UNITED STATES SECURITIES AND EXCHANGE
COMMISSION


WASHINGTON,
DC 20549





FORM 10-K




þ
            Annual Report Pursuant to
      Section 13 or 15(d) of the Securities Exchange Act of
      1934For the Fiscal Year Ended
      September 30, 2008


OR


o
            Transition Report Pursuant to
      Section 13 or 15(d) of the Securities Exchange Act of
      1934




COMMISSION FILE NUMBER:
000-28052


_________________________________





EN POINTE TECHNOLOGIES,
INC.


(EXACT
NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)




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




18701 S. FIGUEROA STREET, GARDENA,
CALIFORNIA 90248


(310) 337-5200


_________________________________




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


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


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


None


__________________________________




Indicate
by check mark if the registrant is a well-known seasoned issuer, as defined in
Rule 405 of the Securities Act.


Yes o No þ




Indicate
by check mark if the registrant is not required to file reports pursuant to
Section 13 or Section 15(d) of the Act.


Yes o No þ




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




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




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




Large accelerated
filer o        Accelerated
filer        
               o
 Non-accelerated
filer   o                   
Smaller Reporting Company    þ






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




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




DOCUMENTS
INCORPORATED BY REFERENCE




PORTIONS
OF REGISTRANT’S PROXY STATEMENT FOR THE 2009 ANNUAL MEETING OF STOCKHOLDERS (TO
BE


FILED
WITH THE COMMISSION ON OR BEFORE JANUARY 28, 2009): PART III, ITEMS
10-14.



















EN POINTE TECHNOLOGIES,
INC.


FORM 10-K


YEAR ENDED SEPTEMBER 30,
2008




Table of
Contents


PART I
            
            
            
            
            2ITEM
      1.
            
            BUSINESS
            
            
            2ITEM
      1A.
            
            RISK FACTORS
            
            
            7ITEM
      1B.
            
            UNRESOLVED STAFF
    COMMENTS
            
            
            13ITEM
      2.
            
            PROPERTIES
            
            
            13ITEM
      3.
            
            LEGAL PROCEEDINGS
            
            
            14ITEM
      4.
            
            SUBMISSION OF MATTERS TO A VOTE OF SECURITY
      HOLDERS
            
            
            14PART II
            
            
            
            
            15ITEM
      5.
            
            MARKET FOR REGISTRANT’S COMMON EQUITY,
      RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY
      SECURITIES
            
            
            15ITEM
      6.
            
            SELECTED CONSOLIDATED FINANCIAL
      DATA
            
            
            15ITEM
      7.
            
            MANAGEMENT’S DISCUSSION AND ANALYSIS OF
      FINANCIAL CONDITION AND RESULTS OF OPERATIONS
            
            
            15ITEM
      7A.
            
            QUANTITATIVE AND QUALITATIVE
      DISCLOSURES ABOUT MARKET RISK
            
            
            25ITEM
      8.
            
            FINANCIAL STATEMENTS AND SUPPLEMENTARY
      DATA
            
            
            25ITEM
      9.
            
            CHANGES IN AND DISAGREEMENTS WITH
      ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURES
            
            
            25ITEM
      9A(T)
            
            CONTROLS AND PROCEDURES
            
            
            25ITEM
      9B
            
            OTHER INFORMATION
            
            
            26PART III
            
            
            
            
            26ITEM
      10.
            
            DIRECTORS, EXECUTIVE
      OFFICERS AND CORPORATE GOVERNANCE
            
            
            26ITEM
      11.
            
            EXECUTIVE COMPENSATION
            
            
            26ITEM
      12.
            
            SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
      OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
            
            
            26ITEM
      13.
            
            CERTAIN RELATIONSHIPS AND RELATED
      TRANSACTIONS, AND DIRECTOR INDEPENDENCE
            
            
            27ITEM
      14.
            
            PRINCIPAL ACCOUNTANT FEES AND
      SERVICES
            
            
            27PART IV
            
            
            
            
            27ITEM
      15
            
            EXHIBITS AND FINANCIAL STATEMENT
      SCHEDULES
            
            
            27SIGNATURESCHIEF
      EXECUTIVE OFFICER, CHIEF FINANCIAL OFFICER, AND DIRECTORSEXHIBIT
      21.1EXHIBIT
      23.1EXHIBIT
      23.2EXHIBIT
      31.1EXHIBIT
      31.2EXHIBIT
      32.1








1





PART I





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









ITEM 1. BUSINESS





GENERAL

























2













































3










•
            maintains
      software agreements for all major software publishers;•
            incorporates
      a dynamic data model that simplifies reporting processes to allow improved
      identification of customer trends, sales opportunities, and customer
      milestones;•
            provides
      real-time product configuration that reduces time for sales
      representatives to identify customer requested software
      products;•
            restricts
      the data entry to a structured format that ensures adherence to vendor and
      publisher rules, thereby avoiding the costly retroactive correction of
      errors in processing;•
            manages
      software agreements to offer customers the ability to purchase software
      more efficiently by increasing their awareness of software agreement
      terms, purchasing history, and needs;•
            identifies
      software products for compliance with customer software
      agreements;•
            allows
      stricter service level agreements to be met by reducing turnaround time
      for quotes and orders; and•
            manages
      licensing agreements assuring customers are quoted and sold products in
      accordance with their existing
agreements.




EBUSINESS




































BUSINESS PROCESS
OUTSOURCING




Effective
October 1, 2006, we acquired 70% of the capital stock of two privately owned
Pakistani companies, Ovex Technologies (Private) Limited and Ovex Pakistan
(Private) Limited.  Ovex Technologies (Private) Limited was engaged in
providing business process outsourcing, or BPO, services exclusively for the
Company’s internal needs as well as for the customers of Premier BPO,
Inc., or PBPO, a privately-held corporation that promotes and sells BPO services
to U.S. businesses while Ovex Pakistan (Private) Limited provided services for
the BPO market in Pakistan.





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




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




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




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




COMPETITION




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




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




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




5






GETTING PRODUCT TO THE
CUSTOMER




















GETTING PRODUCT FROM THE
SUPPLIER
















6


INTELLECTUAL
PROPERTY
















SEGMENT
INFORMATION
























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




ITEM 1A. RISK
FACTORS


7
 Certain
important factors affecting the forward-looking statements made herein include,
but are not limited to:
  •
              stagnate
      sales growth in the last five years;•
              limited
      availability of alternative credit facilities;•
              low
      margin products business; and•
              concentration
      of product sales in several major
  customers.
      THERE IS A RISK WE COULD LOSE OUR
ASSET BASED FINANCING LINE WITHOUT BEING ABLE TO READILY REPLACE
IT
      THERE IS RISK THAT WE COULD LOSE A
LARGE CUSTOMER WITHOUT BEING ABLE TO FIND A READY
REPLACEMENT
      OUR ACQUISITION OF A SUBSTANTIAL
INTEREST IN A PAKISTANI CORPORATION EXPOSES US TO FOREIGN OPERATIONAL
RISKS
  With our
acquisition of a majority interest in Ovex, a Pakistani corporation, we are
exposed to adverse fluctuations in foreign currency exchange rates, limitations
on asset transfers, changes in foreign regulations and political turmoil, any or
all of which could adversely affect our operating results. In addition, we have
relocated many of our “back-office” functions to Ovex including, among others,
customer support, purchasing, credit and collections, accounts payable,
accounting and other administrative and support functions. We established both
voice and data communications between our corporate headquarters in Gardena,
California and Pakistan. However, there can be no assurance that these lines of
communication
 8
 will not
be interrupted. Should we have interruptions with our communications to
Pakistan, any such interruption could have a material adverse impact on our
business, financial position, results of operations and cash flows.
  OUR LOW MARGINS EXPOSE US TO RISKS
FROM MINOR ADVERSITIES
  Our
overall gross profit percentages for the past three fiscal years 2008, 2007 and
2006 were 14.6%, 12.5%, and 12.2%, respectively, with gross margin from product
sales in such fiscal years being 10.3%, 8.4% and 8.3%, respectively. Our gross
profit margins on product and software sales are low compared to many other
resellers of information technology products and have continued to remain low.
Given the significant levels of competition that characterize the reseller
market, as well as the lower gross profit margins that we generate as a result
of our reliance on purchasing information technology products from our
suppliers, it is unlikely that we will be able to increase product gross profit
margins appreciably in our core business of reselling information technology
products. Moreover, in order to attract and retain many of our larger customers,
we frequently must agree to pricing and maximum allowable mark-downs that serve
to limit the profitability of product sales to such customers. Accordingly, to
the extent that our sales to such customers increase, our gross profit margins
may be reduced, and therefore any future increases in net income will have to be
derived from net sales growth, effective expansion into higher margin business
segments or a reduction in operating expenses as a percentage of net sales, none
of which can be assured. Furthermore, low gross profit margins increase the
sensitivity of our business to increases in costs of financing, because
financing costs to carry a receivable can be relatively high compared to the low
dollar amount of gross profit on the sale underlying the receivable itself. Low
gross profit margins also increase the sensitivity of the business to any
increase in product returns and bad debt write-offs, as the impact resulting
from the inability to collect the full amount for products sold will be
relatively high compared to the low amount of gross profit on the sale of such
product. Any failure by us to maintain our gross profit margins and sales levels
could have a material adverse effect on our business, financial position,
results of operations and cash flows.
  COSTS AND OTHER FACTORS ASSOCIATED
WITH PENDING OR FUTURE LITIGATION COULD MATERIALLY HARM OUR BUSINESS, RESULTS OF
OPERATIONS AND FINANCIAL CONDITION.
  We at
times receive claims and become subject to litigation, including claims related
to customers, stockholders, acquisitions, employment, intellectual property,
trade secrets and other commercial litigation related to the conduct of our
business. Additionally, we may at times institute legal proceedings against
third parties to protect our interests. Any litigation in which we are a named
party could be costly and time consuming and could divert our management and key
personnel from our business operations. In connection with any such litigation,
we may be subject to significant damages or equitable remedies relating to the
operation of our business. We cannot determine with any certainty the costs or
outcome of pending or future litigation. Any such litigation may materially harm
our business, results of operations and financial condition.
  THERE ARE RISKS IN CONDUCTING OUR
DAILY BUSINESS PLANS AND STRATEGY
  For our
first five full fiscal years since inception, we experienced rapid growth in net
sales, employees and branch offices leading to peak net sales of $668.3 million
in fiscal year 1999 from a base of $110.0 million in fiscal year 1994. From
the peak in net sales in fiscal year 1999 of $668.3 million, net sales
contracted reaching a low in net sales of $257.0 million three years later in
fiscal year 2002.  Since bottoming out in fiscal year 2002, net sales have
never fully recovered to those recorded in fiscal year 1999.  Instead,
there has been a gradual increase in net sales to the $347.1 million reached in
fiscal year 2007, which is a compounded annual growth rate of 3.7% over such
five-year period and which exceeded our fiscal year 2008 sales by $46.7
million.
  The
effort to increase net sales or to supplement the loss of net sales with higher
margin products has and will continue to challenge our management,
operational and financial resources. To execute our growth strategy, we expect
to require the addition of new management personnel, including
sales personnel, and the development of additional expertise by existing
personnel. Our ability to manage effectively will require us to continue to
implement and improve our operational, financial and sales systems at both the
national and local level, to develop the skills of our managers and supervisors
and to hire, train, motivate, retain and effectively manage our employees. There
can be no assurance that we will be successful in such an effort, and the
failure to do so could materially adversely affect our business, financial
position, results of operations and cash flows.
  WITH OUR FAST CHANGING INDUSTRY
EVOLUTION WE RISK BEING OUTMODED OR EXCLUDED FROM THE DISTRIBUTION
CHANNEL
  The
personal computer industry is undergoing significant change. In addition, a
number of alternative cost-effective channels of distribution have developed in
the industry, such as the Internet, computer superstores, consumer electronic
and office supply superstores, national direct marketers and mass merchants.
Computer resellers are consolidating operations and acquiring or merging with
other resellers and/or direct marketers to achieve economies of scale and
increased efficiency. The current industry reconfiguration and the trend towards
consolidation could cause the industry to become even more competitive, further
increase pricing pressures and make it more difficult for us to maintain our
operating margins or to increase or maintain the same level of net sales or
gross profit. Declining prices, resulting in part from technological changes,
may require us to sell a greater number of products to achieve the same level of
net sales and gross profit. Such a trend could make it more difficult for us to
continue to increase our net sales and earnings growth. In addition, growth in
the personal computer market has slowed. If the growth rate of the personal
computer market were to further decrease, our business, financial condition and
operating results could be adversely affected.
  9
   •
              traditional
      personal computer retailers,•
              computer
      superstores,•
              consumer
      electronics and office supply superstores,•
              mass
      merchandisers,•
              corporate
      resellers,•
              value-added
      resellers,•
              specialty
      retailers,•
              distributors,•
              franchisers,•
              mail-order
      and web-order companies,•
              national
      computer retailers, and•
              manufacturers
      that have their own direct marketing operations to
    end-users.
      WE RISK DEPENDING ON A FEW
DISTRIBUTORS AND MANUFACTURERS WHO COULD COMPETE WITH US OR LIMIT OUR ACCESS TO
THEIR PRODUCT LINE
     10
 Evolution
of the distribution process in the information technology industry has put
pressure on gross profit margins, and has adversely affected a number of
distributors of information technology products, including certain suppliers.
There can be no assurance that the continuing evolution of the information
technology industry will not further adversely affect our distributors. Because
our overall business strategy depends on our relationships with our suppliers,
our business, financial position, results of operations and cash flows would be
materially adversely affected in the event that distributors in general and
suppliers in particular continue to suffer adverse consequences due to ongoing
changes in the information technology industry. There has been a consolidation
trend in the information technology industry, including consolidation among
distributors of information technology products. Because our business model is
dependent upon the availability of a number of information technology product
distributors, any further consolidation would result in fewer distributors
available to supply products to us, which could have a material adverse impact
on our business, financial position, results of operations and cash
flows.
  WE HAVE THE RISK OF LOSING OUR SENIOR
MANAGEMENT AND OTHER KEY PERSONNEL UPON WHOM WE DEPEND
      WE RISK FAILURE TO INTEGRATE
ACQUISITIONS AND/OR INVESTMENTS INTO OUR BUSINESS THAT COULD CAUSE FUTURE
LOSSES
      •
              failure
      to achieve anticipated operating results,•
              difficulties
      in the assimilation of the operations, services, products, vendor
      agreements, and personnel of the acquired company,•
              the
      diversion of management’s attention and other resources from other
      business concerns,•
              entry
      into markets in which we have little or no prior experience,
      and•
              the
      potential loss of key employees, customers, or contracts of the acquired
      company.
  Acquisitions
and investments could also conflict with restrictions in our agreements with
existing or future lenders, distributors or manufacturers. We are unable to
predict whether or when any prospective acquisition or investment candidate will
become available or the likelihood that any acquisition or investment will be
completed or successfully integrated. Failure to successfully manage potential
acquisitions or investments in complementary businesses, or failure of any of
our investments that are subject to consolidation, could have a material adverse
effect on our business, financial position, results of operations and cash
flows.
  WE RISK BUSINESS INTERRUPTION FROM
OUR DEPENDENCE ON CENTRALIZED OPERATIONS
    WITH THE 40% CONCENTRATION OF
OWNERSHIP OF OUR STOCK HELD BY A SMALL GROUP OF DIRECTORS, OFFICERS, FAMILY
MEMBERS AND AN OUTSIDE PRINCIPAL STOCKHOLDER THERE ARE RISKS THAT THEY CAN EXERT
SIGNIFICANT INFLUENCE OVER CORPORATE MATTERS
 11
 The
directors, executive officers, family members and a significant outside
stockholder of En Pointe and their affiliates beneficially own, in the
aggregate, approximately 40% of our outstanding common stock as of September 30,
2008. As a result, these stockholders acting together will be able to exert
considerable influence over the election of our directors and the outcome of
most corporate actions requiring stockholder approval. Additionally, the
directors and executive officers have significant influence over the policies
and operations of our management and the conduct of our business. Such
concentration of ownership may have the effect of delaying, deferring or
preventing a change of control of En Pointe and consequently could affect the
market price of our common stock.
  THERE ARE RISKS THAT OUR QUARTERLY
OPERATING RESULTS CAN VARY FROM PAST RESULTS AND BECOME VOLATILE AND
UNPREDICTABLE
  Our
quarterly net sales and operating results may vary significantly as a result of
a variety of factors, including:
  •
              the
      demand for information technology products and value-added
      services;•
              adoption
      of internet commerce models;•
              introduction
      of new hardware and software technologies;•
              introduction
      of new value-added services by us and our competitors;•
              changes
      in manufacturers’ prices or price protection policies;•
              changes
      in shipping rates;•
              disruption
      of warehousing or shipping channels;•
              changes
      in the level of operating expenses, including costs from turnover of sales
      personnel;•
              the
      timing of major marketing or other service projects;•
              product
      supply shortages;•
              inventory
      adjustments;•
              changes
      in product mix;•
              entry
      into new geographic markets;•
              the
      timing and integration of acquisitions or investments;•
              difficulty
      in managing margins;•
              the
      loss of significant customer contracts;•
              the
      necessity to write-off a significant amount of accounts receivable or
      inventory; and•
              general
      competitive and economic
conditions.
  In
addition, a substantial portion of our net sales in each quarter results from
orders booked in such quarter. Accordingly, we believe that period-to-period
comparisons of our operating results are not necessarily meaningful and should
not be relied upon as an indication of future performance.
  As has
occurred in the past it is possible that in future periods, our operating
results may be below the expectations of the public and investors. In such
event, the market price of our common stock would likely be materially adversely
affected. See ‘‘Management’s Discussion and Analysis of Financial Condition and
Results of Operations.’’
  OUR STOCK TENDS TO BE VOLATILE WITH
LARGE PERCENTAGE PRICE MOVES WHICH CAN EXPOSE INVESTORS TO UNANTICIPATED
LOSSES
  Factors
such as the announcement of acquisitions by us or our competitors,
quarter-to-quarter variations in our operating results, governmental regulatory
action, general trends and market conditions in the information technology
industry, as well as other factors, may have a significant impact on the market
price of our common stock. Moreover, trading volumes in our common stock has
been low historically and could exacerbate price fluctuations in the common
stock. Further, the stock market has recently and in other periods experienced
extreme price and volume fluctuations, which have particularly affected the
market prices of the equity securities of many companies and which have often
been unrelated to the operating performance of such companies. These broad
market fluctuations may materially and adversely affect the market price of our
common stock. See ‘‘Market for Registrant’s Common Equity, Related Stockholder
Matters and Issuer Purchases of Equity Securities.’’
  IF OUR INTERNAL CONTROLS PROVE TO BE
INEFFECTIVE THAT COULD NEGATIVELY IMPACT INVESTORS’ CONFIDENCE IN OUR COMPANY
AND CAUSE OUR STOCK PRICE TO DROP
  Changing
laws, regulations and standards relating to corporate governance and public
disclosure, including the Sarbanes-Oxley Act of 2002 and related regulations
implemented by the Securities and Exchange Commission, or SEC, and The Nasdaq
Stock Market, or the Nasdaq, are creating uncertainty for public companies,
increasing legal and financial compliance costs and making some activities more
time consuming. We are undergoing an evaluation of our internal controls systems
to allow management to report on, and our independent auditors to attest to, our
internal controls. We are also in the process of performing the system and
process evaluation and testing (and any necessary remediation) required to
comply with the management certification and auditor attestation requirements of
Section 404 of the Sarbanes-Oxley Act.  As a result, we expect to incur
substantial additional expenses and
 12
 diversion
of management’s time. While we anticipate being able to fully implement the
requirements relating to internal controls and all other aspects of Section 404
by the extended September 30, 2009 deadline, we cannot be certain as to the
timing of completion of our evaluation, testing and remediation actions or the
impact of the same on our operations since there is presently no precedent
available by which to measure compliance adequacy. If we are not able to
implement the requirements of Section 404 in a timely manner or with adequate
compliance, we may not be able to accurately report our financial results or
prevent fraud and might be subject to sanctions or investigation by regulatory
authorities, such as the SEC or the Nasdaq. Any such action could harm our
business or investors’ confidence in our company, and could cause our stock
price to fall.
  IF PREFERRED STOCK IS ISSUED AS AN
ANTI-TAKEOVER MEASURE, THERE IS A RISK THAT THE PRICE OF OUR COMMON STOCK COULD
BE ADVERSELY AFFECTED
  Our Board
of Directors has the authority to issue up to 5,000,000 shares of preferred
stock and to determine the price, rights, preferences, qualifications,
limitations and restrictions, including voting rights, of those shares without
any further vote or action by the stockholders. The rights of the holders of
common stock will be subject to, and may be adversely affected by, the rights of
the holders of any preferred stock that may be issued in the future. The
issuance of preferred stock, while providing desirable flexibility in connection
with possible acquisitions and other corporate purposes, could have the effect
of delaying or preventing a third party from acquiring a majority of our
outstanding voting stock. Further, Section 203 of the General Corporation Law of
Delaware prohibits us from engaging in certain business combinations with
interested stockholders. These provisions may have the effect of delaying or
preventing a change in control of En Pointe without action by our stockholders,
and therefore could adversely affect the market price of our common
stock.
  THERE ARE RISKS OUTSIDE OF OUR
CONTROL OF UNFAVORABLE ECONOMIC CONDITIONS THAT COULD NEGATIVELY IMPACT OUR
REVENUES AND PROFITS
  Revenue
growth depends on the overall demand for information technology spending. With
the unstable status of the economy in the United States that
has required, among other fiscal efforts, massive government bail outs
to financial institutions, there can be no assurance that there will not be
severe consequences to the economy.  The downturn in the United States
economy may result in cut backs by customers in the purchase of information
technology products, postponed or canceled orders, longer sales cycles and lower
average selling prices. To the extent that the downturn worsens, we believe
demand for our products, and therefore future revenues, could be further
adversely impacted.


ITEM 1B. UNRESOLVED STAFF COMMENTS




Not
applicable.




ITEM 2. PROPERTIES















13


•
            Atlanta,
      Georgia•
            Addison,
      Texas•
            Austin,
      Texas•
            Beaverton,
      Oregon•
            Bolder,
      Colorado•
            Chicago,
      Illinois•
            Draper,
      Utah•
            San
      Francisco, California•
            St.
      Louis, Missouri•
            Walpole,
      Massachusetts












ITEM 3. LEGAL PROCEEDINGS












SUBMISSION OF
MATTERS TO A VOTE OF SECURITY HOLDERS




Not
applicable.




14


PART II




ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED
STOCKHOLDER




MATTERS
AND ISSUER PURCHASES OF EQUITY SECURITIES










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






















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




Stock Performance
Graph




Not
applicable to smaller reporting company




ITEM 6. SELECTED CONSOLIDATED FINANCIAL
DATA











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








EXECUTIVE
OVERVIEW







15








































Revenue
recognition.






16


















Allowance for doubtful
accounts.




Product
returns.




Vendor
returns.




Rebates and Cooperative
Marketing Incentives.








Inventory.




17


RESULTS OF
OPERATIONS




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






Fiscal
      Year Ended September 30,2008
            
            
            2007
            
            
            2006Net
      sales:Product
            
            
            86.5
            %
            
            
            86.2
            %
            
            
            85.5
            %Services
            
            
            13.5
            
            
            
            13.8
            
            
            
            14.5Total
      net sales
            
            
            100.0
            
            
            
            100.0
            
            
            
            100.0Gross
      profit:Product
            
            
            8.9
            
            
            
            7.2
            
            
            
            7.1Services
            
            
            5.7
            
            
            
            5.3
            
            
            
            5.1Total
      gross profit
            
            
            14.6
            
            
            
            12.5
            
            
            
            12.2Selling
      and marketing expenses
            
            
            12.5
            
            
            
            8.8
            
            
            
            8.8General
      and administrative expenses
            
            
            5.0
            
            
            
            3.4
            
            
            
            3.4Operating
      (loss) income
            
            
            (2.9
            )
            
            
            0.3
            
            
            
            0.0Interest
      income, net
            
            
            0.0
            
            
            
            0.1
            
            
            
            0.1Other
      income, net
            
            
            4.9
            
            
            
            0.0
            
            
            
            0.0Income before
      taxes and other items
            
            
            2.0
            
            
            
            0.4
            
            
            
            0.1Income
      tax provision (benefit)
            
            
            0.7
            
            
            
            (0.1
            )
            
            
            0.0Income before other
      items
            
            
            1.3
            
            
            
            0.5
            
            
            
            0.1Loss
      from equity investment and non-controlling interest
            
            
            (0.1
            )
            
            
            0.0
            
            
            
            0.1Net
      income
            
            
            1.2
            %
            
            
            0.5
            %
            
            
            0.2
            %





COMPARISON OF FISCAL YEARS ENDED
SEPTEMBER 30, 2008 AND 2007




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


Software
sales, a major component of product sales, have shown a steady rise in contrast
to the decline in other product sales such as laptops, printers, and
monitors.  Net software sales, including agency commissions, in fiscal
year 2008 were $82.2 million, or 27.8% of total net sales.  This was
an increase of $17.8 million, or 27.7%, in fiscal year 2008 to the $64.4 million
of net software sales in fiscal year 2007.
 
 Our
affiliates, PBPO and Ovex, did not have a significant impact on total net sales
for fiscal year 2008 as combined both companies had net sales of $7.3 million,
an increase of $0.6 million over fiscal year 2007.
 
 Service
net sales in fiscal year 2008 decreased $7.3 million, or 15.3% over fiscal year
2007.  The decrease can be attributed to the sale of the service
business that was effective July 1, 2008.  The service business that
was excluded from our fourth quarter fiscal year 2008 service sales as a result
of the sale amounted to $10.0 million.  We anticipate that service net
sales will continue this negative trend when compared with corresponding prior
year quarters for the next three quarters.  Our core information
technology services, which were substantially sold in July 2008 (excluding
income from our partially-owned affiliates that we consolidate that engaged in
business process outsourcing services) represented 83.1% of the total $40.5
million in service revenues reported.  These services that we perform
include installation of fiber optic cable, configuration services, and
logistical services related to the life cycle of computer
maintenance.


GROSS PROFIT.Gross profits increased $0.3 million, or 0.7%, to
$43.8 million in fiscal year 2008 from $43.6 million for fiscal year
2007.  The marginal increase in gross profits can be ascribed to
product gross profits that increased $1.5 million, or 6.0%, in fiscal year 2008
as compared with fiscal year 2007.   Services gross profits
declined $1.2 million, or 6.6%, to $17.1 million in fiscal year 2008 from the
$18.3 million in fiscal year 2007.  The decline in gross profits can
be attributed to the volume loss in the fourth quarter from the sale of the
service business.
  18


SELLING
AND MARKETING EXPENSES. Selling
and marketing expenses increased $7.0 million, or 23.0%, to $37.6 million in
fiscal year 2008, from $30.6 million in fiscal year 2007.  The $7.0
million increase in selling and marketing expenses in fiscal year 2008 was
attributable principally from the following increases:   $2.8
million increase in bad debt provisions, $1.1 million increase in reserve for
sales tax and business tax audit provisions, $1.0 million increase in wage
related costs, $0.9 million increase in settlement costs, and $0.8 million in
increase in bonuses related to the sale of the service business.  The
remaining $0.4 million increase in selling and marketing expenses relates to
increases in expenses for our affiliates, PBPO, and Ovex.  Selling and
marketing expenses expressed as a percentage of net sales, increased to 12.5% in
fiscal year 2008 from 8.8% in fiscal year 2007.
  GENERAL AND ADMINISTRATIVE
EXPENSES.  General and
administrative expenses, or G&A, increased $3.2 million, or 26.8%, to $15.1
million in fiscal year 2008 from $11.9 million in fiscal year
2007.  The $3.2 million increase in G&A in fiscal year 2008 was
principally from the following increases:  $1.8 million increase in
bonuses related to the sale of the service business, $1.1 million increase in
legal costs, $0.3 million increase in facilities costs.   As with
selling and marketing expenses, when G&A expenses are expressed as a
percentage of net sales, they also increased to 5.0% for fiscal year 2008 from
3.4% in fiscal year 2007.


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




INTEREST INCOME,
NET.




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




Year
      Ended September 30,2008
            
            
            2007Interest
      income
            
            $
            295
            
            
            $
            615Interest
      expense
            
            
            (241
            )
            
            
            (318
            )Net
      interest income
            
            $
            54
            
            
            $
            297




Interest
income decreased $0.3 million in fiscal year 2008 to $0.3 million from $0.6
million in fiscal year 2007.  Interest income in both fiscal years
resulted from our short term cash investments.   Interest expense
decreased $0.1 million in fiscal year 2008 to $0.2 million from $0.3 million in
fiscal year 2007.  The decrease was from declines in interest expense from
our core information technology operations as well as from our affiliates, PBPO
and Ovex.  The interest expense in fiscal years 2008 and 2007 from our
lending facility with GE Commercial Distribution Finance Corporation was
approximately $17,000 and $11,000 respectively, which is customarily
low due to our interest-free borrowing periods allowed under the
financing.


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


INCOME TAX PROVISION
(BENEFIT).  Our income tax provision was $2.1 million in
fiscal year 2008 compared to a tax benefit of $0.2 million for the prior fiscal
year 2007.   In the prior fiscal year our current tax
liability was offset in full by our net operating loss carryforward, or
NOL,  which amounted to a tax of $60,000 under the low alternative
minimum tax rates.  A deferred tax benefit of $263,000 from the
reduction of the valuation allowance for deferred tax benefits resulted in a net
tax benefit of $203,000 for the fiscal year 2007.
  In
fiscal year 2008, however, we used the last remaining $0.6 million portion of
the federal NOL carry forwards excluding the $4.7 million NOL that arose in
fiscal year 2000 that pertained to stock option expense.  Under FAS
123(R) we are precluded from recognizing the $4.7 million of federal NOL carry
forwards that were a result of excess tax stock option expense over the
book amounts as a tax benefit.  Instead, the difference of $1.4
million between our fiscal year 2008 tax expense and our federal tax liability
has been added to paid-in capital.  The federal tax rate applied to
the fiscal year 2008 provision was calculated at the 34% tax rate.
  Deferred
taxes increased $0.6 million to $0.3 million in fiscal year 2008 from a credit
of $0.3 million in fiscal year 2007.  The increase was a result of the
reversal in the amount of valuation allowance credit  for net deferred
assets that was estimated in the prior year as usable to offset future taxable
income.
  19
 At
September 30, 2008 there were no further federal NOL carry-forwards
available.


NON-CONTROLLING
INTEREST. Under FIN 46 and other recent changes in
consolidation principles, certain minority interests are required to be
consolidated.  We own an approximate 30% voting interest in PBPO and
under FIN 46 are required to consolidate PBPO’s financial results in our
financial statements.  As a result, we allocate certain losses to the
other stockholders of PBPO who collectively own approximately 70% of
PBPO. Losses so allocated to the non-controlling interest are not based
upon the percentage of ownership, but upon the “at risk” capital of those
owners.  Once the non-controlling interest at risk capital has been
absorbed by losses, all remaining losses are allocated to us, without regard for
the amount of capital for which we are “at risk”.
  On
the other hand, Ovex, which we acquired in fiscal year 2007, is owned 70% by
us.  Thus, we allocate 30% of the net income of Ovex to its minority
shareholders.  The allocations to the non-controlling interest (in
thousands) for the last two fiscal years was as follows:




Year
      Ended September 30,2008
            
            
            2007Ovex
      profit
            
            $
            (34
            )
            
            $
            (186
            )PBPO
      loss
            
            
            29
            
            
            
            118(Profit)/loss
      allocations
            
            $
            (5
            )
            
            $
            (68
            )




LOSS FROM EQUITY
INVESTMENT.On July 2, 2008, we formed En Pointe
Global Services, LLC., or EPGS, as a wholly-owned subsidiary for the express
purposes of transferring our information technology service business to that
entity.  On July 9, 2008, we sold an 80.5% interest in EPGS to Allied
Digital Services, Limited. and retained a non-controlling interest of
19.5%.  Prior to the formation of EPGS the service and product
operations were reported by En Pointe Technologies Sales, Inc. and because the
service and product business was closely integrated no separate accounting for
management to review and evaluate the financial results of each operation was
possible.
  Because
the information technology service business was not previously considered to be
a separate segment, no prior period comparative financial information is
available.  However, contributing significantly to the $0.8 million
net loss allocatable to partners below that was not present in the prior fiscal
year quarter was the bankruptcy of one of the larger service customers of EPGS
and that bankruptcy contributed the majority of the $0.4 million of bad debts
that were incurred for the quarter.
  The EPGS results of operations
for the initial quarter of operations ended September 30, 2008 (in
thousands, except percentage ownership) was as follows:
  Quarter
      Ended September 30,2008Net
      service revenues
                
                
                10,016Cost
      of revenues
                
                $
                6,226Total
      gross profit
                
                
                3,790Selling,
      marketing and administration
                
                
                4,567Net
      loss allocatable to partners
                
                
                (777
                )En
      Pointe percentage ownership
                
                
                19.5
                %Allocated
      to En Pointe
                
                $
                (152
                )
    NET
INCOME.  Net income increased $2.0 million to $3.6 million in
fiscal year 2008 from $1.6 million in fiscal year 2007.  The increase
was attributed to a $14.6 million increase in other income arising principally
from the sale of the services business.
  20
 COMPARISON OF FISCAL YEARS ENDED
SEPTEMBER 30, 2007 AND 2006


NET SALES.Net
sales increased $23.4 million, or 7.2%, to $347.1 million in fiscal year 2007
from $323.7 million in fiscal year 2006.  Our affiliate, PBPO, and
subsidiary, Ovex, contributed $3.2 million and $0.9 million, respectively, of
the total net sales increase with the remaining $19.3 million increase coming
from our core operations of sales and service of information technology
products.  While no one customer accounted for 10% or more of total
net sales in fiscal years 2007 or 2006, the core operation increase in sales
resulted, in fact, from large volume customers who purchased increased amounts
of our products and services.   For example, net sales to our top
five customers accounted for 39.6% of total net sales in fiscal year
2007.  Net sales to these top five customers increased $53.1 million,
or 15.6%, in fiscal year 2007 over the total net sales to these same five
customers in the prior fiscal year.
      GROSS PROFIT.Gross
profits increased $3.9 million, or 9.8%, to $43.6 million in fiscal year 2007
from $39.7 million for fiscal year 2006.  The bulk of the increase in
gross profits, $2.2 million, was from product gross profits, with the remainder
$1.7 million attributable to services.  Our affiliate, PBPO, and
subsidiary, Ovex, contributed approximately one-third of the gross profits
increase, or $1.3 million, on aggregate base sales of $2.1 million for fiscal
year 2007.  Overall gross margins improved to 12.5% in fiscal year
2007 from 12.2% in the prior fiscal year.
  Product
gross profits increased $2.2 million in fiscal year 2007 to $25.2 million from
$23.0 million in the prior fiscal year principally from increased sales
volume.  Product gross margin percentages improved marginally to 8.4%
in fiscal year 2007 from 8.3% in fiscal year 2006.  The slight
improvement in margins was attributable to the increase in agency commission
fees that bear no associated costs.  Excluding the agency commissions,
product gross margins fell to 6.1% in fiscal year 2007 from 6.3% in the prior
fiscal year.
  Service
gross profits increased $1.7 million in fiscal year 2007 to $18.3 million from
$16.6 million in the prior fiscal year.  Most of the increase, $1.1
million, was attributable to an increase in service gross profits from our
affiliate, PBPO, which operates on an approximate 35% service gross
margin.  Our core service gross profits, which relates to the service
of information technology products and excludes the contributions of PBPO and
Ovex, increased marginally $0.4 million in fiscal year 2007 to $16.2 million
from $15.8 million in the prior fiscal year.  Related core service
gross margins increased 3.8% to 39.4% from 35.6%.
 
 While
core service net sales were down, core service gross profits and margins were
up.  Most of the service gross margin improvement can be traced to a
major municipal service project that was largely completed in fiscal year 2006
and whose revenues of $4.2 million and service gross margins of 11% adversely
impacted fiscal 2006 results causing a 3% drop in overall gross margins for that
year.
 
 SELLING AND MARKETING
EXPENSES.Selling and marketing expenses increased $2.2 million, or 7.9%, to $30.5 million
in fiscal year 2007, from $28.3 million in fiscal year 2006.  The $2.2
million increase in selling and marketing expenses in fiscal year 2007 was
attributable principally to a $1.9 million increase in wages from the hiring of
an additional 48 employees, including 40 for the call center in theU.S.and 8 for the recently formed cabling
division, and $0.2 million in increased overtime pay.  The remaining
$0.1 increase in selling and marketing expenses relates to increases in expenses
for our affiliate, PBPO, and subsidiary, Ovex.  Selling and marketing
expenses expressed as a percentage of net sales, were flat at 8.8% for fiscal
years 2007 and 2006.
  GENERAL AND ADMINISTRATIVE
EXPENSES.  General and administrative expenses, or G&A,
increased $0.8 million, or 7.0%, to $11.9 million in fiscal year 2007 from $11.1
in fiscal year 2006.  All of the increase was attributed to our
affiliate, PBPO, and subsidiary, Ovex, with G&A expense for PBPO and Ovex
increasing $0.4 million and $0.6 million respectively.  The Ovex
increase was due to our acquisition of Ovex stock and Ovex’s merger in fiscal
year 2007 with no comparable expense in prior fiscal years.  The majority
of the increase for PBPO relates to increases in salary as well as increases in
travel and entertainment related costs.  As with selling and marketing
expenses, when G&A expenses are expressed as a percentage of net sales, the
results are flat at 3.4% for fiscal years 2007 and 2006.
  21
 OPERATING INCOME. 
Operating income increased $0.9 million in fiscal year 2007 to $1.1 million
as compared with $0.2 million in the prior fiscal year.  The increase
of $0.9 million in operating income can be attributed to the increase in gross
profit of $3.9 million less the $3.0 million increase in operating expenses
during fiscal year 2007 as discussed above.
  INTEREST INCOME,
NET.
  Interest
income is net of interest expense and consisted of the following components for
the last two fiscal years (in thousands):
  Year
      Ended September 30,2007
              
              
              2006Interest
      income
              
              $
              615
              
              
              $
              263Interest
      expense
              
              
              (318
              )
              
              
              (82
              )Net
      interest income
              
              $
              297
              
              
              $
              181
  Net
interest income increased $0.1 million in fiscal year 2007 to $0.3 million
from $0.2 million in fiscal year 2006.  Interest income in both fiscal
years resulted from our short term cash investments.   Interest
expense increased $0.2 million in fiscal year 2007 to $0.3 million from $0.1
million in fiscal year 2006.  The increase was principally from the
acquisition of Ovex in fiscal year 2007 and the related interest expense that
was not present in the prior fiscal year.  The Ovex interest expense
includes $0.1 million related to short-term borrowings under an export finance
program.  In addition, consolidated interest expense includes
approximately $0.1 million related to capitalized leases.  The interest
expense in fiscal years 2007 and 2006 from our lending facility with GE
Commercial Distribution Finance Corporation was approximately $11,000 and
$14,000 respectively, which is customarily low due to our interest-free
borrowing periods allowed under the financing.
 
 OTHER INCOME.  Other
income increased a marginal $43,000 in fiscal year 2007 as compared with fiscal
year 2006 but was not a significant factor for either fiscal year.
  INCOME TAX (BENEFIT)
PROVISION.  A $203,000 tax benefit was provided for fiscal year
2007, which arose principally from a $400,000 decrease to our valuation
allowance for deferred tax benefits related to net operating loss tax
benefits.  The decrease of $400,000 represented our estimate of the federal
and state taxes at a combined rate of 40% that would be incurred in future
periods and for which the tax benefit of the deferred net operating loss
deduction would be available.  Only $263,000 of the $400,000 decrease was
available for the reduction of deferred taxes since the balance, $137,000,
relates to net operating losses arising from stock options and are considered an
adjustment of equity.  As a result of the use of the deferred net operating
loss of $263,000, future provisions for taxes, for financial statement
purposes, will not benefit from the net operating loss deduction and will be
computed at the full statutory rates.
  We file a
consolidated federal income tax return, while for many of our state tax returns
we file separately under the name of our wholly-owned sales subsidiary, En
Pointe Technologies Sales, Inc., that is qualified to do business in all fifty
states.  Our consolidated return excludes both PBPO and Ovex because
in the case of PBPO, our investment is less than the required 80% to consolidate
under  federal tax law.  In the case of Ovex, we are not taxed on
foreign income until it is distributed.
  As of
September 30, 2007 we had $5.3 million of  federal NOL carry-forwards,
which at 35% federal tax rates would reduce future federal taxes by $1.9
million.  In addition, there are $0.1 million of alternative minimum
tax credits carry-forwards that bring the total future benefit to $2.0 million,
of which $0.4 million was recognized in fiscal year 2007.  The NOL
carry-forwards are scheduled to expire at various dates through fiscal year
2023.  Section 382 of the Internal Revenue Code could limit the future
use of some or all of the NOL carry-forwards if the ownership of our common
stock changes by more than 50 percentage points in certain circumstances over a
three year testing period.
  NON-CONTROLLING 
INTEREST.  Under FIN 46 and other recent changes in consolidation
principles, certain minority interests are required to be
consolidated.  We own an approximate 30% voting interest in PBPO and
under FIN 46 are required to consolidate PBPO’s financial results in our
financial statements.  As a result, we allocate certain losses to the
other stockholders of PBPO who collectively own approximately 70% of
PBPO. Losses so allocated to the “minority interest” are not based upon the
percentage of ownership, but upon the “at risk” capital of those owners.
 Once the “minority interest at risk” capital has been absorbed by losses,
all remaining losses are allocated to us, without regard for the amount of
capital that we hold “at risk”.
  Ovex, on
the other hand, was acquired in fiscal year 2007 and we own a majority 70%
interest in that company.  Thus, we allocate 30% of the net income of
Ovex to its minority shareholders.  The allocations to the minority
interest (in thousands) for the 2007 and 2006 fiscal years were as
follows:
  22
  Year
      Ended September 30,2007
              
              
              2006Ovex
      profit
              
              
              (186
              )
              
              
              --PBPO
      loss
              
              $
              118
              
              
              $
              121(Profit)/loss
      allocations
              
              $
              (68
              )
              
              $
              121
  NET INCOME.  Net
income increased $1.1 million to $1.6 million in fiscal year 2007 from $0.5
million in fiscal year 2006.  The principal reasons for the $1.1
million increase in net income was from the $0.9 million increase in operating
income and the $0.2 million decrease in income taxes.


LIQUIDITY AND CAPITAL
RESOURCES




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





Cash flows from operating
activities:





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




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




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




Cash flows from investing
activities:





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





Cash flows from financing
activities:





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




Credit
facility:





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




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




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


23


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




•
            
            Tangible
      Net Worth and Subordinated Debt in the combined amount of not less than
      $12,750,000.•
            
            Total Funded
      Indebtedness to EBITDA for the preceding four fiscal quarters
      then ended, shall be no more
  than 3.00:1.00.




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




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




RECENT ACCOUNTING
PRONOUNCEMENTS




Accounting pronouncements
adopted:




In July
2006, the Financial Accounting Standards Board (“FASB”) issued Interpretation
No. 48, Accounting for Uncertainty in Income Taxes ("FIN No. 48"). This
interpretation requires recognition and measurement of uncertain income tax
positions using a "more-likely-than-not" approach. The provisions of FIN No. 48
are effective for fiscal years beginning after December 15, 2006. We adopted
this accounting pronouncement effective October 1, 2007 and the adoption has not
had a material effect on our consolidated financial statements.
  In
February 2006, the FASB issued FAS 155, Accounting for Certain Hybrid Financial
Instruments - an Amendment of FASB Statements No. 133 and 140. This statement
permits fair value remeasurement for any hybrid financial instrument that
contains an embedded derivative that would otherwise have to be accounted for
separately. The new statement also requires companies to identify interests in
securitized financial assets that are freestanding derivatives or contain
embedded derivatives that would have to be accounted
for separately, clarifies which interest-and principal-only strips are subject
to Statement No. 133, and amends Statement No. 140 to revise the conditions of a
qualifying special purpose entity due to the new requirement to identify whether
interests in securitized financial assets are freestanding derivatives or
contain embedded derivates. This statement is effective for all financial
instruments acquired or issued after the beginning of an entity's first fiscal
year that begins after September 15, 2006. We adopted this accounting
pronouncement effective October 1, 2006 and the adoption has not had a material
effect on our consolidated financial statements.


Accounting pronouncements
pending adoption:




In March
2008, the FASB issued Statement of Financial Accounting Standards ("SFAS") No.
161, Disclosures about Derivative Instruments and Hedging Activities, an
amendment of FASB Statement No. 133. SFAS No. 161 requires enhanced disclosures
about a company's derivative and hedging activities. These enhanced disclosures
will discuss (a) how and why a company uses derivative instruments, (b) how
derivative instruments and related hedged items are accounted for under FASB
Statement No. 133 and its related interpretations and (c) how derivative
instruments and related hedged items affect a company's financial position,
results of operations and cash flows. SFAS No. 161 is effective for fiscal years
beginning on or after November 15, 2008, with earlier adoption allowed. We do
not anticipate that the adoption of this accounting pronouncement will have a
material effect on our consolidated financial statements.
  In
February 2008, the FASB issued FASB Staff Position No. 157-2, Effective Date of
FASB Statement No. 157, which delays the effective date of SFAS 157 for
nonfinancial assets and nonfinancial liabilities to fiscal years beginning after
November 15, 2008. Therefore, we will delay application of SFAS 157 to our
nonfinancial assets and nonfinancial liabilities. We do not anticipate that the
delayed adoption of this accounting pronouncement will have a material effect on
our consolidated financial statements.
  In
December 2007, the FASB issued SFAS No. 141(R), Business Combinations, and SFAS
No. 160, Accounting and Reporting of Noncontrolling Interests in Consolidated
Financial Statements, an amendment of ARB No. 51. These new standards will
significantly change the financial accounting and reporting of business
combination transactions and noncontrolling (or minority) interests in
consolidated financial statements. SFAS 141(R) is required to be adopted
concurrently with SFAS 160 and is effective for business combination
transactions for which the acquisition date is on or after the beginning of the
first annual reporting period beginning on or after December 15, 2008. Early
adoption is prohibited. We do not anticipate that the adoption of this
accounting pronouncement will have a material effect on our consolidated
financial statements.
  In
February 2007, the FASB issued SFAS No. 159, The Fair Value Option for Financial
Assets and Financial Liabilities-Including an Amendment of FASB Statement No.
115, which is effective for us in fiscal years beginning after July 1, 2008.
This statement permits an entity to choose to measure many financial instruments
and certain other items at fair value at
  24
 specified
election dates. Subsequent unrealized gains and losses on items for which the
fair value option has been elected will be reported in earnings. We do not
anticipate that the adoption of this accounting pronouncement will have a
material effect on our consolidated financial statements.
  In
September 2006, the FASB issued FAS 157, Fair Value Measurements. This standard
defines fair value, establishes a framework for measuring fair value in
generally accepted accounting principles, and expands disclosures about fair
value measurements. This statement is effective for financial statements issued
for fiscal years beginning after November 15, 2007. We do not anticipate that
the adoption of this accounting pronouncement will have a material effect on our
consolidated financial statements.


OFF-BALANCE SHEET
ARRANGEMENTS




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




OBLIGATIONS AND
COMMITMENTS








Impact of
Inflation




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




ITEM 7A.  QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT
MARKET RISK








ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY
DATA




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




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




Not
Applicable




ITEM 9A(T).  CONTROLS AND PROCEDURES




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




Under the
supervision and with the participation of our management, including our Chief
Executive Officer and Chief Financial Officer, we have evaluated the
effectiveness of the design and operation of our “disclosure controls and
procedures,” as such term is defined under Rules 13a-15(e) and 15d-15(d)-15(e)
promulgated under the Exchange Act. Based on that evaluation, the Chief
Executive Officer and Chief Financial Officer have concluded that these
disclosure controls and procedures are effective.




Management’s
      Report on Internal Control Over Financial
  Reporting
  Our
management is responsible for establishing and maintaining adequate internal
control over financial reporting, as such term is defined in Exchange Act Rule
13a-15(f) or 15d-15(f).  We did not carry out a full evaluation of the
effectiveness of our internal control over financial reporting using the
criteria set by the Committee of Sponsoring Organizations of the Treadway
Commission (“COSO”) in Internal Control-Integrated
Frameworkat the end of the period covered by this Form 10-K because we
were unable to complete the evaluation of our financial and
information technology controls due to limited
resources.  Consequently, our chief executive officer and chief
financial officer were not able to draw a conclusion for the purpose of the COSO
criteria if our internal control over financial reporting was effective as of
September 30, 2008.  We anticipate our evaluation to be completed by March
31, 2009 and to be included in our interim financials for that
period.
 There has
been no change, during the fourth quarter of our 2008 fiscal year, in our
internal control over financial reporting that has materially affected, or is
reasonably likely to materially affect, our internal control over financial
reporting   However, the effectiveness of any system of internal
controls is subject to inherent limitations and there can be no assurance that
our internal control over financial reporting will prevent or detect all
errors.
 25
 Attiazaz
“Bob” Din
 (Chief
Executive Officer)
 
 Javed
Latif
 (Chief
Financial Officer)
  This
annual report does not include an attestation report of our registered public
accounting firm regarding internal control over financial reporting. 
Management's report was not subject to attestation by our registered public
accounting firm pursuant to temporary rules of the Commission that permit us to
provide only management's report in this annual report
  ITEM 9B.  OTHER INFORMATION




Not
Applicable.




PART III




ITEM 10.  DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE
GOVERNANCE





There is
hereby incorporated by reference the information appearing under the captions
''DIRECTORS,’’ “EXECUTIVE OFFICERS,” “BOARD COMMITTEES -- AUDIT COMMITTEE” and
''SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE’’ from our definitive
proxy statement for the 2009 Annual Meeting of the Stockholders to be filed with
the Commission on or before January 28, 2009.




We
adopted a Code of Ethics pursuant to Section 406 of the Sarbanes-Oxley Act of
2002 during the first quarter of 2004, which applies to our principal
executive officer, principal financial officer, principal accounting officer or
controller, or persons performing similar functions and other designated
officers and employees.  We posted the Code of Ethics on our website
at www.enpointe.com.  Any amendment or waiver to our Code of Ethics
that applies to our directors or executive officers will be posted on our
website or in a report filed with the SEC on Form 8-K.




ITEM 11.  EXECUTIVE COMPENSATION




There is
hereby incorporated by reference information appearing under the captions
“COMPENSATION DISCUSSION AND ANALYSIS,” ''EXECUTIVE COMPENSATION,’’ “DIRECTORS’
COMPENSATION,” “Option Matters,” “Compensation Committee Report” and
“Compensation Committee Interlocks and Insider Participation” from our
definitive proxy statement for the 2009 Annual Meeting of Stockholders to be
filed with the Commission on or before January 28, 2009.




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




There is
hereby incorporated by reference the information appearing under the caption
''Security Ownership of Certain Beneficial Owners and Management’’ from our
definitive proxy statement for the 2009 Annual Meeting of Stockholders to be
filed with the Commission on or before January 28, 2009.







26





Equity Compensation Plan
Information




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




Number
      of securitiesremaining
      available forNumber
      of securities
            
            
            
            
            
            
            
            future
      issuance under equityto
      be issued upon exercise
            
            
            Weighted-average
            
            
            
            compensation
      plans as ofof
      outstanding options,
            
            
            
            exercise
      price of
            
            
            
            September
      30, 2008warrants
      and rights as
            
            
            
            outstanding
      options,
            
            
            
            (excluding
      securitiesof
      September 30, 2008
            
            
            
            warrants
      and rights
            
            
            
            reflected
      in column (a))Plan
      Category
            
            
            (a)
            
            
            
            (b)
            
            
            
            (c)Equity
      compensation plansapproved
      by security holders:1996
      Stock Incentive Plan
            
            
            1,000,947
            
            
            $
            2.91
            
            
            
            NoneEmployee
      Stock Purchase Plan
            
            
            N/A
            
            
            
            N/A
            
            
            
            N/AEquity
      compensation plans notapproved
      by security holders
            
            None
            
            
            
            N/A
            
            
            
            NoneTotal
            
            
            1,000,947
            
            
            $
            2.91
            
            
            
            None




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




There is
hereby incorporated by reference the information appearing under the
captions “Corporate Governance” and ''Certain Transactions’’ from our
definitive proxy statement for the 2009 Annual Meeting of Stockholders to be
filed with the Commission on or before January 28, 2009.




ITEM 14.  PRINCIPAL ACCOUNTANT FEES AND
SERVICES




There is
hereby incorporated by reference the information appearing under the captions
''PRINCIPAL ACCOUNTANT FEES AND SERVICES” and “POLICY ON AUDIT COMMITTEE
PRE-APPROVAL OF AUDIT SERVICES AND PERMISSIBLE NON-AUDIT SERVICES OF INDEPENDENT
AUDITORS” from our definitive proxy statement for the 2009 Annual Meeting of
Stockholders to be filed with the Commission on or before January 28,
2009.




PART IV




ITEM 15.  EXHIBITS AND FINANCIAL STATEMENT
SCHEDULES




(a) The
following documents are filed as part of this report:




(1)
Financial Statements




The list
of financial statements contained in the accompanying Index to Financial
Statements covered by Report of Independent Accountants is herein incorporated
by reference.




(2)
Financial Statement Schedules




The list
of financial statements schedules contained in the accompanying Index to
Financial Statements covered by Report of Independent Accountants is herein
incorporated by reference.




All other
schedules are omitted because they are not applicable or the required
information is shown in the financial statements or notes thereto.




(3)
Exhibits





See (b)
below.




(b)
Exhibits




The list
of exhibits on the accompanying Exhibit Index is herein incorporated by
reference.










27








En Pointe
Technologies, Inc.




INDEX TO FINANCIAL
STATEMENTS




PageReports of Independent Registered Public
      Accounting Firms
            F-2
      – F-3Consolidated Balance Sheets as of September 30, 2008
      and 2007
            F-4Consolidated Statements of Operations for
      each of the Three Years in the Period Ended September 30,
      2008
            F-5Consolidated Statements of Stockholders’ Equity
      for each of the Three Years in the Period Ended September 30,
      2008
            F-6Consolidated Statements of Cash Flows for each of the
      Three Years in the Period Ended September 30, 2008
            F-7Notes to Consolidated Financial
      Statements
            F-8Schedule II—Valuation and Qualifying
      Accounts
            F-26

















F
-
1
















REPORT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM




To the
Board of Directors and Stockholders


En Pointe
Technologies, Inc.


Gardena,
California




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




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




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
















/s/ Rose,
Snyder & Jacobs


A
Corporation of Certified Public Accountants


Encino,
California




December
24, 2008

















F
-
2





En Pointe
Technologies, Inc.


Consolidated Balance Sheets


(In
Thousands Except Share and Per Share Amounts)




September
      30,2008
            
            
            2007ASSETS:Current
      assets:Cash
            
            $
            3,691
            
            
            $
            6,000Restricted
      cash
            
            
            10
            
            
            
            76Short
      term cash investment
            
            
            --
            
            
            
            1,000Accounts
      receivable, net of allowance for returnsand
      doubtful accounts of $3,535 and $794 respectively
            
            
            35,448
            
            
            
            61,391Due
      from affiliate
            
            
            3,586
            
            
            
            --Inventories,
      net of allowances of $830 and $552, respectively
            
            
            5,858
            
            
            
            8,768Prepaid
      expenses and other current assets
            
            
            1,294
            
            
            
            1,548Total
      current assets
            
            
            49,887
            
            
            
            78,783Property
      and equipment, net of accumulateddepreciation
      and amortization
            
            
            4,202
            
            
            
            5,022Other
      assets
            
            
            3,931
            
            
            
            2,201Investment
      in affiliate
            
            
            1,823
            
            
            
            --Receivable from escrow
            
            
            7,955
            
            
            
            --Total
      assets
            
            $
            67,798
            
            
            $
            86,006LIABILITIES AND STOCKHOLDERS'
      EQUITY:Current
      liabilities:Accounts
      payable, trade
            
            $
            15,817
            
            
            $
            19,034Borrowings
      under line of credit
            
            
            7,840
            
            
            
            30,314Short-term borrowings and current maturities of long-term
      debt
            
            
            375
            
            
            
            2,450Accrued
      employee compensation and benefits
            
            
            5,389
            
            
            
            4,264Other
      accrued liabilities
            
            
            4,409
            
            
            
            1,913Deferred
      income
            
            
            1,355
            
            
            
            582Accrued
      taxes and other liabilities
            
            
            4,522
            
            
            
            3,782Total
      current liabilities
            
            
            39,707
            
            
            
            62,339Long
      term liabilities
            
            
            475
            
            
            
            447Total
      liabilities
            
            
            40,182
            
            
            
            62,786Non-controlling
      interest
            
            
            1,962
            
            
            
            1,957Commitments
      and contingencies (Notes 7 and 11)Stockholders'
      equity:Preferred
      stock, $.001 par value:Shares
      authorized--5,000,000No
      shares issued or outstanding
            
            
            --
            
            
            
            --Common
      stock, $.001 par value:Shares
      authorized--15,000,000; with 7,162,643 and 7,159,193shares
      issued
            
            
            7
            
            
            
            7Additional
      paid-in capital
            
            
            43,616
            
            
            
            42,207Treasury
      stock
            
            
            (1
            )
            
            
            (1
            )Accumulated
      other comprehensive income
            
            
            (659
            )
            
            
            (14
            )Accumulated
      deficit
            
            
            (17,309
            )
            
            
            (20,936
            )Total
      stockholders' equity
            
            
            25,654
            
            
            
            21,263Total
      liabilities and stockholders' equity
            
            $
            67,798
            
            
            $
            86,006





See Notes
to Consolidated Financial Statements.







F
-
3





En Pointe Technologies,
Inc.


Consolidated Statements of
Operations


(In Thousands Except Per Share
Amounts)






Year
      Ended September 30,2008
            
            
            2007
            
            
            2006Net
      sales:Product
            
            $
            260,004
            
            
            $
            299,335
            
            
            $
            276,736Service
            
            
            40,458
            
            
            
            47,791
            
            
            
            46,997Total
      net sales
            
            
            300,462
            
            
            
            347,126
            
            
            
            323,733Cost
      of sales:Product
            
            
            233,291
            
            
            
            274,128
            
            
            
            253,765Service
            
            
            23,332
            
            
            
            29,447
            
            
            
            30,318Total
      cost of sales
            
            
            256,623
            
            
            
            303,575
            
            
            
            284,083Gross
      profit:Product
            
            
            26,713
            
            
            
            25,207
            
            
            
            22,971Service
            
            
            17,126
            
            
            
            18,344
            
            
            
            16,679Total
      gross profit
            
            
            43,839
            
            
            
            43,551
            
            
            
            39,650Selling
      and marketing expenses
            
            
            37,615
            
            
            
            30,565
            
            
            
            28,337General
      and administrative expenses
            
            
            15,054
            
            
            
            11,871
            
            
            
            11,098Operating
      (loss) income
            
            
            (8,830
            )
            
            
            1,115
            
            
            
            215Interest
      income, net
            
            
            54
            
            
            
            297
            
            
            
            181Other
      income, net
            
            
            14,708
            
            
            
            79
            
            
            
            36Income before
      income taxes, loss from equity investment and non-controlling
      interest
            
            
            5,932
            
            
            
            1,491
            
            
            
            432Income
      tax provision (benefit)
            
            
            2,148
            
            
            
            (203
            )
            
            
            42Income before
      loss from equity investment and non-controlling
    interest
            
            
            3,784
            
            
            
            1,694
            
            
            
            390Loss
      from equity investment
            
            
            (152
            )
            
            
            (68
            )
            
            
            121Non-controlling
      interest
            
            
            (5
            )Net
      income
            
            $
            3,627
            
            
            $
            1,626
            
            
            $
            511Net
      income per share:Basic
            
            $
            0.51
            
            
            $
            0.23
            
            
            $
            0.07Diluted
            
            $
            0.50
            
            
            $
            0.22
            
            
            $
            0.07Weighted
      average shares outstanding:Basic
            
            
            7,160
            
            
            
            7,145
            
            
            
            7,006Diluted
            
            
            7,263
            
            
            
            7,456
            
            
            
            7,125










See Notes
to Consolidated Financial Statements.








F
-
4


En Pointe Technologies,
Inc.
 Consolidated Statements of Stockholders’
Equity
 (In
Thousands)
 
   AccumulatedAdditional
              
              
              
              
              
              OtherCommon
      Stock
              
              
              Paid-In
              
              
              Treasury
              
              
              Comprehensive
              
              
              (AccumulatedShares
              
              
              Amount
              
              
              Capital
              
              
              Stock
              
              
              Income
              
              
              Deficit)
              
              
              TotalBalance
      at September 30, 2005
              6,973
              
              $
              7
              
              $
              41,718
              
              $
              (1
              )
              $
              
              
              $
              (23,273
              )
              $
              18,451Net
      income
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              511
              
              
              511Issuance
      of common stock under stock option plan
              58
              
              
              
              
              
              105
              
              
              
              
              
              
              
              
              
              
              
              105Deferred
      compensation related toacceleration
      of stock options
              
              
              
              
              
              
              (56
              )
              
              
              
              
              
              
              
              
              
              
              (56
              )Balance
      at September 30, 2006
              7,031
              
              $
              7
              
              $
              41,767
              
              $
              (1
              )
              $
              --
              
              $
              (22,762
              )
              $
              19,011SAB 108 cumulative effect adjustment
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              200
              
              
              200Balance
      at September 30, 2006, as adjusted
              7,031
              
              
              7
              
              
              41,767
              
              
              (1
              )
              
              --
              
              
              (22,562
              )
              
              19,211Net
      income
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              1,626
              
              
              1,626Foreign
      currency translation
              
              
              
              
              
              
              
              
              
              
              
              
              (14
              )
              
              
              
              
              (14
              )Comprehensive income
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              1,612Issuance
      of common stock under stock option plan
              30
              
              
              
              
              
              63
              
              
              
              
              
              
              
              
              
              
              
              63Net
      operating loss tax benefit related to stock options
              
              
              
              
              
              
              137
              
              
              
              
              
              
              
              
              
              
              
              137Stock
      issued related to business acquisition
              98
              
              
              
              
              
              240
              
              
              
              
              
              
              
              
              
              
              
              240Balance
      at September 30, 2007
              7,159
              
              $
              7
              
              $
              42,207
              
              $
              (1)
              
              $
              (14
              )
              $
              (20,936
              )
              $
              21,263Net
      income
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              3,627
              
              
              3,627Foreign
      currency translation
              
              
              
              
              
              
              
              
              
              
              
              
              (645
              )
              
              
              
              
              (645
              )Comprehensive
      income
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              2,982Issuance
      of common stock under stock option plan
              4
              
              
              
              
              
              5
              
              
              
              
              
              
              
              
              
              
              
              5Net operating loss tax benefit related to stock
    options
              
              
              
              
              
              
              1,404
              
              
              
              
              
              
              
              
              
              
              
              1,404Balance
      at September 30, 2008
              7,163
              
              $
              7
              
              $
              43,616
              
              $
              (1)
              
              $
              (659
              )
              $
              (17,309
              )
              $
              25,654
  
 
  
 See Notes
to Consolidated Financial Statements.










En Pointe Technologies,
Inc.


Consolidated
Statements of Cash Flows


(In Thousands)




Year
      Ended September 30,2008
            
            
            2007
            
            
            2006Cash
      flows from operating activities:Net
      income
            
            $
            3,627
            
            
            $
            1,626
            
            
            $
            511Adjustments
      to reconcile net incometo
      net cash used by operations:Depreciation
      and amortization
            
            
            2,678
            
            
            
            2,492
            
            
            
            1,491(Gain)
      loss on disposal of assets
            
            
            (15,390
            )
            
            
            --
            
            
            
            52Amortization
      of option expense
            
            
            --
            
            
            
            --
            
            
            
            (56
            )Amortization
      of deferred gain on sale-leaseback
            
            
            --
            
            
            
            (35
            )
            
            
            (354
            )Allowances
      for doubtful accounts, returns and inventory
            
            
            2,847
            
            
            
            123
            
            
            
            564Impairment
      of investment
            
            
            500
            
            
            
            --
            
            
            
            --Stock
      acquired for product and services sold
            
            
            (300
            )
            
            
            --
            
            
            
            --Non-controlling
      interest in income (loss) of affiliates
            
            
            5
            
            
            
            68
            
            
            
            (121
            )Decrease
      (increase) in deferred tax benefit
            
            
            263
            
            
            
            (263
            )
            
            
            --Changes
      in operating assets and liabilities:Equity in loss of affiliate
            
            
            152
            
            
            
            --
            
            
            
            --Restricted
      cash
            
            
            66
            
            
            
            (2
            )
            
            
            (2
            )Accounts
      receivable
            
            
            23,118
            
            
            
            (15,052
            )
            
            
            (5,916
            )Due from affiliate
            
            
            (3,586
            )Inventories
            
            
            2,888
            
            
            
            (4,495
            )
            
            
            6,017Prepaid
      expenses and other current assets
            
            
            (9
            )
            
            
            168
            
            
            
            (303
            )Other
      assets
            
            
            (2,288
            )
            
            
            69
            
            
            
            (28
            )Accounts
      payable, trade
            
            
            (3,217
            )
            
            
            (51
            )
            
            
            661Accrued
      expenses
            
            
            2,976
            
            
            
            426
            
            
            
            1,027Accrued
      taxes and other liabilities and deferred income
            
            
            1,513
            
            
            
            (343
            )
            
            
            1,942Net
      cash provided (used) by operating activities
            
            
            15,843
            
            
            
            (15,269
            )
            
            
            5,485Cash
      flows from investing activities:Acquisition
      of business
            
            
            --
            
            
            
            (1,302
            )
            
            
            (550
            )Proceeds
      from sale of assets
            
            
            8,000
            
            
            
            --
            
            
            
            --Investments in securities and affiliate
            
            
            (1,475
            )
            
            
            --
            
            
            
            --Short-term
      cash disposition (investment)
            
            
            1,000
            
            
            
            (1,000
            )
            
            
            --Purchase
      of property and equipment
            
            
            (2,366
            )
            
            
            (2,849
            )
            
            
            (904
            )Net
      cash provided (used) by investing activities
            
            
            5,159
            
            
            
            (5,151
            )
            
            
            (1,454
            )Cash
      flows from financing activities:Net
      (repayments) borrowings under line of credit
            
            
            (22,474
            )
            
            
            14,641
            
            
            
            (1,151
            )Net (repayments) borrowings under export loan
            
            
            (1,414
            )
            
            
            1,931
            
            
            
            --Net operating loss tax benefit related to stock options
            
            
            1,404
            
            
            
            --
            
            
            
            --Capital
      contributed by minority interest
            
            
            --
            
            
            
            100
            
            
            
            705Proceeds
      from sale of stock under employee plans
            
            
            5
            
            
            
            63
            
            
            
            105Payment
      on long term liabilities
            
            
            (832
            )
            
            
            (555
            )
            
            
            (352
            )Net
      cash (used) provided by financing activities
            
            
            (23,311
            )
            
            
            16,180
            
            
            
            (693
            )(Decrease)
      increase in cash
            
            
            (2,309
            )
            
            
            (4,240
            )
            
            
            3,337Cash
      at beginning of year
            
            
            6,000
            
            
            
            10,240
            
            
            
            6,903Cash
      at end of year
            
            $
            3,691
            
            
            $
            6,000
            
            
            $
            10,240




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





See Notes
to Consolidated Financial Statements.








F
-
6


NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS




1
ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES




ORGANIZATION




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




LIQUIDITY AND CAPITAL
RESOURCES




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




PRINCIPLES OF
CONSOLIDATION




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




INVESTMENT IN
LIMITED LIABILITY COMPANY




Because
the information technology service business was not previously considered to be
a separate segment, no prior period comparative financial information is
available.
  The EPGS results of operations
for the initial quarter of operations ended September 30, 2008 and the
financial position (in thousands) were as follows:
  Quarter
      Ended September 30,2008Net
      service revenues
                
                $
                10,016Cost
      of revenues
                
                
                6,226Total
      gross profit
                
                
                3,790Selling,
      marketing and administration
                
                
                4,567Net
      loss allocatable to partners
                
                
                (777
                )En
      Pointe percentage ownership
                
                
                19.5
                %Allocated
      to En Pointe
                
                $
                152






F -
7




September
      30, 2008Cash
              
              $
              1,005Accounts
      receivable, net
              
              
              5,146Other
      current assets
              
              
              512Total
      current assets
              
              
              6,663Property
      and equipment, net
              
              
              968$
              7,631Accounts
      payable
              
              $
              53Accrued
      liabilities
              
              
              1,731Due
      En Pointe
              
              
              3,649Total
      current liabilities
              
              
              5,433Member
      equity
              
              
              2,198$
              7,631








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




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




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




PBPO is
considered a related party because of the Company’s equity interest in PBPO as
well as the interrelationship of several of the investors with the
Company.  One of the Company’s board members, Mark Briggs, owns
approximately 17% of PBPO and also serves as its Chairman of the Board and Chief
Executive Officer.  Further, the Company’s CEO, Bob Din, represents En
Pointe’s interest as a member of the board of directors of PBPO.  In
addition, the owners of Ovex Technologies (Private) Limited (“Ovex”), the
Pakistani company that performs the operational and accounting side of the
Company’s outsourcing under a cost plus fixed agreement that may be cancelled
upon written notice, owns collectively approximately 16% of
PBPO.  Omar and Arif Saeed, who as of October 1, 2006 were
collectively approximate 30% owners of Ovex also hold shares of Series A
non-voting convertible preferred stock of PBPO that they received in October
2004 in exchange for the conversion of their five-year notes that aggregated
$603,000 in principal and interest.  The preferred shares held by the
Saeeds are a component of the PBPO minority interest and as such are not subject
to the allocation of PBPO losses.




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




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




USE OF ESTIMATES




The
preparation of financial statements in conformity with generally accepted
accounting principles in the United States of America requires management to
make estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period.  Actual results could differ from those
estimates.




F -
8


REVENUE
RECOGNITION




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




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





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




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




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




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







CASH AND CASH
EQUIVALENTS




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




RESTRICTED CASH




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




INVESTMENTS IN
SECURITIES


The
Company's securities are carried at their fair market value based on
quoted market prices. The Company holds two equity securities which approximate
$875,000 in value.
  RECEIVABLE
FROM ESCROW
  The
Company has an escrow receivable for 745,000 restricted shares of common stock
in Allied Digital Services, Limited  in connection with the July 9,
2008 sale of its services business.  The $8.0 million value of the escrow
receivable is based on the underlying stock which has been adjusted down by
$6.0 million for the restricted nature of the stock and the decline in value
between July 9, 2008 and September 30, 2008 when it closed at $14.28 a
share on an unrestricted trading basis.  On December 10, 2008 the
Allied Digital Services, LTD stock closed at $4.94 a share on an unrestricted
trading basis.
  F -
9


INVENTORIES




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




PROPERTY AND
EQUIPMENT




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




The
Company accounts for computer software costs developed for internal use in
accordance with Statement of Position 98-1 (SOP 98-1), “Accounting for the Costs
of Computer Software Developed or Obtained for Internal Use,” which requires
companies to capitalize certain qualifying costs during the application
development stage of the related software development project and to exclude the
initial planning phase that determines performance requirements, most data
conversion, general and administrative costs related to payroll and training
costs incurred.  Whenever a software program is considered
operational, the Company considers the project to be completed and places it
into service and commences amortization of the development cost in the
succeeding month.




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




FAIR VALUE OF FINANCIAL
INSTRUMENTS




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




IMPAIRMENT OF LONG-LIVED
ASSETS




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




GOODWILL AND INTANGIBLE
ASSETS




The
Company accounts for its goodwill and intangible assets in accordance with the
provisions of Statement of Financial Accounting Standard (SFAS) No. 142,
“Goodwill and Other Intangible Assets”, which requires, among other things, that
purchased goodwill and certain intangibles not be amortized.  Under a
nonamortization approach, goodwill and intangibles having an indefinite life are
not amortized, but instead will be reviewed for impairment at least annually or
if an event occurs or circumstances indicate that the carrying amount may be




F -
10


impaired.  Events
or circumstances which could indicate an impairment include a significant change
in the business climate, economic and industry trends, legal factors, negative
operating performance indicators, significant competition, changes in strategy
or disposition of a reporting unit or a portion thereof.  Goodwill
impairment testing is performed at the reporting unit level.




SFAS 142
requires that goodwill be tested annually for impairment using a two-step
process.  If an event occurs that would more likely than not reduce
the fair value of a reporting unit below its carrying amount, then goodwill
shall be tested at that time.  The first step of the goodwill
impairment test, used to identify potential impairment, compares the fair value
of a reporting unit with its carrying amount, including goodwill.  If
the fair value of a reporting unit exceeds its carrying amount, goodwill of the
reporting unit is not considered to be impaired and the second step of the
impairment test is unnecessary.  If the carrying amount of a reporting
unit exceeds its fair value, the second step of the goodwill impairment test
must be performed to measure the amount of impairment loss, if
any.  The second step of the goodwill impairment test compares the
implied fair value of reporting unit goodwill with the carrying amount of that
goodwill.  The implied fair value of goodwill is determined in the
same manner as the amount of goodwill recognized in a business
combination.  If the carrying amount of the reporting unit goodwill
exceeds the implied fair value of that goodwill, an impairment loss is
recognized in an amount equal to that excess.




Application
of the goodwill impairment test requires judgment, including the identification
of reporting units, assignment of assets and liabilities to reporting units,
assignment of goodwill to reporting units, and determination of the fair value
of each reporting unit.  The fair value of each reporting unit is
estimated using a discounted cash flow methodology.  This requires
significant judgments including estimation of future cash flows, which is
dependent on internal forecasts, estimation of the long-term rate of growth for
the


Company’s
business, the useful life over which cash flows will occur, and determination of
the weighted average cost of capital.  Changes in these estimates and
assumptions could materially affect the determination of fair value and/or
goodwill impairment for each reporting unit.




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




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




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




ADVERTISING AND SHIPPING AND HANDLING
COSTS




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




INCOME TAXES




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




CONCENTRATION OF CREDIT RISK AND
MAJOR CUSTOMERS AND VENDORS




Financial
instruments that potentially subject the Company to significant concentrations
of credit risk consists principally of cash deposits and trade accounts
receivable. The Company’s cash deposits are placed with a few financial
institutions. The combined account balances at one or more institutions
typically exceed the $100,000 Federal Depository Insurance Corporation ("FDIC")
insurance coverage, and, as a result, there is a concentration of credit risk
related to amounts on deposit in excess of FDIC insurance coverage.




F -
11







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




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




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




TREASURY STOCK




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




VENDOR PROGRAMS




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




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




EARNINGS PER
SHARE




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




COMPREHENSIVE
INCOME




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




SEGMENT REPORTING




The provisions of SFAS No. 131,
“Disclosures about Segments of anEnterpriseand Related Information”, require
public companies to report financial and descriptive information about
their reportable operating segments.  The Company identifies
reportable segments based on how management internally evaluates separate
financial information, business activities and management
responsibility.  For the year ended September 30, 2006, the Company
operated in only one segment.  In fiscal years ended September 30, 2008 and
2007, the Company  operated in four and three segments,
respectively, as follows:




F -
12




As
      of and for the Year Ended September 30, 2008US
              
              
              Pakistan
              
              
              ChinaSales
      of Product
              
              
              Business
      Process
              
              
              Business
      Process
              
              
              
              UK
              
              Intersegment
              
              
              ConsolidatedIn
      Thousands
              
              and
      Services
              
              
              Services
              
              
              Services
              
              
              
              Sales of
      Product
              
              Eliminations
              
              
              TotalSales
      from non affiliated customers
              
              $
              299,298
              
              
              $
              1,164
              
              
              $
              --
              
              
              $
              --
              
              $
              --
              
              
              $
              300,462Intersegment
      sales
              
              $
              --
              
              
              $
              7,775
              
              
              $
              473
              
              
              $
              --
              
              $
              (8,248
              )
              
              $
              0Depreciation
      and amortization
              
              $
              2,182
              
              
              $
              481
              
              
              $
              11
              
              
              $
              1
              
              $
              (66
              )
              
              $
              2,609Segment
      profit (loss)
              
              $
              4,879
              
              
              $
              87
              
              
              $
              45
              
              
              $
              (39
              )
              $
              (1,345
              )
              
              $
              3,627Segment
      assets
              
              $
              65,046
              
              
              $
              3,246
              
              
              $
              188
              
              
              $
              21
              
              $
              (703
              )
              
              $
              67,798






As
      of and for the Year Ended September 30, 2007US
            
            
            Pakistan
            
            
            ChinaSales
      of Product
            
            
            Business
      Process
            
            
            Business
      Process
            
            
            Intersegment
            
            
            ConsolidatedIn
      Thousands
            
            and
      Services
            
            
            Services
            
            
            Services
            
            
            Eliminations
            
            
            TotalSales
      from non affiliated customers
            
            $
            346,237
            
            
            $
            884
            
            
            $
            5
            
            
            $
            --
            
            
            $
            347,126Intersegment
      sales
            
            $
            --
            
            
            $
            7,827
            
            
            $
            218
            
            
            $
            (8,045
            )
            
            $
            0Depreciation
      and amortization
            
            $
            1,920
            
            
            $
            378
            
            
            $
            22
            
            
            $
            --
            
            
            $
            2,320Segment
      profit (loss)
            
            $
            1,140
            
            
            $
            649
            
            
            $
            (96
            )
            
            $
            (67
            )
            
            $
            1,626Segment
      assets
            
            $
            87,887
            
            
            $
            4,232
            
            
            $
            170
            
            
            $
            (6,283
            )
            
            $
            86,006




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




NON-CONTROLLING
INTEREST





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




Year
      Ended September 30,2008
            
            
            2007Beginning
      minority interest balance
            
            $
            1,957
            
            
            $
            1,487Minority
      interest acquired in Ovex acquisition
            
            
            --
            
            
            
            302Capital
      contributed by PBPO minority interest
            
            
            --
            
            
            
            100Earnings allocated
      to minority shareholders
            
            
            5
            
            
            
            68Ending
      minority interest balance
            
            $
            1,962
            
            
            $
            1,957




RECENT ACCOUNTING
PRONOUNCEMENTS




Accounting pronouncements
adopted:





In July
2006, the Financial Accounting Standards Board (“FASB”) issued Interpretation
No. 48, Accounting for Uncertainty in Income Taxes ("FIN No. 48"). This
interpretation requires recognition and measurement of uncertain income tax
positions using a "more-likely-than-not" approach. The provisions of FIN No. 48
are effective for fiscal years beginning after December 15, 2006. The
Company adopted this accounting pronouncement effective October 1, 2007 and
the adoption has not had a material effect on its consolidated financial
statements.
  In
February 2006, the FASB issued FAS 155, Accounting for Certain Hybrid Financial
Instruments - an Amendment of FASB Statements No. 133 and 140. This statement
permits fair value remeasurement for any hybrid financial instrument that
contains an embedded derivative that would otherwise have to be accounted for
separately. The new statement also requires companies to identify interests in
securitized financial assets that are freestanding derivatives or contain
embedded derivatives that would have to be accounted
for separately, clarifies which interest-and principal-only strips are subject
to Statement No. 133, and amends Statement No. 140 to revise the conditions of a
qualifying special purpose entity due to the new requirement to identify whether
interests in securitized financial assets are freestanding derivatives or
contain embedded derivates. This statement is effective for all financial
instruments acquired or issued after the beginning of an entity's first fiscal
year that begins after September 15, 2006. The Company adopted this accounting
pronouncement effective October 1, 2006 and the adoption has not had a material
effect on its consolidated financial statements.
  F -
13


Accounting pronouncements
pending adoption:





In March
2008, the FASB issued Statement of Financial Accounting Standards ("SFAS") No.
161, Disclosures about Derivative Instruments and Hedging Activities, an
amendment of FASB Statement No. 133. SFAS No. 161 requires enhanced disclosures
about a company's derivative and hedging activities. These enhanced disclosures
will discuss (a) how and why a company uses derivative instruments, (b) how
derivative instruments and related hedged items are accounted for under FASB
Statement No. 133 and its related interpretations and (c) how derivative
instruments and related hedged items affect a company's financial position,
results of operations and cash flows. SFAS No. 161 is effective for fiscal years
beginning on or after November 15, 2008, with earlier adoption allowed. 
The Company does not anticipate that the adoption of this accounting
pronouncement will have a material effect on its consolidated financial
statements.
  In
February 2008, the FASB issued FASB Staff Position No. 157-2, Effective Date of
FASB Statement No. 157, which delays the effective date of SFAS 157 for
nonfinancial assets and nonfinancial liabilities to fiscal years beginning after
November 15, 2008. Therefore, the Company will delay application of SFAS 157 to
its nonfinancial assets and nonfinancial liabilities. The Company does not
anticipate that the delayed adoption of this accounting pronouncement will have
a material effect on its consolidated financial statements.
  In
December 2007, the FASB issued SFAS No. 141(R), Business Combinations, and SFAS
No. 160, Accounting and Reporting of Noncontrolling Interests in Consolidated
Financial Statements, an amendment of ARB No. 51. These new standards will
significantly change the financial accounting and reporting of business
combination transactions and noncontrolling (or minority) interests in
consolidated financial statements. SFAS 141(R) is required to be adopted
concurrently with SFAS 160 and is effective for business combination
transactions for which the acquisition date is on or after the beginning of the
first annual reporting period beginning on or after December 15, 2008. Early
adoption is prohibited.  The Company does not anticipate that the adoption
of this accounting pronouncement will have a material effect on its
consolidated financial statements.
  In
February 2007, the FASB issued SFAS No. 159, The Fair Value Option for Financial
Assets and Financial Liabilities-Including an Amendment of FASB Statement No.
115, which is effective for the Company in fiscal years beginning after July 1,
2008. This statement permits an entity to choose to measure many financial
instruments and certain other items at fair value at specified election dates.
Subsequent unrealized gains and losses on items for which the fair value option
has been elected will be reported in earnings.  The Company does not
anticipate that the adoption of this accounting pronouncement will have a
material effect on its consolidated financial statements.
  In
September 2006, the FASB issued FAS 157, Fair Value Measurements. This standard
defines fair value, establishes a framework for measuring fair value in
generally accepted accounting principles, and expands disclosures about fair
value measurements. This statement is effective for financial statements issued
for fiscal years beginning after November 15, 2007.  The Company does not
anticipate that the adoption of this accounting pronouncement will have a
material effect on its consolidated financial
statements.






2 PROPERTY AND
EQUIPMENT




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


September
      30,2008
            
            
            2007Software and
      other asset development
            
            $
            572
            
            
            $
            344Computer
      equipment and software
            
            
            12,983
            
            
            
            12,925Office
      equipment and other
            
            
            1,065
            
            
            
            1,075Warehouse
      equipment
            
            
            --
            
            
            
            116Leasehold
      improvements
            
            
            477
            
            
            
            812Capitalized
      leases (see Note 7)
            
            
            2,309
            
            
            
            1,93817,406
            
            
            
            17,210Less:
      Accumulated depreciation and amortization
            
            
            (13,204
            )
            
            
            (12,188
            )$
            4,202
            
            
            $
            5,022




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




F -
14


3 LINES OF CREDIT




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




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




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




•
            
            Tangible
      Net Worth and Subordinated Debt in the combined amount of not less than
      $12,750,000.•
            
            Total Funded
      Indebtedness to EBITDA for the preceding four fiscal quarters
      then ended, shall be no more
  than 3.00:1.00.




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




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




4 OTHER INCOME - GAIN ON SALE OF SERVICE BUSINESS


In
connection with the transaction, the Company transferred a majority of its IT
service business, including related employees and contracts, to EPGS.  ADSL
is a publicly traded corporation on the Bombay Stock Exchange in India. 
Consideration for the purchase was $10 million in cash, of which $8 million
has been received and 745,000 shares of restricted ADSL stock with a
face value of $14 million on July 9, 2008, the date of the signing of the
contract.  The
securities portion of the consideration has been adjusted down by $6.0 million
for the restricted nature of the stock and the decline in value between July and
September 2008, which has resulted in an reported gain on the sale of $15.4
million after related costs of $0.6 million have been considered.The gain on the sale does not reflect a remaining $2.0 million of cash
consideration that is due.  Such consideration and resulting gain will be
recorded when it is received.
      There
will be continuity of management as the former service employees of the Company
will initially continue in their same capacities and will operate
autonomously.  Under a three year Master Service Agreement signed in
conjunction with the sale, the Company provides certain services,
including, without limitation, administrative, corporate, information
  F -
15
 technology,
engineering and other services to EPGS.  EPGS has signed a separate
subleasing agreement to sublease one half of the Company’s corporate
headquarters from the Company.  The CEO of En Pointe Technologies, Inc.,
Bob Din, will also serve on the board of EPGS as a representative of the
Company.  On going service contracts that could not be readily transferred
to EPGS are being billed by the Company on behalf of EPGS and the Company
continues to be liable for such contracts until their future
renegotiation.




5 EMPLOYEE BENEFIT
PLAN




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




6 INCOME TAXES




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




Year
      Ended September 30,2008
            
            
            2007
            
            
            2006Current:Federal
            
            $
            1,727
            
            
            $
            28
            
            
            $
            20State
            
            
            158
            
            
            
            32
            
            
            
            22$
            1,885
            
            
            $
            60
            
            
            $
            42




Deferred:Federal
            
            
            213
            
            
            
            (213
            )
            
            
            --State
            
            
            50
            
            
            
            (50
            )
            
            
            --263
            
            
            
            (263
            )
            
            
            --$
            2,148
            
            
            $
            (203
            )
            
            $
            --






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




Year
      Ended September
      30,2008
            
            2007
            
            2006Federal
      statutory rate
            
            34
            
            %
            
            35
            
            %
            
            35
            
            %State
      taxes, net of federal benefits
            
            1
            
            
            
            1
            
            
            
            2Expenses
      not deductible
            
            1
            
            
            
            5
            
            
            
            8Affiliate
      (earnings) losses not taxable
            
            1
            
            
            
            (11
            )
            
            
            35Non-controlling
      interest
            
            
            
            
            
            (2
            )
            
            
            (8
            )Net
      operating loss carryforward
            
            (4
            )
            
            
            (50
            )
            
            
            (82
            )Valuation
      allowances
            
            4
            
            
            
            8
            
            
            
            1837
            
            %
            
            (14
            )
            %
            
            8
            
            %




The
Company’s consolidated return excludes two affiliates (see “Affiliate (earnings)
losses not taxable” in table above), PBPO and Ovex.  PBPO is excluded
because the Company’s investment is less than the required 80% ownership
required to consolidate under federal tax law and Ovex is excluded because
foreign income is not subject to U.S. tax until distributed.




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




F -
16




September
      30,2008
            
            
            2007Deferred
      tax assets:Accounts
      receivable and other allowances
            $
            1,678
            
            
            $
            533Expenses
      not currently deductible
            
            2,965
            
            
            
            1,170Depreciation
            
            178
            
            
            
            295Federal
      net operating loss and alternative minimum tax credits
            162
            
            
            
            2,001State
      net operating loss
            
            697
            
            
            
            9335,680
            
            
            
            4,931Deferred
      tax liabilities
            
            (3,040
            )
            
            
            --Net
      deferred tax asset
            
            2,640
            
            
            
            4,931Valuation
      allowance
            
            (2,640
            )
            
            
            (4,531
            )Deferred
      tax asset
            $
            --
            
            
            $
            400




Portion
      allocated to income
            $
            --
            
            
            $
            263Portion
      allocated to equity related to stock options
            
            --
            
            
            
            137Total
      deferred tax asset
            $
            --
            
            
            $
            400




The Company has no Federal net
operating losses (‘‘NOL’’) available.




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


On
October 1, 2007, the Company adopted the provisions of FASB Interpretation No.
48 (FIN 48), “Accounting for Uncertainty in Income Taxes – An Interpretation of
FASB Statement No. 109.”  FIN 48 prescribes a threshold for the
financial statement recognition and measurement of a tax position taken in an
income tax return.  FIN 48 requires that a company determine whether
the benefits of tax positions are more likely than not of being sustained upon
audit based on the technical merits of the tax position.  For tax
positions that are more likely than not of being sustained upon audit, a company
must recognize the largest amount of the benefit that is more likely than not of
being sustained in the financial statements.  For tax positions that
are not more likely than not of being sustained upon audit, a company may not
recognize any portion of the benefit in the financial statements.
  The
Company investigated and identified all significant certain and uncertain tax
positions.  The investigation included a review of federal tax
returns for all open years.  The Company also reviewed all book to tax
adjustments recorded in its federal tax returns for open tax
years.  The Company also reviewed its transactional level detail to
identify tax exposure areas and items.  As part of the Company’s
identification process, the Company completed a FIN 48 Checklist and Inventory
of Uncertain Tax Positions.  The Checklist covered areas such as
accounting methods, mergers and acquisitions, state and local taxes,
international tax, research and development, compensation and benefits and other
federal tax issues.
  Based on
the investigation and review, the Company concluded that no uncertain tax
positions exist on its tax returns for open years except for the issues
discussed below whereby the likelihood of realization upon audit was not
considered initially to be highly certain.  The following item was
specifically addressed:
  Domestic Transfer Pricing– En Pointe Technologies, Inc. and its wholly-owned subsidiaries file
consolidated, combined and separate returns in various states. For the
jurisdictions in which En Pointe Technologies wholly-owned subsidiaries file
separate state returns, there is exposure with respect to domestic transfer
pricing by way of management fees and overhead allocations charged by the
Company.  The Company has not performed a transfer pricing study with
respect to the management fees and overhead allocation.  In addition,
the documentation supporting the allocation may not be satisfactory to the state
taxing authorities.
  Management
has determined that this tax position is more likely than not, but not highly
certain.  Accordingly a liability for the tax position with respect to
this item has been recorded in the amount of $10,000.




F -
17


7 LONG-TERM LIABILITIES AND
COMMITMENTS AND CONTINGENCIES




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




Minimum
      Lease
            
            
            
            CapitalizedPayments
            
            
            
            LeasesFiscal
      year 2009
            
            $
            1,921
            
            
            $
            452Fiscal
      year 2010
            
            
            1,663
            
            
            
            235Fiscal
      year 2011
            
            
            1,678
            
            
            
            190Fiscal
      year 2012
            
            
            1,643
            
            
            
            102Fiscal
      year 2013
            
            
            1,610Thereafter
            
            
            4,411Total
      minimum lease payments
            
            $
            12,926
            
            
            
            979Less
      amount representing interest
            
            
            
            
            
            
            (129
            )Principal
      amount
            
            
            
            
            
            $
            850Current
            
            
            
            
            
            
            375Long-term
            
            
            
            
            
            
            475Total
            
            
            
            
            
            $
            850


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




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




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




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




On
October 29, 2007, the Company entered into a lease agreement for its new
corporate headquarters. The property leased is a two story office building
with 29,032 square feet of office space in Carson, California. The lease is for
a period of seven years commencing on November 1, 2007. The lease requires
monthly payments of $48,483.44 for the first year and contains an annual base
rent increase of 3% that is effective for each November 1 for the succeeding six
years. There is an option to extend the lease for two additional five year
periods. Each of the two option periods to extend the lease contain the same
base rent increases of 3% as found in the original lease. The scheduled monthly
payments under the lease extension options are at the same original base monthly
rate of $48,483.44 plus the sum of the accumulated annual 3% base rent increases
to date. A security deposit of $96,966.88 is due upon execution of the lease.
The lessee is responsible for the payment of real property taxes on the leased
premises as well as for all utilities and services.
    F -
18
 The lessor of the leased corporate
headquarters, Dominguez Channel, LLC, is 85% owned by the Chief Executive
Officer of the Company and four members of his immediate family, two of whom are
employees and another a director of the Company.The terms and provisions
of the lease agreement were reviewed and unanimously approved on August 8, 2007
by the Company's Audit Committee, comprised of disinterested
directors.
  On February
15, 2008, the Company and The Capital Development Authority, an organization
commissioned by the government of Pakistan to oversee the planning and
maintenance of Islamabad, entered into a leasing agreement to lease the
Company approximately 41.25 acres of land.  The lease is for three
incremental renewable periods of thirty-three years each.  The land
is being leased for the construction of a technology campus for
multiple educational, training and conferences which may include but is not
limited to technical labs, including research data and development labs and
centers for all types of information technology services, including data
recovery centers, knowledge and business processing outsourcing, training across
various market segments, managed services and help desk support.  The
technology campus will include accommodations for the faculty, students, staff,
as well as visiting foreign and domestic guests and business and professional
people.  It will contain auditoriums, conference centers, recreational
facilities, special dedicated commerce teaching and training blocks for advanced
courses for multinational companies such as Microsoft Corporation and Cisco
Systems, Inc and numerous other manufacturers and software publishers or their
resellers or agents.
  Under
terms of the lease agreement, the Company will pay a total lease
rental of $10.0 million over a ten year period of time.  Lease
payments totaling $5.3 million are due in installments of $0.5 million annually
over a ten year period of time, with total interest estimated at $2.9 million
based on a given monthly average of the KIBOR (Karachi Interbank Offered
Rate) which has been estimated to be at the rate of 10% APR.  A
down payment of 10%, or $0.7 million, was paid when the letter of intent
was originally signed with the lessor, and another 15%, or $1.1 million,
was paid when the agreement was signed.  In addition to the $10.0
million lease rental, there is an annual ground rental charge of
approximately $13,000 a year and the Company is responsible for all applicable
property related taxes.
 The $10.0
million cost of the lease will be amortized over thirty-three years, or $0.3
million per year, and is presently considered non-operating investment
expense.  The $1.5 million of advance lease payments
is substantially non-current and is included with other assets in the
balance sheet.


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




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








8 EARNINGS PER SHARE AND PREFERRED
STOCK




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


Year
      Ended September 30,2008
            
            
            2007
            
            
            2006Net
      income
            
            $
            3,627
            
            
            $
            1,626
            
            
            $
            511Denominator:Weighted-average
      shares outstanding
            
            
            7,160
            
            
            
            7,145
            
            
            
            7,006Effect
      of dilutive securities:Dilutive
      potential of options and warrants
            
            
            103
            
            
            
            311
            
            
            
            119Weighted-average
      shares and share equivalentsoutstanding
            
            
            7,263
            
            
            
            7,456
            
            
            
            7,125Basic
      income per share
            
            $
            0.51
            
            
            $
            0.23
            
            
            $
            0.07Diluted
      income per share
            
            $
            0.50
            
            
            $
            0.22
            
            
            $
            0.07




F -
19


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




9 STOCK OPTIONS




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




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




The
following is a summary of stock option activity:


TotalExerciseNumber
      of Shares
            
            
            ValueNon-Qualified
            
            
            Incentive
            
            
            (In
      Thousands)Outstanding
      at September 30, 2005
            
            
            820,667
            
            
            
            725,106
            
            
            $
            5,266GrantedExercised
            
            
            (4,000
            )
            
            
            (53,034
            )
            
            
            (105
            )Cancelled
            
            
            --
            
            
            
            (88,291
            )
            
            
            (331
            )Outstanding
      at September 30, 2006
            
            
            816,667
            
            
            
            583,781
            
            
            $
            4,830Granted
            
            
            --
            
            
            
            --
            
            
            
            --Exercised
            
            
            
            
            
            
            (31,125
            )
            
            
            (62
            )Cancelled
            
            
            (8,333
            )
            
            
            (75,234
            )
            
            
            (966
            )Outstanding
      at September 30, 2007
            
            
            808,334
            
            
            
            477,422
            
            
            $
            3,804Granted
            
            
            --
            
            
            
            --
            
            
            
            --Exercised
            
            
            --
            
            
            
            (3,450
            )
            
            
            (5
            )Cancelled
            
            
            
            
            
            
            (281,359
            )
            
            
            (966
            )Outstanding
      at September 30, 2008
            
            
            808,334
            
            
            
            192,613
            
            
            $
            2,833






Weighted
            
            
            RemainingOptions
            
            
            Average
            
            
            ContractualExercisable
            
            
            Exercise
      Price
            
            
            LifeSeptember
      30, 2006
            
            1,400,448
            
            $
            3.45
            
            
            5.63September
      30, 2007
            
            1,285,756
            
            $
            2.96
            
            
            4.92September
      30, 2008
            
            1,000,947
            
            $
            2.91
            
            
            4.22






10 ACQUISITION OF
BUSINESSES





On
September 19, 2006, the Company entered into a Share Purchase Agreement with
Omar Saeed and Arif Saeed (the "Saeeds"), effective October 1, 2006, to acquire
70% of the capital stock of two privately owned Pakistani companies, Ovex
Technologies (Private) Limited and Ovex Pakistan (Private) Limited.
Subsequently, on July 7, 2007, the two companies were approved for merger by the
Pakistan Court effective October 1, 2006.  The surviving company in
the merger was Ovex Technologies (Private) Limited
(“Ovex”).


F
-20


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




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




Tangible
      assets acquired
            
            $
            704Excess
      purchase price over net assets acquired
            976Purchase
      price
            
            $
            1,680Intangible
      assets:Goodwill
            
            
            458Covenant
      not to compete
            
            
            420Customer
      relationships
            
            
            98Total
      intangibles
            
            $
            976




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




The
Company allocated the $975,000 purchase price to the tangible and intangible
assets acquired, based on their estimated fair values.  The excess
purchase price over those fair values was recorded as goodwill.  The
fair value assigned to the intangible assets acquired was based on valuations
estimated by management with the assistance of an independent appraisal
firm.  In accordance with SFAS No. 142, “Goodwill and Other Intangible
Assets”, goodwill and purchased intangibles with indefinite lives acquired after
June 30, 2001 are not amortized but will be reviewed periodically for
impairment.  Of the purchase price, approximately $154,000 was
allocated to amortizable (over five years using sum of the year’s digits method)
customer relationships and approximately $460,000 was allocated to amortizable
(over three years on a straight-line basis) non-competition
agreements.  The allocation of the purchase price (in
thousands) was as follows:




Depreciable
      assets acquired
            
            $
            57Excess
      purchase price over net assets acquired
            
            
            918Purchase
      price
            
            $
            975Intangible
      assets:Customer
      relationships
            
            
            154Goodwill
            
            
            304Covenant
      not to compete
            
            
            460Total
      intangibles
            
            $
            918




F -
21


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




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




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





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




Tabin
            
            
            Viablelinks
            
            
            SMI
            
            
            Ovex
            
            
            TotalBeginning
      accumulated amortization
            $
            470
            
            
            $
            160
            
            
            $
            350
            
            
            $
            116
            
            
            $
            1,096Fiscal
      year 2008 amortization
            
            
            
            
            
            
            27
            
            
            
            187
            
            
            
            117
            
            
            
            331Ending
      accumulated amortization
            
            $
            470
            
            
            $
            187
            
            
            $
            537
            
            
            $
            233
            
            
            $
            1,427Fiscal
      year:2009
            
            
            --
            
            
            
            13
            
            
            
            61
            
            
            
            117
            
            
            
            1912010
            
            
            --
            
            
            
            --
            
            
            
            13
            
            
            
            97
            
            
            
            1102011
            
            
            --
            
            
            
            --
            
            
            
            3
            
            
            
            91
            
            
            
            94Total
      future year's amortization
            
            $
            --
            
            
            $
            13
            
            
            $
            77
            
            
            $
            285
            
            
            $
            375Total
      amortization
            
            $
            470
            
            
            $
            200
            
            
            $
            614
            
            
            $
            518
            
            
            $
            1,802




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




Year
      Ended September
      30,2006Pro
      Forma
            
            
            As
      ReportedNet
      sales
            
            $
            327,090
            
            
            $
            323,723Net
      income
            
            $
            826
            
            
            $
            511Net
      income per share:Basic
            
            $
            0.12
            
            
            $
            0.07Diluted
            
            $
            0.12
            
            
            $
            0.07Weighted
      average shares outstanding:Basic
            
            
            7,006
            
            
            
            7,006Diluted
            
            
            7,125
            
            
            
            7,125




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




11 LITIGATION




In July
2006, Church Gardens, LLC, the current owner of our formerly leased
configuration facility in Ontario, California, filed suit against the Company in
San Bernardino County Superior Court, Case No. RCV096518. The complaint centers
on certain furniture, fixtures, equipment and leasehold improvements that were
sold to, and leased back to the Company, by plaintiff’s predecessor in 1999 when
the Company still occupied its former leased configuration facility in Ontario,
California. The plaintiff alleges, among other things, that a portion of the
leased-back property was sold, destroyed, altered, or removed from the premises,
and demands both an inspection and an accounting of the property remaining and
for the court to provide damages to the extent that the Company may have
breached its contract. The Company disputes the allegations and believes that
any property loss liability under the lease provisions would be limited to the
$75,000 that has already been accrued in its financial statements.
 F -
22
 In
February 2007, the Company filed a cross-complaint against Church Gardens LLC.
The cross-complaint asks that the Company's $90,720 security deposit be returned
with interest. In addition, the Company claims that Church Gardens LLC engaged
in unfair business practices in retaining the security deposit and in not
allowing the removal of certain personal property that the Company owned and
that Church Gardens LLC engaged in unlawful conversion of certain property
belonging to the Company.  The Company also asked the court to grant
declaratory relief as to the actions in the Company's attempt to preserve the
disputed property pending a judicial determination of rights. the Company also
seeks recovery of possession of its personal property and injunctive relief
preventing the plaintiff from liquidating the Company's property.
  In
January 2007, US Real Estate Consortium, the predecessor owner of the Company's
former leased configuration facility in Ontario, California filed suit against
the current owner, Church Gardens LLC, in San Bernardino County Superior Court,
Case No. RCV100476.
  In March
2007, the current owner, Church Gardens LLC, filed a cross-complaint against the
Company and the former owner, US Real Estate Consortium, among others. On May
31, 2007, the Company answered and cross-claimed against the current owner,
Church Gardens, LLC. On July 25, 2007, Church Gardens, LLC filed its answer to
the first amended cross-complaint filed by the Company.  Both cases
(RCV096518 and RCV100476) have now been consolidated for all
purposes.
  There has
been substantial discovery, and substantial law and motion practice to
date.  The Company is contesting the consolidated case
vigorously, and intend to continue doing so.
  On July
25, 2008, the Circuit Court for the City of Norfolk, Virginia granted leave to
Softchoice Corporation to amend its Complaint in Case Number CL07-5777 against
certain of the Company's employees who were former Softchoice Corporation
employees to add the Company and its subsidiary, En Pointe Technologies Sales,
Inc., as defendants therein.  The Company has not yet filed a responsive
pleading and vigorously disputes liability.
  There are
various other claims and litigation proceedings in which the Company is involved
in the ordinary course of business.  The Company provides for costs related
to contingencies when a loss is probable and the amount is reasonably
determinable. While the outcome of the foregoing and other claims and
proceedings cannot be predicted with certainty, after consulting with legal
counsel, management does not believe that it is reasonably possible that any
ongoing or pending litigation will result in an unfavorable outcome or have a
material adverse affect on our business, financial position and results of
operations or cash flows.




12 QUARTERLY FINANCIAL DATA
(UNAUDITED)




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




Fiscal
      2008 Quarter EndedSeptember
            
            June
            
            March
            
            DecemberNet
      sales
            
            $
            63,084
            
            $
            79,929
            
            $
            70,567
            
            $
            86,822Gross
      profit
            
            
            7,653
            
            
            13,307
            
            
            10,985
            
            
            11,894Net
      income (loss)
            
            
            6,140
            
            
            465
            
            
            (3,021
            )
            
            43Basic
      net income (loss) per share
            
            
            0.86
            
            
            0.06
            
            
            (0.42
            )
            
            0.01Diluted
      net income (loss) per share
            
            
            0.85
            
            
            0.06
            
            
            (0.42
            )
            
            0.01






Fiscal
      2007 Quarter EndedSeptember
            
            June
            
            March
            
            DecemberNet
      sales
            
            $
            97,041
            
            $
            99,967
            
            $
            74,498
            
            $
            75,620Gross
      profit
            
            
            11,704
            
            
            11,888
            
            
            10,086
            
            
            9,873Net income
            
            
            729
            
            
            412
            
            
            213
            
            272Basic
      net income per share
            
            
            0.10
            
            
            0.06
            
            
            .03
            
            .04Diluted
      net income per share
            
            
            0.10
            
            
            0.06
            
            
            .03
            
            .04






F -
23


En Pointe Technologies,
Inc.




Schedule II




VALUATION AND QUALIFYING
ACCOUNTS






Balance
      At
            
            
            Charges
      (Reversals)
            
            
            
            
            
            
            Balance
      AtBeginning
      of
            
            
            to
      Cost and
            
            
            
            
            
            
            End
      ofPeriod
            
            
            Expenses
            
            
            Deductions
            
            
            PeriodYear Ended September 30,
      2008(in thousands):Allowance
      for doubtful accounts
            
            $
            695
            
            
            $
            2,825
            
            
            $
            (84
            )
            
            $
            3,436Allowance
      for returns
            
            
            99
            
            
            
            —
            
            
            
            —
            
            
            
            99Allowance
      for inventory valuation
            
            
            552
            
            
            
            278
            
            
            
            —
            
            
            
            830$
            1,346
            
            
            $
            3,103
            
            
            $
            (84
            )
            
            $
            4,365Year Ended September 30,
      2007(in thousands):Allowance
      for doubtful accounts
            
            $
            1,011
            
            
            $
            205
            
            
            $
            (521
            )
            
            $
            695Allowance
      for returns
            
            
            99
            
            
            
            —
            
            
            
            —
            
            
            
            99Allowance
      for inventory valuation
            
            
            523
            
            
            
            29
            
            
            
            —
            
            
            
            552$
            1,633
            
            
            $
            234
            
            
            $
            (521
            )
            
            $
            1,346Year Ended September 30,
      2006(in thousands):Allowance
      for doubtful accounts
            
            $
            723
            
            
            $
            415
            
            
            $
            (127
            )
            
            $
            1,011Allowance
      for returns
            
            
            99
            
            
            
            —
            
            
            
            —
            
            
            
            99Allowance
      for inventory valuation
            
            
            374
            
            
            $
            149
            
            
            
            —
            
            
            
            523$
            1,196
            
            
            $
            564
            
            
            $
            (127
            )
            
            $
            1,633






F -
24


SIGNATURES




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.




EN POINTE
TECHNOLOGIES, INC.




/s/ ATTIAZAZ “BOB” DINDated:
      December 26, 2008
            
            BY:Attiazaz
      ‘‘Bob’’ Din,Chief
      Executive Officer and President(Principal
      Executive Officer)




POWER OF ATTORNEY




We, the
undersigned directors and officers of En Pointe Technologies, Inc. do hereby
constitute and appoint Attiazaz Din and Javed Latif, or either of them, with
full power of substitution and resubstitution, our true and lawful attorneys and
agents, to do any and all acts and things in our name and behalf in our
capacities as directors and officers and to execute any and all instruments for
us and in our names in the capacities indicated below, which said attorneys and
agents, or either of them, or their substitutes, may deem necessary or advisable
to enable said corporation to comply with the Securities Exchange Act of 1934,
as amended, and any rules, regulations and requirements of the Securities and
Exchange Commission in connection with this Annual Report on Form 10-K,
including specifically, but without limitation, power and authority to sign for
us or any of us in our names and in the capacities indicated below, any and all
amendments (including post-effective amendments) hereto; and we do hereby ratify
and confirm all that the said attorneys and agents, or either of them, shall do
or cause to be done by virtue hereof.




Pursuant
to the requirements of the Securities Exchange Act of 1934, this report has been
signed below by the following persons in the capacities and on the dates
indicated.




Signature
            
            Title
            
            Date/s/
      MANSOOR S. SHAH
            
            Chairman
      of the Board and Director
            
            December
      26, 2008Mansoor
      S. Shah/s/
      ATTIAZAZ “BOB” DIN
            
            Chief
      Executive Officer, President and Director (Principal Executive
      Officer)
            
            December
      26, 2008Attiazaz
      “Bob” Din/s/
      JAVED LATIF
            
            Chief
      Financial Officer and Senior Vice President (Principal Financial and
      Principal Accounting Officer)
            
            December
      26, 2008Javed
      Latif/s/
      NAUREEN DIN
            
            Director
            
            December
      26, 2008Naureen
      Din/s/
      ZUBAIR AHMED
            
            Director
            
            December
      26, 2008Zubair
      Ahmed/s/
      MARK BRIGGS
            
            Director
            
            December
      26, 2008Mark
      Briggs/s/
      EDWARD O. HUNTER
            
            Director
            
            December
      26, 2008Edward
      O. Hunter/s/
      TIMOTHY J. LILLIGREN
            
            Director
            
            December
      26, 2008Timothy
      J. Lilligren











Index to Exhibits




ExhibitNumber
            
            Description2.1
            
            Agreement
      and Plan of Merger between the Registrant and En Pointe Technologies,
      Inc., a Texas corporation, effective February 29, 1996 (incorporated by
      reference to the same numbered exhibit to the Registrant’s Registration
      Statement on Form S-1 filed May 8, 1996).3.1
            
            Certificate
      of Incorporation of Registrant (incorporated by reference to the same
      numbered exhibit to the Registrant’s Registration Statement on Form S-1
      filed May 8, 1996).3.2
            
            Bylaws
      of Registrant (incorporated by reference to the same numbered exhibit to
      the Registrant’s Registration Statement on Form S-1 filed May 8,
      1996).3.3
            
            Certificate
      of Amendment to Certificate of Incorporation of Registrant filed May 16,
      2000. (incorporated by reference to the same numbered exhibit to the
      Registrant’s Registration Statement on Form 10-K filed January 18,
      2001).3.4
            
            Certificate
      of Amendment to Certificate of Incorporation of Registrant filed May 16,
      2005. (incorporated by reference to the same numbered exhibit to the
      Registrant’s Form 10-Q filed May 16, 2005).4.3
            
            Form
      of Common Stock Certificate (incorporated by reference to the same
      numbered exhibit to the Registrant’s Registration Statement on Form S-1
      filed May 8, 1996).10.3
            
            Form
      of Directors’ and Officers’ Indemnity Agreement (incorporated by reference
      to the same numbered exhibit to the Registrant’s Registration Statement on
      Form S-1 filed May 8, 1996).*10.5
            
            Employment
      Agreement between the Registrant and Attiazaz ‘‘Bob’’ Din, dated March 1,
      1996 (incorporated by reference to the same numbered exhibit to the
      Registrant’s Registration Statement on Form S-1 filed May 8,
      1996).*10.6
            
            Amended
      Employment Agreement between the Registrant and Attiazaz ‘‘Bob’’ Din,
      dated April 2, 1997 (incorporated by reference to the same numbered
      exhibit to the Registrant’s Registration Statement on Form 10-K filed
      December 29, 1997).*10.24
            
            Assignment
      and License Agreement between the Registrant and SupplyAccess, Inc., dated
      September 21, 2001 (incorporated by reference to the same numbered exhibit
      to the Registrant’s Form 10-K filed December 31, 2001.)10.27
            
            Employment
      Agreement between the Registrant and Kevin Schatzle, dated March 28, 2002.
      (incorporated by reference to the same numbered exhibit to the
      Registrant’s Form 10-K filed December 27, 2002).*10.31
            
            Asset
      Purchase Agreement entered into as of October 9, 2002 between Tabin
      Corporation and En Pointe Technologies Sales, Inc. (incorporated by
      reference to the same numbered exhibit to the Registrant’s Form 10-K filed
      December 27, 2002).10.36
            
            Employment
      agreement between the Registrant and Javed Latif, dated March 28, 2002.
      (incorporated by reference to the same numbered exhibit to the
      Registrant’s Form 10-Q filed February 14, 2003).*10.39
            
            Employee
      Leasing and Licensing Agreement by and between the Registrant and En
      Pointe Global Services, Inc., dated October 17, 2003. (incorporated by
      reference to the same numbered exhibit to the Registrant’s Form 10-Q filed
      May 17, 2004).10.41
            
            Business
      Financing Agreement between En Pointe Technologies Sales, Inc. and GE
      Commercial Distribution Finance Corporation, dated June 25, 2004.
      (incorporated by reference to the same numbered exhibit to the
      Registrant’s Form 10-Q filed August 16,
2004).














ExhibitNumber
            
            Description10.42
            
            Agreement
      for Wholesale Financing between En Pointe Technologies, Inc. and GE
      Commercial Distribution Finance Corporation, dated June 25, 2004.
      (incorporated by reference to the same numbered exhibit to the
      Registrant’s Form 10-Q filed August 16, 2004).10.43
            
            Addendum
      to Business Financing Agreement and Agreement for Wholesale Financing
      between En Pointe Technologies, Inc. and GE Commercial Distribution
      Finance Corporation, dated June 25, 2004. (incorporated by reference to
      the same numbered exhibit to the Registrant’s Form 10-Q filed August 16,
      2004).10.44
            
            Addendum
      to Business Financing Agreement and Agreement for Wholesale Financing
      between En Pointe Technologies, Inc. and GE Commercial Distribution
      Finance Corporation, dated July 27, 2004. (incorporated by reference to
      the same numbered exhibit to the Registrant’s Form 10-Q filed August 16,
      2004).10.45
            
            Asset
      Purchase Agreement entered into as of October 1, 2004 between Viablelinks,
      Inc. and En Pointe Technologies Sales, Inc. (incorporated by reference to
      the same numbered exhibit to the Registrant’s Form 10-Q filed February 14,
      2005).10.46
            
            Subscription
      Agreement dated March 18, 2005 between Premier BPO Inc. and the Registrant
      (incorporated by reference to the same numbered exhibit to the
      Registrant’s Form 10-Q filed May 16, 2005).10.47
            
            Amendment
      to Employment Agreement between the Registrant and Attiazaz ‘‘Bob’’
      Din, dated November 15, 2004 (incorporated by reference to exhibit
      99.1 to the Registrant’s Form 8-K filed on November 18,
      2004.)*10.48
            
            Addendum
      to Business Financing Agreement and Agreement for Wholesale Financing
      among En Pointe Technologies Sales, Inc., En Pointe Gov, Inc. and GE
      Commercial Distribution Finance Corporation, effective January 23, 2006.
      (incorporated by reference to the same numbered exhibit to the
      Registrant’s Form 8-K filed January 30, 2006).10.49
            
            Asset
      Purchase Agreement entered into as of January 18, 2006 between Software
      Medium, Inc., Veridyn, LLC and En Pointe Technologies Sales, Inc.
      (incorporated by reference to the same numbered exhibit to the
      Registrant’s Form 10-Q filed February 14, 2006).10.50
            
            Employment
      Agreement between the Registrant and Robert Mercer, dated March 28, 2002.
      (incorporated by reference to the same numbered exhibit to the
      Registrant’s Form 10-Q filed February 14, 2006).10.51
            
            Employment
      Agreement between the Registrant and Robert Mercer, dated March 28, 2002.
      (incorporated by reference to the same numbered exhibit to the
      Registrant’s Form 10-Q filed February 14, 2006).*10.52
            
            Employment
      Agreement between the Registrant and David L. Mochalski, dated May 28,
      2002. (incorporated by reference to the same numbered exhibit to the
      Registrant’s Form 10-Q filed February 14, 2006).*10.53
            
            Sublease
      dated March 30, 2006 between Jetabout North America, Inc. and the
      Registrant for the property located at 2381 Rosecrans Avenue, El Segundo,
      California 90245 (incorporated by reference to the same numbered
      Exhibit to the Registrant’s Form 10-Q filed May 15,
  2006).10.55
            
            Addendum
      to Business Financing Agreement and Agreement for Wholesale Financing
      among En Pointe Technologies Sales, Inc., En Pointe Gov, Inc. and GE
      Commercial Distribution Finance Corporation, dated May 12, 2006
      (incorporated by reference to the same numbered exhibit to the
      Registrant’s Form 8-K filed May 17, 2006).10.56
            
            Sublease
      dated July 12, 2006 between North Pacific Group, Inc. and the Registrant
      for certain industrial warehouse properties located at 11081 Tacoma Drive,
      Rancho Cucamonga, California 91730 (incorporated by reference to the
      same numbered exhibit to the Registrant’s Form 8-K filed September 1,
      2006).10.57
            
            Share
      Purchase Agreement dated September 19, 2006, by and among the Registrant,
      Omar Saeed and Arif Saeed. (incorporated by reference to the same numbered
      Exhibit to the Registrant’s Form 8-K filed September 25,
      2006).














ExhibitNumber
            
            Description10.58
            
            Employment
      Agreement between the Registrant and Richard R. Emil, dated September 27,
      2006. (incorporated by reference to the same numbered exhibit to the
      Registrant’s Form 8-K filed September 27, 2006).*10.59
            
            Promissory
      Note between the Registrant and Omar and Arif Saeed, dated October 5,
      2006.  (incorporated by reference to the same numbered exhibit
      to the Registrant’s Form 10-K filed December 18, 2006).10.60
            
            Amendment
      to Share Purchase Agreement effective October 1, 2006, by and among the
      Registrant, Omar Saeed and Arif Saeed.  (incorporated by
      reference to the same numbered exhibit to the Registrant’s Form 10-K filed
      December 18, 2006).10.61
            
            Temporary
      Overline Agreement by GE Commercial Distribution Finance
      Corporation for En Pointe Technologies Sales, Inc. and En Pointe Gov,
      Inc., dated June 13, 2007.  (incorporated by reference to
      exhibit 10.60 to the Registrant’s Form 8-K filed June 14,
      2007).10.62
            
            Amendment
      to Business Financing Agreement and Agreement for Wholesale Financing
      among En Pointe Technologies Sales, Inc., En Pointe Gov, Inc. and GE
      Commercial Distribution Finance Corporation, dated July 30,
      2007.  (incorporated by reference to exhibit 10.61 to the
      Registrant’s Form 8-K filed July 31, 2007).10.63
            
            Addendum
      to Business Financing Agreement and Agreement for Wholesale Financing
      among En Pointe Technologies Sales, Inc., En Pointe Gov, Inc. and GE
      Commercial Distribution Finance Corporation, dated September 25,
      2007.  (incorporated by reference to the same numbered
      exhibit to the Registrant’s Form 8-K filed September 26,
      2007).10.64
            
            Lease
      dated October 29, 2007 between Dominguez Channel, LLC and En Pointe
      Technologies Sales, Inc. for certain office properties located at 18701 S.
      Figueroa Street, Carson, California (incorporated by reference to the same
      numbered exhibit to the Registrant’s Form 8-K/A filed October 31,
      2007).10.65
            
            Lease
      dated February 15, 2008 between The Capital Development Authority and the
      Registrant for
      41.25 acres of land in Islamabad, Pakistan (incorporated by reference to
      the same numbered
      Exhibit to the Registrant’s Form 8-K filed February 22,
      2008).10.66
            
            Agreement
      for Inventory Financing between En Pointe Technologies Sales, Inc., and
      IBM Credit LLC,
      dated March 20, 2008.  (incorporated by reference to the
      same numbered exhibit to the Registrant’s Form
      8-K filed March 21, 2008).10.67
            
            Collateralized
      Guarantee between En Pointe Technologies, Inc. and IBM Credit LLC, dated
      March 20,
      2008.  (incorporated by reference to the same numbered
      exhibit to the Registrant’s Form 8-K filed
      March 21, 2008).10.68
            
            Deposit
      Account Control Agreement between En Pointe Technologies Sales, Inc. and
      IBM Credit LLC,
      dated March 20, 2008 (incorporated by reference to the same numbered
      exhibit to the Registrant’s Form
      8-K filed March 21, 2008).10.69
            
            Intercreditor
      Agreement between GE Commercial Distribution Finance Corporation and IBM
      Credit
      LLC, dated March 2008 (incorporated by reference to the same numbered
      exhibit to the Registrant’s Form
      8-K filed March 21, 2008).10.70
            
            Limited
      Liability Company Purchase agreement between En Pointe Technologies Sales,
      Inc. and Allied
      Digital Services Ltd., dated July 9, 2008 (incorporated by reference to
      the same numbered exhibit to the
      Registrant’s Form 8-K filed July 15,
2008.10.71
            
            Escrow Agreement
      by and among En Pointe Technologies Sales, Inc., Allied Digital Services
      Ltd.,
      and U.S. Bank National Association, dated July 9, 2008 (incorporated by
      reference to the same numbered exhibit to
      the Registrant’s Form 8-K filed July 15,
    2008.10.72
            
            Master
      Services Agreement between En Pointe Technologies, Inc. and En Pointe
      Technologies Sales,
      Inc. and En Pointe Global Services, LLC, dated September 2, 2008
      (incorporated by reference
      to the same numbered exhibit to the Registrant’s Form 8-K filed
      September 2, 2008.10.73
            
            First
      amendment to July 9, 2008 Limited Liability Company Interest Purchase
      Agreementbetween
      En Pointe Technologies Sales, Inc. and Allied Digital Services Ltd., dated
      December2,
      2008 (incorporated by reference to the same numbered exhibit to the
      Registrant’s Form 8-K filedDecember
      2, 2008.21.1
            
            Subsidiaries
      of the Company23.1
            
            Consent
      of Rose, Snyder & Jacobs CPA Corp.31.1
            
            Certification
      of the Chief Executive Officer, as required by Rule 13a-14(a) or 15d-14(a)
      of the Securities Exchange Act of 1934, as amended.31.2
            
            Certification
      of the Chief Financial Officer, as required by Rule 13a-14(a) or 15d-14(a)
      of the Securities Exchange Act of 1934, as amended.32.1
            
            Certifications
      of the Chief Executive Officer and Chief Financial Officer, as required by
      Rule 13a-14(b) or 15d-14(b) of the Securities Exchange Act of 1934, as
      amended, and 18 U.S.C. Section 1350.


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