Summary of MTM TECHNOLOGIES, INC.

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations.

The following discussion and analysis of our results of operations and financial condition should be read in conjunction with our audited consolidated financial statements, management's discussion and analysis and notes to the financial statements included in our Annual Report on Form 10-K for the year ended March 31, 2008 and the unaudited condensed consolidated financial statements and related notes included in this Quarterly Report on Form 10-Q.

Introductory Comment-Terminology

Throughout this Form 10-Q, the terms "we", "us", "our" and "Company" refers to MTM Technologies, Inc. ("MTM") and, unless the context indicates otherwise, our subsidiaries on a consolidated basis.

"FirstMark Fund" refers to FirstMark III L.P., "FirstMark Offshore Partners" refers to FirstMark III Offshore Partners, L.P., and collectively with FirstMark Fund, "FirstMark". "Constellation Venture" refers to Constellation Venture Capital II, L.P., "Constellation Offshore" refers to Constellation Venture Capital Offshore II, L.P., "BSC" refers to The BSC Employee Fund VI, L.P., "CVC" refers to the CVC II Partners, LLC, and collectively with Constellation Venture, Constellation Offshore and BSC, "Constellation", and together with FirstMark, the "Investors".

Introductory Comment-Forward-Looking Statements

Statements contained in this Form 10-Q include "forward-looking statements" within the meaning of such term in Section 27A of the Securities Act of 1933 and
Section 21E of the Securities Exchange Act of 1934. Forward-looking statements involve known and unknown risks, uncertainties and other factors which could cause actual financial or operating results, performances or achievements expressed or implied by such forward-looking statements not to occur or be realized. Forward-looking statements made in this Form 10-Q generally are based on our best estimates of future results, performances or achievements, predicated upon current conditions and the most recent results of the companies involved and their respective industries. Forward-looking statements may be identified by the use of forward-looking terminology such as "may", "will", "could", "should", "project", "expect", "believe", "estimate", "anticipate", "intend", "continue", "potential", "opportunity" or similar terms, variations of those terms or the negative of those terms or other variations of those terms or comparable words or expressions. Potential risks and uncertainties include, among other things, such factors as:

º we require access to significant working capital and vendor credit to fund our day-to-day operations;

º we have incurred losses in our last three fiscal years and our losses may continue;

º our dependence on third party licenses and the failure to maintain our status as an authorized reseller/service provider of information technology ("IT") products could have a material adverse effect on our business and operations;

º our failure to comply with the financial and other covenants under our credit facilities agreement and our other debt arrangements could lead to a termination of those agreements and an acceleration of our outstanding debt;

º our ability to raise additional capital, if and as needed;

º the competitive environments within the industries in which we operate;

º general economic conditions in the United States and elsewhere, as well as the economic conditions affecting the industries in which we operate; and

º the other risks detailed in this Form 10-Q and, from time to time, in our other filings with the Securities and Exchange Commission ("SEC").

Readers are urged to carefully review and consider the various disclosures made by us in this Quarterly Report on Form 10-Q and in our other filings with the SEC including the factors discussed in Part I, Item 1A. Risk Factors in our Annual Report on Form 10-K for the year ended March 31, 2008. These reports attempt to advise interested parties of the risks and factors that may affect our business, financial condition and results of operations and prospects. The forward-looking statements made in this Form 10-Q speak only as of the date hereof and we disclaim any obligation to provide updates, revisions or amendments to any forward-looking statements to reflect changes in our expectations or future events.

Overview of Our Business

We are a leading national provider of innovative IT solutions including Access, Unified Communications, Virtualization, and Managed Services. 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 systems, networking, IP telephony, storage, security and data center infrastructure services 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 Stock Market (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.

As of December 31, 2008 the FirstMark and Constellation investment totaled approximately $73 million. We have used these funds to execute a growth strategy, as well as for working capital needs. The Company has executed its growth strategy since July 2004 by completing six strategic acquisitions of providers of advanced technology solutions and products. The most recent of these acquisitions was completed in April 2006. Currently, we are not actively seeking acquisition candidates, but we believe that growth through acquisition may be an important component of our long-term strategy.

The Company sustained net losses for the three and nine months ended December 31, 2008 and during the fiscal years ended March 31, 2008 and 2007. Our decline in performance in fiscal 2009 continues 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. 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 recently have taken significant measures to further reduce headcount, streamline operations 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 and have recently raised another $2.0 million in financing during the fourth quarter of fiscal 2009. This is in addition to recently completing several financing arrangements with the Investors amounting to $6.0 million, securing an additional $3.0 million in financing under the CP/NEBF Credit Agreement, and issuing additional shares of preferred stock raising over $9.0 million in the prior fiscal year alone.

Critical Accounting Policies

Our condensed 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, allowance for doubtful accounts, stock-based compensation, the assessment of recoverability of long-lived assets, and the assessment of recoverability of goodwill and intangible assets.

The Company's critical accounting policies are disclosed in the Company's Annual Report on Form 10-K. There have been no material changes to these policies during the first nine months of fiscal 2009, except as noted below:

Accrual of Unreported Medical Claims

We adopted a self-funded medical insurance plan effective May 1, 2008 covering all enrolled employees with regard to medical, dental, vision and prescription benefits. Beginning in the first quarter of fiscal 2009, we established an estimate of an amount to accrue for medical costs incurred but not yet reported under our self-funded employee medical insurance plans. We estimate the reserve based on an evaluation of past rates of claim payouts and trends in the amount of payouts. The reserve amount requires significant judgment and assumes past patterns are representative of future payment patterns and that we have identified any trends in our claims experience. A significant shift in claim and payment patterns within our medical plans could necessitate significant adjustments to these accruals in future accounting periods. To mitigate a portion of the claim risk, we maintain a stop loss policy for individual and aggregate claims.