UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

þ		QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

o		TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

EN POINTE TECHNOLOGIES, INC.

(Exact name of registrant as specified in its charter)

Delaware		75-2467002
(State or other jurisdiction of		(I.R.S. Employer Identification No.)
incorporation or organization):
2381 Rosecrans Avenue, Suite 325
El Segundo, California		90245
(Address of principal executive offices)		(Zip Code)

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 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.

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

As of February 14, 2007, 7,149,068 shares of common stock of the Registrant were issued and outstanding.

INDEX

En Pointe Technologies, Inc.

PART I            FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Consolidated Balance Sheets – December 31, 2006 and September 30, 2006			3
Condensed Consolidated Statements of Operations — Three months ended December 31, 2006 and 2005			4
Condensed Consolidated Statements of Cash Flows — Three months ended December 31, 2006 and 2005			5
Notes to Condensed Consolidated Financial Statements — December 31, 2006			6
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations			16
Item 3. Quantitative and Qualitative Disclosures About Market Risk			23
Item 4. Controls and Procedures			23
PART II            OTHER INFORMATION			24
Item 1. Legal Proceedings			24
Item 6. Exhibits			25
Signatures			25
Items 1A and 2 through 5 of Part II have been omitted because they are not applicable with respect to the current reporting period.
EXHIBIT 31.1
EXHIBIT 31.2
EXHIBIT 32.1

En Pointe Technologies, Inc.

Unaudited

		December 31,				September 30,
		2006				2006
ASSETS:
Current assets:
Cash		$	11,032			$	10,240
Restricted cash			74				74
Short term cash investment			551				—
Accounts receivable, net			50,603				46,417
Inventories, net			5,309				4,201
Prepaid expenses and other current assets			840				1,067
Total current assets			68,409				61,999
Property and equipment, net of accumulated depreciation and amortization			3,977				2,765
Other assets			2,524				1,474
Total assets		$	74,910			$	66,238
LIABILITIES AND STOCKHOLDERS’ EQUITY:
Current liabilities:
Accounts payable, trade		$	27,459			$	19,105
Borrowings under line of credit			13,164				15,673
Accrued liabilities			5,157				5,796
Accrued taxes and other liabilities			7,245				4,928
Total current liabilities			53,025				45,502
Long term liabilities			424				238
Total liabilities			53,449				45,740
Minority interest			1,914				1,487
Stockholders’ equity:
Preferred stock, $.001 par value:
Shares authorized—5,000,000 No shares issued or outstanding			—				—
Common stock, $.001 par value:
Shares authorized—15,000,000; with 7,149,068 and 6,976,366 shares issued			7				7
Additional paid-in capital			42,044				41,767
Treasury stock			(1	)			(1	)
Accumulated deficit			(22,503	)			(22,762	)
Total stockholders’ equity			19,547				19,011
Total liabilities and stockholders’ equity		$	74,910			$	66,238

See Notes to Condensed Consolidated Financial Statements.

En Pointe Technologies, Inc.

Condensed Consolidated Statements of Operations
and Comprehensive Income
(Unaudited)
(in thousands, except per share data)

		Three months ended
		December 31,
		2006				2005
Net sales:
Product		$	62,962			$	67,257
Service			12,658				11,431
Total net sales			75,620				78,688
Cost of sales:
Product			57,697				63,202
Service			8,050				7,966
Total cost of sales			65,747				71,168
Gross profit:
Product			5,265				4,055
Service			4,608				3,465
Total gross profit			9,873				7,520
Selling and marketing expenses			6,551				6,074
General and administrative expenses			3,058				2,518
Operating income (loss)			264				(1,072	)
Interest (income) expense, net			(39	)			(6	)
Other income, net			(16	)			(16	)
Income (loss) before income taxes and minority interest			319				(1,050	)
Provision for income taxes			22				—
Income (loss) before minority interest			297				(1,050	)
Minority interest			(25	)			53
Net income (loss)			272				(997	)
Other comprehensive loss, net of tax
Foreign currency translation adjustment			(13	)			—
Comprehensive income (loss)		$	259			$	(997	)
Net income (loss) per share:
Basic		$	0.04			$	(0.14	)
Diluted		$	0.04			$	(0.14	)
Weighted average shares outstanding:
Basic			7,124				6,976
Diluted			7,372				7,153

See Notes to Condensed Consolidated Financial Statements.

En Pointe Technologies, Inc.

Condensed Consolidated Statements of Cash Flows
(Unaudited)
(in thousands)

		Three months ended
		December 31,
		2006				2005
Cash flows from operating activities:
Net income (loss)		$	272			$	(997	)
Adjustments to reconcile net income to net cash used by operations:
Depreciation and amortization			542				323
Amortization of deferred gain on sale-leaseback
Allowances for doubtful accounts, returns, and inventory			83				120
Minority interest in income (loss) of affiliates			25				(53	)
Net change in operating assets and liabilities			4,991				3,721
Net cash provided by operating activities			5,913				3,114
Cash flows from investing activities:
Acquisition of business			(1,302	)			—
Short-term cash investment			(551	)			—
Purchase of property and equipment			(783	)			(191	)
Net cash used by investing activities			(2,636	)			(191	)
Cash flows from financing activities:
Net repayments under line of credit			(2,509	)			(2,007	)
Proceeds from convertible bond issued by affiliate			—				50
Stock offering by affiliate			100				—
Proceeds from exercise of employee stock options			37				8
Payment on long term liabilities			(113	)			(84	)
Net cash used by financing activities			(2,485	)			(2,033	)
Increase in cash		$	792			$	890
Supplemental disclosures of cash flow information:
Interest paid		$	53			$	23
Income taxes paid		$	23			$	31
Capitalized leases		$	134			$	—
Stock issued for acquisition of business		$	240			$	—

See Notes to Condensed Consolidated Financial Statements.

En Pointe Technologies, Inc.

Notes to Condensed Consolidated Financial Statements
(Unaudited)

Note 1 — Basis of Presentation and General Information

     In the opinion of management, the unaudited condensed consolidated balance sheet of En Pointe Technologies, Inc., including (i) its wholly-owned subsidiaries En Pointe Technologies Sales, Inc., En Pointe Gov, Inc., En Pointe Technologies Canada, Inc., and The Xyphen Corporation, (ii) effective October 1, 2006, its majority-owned subsidiaries Ovex Technologies (Private) Limited and Ovex Pakistan (Private) Limited, En Pointe Technologies India Pvt. Ltd., and (iii) effective October 2003, its minority-owned Premier BPO, Inc. (a Variable Interest Entity, see Note 8) (collectively, the “Company” or “En Pointe”), at December 31, 2006, and the unaudited condensed consolidated statements of operations and unaudited condensed consolidated statements of cash flows for the interim periods ended December 31, 2006 and 2005, respectively, include all adjustments (consisting only of normal recurring adjustments) necessary to fairly state these financial statements in accordance with the rules and regulations of the United States Securities and Exchange Commission (“SEC”) for interim financial reporting.

     Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted pursuant to the rules and regulations of the SEC. The year-end balance sheet data were derived from audited financial statements, but do not include disclosures required by generally accepted accounting principles. Operating results for the three months ended December 31, 2006 are not necessarily indicative of the results that may be expected for the year ending September 30, 2007. It is suggested that these condensed financial statements be read in conjunction with the Company’s most recent Form 10-K for the fiscal year ended September 30, 2006.

     The preparation of financial statements in conformity with generally accepted accounting principles requires management to make certain estimates and assumptions that affect the reported amount of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reported period. On an on-going basis, management evaluates its estimates and judgments, including those related to customer bad debts, product returns, vendor returns, rebate reserves, inventories, other contingencies and litigation. Management bases its estimates and judgments on historical experience and on various other factors that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.

Note 2 – Accounting for Stock-Based Compensation

     In December 2004, the Financial Accounting Standards Board (“FASB”) issued Statement Financial Accounting Standard (“SFAS”) No. 123 (R), “Share-Based Payment”. SFAS No. 123 (R) requires all share-based payments to employees, including grants of employee stock options, to be recognized as compensation expense in the consolidated financial statements based on their fair values. That expense is then recognized over the period during which an employee is required to provide services in exchange for the award, known as the requisite service period (usually the vesting period). The Company adopted SFAS No. 123 (R) effective beginning October 1, 2005 using the Modified Prospective Application Method. Under this method, SFAS No. 123 (R) applies to new awards and to awards modified, repurchased or cancelled after the effective date. There have been no new share based awards since the Company adopted SFAS No. 123(R) and thus there has been no financial impact from its adoption. Additionally, the Company’s sole equity incentive plan, the 1996 stock option plan, terminated by its terms in March 2006 so no further awards can be made thereunder. The Company has not adopted any new equity incentive plans.

Note 3 – Computation of Earnings Per Share

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

		Three Months Ended
		December 31,
		2006				2005
Net income (loss)		$	272			$	(997	)
Weighted average shares outstanding			7,124				6,976
Effect of dilutive securities:
Dilutive potential of options			248				177
Weighted average shares and share equivalents outstanding			7,372				7,153
Basic income (loss) per share		$	0.04			$	(0.14	)
Diluted income (loss) per share		$	0.04			$	(0.14	)

Note 4 – Recent Accounting Pronouncements

     In September 2006, the SEC released Staff Accounting Bulletin No. 108, “Considering the Effects of Prior Year Misstatements when Quantifying Misstatements in Current Year Financial Statements” (SAB 108). SAB 108 provides interpretive guidance on the SEC’s views regarding the process of quantifying materiality of financial statement misstatements. SAB 108 is effective for fiscal years ending after November 15, 2006. The Company does not anticipate that the adoption of this accounting pronouncement will have a material effect on its consolidated financial statements.

     In September 2006, the FASB issued FAS 157, “Fair Value Measurements.” This standard defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles, and expands disclosures about fair value measurements. This statement is effective for financial statements issued for fiscal years beginning after November 15, 2007. The Company does not anticipate that the adoption of this accounting pronouncement will have a material effect on its consolidated financial statements.

     In July 2006, the FASB issued Interpretation No. 48, “Accounting for Uncertainty in Income Taxes” (FIN No. 48). This interpretation requires recognition and measurement of uncertain income tax positions using a “more-likely-than-not” approach. The provisions of FIN No. 48 are effective for fiscal years beginning after December 15, 2006. The Company does not anticipate that the adoption of this accounting pronouncement will have a material effect on its consolidated financial statements.

     In March 2006, the FASB issued FAS 156, “Accounting for Servicing of Financial Assets — an Amendment of FASB Statement No. 140.” This standard clarifies when to separately account for servicing rights, requires servicing rights to be separately recognized initially at fair value, and provides the option of subsequently accounting for servicing rights at either fair value or under the amortization method. The standard is effective for fiscal years beginning after September 15, 2006 but can be adopted early as long as financial statements for the fiscal year in which early adoption is elected, including interim statements, have not yet been issued. The Company adopted this accounting pronouncement effective October 1, 2006 and the adoption has not had a material effect on its consolidated financial statements.

     In February 2006, the FASB issued FAS 155, “Accounting for Certain Hybrid Financial Instruments — an amendment of FASB Statements No. 133 and 140.” This statement permits fair value remeasurement for any hybrid financial instrument that contains an embedded derivative that would otherwise have to be accounted for separately. The new statement also requires companies to identify interests in securitized financial assets that are freestanding derivatives or contain embedded derivatives that would have to be accounted for separately, clarifies which interest-and principal-only strips are subject to Statement No. 133, and amends Statement No. 140 to revise the conditions of a qualifying special purpose entity due to the new requirement to identify whether interests in securitized financial assets are freestanding derivatives or contain embedded derivates. This statement is effective for all financial instruments acquired or issued after the beginning of an entity’s first fiscal year that begins after September 15, 2006. The Company adopted this accounting pronouncement effective October 1, 2006 and the adoption has not had a material effect on its consolidated financial statements.

Note 5 – Acquisition of Business

     On September 19, 2006, the Company entered into a share purchase agreement with Omar Saeed and Arif Saeed (the “Saeeds”), effective October 1, 2006, to acquire 70% of the capital stock of two privately owned Pakistani companies, Ovex Technologies (Private) Limited (“OvexUS”) and Ovex Pakistan (Private) Limited (“OvexDomestic). Both companies are engaged in providing business process outsourcing (“BPO”) services and were wholly-owned by the Saeeds. Under the terms of the agreement, the Company paid the Saeeds a total of $1,680,000 in exchange for 70% of the capital stock of each of the two companies. The form of the consideration paid consisted of $240,000 in cash, $240,000 in unregistered shares of Company common stock, and a promissory note in the principal amount of $1,200,000, which promissory note was repaid in full in November 2006. Additionally, pursuant to the terms of the agreement, the boards of directors of OvexUS and OvexDomestic were each be reconfigured to consist of three members; one designated by the Company, one designated by the Saeeds and one designated mutually by the two designees.

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

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

     OvexUS and the Saeeds have had and continue to have certain ongoing relationships with the Company. Since 2003, OvexUS has provided the Company with BPO services for the Company’s selling and marketing operations. During the quarter ended June 30, 2006, OvexUS also assumed the responsibilities for the Company’s accounting and finance outsourcing that was previously done by KPMG Taseer Hadi & Co, a Pakistani member firm of KPMG.

     OvexUS also has an ongoing relationship with Premier BPO, Inc. (formerly known as En Pointe Global Services, Inc.,“PBPO”), who promotes and sells BPO services to U.S. businesses, by virtue of having been the principal provider of BPO services to their U.S. customers. The Company owns 30% of the outstanding shares of PBPO’s common stock, 50% of the outstanding shares of PBPO’s Series A non-voting convertible preferred stock, has a representative on PBPO’s board of directors and consolidates PBPO in its financial reports as a variable interest entity. In addition to the business relationship that Ovex has with PBPO, the Saeeds collectively own 16% of the outstanding shares of common stock of PBPO, as well as 50% of the outstanding shares of Series A non-voting convertible preferred stock of PBPO and have a representative on its board of directors.

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

on a quarterly basis, subject to continued employment, and approximates 25% of such EBITDA per year, subject to a maximum annual aggregate bonus payment of $400,000. Additional fees payable and estimated to be payable for professional services directly related to the acquisition total $175,000.

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

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

     The following unaudited pro forma consolidated financial information reflects the results of operations for the three months ended December 31, 2005 as if the acquisition of Ovex and SMI had occurred on October 1, 2005 (in thousands, except per share amounts). The pro forma for the three months ended December 31, 2006 is not presented since both acquisitions were fully integrated during the first quarter of fiscal 2007.

		Three Months Ended
		December 31, 2005
		Pro Forma				As Reported
Net sales		$	80,911			$	78,688
Net loss		$	(807	)		$	(997	)
Net loss per share:
Basic		$	(0.11	)		$	(0.14	)
Diluted		$	(0.11	)		$	(0.14	)
Weighted average shares outstanding:
Basic			7,074				6,976
Diluted			7,251				7,153

Note 6 – Goodwill and Other Intangibles

     At December 31, 2006, intangibles consisting of goodwill, customer relationships and covenants not to compete consisted of the following (in thousands):

		Cost
						Customer				Covenant
		Goodwill				Relationships				Not to Compete
10/11/02 Tabin acquisition		$	230			$	470			$	—
10/01/04 Viablelinks acquisition			88				200