RAND WORLDWIDE INC - FORM 10-Q

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EXCEL - IDEA: XBRL DOCUMENT - RAND WORLDWIDE INC	Financial_Report.xls
EX-31.2 - SECTION 302 CFO CERTIFICATION - RAND WORLDWIDE INC	d254759dex312.htm
EX-31.1 - SECTION 302 CEO CERTIFICATION - RAND WORLDWIDE INC	d254759dex311.htm
EX-32.1 - SECTION 906 CEO AND CFO CERTIFICATION - RAND WORLDWIDE INC	d254759dex321.htm

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 September 30, 2011

¨	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 x 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 x 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):

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

Indicate the number of shares outstanding of each of the issuer’s classes of common equity, as of the latest practicable date: as of November 14, 2011, there were 52,282,055 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 – September 30, 2011 and June 30, 2011 (Unaudited)		3

	Consolidated Statements of Operations – Three months ended September 30, 2011 and 2010 (Unaudited)		5

	Consolidated Statement of Stockholders’ Equity – Three months ended September 30, 2011 (Unaudited)		6

	Consolidated Statements of Cash Flows – Three months ended September 30, 2011 and 2010 (Unaudited)		7

	Notes to Consolidated Financial Statements (Unaudited)		8

ITEM 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		15

ITEM 4.	Controls and Procedures		21

PART II	OTHER INFORMATION

ITEM 6.	Exhibits		22

SIGNATURES			23

EXHIBIT INDEX			24

PART I. FINANCIAL INFORMATION

Rand Worldwide, Inc. and Subsidiaries

Consolidated Balance Sheets

(unaudited)


	September 30, 2011			June 30, 2011

Assets
Current assets:
Cash	$	2,536,000		$	2,631,000
Accounts receivable, less allowance of $474,000 as of September 30, 2011 and $390,000 as of June 30, 2011		15,381,000			20,112,000
Income tax receivable		60,000			87,000
Other receivables		707,000			816,000
Inventory		88,000			132,000
Prepaid expenses and other current assets		972,000			926,000

Total current assets		19,744,000			24,704,000

Property and equipment:
Computer software and equipment		6,866,000			6,918,000
Office furniture and equipment		1,816,000			1,818,000
Leasehold improvements		645,000			647,000

		9,327,000			9,383,000
Less accumulated depreciation and amortization		(7,664,000	)		(7,628,000	)

		1,663,000			1,755,000

Customer list, net of accumulated amortization of $5,676,000 as of September 30, 2011 and $5,570,000 as of June 30, 2011		3,239,000			3,345,000
Goodwill		15,147,000			15,240,000
Trade name, net of accumulated amortization of $878,000 as of September 30, 2011 and $802,000 as of June 30, 2011		3,053,000			3,129,000
Other assets		396,000			403,000


Total assets	$	43,242,000		$	48,576,000

See accompanying notes.

Rand Worldwide, Inc. and Subsidiaries

Consolidated Balance Sheets (continued)

(unaudited)


	September 30, 2011			June 30, 2011

Liabilities and Stockholders’ Equity
Current liabilities:
Borrowings under line of credit	$	3,218,000		$	3,939,000
Accounts payable and accrued expenses		10,113,000			13,698,000
Accrued compensation and related benefits		1,412,000			2,455,000
Deferred revenue		4,026,000			4,017,000
Obligations under capital leases		28,000			77,000

Total current liabilities		18,797,000			24,186,000

Long-term liabilities:
Deferred tax liability		1,688,000			1,690,000
Obligations under capital leases		25,000			28,000

Total liabilities		20,510,000			25,904,000

Stockholders’ equity:
Convertible Preferred Stock, $0.01 par value; 1,300,537 shares authorized, 1,298,728 shares issued; 1,090,150 shares outstanding with an aggregate liquidation preference of $1,591,000 at September 30, 2011 and June 30, 2011 (note 9)		11,000			11,000
Common stock, $0.01 par value; 80,000,000 shares authorized; issued and outstanding shares of 51,955,678 and 51,882,678 at September 30, 2011 and June 30, 2011, respectively		520,000			519,000
Additional paid-in capital		64,901,000			64,864,000
Accumulated deficit		(43,663,000	)		(44,065,000	)
Accumulated other comprehensive income		963,000			1,343,000

Total stockholders’ equity		22,732,000			22,672,000


Total liabilities and stockholders’ equity	$	43,242,000		$	48,576,000

See accompanying notes.

Rand Worldwide, Inc. and Subsidiaries

Consolidated Statements of Operations

(unaudited)


	Three Months Ended September 30,
	2011			2010

Revenues:
Product sales	$	13,277,000		$	9,328,000
Service revenue		4,802,000			4,495,000
Commission revenue		3,865,000			2,999,000

		21,944,000			16,822,000

Cost of revenue:
Cost of product sales		9,302,000			6,363,000
Cost of service revenue		3,132,000			3,256,000

		12,434,000			9,619,000

Gross margin		9,510,000			7,203,000
Other operating expenses:
Selling, general and administrative		8,518,000			8,615,000
Depreciation and amortization		396,000			382,000

		8,914,000			8,997,000

Operating income (loss)		596,000			(1,794,000	)
Other expense, net		(142,000	)		(315,000	)

Income (loss) before income taxes		454,000			(2,109,000	)
Income tax expense		52,000			62,000

Net income (loss)	$	402,000		$	(2,171,000	)
Preferred stock dividends		(39,000	)		(398,000	)

Net income (loss) available to common stockholders	$	363,000		$	(2,569,000	)


Income (loss) per common share, basic	$	0.01		$	(0.06	)

Income (loss) per common share, diluted	$	0.01		$	(0.06	)


Shares used in computing income (loss) per common share:
Weighted average shares used in computation - basic		51,921,676			42,701,339
Weighted average shares used in computation - diluted		52,138,108			42,701,339

See accompanying notes.

Rand Worldwide, Inc. and Subsidiaries

Consolidated Statement of Stockholders’ Equity (Unaudited)


	Convertible Preferred Stock				Common Stock
	Number of Shares		Par Value		Number of Shares		Par Value		Additional Paid-In Capital			Accumulated Deficit			Accumulated Other Comprehensive Income			Total

Balance at July 1, 2011		1,090,150	$	11,000		51,882,678	$	519,000	$	64,864,000		$	(44,065,000	)	$	1,343,000		$	22,672,000

Vesting of stock options granted to employees										41,000									41,000
Preferred stock dividends										(39,000	)								(39,000	)
Issuance of common stock upon the exercise of stock options						73,000		1,000		35,000									36,000
Foreign currency translation adjustment																(380,000	)		(380,000	)
Net income for the three months ended September 30, 2011													402,000						402,000

Comprehensive income																			22,000


Balance at September 30, 2011		1,090,150	$	11,000		51,955,678	$	520,000	$	64,901,000		$	(43,663,000	)	$	963,000		$	22,732,000

See accompanying notes.

Rand Worldwide, Inc. and Subsidiaries

Consolidated Statements of Cash Flows

(unaudited)


	Three Months Ended September 30,
	2011			2010
Cash flows from operating activities
Net income (loss)	$	402,000		$	(2,171,000	)
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
Loss on sale of property and equipment		9,000			—
Bad debt expense (recoveries)		(85,000	)		15,000
Depreciation and amortization		396,000			492,000
Stock-based compensation		41,000			5,000
Deferred income taxes		(2,000	)		(1,000	)
Changes in operating assets and liabilities net of those acquired:
Accounts receivable and other receivables		4,925,000			640,000
Income tax receivable		27,000			(289,000	)
Inventory		44,000			150,000
Prepaid expenses and other current assets		(46,000	)		(59,000	)
Other assets		7,000			66,000
Accounts payable and accrued expenses		(3,585,000	)		(73,000	)
Accrued compensation and related benefits		(1,043,000	)		633,000
Deferred revenue		9,000			146,000
Income taxes payable		—			(34,000	)
Other long-term liabilities		—			(70,000	)
Net effect of recapitalization of Term Notes		—			115,000

Net cash provided by (used in) operating activities		1,099,000			(435,000	)


Cash flows from investing activities
Cash acquired through reverse acquisition		—			2,123,000
Purchases of property and equipment		(131,000	)		(207,000	)

Net cash (used in) provided by investing activities		(131,000	)		1,916,000


Cash flows from financing activities
Proceeds from borrowings under line of credit		32,205,000			12,940,000
Repayment of borrowings under line of credit		(32,978,000	)		(13,081,000	)
Proceeds from the issuance of common stock to employees		36,000			—
Payment of preferred stock dividends		(39,000	)		(27,000	)

Net cash used in financing activities		(776,000	)		(168,000	)
Effect of exchange rate changes on cash		(287,000	)		182,000

Net change in cash		(95,000	)		1,495,000
Cash - beginning of period		2,631,000			1,198,000

Cash - end of period	$	2,536,000		$	2,693,000

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.

On August 17, 2010, the Company, then known as Avatech Solutions, Inc. (“Avatech”), acquired all the outstanding common stock of a separate corporation then known as Rand Worldwide, Inc. in a reverse merger transaction (the “Merger”). On January 1, 2011, the Company changed its name from Avatech Solutions, Inc. to Rand Worldwide, Inc. In accordance with U.S. generally accepted accounting principles (“U.S. GAAP”), because the Merger was accounted for as a reverse merger, the consolidated financial statements represent a continuation of the pre-Merger Rand Worldwide, Inc. Accordingly, the financial results for the quarter ended September 30, 2010 include the results of pre-Merger Rand Worldwide, Inc. from July 1, 2010 through August 17, 2010 and the results of the post-Merger combined Company from August 18, 2010 through September 30, 2010. Results for pre-Merger Avatech prior to August 17, 2010 have not been included. The results for the quarter ended September 30, 2011 are those of the combined post-Merger Company. All intercompany accounts and transactions between Avatech and its subsidiaries prior to the Merger, between pre-Merger Rand Worldwide, Inc. and its subsidiaries prior to the Merger, and the combined post-Merger Company and its subsidiaries have been eliminated in consolidation.

References in these Notes to “Rand Worldwide”, “the Company”, “us”, “we”, “our” are references to the post-Merger corporation 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 and also sells its own proprietary software products and related services, enhancing its total client solution offerings. IMAGINiT operates from locations across North America, Australia, Singapore and Malaysia.

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 customers using that use products other than those from Autodesk.

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 10.

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’s Annual Report on Form 10-K for the fiscal year ended June 30, 2011. Operating results for the three months ended September 30, 2011 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. Translations 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 at 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. Recent Accounting Pronouncements

In May 2011, the Financial Accounting Standards Board (“FASB”) issued guidance to amend the accounting and disclosure requirements on fair value measurements. The new guidance limits the highest-and-best-use measure to nonfinancial assets, permits certain financial assets and liabilities with offsetting positions in market or counterparty credit risks to be measured on a net basis, and provides guidance on the applicability of premiums and discounts. Additionally, the new guidance expands the disclosures on Level 3 inputs by requiring quantitative disclosure of the unobservable inputs and assumptions, as well as description of the valuation processes and the sensitivity of the fair value to changes in unobservable inputs. The updated guidance is effective on a prospective basis for financial statements issued for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2011. We do not anticipate adoption to have a material impact on our consolidated financial statements.

In June 2011, the FASB issued guidance on presentation of comprehensive income. The new guidance eliminates the current option to report other comprehensive income and its components in the statement of changes in equity. Instead, an entity will be required to present either a continuous statement of net income and other comprehensive income or two separate but consecutive statements and will result in presentation changes for our consolidated financial statements. The updated guidance is effective on a retrospective basis for financial statements issued for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2011. We do not anticipate adoption to have a material impact on our consolidated financial statements.

In September 2011, the FASB amended Accounting Standards Codification (“ASC”) 350, “Intangibles – Goodwill and Other”. Under the amendment, an entity may assess qualitative factors to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount, including goodwill. If determined to be necessary, the two-step impairment test shall be used to identify potential goodwill impairment and measure the amount of a goodwill impairment loss to be recognized, if any. The amendment is effective for annual and interim goodwill impairment tests performed for fiscal years beginning after December 15, 2011. We do not anticipate adoption of this amendment will have a material impact on our consolidated financial statements.

3. Supplemental Disclosure of Cash Flow Information

The Company paid interest of approximately $61,000 and $36,000 during the three months ended September 30, 2011 and 2010, respectively. The Company also paid federal and state income taxes of approximately $100,000 and $275,000 during the three months ended September 30, 2011 and 2010, respectively.

4. Employee Stock Compensation Plans

The Board of Directors may grant options under the Avatech Solutions, Inc. 2002 Stock Option Plan (the “Plan”) 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. The Plan provided for the granting of either incentive or non-qualified stock options to purchase an aggregate of up to 3,100,000 shares of common stock to eligible employees, officers, and directors of the Company. At the Company’s Annual Shareholder meeting held on November 9, 2011, shareholders approved an amendment to the Plan increasing the aggregate number of shares in the Plan by 3,700,000, or a total of 7,800,000 shares. Stock options generally expire after 10 years. Options generally vest ratably over three or four years, depending on the specific grant award. As of the date of the Merger with Rand Worldwide, all of Avatech’s outstanding stock options became fully vested in accordance with their respective option agreements. For the three months ended September 30, 2011, total stock compensation expense charged against income for this Plan was $41,000. There were no stock options granted during the three months ended September 30, 2011 or 2010.

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 three months ended September 30, 2011 and related information is included in the table below:


	Options			Weighted- Average Exercise Price		Aggregate Intrinsic Value

Outstanding at July 1, 2011		3,328,332		$	0.81
Granted		—			—
Exercised		(73,000	)		0.50
Forfeited		(634,800	)		1.07
Expired		—			—


Outstanding at September 30, 2011		2,620,532		$	0.76	$	149,000


Exercisable at September 30, 2011		827,012		$	0.88	$	36,000


Weighted-average remaining contractual life		4.3 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 September 30, 2011 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		189,947	$	0.41	3.0 years		189,947	$	0.41	3.0 years
0.51 – 0.75		1,883,320		0.70	9.4 years		89,800		0.64	5.7 years
0.76 – 1.00		280,000		0.86	4.8 years		280,000		0.86	4.8 years
1.01 – 3.81		267,265		1.31	4.2 years		267,265		1.31	4.2 years

		2,620,532					827,012

Assuming that no additional share-based payments are granted after September 30, 2011, $584,000 of compensation expense will be recognized in the consolidated statement of operations over a weighted-average period of 3.7 years.

5. Borrowings Under Line of Credit

On December 31, 2010, certain subsidiaries of the Company entered into a new line of credit facility which permits up to $9 million of borrowings limited to 85% of aggregate eligible accounts receivable with PNC Bank, National Association. The interest rate is, at the Company’s option, either (i) the “Eurodollar Rate”, which is calculated by using the LIBOR rate plus an applicable margin ranging from 2.5% to 3.25% or (ii) the bank’s “Alternate Base Rate”, which is calculated by using the base rate of the bank, the federal funds open rate, or the daily LIBOR rate plus an applicable margin ranging from 1.75% to 2.75%. The interest rate as of September 30, 2011 was 5%. The Company had outstanding borrowings from the bank under its

credit line of approximately $3.2 million as of September 30, 2011 and had $3.9 million outstanding as of June 30, 2011. The line expires on December 31, 2012 and is secured by 65% of the stock in one of the Company’s subsidiaries and 100% of the stock of a separate subsidiary.

6. Obligations Under Capital Leases

The Company has incurred various capital lease obligations for computer equipment purchased in prior years. This capital lease obligation totaled $53,000 and $105,000 as of September 30, 2011 and June 30, 2011, respectively.

7. 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.

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 upon audit by the taxing authorities and does not anticipate any adjustments that will result in 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.

8. Earnings (Loss) Per Share

Basic earnings (loss) per common share is computed by dividing net earnings (loss) available to common stockholders by the weighted-average number of common shares outstanding for the period. Diluted earnings (loss) 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. There is no dilutive effect on earnings (loss) per share during loss periods. As of September 30, 2011, 6,242,315 shares of common stock were issuable upon the conversion or exercise of options, warrants and preferred stock. For the three months ended September 30, 2011 and 2010, there were 4,174,448 and 5,947,062 shares of common stock equivalents, respectively, excluded from the computation of diluted earnings (loss) per share because their effect would have been antidilutive.

The following summarizes the computations of basic and diluted earnings (loss) per common share for the three months ended September 30, 2011 and 2010:


	Three Months Ended September 30,
	2011			2010
Numerator for basic and diluted earnings per share:
Net income (loss)	$	402,000		$	(2,171,000	)
Payment and/or accretion of preferred stock dividends		(39,000	)		(398,000	)

Net income (loss) available to common stockholders	$	363,000		$	(2,569,000	)


Weighted average shares used in computing basic net income (loss) per share:		51,921,676			42,701,339
Effect of dilutive securities		216,432			—

Weighted average shares used in computing diluted net income (loss) per share:		52,138,10854			42,701,339

Income (loss) per common share, basic	$	0.01		$	(0.06	)


Income (loss) per common share, diluted	$	0.01		$	(0.06	)

9. Preferred Stock

Convertible Preferred Stock

At September 30, 2011, 1,089,213 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 a business combination that is approved by the Board of Directors and subsequently submitted and approved by a vote of the Company’s stockholders. The terms of the Merger with Rand Worldwide did not trigger any redemption provisions of the Series D shares. 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 September 30, 2011, 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 September 30, 2011, 937 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 a business combination that is approved by the Board of Directors and subsequently submitted and approved by a vote of the Company’s stockholders. The terms of the Merger with Rand Worldwide did not trigger any redemption provisions of the Series E shares. 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 September 30, 2011 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.

10. Segment Information

The Company’s operations include business in North America, Singapore/Malaysia and Australia. 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 September 30, 2011


	North America		Singapore/Malaysia		Australia		Total
Revenue-

Product sales	$	11,297,000	$	781,000	$	1,199,000	$	13,277,000

Service revenue		4,348,000		194,000		260,000		4,802,000

Commission revenue		3,635,000		21,000		209,000		3,865,000


Total revenue		19,280,000		996,000		1,668,000		21,944,000


Cost of revenue-
Cost of product sales		7,870,000		566,000		866,000		9,302,000

Cost of service revenue		2,879,000		122,000		131,000		3,132,000


Total cost of revenue		10,749,000		688,000		997,000		12,434,000

Gross margin		8,531,000		308,000		671,000		9,510,000

Total operating expenses		8,224,000		242,000		448,000		8,914,000


Income from operations	$	307,000	$	66,000	$	223,000	$	596,000

Three Months Ended September 30, 2010


	North America			Singapore/Malaysia		Australia		Total
Revenue-

Product sales	$	8,370,000		$	528,000	$	430,000	$	9,328,000

Service revenue		4,136,000			120,000		239,000		4,495,000

Commission revenue		2,837,000			50,000		112,000		2,999,000


Total revenue		15,343,000			698,000		781,000		16,822,000


Cost of revenue-

Cost of product sales		5,680,000			364,000		319,000		6,363,000

Cost of service revenue		3,045,000			89,000		122,000		3,256,000


Total cost of revenue		8,725,000			453,000		441,000		9,619,000

Gross margin		6,618,000			245,000		340,000		7,203,000

Total operating expenses		8,581,000			138,000		278,000		8,997,000


Income (loss) from operations	$	(1,963,000	)	$	107,000	$	62,000	$	(1,794,000	)

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

The Company is a leading provider of design engineering, data archiving, facilities and data management solutions for the manufacturing, building design, engineering, and total infrastructure markets. The Company also specializes in technical support, training, and consulting services aimed at improving design and documentation efficiencies and the seamless integration of workflow processes. This combination of technology solutions and services enables customers to enhance productivity, profitability, and competitive position.

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 economy;

•

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

•

Acquire 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 training, implementation, consulting services, software development, custom courseware development and technical support 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 the Company 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 Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 605.

The Company also generates commission revenue from the resale of Autodesk software to various customers, a number of which Autodesk considers “major accounts.” Autodesk designates these 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 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 the product 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 incentives from its main supplier based upon the achievement of certain quarterly sales targets and these incentives, when achieved, serve to reduce the cost of product sales. The incentive targets are set annually and while the targets have changed over time in amount and structure, 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 from 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, employee benefits, travel, printed materials 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 expense 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 expense.

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 September 30, 2011 Compared to the Three Months Ended September 30, 2010

The following tables set forth a comparison of the Company’s results of operations for the three-month period ended September 30, 2011 to the three-month period ended September 30, 2010. 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 September 30,
	2011		2010		% change
Revenues:
Product sales	$	13,277,000	$	9,328,000		42.3	%
Service revenue		4,802,000		4,495,000		6.8	%
Commission revenue		3,865,000		2,999,000		28.9	%


Total revenues	$	21,944,000	$	16,822,000		30.4	%

Revenues. Total revenues for the three months ended September 30, 2011 increased by $5,122,000, or 30.4%, when compared to the same period in the prior fiscal year.

Product sales increased $3,949,000, or 42.3% for the three months ended September 30, 2011 when compared to the same period in the prior fiscal year. Approximately $2.4 million of this increase was because the prior fiscal quarter included only a partial quarter of post-Merger operations, while the current fiscal quarter included a full quarter of post-Merger results. In addition, approximately $700,000 of the increase was due to a single sale from the Company’s Australian operations with the remaining increase due to economic improvements in the markets served by the Company.

Service revenues increased $307,000, or 6.8%, for the three months ended September 30, 2011 when compared with the same period in the prior fiscal year. The effect of having a full quarter of post-Merger operations in the current fiscal quarter versus a partial quarter of post-Merger operations in the prior fiscal quarter was an increase in service revenues of $865,000. Service revenues would have decreased approximately $557,000 if the Merger had not taken place, due to decreases in Autodesk-related services of approximately $400,000 and declines in email archiving and data storage services of approximately $155,000. The Company recently made substantial investments in new data archiving infrastructure, greatly enhancing its data archiving service offerings. These new data archiving services, marketed under the trade name of Rand Secure Archive, are expected to improve data archiving service revenues in the near term. Additionally, the Company recently started an initiative targeting strategic accounts and offering enterprise-wide training services for the Autodesk products, leveraging on the proven skills of a team of training sales professionals.

Commission revenues increased $866,000, or 28.9%, for the three months ended September 30, 2011 when compared with the same period in the prior fiscal year. Approximately $776,000 of this increase was because the prior fiscal quarter included only a partial quarter of post-Merger operations, while the current fiscal quarter included a full quarter of post-Merger results.

Cost of Revenues and Gross Margin


	Three Months Ended September 30,
	2011		2010		% change
Cost of revenue:
Cost of product sales	$	9,302,000	$	6,363,000		46.2	%
Cost of service revenue		3,132,000		3,256,000		(3.8	)%

Total cost of revenue	$	12,434,000	$	9,619,000		29.3	%


Gross margin	$	9,510,000	$	7,203,000

Cost of revenue. The total cost of revenue increased $2,815,000, or 29.3%, for the three months ended September 30, 2011 when compared to the same period in the prior fiscal year.

Cost of product sales increased 46.2% during the three months ended September 30, 2011 when compared with the same period in the prior fiscal year, while product revenue increased 42.3%. Product costs increased at a higher rate than product revenues due to the Company earning lower sales rebates based on targets established by the Company’s principal supplier, Autodesk. These sales rebates were applied to the cost of product sales.

Cost of service revenue decreased 3.8%, or $124,000, for the three months ended September 30, 2011 when compared to the same period in the prior fiscal year, while service revenues increased 6.8%. The effect of having a full quarter of post-Merger operations in the current fiscal quarter versus a partial quarter of post-Merger operations in the same quarter the prior fiscal year was a $588,000 increase in cost of services revenue, offset by cost reductions due to having fewer technical staff as well as decreased external costs associated with email archiving and data storage services. Cost of service revenue as a percentage of related revenue decreased to 65.2% during the three months ended September 30, 2011 from 72.4% during the same period in the prior fiscal year for the reasons explained above.

Gross margin. The Company’s overall gross margin percentage of 43.3% for the three months ended September 30, 2011 was higher than the 42.8% gross margin in the same period in the prior fiscal year due primarily to the decreased services costs.

Other Operating Expenses


	Three Months Ended September 30,
	2011		2010		% change
Other operating expenses:
Selling, general and administrative	$	8,518,000	$	8,615,000		(1.1	)%
Depreciation and amortization		396,000		382,000		3.7	%

Total other operating expenses	$	8,914,000	$	8,997,000		(0.9	)%

Selling, General and Administrative Expense. Selling, general and administrative expenses decreased $97,000, or 1.1%, for the three months ended September 30, 2011 when compared to the same period in the prior fiscal year. Selling, general and administrative expense as a percent of total revenues was 38.8% for the three months ended September 30, 2011, a decrease from 51.2% for the same period in the prior fiscal year. The quarter ended September 30, 2010 included $1.7 million in one-time Merger-related costs, and

did not include $1.6 million in expenses from the operations of pre-Merger Avatech, while the quarter ended September 30, 2011 included no Merger-related costs, and was for a full quarter of post-Merger operations, resulting in a net $97,000 decrease in selling, general and administrative expenses.

Depreciation and Amortization. Depreciation and amortization expenses increased $14,000, or 3.7%, for the three months ended September 30, 2011 when compared to the same period in the prior fiscal year. The increase was due primarily to the additional amortization costs associated with the customer list and trade name acquired from Avatech in the Merger.

Other (Expense) Income, net


	Three Months Ended September 30,
	2011			2010			% change
Other expense, net	$	(142,000	)	$	(315,000	)		(54.9	)%

Other (Expense) Income, net. The Company incurred $142,000 in other expense, net, during the three months ended September 30, 2011, compared to $315,000 during the same period in the prior fiscal year. The decrease is due to $165,000 of interest expense incurred on related-party notes payables for the three months ended September 30, 2010 as discussed below.

The pre-Merger Rand Worldwide, Inc. had outstanding term notes totaling approximately $12.6 million held by its majority stockholder. Immediately prior to the Merger, the pre-Merger Rand Worldwide, Inc. completed a recapitalization which had the effect of exchanging common stock for its Series A Redeemable Preferred Stock and accrued dividends thereon, as well as its related-party notes payable, and accrued interest thereon. The pre-Merger Rand Worldwide, Inc. incurred $165,000 of interest expense on these term notes for the three months ended September 30, 2010.

Income Tax Expense


	Three Months Ended September 30,
	2011		2010		% Change
Income tax expense	$	52,000	$	62,000		(16.1	)%

Income Tax Expense. The Company recorded $52,000 of income tax expense during the three months ended September 30, 2011, compared to $62,000 in income tax expense recorded for the same period in the prior fiscal year.

As of September 30, 2011, the Company had U.S. federal net operating loss carryforwards available to reduce future taxable income of approximately $28.7 million a portion of which may be limited as to annual utilization under Internal Revenue Code Section 382. These carryforwards expire between 2011 and 2029. As of September 30, 2011, the Company also had foreign net operating loss carryforwards of approximately $18.2 million available to reduce future taxable income. These carryforwards expire between 2011 and 2029 for some jurisdictions and for other jurisdictions the losses may be carried forward indefinitely.

As of September 30, 2011, the Company had established a valuation allowance of its net deferred tax assets of approximately $15 million in all jurisdictions including the United States, because it believes that it is more likely than not that the tax assets in those jurisdictions will not be realized prior to their expiration.

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 December 31, 2010, the Company entered into a combined line of credit with PNC Bank, National Association by amending the existing line of credit held by Rand Worldwide. The Company’s new line of credit permits up to $9 million of borrowing limited to 85% of aggregate eligible accounts

receivable. The interest rate is, at the Company’s option, either (i) the “Eurodollar Rate”, which is calculated by using the LIBOR rate plus an applicable margin ranging from 2.5% to 3.25% or (ii) the bank’s “Alternate Base Rate”, which is calculated by using the base rate of the bank, the federal funds open rate, or the daily LIBOR rate plus an applicable margin ranging from 1.75% to 2.75%. The interest rate as of September 30, 2011 was 5%. The Company had outstanding borrowings from the bank under its credit line of approximately $3.2 million as of September 30, 2011 and had $3.9 million outstanding as of June 30, 2011. The line expires on December 31, 2012 and is secured by 65% of the stock in one of the Company’s subsidiaries and 100% of the stock of a separate subsidiary.

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 that provides it with credit to finance those purchases.

For the three months ended September 30, 2011, net cash provided by operating activities was $1,099,000, compared with net cash used in operating activities of $435,000 during the three months ended September 30, 2010. The increase in cash provided by operating activities from the three months ended September 30, 2011, compared to the three months ended September 30, 2010 was due mainly to the profitability of the Company, with some offsetting changes such as increased accounts receivable as a result of increased revenues.

The Company’s investing activities consist principally of investments in computer and office equipment. Cash purchases of equipment for the three months ended September 30, 2011 decreased to $131,000 from $207,000 when compared to the three months ended September 30, 2010. The Company also acquired $2,123,000 of cash during the three months ended September 30, 2010 as a result of the Merger.

For the three months ended September 30, 2011, net cash used in financing activities was $776,000. compared to $168,000 during the three months ended September 30, 2010 as a result of making a larger net pay down on the line of credit.

The Company had a working capital surplus of $947,000 as of September 30, 2011.

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, 2010. 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 September 30, 2011:


Twelve months ending September 30:
2012	$	2,380,000
2013		1,907,000
2014		1,594,000
2015		1,184,000
2016		525,000
Thereafter		615,000


Total minimum lease payments	$	8,205,000

Capital Leases

The Company has various computer equipment used in training facilities and by employees throughout its office locations. These capital lease obligations totaled $53,000 as of September 30, 2011 with approximately $28,000 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 April 2015 and depreciation expense on this equipment was approximately $46,000 as of September 30, 2011. Future minimum payments consisted of the following at September 30, 2011:


Twelve months ending September 30:
2012	$	34,000
2013		21,000
2014		5,000
2015		2,000


Total minimum lease payments		62,000
Less:
Taxes		1,000
Imputed interest		8,000

Present value of future minimum lease payments	$	53,000

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 September 30, 2011 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 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: November 14, 2011	By:	/s/ Marc L. Dulude
	Marc L. Dulude
	Chief Executive Officer
	(Principal Executive Officer)

Date: November 14, 2011	By:	/s/ Lawrence Rychlak
	Lawrence Rychlak
	President and Chief Financial Officer
	(Principal Financial and Accounting Officer)

EXHIBIT INDEX


Exhibit		Description

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.

*	Furnished electronically with this report.

Large accelerated filer

Accelerated filer

Non-accelerated filer

¨ (Do not check if a smaller reporting company)

Smaller reporting company