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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 1934
 For the Fiscal Year Ended September 30, 2006
 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.
  DELAWARE
    
    75-2467002(State or other jurisdiction of incorporation or
    
    (I.R.S. Employer Identification No.)organization)
 2381 ROSECRANS AVENUE, SUITE 325, EL SEGUNDO, CALIFORNIA 90245
(310) 725-5200
 
 
 
 
 o þ
 o þ
 þ o
 þ
  o o þ
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##### 



EN POINTE TECHNOLOGIES, INC.
FORM 10-K
YEAR ENDED SEPTEMBER 30, 2006
 Table of Contents
 PART I
    
    
    
    
    2ITEM 1.
    
    BUSINESS
    
    
    2ITEM 1A.
    
    RISK FACTORS
    
    
    14ITEM 1B.
    
    UNRESOLVED STAFF COMMENTS
    
    
    24ITEM 2.
    
    PROPERTIES
    
    
    24ITEM 3.
    
    LEGAL PROCEEDINGS
    
    
    24ITEM 4.
    
    SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
    
    
    25PART II
    
    
    
    
    26ITEM 5.
    
    MARKET FOR REGISTRANTS COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
    
    
    26ITEM 6.
    
    SELECTED CONSOLIDATED FINANCIAL DATA
    
    
    26ITEM 7.
    
    MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
    
    
    27ITEM 7A.
    
    QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
    
    
    42ITEM 8.
    
    FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
    
    
    42ITEM 9.
    
    CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURES
    
    
    42ITEM 9A
    
    CONTROLS AND PROCEDURES
    
    
    42ITEM 9B
    
    OTHER INFORMATION
    
    
    43PART III
    
    
    
    
    44ITEM 10.
    
    DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
    
    
    44ITEM 11.
    
    EXECUTIVE COMPENSATION
    
    
    44ITEM 12.
    
    SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
    
    
    44ITEM 13.
    
    CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
    
    
    45ITEM 14.
    
    PRINCIPAL ACCOUNTANT FEES AND SERVICES
    
    
    45PART IV
    
    
    
    
    45ITEM 15
    
    EXHIBITS AND FINANCIAL STATEMENT SCHEDULES CONSOLIDATED FINANCIAL STATEMENTS
    
    
    45SIGNATURESCHIEF EXECUTIVE OFFICER, CHIEF FINANCIAL OFFICER, AND DIRECTORSEXHIBIT 10.59EXHIBIT 10.60EXHIBIT 21.1EXHIBIT 23.1EXHIBIT 23.2EXHIBIT 23.3EXHIBIT 31.1EXHIBIT 31.2EXHIBIT 32.1EXHIBIT 32.2




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THIS ANNUAL REPORT ON FORM 10-K CONTAINS FORWARD-LOOKING STATEMENTS RELATING 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.
  
 ITEM 1. BUSINESS
   2




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tm tm
 BUSINESS MODEL
  TM TM
  3




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TM
   4




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
    
    overall customer project planning;
    
    detailed planning and scheduling of customer assets to be serviced;
    
    receipt confirmation of customer assets and subsequent tracking ability;
    
    periodic detailed customer asset reporting by serial number; and
    
    management of customer life cycle process to include:
 
    
    reconditioning and packaging,
    
    redeployment,
    
    liquidation, identification of leased assets and compliance with lease terms, and
work order history by serial number of each customer asset.
 5




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TM
 
    
    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
   6




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MANAGED AND PROFESSIONAL SERVICES
  
    
    needs assessment,
    
    solution design,
    
    image development,
    
    configuration,
    
    deployment and implementation
    
    install/move/add/change
    
    system refresh and disposal services,
 7




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
    
    post deployment support and training
    
    help desk,
    
    maintenance, and
    
    asset management.
      8




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PRODUCTS
  BUSINESS PROCESSING OUTSOURCING
   9




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COMPETITION
    10




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GETTING PRODUCT TO THE CUSTOMER
     11




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GETTING PRODUCT FROM THE SUPPLIER
    INTELLECTUAL PROPERTY
  12




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tm
 tm
 SEGMENT INFORMATION
  EMPLOYEES
    13




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ITEM 1A. RISK FACTORS
   
    
    declining sales in six of the last seven years;
    
    limited availability of alternative credit facilities;
    
    low margin business; and
    
    concentration of product and service sales in several major customers.
   THERE ARE RISKS IN CONDUCTING OUR DAILY BUSINESS PLANS AND STRATEGY
  14




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THERE ARE RISKS OUTSIDE OF OUR CONTROL OF UNFAVORABLE ECONOMIC CONDITIONS THAT COULD NEGATIVELY
IMPACT OUR REVENUES AND PROFITS
  THERE IS A RISK WE COULD LOSE OUR ASSET BASED FINANCING LINE WITHOUT BEING ABLE TO READILY REPLACE
IT
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OUR LOW MARGINS EXPOSE US TO RISKS FROM MINOR ADVERSITIES
  THERE IS RISK THAT A LARGE CUSTOMER COULD BE LOST WITHOUT BEING ABLE TO FIND A READY REPLACEMENT
  16




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WITH OUR FAST CHANGING INDUSTRY EVOLUTION WE RISK BEING OUTMODED OR EXCLUDED FROM THE DISTRIBUTION
CHANNEL
   
    
    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,
    
    service-only providers, and
    
    manufacturers that have their own direct marketing operations to end-users.
  17




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WE RISK DEPENDING ON A FEW DISTRIBUTORS AND MANUFACTURERS WHO COULD COMPETE WITH US OR LIMIT OUR
ACCESS TO THEIR PRODUCT LINE
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WE RISK LOSING COMMUNICATIONS WITH OUR BACK-OFFICE OPERATION IN PAKISTAN
  19




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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,
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
    
    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.
  WE RISK BUSINESS INTERRUPTION FROM OUR DEPENDENCE ON CENTRALIZED OPERATIONS
  WITH THE 36% CONCENTRATION OF OWNERSHIP OF OUR STOCK HELD BY A SMALL GROUP OF DIRECTORS, OFFICERS,
FAMILY MEMBERS AND AN OUTSIDE PRINCIPAL STOCKHOLDER THERE ARE RISKS THEY CAN EXERT SIGNIFICANCE
INFLUENCE OVER CORPORATE MATTERS
  21




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THERE ARE RISKS QUARTERLY OPERATING RESULTS CAN VARY FROM PAST RESULTS AND BECOME VOLATILE AND
UNPREDICTABLE
  
    
    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.
   OUR STOCK TENDS TO BE VOLATILE WITH LARGE PERCENTAGE PRICE MOVES WHICH CAN EXPOSE INVESTORS TO
UNANTICIPATED LOSSES
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IF OUR
INTERNAL CONTROLS PROVE TO BE INEFFECTIVE THAT COULD NEGATIVELY IMPACT INVESTORS AND CAUSE OUR
STOCK PRICE TO DROP
  IF PREFERRED STOCK IS EVER ISSUED AS AN ANTI-TAKEOVER MEASURE, THERE IS A RISK THAT COMMON
STOCKHOLDERS COULD BE ADVERSELY AFFECTED
  23




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OUR RECENT 70% ACQUISITION OF TWO PAKISTANI CORPORATIONS EXPOSES US TO FOREIGN OPERATIONAL RISKS
  
 ITEM 1B. UNRESOLVED STAFF COMMENTS
  
 ITEM 2. PROPERTIES
    
    
    Atlanta, Georgia
    
    Austin, Texas
    
    Boulder, Colorado
    
    Chicago, Illinois
    
    Draper, Utah
    
    Huntington Beach, California
    
    San Francisco, California
    
    Walpole, Massachusetts
   
 ITEM 3. LEGAL PROCEEDINGS
  24




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ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
  25




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PART II
 
 ITEM 5. MARKET FOR REGISTRANTS COMMON EQUITY, RELATED STOCKHOLDER
   HIGH
    
    LOWFiscal 2005First quarter
    
    $
    3.490
    
    
    $
    1.710Second quarter
    
    
    4.000
    
    
    
    2.550Third quarter
    
    
    3.500
    
    
    
    2.500Fourth quarter
    
    
    3.430
    
    
    
    2.520Fiscal 2006First quarter
    
    $
    3.100
    
    
    $
    2.020Second quarter
    
    
    2.700
    
    
    
    1.990Third quarter
    
    
    2.450
    
    
    
    1.340Fourth quarter
    
    
    3.080
    
    
    
    1.380Fiscal 2007First quarter (through 12/15/06)
    
    $
    7.470
    
    
    $
    2.280
    
 ITEM 6. SELECTED CONSOLIDATED FINANCIAL DATA
  26




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Fiscal Year Ended September 30,2006
    
    
    2005
    
    
    2004
    
    
    2003
    
    
    2002(in thousands, except per share data)Statement of Operations Data:Net sales
    
    $
    323,733
    
    
    $
    328,332
    
    
    $
    279,234
    
    
    $
    289,811
    
    
    $
    257,043Cost of sales
    
    
    284,083
    
    
    
    293,274
    
    
    
    244,758
    
    
    
    253,771
    
    
    
    229,505Gross profit
    
    
    39,650
    
    
    
    35,058
    
    
    
    34,476
    
    
    
    36,040
    
    
    
    27,538Operating expenses:Selling and marketing expenses
    
    
    28,337
    
    
    
    25,792
    
    
    
    22,930
    
    
    
    27,556
    
    
    
    23,631General and administrative expenses
    
    
    11,098
    
    
    
    10,143
    
    
    
    10,048
    
    
    
    9,998
    
    
    
    10,783Charges (income)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    393
    
    
    
    (918
    )Operating income (loss)
    
    
    215
    
    
    
    (877
    )
    
    
    1,499
    
    
    
    (1,907
    )
    
    
    (5,958
    )Interest (income) expense
    
    
    (181
    )
    
    
    (6
    )
    
    
    749
    
    
    
    871
    
    
    
    686Other income, net
    
    
    (36
    )
    
    
    (644
    )
    
    
    (646
    )
    
    
    (238
    )
    
    
    (364
    )Income (loss) before taxes, minority interest and income (loss) from affiliates
    
    
    432
    
    
    
    (227
    )
    
    
    1,396
    
    
    
    (2,540
    )
    
    
    (6,280
    )Provision (benefit) for income taxes
    
    
    42
    
    
    
    21
    
    
    
    131
    
    
    
    
    
    
    
    (2,182
    )Income (loss) before minority interest and income from affiliates
    
    
    390
    
    
    
    (248
    )
    
    
    1,265
    
    
    
    (2,540
    )
    
    
    (4,098
    )Minority interests in affiliate losses
    
    
    121
    
    
    
    393
    
    
    
    136
    
    
    
    
    
    
    
    Income from affiliates
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    143
    
    
    
    674Net income (loss)
    
    $
    511
    
    
    $
    145
    
    
    $
    1,401
    
    
    $
    (2,397
    )
    
    $
    (3,424
    )Net income (loss) per share:Basic
    
    $
    .07
    
    
    $
    .02
    
    
    $
    .21
    
    
    $
    (.36
    )
    
    $
    (.51
    )Diluted
    
    $
    .07
    
    
    $
    .02
    
    
    $
    .20
    
    
    $
    (.36
    )
    
    $
    (.51
    )Weighted average shares and share equivalents
outstanding (1):Basic
    
    
    7,006
    
    
    
    6,866
    
    
    
    6,737
    
    
    
    6,720
    
    
    
    6,666Diluted
    
    
    7,125
    
    
    
    7,103
    
    
    
    6,854
    
    
    
    6,720
    
    
    
    6,666
 As of September 30,2006
    
    2005
    
    2004
    
    2003
    
    2002(in thousands)Balance Sheet Data:Working capital
    
    $
    16,497
    
    
    $
    16,064
    
    
    $
    17,878
    
    
    $
    14,732
    
    
    $
    16,846Total assets
    
    $
    66,238
    
    
    $
    62,896
    
    
    $
    61,432
    
    
    $
    51,655
    
    
    $
    52,200Borrowings under lines of credit and flooring
    
    $
    15,673
    
    
    $
    16,824
    
    
    $
    18,309
    
    
    $
    11,326
    
    
    $
    12,421Long term liabilities
    
    $
    238
    
    
    $
    584
    
    
    $
    5,628
    
    
    $
    5,391
    
    
    $
    5,433Stockholders equity
    
    $
    19,011
    
    
    $
    18,451
    
    
    $
    17,978
    
    
    $
    16,426
    
    
    $
    18,823
 
 ITEM 7. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
  27




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EXECUTIVE OVERVIEW
       28




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Revenue recognition
    29




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Allowance for doubtful accounts
 Product returns
 Vendor returns
 Rebates and Cooperative Marketing Incentives
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Inventory.
   Fiscal Year Ended September 30,2006
    
    2005
    
    2004Net sales:Product
    
    
    85.5
    %
    
    
    85.1
    %
    
    
    84.8
    %Services
    
    
    14.5
    
    
    
    14.9
    
    
    
    15.2Total net sales
    
    
    100.0
    
    
    
    100.0
    
    
    
    100.0Gross profit:Product
    
    
    7.1
    
    
    
    6.3
    
    
    
    6.3Services
    
    
    5.1
    
    
    
    4.3
    
    
    
    6.1Total gross profit
    
    
    12.2
    
    
    
    10.7
    
    
    
    12.3Selling and marketing expenses
    
    
    8.8
    
    
    
    7.9
    
    
    
    8.2General and administrative expenses
    
    
    3.4
    
    
    
    3.1
    
    
    
    3.6Operating income (loss)
    
    
    0.0
    
    
    
    (.2
    )
    
    
    0.5Interest (income) expense,
net
    
    
    (.1
    )
    
    
    0.0
    
    
    
    0.2Other income, net
    
    
    0.0
    
    
    
    (0.1
    )
    
    
    (0.2
    )Income (loss) before taxes and minority interest
    
    
    0.1
    
    
    
    (0.1
    )
    
    
    0.5Provision for income taxes
    
    
    0.0
    
    
    
    0.0
    
    
    
    0.0Income (loss) before minority interest
    
    
    0.1
    
    
    
    (0.1
    )
    
    
    0.5Minority interest in affiliate loss
    
    
    0.1
    
    
    
    0.1
    
    
    
    0.0Net income
    
    
    0.2
    %
    
    
    0.0
    %
    
    
    0.5
    %
 COMPARISON OF FISCAL YEARS ENDED SEPTEMBER 30, 2006 AND 2005
 NET SALES
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COMPARISON OF FISCAL YEARS ENDED SEPTEMBER 30, 2005 AND 2004
 NET SALES
 34




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LIQUIDITY AND CAPITAL RESOURCES
   37




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RECENT ACCOUNTING PRONOUNCEMENTS
     39




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Payments Due by Period (In Thousands)Less ThanContractual Cash Obligations
    
    Total
    
    1 Year
    
    1-3 Years
    
    4-5 Years
    
    After 5 YearsCapital leases
    
    $
    621
    
    
    $
    377
    
    
    $
    244
    
    
    $
    
    
    
    $
    Operating leases
    
    $
    2,158
    
    
    $
    1,128
    
    
    $
    774
    
    
    $
    256
    
    
    $
    Line of credit
    
    $
    15,673
    
    
    $
    15,673
    
    
    $
    
    
    
    $
    
    
    
    $
    
 41




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Impact of Inflation
  
 ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
   
 ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
  
 ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
  
 ITEM 9A. CONTROLS AND PROCEDURES
  42




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ITEM 9B. OTHER INFORMATION
  43




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PART III
 
 ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
   
 ITEM 11. EXECUTIVE COMPENSATION
  
 ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
    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, 2006warrants and rights as
    
    outstanding options,
    
    (excluding securitiesof September 30, 2006
    
    warrants and rights
    
    reflected in column (a))(a)
    
    (b)
    
    (c)Plan CategoryEquity compensation plans
approved by security holders:1996 Stock Incentive Plan
    
    
    1,400,448
    
    
    $
    3.45
    
    
    
    424,245Employee Stock Purchase Plan
    
    
    N/A
    
    
    
    N/A
    
    
    
    350,007Equity compensation plans not
approved by security holders
    
    
    
    
    
    
    
    
    
    
    Total
    
    
    1,400,448
    
    
    $
    3.45
    
    
    
    774,252
 44




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ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
  
 ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
  
 PART IV
 
 ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
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INDEX TO FINANCIAL STATEMENTS
 PageReports of Independent Registered Public Accounting Firms
    
    
    F-2  F-4Consolidated Balance Sheets as of September 30, 2006 and 2005
    
    
    F-5Consolidated Statements of Operations for each of the Three Years in the Period Ended
September 30, 2006
    
    
    F-6Consolidated Statements of Stockholders Equity for each of the Three Years in the Period
Ended September 30, 2006
    
    
    F-7Consolidated Statements of Cash Flows for each of the Three Years in the Period Ended
September 30, 2006
    
    
    F-8  F-9Notes to Consolidated Financial StatementsSchedule IIValuation
and Qualifying Accounts
    
    
    F-37
 F-1




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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
 
    
 
 F - 2




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INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
 
     
 F - 3




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INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
 
   
 F - 4




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En Pointe Technologies, Inc.
 
 Consolidated Balance Sheets
 (In Thousands Except Share and Per Share Amounts)
 September 30,2006
    
    
    2005ASSETS:Current assets:Cash
    
    $
    10,240
    
    
    $
    6,903Restricted cash
    
    
    74
    
    
    
    72Accounts receivable, net of allowance for returns
and doubtful accounts of $1,110 and
$822, respectively
    
    
    46,417
    
    
    
    40,916Inventories, net of allowances of $523 and $374,
respectively
    
    
    4,201
    
    
    
    10,367Prepaid expenses and other current assets
    
    
    1,067
    
    
    
    764Total current assets
    
    
    61,999
    
    
    
    59,022Property and equipment, net of accumulated
depreciation and amortization
    
    
    2,765
    
    
    
    3,070Other assets
    
    
    1,474
    
    
    
    804Total assets
    
    $
    66,238
    
    
    $
    62,896LIABILITIES AND STOCKHOLDERS EQUITY:Current liabilities:Accounts payable, trade
    
    $
    19,105
    
    
    $
    18,444Borrowings under line of credit
    
    
    15,673
    
    
    
    16,824Accrued employee compensation and benefits
    
    
    3,684
    
    
    
    3,409Other accrued liabilities
    
    
    2,112
    
    
    
    935Deferred income
    
    
    368
    
    
    
    908Accrued taxes and other liabilities
    
    
    4,560
    
    
    
    2,438Total current liabilities
    
    
    45,502
    
    
    
    42,958Long term liabilities
    
    
    238
    
    
    
    584Total liabilities
    
    
    45,740
    
    
    
    43,542Minority interest
    
    
    1,487
    
    
    
    903Commitments and contingencies (Notes 7 and 12)Stockholders equity:Preferred stock, $.001 par value:Shares authorized5,000,000No shares issued or outstanding
    
    
    
    
    
    
    Common stock, $.001 par value:Shares authorized40,000,000; with 7,030,506 and 6,973,472
shares issued
    
    
    7
    
    
    
    7Additional paid-in capital
    
    
    41,767
    
    
    
    41,718Treasury stock, at cost; 702 shares in 2006 and 2005
    
    
    (1
    )
    
    
    (1
    )Accumulated deficit
    
    
    (22,762
    )
    
    
    (23,273
    )Total stockholders equity
    
    
    19,011
    
    
    
    18,451Total liabilities and stockholders equity
    
    $
    66,238
    
    
    $
    62,896
  F - 5




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##### Table of Contents



En Pointe Technologies, Inc.
 
 Consolidated Statements of Operations
 (In Thousands Except Per Share Amounts)
 Year Ended September 30,2006
    
    
    2005
    
    
    2004Net salesProduct
    
    $
    276,736
    
    
    $
    279,325
    
    
    $
    236,707Service
    
    
    46,997
    
    
    
    49,007
    
    
    
    42,527Total net sales
    
    
    323,733
    
    
    
    328,332
    
    
    
    279,234Cost of salesProduct
    
    
    253,765
    
    
    
    258,516
    
    
    
    219,125Service
    
    
    30,318
    
    
    
    34,758
    
    
    
    25,633Total cost of sales
    
    
    284,083
    
    
    
    293,274
    
    
    
    244,758Gross profitProduct
    
    
    22,971
    
    
    
    20,809
    
    
    
    17,582Service
    
    
    16,679
    
    
    
    14,249
    
    
    
    16,894Total gross profit
    
    
    39,650
    
    
    
    35,058
    
    
    
    34,476Selling and marketing expenses
    
    
    28,337
    
    
    
    25,792
    
    
    
    22,930General and administrative expenses
    
    
    11,098
    
    
    
    10,143
    
    
    
    10,047Operating income (loss)
    
    
    215
    
    
    
    (877
    )
    
    
    1,499Interest (income) expense, net
    
    
    (181
    )
    
    
    (6
    )
    
    
    749Other income, net
    
    
    (36
    )
    
    
    (644
    )
    
    
    (646
    )Income (loss) before income taxes and minority interest
    
    
    432
    
    
    
    (227
    )
    
    
    1,396Provision for income taxes
    
    
    42
    
    
    
    21
    
    
    
    131Income (loss) before minority interest
    
    
    390
    
    
    
    (248
    )
    
    
    1,265Minority interest in affilate loss
    
    
    121
    
    
    
    393
    
    
    
    136Net income
    
    $
    511
    
    
    $
    145
    
    
    $
    1,401Net income per share:Basic
    
    $
    .07
    
    
    $
    .02
    
    
    $
    .21Diluted
    
    $
    .07
    
    
    $
    .02
    
    
    $
    .20Weighted average shares and share equivalents outstanding:Basic
    
    
    7,006
    
    
    
    6,866
    
    
    
    6,737Diluted
    
    
    7,125
    
    
    
    7,103
    
    
    
    6,854
  F - 6




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##### Table of Contents



En Pointe Technologies, Inc.
 
 Consolidated Statements of Stockholders Equity
 (In Thousands)
 AdditionalCommon Stock
    
    
    Paid-In
    
    
    Treasury
    
    
    (AccumulatedShares
    
    
    Amount
    
    
    Capital
    
    
    Stock
    
    
    Deficit)
    
    
    TotalBalance at September 30, 2003
    
    
    6,721
    
    
    $
    7
    
    
    $
    41,241
    
    
    $
    (4
    )
    
    $
    (24,818
    )
    
    $
    16,426Issuance of common stock under stock
option plan
    
    
    93
    
    
    
    
    
    
    
    149
    
    
    
    
    
    
    
    
    
    
    
    149Treasury stock issued under stock plans
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3
    
    
    
    (1
    )
    
    
    2Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,401
    
    
    
    1,401Balance at September 30, 2004
    
    
    6,814
    
    
    $
    7
    
    
    $
    41,390
    
    
    $
    (1
    )
    
    $
    (23,418
    )
    
    $
    17,978Issuance of common stock under stock
option plan
    
    
    159
    
    
    
    
    
    
    
    260
    
    
    
    
    
    
    
    
    
    
    
    260Deferred compensation related to
acceleration of stock options
    
    
    
    
    
    
    
    
    
    
    68
    
    
    
    
    
    
    
    
    
    
    
    68Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    145
    
    
    
    145Balance at September 30, 2005
    
    
    6,973
    
    
    $
    7
    
    
    $
    41,718
    
    
    $
    (1
    )
    
    $
    (23,273
    )
    
    $
    18,451Issuance of common stock under stock
option plan
    
    
    58
    
    
    
    
    
    
    
    105
    
    
    
    
    
    
    
    
    
    
    
    105Deferred compensation related to
acceleration of stock options
    
    
    
    
    
    
    
    
    
    
    (56
    )
    
    
    
    
    
    
    
    
    
    
    (56
    )Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    511
    
    
    
    511Balance at September 30, 2006
    
    
    7,031
    
    
    $
    7
    
    
    $
    41,767
    
    
    $
    (1
    )
    
    $
    (22,762
    )
    
    $
    19,011
  F - 7




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##### Table of Contents



En Pointe Technologies, Inc.
 
 Consolidated Statements of Cash Flows
 (In Thousands)
 Year Ended September 30,2006
    
    
    2005
    
    
    2004Net income
    
    $
    511
    
    
    $
    145
    
    
    $
    1,401Adjustments to reconcile net income
to net cash provided by operations:Depreciation and amortization
    
    
    1,491
    
    
    
    1,110
    
    
    
    1,884Loss (gain) on disposal of assets
    
    
    52
    
    
    
    (22
    )Amortization of option expense
    
    
    (56
    )
    
    
    68
    
    
    
    Amortization of deferred gain from sale-leaseback
    
    
    (354
    )
    
    
    (330
    )
    
    
    Allowance for doubtful accounts
    
    
    415
    
    
    
    255
    
    
    
    145Allowance for returns and other allowances
    
    
    
    
    
    
    
    
    
    
    91Allowance for inventory obsolescense
    
    
    149
    
    
    
    20
    
    
    
    38Loss reversal income from affiliates
    
    
    
    
    
    
    
    
    
    
    Minority interest in loss of subsidiary
    
    
    (121
    )
    
    
    (393
    )
    
    
    (136
    )Changes in operating assets and liabilities:Restricted cash
    
    
    (2
    )
    
    
    (1
    )
    
    
    Accounts receivable
    
    
    (5,916
    )
    
    
    (9,067
    )
    
    
    3,407Inventories
    
    
    6,017
    
    
    
    (3,282
    )
    
    
    (1,397
    )Recoverable taxes
    
    
    
    
    
    
    
    
    
    
    Prepaid expenses and other current assets
    
    
    (303
    )
    
    
    (186
    )
    
    
    215Other assets
    
    
    (28
    )
    
    
    (37
    )
    
    
    129Accounts payable, trade
    
    
    661
    
    
    
    4,473
    
    
    
    1,329Accrued expenses
    
    
    1,027
    
    
    
    257
    
    
    
    (622
    )Accrued taxes and other liabilities and deferred income
    
    
    1,942
    
    
    
    1,548
    
    
    
    (233
    )Net cash provided (used) by operating activities
    
    
    5,485
    
    
    
    (5,442
    )
    
    
    6,251Acquisition of business
    
    
    (550
    )
    
    
    (878
    )
    
    
    Proceeds from sale of assets
    
    
    
    
    
    
    154
    
    
    
    Purchase of property and equipment
    
    
    (904
    )
    
    
    (1,999
    )
    
    
    (765
    )Net cash used by investing activities
    
    
    (1,454
    )
    
    
    (2,723
    )
    
    
    (765
    )Net (repayments) borrowings under lines of credit
    
    
    (1,151
    )
    
    
    (1,485
    )
    
    
    6,983Payment on notes payable
    
    
    (352
    )
    
    
    (164
    )
    
    
    (210
    )Net proceeds from sale of common stock under employee plans
    
    
    105
    
    
    
    260
    
    
    
    151Capital contributed by minority interest
    
    
    705
    
    
    
    385
    
    
    
    444Net cash (used) provided by financing activities
    
    
    (693
    )
    
    
    (1,004
    )
    
    
    7,368Increase (decrease) in cash
    
    
    3,337
    
    
    
    (9,169
    )
    
    
    12,854Cash at beginning of year
    
    
    6,903
    
    
    
    16,072
    
    
    
    3,218Cash at end of year
    
    $
    10,240
    
    
    $
    6,903
    
    
    $
    16,072
  F - 8




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##### Table of Contents



En Pointe Technologies, Inc.
Consolidated Statements of Cash Flows  (In Thousands)
 Year Ended September 30,2006
    
    
    2005
    
    
    2004Supplemental disclosures of cash flow information:Interest paid
    
    $
    82
    
    
    $
    260
    
    
    $
    750Income taxes
    
    $
    31
    
    
    $
    215
    
    
    $
    Supplemental schedule of non-cash financing and investing activities:Capitalized lease
    
    $
    
    
    
    $
    1,009
    
    
    $
    69
  F - 9




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##### Table of Contents



1 ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 ORGANIZATION
  LIQUIDITY AND CAPITAL RESOURCES
  PRINCIPLES OF CONSOLIDATION
  INVESTMENT IN PREMIER PBO, INC.
  F - 10




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##### Table of Contents



F - 11




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##### Table of Contents



Year Ended September 30,2006
    
    
    2005
    
    
    2004Business transactions with Ovex
    
    $
    4,488
    
    
    $
    2,175
    
    
    $
    1,758Outstanding balances at fiscal year end due to/(due from) Ovex
    
    $
    93
    
    
    $
    41
    
    
    $
    (30
    )
  Year Ended September 30,2006
    
    
    2005Beginning minority interest balance
    
    $
    903
    
    
    $
    308Loan conversion to preferred stock
    
    
    
    
    
    
    603Private stock offering
    
    
    705
    
    
    
    385Loss allocated to minority shareholders
    
    
    (121
    )
    
    
    (393
    )Ending minority interest balance
    
    $
    1,487
    
    
    $
    903
   REVENUE RECOGNITION
   F - 12




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##### Table of Contents



CASH AND CASH EQUIVALENTS
  RESTRICTED CASH
  INVENTORIES
  F - 13




---



##### Table of Contents



PROPERTY AND EQUIPMENT
    FAIR VALUE OF FINANCIAL INSTRUMENTS
  F - 14




---



##### Table of Contents



IMPAIRMENT OF LONG-LIVED ASSETS
  GOODWILL AND INTANGIBLE ASSETS
   F - 15




---



##### Table of Contents



ADVERTISING AND SHIPPING AND HANDLING COSTS
  INCOME TAXES
  F - 16




---



##### Table of Contents



CONCENTRATION OF CREDIT RISK AND MAJOR CUSTOMERS AND VENDORS
   Years Ended September 30, and as of September 30,2006
    
    
    2005
    
    
    2004% Net
    
    
    % Trade
    
    
    % Net
    
    
    % Trade
    
    
    % Net
    
    
    % TradeSales
    
    
    Receivables
    
    
    Sales
    
    
    Receivables
    
    
    Sales
    
    
    ReceivablesMajor customer
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    11
    %
    
    
    10
    %
    TREASURY STOCK
  F - 17




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##### Table of Contents



STOCK BASED COMPENSATION
      F - 18




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##### Table of Contents



Fiscal Year Ended September 30,2006
    
    
    2005
    
    
    2004Net income as reported
    
    $
    511
    
    
    $
    145
    
    
    $
    1,401Stock based compensation cost, net of related tax
effects, using the fair value method of reporting
    
    
    
    
    
    
    (868
    )
    
    
    (684
    )Effect of acceleration of unvested stock options
    
    
    
    
    
    
    (581
    )
    
    
    Pro forma net income (loss)
    
    $
    511
    
    
    $
    (1,304
    )
    
    $
    717Basic earnings (loss) per common share:As reported
    
    $
    0.07
    
    
    $
    0.02
    
    
    $
    0.21Pro forma
    
    $
    
    
    
    $
    (0.19
    )
    
    $
    0.11Diluted earnings (loss) per common share:As reported
    
    $
    0.07
    
    
    $
    0.02
    
    
    $
    0.20Pro forma
    
    $
    
    
    
    $
    (0.18
    )
    
    $
    0.10
  F - 19




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##### Table of Contents



EARNINGS PER SHARE
  COMPREHENSIVE INCOME
  SEGMENT REPORTING
  F - 20




---



##### Table of Contents



RECENT ACCOUNTING PRONOUNCEMENTS
      F - 21




---



##### Table of Contents



F - 22




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##### Table of Contents



2 PROPERTY AND EQUIPMENT
  September 30,2006
    
    
    2005Software under development
    
    $
    197
    
    
    $
    35Computer equipment and software
    
    
    9,519
    
    
    
    9,340Office equipment and other
    
    
    1,006
    
    
    
    999Warehouse equipment
    
    
    151
    
    
    
    149Leasehold improvements
    
    
    561
    
    
    
    466Capitalized leases (see Note 7)
    
    
    1,211
    
    
    
    1,21112,644
    
    
    
    12,200Less: Accumulated depreciation and amortization
    
    
    (9,879
    )
    
    
    (9,130
    )$
    2,765
    
    
    $
    3,070
  F - 23




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##### Table of Contents



3 LINES OF CREDIT
    
    
    There will be no EBITDA requirement until the June 2007 quarter. Commencing with the
June 2007 quarter, the ratio of EBITDA to interest expense for the twelve month trailing
period ending on the last day of each fiscal quarter will not be less than 1.25:1.0.
    
    The requirement that tangible net worth and subordinated debt must equal or exceed $14.0
million was reduced to lesser amounts commencing with the March 2006 quarter-end. The
revised ratios in millions for September 2006 and thereafter are $12.3 and $12.8,
respectively.
    
    The requirement that the ratio of debt minus subordinated debt to tangible net worth and
subordinated debt not exceed 4.5:1.0 for each December and June quarter-end and 4.0:1.0 for
each March and September quarter-end was increased to greater ratio amounts commencing with
the June 2006 quarter-end. The revised ratio is 4.75:1.0 for the September 2006 quarter-end
and each quarter-end thereafter.
    
    The requirement that the ratio of current tangible assets to current liabilities must
not be less than 1.2:1.0 was unchanged.
  F - 24




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##### Table of Contents



4 OTHER INCOME
  5 EMPLOYEE BENEFIT PLAN
  6 INCOME TAXES
  Year Ended September 30,2006
    
    
    2005
    
    
    2004Current:Federal
    
    $
    20
    
    
    $
    13
    
    
    $
    38State
    
    
    22
    
    
    
    8
    
    
    
    9342
    
    
    
    21
    
    
    
    131
  Year Ended September 30,2006
    
    
    2005
    
    
    2004Federal statutory rate
    
    
    35
    %
    
    
    35
    %
    
    
    35
    %State taxes, net of federal benefits
    
    
    2
    
    
    
    5
    
    
    
    4Expenses not deductible
    
    
    8
    
    
    
    23
    
    
    
    2Losses providing no tax benefits
    
    
    35
    
    
    
    312
    
    
    
    26Minority interest
    
    
    (8
    )
    
    
    (83
    )
    
    
    (3
    )Net operating loss carryforward
    
    
    (82
    )
    
    
    (123
    )
    
    
    (37
    )Valuation allowances
    
    
    18
    
    
    
    (156
    )
    
    
    (18
    )8
    %
    
    
    13
    %
    
    
    9
    %
  F - 25




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##### Table of Contents



September 30,2006
    
    
    2005Deferred tax assets:Accounts receivable and other allowances
    
    $
    628
    
    
    $
    486Expenses not currently deductible
    
    
    883
    
    
    
    611Depreciation
    
    
    250
    
    
    
    687Federal net operating loss and alternative minimium tax credits
    
    
    2,436
    
    
    
    2,861State net operating loss
    
    
    1,800
    
    
    
    1,9105,996
    
    
    
    6,555Deferred tax liabilities
    
    
    
    
    
    
    Net deferred tax asset
    
    
    5,996
    
    
    
    6,555Valuation allowance
    
    
    (5,996
    )
    
    
    (6,555
    )Deferred tax liability
    
    $
    
    
    
    $
    
  NOL AmountYear NOL Incurred
    
    (in thousands)
    
    
    Expiration Date2000
    
    $
    988
    
    
    
    20202002
    
    
    4,049
    
    
    
    20222003
    
    
    1,832
    
    
    
    2023$
    6,869
  F - 26




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##### Table of Contents



7 LONG-TERM LIABILITIES AND COMMITMENTS AND CONTINGENCIES
  Minimum LeasePayments
    
    
    Capitalized Leases2007
    
    $
    1,128
    
    
    $
    3772008
    
    
    774
    
    
    
    2442009
    
    
    256
    
    
    
    Total minimum lease payments
    
    $
    2,158
    
    
    
    621Less amount representing interest
    
    
    
    
    
    
    (37
    )$
    584Current
    
    
    
    
    
    
    346Long-term
    
    
    
    
    
    
    238$
    584
      F - 27




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##### Table of Contents



8 EARNINGS PER SHARE AND PREFERRED STOCK
  Year Ended September 30,2006
    
    
    2005
    
    
    2004Net income
    
    $
    511
    
    
    $
    145
    
    
    $
    1,401Denominator:Weighted -average shares outstanding
    
    
    7,006
    
    
    
    6,866
    
    
    
    6,737Effect of dilutive securities:Dilutive potential of options and warrants
    
    
    119
    
    
    
    237
    
    
    
    117Weighted-average shares and share equivalents
outstanding
    
    
    7,125
    
    
    
    7,103
    
    
    
    6,854Basic income (loss) per share
    
    $
    .07
    
    
    $
    .02
    
    
    $
    .21Diluted income (loss) per share
    
    $
    .07
    
    
    $
    .02
    
    
    $
    .20
  F - 28




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##### Table of Contents



9 STOCK OPTIONS
    TotalExerciseNumber of Shares
    
    
    ValueNon-Qualified
    
    
    Incentive
    
    
    (In Thousands)Outstanding at September 30, 2003
    
    
    521,667
    
    
    
    811,266
    
    
    $
    4,832Granted
    
    
    150,000
    
    
    
    300,000
    
    
    
    1,309Exercised
    
    
    (25,900
    )
    
    
    (67,859
    )
    
    
    (150
    )Cancelled
    
    
    (29,100
    )
    
    
    (164,686
    )
    
    
    (734
    )Outstanding at September 30, 2004
    
    
    616,667
    
    
    
    878,721
    
    
    $
    5,257Granted
    
    
    250,000
    
    
    
    25,000
    
    
    
    575Exercised
    
    
    (46,000
    )
    
    
    (113,136
    )
    
    
    (260
    )Cancelled
    
    
    
    
    
    
    (65,479
    )
    
    
    (306
    )Outstanding at September 30, 2005
    
    
    820,667
    
    
    
    725,106
    
    
    $
    5,266Granted
    
    
    
    
    
    
    
    
    
    
    Exercised
    
    
    (4,000
    )
    
    
    (53,034
    )
    
    
    (105
    )Cancelled
    
    
    
    
    
    
    (88,291
    )
    
    
    (331
    )Outstanding at September 30, 2006
    
    
    816,667
    
    
    
    583,781
    
    
    $
    4,830
 Weighted
    
    RemainingOptions
    
    Average
    
    ContractualExercisable
    
    Exercise Price
    
    LifeSeptember 30, 2004
    
    
    877,719
    
    
    $
    3.88
    
    
    
    6.21September 30, 2005
    
    
    1,545,773
    
    
    $
    3.41
    
    
    
    7.65September 30, 2006
    
    
    1,400,448
    
    
    $
    3.45
    
    
    
    5.63
 F - 29




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##### Table of Contents



Expected
    
    
    
    
    
    Risk FreeDividend
    
    Expected
    
    Interest
    
    ExpectedYield
    
    Volatility
    
    Rate
    
    LivesYear ended September 30, 2004
    
    
    0
    %
    
    
    101
    %
    
    
    3.10
    %
    
    
    5.0Year ended September 30, 2005
    
    
    0
    %
    
    
    105
    %
    
    
    3.35
    %
    
    
    5.0Year ended September 30, 2006
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
 10 EMPLOYEE STOCK PLAN
  11 ACQUISITION OF BUSINESSES
  F - 30




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##### Table of Contents



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 - 31




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##### Table of Contents



Accounts receivable
    
    $
    533Depreciable assets
    
    
    57Net assets acquired
    
    
    590Excess purchase price over net assets acquired
    
    
    288Purchase price
    
    $
    878Intangible assets:Customer relationships
    
    
    200Goodwill
    
    
    88Total intangibles
    
    $
    288
   Inventory
    
    $
    76Depreciable assets
    
    
    145Customer relationships
    
    
    470Goodwill
    
    
    230$
    921
  F - 32




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##### Table of Contents



Year Ended September 30, 2006
    
    Tabin
    
    
    Viablelinks
    
    
    Software Medium
    
    
    TotalBeginning accumulated amortization
    
    $
    332
    
    
    $
    67
    
    
    $
    
    
    
    $
    3992006
    
    
    69
    
    
    
    53
    
    
    
    153
    
    
    
    275Ending accumulated amortization
    
    $
    401
    
    
    $
    120
    
    
    $
    153
    
    
    $
    6742007
    
    $
    69
    
    
    $
    40
    
    
    $
    197
    
    
    $
    3062008
    
    
    
    
    
    
    27
    
    
    
    187
    
    
    
    2142009
    
    
    
    
    
    
    13
    
    
    
    61
    
    
    
    742010
    
    
    
    
    
    
    
    
    
    
    13
    
    
    
    132011
    
    
    
    
    
    
    
    
    
    
    3
    
    
    
    3Total future years amortization
    
    $
    69
    
    
    $
    80
    
    
    $
    461
    
    
    $
    6100Total amortization
    
    $
    470
    
    
    $
    200
    
    
    $
    614
    
    
    $
    1,284
  Years Ended September 30,2006
    
    
    2005
    
    
    2004Pro Forma
    
    
    As Reported
    
    
    Pro Forma
    
    
    As Reported
    
    
    Pro Forma
    
    
    As ReportedNet sales
    
    $
    326,043
    
    
    $
    323,733
    
    
    $
    342,140
    
    
    $
    328,332
    
    
    $
    315,092
    
    
    $
    279,234Net income
    
    $
    745
    
    
    $
    511
    
    
    $
    769
    
    
    $
    145
    
    
    $
    2,329
    
    
    $
    1,401Net income
per share:Basic
    
    $
    0.07
    
    
    $
    0.07
    
    
    $
    0.11
    
    
    $
    0.02
    
    
    $
    0.35
    
    
    $
    0.21Diluted
    
    $
    0.07
    
    
    $
    0.07
    
    
    $
    0.11
    
    
    $
    0.02
    
    
    $
    0.34
    
    
    $
    0.21Weighted average shares outstanding:Basic
    
    
    7,006
    
    
    
    7,006
    
    
    
    6,866
    
    
    
    6,866
    
    
    
    6,737
    
    
    
    6,737Diluted
    
    
    7,125
    
    
    
    7,125
    
    
    
    7,103
    
    
    
    7,103
    
    
    
    6,854
    
    
    
    6,854
  12 LITIGATION
  F - 33




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F - 34




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13 QUARTERLY FINANCIAL DATA (UNAUDITED)
  Fiscal 2006 Quarter EndedSeptember
    
    June
    
    March
    
    DecemberNet sales
    
    $
    78,409
    
    
    $
    95,624
    
    
    $
    71,012
    
    
    $
    78,688Gross profit
    
    
    11,400
    
    
    
    11,492
    
    
    
    9,238
    
    
    
    7,520Net (loss) income
    
    
    1,529
    
    
    
    1,016
    
    
    
    (1,037
    )
    
    
    (997
    )Basic net (loss) income per share
    
    
    .22
    
    
    
    .14
    
    
    
    (.15
    )
    
    
    (.14
    )Diluted net (loss) income per share
    
    
    .21
    
    
    
    .14
    
    
    
    (.15
    )
    
    
    (.14
    )
 Fiscal 2005 Quarter EndedSeptember
    
    June
    
    March
    
    DecemberNet sales
    
    $
    87,410
    
    
    $
    92,592
    
    
    $
    73,055
    
    
    $
    75,275Gross profit
    
    
    9,111
    
    
    
    9,078
    
    
    
    7,963
    
    
    
    8,906Net (loss) income
    
    
    (349
    )
    
    
    102
    
    
    
    90
    
    
    
    302Basic net (loss) income per share
    
    
    (.05
    )
    
    
    .01
    
    
    
    .01
    
    
    
    .04Diluted net (loss) income per share
    
    
    (.05
    )
    
    
    .01
    
    
    
    .01
    
    
    
    .04
 14 SUBSEQUENT EVENT
   F - 35




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F - 36




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##### Table of Contents



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, 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
    )
    
    $
    1,633Year Ended September 30, 2005 (in thousands):Allowance for doubtful accounts
    
    $
    945
    
    
    $
    255
    
    
    $
    (477
    )
    
    $
    723Allowance for returns
    
    $
    99
    
    
    $
    
    
    
    $
    
    
    
    $
    99Allowance for inventory valuation
    
    $
    354
    
    
    $
    20
    
    
    $
    
    
    
    $
    374$
    1,398
    
    
    $
    275
    
    
    $
    (477
    )
    
    $
    1,196Year Ended September 30, 2004 (in thousands):Allowance for doubtful accounts
    
    $
    1,003
    
    
    $
    145
    
    
    $
    (203
    )
    
    $
    945Allowance for returns
    
    $
    99
    
    
    

    
    
    
    $
    
    
    
    $
    99Allowance for inventory valuation
    
    $
    316
    
    
    $
    38
    
    
    $
    
    
    
    $
    354$
    1,418
    
    
    $
    183
    
    
    $
    (203
    )
    
    $
    1,398
 F - 37




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##### Table of Contents



SIGNATURES
   Dated: December 15, 2006
    BY:      /s/ ATTIAZAZ BOB DINAttiazaz Bob Din,Chief Executive Officer and President
(Principal Executive Officer)    Signature
    
    Title
    
    Date/s/ MANSOOR S. SHAH

Mansoor S. Shah
    
    Chairman of the Board,
Director
    
    December 15, 2006/s/ ATTIAZAZ BOB DIN

Attiazaz Bob Din
    
    Chief Executive Officer and
President (Principal
Executive Officer)
    
    December 15, 2006/s/ JAVED LATIF

Javed Latif
    
    Chief Financial Officer
(Principal Financial and Principal Accounting
Officer)
    
    December 15, 2006




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##### Table of Contents



Signature
    
    Title
    
    Date/s/ NAUREEN DIN

Naureen Din
    
    Director
    
    December 15, 2006/s/ ZUBAIR AHMED

Zubair Ahmed
    
    Director
    
    December 15, 2006/s/ MARK BRIGGS

Mark Briggs
    
    Director
    
    December 15, 2006/s/ EDWARD O. HUNTER

Edward O. Hunter
    
    Director
    
    December 15, 2006/s/ TIMOTHY J. LILLIGREN

Timothy J. Lilligren
    
    Director
    
    December 15, 2006




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##### Table of Contents



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).10.1
    
    En Pointe Technologies, Inc. 1996 Stock Incentive Plan (incorporated by reference to the
same
numbered Exhibit to the Registrants Registration Statement on Form S-1 filed May 8, 1996).10.2
    
    En Pointe Technologies, Inc. Employee Stock Purchase Plan (incorporated by reference to the
same numbered Exhibit to the Registrants Registration Statement on Form S-1 filed May 8,
1996).10.3
    
    Form of Directors and Officers Indemnity Agreement (incorporated by reference to the same
numbered Exhibit to the Registrants Registration Statement on Form S-1 filed May 8, 1996).10.5
    
    Employment Agreement between the Registrant and Attiazaz Bob Din, dated March 1, 1996
(incorporated by reference to the same numbered Exhibit to the Registrants Registration
Statement on Form S-1 filed May 8, 1996).10.6
    
    Amended Employment Agreement between the Registrant and Attiazaz Bob Din, dated April
2, 1997 (incorporated by reference to the same numbered Exhibit to the Registrants
Registration
Statement on Form 10-K filed December 29, 1997).




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##### Table of Contents



ExhibitNumber
    
    Description10.24
    
    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 En Pointe Technologies, Inc. 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, Inc, and GE Commercial
Distribution Finance Corporation, dated June 25, 2004. (incorporated by reference to the
same numbered exhibit to the Registrants Form 10-Q filed August 16, 2004).10.42
    
    Agreement for Wholesale Financing between En Pointe Technologies, Inc. and GE Commercial
Distribution Finance Corporation, dated June 25, 2004. (incorporated by reference to the
same numbered exhibit to the Registrants Form 10-Q filed August 16, 2004).10.43
    
    Addendum to Business Financing Agreement and Agreement for Wholesale Financing between En
Pointe Technologies, Inc. and GE Commercial Distribution Finance Corporation, dated June
25, 2004. (incorporated by reference to the same numbered exhibit to the Registrants
Form 10-Q filed August 16, 2004).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 En Pointe
Technologies, Inc. (incorporated by reference to the same numbered exhibit to the
Registrants Form 10-Q filed May 16, 2005).10.47
    
    Amended Employment Agreement between the Registrant and Attiazaz Bob Din, dated
October 1, 2005 (incorporated by reference to Exhibit 99.1 to the Registrants Form 8-K
filed on November 18, 200510.48
    
    Addendum to Business Financing Agreement and Agreement for Wholesale Financing between En
Pointe Technologies, 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).




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##### Table of Contents



ExhibitNumber
    
    Description10.51
    
    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 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 August 28, 2006).10.57
    
    Share purchase agreement dated September 19, 2006, by and among the Registrant, Omar Saeed
and Arif Saeed. (incorporated by reference to the same numbered Exhibit to the
Registrants Form 8-K filed September 25, 2006).10.58
    
    Employment Agreement between the Registrant and Richard R. Emil, dated September 27, 2006.
(incorporated by reference to the same numbered exhibit to the Registrants Form 8-K
filed September 27, 2006).10.59
    
    Promissory note between the Registrant and Omar and Arif Saeed, dated October 5, 2006.10.60
    
    Amendment to Share purchase agreement effective October 1, 2006, by and among the
Registrant, Omar Saeed and Arif Saeed.21.1
    
    Subsidiaries of the Company23.1
    
    Consent of Rose, Snyder & Jacobs CPA Corp.23.2
    
    Consent of BDO Seidman, LLP.23.3
    
    Consent of PricewaterhouseCoopers LLP.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
    
    Certification of the Chief Executive 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 135032.2
    
    Certification of the 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.