UNITED
STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON,
DC 20549
FORM
10-K
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þ |
Annual
Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of
1934 |
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For
the Fiscal Year Ended September 30,
2007 |
OR
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Transition
Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of
1934 |
COMMISSION
FILE NUMBER: 000-28052
_________________________________
EN
POINTE TECHNOLOGIES, INC.
(EXACT
NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
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DELAWARE |
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75-2467002 |
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(State
or other jurisdiction of incorporation or |
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(I.R.S.
Employer Identification No.) |
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organization) |
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18701
S. FIGUEROA STREET, GARDENA, CALIFORNIA 90248
(310)
337-5200
_________________________________
Securities
registered pursuant to Section 12(b) of the Act:
Common
Stock, par value $0.001 per share Nasdaq Capital Market
Securities
registered pursuant to Section 12(g) of the Act:
None
__________________________________
Indicate
by check mark if the registrant is a well-known seasoned issuer, as defined in
Rule 405 of the Securities Act.
Yes o No þ
Indicate
by check mark if the registrant is not required to file reports pursuant to
Section 13 or Section 15(d) of the Act.
Yes o No þ
Indicate
by check mark whether the registrant (1) has filed all reports required to be
filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the registrant was required
to file such reports), and (2) has been subject to such filing requirements for
the past 90 days. Yes þ No
o
Indicate
by check mark if disclosure of delinquent filers pursuant to Item 405 of
Regulation S-K is not contained herein, and will not be contained, to the best
of registrant’s knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. þ
Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, or a non-accelerated filer. See definition of “accelerated
filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check
one):
Large accelerated
filer o Accelerated Filer
o Non-accelerated filer
þ
Indicate
by check mark whether the Registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act). Yes o No þ
The
aggregate market value of the voting stock held by non-affiliates of the
Registrant, based upon the closing sales price of the Common Stock as of March
31, 2007, was approximately $14,825,671. The number
of outstanding shares of the Registrant’s Common Stock as of December 14, 2007
was 7,159,193
DOCUMENTS
INCORPORATED BY REFERENCE
PORTIONS
OF REGISTRANT’S PROXY STATEMENT FOR THE 2008 ANNUAL MEETING OF STOCKHOLDERS (TO
BE
FILED
WITH THE COMMISSION ON OR BEFORE JANUARY 28, 2008): PART III, ITEMS
10-14.
EN
POINTE TECHNOLOGIES, INC.
FORM
10-K
YEAR
ENDED SEPTEMBER 30, 2007
Table of Contents
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PART
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PART
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PART
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ITEM
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ITEM
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ITEM
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ITEM
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ITEM
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PART
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SIGNATURES |
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CHIEF
EXECUTIVE OFFICER, CHIEF FINANCIAL OFFICER, AND DIRECTORS |
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EXHIBIT
21.1 |
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EXHIBIT
23.1 |
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EXHIBIT
23.2 |
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EXHIBIT
31.1 |
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EXHIBIT
31.2 |
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EXHIBIT
32.1 |
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PART
I
THIS
ANNUAL REPORT ON FORM 10-K CONTAINS FORWARD-LOOKING STATEMENTS WITHIN THE
MEANING OF SECTION 27A OF THE SECURITIES ACT OF 1933 AND SECTION 21E OF THE
SECURITIES EXCHANGE ACT OF 1934 AND THE COMPANY INTENDS THAT SUCH
FORWARD-LOOKING STATEMENTS BE SUBJECT TO THE SAFE HARBORS CREATED
THEREBY. THE FORWARD-LOOKING STATEMENTS RELATE TO FUTURE EVENTS OR
THE FUTURE FINANCIAL PERFORMANCE OF THE COMPANY INCLUDING, BUT NOT LIMITED TO,
STATEMENTS CONTAINED IN: ‘‘ITEM 1. BUSINESS,” “ITEM 1A. RISK FACTORS’’ AND
‘‘ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.” READERS ARE CAUTIONED THAT SUCH STATEMENTS, WHICH MAY BE
IDENTIFIED BY WORDS INCLUDING ‘‘ANTICIPATES,’’ ‘‘BELIEVES,’’ ‘‘INTENDS,’’
‘‘ESTIMATES,’’ ‘‘EXPECTS,’’ AND SIMILAR EXPRESSIONS, ARE ONLY PREDICTIONS OR
ESTIMATIONS AND ARE SUBJECT TO KNOWN AND UNKNOWN RISKS AND UNCERTAINTIES. IN
EVALUATING SUCH STATEMENTS, READERS SHOULD CONSIDER THE VARIOUS FACTORS
IDENTIFIED IN THIS ANNUAL REPORT ON FORM 10-K, INCLUDING MATTERS SET FORTH IN
‘‘ITEM 1A. RISK FACTORS,’’ WHICH COULD CAUSE ACTUAL EVENTS, PERFORMANCE OR
RESULTS TO DIFFER MATERIALLY FROM THOSE INDICATED BY SUCH STATEMENTS. IN
LIGHT OF THE SIGNIFICANT UNCERTAINTIES INHERENT IN THE FORWARD-LOOKING
INFORMATION INCLUDED HEREIN, THE INCLUSION OF SUCH INFORMATION SHOULD NOT BE
REGARDED AS REPRESENTATION BY THE COMPANY OR ANY OTHER PERSON THAT ITS
OBJECTIVES OR PLANS WILL BE ACHIEVED. THE COMPANY DOES NOT UNDERTAKE
AND SPECIFICALLY DECLINES ANY OBLIGATION TO UPDATE ANY FORWARD-LOOKING
STATEMENTS OR TO PUBLICLY ANNOUNCE THE RESULTS OF ANY REVISIONS TO ANY
STATEMENTS TO REFLECT NEW INFORMATION OR FUTURE EVENTS OR
DEVELOPMENTS.
References
made in this Annual Report on Form 10-K to ‘‘En Pointe Technologies,’’ ‘‘En
Pointe,’’ the ‘‘Company,’’ “we,” “us,” or “our” refer to En Pointe
Technologies, Inc. and its subsidiaries, En Pointe Technologies Sales, Inc., En
Pointe Gov, Inc. (formerly En Pointe Technologies Ventures, Inc.,), The Xyphen
Corporation (dba ContentWare), En Pointe Technologies Canada, Inc.,
Ovex Technologies (Private) Limited, En Pointe Technologies India Pvt. Ltd., and
its affiliate, Premier BPO, Inc., a variable interest entity and its
wholly-owned Chinese subsidiary, Premier BPO Tianjin Co., LTD. En
Pointe Technologies and the Building Blocks design are registered trademarks of
the Company and are mentioned or referred to in this Annual Report.
GENERAL
En Pointe
Technologies, Inc. was originally incorporated in Texas on January 25, 1993 and
reincorporated in Delaware on February 6, 1996 and serves as a holding company
and a provider of administrative services to its subsidiaries. We are a
national provider of information technology products (hardware and software) 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 managed and professional services
infrastructure. En Pointe is represented in approximately 17 sales and
service markets throughout the United States. In addition, we
maintain a value-added integration center that we recently moved to in
October 2006 in Rancho Cucamonga, California that is ISO
9001:2000 certified.
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, AccessPointetm, is a uniquely
powerful and flexible Internet procurement system that is electronically linked
to the extensive warehousing, purchasing and distribution functions of our
suppliers. AccessPointetm provides
ease-of-use, real-time accuracy, and the power to control the purchasing
process, from paperless requisition creation to line-item detail delivery
tracking. The direct links to our suppliers enhance our capacity to
provide our customers with automated direct access to an extensive range of
products at competitive prices.
BUSINESS
MODEL
Our
business model covers hardware and software fulfillment and value-added
services. Hardware fulfillment extends beyond efficient delivery to
include pre-deployment services that we perform prior to shipment, including
imaging and image management, configurations, asset tagging, inventory
management and master packing. The procurement process is vital to
hardware fulfillment and we try to make this process as efficient as possible
for our customers. Value-added services include ongoing managed services
such as management of information technology infrastructure as well as
professional services that provide specific information technology solutions for
our customers. Software fulfillment includes presales consulting, monitoring
license compliance and managing software publishers’ relationships.
The
hardware fulfillment business relies on our virtual inventory model that has
been developed and enhanced over time, but since our inception in 1993, our core
concepts have remained the same. The virtual inventory model’s essential
elements are (i) a low cost overhead structure resulting from the automation of
many management and operating functions; (ii) effective electronic information
systems; and (iii) reduced working capital requirements due to the limited
amount of physical inventory that we hold and our allied distributor
relationships. Our sophisticated and customized enterprise resource planning
system, referred to as SAP, allows us to monitor sales, product returns,
inventories, profitability and accounts receivable at the sales representative
and customer level. Additionally, we have integrated product purchasing
and customer invoicing into our information systems to expedite procurement and
billing. AccessPointeTM, an eBusiness
platform, provides us and our customers with up-to-date product
information and streamlines the procurement process. The
completely integrated eBusiness information technology architecture helps us
maintain effective online communication links with our sales representatives,
selected suppliers, and many of our customers. AccessPointetm is provided
free of charge to our customers to better enable them to execute transactions
and research their orders online with us.
We
continue to focus on cost control and strive to maintain a low-cost overhead
structure through the automation of many of our management and operating
functions. In fiscal 2003, we introduced another low-cost overhead element to
our business model by relocating many of our “back-office” functions to a
service provider in Islamabad, Pakistan. Effective October 1, 2006, we
continued our cost control focus by acquiring a 70% ownership interest of that
service provider in Pakistan, Ovex Technologies (Private) Limited, or
Ovex.
The
day-to-day customer support function is shared between a centralized staff at
headquarters, back-office contract workers in Pakistan, and local account
management. This helps us improve field response yet maintains
direct access to all back-office functions and senior management. Increased
local coverage has fueled efforts to identify new opportunities. We believe that
time in front of customers is the top priority for all account managers, account
executives, and senior management to build long lasting relationships and
identify business solutions for existing and new customers.
Our
product sales are conducted principally from both traditional branch offices as
well as from virtual offices which are located in approximately 15 metropolitan
markets in 11 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 continue to be, since May, 2002, certified as a minority-controlled
company by the National Minority Supplier Development Council. The certification
is considered valuable because many large buying organizations, private
enterprise accounts and state and local government agencies have supplier
diversity initiatives that may require certain purchases to be made from
certified minority controlled companies.
An
integral component of our business model is our ability to access an extensive
inventory of information technology products stocked by our suppliers through
our integrated supply chain information systems that are key features of
AccessPointeTM.
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 Rancho Cucamonga, 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 information
system that identifies which of our suppliers can supply the desired product at
the best price when needed from different products offered from multiple
suppliers.
A
distinct advantage of our business model is the economy achieved by the
conservation of working capital through leveraging our virtual inventory model
that engages the extensive warehousing, purchasing, distribution, marketing and
information-technology functions of our suppliers. Since inception, we
have been an innovator in using the drop shipping capabilities of our
suppliers whenever product configuration is not required. Drop shipping
avoids the costs and risks associated with maintaining inventory, enabling us to
quickly adapt our product offerings to changing market demands. As product
proliferation has occurred, we believe that our limited inventory position has
given us a competitive advantage with respect to price and availability on a
broad range of products. We do, however, still maintain and stage
inventory for our customers, as necessary, whenever it’s economical and fulfills
a business purpose. We believe our business model allows us to have the
capacity to increase sales with minimal additional capital
investment.
Our
value-added services business, by offering certain essential and highly
individualized services, principally the optimization and management of
customer’s information technology infrastructure, caters to multi-year service
contracts, which constitutes the majority of our service business. Our
service agreements are designed exclusively for the Windows/Intel/Cisco
operating environment, which is the dominant industry platform. Our
services include life cycle management which encompasses hardware configuration,
customer customization, deployment, install/move/add/change, maintenance, asset
management and help desk. Our customer base is broad and encompasses both
large national accounts as well as small to medium businesses and governmental
agencies. Various service fee arrangements are available from which
customers are supported by certified technical engineers that are trained on
each customer’s specific requirements. The fee arrangements range
from fixed-price in which our personnel may be shared to cost-plus for dedicated
on-site personnel, or a combination of both, depending on the customer’s
needs.
We also
offer an array of value-added professional services that include needs
assessment, design solutions, deployment and post deployment support, and help
desk for our customers. In addition, we provide at our ISO 9001:2000
certified integration facility configuration services, including hardware
configuration, software installation and custom imaging services, testing,
aggregation, and asset tagging.
Whether
customers buy their products from us or others, we can provide them with
extensive logistics support. In support of that growing part of our business,
during the later half of fiscal 2005, we completed the development of the
Logistics Management System, or LMS, software program. The LMS program is
integrated with SAP and allows us to more efficiently work with our customers
and common carriers. The LMS program’s single system environment has the
capability to manage and track logistic activities, providing customers with
detailed asset reporting as well as asset life cycle management. The LMS
program has the following benefits:
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overall
customer project planning; |
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detailed
planning and scheduling of customer assets to be
serviced; |
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receipt
confirmation of customer assets and subsequent tracking
ability; |
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periodic
detailed customer asset reporting by serial number; and |
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management
of customer life cycle process to include: |
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reconditioning and packaging, |
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redeployment, and |
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– liquidation, identification of leased assets and compliance with
lease terms, and work order history by serial number of each customer
asset. |
The
software licensing business employs highly skilled personnel to provide
comprehensive solutions to customers needing software solutions. This
specialized group provides value to customers in their presales consulting,
monitoring license compliance and managing software publishers’
relationships.
Although
we have been for several years an authorized Microsoft Large Account Reseller as
well as an authorized agent for many other software publishers, we had not fully
developed the operational and system capabilities to expand sales
opportunities. In early fiscal year 2005, recognizing that need, we began
the process of enhancing the capabilities of SAP and AccessPointeTM to improve upon
presales consulting, monitoring license compliance and managing software
publishers’ relationships. Upon completion of the software upgrades in
June 2005, we now believe that we have a more efficient software selling process
that has produced and will continue to produce noticed improvements for our
customers’ ordering and maintenance needs. The program provides the
following benefits:
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maintains
software agreements for all major software publishers; |
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incorporates
a dynamic data model that simplifies reporting processes to allow improved
identification of customer trends, sales opportunities, and customer
milestones; |
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provides
real-time product configuration that reduces time for sales
representatives to identify customer requested software
products; |
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restricts
the data entry to a structured format that ensures adherence to vendor and
publisher rules, thereby avoiding the costly retroactive correction of
errors in processing; |
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manages
software agreements to offer customers the ability to purchase software
more efficiently by increasing their awareness of software agreement
terms, purchasing history, and needs; |
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identifies
software products for compliance with customer software
agreements; |
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