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Position

Attiazaz (“Bob”) Din

President and Chief Executive Officer

Javed Latif

Senior Vice President and Chief Financial Officer

Robert A. Mercer

Senior Vice President of Finance and Taxation and Secretary

UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549

Form 10-K/A

Amendment No. 3


þ		ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
		For the Fiscal Year Ended September 30, 2008
OR
o		TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

COMMISSION FILE NUMBER: 000-28052

EN POINTE TECHNOLOGIES, INC.

(Exact name of registrant as specified in its charter)


DELAWARE (State or other jurisdiction of incorporation or organization)		75-2467002 (I.R.S. Employer Identification No.)

18701 S. FIGUEROA STREET, GARDENA, CALIFORNIA 90248
(310) 337-5200

Securities registered pursuant to Section 12(b) of the Act:

Common Stock, par value $0.001 per share Nasdaq Capital Market

Securities registered pursuant to Section 12(g) of the Act:

None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes o No þ

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes o No þ

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes þ No o

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. þ

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):


Large accelerated filer o	Accelerated filer o	Non-accelerated filer o	Smaller reporting company þ

(Do not check if a smaller reporting company)

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

The aggregate market value of the voting stock held by non-affiliates of the Registrant, based upon the closing sales price of the Common Stock as of March 31, 2008, was approximately $13,203,209. The number of outstanding shares of the Registrant’s Common Stock as of December 23, 2008 was 7,182,643.

DOCUMENTS INCORPORATED BY REFERENCE

None.

PART I

THIS ANNUAL REPORT ON FORM 10-K CONTAINS FORWARD-LOOKING STATEMENTS WITHIN THE MEANING OF SECTION 27A OF THE SECURITIES ACT OF 1933 AND SECTION 21E OF THE SECURITIES EXCHANGE ACT OF 1934 AND THE COMPANY INTENDS THAT SUCH FORWARD-LOOKING STATEMENTS BE SUBJECT TO THE SAFE HARBORS CREATED THEREBY. THE FORWARD-LOOKING STATEMENTS RELATE TO FUTURE EVENTS OR THE FUTURE FINANCIAL PERFORMANCE OF THE COMPANY INCLUDING, BUT NOT LIMITED TO, STATEMENTS CONTAINED IN: “ITEM 1. BUSINESS,” “ITEM 1A. RISK FACTORS” AND “ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.” READERS ARE CAUTIONED THAT SUCH STATEMENTS, WHICH MAY BE IDENTIFIED BY WORDS INCLUDING “ANTICIPATES,” “BELIEVES,” “INTENDS,” “ESTIMATES,” “EXPECTS,” AND SIMILAR EXPRESSIONS, ARE ONLY PREDICTIONS OR ESTIMATIONS AND ARE SUBJECT TO KNOWN AND UNKNOWN RISKS AND UNCERTAINTIES. IN EVALUATING SUCH STATEMENTS, READERS SHOULD CONSIDER THE VARIOUS FACTORS IDENTIFIED IN THIS ANNUAL REPORT ON FORM 10-K, INCLUDING MATTERS SET FORTH IN “ITEM 1A. RISK FACTORS” WHICH COULD CAUSE ACTUAL EVENTS, PERFORMANCE OR RESULTS TO DIFFER MATERIALLY FROM THOSE INDICATED BY SUCH STATEMENTS. IN LIGHT OF THE SIGNIFICANT UNCERTAINTIES INHERENT IN THE FORWARD-LOOKING INFORMATION INCLUDED HEREIN, THE INCLUSION OF SUCH INFORMATION SHOULD NOT BE REGARDED AS REPRESENTATION BY THE COMPANY OR ANY OTHER PERSON THAT ITS OBJECTIVES OR PLANS WILL BE ACHIEVED. THE COMPANY DOES NOT UNDERTAKE AND SPECIFICALLY DECLINES ANY OBLIGATION TO UPDATE ANY FORWARD-LOOKING STATEMENTS OR TO PUBLICLY ANNOUNCE THE RESULTS OF ANY REVISIONS TO ANY STATEMENTS TO REFLECT NEW INFORMATION OR FUTURE EVENTS OR DEVELOPMENTS.

References made in this Annual Report on Form 10-K to “En Pointe Technologies,” “En Pointe,” the “Company,” “we,” “us,” or “our” refer to En Pointe Technologies, Inc. and its subsidiaries, En Pointe Technologies Sales, Inc., En Pointe Gov, Inc. (formerly En Pointe Technologies Ventures, Inc.,), The Xyphen Corporation (dba ContentWare), En Pointe Technologies Canada, Inc., Ovex Technologies (Private) Limited, En Pointe Technologies India Pvt. Ltd., En Pointe Europe, Inc. Limited, and its affiliate, Premier BPO, Inc., a variable interest entity and its wholly-owned Chinese subsidiary, Premier BPO Tianjin Co., LTD. En Pointe Technologies and the Building Blocks design are registered trademarks of the Company and are mentioned or referred to in this Annual Report.


ITEM 1.	*BUSINESS*

GENERAL

En Pointe Technologies, Inc. was originally incorporated in Texas on January 25, 1993 and reincorporated in Delaware on February 6, 1996 and serves as a holding company and a provider of administrative services to its subsidiaries. We are a national provider of information technology products (hardware and software) with a customer base consisting primarily of large and medium sized companies and government entities. We also were a value-added information technology services provider until July 2008 when we sold an 80.5% interest in the majority of that business with the result that we now retain a non-controlling equity investment in such services.

We use proprietary and non-proprietary software and systems to drop-ship information technology products to our customers through an electronically linked network of suppliers that include distributors and certain manufacturers in the United States. This software allows us to serve as an electronic clearinghouse of computers and computer related products without many of the risks and costs associated with maintaining significant inventory. We have 11 sales offices in 9 states and maintain virtual offices in various other states which allows us to conduct business throughout the United States.

We provide our customers with cost effective electronic commerce tools that help them to maximize their purchasing power when searching for and acquiring computer equipment and other technology products. One of our available tools, AccessPointe, is a uniquely powerful and flexible Internet procurement system that is electronically linked to the extensive warehousing, purchasing and distribution functions of our suppliers. AccessPointe provides

ease-of-use, real-time accuracy, and the power to control the purchasing process, from paperless requisition creation to line-item detail delivery tracking. The direct links to our suppliers enhance our capacity to provide our customers with automated direct access to an extensive range of products at competitive prices.

BUSINESS MODEL

Our business model originally covered hardware and software fulfillment and value-added services. Hardware fulfillment includes more than just efficient delivery but also pre-deployment services that we perform prior to shipment, including imaging and image management, configurations, asset tagging, inventory management and master packing. The procurement process is vital to hardware fulfillment and we try to make this process as efficient as possible for our customers. Value-added services included ongoing managed services such as management of information technology infrastructure as well as professional services that provide specific information technology solutions for our customers. Software fulfillment includes presales consulting, monitoring license compliance and managing software publishers’ relationships.

In July 2008 we sold an 80.5% interest in our value-added service business, En Pointe Global Services, LLC, or EPGS, to Allied Digital Services Limited, or ADSL. We still own and maintain a 19.5% interest in EPGS. Our chief executive officer serves on its board and is one of the officers of EPGS. EPGS also shares our corporate headquarters facilities with us in Gardena, California, pursuant to a sublease arrangement. The services that we perform are now limited to product related services such as configuration, asset tagging, and pre-deployment to name a few. In addition, our subsidiaries continue to sell and perform business process outsourcing.

The hardware fulfillment business relies on our virtual inventory model that has been developed and enhanced over time, but since our inception in 1993, our core concepts have remained the same. The virtual inventory model’s essential elements are (i) a low cost overhead structure resulting from the automation of many management and operating functions; (ii) effective electronic information systems; and (iii) reduced working capital requirements due to the limited amount of physical inventory that we hold and our allied distributor relationships. Our sophisticated and customized enterprise resource planning system, referred to as SAP, allows us to monitor sales, product returns, inventories, profitability and accounts receivable at the sales representative and customer level. Additionally, we have integrated product purchasing and customer invoicing into our information systems to expedite procurement and billing. AccessPointe, an eBusiness platform, provides us and our customers with up-to-date product information and streamlines the procurement process. The completely integrated eBusiness information technology architecture helps us maintain effective online communication links with our sales representatives, selected suppliers, and many of our customers. AccessPointe is provided free of charge to our customers to better enable them to execute transactions and research their orders online with us.

We continue to focus on cost control and strive to maintain a low-cost overhead structure through the automation of many of our management and operating functions. In fiscal 2003, we introduced another low-cost overhead element to our business model by relocating many of our “back-office” functions to a service provider in Islamabad, Pakistan. Effective October 1, 2006, we continued our cost control focus by acquiring a 70% ownership interest of that service provider in Pakistan, Ovex Technologies (Private) Limited, or Ovex.

The day-to-day customer support function is shared between a centralized staff at headquarters, back-office contract workers in Pakistan, and local account management. This helps us improve field response yet maintains direct access to all back-office functions and senior management. Increased local coverage has fueled efforts to identify new opportunities. We believe that time in front of customers is the top priority for all account managers, account executives, and senior management to build long lasting relationships and identify business solutions for existing and new customers.

Our product sales are conducted from a combination of eleven traditional sales offices as well as from various virtual offices that allow us to do business throughout the United States. We believe in seeking out new markets wherever there is a business case to support the incurring of additional personnel expense or whenever specific account opportunities arise.

We have been and continue to be, since May, 2002, certified as a minority-controlled company by the National Minority Supplier Development Council. The certification is considered valuable because many large buying

organizations, private enterprise accounts and state and local government agencies have supplier diversity initiatives that may require certain purchases to be made from certified minority controlled companies.

An integral component of our business model is our ability to access an extensive inventory of information technology products stocked by our suppliers through our integrated supply chain information systems that are key features of AccessPointe. Additionally, the intelligent purchasing feature of our software allows our purchasing department to place multiple line item orders automatically from multiple sources at the lowest possible price, maximizing the fill rate and increasing the potential profitability on each order.

The data provided by our customized information system allows our sales representatives to design each customer’s orders according to their particular needs. Product can be delivered directly from suppliers to the customer. We simplify the ordering, staging, and delivery process through supply chain management for any size order. Our suppliers perform the configuration tests of loading systems with predefined customer images. The systems are then shipped ready-to-install, saving customers money in downstream deployment costs. Our information system identifies which of our suppliers can supply the desired product at the best price when needed from different products offered from multiple suppliers.

A distinct advantage of our business model is the economy achieved by the conservation of working capital through leveraging our virtual inventory model that engages the extensive warehousing, purchasing, distribution, marketing and information-technology functions of our suppliers. Since inception, we have been an innovator in using the drop shipping capabilities of our suppliers whenever product configuration is not required. Drop shipping avoids the costs and risks associated with maintaining inventory, enabling us to quickly adapt our product offerings to changing market demands. As product proliferation has occurred, we believe that our limited inventory position has given us a competitive advantage with respect to price and availability on a broad range of products. We believe our business model allows us to have the capacity to increase sales with minimal additional capital investment.

The software licensing business employs highly skilled personnel to provide comprehensive solutions to customers needing software solutions. This specialized group provides value to customers in their presales consulting, monitoring license compliance and managing software publishers’ relationships.

Although we have been for several years an authorized Microsoft Large Account Reseller as well as an authorized agent for many other software publishers, we had not fully developed the operational and system capabilities to expand sales opportunities. In early fiscal year 2005, recognizing that need, we began the process of enhancing the capabilities of SAP and AccessPointe to improve upon presales consulting, monitoring license compliance and managing software publishers’ relationships. Upon completion of the software upgrades in June 2005, we now believe that we have a more efficient software selling process that has produced and will continue to produce noticed improvements for our customers’ ordering and maintenance needs. The program provides the following benefits:


	•	maintains software agreements for all major software publishers;

	•	incorporates a dynamic data model that simplifies reporting processes to allow improved identification of customer trends, sales opportunities, and customer milestones;

	•	provides real-time product configuration that reduces time for sales representatives to identify customer requested software products;

	•	restricts the data entry to a structured format that ensures adherence to vendor and publisher rules, thereby avoiding the costly retroactive correction of errors in processing;

	•	manages software agreements to offer customers the ability to purchase software more efficiently by increasing their awareness of software agreement terms, purchasing history, and needs;

	•	identifies software products for compliance with customer software agreements;

	•	allows stricter service level agreements to be met by reducing turnaround time for quotes and orders; and

	•	manages licensing agreements assuring customers are quoted and sold products in accordance with their existing agreements.

EBUSINESS

We offer competitive advantages for our customers through use of modern information technologies, and inventive business processes. By use of our virtual inventories and online procurement and service solutions we leverage technology to enable our business model.

We begin by employing Enterprise Resource Planning, or ERP, technology via an SAP-based system that maintains our operational and financial processes within a structure that provides for flexibility with full executive control and accountability. This system forms the core of our organization and maintains control over every transaction whether with vendors or customers. Reporting, decision making support, inventory control, and logistic management are some of the key functions of our ERP system that have been customized to offer a broad range of services including; order processing from our virtual inventory, customized configuration orders, customer logistic and disposal management, software license management as well as back-office accounting for our professional services.

To make business transactions with us easy and intuitive, we have created our online Internet-based application AccessPointe dedicated toward advancing our e-business by using solutions that provide for integration with each customer’s applications and unique procurement processes. AccessPointe provides customers with a complete life cycle procurement solution that helps put customers in control of their organization’s spending practices and standardizes their information technology selections. AccessPointe does this by providing customer-based approval workflow as well as allowing customers to encourage or enforce ordering for certain products over others. AccessPointe provides the capability for customers to have highly customized views of our product catalog by restricting products they don’t want to order. With AccessPointe, customers can do real-time searches for all products available from En Pointe’s vendors or, in the case of software inquiries, customers can confine their searches to those software products that apply to their specific software license contracts. Transaction history is also available from AccessPointe in customizable reports that can be programmed to generate whenever desired. AccessPointe provides confidence that our customers’ transactions will be secure and private, and can integrate with other information technology online marketplaces.

In addition to our main systems, we have ancillary systems that automate our internal processing of transactions. These tools and application solutions allow us to create custom information technology product and service catalogs for our customers and also provide capabilities to integrate with customer order and payment processes within our distributor network. These solutions are flexible enough to allow us to not only manage content from any number of vendors but to also be able to provide data management services daily to select customers and support custom order integration with customers with complex and unique ordering needs.

PRODUCTS

The majority of our sales are information technology products. We currently make available to our customers an extensive selection of products at what we believe to be a competitive combination of price and availability. We currently offer hundreds of thousands of information technology products from hundreds of manufacturers, including, without limitation, International Business Machines Corporation, or IBM, Hewlett-Packard Company, or HP, Dell Computer Corporation, or Dell, Lenovo, Cisco Systems, Inc., Fujitsu Limited, Apple Inc., 3Com Corporation, Microsoft Corporation, or Microsoft, Toshiba Corporation, Kingston Technology Corporation, Lexmark International, Inc., Sony Corporation, Symantec Corporation, McAfee, Inc., BEA Systems, Inc., Avaya, Inc., VMware, Inc. and NetApp,Inc. We are also one of a limited number of Microsoft Certified Large Account Resellers. We have different levels of certifications on many of these product lines. Products that we offer include desktop and laptop computers, servers, monitors, memory, peripherals and accessories, operating systems, application software, consumables and supplies. In fiscal 2008, products manufactured by HP accounted for approximately 20% of our product sales in terms of revenue compared with 20% and 22% for the two consecutive prior fiscal years.

BUSINESS PROCESS OUTSOURCING

Effective October 1, 2006, we acquired 70% of the capital stock of two privately owned Pakistani companies, Ovex Technologies (Private) Limited and Ovex Pakistan (Private) Limited. Ovex Technologies (Private) Limited

was engaged in providing business process outsourcing, or BPO, services exclusively for the Company’s internal needs as well as for the customers of Premier BPO, Inc., or PBPO, a privately-held corporation that promotes and sells BPO services to U.S. businesses while Ovex Pakistan (Private) Limited provided services for the BPO market in Pakistan.

Subsequently, on July 7, 2007, the two companies were approved for merger by the Pakistan Court effective October 1, 2006. The surviving company in the merger was Ovex Technologies (Private) Limited, or Ovex. Ovex employs approximately 803 people. Since 2003, Ovex has provided us with BPO services for our selling and marketing operations. Commencing with the quarter ended June 30, 2006, Ovex has also assumed the responsibilities for our accounting and finance outsourcing.

With the addition of Ovex to our portfolio, we have continued to recognize the growth opportunities present in BPO services and have committed to its future as a viable segment of our business model. Ovex complements our existing investment in PBPO. PBPO also has a wholly-owned Chinese subsidiary, Premier BPO Tianjin Co., LTD, or PBPOChina, that it formed in fiscal 2007 that provides BPO services in China similar to the services provided by Ovex in Pakistan.

Ovex has an ongoing business relationship with PBPO by virtue of having been the principal provider of BPO services to PBPO’s U.S. customers. In addition, the approximate 30% owners of Ovex collectively own 16% of the outstanding shares of common stock of PBPO, as well as 50% of the outstanding shares of Series A non-voting convertible preferred stock of PBPO and have a representative on its board of directors. We, in turn, own 30% of the outstanding voting shares of PBPO’s common stock, 50% of the outstanding shares of PBPO’s Series A non-voting convertible preferred stock, have a representative on PBPO’s board of directors and consolidate PBPO in our financial reports as a variable interest entity, or VIE, in accordance with Financial Accounting Standards Board Interpretation No. 46.

PBPO shares workspace with Ovex in Islamabad for a nominal fee using contracted Ovex workers and, effective September 2005, entered into a five year cost-plus fixed fee service agreement with Ovex to supply contracted employees and an operating facility in Lahore, Pakistan. In addition, PBPO has agreed to provide certain marketing services for Ovex. The agreements can be terminated with thirty days written notice by PBPO.

COMPETITION

We operate in the highly competitive sales segment of the information technology industry, and compete with a large number and variety of types of resellers of information technology products and services. Our competition also includes hardware and software manufacturers and national computer retailers that market directly to end-users. Many of these companies compete principally on the basis of price and may have lower costs than us, allowing them to offer the same products for less. Others have developed highly specialized practices focusing on specific segments such as security, storage, server consolidation, voice-over-internet protocol, etc. Many of our competitors are of equal size or smaller and sell to regional markets, or are larger, and sell nationally with substantially greater financial, technical, and marketing resources available to them.

Some of our larger competitors are MoreDirect, Inc., CompuCom, Inc., Technology Integration Group, Pomeroy IT Solutions, Inc., CDW Corporation, PC Mall, Inc., Zones, Inc., World Wide Technology, Inc., SoftwareOne PTE Ltd. and Insight Enterprises, Inc. A few of these organizations stock inventory and take advantage of opportunistic seasonal buys which often affords them a pricing advantage. We also partner with service only providers in several areas including dispatch, install, move, add and change support services.

Dell and Gateway, Inc., or Gateway, initially launched the manufacturer “direct” model and were successful in gaining market share. Other manufacturers (e.g. IBM and HP) have adopted a direct model to actively market products directly to customers. Sometimes this is done through an agent referral program by which independent sales agents receive commissions directly from manufacturers. This has had the effect of reducing the role of distributors and resellers, particularly in the enterprise accounts, which is a large percentage of our traditional target market. In order to compensate for this potential loss of business, some distributors are now also adopting sales agent programs as an alternative means of directly securing product orders to end user customers. The “direct”

business model can infringe on some value-added resellers, such as us, by taking a slice of those sales that can be resolved through a single vendor solution.

Our business model offers hardware and software products, attracting mainly enterprise organizations, government and to a lesser extent, mid-market customers. With the sales channel continuing to consolidate, absorbing those companies that combine face-to-face direct selling with web-based models, we believe that our business model will succeed, as it embraces both comprehensive and web-based types of selling methods, allowing us to cater to various customer preferences. We believe that we differentiate ourselves from our competitors through our eBusiness systems and the scalability of our operations to meet our customers’ needs as well as providing a single point of contact for hardware, software, and services that are provided through En Pointe Global Services, LLC.

GETTING PRODUCT TO THE CUSTOMER

The distribution of information technology products requires considerable investment in inventory, production control systems, and the development and maintenance of distribution channels. Resellers who assume these functions incur capital costs associated with the warehousing of products, including the costs of leasing warehouse space, maintaining inventory and tracking systems, and employing personnel to perform all the associated tasks. Furthermore, resellers who stock inventory risk obsolescence costs, which we believe may be significant due to the rapid product innovation that characterizes this market. These overhead and “touch” costs require expenses that we believe more than offset the lower price advantages offered for purchasing at volume discounts and holding for future sale.

Our business model eliminates many overhead and “touch” costs and substantial risks by leveraging the operational strengths of our suppliers, who have developed extensive warehousing, purchasing and distribution functions. As a result, our continuing strategy is to limit our product inventory and the associated capital costs, allowing us to accept lower gross profit margins than many of our competitors.

By relying on the processing strengths of our suppliers, we are able to concentrate on developing our information systems and focus on more customer-oriented activities including researching, specifying, and delivering solutions. After helping a customer select the most appropriate technology, our sales staff use our information systems to determine the best combination of price and availability for a wide variety of information technology products.

Our ability to fill and deliver orders with a high level of speed and accuracy is a key benefit of our business model. Our sophisticated systems, which include all order processing functions, enable us to review, approve, and electronically transmit orders to the proper supplier(s) within minutes of receiving them from customers. Most orders for in-stock product are picked, staged, and drop-shipped directly to the customer from the suppliers within 24 hours of receipt of an order, and on the same business day for orders received by 1 p.m. Pacific Time. We usually electronically obtain order delivery information the day following shipment from our major suppliers. We then use that information to produce an invoice, which is often sent to the customer electronically. The standard delivery, based on product availability, is within two to three business days. Custom configuration usually adds a few more business days to the shipping time.

GETTING PRODUCT FROM THE SUPPLIER

Our staff has the ability to access the current inventory and availability records of our suppliers, so we can quickly determine which supplier can best fill an order at a given price. Furthermore, if any one supplier is unable to fill all of a customer’s requirements, we are generally able to split the order among multiple sources. This increases the same-day fill rate, reduces back orders, and shrinks the time to complete an order. Our suppliers maintain warehouses throughout the country, and their individual stocking levels are updated and readily available through our systems. This allows our staff to determine where the product is available for shipment, better gauging the delivery time to the customer’s door.

We and our suppliers utilize various carriers, including industry giants United Parcel Service, Inc. and Federal Express Corporation, to deliver product. Again taking advantage of a vendor’s particular expertise, we integrate the

carriers’ tracking system facility into our own systems to closely monitor shipments and provide delivery status for our customers. This provides an audit trail for the customer to update order status, by tying the customer purchase order to an En Pointe invoice and a subsequent proof of delivery.

We purchase most of our products from major distributors such as SYNNEX Corporation (“SYNNEX”), Tech Data Corporation (“Tech Data”), and Ingram Micro Inc. (“Ingram Micro”), and directly from large manufacturers such as IBM, HP (including the former Compaq), Dell and Microsoft. These are suppliers who have the requisite system strengths and integration capabilities that enable our automated systems to function efficiently. We have successfully implemented our business strategy due in large part to these system synergies and to our close relationships with our suppliers. Equally significant to the success of our supplier relationships has been the volume of business we generate, as this volume has allowed us to negotiate more favorable terms with our suppliers. See “Item 1A. Risk Factors — We Risk Depending on a Few Distributors and Manufacturers Who Could Compete With Us or Limit Our Access to Their Product Line.”

INTELLECTUAL PROPERTY

Our ability to effectively compete in our market will depend significantly on our ability to protect our intellectual property. We do not have patents on any of our technology, which we believe to be material to our future success. We rely primarily on trade secrets, proprietary knowledge and confidentiality agreements to establish and protect our rights in intellectual property, and to maintain our competitive position. There can be no assurance that others may not independently develop similar or superior intellectual property, gain access to our trade secrets or knowledge, or that any confidentiality agreements between us and our employees will provide meaningful protection for us in the event of any unauthorized use or disclosure of our proprietary information.

SupplyAccess, Inc., a former affiliate of ours, was liquidated in February 2002, and as a result of that liquidation, we acquired the full rights to AccessPointe as well as the intellectual property rights to all of SupplyAccess, Inc’s software, copyrights, trade secrets and other proprietary technology.

We conduct our business under the trademark and service mark “En Pointe Technologies” as well as our logo, “AccessPointe” and other marks. We have been issued registrations for our “En Pointe Technologies” and “Building Blocks” marks in the United States. We do not believe that our operations are dependent upon any of our trademarks or service marks. We also sell products and provide services under various trademarks, service marks, and trade names that are the properties of others. These owners have reserved all rights with respect to their respective trademarks, service marks, and trade names.

SEGMENT INFORMATION

The provisions of SFAS No. 131, “Disclosures about Segments of an Enterprise and Related Information”, require public companies to report financial and descriptive information about their reportable operating segments. We identify reportable segments based on how management internally evaluates separate financial information, business activities and management responsibility. For the year ended September 30, 2008, we operated in four segments, U.S. Sales of Products and Services, Pakistan Business Process Services, China Business Process Services and United Kingdom Sales of Products. See our Consolidated Financial Statements and Notes thereto included elsewhere in this Annual Report on Form 10-K for disclosures of the amounts reported for the different segments. En Pointe Technologies, Inc. and its wholly-owned subsidiaries combined with PBPO, but exclusive of its wholly-owned subsidiary PBPOChina, operate in the U.S. Sales of Products and Services segment, Ovex operates in the Pakistan Business Process Services segment, PBPOChina operates in the China Business Process Services segment and the wholly-owned United Kingdom subsidiary operates in the Sales of Products. In fiscal year 2007 before the United Kingdom subsidiary began operations, we operated in three segments.

In the fiscal year 2006, before we had acquired Ovex and before PBPOChina commenced operations we reported in only one segment.

EMPLOYEES

As of September 30, 2008, En Pointe Technologies, Inc. and its wholly-owned subsidiaries employed approximately 168 employees including approximately 125 in sales, marketing and related support, 1 in warehousing, 21 in information technology and 21 in administration and finance. We believe that our ability to recruit and retain highly skilled technical and other management personnel will be critical to our ability to execute our business model and growth strategy. None of our employees are represented by a labor union or are subject to a collective bargaining agreement. We believe that our relations with our employees are good.

In addition to our U.S. employees, we have foreign employees working for Ovex in Pakistan that provides us with back-office support, provides our affiliate, PBPO, with customer BPO services support, and provides BPO services to customers in Pakistan. As of September 30, 2008 Ovex employed approximately 809 people of which 644 were in support of us and PBPO covering customer support, sales, telemarketing, purchasing, operations, help desk, accounting, and information technology functions, 32 employees were working on behalf of En Pointe Global Services, LLC and 133 employees worked for Ovex.

As of September 30, 2008 PBPO and PBPOChina collectively employed a total of 47 people.


ITEM 1A.	*RISK FACTORS*

This Annual Report on Form 10-K contains forward-looking statements within the meaning of Section 27A of the Securities Exchange Act of 1933 and Section 21E of the Securities Exchange Act of 1934. In light of the important factors that can materially affect results, including but not limited to those set forth in this paragraph and below, the inclusion of forward-looking information herein should not be regarded as a representation by us or any other person that our objectives or plans will be achieved; we may encounter competitive, technological, financial, economic and business challenges making it more difficult than expected to continue to sell our products and services; we may be unable to retain existing key sales, technical and management personnel; there may be other material adverse changes in the information technology industry or the economy, or in our operations or business; and any or all of these factors may affect our ability to continue our current sales rate or may result in lower sales volume than currently experienced.

Certain important factors affecting the forward-looking statements made herein include, but are not limited to:


	•	stagnate sales growth in the last five years;

	•	limited availability of alternative credit facilities;

	•	low margin products business; and

	•	concentration of product sales in several major customers.

Assumptions relating to budgeting, marketing, and other management decisions are subjective in many respects and thus susceptible to interpretations and periodic revisions based on actual experience and business developments, the impact of which may cause us to alter our marketing, capital expenditure or other budgets, which may in turn affect our business, financial position, results of operations and cash flows. The reader is therefore cautioned not to place undue reliance on forward-looking statements contained herein, which speak as of the date of this Annual Report on Form 10-K. We do not undertake and specifically decline any obligation to update any forward-looking statements or to publicly announce the results of any revisions to any statements to reflect new information or future events or developments.

The reader should carefully consider the following risks. In addition, keep in mind that the risks described below are not the only risks faced. The risks described below are only the risks that we currently believe are material to our business. However, additional risks not presently known, or risks that are currently believed to be immaterial, may also impair business operations.

THERE IS A RISK WE COULD LOSE OUR ASSET BASED FINANCING LINE WITHOUT BEING ABLE TO READILY REPLACE IT

Our business requires significant capital to finance accounts receivable and, to a lesser extent, product inventories. In order to obtain necessary working capital, we rely primarily on a line of credit that is collateralized by substantially all of our assets. As a result, the amount of credit available to us may be adversely affected by numerous factors beyond our control, such as delays in collection or deterioration in the quality of our accounts receivable, economic trends in the information technology industry, reduction in interest-free flooring periods provided by various manufacturers and the lending policies of our creditors. Any decrease or material limitation on the amount of capital available to us under our line of credit and other financing arrangements, particularly our interest-free flooring, may limit our ability to fill existing sales orders or expand our sales levels and, therefore, may have a material adverse effect on our business, financial position, results of operations and cash flows. We are dependent on the availability of accounts receivable financing on reasonable terms and at levels that are high relative to our equity base in order to maintain and increase our sales.

Our financing agreement contains various liquidity debt covenants that must be met each quarter. There can be no assurance that we will continue to meet those debt covenants and failure to do so would place us under default and could cause us to lose our financing. There can be no assurance that such financing will continue to be available to us in the future on acceptable terms, as there are a very limited number of asset-based lenders that service our industry. Our inability to have continuous access to such financing at reasonable costs could materially adversely impact our business, financial position, results of operations and cash flows. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Liquidity and Capital Resources.”

THERE IS RISK THAT WE COULD LOSE A LARGE CUSTOMER WITHOUT BEING ABLE TO FIND A READY REPLACEMENT

For fiscal years 2008, 2007 and 2006, no one customer accounted for 10% or more of our total net sales. However, our sales do tend to be concentrated in a relatively few accounts with our top five customers in fiscal years 2008, 2007 and 2006 accounting for an aggregate of 25.8%, 38.9% and 27.1%, respectively, of total net sales and our top twenty-five customers representing an aggregate of 55.0%, 63.8% and 59.7%, respectively, of total net sales.

Our contracts for the provision of products are generally non-exclusive agreements that are terminable by either party upon 30 days’ notice. Either the loss of any large customer, or the failure of any large customer to pay its accounts receivable on a timely basis, or a material reduction in the amount of purchases made by any large customer could have a material adverse effect on our business, financial position, results of operations and cash flows.

OUR ACQUISITION OF A SUBSTANTIAL INTEREST IN A PAKISTANI CORPORATION EXPOSES US TO FOREIGN OPERATIONAL RISKS

With our acquisition of a majority interest in Ovex, a Pakistani corporation, we are exposed to adverse fluctuations in foreign currency exchange rates, limitations on asset transfers, changes in foreign regulations and political turmoil, any or all of which could adversely affect our operating results. In addition, we have relocated many of our “back-office” functions to Ovex including, among others, customer support, purchasing, credit and collections, accounts payable, accounting and other administrative and support functions. We established both voice and data communications between our corporate headquarters in Gardena, California and Pakistan. However, there can be no assurance that these lines of communication will not be interrupted. Should we have interruptions with our communications to Pakistan, any such interruption could have a material adverse impact on our business, financial position, results of operations and cash flows.

OUR LOW MARGINS EXPOSE US TO RISKS FROM MINOR ADVERSITIES

Our overall gross profit percentages for the past three fiscal years 2008, 2007 and 2006 were 14.6%, 12.5%, and 12.2%, respectively, with gross margin from product sales in such fiscal years being 10.3%, 8.4% and 8.3%, respectively. Our gross profit margins on product and software sales are low compared to many other resellers of information technology products and have continued to remain low. Given the significant levels of competition that

characterize the reseller market, as well as the lower gross profit margins that we generate as a result of our reliance on purchasing information technology products from our suppliers, it is unlikely that we will be able to increase product gross profit margins appreciably in our core business of reselling information technology products. Moreover, in order to attract and retain many of our larger customers, we frequently must agree to pricing and maximum allowable mark-downs that serve to limit the profitability of product sales to such customers. Accordingly, to the extent that our sales to such customers increase, our gross profit margins may be reduced, and therefore any future increases in net income will have to be derived from net sales growth, effective expansion into higher margin business segments or a reduction in operating expenses as a percentage of net sales, none of which can be assured. Furthermore, low gross profit margins increase the sensitivity of our business to increases in costs of financing, because financing costs to carry a receivable can be relatively high compared to the low dollar amount of gross profit on the sale underlying the receivable itself. Low gross profit margins also increase the sensitivity of the business to any increase in product returns and bad debt write-offs, as the impact resulting from the inability to collect the full amount for products sold will be relatively high compared to the low amount of gross profit on the sale of such product. Any failure by us to maintain our gross profit margins and sales levels could have a material adverse effect on our business, financial position, results of operations and cash flows.

COSTS AND OTHER FACTORS ASSOCIATED WITH PENDING OR FUTURE LITIGATION COULD MATERIALLY HARM OUR BUSINESS, RESULTS OF OPERATIONS AND FINANCIAL CONDITION.

We at times receive claims and become subject to litigation, including claims related to customers, stockholders, acquisitions, employment, intellectual property, trade secrets and other commercial litigation related to the conduct of our business. Additionally, we may at times institute legal proceedings against third parties to protect our interests. Any litigation in which we are a named party could be costly and time consuming and could divert our management and key personnel from our business operations. In connection with any such litigation, we may be subject to significant damages or equitable remedies relating to the operation of our business. We cannot determine with any certainty the costs or outcome of pending or future litigation. Any such litigation may materially harm our business, results of operations and financial condition.

THERE ARE RISKS IN CONDUCTING OUR DAILY BUSINESS PLANS AND STRATEGY

For our first five full fiscal years since inception, we experienced rapid growth in net sales, employees and branch offices leading to peak net sales of $668.3 million in fiscal year 1999 from a base of $110.0 million in fiscal year 1994. From the peak in net sales in fiscal year 1999 of $668.3 million, net sales contracted reaching a low in net sales of $257.0 million three years later in fiscal year 2002. Since bottoming out in fiscal year 2002, net sales have never fully recovered to those recorded in fiscal year 1999. Instead, there has been a gradual increase in net sales to the $347.1 million reached in fiscal year 2007, which is a compounded annual growth rate of 3.7% over such five-year period and which exceeded our fiscal year 2008 sales by $46.7 million.

The effort to increase net sales or to supplement the loss of net sales with higher margin products has and will continue to challenge our management, operational and financial resources. To execute our growth strategy, we expect to require the addition of new management personnel, including sales personnel, and the development of additional expertise by existing personnel. Our ability to manage effectively will require us to continue to implement and improve our operational, financial and sales systems at both the national and local level, to develop the skills of our managers and supervisors and to hire, train, motivate, retain and effectively manage our employees. There can be no assurance that we will be successful in such an effort, and the failure to do so could materially adversely affect our business, financial position, results of operations and cash flows.

WITH OUR FAST CHANGING INDUSTRY EVOLUTION WE RISK BEING OUTMODED OR EXCLUDED FROM THE DISTRIBUTION CHANNEL

The personal computer industry is undergoing significant change. In addition, a number of alternative cost-effective channels of distribution have developed in the industry, such as the Internet, computer superstores, consumer electronic and office supply superstores, national direct marketers and mass merchants. Computer resellers are consolidating operations and acquiring or merging with other resellers and/or direct marketers to

achieve economies of scale and increased efficiency. The current industry reconfiguration and the trend towards consolidation could cause the industry to become even more competitive, further increase pricing pressures and make it more difficult for us to maintain our operating margins or to increase or maintain the same level of net sales or gross profit. Declining prices, resulting in part from technological changes, may require us to sell a greater number of products to achieve the same level of net sales and gross profit. Such a trend could make it more difficult for us to continue to increase our net sales and earnings growth. In addition, growth in the personal computer market has slowed. If the growth rate of the personal computer market were to further decrease, our business, financial condition and operating results could be adversely affected.

The segment of the information technology industry in which we operate is highly competitive. We compete with a large number and wide variety of resellers and providers of information technology products and services, including:


	•	traditional personal computer retailers,

	•	computer superstores,

	•	consumer electronics and office supply superstores,

	•	mass merchandisers,

	•	corporate resellers,

	•	value-added resellers,

	•	specialty retailers,

	•	distributors,

	•	franchisers,

	•	mail-order and web-order companies,

	•	national computer retailers, and

	•	manufacturers that have their own direct marketing operations to end-users.

Many of these companies compete principally on the basis of price and may have lower costs than us, which allow them to offer the same products at lower prices. Many of our competitors are larger, have substantially greater financial, technical, marketing and other resources than we do. We compete with, among others, CompuCom Systems, Inc., Dell, Gateway, Pomeroy IT Solutions, Inc., CDW Corporation, IBM, HP, Insight Enterprises, Inc., PC Mall, Inc., GTSI Corp., Zones, Inc., PC Connection, Inc., and certain distributors. We expect to face additional competition from new market entrants in the future.

Competitive factors include price, service and support, the variety of products and value-added services offered, and marketing and sales capabilities. While we believe that we compete successfully with respect to most, if not all of these factors, there can be no assurance that we will continue to do so in the future. The information technology industry has come to be characterized by aggressive price-cutting and we expect pricing pressures will continue in the foreseeable future. In addition, the information technology products industry is characterized by abrupt changes in technology and associated inventory and product obsolescence, rapid changes in consumer preferences, short product life cycles and evolving industry standards. We will need to continue to provide competitive prices, superior product selection and quick delivery response time in order to remain competitive. If we were to fail to compete favorably with respect to any of these factors, our business, financial position, results of operations and cash flows would be materially and adversely affected. See “Business — Competition.”

WE RISK DEPENDING ON A FEW DISTRIBUTORS AND MANUFACTURERS WHO COULD COMPETE WITH US OR LIMIT OUR ACCESS TO THEIR PRODUCT LINE

A key element of our past success and future business strategy involves the maintaining of alliances with certain key suppliers of information technology products, including, Tech Data, Microsoft, Ingram Micro, Hewlett Packard, Dell and Synnex. These alliances enable us to make available to our customers a wide selection of products

without subjecting us to many of the costs and risks associated with maintaining large amounts of inventory. Products and services purchased from the top five suppliers, in fiscal years 2008, 2007 and 2006 accounted for 67%, 57% and 67% of our aggregate purchases. Furthermore, we compete with certain suppliers for many of the same customers. Therefore, there can be no assurance that any such allied distributor will not use its position as a key supplier to pressure us from directly competing with them. Substantially all of our contracts with our suppliers are terminable by either party upon 30 days notice or less and several contain minimum purchase volume requirements as a condition to providing discounts to us. The termination or interruption of our relationships with any of the suppliers, modification of the terms or discontinuance of agreements with any of the suppliers, failure to meet minimum purchase volume requirements, or the failure to maintain a good working relationship with any significant new distributor of information technology products could materially adversely affect our business, financial position, results of operations and cash flows. See “Business — Getting Product to the Customer.”

Certain of the products we offer are subject to manufacturer allocations, which limit the number of units of such products available to the suppliers, which in turn may limit the number of units available to us for resale to our customers. Because of these limitations, there can be no assurance that we will be able to offer popular new products or product enhancements to our customers in sufficient quantity or in a timely manner to meet demand. In order to offer the products of most manufacturers, we are required to obtain authorizations from such manufacturers to act as a reseller of such products, which authorizations may be terminated at the discretion of the suppliers. As well, certain manufacturers provide us with substantial incentives in the form of allowances, training, financing, rebates, discounts, credits and cooperative advertising, which incentives directly affect our operating income. There can be no assurance that we will continue to receive such incentives and authorizations in the future and any reduction in these incentives could have a material adverse effect on our business, financial position, results of operations and cash flows. There can also be no assurance that we will be able to obtain or maintain authorizations to offer products, directly or indirectly, from new or existing manufacturers. Termination of our rights to act as a reseller of the products of one or more significant manufacturers or our failure to gain sufficient access to such new products or product enhancements could have a material adverse effect on our business, financial position, results of operations and cash flows.

Evolution of the distribution process in the information technology industry has put pressure on gross profit margins, and has adversely affected a number of distributors of information technology products, including certain suppliers. There can be no assurance that the continuing evolution of the information technology industry will not further adversely affect our distributors. Because our overall business strategy depends on our relationships with our suppliers, our business, financial position, results of operations and cash flows would be materially adversely affected in the event that distributors in general and suppliers in particular continue to suffer adverse consequences due to ongoing changes in the information technology industry. There has been a consolidation trend in the information technology industry, including consolidation among distributors of information technology products. Because our business model is dependent upon the availability of a number of information technology product distributors, any further consolidation would result in fewer distributors available to supply products to us, which could have a material adverse impact on our business, financial position, results of operations and cash flows.

WE HAVE THE RISK OF LOSING OUR SENIOR MANAGEMENT AND OTHER KEY PERSONNEL UPON WHOM WE DEPEND

We believe that our success has been and will continue to be dependent on the services and efforts of our existing senior management and other key personnel. The loss of the services of one or more of any of our existing senior management and other key personnel would have a material adverse effect on our business, financial position, results of operations and cash flows.

Our success and plans for future growth also depend on our ability to attract and retain highly skilled personnel in all areas of our business, including application development and sales. Competition for qualified personnel in the information technology industry is intense, and although we believe that we have thus far been successful in attracting and retaining qualified personnel for our business, the inability to attract and retain qualified personnel in the future could have a material adverse effect upon our business, financial position, results of operations and cash flows.

WE RISK FAILURE TO INTEGRATE ACQUISITIONS AND/OR INVESTMENTS INTO OUR BUSINESS THAT COULD CAUSE FUTURE LOSSES

One element of our growth strategy may include continuing to expand our business through strategic acquisitions and investments in complementary businesses. To date, we have made several such acquisitions and investments.

However, we do not have significant acquisition or investment experience, and there can be no assurance that we will be able to successfully identify suitable acquisition or investment candidates in the future, complete acquisitions or investments, or successfully integrate acquired businesses into our operations. Acquisitions and investments involve numerous risks, including but not limited to:


	•	failure to achieve anticipated operating results,

	•	difficulties in the assimilation of the operations, services, products, vendor agreements, and personnel of the acquired company,

	•	the diversion of management’s attention and other resources from other business concerns,

	•	entry into markets in which we have little or no prior experience, and

	•	the potential loss of key employees, customers, or contracts of the acquired company.

Acquisitions and investments could also conflict with restrictions in our agreements with existing or future lenders, distributors or manufacturers. We are unable to predict whether or when any prospective acquisition or investment candidate will become available or the likelihood that any acquisition or investment will be completed or successfully integrated. Failure to successfully manage potential acquisitions or investments in complementary businesses, or failure of any of our investments that are subject to consolidation, could have a material adverse effect on our business, financial position, results of operations and cash flows.

WE RISK BUSINESS INTERRUPTION FROM OUR DEPENDENCE ON CENTRALIZED OPERATIONS

We believe that our success to date has been, and future results of operations will be, dependent in large part upon our ability to provide prompt and efficient service to our customers. As a result, a substantial disruption of our day-to-day operations could have a material adverse effect upon our business, financial position, results of operations and cash flows. In addition, our success is largely dependent on the accuracy, quality and utilization of the information generated by our information systems, which are primarily based in Gardena, California. Repairs, replacement, relocation or a substantial interruption in these systems or in our telephone or data communications systems, servers or power could have a material adverse effect on our business, financial position, results of operations and cash flows. Although we have business interruption insurance, an uninsurable loss could have a material adverse effect on our business, financial position, results of operations and cash flows. Losses in excess of insurance coverage, an uninsurable loss, or change in freight rates could have a material adverse effect on our business, financial position, results of operations and cash flows.

WITH THE 40% CONCENTRATION OF OWNERSHIP OF OUR STOCK HELD BY A SMALL GROUP OF DIRECTORS, OFFICERS, FAMILY MEMBERS AND AN OUTSIDE PRINCIPAL STOCKHOLDER THERE ARE RISKS THAT THEY CAN EXERT SIGNIFICANT INFLUENCE OVER CORPORATE MATTERS

The directors, executive officers, family members and a significant outside stockholder of En Pointe and their affiliates beneficially own, in the aggregate, approximately 40% of our outstanding common stock as of September 30, 2008. As a result, these stockholders acting together will be able to exert considerable influence over the election of our directors and the outcome of most corporate actions requiring stockholder approval. Additionally, the directors and executive officers have significant influence over the policies and operations of our management and the conduct of our business. Such concentration of ownership may have the effect of delaying, deferring or preventing a change of control of En Pointe and consequently could affect the market price of our common stock.

THERE ARE RISKS THAT OUR QUARTERLY OPERATING RESULTS CAN VARY FROM PAST RESULTS AND BECOME VOLATILE AND UNPREDICTABLE

Our quarterly net sales and operating results may vary significantly as a result of a variety of factors, including:


	•	the demand for information technology products and value-added services;

	•	adoption of internet commerce models;

	•	introduction of new hardware and software technologies;

	•	introduction of new value-added services by us and our competitors;

	•	changes in manufacturers’ prices or price protection policies;

	•	changes in shipping rates;

	•	disruption of warehousing or shipping channels;

	•	changes in the level of operating expenses, including costs from turnover of sales personnel;

	•	the timing of major marketing or other service projects;

	•	product supply shortages;

	•	inventory adjustments;

	•	changes in product mix;

	•	entry into new geographic markets;

	•	the timing and integration of acquisitions or investments;

	•	difficulty in managing margins;

	•	the loss of significant customer contracts;

	•	the necessity to write-off a significant amount of accounts receivable or inventory; and

	•	general competitive and economic conditions.

In addition, a substantial portion of our net sales in each quarter results from orders booked in such quarter. Accordingly, we believe that period-to-period comparisons of our operating results are not necessarily meaningful and should not be relied upon as an indication of future performance.

As has occurred in the past it is possible that in future periods, our operating results may be below the expectations of the public and investors. In such event, the market price of our common stock would likely be materially adversely affected. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”

OUR STOCK TENDS TO BE VOLATILE WITH LARGE PERCENTAGE PRICE MOVES WHICH CAN EXPOSE INVESTORS TO UNANTICIPATED LOSSES

Factors such as the announcement of acquisitions by us or our competitors, quarter-to-quarter variations in our operating results, governmental regulatory action, general trends and market conditions in the information technology industry, as well as other factors, may have a significant impact on the market price of our common stock. Moreover, trading volumes in our common stock has been low historically and could exacerbate price fluctuations in the common stock. Further, the stock market has recently and in other periods experienced extreme price and volume fluctuations, which have particularly affected the market prices of the equity securities of many companies and which have often been unrelated to the operating performance of such companies. These broad market fluctuations may materially and adversely affect the market price of our common stock. See “Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.”

IF OUR INTERNAL CONTROLS PROVE TO BE INEFFECTIVE THAT COULD NEGATIVELY IMPACT INVESTORS’ CONFIDENCE IN OUR COMPANY AND CAUSE OUR STOCK PRICE TO DROP

Changing laws, regulations and standards relating to corporate governance and public disclosure, including the Sarbanes-Oxley Act of 2002 and related regulations implemented by the Securities and Exchange Commission, or SEC, and The Nasdaq Stock Market, or the Nasdaq, are creating uncertainty for public companies, increasing legal and financial compliance costs and making some activities more time consuming. We are undergoing an evaluation of our internal controls systems to allow management to report on, and our independent auditors to attest to, our internal controls. We are also in the process of performing the system and process evaluation and testing (and any necessary remediation) required to comply with the management certification and auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act. As a result, we expect to incur substantial additional expenses and diversion of management’s time. While we anticipate being able to fully implement the requirements relating to internal controls and all other aspects of Section 404 by the extended September 30, 2009 deadline, we cannot be certain as to the timing of completion of our evaluation, testing and remediation actions or the impact of the same on our operations since there is presently no precedent available by which to measure compliance adequacy. If we are not able to implement the requirements of Section 404 in a timely manner or with adequate compliance, we may not be able to accurately report our financial results or prevent fraud and might be subject to sanctions or investigation by regulatory authorities, such as the SEC or the Nasdaq. Any such action could harm our business or investors’ confidence in our company, and could cause our stock price to fall.

IF PREFERRED STOCK IS ISSUED AS AN ANTI-TAKEOVER MEASURE, THERE IS A RISK THAT THE PRICE OF OUR COMMON STOCK COULD BE ADVERSELY AFFECTED

Our Board of Directors has the authority to issue up to 5,000,000 shares of preferred stock and to determine the price, rights, preferences, qualifications, limitations and restrictions, including voting rights, of those shares without any further vote or action by the stockholders. The rights of the holders of common stock will be subject to, and may be adversely affected by, the rights of the holders of any preferred stock that may be issued in the future. The issuance of preferred stock, while providing desirable flexibility in connection with possible acquisitions and other corporate purposes, could have the effect of delaying or preventing a third party from acquiring a majority of our outstanding voting stock. Further, Section 203 of the General Corporation Law of Delaware prohibits us from engaging in certain business combinations with interested stockholders. These provisions may have the effect of delaying or preventing a change in control of En Pointe without action by our stockholders, and therefore could adversely affect the market price of our common stock.

THERE ARE RISKS OUTSIDE OF OUR CONTROL OF UNFAVORABLE ECONOMIC CONDITIONS THAT COULD NEGATIVELY IMPACT OUR REVENUES AND PROFITS

Revenue growth depends on the overall demand for information technology spending. With the unstable status of the economy in the United States that has required, among other fiscal efforts, massive government bail outs to financial institutions, there can be no assurance that there will not be severe consequences to the economy. The downturn in the United States economy may result in cut backs by customers in the purchase of information technology products, postponed or canceled orders, longer sales cycles and lower average selling prices. To the extent that the downturn worsens, we believe demand for our products, and therefore future revenues, could be further adversely impacted.


ITEM 1B.	*UNRESOLVED STAFF COMMENTS*

Not applicable.


ITEM 2.	*PROPERTIES*

On October 29, 2007, we entered into a lease agreement for the our corporate headquarters. The property leased is a two story office building with 29,032 square feet of office space in Carson, California with a Gardena, California postal address. The lease is for a period of seven years commencing on November 1, 2007. The lease

requires monthly payments of $48,483.44 for the first year and contains an annual base rent increase of 3% that is effective for each November 1 for the succeeding six years. There is an option at our election to extend the lease for two additional five year periods. Each of the two option periods to extend the lease contain the same base rent increases of 3% as found in the original lease. The scheduled monthly payments under the lease extension options are at the same original base monthly rate of $48,483.44 plus the sum of the accumulated annual 3% base rent increases to date. The lessee is responsible for the payment of real property taxes on the leased premises as well as for all utilities and services. Under terms of the sale of our service business in July 2008, EPGS, entered into a sublease agreement to sublease the ground floor of the Carson, California corporate headquarters from En Pointe Technologies Sales, Inc. The sublease substantially mirrors the terms of the master lease and requires EPGS to assume 50% of the lease costs. Our corporate headquarters, as well as our leased branch offices listed below, are utilized for our United States sales of products (and formerly for our services business).

During October 2006, we also moved from our 126,000 square foot leased facility in Ontario, California, which was used for configuration, maintenance services, and storage for customer products to a 95,090 square foot subleased facility in Rancho Cucamonga, California. The sublease is for approximately two and a half years, ending on February 15, 2009. Under terms of the sale of our service business in July 2008, certain costs related to the service business, including the Rancho Cucamonga sublease, have been assumed by EPGS.

Currently we operate, in addition to our corporate headquarters sales office, from leased branch offices in the following locations:


	•	Atlanta, Georgia

	•	Addison, Texas

	•	Austin, Texas

	•	Beaverton, Oregon

	•	Bolder, Colorado

	•	Chicago, Illinois

	•	Draper, Utah

	•	San Francisco, California

	•	St. Louis, Missouri

	•	Walpole, Massachusetts

Our VIE affiliate, PBPO, leases approximately 3,000 square feet for its main offices in Clarksville, Tennessee while the PBPOChina subsidiary that performs the China BPO services segment of our business in Tianjin leases 1,272 square feet of office space. Ovex, our 70% owned subsidiary that performs the Pakistan BPO services segment of our business, leases office space in Lahore, Islamabad and Karachi, Pakistan, the square footage leased being 21,000, 26,490 and 3,969 respectively.

Management believes our headquarters and sales offices and those offices of our affiliates are adequate to support our current level of operations.


ITEM 3.	*LEGAL PROCEEDINGS*

In July 2006, Church Gardens, LLC, the current owner of our formerly leased configuration facility in Ontario, California, filed suit against us in San Bernardino County Superior Court, Case No. RCV096518. The complaint centers on certain furniture, fixtures, equipment and leasehold improvements that were sold to, and leased back to us, by plaintiff’s predecessor in 1999 when we still occupied its former leased configuration facility in Ontario, California. The plaintiff alleges, among other things, that a portion of the leased-back property was sold, destroyed, altered, or removed from the premises, and demands both an inspection and an accounting of the property remaining and for the court to provide damages to the extent that we may have breached our contract. We dispute the

allegations and believe that any property loss liability under the lease provisions would be limited to the $75,000 that has already been accrued in our financial statements.

In February 2007, we filed a cross-complaint against Church Gardens LLC. The cross-complaint asks that our $90,720 security deposit be returned with interest. In addition, we claim that Church Gardens LLC engaged in unfair business practices in retaining the security deposit and in not allowing the removal of certain personal property that we owned and that Church Gardens LLC engaged in unlawful conversion of certain property belonging to us. We also asked the court to grant declaratory relief as to our actions in our attempt to preserve the disputed property pending a judicial determination of rights. We also seek recovery of possession of our personal property and injunctive relief preventing the plaintiff from liquidating our property.

In January 2007, US Real Estate Consortium, the predecessor owner of our former leased configuration facility in Ontario, California filed suit against the current owner, Church Gardens LLC, in San Bernardino County Superior Court, Case No. RCV100476.

In March 2007, the current owner, Church Gardens LLC, filed a cross-complaint against us and the former owner, US Real Estate Consortium, among others. On May 31, 2007, we answered and cross-claimed against the current owner, Church Gardens, LLC. On July 25, 2007, Church Gardens, LLC filed its answer to the first amended cross-complaint filed by us. Both cases (RCV096518 and RCV100476) have now been consolidated for all purposes.

There has been substantial discovery, and substantial law and motion practice to date. We are contesting the consolidated case vigorously, and intend to continue doing so.

On July 25, 2008, the Circuit Court for the City of Norfolk, Virginia granted leave to Softchoice Corporation to amend its Complaint in Case Number CL07-5777 against certain of our employees who were former Softchoice Corporation employees to add us and our subsidiary, En Pointe Technologies Sales, Inc., as defendants therein. We have not yet filed a responsive pleading and vigorously dispute liability.

There are various other claims and litigation proceedings in which we are involved in the ordinary course of business. We provide for costs related to contingencies when a loss is probable and the amount is reasonably determinable. While the outcome of the foregoing and other claims and proceedings cannot be predicted with certainty, after consulting with legal counsel, management does not believe that it is reasonably possible that any ongoing or pending litigation will result in an unfavorable outcome or have a material adverse affect on our business, financial position and results of operations or cash flows.


ITEM 4.	*SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS*

Not applicable.

PART II


ITEM 5.	*MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES*

Our common stock, par value $0.001 per share, trades on the NASDAQ Capital Market under the symbol “ENPT.” The following table sets forth, for the periods indicated, the high and low sales prices for our common stock as reported by the NASDAQ Capital Market.


	High		Low

Fiscal 2007
First quarter	$	7.47	$	2.28
Second quarter		7.74		3.04
Third quarter		4.50		3.23
Fourth quarter		5.28		2.55
Fiscal 2008
First quarter		3.48		2.11
Second quarter		2.94		1.71
Third quarter		2.89		1.74
Fourth quarter		2.92		1.54
Fiscal 2009
First quarter (through 12/14/08)	$	2.31	$	0.61

On December 9, 2008, the closing sale price for our common stock on the NASDAQ Capital Market was $0.77 per share. As of December 9, 2008, there were 48 stockholders of record of our common stock.

Dividends

We have never declared or paid any cash dividends on our common stock. We currently anticipate that we will retain all available funds for use in the operation of our business, and do not intend to pay any cash dividends in the foreseeable future. The payment of any future dividends will be at the discretion of our Board of Directors and will depend upon, among other factors, future earnings, operations, capital requirements, our general financial condition and general business conditions. Our ability to pay cash dividends is currently restricted by our credit facility, and the terms of future credit facilities or other agreements may contain similar restrictions.

Repurchases of Securities

During the quarter ended September 30, 2008, we did not repurchase any of our securities.

Stock Performance Graph

Not applicable to smaller reporting company


ITEM 6.	*SELECTED CONSOLIDATED FINANCIAL DATA*

Not applicable to smaller reporting company


ITEM 7.	*MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS*

For an understanding of the significant factors that influenced our performance during the past three fiscal years, this financial discussion should be read in conjunction with the Consolidated Financial Statements and the Notes thereto presented in this Form 10-K.

EXECUTIVE OVERVIEW

We began operations in March of 1993 as a reseller of information technology products. In fiscal year 1999, value-added services were added to our customer offerings. Value-added services represented 13.5%, 13.8% and 14.5% of our net sales in fiscal years 2008, 2007 and 2006, respectively. In July 2008, we sold an 80.5% interest in the services business for approximately $24.0 million in combination of cash and equity of the purchaser. We retained a 19.5% interest in the service business and have set up business referrals and cost sharing arrangements.

In October 2003, we made an initial investment in PBPO, a start up company in Tennessee that sells BPO services that carry higher gross profit margins, similar to those found in our value-added services. Then, in October 2006 we broadened our BPO capability by acquiring a 70% interest in Ovex, a private company in Pakistan that had significant experience and success in providing BPO services for our internal operations as well as for PBPO’s customers.

In our initial operating years from fiscal 1994 to fiscal 1999, with the aid of a robust economy and an information technology market that accommodated our business model, our net sales increased at a compounded annual growth rate of 35.1%. Seasonal trends were never prominent in our business, although March quarters were historically regarded as one of the least promising quarters.

In fiscal 2000 we experienced our first annual net sales decline of 26%, or $173.8 million, from net sales in fiscal 1999 due to a softer information technology market and difficulties in transitioning to a new enterprise resource planning business system. Net sales continued to decline in subsequent fiscal years reaching a low of $257.0 million in fiscal year 2002, or a compounded annual decline rate of 27% for the three years. The last six years have seen a very marginal compounded annual growth rate of 1% in net sales from $289.8 million in fiscal year 2003 to the present $300.5 million in fiscal year 2008.

As a result of the sale of the IT service business in July 2008 and a slow down in product sales, net sales decreased $46.7 million, or 13.4%, in fiscal year 2008 as compared with 2007. However despite the decline in net sales, our gross profit percentage widened sufficiently to allow a marginal increase in gross profits of $0.3 million for fiscal 2008 over the prior fiscal year. But a $10.2 million increase in operating expenses for fiscal 2008 more than eclipsed the marginal $0.3 million increase in gross profits resulting in a $9.9 million increase in our operating loss in fiscal year 2008 over that of fiscal year 2007.

Because our business model involves the resale of information technology products held in inventory by certain distributors, we do not maintain significant amounts of inventory on hand for resale. We typically do not place an order for product purchases from distributors until we have received a customer purchase order. Inventory is then configured, if necessary, and drop-shipped by the distributor to our customer. The distributor typically ships products within 24 hours following receipt of a purchase order and, consequently, substantially all of our product net sales in any quarter result from orders received in that quarter. Although we may maintain a relatively small amount of inventory in stock for resale, most of our inventory represents either merchandise being configured for customers’ orders or products purchased from distributors and shipped, but not yet received and accepted by our customers.

Product revenues are generally recognized upon delivery to the customer. Service revenues are recognized based on contractual hourly rates as services are rendered or upon completion of specified contract services. Net sales consist of product and service revenues, less discounts. Cost of sales includes product and service costs and current and estimated allowances for returns of products that are not accepted by our distributors or manufacturers, less any incentive credits.

CRITICAL ACCOUNTING POLICIES

The preparation of financial statements and related disclosures in conformity with U.S. generally accepted accounting principles and our discussion and analysis of our financial condition and results of operations require us to make judgments, assumptions, and estimates that affect the amounts reported in our consolidated financial statements and accompanying notes. Note 1 of the Notes to Consolidated Financial Statements of this Form 10-K describes the significant accounting policies and methods used in the preparation of our consolidated financial statements. We base our estimates on historical experience and on various other assumptions we believe to be

reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities. We regularly discuss with our audit committee the basis of our estimates. Actual results may differ from these estimates and such differences may be material.

We believe the following critical accounting policies, among others, affect our more significant judgments and estimates used in the preparation of our consolidated financial statements:

Revenue recognition. Our net sales consist primarily of revenue from the sale of hardware, software, peripherals, and, prior to July 2008, IT service and support contracts. We apply the provisions of the SEC Staff Accounting Bulletin (SAB) No. 104, “Revenue Recognition in Financial Statements,” which provides guidance on the recognition, presentation and disclosure of revenue in financial statements filed with the SEC. SAB No. 104 outlines the basic criteria that must be met to recognize revenue and provides guidance for disclosure related to revenue recognition policies. In general, we recognize revenue when (i) persuasive evidence of an arrangement exists, (ii) delivery of products has occurred or services have been rendered, (iii) the sales price charged is fixed or determinable and (iv) collection is reasonably assured.

Under our standard shipping terms, title passes upon delivery to a common carrier but revenue is not recognized until delivery takes place which is generally two to three days later. Product is therefore considered received and accepted by the customer only upon the customer’s receipt of the product from the carrier. Any undelivered product is included in our inventory.

The majority of our sales relate to physical products and are recognized on a gross basis with the selling price to the customer recorded as net sales and the acquisition cost of the product recorded as cost of sales. However, software maintenance contracts, software agency fees, and extended warranties that we sell in which we are not the primary obligor, are recorded on a net basis in accordance with SEC Staff Accounting Bulletin No. 104 “Revenue Recognition” and Emerging Issues Task Force 99-19, “Reporting Revenue Gross as a Principal versus Net as an Agent.” Such net revenues are recognized in full at the time of sale.

We have adopted the provisions of Statement of Position No. 97-2, “Software Revenue Recognition” (SOP 97-2) as amended by SOP No. 98-9, “Modification of SOP 97-2, Software Revenue Recognition with Respect to Certain Transactions” (SOP 98-9) in recognizing revenue from software transactions. Revenue from software license sales is recognized when persuasive evidence of an arrangement exists, delivery of the product has been made, and a fixed fee and collectibility has been determined.

Service revenues are recognized based on contracted hourly rates, as services are rendered or upon completion of specified contracted services and acceptance by the customer. Revenue from customer maintenance support agreements, in which we are not the primary obligor, is reported on a net basis and recognized at the time of the sale. Net sales consist of product and service revenues, less discounts and estimated allowances for sales returns. Cost of sales include the cost of product and services sold and current and estimated allowances for product returns that will not be accepted by our suppliers, less rebates.

Deferred revenues result from prepaid management services and maintenance contracts. Many of our management services are pre-billed quarterly and income is recognized as services are performed. Our maintenance contracts are generally for services that may be performed over a one year period of time. Income is recognized on such contracts ratably over the period of the contract.

Allowance for doubtful accounts. We estimate our allowance for doubtful accounts related to trade receivables by three methods. First, we evaluate specific accounts over 90 days outstanding and apply various levels of risk analysis to these accounts to determine a satisfactory risk category to which given percentages are applied to establish a reserve. Second, a general reserve is established for all other accounts, exclusive of the accounts identified for the specific reserve, in which a percentage is applied that is supportable by historic collection patterns. Third, we review accounts under 90 days for any known risks of collection, for example, bankruptcy proceedings and establish reserves accordingly.

Product returns. We provide an allowance for sales returns, which is based on historical experience. In general, we follow a strict policy of duplicating the terms of our vendor or manufacturers’ product return policies. However, in certain cases we must deviate from this policy in order to satisfy the requirements of certain sales

contracts and/or to satisfy or maintain customer relations. To establish a reserve for returns, outstanding Return Merchandise Authorizations, or RMAs, are reviewed. Those RMAs issued for which the related product has not been returned by the customer are considered future sale reversals and are fully reserved. In addition, an estimate, based on historical return patterns, is provided for probable future RMAs that relate to past sales. Generally, customers return goods to our configuration facility in Rancho Cucamonga, California, where they are processed to return to the vendor.

Vendor returns. After product has been returned to vendors under authenticated RMAs, we review such outstanding receivables from our vendors and establish a reserve on product that will not qualify for refund based on a review of specific vendor receivables.

Rebates and Cooperative Marketing Incentives. We receive incentives from suppliers related to product and volume rebates and cooperative marketing development funds. These incentives are generally under monthly, quarterly, or annual agreements with the suppliers; however, some of these incentives are product driven or are provided to support specific programs established by the supplier. Suppliers generally require that we use their cooperative marketing development funds exclusively for advertising or other marketing programs. As marketing expenses are recognized, these restricted cooperative marketing development funds are recorded as a reduction of the related marketing expense with any excess funding that can not be identified with a specific vendor program reducing cost of goods sold.

As rebates are earned, we record the rebate receivables with a corresponding reduction of cost of goods sold. Any amounts received from suppliers related to cooperative marketing development funds are deferred until earned. Incentive programs are subject to audit as to whether the requirements of the incentives were actually met. We establish reserves to cover any collectibility risks including subsequent supplier audits.

Inventory. Although we employ a virtual inventory model that generally limits our exposure to inventory losses, with certain large customers we contractually obligate ourselves to product availability terms that require maintaining physical inventory, as well as configured product. Such inventory is generally confined to a very limited range of product that applies to specific customers or contracts. Included in our inventory is product that has been returned by customers but is not acceptable as returnable by the vendor. As a result, we expose ourselves to losses from such inventory that requires reserves for losses to be established. We record varying reserves based upon the class of inventory (i.e. held for resale or returned from customers) and age of inventory.

RESULTS OF OPERATIONS

The following table sets forth certain financial data as a percentage of net sales for the periods indicated.


	Fiscal Year Ended September 30,
	2008			2007			2006

Net sales:
Product		86.5	%		86.2	%		85.5	%
Services		13.5			13.8			14.5

Total net sales		100.0			100.0			100.0
Gross profit:
Product		8.9			7.2			7.1
Services		5.7			5.3			5.1

Total gross profit		14.6			12.5			12.2
Selling and marketing expenses		12.5			8.8			8.8
General and administrative expenses		5.0			3.4			3.4

Operating (loss) income		(2.9	)		0.3			0.0
Interest income, net		0.0			0.1			0.1
Other income, net		4.9			0.0			0.0

Income before taxes and other items		2.0			0.4			0.1
Income tax provision (benefit)		0.7			(0.1	)		0.0

Income before other items		1.3			0.5			0.1
Loss from equity investment and non-controlling interest		(0.1	)		0.0			0.1

Net income		1.2	%		0.5	%		0.2	%

COMPARISON OF FISCAL YEARS ENDED SEPTEMBER 30, 2008 AND 2007

NET SALES. Net sales decreased $46.7 million, or 13.4%, to $300.5 million in fiscal year 2008 from $347.1 million in fiscal year 2007. Net sales declines were prevalent in both product and service sales. However, the product sales decline was the more prominent, declining $39.3 million, or 13.1%, to $260.0 million in fiscal year 2008 from $299.3 million in fiscal year 2007. Except for the first quarter of fiscal year 2008, product sales declined each quarter in comparison with like quarters in the prior fiscal year and the decline has become more severe with each passing quarter as witnessed by the fourth quarter of fiscal year 2008 reaching a decline of $25.1 million in net sales as compared to the fourth quarter of the prior fiscal year. The reasons for the decline in product net sales include overall declines in sales to major customers, the loss of a major customer that is expected to make its future purchases directly from manufactures and the loss of customers that were victims of the instability of the banking industry. The impact of the loss of sales to major customers can be noted from the fact that in fiscal year 2007 net product sales to the top ten product customers amounted to $182.0 million, or 60.8% of total product net sales. In fiscal year 2008 the top ten product customers accounted for only $94.0 million, or 36.2% of total product net sales. The trending of less dependence on major customers has brought the benefit that there is presently less risk in sales concentration in that no one customer accounted for 10% or more of total net sales in either fiscal year 2008 or 2007.

Software sales, a major component of product sales, have shown a steady rise in contrast to the decline in other product sales such as laptops, printers, and monitors. Net software sales, including agency commissions, in fiscal year 2008 were $82.2 million, or 27.8% of total net sales. This was an increase of $17.8 million, or 27.7%, in fiscal year 2008 to the $64.4 million of net software sales in fiscal year 2007.

Our affiliates, PBPO and Ovex, did not have a significant impact on total net sales for fiscal year 2008 as combined both companies had net sales of $7.3 million, an increase of $0.6 million over fiscal year 2007.

Service net sales in fiscal year 2008 decreased $7.3 million, or 15.3% over fiscal year 2007. The decrease can be attributed to the sale of the service business that was effective July 1, 2008. The service business that was excluded from our fourth quarter fiscal year 2008 service sales as a result of the sale amounted to $10.0 million. We anticipate that service net sales will continue this negative trend when compared with corresponding prior year quarters for the next three quarters. Our core information technology services, which were substantially sold in July 2008 (excluding income from our partially-owned affiliates that we consolidate that engaged in business process outsourcing services) represented 83.1% of the total $40.5 million in service revenues reported. These services that we perform include installation of fiber optic cable, configuration services, and logistical services related to the life cycle of computer maintenance.

GROSS PROFIT. Gross profits increased $0.3 million, or 0.7%, to $43.8 million in fiscal year 2008 from $43.6 million for fiscal year 2007. The marginal increase in gross profits can be ascribed to product gross profits that increased $1.5 million, or 6.0%, in fiscal year 2008 as compared with fiscal year 2007. Services gross profits declined $1.2 million, or 6.6%, to $17.1 million in fiscal year 2008 from the $18.3 million in fiscal year 2007. The decline in gross profits can be attributed to the volume loss in the fourth quarter from the sale of the service business.

SELLING AND MARKETING EXPENSES. Selling and marketing expenses increased $7.0 million, or 23.0%, to $37.6 million in fiscal year 2008, from $30.6 million in fiscal year 2007. The $7.0 million increase in selling and marketing expenses in fiscal year 2008 was attributable principally from the following increases:$2.8 million increase in bad debt provisions, $1.1 million increase in reserve for sales tax and business tax audit provisions, $1.0 million increase in wage related costs, $0.9 million increase in settlement costs, and $0.8 million in increase in bonuses related to the sale of the service business. The remaining $0.4 million increase in selling and marketing expenses relates to increases in expenses for our affiliates, PBPO, and Ovex. Selling and marketing expenses expressed as a percentage of net sales, increased to 12.5% in fiscal year 2008 from 8.8% in fiscal year 2007.

GENERAL AND ADMINISTRATIVE EXPENSES. General and administrative expenses, or G&A, increased $3.2 million, or 26.8%, to $15.1 million in fiscal year 2008 from $11.9 million in fiscal year 2007. The $3.2 million increase in G&A in fiscal year 2008 was principally from the following increases: $1.8 million increase in bonuses related to the sale of the service business, $1.1 million increase in legal costs, $0.3 million increase in facilities costs. As with selling and marketing expenses, when G&A expenses are expressed as a percentage of net sales, they also increased to 5.0% for fiscal year 2008 from 3.4% in fiscal year 2007.

OPERATING (LOSS) INCOME. We had an operating loss of $8.8 million in fiscal year 2008 compared with $1.1 million of operating income in the prior fiscal year. The increase of $9.9 million in operating loss can be attributed to the $10.2 million increase in operating expenses during fiscal year 2008 less the $0.3 million increase in gross profit, as discussed above.

INTEREST INCOME, NET.

Interest income is net of interest expense and consisted of the following components for the last two fiscal years (in thousands):


	Year Ended September 30,
	2008			2007

Interest income	$	295		$	615
Interest expense		(241	)		(318	)

Net interest income	$	54		$	297

Interest income decreased $0.3 million in fiscal year 2008 to $0.3 million from $0.6 million in fiscal year 2007. Interest income in both fiscal years resulted from our short term cash investments. Interest expense decreased $0.1 million in fiscal year 2008 to $0.2 million from $0.3 million in fiscal year 2007. The decrease was from declines in interest expense from our core information technology operations as well as from our affiliates, PBPO and Ovex. The interest expense in fiscal years 2008 and 2007 from our lending facility with GE Commercial

Distribution Finance Corporation was approximately $17,000 and $11,000 respectively, which is customarily low due to our interest-free borrowing periods allowed under the financing.

OTHER INCOME. Other income increased $14.6 million in fiscal year 2008 to $14.7 million. The major component of the increase in other income was the gain on the sale of the service business of $15.4 million, net of $0.6 million in related costs and $6.0 million reduction related to the value of the consideration paid in stock that has had a decline in value and for the discount for the fact that it is restricted in trading for more than one year. Other losses, including the impairment of an investment of $0.5 million accounted for the remaining offsetting difference of $0.8 million in arriving at the net increase of $14.6 million in other income. An additional $2.0 million of gain from the sale of the service business has been deferred until such time as collection is reasonably assured.

INCOME TAX PROVISION (BENEFIT). Our income tax provision was $2.1 million in fiscal year 2008 compared to a tax benefit of $0.2 million for the prior fiscal year 2007. In the prior fiscal year our current tax liability was offset in full by our net operating loss carryforward, or NOL, which amounted to a tax of $60,000 under the low alternative minimum tax rates. A deferred tax benefit of $263,000 from the reduction of the valuation allowance for deferred tax benefits resulted in a net tax benefit of $203,000 for the fiscal year 2007.

In fiscal year 2008, however, we used the last remaining $0.6 million portion of the federal NOL carry forwards excluding the $4.7 million NOL that arose in fiscal year 2000 that pertained to stock option expense. Under FAS 123(R) we are precluded from recognizing the $4.7 million of federal NOL carry forwards that were a result of excess tax stock option expense over the book amounts as a tax benefit. Instead, the difference of $1.4 million between our fiscal year 2008 tax expense and our federal tax liability has been added to paid-in capital. The federal tax rate applied to the fiscal year 2008 provision was calculated at the 34% tax rate.

Deferred taxes increased $0.6 million to $0.3 million in fiscal year 2008 from a credit of $0.3 million in fiscal year 2007. The increase was a result of the reversal in the amount of valuation allowance credit for net deferred assets that was estimated in the prior year as usable to offset future taxable income.

At September 30, 2008 there were no further federal NOL carry-forwards available.

NON-CONTROLLING INTEREST. Under FIN 46 and other recent changes in consolidation principles, certain minority interests are required to be consolidated. We own an approximate 30% voting interest in PBPO and under FIN 46 are required to consolidate PBPO’s financial results in our financial statements. As a result, we allocate certain losses to the other stockholders of PBPO who collectively own approximately 70% of PBPO. Losses so allocated to the non-controlling interest are not based upon the percentage of ownership, but upon the “at risk” capital of those owners. Once the non-controlling interest at risk capital has been absorbed by losses, all remaining losses are allocated to us, without regard for the amount of capital for which we are “at risk”.

On the other hand, Ovex, which we acquired in fiscal year 2007, is owned 70% by us. Thus, we allocate 30% of the net income of Ovex to its minority shareholders. The allocations to the non-controlling interest (in thousands) for the last two fiscal years was as follows:


	Year Ended September 30,
	2008			2007

Ovex profit	$	(34	)	$	(186	)
PBPO loss		29			118

(Profit)/loss allocations	$	(5	)	$	(68	)

LOSS FROM EQUITY INVESTMENT. On July 2, 2008, we formed En Pointe Global Services, LLC., or EPGS, as a wholly-owned subsidiary for the express purposes of transferring our information technology service business to that entity. On July 9, 2008, we sold an 80.5% interest in EPGS to Allied Digital Services, Limited. and retained a non-controlling interest of 19.5%. Prior to the formation of EPGS the service and product operations were reported by En Pointe Technologies Sales, Inc. and because the service and product business was closely integrated no separate accounting for management to review and evaluate the financial results of each operation was possible.

Because the information technology service business was not previously considered to be a separate segment, no prior period comparative financial information is available. However, contributing significantly to the $0.8 million net loss allocatable to partners below that was not present in the prior fiscal year quarter was the bankruptcy of one of the larger service customers of EPGS and that bankruptcy contributed the majority of the $0.4 million of bad debts that were incurred for the quarter.

The EPGS results of operations for the initial quarter of operations ended September 30, 2008 (in thousands, except percentage ownership) was as follows:


	Quarter
	Ended
	September 30,
	2008

Net service revenues		10,016
Cost of revenues	$	6,226

Total gross profit		3,790
Selling, marketing and administration		4,567

Net loss allocatable to partners		(777	)
En Pointe percentage ownership		19.5	%

Allocated to En Pointe	$	(152	)

NET INCOME. Net income increased $2.0 million to $3.6 million in fiscal year 2008 from $1.6 million in fiscal year 2007. The increase was attributed to a $14.6 million increase in other income arising principally from the sale of the services business.

COMPARISON OF FISCAL YEARS ENDED SEPTEMBER 30, 2007 AND 2006

NET SALES. Net sales increased $23.4 million, or 7.2%, to $347.1 million in fiscal year 2007 from $323.7 million in fiscal year 2006. Our affiliate, PBPO, and subsidiary, Ovex, contributed $3.2 million and $0.9 million, respectively, of the total net sales increase with the remaining $19.3 million increase coming from our core operations of sales and service of information technology products. While no one customer accounted for 10% or more of total net sales in fiscal years 2007 or 2006, the core operation increase in sales resulted, in fact, from large volume customers who purchased increased amounts of our products and services. For example, net sales to our top five customers accounted for 39.6% of total net sales in fiscal year 2007. Net sales to these top five customers increased $53.1 million, or 15.6%, in fiscal year 2007 over the total net sales to these same five customers in the prior fiscal year.

Product net sales in fiscal year 2007 increased $22.6 million, or 8.2%, over fiscal year 2006 and were responsible for most of the increase in the total net sales for the year. Top selling products were software, desktop computers and laptops, respectively, for both fiscal years 2007 and 2006 with software sales being the leading component of the sales mix. Software agency commissions, a part of product sales, increased for the third consecutive year in fiscal year 2007, to $7.0 million, an increase of $1.5 million, or 21.0% over fiscal 2006 commissions.

Service net sales in fiscal year 2007 increased a marginal $0.8 million, or 1.7% over fiscal year 2006. Service net sales from our affiliate, PBPO, and our subsidiary, Ovex, that promotes and performs business process outsourcing services, increased $4.1 million to an aggregate of $6.7 million for fiscal year 2007 and were responsible for all of the increase in our service net sales for fiscal year 2007. Core service net sales in fiscal year 2007, which relate to the service of information technology products and exclude the contributions of PBPO and Ovex, decreased $3.3 million to $41.1 million from $44.4 million in fiscal year 2006. The decline in core service net sales in fiscal year 2007 was in large part from the conclusion of a substantial municipal services work project that was principally completed in fiscal year 2006 as well as from a decrease of services to a major customer that has been adversely affected by the general slow down in the mortgage industry.

GROSS PROFIT. Gross profits increased $3.9 million, or 9.8%, to $43.6 million in fiscal year 2007 from $39.7 million for fiscal year 2006. The bulk of the increase in gross profits, $2.2 million, was from product gross profits, with the remainder $1.7 million attributable to services. Our affiliate, PBPO, and subsidiary, Ovex, contributed approximately one-third of the gross profits increase, or $1.3 million, on aggregate base sales of $2.1 million for fiscal year 2007. Overall gross margins improved to 12.5% in fiscal year 2007 from 12.2% in the prior fiscal year.

Product gross profits increased $2.2 million in fiscal year 2007 to $25.2 million from $23.0 million in the prior fiscal year principally from increased sales volume. Product gross margin percentages improved marginally to 8.4% in fiscal year 2007 from 8.3% in fiscal year 2006. The slight improvement in margins was attributable to the increase in agency commission fees that bear no associated costs. Excluding the agency commissions, product gross margins fell to 6.1% in fiscal year 2007 from 6.3% in the prior fiscal year.

Service gross profits increased $1.7 million in fiscal year 2007 to $18.3 million from $16.6 million in the prior fiscal year. Most of the increase, $1.1 million, was attributable to an increase in service gross profits from our affiliate, PBPO, which operates on an approximate 35% service gross margin. Our core service gross profits, which relates to the service of information technology products and excludes the contributions of PBPO and Ovex, increased marginally $0.4 million in fiscal year 2007 to $16.2 million from $15.8 million in the prior fiscal year. Related core service gross margins increased 3.8% to 39.4% from 35.6%.

While core service net sales were down, core service gross profits and margins were up. Most of the service gross margin improvement can be traced to a major municipal service project that was largely completed in fiscal year 2006 and whose revenues of $4.2 million and service gross margins of 11% adversely impacted fiscal 2006 results causing a 3% drop in overall gross margins for that year.

SELLING AND MARKETING EXPENSES. Selling and marketing expenses increased $2.2 million, or 7.9%, to $30.5 million in fiscal year 2007, from $28.3 million in fiscal year 2006. The $2.2 million increase in selling and marketing expenses in fiscal year 2007 was attributable principally to a $1.9 million increase in wages from the hiring of an additional 48 employees, including 40 for the call center in the U.S. and 8 for the recently formed cabling division, and $0.2 million in increased overtime pay. The remaining $0.1 increase in selling and marketing expenses relates to increases in expenses for our affiliate, PBPO, and subsidiary, Ovex. Selling and marketing expenses expressed as a percentage of net sales, were flat at 8.8% for fiscal years 2007 and 2006.

GENERAL AND ADMINISTRATIVE EXPENSES. General and administrative expenses, or G&A, increased $0.8 million, or 7.0%, to $11.9 million in fiscal year 2007 from $11.1 in fiscal year 2006. All of the increase was attributed to our affiliate, PBPO, and subsidiary, Ovex, with G&A expense for PBPO and Ovex increasing $0.4 million and $0.6 million respectively. The Ovex increase was due to our acquisition of Ovex stock and Ovex’s merger in fiscal year 2007 with no comparable expense in prior fiscal years. The majority of the increase for PBPO relates to increases in salary as well as increases in travel and entertainment related costs. As with selling and marketing expenses, when G&A expenses are expressed as a percentage of net sales, the results are flat at 3.4% for fiscal years 2007 and 2006.

OPERATING INCOME. Operating income increased $0.9 million in fiscal year 2007 to $1.1 million as compared with $0.2 million in the prior fiscal year. The increase of $0.9 million in operating income can be attributed to the increase in gross profit of $3.9 million less the $3.0 million increase in operating expenses during fiscal year 2007 as discussed above.

INTEREST INCOME, NET.

Interest income is net of interest expense and consisted of the following components for the last two fiscal years (in thousands):


	Year Ended September 30,
	2007			2006

Interest income	$	615		$	263
Interest expense		(318	)		(82	)

Net interest income	$	297		$	181

Net interest income increased $0.1 million in fiscal year 2007 to $0.3 million from $0.2 million in fiscal year 2006. Interest income in both fiscal years resulted from our short term cash investments. Interest expense increased $0.2 million in fiscal year 2007 to $0.3 million from $0.1 million in fiscal year 2006. The increase was principally from the acquisition of Ovex in fiscal year 2007 and the related interest expense that was not present in the prior fiscal year. The Ovex interest expense includes $0.1 million related to short-term borrowings under an export finance program. In addition, consolidated interest expense includes approximately $0.1 million related to capitalized leases. The interest expense in fiscal years 2007 and 2006 from our lending facility with GE Commercial Distribution Finance Corporation was approximately $11,000 and $14,000 respectively, which is customarily low due to our interest-free borrowing periods allowed under the financing.

OTHER INCOME. Other income increased a marginal $43,000 in fiscal year 2007 as compared with fiscal year 2006 but was not a significant factor for either fiscal year.

INCOME TAX (BENEFIT) PROVISION. A $203,000 tax benefit was provided for fiscal year 2007, which arose principally from a $400,000 decrease to our valuation allowance for deferred tax benefits related to net operating loss tax benefits. The decrease of $400,000 represented our estimate of the federal and state taxes at a combined rate of 40% that would be incurred in future periods and for which the tax benefit of the deferred net operating loss deduction would be available. Only $263,000 of the $400,000 decrease was available for the reduction of deferred taxes since the balance, $137,000, relates to net operating losses arising from stock options and are considered an adjustment of equity. As a result of the use of the deferred net operating loss of $263,000, future provisions for taxes, for financial statement purposes, will not benefit from the net operating loss deduction and will be computed at the full statutory rates.

We file a consolidated federal income tax return, while for many of our state tax returns we file separately under the name of our wholly-owned sales subsidiary, En Pointe Technologies Sales, Inc., that is qualified to do business in all fifty states. Our consolidated return excludes both PBPO and Ovex because in the case of PBPO, our investment is less than the required 80% to consolidate under federal tax law. In the case of Ovex, we are not taxed on foreign income until it is distributed.

As of September 30, 2007 we had $5.3 million of federal NOL carry-forwards, which at 35% federal tax rates would reduce future federal taxes by $1.9 million. In addition, there are $0.1 million of alternative minimum tax credits carry-forwards that bring the total future benefit to $2.0 million, of which $0.4 million was recognized in fiscal year 2007. The NOL carry-forwards are scheduled to expire at various dates through fiscal year 2023. Section 382 of the Internal Revenue Code could limit the future use of some or all of the NOL carry-forwards if the ownership of our common stock changes by more than 50 percentage points in certain circumstances over a three year testing period.

NON-CONTROLLING INTEREST. Under FIN 46 and other recent changes in consolidation principles, certain minority interests are required to be consolidated. We own an approximate 30% voting interest in PBPO and under FIN 46 are required to consolidate PBPO’s financial results in our financial statements. As a result, we allocate certain losses to the other stockholders of PBPO who collectively own approximately 70% of PBPO. Losses so allocated to the “minority interest” are not based upon the percentage of ownership, but upon the “at risk” capital of those owners. Once the “minority interest at risk” capital has been absorbed by losses, all remaining losses are allocated to us, without regard for the amount of capital that we hold “at risk”.

Ovex, on the other hand, was acquired in fiscal year 2007 and we own a majority 70% interest in that company. Thus, we allocate 30% of the net income of Ovex to its minority shareholders. The allocations to the minority interest (in thousands) for the 2007 and 2006 fiscal years were as follows:


	Year Ended September 30,
	2007			2006

Ovex profit		(186	)		—
PBPO loss	$	118		$	121

(Profit)/loss allocations	$	(68	)	$	121

NET INCOME. Net income increased $1.1 million to $1.6 million in fiscal year 2007 from $0.5 million in fiscal year 2006. The principal reasons for the $1.1 million increase in net income was from the $0.9 million increase in operating income and the $0.2 million decrease in income taxes.

LIQUIDITY AND CAPITAL RESOURCES

Our sources of liquidity include cash and cash equivalents, cash flow from operations, and amounts available under our GE financing facility. These sources have been adequate for day-to-day operations and for capital expenditures. Although we can not provide any assurance, we believe that our remaining cash balances, cash flows from operations, and availability of funds under our financing facility will be sufficient to satisfy our operating requirements for the next fiscal year.

Cash flows from operating activities:

During fiscal 2008, our operating activities provided cash totaling $15.8 million as compared with $15.3 million that was used by operating activities in the prior fiscal year. The lead contributor to the $31.1 million net increase in cash from operating activities in fiscal year 2008 over fiscal year 2007 was the decrease in the change in accounts receivable of $38.2 million.

Our accounts receivable balance, net of allowances for returns and doubtful accounts, at September 30, 2008 and 2007, was $35.4 million and $61.4 million, respectively, a decrease of $26.0 million in fiscal year 2008. The accounts receivable decrease was principally from the decline in net sales resulting from an overall decline in sales and the decline in net sales from the sale of the service business. The marked decline in net accounts receivable, caused an accompanying large decrease in the number of days’ sales outstanding in accounts receivable that shrank from 65 days as of September 30, 2007 to 43 days, as of September 30, 2008.

Inventory, net of allowance, decreased $2.9 million in fiscal year 2008 to $5.9 million from the $8.8 million reported at the end of the prior fiscal year. The majority of the decrease resulted from decreases in physical inventory held in configuration that was purchased for specific customer orders.

Cash flows from investing activities:

Investing activities provided cash totaling $5.2 million for fiscal year 2008, an increase of $10.3 million from the $5.2 million used by investing activities in the prior fiscal year. The $10.3 million increase resulted from principally from the $8.0 million cash proceeds paid at closing in the sale of the 80.5% interest in our service business.

Cash flows from financing activities:

Financing activities used net cash totaling $23.3 million in fiscal 2008, $39.5 million more than the $16.2 million of net cash that was provided in fiscal 2007. Most of the $39.5 million increase in cash used in fiscal 2008 was from the increase of $37.1 million in net repayments under our line of credit. In addition, our subsidiary, Ovex, had an increase in net repayments of $3.3 million under its export loan program.

Credit facility:

As of September 30, 2008, we had approximately $3.7 million in cash and working capital of $10.2 million.

Our two primary information technology sales subsidiaries, En Pointe Technologies Sales, Inc. and En Pointe Gov, Inc., and GE Commercial Distribution Finance Corporation (“GE”) are parties to that certain Business Financing Agreement and that certain Agreement for Wholesale Financing dated June 25, 2004, as amended to date (collectively, the “Agreements”). En Pointe Technologies, Inc. is the guarantor of the obligations under the Agreements. Under the flooring arrangement, the two subsidiaries may purchase and finance information technology products from GE-approved vendors on terms that depend upon certain variable factors. The two subsidiaries may borrow up to 85% of their collective eligible accounts receivable at an interest rate of prime plus 1.0% per annum, subject to a minimum rate of 5.0%. Such purchases from GE-approved vendors have historically been on terms that allow interest-free flooring. The original Agreements provided for a $30.0 million accounts receivable and flooring facility and expired on June 25, 2007, but were extended on June 13, 2007 to July 31, 2007 via a temporary overline letter agreement.

Effective July 25, 2007, the facility was increased to $45.0 million and certain financial covenants were revised pursuant to an addendum executed among the parties. The addendum also provided an extension of the term of the facility for a period of three years from August 1, 2007 and for successive one-year renewal periods thereafter, subject to termination at the end of any such period on at least sixty days prior written notice by any party to the other parties.

Effective September 25, 2007, we entered into an amendment to delete all prior financial covenants contained in the Agreements and to restate them effective for the last day of each calendar quarter as follows (as such terms are defined in the Agreements):


	•	Tangible Net Worth and Subordinated Debt in the combined amount of not less than $12,750,000.

	•	Total Funded Indebtedness to EBITDA for the preceding four fiscal quarters then ended, shall be no more than 3.00:1.00.

We were in compliance with all of our debt covenants as of September 30, 2008.

The GE facility is collateralized by accounts receivable, inventory and substantially all of our other assets. As of September 30, 2008, approximately $7.8 million in borrowings were outstanding under the $45.0 million financing facility. At September 30, 2008, there were additional borrowings available of approximately $23.5 million after taking into consideration the borrowing limitations under the Agreements, as amended to date.

RECENT ACCOUNTING PRONOUNCEMENTS

Accounting pronouncements adopted:

In July 2006, the Financial Accounting Standards Board (“FASB”) issued Interpretation No. 48, Accounting for Uncertainty in Income Taxes (“FIN No. 48”). This interpretation requires recognition and measurement of uncertain income tax positions using a “more-likely-than-not” approach. The provisions of FIN No. 48 are effective for fiscal years beginning after December 15, 2006. We adopted this accounting pronouncement effective October 1, 2007 and the adoption has not had a material effect on our consolidated financial statements.

In February 2006, the FASB issued FAS 155, Accounting for Certain Hybrid Financial Instruments — an Amendment of FASB Statements No. 133 and 140. This statement permits fair value remeasurement for any hybrid financial instrument that contains an embedded derivative that would otherwise have to be accounted for separately. The new statement also requires companies to identify interests in securitized financial assets that are freestanding derivatives or contain embedded derivatives that would have to be accounted for separately, clarifies which interest-and principal-only strips are subject to Statement No. 133, and amends Statement No. 140 to revise the conditions of a qualifying special purpose entity due to the new requirement to identify whether interests in securitized financial assets are freestanding derivatives or contain embedded derivates. This statement is effective for all financial instruments acquired or issued after the beginning of an entity’s first fiscal year that begins after September 15,

2006. We adopted this accounting pronouncement effective October 1, 2006 and the adoption has not had a material effect on our consolidated financial statements.

Accounting pronouncements pending adoption:

In March 2008, the FASB issued Statement of Financial Accounting Standards (“SFAS”) No. 161, Disclosures about Derivative Instruments and Hedging Activities, an amendment of FASB Statement No. 133. SFAS No. 161 requires enhanced disclosures about a company’s derivative and hedging activities. These enhanced disclosures will discuss (a) how and why a company uses derivative instruments, (b) how derivative instruments and related hedged items are accounted for under FASB Statement No. 133 and its related interpretations and (c) how derivative instruments and related hedged items affect a company’s financial position, results of operations and cash flows. SFAS No. 161 is effective for fiscal years beginning on or after November 15, 2008, with earlier adoption allowed. We do not anticipate that the adoption of this accounting pronouncement will have a material effect on our consolidated financial statements.

In February 2008, the FASB issued FASB Staff Position No. 157-2, Effective Date of FASB Statement No. 157, which delays the effective date of SFAS 157 for nonfinancial assets and nonfinancial liabilities to fiscal years beginning after November 15, 2008. Therefore, we will delay application of SFAS 157 to our nonfinancial assets and nonfinancial liabilities. We do not anticipate that the delayed adoption of this accounting pronouncement will have a material effect on our consolidated financial statements.

In December 2007, the FASB issued SFAS No. 141(R), Business Combinations, and SFAS No. 160, Accounting and Reporting of Noncontrolling Interests in Consolidated Financial Statements, an amendment of ARB No. 51. These new standards will significantly change the financial accounting and reporting of business combination transactions and noncontrolling (or minority) interests in consolidated financial statements. SFAS 141(R) is required to be adopted concurrently with SFAS 160 and is effective for business combination transactions for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after December 15, 2008. Early adoption is prohibited. We do not anticipate that the adoption of this accounting pronouncement will have a material effect on our consolidated financial statements.

In February 2007, the FASB issued SFAS No. 159, The Fair Value Option for Financial Assets and Financial Liabilities-Including an Amendment of FASB Statement No. 115, which is effective for us in fiscal years beginning after July 1, 2008. This statement permits an entity to choose to measure many financial instruments and certain other items at fair value at specified election dates. Subsequent unrealized gains and losses on items for which the fair value option has been elected will be reported in earnings. We do not anticipate that the adoption of this accounting pronouncement will have a material effect on our consolidated financial statements.

In September 2006, the FASB issued FAS 157, Fair Value Measurements. This standard defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles, and expands disclosures about fair value measurements. This statement is effective for financial statements issued for fiscal years beginning after November 15, 2007. We do not anticipate that the adoption of this accounting pronouncement will have a material effect on our consolidated financial statements.

OFF-BALANCE SHEET ARRANGEMENTS

We do not currently have any off-balance sheet arrangements within the meaning of Item 303(a)(4) of Regulation S-K.

OBLIGATIONS AND COMMITMENTS

Not applicable to smaller reporting company

Impact of Inflation

We do not believe that inflation has had or will have a material effect on our net sales or results of operations.


ITEM 7A.	*QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK*

Not applicable to smaller reporting company


ITEM 8.	*FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA*

The financial statements are listed in the Index to Financial Statements on page F-1.


ITEM 9.	*CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE*

Not Applicable


ITEM 9A(T).	*CONTROLS AND PROCEDURES*

In our initial Annual Report on Form 10-K for our fiscal year ended September 30, 2008 filed with the SEC on December 29, 2008, or the Initial 10-K, we disclosed that we did not complete the assessment of our internal control over financial reporting as of September 30, 2008 due to our limited resources. As a result, our principal executive officer and principal financial officer were not able to draw a conclusion regarding the effectiveness of our internal control over financial reporting as of September 30, 2008 prior to the filing of the Initial 10-K.

Since then, we have successfully completed the annual assessment of our internal controls over financial reporting for which we were deficient at September 30, 2008. Furthermore the material weaknesses that were noted in our system of internal controls that are discussed below have all been remediated as of April 28, 2009. This was done by devoting substantial time and resources to the completion of the required assessment of our internal controls over financial reporting as well as the subsequent remediation of the material weaknesses that were identified as a result of that assessment. Our efforts involved both those of management as well as our audit committee, which approved and provided oversight in the execution of the assessment. We intend to continue to allocate a sufficient level of resources to ensure that our internal control structure is maintained and functions properly and effectively.

In light of these material weaknesses discussed below, our management performed additional analytics, validation processes and additional post-closing procedures to provide reasonable assurance that our consolidated financial statements presented in the Initial 10-K were prepared in accordance with generally accepted accounting principles and the rules and regulations of the Commission. Based on the results of these analytics, validation processes and additional post-closing procedures, we do not believe that any restatement of, or material adjustment to, our consolidated financial statements as of and for the period ended September 30, 2008 is required.


*(a)*	*Disclosure Controls and Procedures*

We maintain disclosure controls and procedures (as defined in Rules 13a-15(e) and 15(d)-15(e) under the Securities Exchange Act of 1934, as amended, or the Exchange Act, that are designed to ensure that information required to be disclosed in our reports under the Exchange Act, is recorded, processed, summarized and reported within the time periods specified in the Commission’s rules and forms, and that such information is accumulated and communicated to our management, including our principal executive officer and our principal financial officer, as appropriate, to allow timely decisions regarding required disclosure.

Under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, we conducted an evaluation of the effectiveness of our disclosure controls and procedures, as such term is defined under Rule 13a-15(e) of the Exchange Act. Based on this evaluation and solely because we were unable to complete the required management’s report on internal control over financial reporting in the Initial 10-K due to our limited resources at the time, our principal executive officer and principal financial officer concluded that, as of September 30, 2008, the Company’s disclosure controls and procedures were not effective.


*(b)*	*Management’s Report on Internal Control over Financial Reporting*

Our management is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act. Our internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the

preparation of financial statements for external purposes in accordance with generally accepted accounting principles. Our internal control over financial reporting includes those policies and procedures that:


	•	pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of our assets;

	•	provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that our receipts and expenditures are being made only in accordance with authorizations of our management and directors; and

	•	provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on our financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Our management has evaluated the effectiveness of our internal control over financial reporting (ICFR) as of September 30, 2008 based on the control criteria established in a report entitled Internal Control — Integrated Framework, issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on this evaluation, our management concluded that our internal control over financial reporting was not effective as of September 30, 2008 due to the following material weaknesses in internal control over financial reporting:


	•	ineffective controls over changes and access to financial reporting applications and related sub systems.

	•	an insufficient level of information technology personnel to execute general computing controls over our information technology structure.

	•	an insufficient level of experienced personnel to timely execute our annual assessment of internal controls over financial reporting.

A material weakness in internal control over financial reporting is defined by the Public Company Accounting Oversight Board’s Audit Standard No. 5 as being a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the company’s annual or interim financial statements will not be prevented or detected on a timely basis.

This annual report does not include an attestation report of our independent registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by our independent registered public accounting firm pursuant to temporary rules of the Commission that permit us to provide only management’s report in this annual report.


*(c)*	*Changes in Internal Control Over Financial Reporting.*

No change in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) occurred during the fiscal quarter ended September 30, 2008 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.


*(d)*	*Remediation of Material Weaknesses in Internal Control Over Financial Reporting*

As noted in our introductory paragraph, our audit committee and management have evaluated the material weaknesses in our internal control over financial reporting as of September 30, 2008 and have instituted steps for their remediation. We hired additional temporary staff and arranged for the use of financial and IT consultants to provide us with the assistance necessary to remediate the material weaknesses. We developed a remediation plan to address these material weaknesses. The plan consists of the following elements:


	•	Implementation of an application to document and track significant changes to information technology (“IT”) applications and related subsystems.

	•	Issuance and monitoring of policies and procedures for significant IT activities relating to change management, operations and security, including the disposal of IT assets.

	•	Allocation of additional resources to complete documentation, testing and remediation of the general computing controls over our IT structure.

PART III


ITEM 10.	*DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE*

Directors

The Company has seven (7) members serving on its Board of Directors. Directors are elected at each annual stockholders’ meeting to hold office untilthe next annual meeting or until their successors are elected and have qualified. The directors’ names, their ages, the year in which each first became a director of the Company and their principal occupations or employment during at least the past five years are as follows :


			Director
Name	Age		Since		Position

Mansoor S. Shah(1)(2)(3)		60		2003	Chairman of the Board
Attiazaz (“Bob”) Din		56		1993	Director, President and Chief Executive Officer
Naureen Din		54		1993	Director
Zubair Ahmed(1)		56		1994	Director
Mark Briggs		52		1998	Director
Edward O. Hunter(2)(3)		61		2003	Director
Timothy J. Lilligren(1)(2)(3)		55		2003	Director


(1)		Member of Nominating Committee.

(2)		Member of Audit Committee.

(3)		Member of Compensation Committee.

MANSOOR S. SHAH has been a director of the Company since December 2003. Since March 2006, Dr. Shah has served as the Chairman of the Board. Dr. Shah is a full-time practicing physician. Since 1978, Dr. Shah has been President of the Lakewood Primary Care Medical Group where he is responsible for managing and coordinating the medical care of approximately 10,000 patients annually in four Southern California regional hospitals. In addition, in 1996, Dr. Shah was appointed Chairman and Chief Executive Officer of Lakewood Health Plan, Inc., an individual physicians’ association (“IPA”) with a membership of 650 physicians, where he is responsible for the overall management and profitability of the IPA.

ATTIAZAZ (“BOB”) DIN is a founder of the Company and has served in various capacities with the Company since its inception in January 1993. Mr. Din has served as a director since April 1994, as the Chairman of the Board from January 1996 to March 2006 and as Chief Executive Officer of the Company since January 1996, and as President since March 2002. Mr. Din also previously served as the Company’s President from April 1994 to September 1997 and from January 1999 to May 2000. Prior to founding the Company, from November 1985 to January 1993, Mr. Din served as Chairman of the Board of Directors, President and Chief Executive Officer of InfoSystems Computer Center, a Southern California-based reseller of computer products. Mr. Din currently serves on the Boards of Directors of En Pointe Technologies Sales, Inc., En Pointe Technologies Canada, Inc., The Xyphen Corporation, En Pointe Gov, Inc. (formerly En Pointe Ventures, Inc.), all wholly-owned subsidiaries of the Company, and Premier BPO, Inc. (formerly En Pointe Global Services, Inc.), a consolidated affiliate of the Company. Mr. Din also serves on the Board of Director of California Republic Bank and is a member of its Compensation Committee. Pursuant to the terms of Mr. Din’s employment agreement, upon the request of Mr. Din, the Company is obligated to include him as a management nominee for election to the Board of Directors during the term of such agreement and for a period of five (5) years thereafter (See “Employment Agreements”).

NAUREEN DIN is a founder of the Company and currently serves as a director of the Company. Mrs. Din has served as a director since January 1993. Mrs. Din previously served as Secretary from the Company’s inception in January 1993 to March 2001, as President from the Company’s inception to April 1994, as Chief Executive Officer from the Company’s inception until January 1996 and as Chief Financial Officer from the Company’s inception until October 1995. Mrs. Din also serves as a director on the Board of Development in Literacy, a non-profit organization.

ZUBAIR AHMED has been a director of the Company since April 1994. Mr. Ahmed previously served as an Executive Vice President of the Company from April 1994 to December 1995 and as Director of Business Development of the Company from April 1994 to May 1996. From January 1989 to April 1993, Mr. Ahmed served as the General Manager of Inter Equipment Establishment, a seller of heavy equipment. From May 1996 to the present, Mr. Ahmed has been an independent investor.

MARK R. BRIGGS has been a director of the Company since March 1998. Since October 2003, Mr. Briggs has served as the Chairman and Chief Executive Officer of Premier BPO, Inc. (formerly En Pointe Global Services, Inc.), a consolidated affiliate of the Company. From January 1997 to July 2003, Mr. Briggs was the President and Chief Executive Officer of ClientLogic Corporation (formerly Softbank Services Group), a leading outsourcer to the digital marketplace.

EDWARD O. HUNTER has been a director of the Company since August 2003. Since December 2006, Mr. Hunter has served as a director of Ovex Technologies (Private) Limited which is a 70% owned subsidiary of the Company and the surviving company to the merger with Ovex Pakistan (Private) Limited, that was effective on October 1, 2006. Since March 2002, Mr. Hunter has been an attorney of counsel to Robinson & Robinson, LLP, a business transactional and litigation law firm. From July 2000 to March 2002, Mr. Hunter maintained a private law practice and was Vice President and General Counsel for an international telecommunications joint venture during its start-up development phase. Prior to that, for an approximate nine year period, Mr. Hunter practiced law with LeBoeuf, Lamb, Greene & MacRae, LLP, a large multinational law firm, with emphasis on clients in heavy manufacturing, importation and national distribution. Mr. Hunter also serves as a director for a publicly-held corporation, International Stem Cell Corporation, an early-stage stem cell therapeutics company based in Oceanside, California.

TIMOTHY J. LILLIGREN has been a director of the Company since December 2003. Since December 2006, Mr. Lilligren has also served as a director of En Pointe Technologies India Pvt. Ltd., a wholly-owned subsidiary of the Company. Mr. Lilligren is a practicing CPA, with offices in Manhattan Beach, California. Since 1984 he has conducted his practice as a sole practitioner, offering his clients audit and tax services in a variety of industries. Mr. Lilligren has served on the boards of local non-profit organizations in various capacities including Treasurer. In addition to his practice, Mr. Lilligren is active in Manhattan Beachpolitics and is currently serving as the City Treasurer with responsibility for a portfolio approximating $50 million. In the past, from 1988 through 2001, Mr. Lilligren served as City Clerk, City Councilman, Mayor, and a member of the City Finance Committee of Manhattan Beach.

Executive Officers

The Company has three (3) executive officers as follows, each of whom serves at the discretion of the Board of Directors:

A biographical summary regarding Mr. Attiazaz (“Bob”) Din is set forth above. Biographical information with respect to the Company’s other executive officers is set forth below:

JAVED LATIF rejoined the Company as Senior Vice President of Operations in August 2002 and was appointed Chief Financial Officer in February 2004. Prior to that time, he served as a consultant to the Company from August 2001 until August 2002. From September 2000 until August 2001, Mr. Latif served as the Controller for SupplyAccess, Inc., a former affiliate of the Company. From January 1999 through June 2000, Mr. Latif served as Executive Vice President and Chief Financial Officer of the Company. Prior to assuming the Chief Financial Officer duties in January 1999, Mr. Latif was Executive Vice President of the Company from May 1994 to January 1999.

ROBERT A. MERCER has served as Senior Vice President of Finance and Taxation since April 1998. From December 1995 to April 1998, Mr. Mercer served as the Company’s Chief Financial Officer. Since May 2001,

Mr. Mercer has also served as the Company’s Secretary, having previously served as its Assistant Secretary since April 1998.

Family Relationships

Bob Din and Naureen Din are husband and wife. Javed Latif, Chief Financial Officer and Senior Vice President, is the brother-in-law of Bob Din. There are no other family relationships among any of the directors or executive officers of the Company.

Corporate Governance

Independent Director Determination

The Board of Directors has determined that, except for Bob and Naureen Din all of the members of the Board are “independent directors” within the meaning of Rule 4200 of the NASDAQ Marketplace Rules. With respect to the Board of Directors’ determination that Mark Briggs is an “independent director,” in making its determination the Board of Directors also considered that Mr. Briggs serves as the Chairman, Chief Executive Officer and is a significant stockholder of Premier BPO, Inc., a variable interest entity that is consolidated with the Company’s financials. Neither Mr. Din or Mrs. Din nor Mr. Briggs serves on the Audit Committee, the Compensation Committee or the Nominating Committee.

Board Committees and Meetings

The Board of Directors of the Company held five (5) meetings and otherwise acted by written consent during the fiscal year ended September 30, 2008. Each incumbent director attended at least seventy-five percent (75%) of the aggregate of the number of meetings of the Board of Directors and the committees upon which he or she served, except for Naureen Din, Mark Briggs and Zubair Ahmed. The Company does not currently have a specific policy regarding director attendance at annual stockholder meetings. However, directors are strongly encouraged to attend annual stockholder meetings. Six of the seven members of the Board of Directors attended the 2008 Annual Meeting of Stockholders.

Director Education

Members of the Board of Directors are encouraged to attend continuing education programs regarding directorships and issues related thereto on a regular basis.

Code of Ethics

The Company has adopted a code of ethics that is applicable to, among others, its principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions, and other designated officers and employees. The Company has posted such code on its corporate website at http://www.enpointe.com. Any amendment or waiver to the Company’s code of ethics that applies to its directors or executive officers will be posted on its website or in a report filed with the Securities and Exchange Commission (the “SEC”) on Form 8-K.

Audit Committee and Audit Committee Financial Expert

The Company’s Audit Committee is composed entirely of directors who are “independent” as defined in the NASDAQ listing standards. The Company’s Audit Committee for fiscal year 2008 was composed of Messrs. Lilligren, Shah and Hunter. Mr. Lilligren served as the Chairman of the Audit Committee. Assuming the election of management’s nominees to the Board of Directors at the Company’s 2009 Annual Meeting of Stockholders, the Audit Committee for fiscal year 2009 shall consist of Messrs. Lilligren, Shah and Hunter. The Board of Directors has determined that each of Messrs. Lilligren and Shah qualifies as a “financial expert” as that term is used in the rules and regulations of the SEC.

SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

Section 16(a) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), requires the Company’s directors, officers and any persons holding ten percent (10%) or more of the Company’s common stock, to file initial reports of ownership and reports of changes in ownership with the SEC. Such filing persons or entities are required by SEC regulations to furnish the Company with copies of all Section 16(a) forms that they file.

Based solely upon its review of the copies of Forms 3, 4 and 5 and amendments thereto furnished to the Company, or written representations that no other reports were required, the Company believes that all filing requirements under Section 16(a) of the Exchange Act applicable to its directors, officers and any persons holding ten percent (10%) or more of the Company’s common stock, were made with respect to the Company’s fiscal year ended September 30, 2008.


ITEM 11.	*EXECUTIVE COMPENSATION*

COMPENSATION DISCUSSION AND ANALYSIS

Compensation Overview

The Company’s executive compensation program is overseen by the Compensation Committee of the Company’s Board of Directors. The basic responsibility of the Committee is to review the performance of the officers and key employees toward achieving the Company’s strategic goals and to help ensure that the Company is able to attract and retain people who can lead the Company to achieve those goals. One of the Company’s primary strategic goals is to improve stockholder value while meeting its objectives for customer satisfaction, improved sales and financial performance, sound corporate governance and competitive advantage. The Company’s current emphases on controlling costs and improving profit margins on a consistent basis are also important factors which affect the Company’s compensation decisions. The Committee’s goal is to work with management to balance the Company’s financial goals and circumstances with the need to attract, motivate and retain the fully qualified and capable people the Company needs to meet and surpass its customers’ and stockholders’ expectations in the highly-competitive information technology industry.

Compensation Philosophy and Objectives

The core of the Company’s executive compensation philosophy is to pay for performance. To that end, incentive bonus targets are set each year to reward excellent executive performance based upon the achievement of specific quarterly profit objectives by business segment and the Company’s overall profitability. If the Company does not record a net overall profit for a given quarter, personal and segment incentives are not payable, thus stimulating all executives to assume broad responsibility for the Company’s overall financial welfare and performance.

The Committee’s guiding principles are as follows:


	•	Work with management to provide a compensation program that recognizes individual contributions as well as the Company’s overall business results;

	•	Provide reasonable levels of total compensation which will enable the Company to attract and retain qualified and capable executive talent within its industry while also considering the Company’s current goals of controlling costs and effecting consistent improvements in its overall financial condition;

	•	Motivate executive officers to deliver optimum individual and departmental performance;

	•	Develop and reward a leadership team that is capable of successfully operating and growing an increasingly competitive and complex business in a rapidly changing industry; and

	•	Ensure that executive compensation-related disclosures are made to the public on a timely basis.

Role of the Compensation Committee

The Compensation Committee sets and approves the Chief Executive Officer’s total compensation within the parameters of the Chief Executive’s employment agreement, as modified from time to time by mutual agreement. The compensation of all other executive officers is recommended by the Chief Executive Officer and, after review and analysis, approved by the Compensation Committee. The Compensation Committee met five (5) times during fiscal 2008. The specifics of the responsibilities of the Compensation Committee are set forth in the Compensation Committee Charter, which was reviewed and approved by the Company’s Board of Directors on September 30, 2005. Under that Charter, the key responsibilities of the Compensation Committee include:


	•	Review and approve compensation packages for new executives and, as needed, termination packages for departing officers or other executives.


	•	Review and, as deemed necessary or desirable, oversee the administration of the Company’s 1996 Stock Incentive Plan and Employee Stock Purchase Plan, both of which expired in 2006 by their own terms (and which to date have not be renewed or replaced).

	•	Assist the Board of Directors and management in developing and evaluating potential candidates for executive positions. Lead the Board of Directors in its succession-planning initiatives for the Chief Executive Officer and other senior officers.

	•	Oversee preparation of a report on executive compensation as required for inclusion in the Company’s annual proxy statement.

Role of Management in the Compensation Determination Process

The Company’s senior management team, primarily the Chief Executive Officer and the Chief Financial Officer, support the Committee in the executive compensation decision-making process. At the request of the Compensation Committee, the Chief Executive Officer presents his performance assessment and recommendations to the Committee regarding base salaries, incentive targets and profitability ranges, incentive plan structure and other compensation-related matters of the Company’s executives.

However, the Chief Executive Officer and other management personnel typically do not attend Compensation Committee meetings, nor do they participate in the Committee’s deliberations.

Role of Compensation Consultant

The Compensation Committee has decided not to utilize the services of a paid compensation consultant after conducting interviews and concluding that such a consultant would provide insufficient value for the cost thereof, given the Company’s current profit margins. Instead, the Committee has from time to time obtained competitive compensation data from public and private sources and used them to evaluate the competitiveness of the Company’s executive compensation plans. The Committee plans to continue this cost-effective approach for the foreseeable future, rather than incurring the costs of a paid consultant. However, the Committee may revisit this topic at appropriate intervals in the future as the Company’s needs or circumstances may change.

Total Compensation for Executive Officers

The compensation packages offered to the Company’s executive officers are comprised of one or more of the following elements:


	•	Base salary;

	•	Quarterly and annual cash bonus incentives; and

	•	Long term equity -based incentive compensation

The Company does not have any formal policies which dictate the amount to be paid with respect to each element, nor does it have any policies which dictate the relative proportion of the various elements. The Company also does not have any formal policies for allocating between cash and non-cash compensation or short-term and long-term compensation. Instead, the Company relies on the judgment of the Compensation Committee and input and feedback from the management team, including in particular the Chief Executive Officer and the Chief Financial Officer. The Committee has no plans to adopt any such formulas, ratios or other such targets that might artificially dilute the Company’s effectiveness in achieving its overall net-profit objectives. In fact, all of the Company’s compensation policy decisions are made in the context of its current financial position and subordinated to the Company’s ability to achieve overall profitability on an annual basis as a primary consideration. Each of the compensation components is described in more detail below.

Base Salary

The Company provides executive officers and other employees with base salary to compensate them for services rendered during the fiscal year. The purpose of base salary is to reward effective fulfillment of the assigned job responsibilities, and to reflect the position’s relative value to the Company and competitiveness of the executive job market. Base salaries for executive officers are determined based on the nature and responsibility of the position, salary norms (if any) for comparable positions, the expertise and effectiveness of the individual executive, and the competitiveness of the market for the executive officer’s services.

The Company has successfully held most base salaries at the low end of the competitive range in order to reduce its overall cost structure and to achieve systematic improvement in the financial performance of the business since early 2003, without incurring a large turnover in executive talent and leadership. In this pay-for-performance process, the Company has placed increasing emphasis on profit-based compensation payments for each executive officer, as well as for members of the Company’s Board of Directors.

Any so-called “merit increases” for the Company’s executive officers are subject to the same budgetary constraints as apply to all other employees and operating departments. Executive officer salaries are evaluated as part of the Company’s annual review process and may be adjusted where justified in the context of the Company’s current focus on net profitability and controlling expenses. The base salary of the Chief Executive Officer is defined and approved by the Compensation Committee within the parameters of the existing employment agreement. The base salary of all other executive officers is recommended by the Chief Executive Officer and approved by the Compensation Committee.

Quarterly and Annual Cash Bonus Incentives

The Company’s policy is to make a substantial portion of each executive’s compensation contingent upon the Company’s basic financial performance as well as upon his or her own level of performance and contribution to the business or segment of the Company’s operations. The achievement of specific strategic and individual goals is intended to correlate with the creation of quarterly and longer-term stockholder value. Profit-related quarterly and annual bonus incentives allow the Company to offer a reasonably competitive total compensation package despite relatively lower base salaries, while directly aligning each executive’s performance with the Company’s overall financial performance. Quarterly and annual bonus incentives and ranges are recommended by the Chief Executive Officer with oversight and approval of the Compensation Committee.

Each executive’s individual objectives are intended to be closely aligned with the Company’s overall strategic objectives, and the financial targets are focused on quarterly measures of net income after any bonus deduction. Ranges of profitability in terms of net income are fixed by the Compensation Committee on recommendations received from the Chief Executive Officer, typically in four ranges of ascending net income. Achievement of net income in the first range results in quarterly incentive payments to each eligible executive of 100% of his or her bonus amount, as awarded annually by the Compensation Committee; and in the highest range, a bonus of 145% can be earned. Thus, if targets are met each quarter throughout the year, the total annual incentive bonus payments can range from 100% to 145% of each executive’s annual bonus plan for each executive other than the Chief Executive Officer. Unfortunately, competitive pressures and shrinking profit margins have prevented the Company from achieving its minimal profitability goals each quarter, thus substantially reducing management’s eligibility for bonus payments under this structure. On the other hand, sufficient profits were achieved during the fiscal year ended September 30, 2008 to generate some bonus payments for each of the Company’s eligible officers, executives and directors (other than the Chief Executive Officer).

For the fiscal year ended September 30, 2008, bonus targets for the Company’s named executive officers set forth in the Summary Compensation Table (the “Named Executive Officers”) (other than the Chief Executive Officer) were as follows:


Net Income		Bonus Target

$	350,000		100	%
$	750,000		115	%
$	1,000,000		125	%
$	2,000,000		145	%

The base quarterly bonus amounts for Mr. Latif and Mr. Mercer, who were the sole Named Executive Officers other than the Company’s Chief Executive Officer, Mr. Din, were $43,750 and $18,750, respectively. Additionally, pursuant to Mr. Latif’s employment agreement, he is guaranteed a minimum quarterly draw of $25,000 (which amount is offset by any bonus to which he would otherwise be entitled). Based on the Company’s performance during the 2008 fiscal year, bonus incentives of 100% of the base quarterly bonus amounts for the June quarter and 145% of the base quarterly bonus amounts for the September quarter were achieved and paid out to the Named Executive Officers (other than the Chief Executive Officer who received no bonus or incentive award during the year). Further, Mr. Latif received his guaranteed minimum quarterly draw of $25,000 for the December and March quarters of the 2008 fiscal year.

While the Company did achieve an improvement in earnings as compared to fiscal 2007, it did not reach the minimum profitability ranges in two of the four fiscal quarters of the year and thus the incentive compensation tied

to those quarterly targets was not earned or paid. The aggregate bonus incentives paid to the Named Executive Officers are set forth in the “Non-Equity Incentive Plan Compensation” column of the Summary Compensation Table.

Transactional Bonus

In the fiscal year ended September 30, 2008, the Compensation Committee approved a special transactional bonus of $2.2 million to be paid to those key employees of the Company and those former employees who transferred to En Pointe Global Service, LLC and who were instrumental in the successful sale and transition of the information technology service business. The bonus becomes payable on October 23, 2009. The Chief Executive Officer was awarded $600,000, four key employees of the Company $250,000 each, two employees of En Pointe Global Service, LLC $250,000 each, and undesignated others a total of $120,000.

Long-Term Equity-Based Incentive Compensation

In recent years, due to shrinking profit-margins and wide and disturbing fluctuations in the U.S. equities markets generally and the Company’s market segment in particular, the Compensation Committee has concluded that long-term stock-related compensation has very limited if any value as an employee incentive or retention tool. Unlike some historical patterns that richly rewarded long-term loyalty and retention, most of the Company’s equity-based incentive awards have proved to have little or no value to the recipient.

Beginning in 2005, U.S.accounting rules required the Company to expense any stock option awards according to a formula which could impose a costly charge on the Company’s income statements, thereby burdening or erasing its fragile profit margins. Under the circumstances, the Company elected to end the granting of stock options and awards to avoid the adverse effects of such expenses. Subsequently, as noted above, both the Company’s 1996 Stock Incentive Plan and the Employee Stock Purchase Plan expired in 2006 by their own terms. To date, neither plan has been renewed and there is no current plan to do so within the foreseeable future.

Nevertheless, the Company aims to align its executive officers’ interests with those of its stockholders by enhancing the link between the creation of sustainable profits and, in turn, improved stockholder value through the profit-related executive incentive compensation plan described above. The Compensation Committee believes that by increasing profit margins on a continuing basis the Company can derive long-term growth in stockholder value as reflected in the Company’s market price per share. This concept has been validated during prior periods of the Company’s sustained quarter-to-quarter profitability, but is undone when the Company is unable to generate back-to-back repeating quarters of profitable operations.

Prior to 2005, employees at all levels had been awarded non-qualified stock options. All stock options were awarded at or above the market price of the underlying stock at the time of the award. Restricted stock grants based on performance may be awarded by the Compensation Committee, although none have been awarded to any executive officers in recent years. The authority to make grants of equity incentive awards rests with the Compensation Committee, subject to ratification by the full Board of Directors.

Non-Qualified Stock Options. In fiscal 2008, the Company did not award any stock options to the Named Executive Officers or any of its other employees or directors. Historically, the number of stock options granted to an executive officer is based upon the executive officer’s position and level of responsibility. The Company does not issue discounted stock options or permit the repricing or reissue of previously issued options. Stock options have a ten (10) year term and generally vest ratably over either a three-year or four-year period. The Company utilizes the Black-Scholes option pricing model for valuing stock option awards.

Restricted Stock. In fiscal 2008, the Company did not award any shares of restricted common stock to the Named Executive Officers or to any of its other employees or directors. As with stock options, the number of shares of restricted stock that may be awarded to a Named Executive Officer in the future, if any, will be based upon the executive’s position and level of responsibility. The authority to make grants of restricted stock rests with the Compensation Committee, subject to ratification by the full Board of Directors.

Non-Qualified Deferred Compensation

The Company does not currently sponsor any non-qualified deferred compensation plans on behalf of the Named Executive Officers or other management personnel. Likewise, the Company does not have any current plans to implement such a program.

Pension Benefits

The Company does not currently sponsor any pension plans for the benefit of the Named Executive Officers or other members of management. Additionally, the Company does not have any current plans to implement such a program.

Perquisites and Other Benefits

The Company provides its executive officers with various health and welfare programs and other employee benefits which are generally available on the same cost-sharing basis to all of its employees. However, in keeping with the Company’s policy of controlling costs in connection with its profitability objectives, it does not provide any significant perquisites or other special benefits to its executive officers like payment of club memberships, financial planning, executive dining rooms or special transportation rights with exception of auto lease reimbursement for its Chief Executive Officer. The Company does not own an airplane or provide aircraft for executives for business or personal purposes.

Tax and Accounting Implications

The Compensation Committee is also responsible for considering the deductibility of executive compensation under Section 162(m) of the Internal Revenue Code, which provides that it may not deduct non-performance-based compensation of more than $1,000,000 that is paid to its executive officers. The Company believes that the compensation paid under the current management incentive programs is fully deductible for federal income tax purposes. In certain situations, the Committee may approve compensation that will not meet the requirements for deductibility in order to ensure competitive levels of compensation for its executives and to meet its obligations under the terms of various incentive programs. However, the issue of deductibility has not come before the Committee in recent years and is not expected to be a concern for the foreseeable future, for the reasons noted under Base Salary above.

Summary Compensation Table

The following table shows the total compensation paid or accrued by the Company for the fiscal years ended September 30, 2008 and 2007, respectively, to the Chief Executive Officer, the Chief Financial Officer and the Senior Vice President of the Company (the “Named Executive Officers”)


											Non-Equity			Nonqualified		All
											Incentive			Deferred		Other
							Stock		Option		Plan			Compensation		Compensation
	Fiscal		Salary		Bonus(1)		Awards		Awards		Compensation			Earnings		(2)			Total
	Year		($)		($)		($)		($)		($)			($)		($)			($)
Name and Principal Position (a)	(b)		(c)		(d)		(e)		(f)		(g)			(h)		(i)			(j)

Attiazaz (“Bob”) Din		2008		650,000		600,000		—		—		—			—		27,315(3	)		1,250,000
Chief Executive Officer and President		2007		650,000		—		—		—		—			—		31,059(3	)		681,059
Javed Latif		2008		175,000		250,000		—		—		175,935(4	)		—		—			600,935
Chief Financial Officer and Senior Vice President		2007		175,000		—		—		—		115,625			—		—			290,625
Robert A. Mercer		2008		150,000		250,000		—		—		64,687(4	)		—		—			464,687
Senior Vice President of Finance and Taxation and Secretary		2007		150,000		—		—		—		25,000			—		—			175,000


(1)		Consists of bonuses related to sale of 80.5% interest in services business that become payable on October 23, 2009.

(2)		In accordance with SEC rules, “Other Annual Compensation” in the form of perquisites and other personal benefits has been omitted where the aggregate amount of such perquisites and other personal benefits was less than $10,000.

(3)		Consists of lease payments for an automobile.

(4)		Includes $18,747 in accrued bonus earned in fiscal year 2007 and paid in fiscal year 2008.

Narrative to Summary Compensation Table

See “Compensation Discussion and Analysis” and “Employment Agreements” for further discussion of compensation arrangements pursuant to which the amounts listed under the Summary Compensation Table were paid or awarded and the criteria for such payment or award.

Outstanding Equity Awards at Fiscal Year End Table

There were no outstanding stock awards as of September 30, 2008. The following table relates solely to outstanding stock option awards as of September 30, 2008 held by the Named Executive Officers. All stock options described below are fully-vested and have ten year terms from the date of grant.


					Equity Incentive
					Plan Awards:
					Number of
	Number of Securities Underlying				Securities Under-
	Unexercised Options				lying Unexercised		Option		Option
	#		#		Unearned Options		Exercise		Expiration
Name	Exercisable		Unexercisable		#		Price		Date

Attiazaz (“Bob”) Din		50,000		—		—		1.94		05/14/11
		250,000		—		—		2.10		10/01/14
Javed Latif		90,000		—		—		1.25		10/01/12
		75,000		—		—		2.70		04/01/14
Robert Mercer		5,000		—		—		12.25		04/18/10
		5,000		—		—		1.25		04/14/11
		30,000		—		—		1.25		10/01/12
		5,000						2.70		04/01/14

Options Exercised and Stock Vested

None of the Company’s Named Executive Officers exercised any stock options, SARs or similar instruments or vested any stock, including restricted stock, restricted stock units or similar instruments, during the fiscal year ended September 30, 2008.

Potential Payments upon Termination or Change in Control

Payments Made upon Termination

Regardless of the manner in which a Named Executive Officer’s employment terminates, he or she may be entitled to receive amounts earned during the term of his or her employment. Such amounts include stock options awarded under the Company’s 1996 Stock Option Plan (which Plan terminated by its terms in March 2006) and unused vacation pay.

Additionally, the Company has entered into an agreement with Bob Din, the Company’s President and Chief Executive Officer, pursuant to which if his employment is terminated by the Company without “cause,” as defined in the employment agreement, or by Mr. Din for “good reason,” as defined in the employment agreement, and other than in connection with an “unapproved change in control,” as defined in the employment agreement, Mr. Din will be entitled to receive, as severance pay, subject to certain conditions, monthly salary payments in the amount of Mr. Din’s current salary for a period of five (5) years, the payment of certain additional benefits, such as health insurance for the same term, and continuation of lease payments on his automobile for the same term (which automobile shall be transferred to his name at the end of such term without any additional consideration), and gross up payments to cover additional taxes as a result of such benefits, including any excise taxes. In such event, Mr. Din’s employment agreement also provides for full acceleration of vesting of all stock options he holds as well as extension of exercisability for the duration of the term of such options. In the event that Mr. Din secures a substantial employment during the term of his severance payout, his employment agreement provides for a reduced payout. Termination for “cause” or without “good reason” results in no additional severance payments being made by the Company under his employment agreement.

Further, the Company has entered into an agreement with Javed Latif, the Company’s Chief Financial Officer, pursuant to which if his employment is terminated by the Company without “cause,” as defined in the employment

agreement, or by Mr. Latif for “good reason,” as defined in the employment agreement, Mr. Latif will be entitled to receive, as severance pay, an amount equal to six (6) months of his then-current base salary.

Further, the Company has entered into an agreement with Robert Mercer, the Company’s Senior Vice President of Finance and Taxation and Secretary, pursuant to which if his employment is terminated by the Company without “cause,” as defined in the employment agreement, or by Mr. Mercer for “good reason,” as defined in the employment agreement, Mr. Mercer will be entitled to receive, as severance pay, an amount equal to six (6) months of his then-current base salary.

Payments Made upon Death or Disability

In the event of the death or disability of a Named Executive Officer, in addition to the benefits listed in the first paragraph under the heading, “Payments Made Upon Termination” above, the Named Executive Officer will receive benefits under the Company’s disability plan or payments under the Company’s life insurance plan, as appropriate.

Additionally, in the case of termination due to death or disability, Mr. Din’s employment agreement provides for a severance payment equal to his base salary for a period of three (3) years, and benefits for a five (5) year term if termination is due to disability. Such benefits include, without limitation, health insurance and continuation of lease payments on his automobile for the same term (which automobile shall be transferred to his name at the end of such term without any additional consideration), and gross up payments to cover additional taxes as a result of such benefits, including any excise taxes. In such event, Mr. Din’s employment agreement also provides for acceleration of vesting of all stock options he holds for an additional three (3) year period as well as extension of exercisability for the duration of the term of such options. In the event that Mr. Din secures a substantial employment during the term of his severance payout, his employment agreement provides for a reduced payout.

Further, pursuant to the terms of Mr. Latif’s employment agreement, in the event that Mr. Latif’s employment is terminated because of his death or disability, Mr. Latif will be entitled to receive, as severance pay, an amount equal to six (6) months of his then-current base salary.

Payments Made upon a Change of Control

Pursuant to the terms of Mr. Din’s employment agreement, if his employment is terminated by the Company within thirty (30) days following an “unapproved change of control‘(other than termination for “cause” or by reason of death or disability) or if he terminates his employment in certain circumstances defined in the agreement that constitute “good reason”, then in addition to the benefits listed in the first paragraph under the heading “Payments Made Upon Termination”, Mr. Din will receive a lump sum severance payment of four (4) times his annual base salary within ninety (90) days of termination and will be entitled to the payment of additional benefits, including health insurance, for a five (5) year period thereafter, continuation of lease payments on his automobile for the same term (which automobile shall be transferred to his name at the end of such term without any additional consideration), and gross up payments to cover additional taxes as a result of such benefits, including any excise taxes. Additionally, pursuant to the terms of Mr. Din’s employment agreement all stock options then held by Mr. Din will automatically vest in full and become exercisablefor the duration of their terms. Neither Mr. Latif’s employment agreement nor Mr. Mercer’s employment agreement contain any terms providing for an additional payment arising solely as result of a change of control of the Company.

Employment Agreements

Mr. Din’s employment agreement with the Company was originally entered into as of March 1, 1996, and was amended in April 1997 and October 2004. Upon the request of Mr. Din, the Company is obligated to include him as a management nominee for election to the Board of Directors during the term of such agreement and for a period of five (5) years thereafter. His employment agreement, as amended to date, provides for an annual base salary of $650,000 per year, effective October 1, 2004. As part of his employment, Mr. Din is entitled to a bonus equal to 3.5% of the Company’s pre-tax net income (if $4.5 million or greater) and his employment agreement terminates on the later of (i) the fifth anniversary of the date the agreement was entered into, or (ii) five years following the date on which either Mr. Din or the Company gives a notice of non-renewal or termination. Mr. Din’s employment agreement also contains severance payments and benefits upon termination of his employment in certain circumstances. Mr. Din’s agreement prohibits him from competing with the Company for five years following

the date of his termination. Pursuant to his employment agreement, Mr. Din is obligated, subsequent to his termination, to offer first to the Company any block of 100,000 shares or more of the Company’s common stock offered by him for sale, if offered for sale other than pursuant to an over-the-counter or exchange transaction. Mr. Din’s agreement also contains confidentiality, intellectual property rights and dispute resolution provisions.

On March 28, 2002, the Company entered into an employment agreement with Mr. Latif that provided for an annual base salary of $150,000 and provided for quarterly bonuses at the discretion of the Chief Executive Officer and Board of Directors, conditional upon the Company’s cumulative pre-tax net income being positive at the time of bonus consideration. The agreement automatically renewed at the end of the initial term (July 31, 2003) on a month-to-month basis until terminated in accordance with its terms. Mr. Latif’s employment agreement also contains (i) certain non-solicitation provisions that expire eighteen (18) months after termination of such agreement and (ii) a dispute resolution provision. Effective April, 2005, Mr. Latif’s annual base salary was increased to $175,000. On May 30, 2007, the Company implemented a bonus plan based on meeting certain targets of quarterly net income for the period from April 1, 2007 through March 31, 2009. Under the plan, Mr. Latif’ earns a minimum guaranteed annual draw of $100,000 (or $25,000 per quarter) without regard for Company profitability and has the potential to earn annually from $175,000 to $253,750 based upon the Company’s quarterly net income. Minimum guaranteed draws are offset by any bonus that Mr. Latif’ would otherwise be entitled.

On March 28, 2002, the Company entered into an employment agreement with Mr. Mercer that provided for an annual base salary of $150,000 and provided for quarterly bonuses at the discretion of the Chief Executive Officer and Board of Directors, conditional upon the Company’s cumulative pre-tax net income being positive at the time of bonus consideration. The agreement automatically renewed at the end of the initial term (March 15, 2003) on a month-to-month basis until terminated in accordance with its terms. In the event that Mr. Mercer’s employment is terminated by the Company during the term of the agreement without “cause,” as defined in the agreement, by Mr. Mercer for “good reason,” as defined in the agreement, or because of his death or disability, Mr. Mercer will be entitled to receive, as severance pay, an amount equal to six months of his then-current base salary. Mr. Mercer’s employment agreement also contains (i) certain non-solicitation provisions that expire eighteen (18) months after termination of such agreement and (ii) a dispute resolution provision.

Directors’ Compensation

The Compensation Committee uses cash, and not equity, compensation to attract and retain qualified candidates to serve on the Board of Directors. In setting director compensation, the Compensation Committee considers the significant amount of time that directors expend in fulfilling their duties to the Company as well as the skill-level required by the Company of members of the Board of Directors. Each non-employee director is entitled to receive $1,500 per month for services as a director. Additionally, committee members receive $350 monthly for each committee upon which they serve. The Compensation Committee also awards directors bonuses based on the attainment of certain profitability targets by the Company.

During fiscal 2008, each of the Company’s six outside directors cash compensation of $1,500 per month. Each of the Company’s outside committee members was also entitled to receive monthly cash compensation of $350 for every committee on which the respective director served. During fiscal 2008, quarterly bonuses for the June and September quarters of fiscal 2008 were paid to the outside directors based on the Company meeting net income targets of $350,000 and $2,000,000 respectively that amounted to $19,800 and 35,640 respectively.


									Change in
									Pension
									Value and
	Fees						Non-Equity		Nonqualified
	Earned or						Incentive		Deferred		(1)
	Paid in		Stock		Option		Plan		Compensation		All Other
	Cash		Awards		Awards		Compensation		Earnings		Compensation		Total
	($)		($)		($)		($)		($)		($)		($)
Name and Principal Position(a)	(b)		(c)		(d)		(e)		(f)		(g)		(h)

Attiazaz (“Bob”) Din(2)		—		—		—		—		—		—		—
Naureen Din		18,000		—		—		6,300		—		—		24,300
Zubair Ahmed(3)		26,400		—		—		6,300		—		—		32,700
Mark Briggs		18,000		—		—		6,300		—		—		24,300
Edward O. Hunter(4)		60,600		—		—		12,180		—		—		72,780
Mansoor S. Shah(5)		30,600		—		—		12,180		—		—		42,780
Timothy J. Lilligren(6)		64,800		—		—		12,180		—		—		79,480

Notes:


(1)		In accordance with SEC rules, “All Other Compensation” in the form of perquisites and other personal benefits has been omitted where the aggregate amount of such perquisites and other personal benefits was less than $10,000.

(2)		As Chief Executive Officer and President of the Company, Mr. Din receives no separate compensation in the form of meeting fees or retainer fees for his service on the Board of Directors or any subsidiary of the Company. All of Mr. Din’s compensation is reflected in the Summary Compensation Table.

(3)		Mr. Ahmed is a member of the Nominating Committee.

(4)		Mr. Hunter is a member of the Compensation and Audit Committees. Mr. Hunter also serves on the Board of Ovex Technologies (PVT) Limited , a majority-owned subsidiary of the Company, and received fees of $15,500 in that capacity (which fees are not reflected in the foregoing table) .

(5)		Dr. Shah is the Chairman of the Board and a member of the Compensation, Nominating and Audit Committees.

(6)		Mr. Lilligren is a member of the Nominating, Compensation and Audit Committees. Mr. Lilligren also serves on the Board of En Pointe Technologies

(6)		India Pvt. Ltd., a wholly-owned subsidiary of the Company, and earned fees of $2,500 in that capacity (which fees are not reflected in the foregoing table).

Other Compensation Arrangements

401(K) PLAN

Effective as of July 1993, the Company adopted the En Pointe Technologies, Inc. Employee Savings Plan (the “401(k) Plan”), which is a retirement profit sharing plan that covers all U.S. employees of the Company who are 21 years old or older and have completed at least six months of service. The 401(k) Plan provides that employees may elect to defer, in the form of contributions to the 401(k) Plan, up to 20% of the total compensation that would otherwise be paid to the employee, not to exceed $15,500 in 2008 (subject to adjustments annually as provided in the Internal Revenue Code).

The Company may make discretionary matching contributions to the 401(k) Plan, but the Company has not made any contributions to the 401(k) Plan to date. Contributions are held under a group annuity contract and are invested in selected eligible investments. Employee contributions are fully-vested and non-forfeitable at all times.

Compensation Committee Interlocks and Insider Participation

The members of the Company’s Compensation Committee during the fiscal year ended September 30, 2008 consisted of Messrs. Hunter, Shah and Lilligren, none of whom serves or has served as an executive officer or employee of the Company or any of its subsidiaries. The Company is not aware of any “compensation committee interlocks” that existed during fiscal 2008.

Compensation Committee Report

The Compensation Committee of the Company has reviewed and discussed the Compensation analysis required by Item 402(b) of Regulation S-K with management and, based on such review and discussions, the Compensation Committee recommended to the Board of Directors that the Compensation Discussion and Analysis be included in this report.

The Compensation Committee of the Board of Directors

Edward Hunter
Mansoor Shah
Timothy Lilligren

The above Report of the Compensation Committee does not constitute soliciting material and should not be deemed filed or incorporated by reference into any other Company filing, whether under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, whether made on, before or after the date of this Amendment No. 1 to Form 10-K and irrespective of any general incorporation language in such filing, except to the extent the Company specifically incorporates this Report by reference therein.


ITEM 12.	*SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS*

The following table sets forth, to the knowledge of the Company, certain information regarding the beneficial ownership of common stock as of January 23, 2009 by (i) each stockholder who is known by the Company to own beneficially more than five percent of the Company’s outstanding common stock, (ii) each director and nominee for director of the Company, (iii) each of the Company’s executive officers named in the Summary Compensation Table (see “Executive Compensation”) and (iv) by all executive officers and directors of the Company as a group. The information as to each person or entity has been furnished by such person or group.


	Shares Beneficially Owned(1)
Name of Beneficial Owner	Number		Percentage

Attiazaz “Bob” Din(2)(3)		756,802		10.3	%
Naureen Din(2)(3)		756,802		10.3	%
Daniel Zeff(4)		715,255		10.0	%
co Zeff Holding Company, LLC
50 California Street, Suite 1500
San Francisco, California 94111
Zubair Ahmed(5)		692,396		9.6	%
Javed Latif(6)		175,000		2.4	%
Mansoor Shah(5)		68,000		*
Mark Briggs(7)		64,000		*
Edward Hunter(5)		50,000		*
Timothy Lilligren(5)		50,000		*
Robert Mercer(8)		45,500		*
Mediha Din(9)		485,912		6.8	%
All executive officers and directors as a group (9 persons)(10)		2,658,500		33.2	%


*		Less than 1%.

(1)		Applicable percentage of ownership at January 24, 2009, is based upon 7,182,643 shares of common stock outstanding. Beneficial ownership is determined in accordance with the rules of the Securities and Exchange Commission and includes voting and investment power with respect to shares shown as beneficially owned. All shares of common stock subject to options were made fully vested and exercisable as of July 20, 2005 and those unexercised as of January 21, 2009 are deemed outstanding for computing the shares and percentage ownership of the person holding such options or warrants, but are not deemed outstanding for computing the percentage


		ownership of any other person or entity. Except as otherwise indicated, to the knowledge of the Company the persons listed above have sole voting and investment power with respect to all shares shown as beneficially owned by them. Unless otherwise specified, the address for each beneficial owner is the Company’s principal executive offices, 18701 Figueroa Street, Gardena, California 90248.

(2)		Bob and Naureen Din are married, and each may therefore be deemed to have a beneficial interest in each other’s shares of common stock. However, Mr. and Mrs. Din have each disclaimed beneficial ownership in each other’s shares. The number of shares reported for Mr. and Mrs. Din each, including unexercised options that are fully vested and exercisable, reflects 50% of the total number of shares beneficially owned by Mr. and Mrs. Din together in either of their names. Additionally, the amounts reported for Mr. and Mrs. Din exclude 211,511 shares of common stock held in trust for the benefit of their son, Ali Din, for which Ms. Din serves as the sole trustee; Mr. and Mrs. Din disclaim beneficial ownership of all such shares of common stock.

(3)		Includes 175,000 shares of common stock subject to options, all of which are immediately exercisable.

(4)		Based on a Schedule 13G dated January 23, 2009, filed with the SEC by Daniel Zeff, which reflects his beneficial ownership as of December 31, 2008. The Schedule 13-G states that Mr. Zeff has sole voting and dispositive power over 715,255 shares of common stock comprised of 450,721 shares held by Zeff Capital Partners I, L.P.(and Zeff Holding Company, LLC) and 264,534 shares held by Spectrum Galaxy Fund Ltd.

(5)		Includes 50,000 shares of common stock subject to options, all of which are immediately exercisable.

(6)		Includes 165,000 shares of common stock subject to options, all of which are immediately exercisable.

(7)		Includes 55,000 shares of common stock subject to options, all of which are immediately exercisable. Includes 5,000 shares of common stock held in joint tenancy with spouse.

(8)		Includes of 45,000 shares of common stock subject to options, all of which are immediately exercisable.

(9)		Shares held by a trust of which Ms. Din is the sole beneficiary.


(10)		Includes 815,000 shares of common stock subject to options, all of which are immediately exercisable.

The Company is not aware of any binding arrangements that may at a subsequent date result in a change of control of the Company.

Equity Compensation Plan Information

The following table sets forth information regarding outstanding options, warrants and rights and shares reserved for future issuance under the Company’s existing equity compensation plans as of September 30, 2008. The Company’s sole remaining active stockholder approved equity compensation plan is the 1996 Stock Incentive Plan. It was established in May 1996, had a ten year life, and by its terms terminated in May 2006 and has not been replaced. The Company’s stock purchase plan also terminated in May 2006 and has not been replaced. The Company does not have any non-stockholder approved equity compensation plans.

Number of Securities

Remaining Available for

Future Issuance Under

Number of Securities

Equity

to be Issued Upon Exercise

Weighted-Average

Compensation Plans as of

of Outstanding Options,

Exercise Price of

September 30, 2008

Warrants and Rights as

Outstanding Options,

(Excluding Securities

of September 30, 2008

Warrants and Rights

Reflected in Column (a))

Plan Category

(a)

(b)

(c)

Equity compensation plans approved by security holders:

1996 Stock Incentive Plan

1,000,947

2.91

None

Employee Stock Purchase Plan

N/A

Equity compensation plans not approved by security holders

None

N/A

None

Total

1,000,947

2.91

None


ITEM 13.	*CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE*

Certain Relationships and Related Transactions

See “EXECUTIVE COMPENSATION — Employment Agreements” for a description of certain arrangements and transactions with executive officers and directors. During fiscal 2008, certain members of Mr. Din’s family were employed by the Company and earned the following compensation in excess of $120,000 (including bonus and commissions, where applicable):


Name	Relationship	Position	Compensation

Shahzad Munawar	Brother	Chief Information Officer	$	304,375
Waseem Munawar	Brother	Manager of EDI purchasing	$	125,483
Ali Din	Son	Director of Marketing	$	120,000

The foregoing relatives of Mr. Din continue to be employed by the Company during fiscal 2009. The employment arrangements were approved by both the Compensation Committee and the Audit Committee.

On October 29, 2007, the Company entered into a lease agreement its new corporate headquarters. The property leased is a two story office building with 29,032 square feet of office space in Carson, California. The lease is for a period of seven years commencing on November 1, 2007. The lease requires monthly payments of $48,483.44 for the first year and contains an annual base rent increase of 3% that is effective for each November 1 for the succeeding six years. There is an option to extend the lease for two additional five year periods. Each of the two option periods to extend the lease contain the same base rent increases of 3% as found in the original lease. The scheduled monthly payments under the lease extension options are at the same original base monthly rate of $48,483.44 plus the sum of the accumulated annual 3% base rent increases to date. A security deposit of $96,966.88 was due upon execution of the lease. The lessee is responsible for the payment of real property taxes on the leased premises as well as for all utilities and services.

The lessor of the leased corporate headquarters, Dominguez Channel, LLC, is 85% owned by Bob Din, the Chief Executive Officer of the Company, and four members of his immediate family, two of whom are employees, Ali Din and Waseem Munawar, and another a director of the Company, Naureen Din. The terms and provisions of the lease agreement were reviewed and unanimously approved on August 8, 2007 by the Company’s Audit Committee, comprised of disinterested directors.

Review, Approval or Ratification of Transactions with Related Persons

Pursuant to the Company’s Audit Committee charter, the Company’s executive officers, directors, nominees for directors and principal stockholders, including their immediate family members and affiliates, are prohibited from entering into a related party transaction with the Company that would be reportable under Item 404 of Regulation S-K without the prior approval of its Audit Committee (or other independent committee of the Board of Directors in cases where it is inappropriate for the Audit Committee to review such transaction due to a conflict of interest). Any request for the Company to enter into a transaction with an executive officer, director, nominee for director, principal stockholder or any of such persons’ immediate family members or affiliates that would be reportable under Item 404 of Regulation S-K must first be presented to the Audit Committee for review, consideration and approval. In approving or rejecting the proposed agreement, the Audit Committee will consider the relevant facts and circumstances available and deemed relevant, including but not limited to, the risks, costs, and benefits to the Company, the terms of the transactions, the availability of other sources for comparable services or products, and, if applicable, the impact on director independence. The Audit Committee shall only approve those agreements that, in light of known circumstances, are in or are not inconsistent with, the Company’s best interests, as determined in good faith by the Audit Committee.

Independent Director Determination

The Board of Directors has determined that, except for Bob and Naureen Din, all of the members of the Board are “independent directors” within the meaning of Rule 4200 of the NASDAQ Marketplace Rules. With respect to the Board of Directors’ determination that Mark Briggs is an “independent director,” in making its determination the Board of Directors also considered that Mr. Briggs serves as the Chairman, Chief Executive Officer and is a significant stockholder of Premier BPO, Inc., a variable interest entity that is consolidated with the Company’s

financials. Neither Mr. Din or Mrs. Din nor Mr. Briggs serves on the Audit Committee, the Compensation Committee or the Nominating Committee.


ITEM 14.	*PRINCIPAL ACCOUNTANT FEES AND SERVICES*

Rose, Snyder & Jacobs, CPA Corporation (“RSJ”) are the Company’s independent auditors and provided audit services to the Company, including the examination of the Company’s consolidated financial statements for the year ended September 30, 2008 and a review of the Company’s consolidated financial statements included in the Company’s quarterly report on Form 10-Q filed with the SEC for the fiscal quarters of the year.

Independent Auditor Fees

The following table represents aggregate fees billed to the Company for fiscal 2008 and 2007 by RSJ, the Company’s principal accounting firm.


	Fiscal 2008		Fiscal 2007

Audit Fees	$	212,050	$	180,900
Audit-Related Fees		11,350		11,000
Tax Fees		—		—
All Other Fees		7,500		—

Total Fees	$	230,900	$	191,900

All services rendered by RSJ were permissible under applicable laws and regulations, and were pre-approved by the Audit Committee. Pursuant to SEC rules, the fees billed by RSJ for services are disclosed in the table above under the categories listed below.


	•	Audit Fees — These are fees for professional services performed by RSJ for the audit of the Company’s annual financial statements and for the review of financial statements included in the Company’s Form 10-Q filings and services that are normally provided in connection with statutory and regulatory filings or engagements.

	•	Audit- Related Fees — These are fees in conjunction with the Company’s benefit plan audit.

	•	All Other Fees — These are fees in conjunction with assistance in reviewing the Company’s financial forecast.

These services are actively monitored (both spending level and work content) by the Audit Committee to maintain the appropriate objectivity and independence in RSJ, which is the audit of the Company’s consolidated financial statements. The Audit Committee has determined that the provision of services, in addition to audit services, rendered by RSJ and the fees paid therefore in fiscal 2008 were compatible with maintaining RSJ’s independence.

Policy on Audit Committee Pre-Approval of Audit Services and Permissible Non-Audit Services of Independent Auditors

The Audit Committee’s policy is to pre-approve all audit and permissible non-audit services performed by the independent auditors. These services may include audit services, audit-related services, tax services and other services. For audit services, the independent auditor provides the Audit Committee with an audit plan including proposed fees in advance of the annual audit. The Audit Committee approves the plan and fees for the audit.

For non-audit services, the Company’s senior management will submit from time to time to the Audit Committee for approval non-audit services that it recommends the Audit Committee engage the independent auditor to provide during the fiscal year. The Company’s senior management and the independent auditor will each confirm to the Audit Committee that each non-audit service is permissible under all applicable legal requirements. A budget, estimating non-audit service spending for the fiscal year, will be provided to the Audit Committee along with the request. The Audit Committee must approve both permissible non-audit services and the budget for such services.

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Stockholders

En Pointe Technologies, Inc.

Gardena, California

We have audited the accompanying consolidated balance sheets of En Pointe Technologies, Inc. and subsidiaries (the “Company”) as of September 30, 2008 and 2007, and the related consolidated statements of operations, stockholders’ equity, and cash flows for the three years ended September 30, 2008. In connection with our audits of the consolidated financial statements, we have also audited Schedule II (Valuation and qualifying accounts). These consolidated financial statements and schedule are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements and schedule based on our audits.

We conducted our audits in accordance with the standards established by the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of En Pointe Technologies, Inc. and subsidiaries as of September 30, 2008 and 2007, and the results of their operations and their cash flows for the three years ended September 30, 2008, in conformity with accounting principles generally accepted in the United States of America. Also in our opinion, the related schedule, when considered in relation to the basic consolidated financial statements taken as a whole, present fairly, in all material respects, the information set forth therein.

/s/ Rose, Snyder & Jacobs

A Corporation of Certified Public Accountants

Encino, California

December 24, 2008

En Pointe Technologies, Inc.

Consolidated Balance Sheets


	September 30,
	2008			2007
	(In thousands except share and per share amounts)

ASSETS:
Current assets:
Cash	$	3,691		$	6,000
Restricted cash		10			76
Short term cash investment		—			1,000
Accounts receivable, net of allowance for returns
and doubtful accounts of $3,535 and $794 respectively		35,448			61,391
Due from affiliate		3,586			—
Inventories, net of allowances of $830 and $552, respectively		5,858			8,768
Prepaid expenses and other current assets		1,294			1,548

Total current assets		49,887			78,783
Property and equipment, net of accumulated
depreciation and amortization		4,202			5,022
Other assets		3,931			2,201
Investment in affiliate		1,823			—
Receivable from escrow		7,955			—

Total assets	$	67,798		$	86,006


LIABILITIES AND STOCKHOLDERS’ EQUITY:
Current liabilities:
Accounts payable, trade	$	15,817		$	19,034
Borrowings under line of credit		7,840			30,314
Short-term borrowings and current maturities of long-term debt		375			2,450
Accrued employee compensation and benefits		5,389			4,264
Other accrued liabilities		4,409			1,913
Deferred income		1,355			582
Accrued taxes and other liabilities		4,522			3,782

Total current liabilities		39,707			62,339
Long term liabilities		475			447

Total liabilities		40,182			62,786

Non-controlling interest		1,962			1,957

Commitments and contingencies (Notes 7 and 11)
Stockholders’ equity:
Preferred stock, $.001 par value:
Shares authorized — 5,000,000
No shares issued or outstanding		—			—
Common stock, $.001 par value:
Shares authorized — 15,000,000; with 7,162,643 and 7,159,193
shares issued		7			7
Additional paid-in capital		43,616			42,207
Treasury stock		(1	)		(1	)
Accumulated other comprehensive income		(659	)		(14	)
Accumulated deficit		(17,309	)		(20,936	)

Total stockholders’ equity		25,654			21,263

Total liabilities and stockholders’ equity	$	67,798		$	86,006

See Notes to Consolidated Financial Statements.

En Pointe Technologies, Inc.

Consolidated Statements of Operations


	Year Ended September 30,
	2008			2007			2006
	(In thousands except per share amounts)

Net sales:
Product	$	260,004		$	299,335		$	276,736
Service		40,458			47,791			46,997

Total net sales		300,462			347,126			323,733

Cost of sales:
Product		233,291			274,128			253,765
Service		23,332			29,447			30,318

Total cost of sales		256,623			303,575			284,083

Gross profit:
Product		26,713			25,207			22,971
Service		17,126			18,344			16,679

Total gross profit		43,839			43,551			39,650

Selling and marketing expenses		37,615			30,565			28,337
General and administrative expenses		15,054			11,871			11,098

Operating (loss) income		(8,830	)		1,115			215

Interest income, net		54			297			181
Other income, net		14,708			79			36

Income before income taxes, loss from equity investment and non-controlling interest		5,932			1,491			432
Income tax provision (benefit)		2,148			(203	)		42

Income before loss from equity investment and non-controlling interest		3,784			1,694			390
Loss from equity investment		(152	)		(68	)		121
Non-controlling interest		(5	)

Net income	$	3,627		$	1,626		$	511

Net income per share:
Basic	$	0.51		$	0.23		$	0.07

Diluted	$	0.50		$	0.22		$	0.07

Weighted average shares outstanding:
Basic		7,160			7,145			7,006

Diluted		7,263			7,456			7,125

See Notes to Consolidated Financial Statements.

En Pointe Technologies, Inc.

Consolidated Statements of Stockholders’ Equity


											Accumulated
					Additional						Other
	Common Stock				Paid-In			Treasury			Comprehensive			(Accumulated
	Shares		Amount		Capital			Stock			Income			Deficit)			Total
	(In thousands)

Balance at September 30, 2005		6,973	$	7	$	41,718		$	(1	)	$			$	(23,273	)	$	18,451
Net income															511			511
Issuance of common stock under stock option plan		58				105												105
Deferred compensation related to acceleration of stock options						(56	)											(56	)

Balance at September 30, 2006		7,031	$	7	$	41,767		$	(1	)	$	—		$	(22,762	)	$	19,011
SAB 108 cumulative effect adjustment															200			200

Balance at September 30, 2006, as adjusted		7,031		7		41,767			(1	)		—			(22,562	)		19,211
Net income															1,626			1,626
Foreign currency translation												(14	)					(14	)

Comprehensive income																		1,612
Issuance of common stock under stock option plan		30				63												63
Net operating loss tax benefit related to stock options						137												137
Stock issued related to business acquisition		98				240												240

Balance at September 30, 2007		7,159	$	7	$	42,207		$	(1	)	$	(14	)	$	(20,936	)	$	21,263
Net income															3,627			3,627
Foreign currency translation												(645	)					(645	)

Comprehensive income																		2,982
Issuance of common stock under stock option plan		4				5												5
Net operating loss tax benefit related to stock options						1,404												1,404

Balance at September 30, 2008		7,163	$	7	$	43,616		$	(1	)	$	(659	)	$	(17,309	)	$	25,654

See Notes to Consolidated Financial Statements.

En Pointe Technologies, Inc.

Consolidated Statements of Cash Flows


	Year Ended September 30,
	2008			2007			2006
	(In thousands)

Cash flows from operating activities:
Net income	$	3,627		$	1,626		$	511
Adjustments to reconcile net income to net cash used by operations:
Depreciation and amortization		2,678			2,492			1,491
(Gain) loss on disposal of assets		(15,390	)		—			52
Amortization of option expense		—			—			(56	)
Amortization of deferred gain on sale-leaseback		—			(35	)		(354	)
Allowances for doubtful accounts, returns and inventory		2,847			123			564
Impairment of investment		500			—			—
Stock acquired for product and services sold		(300	)		—			—
Non-controlling interest in income (loss) of affiliates		5			68			(121	)
Decrease (increase) in deferred tax benefit		263			(263	)		—
Changes in operating assets and liabilities:
Equity in loss of affiliate		152			—			—
Restricted cash		66			(2	)		(2	)
Accounts receivable		23,118			(15,052	)		(5,916	)
Due from affiliate		(3,586	)
Inventories		2,888			(4,495	)		6,017
Prepaid expenses and other current assets		(9	)		168			(303	)
Other assets		(2,288	)		69			(28	)
Accounts payable, trade		(3,217	)		(51	)		661
Accrued expenses		2,976			426			1,027
Accrued taxes and other liabilities and deferred income		1,513			(343	)		1,942

Net cash provided (used) by operating activities		15,843			(15,269	)		5,485

Cash flows from investing activities:
Acquisition of business		—			(1,302	)		(550	)
Proceeds from sale of assets		8,000			—			—
Investments in securities and affiliate		(1,475	)		—			—
Short-term cash disposition (investment)		1,000			(1,000	)		—
Purchase of property and equipment		(2,366	)		(2,849	)		(904	)

Net cash provided (used) by investing activities		5,159			(5,151	)		(1,454	)

Cash flows from financing activities:
Net (repayments) borrowings under line of credit		(22,474	)		14,641			(1,151	)
Net (repayments) borrowings under export loan		(1,414	)		1,931			—
Net operating loss tax benefit related to stock options		1,404			—			—
Capital contributed by minority interest		—			100			705
Proceeds from sale of stock under employee plans		5			63			105
Payment on long term liabilities		(832	)		(555	)		(352	)

Net cash (used) provided by financing activities		(23,311	)		16,180			(693	)

(Decrease) increase in cash		(2,309	)		(4,240	)		3,337
Cash at beginning of year		6,000			10,240			6,903

Cash at end of year	$	3,691		$	6,000		$	10,240

Supplemental disclosures of cash flow information:
Interest paid	$	241		$	139		$	82
Income taxes paid	$	44		$	23		$	31
Capitalized leases	$	199		$	836		$	—
Stock issued for acquisition of business	$	—		$	240		$	—

See Notes to Consolidated Financial Statements.

En Pointe Technologies, Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1 ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

ORGANIZATION

The Company is a reseller of information technology products and, prior to July 1, 2008, a provider of value-added services to large and medium sized companies and government entities with sales personnel in 19 markets located in the United States. The Company is headquartered in Gardena, California and was originally incorporated in Texas in 1993 and reincorporated in Delaware in 1996. The parent company, En Pointe Technologies, Inc., is a holding company and provides administrative services to its subsidiaries. All sales are conducted through subsidiaries.

LIQUIDITY AND CAPITAL RESOURCES

As of September 30, 2008, the Company had approximately $3.7 million in cash and working capital of $10.2 million. As discussed in Note 3, in July 2007, the Company entered into an Addendum to its original replacement working capital financing facility with GE Commercial Distribution Finance Corporation (“GE”). Under terms of the Addendum the Company’s two wholly-owned subsidiaries engaged in information technology hardware and software selling may borrow up to $45.0 million. The term of the facility is for a period of three years from August 1, 2007, except that either party may terminate the agreement upon 60 days’ prior written notice to the other party. As of September 30, 2008, credit line borrowings amounted to $7.8 million with additional borrowings available of approximately $23.5 million after taking into consideration the available collateral and borrowing limitations under its agreements. Borrowings under the line of credit agreement are collateralized by substantially all of the Company’s assets. The financing agreements contain various liquidity financial debt covenants as explained in Note 3. The Company was in compliance with all of its debt covenants as of September 30, 2008.

PRINCIPLES OF CONSOLIDATION

The consolidated financial statements include the Company’s accounts and those of its wholly-owned and majority-owned subsidiaries as well its affiliate, Premier BPO, Inc. (formerly known as En Pointe Global Services, Inc., “PBPO”), an approximate 30% voting interest owned Variable Interest Entity. All intercompany accounts and transactions have been eliminated in the consolidated financial statements. Since there are other stockholders of PBPO who collectively represent approximately 69% voting interest, both their majority ownership interest and their entitlement to share in losses is reflected in the Company’s consolidated balance sheet and statement of operations as “non-controlling interest”. Losses allocated to the 69% owners of PBPO are not based upon the percentage of ownership, but upon the “at risk” capital of each of those owners. Losses in excess of their “at risk” capital are allocated to the Company without regard for the Company’s capital at risk. To date, such losses absorbed amounted to $1.6 million and exceed the Company’s invested capital of $1.4 million by $0.2 million.

INVESTMENT IN LIMITED LIABILITY COMPANY

On July 2, 2008, the Company formed En Pointe Global Services, LLC., or EPGS, as a wholly-owned subsidiary for the express purpose of transferring the Company’s information technology service business to that entity. On July 9, 2008, the Company sold an 80.5% interest in EPGS to Allied Digital Services, Limited and retained a non-controlling interest of 19.5%. Prior to the formation of EPGS the service and product operations were reported by En Pointe Technologies Sales, Inc. and because the service and product business was closely integrated no separate accounting for management to review and evaluate the financial results of each operation was possible.

Because the information technology service business was not previously considered to be a separate segment, no prior period comparative financial information is available.

En Pointe Technologies, Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

The EPGS results of operations for the initial quarter of operations ended September 30, 2008 and the financial position (in thousands) were as follows:


	Quarter Ended
	September 30,
	2008

Net service revenues	$	10,016
Cost of revenues		6,226

Total gross profit		3,790
Selling, marketing and administration		4,567

Net loss allocatable to partners		(777	)
En Pointe percentage ownership		19.5	%

Allocated to En Pointe	$	152


	September
	30, 2008

Cash	$	1,005
Accounts receivable, net		5,146
Other current assets		512
Total current assets		6,663
Property and equipment, net		968

	$	7,631

Accounts payable	$	53
Accrued liabilities		1,731
Due En Pointe		3,649
Total current liabilities		5,433
Member equity		2,198

	$	7,631

INVESTMENT IN VARIABLE INTEREST ENTITY (“VIE”) — PREMIER PBO, INC. (“PBPO”)

The Company has, in a series of investments, invested through September 30, 2008, the cumulative amount of $759,000 (representing an approximate 30% voting interest) in the common stock of PBPO, in the privately-held corporation. PBPO is a business process outsourcing company formed in October 2003 and headquartered in Clarksville, Tennessee.

In addition to the Company’s common stock investment in PBPO, the Company invested $600,000 in PBPO in the form of a five-year 6% interest-bearing note that subsequently was converted into Series A non-voting convertible preferred stock of PBPO in October 2004. The preferred stock may not be converted to common stock until the earlier of five years from the issuance date of the preferred stock or the effective date of an initial public offering. The conversion price is set as the greater of $100 per share or the fair market value, as determined under the preferred stock agreement. En Pointe’s approximate 30% voting interest in PBPO referenced above excludes the Series A non-voting convertible preferred stock that it holds.

PBPO is considered a related party because of the Company’s equity interest in PBPO as well as the interrelationship of several of the investors with the Company. One of the Company’s board members, Mark Briggs, owns approximately 17% of PBPO and also serves as its Chairman of the Board and Chief Executive Officer. Further, the Company’s CEO, Bob Din, represents En Pointe’s interest as a member of the board of directors of PBPO. In addition, the owners of Ovex Technologies (Private) Limited (“Ovex”), the Pakistani company that

En Pointe Technologies, Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

performs the operational and accounting side of the Company’s outsourcing under a cost plus fixed agreement that may be cancelled upon written notice, owns collectively approximately 16% of PBPO. Omar and Arif Saeed, who as of October 1, 2006 were collectively approximate 30% owners of Ovex also hold shares of Series A non-voting convertible preferred stock of PBPO that they received in October 2004 in exchange for the conversion of their five-year notes that aggregated $603,000 in principal and interest. The preferred shares held by the Saeeds are a component of the PBPO minority interest and as such are not subject to the allocation of PBPO losses.

Because of the substantial investment that the Company made in PBPO, the related party nature of the investment, as well as other factors, when the Company’s acquired interest in PBPO was evaluated, it was determined that PBPO met the tests of a Variable Interest Entity under Financial Accounting Standards Board (“FASB”) Interpretation No. 46 (“FIN 46”) and PBPO’s financial results have thus been consolidated with the Company’s financial statements since PBPO’s inception.

PBPO, has contracted with Ovex in Pakistan and has employees in China to provide its workforces for back-office support. PBPO shares workspace with the Company in Islamabad for a nominal fee using contracted Ovex workers and contracts directly with Ovex for workspace and workers in Lahore.

USE OF ESTIMATES

The preparation of financial statements in conformity with generally accepted accounting principles in the United States of America 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 and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

REVENUE RECOGNITION

Net sales consist primarily of revenue from the sale of hardware, software, peripherals, and service and support contracts. The Company applies the provisions of the SEC Staff Accounting Bulletin (SAB) No. 104, “Revenue Recognition in Financial Statements,” which provides guidance on the recognition, presentation and disclosure of revenue in financial statements filed with the SEC. SAB No 104 outlines the basic criteria that must be met to recognize revenue and provides guidance for disclosure related to revenue recognition policies. In general, the Company recognizes revenue when (i) persuasive evidence of an arrangement exists, (ii) delivery of products has occurred or services have been rendered, (iii) the sales price charged is fixed or determinable and (iv) collection is reasonably assured.

Product is considered received and accepted by the customer only upon the customer’s receipt of the product from the carrier and acceptance thereof. Any undelivered product is included in our inventory.

The majority of the Company’s sales relate to physical products and are recognized on a gross basis with the selling price to the customer recorded as net sales and the acquisition cost of the product recorded as cost of sales. However, software maintenance contracts, software agency fees, and extended warranties that are sold in which the Company is not the primary obligor, are recorded on a net basis in accordance with SEC Staff Accounting Bulletin No. 104 “Revenue Recognition” and Emerging Issues Task Force 99-19, “Reporting Revenue Gross as a Principal versus Net as an Agent.” Such net revenues are recognized in full at the time of sale.

The Company has adopted the provisions of Statement of Position No. 97-2, “Software Revenue Recognition” (SOP 97-2) as amended by SOP No. 98-9, “Modification of SOP 97-2, Software Revenue Recognition with Respect to Certain Transactions” (SOP 98-9) in recognizing revenue from software transactions. Revenue from software license sales is recognized when persuasive evidence of an arrangement exists, delivery of the product has been made, and a fixed fee and collectibility has been determined.

En Pointe Technologies, Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

the sale. Net sales consist of product and service revenues, less discounts and estimated allowances for sales returns. Cost of sales include the cost of product and services sold and current and estimated allowances for product returns that will not be accepted by our suppliers, less rebates.

Deferred revenues result from prepaid management services and maintenance contracts. Many management services are pre-billed quarterly and income is recognized as services are performed. The Company’s maintenance contracts are generally for services that may be performed over a one year period of time. Income is recognized on such contracts ratably over the period of the contract.

CASH AND CASH EQUIVALENTS

For purposes of the statement of cash flows, the Company considers all time deposits and highly liquid investments with original maturities of three months or less to be cash equivalents. The Company has bank balances, including cash equivalents, which typically exceed federally insured limits.

RESTRICTED CASH

Restricted cash at September 30, 2008 and 2007 represents deposits maintained for certain government tax agencies.

INVESTMENTS IN SECURITIES

The Company’s securities are carried at their fair market value based on quoted market prices. The Company holds two equity securities which approximate $875,000 in value.

RECEIVABLE FROM ESCROW

The Company has an escrow receivable for 745,000 restricted shares of common stock in Allied Digital Services, Limited in connection with the July 9, 2008 sale of its services business. The $8.0 million value of the escrow receivable is based on the underlying stock which has been adjusted down by $6.0 million for the restricted nature of the stock and the decline in value between July 9, 2008 and September 30, 2008 when it closed at $14.28 a share on an unrestricted trading basis. On December 10, 2008 the Allied Digital Services, LTD stock closed at $4.94 a share on an unrestricted trading basis.

INVENTORIES

Inventories consist principally of merchandise being configured for customer orders and merchandise purchased by the Company that has been drop shipped, but not yet received and accepted by the customer and are stated at the lower of cost (specific identification method) or market. On an ongoing basis, inventories are reviewed and written down for estimated obsolescence or unmarketable inventories equal to the difference between the cost of inventories and the estimated net realizable value. Changes to increase inventory reserves are recorded as an increase in cost of goods sold.

PROPERTY AND EQUIPMENT

Property and equipment are stated at cost and are depreciated using the straight-line method over their estimated useful lives of three to seven years. Assets acquired under capital lease arrangements are recorded at the present value of the minimum lease payments and are amortized using the straight-line method over the life of the asset or term of the lease, whichever is shorter. Such amortization expense is included in depreciation expense. Leasehold improvements are amortized using the straight-line method over the shorter of the lease terms or the useful lives of the improvements. Expenses for repairs and maintenance are charged to expense as incurred, while renewals and betterments are capitalized. Gains or losses on the sale or disposal of property and equipment are reflected in operating income.

The Company accounts for computer software costs developed for internal use in accordance with Statement of Position 98-1 (SOP 98-1), “Accounting for the Costs of Computer Software Developed or Obtained for Internal Use,” which requires companies to capitalize certain qualifying costs during the application development stage of

En Pointe Technologies, Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

the related software development project and to exclude the initial planning phase that determines performance requirements, most data conversion, general and administrative costs related to payroll and training costs incurred. Whenever a software program is considered operational, the Company considers the project to be completed and places it into service and commences amortization of the development cost in the succeeding month.

In fiscal year 2005 the Company concluded the development of three internal-use software programs that are being amortized on a straight-line basis over the economic lives of each of the software products that is estimated to be four years. Costs capitalized include internal payroll and direct fringe benefits and external direct project costs, including labor and travel. The Company began amortizing its first internal-use programs in May and the remaining two in October 2005. The Company’s property and equipment (see Note 2), as of September 30, 2008, 2007, and 2006 included $948,000, $948,000 and $781,000 respectively of capitalized software development costs included in computer equipment and software in addition to the $325,000 in costs related to software under development.

FAIR VALUE OF FINANCIAL INSTRUMENTS

The carrying amounts of financial instruments including cash and cash equivalents, restricted cash, accounts receivable and payable, accrued and other current liabilities and current maturities of long-term debt approximate fair value due to their short maturity. The carrying amount of the Company’s long-term liabilities also approximates fair value based on interest rates currently available to it for debt of similar terms and remaining maturities.

IMPAIRMENT OF LONG-LIVED ASSETS

The Company assesses the potential impairments of its long-lived assets in accordance with the provisions of SFAS No. 144, “Accounting for the Impairment or Disposal of Long-lived Assets”. An impairment review is performed whenever events or changes in circumstances indicate that the carrying value of the assets may not be recoverable. Factors the Company considers include, but are not limited to, significant underperformance relative to expected historical or projected future operating results; significant changes in the manner of use of the acquired assets or the strategy for the overall business; and significant negative industry or economic trends. When the carrying value of a long-lived asset may not be recoverable based upon the existence of one or more of the above indicators of impairment, the Company estimates the future undiscounted cash flows expected to result from the use of the asset and its eventual disposition. If the sum of the expected future undiscounted cash flows and eventual disposition is less than the carrying amount of the asset, the Company recognizes an impairment loss. An impairment loss is reflected as the amount by which the carrying amount of the asset exceeds the fair value of the asset, based on the fair market value if available, or discounted cash flows, if not. To date, the Company has not recognized an impairment charge related to the write-down of long-lived assets.

GOODWILL AND INTANGIBLE ASSETS

The Company accounts for its goodwill and intangible assets in accordance with the provisions of Statement of Financial Accounting Standard (SFAS) No. 142, “Goodwill and Other Intangible Assets”, which requires, among other things, that purchased goodwill and certain intangibles not be amortized. Under a nonamortization approach, goodwill and intangibles having an indefinite life are not amortized, but instead will be reviewed for impairment at least annually or if an event occurs or circumstances indicate that the carrying amount may be impaired. Events or circumstances which could indicate an impairment include a significant change in the business climate, economic and industry trends, legal factors, negative operating performance indicators, significant competition, changes in strategy or disposition of a reporting unit or a portion thereof. Goodwill impairment testing is performed at the reporting unit level.

SFAS 142 requires that goodwill be tested annually for impairment using a two-step process. If an event occurs that would more likely than not reduce the fair value of a reporting unit below its carrying amount, then goodwill shall be tested at that time. The first step of the goodwill impairment test, used to identify potential impairment, compares the fair value of a reporting unit with its carrying amount, including goodwill. If the fair value of a reporting unit exceeds its carrying amount, goodwill of the reporting unit is not considered to be impaired and the second step of the impairment test is unnecessary. If the carrying amount of a reporting unit exceeds its fair value,

En Pointe Technologies, Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

the second step of the goodwill impairment test must be performed to measure the amount of impairment loss, if any. The second step of the goodwill impairment test compares the implied fair value of reporting unit goodwill with the carrying amount of that goodwill. The implied fair value of goodwill is determined in the same manner as the amount of goodwill recognized in a business combination. If the carrying amount of the reporting unit goodwill exceeds the implied fair value of that goodwill, an impairment loss is recognized in an amount equal to that excess.

Application of the goodwill impairment test requires judgment, including the identification of reporting units, assignment of assets and liabilities to reporting units, assignment of goodwill to reporting units, and determination of the fair value of each reporting unit. The fair value of each reporting unit is estimated using a discounted cash flow methodology. This requires significant judgments including estimation of future cash flows, which is dependent on internal forecasts, estimation of the long-term rate of growth for the Company’s business, the useful life over which cash flows will occur, and determination of the weighted average cost of capital. Changes in these estimates and assumptions could materially affect the determination of fair value and/or goodwill impairment for each reporting unit.

In accordance with SFAS 142, the Company selected September 30 as the date on which to perform its annual goodwill impairment test. Based on its valuation of goodwill, no impairment charges related to the write-down of goodwill were recognized for the years ended September 30, 2008, 2007 and 2006. However, in conjunction with the sale of the service business on July 9, 2008, the Company reduced its goodwill that was related to its service acquisition that was sold by $265,000.

In connection with the Company’s acquisitions, the Company has applied the provisions of SFAS No. 141 “Business Combinations”, using the purchase method of accounting. The assets and liabilities assumed were recorded at their estimated fair values as determined by management and were based on information currently available and current assumptions as to future operations. The excess purchase price over those fair values was recorded as goodwill. The Company’s goodwill balance during the years ended September 30, 2008 and 2007 was $815,000 and $1,080,000, respectively, and was included in other assets in the accompanying consolidated balance sheets.

Separable intangible assets that have finite useful lives are amortized over their useful lives. An impaired asset is written down to fair value. Intangible assets with finite useful lives consist of customer relationships and non-compete agreements and are amortized over the expected benefit period using the straight-line and sum-of-the-years-digits methods. At September 30, 2008 and 2007, such intangible assets amounted to $374,000 (net of $1,427,000 of accumulated amortization) and $705,000 (net of $1,096,000 of accumulated amortization), respectively, and are included in other assets in the accompanying consolidated balance sheets.

ADVERTISING AND SHIPPING AND HANDLING COSTS

The Company reports the costs of all advertising in the periods in which those costs are incurred. For the fiscal years ended September 30, 2008, 2007, and 2006 advertising expense was approximately $498,000, $403,000 and $346,000 respectively. Shipping and handling costs incurred by the Company are included in cost of sales.

INCOME TAXES

The Company accounts for income taxes under the liability method. Under this method, deferred tax assets and liabilities are determined based on differences between the financial reporting and tax bases of assets and liabilities and are measured using the enacted tax rates and laws which will be in effect when the differences are expected to reverse. Valuation allowances are established when necessary to reduce deferred tax assets to the amounts more likely than not to be realized. Income tax expense represents the tax payable for the period and the change during the period in deferred tax assets and liabilities.

CONCENTRATION OF CREDIT RISK AND MAJOR CUSTOMERS AND VENDORS

Financial instruments that potentially subject the Company to significant concentrations of credit risk consists principally of cash deposits and trade accounts receivable. The Company’s cash deposits are placed with a few

En Pointe Technologies, Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

financial institutions. The combined account balances at one or more institutions typically exceed the $100,000 Federal Depository Insurance Corporation (“FDIC”) insurance coverage, and, as a result, there is a concentration of credit risk related to amounts on deposit in excess of FDIC insurance coverage.

No one customer accounted for more than 10% of net sales for the fiscal year 2008 and for the prior two fiscal years. No one customer accounted for more than 10% of accounts receivable at the end of the fiscal year 2008.

The Company performs periodic credit evaluations of the financial condition of its customers, monitors collections and payments from customers, and generally does not require collateral. Receivables are generally due within 45 days. The Company provides for the possible inability to collect accounts receivable by recording an allowance for doubtful accounts. The Company writes off an account when it is considered to be uncollectible. The Company estimates its allowance for doubtful accounts based on historical experience, aging of accounts receivable, and information regarding the creditworthiness of its customers. To date, losses have been within the range of management’s expectations.

The Company contracts with various suppliers. Although there are a limited number of suppliers capable of supplying its inventory needs, the Company believes that any shortfalls from existing suppliers would be absorbed from other suppliers on comparable terms. However, a change in suppliers could cause a delay in sales and adversely effect results.

Purchases from the Company’s three largest vendors during the years ended September 30, 2008, 2007, and 2006, comprised, 57%, 49%, and 51%, respectively, of its total purchases of product.

TREASURY STOCK

The Company uses the specific identification method for accounting for treasury stock. During the 2004 fiscal year, the Company issued 1,000 additional shares for employee stock benefit plans with a cost basis of $2,000. At September 30, 2008 and 2007, there remained approximately 1,000 treasury shares, with a cost of $1,000.

VENDOR PROGRAMS

The Company receives incentives from suppliers related to product and volume rebates and cooperative marketing development funds. These incentives are generally under monthly, quarterly, or annual agreements with the suppliers; however, some of these incentives are product driven or are provided to support specific programs established by the supplier. Suppliers generally require that the Company uses their cooperative marketing development funds exclusively for advertising or other marketing programs. These restricted cooperative marketing development funds are generally recognized as a reduction of operating expense or in some cases, when funds are in excess of their targeted marketing program, a reduction of cost of goods sold in accordance with Emerging Issues Task Force Issue No. 02-16, “Accounting by a Customer (Including a Reseller) for Certain Consideration Received from a Vendor”, as the related marketing expenses are recognized.

As rebates are earned, the Company records the income as a reduction of cost of goods sold. Any amounts received from suppliers related to cooperative marketing development funds, are deferred until earned. Incentive programs are subject to audit as to whether the requirements of the incentives were actually met. The Company establishes reserves to cover any collectibility risks including subsequent supplier audits.

EARNINGS PER SHARE

The Company accounts for earnings per common share in accordance with SFAS 128 “Earnings per Share”. Basic net income (loss) per share is computed by dividing the net income (loss) for the period by the weighted average number of common shares outstanding during the period. Diluted net income (loss) per share is computed by dividing the net income (loss) for the period by the weighted average number of common shares and common share equivalents outstanding during the period. Common share equivalents, consisting of stock options, are not included in the calculation to the extent they are antidilutive.

En Pointe Technologies, Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

COMPREHENSIVE INCOME

SFAS No. 130, “Reporting Comprehensive Income.” establishes standards for reporting and displaying comprehensive income and its components in financial statements. SFAS No. 130 requires that all items that are required to be reported under accounting standards as components of comprehensive income be reported in a financial statement that is displayed with the same prominence as other financial statements. The Company has reported comprehensive income for the fiscal year ended September 30, 2008 and 2007, respectively, but did not have any components of comprehensive income for fiscal year ended September 30, 2006.

SEGMENT REPORTING


	As of and for the Year Ended September 30, 2008
	US		Pakistan		China
	Sales of		Business		Business		UK
	Product		Process		Process		Sales of			Intersegment			Consolidated
	and Services		Services		Services		Product			Eliminations			Total
	In thousands

Sales from non affiliated customers	$	299,298	$	1,164	$	—	$	—		$	—		$	300,462
Intersegment sales	$	—	$	7,775	$	473	$	—		$	(8,248	)	$	0
Depreciation and amortization	$	2,182	$	481	$	11	$	1		$	(66	)	$	2,609
Segment profit (loss)	$	4,879	$	87	$	45	$	(39	)	$	(1,345	)	$	3,627
Segment assets	$	65,046	$	3,246	$	188	$	21		$	(703	)	$	67,798


	As of and for the Year Ended September 30, 2007
	US		Pakistan		China
	Sales of		Business		Business
	Product		Process		Process			Intersegment			Consolidated
	and Services		Services		Services			Eliminations			Total
	In thousands

Sales from non affiliated customers	$	346,237	$	884	$	5		$	—		$	347,126
Intersegment sales	$	—	$	7,827	$	218		$	(8,045	)	$	0
Depreciation and amortization	$	1,920	$	378	$	22		$	—		$	2,320
Segment profit (loss)	$	1,140	$	649	$	(96	)	$	(67	)	$	1,626
Segment assets	$	87,887	$	4,232	$	170		$	(6,283	)	$	86,006

The Company recognizes revenues in geographic areas based on the location to which the product was shipped or services have been rendered.

En Pointe Technologies, Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

NON-CONTROLLING INTEREST

Non-controlling interest consists of capital contributed by non-controlling interests as well as earnings or losses allocated to them. The Company has non-controlling interests resulting from its equity investments in PBPO and Ovex. The changes in non-controlling interest (in thousands) since October 1, 2006 are as follows:


	Year Ended September 30,
	2008		2007

Beginning minority interest balance	$	1,957	$	1,487
Minority interest acquired in Ovex acquisition		—		302
Capital contributed by PBPO minority interest		—		100
Earnings allocated to minority shareholders		5		68

Ending minority interest balance	$	1,962	$	1,957

RECENT ACCOUNTING PRONOUNCEMENTS

Accounting pronouncements adopted:

In July 2006, the Financial Accounting Standards Board (“FASB”) issued Interpretation No. 48, Accounting for Uncertainty in Income Taxes (“FIN No. 48”). This interpretation requires recognition and measurement of uncertain income tax positions using a “more-likely-than-not” approach. The provisions of FIN No. 48 are effective for fiscal years beginning after December 15, 2006. The Company adopted this accounting pronouncement effective October 1, 2007 and the adoption has not had a material effect on its consolidated financial statements.

Accounting pronouncements pending adoption:

In March 2008, the FASB issued Statement of Financial Accounting Standards (“SFAS”) No. 161, Disclosures about Derivative Instruments and Hedging Activities, an amendment of FASB Statement No. 133. SFAS No. 161 requires enhanced disclosures about a company’s derivative and hedging activities. These enhanced disclosures will discuss (a) how and why a company uses derivative instruments, (b) how derivative instruments and related hedged items are accounted for under FASB Statement No. 133 and its related interpretations and (c) how derivative instruments and related hedged items affect a company’s financial position, results of operations and cash flows. SFAS No. 161 is effective for fiscal years beginning on or after November 15, 2008, with earlier adoption allowed. The Company does not anticipate that the adoption of this accounting pronouncement will have a material effect on its consolidated financial statements.

In February 2008, the FASB issued FASB Staff Position No. 157-2, Effective Date of FASB Statement No. 157, which delays the effective date of SFAS 157 for nonfinancial assets and nonfinancial liabilities to fiscal years beginning after November 15, 2008. Therefore, the Company will delay application of SFAS 157 to its nonfinancial assets and nonfinancial liabilities. The Company does not anticipate that the delayed adoption of this accounting pronouncement will have a material effect on its consolidated financial statements.

En Pointe Technologies, Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

In December 2007, the FASB issued SFAS No. 141(R), Business Combinations, and SFAS No. 160, Accounting and Reporting of Noncontrolling Interests in Consolidated Financial Statements, an amendment of ARB No. 51. These new standards will significantly change the financial accounting and reporting of business combination transactions and noncontrolling (or minority) interests in consolidated financial statements. SFAS 141(R) is required to be adopted concurrently with SFAS 160 and is effective for business combination transactions for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after December 15, 2008. Early adoption is prohibited. The Company does not anticipate that the adoption of this accounting pronouncement will have a material effect on its consolidated financial statements.

In February 2007, the FASB issued SFAS No. 159, The Fair Value Option for Financial Assets and Financial Liabilities-Including an Amendment of FASB Statement No. 115, which is effective for the Company in fiscal years beginning after July 1, 2008. This statement permits an entity to choose to measure many financial instruments and certain other items at fair value at specified election dates. Subsequent unrealized gains and losses on items for which the fair value option has been elected will be reported in earnings. The Company does not anticipate that the adoption of this accounting pronouncement will have a material effect on its consolidated financial statements.

In September 2006, the FASB issued FAS 157, Fair Value Measurements. This standard defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles, and expands disclosures about fair value measurements. This statement is effective for financial statements issued for fiscal years beginning after November 15, 2007. The Company does not anticipate that the adoption of this accounting pronouncement will have a material effect on its consolidated financial statements.

2 PROPERTY AND EQUIPMENT

Property and equipment consist of the following (in thousands):


	September 30,
	2008			2007

Software and other asset development	$	572		$	344
Computer equipment and software		12,983			12,925
Office equipment and other		1,065			1,075
Warehouse equipment		—			116
Leasehold improvements		477			812
Capitalized leases (see Note 7)		2,309			1,938

		17,406			17,210
Less: Accumulated depreciation and amortization		(13,204	)		(12,188	)

	$	4,202		$	5,022

Depreciation and amortization expense was $2,609,000, $2,320,000 and $1,491,000 for the years ended September 30, 2008, 2007, and 2006, respectively. Assets fully depreciated were $10,424,000 and $8,380,000 as of September 30, 2008, and 2007, respectively. Accumulated amortization on capitalized leases was $1,329,000 and $849,000 at September 30, 2008 and 2007, respectively.

3 LINES OF CREDIT

The Company’s two primary information technology sales subsidiaries, En Pointe Technologies Sales, Inc. and En Pointe Gov, Inc., and GE Commercial Distribution Finance Corporation (“GE”) are parties to that certain Business Financing Agreement and that certain Agreement for Wholesale Financing dated June 25, 2004, as amended to date (collectively, the “Agreements”). The Company is the guarantor of the obligations under the Agreements. Under the flooring arrangement, the two subsidiaries may purchase and finance information technology products from GE-approved vendors on terms that depend upon certain variable factors. The two subsidiaries may borrow up to 85% of the Company’s collective eligible accounts receivable at an interest rate

En Pointe Technologies, Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

of prime plus 1.0% per annum, subject to a minimum rate of 5.0%. Such purchases from GE-approved vendors have historically been on terms that allow interest-free flooring. The original Agreements provided for a $30.0 million accounts receivable and flooring facility and expired on June 25, 2007, but were extended on June 13, 2007 to July 31, 2007 via a temporary overline letter agreement.

Effective September 25, 2007, the parties entered into an amendment to delete all prior financial covenants contained in the Agreements and to restate them effective for the last day of each calendar quarter as follows (as such terms are defined in the Agreements):


	•	Tangible Net Worth and Subordinated Debt in the combined amount of not less than $12,750,000.

	•	Total Funded Indebtedness to EBITDA for the preceding four fiscal quarters then ended, shall be no more than 3.00:1.00.

The GE facility is collateralized by accounts receivable, inventory and substantially all of the Company’s other assets. As of September 30, 2008, approximately $7.8 million in borrowings were outstanding under the $45.0 million financing facility. At September 30, 2008, there were additional borrowings available of approximately $23.4 million after taking into consideration the borrowing limitations under the Agreements, as amended to date.

Since the Company replaced its working capital financing facility in June 2004, minimal interest expense has been incurred on borrowings under the line of credit because of the extended interest-free period under the flooring plan. In fiscal years 2008, 2007 and 2006 such interest expense amounted to $17,000, $11,000 and $14,000 respectively. Total interest expense, the majority of which in fiscal years 2008 and 2007 applied to capitalized leases, for the years ended September 30, 2008, 2007 and 2006 was $241,000, $318,000 and $82,000 respectively.

4 OTHER INCOME — GAIN ON SALE OF SERVICE BUSINESS

On July 9, 2008, the Company sold an 80.5% interest in its service business, En Pointe Global Services, LLC (“EPGS”), to Allied Digital Services, Limited (“ADSL”). In connection with the transaction, the Company transferred a majority of its IT service business, including related employees and contracts, to EPGS. ADSL is a publicly traded corporation on the Bombay Stock Exchange in India. Consideration for the purchase was $10 million in cash, of which $8 million has been received and 745,000 shares of restricted ADSL stock with a face value of $14 million on July 9, 2008, the date of the signing of the contract. The securities portion of the consideration has been adjusted down by $6.0 million for the restricted nature of the stock and the decline in value between July and September 2008, which has resulted in an reported gain on the sale of $15.4 million after related costs of $0.6 million have been considered. The gain on the sale does not reflect a remaining $2.0 million of cash consideration that is due. Such consideration and resulting gain will be recorded when it is received.

The sale of the business has not been considered as a discontinued operations because the service business was never a separate segment under FAS 144 based on the fact that its operations and cash flows could not be clearly distinguished operationally from the rest of the Company.

At September 30, 2008 the escrow receivable for the 745,000 shares of ADSL stock was reevaluated and reduced for both the decline in market value and the restriction on the stock — see the Marketable Securities note below.

There will be continuity of management as the former service employees of the Company will initially continue in their same capacities and will operate autonomously. Under a three year Master Service Agreement signed in conjunction with the sale, the Company provides certain services, including, without limitation,

En Pointe Technologies, Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

administrative, corporate, information technology, engineering and other services to EPGS. EPGS has signed a separate subleasing agreement to sublease one half of the Company’s corporate headquarters from the Company. The CEO of En Pointe Technologies, Inc., Bob Din, will also serve on the board of EPGS as a representative of the Company. On going service contracts that could not be readily transferred to EPGS are being billed by the Company on behalf of EPGS and the Company continues to be liable for such contracts until their future renegotiation.

The Company’s continuing interest of 19.5% in EPGS will be reported under the equity method of accounting promulgated by APB 18.

5 EMPLOYEE BENEFIT PLAN

The Company has an employee savings plan (the “401(k) Plan”) that covers substantially all full-time employees who are twenty-one years of age or older. The Company’s contributions to the 401(k) Plan are at the discretion of the Board of Directors and vest over seven years of service. To date the Company has made no contributions to the 401(k) Plan.

6 INCOME TAXES

The components of the income tax (benefit) provision are as follows (in thousands):


	Year Ended September 30,
	2008		2007			2006

Current:
Federal	$	1,727	$	28		$	20
State		158		32			22

	$	1,885	$	60		$	42

Deferred:
Federal		213		(213	)		—
State		50		(50	)		—

		263		(263	)		—

	$	2,148	$	(203	)	$	—

The provision for income taxes differs from the amount computed by applying the federal statutory rate to income before provision for income taxes as follows:


	Year Ended September 30,
	2008			2007			2006

Federal statutory rate		34	%		35	%		35	%
State taxes, net of federal benefits		1			1			2
Expenses not deductible		1			5			8
Affiliate (earnings) losses not		1			(11	)		35
taxable
Non-controlling interest					(2	)		(8	)
Net operating loss carryforward		(4	)		(50	)		(82	)
Valuation allowances		4			8			18

		37	%		(14	)%		8	%

The Company’s consolidated return excludes two affiliates (see “Affiliate (earnings) losses not taxable” in table above), PBPO and Ovex. PBPO is excluded because the Company’s investment is less than the required 80%

En Pointe Technologies, Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

ownership required to consolidate under federal tax law and Ovex is excluded because foreign income is not subject to U.S. tax until distributed.

Deferred income taxes reflect the tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Due to the uncertainty surrounding the realization of a portion of the net deferred tax asset of $4.9 million, management has provided a valuation allowance. Significant components of deferred taxes are as follows (in thousands):


	September 30,
	2008			2007

Deferred tax assets:
Accounts receivable and other allowances	$	1,678		$	533
Expenses not currently deductible		2,965			1,170
Depreciation		178			295
Federal net operating loss and		162			2,001
alternative minimum tax credits
State net operating loss		697			933

		5,680			4,931
Deferred tax liabilities		(3,040	)		—

Net deferred tax asset		2,640			4,931
Valuation allowance		(2,640	)		(4,531	)

Deferred tax asset	$	—		$	400

Portion allocated to income	$	—		$	263
Portion allocated to equity related to stock options		—			137

Total deferred tax asset	$	—		$	400

The Company has no Federal net operating losses (“NOL”) available.

The Company files income tax returns in the U.S. federal jurisdiction, various foreign jurisdictions and most states in the United States. The Company is subject to income tax examination by U.S. federal tax authorities for years ending on or after September 30, 2005. The Company is subject to income tax examinations by the State of California tax authorities for years ending on or after September 30, 2004. Neither the Internal Revenue Service nor taxing authorities in any other jurisdictions have commenced an examination of the Company’s income tax returns for any tax year.

On October 1, 2007, the Company adopted the provisions of FASB Interpretation No. 48 (FIN 48), “Accounting for Uncertainty in Income Taxes — An Interpretation of FASB Statement No. 109.” FIN 48 prescribes a threshold for the financial statement recognition and measurement of a tax position taken in an income tax return. FIN 48 requires that a company determine whether the benefits of tax positions are more likely than not of being sustained upon audit based on the technical merits of the tax position. For tax positions that are more likely than not of being sustained upon audit, a company must recognize the largest amount of the benefit that is more likely than not of being sustained in the financial statements. For tax positions that are not more likely than not of being sustained upon audit, a company may not recognize any portion of the benefit in the financial statements.

The Company investigated and identified all significant certain and uncertain tax positions. The investigation included a review of federal tax returns for all open years. The Company also reviewed all book to tax adjustments recorded in its federal tax returns for open tax years. The Company also reviewed its transactional level detail to identify tax exposure areas and items. As part of the Company’s identification process, the Company completed a FIN 48 Checklist and Inventory of Uncertain Tax Positions. The Checklist covered areas such as accounting

En Pointe Technologies, Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

methods, mergers and acquisitions, state and local taxes, international tax, research and development, compensation and benefits and other federal tax issues.

Based on the investigation and review, the Company concluded that no uncertain tax positions exist on its tax returns for open years except for the issues discussed below whereby the likelihood of realization upon audit was not considered initially to be highly certain. The following item was specifically addressed:

Domestic Transfer Pricing — En Pointe Technologies, Inc. and its wholly-owned subsidiaries file consolidated, combined and separate returns in various states. For the jurisdictions in which En Pointe Technologies wholly-owned subsidiaries file separate state returns, there is exposure with respect to domestic transfer pricing by way of management fees and overhead allocations charged by the Company. The Company has not performed a transfer pricing study with respect to the management fees and overhead allocation. In addition, the documentation supporting the allocation may not be satisfactory to the state taxing authorities.

Management has determined that this tax position is more likely than not, but not highly certain. Accordingly a liability for the tax position with respect to this item has been recorded in the amount of $10,000.

7 LONG-TERM LIABILITIES AND COMMITMENTS AND CONTINGENCIES

The Company leases office facilities and various types of office equipment. These leases vary in duration and many contain renewal options and/or escalation clauses. Estimated future minimum lease payments under leases having initial or remaining non-cancelable lease terms in excess of one year at September 30, 2008 were approximately as follows (in thousands):


	Minimum Lease		Capitalized
	Payments		Leases

Fiscal year 2009	$	1,921	$	452
Fiscal year 2010		1,663		235
Fiscal year 2011		1,678		190
Fiscal year 2012		1,643		102
Fiscal year 2013		1,610
Thereafter		4,411

Total minimum lease payments	$	12,926		979

Less amount representing interest				(129	)

Principal amount			$	850
Current				375
Long-term				475

Total			$	850

In June 1999, the Company entered into a sale-leaseback arrangement for a 126,000 square foot configuration facility in Ontario, California. Under SFAS No. 98, because of a sublease that was for more than 10% of the total leased premises, the Company was required to account for its lease, which would have otherwise been considered an operating lease, as a financing transaction. The Company recorded lease payments as a reduction of its obligation to the lessor and as interest expense on such obligation, as well as depreciation expense on the capitalized property.

Upon termination of the sublease and conclusion that the Company no longer has a continuing interest in its Ontario facility in March 2005, the Company, in accordance with SFAS No. 98, removed the leased assets and liability accounts from its balance sheet. However, over approximately six years, the capitalized leased assets had been depreciated more rapidly than the liability to the lessor was being amortized, resulting in the liability to the lessor exceeding the net book value of the capitalized lease property by $0.7 million at the date immediately preceding the termination of the sublease.

En Pointe Technologies, Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

The $0.7 million gain was deferred and amortized on a straight-line basis over approximately sixteen months, which represented the conclusion of the seventh year of the fifteen year lease and the first date on which the Company could terminate the lease without cost or penalty. During the years ended September 30, 2007 and 2006, the Company amortized into earnings $30,000 and $387,000 respectively, of deferred gain.

On August 26, 2005 the Company gave notification to the lessor of the Ontario facility of its intention to terminate the lease and its notification was acknowledged on September 14, 2005. On March 30, 2006, the Company amended the lease agreement to extend the lease that was due to terminate on May 31, 2006 until October 31, 2006. In August 2006, the Company found the alternative location for its configuration center that it was seeking and entered into a sublease agreement for approximately 95,090 square feet at Rancho Cucamonga, California. The sublease is for approximately two and a half years, ending on February 15, 2009.

On October 29, 2007, the Company entered into a lease agreement for its new corporate headquarters. The property leased is a two story office building with 29,032 square feet of office space in Carson, California. The lease is for a period of seven years commencing on November 1, 2007. The lease requires monthly payments of $48,483.44 for the first year and contains an annual base rent increase of 3% that is effective for each November 1 for the succeeding six years. There is an option to extend the lease for two additional five year periods. Each of the two option periods to extend the lease contain the same base rent increases of 3% as found in the original lease. The scheduled monthly payments under the lease extension options are at the same original base monthly rate of $48,483.44 plus the sum of the accumulated annual 3% base rent increases to date. A security deposit of $96,966.88 is due upon execution of the lease. The lessee is responsible for the payment of real property taxes on the leased premises as well as for all utilities and services.

On July 11, 2008, the Company entered into a sublease agreement for the ground floor of its new corporate headquarters with En Pointe Global Services, LLC in which it has a 19.5% ownership interest. The lease commences on July 1, 2008 and terminates on October 31, 2014. The lease requires monthly payments of $24,241.72 (one-half of the amount in the master lease agreement) and substantially mirrors the terms of the master lease agreement with any payment amounts reduced to one-half of the master agreement.

The lessor of the leased corporate headquarters, Dominguez Channel, LLC, is 85% owned by the Chief Executive Officer of the Company and four members of his immediate family, two of whom are employees and another a director of the Company. The terms and provisions of the lease agreement were reviewed and unanimously approved on August 8, 2007 by the Company’s Audit Committee, comprised of disinterested directors.

On February 15, 2008, the Company and The Capital Development Authority, an organization commissioned by the government of Pakistan to oversee the planning and maintenance of Islamabad, entered into a leasing agreement to lease the Company approximately 41.25 acres of land. The lease is for three incremental renewable periods of thirty-three years each. The land is being leased for the construction of a technology campus for multiple educational, training and conferences which may include but is not limited to technical labs, including research data and development labs and centers for all types of information technology services, including data recovery centers, knowledge and business processing outsourcing, training across various market segments, managed services and help desk support. The technology campus will include accommodations for the faculty, students, staff, as well as visiting foreign and domestic guests and business and professional people. It will contain auditoriums, conference centers, recreational facilities, special dedicated commerce teaching and training blocks for advanced courses for multinational companies such as Microsoft Corporation and Cisco Systems, Inc and numerous other manufacturers and software publishers or their resellers or agents.

Under terms of the lease agreement, the Company will pay a total lease rental of $10.0 million over a ten year period of time. Lease payments totaling $5.3 million are due in installments of $0.5 million annually over a ten year period of time, with total interest estimated at $2.9 million based on a given monthly average of the KIBOR (Karachi Interbank Offered Rate) which has been estimated to be at the rate of 10% APR. A down payment of 10%, or $0.7 million, was paid when the letter of intent was originally signed with the lessor, and another 15%, or

En Pointe Technologies, Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

$1.1 million, was paid when the agreement was signed. In addition to the $10.0 million lease rental, there is an annual ground rental charge of approximately $13,000 a year and the Company is responsible for all applicable property related taxes.

The $10.0 million cost of the lease will be amortized over thirty-three years, or $0.3 million per year, and is presently considered non-operating investment expense. The $1.5 million of advance lease payments is substantially non-current and is included with other assets in the balance sheet.

Rent expense for the years ended September 30, 2008, 2007, and 2006 under all operating leases was approximately $1,826,000, $1,292,000 and $1,812,000, respectively.

Under an amendment to the employment agreement of the Company’s CEO entered into on October 1, 2004 and effective October 15, 2004, there is provision that in the event of termination of employment, under certain circumstances following an unapproved change in control of the Company, a severance payout equal to four times annual base salary in a single lump-sum payment will be made.

The Company is subject to sales tax examinations from all of the sales tax jurisdictions throughout the United States. Sales tax regulations are set by each state or local taxing authority and involve difficultly in their interpretation and application to all the variations in sales tax transactions that the Company incurs. Accordingly, the Company provides its best estimates as to any sales tax deficiency as soon as it becomes aware of such deficiency. Currently the Company is undergoing examinations by two major states that receive a majority of the Company’s sales tax proceeds. The Company has accrued $1.4 million for any findings that may result from these and other sales tax examinations and believes that the amount accrued will not differ materially from the final audit examination results.

8 EARNINGS PER SHARE AND PREFERRED STOCK

The following table sets forth the computation of basic and diluted net income per share (in thousands, except per share amounts):


	Year Ended September 30,
	2008		2007		2006

Net income	$	3,627	$	1,626	$	511
Denominator:
Weighted-average shares outstanding		7,160		7,145		7,006
Effect of dilutive securities:
Dilutive potential of options and warrants		103		311		119

Weighted-average shares and share equivalents outstanding		7,263		7,456		7,125

Basic income per share	$	0.51	$	0.23	$	0.07

Diluted income per share	$	0.50	$	0.22	$	0.07

The Company has an anti-takeover provision in its Certificate of Incorporation, as amended to date, that grants its Board of Directors the authority to issue up to 5,000,000 shares of preferred stock and to determine the price, rights, preferences, qualifications, limitations and restrictions, including voting rights, of those shares without any further vote or action by the stockholders. The rights of the holders of common stock will be subject to, and may be adversely affected by, the rights of the holders of any preferred stock that may be issued in the future. The issuance of preferred stock, while providing desirable flexibility in connection with possible acquisitions and other corporate purposes, could have the effect of delaying or preventing a third party from acquiring a majority of the Company’s outstanding voting stock. Further, Section 203 of the General Corporation Law of Delaware prohibits the Company from engaging in certain business combinations with interested stockholders. These provisions may have the effect of delaying or preventing a change in the Company’s control without action by the stockholders, and therefore could adversely affect the market price of its common stock.

En Pointe Technologies, Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

9 STOCK OPTIONS

In March 1996, the Company instituted a qualified and non-qualified stock option plan which provides currently that options for a maximum of 2,760,000 shares of common stock may be granted to directors, officers, and key employees with an exercise period not to exceed ten years. The stock options are generally exercisable at fair market value at the date of grant and generally vest on a pro-rata basis ending on the third, ninth and twenty-seventh months following the grant date or 25% in six months with the remaining 75% vesting quarterly over three and one half years. However, in anticipation of the adverse effects that adoption of SFAS No. 123(R) would have, the Compensation Committee and Board of Directors approved and made effective July 20, 2005 the acceleration of all unvested stock options. In March 2006, under its terms, the stock option plan terminated and no further shares are available for grant under the plan.

No options have been granted since the fiscal year ended September 30, 2005, when the Company granted options to purchase 275,000 shares of common stock to a director and an employee with exercise prices ranging from $2.00 to $2.10 per share. The options granted were accelerated so as to be fully vested as of July 20, 2005 and will expire ten years from the date of grant unless earlier exercised or terminated. A compensation charge was not recorded in connection with the issuance of such options as the exercise price of the stock options granted was not less than the fair market value of the Company’s stock price as of the date of grant.

The following is a summary of stock option activity:


							Total
	Number of Shares						Exercise
	Non-Qualified			Incentive			Value
							(In thousands)

Outstanding at September 30, 2005		820,667			725,106		$	5,266
Granted
Exercised		(4,000	)		(53,034	)		(105	)
Cancelled		—			(88,291	)		(331	)

Outstanding at September 30, 2006		816,667			583,781		$	4,830
Granted		—			—			—
Exercised					(31,125	)		(62	)
Cancelled		(8,333	)		(75,234	)		(966	)

Outstanding at September 30, 2007		808,334			477,422		$	3,804
Granted		—			—			—
Exercised		—			(3,450	)		(5	)
Cancelled					(281,359	)		(966	)

Outstanding at September 30, 2008		808,334			192,613		$	2,833


			Weighted		Remaining
	Options		Average		Contractual
	Exercisable		Exercise Price		Life

September 30, 2006		1,400,448	$	3.45		5.63
September 30, 2007		1,285,756	$	2.96		4.92
September 30, 2008		1,000,947	$	2.91		4.22

10 ACQUISITION OF BUSINESSES

On September 19, 2006, the Company entered into a Share Purchase Agreement with Omar Saeed and Arif Saeed (the “Saeeds”), effective October 1, 2006, to acquire 70% of the capital stock of two privately owned Pakistani companies, Ovex Technologies (Private) Limited and Ovex Pakistan (Private) Limited. Subsequently, on

En Pointe Technologies, Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

July 7, 2007, the two companies were approved for merger by the Pakistan Court effective October 1, 2006. The surviving company in the merger was Ovex Technologies (Private) Limited (“Ovex”).

Both companies are engaged in providing business process outsourcing (“BPO”) services and were wholly-owned by the Saeeds. Under the terms of the agreement, the Company paid the Saeeds a total of $1,680,000 in exchange for 70% of the capital stock of each of the two companies. The form of the consideration paid consisted of $240,000 in cash, $240,000 in unregistered shares of Company common stock, and a promissory note in the principal amount of $1,200,000, which promissory note was repaid in full in November 2006. Additionally, the board of directors of Ovex consists of five members; one designated by the Company (Edward O. Hunter, a director of the Company, serves as the Company’s designee), one of the Saeeds and three designated mutually by the two designees.

The Company allocated the $1,680,000 purchase price to the tangible and intangible assets acquired, based on their estimated fair values. The excess purchase price over those fair values was recorded as goodwill. The fair value assigned to the intangible assets acquired was based on valuations estimated by management with the assistance of an independent appraisal firm. In accordance with SFAS No. 142, “Goodwill and Other Intangible Assets”, goodwill and purchased intangibles with indefinite lives are not amortized but will be reviewed periodically for impairment. Of the purchase price, approximately $98,000 was allocated to amortizable (over five years using sum of the year’s digits method) customer relationships and approximately $420,000 was allocated to amortizable (over five years on a straight-line basis) non-competition agreements. The allocation of the purchase price (in thousands) was as follows:


Tangible assets acquired	$	704
Excess purchase price over net assets acquired		976

Purchase price	$	1,680

Intangible assets:
Goodwill		458
Covenant not to compete		420
Customer relationships		98

Total intangibles	$	976

On January 18, 2006, pursuant to an Asset Purchase Agreement with Software Medium, Inc., a Texas corporation (“SMI”), and Veridyn, LLC, a Texas limited liability company and a wholly-owned subsidiary of SMI (“Veridyn,” and collectively with SMI, the “Sellers”), the Company acquired certain depreciable and intangible assets and assumed certain liabilities, including a short-term lease commitment for office facilities. On closing, $550,000 in cash was paid to the Sellers. Two of Sellers’ officers entered into employment agreements with the Company. One of the officers was guaranteed a $250,000 bonus that will be payable over two years, subject to continued employment and is considered part of the purchase price. The other Sellers’ officer’s employment agreement contains a performance-based bonus provision that is based on the percentage of Earnings before Interest, Taxes, Depreciation and Amortization (“EBITDA”) on sales of security services. The bonus is payable over three years on a quarterly basis, subject to continued employment, and approximates 25% of such EBITDA per year, subject to a maximum annual aggregate bonus payment of $400,000. Additional fees payable and estimated to be payable for professional services directly related to the acquisition total $175,000.

The Company allocated the $975,000 purchase price to the tangible and intangible assets acquired, based on their estimated fair values. The excess purchase price over those fair values was recorded as goodwill. The fair value assigned to the intangible assets acquired was based on valuations estimated by management with the assistance of an independent appraisal firm. In accordance with SFAS No. 142, “Goodwill and Other Intangible Assets”, goodwill and purchased intangibles with indefinite lives acquired after June 30, 2001 are not amortized but will be reviewed periodically for impairment. Of the purchase price, approximately $154,000 was allocated to amortizable

En Pointe Technologies, Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

(over five years using sum of the year’s digits method) customer relationships and approximately $460,000 was allocated to amortizable (over three years on a straight-line basis) non-competition agreements. The allocation of the purchase price (in thousands) was as follows:


Depreciable assets acquired	$	57
Excess purchase price over net assets acquired		918

Purchase price	$	975

Intangible assets:
Customer relationships		154
Goodwill		304
Covenant not to compete		460

Total intangibles	$	918

Management considers that sum-of-the-years digits best reflects the pattern in which the economic benefits of SMI and Viablelinks (as defined below) customer relationships will be realized. At September 30, 2005, the Company increased its amortization of the Tabin (as defined below) customer relationships $50,000 in recognition of impairment of certain customer relationships.

In prior fiscal years, in addition to the transactions described above, the Company made the following acquisitions:


October 11, 2002		Tabin Corporation (“Tabin”)
October 01, 2004		Viablelinks, Inc. (“Viablelinks”)

At September 30, 2008, amortization of customer relationships for current and future years is as follows (in thousands):


	Tabin		Viablelinks		SMI		Ovex		Total

Beginning accumulated amortization	$	470	$	160	$	350	$	116	$	1,096
Fiscal year 2008 amortization				27		187		117		331

Ending accumulated amortization	$	470	$	187	$	537	$	233	$	1,427

Fiscal year:
2009		—		13		61		117		191
2010		—		—		13		97		110
2011		—		—		3		91		94

Total future year’s amortization	$	—	$	13	$	77	$	285	$	375

Total amortization	$	470	$	200	$	614	$	518	$	1,802

En Pointe Technologies, Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

The following unaudited pro forma consolidated financial information reflects the results of operations for the year ended September 30, 2006 as if the acquisitions of Ovex and SMI had occurred on October 1, 2005 Pro form results for the years ended September 30, 2008 and 2007 is not presented because both companies were fully integrated with the Company’s operations during those periods. (In thousands, except per share data):


	Year Ended September 30, 2006
	Pro Forma		As Reported

Net sales	$	327,090	$	323,723
Net income	$	826	$	511
Net income per share:
Basic	$	0.12	$	0.07

Diluted	$	0.12	$	0.07

Weighted average shares outstanding:
Basic		7,006		7,006

Diluted		7,125		7,125

These pro forma results have been prepared for comparative purposes only and do not purport to be indicative of what operating results would have been had the acquisitions actually taken place in those earlier years. In addition, these results are not intended to be a projection of future results and do not reflect any synergies that might be achieved from the combined operations.

11 LITIGATION

In July 2006, Church Gardens, LLC, the current owner of our formerly leased configuration facility in Ontario, California, filed suit against the Company in San Bernardino County Superior Court, Case No. RCV096518. The complaint centers on certain furniture, fixtures, equipment and leasehold improvements that were sold to, and leased back to the Company, by plaintiff’s predecessor in 1999 when the Company still occupied its former leased configuration facility in Ontario, California. The plaintiff alleges, among other things, that a portion of the leased-back property was sold, destroyed, altered, or removed from the premises, and demands both an inspection and an accounting of the property remaining and for the court to provide damages to the extent that the Company may have breached its contract. The Company disputes the allegations and believes that any property loss liability under the lease provisions would be limited to the $75,000 that has already been accrued in its financial statements.

In February 2007, the Company filed a cross-complaint against Church Gardens LLC. The cross-complaint asks that the Company’s $90,720 security deposit be returned with interest. In addition, the Company claims that Church Gardens LLC engaged in unfair business practices in retaining the security deposit and in not allowing the removal of certain personal property that the Company owned and that Church Gardens LLC engaged in unlawful conversion of certain property belonging to the Company. The Company also asked the court to grant declaratory relief as to the actions in the Company’s attempt to preserve the disputed property pending a judicial determination of rights. the Company also seeks recovery of possession of its personal property and injunctive relief preventing the plaintiff from liquidating the Company’s property.

In January 2007, US Real Estate Consortium, the predecessor owner of the Company’s former leased configuration facility in Ontario, California filed suit against the current owner, Church Gardens LLC, in San Bernardino County Superior Court, Case No. RCV100476.

In March 2007, the current owner, Church Gardens LLC, filed a cross-complaint against the Company and the former owner, US Real Estate Consortium, among others. On May 31, 2007, the Company answered and cross-claimed against the current owner, Church Gardens, LLC. On July 25, 2007, Church Gardens, LLC filed its answer to the first amended cross-complaint filed by the Company. Both cases (RCV096518 and RCV100476) have now been consolidated for all purposes.

En Pointe Technologies, Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

There has been substantial discovery, and substantial law and motion practice to date. The Company is contesting the consolidated case vigorously, and intend to continue doing so.

On July 25, 2008, the Circuit Court for the City of Norfolk, Virginia granted leave to Softchoice Corporation to amend its Complaint in Case Number CL07-5777 against certain of the Company’s employees who were former Softchoice Corporation employees to add the Company and its subsidiary, En Pointe Technologies Sales, Inc., as defendants therein. The Company has not yet filed a responsive pleading and vigorously disputes liability.

There are various other claims and litigation proceedings in which the Company is involved in the ordinary course of business. The Company provides for costs related to contingencies when a loss is probable and the amount is reasonably determinable. While the outcome of the foregoing and other claims and proceedings cannot be predicted with certainty, after consulting with legal counsel, management does not believe that it is reasonably possible that any ongoing or pending litigation will result in an unfavorable outcome or have a material adverse affect on our business, financial position and results of operations or cash flows.

12 QUARTERLY FINANCIAL DATA (UNAUDITED)

Selected financial information for the quarterly periods in the fiscal years ended September 30, 2008 and 2007 is presented below (in thousands, except per share amounts):


	Fiscal 2008 Quarter Ended
	September		June		March			December

Net sales	$	63,084	$	79,929	$	70,567		$	86,822
Gross profit		7,653		13,307		10,985			11,894
Net income (loss)		6,140		465		(3,021	)		43
Basic net income (loss) per share		0.86		0.06		(0.42	)		0.01
Diluted net income (loss) per share		0.85		0.06		(0.42	)		0.01


	Fiscal 2007 Quarter Ended
	September		June		March		December

Net sales	$	97,041	$	99,967	$	74,498	$	75,620
Gross profit		11,704		11,888		10,086		9,873
Net income		729		412		213		272
Basic net income per share		0.10		0.06		.03		.04
Diluted net income per share		0.10		0.06		.03		.04

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this Amendment No. 3 on Form 10-K/A to be signed on its behalf by the undersigned, thereunto duly authorized.

EN POINTE TECHNOLOGIES, INC.

/s/ ATTIAZAZ “BOB” DIN

Attiazaz “Bob” Din,

Chief Executive Officer and President

(Principal Executive Officer)

May 14, 2009

Pursuant to the requirements of the Securities Exchange Act of 1934, this Amendment No. 3 on Form 10-K/A has been signed below by the following persons in the capacities and on the dates indicated.


Signature	Title	Date


*/s/ MANSOOR S. SHAH Mansoor S. Shah	Chairman of the Board and Director	May 14, 2009

*/s/ ATTIAZAZ “BOB” DIN Attiazaz “Bob” Din	Chief Executive Officer, President and Director (Principal Executive Officer)	May 14, 2009

*/s/ JAVED LATIF Javed Latif	Chief Financial Officer and Senior Vice President (Principal Financial and Principal Accounting Officer)	May 14, 2009

*/s/ NAUREEN DIN Naureen Din	Director	May 14, 2009

*/s/ ZUBAIR AHMED Zubair Ahmed	Director	May 14, 2009

*/s/ MARK BRIGGS Mark Briggs	Director	May 14, 2009

*/s/ EDWARD O. HUNTER Edward O. Hunter	Director	May 14, 2009

*/s/ TIMOTHY J. LILLIGREN Timothy J. Lilligren	Director	May 14, 2009

*By: /s/ ATTIAZAZ “BOB” DIN Attiazaz “Bob” Din, Attorney-in-Fact		May 14, 2009

Index to Exhibits


Exhibit
Number			Description

	2	.1	Agreement and Plan of Merger between the Registrant and En Pointe Technologies, Inc., a Texas corporation, effective February 29, 1996 (incorporated by reference to the same numbered exhibit to the Registrant’s Registration Statement on Form S-1 filed May 8, 1996).
	3	.1	Certificate of Incorporation of Registrant (incorporated by reference to the same numbered exhibit to the Registrant’s Registration Statement on Form S-1 filed May 8, 1996).
	3	.2	Bylaws of Registrant (incorporated by reference to the same numbered exhibit to the Registrant’s Registration Statement on Form S-1 filed May 8, 1996).
	3	.3	Certificate of Amendment to Certificate of Incorporation of Registrant filed May 16, 2000. (incorporated by reference to the same numbered exhibit to the Registrant’s Registration Statement on Form 10-K filed January 18, 2001).
	3	.4	Certificate of Amendment to Certificate of Incorporation of Registrant filed May 16, 2005. (incorporated by reference to the same numbered exhibit to the Registrant’s Form 10-Q filed May 16, 2005).
	4	.3	Form of Common Stock Certificate (incorporated by reference to the same numbered exhibit to the Registrant’s Registration Statement on Form S-1 filed May 8, 1996).
	10	.1	En Pointe Technologies, Inc. 1996 Stock Incentive Plan (incorporated by reference to the same numbered Exhibit to the Registrant’s Registration Statement on Form S-1 filed May 8, 1996).*
	10	.3	Form of Directors’ and Officers’ Indemnity Agreement (incorporated by reference to the same numbered exhibit to the Registrant’s Registration Statement on Form S-1 filed May 8, 1996).*
	10	.5	Employment Agreement between the Registrant and Attiazaz “Bob” Din, dated March 1, 1996 (incorporated by reference to the same numbered exhibit to the Registrant’s Registration Statement on Form S-1 filed May 8, 1996).*
	10	.6	Amended Employment Agreement between the Registrant and Attiazaz “Bob” Din, dated April 2, 1997 (incorporated by reference to the same numbered exhibit to the Registrant’s Registration Statement on Form 10-K filed December 29, 1997).*
	10	.24	Assignment and License Agreement between the Registrant and SupplyAccess, Inc., dated September 21, 2001 (incorporated by reference to the same numbered exhibit to the Registrant’s Form 10-K filed December 31, 2001.)
	10	.27	Employment Agreement between the Registrant and Kevin Schatzle, dated March 28, 2002. (incorporated by reference to the same numbered exhibit to the Registrant’s Form 10-K filed December 27, 2002).*
	10	.31	Asset Purchase Agreement entered into as of October 9, 2002 between Tabin Corporation and En Pointe Technologies Sales, Inc. (incorporated by reference to the same numbered exhibit to the Registrant’s Form 10-K filed December 27, 2002).
	10	.36	Employment agreement between the Registrant and Javed Latif, dated March 28, 2002. (incorporated by reference to the same numbered exhibit to the Registrant’s Form 10-Q filed February 14, 2003).*
	10	.39	Employee Leasing and Licensing Agreement by and between the Registrant and En Pointe Global Services, Inc., dated October 17, 2003. (incorporated by reference to the same numbered exhibit to the Registrant’s Form 10-Q filed May 17, 2004).
	10	.41	Business Financing Agreement between En Pointe Technologies Sales, Inc. and GE Commercial Distribution Finance Corporation, dated June 25, 2004. (incorporated by reference to the same numbered exhibit to the Registrant’s Form 10-Q filed August 16, 2004).
	10	.42	Agreement for Wholesale Financing between En Pointe Technologies, Inc. and GE Commercial Distribution Finance Corporation, dated June 25, 2004. (incorporated by reference to the same numbered exhibit to the Registrant’s Form 10-Q filed August 16, 2004).
	10	.43	Addendum to Business Financing Agreement and Agreement for Wholesale Financing between En Pointe Technologies, Inc. and GE Commercial Distribution Finance Corporation, dated June 25, 2004. (incorporated by reference to the same numbered exhibit to the Registrant’s Form 10-Q filed August 16, 2004).


Exhibit
Number			Description

	10	.44	Addendum to Business Financing Agreement and Agreement for Wholesale Financing between En Pointe Technologies, Inc. and GE Commercial Distribution Finance Corporation, dated July 27, 2004. (incorporated by reference to the same numbered exhibit to the Registrant’s Form 10-Q filed August 16, 2004).
	10	.45	Asset Purchase Agreement entered into as of October 1, 2004 between Viablelinks, Inc. and En Pointe Technologies Sales, Inc. (incorporated by reference to the same numbered exhibit to the Registrant’s Form 10-Q filed February 14, 2005).
	10	.46	Subscription Agreement dated March 18, 2005 between Premier BPO Inc. and the Registrant (incorporated by reference to the same numbered exhibit to the Registrant’s Form 10-Q filed May 16, 2005).
	10	.47	Amendment to Employment Agreement between the Registrant and Attiazaz “Bob” Din, dated November 15, 2004 (incorporated by reference to exhibit 99.1 to the Registrant’s Form 8-K filed on November 18, 2004.)*
	10	.48	Addendum to Business Financing Agreement and Agreement for Wholesale Financing among En Pointe Technologies Sales, Inc., En Pointe Gov, Inc. and GE Commercial Distribution Finance Corporation, effective January 23, 2006. (incorporated by reference to the same numbered exhibit to the Registrant’s Form 8-K filed January 30, 2006).
	10	.49	Asset Purchase Agreement entered into as of January 18, 2006 between Software Medium, Inc., Veridyn, LLC and En Pointe Technologies Sales, Inc. (incorporated by reference to the same numbered exhibit to the Registrant’s Form 10-Q filed February 14, 2006).
	10	.50	Employment Agreement between the Registrant and Armen Martirosyan, dated March 28, 2002. (incorporated by reference to the same numbered exhibit to the Registrant’s Form 10-Q filed February 14, 2006).*
	10	.51	Employment Agreement between the Registrant and Robert Mercer, dated March 28, 2002. (incorporated by reference to the same numbered exhibit to the Registrant’s Form 10-Q filed February 14, 2006).*
	10	.52	Employment Agreement between the Registrant and David L. Mochalski, dated May 28, 2002. (incorporated by reference to the same numbered exhibit to the Registrant’s Form 10-Q filed February 14, 2006).*
	10	.53	Sublease dated March 30, 2006 between Jetabout North America, Inc. and the Registrant for the property located at 2381 Rosecrans Avenue, El Segundo, California 90245 (incorporated by reference to the same numbered Exhibit to the Registrant’s Form 10-Q filed May 15, 2006).
	10	.55	Addendum to Business Financing Agreement and Agreement for Wholesale Financing among En Pointe Technologies Sales, Inc., En Pointe Gov, Inc. and GE Commercial Distribution Finance Corporation, dated May 12, 2006 (incorporated by reference to the same numbered exhibit to the Registrant’s Form 8-K filed May 17, 2006).
	10	.56	Sublease dated July 12, 2006 between North Pacific Group, Inc. and the Registrant for certain industrial warehouse properties located at 11081 Tacoma Drive, Rancho Cucamonga, California 91730 (incorporated by reference to the same numbered exhibit to the Registrant’s Form 8-K filed September 1, 2006).
	10	.57	Share Purchase Agreement dated September 19, 2006, by and among the Registrant, Omar Saeed and Arif Saeed. (incorporated by reference to the same numbered Exhibit to the Registrant’s Form 8-K filed September 25, 2006).
	10	.58	Employment Agreement between the Registrant and Richard R. Emil, dated September 27, 2006. (incorporated by reference to the same numbered exhibit to the Registrant’s Form 8-K filed September 27, 2006).*
	10	.59	Promissory Note between the Registrant and Omar and Arif Saeed, dated October 5, 2006. (incorporated by reference to the same numbered exhibit to the Registrant’s Form 10-K filed December 18, 2006).
	10	.60	Amendment to Share Purchase Agreement effective October 1, 2006, by and among the Registrant, Omar Saeed and Arif Saeed. (incorporated by reference to the same numbered exhibit to the Registrant’s Form 10-K filed December 18, 2006).


Exhibit
Number			Description

	10	.61	Temporary Overline Agreement by GE Commercial Distribution Finance Corporation for En Pointe Technologies Sales, Inc. and En Pointe Gov, Inc., dated June 13, 2007. (incorporated by reference to exhibit 10.60 to the Registrant’s Form 8-K filed June 14, 2007).
	10	.62	Amendment to Business Financing Agreement and Agreement for Wholesale Financing among En Pointe Technologies Sales, Inc., En Pointe Gov, Inc. and GE Commercial Distribution Finance Corporation, dated July 30, 2007. (incorporated by reference to exhibit 10.61 to the Registrant’s Form 8-K filed July 31, 2007).
	10	.63	Addendum to Business Financing Agreement and Agreement for Wholesale Financing among En Pointe Technologies Sales, Inc., En Pointe Gov, Inc. and GE Commercial Distribution Finance Corporation, dated September 25, 2007. (incorporated by reference to the same numbered exhibit to the Registrant’s Form 8-K filed September 26, 2007).
	10	.64	Lease dated October 29, 2007 between Dominguez Channel, LLC and En Pointe Technologies Sales, Inc. for certain office properties located at 18701 S. Figueroa Street, Carson, California (incorporated by reference to the same numbered exhibit to the Registrant’s Form 8-K/A filed October 31, 2007).
	10	.65	Lease dated February 15, 2008 between The Capital Development Authority and the Registrant for 41.25 acres of land in Islamabad, Pakistan (incorporated by reference to the same numbered Exhibit to the Registrant’s Form 8-K filed February 22, 2008).
	10	.66	Agreement for Inventory Financing between En Pointe Technologies Sales, Inc., and IBM Credit LLC, dated March 20, 2008. (incorporated by reference to the same numbered exhibit to the Registrant’s Form 8-K filed March 21, 2008).
	10	.67	Collateralized Guarantee between En Pointe Technologies, Inc. and IBM Credit LLC, dated March 20, 2008. (incorporated by reference to the same numbered exhibit to the Registrant’s Form 8-K filed March 21, 2008).
	10	.68	Deposit Account Control Agreement between En Pointe Technologies Sales, Inc. and IBM Credit LLC, dated March 20, 2008 (incorporated by reference to the same numbered exhibit to the Registrant’s Form 8-K filed March 21, 2008).
	10	.69	Intercreditor Agreement between GE Commercial Distribution Finance Corporation and IBM Credit LLC, dated March 2008 (incorporated by reference to the same numbered exhibit to the Registrant’s Form 8-K filed March 21, 2008).
	10	.70	Limited Liability Company Purchase agreement between En Pointe Technologies Sales, Inc. and Allied Digital Services Ltd., dated July 9, 2008 (incorporated by reference to the same numbered exhibit to the Registrant’s Form 8-K filed July 15, 2008).
	10	.71	Escrow Agreement by and among En Pointe Technologies Sales, Inc., Allied Digital Services Ltd., and U.S. Bank National Association, dated July 9, 2008 (incorporated by reference to the same numbered exhibit to the Registrant’s Form 8-K filed July 15, 2008).
	10	.72	Master Services Agreement between En Pointe Technologies, Inc. and En Pointe Technologies Sales, Inc. and En Pointe Global Services, LLC, dated September 2, 2008 (incorporated by reference to the same numbered exhibit to the Registrant’s Form 8-K filed September 2, 2008).
	10	.73	First amendment to July 9, 2008 Limited Liability Company Interest Purchase Agreement between En Pointe Technologies Sales, Inc. and Allied Digital Services Ltd., dated December 2, 2008 (incorporated by reference to the same numbered exhibit to the Registrant’s Form 8-K filed December 2, 2008).
	21	.1	Subsidiaries of the Company.
	23	.1	Consent of Rose, Snyder & Jacobs CPA Corp.
	31	.1	Certification of the Chief Executive Officer, as required by Rule 13a-14(a) or 15d-14(a) of the Securities Exchange Act of 1934, as amended.
	31	.2	Certification of the Chief Financial Officer, as required by Rule 13a-14(a) or 15d-14(a) of the Securities Exchange Act of 1934, as amended.
	32	.1	Certifications of the Chief Executive Officer and Chief Financial Officer, as required by Rule 13a-14(b) or 15d-14(b) of the Securities Exchange Act of 1934, as amended, and 18 U.S.C. Section 1350.


*		Each of these Exhibits constitutes a management contract, compensatory plan, or arrangement.


PART I		4
ITEM 1.	BUSINESS	4
ITEM 1A.	RISK FACTORS	11
ITEM 1B.	UNRESOLVED STAFF COMMENTS	18
ITEM 2.	PROPERTIES	18
ITEM 3.	LEGAL PROCEEDINGS	19
ITEM 4.	SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS	20

PART II		21
ITEM 5.	MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES	21
ITEM 6.	SELECTED CONSOLIDATED FINANCIAL DATA	21
ITEM 7.	MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	21
ITEM 7A.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	34
ITEM 8.	FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA	34
ITEM 9.	CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURES	34
ITEM 9A(T)	CONTROLS AND PROCEDURES	34
ITEM 9B	OTHER INFORMATION	36

PART III		37
ITEM 10.	DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE	37
ITEM 11.	EXECUTIVE COMPENSATION	40
ITEM 12.	SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS	49
ITEM 13.	CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE	51
ITEM 14.	PRINCIPAL ACCOUNTANT FEES AND SERVICES	52

PART IV		53
ITEM 15	EXHIBITS AND FINANCIAL STATEMENT SCHEDULES	53
SIGNATURES		82
EX-21.1
EX-23.1
EX-31.1
EX-31.2
EX-32.1


	•	Outsourcing of the monitoring of our IT network and firewall to a reputable third party vendor.

	•	Updated password policies related to our financial reporting applications and related operating systems.


ITEM 15.	*EXHIBITS AND FINANCIAL STATEMENT SCHEDULES*


	Page

Reports of Independent Registered Public Accounting Firms		55
Consolidated Balance Sheets as of September 30, 2008 and 2007		56
Consolidated Statements of Operations for each of the Three Years in the Period Ended September 30, 2008		57
Consolidated Statements of Stockholders’ Equity for each of the Three Years in the Period Ended September 30, 2008		58
Consolidated Statements of Cash Flows for each of the Three Years in the Period Ended September 30, 2008		59
Notes to Consolidated Financial Statements		60
Schedule II — Valuation and Qualifying Accounts		81


			Charges
	Balance at		(Reversals)					Balance at
	Beginning of		to Cost and					End of
	Period		Expenses		Deductions			Period

Year Ended September 30, 2008(in thousands):
Allowance for doubtful accounts	$	695	$	2,825	$	(84	)	$	3,436
Allowance for returns		99		—		—			99
Allowance for inventory valuation		552		278		—			830

	$	1,346	$	3,103	$	(84	)	$	4,365

Year Ended September 30, 2007(in thousands):
Allowance for doubtful accounts	$	1,011	$	205	$	(521	)	$	695
Allowance for returns		99		—		—			99
Allowance for inventory valuation		523		29		—			552

	$	1,633	$	234	$	(521	)	$	1,346

Year Ended September 30, 2006(in thousands):
Allowance for doubtful accounts	$	723	$	415	$	(127	)	$	1,011
Allowance for returns		99		—		—			99
Allowance for inventory valuation		374	$	149		—			523

	$	1,196	$	564	$	(127	)	$	1,633


ITEM 9B.	*OTHER INFORMATION*