands)                                   2009       2008
                                                        - ------   - ------
         Cash                                           $  2,150   $  3,210
         Working capital(deficit)                       $ (5,782 ) $ (3,326 )
         Current ratio                                    0.86:1     0.94:1
         Related party notes payable                    $  6,833   $  2,431
         Secured financing facilities                   $ 15,667   $ 23,901
         Secured promissory note and related interest   $ 41,640   $ 30,116

We require access to significant working capital and vendor credit to fund our day-to-day operations, particularly at the end of our fiscal quarters when demand for our products and services increases substantially. Our primary source of day-to-day working capital is from our Credit Facilities Agreement with CDF (described below in this Item) and vendor lines of credit. We have made a concerted effort to improve our working capital position over the past few years and during fiscal 2009 had taken significant measures to further reduce headcount, streamline operations, consolidate facilities and manage costs in response to the impact of the economic downturn. We have also significantly reduced our infrastructure investment by limiting future capital expenditures including the internal development of purchased and developed software. We continue to drive accounts receivable and have made strong progress in collecting overdue accounts.

As of March 31, 2009 the FirstMark and Constellation investment totaled approximately $73 million. We had used these funds, dating back to July 2004, to acquire six strategic providers of advanced technology solutions and products, as well as for working capital needs. The Company successfully raised an additional $6.5 million in financing during the first fiscal quarter of 2009, the proceeds of which were primarily used to pay trade accounts payable and raised another $2.0 million in financing in the fourth quarter of fiscal 2009 which proceeds were used to fund working capital needs.

A detailed review of the financing arrangements entered into by the Company during fiscal year 2009, as well as several related arrangements which have been entered since the beginning of fiscal year 2010 follows.

Letter of Credit Agreement

On June 11, 2009, the Company entered into a Letter of Credit Commitment and Reimbursement Agreement with NEBF, CP Investment Management, FirstMark and Constellation (collectively, the "L/C Guarantors") and CP Investment Management, as Investment Manager for the L/C Guarantors (the "L/C Agreement"). As a condition of CDF continuing to make advances under the Credit Facilities Agreement, CDF required that one or more of the L/C Guarantors provide letters of credit in the aggregate amount of $8,500,000 to provide credit support and additional collateral to secure the Companies' obligations under the CDF Credit Facilities Agreement. The terms of the L/C Agreement provide that the letters of credit shall expire no later than May 31, 2010.

The Company is obligated to reimburse the L/C Guarantors for any drawing made on a letter of credit immediately following any payment made by the issuing bank of such letter of credit. The Company is required to pay a drawing fee equal to the amount required to provide the L/C Guarantors with a 15% rate of return on drawings made on the letters of credit. Additionally, in the event of a Change of Control, Event of Default or Liquidity Event (as such terms are defined in the L/C Agreement), the Company is required to pay to the L/C Guarantors a Success Fee payable in cash in the amount of $34,000,000.

To secure the repayment obligations of the Company under the L/C Agreement (including the obligation to pay the Success Fee), the Company has granted to CP Investment Management, as investment manager, a security interests in: (i) all . . .