En Pointe Technologies, Inc., including its wholly-owned subsidiaries En Pointe Technologies Sales, Inc., En Pointe Gov, Inc., En Pointe Technologies Canada, Inc., The Xyphen Corporation, and En Pointe Europe, Inc. Limited, its majority-owned subsidiary Ovex Technologies (Private) Limited , and its minority-owned affiliate Premier BPO, Inc. (a Variable Interest Entity referred to as "PBPO") and its wholly-owned Chinese subsidiary, Premier BPO Tianjin Co., Ltd. are collectively referred to as "we," "us" "our" or similar terms.

The following statements are or may constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995:

(i) any statements contained or incorporated herein regarding possible or assumed future results of operations of our business, anticipated cost savings or other synergies, the markets for our services and products, anticipated capital expenditures, regulatory developments or competition; (ii) any statements preceded by, followed by or that include the words "intends," "estimates," "believes," "expects," "anticipates," "should," "could," "projects," "potential," or similar expressions; and (iii) other statements contained or incorporated by reference herein regarding matters that are not historical facts.

Such forward-looking statements, within the meaning of the Private Securities Litigation Reform Act of 1995, included in Management's Discussion and Analysis of Financial Condition and Results of Operations and elsewhere in this Form 10-Q, which reflect management's best judgment based on factors currently known, involve risks and uncertainties. The Company's actual results may differ significantly from the results discussed in the forward-looking statements and their inclusion should not be regarded as a representation by us or any other person that the objectives or plans will be achieved. Factors that might cause such a difference include, but are not limited to:

(i) a significant portion of our sales continuing to be to certain large customers, (ii) continued dependence by us on certain allied distributors, (iii) continued downward pricing pressures in the information technology market, (iv) our ability to maintain inventory and accounts receivable financing on acceptable terms, (v) quarterly fluctuations in results, (vi) seasonal patterns of sales and client buying behaviors, (vii) changing economic influences in the industry, (viii) the development by competitors of new or superior delivery technologies or entry in the market by new competitors, (ix) dependence on intellectual property rights, (x) delays in product development, (xi) our dependence on key personnel, (xii) potential influence by executive officers and principal stockholders, (xiii) volatility of our stock price, (xiv) delays in the receipt of orders or in the shipment of products, (xv) any delay in execution and implementation of our system development plans, (xvi) loss of minority ownership status, (xvii) planned or unplanned changes in the quantity and/or quality of the suppliers available for our products, (xviii) changes in the costs or availability of products, (xix) interruptions in transport or distribution, (xx) general business conditions in the economy, (xxi) our ability to prevail in litigation, and (xxii) losses from foreign currency fluctuation, limitations on foreign asset transfers and changes in foreign regulations and political turmoil.

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 therefore cautioned not to place undue reliance on forward-looking statements contained herein and to consider other risks detailed more fully in our most recent Annual Report on Form 10-K, as amended, for the fiscal year ended September 30, 2008. We undertake no obligation to publicly release the result of any revisions to these forward-looking statements which may be made to reflect events or circumstances after the date hereof, or to reflect the occurrence of unanticipated events.

Critical Accounting Policies

There have been no major changes to our critical accounting policies since the disclosure of critical accounting policies made in the September 30, 2008 Annual Report on Form 10-K, as amended.

Comparisons of Financial Results

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

                                             Three Months Ended           Six Months Ended
                                                  March 31,                   March 31,
                                             2009           2008          2009         2008
Net sales:
  Product                                       93.8 %        82.9 %         94.7 %      84.2 %
  Services                                       6.2          17.1            5.3        15.8
   Total net sales                             100.0         100.0          100.0       100.0
Gross profit:
  Product                                       11.5           8.6           11.2         7.8
  Services                                       1.9           7.0            1.7         6.7
   Total gross profit                           13.4          15.6           12.9        14.5
Selling and marketing expenses                  10.1          13.6            9.5        11.7
General and administrative expenses              6.9           5.5            5.5         4.4
   Operating loss                               (3.6 )        (3.5 )         (2.1 )      (1.6 )
Interest (expense) income, net                   0.0           0.0            0.0         0.1
Other (expense) income, net                      4.3          (0.8 )          1.9        (0.3 )
  Income (Loss) before taxes and other
items                                            0.7          (4.3 )         (0.1 )      (1.9 )
(Benefit) provision for income taxes             0.0           0.0            0.0         0.0
   Income (loss) before other items              0.7          (4.3 )         (0.1 )      (1.9 )
Allocated income from equity investment          0.2          (0.0 )          0.1        (0.0 )
Allocated loss (income) to
noncontrolling interest                          0.0
   Net income (loss)                             0.9 %        (4.3 )%         0.0 %      (1.9 )%

Comparison of the Results of Operations for the Three Months and Six Months
Ended March 31, 2009 and 2008

   NET SALES

 NET SALES
 COMPARISONS
                               Three Months Ended                          Six Months Ended
                                    March 31,                                  March 31,
 Period-to-Period
 Comparison         Change          2009              2008          Change        2009        2008
 Net sales:
   Product          $ (15.4 )    $      43.1     $         58.5     $ (37.1 )    $  95.5     $ 132.6
   Services         $  (9.3 )    $       2.8     $         12.1     $ (19.5 )    $   5.3     $  24.8
 Total              $ (24.7 )    $      45.9     $         70.6     $ (56.6 )    $ 100.8     $ 157.4
 Percentage
 change               (35.0 )%                                        (36.0 )%

                                  March 31,       December 31,
 Sequential
 Comparison         Change          2009              2008
 Net sales:
   Product          $  (9.3 )    $      43.1     $         52.4
   Services         $   0.3      $       2.8     $          2.5
 Total              $  (9.0 )    $      45.9     $         54.9
 Percentage
 change               (16.4 )%

Net sales decreased $24.7 million, or 35.0%, in the March 2009 quarter as compared to the March 2008 quarter, with decreases in net sales of both product and services. Of the $24.7 million decline in net sales, $9.3 million resulted from the absence of service revenue that is now reported by EP Global as a result of the divestiture of the IT services business in July 2008 (see "Note 7
- Equity Investment"). Service revenues are now limited to those provided by PBPO for the selling of business process outsourcing services of $1.5 million in the March 2009 quarter, vendor configuration services, third-party product maintenance agreement sales (a combined $1.1 million in the March 2009 quarter) and a small amount of business outsourcing services as provided by Ovex of $0.2 million in the March 2009 quarter. The remaining $15.4 million decline in net product sales, or 26.3%, is reflective of the loss of some major customers that were replaced by new customers making less purchases, as well as sharp reductions in spending by other major customers.

The decline in net sales can be assessed by a review of our top twenty customers that accounted for 52% of core net sales revenues ("core" defined as sales of other than sales of business process outsourcing services and product and service revenue from foreign subsidiaries) during both March fiscal quarters. Eleven new top twenty customers were added to the mix in the March 2009 quarter while eleven were dropped from the March 2008 quarter. However, the added new top twenty customers that replaced those lost from the prior March quarter contributed $1.4 million less in net sales, or 9.6% less, than in the comparable prior March quarter. The decline in net sales was much more pronounced in the remaining nine repeat top twenty customers from the March 2008 fiscal year quarter. The decline in their net sales amounted to $6.9 million in the March 2009 quarter over the March 2008 quarter, or 42.0% less. The drop in the large repeat enterprise customers of 42.0% was much greater than that found in the remaining customer base. Sales to customers outside of the top twenty decreased $7.5 million to $20.4 million, or 26.9%, from the $27.8 million in the March 2008 quarter.

Software sales in the March 2009 quarter continued to increase as a percentage of total product net sales. For the March 2009 quarter, software sales were 35.0% of total net product sales as compared with 30.8% of total net product sales in the March 2008 quarter. Software sales, including licenses, maintenance, and agency commissions related thereto, decreased $2.9 million in the March 2009 quarter to $15.1 million from $18.0 million in the March 2008 quarter.

Our non-core net sales were essentially flat with $2.1 million of revenues recorded in the March 2009 quarter as compared with $1.6 million of revenues in the March 2008 quarter.

On a sequential basis, net sales decreased $9.0 million, or 16.4%, when compared with the December 2008 quarter, as a result of decreased product revenue.

For the six months ended March 31, 2009, net sales followed a similar pattern as in the second quarter of fiscal 2009 and 2008, decreasing $56.6 million, or 36.0%, as compared with the first six months of fiscal 2008. Of the $56.6 million decrease in net sales for the six months ended March 31, 2009 compared with the prior period in 2008, $19.5 million relates to the loss of the IT service business that was divested in July 2008. The remaining $37.1 million decrease, or 28.0%, was a result of losses in product net sales for the same reasons as discussed above for the second quarter of fiscal year 2009 results.

Net sales to one customer amounted to 10.6% in the March 2009 quarter, while no one customer accounted for more than 10% of sales in the March 2008 quarter. For the six months ended March 31, 2009 and 2008, no one customer accounted for more than 10% of net sales.

GROSS PROFIT

 GROSS PROFIT COMPARISONS
                                  Three Months Ended                          Six Months Ended
                                      March 31,                                  March 31,
 Period-to-Period
 Comparison           Change           2009              2008          Change        2009       2008
 Gross profit:
   Product          $     (0.7 )    $       5.3     $          6.0     $  (1.0 )    $ 11.3     $ 12.3
   Services         $     (4.1 )    $       0.9     $          5.0     $  (8.9 )    $  1.7     $ 10.6
 Total              $     (4.8 )    $       6.2     $         11.0     $  (9.9 )    $ 13.0     $ 22.9
 Percentage
 change                  (43.6 )%                                        (43.2 )%

 Gross margin
 percentage:
   Product                 1.9 %           12.2 %             10.3 %       2.6 %      11.8 %      9.3 %
   Services               (9.7 )%          31.3 %             41.3 %     (11.4 )%     31.4 %     42.7 %
  Combined gross
 margin
 percentage               (2.1 )%          13.5 %             15.6 %      (1.7 )%     12.9 %     14.5 %

                                     March 31,        December 31,
 Sequential
 Comparison           Change           2009              2008
 Gross profit:
   Product          $     (0.7 )    $       5.3     $          6.0
   Services         $      0.1      $       0.9     $           .8
 Total              $     (0.6 )    $       6.2     $          6.8
 Percentage
 change                   (8.8 )%
 Gross margin
 percentage:
   Product                 0.7 %           12.2 %             11.5 %
   Services               (0.3 )%          31.3 %             31.6 %
  Combined gross
 margin
 percentage                1.1 %           13.5 %             12.4 %

Gross profits decreased $4.8 million in the March 2009 quarter, or 43.6%, to $6.2 million as compared with the $11.0 million in the March 2008 quarter. The majority of the decrease in gross profits was attributable to the decline in service revenues resulting from the divestiture of the IT service business in the fourth quarter of fiscal 2008. The $4.1 million decline in service gross profits in the March 2009 quarter compared with the March 2008 quarter approximates the $4.4 million of service revenues recognized by the IT service business transferred to EP Global (see "Note 7 - Equity Investment"). Product gross profits for the March 2009 quarter decreased $0.7 million to $5.3 million from the March 2008 quarter of $6.0 million. The $0.7 million decline in product gross profitswas attributable primarily to the $15.4 million decrease in product net sales, as the product gross margin percentage increased 1.9% to 12.2% from 10.3% in the March 2008.

Software agency commissions, provided chiefly by Microsoft, Inc., are recorded net of costs and have a major influence on product gross profits. As a result, the decrease in software agency commissions for the March 2009 quarter of $0.8 million over the March 2008 quarter to $1.6 million from $2.4 million was a drag on the 1.9% increase in product gross margin percentage of approximately 0.4%. The current decrease noted in software agency commissions follows the Company's recent disclosure for the December 2008 quarter of an anticipated a future erosion of the agency commission fee structure from Microsoft, Inc. Software gross profits combined with agency commissions amounted to $2.6 million of the $5.3 million total gross profits for the March 2009 quarter.

SELLING AND MARKETING EXPENSES. Selling and marketing expenses decreased $4.9 million, or 51.4%, to $4.6 million in the March 2009 quarter, from $9.5 million in the March 2008 quarter. Most of the $4.9 million decrease is attributed to the absence of selling and marketing expenses related to the services business transferred to EP Global as EP Global incurred $4.1 million in selling and marketing expenses for the March 2009 quarter.

For the six months ended March 31, 2009 as compared with the same six month period in 2008, selling and marketing expenses were similarly reduced from the absence of EP Global expenses. Selling and marketing expenses for this period decreased $8.8 million, or 47.9%, to $9.6 million as compared with $18.4 million in the prior fiscal period.

Selling and marketing expenses as a percentage of net sales likewise decreased 3.5% to 10.1% in the March 2009 quarter from the 13.6% recorded in the March 2008 quarter. On a sequential basis, selling and marketing expenses remained relatively constant decreasing $0.3 million in the March 2009 quarter from the $4.9 million incurred in the December 2008 quarter.

GENERAL AND ADMINISTRATIVE EXPENSES. General and administrative expenses decreased $0.7 million, or 19.0%, to $3.2 million in the March 2009 quarter from the $3.9 million in the March 2008 quarter. The decrease was principally from the absence of general and administrative expenses related to the services business that was transferred to EP Global.

For the six months ended March 31, 2009, general and administrative expenses decreased $1.5 million to $5.5 million, or 20.8%, as compared with the $7.0 million incurred in the first six months of fiscal 2008. The decrease was again principally from the absence of general and administrative expenses related to the services business that was transferred to EP Global.

On a sequential basis, general and administrative expenses increased $0.8 million in the March 2009 quarter from the $2.4 million incurred in the December 2008 quarter. The sequential increase is due to the March 2009 quarter having incurred additional costs related to the pending merger proposal. Expressed as a percentage of net sales, general and administrative expenses increased 4.4% to 6.9%. The percentage increase was caused by the decrease in the net sales base upon which to spread the general and administrative costs.

OPERATING LOSS. The operating loss decreased $0.8 million in the March 2009 quarter to $1.6 million compared with a $2.4 million of operating loss in the March 2008 quarter. The decrease in the operating loss was a result of the $5.6 million decrease in operating expenses exceeding the $4.8 million decrease in gross profits.

For the six months ended March 31, 2009, the operating loss decreased $0.4 million to $2.1 million, or 14.1%, as compared with the $2.5 million operating loss in the first six months of fiscal 2008. The decrease was also because the decrease in operating expenses exceeded the decrease in gross profits for the period.

INTEREST (EXPENSE) INCOME, NET. For the three months and six months ended March 31, 2009 and 2008, net interest (expense) income was as follows (in thousands):

                                  Three Months Ended           Six Months Ended
                                       March 31,                   March 31,
                                 2009            2008          2009          2008

            Interest income    $      43       $      48     $    100       $  188
            Interest expense         (48 )           (73 )        (85 )       (147 )
                               $      (5 )     $     (25 )   $     15       $   41

Interest income results principally from short-term money market investments earned from excess cash holdings and short-term cash investments. Interest expense results principally from lease financing.

OTHER INCOME (EXPENSE), NET. For the three months and six months ended March 31, 2009 and 2008, net other income was as follows (in thousands):

                                                Quarter Ended          Six Months Ended
                                                  March 31,                March 31,
                                               2009        2008         2009         2008

   Gain on sale of service business           $ 2,000   $   --       $    2,000     $  --
   Gain on sale of Indian subsidiary               38                        38       --
   Loss on note receivable                       --         (500 )        --          (500 )
   Prepaid lease amortization on investment       (75 )      (50 )         (150 )      (50 )
   Other income                                    12        (17 )           58         44

     Total net other income (expense)         $ 1,975   $   (567 )   $    1,946     $ (506 )

Net other income increased $2.5 million in both the March 2009 quarter as compared to the March 2008 quarter and in the six months ended March 31, 2009 as compared with the six months ended March 31, 2008. The increases were from the gain on the sale of the service business, the gain on the sale of En Pointe Technologies India Pvt. Ltd (a majority owned subsidiary that took place in the March 2009 quarter) and the presence in the fiscal 2008 periods of a loss on a note receivable. The $2.0 million gain on the sale of the service business relates to the July 9, 2008 sale of an 80.5% interest in EP Global. Two million dollars of the gain from the sale had been deferred until payment was forthcoming. The Indian subsidiary performed programming services for our internal use and was sold to Allied Digital Services, Ltd., the 80.5% partner in EP Global. The sale of the Indian subsidiary, which was effective as of January 1, 2009, closed on March 31, 2009 and the proceeds from the sale, 2,039,048 Indian Rupees (which was estimated at $41,000) are payable on June 30, 2009.

BENEFIT FOR INCOME TAXES. For the March 2009 quarter, we estimated a net income tax benefit of $18,000 for the quarter. The tax benefit reflects the potential of a federal tax refund from the $114,000 of federal income taxes paid in the prior fiscal year of which one quarter, or $28,500 has been recognized for the quarter, reduced by estimated state minimum income taxes of $10,500. For the six months ended March 31, 2009, $57,000 federal tax benefit has been recognized reduced by $13,500 of state minimum income taxes.

As of March 31, 2009, there were no available federal net operating loss carry forwards as all net operating loss carryforwards were applied in full in the prior fiscal year.

ALLOCATED LOSS (INCOME) TO NONCONTROLLING INTERESTS. Under FIN 46 and other recent changes in consolidation principles, certain noncontrolling interests are required to be consolidated. We own an approximate 30% voting interest in PBPO as of March 31, 2009 and under FIN 46 are required to consolidate PBPO's financial results in our financial statements. In the second quarter of fiscal 2009 and in the six months of fiscal 2009, PBPO incurred losses that were allocated to the noncontrolling interest.

Ovex, which is 70% owned by us, was profitable for the second quarter of fiscal 2009 of which 30% has been allocated to noncontrolling interest. For the six months ended March 31, 2009 Ovex incurred losses of which 30% has been allocated to the noncontrolling interest.

For the three months and six months ended March 31, 2009 and 2008, allocations to noncontrolling interest was as follows (in thousands):

                                           Three Months Ended           Six Months Ended
                                               March 31,                   March 31,
                                          2009             2008       2009           2008

  PBPO                                  $      10         $   --     $     9       $      21
  Ovex                                         (1 )           10          19             (54 )
  Loss (profit) allocations             $       9         $   10     $    28       $     (33 )

NET INCOME (LOSS). For the March 2009 quarter net income of $0.4 million was realized as compared with a net loss of $3.0 million in the March 2008 quarter. The increase approximate of $3.4 million net income for the March 2008 quarter was due primarily a decline in operating loss of $0.8 million and $2.6 million increase in non-operating income. For the six months ended March 31, 2009, net income increased $3.0 million from a decline in operating loss of $0.3 million and $2.7 million increase in non-operating income.

Sources of liquidity for us include cash and cash equivalents, cash flow from operations, and amounts available under our GE and IBM financing facilities. These sources have been adequate for day-to-day operations and for capital expenditures. Although there can be no assurance, management believes that the remaining cash balances, cash flows from operations, and availability of funds under our financing facilities will be sufficient to satisfy our operating requirements for the next fiscal year. As of March 31, 2009, we had approximately $8.2 million in cash and working capital of $5.6 million.

Cash flows from operating activities:

During the six months ended March 2009, operating activities provided cash totaling $3.0 million as compared with $16.9 million in the comparable period of the prior fiscal year. The primary reason for the $13.9 million net decrease in cash from operating activities was the decrease of $14.0 million of accounts receivable that generated cash in the
six month period ended March 2008 whereas in the comparable fiscal year 2009 period there was a $4.0 million increase in accounts receivable, providing a net decrease of $10.0 million. In addition, the increases in inventory had a $5.0 million net adverse effect on operating cash when comparing the March 2009 and 2008 six month periods.

Accounts receivable, net of allowances for returns and doubtful accounts, at March 31, 2009 and 2008, was $34.1 million and $47.0 million, respectively, a decrease of $12.9 million. The number of days' sales, or DSOs, outstanding in accounts receivable was 62 and 57, as of March 31, 2009 and 2008, respectively. The increase in DSOs was due to the slowing in payments from customers. While we have experienced improvements in the customer ageing in current, 30 day past due, and 60 day past due categories, the over 90 day past due has increased. Over 90 day past due has arisen to 8%, or $3.3 million, of total receivables in the March 2009 quarter as compared with 2% in the March 2008 quarter. Almost half of the $3.3 million, or $1.5 million has been specifically set aside for customers that are doubtful for collection or in bankruptcy. The remaining represent customers that have become slower pay.

Cash flows from investing activities:

Investing activities used cash totaling $0.6 million during the six months ended March 2009, a decrease of $0.6 million from that expended in the prior fiscal year period. The $0.6 million decrease resulted principally from the reduction in the purchase of property and equipment of $0.9 million offset by the absence in the March 2009 six month period of net expenditures for investments of $0.5 million that was present in the March 2008 six month period.

Cash flows from financing activities:

Financing activities provided net cash totaling $2.1 million in the six months ended March 2009, as opposed to the $18.8 million of cash that was used from financing activities
primarily in the net repayment of credit facilities in the prior fiscal year period. The total $20.9 million increase in cash provided in the fiscal 2009 period over the fiscal 2008 period was from the increased borrowings under lines of credit and our export loan.

Credit facilities:

Our two primary information technology sales subsidiaries, En Pointe Technologies Sales, Inc. and En Pointe Gov, Inc., and GE Commercial Distribution Finance Corporation ("GE") are parties to that certain Business Financing Agreement and that certain Agreement for Wholesale Financing dated June 25, 2004 with various subsequent amendments to date (collectively, the "Agreements"). En Pointe Technologies, Inc. is the guarantor of the obligations under the Agreements. Under the flooring arrangement, the two subsidiaries may purchase and finance information technology products from GE-approved vendors on terms that depend upon certain variable factors. The two subsidiaries may borrow up to 85% of their collective eligible accounts receivable at an interest rate of prime plus 1.0% per annum, subject to a minimum rate of 5.0%. Such purchases . . .