|UNITED STATESSECURITIES AND EXCHANGE COMMISSION 
  WASHINGTON, DC 20549
  ______________FORM 10-K
|-------------------------------------------------------------------------------------------------
|(Mark One)                                                                                       
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|                                                                                                 
|                                                                                                 
|                                                                                                 
|OR                                                                                               
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| | £TRANSITION
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
| | -----------------------------------------------------------------------------------------
| | For the transition period from.................to.........................               

Commission file number: 0-32789

EMTEC, INC.(Exact name of registrant as specified in its charter)

|Delaware
    (State of incorporation or organization) | 87-0273300
    (I.R.S. Employer Identification No.)
|----------------------------------------------------- | ---------------------------------------------------

|                                                                                                                            
|----------------------------------------------------------------------------------------------------------------------------
|572 Whitehead Road, Bldg#1
      Trenton, New Jersey 08619 
    (Address of principal executive offices, including zip code)
|                                                                                                                            
|(609)-528-8500                                                                                                              
|(Registrants telephone number, including area code)                                                                        
|                                                                                                                            
|Securities registered pursuant to Section 12(b) of the Act: None                                                            
|                                                                                                                            
|Securities registered pursuant to Section 12(g) of the Act:                                                                 
|                                                                                                                            
|Common Stock, $0.01 par value                                                                                               
|                                                                                                            
|                                                                                                                            
|Title of  class                                                                                                             

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 S   No £

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.  £

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of
the Exchange Act). £Yes S No

The aggregate market value of the voting and non-voting common equity held by non-affiliates of the
registrant as of September 30, 2004 was approximately $4,040,696 computed by reference to the closing
price of the common stock for that date.

As of July 11, 2005, there were outstanding 7,566,888 shares of the registrants common stock.



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|EMTEC, INC.
      2005 FORM 10-K ANNUAL REPORT
    TABLE OF CONTENTS
|--------------------------------------------------------------------
|                                                                    
|PART I                                                              
|                                                                    
|Item 1.                                                             
|Item 2.                                                             
|Item 3.                                                             
|Item 4.                                                             
|                                                                    
|PART II                                                             
|                                                                    
|Item 5.                                                             
|Item 6.                                                             
|Item 7.                                                             
|Item 7A.                                                            
|Item 8.                                                             
|Item 9.                                                             
|Item 9A.                                                            
|Item 9B.                                                            
|                                                                    
|PART III                                                            
|                                                                    
|Item 10.                                                            
|Item 11.                                                            
|Item 12.                                                            
|Item 13.                                                            
|Item 14.                                                            
|                                                                    
|PART IV                                                             
|                                                                    
|Item 15.                                                            
|                                                                    
|                                                                    

- i -

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References in this Annual Report to we, us, or our are to Emtec,
Inc. and its subsidiaries, unless the context specifies or requires otherwise.

Cautionary Statement Regarding Forward-Looking Statements

You should carefully review the information contained in this Annual Report and in other reports or
documents that we file from time to time with the Securities and Exchange Commission (the SEC).
In this Annual Report, we state our beliefs of future events and of our future financial performance.
In some cases, you can identify those so-called forward-looking statements by words such
as may, will, should, expects, plans, anticipates,
believes, estimates, predicts, potential, or continue
or the negative of those words and other comparable words. You should be aware that those statements
are only our predictions. Actual events or results may differ materially. In evaluating those statements,
you should specifically consider various factors, including the risks discussed in this Annual Report
for the year ended March 31, 2005 and other reports or documents that we file from time to time with
the SEC. Those factors may cause our actual results to differ materially from any of our forward-looking
statements. All forward-looking statements attributable to us or a person acting on our behalf are
expressly qualified in their entirety by this cautionary statement.

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.

- ii -

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PART I
Item 1. Business
Introduction
Emtec (OTC: ETEC) is a systems integrator focused on providing technology solutions that enable
its customers to effectively use and manage their data to grow their businesses. Our areas of specialization
in information technology (IT) services include enterprise computing, data communications,
data access, network design, enterprise backup and storage consolidation, managed services and staff
augmentation. Emtecs solutions are crafted to enable our customers to become more efficient
and effective, thereby giving them a competitive advantage. To date, the most significant portion
of our revenues has been derived from our activities as a reseller of IT products, such as workstations,
servers, microcomputers, application software and networking and communications equipment. However,
we are actively endeavoring to increase the portion of our revenues that are derived from IT services.
We anticipate that an increasing percentage of our future revenues will be derived from such business.
Named to the VARBusiness 500 list of top network integrators, value added resellers, and consultants in the U.S. every year
since 1995, we combine extensive experience in systems integration with premier technology elements
to provide our customers with sophisticated, streamlined, truly comprehensive solutions.
Over the past two decades, we have built strong relationships with leading manufacturers, such as Cisco,
HP, IBM, Microsoft, Sun Microsystems, Dell, and Veritas, thereby enabling us to provide cutting-edge,
scalable, reliable and secure solutions. This, along with our background in information technology,
positions us as a premier, single-source provider of information systems, and network solutions.
Our customers are primarily Fortune 2000 companies, state and local government, local school districts,
and other large and mid-sized companies located principally in the New York/New Jersey Metropolitan
area and the Southeastern United States. We service our customer base from leased facilities in New
Jersey, New York, Georgia, and Florida.
Prior
to January 17, 2001, we were engaged in the oil and gas exploration and development business under
the name American Geological Enterprises, Inc. At that time our principal asset, other than cash,
was a 5.49% working interest in a geothermal power unit. On January 17, 2001, we completed a
merger with Emtec, Inc., a privately held New Jersey corporation (Emtec-NJ), which since
1980 had been engaged in the business of providing IT products and services to the computer industry.
Upon the merger we retained all of our assets, subject to liabilities, and assumed all of the assets
and liabilities of Emtec-NJ. In March 2005, we disposed of our geothermal investment through an assignment
of our 5.49% working interest in the Roosevelt Hot Spring geothermal power unit as well as some other
minor oil and gas rights to Energy Minerals, Inc., a Nevada corporation for $150,000 in cash.
Our executive offices are located at 572 Whitehead Road, Building#1, Trenton, New Jersey; telephone:
(609) 528-8500. Our website is located at www.emtecinc.com. We have made available free of charge through our website our annual report on Form 10-K, quarterly
reports on Form 10-Q, current reports on Form 8-K and amendments to those reports filed or furnished
pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934 as soon as reasonably practicable
after such material was electronically filed with, or furnished to, the Securities and Exchange Commission.
The information on our website is not part of this Annual Report.


Recent Development
On July 14, 2005, we announced that we had entered into a definitive agreement to merge with DARR Westwood Technology Corporation, the parent company of Westwood Computer Corporation.
Westwood Computer Corporation, headquartered in Springfield, New Jersey and established in 1964, is a privately held information technology company and a leading supplier of information technology products and services to the Federal Government. It has been recognized as one of the top 20 General Services Administration vendors in the IT industry during each of the past eight years and was named in data compiled by the GSA as the ninth largest such vendor for the Federal Governments 2004 fiscal year. Westwood Computer has additional locations in New York and Virginia, as well as five regional offices in the South and Western United States.
Upon
  the effectiveness of the merger, which is expected to occur within the next
  several weeks, DARR Westwoods shareholders will acquire approximately
  55% of our then issued and outstanding shares of common stock and our board
  of directors will be comprised solely of DARR Westwoods designees, thereby
  resulting in a change in our control. Dinesh Desai, Chairman of Westwood
  Computer Corporation, will become our Chairman and CEO. John Howlett and Ron
  Seitz, currently our CEO and our COO, respectively, will remain in our employ
  as our President, Northeast and as our President, Southeast, respectively.
The combined companies will continue to operate under our current name. Westwood Computers revenues for the 12 months ended August 31, 2004 were $129.87 million. Our revenues for our fiscal year ended March 31, 2005 were $112.70 million.
Completion of the merger is subject, among other matters, to regulatory filings and the expiration of a subsequent 10 day waiting period. Subject to the receipt of institutional financing, which is also a condition to the completion of the merger, we will initiate within 30 days thereafter a self-tender offer to repurchase up to 2,864,584 shares of our then issued and outstanding shares of common stock having an aggregate purchase price of up to $5.5 million at a price of $1.92 per share.
Our shareholders and other interested parties are urged to read our offer to purchase and other relevant documents filed with the SEC when they become available because they will contain important information. Our shareholders will be able to obtain such documents free of charge at the SECs website: www.sec.gov or from us at 572 Whitehead Road, Bldg. #1, Trenton, New Jersey 08619, Attn: Secretary.
Industry Background
The broad market in which we compete is the provision of IT services. This marketplace consists of
traditional IT services such as hardware and software procurement, life-cycle services, and network
consulting, as well as new and innovative Internet services such as web enablement, remote network
monitoring, help desk services, and information security.
As the market for IT products has matured over the past several years, price competition has intensified.
That factor, combined with abbreviated product lifecycles, has forced IT product manufacturers to
pursue lower cost manufacturing and distribution strategies. Resellers who were able to serve the
needs of corporate end users requiring diverse brands of products and related IT services were initial
beneficiaries of this heightened competition. More recently, however, continuing competition and
manufacturers renewed efforts to improve their cost structures have led to both consolidations
and business failures among resellers. Manufacturers have shifted from exclusive distribution partners
to open sourcing and some have begun direct selling efforts with a view toward capturing
market share from resellers.
At the same time that the market for IT products is consolidating, the market for IT services is expanding.
Many companies have become increasingly dependent on the use of IT as a competitive tool in todays
business environment. The need to distribute and access data on a real-time basis throughout an organization
and between organizations has led to the rapid growth in network computing infrastructures that connect
numerous and geographically dispersed end users through local and wide area networks. This growth
has been driven by the emergence of industry standard hardware, software, and communications tools,
as well as the significant improvement in the performance, capacity, and utility of such network-based
equipment and applications.
The decision-making process that confronts companies when planning, selecting, and implementing IT
infrastructure and services continues to grow more complex. Organizations are continually faced with
technology obsolescence and must design new networks, upgrade, and migrate to new systems. As a result
of the rapid changes in IT products and the risks associated with the commitment of large capital
expenditures for products and services whose features and perceived benefits are not within the day-to-day
expertise of operating management, many businesses increasingly are outsourcing some or all of their
network management and support functions and are seeking the expertise of independent providers of
IT products and services.
Our Strategy
Our primary business objective is to become a leading single-source provider of high quality and innovative
IT products, services, and support. We believe that by working with a single-source provider, business
organizations will be able to adapt more quickly to technological changes and reduce their overall
IT costs. To this end, we are pursuing the following strategies:
Pursuing Strategic AcquisitionsWe are seeking to expand our service offerings, to add to or enhance our base of technical or sales
personnel, and to nurture and expand client relationships by means of acquisitions of companies whose
businesses complement our businesses and, in particular, our IT consulting services. We intend to
focus on companies with management teams who are willing to commit to long-term participation in
our organization and who share our vision of continued growth.
- 2 -

On January 9, 2002, we acquired substantially all of the assets of Devise Associates, Inc., an information
technology consulting and managed services subsidiary of McLeodUSA, Inc. located in New York City.
On August 12, 2002, we acquired certain assets of Acentra Technologies, Inc., including the assumption
of the State of New Jersey computer supply and services contract, for a net purchase price of $165,607
in cash.
On August 31, 2002, we acquired all of the customer contracts and certain assets of Turnkey Computer
Systems, Inc. of Clifton, NJ.
Capitalizing on Existing Relationships
We have invested in training and committed resources to obtain company certifications from key industry
manufacturers, and have entered into written agreements with most of these manufacturers, such as
Sun, IBM, HP, Dell, CISCO, Microsoft, Novell and Citrix. These agreements grant us a nonexclusive
right to purchase the manufacturers hardware and license its software for our internal business
use and for commercial integration and resale. Typically, our agreements with such manufacturers,
such as those with Sun, IBM, CISCO, Microsoft, Novell and Citrix, provide for a one-year term, renewable
by the parties for successive one-year terms and are terminable by either party on prior written
notice ranging from 30 to 45 days. They generally do not contain financial terms for resale of the
manufacturers products, which terms are separately governed by purchase orders.
Moreover, we believe that our history of satisfying the IT product requirements of our larger customers
is facilitating the marketing of our broad range of services to this important segment of our clientele.
Our Business

IT ServicesEnterprise Computing Solutions: We offer a full spectrum of IT product acquisition and support services needed to support client/server
environments, including product sourcing, network design and implementation, technical support, server
consolidation, and clustering and load balancing for high availability.
Managed Services and Staff Augmentation Solutions: We manage and support customers networks through the utilization of outsourced help desk and
network monitoring services as well as through our own on-site engineering resources. This allows
organizations to focus the majority of their efforts on their businesses - not on managing their
IT infrastructures.
Data Communications Solutions: We offer Local Area Network/ Wide Area Network and data wireless connectivity, voice over IP and
structured cabling solutions that are designed to enhance communication capabilities, while decreasing
costs.
Data Access Solutions: We enable on-demand access to information from anywhere over any network; our mobility, messaging,
and management solutions provide secure data access, increased business productivity, and reduced
IT costs for any organization.
Lifecycle Management Services:Our lifecycle management services are designed to provide customers with continuous availability of
service and support throughout the lifecycle of their IT
- 3 -

investments, including the full spectrum of IT product acquisition and support services needed to support
server environments. Our services include:

Evaluation and prioritization of business objectives to determine the best course of action for our
customers;
Consultation with customers to identify the right IT products and services for their needs;
Leveraging our vendor relationships to quickly source the right combination of products;
Providing logistical support needed to deploy a major technology roll out;
Offering assistance to reduce the overall operating cost of maintaining current technology through
a private label lease program; and
Providing continuous support to enable a client to improve end-user satisfaction, minimize downtime,
and lower the total cost of ownership.K-12 Specialized Services for Student and Faculty Needs:We integrate top-quality curriculum software and computer products into the classroom. We have significant
experience in building local area networks that link many campuses together. We also provide district-wide
support and sustain Internet access to educational resources worldwide. We tailor our array of services
to make the best use of limited funds.
Manufacturers Support Services Contracts: We offer manufacturer support service contracts that provide our clients with extended technical
support, onsite hardware service and access to new software releases at a fixed price. Most of the
revenue from this portion of our business comes from selling Sun Microsystems contracts.
Our IT services activities accounted for approximately 13.4%, 18.0%, and 17.5% of our total revenues
for fiscal years 2005, 2004 and 2003, respectively.

IT ResellerIT Reseller:We are an authorized reseller of the products of many leading IT manufacturers, such as 3Com, CISCO,
HP, IBM, Intel, Microsoft, NEC, Veritas, Novell, Dell, and Sun. Such products include workstations,
servers, networking and communications equipment, enterprise computing products, and application
software. Our business depends in large part upon our ongoing access to well established aggregators,
in particular GE Access, Ingram Micro, Inc. and Tech Data Corp. as well as directly with Dell Computers
to enable us to acquire IT products at competitive prices and on reasonable terms for resale to our
customers.
Through our alliances with GE Access, Ingram, Tech Data and Dell Computers, we provide our customers
with competitive pricing and value-added services such as electronic product ordering, product configuration,
testing, warehousing, and delivery. Our relationships with our aggregators and Dell Computers allow
us to minimize inventory risk by ordering products primarily on an as-needed basis. We believe that
in most cases our ability to acquire products on a cost-plus basis affords us the opportunity to
avail ourselves of prices lower than those that could be obtained independently from manufacturers
or other vendors. We utilize electronic ordering and pricing systems that provide real-time status
checks on the aggregators inventories and maintain electronic data interchange links to other
suppliers. Our sales team is
- 4 -

thereby able to schedule shipments more accurately and to provide electronically-generated client price
lists.
We have not entered into any long-term supply contracts with any of our suppliers, as we purchase computers,
computer systems, components, and parts on a purchase order basis. Our agreements with GE Access,
Ingram, Tech Data and Dell, who collectively supplied approximately 99.8%, 93.5%, and 84.7% of our
resale products in the fiscal years 2005, 2004, and 2003, respectively, may be terminated by such
companies at any time upon 30 days prior written notice.
We receive manufacturer rebates resulting from certain equipment sales. In addition, we receive volume
discounts and other incentives from various suppliers. Our accounting policy is to reduce cost of
revenues of procurement services for rebates, discounts, and other incentives received from these
suppliers. Except for products in transit or products awaiting configuration at our facility, we
generally do not maintain large inventory balances. Our primary vendors limit price protection to
that provided by the manufacturer (generally less than 30 days) and they restrict product returns,
other than defective returns, to a percentage (the percentage varies depending on the vendor and
when the return is made) of products purchased. Those returns must occur during a defined period,
at the lower of the invoiced price or the current price, subject to the specific manufacturers
requirements and restrictions.
Our IT reseller activities accounted for approximately for 86.6% 82.0%, and 82.5% of our total revenues
for the fiscal years ended March 31, 2005, 2004, and 2003, respectively.
Marketing
Our marketing efforts are focused on:

Broadening our public image as an IT service provider;
Promoting our offerings to current customers, prospects, partners, and investors;
Maintaining a constant flow of marketing communications to increase and maintain our market presence;
Driving prospects to our web site; and
Increasing overall inquiries and sales from all sources.Our marketing division is charged with sales lead generation. Through diverse efforts that include
seminars, tradeshows, direct mail, telemarketing, a bi-monthly newsletter, and through our website
we create multiple and frequent touches of our prospective customers. The primary goal
 to increase the number of face to face meeting opportunities between our account team and
prospective clients, and to drive additional opportunities through our sales pipeline.
Customers
Our targeted customers are primarily Fortune 2000 companies, state and local governments, local school
districts, and other large and mid-sized companies located principally in the New York/New Jersey
Metropolitan area and the Southeastern United States. Although we have over 150 customers, our three
largest customers, Gwinnett County School System (Georgia), State of New Jersey, and Duval County
School System, accounted, respectively, for approximately 24.2%, 15.2% and 10.6% of our revenues
for the year ended March 31, 2005. These same three customers accounted, respectively, for approximately
- 5 -

16.0%, 31.0% and 10.8% of our revenues in fiscal year 2004 and approximately 22.7%, 17.3% and 10.5%
of our revenues in fiscal year 2003. The State of New Jersey computer supply and service contract
was acquired in the August 12, 2002 asset acquisition from Acentra Technologies. The State of New
Jersey contract is subject to annual renewals. In June 2005, the State of New Jersey extended the
contract terms through June 2006. An additional seven customers, General Electric, Cingular Wireless,
Cox Communications, Bell South, Tiffany & Co., MBNA America, and The Bank of New York, collectively
accounted for 30.3% of our revenues for the year ended March 31, 2005. We anticipate that these customer
concentrations will continue for the foreseeable future. The loss of any one of these customers may
cause results of operations to vary materially from those anticipated.
Intellectual Property
We rely upon a combination of nondisclosure and other contractual arrangements and trade secret, copyright,
and trademark laws to protect our proprietary rights and the proprietary rights of third parties
from whom we license intellectual property. We enter into confidentiality agreements with our employees
and limit distribution of proprietary information.
Our business also includes the development of custom software applications in connection with specific
client engagements. Ownership of such software is generally assigned to our client.
Competition
The IT services industry is highly competitive. Our competitors include:

established computer product manufacturers (some of which supply products to us);
distributors;
computer resellers;
systems integrators; and
other IT service providers.Many computer product manufacturers also sell to customers through their direct sales organizations
and certain of them have announced their intention to enhance such direct sales efforts. Many of
our current and potential competitors have longer operating histories and financial, sales, marketing,
technical, and other resources substantially greater than we do. As a result, our competitors may
be able to adapt more quickly to changes in client needs or to devote greater resources than we can
to the sales of IT products and the provision of IT services. Such competitors could also attempt
to increase their presence in our markets by forming strategic alliances with our other competitors
or with our customers, offering new or improved products and services to our customers or increasing
their efforts to gain and retain market share through competitive pricing. Although, we have contracts
with the State of New Jersey, Gwinnett County School System, Duval County School System and Tiffany
& Co., we have no ongoing written commitments from any customers to purchase products, and all
product sales are made on a purchase-order basis.
We are also in direct competition with local, regional, and national distributors of microcomputer
products and related services as well as with various IT consulting companies. These competitors
run the gamut from new dot com consulting companies to the established consulting arms of nationwide
accounting and auditing firms. Several of these competitors offer most of the same basic products
as we
- 6 -

do. We also encounter competition from microcomputer suppliers that sell their products through
direct sales forces, rather than through resellers such as ourselves, and from manufacturers and
distributors that emphasize mail order and telemarketing sales.
Depending on the customer, the principal areas of competition may include price, pre-sale and post-sale
technical support and service, availability of inventory, and breadth of product line. We have an
insignificant market share of sales in the microcomputer industry and of the service markets that
we serve. Most of our competitors at the regional and national levels are substantially larger, have
more personnel, have materially greater financial and marketing resources, and operate within a larger
geographic area than we do.
Employees
As of July 5, 2005, we employed 153 individuals, including 29 sales, marketing and related support
personnel, 79 service and support employees, 19 operations and administration personnel, and 14 employees
in accounting, finance, and human resources. 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. We have 12 employees in our Cabling Department who are covered by a collective
bargaining agreement with the International Brotherhood of Electrical Workers (IBEW). We believe
that our relations with our employees are good.
- 7 -

Item 2. Properties
We lease space in seven locations. Our corporate headquarters and principal operational facilities
are currently located in Trenton, New Jersey. The following table contains certain information about
each of our leased facilities:
Address
    Size(in square feet)
    
    Monthly Rent
    
    Expiration Date572 Whitehead Road, Bldg. #1
      Trenton, NJ 08619
    
    16,000
    
    
    $   11,600
    
    
    
    May 31, 2006354 North Avenue East
      Cranford, NJ 07016
    
    1,500
    
    
    $     3,000
    
    
    
    May 31, 2007500 Satellite Blvd.
      Suwanee, GA 30024
    
    21,284
    
    
    $   12,416
    
    
    
    November 30, 20097843 Bayberry Road, 
      Jacksonville, FL 32256
    
    3,340
    
    
    $     2,218
    
    
    
    February 28, 2006880 Third Avenue, 12th floor 
      New York, NY 10022
    
    7,635
    
    
    $   24,777
    
    
    
    June 30, 2008(1)116 West 23rd Street Suite 500 
      New York, NY 10011
    
    N/A
    
    
    $     2,730
    
    
    
    February 29, 2006572 Whitehead Road, Bldg. #5 
      Trenton, NJ 08619
    
    9,582
    
    
    $     4,432
    
    
    
    November 14, 2003(2)(1)
We assumed this lease on January 9, 2002 in connection with our acquisition of Devise Associates, Inc.
We have sub-leased this office space though June 30, 2008 for an approximate monthly rental payment
of $15,700.(2)
This space is strictly a warehouse facility, currently on a month to month lease term.We believe these facilities will satisfy our anticipated needs for the foreseeable future.
- 8 -

Item 3. Legal Proceedings
In March 2002, Logical Business Solutions, Inc., one of our competitors, instituted an action
in the Circuit Court, Fourth Judicial Circuit, in Duval County, Florida, against us and Cheryl Pullen,
one of our employees, alleging that we wrongfully interfered with its contractual relationship with
one of its customers. The amount of damages was not specified. The litigation is currently in the
discovery stage. We believe that the claim is without merit and intend to vigorously defend against
the claim.
In addition we are subject to legal proceedings that arise in the ordinary course of business, but
we do not believe these claims will have a material impact on our financial position or results of
operations.
- 9 -

Item 4. Submission of Matters to a Vote of Security Holders
Our Annual Meeting of Shareholders (the Meeting) was held on March 7, 2005. There were
present at the Meeting in person or by proxy shareholders holding an aggregate of 5,938,809 shares
of Common Stock of a total number of 7,380,498 shares of Common Stock issued, outstanding and entitled
to vote at the Meeting. The results of the vote taken at the Meeting with respect to the election
of one director to Class A of the Board of Directors to serve for a three year term and the election
of one director to Class B of the Board of Directors to serve for a one year term were as follows:

Nominee
    For
    WithholdR. Frank Jerd  Class A
    5,925,446
    13,363George F. Raymond  Class B
    5,925,446
    13,363- 10 -

PART II
Item 5.
Market for Registrants Common Equity, Related Stockholder Matters and Issuer Purchases
of Equity SecuritiesOur common stock is quoted on the OTC Bulletin Board under the symbol ETEC. The following
table sets forth the high and low closing prices of our common stock for the periods indicated:
Three Months Ended
    
    High
    
    LowMarch 31, 2005
    
    $
    3.04
    
    $
    1.32December 31, 2004
    
    
    2.80
    
    
    .85September 30, 2004
    
    
    1.15
    
    
    .88June 30, 2004
    
    
    1.35
    
    
    .95March 31, 2004
    
    
    1.45
    
    
    .80December 31, 2003
    
    
    1.20
    
    
    .80September 30, 2003
    
    
    .96
    
    
    .37June 30, 2003
    
    
    .52
    
    
    .22The above quotations represent prices between dealers and do not include retail mark-ups, markdowns
or commissions. They do not necessarily represent actual transactions.
On
November 7, 2004, we granted stock options to our non-employee directors to purchase an aggregate
of 60,000 shares of common stock. The grants of stock options were not registered under the Securities
Act of 1933 because such grants either did not involve an offer or sale for purposes of Section 2(a)(3)
of the Securities Act of 1933, in reliance on the fact that the stock options were granted for no
consideration, or were offered and sold in transactions not involving a public offering, exempt from
registration under the Securities Act of 1933 pursuant to Section 4(2).
As of July 10, 2005, there were 631 record holders of our common stock, although we believe that beneficial
holders approximate 850.
We
have never declared any dividends on our common stock and we have no intention to do so in the foreseeable
future.
- 11 -

Item 6. Selected Financial Data
The following selected consolidated financial data below should be read in conjunction with our consolidated
financial statements including the accompanying notes and Managements Discussion and Analysis
of Financial Condition and Results of Operations, both elsewhere in this Report. The data as of March
31, 2005 and 2004 and for each of the three years ended March 31, 2005 have been derived from, and
should be read in conjunction with, our audited consolidated financial statements and accompanying
notes, which are contained elsewhere in this Report. The data as of March 31, 2003, 2002, and 2001
and for each of the two years ended March 31, 2002 have been derived from our audited financial statements,
which are not contained in this Report.
YEAR ENDED MARCH 31,2005
    
    
    2004
    
    
    2003
    
    
    2002
    
    
    2001Net revenues
    
    $112,699,998
    
    
    $100,171,308
    
    
    $92,084,126
    
    
    $62,468,218
    
    
    $88,279,232Income (loss) from continuing operations
    
    $2,613,530
    
    
    $620,105
    
    
    ($ 265,989)
    
    
    $166,691
    
    
    ($1,261,910)Net Income (loss)
    
    $2,869,860
    
    
    $642,988
    
    
    ($ 211,471)
    
    
    $216,972
    
    
    ($1,321,474)Income (loss) per common share from 
    continuing operations (basic)
    
    $0.35
    
    
    $0.08
    
    
    ($0.04)
    
    
    $0.02
    
    
    ($0.22)Income (loss) per common share from 
    continuing operations (diluted)
    
    $0.34
    
    
    $0.08
    
    
    ($0.04)
    
    
    $0.02
    
    
    ($0.22)Net Income (loss) per common share
    (basic)
    
    $0.39
    
    
    $0.09
    
    
    ($0.03)
    
    
    $0.03
    
    
    ($0.23)Net Income (loss) per common share 
    (diluted)
    
    $0.37
    
    
    $0.09
    
    
    ($0.03)
    
    
    $0.03
    
    
    ($0.23)AT MARCH 31,2005
    
    
    2004
    
    
    2003
    
    
    2002
    
    
    2001Total assets
    
    $30,204,457
    
    
    $18,908,612
    
    
    $22,334,584
    
    
    $11,388,473
    
    
    $18,699,032Emtec had no long-term debt obligations or outstanding preferred stock during the five years ended
March 31, 2005. In addition, no dividends were paid to common stockholders during the same period.
- 12 -

Item 7. Managements Discussion and Analysis of Financial Condition and Results of OperationsReference is made to the Risk Factors below for a discussion of important factors that
could cause actual results to differ from expectations and any of our forward-looking statements
contained herein. In addition, the following discussion should be read in conjunction with our audited
consolidated financial statements as of March 31, 2005 and 2004 and for the fiscal years ended March 31,
2005, and 2004 and 2003.
Critical Accounting Policies
Emtecs financial statements are prepared in accordance with accounting principles that are generally
accepted in the United States. The methods, estimates, and judgments we use in applying our most
critical accounting policies have a significant impact on the results we report in our financial
statements. The Securities and Exchange Commission has defined critical accounting policies as policies
that involve critical accounting estimates that require (i) management to make assumptions that are
highly uncertain at the time the estimate is made, and (ii) different estimates that could have been
reasonably used for the current period, or changes in the estimates that are reasonably likely to
occur from period to period, which would have a material impact on the presentation of our financial
condition, changes in financial condition or in result of operations. Based on this definition, our
most critical policies include: revenue recognition, allowance for doubtful accounts, inventory valuation
reserve, the assessment of recoverability of long-lived assets, the assessment of recoverability
of goodwill and intangible assets, and valuation of deferred tax assets.

Revenue RecognitionWe recognize revenues when the earning process is complete, evidenced by an agreement between us and
the customer, there has been delivery and acceptance, collectibility is probable, and pricing is
fixed and determinable. Procurement services revenue represents sales of computer hardware and pre-packaged
software. These arrangements often include software installations, configurations, and imaging, along
with delivery and set-up of hardware. We follow the criteria contained in EITF 00-21 and SAB 104
in recognizing revenue associated with these transactions. We perform all software installations,
configurations and imaging services at our locations prior to the delivery of the product. Some customer
arrangements include set-up services performed at customer locations where our personnel
perform the routine tasks of removing the equipment from boxes, and setting up the equipment at customer
workstations by plugging in all necessary connections, etc. This service is usually done on the same
day as delivery. Revenue is recognized at date of delivery, except as follows:

    In some instances, the set-up service is performed after date of delivery.  We recognize revenue for the hardware component at date of delivery when the amount of revenue allocable to this component is not contingent upon the completion of set-up services and therefore, our customer has agreed that the transaction is complete as to the hardware component. In instances where our customer does not accept delivery until set-up services are completed, we defer all revenue in the transaction until customer acceptance occurs.
    There are occasions when a customer requests a transaction on a bill & hold basis.  We follow the SAB 104 criteria and recognize revenue prior to date of physical delivery only when all the criteria are met as follows:
    Risks of ownership have passed to our customer- 13 -


    The customer has made a fixed commitment, in writing.
    A fixed delivery schedule is established
    We have not retained any specific performance obligations.
    We segregate the customers ordered goods from our general inventory and the order is complete and ready for shipment.We do not modify our normal billing and credit terms for such customers. Our customer is invoiced at
the date of revenue recognition when all of the above criteria have been met.
We have experienced minimal customer returns. Since all eligible products must be returned to us within
30 days from the date of the invoice, we reduce the procurement services revenue and cost of procurement
services in each accounting period based on the actual returns that occurred in the next 30 days
after the close of the accounting period.
Service and consulting contracts include time billings based upon billable hours charged to the customers,
fixed price short-term projects, hardware maintenance contracts, and manufacturer support service
contracts. These contracts generally are task specific and do not involve multiple deliverables.
Revenues from time billings are recognized as services are delivered. Revenues from short-term fixed
price projects are recognized using the percentage of completion method, whenever reliable estimates
of progress toward completion are available. Revenues from hardware maintenance contracts are recognized
ratably over the contract period. Net revenues from manufacturer support service contracts where
the manufacturer is responsible for fulfilling the service requirements of the customer are recognized
immediately on their contract sale date. Manufacturer support service contracts contain cancellation
privileges that allow our customers to terminate a contract with 90 days written notice. In
this event, the customer is entitled to a pro-rated refund based on the remaining term of the contract
and we would owe the manufacturer a pro-rated refund of the cost of the contract. However, we have
experienced no customer cancellations of any significance during our most recent 3-year history and
do not expect cancellations of any significance in the future.

Trade ReceivablesWe maintain allowance for doubtful accounts for estimated losses resulting from the inability of our
customers to make required payments. We base our estimates on the aging of our accounts receivable
balances and our historical write-off experience, net of recoveries. If the financial condition of
our customers were to deteriorate, additional allowances may be required. We believe the accounting
estimate related to the allowance for doubtful accounts is a critical accounting estimate
because changes in it can significantly affect net income. Allowance for doubtful accounts was $588,415
and $363,402 as of March 31, 2005, and 2004, respectively.

InventoriesInventories are stated at the lower of cost (first-in, first-out) or market. Cost is based on standard
costs generated principally by the most recent purchase prices. We provide an inventory reserve for
obsolescence and deterioration based on managements review of the current status of the excess
inventory, its age, and net realizable value based upon assumptions about future demand and market
condition. At March 31, 2005, and 2004, inventory reserve was $433,667 and $722,551, respectively.
We disposed of $427,520 of old and obsolete inventory during this year which was charged against
the inventory reserve.
- 14 -


Property and EquipmentWe estimate the useful lives of property and equipment in order to determine the amount of depreciation
and amortization expense to be recorded during any reporting period. The majority of our equipment
is depreciated over three years. The estimated useful lives are based on the historical experience
with similar assets as well as taking into account anticipated technological or other changes. If
technological changes were to occur more rapidly than anticipated or in a different form than anticipated,
the useful lives assigned to these assets may need to be accelerated, resulting in the recognition
of increased depreciation and amortization expense in future periods. We evaluate the recoverability
of our long-lived assets (other than intangibles and deferred tax assets) in accordance with Statement
of Financial Accounting Standard No. 144, Accounting for the Impairment or Disposal of Long-Lived
Assets,(SFAS No. 144). Long-lived assets are reviewed for impairment under SFAS No. 144 whenever
events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable.
SFAS No. 144 requires recognition of impairment of long-lived assets in the event that the net book
value of such assets exceeds the future undiscounted net cash flows attributable to such assets.
Impairment, if any, is recognized in the period of identification to the extent the carrying amount
of an asset exceeds the fair value of such asset. Property and equipment along with their components are as follows:
Original Cost
    
    Estimated LifeMarch 2005
    
    March 2004
    
    (Years)Computer equipment
    
    $
    3,831,311
    
    $
    3,643,052
    
    
    3Furniture and fixtures
    
    
    357,845
    
    
    357,845
    
    
    5Leasehold improvements
    
    
    267,307
    
    
    244,847
    
    
    5Vehicles
    
    
    80,984
    
    
    80,984
    
    
    2Total Property and Equipment
    
    $
    4,537,447
    
    $
    4,326,728Less: accumulated depreciation and amortization
    
    
    (4,200,279
    )
    
    (3,939,655
    )Net book value
    
    $
    337,168
    
    $
    387,073We estimate the useful lives of property and equipment in order to determine the amount of depreciation
and amortization expense to be recorded during any reporting period. The majority of our equipment
is depreciated over three years. The estimated useful lives are based on the historical experience
with similar assets as well as taking into account anticipated technological or other changes. If
technological changes were to occur more rapidly than anticipated or in a different form than anticipated,
the useful lives assigned to these assets may need to be accelerated, resulting in the recognition
of increased depreciation and amortization expense in future periods. We evaluate the recoverability
of our long-lived assets (other than intangibles and deferred tax assets) in accordance with Statement
of Financial Accounting Standard No. 144, Accounting for the Impairment or Disposal of Long-Lived
Assets,(SFAS No. 144). Long-lived assets are reviewed for impairment under SFAS No. 144 whenever
events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable.
SFAS No. 144 requires recognition of impairment of long-lived assets in the event that the net book
value of such assets exceeds the future undiscounted net cash flows attributable to such assets.
Impairment, if any, is recognized in the period of identification to the extent the carrying amount
of an asset exceeds the fair value of such asset.
- 15 -

We invested $687,000 for the purchase of computer hardware, software and consulting services for our
Network Operations Center to enhance our offerings in Managed Services during fiscal year ended March
31, 2003. We originally intended to depreciate these assets over 36 months based on the original
projections of the future undiscounted net cash flows. We performed an impairment test of these assets
as of December 31, 2003, and March 31, 2004. We compared our original projections of the future undiscounted
cash flows with actual performance, and reviewed our current sales pipeline. Based on these impairment
tests, we recorded impairment charges of $223,858, and $239,057 for December 31, 2003 and March 31,
2004, respectively. Total impairment charges of $462,915 were classified as general and administrative
expense during the twelve months ended March 31, 2004. The net book value of these assets after the
impairment charge was $0.

Intangible AssetsWe have adopted Statement of Financial Accounting Standards No. 141 Business Combinations
and No. 142 Goodwill and Other Intangible Assets. As a result, amortization of goodwill
was discontinued. Based on the impairment tests performed during the fiscal year ended March 31,
2005 , we found no impairment of the remaining goodwill. The next annual impairment test shall be
performed during the fourth quarter of the fiscal year 2006.
We were assigned a contract
to supply computer hardware and services to the State of New Jersey in the August 12, 2002 acquisition
of Acentra Technologies, Inc. This contract was valued at $100,000 in the acquisition. Amortization
expense of $9,091 and $54,545 was expensed in fiscal years ended March 31, 2005 and 2004, based upon
then contract term scheduled to end in May 2004. The contract is subject to annual renewals. In May
of 2004, the State of New Jersey extended the contract term through December 2004. Currently, the
contract is extended through June 30, 2006. The net carrying value for this contract amounted to
$ 0 and $ 9,091 at March 31, 2005 and 2004, respectively.

Income TaxesIncome taxes are accounted for under an asset and liability approach that requires the recognition
of deferred tax assets and liabilities for the expected future tax consequences of events that have
been recognized in our financial statements or tax returns. In estimating future tax consequences,
we generally consider all expected future events other than the enactment of changes in tax laws
or rates. A valuation allowance is recognized if, on weight of available evidence, it is more likely
than not that some portion or all the deferred tax assets will not be realized. Income tax expense,
as a percentage of income before taxes, increased to 27.5% for the year ended March 31, 2005 as compared
to 16.4% for the year ended March 31, 2004. This increase is a result of the utilization of approximately
$850,000 of federal tax loss carryovers during the year ended March 31, 2004. The Company had previously
recorded significant valuation allowances for deferred tax assets, which effectively reduced the
income tax expense percentage during the year ended March 31, 2004. The income tax expense of 27.5%
of pre-tax income for 2005 was below the expected tax expense at U.S. statutory income tax rates
due to a 2005 change in the valuation allowance estimate to reduce the beginning valuation allowance
of $435,271 to zero. The change in estimate was a result of our fiscal 2005 operating results that
caused us to believe that it is more likely than not that we will realize our deferred tax assets in future periods.
Results of Operations
The following discussion and analysis provides information that management believes is relevant to
an assessment and understanding of our Results of Operations for the fiscal years ended March 31,
2005, and 2004.
- 16 -

CONSOLIDATED STATEMENTS OF OPERATIONSYears Ended March 31,2005
    
    2004
    
    Change
    
    %RevenuesProcurement services
    
    $
    97,605,588
    
    $
    82,184,744
    
    $
    15,420,844
    
    
    18.8
    %Service and consulting
    
    
    15,094,410
    
    
    17,986,564
    
    $
    (2,892,154
    )
    
    -16.1
    %Total Revenues
    
    
    112,699,998
    
    
    100,171,308
    
    $
    12,528,690
    
    
    12.5
    %Cost of RevenuesProcurement services
    
    
    85,879,341
    
    
    74,282,388
    
    $
    11,596,953
    
    
    15.6
    %Service and consulting
    
    
    10,467,370
    
    
    11,497,465
    
    $
    (1,030,095
    )
    
    -9.0
    %Total Cost of Revenues
    
    
    96,346,711
    
    
    85,779,853
    
    $
    10,566,858
    
    
    12.3
    %Percent of revenues
    
    
    85.5
    %
    
    85.6
    %Gross ProfitProcurement services
    
    
    11,726,247
    
    
    7,902,356
    
    $
    3,823,891
    
    
    48.4
    %Service and consulting
    
    
    4,627,040
    
    
    6,489,099
    
    $
    (1,862,059
    )
    
    -28.7
    %Total Gross Profit
    
    
    16,353,287
    
    
    14,391,455
    
    $
    1,961,832
    
    
    13.6
    %Percent of revenue
    
    
    14.5
    %
    
    14.4
    %Operating ExpensesSales, General & Administrative Expenses
    
    
    12,532,580
    
    
    13,321,726
    
    $
    (789,146
    )
    
    -5.9
    %Interest Expense
    
    
    217,860
    
    
    328,296
    
    $
    (110,436
    )
    
    -33.6
    %Loss on impairment, Goodwill
    
    
    
    
    
    
    
    $
    
    
    
    N/MTotal Operating Expenses
    
    
    12,750,440
    
    
    13,650,022
    
    $
    (899,582
    )
    
    -6.6
    %Percent of revenue
    
    
    11.3
    %
    
    13.6
    %Income(Loss) From Continuing Operations Before Income Taxes
    
    
    3,602,847
    
    
    741,433
    
    $
    2,861,414
    
    
    385.9
    %Income Tax Expense (Benefit)
    
    
    989,317
    
    
    121,328
    
    $
    867,989
    
    
    715.4
    %Income(Loss) From Continuing Operations
    
    
    2,613,530
    
    
    620,105
    
    $
    1,993,425
    
    
    321.5
    %Income From Discontinued Geothermal Operations, net of tax
    
    
    48,052
    
    
    22,883
    
    $
    25,169
    
    
    110.0
    %Gain on the Sale of the Geothermal Investment, net of tax
    
    
    208,278
    
    
    
    
    $
    208,278
    
    
    N/MNet Income (Loss)
    
    $
    2,869,860
    
    $
    642,988
    
    $
    2,226,872
    
    
    346.3
    %Net Income (Loss) Per Share - Basic
    
    $
    0.39
    
    $
    0.09Net Income (Loss) Per Share - Diluted
    
    $
    0.37
    
    $
    0.09N/M = not meaningful
- 17 -

Comparison of Years Ended March 31, 2005 and 2004
Total Revenues
Total revenues, which include services and consulting revenues, and procurement revenues, increased
by 12.5% or $12.53 million, to $112.70 million for the year ended March 31, 2005, compared to
$100.17 million for the year ended March 31, 2004. This increase is primarily attributable to computer
roll-out projects for various school districts in Georgia, and Florida as well as recent sales growth
in our commercial customer base. Total revenues associated with our commercial customers and revenue
associated with computer roll-out projects increased by approximately $27.00 million as compared
with the prior year, this increase was off-set partially by approximately $14.60 million decrease
in computer roll-out projects for the various state agencies in the State of New Jersey.
Procurement revenues increased by 18.8%, or $15.42 million, to $97.61 million for the year ended
March 31, 2005. This change is primarily attributable to reasons discussed above.
Services and consulting revenue decreased by 16.1%, or $2.89 million, to $15.09 million for the year
ended March 31, 2005 compared to $17.99 million for the year ended March 31, 2004. This decrease
in services and consulting revenue is mainly due to overall decrease in our installation services
associated with computer roll-out projects for the various state agencies in the State of New Jersey,
and decrease in our manufacturers support service contract revenue. The decrease in manufacturers
support service contract is mainly due to the non-renewal of an annual maintenance contract by one
of our major commercial customers.
During the first quarter of our fiscal year ending March 31, 2006, our contract with the State of New
Jersey was extended through June 30, 2006, and we expect our revenues from commercial customer base
will continue to grow, and to continue to roll-out computers to school districts in GA and FL.
Our three largest customers, Gwinnett County School System (Georgia), State of New Jersey, and Duval
County School System, accounted, respectively, for approximately 24.2%, 15.2% and 10.6% of our revenues
for the year ended March 31, 2005. These same three customers accounted, respectively, for approximately
16.0%, 31.0% and 10.8% of our revenues in fiscal year 2004 and approximately 22.7%, 17.3% and 10.5%
of our revenues in fiscal year 2003. We anticipate that these customer concentrations will continue
for the foreseeable future. The loss of any one of these customers may cause results of operations
to vary materially from those anticipated.
Gross Profit
Aggregate gross profit increased by 13.6%, or $1.96 million, to $16.35 million for the year ended
March 31, 2005. This increase is mainly attributable to computer roll-out projects for various school
districts in Georgia and Florida, and sales growth in our commercial customer base. Measured as a
percentage of total revenues, our overall gross profit margin increased to 14.5% of total revenues
for the year ended March 31, 2005 from 14.4% for the year ended March 31, 2004.
Gross profit for product sales increased by 48.4%, or $3.82 million, to $11.73 million for the
year ended March 31, 2005 as compared with $7.90 million for the year ended March 31, 2004. This
increase is primarily attributable to computer roll-out projects for various school districts in
Georgia, and Florida as well as recent sales growth in our commercial customer base as discussed
in the revenue section above. Measured as a percentage of procurement revenues, our gross profit
margin increased to 12.0% of procurement revenue for the year ended March 31, 2005 from 9.6% for
the year ended March 31, 2004. This percentage increase is primarily attributable to greater selling
efforts and favorable price drops and
- 18 -

other incentives offered by manufacturers. We can not predict that price drops like these are going
to repeat in the future.
Gross profit for service and consulting revenue decreased by 28.7%, or $1.86 million, to $4.63 million
for the year ended March 31, 2005 as compared with $6.49 million for the year ended March 31, 2004.
This decrease is mainly due to an over-all decrease in IT spending particularly with various state
agencies in the State of New Jersey, a non-renewal of manufacturers support service contract
sold to one customer in the prior year as discussed in the revenue section and our inability to attract
new major customers. Measured as a percentage of service and consulting revenue, our gross margin
attributable to service and consulting revenue decreased to 30.7% of service and consulting revenue
for the year ended March 31, 2005 from 36.1% for the year ended March 31, 2004. Even though our billing
rates (total revenue generated divided by total billable hours available during the period) and utilization
rates (billable hours divided by paid hours) of engineers were higher during this year, this decrease
was mainly due to the non-renewal of a manufacturers support service contract sold to one customer
in the prior year as discussed in the revenue section.
We must continue to manage billing rates and utilization rates effectively to remain competitive.
Sales, General, and Administrative Expenses
Sales, general and administrative expenses decreased by 5.9%, or $789,146, to $12.53 million for the
year ended March 31, 2005. This decrease includes a one-time charge of $470,000 associated with the
sub-lease of our New York office located at 880 3rd Avenue. This charge is a present value of the difference between obligations to the landlord minus
the expected future rental income to be received from the sub-tenant through June 30, 2008. Without
this one time charge of $470,000, our sales, general and administrative expenses would have decreased
by 9.5%, or $1.26 million, to $12.06 million for the year ended March 31, 2005 as compared with $13.32
million for the year ended March 31, 2004. This decrease is primarily attributable to our continuous
focus on cost containment measures and the following:

Elimination of non-productive sales staff;
Eliminated duplication of non-essential administrative support services.
Consolidation of our operations, administrative and inventory warehousing functions from Mt. Laurel,
NJ and Cranford, NJ to Trenton, NJ.
Lower bonus accrual charged to sales expense due to lower earning share in connection with the earning
share agreements with prior three owners of Acentra Technologies, Inc. and Turnkey Computer Systems,
Inc. These earning share agreements expired on August 31, 2004.
Lower depreciation expense in the current fiscal year due to write-down of NOC and Help Desk assets
during fiscal 2004.We estimate our cash flow will be improved by approximately $165,000 annually, and our net rent expense
will be reduced by approximately $300,000 annually attributable to the sub-lease of our former NYC
office.
In spite of our vigorous cost containment efforts, various factors, such as retention of employees,
costs associated with marketing and selling activities, compliance costs associated with new Securities
and
- 19 -

Exchange Commission rules, and insurance markets may increase our sales, general and administrative
expenses and this could have a negative impact on fiscal year 2006.
Interest expense
Interest expense decreased by 33.6%, or $110,436, to $217,860 for the year ended March 31, 2005 as
compared with $328,296 for the year ended March 31, 2004. This decrease is primarily attributable
to a lower balance on our line of credit, lower days sales outstanding, and lower interest charged
by the lender during the year than prior year.
Income Taxes
Income tax expense, as a percentage of income before income taxes, increased for the year ended March
31, 2005 to 27.5% or $989,317, as compared to 16.4% or $121,328 for the year ended March 31, 2004.
This increase is primarily a result the $3.09 million increase in income before income taxes for
the year ended March 31, 2005 compared to the year ended March 31, 2004 and the utilization of federal
tax loss carryovers during the year ended March 31, 2004. We had previously recorded significant
valuation allowances for deferred tax assets, which effectively reduced the income tax expense percentage
during both years below the expected income tax expense at U.S. statutory rates.
Net Income
For the year ended March 31, 2005, net income was $2.87 million compared to net income of $642,988
for the comparable period in 2004, an increase of 346.3%.
As discussed, the increase in net income is mainly attributable to computer roll-out projects for various
school districts in Georgia and Florida, and revenue growth in our commercial customer base as well
as continuous cost containment efforts undertaken by us. The reported income from continuing operations
before income taxes for the year ended March 31, 2005 includes a one-time charge of $470,000 associated
with the sub-lease of our New York office. Without this one-time charge, our income from continuing
operations before income taxes for the year ended March 31, 2005 would have been approximately $4.07
million, compared to a income from continuing operations before taxes of $741,433 for the year ended
March 31, 2004, an increase of 449.3%.
Comparison of Years Ended March 31, 2004 and 2003
The following discussion and analysis provides information that management believes is relevant to
an assessment and understanding of our Results of Operations for the fiscal years ended March 31,
2004, and 2003.
- 20 -


EMTEC, INC.CONSOLIDATED STATEMENTS OF OPERATIONSYears Ended March 31,2004
    
    2003
    
    Change
    
    %RevenuesProcurement services
    $
    82,184,744
    
    $
    75,943,230
    
    $
    6,241,514
    
    8.2
    %Service and consulting
    
    17,986,564
    
    
    16,140,896
    
    $
    1,845,668
    
    11.4
    %Total Revenues
    
    100,171,308
    
    
    92,084,126
    
    $
    8,087,182
    
    8.8
    %Cost of RevenuesProcurement services
    
    74,282,388
    
    
    67,525,430
    
    $
    6,756,958
    
    10.0
    %Service and consulting
    
    11,497,465
    
    
    11,915,844
    
    $
    (418,379
    )
    -3.5
    %Total Cost of Revenues
    
    85,779,853
    
    
    79,441,274
    
    $
    6,338,579
    
    8.0
    %Percent of revenues
    
    85.6
    %
    
    86.3
    %Gross ProfitProcurement services
    
    7,902,356
    
    
    8,417,800
    
    $
    (515,444
    )
    -6.1
    %Service and consulting
    
    6,489,099
    
    
    4,225,052
    
    $
    2,264,047
    
    53.6
    %Total Gross Profit
    
    14,391,455
    
    
    12,642,852
    
    $
    1,748,603
    
    13.8
    %Percent of revenue
    
    14.4
    %
    
    13.7
    %Operating ExpensesSales, General & Administrative Expenses
    
    13,321,726
    
    
    12,533,905
    
    $
    787,821
    
    6.3
    %Interest Expense
    
    328,296
    
    
    160,803
    
    $
    167,493
    
    104.2
    %Loss on impairment, Goodwill
    
    
    
    
    254,894
    
    $
    (254,894
    )
    N/MTotal Operating Expenses
    
    13,650,022
    
    
    12,949,602
    
    $
    700,420
    
    5.4
    %Percent of revenue
    
    13.6
    %
    
    14.1
    %Income(Loss) From Continuing Operations Before Income Taxes
    
    741,433
    
    
    (306,750
    )
    $
    1,048,183
    
    341.7
    %Income Tax Expense (Benefit)
    
    121,328
    
    
    (40,761
    )
    $
    162,089
    
    397.7
    %Income(Loss) From Continuing Operations
    
    620,105
    
    
    (265,989
    )
    $
    886,094
    
    333.1
    %Income From Discontinued Geothermal Operations, net of tax
    
    22,883
    
    
    54,518
    
    $
    (31,635
    )
    -58.0
    %Gain on the Sale of the Geothermal Investment, net of tax
    
    
    
    
    
    
    $
    
    
    0.0
    %Net Income (Loss)
    $
    642,988
    
    $
    (211,471
    )
    $
    854,459
    
    404.1
    %Net Income (Loss) Per Share - Basic
    $
    0.09
    
    $
    (0.03
    )Net Income (Loss) Per Share - Diluted
    $
    0.09
    
    $
    (0.03
    )N/M = not meaningful- 21 -
Total Revenues
Total revenues, which include services and consulting revenues, and procurement revenues, increased
by 8.8% or $8.09 million, to $100.17 million for the year ended March 31, 2004, compared
to $92.08 million for the year ended March 31, 2003. This increase is primarily attributable to our
acquisition of Acentra Technologies, Inc. and Turnkey Computer Systems, Inc. in August 2002. IT revenues
associated with these acquisitions increased by $12.93 million because in the fiscal year ended March
31, 2004, we recognized a full twelve months of revenue versus eight months in the fiscal year ended
March 31, 2003. Without these acquisitions, revenues associated with our IT business would have decreased
by 5.26% or $4.84 million for the year ended March 31, 2004. This decrease is mainly due to an over-all
decrease in our customers IT spending, a slow-down in the economy and our inability to attract
new major customers.
Services and consulting revenue increased by 11.4%, or $1.84 million, to $17.99 million for the year
ended March 31, 2004 compared to $16.14 million for the year ended March 31, 2003. This increase
is also attributable to our acquisition of Acentra Technologies Inc. and Turnkey Computer Systems,
Inc. Services and consulting revenues associated with these acquisitions increased by $2.65 million
due to the same reasons discussed in the above paragraph. Without these acquisitions, services and
consulting revenue would have decreased by 5.0% or $806,060, to $15.33 million for the year ended
March 31, 2004. This decrease is mainly due to an overall decrease in the economy and our inability
to attract new major customers.
Procurement revenues increased by 8.2%, or $6.24 million, to $82.18 million for the year
ended March 31, 2004. This increase is also attributable to the acquisitions discussed in the above
paragraph. Without these acquisitions, procurement revenue would have decreased by 5.3%, or $4.04
million, for the year ended March 31, 2004. This decrease is mainly due to reasons mentioned above
regarding total IT revenues.
Gross Profit
Aggregate gross profit increased by 13.8%, or $1.75 million, to $14.39 million for the year ended
March 31, 2004. This increase is mainly attributable to a 11.4% increase in our services and consulting
revenues, and a 3.5% decrease in our cost of revenues for services and consulting. Measured as a
percentage of total revenues, our overall gross profit margin increased to 14.4% of total revenues
for the year ended March 31, 2004 from 13.7% for the year ended March 31, 2003. This increase is
also mainly attributable to increase in our services and consulting revenues.
Gross profit for product sales decreased by 6.1%, or $515,444, to $7.90 million for the year
ended March 31, 2004 as compared with $8.42 million for the year ended March 31, 2003. Measured as
a percentage of procurement revenues, our gross profit margin decreased to 9.6% of procurement revenue
for the year ended March 31, 2004 from 11.1% for the year ended March 31, 2003. This decrease is
mainly due to continued downward pricing pressure on product sales from our customers.
Gross profit for service and consulting increased by 53.6%, or $2.26 million, to $6.49 million for
the year ended March 31, 2004 as compared with $4.22 million for the year ended March 31, 2003. Measured
as a percentage of service and consulting revenue, our gross margin attributable to service and consulting
revenue increased to 36.1% of service and consulting revenue for the year ended March 31, 2004 from
26.2% for the year ended March 31, 2003. This increase in services and consulting gross profit and
margin was mainly attributable to installation services associated with computer roll-out projects
for the various state agencies in the State of New Jersey, and school districts in Georgia and Florida
as well as
- 22 -
our ability to manage our billing rates (total revenue generated divided by total billable hours available
during the period) and utilization rates (billable hours divided by paid hours) of engineers more
effectively.
We must continue to manage billing rates and utilization rates effectively to remain competitive.
Sales, General, and Administrative Expenses
Sales, general and administrative expenses increased by 6.3%, or $787,821, to $13.32 million for the
year ended March 31, 2004. This increase is mainly due to our acquisition of Acentra Technologies,
Inc. and Turnkey Computer Systems, Inc., and an impairment charge of $462,915 associated with our
investment in Network Operation Center. Sales, general and administrative expenses associated with
these acquisitions increased by $1.46 million because in the fiscal year ended March 31, 2004, we
recorded a full twelve months of expenses versus eight months in the fiscal year ended March 31,
2003. Without these acquisitions and impairment charge, our sales, general and administrative expenses
would have decreased by approximately 8.9%, or $1.12 million, for the year ended March 31, 2004.
This decrease is mainly attributable to the following:

Elimination of non-productive sales staff;
Reduction in sales commission compensation plans; and
Eliminated duplication of non-essential administrative support services.Interest expense
Interest expense increased by 104.2%, or $167,493, to $328,296 for the year ended March 31, 2004 as
compared with $160,803 for the year ended March 31, 2003. This increase is mainly due to increased
borrowings activities, higher days sales outstanding as well as higher interest rate charged
by our lender starting October 2003.
Income Taxes
Income tax expense for the year ended March 31, 2004 was $121,328, as compared with benefit of $40,761
for the year ended March 31, 2003. For the year ended March 31, 2004, we recognized a deferred income
tax benefit of $176,047 which was netted against the income tax expense of $297,375.
Net Income
Net income increased by 404.1%, or $854,459, to $642,988 or $0.09 per share for the year ended March
31, 2004 as compared with net loss of $(211,471) or $(0.03) per share for the year ended March 31,
2003.
As discussed, the increase in net income is mainly attributable to increased installation services
associated with computer roll-out projects for the various state agencies in the State of New Jersey,
and school districts in Georgia and Florida as well as our ability to manage utilization rates of
engineers more effectively.
Recently Issued Accounting Standards
In
November 2004, the Financial Accounting Standards Board (FASB) issued SFAS No. 151, Inventory
Costs, and an Amendment of ARB No. 43, Chapter 4. SFAS No. 151 retains the general
- 23 -
principle  of  ARB No. 43, Chapter 4, Inventory Pricing, that inventories
are presumed to be stated at cost; however, it amends ARB No. 43 to clarify that abnormal amounts of idle facilities, freight,
handling costs and spoilage should be recognized as current period expenses. Also,
SFAS No. 151 requires fixed overhead costs be allocated to inventories based on normal production
capacity. The guidance in SAFS No. 151 is effective for inventory costs incurred during fiscal years
beginning after June 15, 2005. We believe that implementing SFAS No. 151 should not have any material
impact on its financial condition, results of operations or cash flows.
In
December 2004, the FASB issued SFAS No. 123 (revised 2004), Share-Based Payment (SFAS 123R), which replaces SFAS No.
123, Accounting for Stock-Based Compensation (SFAS 123) and supersedes APB
Opinion No. 25, Accounting for Stock Issued to Employees. SFAS 123R requires all share-based payments to employees, including grants of employee stock
options, to be recognized in the financial statements based on their fair values, beginning
with the next fiscal year that begins after June 15, 2005. The pro forma disclosures previously permitted under SFAS 123 no longer
will be an alternative to financial statement recognition. Under SFAS 123R, we must
determine the appropriate fair value model to be used for valuing
share-based payments, the amortization method for compensation cost and the transition method to
be used at date of adoption.
SFAS
No. 123R will apply to awards granted or modified by us after April 1, 2006. Compensation cost will
also be recorded for prior option grants that vest after that date. The effect of adopting SFAS 123
on our consolidated results of operations will depend on the level of future option
grants and the fair value of the options granted at such future dates, as well as
the vesting periods provided by such awards and, therefore, cannot currently be estimated.
We are evaluating the requirements of SFAS 123R and have not yet determined
the method of adoption or the effect of adopting SFAS 123R, and we have not determined
whether the adoption will result in amounts that are similar to the current pro forma disclosures
under SFAS 123.
Liquidity and Capital Resources
Cash and cash equivalents at March 31, 2005 of $2,357,972 represented an increase of $2,353,180 from
$4,792 at March 31, 2004. We are a net borrower; consequently, we believe our cash and cash equivalents
balance must be viewed along with the available balance on our line of credit. At March 31, 2005,
our working capital was increased to $4.45 million from $2.08 as of March 31, 2004. This increase
in working capital was primarily attributable to net earnings for the year ended March 31, 2005.
Since our inception, we have funded our operations primarily from borrowings under our credit facility.
On December 10, 2004, we entered into an amendment to the Loan and Security Agreement with Bank of
America Business Capital Corporation (successor by merger to Fleet Capital Corporation) (BOA)
extending our credit facility through November 21, 2006. This amendment increased our credit facility
from $10 million to $12 million. We can borrow up to a lesser of $12 million minus the outstanding
letter of credit obligations or 85% of eligible accounts receivable minus the outstanding letter
of credit obligations. Interest on outstanding loans under our revolving credit facility with BOA
is charged monthly at a fluctuating rate per annum equal to 0.25% above the Prime Rate and, at our
option, interest on the outstanding loans may be charged at LIBOR plus 2.75%. The BOA revolving credit
facility is collateralized by a lien upon and security interest in substantially all of our assets.
Since current credit facilities with two of our primary trade vendors (GE Access and Ingram Micro.)
were also collateralized by substantially all of our assets, BOA, GE Access and Ingram Micro have
entered into intercreditor agreements, which provide that as regards to these vendors, debt obligations
to BOA are accorded priority.
- 24 -
Effective February 11, 2005, Wells Fargo Business Credit, Inc. (Wells Fargo) acquired our
loan from BOA. All terms and conditions remain unchanged.
As of March 31, 2005, we were in compliance with all of our financial covenants and we had a $4.65
million outstanding balance under the credit facility and an unused availability of $6.35 million
and we had $1 million in outstanding letter of credit obligations.
At March 31, 2005, our credit facilities with our primary trade vendors, GE Access, Ingram Micro, and
Tech Data were as follows:

Our credit line with GE Access was $7.5 million, with an outstanding principal balance of $7.3 million.
Our credit line with Ingram Micro was $5.5 million, with an outstanding principal balance of $4.7 million.
Our credit line with Tech Data was $1.5 million, with an outstanding balance of $363,000.Under these credit lines, we are obligated to pay each invoice within 30 days from the date of such
invoice.
Capital expenditures of $215,168 during the year ended March 31, 2005 were primarily for the purchase
of computer equipment for internal use, and furniture and fixtures. We anticipate our capital expenditures
for fiscal year ending March 31, 2006 will be approximately $400,000.
Emtec has no arrangements or other relationships with unconsolidated entities or other persons
that are reasonably likely to materially affect liquidity or the availability of or requirements
for capital resources.
We believe that funds generated from operations and bank borrowings should be sufficient to meet our
current operating cash requirements through the next twelve months, although there can be no assurance
that all of the aforementioned sources of cash can be realized.
The following are our contractual obligations associated with lease commitments. We lease warehouse
and office facilities, vehicles and certain office equipment under noncancellable operating leases.
Future minimum lease payments under such leases are as follows:
Fiscal Years2006
    $
    675,2002007
    
    484,1932008
    
    447,2772009
    
    173,533Thereafter
    
    2,451Total
    $
    1,782,654We have no other long-term commitments.
Risk Factors
We cannot assure you that we can successfully increase the portion of our revenues derived from IT services. If we are unsuccessful our future results may be adversely affected.
Our transition from an emphasis on reselling IT products to an emphasis on providing IT services has
placed significant demands on our managerial, administrative, and operational resources. Our ability
to
- 25 -
manage this transition effectively is dependent upon our ability to develop and improve operational,
financial, and other internal systems, as well as our business development capabilities, and to attract,
train, retain, motivate, and manage our employees. If we are unable to do so, our ability to effectively
deliver and support our services may be adversely affected. Further, our transitional efforts to
access higher-margin services and consulting revenues have resulted in reduced IT product sales.
If we successfully expand our IT services offerings, periods of variability in utilization may continue
to occur. In addition, we are likely to incur greater technical training costs during such periods.
Historically, our IT reseller activities accounted for 86.6%, or $97.61 million, of our total revenue
of $112.70 million for the fiscal year ended March 31, 2005, 82.0%, or $82.18 million, of our
total revenue of $100.17 million for the fiscal year ended March 31, 2004, and 82.5%, or
$75.94 million, of our total revenue of $92.08 million for the fiscal year ended March 31,
2003. In contrast, our IT services activities accounted for approximately 13.4%, or $15.09 million,
18.0%, or $17.99 million, and 17.5%, or $16.14 million, of our total revenue for the fiscal
years ended March 31, 2005, 2004 and 2003, respectively
Our new services have not achieved widespread client acceptance. If they do not achieve market acceptance, our profit potential may be adversely affected.
While we have offered IT services to our customers since 1983, our major emphasis on IT consulting
and services began in 1995 and we started focusing on our new managed services and network security
during fiscal year 2002.
We have limited experience in developing, marketing, or providing these services. We cannot assure
you that we will be able to successfully market such services to either new or existing customers,
that our services will achieve market acceptance, or that we will be able to effectively hire, integrate,
and manage additional technical personnel to enable us to perform these services to our customers
expectations.
Our inability to maintain high personnel utilization rates may adversely impact our profit potentiality.
The most significant cost relating to the services component of our business is personnel expense,
which consists of salaries, benefits, and payroll related expenses. Thus, the financial performance
of our service business is based primarily upon billing margins (billable hourly rates less the costs
to us of service personnel on an hourly basis) and utilization rates (billable hours divided by paid
hours). The future success of the services component of our business will depend in large part upon
our ability to maintain high utilization rates at profitable billing margins. The competition for
quality technical personnel has continued to intensify, resulting in increased personnel costs. This
intense competition has caused our billing margins to be lower than they might otherwise have been.
Our utilization rates for service personnel likely will also be adversely affected during periods
of rapid and concentrated hiring.
Our revenues and expenses are unpredictable. A decrease in revenues or increase in expenses could materially
adversely affect our operating results.
Our operating results have been, and will continue to be, impacted by changes in technical personnel
billing and utilization rates. Moreover, we expect that downward pricing pressure will persist due
to the continued commoditization of computer products.
Our operating results have been, and will continue to be, impacted by changes in technical personnel
billing and utilization rates. Further, there are numerous other factors, which are not within our
control that can contribute to fluctuations in our operating results, including the following:
- 26 -

patterns of capital spending by customers;
the timing, size, and mix of product and service orders and deliveries;
the timing and size of new projects, including projects for new customers; and
changes in trends affecting outsourcing of IT services;We also believe that, to a limited degree, our business is seasonal with a greater proportion of our
product sales occurring in the second and third quarter of our fiscal year due to the capital budgeting
and spending patterns of some of our larger customers. Operating results have been, and may in the
future also be, affected by the cost, timing, and other effects of acquisitions, including the mix
of product and service revenues of acquired companies.
Since our inception, we have funded our operations primarily from borrowings under our credit facility.
Our lending agreement with Wells Fargo contains financial covenants that require us to maintain a maximum
leverage ratio, and a minimum debt ratio on a quarterly basis. As of March 31, 2005 we were in compliance
with all our financial covenants and we had a $4.65 million outstanding balance under the credit
facility and an unused line of $6.35 million. However, there can be no assurance that we will be
in compliance will all of our financial covenants through November 2006 and Wells Fargo will not
immediately call for repayment of the outstanding borrowings under the credit facility.
We do not have long-term commitments from any of our customers and our product sales are on a purchase
order basis. Our revenues are concentrated and a loss of any one of our two top customers could materially
affect our operations and business.
In general, there are no ongoing written commitments by customers to purchase products from us. All
product sales we make are on a purchase order basis. Moreover, our client base is highly concentrated,
with our three largest customers, Gwinnett County School System (Georgia), State of New Jersey, and
Duval County School System, accounted, respectively, for approximately 24.2%, 15.2% and 10.6% of
our revenues for the year ended March 31, 2005. These same three customers accounted, respectively,
for approximately 16.0%, 31.0% and 10.8% of our revenues in fiscal year 2004 and approximately 22.7%,
17.3% and 10.5% of our revenues in fiscal year 2003. The State of New Jersey computer supply and
service contract was acquired in the August 12, 2002 asset acquisition from Acentra Technologies.
The State of New Jersey contract is subject to annual renewals. In June 2005, the State of New Jersey
extended the contract terms through June 2006. An additional seven customers, General Electric, Cingular
Wireless, Cox Communications, Bell South, Tiffany & Co., MBNA America, and The Bank of New York,
collectively accounted for 30.3% of our revenues for the year ended March 31, 2005. We anticipate
that these customer concentrations will continue for the foreseeable future. The loss of any one
of these customers may cause results of operations to vary materially from those anticipated.
We may not be able to compete effectively in the highly competitive IT services industry.
The IT services business is highly competitive. Our competitors include:

established computer product manufacturers, some of which supply products to us;
distributors;- 27 -

computer resellers;
systems integrators; and
other IT service providers.Many computer product manufacturers also sell to customers through their direct sales organizations
and certain of them have announced their intentions to enhance such direct sales efforts. Many of
our current and potential competitors have longer operating histories and financial, sales, marketing,
technical, and other resources substantially greater than we do. As a result, our competitors may
be able to adapt more quickly to changes in client needs or to devote greater resources than we can
to the sales of IT products and the provision of IT services and we may not have the resources to
compete effectively.
We must maintain our status as an authorized reseller/service of IT products. The loss on any one of
such authorizations could have a material adverse effect on our business and operations.
We are materially dependent on our continued status as an approved reseller of IT products and our
continued authorization as an IT service provider. Without such authorizations, we would be unable
to provide the range of products and services we currently offer, including warranty services, and
manufacturers support services contracts. Our resale agreements with manufacturers generally are
terminable by manufacturers upon 30 days prior written notice. The loss of one or more of such
authorizations could have a material adverse effect on our business and results of operations.
We have no long-term sales commitments from any of our suppliers. A loss of any of our four principal
suppliers would material adversely affect our IT reseller business.
Our IT reseller business depends on large part upon our access to aggregators and manufacturers, in
particular GE Access, Ingram, Tech Data, and Dell to supply us with products at competitive prices
and on reasonable terms for resale by us to our customers. Our agreements with Ingram, Tech Data
and Dell may be terminated by such companies upon 30 days prior written notice. Our agreement with
GE Access is effective until February 28, 2006. After February 28, 2006, our agreement with GE Access
can be renewed or terminated by either party. We cannot assure you that we will be able to continue
to obtain products from GE Access, Ingram, Tech Data, and Dell or our other vendors at prices or
on terms acceptable to us, if at all.
Reduction in or elimination of our credit facilities with our primary trade vendors could have a material
adverse effect on our business and operations.
Our credit facilities as of March 31, 2005 with our primary trade vendors, GE Access, Ingram Micro,
and Tech Data are $7.5 million, $5.5 million and $1.5 million, respectively. Under these credit lines,
we are obligated to pay each invoice within 30 days from the date of such invoice. These credit lines
could be reduced or eliminated without a notice, and this action could have a material adversely
affect our business, result of operations, and financial condition.
Our client engagements entail significant risks; a failure to meet a clients expectations could
materially adversely affect our reputation and business.
Many of our engagements involve projects that are critical to the operations of our customers
businesses and provide benefits that may be difficult to quantify. Our failure or inability to meet
a clients expectations in the performance of our services could result in a material adverse
change to the clients
- 28 -
operations and therefore could give rise to claims against us or damage our reputation, adversely affecting
our business, results of operations, and financial condition.
Our ability to protect our intellectual property rights is questionable. If we are unable to protect
such rights, our financial condition could be materially adversely affected.
We rely upon a combination of nondisclosure and other contractual arrangements and trade secret, copyright,
and trademark laws to protect our proprietary rights and the proprietary rights of third parties
from whom we license intellectual property. We enter into confidentiality agreements with our employees
and limit distribution of proprietary information. However, we cannot assure you that the steps taken
by us in this regard will be adequate to deter misappropriation of proprietary information or that
we will be able to detect unauthorized use and take appropriate steps to enforce our intellectual
property rights. We are subject to the risk of litigation alleging infringement of third-party intellectual
property rights. Any such claims could require us to spend significant sums in litigation, pay damages,
develop non-infringing intellectual property, or acquire licenses to the intellectual property that
is the subject of the alleged infringement. Our inability or failure to establish rights or to protect
our rights may have a material adverse effect on our business, results of operations, and financial condition.
We intend to expand our business through acquisitions of complementary businesses. There is no certainty,
however, that we will be successful in acquiring any new businesses or that any such acquisitions
will help us achieve our strategic objectives.
As a part of our business development strategy, we intend to pursue acquisitions of IT product and
service businesses in order to expand our service offerings, to add to or enhance our base of technical
or sales personnel, or to provide desirable client relationships. The success of this strategy depends
not only upon our ability to acquire complementary businesses on a cost-effective basis, but also
upon our ability to integrate acquired operations into our organization effectively, to retain and
motivate key personnel, and to retain customers of acquired firms. We cannot assure you that we will
be able to acquire or integrate such businesses successfully. Furthermore, we cannot assure you that
financing for any such acquisitions will be available on satisfactory terms, or that we will be able
to accomplish our strategic objectives as a result of any such transaction or transactions. In addition,
we expect to compete for attractive acquisition candidates with other companies or investors in the
IT industry, which could have the effect of increasing the cost of pursuing our acquisition strategy,
or it could reduce the number of attractive candidates to be acquired. Acquisitions also may involve
a number of specific risks, including:

possible adverse short-term effects on our operating results;
dependence on retaining key customers and personnel;
diversion of managements attention;
amortization or impairment of acquired intangible assets; and
risks associated with unanticipated problems, liabilities, or contingencies.- 29 -
Item 7A.      Quantitative and Qualitative Disclosures About Market Risk
We do not engage in trading market risk sensitive instruments and do not purchase hedging instruments
or other than trading instruments that are likely to expose us to market risk, whether
interest rate, foreign currency exchange, commodity price or equity price risk. We have issued no
debt instruments, entered into no forward or future contracts, purchased no options and entered into
no swaps. Our primary market risk exposures are those of interest rate fluctuations. A change in
interest rates would affect the rate at which we could borrow funds under our revolving credit facility.
Our average balance on the line of credit at March 31, 2005 was approximately $3.63 million. Assuming
no material increase or decrease in such balance, a one percent change in the interest rate would
change our interest expense by approximately $36,300 annually.
- 30 -
Item 8. Financial Statements and Supplementary Data
Reference is made to Item 15(a)(i) herein.
- 31 -
Item 9. Changes in and Disagreements With Accountants on Accounting and Financial DisclosureNone
- 32 -
Item 9A.       Controls and Procedures
Our management carried out an evaluation, with the participation of our Chief Executive Officer and
Chief Financial Officer, of the effectiveness of our disclosure controls and procedures as of March
31, 2005. Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer concluded
that our disclosure controls and procedures were effective to ensure that information required to
be disclosed by us in reports that we file or submit under the Securities Exchange Act of 1934 is
recorded, processed, summarized and reported, within the time periods specified in the rules and
forms of the Securities and Exchange Commission.
There has not been any change in our internal control over financial reporting in connection with the
evaluation required by Rule 13a-15(d) under the Exchange Act that occurred during the quarter ended
March 31, 2005 that has materially affected, or is reasonably likely to materially affect, our internal
control over financial reporting.
- 33 -
Item 9B.       Other Information
Not Applicable
- 34 -
PART III
Item 10. Directors and Executive Officers of the Registrant
The following table sets forth certain information as to each of our executive officers and directors:
Name
    
    Age
    
    Positions and
      Offices Presently HeldJohn P. Howlett
    
    61
    
    Chairman of the Board and Chief Executive OfficerRonald A. Seitz
    
    58
    
    President and Chief Operating Officer and DirectorR. Frank Jerd
    
    63
    
    DirectorGeorge F. Raymond
    
    68
    
    DirectorSam Bhatt
    
    37
    
    Vice President Finance and TreasurerJohn P. Howlett has been our Chairman of the Board and Chief Executive Officer since January 17, 2001 and
Chief Executive Officer of Emtec-NJ since August, 1997 and Chairman of Emtec-NJ since August, 1998.
He has been a director of Emtec-NJ since October, 1996. Mr. Howlett was the founder (in 1983) of
Cranford, New Jersey-based Comprehensive Business Systems, Inc. (CBSI). CBSI primarily provided microcomputer
systems, network integration, training, and data communications to mid-size and Fortune 1000 corporations.
In October 1996, CBSI merged into Emtec-NJ. Prior to founding CBSI, Mr. Howlett was with the AT&T
Long Lines Division for twelve years. He earned a Bachelor of Science degree in Electrical Engineering
from Rose Hulman Institute of Technology in Terre Haute, Indiana, and a Master of Business Administration
degree from Fairleigh Dickinson University in New Jersey. A Vietnam veteran, Mr. Howlett served in
the U.S. Army for four years.
Ronald A. Seitz has been our President and Chief Operating Officer since February 2003 and Executive Vice-President
and a director since January 17, 2001 and Executive Vice President of Emtec-NJ since March,
1996. Prior to that he was the Chief Operating Officer of Emtec-NJ. He has been a director of Emtec-NJ
since April, 1995. Mr. Seitz was the founder (in 1980) of Charleston, South Carolina-based Computer
Source, Inc. (CSI). CSI primarily provided microcomputer systems, network integration, and data communications
to mid-size and Fortune 1000 corporations. In April 1995, CSI merged with Landress Information Systems
of Mt. Laurel, New Jersey to become Emtec-NJ. Prior to founding CSI, Mr. Seitz was employed for six
years as an engineer with the U.S. government in Washington, DC. He graduated from North Carolina
State University with a Bachelor of Science degree and from George Washington University with an
MBA in computer science. Mr. Seitz also holds a DMD degree from the Dental School at the Medical
University of South Carolina.
R. Frank Jerd was appointed as a director upon the consummation of our merger with Emtec-NJ. Mr. Jerd is the
CEO of Viecore FSD and has been since 2002. From 1994 to 2002 he was a technology consultant
for Montauk Capital in New York . He was CEO of Gandalf Systems Corporation from 1993 to
1994 From 1992 to 1993, he was CEO of Benesys, Inc. Prior to that Mr., Jerd spent 20 years
with Memorex Telex as Executive VP and General Manager. Mr. Jerd earned a Bachelor of Science Degree
in Mathematics at Marshall University.
- 35 -
George F. Raymond  was elected as a director in August 2001. Mr. Raymond has been retired from active employment
since 1989. Since his retirement, he has worked as a consultant to the information technology industry.
In 1972, Mr. Raymond founded Automatic Business Centers, Inc., a payroll process service company
and served as its president until its sale to Automatic Data Processing in 1989. In 1965 he co-founded
Computer Services Inc, a general purpose data processing service company, which was purchased by
Management Data Corp. in 1969. Mr. Raymond served as the president of Computer Services Inc. until
1972. Prior thereto, Mr. Raymond was a management consultant with Touche Ross & Co. from 1961
to 1965. Currently Mr. Raymond serves on the Board of directors of five companies, four of which
are publicly traded.
Sam Bhatt  has been Vice President  Finance and Treasurer of Emtec since January 17, 2001 and of
Emtec-NJ since July 2000. Prior to that and from July, 1997, he was Director of Accounting for Emtec-NJ.
He also held the positions at Emtec-NJ of Accounting Manager (from 1994 to July, 1997) and of Senior
Accountant (from 1992 to 1994). Mr. Bhatt holds a Bachelor of Science Degree in business administration
from Drexel University in Pennsylvania and a Diploma in Hotel Management from the Institute of Hotel
Management and Catering Technology in Bombay, India.
Our Board usually meets four times a year in regularly scheduled meetings. It may meet more often if
necessary. The Board held eight meetings in fiscal 2005. Each director attended all of the meetings.
The Chairman usually determines the agenda for the meetings. Board members receive the agenda and
supporting information in advance of the meetings. Board members may also raise other matters at
the meetings.
Since we are not a listed company, we are not required to establish an audit committee. Our board of
directors believes it can conduct all the functions of an audit committee without unduly burdening
the duties and responsibilities of the board members. Our board of directors has determined that
Mr. George F. Raymond, an independent member of our board of directors, meets the definition of an
audit committee financial expert.
Our Board of Directors has adopted a Code of Ethics applicable to all of its employees, including its
Principal Executive Officer, Principal Financial Officer and Principal Accounting Officer, as well
as the members of its board of directors.
Currently, there is no compensation committee. The members of the entire board deliberate and decide
compensation. Neither Mr. Jerd nor Mr. Raymond is or has been an employee or an officer of our company.
Mr. Howlett is our Chairman, and Chief Executive Officer, and Mr, Seitz is our President and Chief
Operating Officer.
Compliance with Section 16(a) of the Securities Exchange Act of 1934
Section 16(a) of the Exchange Act requires our directors and executive officers and persons who own
beneficially more than 10% of our common stock to file reports of ownership and changes in ownership
of such common stock with the Securities and Exchange Commission, and to file copies of such reports
with us. Based solely upon a review of the copies of such reports filed with Emtec, Emtec believes
that during the past four fiscal years, such reporting persons complied with the filing
requirements of said Section 16(a) or any filing delinquencies by such persons were reported
under the Exchange Act, except that George F. Raymond did not file on a timely basis a Form
3 reflecting his initial statement of beneficial ownership and did not file on a timely basis
five Form 4s reflecting one transaction, one transaction, one transaction, two transactions
and three transactions, respectively, and R. Frank Jerd did not file on a
- 36 -
timely basis four Form 4s reflecting one transaction, one transaction, one transaction and four
transactions, respectively.
- 37 -
Item 11. Executive Compensation
The following table sets forth the aggregate compensation that we paid for services rendered to us
in all capacities during our fiscal years ended March 31, 2005, 2004 and 2003 by our chief executive
officer and by our other executive officers whose cash compensation exceeded $100,000 per year in
any such year.
Summary Compensation Table
Long Term CompensationAnnual Compensation
    
    
    Awards
    
    PayoutsName and
    Principal Position
    
    
    
    
    Other Annual CompensationFiscal Year
    
    Salary
    
    Bonus
    
    
    Restricted Stock 
    Awards
    
    Number of
    Options
    
    Long Term
    Incentive Payouts
    
    All Other
      CompensationJohn P. Howlett
    
    2005
    
    $
    229,280
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    15,250
    (1)- Chief Executive
    
    2004
    
    $
    216,300
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    18,553
    (1)Officer
    
    2003
    
    $
    212,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    16.750
    (1)Ronald A. Seitz
    
    2005
    
    $
    229,280
    
    $
    25,000
    
    
    
    
    
    
    
    
    
    
    $
    4,544
    (2)- Chief Operating
    
    2004
    
    $
    216,300
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    6,642
    (2)Officer
    
    2003
    
    $
    212,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    6,704
    (2)and PresidentSam Bhatt
    
    2005
    
    $
    127,300
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    -Vice President
    
    2004
    
    $
    128,757
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    -Finance
    
    2003
    
    $
    120,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Guy Fessenden
    
    2005
    
    $
    200,192
    
    $
    7,500
    
    $
    13,454
    (3)
    
    
    
    
    
    
    $
    47,692
    (4)-Executive Vice-
    
    2004
    
    $
    176,154
    
    
    
    
    $
    17,500
    (3)
    
    
    
    
    
    
    
    President
    
    2003
    
    $
    150,000
    
    
    
    
    $
    83,330
    (3)
    
    
    
    
    
    
    
    _____________(1)
Reflects employer contributions for life insurance premiums and for disability insurance premiums.(2)
Reflects employer contribution for life insurance premiums.(3)
Reflects paid commissions during fiscal 2005, 2004 and 2003.(4)
Reflects severance paid to terminated officer.Stock Options
None of the named executive officers listed in the Summary Compensation Table were granted stock options
during the fiscal year ended March 31, 2005.
Set forth below is information with respect to unexercised options held by our named executive officers
to purchase our common stock
- 38 -
Aggregated Option Exercises in Fiscal Year 2005and Fiscal Year End Option Values
Number of 
      Shares
      Acquired on
    Exercise
    
    Value
    Realized
    
    Number of Unexercised 
      Securities Underlying Options
      at March 31, 2005
    
    Value of Unexercised
      In-the-Money OptionsName
    
    
    
    Exercisable
    
    Unexercisable
    
    Exercisable
    
    UnexercisableJohn P. Howlett
    
    
    
    $ 0
    
    
    0
    
    0
    
    $ 0
    
    
    $ 0Ronald A. Seitz
    
    
    
    $ 0
    
    
    0
    
    0
    
    $ 0
    
    
    $ 0Sam Bhatt
    
    
    
    $ 0
    
    
    4,877
    
    0
    
    $1,609
    
    
    $ 0Guy Fessenden
    
    
    
    $ 0
    
    
    0
    
    0
    
    $ 0
    
    
    $ 0Compensation of Directors
Non-employee
  directors receive annual compensation of $10,000. Directors also receive stock
  options at the discretion of the Board. Each of our non-employee directors received
  options to purchase an aggregate of 45,000 shares of common stock for services
  performed during the past three fiscal years. Non-employee directors receive
  reimbursement of out-of-pocket expenses incurred for each board meeting or committee
  meeting attended.
Compensation Committee Interlocks and Insider Participation
Currently, there is no compensation committee. The members of the entire board deliberate and decide
compensation. Neither Mr. Jerd nor Mr. Raymond is or has been an employee or an officer of our company.
Mr. Howlett is our Chairman, and Chief Executive Officer, and Mr. Seitz is our President and Chief
Operating Officer.
- 39 -
Item 12. Security Ownership of Certain Beneficial Owners and Management
The following table sets forth, as of July 11, 2005, based on information obtained from the persons
named below, with respect to the beneficial ownership of our common stock held by:

each person known by us to be the owner of more than 5% of our outstanding shares;
each director;
each executive officer named in the Summary Compensation Table; and
all executive officers and directors as a group.Name and Address of
      Beneficial Owner(1)
    
    Amount and Percentage of 
      Beneficial Ownership(2)John P. and Rosemary A. Howlett
    
    1,400,910
    
    18.5
    %Ronald A. Seitz
    
    829,519
    (3)
    11.0
    %Sam Bhatt
    
    27,631
    
    .4
    %R. Frank Jerd
    
    88,030
    (4)
    1.2
    %George F. Raymond
    
    65,000
    (5)
    0.9
    %Tom Dresser
    
    1,029,774
    
    13.6
    %3505 S. Ocean BoulevardHollywood, FL 33019Richard Landon
    
    955,974
    
    12.6
    %142 York RoadDelran, NJ 08075Carla Seitz
    
    782,707
    (6)
    10.3
    %P.O. Box 2243Mt. Pleasant, SC 29465All executive officers and directors as a group (5 persons)
    
    2,411,090
    (3)(7)
    31.4
    %(1)
Each stockholders address is c/o Emtec, 572 Whitehead Road, Bldg#1, Trenton, New Jersey, unless
otherwise indicated.(2)
As used herein, beneficial ownership means the sole or shared power to vote, or direct the voting of,
a security, or the sole or shared power to invest or dispose, or direct the investment or disposition,
of a security. Except as otherwise indicated, all persons named herein have (i) sole voting
power and investment power with respect to their shares, except to the extent that authority is shared
by spouses under applicable law and (ii) record and beneficial ownership with respect to their
shares; also includes any shares issuable upon exercise of options or warrants that are currently
exercisable or will become exercisable within 60 days of June 30, 2005.(3)
Excludes 782,707 shares owned by Carla Seitz, Mr. Seitzs spouse. Mr. Seitz disclaims any beneficial
interest in these shares.- 40 -
(4)
    Includes 75,000 shares issuable upon the exercise of options.(5)
    Includes 45,000 shares issuable upon the exercise of options.(6)
    Excludes 829,519 shares owned by Ronald A. Seitz, Mrs. Seitzs spouse. Mrs. Seitz disclaims any beneficial ownership in these shares.(7)
    Includes 120,000 shares issuable upon the exercise of options.Equity Compensation Plan Information
Plan category
    Number of securities
      to be issued upon
      exercise of 
      outstanding options, 
      warrants and rights
    Weighted-average 
      exercise price of 
      outstanding 
      options, warrants
      and rights
    Number of securites
            remaining available for
            future issuance underequity 
            compensation plans 
            (excluding securities 
            reflected in column(a))Equity compensation 
      plans approved by 
      security holders
    
    
    Equity compensation 
      plans not approved by
      security holders (1)
    336,522
    $0.83
    551,878Total
    336,522
    $0.83
    551,878(1)
Our 1996 Stock Option Plan (the Plan) (amended in 1999) authorizes the granting of stock options to
directors and eligible employees. We have reserved 1,000,000 shares of its common stock for issuance
under the Plan at prices not less than 100% of the fair value of our common stock on the date of
grants (110% in the case of shareholders owning more than 10% of our common stock).As of March 31,
2005, 111,600 options have been exercised under the Plan.- 41 -
Item 13. Certain Relationships and Related Transactions
We moved our 2990 Gateway Drive,
Norcross, GA office and warehouse location to 500 Satellite Blvd., Suwanee, GA on December 1, 2004.
We are occupying approximately 21,000 square feet of office and warehouse space out of a total of
approximately 70,000 square feet. This space is leased from GS&T Properties, LLC, in which Messrs.
John Howlett and Ronald Seitz, each an executive officer and director of our company, are passive
investors, each owning an approximate 10% equity interest. The lease term is for 5 years with monthly
base rent of $12,500.
- 42 -
Item 14. Principal Accountants Fees and Services
Baratz & Associates, P.A. (BA) was retained as our independent auditors for our
fiscal year ended March 31, 2005. We did not consult with BA during either the prior fiscal years
or the interim period with respect to (i) either the application of accounting principles to
a specified transaction, either completed or proposed, or the type of audit opinion that might be
rendered on our financial statements, or (ii) any matter that was either the subject of a disagreement
or a reportable event.
The following table sets forth the aggregate fees incurred by us for the fiscal years ended March
31, 2005 and 2004 to our principal auditing firm:
2005
    
    2004Audit Fees
    $
    88,000
    
    $
    86,000Audit Related Fees
    $
    500
    
    $
    500Tax Fees
    $
    22,000
    
    $
    20,000All Other Fees
    $
    8,000
    
    $
    7,000Total
    $
    118,500
    
    $
    113,500Audit Fees: The Audit Fees billed by BA for the fiscal years ended March 31, 2005 and March 31, 2004 were for
professional services rendered for the audits of the financial statements of the Company, quarterly
reviews, and assistance with the review of documents filed with the Securities and Exchange Commission.
Audit Related Fees: The Audit Related Fees for the fiscal years ended March 31, 2005 and March 31, 2004 were for attendance
at the annual stockholders meeting.
Tax Fees: The Tax Fees billed by BA for the fiscal years ended March 31, 2005 and March 31, 2004 were for services
performed in connection with income tax compliance.
All Other Fees: All Other fees billed by BA for the fiscal years ended March 31, 2005 and March 31, 2004 were for
professional services rendered for the 401K audit.
Our board of directors has adopted a policy that requires advance approval of all audit, audit-related,
tax services, and other services performed by our independent auditor. The policy provides for pre-approval
by the board of directors of specifically defined audit and non-audit services. Unless the specific
service has been previously pre-approved with respect to that year, the board of directors must approve
the permitted service before the independent auditor is engaged to perform it.
- 43 -
PART IV
Item 15. Exhibits, Financial Statement Schedules
(a) Financial Statements
Report of Independent Public Accountants
    
    47Consolidated Balance Sheets as of March 31, 2005 and 2004
    
    48-49Consolidated Statements of Operations for the Fiscal Years Ended
      March 2005, 2004 and 2003
    
    50Consolidated Statements of Shareholders Equity for the Fiscal Years Ended
      March 31, 2005, 2004 and 2003
    
    51Consolidated Statements of Cash Flows for the Years Ended March 2005, 2004 and 2003
    
    52Notes to Consolidated Financial Statements
    
    53-68(b) Financial Statement Schedules
None
(c) Exhibits:
Exhibit No.
    Description2.1
    
    Agreement and Plan of Merger and Reorganization dated as of December 14, 2000 between Registrant, then known as American Geological Enterprises, Inc., and Emtec, Inc. (1)3.1
    
    Certificate of Incorporation, as amended(2)3.2
    
    Amended and Restated Bylaws(2)4.1
    
    Certificate evidencing shares of common stock(2)10.1
    
    Resale Agreement dated September 29, 1997 between Registrant and Ingram Micro, Inc.(2)10.2
    
    Volume Purchase Agreement dated January 28, 1998 between Registrant and Tech Data Corporation(2)10.3
    
    Microsoft Certified Partner Agreement, dated December 20, 2000, between Microsoft and Registrant(3)10.4
    
    IBM Business Partner Agreement, dated May 31, 2000, between International Business Machines Corporation and Registrant(3)10.5
    
    Letter Agreement, dated April 24, 2001, between Novell Inc. and Registrant(3)10.6
    
    Citrix Solutions Network Gold Renewal Membership Agreement, dated April 30, 2001, between Citrix Systems, Inc. and Registrant(3)10.7
    
    U.S. Systems Integrator Agreement, dated December 22, 1999, between Cisco System, Inc. and Registrant.(3)10.8
    
    Sun Microsystem, Inc. Channel Agreement, dated February 1, 2000, between Sun Microsystems, Inc. and Emtec, Inc. .(6)- 44 -
Exhibit No.
    Description10.9
    
    Loan and Security Agreement, dated November 21, 2001, by and between Fleet Capital Corporation and Registrant.(4)10.10
    
    Agreement for Wholesale Financing, dated November 21, 2001, by and between IBM Credit Corporation and Registrant.(4)10.11
    
    Subordination Agreement, dated as of the 21st day of November, 2001, among Registrant, MRA Systems, Inc. dba GE Access and Fleet Capital Corporation.(4)10.12
    
    Intercreditor Agreement, dated as of November 21, 2001, between Fleet Capital Corporation and Ingram Micro Inc. and accepted by Registrant.(4)10.13
    
    Asset Acquisition Agreement dated December 5, 2001 by and between Devise Associates, Inc. and Registrant.(5)10.14
    
    Lease Agreement dated January 9, 2002 between Registrant and Vandergrand Properties Co., L.P., for New York, New York facility.(9)10.15
    
    Lease Agreement dated March 1, 2002 between Registrant and G. F. Florida Operating Alpha, Inc.,, for Jacksonville, Florida facility.(9)10.16
    
    Lease Agreement dated November 15, 2002 between Registrant and Hamilton Transit Corporate Center, for warehouse facility in Trenton, New Jersey.(10)10.17
    
    Asset Acquisition Agreement dated August 12, 2002 by and between Acentra Technologies, Inc. and Registrant.(7)10.18
    
    Asset Acquisition Agreement dated August 31, 2002 by and between Turnkey Computer Systems, Inc. and Registrant.(8)10.19
    
    Assignment of State of New Jersey Contract from Acentra Technologies, Inc. to the Registrant.(7)10.20
    
    Remarketer/Integrator Agreement dated August 15, 2002 between Dell Marketing L.P. and the Registrant.(7)10.21
    
    Lease Agreement dated June 1, 2004 between Registrant and Hamilton Transit Corporate Center, for office space in Trenton, New Jersey.(11)10.22
    
    Lease Agreement dated May 20, 2004 between Registrant and Facstore, for office space in Cranford, New Jersey. (11)10.23
    
    Amendment to Loan and Security Agreement, dated as of December 10, 2004 , between Bank of America Business Capital Corporation and Emtec, Inc.(12)10.24
    
    Lease Agreement dated September 2, 2004 between Registrant and GS&T Properties, LLC, for Suwanee, GA facility.10.25
    
    Lease Agreement dated January 1, 2005 between Registrant and Select Office Suites, for a sales office space in New York, New York.10.26
    
    Sub- lease Agreement dated November 24, 2004 between Registrant and vFinance, Inc., for office space in New York, New York.10.27
    
    1996 Stock Option Plan, as amended in 1999(2)14.1
    
    Code of Ethics(11)21.1
    
    Subsidiaries(2)23.1
    
    Consent of Baratz & Associates, P.A.- 45 -
Exhibit No.
    Description31.1
    
    Certification of John P. Howlett, Principal Executive Officer, of Emtec, Inc. dated July 14, 2005. Rule 13a-14(a)/15 d-14(a)31.2
    
    Certification of Sam Bhatt, Principal Financial Officer, of Emtec, Inc. dated July 14, 2005. Rule 13a-14(a)/15 d-14(a)32.1
    
    Certificate of John P. Howlett, Principal Executive Officer, of Emtec, Inc. dated July 14, 2005. Section 135032.2
    
    Certificate of Sam Bhatt, Principal Financial Officer, of Emtec, Inc. dated July 14, 2005. Section 1350.(1)
    
    Previously filed as an exhibit to Registrants Current Report on Form 8K dated January 17, 2001, filed on January 31, 2001, and incorporated herein by reference.(2)
    
    Previously filed as an exhibit to Registrants Registration Statement on Form 10 filed on May 21, 2001, and incorporated herein by reference.(3)
    
    Previously filed as an exhibit to Amendment No. 1 to Registration Statement on Form 10, filed on July 12, and incorporated herein by reference.(4)
    
    Previously filed as an exhibit to Registrants Current Report on Form 8K dated November 21, 2001, filed on November 26, 2001, and incorporated herein by reference.(5)
    
    Previously filed as an exhibit to Registrants Current Report on Form 8K dated December 5, 2001, filed on December 20, 2001, and incorporated herein by reference.(6)
    
    Previously filed as an exhibit to Registrants Form 10-K dated March 31, 2001, filed on July 12, 2001, and incorporated herein by reference.(7)
    
    Previously filed as an exhibit to Registrants Current Report on Form 8K dated August 12, 2002 filed on August 26, 2002, and incorporated herein by reference.(8)
    
    Previously filed as an exhibit to Registrants Current Report on Form 8K dated August 31, 2002 filed on September 13, 2002, and incorporated herein by reference.(9)
    
    Previously filed as an exhibit to Registrants Form 10-K dated March 31, 2002, filed on June 30, 2002, and incorporated herein by reference.(10)
    
    Previously filed as an exhibit to Registrants Form 10-K dated March 31, 2003, filed on July 15, 2003, and incorporated herein by reference.(11)
    
    Previously filed as an exhibit to Registrants Form 10-K dated March 31, 2004, filed on July 14, 2004, and incorporated herein by reference.(12)
    
    Previously filed as an exhibit to Registrants Current Report on Form 8K dated December 10, 2004, filed on December 14, 2004, and incorporated herein by reference.- 46 -
INDEPENDENT AUDITORS REPORT
To the Board of Directors and StockholdersEmtec, Inc.572 Whitehead Road, Bldg #1Trenton, New Jersey 08619
We have audited the accompanying consolidated balance sheets of Emtec, Inc. as of March 31, 2005 and
2004, and the related consolidated statements of operations, stockholders equity, and cash
flows for each of the three years in the period ended March 31, 2005. These financial statements
are the responsibility of the Companys management. Our responsibility is to express an opinion
on these financial statements based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight
Board (United States). Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements.
An audit also includes 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 financial statements referred to above present fairly, in all material respects,
the consolidated financial position of Emtec, Inc. as of March 31, 2005 and 2004, and the consolidated
results of its operations and its cash flows for each of the three years in the period ended March
31, 2005, in conformity with accounting principles generally accepted in the United States of America.
As discussed in Note 1 to the consolidated financial statements, effective April 1, 2002, the
Company changed its method for accounting for goodwill and other intangible assets by adopting Statement
of Financial Accounting Standards No. 142, Goodwill and Other Intangible Assets.
/s/ Baratz & Associates, P.A.Baratz & Associates, P.A.
Marlton, New JerseyJune 6, 2005
  (except for Note 18, as to which the date is July 14, 2005)
47
EMTEC, INC.CONSOLIDATED BALANCE SHEETSMARCH 31, 2005 AND 2004
2005
    
    2004AssetsCurrent AssetsCash and cash equivalents
    $
    2,357,972
    
    $
    4,792Receivables:Trade, net
    
    21,396,698
    
    
    15,206,972Others
    
    1,640,613
    
    
    289,445Inventories
    
    2,945,018
    
    
    1,599,166Prepaid expenses
    
    395,228
    
    
    396,313Deferred tax assets
    
    437,923
    
    
    186,368Total Current Assets
    
    29,173,452
    
    
    17,683,056Property and equipment, net
    
    337,168
    
    
    387,073Investment in geothermal power unit, net
    
    
    
    
    569,960Deferred tax assets
    
    359,907
    
    
    103,813Intangible assets
    
    105,219
    
    
    118,198Restricted cash
    
    150,534
    
    
    Other assets
    
    78,177
    
    
    46,512Total Assets
    $
    30,204,457
    
    $
    18,908,612The accompanying notes are an integral partof these consolidated financial statements.
48
EMTEC, INC.
CONSOLIDATED BALANCE SHEETSMARCH 31, 2005 AND 2004
2005
    
    2004Liabilities and Shareholders EquityCurrent LiabilitiesLine of credit
    $
    4,648,559
    
    $
    2,308,416Accounts payable
    
    13,385,997
    
    
    9,295,882Customer deposits
    
    1,571,274
    
    
    332,667Income taxes payable
    
    1,400,312
    
    
    279,397Accrued liabilities
    
    2,703,708
    
    
    2,529,885Deferred revenues
    
    1,016,574
    
    
    853,393Total Current Liabilities
    
    24,726,424
    
    
    15,599,640Deferred revenue
    
    
    
    
    714,573Deferred tax liability
    
    
    
    
    25,924Total Liabilities
    
    24,726,424
    
    
    16,340,137Shareholders EquityCommon stock, $.01 par value; 25,000,000 shares authorized;
   7,492,098 and 7,380,498 shares issued and outstanding
   at March 31, 2005 and 2004
    
    74,921
    
    
    73,805Additional paid-in capital
    
    2,333,387
    
    
    2,294,805Retained earnings
    
    3,069,725
    
    
    199,865Total Shareholders Equity
    
    5,478,033
    
    
    2,568,475Total Liabilities andShareholders Equity
    $
    30,204,457
    
    $
    18,908,612The accompanying notes are an integral part
of these consolidated financial statements.
49
EMTEC, INC.CONSOLIDATED STATEMENTS OF OPERATIONSYEARS ENDED MARCH 31, 2005, 2004 AND 2003
2005
    
    2004
    
    2003Revenues:Procurement services
    $
    97,605,588
    
    $
    82,184,744
    
    $
    75,943,230Service and consulting
    
    15,094,410
    
    
    17,986,564
    
    
    16,140,896Total Revenues
    
    112,699,998
    
    
    100,171,308
    
    
    92,084,126Cost of Revenues:Procurement services
    
    85,879,341
    
    
    74,282,388
    
    
    67,525,430Service and consulting
    
    10,467,370
    
    
    11,497,465
    
    
    11,915,844Total Cost of Revenues
    
    96,346,711
    
    
    85,779,853
    
    
    79,441,274Gross Profit:Procurement services
    
    11,726,247
    
    
    7,902,356
    
    
    8,417,800Service and consulting
    
    4,627,040
    
    
    6,489,099
    
    
    4,225,052Total Gross Profit
    
    16,353,287
    
    
    14,391,455
    
    
    12,642,852Operating Expenses:Selling, general and
        administrative
    
    12,532,580
    
    
    13,321,726
    
    
    12,533,905Interest
    
    217,860
    
    
    328,296
    
    
    160,803Loss on impairment,Goodwill
    
    
    
    
    
    
    
    254,894Total Operating Expenses
    
    12,750,440
    
    
    13,650,022
    
    
    12,949,602Income (loss) from continuing operations
      before income taxes
    
    3,602,847
    
    
    741,433
    
    
    (306,750
    )Income tax expense (benefit)
    
    989,317
    
    
    121,328
    
    
    (40,761
    )Income(loss) from continuing operations
    
    2,613,530
    
    
    620,105
    
    
    (265,989
    )Income from discontinued geothermal
       operations, net of tax
    
    48,052
    
    
    22,883
    
    
    54,518Gain on sale of geothermal investment, 
       net of tax
    
    208,278
    
    
    
    
    
    Net Income (Loss)
    $
    2,869,860
    
    $
    642,988
    
    $
    (211,471
    )Per Share:Income (Loss) From Continuing OperationsBasic
    $
    0.35
    
    $
    0.08
    
    $
    (0.04
    )Diluted
    $
    0.34
    
    $
    0.08
    
    $
    (0.04
    )Income (Loss) From Discontinued OperationsBasic
    $
    0.03
    
    $
    0.00
    
    $
    0.01Diluted
    $
    0.03
    
    $
    0.00
    
    $
    0.01Net Income (Loss)Basic
    $
    0.39
    
    $
    0.09
    
    $
    (0.03

    )Diluted
    $
    0.37
    
    $
    0.09
    
    $
    (0.03
    )Weighted Average Number of SharesOutstanding:Basic
    
    7,389,798
    
    
    7,380,498
    
    
    7,080,498Diluted
    
    7,726,320
    
    
    7,483,549
    
    
    7,123,831The accompanying notes are an integral part
  of these consolidated financial statements.
50
EMTEC, INC.
CONSOLIDATED STATEMENTS OF SHAREHOLDERS EQUITY
YEARS ENDED MARCH 31, 2005, 2004 AND 2003
Additional
      Paid-In 
      Capital
    
    Retained 
      Earnings 
      (Accumulated
      Deficit)
    
    Total 
    Shareholders
      EquityCommon StockShares
    
    AmountBalance, April 1, 2002
    
    7,080,498
    
    $
    70,805
    
    $
    2,210,805
    
    $
    (231,652
    )
    $
    2,049,958Net loss for the year
    
    
    
    
    
    
    (211,471
    )
    (211,471
    )Balance, March 31, 2003
    
    7,080,498
    
    $
    70,805
    
    $
    2,210,805
    
    $
    (443,123
    )
    $
    1,838,487Stock issued as
payment for services
    300,000
    
    3,000
    
    84,000
    
    
    
    87,000Net income for the year
    
    
    
    
    
    
    
    
    
    
    642,988
    
    
    642,988Balance, March 31, 2004
    
    7,380,498
    
    $
    73,805
    
    $
    2,294,805
    
    $
    199,865
    
    $
    2,568,475Stock issued upon
exercise of options
    
    111,600
    
    
    1,116
    
    
    38,582
    
    
    
    
    
    39,698Net income for the year
    
    
    
    
    
    
    2,869,860
    
    2,869,860Balance, March 31, 2005
    
    7,492,098
    
    $
    74,921
    
    $
    2,333,387
    
    $
    3,069,725
    
    $
    5,478,033The accompanying notes are an integral partof these consolidated financial statements.
51
EMTEC, INC.CONSOLIDATED STATEMENTS OF CASH FLOWSYEARS ENDED MARCH 31, 2005, 2004 AND 2003
2005
    
    2004
    
    2003Cash Flows From Operating ActivitiesNet income (loss) for the year
    $
    2,869,860
    
    $
    642,988
    
    $
    (211,471
    )Adjustments to Reconcile Net Income(Loss) To Net Cash Provided By (UsedIn) Operating ActivitiesDepreciation and amortization
    
    315,163
    
    
    605,309
    
    
    590,293Impairment Charges
    
    
    
    
    462,915
    
    
    254,894Deferred income tax benefit
    
    (533,573
    )
    
    (176,047
    )
    
    (78,907
    )Stock issued as payment for services
    
    
    
    
    87,000
    
    
    Gain from sale of geothermal unit
    
    (289,275
    )
    
    
    
    
    Changes In Operating Assets andLiabilitiesIncrease in receivables
    
    (7,540,893
    )
    
    (466,611
    )
(8,444,852
)(Increase) decrease in inventories
    
    (1,345,852
    )
    
    1,282,702
    
    
    (1,791,919
    )Decrease (increase) in prepaid expenses
    
    1,084
    
    
    66,515
    
    
    (74,520
    )Increase in restricted cash
    
    (150,534
    )
    
    
    
    
    (Increase) decrease in other assets
    
    (31,665
    )
    
    2,313
    
    
    (903
    )Increase in accounts payable
    
    4,090,114
    
    
    1,096,092
    
    
    1,589,955Increase (decrease) in customer deposits
    
    1,238,607
    
    
    (155,460
    )
    
    242,740Increase in income taxes payable
    
    1,120,915
    
    
    253,616
    
    
    23,694Increase in accrued liabilities
    
    173,823
    
    
    1,080,759
    
    
    686,931Increase (decrease) in deferred revenues
    
    120,731
    
    
    (510,070
    )
    
    438,150Net Cash Provided By (Used In)Operating Activities
    
    38,505
    
    
    4,272,021
    
    
    (6,775,915
    )Cash Flows From Investing ActivitiesPurchases of equipment
    
    (215,168
    )
    
    (164,456
    )
    
    (1,003,962
    )Additional investment in geothermal unit
    
    
    
    
    
    
    
    (64,978
    )Acquisition of a business unit
    
    
    
    
    
    
    
    (100,000
    )Proceeds from sale of geothermal unit
    
    150,000Net Cash Used In Investing Activities
    
    (65,168
    )
    
    (164,456
    )
    
    (1,168,940
    )Cash Flows From Financing ActivitiesNet increase (decrease) in line of credit
    
    2,340,145
    
    
    (5,894,874
    )
    
    8,203,290Payment of related party debt
    
    
    
    
    
    
    
    (19,000
    )Proceeds from issuance of stock
    
    39,698
    
    
    
    
    
    Net Cash Provided By (Used In)Financing Activities
    
    2,379,843
    
    
    (5,894,874
    )
    
    8,184,290Net Increase (Decrease) inCash and Cash Equivalents
    
    2,353,180
    
    
    (1,787,309
    )
    
    239,435Beginning Cash and Cash Equivalents
    
    4,792
    
    
    1,792,101
    
    
    1,552,666Ending Cash and Cash Equivalents
    $
    2,357,972
    
    $
    4,792
    
    $
    1,792,101The accompanying notes are an integral part
of these consolidated financial statements.
52
EMTEC, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTSYEARS ENDED MARCH 31, 2005, 2004 AND 2003
1.       Organization and Summary of Significant Accounting Policies
Emtec (OTC: ETEC) is a systems integrator focused on providing technology solutions that
enable our customers to effectively use and manage their data to grow their businesses. Our areas
of specialization in IT services include enterprise computing, data communications, data access,
network design, enterprise backup and storage consolidation, managed services and staff augmentation.
Emtecs solutions are crafted to enable our customers to become more efficient and effective,
thereby giving them a competitive advantage. Our customers are primarily Fortune 2000 companies,
state and local governmental agencies, local school districts, and other large and mid-sized companies
located principally in the New York/New Jersey Metropolitan area and the Southeastern United States.
We service our customer base from leased facilities in New Jersey, New York, Georgia, and Florida.
The Company, was formed on April 1, 1995, as a result of the 1995 and 1996 mergers of three information
technology companies that were originally founded between 1980 and 1983.
Principles of Consolidation
The consolidated financial statements include the accounts of the issuer and its wholly owned subsidiary.
Intercompany transactions and balances have been eliminated in consolidation.
Use of Estimates
Our consolidated financial statements have been prepared in accordance with generally accepted accounting
principles in the United States (US GAAP). The preparation of these financial statements requires
us to make estimates and judgments that affect the reported amounts in the financial statements and
accompanying notes. These estimates form the basis for judgments we make about the carrying values
of assets and liabilities that are not readily apparent from other sources. We base our estimates
and judgments on historical experience and on various other assumptions that we believe are reasonable
under the circumstances. However, future events are subject to change and the best estimates and
judgments routinely require adjustment. US GAAP requires us to make estimates and judgments
in several areas, including those related to impairment of goodwill and equity investments, revenue
recognition, recoverability of inventory and receivables, the useful lives of long lived assets such
as property and equipment, the future realization of deferred income tax benefits and the recording
of various accruals.
Revenue Recognition
The Company recognizes revenues when the earning process is complete, evidenced by an agreement between
the Company and the customer, there has been delivery and acceptance, collectibility is probable,
and pricing is fixed and determinable. Procurement services revenue represents sales of computer
hardware and pre-packaged software. These arrangements often include software installations, configurations,
and imaging, along with delivery and set-up of hardware. The Company follows the criteria contained
53
in EITF 00-21 and SAB 104 in recognizing revenue associated with these transactions. The Company performs
all software installations, configurations and imaging services at our locations prior to the delivery
of the product. Some customer arrangements include set-up services performed at customer
locations where the Companys personnel perform the routine tasks of removing the equipment
from boxes, and setting up the equipment at customer workstations by plugging in all necessary connections,
etc. This service is usually done on the same day as delivery. Revenue is recognized at date of delivery,
except as follows:

    In some instances, the set-up service is performed after date of delivery. The Company recognizes revenue for the hardware component at date of delivery when the amount of revenue allocable to this component is not contingent upon the completion of set-up services and therefore, the Companys customer has agreed that the transaction is complete as to the hardware component. In instances where the Companys customer does not accept delivery until set-up services are completed, the Company defers all revenue in the transaction until customer acceptance occurs.
    There are occasions when a customer requests a transaction on a bill & hold basis. The Company follows the SAB 104 criteria and recognizes revenue prior to date of physical delivery only when all the criteria are met as follows:
    Risks of ownership have passed to the customer
    The customer has made a fixed commitment, in writing.
    A fixed delivery schedule is established
    The Company has not retained any specific performance obligations.
    The Company segregates the customers ordered goods from its general inventory and the order is complete and ready for shipment.The Company does not modify its normal billing and credit terms for such customers. The customer is
invoiced at the date of revenue recognition when all of the above criteria have been met.
The Company has experienced minimal customer returns. Since all eligible products must be returned
to the Company within 30 days from the date of the invoice, the Company reduces the procurement services
revenue and cost of procurement services in each accounting period based on the actual returns that
occurred in the next 30 days after the close of the accounting period.
Service and consulting contracts include time billings based upon billable hours charged to the customers,
fixed price short-term projects, hardware maintenance contracts, and manufacturer support service
contracts. These contracts generally are task specific and do not involve multiple deliverables.
Revenues from time billings are recognized as services are delivered. Revenues from short-term fixed
price projects are recognized using the percentage of completion method, whenever reliable estimates
of progress toward completion are available. Revenues from hardware maintenance contracts are recognized
ratably over the contract period. Net revenues from manufacturer support service contracts where
the manufacturer is responsible for fulfilling the service requirements of the customer are recognized
immediately on their contract sale date. Manufacturer support service contracts contain cancellation
privileges that allow our customers to
54
terminate a contract with 90 days written notice. In this event, the customer is entitled to a pro-rated
refund based on the remaining term of the contract and we would owe the manufacturer a pro-rated
refund of the cost of the contract. However, the Company has experienced no customer cancellations
of any significance during our most recent 3-year history and do not expect cancellations of any
significance in the future.
Cash Equivalents
Cash equivalents include items almost as liquid as cash with maturity periods of three months or less
when purchased. The carrying amount of cash and cash equivalents approximates fair value.
Trade Receivables
The Company provides an allowance for losses on trade receivables based on a review of the current
status of existing receivables and managements evaluation of periodic aging of the accounts.
Other Receivables
Other receivables represent rebates, price protection receivables and amounts due from vendors for
purchase returns made in the ordinary course of business. The Companys accounting policy is
to reduce cost of revenues of procurement services for rebates, discounts and other incentives received
from suppliers.
Concentration of Credit Risk
The Company provides its services to a wide variety of commercial, governmental and institutional customers.
Financial instruments which potentially subject the Company to concentrations of credit risk are
cash (and cash equivalents) and trade receivables. The Company performs ongoing credit evaluations
of its customers financial condition and, generally, does not require collateral from its customers.
The Company has not experienced significant credit losses. The Company maintains deposit accounts
with reputable financial institutions; at times, such deposits may exceed Federal Depository Insurance
Limits.
Inventories
Inventories are stated at the lower of cost (first-in, first-out) or market. Cost is based on standard
costs generated principally by the most recent purchase prices. The Company provides an inventory
reserve for obsolescence and deterioration based on managements review of products and sales.
Property and Equipment
Property and equipment are stated at original cost. Depreciation and amortization for financial accounting
purposes are computed using the straight line method over the estimated lives of the respective assets.
Accelerated methods of depreciation are used for tax purposes.
Maintenance and repair costs are charged to expense as incurred. The cost and accumulated depreciation
relating to property and equipment retired or otherwise disposed of are eliminated from the accounts
and any resulting gains or losses are credited or charged to income.
55
Valuation of Long Lived Assets
The Company evaluates the recoverability of its long-lived assets (other than intangibles and deferred
tax assets) in accordance with Statement of Financial Accounting Standard No. 144, Accounting
for the Impairment or Disposal of Long-Lived Assets,(SFAS No. 144). Long-lived assets are reviewed
for impairment under SFAS No. 144 whenever events or changes in circumstances indicate that the carrying
amount of an asset may not be recoverable. SFAS No. 144 requires recognition of impairment of long-lived
assets in the event that the net book value of such assets exceeds the future undiscounted net cash
flows attributable to such assets. Impairment, if any, is recognized in the period of identification
to the extent the carrying amount of an asset exceeds the fair value of such asset.
Goodwill and Intangible Assets
Goodwill is the excess of the purchase price over the fair value of the net assets acquired in a business
combination accounted for under the purchase method. Beginning April 1, 2002, in accordance with
Statement of Financial Accounting Standards No. 142, Goodwill and Other Intangible Assets,
(SFAS 142), goodwill and indefinite-lived assets are no longer amortized, but instead tested for
impairment at least annually. Intangible assets that have finite useful lives are amortized over
their useful lives.
Income Taxes
Income taxes are accounted for under an asset and liability approach that requires the recognition
of deferred tax assets and liabilities for the expected future tax consequences of events that have
been recognized in the Companys financial statements or tax returns. In estimating future tax
consequences, the Company generally considers all expected future events other than the enactment
of changes in tax laws or rates. A valuation allowance is recognized if, on weight of available evidence,
it is more likely than not that some portion of the deferred tax assets will not be realized.
Fair Value of Financial Instruments
The following methods and assumptions were used to estimate fair value of financial instruments at
March 31, 2005 and 2004.
Short-term financial instruments (cash equivalents, receivables, payables, customer deposit and accrued
liabilities) - cost approximates fair value because of the short maturity period.
Line of credit - cost approximates fair value because of the short interest-reset period.
Advertising Costs
Advertising and marketing costs are charged to expense as incurred. Advertising and marketing expenses
for the years ended March 31, 2005, 2004 and 2003 were $399,682, $370,800, and $492,481, respectively.
Stock-Based Compensation
56
The Company did not change to the fair value based method of accounting for stock-based employees
compensation. Accordingly, the adoption of SFAS No. 148 did not affect the Companys financial
condition or results of operations. However,SFAS No. 148 requires that information be provide as
if the Company had accounted for employee stock options under the fair value method of this statement,
including disclosing proforma information regarding net income (loss) and earnings (loss) per share.
The Company accounts for stock based compensation in accordance with APB Opinion No. 25, Accounting
for Stock Issued to Employees, as permitted by SFAS No. 123. Accordingly, compensation cost
for stock options issued to employees is measured as the excess, if any, of the quoted market price
of the Company stock at the date of grant over the amount an employee must pay to acquire the stock.
SFAS No. 123 requires companies that continue to follow APB No. 25 to provide a pro forma disclosure
of the impact of applying the fair value method of SFAS No. 123.
Reclassifications
Certain reclassifications have been made to prior years balances in order to conform to current presentations.
Earnings (Loss) Per Share
Basic earnings (loss) per share are computed by dividing net earnings (loss) by the weighted average
shares outstanding during the reporting period. Diluted earnings (loss) per share are computed similar
to basic earnings (loss) per share except that the weighted average shares outstanding are increased
to include additional shares from the assumed exercise of stock options, if dilutive.
New Accounting Pronouncement
In December 2004, the FASB issued Statement of Financial Accounting Standard No. 123 (Revised), Share-Based
Payments (SFAS 123R), which is effective for the first annual period beginning
after June 15, 2005. Under SFAS 123R, the Company will be required to measure the cost of employee

service received in exchange for awards of stock options based upon the fair value of the options
as of their grant date. The cost of the employee service will be recognized as compensation cost
ratably over the option vesting period. Currently, the Company recognizes compensation expense pursuant
to APB 25, whereby compensation expense is recognized to the extent that an option price is less
than the market price of the stock at the date of the grant (the Intrinsic Value). Because
Emtecs practice is to set the option exercise price equal to the market price of the stock
as of the date of the grant, no compensation expense is recognized for financial reporting purposes.
SFAS 123R allows the use of either the Black-Scholes or a lattice option-pricing model to calculate
the fair value of options. Currently, the Company is evaluating the adoption alternatives under SFAS
123R. The impact on future operating results will be dependent on the type and extent of stock-based
compensation to be issued in future periods and cannot be determined at this time.
2.       Trade Receivables
The Company provides an allowance for losses on trade receivables based on a review of the current
status of existing receivables and managements evaluation of periodic aging of the accounts.
Trade accounts receivable
57
consists of the following:
March 31, 2005
    
    
    March 31, 2004Trade Receivable
    
    $    21,985,113
    
    
    
    $    15,570,374Allowance for doubtful accounts
    
    (588,415
    )
    
    
    (363,402
    )Trade Receivable, net
    
    $    21,396,698
    
    
    
    $    15,206,9723.       Inventories
Inventories are stated at lower of cost (first-in, first-out) or market. Cost is based on standard
costs generated principally by the most recent purchase price. The Company provides an inventory
reserve for obsolescence and deterioration based on managements review of product sales. Inventory
is recorded on the balance sheet net of allowances for inventory valuation of $433,667 and $722,551
at March 31, 2005 and March 31, 2004, respectively.
The components of inventories at March 31, are as follows:
2005
    
    2004Hardware, software and accessories
    $
    3,246,361
    
    $
    2,151,818Service parts
    
    132,324
    
    
    169,8993,378,685
    
    
    2,321,717Less inventory reserve
    
    (433,667
    )
    
    (722,551
    )$
    2,945,018
    
    $
    1,599,1664.       Financing Arrangements
On December 10, 2004, the Company entered into an amendment to the Loan and Security Agreement with
Bank of America Business Capital Corporation (successor by merger to Fleet Capital Corporation) (BOA)
extending its credit facility through November 21, 2006. The amendment increased the Companys
credit facility from $10 million to $12 million. The Company can borrow up to a lesser of $12 million
minus outstanding letter of credits or 85% of eligible accounts receivable minus the outstanding
letter of credit obligations. Interest on outstanding loans under the revolving credit facility with
BOA is charged monthly at a fluctuating rate per annum equal to 0.25% above the Prime Rate and, at
the Companys option, interest on the outstanding loans may be charged at LIBOR plus 2.75%.
The BOA revolving credit facility is collateralized by a lien upon and security interest in substantially
all of the Company assets. Since current credit facilities with two of the Companys primary
trade vendors (GE Access and Ingram Micro.) were also collateralized by substantially all of the
Companys assets, BOA, GE Access and Ingram Micro have entered into intercreditor agreements,
which provide that as regards to these vendors, debt obligations to BOA are accorded priority.
Effective February 11, 2005, Wells Fargo Business Credit, Inc. (Wells Fargo) acquired our
credit facility from BOA. All terms and conditions
58
remain unchanged.
As of March 31, 2005 the Company is in compliance with all its financial covenants.
At March 31, 2005, the Company had a $4.65 million outstanding balance under the credit facility and
an unused availability of $6.35 million and the Company had $1.00 million in outstanding letter of
credit obligations.
At March 31, 2005, the Companys credit facilities with its primary vendors, GE Access, Ingram
Micro and Tech Data were as follows: 1) Credit line with GE Access was $7.5 million, no interest
charged, with an outstanding principal balance of $7.3 million. 2) Credit line with Ingram Micro
was $5.5 million, at an 18% APR interest rate after 30 days from the date of the invoice, with an
outstanding principal balance of $4.7 million. 3) Credit line with Tech Data was $1.5 million, no
interest charged, with an outstanding principal balance of $363,000. Under these credit lines, the
Company is obligated to pay each invoice within 30 days from the date of such invoice.
5.       IntangibleAssets
The Company adopted SFAS No. 142, effective April 1, 2002. As a result, the Company performed its initial
goodwill impairment test as of April 1, 2002 and another impairment test as of March 31,
2003. Based on the impairment test performed as of March 31, 2003, the goodwill of $254,894 associated
with the acquisition of Devise Associates, Inc. was determined to be fully impaired and charged to
earnings. This determination was based upon the operating and cash flow losses of this business unit
since the January 9, 2002 acquisition date and budgeted fiscal 2004 operating and cash flow losses
for this business unit. The Company found no impairment of its remaining goodwill for the years ended
March 31, 2005, 2004 and 2003, respectively.
The Company was assigned a contract to supply computer hardware and services to the State of New Jersey
in the August 12, 2002 acquisition of Acentra Technologies, Inc. This contract was valued at $100,000
in the acquisition. Amortization expense of $ 9,091 and $54,545 was expensed in fiscal years ended
March 31, 2005 and 2004, respectively, based upon the prior contract term that ended at May 2004.
The contract is subject to annual renewals. In May of 2004, the State of New Jersey extended the
contract term through December 2004. Currently, the contract is extended through June 30, 2006. The
net carrying value for this contract amounted to $ 0 and $ 9,091 at March 31, 2005 and 2004, respectively.
6.       Property and Equipment
The Company estimates the useful lives of property and equipment in order to determine the amount of
depreciation and amortization expense to be recorded during any reporting period. The majority of
our equipment is depreciated over three years. The estimated useful lives are based on the historical
experience with similar assets as well as taking into account anticipated technological or other
changes. If technological changes were to occur more rapidly than anticipated or in a different form
than anticipated, the useful lives assigned to these assets may need to be accelerated, resulting
in the recognition of increased depreciation and amortization expense in future
59
periods. The Company evaluates the recoverability of its long-lived assets (other than intangibles
and deferred tax assets) in accordance with Statement of Financial Accounting Standard No. 144, Accounting
for the Impairment or Disposal of Long-Lived Assets,(SFAS No. 144). Long-lived assets are reviewed
for impairment under SFAS No. 144 whenever events or changes in circumstances indicate that the carrying
amount of an asset may not be recoverable. SFAS No. 144 requires recognition of impairment of long-lived
assets in the event that the net book value of such assets exceeds the future undiscounted net cash
flows attributable to such assets. Impairment, if any, is recognized in the period of identification
to the extent the carrying amount of an asset exceeds the fair value of such asset.
The Company invested $687,000 for the purchase of computer hardware, software and consulting services
for its Network Operations Center to enhance its offerings in Managed Services during fiscal year
ended March 31, 2003. The Company originally intended to depreciate these assets over 36 months based
on the original projections of the future undiscounted net cash flows. The Company performed impairment
tests of these assets as of December 31, 2003 and March 31, 2004. The company compared its original
projections of the future undiscounted cash flows with actual performance, and reviewed its current
sales pipeline. Based on these impairment tests, the Company recorded an impairment charge of $223,858
and $239,057 for three months ended December 31, 2003, and March 31, 2004, respectively. The total
impairment charge of $462,915 was classified as general and administrative expense during the twelve
months ended March 31, 2004. The net book value of this asset after impairment charge was $0 at
March 31, 2004.
Property and equipment along with their components are as follows:
Original Cost
    
    Estimated LifeMarch 2005
    
    March 2004
    
    (Years)Computer equipment
     
     
     $
     3,831,311
        
     $
     3,643,052
        
     3Furniture and fixtures
     
     357,845
        
     
     357,845
        
     5Leasehold improvements
     
     267,307
        
     
     244,847
        
     5Vehicles
     
     80,984
        
     
     80,984
        
     2Total Property and Equipment
     $
     4,537,447
        
     $
     4,326,728Less: accumulated depreciation and amortization
     
     
     (4,200,279
        )
     
     (3,939,655
        )Net book value
     $
     337,168
        
     $
     387,0737.       Income Tax Expense (Benefit)
Deferred income taxes reflect the net tax effects of (a) temporary differences between carrying amounts
of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes,
and (b) net operating loss carryforwards (when available).
Income tax expense (benefit) consisted of the following for the years ended March 31:
60
2005
    
    2004
    
    2003Continuing OperationsCurrent taxesFederal$1,124,457
        
     $196,296
        
     $4,870State and local
372,509
        
     101,078
        
     33,2761,496,966
        
     297,374
        
     38,146Deferred taxesFederal
(393,257
        )
     (137,091
        )
     (61,616
        )State and local(114,392
        )
     (38,955
        )
     (17,291
        )(507,649
        )
     (176,046
        )
     (78,907
        )Net Income Tax Expense
(Benefit)- Continuing Operations
$989,317
        
     $121,328
        
     $(40,761
        )Discontinued OperationsIncome tax expense-Discontinued
Operations$18,688
        
     $4,359
        
     $8,146Income tax expense-Sale
of Geothermal Investment80,996
        
     
        
     Total Income Tax Expense/
(Benefits)1,089,001
        
     125,687
        
     (32,615
        )Reconciliation of the U.S. statutory income tax rate to our effective tax rate is as follows:
2005
    
    2004
    
    2003Expected tax expense (benefit) at
statutory rates
    $
    1,346,013
    
    $
    261,350
    
    $
    (82,989
    )Effect of state taxes, net
    
    275,918
    
    
    63,486
    
    
    19,118Valuation allowances
    
    (506,945
    )
    
    (212,138
    )
    
    23,927Permanent differences
    
    (25,985
    )
    
    12,989
    
    
    7,329Actual Income Tax Expense/ (Benefit)
    $
    1,089,001
    
    $
    125,687
    
    $
    (32,615
    )Significant items comprising the Companys deferred tax assets and liability at March 31, are
as follows:
2005
    
    2004Deferred Tax AssetsDifferences between book and tax basis:Trade receivables
     $235,012
        
     $145,142Inventories
     182,636
        
     298,477Property and equipment
     113,348
        
     172,715Accrued liabilities
     186,804
        
     22,301Intangible Assets
     80,030
        
     86,817Net Operating loss carryforwards
     
        
     797,830
        
     725,452Less Valuation Allowance
     
        
     (435,271
        )Net Deferred Tax Assets
     $797,830
        
     $290,181Deferred Tax Liability61
Differences between book and tax basis:Investment in geothermal
    power unit
    
    
    $
    
    
    $
    25,924At March 31, 2004 the Company recorded a valuation allowance against its deferred tax assets, as stated
in the above table, reducing those assets to amounts which, conservatively, are more likely than
not to be realized. Federal net operating loss carryovers approximated $850,000 at March 31, 2003.
The federal net operating losses were utilized in their entirety in 2004 to reduce current federal
income taxes payable. The Company reduced the estimated valuation allowance to zero during the fourth
quarter of fiscal 2005. The change in estimate was the result of strong fiscal 2005 operating results
that cause us to believe that it more likely than not that we will fully realize our deferred tax
assets in future periods.
8.       Major Customers
Major customers approximated 50%, 57%, and 44% of the Companys net revenues in the years 2005,
2004 and 2003 respectively. Major customer revenues are as follows:
% Of Total Revenues
    
    Customers24%
    
    Gwinnett County Public Schools15%
    
    The State of New Jersey Contract11%
    
    Duval County Public Schools2005
    
    50%31%
    
    The State of New Jersey Contract16%
    
    Gwinnett County Public Schools11%
    
    Duval County Public Schools2004
    
    58%23%
    
    Gwinnett County Public Schools17%
    
    The State of New Jersey Contract10%
    
    Duval County Public Schools2003
    
    50%While the Company believes its relationship with these customers will continue, there can be no assurance
that sales to these customers will continue at all or at the same level.
9.       401(k) Plan
The Company sponsors a 401(k) plan for all employees with at least 6 months of service and who are
at least 20 years of age. Eligible employees may contribute 2% to 15% of their annual compensation
to the plan. The Company matches 25% of the first 6% of employee plan contributions and may contribute
additional amounts at the Companys discretion. Participants are vested 20% for each year of
service and are fully vested after 6 years. Company contributions to the plan were $107,480, $86,436,
and $119,911 for the years ended March 31, 2005, 2004, and 2003, respectively.
62
10.       Stock Option Plan
The Companys 1996 Stock Option Plan (the Plan) (amended in 1999) authorizes the granting of stock
options to directors and eligible employees. The Company has reserved 1,000,000 shares of its common
stock for issuance under the Plan at prices not less than 100% of the fair value of the Companys
common stock on the date of grant (110% in the case of shareholders owning more than 10% of the Companys
common stock). The Black-Scholes option pricing model has been used to determine the fair value of
options granted subsequent to January 17, 2001.
Option activity is summarized as follows:
For the year ended March 31, 2003:Options Outstanding - April 1, 2002
    
    
    
    381,328Options granted
    
    
    
    180,000Options exercised
    
    
    
    Options forfeited or expired
    
    
    
    (99,900
    )Options outstanding - March 31, 2003
    
    
    
    461,428For the year ended March 31, 2004:Options granted
    
    
    
    Options exercised
    
    
    
    Options forfeited or expired
    
    
    
    (46,200
    )Options outstanding - March 31, 2004
    
    
    
    415,228For the year ended March 31, 2005:Options granted
    
    
    
    60,000Options exercised
    
    
    
    (111,600
    )Options forfeited or expired
    
    
    
    (27,106
    )Options outstanding- March 31, 2005
    
    
    
    336,522Information with respect to stock options outstanding and exercisable at March 31, 2005 is as follows:
Options Outstanding and ExercisableOutstanding 
    as of 3/31/05
    Weighted Avg. Remaining 
    Life in Years
    Exercise Price56,000
    2.3
    $ 0.2915,000
    2.6
    $ 0.4415,000
    1.6
    $ 0.5560,000
    4.5
    $ 0.8639,712
    1.1
    $ 1.00150,810
    0.4
    $ 1.0363
SFAS No. 123 requires pro forma disclosure under the fair value method of net income (loss) and income (loss) per share when stock options are granted to employees
and directors. The fair value for options was estimated at the date of grant using the Black-Scholes
option pricing model. The Black-Scholes option valuation model was developed for use in estimating
the fair value of traded options that have no vesting restrictions and are fully transferable. In
addition, option valuation models require the input of highly subjective assumptions, including the
expected stock price volatility. The weighted average fair value of options granted in 2005, 2004,
and 2003 and the assumptions used in estimating fair value under the Black-Scholes model are as follows:
2005
    
    
    2004
    
    
    2003Estimated weighted average values of
      options granted
    $
    0.59
    
    $
    n/a
    
    $
    0.24Principal assumptions in applying the Black-Scholes valuation model:
Expected life, in years
    
    
    
    2.50
    
    n/a
    
    
    
    2.50Risk-free interest rate
    
    
    
    2.62
    %
    n/a
    
    
    
    3.01
    %Expected volatility
    
    
    
    1.26
    
    n/a
    
    
    
    1.54Expected dividend yield
    
    
    
    0.00
    %
    n/a
    
    
    
    0.00
    %For purposes of pro forma disclosures, the estimated fair value of options granted to employees and
directors is amortized to expense over the options vesting period and the pro forma expense
is adjusted for the effect of income taxes. Had the Company adopted FASB Statement No. 123 in lieu
of APB No. 25, the Companys net income (loss) and income (loss) per share would have been the
pro forma amounts indicated below:
2005
    
    2004
    
    2003Net income (loss) as reported
    
    
    $
    2,869,860
    
    $
    642,988
    
    $
    (211,471
    )Less: Stock-based compensation underSFAS 123
    
    
    
    25,843
    
    
    
    
    
    21,473Pro forma net income (loss)
    
    
    $
    2,844,017
    
    $
    642,988
    
    $
    (232,944
    )Pro forma net income (loss) per share:Basic -
    
    
    $
    0.38
    
    $
    0.09
    
    $
    (0.03
    )Diluted -
    
    
    $
    0.37
    
    $
    0.09
    
    $
    (0.03
    )Net income (loss) per share as reported:Basic -
    
    
    $
    0.39
    
    $
    0.09
    
    $
    (0.03
    )Diluted -
    
    
    $
    0.37
    
    $
    0.09
    
    $
    (0.03
    )Shares used in calculation of pro formaper shares amounts:    basic
    
    
    
    7,389,798
    
    
    7,380,498
    
    
    7,080,498diluted
    
    
    
    7,726,320
    
    
    7,483,549
    
    
    7,123,83164
11.       Commitments and Contingencies
Leases:
The Company leases offices, warehouse facilities, vehicles and office equipment under noncancellable
operating leases. Future minimum lease payments under such leases are as follows:
Fiscal Years2006
    
    675,2002007
    
    484,1932008
    
    447,2772009
    
    173,533Thereafter
    
    2,451Total
    $
    1,782,654Aggregate rent expense for offices and warehouse facilities amounted to $1,252,601, $1,066,962, and
$920,893 for the years ended March 31, 2005, 2004, and 2003, respectively. Aggregate rent expense
for vehicles and office equipment amounted to $58,946, $71,903, and $118,026 for the years ended
March 31, 2005, 2004, and 2003, respectively.
Litigation:
In March 2002, a lawsuit was filed against the Company by a competitor seeking damages of an unspecified
amount. The competitor is alleging that the Company illegally interfered with customer relationships
of the competitor. At this time, the outcome of this litigation cannot be determined. There has been
no change to this litigation matter in last twelve months. The lawsuit is still in the discovery
phase.
Contingencies:
At March 16, 2005, the Company sold its 5.49% working interest in the Roosevelt Hot Springs geothermal
unit to Energy Minerals, Inc. (buyer). As part of the transaction, the buyer assumed
the remaining liability under the geothermal steam purchase agreement with Pacificorp (d/b/a Utah
Power & Light Company). Under the 30-year agreement executed in 1993, a $1 million prepayment
was received by the Company from Pacificorp. The agreement gives Pacificorp the right to recover
a pro-rated portion of their original $1 million pre-payment should the geothermal unit fail to produce
steam at levels specified under the agreement. The Company recorded the pre-payment as deferred revenue
and was amortizing the amount as earned revenue over the 30-year term of the steam purchase agreement.
Energy Minerals, Inc. has been assigned rights to the steam purchase agreement with Pacificorp and
has assumed the remaining $672,123 deferred revenue liability as of March 16, 2005. However, should
the geothermal unit fail to produce steam at levels specified under the agreement during the remaining
30 year term of the agreement, PacifiCorp could potentially make a claim against Emtec as a former
owner, if the current ownership of the geothermal unit failed to satisfy PacifiCorps claims.
The Company believes that the probability of this occurrence is remote due to the strong production
and operating history of the geothermal unit.
65
12.       Supplemental Cash Flow Information
Cash paid for interest and income taxes were as follows:
2005
    
    2004
    
    2003Interest
    
    
    $
    217,860
    
    $
    328,296
    
    $
    160,803Income Taxes
    
    
    $
    256,225
    
    $
    50,341
    
    $
    17,12813.       Related Party Transactions
The Company moved its 2990 Gateway Drive, Norcross, GA office and warehouse location to 500 Satellite
Blvd., Suwanee, GA on December 1, 2004. The Company is occupying approximately 21,000 square feet
of office and warehouse space out of a total of approximately 70,000 square feet. This space is leased
from GS&T Properties, LLC, in which Messrs. John Howlett and Ronald Seitz, each an executive
officer and director of the Company, are passive investors, each owning an approximate 10% equity
interest. The lease term is for 5 years with monthly base rent of $12,500.
14.       Office Consolidation
In December 2004, the Company completed the final phase of its office consolidation plan by entering
into an agreement to sub-lease its office space at 880 3rd Avenue in New York City. The June 2008 term of the sublease coincides with the term of the Companys
underlying lease. The sublease is expected to generate approximately $15,700 in monthly rental receipts
to the Company to partially offset approximately $25,000 in monthly rent payments to be made by the
Company pursuant to its underlying lease commitment through June 2008.
The Company has recorded a one-time charge of $470,000 to sales, general and administrative expenses
for the year ended March 31, 2005. This charge was computed based upon the net present value of the
Companys remaining lease obligation in excess of the present value of expected rental receipts
under the sub-lease.
The company has moved its New York City office to a much smaller shared office space located at 116
West 23rd Street, New York. The term of this lease is for fourteen months at monthly base rent of $1300.
15.       Discontinued Operations
At March 16 2005, Emtec sold its 5.49% working interest in the Roosevelt Hot Springs geothermal unit
located in Beaver County, Utah for $150,000 cash to Energy Minerals, Inc. The Company recorded a
gain of $ 289,275 on the disposition as follows:
Cash proceeds
    
    
    $
    150,000Deferred Revenue liability assumed in transaction
    
    
    
    672,123Total Consideration
    
    
    
    822,123Carrying Value of Investment @3/16/05
    
    
    
    532,849Net Gain from disposition
    
    
    $
    289.274The net gain as reported in the statement of operations was reduced to
66
$208,278 after giving effect to income taxes of $80,996.
The operating results of the geothermal investment, net of income taxes, for the three years ended
March 31, 2005, 2004 and 2003 are reclassified as discontinued operations in the statement of operations.
Continuing operations include the results of the Companys continuing information technology business.
16.       Quarterly Financial Information - (Unaudited)
First
      Quarter
    
    Second
      Quarter
    
    ThirdQuarter
    
    Fourth
      Quarter
    
    Total
      Year2005Revenues
    $
    28,564,207
    
    $
    29,083,729
    
    $
    24,959,657
    
    $
    30,092,405
    
    $
    112,699,998Gross Profit
    
    3,942,470
    
    
    3,869,923
    
    
    3,686,703
    
    
    4,854,191
    
    
    16,353,287Income (Loss)
From Continuing
Operations
    $
    595,367
    
    $
    603,423
    
    $
    72,195
    
    $
    1,342,545
    
    $
    2,613,530Net Income (Loss)
    $
    603,139
    
    $
    616,393
    
    $
    81,590
    
    $
    1,568,738
    
    $
    2,869,860Per share:Income (Loss) From Continuing OperationsBasic
    $
    .08
    
    $
    .08
    
    $
    0.01
    
    $
    .18
    
    $
    .35Diluted
    $
    .08
    
    $
    .08
    
    $
    0.01
    
    $
    .17
    
    $
    .34Net Income (Loss)Basic
    $
    .08
    
    $
    .08
    
    $
    0.01
    
    $
    .21
    
    $
    .39Diluted
    $
    .08
    
    $
    .08
    
    $
    0.01
    
    $
    .20
    
    $
    .372004Revenues
    $
    28,432,755
    
    $
    25,769,166
    
    $
    24,618,564
    
    $
    21,350,823
    
    $
    100,171,308Gross Profit
    
    3,673,482
    
    
    3,265,192
    
    
    3,837,011
    
    
    3,615,770
    
    
    14,391,455Income (Loss)
From Continuing
Operations
    $
    347,677
    
    $
    (149,727
    )
    $
    337,229
    
    $
    84,926
    
    $
    620,105Net Income (Loss)
    $
    357,891
    
    $
    (138,948
    )
    $
    320,326
    
    $
    103,719
    
    $
    642,988Per share:Income (Loss) From Continuing OperationsBasic
    $
    .05
    
    $
    (.02
    )
    $
    0.04
    
    $
    .01
    
    $
    .08Diluted
    $
    .05
    
    $
    (.02
    )
    $
    0.04
    
    $
    .01
    
    $
    .08Net Income (Loss)Basic
    $
    .05
    
    $
    (.02
    )
    $
    0.05
    
    $
    .01
    
    $
    .09Diluted
    $
    .05
    
    $
    (.02
    )
    $
    0.04
    
    $
    .01
    
    $
    .0967
17.       Accounts
Receivable and Inventory AllowancesThe
following table provides information regarding accounts receivable and inventory
valuation allowance activity for the three years ended March 31, 2005.AllowancesAccounts  ReceivableInventoryBalance, April
1, 2002$152,602$451,715Charged
to costs and expenses88,24523,536Write-offs(      )(4,048)Balance,
March 31, 2003$240,847$471,203Charged
to costs and expenses165,054251,348Write-offs(42,499)(      )Balance,
March 31, 2004$363,402$722,551Charged
to costs and expenses306,304138,636Write-offs(81,291)(427,520)Balance,
March 31, 2005$588,415$433,66718.        Subsequent
Event
On
July 14, 2005, the Company announced that it had entered into a definitive agreement
to merge with DARR Westwood Technology Corporation, the parent company of Westwood
Computer Corporation. Westwood Computer Corporation, headquartered in Springfield,
New Jersey and established in 1964, is a privately held information technology
company and a supplier of information technology products and services to the
Federal Government. Westwood Computer has additional locations in New York and
Virginia, as well as five regional offices in the South and Western United States.Upon
the effectiveness of the merger, which is expected to occur within the next several
weeks, DARR Westwood's shareholders will acquire approximately 55% of the Companys
then issued and outstanding shares of common stock and the Companys board
of directors will be comprised solely of DARR Westwood's designees, thereby resulting
in a change in the Companys control. Dinesh Desai, Chairman and CEO of Westwood
Computer, will become the Companys Chairman and CEO. John Howlett and Ron
Seitz, currently the Companys CEO and our COO, respectively, will remain
as President, Northeast and President, Southeast, respectively.Completion
of the merger is subject, among other matters, to regulatory filings and the expiration
of a subsequent 10 day waiting period. Subject to the receipt of institutional
financing, which is also a condition to the completion of the merger, the Company
will initiate within 30 days thereafter a self-tender offer to repurchase up to
2,864,584 shares of its then issued and outstanding shares of common stock having
an aggregate purchase price of up to $5.5 million at a price of $1.92 per share.68SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant
has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
Dated:    July 14, 2005
EMTEC, INC.By:
    /s/John P. HowlettJohn P. HowlettChairman and Chief Executive OfficerPursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below
by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
Signature
    
    
    Title
    
    
    Date/s/John P. Howlett
    
    Chairman and
    
    July 14, 2005John P. Howlett
    
    Chief Executive Officer/s/Sam Bhatt
    
    Vice President-Finance
    
    July 14, 2005Sam Bhatt
    
    (Principal Financial Officer)(Principal Accounting Officer)/s/Ronald A. Seitz
    
    President, Chief Operating
    
    July 14, 2005Ronald A. Seitz
    
    Officer, and Director/s/Frank Jerd
    
    Director
    
    July 14, 2005Frank Jerd/s/George F. Raymond
    
    Director
    
    July 14, 2005George F. Raymond- 69 -