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UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Form 10-K

COMMISSION FILE NUMBER: 000-28052

En Pointe Technologies, Inc.

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

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

     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.     YES o          NO þ

     Indicate by check mark whether the Registrant is an accelerated filer (as defined in Rule 12b-2 of the 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, 2004, was approximately $12,233,364.

     The number of outstanding shares of the Registrant’s Common Stock as of December 20, 2004 was 6,817,330.

DOCUMENTS INCORPORATED BY REFERENCE

     PORTIONS OF REGISTRANT’S PROXY STATEMENT FOR THE 2005 ANNUAL MEETING OF STOCKHOLDERS (TO BE FILED WITH THE COMMISSION ON OR BEFORE JANUARY 28, 2005): PART III, ITEMS 10-14.

EN POINTE TECHNOLOGIES, INC.

FORM 10-K

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PART I

      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 — FACTORS WHICH MAY AFFECT FUTURE OPERATING RESULTS” 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 “FACTORS WHICH MAY AFFECT FUTURE OPERATING RESULTS,” WHICH COULD CAUSE ACTUAL EVENTS, PERFORMANCE OR RESULTS TO DIFFER MATERIALLY FROM THOSE INDICATED BY SUCH STATEMENTS.

      References made in this Annual Report on Form 10-K to “En Pointe Technologies,” “En Pointe,” the “Company,” “we,” “us,” or “our” refer to En Pointe Technologies, Inc. and its wholly-owned subsidiaries, En Pointe Technologies Sales, Inc., En Pointe Technologies Canada, Inc., En Pointe Gov, Inc. (formerly En Pointe Technologies Ventures, Inc.,) and The Xyphen Corporation (dba ContentWare). The following registered trademarks of the Company are mentioned or referred to in this Annual Report: En Pointe Technologies® and the Building Blocks design.

General

      En Pointe Technologies, Inc. was originally incorporated in Texas on January 25, 1993 and reincorporated in Delaware on February 6, 1996. We are a national provider of information technology products (hardware and software) and value-added services with a customer base consisting primarily of large and medium sized companies and government entities. We use proprietary and non-proprietary software and systems to drop-ship information technology products to our customers through an electronically linked network of suppliers that include distributors and certain manufacturers in the United States. This software allows us to serve as an electronic clearinghouse of computers and computer related products without many of the risks and costs associated with maintaining significant inventory. In addition to seeking efficiencies and growth in our traditional large-enterprise focused core business, we continue to devote resources to the development of our professional services infrastructure. En Pointe is represented in approximately 17 sales and service markets throughout the United States, and maintains a value-added ISO 9001:2000 certified integration operation in Ontario, California.

      We provide our customers with cost effective electronic commerce tools that help them to maximize their purchasing power when searching for and acquiring computer equipment and other technology products. One of our available tools, AccessPointe^TM, is a uniquely powerful and flexible Internet procurement system that is electronically linked to the extensive warehousing, purchasing and distribution functions of our suppliers. AccessPointe^TM provides ease-of-use, real-time accuracy, and the power to control the purchasing process, from paperless requisition creation to line-item detail delivery tracking. The direct links to our suppliers enhance our capacity to provide our customers with automated direct access to an extensive range of products at competitive prices.

Business Model

      Our virtual inventory business model has been developed and enhanced over time, but since our inception in 1993, our core concepts have remained the same. The model’s essential elements are (i) a low cost overhead structure resulting from the automation of many management and operating functions; (ii) effective electronic information systems; and (iii) reduced working capital requirements due to the leveraging of our virtual inventory model and our allied distributor relationships. Our highly sophisticated and customized enterprise resource planning system, SAP, allows us to monitor sales, product returns, inventories, profitability

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      We continue to focus on cost control in our business model and strive to maintain a low-cost overhead structure through the automation of many of our management and operating functions. The day-to-day customer support function is shared between a centralized staff at headquarters, back-office contract workers in Pakistan, and local account management to improve field response yet maintain direct access to all back office functions and senior management. Increased local coverage has fueled efforts to identify new opportunities. We believe that time in front of customers is the top priority for all account managers, account executives, and senior management to build long lasting relationships and identify business solutions for existing and new customers.

      In the third quarter of fiscal 2003, we introduced another low-cost overhead element to our business model strategy by relocating many of our “back-office” functions to service providers in Islamabad, Pakistan. These back-office functions include, among others, customer support, purchasing, credit and collections, accounts payable, accounting, help desk support, information technology support and other administrative and support functions. We contracted with two firms, Taseer Hadi Khalid & Co., a Pakistani member firm of KPMG, and Ovex Technologies (Private) Limited, to provide this support. Taseer Hadi Khalid & Co. provides accounting and payroll support while Ovex Technologies (Private) Limited provides support for the other operational functions. These two firms combined employed approximately 215 people, as of September 30, 2004, dedicated to supporting En Pointe Technologies. This has allowed us to increase the level of support we provide our customers while also keeping us cost competitive.

      Our product sales are conducted from both traditional branch offices as well as home-office locations, which are located in approximately 17 metropolitan markets in 14 states. Our service business is offered nationally and is managed and staffed by our in-house technicians using, when necessary, limited engagements of contracted third party service providers. We believe in seeking out new markets wherever there is a business case to support the incurring of additional personnel expense or whenever specific account opportunities arise.

      We have been and continued to be, since May, 2002, certified as a minority-controlled company by the National Minority Supplier Development Council. The certification is considered valuable because many large buying organizations, private enterprise accounts and state and local government agencies — have supplier diversity initiatives that may require certain purchases to be made from certified minority controlled companies.

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

      The data provided by our customized information system allows our sales representatives to design each customer’s orders according to their particular needs. Product can be delivered directly from suppliers to the customer or processed through our configuration facility located in Ontario, California. We simplify the ordering, staging, and delivery process through supply chain management for any size order. Our configuration facility is located close to our major suppliers’ warehouse locations for convenient same day pick-up of orders. This provides the configuration facility with the flexibility to meet stringent service level agreements and still function economically by limiting inventory to customer ordered product. Once our configuration facility tests and loads systems with predefined customer images, systems are then shipped ready-to-install, saving customers money in downstream deployment costs. Just-in-time configuration is well supported by our

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      In addition to providing a broad array of configuration services, including hardware configuration, software installation and custom imaging services, testing, aggregation, asset tagging and more, we also provide extensive logistics support. Our logistics offerings include all of our standard configuration offerings along with recovery of a customer’s current assets, testing of those assets, inventory management, redeployment and disposal. These services are made available to customers without regard to the source of their new purchases, we offer the ability to manage and deploy a customer’s new equipment even if not purchased directly from us.

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

      We also offer managed services that usually involve multi-year desktop and server support contracts for specified periods of time. We provide such services to several large national accounts by dedicated on-site resources trained and certified to provide network operations support, installations, moves, adds, changes, desktop and server support, and break fix services. We use a multi million-dollar customer relationship management system to manage our help desk operations and track our service level performance for parts tracking, onsite arrival and call resolutions.

      In 2003, we started a sales department dedicated solely to software licensing. Highly skilled personnel were hired with the charter of providing comprehensive solutions to customers related to software procurement. This specialized group provides value to customers by providing presales consulting, monitoring license compliance and managing software publishers’ relationships. We believe that there is considerable opportunity in software licensing and with that in mind, in fiscal year 2005 we began investing in further upgrades to our software solutions for software licensing.

      Although we have been for several years an authorized Microsoft Large Account Reseller as well as an authorized agent for certain other software publishers, we had not fully developed the operational and system capabilities to expand sales opportunities. In early fiscal year 2005, recognizing that need, we began the process of enhancing the capabilities of SAP and AccessPointe^TM to improve upon presales consulting, monitoring license compliance and managing software publishers’ relationships. Upon completion of the software upgrades targeted for mid-2005, we believe that we will have a more efficient software selling process that will have noticed improvements for our customers’ ordering and maintenance needs. To accomplish the software improvements, we hired additional personnel and contracted with an Indian-based privately-held firm.

eBusiness

      Our eBusiness offering is supported by our Internet procurement system, AccessPointe^TM, service management tools and back-office systems, each of which are integral parts of our business. The continuing development and function of our information systems is therefore crucial to our success.

      AccessPointe^TM allows us to integrate with other companies’ procurement systems and provide real time links to content, price and availability of products. AccessPointe^TM electronically links our back-office systems to our suppliers and customers. The application provides direct on-line access to hundreds of millions of dollars of information-technology inventory, representing over 75,000 items from hundreds of manufacturers, and can be used to set up private exchanges across a range of information-technology categories. AccessPointe^TM is available to customers as a tool to access information and procure information-technology products and services from us.

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      Service management tools are built on a Clarify platform. This customer relationship management application allows us to manage complex projects efficiently. Not only can we control and manage our services engagements, but Clarify also makes service information available to our customers via the web.

      The back office is built around the highly scalable SAP enterprise resource planning system that has been customized to accommodate our needs. The system provides the kind of detailed and complex information necessary to manage a national sales organization.

Managed and Professional Services

      We provide a full range of information technology life-cycle services, including the following:

	•	Needs assessment
	•	Solution design
	•	Image development
	•	Configuration
	•	Deployment
	•	System refresh and disposal services
	•	Post deployment support
	•	Help desk

      We employ best practices to provide high quality, low cost service solutions that address client information technology infrastructure needs, from the desktop to the wide area network. A team dedicated to sales of services complements the larger general sales staff to uncover opportunities within existing accounts and to seek new business For the three fiscal years ended in 2004, net sales from services provided 15.2% in fiscal 2004, 12.9% in fiscal 2003 and 10.5% in fiscal 2002, respectively, of our total net sales.

      We have historically focused more on our managed services business than our professional services opportunities because managed services usually involve multi-year desktop and server support contracts for specified periods of time. These engagements typically result in relatively consistent revenue streams that enable us to make strategic long-term investments to expand our service offerings and organizational infrastructure. Professional services, on the other hand, tend to require higher levels of investment without the relative predictability of managed services agreements.

      We provide managed services to large national accounts by dedicated on-site staff trained and certified to provide installations, moves, adds, changes, desktop and server support, and break-fix services. We do our own technical recruiting for these positions, to better control the quality of our staff and to provide timely and cost competitive alternatives suitable for the varying skill and/or geographic requirements of our customers. As an integral part of some of our managed services, we provide storage of inventory for customers at our Ontario configuration and logistics center. Seven large customers accounted for approximately 59.4% of our total service revenues for the 2004 fiscal year.

      Our enterprise help desk services are offered either on-site at the customer location or through our centralized call center. We maintain a technically trained staff that resolves problems during the initial phone call, thereby decreasing customer down time and increasing end user productivity. This also reduces the need to dispatch technicians for on-site visits, which reduces the overall costs of customer support.

      Included in our professional service offerings are: desktop and server design; messaging; storage; wireless, broadband and other network support; and security. With system security being of such concern, we are requiring our engineers and consultants to become security certified. We plan that service engagements offered by us will include a security focus that will differentiate our professional services offerings from those of our competitors While we have not invested significantly in this area relative to our managed services, customer demand for these services appears to be increasing and we will respond to opportunities when we can leverage our existing infrastructure or when it complements an existing customer support agreement.

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      One area in which we continue to expand is in offerings to customers of “return on investment” consulting. We assist customers to maximize the return on their information technology investment dollars by moving to new hardware platforms, consolidating servers and storage, and efficiently managing human resources with our expertise in Active Directory, a Microsoft program that allows organizations to manage information about network resources and users. We also have helped customers implement technologies that allow them to fix end-users’ computers remotely, without having to dispatch an onsite engineer, and compute for them the savings they realize by minimizing their down time.

      We use Clarify, an industry-leading customer relationship management system, to create and track our service calls and to manage service parts. This system measures and reports initial response times, on-site arrival times, and call closure or resolution times. From voluminous call ticket data, this system compiles and calculates the corresponding service levels so that we can be measured against industry standards, our company objectives, and customer commitments. This enables us to improve our processes to achieve greater levels of customer satisfaction.

Products

      The majority of our sales are information technology products. We currently make available to our customers an extensive selection of products at what we believe to be a competitive combination of price and availability. We currently offer over 75,000 information technology products from hundreds of manufacturers, including International Business Machines Corporation (“IBM”), Hewlett-Packard Company (“HP”), Dell Computer Corporation (“Dell”), Cisco Systems, Inc., Fujitsu Limited, Apple Computer, Inc., 3Com Corporation, Microsoft Corporation (“Microsoft”), Toshiba Corporation, Kingston Technology Corporation, Lexmark International, Inc., Sony Corporation, Symantec Corporation, Avaya, Inc., Altiris, Inc. and Nortel Networks Corporation. We are also one of a limited number of Microsoft Certified Large Account Resellers. Products that we offer include desktop and laptop computers, servers, monitors, memory, peripherals and accessories, operating systems, application software, consumables and supplies. Products manufactured by HP and Dell accounted for approximately 28% and 15%, respectively, of our product sales in fiscal 2004.

Business Processing Outsourcing Investment

      During fiscal year 2004, we invested $509,000 for an approximate 38% ownership interest in a privately-held corporation formed in October 2003, Premier BPO, Inc. (formerly En Pointe Global Services, Inc.). Premier BPO, Inc. (“PBPO”) is a business process outsourcing company headquartered in Clarksville, Tennessee. In addition, we provided PBPO with a $600,000 five-year 6% interest-bearing note for working capital that we subsequently converted into Series A non-voting convertible preferred stock in October 2004. PBPO is considered a related party because of our equity interest in PBPO as well as the interrelationship of several of the investors with us. One of our board members owns approximately 22% of PBPO and also serves as its Chairman of the Board and Chief Executive Officer. In addition, the owners of Ovex Technologies (Private) Limited (“Ovex”), the Pakistani company in Islamabad that performs the operational side of our outsourcing, owns collectively approximately 22% of PBPO. Because of the substantial investment that we made in PBPO, the related party nature of the investment, as well as other factors, when we evaluated our acquired interest in PBPO, we determined that PBPO met the tests of a Variable Interest Entity under FIN 46 and PBPO has thus been consolidated with our financial statements since inception.

      PBPO has sales representatives in Nashville, New York City, Dallas, Northern California, and Eastern Pennsylvania. At September 30, 2004, PBPO had ten employees in the U.S., 5 in sales and marketing, 2 in operations and 3 in administration. In addition, PBPO had contracted the services of workers in Islamabad, Pakistan, that perform data entry and accounts receivable functions for customers in the cable and medical industries. Ovex provided the contract workers to PBPO as well as the use of its facility, which is also shared concurrently with En Pointe and our respective contracted workers.

      In September 2004, PBPO initiated its outsourcing services with the acquisition of its first customer. Services are provided contractually with customers accepting a stated monthly fee schedule for each dedicated contract worker that PBPO provides. Customers are then billed monthly as services are performed.

      Subsequent to year end, PBPO acquired five additional customers that commenced using its outsourcing services. As sales continue to ramp up, it is anticipated that PBPO will need to increase its staff. To accommodate PBPO’s growth expectations, it has identified the health care and cable industries as business opportunities based on potential labor cost savings. Other industries of interest for outsourcing potential

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Competition

      We operate in the highly competitive sales segment of the information technology industry, and compete with a large number and variety 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 and services for less. 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.

      On the services side, we compete with several large service providers, some of whom provide products and services and others who only provide services. Those that provide services only include BancTec, Inc., Barrister Global Services Network, Inc. and Halifax Corporation. We also partner with service only providers in several areas including dispatch, install, move, add and change support services.

      Dell and Gateway, Inc. (“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. 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. The “direct” business model also infringes on some of the traditional value-added reseller capabilities in the areas of multi-vendor solutions, integration and image loading, and web-enabled procurement processes, once again reducing the available market share.

      Our business model emphasizes comprehensive solution offerings with services wrapped around hardware and software products, attracting mainly enterprise organizations, government and to a lesser extent, mid-market customers. With the sales channel continuing to consolidate, absorbing those companies that combine face-to-face direct selling with web-based models; we believe that our dual business model will survive, as it embraces both comprehensive and web-based types of selling methods, allowing us to cater to various customer preferences. We believe that we differentiate ourselves from our competitors through our eBusiness systems, services flexibility, and the scalability of our operations to meet our customers’ needs.

Getting Product to the Customer

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

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

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

      Our ability to fill and deliver orders with a high level of speed and accuracy is a key benefit of our business model. Our sophisticated systems, which include all order processing functions, enable us to review, approve,

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Getting Product from the Supplier

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

      We and our suppliers utilize various carriers, including industry giants United Parcel Service, Inc. and Federal Express Corporation, to deliver product. Again taking advantage of a vendor’s particular expertise, we integrate the carriers’ tracking system facility into our own systems to closely monitor shipments and provide delivery status for our customers. This provides an audit trail for the customer to update order status, by tying the customer purchase order to an En Pointe invoice and a subsequent proof of delivery.

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

Intellectual Property

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

      In September 2001, SupplyAccess, Inc. (“SupplyAccess”), a former affiliate of ours granted us a limited, exclusive license to use its AccessPointe^TM web site and content. Upon liquidation of SupplyAccess in February 2002, we were able to acquire full rights to AccessPointe^TM as well as the intellectual property rights to all of SupplyAccess’s software, copyrights, trade secrets and other proprietary technology.

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

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Segment Information

      The provisions of SFAS No. 131, “Disclosures about Segments of an Enterprise and Related Information”, require public companies to report financial and descriptive information about their reportable operating segments. We identify reportable segments based on how management internally evaluates separate financial information, business activities and management responsibility. For the years ended September 30, 2004, 2003 and 2002, we operated in only one segment.

Employees

      As of September 30, 2004, we employed approximately 434 individuals including approximately 146 sales, marketing and related support personnel, 208 service and support personnel, 32 warehousing, manufacturing, and logistic personnel and 48 employees in administration and finance. In addition, PBPO, a consolidated affiliate of ours, employed 10 individuals, 5 in sales and marketing, 2 in operations, and 3 in administration. We believe that our ability to recruit and retain highly skilled technical and other management personnel will be critical to our ability to execute our business model and growth strategy. None of our employees are represented by a labor union or are subject to a collective bargaining agreement. We believe that our relations with our employees are good.

      In addition to our U.S. employees, we have contracted with two companies in Islamabad, Pakistan to provide back-office support. As of September 30, 2004, these two firms employed approximately 232 people dedicated to supporting En Pointe and our affiliate, PBPO. Approximately 48 people provided accounting and administrative support while the remaining 184 provided support to the customer support, purchasing, operations, help desk and information technology functions. These individuals under contract are employees of Taseer Hadi Khalid & Co., a Pakistani member firm of KPMG, and Ovex Technologies (Private) Limited.

Factors Which May Affect Future Operating Results

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

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

	•	our past downward sales trend exacerbated by a soft and spotty business economy with tight corporate capital spending budgets;
	•	our prior two years of operating losses that strained capital and borrowing resources and put us under risk of breaking loan covenants related to minimal acceptable operating levels;
	•	limited availability of alternative credit facilities;
	•	low margin business;
	•	a portion of our sales concentrated in one large customer; and
	•	future funding required to sustain our investment in PBPO and the absorption of related losses until PBPO becomes profitable, if at all.

      Assumptions relating to budgeting, marketing, and other management decisions are subjective in many respects and thus susceptible to interpretations and periodic revisions based on actual experience and business developments, the impact of which may cause us to alter our marketing, capital expenditure or other budgets, which may in turn affect our business, financial position, results of operations and cash flows. The reader is

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

There are Risks in Conducting Our Daily Business Plans and Strategy

      For our first six years since inception, we experienced rapid growth in net sales, employees and branch offices. Beginning in fiscal year 2000, and for the following two fiscal years, we saw net sales declines of approximately 27% in each of the three fiscal years. The effort to reverse the past contraction of net sales or to supplement the loss of sales with higher margin products or services has and will continue to put strains on our management, operational and financial resources. To execute our recovery strategy, we expect to require the addition of new management personnel, including sales and technical services personnel, and the development of additional expertise by existing personnel. Our ability to manage our recovery 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 recovery, and the failure to do so could materially adversely affect our business, financial position, results of operations and cash flows.

There are Risks Outside of Our Control of Unfavorable Economic Conditions That Could Negatively Impact on Our Revenues and Profits

      Revenue growth depends on the overall demand for information technology spending. While economic recovery in the United States appears to be underway, there can be no assurance that the recovery will continue or that it will be sufficiently robust to compensate for the past severe contraction. Any resumption in the downturn in the United States’ economy may result in cutbacks by customers in the purchase of information technology products and services, postponed or canceled orders, longer sales cycles and lower average selling prices. To the extent that a downturn resumes or increases in severity, we believe demand for our products and services, and therefore future revenues, could be further adversely impacted.

There is a Risk We Could Lose Our Asset Based Financing Line Without Being Able to
Readily Replace it

      Our business requires significant capital to finance accounts receivable and, to a lesser extent, product inventories. In order to obtain necessary working capital, we rely primarily on a line of credit that is collateralized by substantially all of our assets. As a result, the amount of credit available to us may be adversely affected by numerous factors beyond our control, such as delays in collection or deterioration in the quality of our accounts receivable, economic trends in the information technology industry, interest rate fluctuations and the lending policies of our creditors. Any decrease or material limitation on the amount of capital available to us under our line of credit and other financing arrangements, particularly our interest-free flooring, may limit our ability to fill existing sales orders or expand our sales levels and, therefore, may have a material adverse effect on our business, financial position, results of operations and cash flows. In addition, any significant increases in interest rates may increase the cost of financing for us and have a material adverse effect on our business, financial position, results of operations and cash flows. We are dependent on the availability of accounts receivable financing on reasonable terms and at levels that are high relative to our equity base in order to maintain and increase our sales. There can be no assurance that such financing will continue to be available to us in the future or available under terms acceptable to us. Our inability to have continuous access to such financing at reasonable costs could materially adversely impact our business, financial position, results of operations and cash flows. As of September 30, 2004, we had outstanding borrowings under our credit facility of $18.3 million out of a total credit facility of $30.0 million.

      See “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Liquidity and Capital Resources.”

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Our Low Margins Expose Us to Risks from Minor Adversities

      Our overall gross profit percentages for the past three fiscal years ended September 30, 2004 were 12.3%, 12.4%, and 10.7%, respectively, with gross margin from product sales being 7.4% in fiscal 2004, 7.7% in fiscal 2003, and 7.6% in fiscal 2002, 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 shrink. 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-ups 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.

There is Risk That a Large Customer Could be Lost Without Being Able to Find a Ready Replacement

      For the year ended September 30, 2004, one customer, Los Angeles County, accounted for 11% of our total net sales, two of our largest customers accounted for a combined 18% of total net sales. In the preceding fiscal year 2003, no one customer accounted for more than 10% of total net sales, while two our largest customers accounted for 18% of total net sales. In fiscal year 2002, two of our customers accounted for 21% of total net sales. For the year ended September 30, 2004, our service sales were also highly concentrated with seven large customers accounting for 59.4% of total service sales while in the prior fiscal year six large customers accounted for 58.5% of total service sales. Our contracts for the provision of products or services are generally non-exclusive agreements that are terminable by either party upon 30 days’ notice. Either the loss of any large customer, or the failure of any large customer to pay its accounts receivable on a timely basis, or a material reduction in the amount of purchases made by any large customer could have a material adverse effect on our business, financial position, results of operations and cash flows.

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, in recent years a number of new, 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.

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

	•	traditional personal computer retailers,
	•	computer superstores,
	•	consumer electronics and office supply superstores,
	•	mass merchandisers,
	•	corporate resellers,
	•	value-added resellers,
	•	specialty retailers,
	•	distributors,
	•	franchisers,
	•	mail-order and web-order companies,
	•	national computer retailers,
	•	service-only providers, and
	•	manufacturers that have their own direct marketing operations to end-users.

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

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

We Risk Depending on a Few Distributors and Manufacturers Who Could Compete with Us or Limit Our Access to Their Product Line

      A key element of our past success and future business strategy involves the maintaining of alliances with certain suppliers of information technology products and services, including, Tech Data, Dell, Synnex and Microsoft. These alliances enable us to make available to our customers a wide selection of products without subjecting us to many of the costs and risks associated with maintaining large amounts of inventory. Products and services purchased from four suppliers, Tech Data, Dell, Synnex and Microsoft accounted for 73% of our aggregate purchases in fiscal 2004. Certain suppliers provide us with substantial incentives in the form of allowances passed through from manufacturers, discounts, credits and cooperative advertising, which incentives directly affect our operating income. There can be no assurance that we will continue to receive such incentives in the future and any reduction in the amount of these incentives could have a material adverse

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

      Termination of our rights to act as a reseller of the products of one or more significant manufacturers or our failure to gain sufficient access to such new products or product enhancements could have a material adverse effect on our business, financial position, results of operations and cash flows.

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

We Risk Losing Communications with Our Back-Office Operation in Pakistan

      In the third quarter of fiscal 2003, we began a business transformation that relocated many of our “back-office” functions to service providers in Islamabad, Pakistan. These back-office functions include, 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 El Segundo, California and Pakistan. However, there can be no assurance that these lines of communication will not be interrupted. Should we have interruptions with Pakistan, any such interruption could have a material adverse impact on our business, financial position, results of operations and cash flows.

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We Have the Risk of Losing Our Senior Management and Other Key Personnel Upon
Whom We Depend

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

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

We Risk Failure to Integrate Acquisitions and/ or Investments Into Our Business That Could Cause Future Losses

      One element of our growth strategy may include expanding our business through strategic acquisitions and investments in complementary businesses. During fiscal year 2004, we invested $509,000 for an approximate 38% ownership interest in PBPO, a privately-held corporation formed in October 2003. PBPO is a business process outsourcing company headquartered in Clarksville, Tennessee. In addition, we provided PBPO with a $600,000 five-year 6% interest-bearing note for working capital that we converted into Series A non-voting preferred stock in October 2004. Because PBPO is considered a Variable Interest Entity under FIN 46, we are required to consolidate our interest in PBPO. There can be no assurance that we will be able provide any future funding required to sustain our investment in PBPO and that we will be able to absorb any related losses until PBPO becomes profitable, if at all.

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

	•	failure to achieve anticipated operating results,
	•	difficulties in the assimilation of the operations, services, products, vendor agreements, and personnel of the acquired company,
	•	the diversion of management’s attention and other resources from other business concerns,
	•	entry into markets in which we have little or no prior experience, and
	•	the potential loss of key employees, customers, or contracts of the acquired company.

      Acquisition 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. Our failure to successfully manage any potential acquisitions or investments in complementary businesses, or PBPO’s failure to make profitable business decisions while it is characterized as a Variable Interest Entity, could have a material adverse effect on our business, financial position, results of operations and cash flows.

We Risk Business Interruption From Our Dependence on Centralized Operations

      We believe that our success to date has been, and future results of operations will be, dependent in large part upon our ability to provide prompt and efficient service to our customers. As a result, a substantial disruption of our day-to-day operations could have a material adverse effect upon our business, financial position, results of operations and cash flows. In addition, our success is largely dependent on the accuracy, quality and utilization of the information generated by our information systems, which are primarily based in Ontario and El Segundo, California. Repairs, replacement, relocation or a substantial interruption in these

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With the 36% Concentration of Ownership of Our Stock Held by a Small Group of Directors and Officers There Are Risks They Can Exert Significant Influence Over Corporate Matters

      The directors, executive officers and principal stockholders of En Pointe and their affiliates beneficially own, in the aggregate, approximately 36% of our outstanding common stock. 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 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 public market analysts 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.”

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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, changes in earnings estimates by analysts, 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 and Related Stockholder Matters.”

If Our Internal Controls Prove To Be Ineffective That Could Negatively Impact Investors and
Cause Our Stock 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 Exchange, or NASD, are creating uncertainty for public companies, increasing legal and financial compliance costs and making some activities more time consuming. We will be evaluating our internal controls systems to allow management to report on, and our independent auditors to attest to, our internal controls. We will be performing the system and process evaluation and testing (and any necessary remediation) required to comply with the management certification and auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act. As a result, we expect to incur substantial additional expenses and diversion of management’s time. While we anticipate being able to fully implement the requirements relating to internal controls and all other aspects of Section 404 by our September 30, 2005 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 NASD. 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 Ever Issued as an Anti-Takeover Measure, There is a Risk That Common Stockholders 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.

      We lease approximately 24,000 square feet of office space for our headquarters in El Segundo, California, under a lease expiring June 30, 2006. We also lease an approximately 126,000 square foot facility in Ontario, California, which is primarily used for configuration and maintenance services. This facility has been operational since July 1, 1998. At the time the Ontario configuration facility was planned, we believed that there would be an emerging “channel assembly” market for resellers, such as us, of computer products. However, instead, certain manufacturers began requiring distributors to “co-locate” their final assembly

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      Currently we operate from branch offices in the following cities:

	•	San Francisco and Irvine, California
	•	Chicago, Illinois;
	•	Denver and Boulder, Colorado;
	•	Draper, Utah;
	•	Boise, Idaho;
	•	Walpole, Massachusetts;
	•	Atlanta, Georgia;
	•	Portland and Tigard, Oregon; and
	•	Issaquah, Washington.

      Our affiliate, PBPO, has its main offices in Clarksville, Tennessee.

      Management believes our headquarters, sales offices and configuration facility are adequate to support our current level of operations.

      In March 2000, an action was brought against us in the Orange County Superior Court, Case No. 00CC03948 contending fraud and breach of contract arising from the purchase by a former subsidiary of the Company of certain assets from a company formerly known as First Source International (“FSI”). The lawsuit is filed by RLC, Inc. Assignee for the benefit of creditors of a defunct corporation, Paragon Solutions, Inc, formerly known as FSI. It is contended that FSI was unable to obtain their contingent earn-out under the agreement because of faulty software provided by the Company. Damages sought range between $0.8 to $3.5 million with the plaintiff seeking punitive damages of $10 million. We were successful in compelling the action to be moved to arbitration, but since November 17, 2000 when the Court of Appeals rejected the request by the plaintiff to prohibit arbitration, no arbitration proceedings have commenced. We vigorously deny the charges and contend that full disclosure was made as to any problems with the software and that the former subsidiary to this date has not produced net income. The case has remained dormant for the past four years. Legal counsel is currently unable to predict the outcome of this litigation.

      On or about September 18, 2000, a claim for arbitration was submitted by First Union Securities to the New York Stock Exchange against, among others, us and our President and Chief Executive Officer, Attiazaz Din (the “En Pointe defendants”). First Union alleges that we and Din violated federal and state securities laws in connection with the promotion and sale of En Pointe stock in the last half of 1999 and the first half of 2000. The En Pointe defendants dispute jurisdiction and intend to vigorously defend the allegations.

      In December 2000, we and certain current and former directors and officers along with several unrelated parties were named in a complaint alleging that the defendants made misrepresentations regarding the Company and that the individual defendants improperly benefited from the sales of shares of the our common stock and seeking a recovery by our shareholders of the damages sustained as a result of such activities (Crosby V. En Pointe Technologies, it al., Superior Court of California, County of San Diego, No. GIC 759905). The parties have stipulated to a stay of the case pending the class action. The En Pointe defendants intend to vigorously defend the allegations.

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      In February 2001, we and five of our directors, one current officer, and certain former officers along with seven unrelated parties were named in a stockholder class action complaint alleging that the defendants made misrepresentations regarding our Company and that the individual defendants improperly benefited from the sales of shares of our common stock and seeking a recovery by our stockholders of the damages sustained as a result of such activities (In Re En Pointe Technologies Securities Litigation, United States District Court, Southern District of California Case No. 01CV0205L (CGA)). In an amended complaint, the plaintiffs limited their claims us and our Chief Executive Officer. In response to a motion to dismiss, the Court further limited plaintiffs’ claims to allegations of market manipulation and insider trading. The En Pointe defendants have answered the amended and limited complaint and intend to vigorously defend the litigation.

      In February 2002, we entered into a settlement agreement and release with NovaQuest InfoSystems, now known as WebVision, Inc. The settling parties agreed to stipulate to reverse and vacate a November 7, 2001 Superior Court judgment relating to certain litigation in which we owed and accrued on our books $1,375,000 along with accrued interest of $293,000. Under the terms of the settlement agreement, we made various payments to representative parties of the plaintiff totaling $1,200,000 in discharge of the litigation claim. We recorded the settlement of this litigation as a charge (income) less certain other litigation related income from insurance reimbursement that resulted in a total recovery of $848,000.

      There are various other claims and litigation proceedings in which we are involved in the ordinary course of business. While the outcome of these claims and proceedings cannot be predicted with certainty, after consulting with legal counsel, management does not believe that the outcome of any of these matters will have a material adverse affect on our business, financial position and results of operations or cash flows.

      Not applicable.

PART II

      Our common stock, par value $0.001 per share, began trading on the NASDAQ SmallCap Market on June 2, 2003 under the symbol “ENPT.” During the periods presented below that were prior to June 2, 2003, our common stock was traded on the NASDAQ National Market. The following table sets forth, for the period indicated, the high and low sale prices for the common stock as reported by the NASDAQ National Market or the NASDAQ SmallCap Market, as applicable.

      On December 20, 2004, the closing sale price for the common stock on the NASDAQ SmallCap Market was $2.79 per share. As of December 20, 2004, there were 72 stockholders of record of the common stock.

      We have never declared or paid any cash dividends on our common stock. We currently anticipate that we will retain all available funds for use in the operation of our business, and do not intend to pay any cash

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      The following selected financial data as of September 30, 2004 and 2003 and for the years ended September 30, 2004, 2003 and 2002, respectively, have been derived from our Consolidated Financial Statements and the related notes thereto that have been audited by PricewaterhouseCoopers LLP, independent accountants, which financial statements and report thereon appear in “Item 8. Financial Statements and Supplementary Data” of this Annual Report on Form 10-K. All other financial data included in “Item 6. Selected Financial Data” presented in this Form 10-K have been derived from our audited financial statements.

      The data set forth below should be read in conjunction with “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our Consolidated Financial Statements and the Notes thereto included elsewhere in this Annual Report on Form 10-K. During the June quarter of 2000, we deconsolidated our former affiliates, firstsource corp. and SupplyAccess, Inc.

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(1)	See Note 1 of Notes to Consolidated Financial Statements.

Significant Factors in Performance

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

Critical Accounting Policies

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

      Revenue Recognition. We apply the provisions of the Securities and Exchange Commission (SEC) Staff Accounting Bulletin (SAB) No. 104, “Revenue Recognition in Financial Statements,” which provides guidance on the recognition, presentation and disclosure of revenue in financial statements filed with the SEC. SAB No. 104 outlines the basic criteria that must be met to recognize revenue and provides guidance for disclosure related to revenue recognition policies. In general, we recognize revenue when (i) persuasive evidence of an arrangement exists, (ii) shipment of products has occurred or services have been rendered, (iii) the sales price charged is fixed or determinable and (iv) collection is reasonably assured.

      We provide an allowance for sales returns, which is based on historical experience. For all product sales shipped directly from suppliers to customers, we take title to the products sold upon shipment, bearing the credit risk, and inventory risk for returned customer products that are not successfully returned to suppliers, although some of these risks are mitigated through arrangements with our shippers and suppliers.

      Service revenues are recognized based on contracted hourly rates, as services are rendered, or upon completion of specified contracted services. 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 maintenance contracts to be performed over future periods of time. Income is recognized on such contracts ratably over the period of the contract.

      Allowance for Doubtful Accounts. We estimate our allowance for doubtful accounts related to trade receivables by two methods. First, we evaluate specific accounts over 90 days outstanding and apply various levels of risk analysis to these accounts to determine a satisfactory risk category to which given percentages are applied to establish a reserve. Second, a general reserve is established for all other accounts, exclusive of the accounts identified for the specific reserve, in which a percentage is applied that is supportable by historic collection patterns.

      Product Returns. In general, we follow a strict policy of duplicating the terms of our vendor or manufacturers’ product return policies. However, in certain cases we must deviate from this policy in order to satisfy the requirements of certain sales contracts and/or to satisfy or maintain customer relations. To establish a reserve for returns, outstanding Return Merchandise Authorizations (“RMA”) are reviewed. Those RMAs issued for which the related product has not been returned by the customer are considered

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

      Rebates and Cooperative Advertising Allowances. We receive incentives from suppliers related to cooperative advertising allowances, volume rebates and other incentive agreements. These incentives are generally under quarterly, semi-annual or annual agreements with the suppliers; however, some of these incentives are product driven or are provided to support specific programs established by the supplier. Suppliers generally require that we use their cooperative advertising allowances exclusively for advertising or other marketing programs. These restricted cooperative advertising allowances are recognized as a reduction of operating expense or as gross profit, as the related expenses are recognized.

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

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

Overview

      We initially began our operations in March of 1993 as a reseller of information technology products. In fiscal 1999, we began offering value-added services to our customers. Gradually value-added services represented a larger percentage of total net sales, accounting for 15.2% and 12.9% of our net sales in fiscal years 2004 and 2003, respectively. The gross profit margins on the value-added services that we currently offer are significantly higher than the gross profit margins on our information technology product business, but require additional overhead expense for supervision, idle time, and other expenses related to service offerings that offset a portion of the increased margin.

      In our initial operating years from fiscal 1994 to fiscal 1999 with the aid of a robust economy and information technology market that accommodated our business model, our net sales increased at a compound annual growth rate of 35.1%. Seasonal trends were never prominent in our business, although March quarters were historically regarded as one of the least promising quarters. However, in fiscal 2000 we experienced our first annual net sales decline of 26%, or $173.8 million, from our net sales in fiscal 1999 due to a softer information technology market and difficulties in transitioning to a new ERP business system. A declining trend resumed in fiscal years 2001 and 2002 with declines of 26.1% and 29.6%, respectively. The trend was temporarily reversed or stalled in fiscal 2003 when net sales increased 12.7% from that of the prior year. For fiscal year 2004, net sales were marginally lower by 3.6% from fiscal year 2003.

      Even with the above mentioned lower net sales and related gross profits, we were able to increase net income for the current fiscal year from a $2.4 million loss in fiscal 2003 to a $1.4 million gain in fiscal 2004. That resulted from a $5.1 million reduction in operating expenses for the fiscal year 2004, that was inclusive of $1.1 million of start-up operating costs of PBPO which when excluded brings the core operating cost reduction to $6.2 million total.

      Because our business model involves the resale of information technology products held in inventory by certain distributors, we do not maintain significant amounts of inventory on hand for resale. We typically do not place an order for product purchases from distributors until it has received a customer purchase order. Inventory is then drop-shipped by the distributor to either the customer or shipped to our configuration center

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

Results of Operations

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

Comparison of Fiscal Years Ended September 30, 2004 and 2003

      Net Sales. Net sales decreased $10.6 million, or 3.6%, to $279.2 million in fiscal 2004 from $289.8 million in fiscal 2002. The decrease in net sales was product related, as we maintained margins by shifting our emphasis from lower-margin product sales to higher-margin service sales. A decline in net sales prevailed in each quarter of fiscal 2004, except for the June quarter that benefited from a large increase in governmental sales. For the year ended September 30, 2004, one customer accounted for 11.1% of our net sales and 9.7% of our accounts receivable.

      Product sales in fiscal 2004 declined $15.8 million, or 6.3% from fiscal 2003. Service sales, on the other hand, increased $5.2 million, or 14.0% from that of the prior fiscal year. Growth in service sales lagged the fiscal year 2003 increase of $10.2 million, or 37.8% over the fiscal year 2002 results, attributed, in part, to several projects that favorably impacted the second half of fiscal 2003 that wound down in early fiscal 2004 and the loss of a major service customer at the end of the June 2004 quarter.

      Gross Profit. Gross profits decreased $1.5 million, or 4.3%, to $34.5 million in fiscal 2004 from $36.0 million for fiscal year 2003. All of the $1.5 million decrease in gross profits can be attributed to decreased product sales as well as decreased product margins. Product gross profit percentage of sales margins slipped from 7.7% in fiscal year 2003 to 7.4% in fiscal year 2004.

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      Expressed as a percentage of net sales, the service gross profit percentage in fiscal 2004 decreased 4.8% from the prior fiscal year to 39.7%, which is more in line with our anticipated 35% to 40% range for services. Even with the 4.8% decline in service margins, service gross profits managed an increased of $0.3 million, or 1.7%, due to the additional volume provided by the $5.2 million service revenue increase in fiscal 2004. Strength in services allowed gross margins for both product and service to remain relatively constant in fiscal years 2004 and 2003 at 12.3% and 12.4%, respectively.

      Selling and Marketing Expenses. Selling and marketing expenses decreased $4.7 million, or 16.8%, to $22.9 million in fiscal 2004, from $27.6 million in fiscal 2003. The $4.7 million decrease is inclusive of PBPO’s initial fiscal year selling and marketing expenses of $0.8 million. Excluding PBPO’s portion of the combined selling and marketing expense, our core selling and marketing expenses decreased to $5.5 million, or 20.0%, as compared to the fiscal 2003 results. Most of the decrease in selling and marketing expense can be traced to a reduction of employee related expense of $5.1 million.

      To accomplish the employee related expense decrease of $5.1 million, in part, we incurred $1.3 million in expense for our program to outsource our back-office sales support offshore, which, in effect, contributed to the $3.8 million net expense reduction benefit. We also had a favorable $0.7 million reduction in connectivity and rent related expenses. Expressed as a percentage of net sales, selling and marketing expense decreased 1.3% from 9.5% in fiscal year 2003 to 8.2% in fiscal year 2004.

      General and Administrative Expenses. General and administrative expenses remained relatively constant at $10.0 million in fiscal 2004 and 2003. The current year’s $10.0 million of general and administrative expenses includes $0.3 million of expense from our affiliate, PBPO, whose operations were not present in fiscal 2003.

      The major increases to general and administrative expenses for fiscal year 2004 included an increase in employee related expenses of $0.4 million. This was due to increased information technology wages, executive bonuses, and employee benefits of $1.1 million, less reduced accounting and finance wages of $0.7 million. Our reduction in accounting and finance wages resulted principally from our efforts to outsource offshore, in which we incurred an additional $0.4 million of outsourcing expense, that resulted in a savings of $0.3 million. In addition, there were $0.6 million in reduced attorney fees and $0.3 million in reduced software maintenance and support expenses related to our SAP license.

      When general and administrative expenses are expressed as a percentage of net sales, there was a small increase of 0.1% to 3.6% in fiscal year 2004 from 3.5% in fiscal year 2003.

      Operating Income (Loss). Operating income improved $3.4 million, from a $1.9 million loss in fiscal year 2003 to $1.5 million income in fiscal year 2004. The improvement can be attributed to the reduction in selling and marketing expenses of $4.7 million discussed above that more than made up for the $1.5 million decline in gross profits. Operating income expressed as a percentage of net sales, improved to 0.5% in fiscal year 2004 from a negative 0.7% in fiscal year 2003.

      Interest Expense. Interest expense of $0.7 million is net of interest income of $0.1 million. Interest expense decreased $0.2 million from $0.9 million in fiscal year 2003. Most of the interest expense, $0.5 million, incurred by us represents interest expense related to our Ontario facility that is being treated as a financing lease and is presently carried as a long-term liability. Interest expense incurred under our previous lender, whose financing arrangement was replaced by GE in June 2004, amounted to $0.3 million.

      Minority Interest. Under FIN 46 and other recent changes in consolidation principles, certain minority interests are required to be consolidated. We own approximately 38% of 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 shareholders of PBPO who collectively own approximately 62% 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”.

      Provision (Benefit) for Income Taxes. We provided a $0.1 million tax provision for fiscal year 2004. Approximately 71% of that provision was for state income tax for California, where we are domiciled and where net operating losses (“NOL”) have temporarily been suspended. The remainder of the $0.1 million

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      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 PBPO because our investment is less than the required 80% to consolidate under federal tax law. Thus, none of the losses generated by PBPO are available for the reduction of income taxes.

      As of September 30, 2004, we had $8.9 million of NOL carry-forwards for which a 100% valuation allowance has been provided. 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. Of the total $8.9 million NOL carry-forwards, $4.7 million will be considered an adjustment to additional paid-in capital and will not benefit future earnings, since those losses were attributable to the exercise of employee stock options, which had been recognized as expense for tax purposes but not for financial statement purposes.

      Net Income (Loss). Net income increased $3.8 million to $1.4 million from a net loss of $2.4 million in prior fiscal year 2003. The principal reason for our improvement in the net income was due to the reduction in selling and marketing expenses of $4.7 million discussed above. As a percentage of net sales, net income was 0.5% in fiscal 2004, as compared with 0.8% net loss in fiscal 2003.

Comparison of Fiscal Years Ended September 30, 2003 and 2002

      Net Sales. Net sales increased $32.8 million, or 12.7%, to $289.8 million in fiscal 2003 from $257.0 million in fiscal 2002. The increase in net sales was steady throughout the fiscal year, as net sales increased in each quarter of fiscal year 2003 over those reported in the respective quarters of the prior fiscal year. The Tabin Corporation acquisition that was made in October 2002 provided approximately $16.4 million of the $32.8 million increase in net sales, or 50.1%. For the year ended September 30, 2003, net sales were less concentrated than in previous fiscal years with no customer accounting for 10% or more of total net sales.

      While product sales led service sales in registering the largest dollar increase, service sales easily outpaced product sales in terms of percentage growth from that of the prior fiscal year. Product net sales increased $22.5 million, or 9.8%, to $252.5 million in fiscal 2003 from $230.0 million in fiscal 2002. Service revenues increased $10.2 million, or 37.8%, to $37.3 million in fiscal 2003 from $27.1 million in fiscal 2002. A portion of the strong growth in service revenues can be attributed to several projects that favorably impacted the second half of fiscal 2003 that wound down in early fiscal 2004.

      Gross Profit. Gross profits increased $8.5 million or 30.9% to $36.0 million in fiscal 2003 from $27.5 million for fiscal year 2002. Of the $8.5 million increase in gross profits, $6.3 million can be attributed to increased sales volume, with the balance, $2.2 million, resulting from improved margins, chiefly those of services. Sales of product contributed $2.0 million to the increase in gross profits, or, 11.3%, while service sales contributed most of the gross profit increase, $6.5 million, or, 64.7%.

      Expressed as a percentage of net sales, the gross profit percentage increased 1.7% to 12.4% from the 10.7% recorded in the prior fiscal year. All of the growth in gross profit margins is attributable to services whose gross profit margins increased 7.3% to 44.5% from the 37.2% recorded in the prior fiscal year. The service profit margin increase is attributable to a small number of short-term projects and is not necessarily considered representative of anticipated future service margins. Product gross profit margins held steady at 7.7%, up a marginal tenth of a percent from that of the prior fiscal year.

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      Selling and Marketing Expenses. Selling and marketing expenses increased $4.0 million, or 16.6%, to $27.6 million in fiscal 2003, from $23.6 million in fiscal 2002. The expense increase related to selling and marketing expenses arising from our commitment that commenced late in fiscal 2002 to reverse past sales declines by selectively increasing the size of its direct sales force. Therefore, most of the increase in selling and marketing expenses relates to commissions, salaries and wage related benefits. To mitigate the costs associated with increasing the direct sales force and to boost productivity, we, late in the June 2003 fiscal quarter, initiated an offshore outsourcing program for much of our back-office sales support.

      The increase in selling and marketing expenses was decidedly less when expressed as a percentage of net sales because of the improvement in net sales. Increased sales provided a larger base for spreading certain fixed elements of selling and marketing expense. As a result, selling and marketing expenses increased only 0.3% to 9.5% in 2003 from 9.2% in 2002.

      General and Administrative Expenses. General and administrative expenses decreased $0.8 million or 7.3% to $10.0 million in fiscal 2003, from $10.8 million in fiscal 2002. Factors responsible for the reduction in general and administrative expenses included reduced wage related expenses of $1.0 million and reduced facilities related expense of $0.7 million. The offshore outsourcing program that began in the June 2003 fiscal quarter contributed to the reduction in wages as did the reduction in wages from the decline in the number of personnel employed. Rent reduction resulted from the finalization of the closure of certain branch offices that were no longer operational as well as the prior year’s renegotiation of the headquarters lease in May of 2002. The benefits of the reduction of expense related to wages and facilities were reduced by the $0.9 million increase in legal expense. When general and administrative expenses are expressed as a percentage of net sales, there was a decrease of 0.7% from 4.2% to 3.5% in fiscal 2003.

      Charges (Income). Charges of $0.4 million in fiscal 2003 primarily resulted from the February 2003 settlement of a litigation claim. The court approved the dismissal and settlement of the stockholder derivative litigation, Fredrick V. Din, et al. As a part of the stipulation of the parties, it was agreed that the defendants would pay the plaintiff’s attorney fees of approximately $0.4 million. After a review by selected members of our Board of Directors who were not defendants in the litigation, and based on the Board’s review and recommendation, we paid the settlement and charged the full amount to expense.

      Operating Loss. Operating loss decreased $4.1 million, or 68.0%, to a loss of $1.9 million in fiscal 2003 from a $6.0 million operating loss in fiscal 2002. The decrease was attributed to an $8.5 million increase in gross profits reduced by an increase of $4.4 million in operating expenses. The operating loss when expressed as a percentage of net sales decreased 1.6% to 0.7% in 2003 from 2.3% in 2002.

      Interest Expense. Interest expense is net of interest income of $0.1 million. Interest expense incurred under the Foothill Capital Corporation (“Foothill”) financing agreement consisted principally of 1%-1.25% charges for acting as guarantor to IBM Credit Corporation (“IBMCC”) in order for IBMCC to provide us with 30-day interest-free flooring. In addition to the guarantee charge, Foothill charged from 6% to 6.5% per annum for use of their line and for float and 0.3% per annum for any unused credit line. Total interest and related charges paid to Foothill amounted to $0.4 million. Most of the interest expense, $0.5 million, incurred by us represents interest expense related to the Ontario facility lease that is being treated as a financing lease and is presently carried as a long-term liability.

      Income from Reversal of Losses from Affiliates. As a result of the deconsolidation of two previously consolidated subsidiaries, in the June quarter of 2002 we began using the equity method of accounting to record our interest in the losses related to the two affiliates. Because we had guaranteed certain debts of our affiliates and were responsible under certain other obligations, losses in excess of our investment in our affiliates were recorded. The majority of the income from the reversal of losses, $8.4 million was reversed in fiscal 2001, with $0.7 million reversed in fiscal 2002 and the remaining balance of $0.1 million reversed in the first quarter of fiscal year 2003.

      (Benefit) Provision for Income Taxes. We have not recorded a tax benefit in the current year as it is likely that any tax benefits will not be realized in the near future. During the second quarter of fiscal 2002, we recognized an unanticipated net $1.5 million of federal income tax benefit. The “Job Creation and Worker Assistance Act of 2002” tax bill allowed us to carry back net operating losses (“NOLs”) arising from the

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      We file consolidated federal income tax returns, 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.

      In carrying tax losses back to prior years we have exhausted all of our benefits from recovery of taxes paid in prior years so that any future losses will have to be carried forward to apply to future income years. As of September 30, 2003 we had $10.8 million of such net operating losses (“NOLs”) that may be carried forward of which $4.7 million NOL will be considered an adjustment to additional paid-in capital and will not benefit future earnings, since that portion of the NOL was attributable to the exercise of stock options by employees which had not been recognized as expense for financial statement purposes.

      Net (Loss) Income. The net loss decreased $1.0 million, or 30.0%, to $2.4 million from the $3.4 million in the prior fiscal year. The decrease in the net loss is due to the increase in gross profits of $8.5 million offset, in part, by an increase in operating expenses of $4.4 million, which when combined reduced the operating loss by $4.1 million. However, the $4.1 million reduced operating loss was offset by increased interest expense and decreased other income of $0.4 million and $2.7 million less tax benefit and less income from the reversal of losses of affiliates than was recognized in fiscal year 2002. As a percentage of net sales, the net loss was 0.8%, as compared with 1.3% in fiscal 2002.

Liquidity and Capital Resources

      During fiscal 2004, our operating activities provided cash totaling $6.5 million, $5.5 million more than the $1.0 million provided in the prior fiscal year. The lead contributor to the $5.5 million net increase in cash from operating activities was the $7.0 million decrease in accounts receivable, as accounts receivable, with the decline in sales, decreased $3.4 million in fiscal 2004 while rising $3.6 million in fiscal 2003. Another factor contributing to the improvement in cash operations was net income, which rose to $1.4 million, or $3.8 million more than the net loss of $2.4 million in fiscal year 2003.

      Our accounts receivable balance, net of allowances for returns and doubtful accounts, at September 30, 2004 and 2003, was $31.6 million and $35.1 million, respectively. The number of days’ sales outstanding in accounts receivable decreased slightly to 41 days from 44 days, as of September 30, 2004 and 2003, respectively.

      Investing activities used cash totaling $1.0 million for fiscal 2004, a decrease of $0.1 million from the prior fiscal year. While we purchased $0.8 million more in equipment in fiscal year 2004 than 2003, in fiscal year 2003 we expended $0.9 million more than fiscal 2004 for the acquisition of Tabin Corporation.

      Financing activities provided net cash totaling $7.4 million in fiscal 2004, or $8.6 million more than the $1.2 million of net cash used in fiscal 2003. Most of the $8.6 million increase in cash from financing activities came from $8.1 million of additional net borrowings made under our line of credit.

      As of September 30, 2004, we had approximately $16.1 million in cash and working capital of $17.9 million. To improve our financing flexibility and reduce costs, in June 2004 we closed a $30.0 million replacement working capital financing facility with GE Commercial Distribution Finance Corporation (“GE”). The term of the facility is for a period of three years, except that either party may terminate the agreement upon 60 days written notice to the other party. Additionally, GE may terminate the facility at any time upon the occurrence of, and subsequent failure to cure in certain instances, an “Event of Default” as such term in defined in such agreement. Under the financing facility, we may borrow up to 85% of the eligible accounts receivable at an interest rate of prime plus 1.0% per annum, subject to a minimum rate of 5.0%. In addition, we may purchase and finance information technology products from GE-approved vendors on terms that depend upon certain variable factors. We anticipate that a substantial portion of such purchases from GE approved vendors will be on terms that allow interest-free flooring. The financing agreements contain various liquidity financial covenants, including, without limitation, that EBITDA be sufficient to cover a multiple of 1.25 times interest expense for a rolling twelve month period ending on the last day of each fiscal quarter. We were in compliance with all of our debt covenants as of September 30, 2004.

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      The GE facility is collateralized by accounts receivable, inventory and all of our other assets. As of September 30, 2004, approximately $18.3 million in borrowings were outstanding under our $30.0 million financing facility. At September 30, 2004, we had additional borrowings available of approximately $7.0 million after taking into consideration the available collateral and borrowing limitations under the agreements.

      As discussed in the Overview section above, the recent five marginally profitable quarters have seen the beginning of a reversal of the loss trend that was so prevalent for four of our past five years of operations. To accomplish that, in the second quarter of fiscal year 2002, our Chairman and CEO changed key executives and resumed his role as our President with day-to-day responsibilities. He refocused our sales strategy to a more aggressive face-to-face style, encouraged selling of higher margin managed services, and enhanced our sales opportunities by qualifying us as a “minority-owned” business. We evaluated smaller competitors that could be accretive to our earnings as potential acquisition candidates. To return us to the low cost operational overhead model under which we had previously succeeded, we contracted with off-shore firms to provide back-office operational and accounting related services at rates substantially discounted to those available in the U.S.

      Management believes its turn around plans will continue to be successful in improving our sales and profitability. However, if we are unable to maintain compliance with our loan covenants and if such noncompliance is not waived by GE, the working capital line of credit could be revoked prior to its expiration date. In such eventuality, we believe that we have sufficient working capital to enable us to continue to operate through at least September 30, 2005. However, we would be required to significantly scale down our business plans if we were unable to obtain alternative sources of financing.

Recently Issued Accounting Standards

      In January 2003, the FASB issued Interpretation No. 46, “Consolidation of Variable Interest Entities” (“FIN 46”), which clarifies the application of Accounting Research Bulletin No. 51, Consolidated Financial Statements. FIN 46 requires variable interest entities (“VIE”) to be consolidated by a company if that company is subject to a majority of the risk of loss from the VIE activities or entitled to receive a majority of the entity’s residual returns or both. A company that consolidates a VIE is called the primary beneficiary of that entity. FIN 46 also requires disclosures about VIE that a company is not required to consolidate but in which it has a significant variable interest. The provisions of this interpretation apply immediately to VIE created after January 31, 2003 and apply to existing VIE in the first fiscal year or interim period ending after December 15, 2003. We adopted FIN 46 for the quarter ended December 31, 2003, which adversely affected our operating results due to substantial losses from our VIE investment, PBPO, being consolidated.

      In December 2003, the FASB issued Interpretation No. 46 (Revised 2003) “Consolidation of Variable Interest Entities” (“FIN 46(R)”), which partially deferred the effective date of FIN 46 for certain entities and makes other changes to FIN 46, including a more complete definition of variable interest and an exemption for many entities defined as businesses.

      In March 2004, the FASB’s Emerging Issues Task Force (“EITF”) finalized new guidance on other-than-temporary impairment of debt and equity securities. The impairment evaluation guidance in Issue No. 03-1, “The Meaning of Other-Than-Temporary Impairment and Its Application to Certain Investments,” is effective for reporting periods beginning after June 15, 2004. We had previously been evaluating impairments of debt and equity securities using much of the guidance incorporated into this new EITF Issue. The implementation of this guidance does not significantly change our procedures for evaluating impairments.

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Obligations and Commitments

      As of September 30, 2004, the Company had the following obligations and commitments to make future payments, contracts, contractual obligations and commercial commitments:

*	The PBPO note payable was subsequently, in October 2004, fully satisfied through conversion to Series A non-voting convertible preferred stock.

      We presently have limited exposure to market risk from changes in interest rates from borrowings under our line of credit with GE. While GE’s lending agreement provides for interest at 1% over prime per annum with a minimum rate of 5.0%, effectively with the interest-free flooring that has been made available, we incur little or no interest expense.

      We are also committed to certain off-balance sheet obligations represented by operating leases for office facilities and various types of office equipment which are fully disclosed in the financial statement footnotes. We have no commercial paper, derivatives, swaps, hedges, joint ventures and/or partnerships, or currency fluctuation to disclose and evaluate for market risks.

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

      Not Applicable

      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, (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 SEC’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.

      An evaluation as of the end of the period covered by this annual report was carried out under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation our “disclosure controls and procedures,” as such term is defined under Rules 13a-15(e) and 15d-15(e) promulgated under the Exchange Act. Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective.

      Our management, including our Chief Executive Officer and Chief Financial Officer, have evaluated any changes in the company’s internal control over financial reporting that occurred during the quarterly period covered by this report, and have concluded that there was no change during the fourth quarter of our 2004 fiscal year that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

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      Not Applicable.

PART III

      There is hereby incorporated by reference the information appearing under the captions “Directors,” “Executive Officers,” “Audit Committee,” “Audit Committee Financial Experts” and “Section 16(a) Beneficial Ownership Reporting Compliance” from our definitive proxy statement for the 2005 Annual Meeting of the Stockholders to be filed with the Commission on or before January 28, 2005.

      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.

      There is hereby incorporated by reference information appearing under the captions “EXECUTIVE COMPENSATION,” “Directors’ Compensation,” and “STOCK PERFORMANCE GRAPH” from our definitive proxy statement for the 2005 Annual Meeting of Stockholders to be filed with the Commission on or before January 28, 2005.

      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 2005 Annual Meeting of Stockholders to be filed with the Commission on or before January 28, 2005.

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, 2004. Our sole stockholder approved equity compensation plan is the 1996 Stock Incentive Plan. The Employee Stock Purchase Plan was also approved by our stockholders, and is listed separately below. We do not have any non-stockholder approved equity compensation plans.

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      There is hereby incorporated by reference the information appearing under the caption “Certain Transactions” from our definitive proxy statement for the 2005 Annual Meeting of Stockholders to be filed with the Commission on or before January 28, 2005.

      There is hereby incorporated by reference the information appearing under the caption “PRINCIPAL ACCOUNTANT FEES AND SERVICES” from our definitive proxy statement for the 2005 Annual Meeting of Stockholders to be filed with the Commission on or before January 28, 2005.

PART IV

      (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.

      (b) Exhibits

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

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EN POINTE TECHNOLOGIES, INC.

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INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

Board of Directors and Stockholders

      In our opinion, the consolidated financial statements listed in the accompanying index present fairly, in all material respects, the consolidated financial position of En Pointe Technologies, Inc. and its subsidiaries at September 30, 2004 and 2003, and the results of their operations and their cash flows for each of the three years in the period ended September 30, 2004, in conformity with accounting principles generally accepted in the United States of America. In addition, in our opinion, the financial statement schedule listed in the accompanying index presents fairly, in all material respects, the information set forth therein when read in conjunction with the related consolidated financial statements. These consolidated financial statements and financial statement schedule are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements and financial statement schedule based on our audits. We conducted our audits of these statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the consolidated financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

	/S/ PRICEWATERHOUSECOOPERS LLP

Los Angeles, California

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EN POINTE TECHNOLOGIES, INC.

CONSOLIDATED BALANCE SHEETS

See Notes to Consolidated Financial Statements.

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EN POINTE TECHNOLOGIES, INC.