Emtec Inc (CE) (ETEC) Share Price

ETEC: Merged with Jaguar Newco, Inc.; $ 5.588414579 per share.

FINRA deleted symbol:

https://otce.finra.org/otce/dailyList?viewType=Deletions

ETEC: 1-20,000 reverse split followed by 20,000-1 forward split cashing out pre-split shareholders at $1.05 p/s

http://www.otcbb.com/asp/dailylist_detail.asp?d=07/11/2013&mkt_ctg=NON-OTCBB

So, abnormal trading early May. Hmm

ETEC was the winner at Penny Stock Rumble today

ETEC...$1.25
Bad report.. Happy to be out..This is dead money..hank


Emtec, Inc. Announces Second Quarter Results

Business Wire - Apr 22 at 10:45

Company Symbols: NASDAQ-OTCBB:ETEC


MARLTON, N.J.--(BUSINESS WIRE)-- Emtec, Inc. (OTCBB: ETEC) ("Emtec," or the "Company") announced today that for the quarter ended February 28, 2010, earnings before interest, taxes, depreciation and amortization expenses ("EBITDA") loss of $696,000 compared to EBITDA profit of $216,000 for the quarter ended February 28, 2009. EBITDA for the six months ended February 28, 2010 was $2.42 million, compared with $2.68 million for the six months ended February 28, 2009. Adjusted EBITDA, which is defined by management as net income before interest, taxes, depreciation, amortization, retention bonuses, non-essential overhead, stock based compensation, executive recruiting fees, severance, temporary wage reductions, discretionary bonuses, merger related professional fees and the recovery of prior year expenses ("Adjusted EBITDA") for the six months ended February 28, 2010 was $3.19 million, compared to $3.23 million for the same six months of the prior year. Net income for the six months ended February 28, 2010 decreased slightly from $621,000 to $558,000 compared to the same six months in the prior fiscal year. The decreases in EBITDA, Net Income, and Adjusted EBITDA are primarily attributable to a longer than anticipated economic downturn in our commercial, state and local business; the after effect of a year long reduction in billing rates by commercial customers, and; investments made in new management to position the company to take advantage of services growth as the economy recovers. A reconciliation of EBITDA and Adjusted EBITDA to net income (loss) is attached to this press release.

EBITDA and Adjusted EBITDA are key financial metrics used by the Company's board of directors and management to evaluate and measure the Company's operating performance. These metrics are not in conformity with generally accepted accounting principles in the United States of America ("GAAP"). Management's calculation of EBITDA eliminates the effect of charges primarily associated with financing decisions, tax regulations and capital investments. Adjusted EBITDA also eliminates certain non-recurring or unusual costs, reflects certain changes made by management during the quarter and makes adjustments which in the opinion of management are necessary to reflect the underlying ongoing operations of the business going forward. Net income (loss) is the most comparable GAAP measure of the Company's operating results presented in the Company's consolidated financial statements. We have made a reconciliation of these non-GAAP measures to net income (loss), the most closely comparable GAAP measure, for the three and six months ended February 28, 2010 and 2009 and discussed these adjustments below. EBITDA and Adjusted EBITDA should not be considered as an alternative to net income (loss) or any other GAAP measure of performance or liquidity, and may not be comparable to other similarly titled measures of other companies. Management believes that the presentation of EBITDA and Adjusted EBITDA is important to investors because Adjusted EBITDA is used by management to evaluate financial performance and continuing operations and to determine resource allocation for each of our business segments.

For the Emtec Infrastructure Services ("EIS") division there was an Adjusted EBITDA loss of $363,000 for the quarter ended February 28, 2010, compared to an Adjusted EBITDA loss of $84,000 for the quarter ended February 28, 2009. Revenue and profits for the second quarter are typically seasonal for EIS. The Federal and Education business typically have less revenue during this quarter. In the past the commercial business has been able to absorb some of this cyclicality, but because of the longer term economic slowdown our commercial business could not absorb as much of the loss as we have seen in past. We have taken steps to alleviate this seasonality in the Federal and Education business by engaging in longer term projects with a higher percentage of consulting and managed services revenues. In addition, as part of this shift into consulting and managed services, we have taken steps to change the nature of our commercial business. In 2009 and 2010, we invested in strengthening our executive management team, marketing initiatives and in April 2010, management analyzed the profitability of the commercial business, and in particular the procurement services business. As a result management initiated new cost containment measures which will reduce and redirect certain expenses away from our commercial procurement business, which was underperforming to our consulting services in the commercial sector. Management estimates that up to $2 million in annualized costs will be reduced as a result of this restructuring and that the costs associated with the restructuring are estimated to be up to $150,000, primarily related to severance costs. Management will continue to invest in attracting talent to the higher gross margin consulting practices in the commercial sector.

Adjusted EBITDA for Emtec Infrastructure Services ("EIS") division increased to $2.63 million for the six months ended February 28, 2010 from $1.79 million comparable to the prior year. Except for retention bonuses, all adjustments included in the calculation of Adjusted EBITDA set forth in the reconciliation table below were for this division.

Adjusted EBITDA for the Emtec Global Services ("EGS") division was $135,000 for the quarter ended February 28, 2010, compared with $498,000 for the quarter ended February 28, 2009. Adjusted EBITDA for the EGS division decreased from $1.44 million for the six months ended February 28, 2009 to $558,000 for the six months ended February 28, 2010. This decline was caused by a 13.2% decrease in hours billed and a 8.0% decrease in the average hourly billing rate during the three months ended February 28, 2010 compared with the corresponding period in 2009. Hours billed for the six months ended February 28, 2010 decreased 18.0% and the average hourly billing rate decreased 7.6% compared to the prior year. Billable hours decreased primarily due to decreases in our Business Analysis and Quality Assurance practices. Most of the clients EGS serves are commercial clients and we believe that this decrease in commercial business is primarily attributed to the current economic downturn. While the overall revenue for the quarter declined on a year over year basis, in the month of February 2010, we began to see an increase in hours billed and an increase in billable rates per hour. We expect this trend to continue, however, we can make no assurance for future trends. The EGS adjustment included in the calculation of Adjusted EBITDA includes retention bonuses paid during the six months ended February 28, 2010.

"We are excited about the continued success in our Federal and Education business which continue to show bottom line increases over last year. In addition, our Infrastructure consulting practice has continued to make new gains, and we have started to see a return to growth for our EGS business. While the results for the quarter were not unexpected, we were disappointed with the performance of our commercial infrastructure practice. We have made investments in transforming the business and we expect results to fluctuate during the periods of these investments. We will continue to look for the best ways to build fundamental value, investing in areas of growth and higher margins, and finding ways to shift costs away from lower margin businesses. We are increasingly pleased that seasoned services industry executives are attracted to the Emtec story and we are very excited about our recent offshore delivery acquisition," said Dinesh Desai, chairman and chief executive officer of Emtec. He added "we ask for all our stakeholders to have patience in our transformation as we look to build a world class differentiated systems integrator."

About Emtec:

Emtec, Inc. a Delaware corporation (the "Company") established in 1964, is a systems integrator providing information technology ("IT") services and products to the federal, state, local, education and commercial markets. Emtec helps clients identify and prioritize areas for improvement and then implement process, technology and business application improvements that reduce cost, improve service and align the delivery of IT with the needs of their organization. The Company's value-based management methods, coupled with IT technology, consulting and development services, allow us to address a wide range of specific client needs, as well as support broader IT transformation initiatives. The Company's client base is comprised of departments of federal, state and local governments in the United States and Canada, schools and commercial businesses throughout the United States and Canada.

Certain statements in this document constitute "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements involve known and unknown risks, uncertainties and other factors, which may cause the actual results, performance or achievements of the Company or industry results, to be materially different from any future results, performance, or achievements expressed or implied by such forward-looking statements. The Company's future operating results are dependent upon many factors, including but not limited to the Company's ability to: (i) obtain sufficient capital or a strategic business arrangement to fund its plan of operations when needed; (ii) build the management and human resources and infrastructure necessary to support the growth of its business; (iii) competitive factors and developments beyond the Company's control; and (iv) other risk factors discussed in the Company's periodic filings with the Securities and Exchange Commission which are available for review at www.sec.gov under "Search for Company Filings." We undertake no obligation to publicly update or revise any forward-looking statements to reflect changed assumptions, the occurrence of anticipated or unanticipated events, or changes to future results over time.


EMTEC, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands)

Three Months Ended February 28, Six Months Ended February 28,

2010 2009 2010 2009

Revenues

Procurement $ 23,275 $ 29,414 $ 82,657 $ 85,773
services

Service and 12,828 12,547 27,023 26,207
consulting

Total Revenues 36,103 41,961 109,680 111,980

Cost of Sales

Cost of
procurement 21,036 26,371 74,209 76,763
services

Service and 9,165 9,464 19,025 20,297
consulting

Total Cost of 30,201 35,835 93,234 97,060
Sales

Gross Profit

Procurement 2,239 3,043 8,448 9,009
services

Procurement 9.6 % 10.3 % 10.2 % 10.5 %
services %

Service and 3,663 3,083 7,998 5,911
consulting

Service and 28.6 % 24.6 % 29.6 % 22.6 %
consulting %

Total Gross 5,902 6,126 16,446 14,920
Profit

Total Gross 16.3 % 14.6 % 15.0 % 13.3 %
Profit %

Operating
expenses:

Selling,
general, and 6,441 5,758 13,719 11,936
administrative
expenses

Rent expense - 157 152 311 304
related party

Depreciation and 571 568 1,167 1,102
amortization

Total operating 7,169 6,478 15,197 13,342
expenses

Percent of 19.9 % 15.4 % 13.9 % 11.9 %
revenues

Operating income (1,267 ) (352 ) 1,249 1,578
(loss)

Percent of -3.5 % -0.8 % 1.1 % 1.4 %
revenues

Other expense
(income):

Interest income (5 ) (6 ) (16 ) (11 )
- other

Interest expense 159 270 303 524

Other (2 ) - (9 ) 4

Income (loss)
before income (1,419 ) (616 ) 971 1,061
taxes

Provision
(benefit) for (569 ) (231 ) 413 440
income taxes

Net income $ (850 ) $ (385 ) $ 558 $ 621
(loss)





EMTEC, INC.

RECONCILIATION OF NET INCOME (LOSS) TO EBITDA AND ADJUSTED EBITDA

(In thousands)

Three Months Ended February 28, Six Months Ended February 28,

2010 2009 2010 2009

Net income $ (850 ) $ (385 ) $ 558 $ 621
(loss)

Interest and
other expense 152 264 278 517
(income):

Provision
(benefit) for (569 ) (231 ) 413 440
income taxes

Depreciation and 571 568 1,167 1,102
amortization

EBITDA (696 ) 216 2,416 2,681

Retention - - 90 -
bonuses (1)

Elimination of
non-essential - 175 - 714
overhead (2)

Stock based 189 42 274 84
compensation

Executive 2 15 101 29
recruiting (3)

Severance 2 82 33 105

Temporary wage
reductions- - (116 ) - (116 )
reinstated (4)

Discretionary 181 - 181 -
Bonus (5)

Merger Related
Professional 94 - 94 -
Fees

Recovery of
prior year - - - (270 )
expenses (6)

Total 468 198 773 546
Adjustments (7)

Adjusted EBITDA $ (228 ) $ 414 $ 3,189 $ 3,227




1) Expenses associated with retention bonuses which were agreed to in connection with the closing of the Company's acquisition of Luceo.

2) Elimination of non-essential overhead includes expenses incurred, which were eliminated by management during the three and six months ended February 28, 2009 and will not recur on an ongoing basis. These charges included $36,000 paid to the former owners of Westwood under contracts that were not renewed (net of ongoing consulting costs paid to an owner), $39,000 paid to a senior executive under a contract that was not renewed and paid to other at-will employees whose positions were terminated and $100,000 in sales compensation changes implemented during the three months ended February 28, 2009. For the six months ended February 28, 2009, these charges included $114,000 paid to the former owners of Westwood under contracts that were not renewed (net of ongoing consulting costs paid to an owner), $400,000 paid to a senior executive under a contract that was not renewed and paid to other at-will employees whose positions were terminated and $200,000 in sales compensation changes.

3) Reflects executive recruiting fees incurred in connection with a management launched search for a senior executive in 2009. Management made a one-time decision to invest in the business by hiring new senior executives to grow the business in 2010 and thereafter.

4) Due to the uncertain economic situation in late calendar 2008, management reduced wages by $116,000 during the three months ended February 28, 2009 and later reinstated full wages at the end of the year, resulting in a one-time cost savings of $116,000.

5) Discretionary bonuses paid to the executive management team in December 2009.

6) Offset from recovered professional fees which the Company previously recorded as an expense that were associated with defending the Company's tax positions during the IRS' 2003 and 2004 tax audit and appeal process.

7) While management has made additional cost cuts in its commercial infrastructure business, it has not included these amounts as adjustments to EBITDA because the Company may invest these amounts in future periods in its consulting services business.


EMTEC INFRASTRUCTURE SERVICES

CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands)

Three Months Ended February 28, Six Months Ended February 28,

2010 2009 2010 2009

Revenues

Procurement $ 23,275 $ 29,414 $ 82,657 $ 85,773
services

Service and 5,904 3,883 12,352 6,830
consulting

Total Revenues 29,179 33,297 95,009 92,603

Cost of Sales

Cost of
procurement 21,036 26,371 74,209 76,763
services

Service and 3,435 2,414 6,918 4,641
consulting

Total Cost of 24,471 28,785 81,127 81,404
Sales

Gross Profit

Procurement 2,239 3,043 8,448 9,010
services

Procurement 9.6 % 10.3 % 10.2 % 10.5 %
services %

Service and 2,469 1,469 5,434 2,189
consulting

Service and 41.8 % 37.8 % 44.0 % 32.0 %
consulting %

Total Gross 4,708 4,512 13,882 11,199
Profit

Total Gross 16.1 % 13.6 % 14.6 % 12.1 %
Profit %

Operating
expenses:

Selling,
general, and 5,437 4,702 11,731 9,772
administrative
expenses

Rent expense - 102 92 203 184
related party

Depreciation and 342 350 711 675
amortization

Total operating 5,881 5,144 12,645 10,631
expenses

Percent of 20.2 % 15.4 % 13.3 % 11.5 %
revenues

Operating income (1,173 ) (632 ) 1,237 568
(loss)

Percent of (4.0 )% (1.9 )% 1.3 % 0.6 %
revenues

Other expense
(income):

Interest income (5 ) (6 ) (16 ) (10 )
- other

Interest expense 104 162 191 300

Other - - (5 ) -

Income (loss)
before income (1,272 ) (788 ) 1,067 278
taxes

Provision
(benefit) for (523 ) (309 ) 435 107
income taxes

Net income $ (749 ) $ (479 ) $ 632 $ 171
(loss)





EMTEC INFRASTRUCTURE SERVICES

RECONCILIATION OF NET INCOME (LOSS) TO EBITDA AND ADJUSTED EBITDA

(In thousands)

Three Months Ended February 28, Six Months Ended February 28,

2010 2009 2010 2009

Net income $ (749 ) $ (479 ) $ 632 $ 171
(loss)

Interest and
other expense 99 156 170 290
(income):

Provision
(benefit) for (523 ) (309 ) 435 107
income taxes

Depreciation and 342 350 711 675
amortization

EBITDA (831 ) (282 ) 1,948 1,243

Elimination of
non-essential - 175 - 714
overhead (1)

Stock based 189 42 274 84
compensation

Executive 2 15 101 29
recruiting (2)

Severance 2 82 33 105

Temporary wage
reductions- - (116 ) - (116 )
reinstated (3)

Discretionary 181 - 181 -
Bonus (4)

Merger Related
Professional 94 - 94 -
Fees

Recovery of
prior year - - - (270 )
expenses (5)

Total 468 198 683 546
Adjustments (6)

Adjusted EBITDA $ (363 ) $ (84 ) $ 2,631 $ 1,789




1) Elimination of non-essential overhead includes expenses incurred, which were eliminated by management during the three and six months ended February 28, 2009 and will not recur on an ongoing basis. These charges included $36,000 paid to the former owners of Westwood under contracts that were not renewed (net of ongoing consulting costs paid to an owner), $39,000 paid to a senior executive under a contract that was not renewed and paid to other at-will employees whose positions were terminated and $100,000 in sales compensation changes implemented during the three months ended February 28, 2009. For the six months ended February 28, 2009, these charges included $114,000 paid to the former owners of Westwood under contracts that were not renewed (net of ongoing consulting costs paid to an owner), $400,000 paid to a senior executive under a contract that was not renewed and paid to other at-will employees whose positions were terminated and $200,000 in sales compensation changes.

2) Reflects executive recruiting fees incurred in connection with a management launched search for a senior executive in 2009. Management made a one-time decision to invest in the business by hiring new senior executives to grow the business in 2010 and thereafter.

3) Due to the uncertain economic situation in late calendar 2008, management reduced wages by $116,000 during the three months ended February 28, 2009 and later reinstated full wages at the end of the year, resulting in a one-time cost savings of $116,000.

4) Discretionary bonuses paid to the executive management team in December 2009.

5) Offset from recovered professional fees which the Company previously recorded as an expense that were associated with defending the Company's tax positions during the IRS' 2003 and 2004 tax audit and appeal process.

6) While management has made additional cost cuts in its commercial infrastructure business, it has not included these amounts as adjustments to EBITDA because the Company may invest these amounts in future periods in its consulting services business.


EMTEC GLOBAL SERVICES

CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands)

Three Months Ended February 28, Six Months Ended February 28,

2010 2009 2010 2009

Revenues

Service and $ 6,924 $ 8,664 $ 14,671 $ 19,378
consulting

Total Revenues 6,924 8,664 14,671 19,378

Cost of Sales

Service and 5,730 7,050 12,107 15,656
consulting

Total Cost of 5,730 7,050 12,107 15,656
Sales

Gross Profit

Service and 1,194 1,614 2,564 3,722
consulting

Service and 17.2 % 18.6 % 17.5 % 19.2 %
consulting %

Total Gross 1,194 1,614 2,564 3,722
Profit

Total Gross 17.2 % 18.6 % 17.5 % 19.2 %
Profit %

Operating
expenses:

Selling,
general, and 1,004 1,056 1,988 2,164
administrative
expenses

Rent expense - 55 60 108 121
related party

Depreciation and 229 218 456 427
amortization

Total operating 1,288 1,334 2,552 2,712
expenses

Percent of 18.6 % 15.4 % 17.4 % 14.0 %
revenues

Operating income (94 ) 280 12 1,010
(loss)

Percent of (1.4 )% 3.2 % 0.1 % 5.2 %
revenues

Other expense
(income):

Interest income - - - (1 )
- other

Interest expense 55 108 112 224

Other (2 ) - (4 ) 4

Income (loss)
before income (147 ) 172 (96 ) 783
taxes

Provision
(benefit) for (46 ) 78 (22 ) 333
income taxes

Net income $ (101 ) $ 94 $ (74 ) $ 450
(loss)





EMTEC GLOBAL SERVICES

RECONCILIATION OF NET INCOME (LOSS) TO EBITDA AND ADJUSTED EBITDA

(In thousands)

Three Months Ended February Six Months Ended February 28,
28,

2010 2009 2010 2009

Net income (loss) $ (101 ) $ 94 $ (74 ) $ 450

Interest and other 53 108 108 227
expense (income):

Provision
(benefit) for (46 ) 78 (22 ) 333
income taxes

Depreciation and 229 218 456 427
amortization

EBITDA 135 498 468 1,437

Retention bonuses - - 90 -
(1)

Total Adjustments - - 90 -

Adjusted EBITDA $ 135 $ 498 $ 558 $ 1,437




1) Expenses associated with retention bonuses which were agreed to in connection with the closing of the Company's acquisition of Luceo.

ETEC..

That trade was a fluke as it was a market order that went thru open orders.. The stock was offered at $1.25 the rest of the day.. hank

ETEC... AT 1.65
(up .50 - 43%)

Somebody's really jerking this one around.... and confusing me in the process.

ETEC.. $1.07

Sold my entire position today.. IT IS ALL POSSIBLE: that ETEC will/could trade higher but as I would not buy ETEC here I feel that owning it makes no sense.. I am fortunate because this is only my first blow up this year.. I have other stocks that are down but none that have failed to meet my goals for profits and EPS.. With the latest 10Q which I have put in the I-Box I think that ETEC will be dead money for some time.. I would reenter below $0.65..hank

Good luck to all the longs.. hank

ETEC.. $1.30

Surprised is not the word.. I spoke to them yesterday about the merger and it never dawned on me to ask how the earnings would be.. There were a lot of orders put on the books lately and I hope that they have increased thier backlog..

The Inda merger is not that large because there will be no 8K filed but I think it was done to keep business in house rather than outsourcing to another company.. This merger might be with the very company which they outsourced some of thier work to..

Bad report but still good vibes about the company.. Will see more if they put out a PR release and my eyes will be looking for the backlog numbers.. Still long a little more than 15K and not a happy camper.. Actually bought stock today @$1.52..Sold 6000 at the close at $1.30 and that was the only trading I did in ETEC today.. GLTA.. hank

Hank, what do you make out of the fact that they had such a decrease in revenues from last Q to this Q? I was pretty surprised. Still a good long term investment with the recent aquisition you think? I never really digged too much into the company. I definitely didn't expect a 6 cent loss this quarter.

ETEC..$1.30

I posted the latest Q in the I-box.. hank

ETEC..$1.30

I spoke a representative of the company yesterday anout the merger and there wasn't the slightest hint of this miss.. The only good thing I found was positive cash flow for the Qtr.. I can't say I was misled or duped because I never really questioned the earnings.. The increase in backlog I hope will be in the press release that they should put out but this is a quiet company that may not put out any release.. Long a bunch and even bought stock today at $1.52 .. hank

10Q Link...
http://secfilings.nasdaq.com/filingFrameset.asp?FileName=0001144204%2D10%2D020075%2Etxt&FilePath=%5C2010%5C04%5C14%5C&CoName=EMTEC+INC%2FNJ&FormType=10%2DQ&RcvdDate=4%2F14%2F2010&pdf=

10Q Link...
http://secfilings.nasdaq.com/filingFrameset.asp?FileName=0001144204%2D10%2D020075%2Etxt&FilePath=%5C2010%5C04%5C14%5C&CoName=EMTEC+INC%2FNJ&FormType=10%2DQ&RcvdDate=4%2F14%2F2010&pdf=

ETEC.. $1.60..

Spoke to the company and found out no filings other than the PR Release will be made by ETEC... because of that one must assume that the transaction which acquired SARK Infotech will be of less than a 10% material effect upon ETEC's ballance sheet.. The fit is great and the synergy is in the best interests of both companies.. Upon the release of the next 10Q we will begin to see the effects of the merger/buyout.. IMO is that this is just a step in keeping what could be outsourced inhouse and will make ETEC more competive in securing more contracts.. Hank

ETEC.. $1.56

Emtec Acquires Software Consulting Company, SARK Infotech
Emtec, Inc. (OTCBB: ETEC), a systems integrator, today announced that it has acquired SARK Infotech, a software consulting company based in Mumbai, India. This acquisition significantly complements Emtec’s ability to deliver application development and integration projects. SARK’s delivery capabilities will be integrated into Emtec’s operations and expand Emtec’s footprint in Asia. Now, with offices in both Mumbai and Bangalore, Emtec offers an expanded global delivery model through a mix of onshore and offshore development centers.

“We are committed to growing our business organically and by acquiring companies that help us expand our service offerings and solutions for our clients,” said Dinesh Desai, chairman, CEO, and president of Emtec. “We are confident that through the acquisition of SARK, Emtec has taken another step forward in expanding our footprint worldwide and look forward to continued growth in our key focus areas of systems integration and application services.”

SARK concentrates on developing web-based applications using primarily Open Source and Microsoft .NET platforms and offers a wide range of services, including network and system management solutions, interactive transactional solutions, and software development, maintenance and migration. SARK also has capabilities to provide embedded software development for Network Processing Unit (NPU) based networking software, wireless applications for handhelds and PDAs, device drivers and other devices and components. The expertise in these areas will allow Emtec to provide a wide array of solutions for its customers using web and mobile technologies simultaneously.

“We are looking forward to becoming part of the Emtec team and increasing the breadth of their offerings,” said Mayank Shah, co-founding director, SARK. “As a company, we are focused on becoming recognized globally as a noted player in the Web and embedded technologies industry and our merger with Emtec will directly support that objective.”

“We are excited about the opportunity for growth offered by being part of a team with Emtec’s extensive business development capabilities,” added Kiran Ambardekar, co-founding director, SARK.

About Emtec, Inc.

Emtec, Inc. established in 1964, is a systems integrator providing IT services and products to the federal, state, local, education and commercial markets. Emtec helps clients identify and prioritize areas for improvement and then implement process, technology and business application improvements that reduce cost, improve service and align the delivery of IT with the needs of their organization. Emtec’s market leading value based management methods, coupled with best-in-class IT technology, consulting and development services, allow it to address a wide range of specific client needs, as well as support broader IT transformation initiatives. Emtec's service capabilities span the USA, Canada and countries around the globe. For more information visit: www.emtecinc.com or www.sarkinfotech.com.

-----------------------
SARK is an international software outsourcing specialist, with an established tradition of high quality, high reliability and highly cost-effective software development services and solutions.

Founded in 1989, SARK is now focused on Embedded software development like NPU based networking applications, wireless applications for hand-helds and PDAs, device drivers etc. SARK continues to concentrate on developing web based applications using Open Source and Microsoft .NET platforms. SARK offers a wide range of services, including software development / maintenance / migration, e-Business solutions, Network and System Management Solutions. SARK specializes in creating innovative turnkey IT solutions for its customers.

SARK has consistently grown at a compounded annual growth rate of over 50% for the past few years at its state-of-the-art development center in Mumbai in India.

In line with our corporate vision, we focus on developing long-term integrated supplier relationships with our customers. The wealth of our expertise and our innovative delivery models allow us to provide our customers with a strategic, full-service partnership -- a relationship we enjoy both with end-users as well as with developers and integrators of software products.

Our almost 100% customer retention rate and low employee turnover attest to our success in adapting to the change inherent in the IT industry.

The foundations of the critical leverage we provide are: 250+ person-years of delivered effort
Multi-person, multi-location projects
Over 16 years of experience
A full range of technology and industry specific expertise...

Vision
Powered by values and expertise in Emerging Technologies, WE want SARK to be a USD20 MILLION global company by 2015.

Mission
•Be a lead player in Web and Embedded Technologies
•Provide Customer specific Quality Solutions
•Bring delight to all stakeholders


Quality Policy
We at SARK Infotech Private Limited are committed to deliver to our customers, timely and effective software solutions that meet their requirements through continual improvement of the quality management system.

Management..

Sharad Godbole

Sharad Godbole brings in 25+ years of experience in the IT field involving both technology and management skills. Sharad was the CEO of IDBI INTECH, an IT consulting company employing over 150 software professionals. Earlier, he served as the Chief General Manager, Information Technology, IDBI, the largest financial Institution in India. Sharad started his career with Mafatlal Consultancy Services in 1971, and played a key role in growing the organization to over 300 software professionals. Sharad holds a Bachelors Degree in Mathematics and a Postgraduate Diploma in Computers, both from Bombay University.

Dilip Katdare

Dilip Katdare brings in 25+ years of experience in the field of management. Dilip is practicing senior advisor for strategic and change management for various public and private sector companies. He has worked on international assignments in the field of Management Information Systems. He has conducted several open seminars on subjects of topical interest on behalf of Bombay Management Association, Maharashtra Economic Development Council. Earlier he has worked for HLL (Indian arm of Unilever group) as a senior manager in various capacities. Dilip is a postgraduate in management from IIM Calcutta, with roll of honors to his credit.

Mayank Shah

Mayank Shah graduated with a Bachelors degree in Electrical Engineering from IIT Mumbai in 1982 followed by Masters in Computer Science and Engineering from IIT Mumbai in 1985. Mayank has participated in number of cutting edge technology and product development efforts at major corporations in India and US. Mayank co-founded SARK and has served as Executive Director since its inception. His reach and vast experience in products as well as customized software development and business acumen are a guiding force to SARK.

Kiran Ambardekar


Kiran Ambardekar is a co-founder of SARK and has been on its board as Executive Director since its inception. Kiran completed his Bachelors in Electrical Engineering from IIT Mumbai in 1984 and Masters in Computer Science and Engineering from IIT Mumbai in 1986. Kiran has worked on several IT projects in India and US involving numerous front line technologies. His extensive experience of delivering solutions to customers, world over is very valuable to SARK and has contributed significantly to growth of SARK.

SARK specializes in development of embedded software for the hi-tech industry. More specifically, SARK has executed several projects involving development of high speed networking software using Network Processor Units (NPUs). SARK has contributed in both data plane and control plane processing of network packets.

Some of the important networking applications/protocols that SARK has worked on include:

•IPv4, IPv6, TCP
•Ethernet, VLAN, PPP, ATM
•DiffServ (QoS), DSLAM
Embedded Network Processor Units (NPUs) that are supported include Intel IXP 23xx, IXP 24xx, IXP 28xx etc. Data plane processing of the packets is handled by the high speed micro-engines of the IXP processors and the control plane processing is handled by the Intel Xscale processors embedded into the NPU chips. Control plane code is compliant with the relevant RFCs. All the applications process packets at wire speeds for relevant NPUs (e.g. at 10 GBPS for 64 Byte packets for IXP 28xx).

SARK also has expertise in supporting various physical interfaces like GE (1 GBPS to 10 GBPS), Utopia, T1/E1/J1, FE etc.

Some of the important features supported include:

•Active Queue Management (SFQ/CBQ) and scheduling (WRR/DRR)
•Flow Control and Congestion Avoidance
•High performance routing with Longest Prefix Match (LPM)
•Forwarding Information Block (FIB) database arranged in a array of Trie blocks
•Support for various NPU boards in single/dual NPU architectures
•Highly reusable code with ease of integrating third party control plane software or protocols
SARK uses a combination of local testing and remote testing while developing embedded networking software. Essentially, functional testing of the networking packets is carried out at the laboratory facilities of SARK in Mumbai. For the high-speed performance testing, high-speed packet generators installed at the laboratory of the customer are used, through the Internet.

Linux is a powerful operating system, which is increasingly being used for Deployment of web based applications, Networking, Software Development and is looked upon as an option for Desktop computers as well. The robustness and stability of Linux and other Open Source tools available for it, has proved as an attractive proposition for businesses to host their Enterprise applications. SARK has considerable expertise in software development using various Open Source tools.
SARK has worked on various projects on the LAMP platform. These include development of product support sites offering various services like Discussion Forums, FAQs, multi-lingual pages, product releases, bug management, Online payments for new releases/upgrades etc.

SARK has also developed and deployed business applications using Java, J2EE, standard database with requisite security on LAN/WAN.

SARK has also implemented VPNs, Firewalls, mailing/messaging solutions, proxy servers, centralized virus scanning etc. on Linux.

SARK is working with Linux for over a decade now (since kernel 2.1.x) and has developed expertise in development of system software like device drivers, porting Linux to new hardware, deploying it as multicast routers etc.

SARK makes extensive use of Open Source tools available and has acquired expertise in customization of these tools to suit the end-users needs.

A common grouse is that it is difficult to find support for solutions based on Open Source technologies. To mitigate these fears, SARK also offers long-term support / enhancement services on the solutions provided to its customers. A dedicated team of software professionals is assigned to ensure continuous support.

Until not so long ago, when one thought of computers, perhaps one thought more about Desktop PCs. This has now changed though. Embedded systems have played a pivotal role as the change-agent. Embedded applications now run on microcomputers that can be found within electronic devices such as household appliances, vending machines, gasoline pumps, cellular phones, pagers and many more.

Until recently, these embedded computers were extremely constrained in terms of space, power, memory, and network connectivity. But these constraints have been removed, and embedded systems have become much more powerful. Organizations are beginning to capitalize on the increased capabilities of embedded microprocessors by building powerful new embedded applications that extend the reach of corporate application systems directly to the device.

The embedded software market is on the brink of massive expansion. SARK envisions this as a real opportunity and recognizes this as a thrust area for growth in the years to come. Accordingly, SARK is working on a number of projects in the embedded arena. These are primarily using Network Processors Units (NPU’s) to develop embedded applications for very high-speed routers, learning bridges, IPv6 based applications, etc. NPU’s seek the sweet spot between general purpose processors, and ASIC (application specific integrated circuits) chips designed for processing network packets. SARK has also set up dedicated overseas development centers for Silicon Valley based product companies operating in the embedded network applications space.

Microsoft has been at the forefront of various computing initiatives, which had significant impact on the computing industry. Microsoft was also responsible for bringing computers to the desktops. Acknowledging this leadership, SARK has been working with Microsoft tools since the days of MS-DOS.

SARK started with development of Business and Systems applications using languages like C/C++ and foxpro/dbase. SARK has successfully made the transition from Console based applications to Windows based applications, by working with languages/tools like Visual Basic, Visual C++ etc. Notable among these earlier works were Terminate and Stay Resident (TSR) program for tele-printer application and Computer Based Training (CBT) software.

Microsoft announced the .NET initiative in July 2000. Microsoft .NET integrates number of technologies that emerged from Microsoft during late 1990s namely COM+ component services, ASP web development framework, XML, Object Oriented Design, WEB Services Protocols - SOAP, WSDL, UDDI etc.

SARK recognized the immense power offered by .NET and was amongst the first ones to successfully deploy .NET applications for its clients. These included Web based applications like Demand Planner, Export Orders Processing and Tracking etc. developed using ASP.NET, VB.NET, COM+, SQL Server. SARK has also developed a web based tool for Logistics Industry to manage shipments by combining .NET tools with Open Source products to deliver the rich user interface possible with .NET, but at the same time keeping the Total Cost of Ownership low.

SARK has developed off-beat applications like Windows services to manage Printers spread across a LAN. It interfaced with existing Oracle based applications and the Windows print spools to allow users to manage printers through a customized interface. SARK has developed prototype attendance system based on RFID technology and tools like Web Scraping to demonstrate the power offered by .NET technologies.

SARK has also worked with Microsoft tools for the mobile platform like eVC++, .NET framework for mobile, Mobile SDK 2003. SARK has developed browsers with controlled functionality, to communicate with the enterprise applications hosted on company's LAN. Applications have also been developed for Retail chains to assist in pricing strategies and to manage stocks efficiently.

SARK visualizes that web based applications with connectivity to handheld devices are order of the day and SARK is well equipped to serve clients with such requirements.

SARK, being an Information technology consulting and development firm, understands difficulties encountered by software product development companies at various stages of SDLC. One of the most difficult tasks is to ensure the quality and reliability of software products. Over the years, using its advanced and systematic Quality Assurance Techniques, SARK has ensured quality in products and solutions developed by global IT companies. Some interesting areas where SARK has carried out Quality Testing are:

Java based web enabled product testing
Automated testing of a database engine
On-line monitoring and testing of messaging system



SARK has extensive domain knowledge of Pharmaceutical, Chemical and Agrochemical Manufacturing Industry. Over the years SARK has provided very robust solutions to many organizations in this segment. Some of the important application areas include:

Exports Order Tracking and Workflow
Sales and Distribution
Materials and Procurement
Material Resource Planning
Production Planning
Stores and Inventory Management
Laboratory analysis and reporting
Accounting

SARK, being an Information technology consulting and development firm, understands difficulties encountered by software product development companies at various stages of SDLC. One of the most difficult tasks is to ensure the quality and reliability of software products. Over the years, using its advanced and systematic Quality Assurance Techniques, SARK has ensured quality in products and solutions developed by global IT companies. Some interesting areas where SARK has carried out Quality Testing are:

Java based web enabled product testing
Automated testing of a database engine
On-line monitoring and testing of messaging system

Banking and Financial Services segment has always been big spender on IT and technology. SARK has identified this segment as a priority segment and has been consistently providing solutions to some of the very high profile members of the segment. These solutions have consistently implemented some of the best security encryption techniques available.

Loan Refinancing
Bills Discounting
Automation of Dealing room
Messaging Solution


SARK has developed DoorDrishti, a solution for live Video Surveillance using various Microsoft Technologies, including Windows Mobile. The solution is now available for commercial use.

DoorDrishti allows users to view the Live Video captured by Cameras mounted at remote locations. The software is very useful to organizations like Educational Institutions, Big warehousing corporations, Construction majors and Huge Parking Lots.

Software runs on Handheld devices based on the Windows Mobile platform. The software has features like -

Ability to view Video from Multiple Cameras
Proper Authentication Mechanism to ensure privacy

If you are interested in the product, please click here to request more information.

SARK has more than 13 years of application/product development, reengineering experience (migration, code conversion, code restructuring, and transition to new architectures such as Client/Server and Web), and application/product maintenance apart from building enterprise applications ground up and has successfully completed many large projects in this area.

Our vast and diverse experience in application/product development, reengineering and application/product maintenance has helped us to create:

A sound Development & Reengineering Methodology
Project Management and Execution Procedures
Testing and QA procedures specific to reengineering projects and application/product maintenance
Reengineering tools repository

SARK's experience has a lot of variety in terms of application domain, technology handled, as well as the reengineering goals.
Classes of applications and products include:

Broad class of business applications such as financial, manufacturing, shipping, and distribution
Technical applications such as CADDS, Workflow systems, Engineering Data Management Systems
Telecom, ERP

In today's competitive markets, speed, flexibility and quality are critical to gain a winning edge. As rapid deployment of information technology is equally crucial to attain this goal, our Offshore Development Center quickly and cost effectively help you get there by functioning as an extension of your in-house software development capabilities.

Our well-honed control and co-ordination mechanisms, state-of-the-art infrastructure coupled with our experienced technical and managerial expertise of handling offshore projects, ensure that we effectively function to address your requirements, while seamlessly integrating with your vision and goals to provide you with the ability to quickly respond to the changing business environment.

In case of "not so well defined" and "iterative project scopes", the duration and nature of work in such types of engagements requires work to be done completely onsite, at the client's premises. Such engagements are characterized by quick ramp-up, ramp-down, short lead times, frequent interaction with clients and the clients' necessity to manage the project onsite.

With our experience in several projects, we have multi-skilled teams who are capable of delivering your requirements on the dot.

Emtec Acquires Software Consulting Company, SARK Infotech

Emtec, Inc. (OTCBB: ETEC), a systems integrator, today announced that it has acquired SARK Infotech, a software consulting company based in Mumbai, India. This acquisition significantly complements Emtec’s ability to deliver application development and integration projects. SARK’s delivery
capabilities will be integrated into Emtec’s operations and expand Emtec’s footprint in Asia. Now, with offices in both Mumbai and Bangalore, Emtec offers an expanded global delivery model through a mix of onshore and offshore development centers.

link to full PR

Looks good. Got my eye on this one.Looks good

ETEC..$0.1.60

The word is finally spreading and expect to see the mid 2's soon.. hank

ETEC.. $1.50

Even though they have small profit margins with the orders in hand I see $3.50 as the min. expectation this year.. hank

ETEC - looks undervalued to me. Excellent numbers last quarter. I'm on board.

ETEC.. $1.33

Emtec Expands Management Team with New Executive Vice President, Public Sector..

Mar 22, 2010 09:02:01 (ET)


MARLTON, N.J., Mar 22, 2010 (BUSINESS WIRE) -- Emtec, Inc. (ETEC, Trade ), a systems integrator, today announced that it has expanded its management team. Brian Mandel has joined as the Executive Vice President, Public Sector for Emtec, Inc. The Public Sector division includes Federal, State, Local and Education clients and provides IT transformation and optimization consulting, business service management, enterprise architecture, data management and systems integration services to its clients. In this role, Mr. Mandel is responsible for the growth of Emtec's Public Sector Revenues.

Mr. Mandel brings over 20 years of sales and management experience within the Public Sector to Emtec. Prior to joining Emtec, Mr. Mandel was Executive Vice President of Public Sector for Keane, Inc, a systems integration and consulting company. Prior to Keane, Mr. Mandel worked at Unisys Corporation where he served clients in the public sector in a variety of roles culminating with his position as Vice President and Managing Partner within Public Sector. Over the entire duration of his 13 year tenure at Unisys, he held various positions within the consulting services business including program leadership, geographic leadership and operational leadership. Mr. Mandel graduated from Temple University with a bachelor's degree in Business Administration and received an MBA from Villanova University, both conferred with high honors.

"With several acquisitions in the past year and great expansion of our service offerings for the Public Sector, we look forward to working with Brian, given his depth of industry experience to help Emtec better understand and meet customer needs," said Dinesh Desai, Chairman of the Board, Chief Executive Officer and President, Emtec, Inc. We are pleased to have Brian join our company and believe he is great addition to our management team."

"I am truly delighted to join Emtec and be part of such a talented team," said Mr. Mandel. "I've met with the leadership of each business unit and am really impressed by the talent, energy and enthusiasm that they bring to the business. Emtec is in an extraordinary position to take advantage of the economic recovery currently underway and I'm excited to lead the way."

About Emtec, Inc.

Established in 1964, Emtec, Inc. is a systems integrator providing services and products to the federal, state, local, education and commercial markets. Emtec helps clients identify and prioritize areas for improvement and then implements process, technology and business application improvements that reduce cost, improve service and align the delivery of IT with the needs of their organization. Emtec's market leading value-based management methods, coupled with best-in-class IT technology, consulting and development services, address a wide range of specific client needs, as well as support broader IT transformation initiatives. Emtec's service capabilities span the United States, Canada and countries around the globe. For more information visit: www.emtecinc.com .

SOURCE: Emtec, Inc.


Emtec, Inc.
David Singer, 973-232-7880
DavidSinger@emtecinc.com
or
Welz & Weisel Communications
Nicole Nolte, 703-218-3555
Nicole@w2comm.com

ETEC.. $1.2928

Leading Canadian Pharmaceutical Company Selects Emtec, Inc. Subsidiary to Provide Value Based Management Services...

MARLTON, N.J., Mar 09, 2010 (BUSINESS WIRE) -- Emtec, Inc. (ETEC, Trade ), a systems integrator, today announced that Axcan Pharma ("Axcan"), a leading specialty pharmaceutical company in Montreal, Quebec, selected Emtec subsidiary, KOAN-IT, to provide Value Based Management (VBM) services to help align its IT infrastructure, people and services with their operational and internal end user support needs. As a result of the VBM assessment, Axcan lowered operational costs and improved its ability to measure the value of IT services for the organization.

With over 500 employees in the United States, the European Union and Canada, requiring IT support, Axcan Pharma decided to evaluate the activities/services of its outsourced IT support provider. Emtec's subsidiary, KOAN-IT, was chosen to construct an analysis of Axcan's IT needs, the services their IT outsourcer provided, and then create a roadmap with specific recommendations for development of an IT improvement plan moving forward.

"As our company continues to expand, we wanted to strategically assess and measure all of our IT components, specifically time to resolution," said Jean Morin, Senior Director of Information Technology and Solutions, Axcan. "We selected Emtec (KOAN-IT) to create a customized framework that would identify and detail our IT services and measure the value of our current offerings. By the end of the process we nearly doubled our service catalog, documented expected service levels and are now able to measure performance/time to resolution. We have become more proactive instead of reactive.

"Emtec (KOAN-IT) is helping us realize our strategic plan- To evolve our IT division from someone who just delivers PCs or support to an integral part of organization bringing solutions and strategies that truly accelerate corporate strategy and goals. We are changing the value of IT to our organization."

With a stronger and more efficient service catalog properly defined, KOAN-IT developed a value chain model for Axcan's IT infrastructure which provides a roadmap to identify areas that Axcan would like to improve upon. This process provided the company with a forward looking vision into its future business objectives and enabled them to adjust services while identifying the resource/cost changes associated with those adjustments. These VBM techniques ensure that IT investments are being allocated in the right areas to bring the most value to the business.

"Given our in-depth knowledge and highly trained professional team, we were able to implement an innovative service that can assess an organization's current services and map them to future business objectives," said Renee-Claude Lafontaine, IT Strategic Value Consultant, KOAN-IT. "By understanding the demand-for-value that is consumed by the organization, and how on-going IT activities and initiatives are contributing to the delivery or improvement of that value, IT managers and executive staff are empowered with real data to make decisions and no longer need to rely on instinct and intuition."

VBM enables organizations to align their IT infrastructure, people and services with their operational and customer service needs while reducing operational costs and improving their ability to measure ITs value to the organization. These VBM techniques help organizations demonstrate "real" IT value and achieve focus with continual service improvement. VBM relates IT operations and functions to IT services and the corresponding organizational value they deliver. IT services are associated to the organization using quantifiable metrics such as performance, cost and risk which are conceptualized in the value model.

About Axcan Pharma

Axcan is a privately-held leading specialty pharmaceutical company focused on gastroenterology. The company markets a wide range of products to treat gastrointestinal diseases and disorders, such as Inflammatory Bowel Disease, cholestatic liver diseases, Irritable Bowel Syndrome and pancreatic enzyme insufficiency. Within the framework of its commitment to gastroenterology, Axcan is driven by its dedication to constantly innovate to provide improved therapies and meet patients' needs.

About Emtec, Inc.

Established in 1964, Emtec, Inc. is a systems integrator providing services and products to the federal, state, local, education and commercial markets. Emtec helps clients identify and prioritize areas for improvement and then implements process, technology and business application improvements that reduce cost, improve service and align the delivery of IT with the needs of their organization. Emtec's market leading value-based management methods, coupled with best-in-class IT technology, consulting and development services, address a wide range of specific client needs, as well as support broader IT transformation initiatives. Emtec's service capabilities span the United States, Canada and countries around the globe. For more information visit: www.emtecinc.com .

SOURCE: Emtec, Inc.


Emtec, Inc.
David Singer, 973-232-7880
DavidSinger@emtecinc.com
or
Welz & Weisel Communications
Nicole Nolte, 703-218-3555
Nicole@w2comm.com

ETEC.. $1.40

MARLTON, N.J., Mar 08, 2010 (BUSINESS WIRE) -- Emtec, Inc. (ETEC, Trade ), a systems integrator, today announced that it has unified the IT consulting services of KOAN-IT under the Emtec brand. Renaming the subsidiary reflects Emtec's move toward consolidating and integrating its comprehensive portfolio of IT services and solutions under a single brand. This provides customers and partners with a single point of reference and builds greater awareness for Emtec and its strength as a leading systems integrator within its target markets including government, education, healthcare, financial services, telecommunications, retail, pharmaceutical and gaming.

"Over the past 24 months, we have made several acquisitions that enable Emtec to differentiate itself from the competition and better serve current and prospective customers. As we head into a new decade we felt it was important to unify all of these organizations including KOAN-IT under the Emtec brand," said Dinesh R. Desai, Chairman of the Board, Chief Executive Officer and President, Emtec, Inc. "Our move towards one company reflects our ability to incorporate our partner companies as one culture, taking the very best aspects of each entity to provide a better level of services to our clients. Looking ahead, we will continue to focus on integrating and building upon the strengths from all of the acquired companies and leverage the Emtec brand to provide the most comprehensive IT solutions for our customers."

In February 2009 Emtec acquired KOAN-IT, a high end provider of IT infrastructure and service management consulting services, to help organizations effectively address and manage big-picture issues and day-to-day events. KOAN-IT's IT Transformation Services combined with its Value Based Management methodology (a continuous cycle that drives quantifiable improvements in ITs contribution to achieving business objectives) help improve processes, technology, skills and metrics across an entire IT organization.

"By expanding our IT services and solutions offerings, we are able to demonstrate and quantify value, while reducing costs and aligning the delivery of IT within organizations. We are transforming the way IT services are delivered, ensuring our clients realize measurable value from their information technology investments," Mr. Desai stated.

About Emtec, Inc.

Established in 1964, Emtec, Inc. is a systems integrator providing services and products to the federal, state, local, education and commercial markets. Emtec helps clients identify and prioritize areas for improvement and then implements process, technology and business application improvements that reduce cost, improve service and align the delivery of IT with the needs of their organization. Emtec's market leading value-based management methods, coupled with best-in-class IT technology, consulting and development services, address a wide range of specific client needs, as well as support broader IT transformation initiatives. Emtec's service capabilities span the United States, Canada and countries around the globe. For more information visit: www.emtecinc.com .

SOURCE: Emtec, Inc.


Emtec
David Singer, 973-232-7880
DavidSinger@emtecinc.com
or
Welz & Weisel Communications
Nicole Nolte, 703-218-3555
Nicole@w2comm.com

ETEC.. $1.52

The more I read the new contract the better it seems to get.. Reminds me of ETCC......... hank

03/02/10 12:59 PM EST Buy 4888 ETEC Executed @ $1.52 Details | Edit
03/02/10 12:47 PM EST Buy 2300 ETEC Executed @ $1.5 Details | Edit
03/02/10 12:40 PM EST Buy 500 ETEC Executed @ $1.5 Details | Edit
03/02/10 11:19 AM EST Buy 461 ETEC Executed @ $1.55 Details | Edit
03/02/10 11:08 AM EST Buy 250 ETEC Executed @ $1.55 Details | Edit
03/02/10 10:51 AM EST Buy 489 ETEC Executed @ $1.55 Details | Edit
03/02/10 10:17 AM EST Buy 2000 ETEC Executed @ $1.52 Details | Edit

================================================

USDA International Technology Services Awards Emtec Federal a Contract with Ceiling Value of $82.5 Million

MARLTON, N.J., Mar 02, 2010 (BUSINESS WIRE) -- Emtec Federal (ETEC, Trade ), a systems integrator, today announced that the United States Department of Agriculture (USDA) International Technology Services (ITS) organization has awarded the company a five-year Blanket Purchase Agreement (BPA) with a not-to-exceed value of $82.5 million. ITS is the in-house provider of Information Technology (IT), service and support for more than 40,000 USDA Service Center Agency (SCA) employees and their networked computers, IT equipment and the shared infrastructure that their agency networks and applications run on.

Under this contract, Emtec Federal will provide procurement and other ancillary services to support the USDA's migration to a paperless business environment and to establish and maintain a consistent, common and compatible technical infrastructure across the SCA's 3,500 Field Service Centers (FSC). This infrastructure will support the FSC's current and future physical and organizational structure as well as current and future projected business needs. This will allow the SCA to create a team approach for program delivery in which the agencies share common resources, thus maximizing customer service and administrative efficiency.

In addition to these IT solutions for ongoing operations, Emtec Federal will provide the same type of procurement services to aid in quick recovery in natural disaster situations, to fulfill special purpose needs in homeland security and ever-changing field service job requirements. The agencies within the SCA comprise the front-line offices within USDA that directly work with its customers -- the Nation's farmers, ranchers and landowners -- in land and water conservation initiatives and farm assistance programs, to include such activities as defined in legislative farm bills.

"Our team is ready to provide USDA employees with the latest technology solutions to ensure that they can get their jobs done effectively and efficiently while simultaneously meeting legislative requirements and Presidential initiatives," said Jeff Posey, VP of Sales, Emtec Federal. "We look forward to providing the USDA and its organizations with state of the art solutions as legacy systems age and newer technologies become available."

About Emtec Federal

Emtec Federal is a subsidiary of Emtec, Inc., established in 1964, and is a systems integrator providing IT services and products to the federal market. Emtec helps clients identify and prioritize areas for improvement and then implement process, technology and business application improvements that reduce cost, improve service and align the delivery of IT with the needs of their organization. Emtec's market leading value based management methods, coupled with best-in-class IT technology, consulting and development services, allow us to address a wide range of specific client needs, as well as support broader IT transformation initiatives. Emtec's service capabilities span the USA, Canada and countries around the globe. For more information visit: www.emtecinc.com .

SOURCE: Emtec Federal


Emtec Federal
David Singer, 973-232-7880
DavidSinger@emtecinc.com
or
Welz & Weisel Communications
Nicole Nolte, 703-218-3555
Nicole@w2comm.com

ETEC..$1.54 Huge Contract..

Posted by: 10 bagger Date: Tuesday, March 02, 2010 10:09:07 AM
In reply to: 10 bagger who wrote msg# 2683 Post # of 2708



USDA International Technology Services Awards Emtec Federal a Contract with Ceiling Value of $82.5

Emtec Federal (OTCBB: ETEC), a systems integrator, today announced that the United States Department of Agriculture (USDA) International Technology Services (ITS) organization has awarded the company a five-year Blanket Purchase Agreement (BPA) with a not-to-exceed value of $82.5 million. ITS is the in-house provider of Information Technology (IT), service and support for more than 40,000 USDA Service Center Agency (SCA) employees and their networked computers, IT equipment and the shared infrastructure that their agency networks and applications run on.

Under this contract, Emtec Federal will provide procurement and other ancillary services to support the USDA's migration to a paperless business environment and to establish and maintain a consistent, common and compatible technical infrastructure across the SCA's 3,500 Field Service Centers (FSC). This infrastructure will support the FSC's current and future physical and organizational structure as well as current and future projected business needs. This will allow the SCA to create a team approach for program delivery in which the agencies share common resources, thus maximizing customer service and administrative efficiency.

In addition to these IT solutions for ongoing operations, Emtec Federal will provide the same type of procurement services to aid in quick recovery in natural disaster situations, to fulfill special purpose needs in homeland security and ever-changing field service job requirements. The agencies within the SCA comprise the front-line offices within USDA that directly work with its customers -- the Nation's farmers, ranchers and landowners -- in land and water conservation initiatives and farm assistance programs, to include such activities as defined in legislative farm bills.

"Our team is ready to provide USDA employees with the latest technology solutions to ensure that they can get their jobs done effectively and efficiently while simultaneously meeting legislative requirements and Presidential initiatives," said Jeff Posey, VP of Sales, Emtec Federal. "We look forward to providing the USDA and its organizations with state of the art solutions as legacy systems age and newer technologies become available."

About Emtec Federal

Emtec Federal is a subsidiary of Emtec, Inc., established in 1964, and is a systems integrator providing IT services and products to the federal market. Emtec helps clients identify and prioritize areas for improvement and then implement process, technology and business application improvements that reduce cost, improve service and align the delivery of IT with the needs of their organization. Emtec's market leading value based management methods, coupled with best-in-class IT technology, consulting and development services, allow us to address a wide range of specific client needs, as well as support broader IT transformation initiatives. Emtec's service capabilities span the USA, Canada and countries around the globe. For more information visit: www.emtecinc.com.

SOURCE: Emtec Federal

Emtec Federal
David Singer, 973-232-7880
DavidSinger@emtecinc.com
or
Welz & Weisel Communications
Nicole Nolte, 703-218-3555
Nicole@w2comm.com

ETEC.. $1.25.. Nice order..

Posted by: 10 bagger Date: Tuesday, February 23, 2010 10:47:59 AM
In reply to: None Post # of 2708

Emtec Federal Lands $5 Million in Contract Awards from Air Force Quarterly Enterprise Buy Program

Feb 23, 2010 07:02:00 (ET)


CHANTILLY, Va., Feb 23, 2010 (BUSINESS WIRE) -- Emtec Federal (ETEC, Trade ), a systems integrator, today announced that it has received awards from the Air Force Quarterly Enterprise Buy (QEB) program to provide Samsung 19, 24 and 32 inch flat-panel display monitors and Lenovo ThinkPad X200 Series Notebooks. All Notebooks are delivered with the latest USAF Standard Desktop Configuration fully installed. Over the next six months, Emtec Federal will manage staged deployments of these systems to agencies across all Air Force organizations worldwide. The total value of the contract is approximately $5 million.

The QEB enables the Air Force to centralize the purchase of common hardware and software products as part of an ongoing effort to streamline purchases and ensure system interoperability. The contract mandates that purchases of desktop and notebook computers be processed through the Air Force's nine major commands, and that officials consolidate hardware buys using the AFWay online procurement system to obtain optimal pricing.

"Emtec Federal has held several Blanket Purchase Agreements (BPA's) with the Air Force for ten plus years and has been a key reseller in the QEB Program since its inception in 2005. This contract further demonstrates our ability to deliver the products and services that best meet the Air Force's needs," stated Jeff Posey, vice president of sales, Emtec Federal. "Emtec Federal prides itself on offering impeccable products and services, partnering with key organizations such as Samsung and Lenovo to provide the latest IT offerings. We look forward to working with the Air Force QEB program once again to help them fulfill their IT requirements around the globe."

In 2009 Emtec Federal provided over thirty-thousand Samsung flat-panel displays and several thousand Lenovo M58 Small Form Factor desktop PC's to the Air Force via multiple QEB awards. Emtec Federal has a strong track record in delivering best-in-class solutions to federal agencies through various sales vehicles including its own GSA Schedule (GS-35F-4564G), BOPnet BPA, Department of Health & Human Services Peripherals BPA, Army ADMC-2, NASA SEWP IV and the National Institutes of Health ECS3.

About Emtec Federal

Emtec Federal, established in 1964 and a subsidiary of Emtec, Inc., is a systems integrator providing services and products to the federal market. Emtec Federal helps clients identify and prioritize areas for improvement and then implements process, technology and business application improvements that reduce cost, improve service and align the delivery of IT with the needs of their organization. Emtec's market leading value-based management methods, coupled with best-in-class IT technology, consulting and development services, address a wide range of specific client needs, as well as support broader IT transformation initiatives. Emtec's service capabilities span the United States, Canada and countries around the globe. For more information visit: www.emtecfederal.com .

SOURCE: Emtec Federal


Media Contacts:
Emtec Federal
David Singer, 973-232-7880
DavidSinger@emtecinc.com
or
Welz & Weisel Communications
Nicole Nolte, 703-218-3555
Nicole@w2comm.com

ETEC.. $1.12

Posted by: 10 bagger Date: Tuesday, January 19, 2010 3:01:21 PM
In reply to: None Post # of 2708

Can't believe that ETEC hasn't caught a pop..

Emtec, Inc. Announces 1Q 2010 Results

PR Newswire - Jan 19 at 10:29 NONE

Company Symbols: NASDAQ-OTCBB:ETEC

Net income increased by 39.9%; Earnings per share increased by 28.6%


MARLTON, N.J., Jan. 19 /PRNewswire-FirstCall/ -- Emtec, Inc. (OTC Bulletin Board: ETEC) ("Emtec" or the "Company") announced today that for the quarter ended November 30, 2009, consolidated operating income increased to $2.5 million, compared to $1.9 million in the quarter ended November 30, 2008. Net income before interest, taxes, depreciation and amortization ("EBITDA") for the quarter ended November 30, 2009 increased to $3.1 million from $2.5 million in the quarter ended November 30, 2008. Adjusted EBITDA, which is defined by management as net income before interest, taxes, depreciation, amortization, retention bonuses, non-essential overhead, stock based compensation, executive recruiting fees, severance and the recovery of prior year expenses ("Adjusted EBITDA"), increased to $3.4 million in the quarter ended November 30, 2009 from $2.8 million in the quarter ended November 30, 2008. Net income for the quarter ended November 30, 2009 increased to $1.4 million, as compared to $1.0 million in the quarter ended November 30, 2008. Earnings per share for the quarter ended November 30, 2009 increased $0.02 to $0.09 per share from $0.07 per share in the quarter ended November 30, 2009. A reconciliation of EBITDA and Adjusted EBITDA to net income (loss) is attached to this press release.

(Logo: http://www.newscom.com/cgi-bin/prnh/20080414/EMTECLOGO)

EBITDA and Adjusted EBITDA are key financial metrics used by the Company's board of directors and management to evaluate and measure the Company's operating performance on a going forward basis. These metrics are not in conformity with generally accepted accounting principles in the United States of America ("GAAP"). Management's calculation of EBITDA eliminates the effect of charges primarily associated with financing decisions, tax regulations and capital investments. Adjusted EBITDA also eliminates certain non-recurring or unusual costs, reflects certain changes made by management during the quarter and makes adjustments which in the opinion of management are necessary to reflect the underlying ongoing operations of the business going forward. Net income (loss) is the most comparable GAAP measure of the Company's operating results presented in the Company's consolidated financial statements. We have made a reconciliation of these non-GAAP measures to net income (loss), the most closely comparable GAAP measure, for the quarters ended November 30, 2009 and 2008 and discussed these adjustments below. EBITDA and Adjusted EBITDA should not be considered as an alternative to net income (loss) or any other GAAP measure of performance or liquidity, and may not be comparable to other similarly titled measures of other companies. Management believes that the presentation of EBITDA and Adjusted EBITDA is important to investors because Adjusted EBITDA is used by management to evaluate financial performance and continuing operations and to determine resource allocation for each of our business segments.

Highlights for quarter ended November 30, 2009 include:

-- Total gross profit increased 19.9% from $8.8 million to $10.5 million
-- Overall gross margin rose to 14.3% from 12.6%
-- Services and consulting gross profit increased 53.3% from $2.8 million
to $4.3 million
-- Services and consulting gross margin rose to 30.5% from 20.7%
-- Operating income increased to $2.5 million from $1.9 million, growth of
30.4%
-- Earnings Per Share increased to $0.09 from $0.07, growth of 28.6%




Adjusted EBITDA for the Emtec Infrastructure Services ("EIS") division increased $1.1 million to $3.0 million for the quarter ended November 30, 2009, compared to $1.9 million for the quarter ended November 30, 2008. This increase in Adjusted EBITDA is primarily attributable to increased gross profit from the growth in revenues from services and consulting, primarily attributable to various IT projects for school districts in Florida and Georgia and various departments of the U.S. government. Except for retention bonuses all adjustments included in the calculation of Adjusted EBITDA set forth in the reconciliation table below were for this division.

Adjusted EBITDA for the Emtec Global Services ("EGS") division was $426,000 for the quarter ended November 30, 2009 compared with $939,000 for the quarter ended November 30, 2008. This decline was caused by a 22.1% decrease in hours billed and a 7.2% decrease in the average hourly billing rate during the three months ended November 30, 2009 compared with the corresponding period in 2008. Billable hours decreased by 22.1%, primarily due to decreases in our Business Analysis and Quality Assurance practices. Most of the clients EGS serves are commercial clients and we believe that this decrease in commercial business is primarily attributed to the current economic downturn. The EGS adjustment included in the calculation of Adjusted EBITDA includes retention bonuses paid during the quarter ended November 30, 2009.

Net income on a consolidated basis increased by $401,000 to $1.4 million for the quarter ended November 30, 2009, compared to $1.0 million for the quarter ended November 30, 2008.

"We are excited about the continued operating performance of the business. Our federal and education businesses continue to perform strongly. While the declines in our EGS business are concerning, they were not unexpected given the current economic environment. We continue to experience challenges in the commercial market place, however, we believe our industry diversification has softened the blow of the economic downturn versus our competitors. We continue to focus on selling our portfolio of services into our client base and feel this will eventually lead to strong growth in all our businesses," said Dinesh Desai, Chairman and Chief Executive Officer of Emtec.

About Emtec:

Emtec, Inc., a Delaware corporation, was formed on January 17, 2001 (the "Company") and is an information technology ("IT") systems integrator, providing consulting, staffing, application services and infrastructure solutions to commercial, federal, education, state and local government clients. The Company's specific practices include IT consulting, communications, data management, enterprise computing, managed services, business service management solutions, training, storage and data center planning and development and staff augmentation solutions. The Company's client base is comprised of departments of the United States and Canada's federal, state and local governments, schools and commercial businesses throughout the United States and Canada.

Certain statements in this document constitute "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements involve known and unknown risks, uncertainties and other factors, which may cause the actual results, performance or achievements of the Company or industry results, to be materially different from any future results, performance, or achievements expressed or implied by such forward-looking statements. The Company's future operating results are dependent upon many factors, including but not limited to the Company's ability to: (i) obtain sufficient capital or a strategic business arrangement to fund its plan of operations when needed; (ii) build the management and human resources and infrastructure necessary to support the growth of its business; (iii) competitive factors and developments beyond the Company's control; and (iv) other risk factors discussed in the Company's periodic filings with the Securities and Exchange Commission which are available for review at www.sec.gov under "Search for Company Filings." We undertake no obligation to publicly update or revise any forward-looking statements to reflect changed assumptions, the occurrence of anticipated or unanticipated events, or changes to future results over time.

Consolidated Financial Statements


EMTEC, INC.

CONSOLIDATED STATEMENTS OF INCOME

(In thousands)

Three Months Ended November 30,

2009 2008 Change %

Revenues

Procurement services $ 59,382 $ 56,359 $ 3,023 5.4%

Service and consulting 14,195 13,660 535 3.9%

Total Revenues 73,577 70,019 3,558 5.1%



Cost of Sales

Cost of procurement services 53,173 50,392 2,781 5.5%

Service and consulting 9,860 10,833 (973) (9.0)%

Total Cost of Sales 63,033 61,225 1,808 3.0%



Gross Profit

Procurement services 6,209 5,967 242 4.1%

Procurement services % 10.5% 10.6%



Service and consulting 4,335 2,827 1,508 53.4%

Service and consulting % 30.5% 20.7%



Total Gross Profit 10,544 8,794 1,750 19.9%

Total Gross Profit % 14.3% 12.6%



Operating expenses:

Selling, general, and administrative
expenses 7,278 6,178 1,100 17.8%

Rent expense – related party 154 152 2 1.0%

Depreciation and amortization 596 534 62 11.6%

Total operating expenses 8,028 6,864 1,164 17.0%

Percent of revenues 10.9% 9.8%



Operating income 2,516 1,930 586 30.4%

Percent of revenues 3.4% 2.8%



Other expense (income):

Interest income – other (11) (5) (6) 124.4%

Interest expense 145 254 (109) (42.9)%

Other (8) 4 (12) (292.1)%



Income before income taxes 2,390 1,676 714 42.6%

Provision for income taxes 983 670 313 46.6%

Net income $ 1,407 $ 1,006 $ 401 39.9%

Percent of revenues 1.9% 1.4%










Reconciliation of net income to EBITDA and Adjusted EBITDA


EMTEC, INC.

RECONCILIATION OF NET INCOME TO EBITDA AND ADJUSTED EBITDA

(In thousands)

Three Months Ended November 30,

2009 2008 Change

Net income $ 1,407 $ 1,006 $ 401

Interest and other expense (income): 126 253 (127)

Income taxes 983 670 313

Depreciation and amortization 596 534 62

EBITDA 3,112 2,464 648



Retention bonuses (1) 90 -

Elimination of non-essential overhead (2) - 539

Stock based compensation 86 42

Executive recruiting (3) 99 15

Severance 29 23

Recovery of prior year expenses (4) - (270)

Total Adjustments 303 349

Adjusted EBITDA $ 3,415 $ 2,813 $ 603






1) Expenses associated with retention bonuses which were agreed to in connection with the closing of the Company's acquisition of Luceo.

2) Elimination of non-essential overhead includes expenses incurred, which were eliminated by management during the three months ended November 30, 2008 and will not recur on an ongoing basis. These charges included $78,000 paid to the former owners of Westwood under contracts that were not renewed (net of ongoing consulting costs paid to an owner), $361,000 paid to a senior executive under a contract that was not renewed and paid to other at-will employees whose positions were terminated and $100,000 in sales compensation changes implemented during the three months ended November 30, 2008.

3) Reflects executive recruiting fees incurred in connection with a management launched search for a senior executive in 2009. Management made a one-time decision to invest in the business by hiring new senior executives to grow the business in 2010 and thereafter.

4) Offset from recovered professional fees which the Company previously recorded as an expense that were associated with defending the Company's tax positions during the IRS' 2003 and 2004 tax audit and appeal process.

Web site www.emtecinc.com

SOURCE Emtec, Inc.

ETEC.. $1.07

Posted by: 10 bagger Date: Thursday, January 14, 2010 5:54:22 PM
In reply to: 10 bagger who wrote msg# 2489 Post # of 2708



ETEC filed a 10Q today for the first QTR.. hank

FORM 10-Q


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


For the quarterly period ended November 30, 2009


Commission file number: 0-32789

EMTEC, INC.
(Exact name of registrant as specified in its charter)

Delaware 87-0273300
(State of incorporation or organization) (I.R.S. Employer Identification
No.)



525 Lincoln Drive
5 Greentree Center, Suite 117
Marlton, New Jersey 08053
(Address of principal executive offices, including zip code)


(856) 552-4204
(Registrant’s telephone number, including area 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 x No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes o No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company (see the definitions of “large accelerated filer,” “accelerated filer,” and “smaller reporting company” in Rule 12b-2 of the Exchange Act). (Check one)

Large accelerated filer o Accelerated filer o Non-accelerated filer o Smaller reporting company x

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No x

As of January 4, 2010, there were outstanding 15,742,431 shares of the registrant’s common stock.



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EMTEC, INC.
FORM 10-Q FOR THE QUARTER ENDED NOVEMBER 30, 2009

Table of Contents

PART I – FINANCIAL INFORMATION

Item 1 - Financial Statements

Condensed Consolidated Balance Sheets 1

Condensed Consolidated Statements of Income 2

Condensed Consolidated Statements of Cash Flows 3

Notes to Condensed Consolidated Financial Statements 4

Item 2 - Management’s Discussion and Analysis of Financial Condition and Results of Operations 18

Item 3 - Quantitative and Qualitative Disclosures About Market Risk 34

Item 4T - Controls and Procedures 35

PART II – OTHER INFORMATION

Item 1 – Legal Proceedings 36

Item 6 – Exhibits 37

SIGNATURES 38




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PART I – FINANCIAL INFORMATION
Item 1. Financial Statements


EMTEC, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In Thousands, Except per Share and Share Data)


November 30,2009
(Unaudited) August 31, 2009

Assets

Current Assets

Cash $ 4,186 $ 1,713
Receivables:
Trade, less allowance for doubtful accounts 41,407 29,463
Others 1,996 2,184
Inventories, net 5,983 4,410
Prepaid expenses and other 1,698 2,184
Deferred tax asset - current 933 680

Total current assets 56,203 40,634

Property and equipment, net 1,331 1,390
Intangible assets, net 10,864 11,235
Goodwill 11,441 11,424
Deferred tax asset- long term 388 459
Other assets 113 131

Total assets $ 80,340 $ 65,273

Liabilities and Stockholders' Equity

Current Liabilities

Line of credit $ 14,909 $ 9,035
Accounts payable 33,599 25,390
Current portion of long term debt - related party 728 1,213
Income taxes payable 1,012 590
Accrued liabilities 6,579 6,723
Deferred revenue 1,895 2,103

Total current liabilities 58,722 45,054

Deferred tax liability- long term 2,673 2,816
Accrued liabilities 184 180

Total liabilities 61,579 48,050

Commitments and contingencies
Stockholders' Equity
Common stock $0.01 par value; 25,000,000 shares authorized; 18,169,679 and 18,059,679 shares issued and 15,305,090 and 15,195,090, outstanding at November 30, 2009 and August 31, 2009, respectively 181 181
Additional paid-in capital 20,880 20,794
Retained earnings 3,078 1,671
Accumulated other comprehensive income 218 173
24,357 22,819
Less: treasury stock, at cost, 2,864,589 shares (5,596 ) (5,596 )

Total stockholders' equity 18,761 17,223

Total liabilities and stockholders' equity $ 80,340 $ 65,273



The accompanying notes are integral parts of these consolidated financial statements.



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EMTEC, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
(In Thousands, Except per Share and Share Data)


For the Three Months Ended November 30,
2009 2008
Revenues

Procurement services $ 59,382 $ 56,359
Service and consulting 14,195 13,660

Total Revenues 73,577 70,019

Cost of Sales

Cost of procurement services 53,173 50,392
Service and consulting 9,860 10,833

Total Cost of Sales 63,033 61,225

Gross Profit

Procurement services 6,209 5,967
Service and consulting 4,335 2,827

Total Gross Profit 10,544 8,794

Operating expenses:

Selling, general, and administrative expenses 7,278 6,178
Rent expense – related parties 154 152
Depreciation and amortization 596 534
Total operating expenses 8,028 6,864

Operating income 2,516 1,930

Other expense (income):
Interest income – other (11 ) (5 )
Interest expense 145 254
Other expense (8 ) 4

Income before income taxes 2,390 1,676
Provision for income taxes 983 670
Net income $ 1,407 $ 1,006

Net income per common share
Basic and Diluted $ 0.09 $ 0.07

Weighted Average Shares Outstanding
Basic 14,914,912 14,578,827

Diluted 15,112,667 14,632,335



The accompanying notes are integral parts of these consolidated financial statements.



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EMTEC, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(In Thousands)


For the Three Months Ended November 30,
2009 2008
Cash Flows From Operating Activities
Net income $ 1,407 $ 1,006

Adjustments to Reconcile Net Income to Net
Cash Used In Operating Activities
Depreciation and amortization 188 189
Amortization related to intangible assets 408 345
Deferred income taxes (benefit) (338 ) (216 )
Stock-based compensation 86 42
Indemnification of professional fees - (270 )

Changes In Operating Assets and Liabilities
Receivables (11,735 ) (2,670 )
Inventories (1,573 ) (1,814 )
Prepaid expenses and other assets 528 189
Accounts payable 8,210 2,519
Income taxes payable 422 477
Accrued liabilities (195 ) (412 )
Deferred revenue (235 ) (144 )
Net Cash Used In Operating Activities (2,827 ) (759 )

Cash Flows From Investing Activities
Purchases of property and equipment (129 ) (78 )
Acquisition of businesses, net of cash acquired - (165 )
Net Cash Used In Investing Activities (129 ) (243 )

Cash Flows From Financing Activities
Net increase in line of credit 5,874 1,474
Repayment of debt (497 ) (237 )
Net Cash Provided By Financing Activities 5,377 1,237

Effect of rate changes on cash 53 -

Net Increase in Cash 2,473 235
Beginning Cash 1,713 2,025

Ending Cash $ 4,186 $ 2,260
Supplemental Disclosure of Cash Flow Information
Cash paid during the period for:
Income taxes $ 857 $ 209
Interest $ 132 $ 146

Supplemental Schedule of Non Cash Investing and Financing Activities
Indemnification receivable due from former shareholders settled by the amounts due to former shareholders $ - $ 631



The accompanying notes are integral parts of these consolidated financial statements.



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EMTEC, INC
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


1. Basis of Presentation


The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and note disclosures required by accounting principles generally accepted in the United States of America for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring adjustments) considered necessary for a fair presentation have been included in the accompanying unaudited condensed consolidated financial statements. Quarterly results are not necessarily indicative of results for the full year. For further information, refer to the annual financial statements and notes thereto included in the Company's Annual Report on Form 10-K for the fiscal year ended August 31, 2009.


2. General


Description of Business


Emtec, Inc., a Delaware corporation, (the “Company”) is an information technology (“IT”) systems integrator, providing consulting, services and infrastructure solutions to commercial, federal, education, state and local government clients. The Company’s areas of specific practices include IT consulting, communications, data management, enterprise computing, managed services, business service management solutions, training, storage and data center planning and development. The Company’s client base is comprised of departments of federal, state and local governments in the United States and Canada, schools and commercial businesses throughout the United States and Canada.

Principles of Consolidation


The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries, Emtec, Inc., a New Jersey Corporation (“Emtec NJ”), Emtec Viasub LLC (“Emtec LLC”), Emtec LLC’s wholly-owned subsidiary Emtec Federal, Inc. (“Emtec Federal”), Emtec Global Services LLC (“EGS”), EGS’ wholly-owned subsidiaries Luceo, Inc. (“Luceo”), eBusiness Application Solutions, Inc. (“eBAS”), Aveeva, Inc. (“Aveeva”) and Aveeva’s subsidiary Aviance Software India Private Limited (“Aviance”), Emtec Infrastructure Services Corporation (“EIS-US”), and EIS-US’s wholly-owned subsidiaries Emtec Infrastructure Services Canada Corporation (“EIS-Canada”), which is referred to in this report as KOAN-IT, and KOAN-IT (US) Corp. (“KOAN-IT (US)”). Significant intercompany account balances and transactions have been eliminated in consolidation.

Segment Reporting


The Company divides its operating activity into two operating segments for reporting purposes: Emtec Infrastructure Services Division (“EIS”) and Emtec Global Services Division (“EGS”). EIS consists of the Company’s historical business (“Systems Division”) which includes Emtec NJ, Emtec LLC, Emtec Federal and the business service management solutions offered by the Information Technology Service Management (“ITSM”) practice. EGS is the Company’s enterprise applications services solutions and training business including its Enterprise Resource Planning (“ERP”) and Application Development practice and its Business Analysis and Quality Assurance Practice.


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Accounting Estimates


The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of financial statements and the reported amounts of revenues and expenses during the reporting period, including, but not limited to, receivable valuations, impairment of goodwill and other long-lived assets and income taxes. Management’s estimates are based on historical experience, facts and circumstances available at the time and various other assumptions that are believed to be reasonable under the circumstances. The Company reviews these matters and reflects changes in estimates as appropriate. Actual results could differ materially from those estimates.


Goodwill


Goodwill represents costs in excess of fair values assigned to the underlying net assets of acquired companies. In accordance with ASC 350 “Intangibles- Goodwill and Other,” goodwill is not amortized but tested for impairment annually, or more frequently if events or changes in circumstances indicate that the asset might be impaired. The Company has set an annual impairment testing date of June 1. The impairment determination is made at the reporting unit level and consists of two steps. First, the Company determines the fair value of the reporting unit and compares it to its carrying amount. Second, if the carrying amount of the reporting unit exceeds its fair value, an impairment loss is recognized for any excess of the carrying amount of the reporting unit’s goodwill over the implied fair value of that goodwill. The implied fair value of goodwill is determined by allocating the fair value of the reporting unit in a manner similar to a purchase price allocation, in accordance with ASC 805 “Business Combinations.” The residual fair value after this allocation is the implied fair value of the reporting unit goodwill. The Company’s policy is to perform its annual impairment testing for all reporting units as of June 1. An impairment charge will be recognized only when the implied fair value of a reporting unit, including goodwill, is less than its carrying amount.


The changes in the carrying amount of goodwill for the three months ended November 30, 2009 are as follows (in thousands):


Balance at August 31, 2009 $ 11,424
Foreign currency translation effect of Canadian goodwill 17
Balance at November 30, 2009 $ 11,441



Based on the income (discounted cash flows) and market-based (guideline company method) valuation approaches, there was no goodwill impairment for the Company’s reporting units consisting of: Systems Division, KOAN-IT, Luceo and eBAS/Aveeva, at June 1, 2009. At November 30, 2009, Emtec's market capitalization was less than its total stockholders' equity, which is one factor the Company considered when determining whether goodwill should be tested for impairment between annual tests. The Company’s stock does not trade frequently and thus management believes the inherent value of the Company has not been reflective of the current or historical stock market valuation of the Company. While we are taking steps to improve our operating performance and grow the Company, we cannot guarantee that the market price will reflect the true value of the stock. The Company’s stock could also be subject to significant volatility. The Company does not currently believe that the reduced market capitalization represents a goodwill impairment indicator as of November 30, 2009. However, if current market conditions persist and the Company’s estimated value under the income and market-based approaches is affected, then it is possible that the Company may have to take a goodwill impairment charge against earnings in a future period.


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Identifiable Intangible Assets


At November 30, 2009 and August 31, 2009, the components of identifiable intangible assets are as follows (in thousands):

November 30, 2009 August 31, 2009
Customer relationships $ 14,098 $ 14,098
Noncompete agreements 398 398
Trademarks 169 169
Foreign currency translation adjustment 41 -
14,706 14,665
Accumulated amortization (3,838 ) (3,430 )
Foreign currency translation adjustment (4 ) -
Balance, ending $ 10,864 $ 11,235


Customer relationships represent the value ascribed to customer relationships purchased in 2005, the acquisitions of Luceo and eBAS/Aveeva in fiscal 2008 and the acquisition of KOAN-IT in February 2009. The amounts ascribed to customer relationships are being amortized on a straight-line basis over 5-15 years.


Noncompete agreements represent the value ascribed to covenants not to compete in employment and acquisition agreements with certain members of Luceo, eBAS/Aveeva and KOAN-IT’s management entered into at the time of the respective acquisitions. The amounts ascribed to noncompete agreements are being amortized on a straight-line basis over 5 years.


Trademarks represent the value ascribed to trade name and trademarks owned by KOAN-IT. The amounts ascribed to trademarks are being amortized on a straight-line basis over 5 years.


Amortization expense related to intangible assets was $408,000 and $345,000 for the three months ended November 30, 2009 and 2008, respectively. We currently expect future amortization for the next four years ending August 31, 2010 through 2013 will be approximately $1.6 million per year and for the fiscal year ending 2014 will be approximately $937,000.


Long-lived assets, including customer relationships and property and equipment, are tested for recoverability whenever events or changes in circumstances indicate that their carrying amount may not be recoverable in accordance with ASC 350 “Intangibles- Goodwill and Other” and ASC 360 “Property, Plant and Equipment”. Recoverability of long-lived assets is assessed by a comparison of the carrying amount to the estimated undiscounted future net cash flows expected to result from the use of the assets and their eventual disposition. If estimated undiscounted future net cash flows are less than the carrying amount, the asset is considered impaired and a loss would be recognized based on the amount by which the carrying value exceeds the fair value of the asset. No impairment of long-lived assets occurred during the fiscal years ended 2009 and 2008.


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Foreign Currency Translation and Other Comprehensive Income


The financial statements of the Company’s foreign subsidiaries are remeasured into U.S. dollars for consolidation and reporting purposes. The functional currency for the Company’s foreign operations is the local currency. Current rates of exchange are used to remeasure assets and liabilities. Adjustments to translate those statements into U.S. dollars are recorded in accumulated other comprehensive income.


The Company’s comprehensive income is presented in the following table:

For the Three Months Ended November 30,
2009 2008

Net Income $ 1,407 $ 1,006
Cumulative translation adjustment, net of taxes 45 -
Total comprehensive income $ 1,452 $ 1,006



Earnings Per Share


Basic earnings per share amounts are computed by dividing net income available to common stockholders (the numerator) by the weighted average shares outstanding (the denominator), during the period. Shares issued during the period are weighted for the portion of the period that they were outstanding.


The computation of diluted earnings per share is similar to the computation of basic earnings per share, except that the denominator is increased to include the number of additional common shares that would have been outstanding if dilutive options, restricted stock awards and warrants had been exercised as of the end of the period. Potentially dilutive shares consist of stock options, restricted stock awards and warrants totaling 197,755 and 53,508 for the three months ended November 30, 2009 and 2008, respectively. Outstanding warrants to purchase 1,700,566 and 1,682,444 common shares as of and for the periods ended November 30, 2009 and 2008, respectively, were not included in the computation of diluted earnings per share because the exercise price was greater than the average market price of the Company’s common shares over those periods.


Income Taxes and Due to Former Stockholders


The Company accounts for income taxes in accordance with ASC 740 "Income Taxes". The Company files a federal consolidated tax return that includes all U.S. entities. The Company also files several combined/consolidated state tax returns and several separate state tax returns. Deferred taxes are provided based upon a review of the tax bases of assets and liabilities, whereby deferred tax assets and liabilities are recognized for temporary differences. Temporary differences are the differences between the reported amounts of assets and liabilities and their tax bases. Deferred tax assets are recognized for tax loss carryforwards. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized. Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws and rates on the date of enactment. Deferred taxes result from timing differences primarily relating to bad debts, inventory reserves, deferred revenue, fixed asset depreciation, compensation expenses and intangible amortization.


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In October 2008, the Company settled the August 2003 and April 2004 tax audits of Emtec Federal, formerly known as Westwood Computer Corporation (“Westwood”), with the Appeals Office of the IRS. The settlement agreement resulted in an additional federal income tax payment of $145,000, which included interest of $41,000. The Company has filed 2003 and 2004 amended New Jersey income tax returns to pay additional New Jersey taxes that resulted from the IRS settlement. The accounting to record the settlements of these pre-merger tax liabilities under ASC 740 resulted in adjustments to goodwill and to deferred tax assets. Since the Westwood merger agreement included indemnification coverage by Westwood’s former stockholders, the Company recorded a receivable “due from the Westwood former stockholders” of $631,000. The $631,000 included pre-merger tax liabilities totaling $361,000 plus associated professional fees to defend the Company’s tax positions totaling $270,000. The $361,000 portion of the Company’s indemnity claim was recorded as a reduction to goodwill acquired in the April 2004 Westwood merger. The remaining $270,000 portion was recorded as a reduction to selling, general and administrative expenses during the three months ended November 30, 2008.


The “due from Westwood former stockholders” receivable was satisfied during October 2008, based on offsetting amounts “due to Westwood former stockholders” totaling $631,000. The amounts “due to Westwood former stockholders” represented funds we held as unclaimed merger consideration.


We conduct business nationally and, as a result, file income tax returns in the U.S federal jurisdiction and various state and local jurisdictions. With a few exceptions, we are no longer subject to federal, state or local income tax examinations for tax returns filed for fiscal years 2005 and prior.


Reconciliation of Liabilities for Unrecognized Tax Benefits for the three months ended November 30, 2009 and 2008 (in thousands) are as follows:

2009 2008
Balance at September 1 $ 202 $ 693

Unrecognized tax positions of prior periods:
Increase - -
Decrease - -

Unrecognized tax positions of current year:
Increase 6 3
Decrease - -

Decrease in Unrecognized tax benefits due to settlements - (547 )

Decrease in Unrecognized tax benefits due to lapse of statute of limitations - -

Balance at November 30 $ 208 $ 149



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For the Three Months Ended,
November 30, 2009 November 30, 2008
Total amount of unrecognized tax benefits that, if recognized, would affect the effective tax rate $ 94 $ 51

Accrued interest and penalties for unrecognized tax benefits $ 83 $ 63

Interest and penalties classified as income tax expense (benefit) $ 5 $ (24 )



Subsequent Events


ASC 855 “Subsequent Events” establishes general standards of accounting for and disclosure of events that occur after the balance sheet date but before financial statements are issued. The pronouncement provides: (a) the period after the balance sheet date during which management of a reporting entity should evaluate events or transactions that may occur for potential recognition or disclosure in the financial statements; (b) the circumstances under which an entity should recognize events or transactions occurring after the balance sheet date in its financial statements; and (c) the disclosures that an entity should make about events or transactions that occurred after the balance sheet date. Management has evaluated subsequent events through January 14, 2010, the date on which financial statements were issued and has determined that no recognized and non-recognized subsequent events warranted inclusion or disclosure in the interim financial statements as of November 30, 2009.


3. Acquisitions


Enterprise Management Solutions, Inc.


On May 12, 2009, KOAN-IT (US) acquired certain assets of EMS, a company under Chapter 11 bankruptcy protection in the Middle District of Florida. The purchase price consisted of $150,000 cash at closing. Additionally, the Company capitalized professional fees of $108,000 that were associated with the acquisition of the assets of EMS. The acquisition was funded through borrowings under the Credit Facility with the Lender (as such terms are later defined in footnote #5).


The Company accounted for the acquisition under the purchase method whereby amounts were assigned to assets acquired based on their fair values on the date of the acquisition. Management determined the fair value of EMS’ assets on May 12, 2009 was $6,000 (property and equipment), which resulted in an excess purchase price over fair value of assets acquired of $252,000 that was recognized as goodwill.


Unaudited pro forma condensed results of operations are not included in this report because the effect of the acquisition is not material.


KOAN-IT Corp.


On February 12, 2009, EIS-Canada, EIS-US, KOAN-IT and the shareholders of KOAN-IT (the “Shareholders”) entered into a Share Purchase Agreement pursuant to which (i) EIS-Canada acquired all of the outstanding stock of KOAN-IT from the Shareholders and (ii) EIS-US acquired all of the outstanding stock of KOAN-IT (US) from KOAN-IT for an aggregate consideration of up to approximately $3.3 million. The purchase price consisted of (i) cash at closing in an aggregate amount equal to $1.2 million (consisting of approximately $1.2 million for the outstanding stock of KOAN-IT and $20,000 for the outstanding stock of KOAN-IT (US)), (ii) unsecured subordinated 6% promissory notes issued to each of the Shareholders in an aggregate principal amount of $408,000 payable in full on the 12 month anniversary of the closing and (iii) the potential right to receive additional cash consideration each year for the next three years on the anniversary of the closing, in the aggregate totaling $1.6 million if certain performance goals are met. The acquisition was funded through borrowings under the Credit Facility with the Lender (as such terms are later defined in footnote #5 – Line of Credit below).


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The Company accounted for the acquisition under the purchase method, whereby, amounts were assigned to assets acquired and liabilities assumed based on their fair values, on the date of the acquisition. Management determined the fair value of KOAN-IT and KOAN-IT (US)’s net assets on February 12, 2009 was $1.1 million, which resulted in an excess purchase price over fair value of net assets acquired of $548,000, which was recognized as goodwill.


The allocation of purchase price by significant component is as follows (in thousands):

Cash $ 572
Trade receivable, net 985
Prepaid expenses and other current assets 583
Plant and equipment 70
Customer relationships 1,100
Trademarks 150
Noncompete asset 25
Accounts payable (463 )
Income taxes payable 27
Deferred tax liabilities (415 )
Deferred revenue (848 )
Accrued expenses (703 )
Fair value of net assets acquired 1,083
Purchase price 1,631
Excess purchase price $ 548



The allocation is preliminary and such amounts are subject to adjustments as additional analysis is performed or obtained from third party sources. The Company allocated $1.1 million to client relationships at the acquisition date that is being amortized over a period of six years. The Company also allocated $150,000 and $25,000 to trademarks and a noncompete asset, respectively, that are being amortized over a period of five years. The allocation of purchase price at closing did not include amounts contingently payable in the future as described above.

The Company capitalized professional fees of $246,000 that were associated with the acquisition of KOAN-IT and KOAN-IT (US).


Unaudited pro forma condensed results of operations are not included in this report because the effect of the acquisition is not material.


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4. Stock-Based Compensation and Warrants

Stock Options

An amendment to the Company’s 2006 Stock-Based Incentive Compensation Plan (the “2006 Plan”) was approved by the Company’s stockholders on February 2, 2009. The 2006 Plan authorizes the granting of stock options to directors and eligible employees. The amendment increased the aggregate number of shares of Common Stock available under the 2006 Plan from 1,400,000 shares to 2,543,207 shares eligible for issuance at prices not less than 100% of the fair value of the Company’s common stock on the date of grant (110% in the case of stockholders owning more than 10% of the Company’s common stock). Options under the 2006 Plan have terms from 7 to 10 years and certain options vest immediately and others through a term up to 4 years.

The Company measures the fair value of options on the grant date using the Black-Scholes option valuation model. The Company estimated the expected volatility using the Company’s historical stock price data over the expected term of the stock options. The Company also used historical exercise patterns and forfeiture behaviors to estimate the options, expected term and our forfeiture rate. The risk-free interest rate is based on the U.S. Treasury zero-coupon yield curve in effect on the grant date. Both expected volatility and the risk-free interest rate are based on a period that approximates the expected term.

A summary of stock options for the three months ended November 30, 2009 is as follows:

For the Three Months EndedNovember 30, 2009 Shares Weighted
Average Exercise
Price Weighted Average
Remaining Term Aggregate Intrinsic
Value *
Options Outstanding -September 1, 2009 359,500 $ 1.15
Options Granted - -
Options Exercised - -
Options Forfeited or Expired - -

Options Outstanding - November 30, 2009 359,500 $ 1.15 5.49 years $ 25,700

Options Exercisable - November 30, 2009 301,425 $ 1.12 5.49 years $ 25,700


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* Represents the total pre-tax intrinsic value based on the Company’s average closing stock prices for the three months ended November 30, 2009.

There were no stock options issued during the three months ended November 30, 2009.

Nonvested Stock (Restricted Stock)

The following table summarizes the Company’s restricted stock activity during the three months ended November 30, 2009:


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For the Three Months Ended November 30, 2009 Shares Weighted
Average Grant
Date Fair Value Fair Value
Nonvested - September 1, 2009 565,859 $ 0.72
Granted 110,000 $ 0.99
Vested (285,681 ) $ 0.60 $ 278,856 (a)
Forfeited - -
Nonvested - November 30, 2009 390,178 $ 0.89 $ 378,473 (b)


(a) The fair value of vested restricted stock shares represents the total pre-tax fair value, based on the closing stock price on the day of vesting, which would have been received by holders of restricted stock shares had all such holders sold their underlying shares on that date.


(b) The aggregate fair value of the nonvested restricted stock shares expected to vest represents the total pre-tax fair value, based on the Company’s closing stock price as of November 30, 2009 which would have been received by holders of restricted stock shares had all such holders sold their underlying shares on that date.


The fair value of these shares was determined based upon the quoted closing price of the Company’s stock on the Over-the-Counter Bulletin Board on the grant date. The Company recognizes compensation expense associated with the issuance of such shares using the closing price of the Company’s common stock on the date of grant over the vesting period on a straight-line basis.

Stock Options and Nonvested Stock

Stock-based compensation costs related to the 2006 Plan totaled $86,000 and $42,000 during the three months ended November 30, 2009 and 2008, respectively. As of November 30, 2009, the Company had recognized a total of $962,000 in compensation costs and had $213,000 of unrecognized compensation cost related to the 2006 Plan. The cost is expected to be recognized over a remaining period of 3 years.

Warrants

On August 5, 2005, the Company issued certain stockholders stock warrants that evidence the obligation of the Company to issue a variable number of shares, in the aggregate, equal to 10% of then total issued and outstanding shares of the Company’s common stock, measured on a post-exercise basis, at any date during the 5-year term of the warrants, which ends August 5, 2010. The aggregate exercise price of these warrants is fixed at $3.7 million. The exercise price per warrant will vary based upon the number of shares issuable under the warrants. The number of shares issuable under the warrants totaled 1,700,566 and 1,682,444 shares, with an exercise price of $2.17 and $2.20 per share, as of November 30, 2009 and 2008, respectively. The outstanding warrants were anti-dilutive for the three months ended November 30, 2009 and 2008 because the exercise price was greater than the average market price of the Company’s common shares.


5. Line of Credit

The Company, Emtec NJ, Emtec LLC, Emtec Federal, Emtec Global, Luceo, eBAS, and Aveeva (collectively, the “Borrower”), have a Loan and Security Agreement with De Lage Landen Financial Services, Inc. (the “Lender”) pursuant to which the Lender provides the Borrower with a revolving credit loan and floor plan loan (the “Credit Facility”). The Credit Facility provides for aggregate borrowings of the lesser of $32.0 million or 85% of Borrower’s eligible accounts receivable, plus 100% of unsold inventory financed by the Lender. The floor plan loan portion of the Credit Facility is for the purchase of inventory from approved vendors and for other business purposes. The Credit Facility subjects the Borrower to mandatory repayments upon the occurrence of certain events as set forth in the Credit Facility.


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On December 5, 2008, the Borrower entered into a First Amendment and Joinder to Loan and Security Agreement and Schedule to Loan and Security Agreement (the “First Amendment”) with the Lender, pursuant to which the Lender extended the term of the loans issued to the Borrower under the Loan and Security Agreement from December 7, 2008 until December 7, 2010 and made certain other amendments to the Loan and Security Agreement, including the following:


§ The First Amendment changed the base rate of interest to the three month (90 day) LIBOR rate from the previous base rate of the “Prime Rate.”



§ The First Amendment changed the interest rate for revolving credit loans to the base rate plus 3.25% from the previous interest rate for revolving credit loans which was the base rate minus 0.5%, and changed the interest rate for floorplan loans, if applicable, to 6.25% in excess of the base rate from the previous interest rate for floorplan loans of 2.5% in excess of the base rate.



§ The First Amendment amended the Schedule to provide that the Borrower must pay the Lender a floorplan annual volume commitment fee if the aggregate amount of all floorplan loans does not equal or exceed $60.0 million in a 12 month period from December 1st through November 30th. The floorplan commitment fee is equal to the amount that the floorplan usage during such 12 month period is less than $60.0 million multiplied by 1%. If the Borrower terminates the Credit Facility during a 12 month period, the Borrower shall be required to pay the Lender a prorated portion of the annual volume commitment fee. For the period from December 1, 2008 through November 30, 2009, the Company’s floorplan volume was approximately $30.0 million. The Company has total accrual of $300,000 in commitment fees as interest payable on the consolidated financial statements of which, approximately $280,000 was expensed during the year ended August 31, 2009 and approximately $20,000 was expensed in three months ended November 30, 2009.


In addition, by executing the First Amendment, Emtec Global, Luceo, eBAS and Aveeva each joined the Credit Facility as a Borrower and granted the Lender a security interest in all of their respective interests in certain of their respective assets, including inventory, equipment, fixtures, accounts, chattel paper, instruments, deposit accounts, documents, general intangibles, letter of credits rights, and proceeds from all judgments, claims and insurance policies. Emtec Global pledged 100% of the outstanding shares of its domestic subsidiaries, eBAS and Luceo, and Emtec Global and Aveeva pledged 65% in the aggregate of the outstanding shares of Aviance Software (India) Pvt. Ltd., an Indian company.

The Company had balances of $14.9 million and $9.0 million outstanding under the revolving portion of the Credit Facility, and balances of $9.5 million and $5.4 million (included in the Company’s accounts payable) outstanding plus $430,000 and $321,000 in open approvals under the floor plan portion of the Credit Facility at November 30, 2009 and August 31, 2009, respectively. Net availability was $9.8 million and $11.9 million under the revolving portion of the Credit Facility, and additionally $2.0 million and $5.4 million was available under the floor plan portion of the Credit Facility as of November 30, 2009 and August 31, 2009, respectively.

As of November 30, 2009, the Company determined that it was in compliance with its financial covenants under the Credit Facility.


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6. Concentration of Credit Risk and Significant Clients

Financial instruments that potentially subject the Company to a concentration of credit risk consist principally of accounts receivable.

The Company’s revenues, by client type, consist of the following (in thousands):

For the Three Months Ended
November 30, 2009 November 30, 2008
Departments of the U.S. Government $ 41,400 56.3 % $ 40,195 57.4 %
Canada Government Agencies 349 0.5 % - 0.0 %
State and Local Governments 1,057 1.4 % 2,996 4.3 %
Commercial Companies 13,599 18.5 % 16,759 23.9 %
Education and other 17,172 23.3 % 10,069 14.4 %
Total Revenues $ 73,577 100.0 % $ 70,019 100.0 %



The Company reviews a client's credit history before extending credit. The Company does not require collateral or other security to support credit sales. The Company provides an allowance for doubtful accounts based on the credit risk of specific clients, historical experience and other identified risks. Trade receivables are carried at original invoice less an estimate made for doubtful receivables, based on review by management of all outstanding amounts on a periodic basis. Trade receivables are considered delinquent when payment is not received within standard terms of sale, and are charged-off against the allowance for doubtful accounts when management determines that recovery is unlikely and ceases its collection efforts.


The trade account receivables consist of the following (in thousands):

November 30, August 31,
2009 2008
Trade receivables $ 41,742 $ 29,767
Allowance for doubtful accounts (335 ) (304 )
Trade receivables, net $ 41,407 $ 29,463



Trade receivables include $1.9 million and $1.5 million of unbilled revenue as of November 30, 2009 and August 31, 2009, respectively.


Sales to one of the school districts in Georgia and to a department of the United States Government accounted for approximately $10.1 million or 13.7% and $8.4 million or 11.5% of the Company’s total revenues for the three months ended November 30, 2009, respectively. The same customers accounted for approximately $8.9 million or 12.8%, and $77,000 or 0.1% of the Company’s total revenues for the three months ended November 30, 2008, respectively.


Trade receivables due from school districts in Georgia and one of the departments of the U.S. Government accounted for approximately 4.9% and 22.6%, respectively, of the Company’s trade receivables as of November 30, 2009. The same clients accounted for approximately 14.4% and 21.4%, respectively of the Company’s trade receivable as of August 31, 2009.


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7. Inventories

Inventories are stated at the lower of average cost or market. Inventories consist of finished goods purchased for resale, including computer hardware, computer software, computer peripherals and related supplies. At November 30, 2009 and August 31, 2009, inventories consisted of the following (in thousands):
November 30, August 31,
2009 2009
Hardware, software, accessories and parts $ 6,211 $ 4,638
Inventory reserve (228 ) (228 )
Net inventories $ 5,983 $ 4,410


8. Accrued Liabilities

At November 30, 2009 and August 31, 2009, accrued liabilities consisted of the following (in thousands):

November 30, August 31,
2009 2009

Accrued payroll $ 2,706 $ 2,559
Accrued commissions 679 586
Accrued state sales taxes 38 74
Accrued third-party service fees 83 72
Other accrued expenses 3,073 3,432
$ 6,579 $ 6,723


9. Long-Term Debt

At November 30, 2009 and August 31, 2009, the Company’s long-term debt consisted of the following (in thousands):

November 30, August 31,
2009 2009

5% subordinated note payable to DARR Global Holdings, Inc. $ 257 $ 345

8% subordinated note payable to Mr. Siva Natarajan - 410
6% subordinated note payable to Former Shareholders of KOAN-IT 471 458

Total debt 728 1,213
Less current portion (728 ) (1,213 )

Long-term debt, net of current portion $ - $ -


10. Related Party Transactions


One of the Company’s facilities is leased under a non-cancelable operating lease agreement with an entity that is owned by a director and an officer of the Company and their related family members. During the three months ended November 30, 2009 and 2008, the Company recorded expense under this lease totaling $52,000 and $45,000, respectively. The facilities consist of office and warehouse space totaling 42,480 square feet located in Springfield, New Jersey.


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The Company is occupying approximately 26,000 square feet of office and warehouse space in a 70,000 square-foot building in Suwannee, GA. This space is leased from GS&T Properties, LLC, in which a certain officer of the Company is a passive investor with an approximately 10% equity interest. The lease term was through November 2009 with monthly rent of $17,000. Currently, the Company is in a process of negotiating the renewal of the lease and is occupying the premise on a month-to-month basis. During the three months ended November 30, 2009 and 2008, the Company recorded expense under this lease totaling $50,000 and $47,000, respectively.


In conjunction with the acquisition of eBAS/Aveeva, the Company entered into a lease for approximately 20,000 square feet of office space in Fremont, California. This space is leased from the spouse of an officer of eBAS/Aveeva. The lease term is through August 31, 2011 with a monthly rent of $20,000. In March 2009, the Company subleased portion of the building for a monthly rent of $3,000 on a month-to-month basis. During the three months ended November 30, 2009 and 2008, the Company recorded expense under this lease totaling $52,000 and $60,000, respectively.


Management believes the lease payments are at or below market lease rates for similar facilities for the leases noted above.


11. Legal Proceedings


During December 2007, the Company received a subpoena issued by the GSA Office of Inspector General (“OIG”), apparently as part of an ongoing, industry-wide investigation. The Company produced documents and data in response to the subpoena to the OIG during 2008. In September 2009, the Company became aware that it had been named along with several other prominent IT companies in a qui tam lawsuit entitled Christopher Crennen, et al., v. Dell Marketing, et al., filed in the United States District Court for the District of Massachusetts alleging violations of the False Claims Act relating to the Company's obligations under the Buy American Act and the Trade Agreements Act. Qui tam lawsuits typically remain under seal (hence, usually unknown to the defendant) for some time while the government decides whether or not to intervene on behalf of a private qui tam plaintiff (known as a relator) and take the lead in the litigation. These lawsuits can involve significant monetary damages and penalties and award bounties to private plaintiffs who successfully bring the suits. The lawsuit, which was previously under seal, appears to have been the cause of the OIG subpoena. Despite its investigation, to date the government has declined to intervene in the lawsuit, however the Company can provide no assurance that the government will not intervene in this case or in any other qui tam suit against the Company in the future. The Company does not know whether the relators will pursue the qui tam lawsuit independently. The Company has filed a motion to dismiss the lawsuit. At this time, the Company is unable to predict the timing and outcome of this matter.


12. Segment Information


The Company provides segment financial information in accordance with ASC 280, “Segment Reporting”. The Company’s business activities are divided into two business segments, EIS and EGS. EIS consists of the Systems Division, which includes Emtec NJ, Emtec LLC, Emtec Federal and the business service management solutions offered by the ITSM practice. EGS is the Company’s enterprise applications services solutions and training business including its ERP and Application Development practice and its Business Analysis and Quality Assurance Practice. The accounting policies of our segments are the same as those described in Note 2 and there are no material intersegment transactions.Summarized financial information relating to the Company’s operating segments is as follows (in thousands):


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(Unaudited)
November 30, August 31,
2009 2009
Identifiable Assets:
EIS $ 66,455 $ 51,586
EGS 13,885 13,687
Total Assets $ 80,340 $ 65,273


For the Three Months Ended
November 30,
(Unaudited)
2009 2008
Revenues
EIS $ 65,829 $ 59,306
EGS 7,748 10,713
Total Revenue $ 73,577 $ 70,019

Gross Profit
EIS $ 9,173 $ 6,687
EGS 1,371 2,107
Gross Profit $ 10,544 $ 8,794

Depreciation and amortization
EIS $ 369 $ 324
EGS 227 210
Depreciation and amortization $ 596 $ 534

Operating Income
EIS $ 2,407 $ 1,200
EGS 109 730
Operating Income $ 2,516 $ 1,930

Interest and Other Expense (Income)
EIS $ 70 $ 134
EGS 56 119
Interest and Other Expense (Income) $ 126 $ 253

Provision for Income Taxes
EIS $ 957 $ 416
EGS 26 254
Provision for Income Taxes $ 983 $ 670

Net Income
EIS $ 1,380 $ 649
EGS 27 357
Net Income $ 1,407 $ 1,006

Capital expenditures
EIS $ 89 $ 74
EGS 40 4
Capital expenditures $ 129 $ 78



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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion and analysis should be read in conjunction with, and is qualified in its entirety by, the unaudited financial statements, including the notes thereto, appearing elsewhere in this Quarterly Report on Form 10-Q.

Cautionary Statement Regarding Forward-Looking Statements

You should carefully review the information contained in this Quarterly Report on Form 10-Q and in other reports or documents that we file from time to time with the Securities and Exchange Commission (the “SEC”). In addition to historical information, this Quarterly Report on Form 10-Q contains our beliefs regarding future events and our future financial performance. In some cases, you can identify those so-called “forward-looking statements” by words such as “may,” “will,” “should,” expects,” “plans,” “anticipates,” “believes,” “estimates,” “predicts,” “potential,” or “continue” or the negative of those words and other comparable words. You should be aware that those statements are only our predictions. Actual events or results may differ materially. We undertake no obligation to publicly release any revisions to forward-looking statements after the date of this report. In evaluating those statements, you should specifically consider various factors, including the risk factors discussed in our Annual Report on Form 10-K for the year ended August 31, 2009 and other reports or documents that we file from time to time with the SEC. All forward-looking statements attributable to us or a person acting on our behalf are expressly qualified in their entirety by this cautionary statement.

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.

Overview of Emtec

We are an IT systems integrator, providing consulting, services and infrastructure solutions to commercial, federal, education, state and local government clients. The Company’s areas of specific practices include IT consulting, communications, data management, enterprise computing, managed services, business service management solutions, training, storage and data center planning and development and staff augmentation solutions. The Company’s client base is comprised of departments of federal, state and local governments in the United States and Canada, schools and commercial businesses throughout the United States and Canada.


We have divided our operating activity into two operating segments for reporting purposes: EIS and EGS. EIS consists of the Company’s historical business, which we refer to as the Systems Division, and the business service management solutions offered by the ITSM practice. EGS is the Company’s enterprise applications services solutions and training business including its ERP and Application Development practice and its Business Analysis and Quality Assurance Practice.


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Consolidated Statements of Income for the Three Months Ended November 30, 2009 compared with the Three Months Ended November 30, 2008.


EMTEC, INC.
CONSOLIDATED STATEMENTS OF INCOME
(In thousands)

Three Months Ended November 30,
2009 2008 Change %
Revenues
Procurement services $ 59,382 $ 56,359 $ 3,023 5.4 %
Service and consulting 14,195 13,660 535 3.9 %
Total Revenues 73,577 70,019 3,558 5.1 %

Cost of Sales
Cost of procurement services 53,173 50,392 2,781 5.5 %
Service and consulting 9,860 10,833 (973 ) (9.0 )%
Total Cost of Sales 63,033 61,225 1,808 3.0 %

Gross Profit
Procurement services 6,209 5,967 242 4.1 %
Procurement services % 10.5 % 10.6 %

Service and consulting 4,335 2,827 1,508 53.4 %
Service and consulting % 30.5 % 20.7 %

Total Gross Profit 10,544 8,794 1,750 19.9 %
Total Gross Profit % 14.3 % 12.6 %

Operating expenses:
Selling, general, and administrative expenses 7,278 6,178 1,100 17.8 %
Rent expense – related party 154 152 2 1.0 %
Depreciation and amortization 596 534 62 11.6 %
Total operating expenses 8,028 6,864 1,164 17.0 %
Percent of revenues 10.9 % 9.8 %

Operating income 2,516 1,930 586 30.4 %
Percent of revenues 3.4 % 2.8 %

Other expense (income):
Interest income – other (11 ) (5 ) (6 ) 124.4 %
Interest expense 145 254 (109 ) (42.9 )%
Other (8 ) 4 (12 ) (292.1 )%

Income before income taxes 2,390 1,676 714 42.6 %
Provision for income taxes 983 670 313 46.6 %
Net income $ 1,407 $ 1,006 $ 401 39.9 %
Percent of revenues 1.9 % 1.4 %


Consolidated Results of Operations Overview

For the three months ended November 30, 2009 compared with the three months ended November 30, 2008, total gross profit increased 19.9% from $8.8 million to $10.5 million; overall gross margin percentage rose to 14.3% from 12.6%; services and consulting gross profit increased 53.3% from $2.8 million to $4.3 million; services and consulting gross margin percentage rose to 30.5% from 20.7%; operating income increased to $2.5 million from $1.9 million, a growth of 30.4%, and earnings per share increased to $0.09 from $0.07, a growth of 28.6%.


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Management examines numerous measures when analyzing the results of our operations. Our objective is to grow the overall revenues of the Company while improving our gross margins and operating margins. We consistently analyze our adjusted earnings before interest, taxes, depreciation and amortization (“Adjusted EBITDA”) and our earnings per share as we feel these measures appropriately reflect the performance of the Company. We look at our segment performance for improvement in these measures as well as other operating metrics, improvements in our balance sheet and return on invested capital. Adjusted EBITDA is a non-GAAP financial measure which may not be comparable to similarly titled measures reported by other companies and may be considered in addition to, but not as a substitute for or preferable to, other information prepared in accordance with GAAP. We may provide additional information on the Company’s Adjusted EBITDA in press releases which will be furnished to the Securities Exchange Commission on Form 8-K.


We currently categorize our revenues and costs of sales into “Procurement Services” and “Services and Consulting.” We have made the categorizations in order to analyze our growth in consulting and other services as a percentage of overall revenues. We have divided our business into two segments. EIS provides a broad range of IT infrastructure services for our clients. These services are focused on improving the value IT assets provide to an organization, and to reduce the costs of these assets. EGS was formed to provide IT application consulting and other services. These services typically include business process improvement through the use of technology. Our consultants are skilled in a wide array of technologies in this segment.


We discuss the results of each segment below.


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Results of Operations -EIS

The following discussion and analysis provides information that management believes is relevant to an assessment and understanding of our Results of Operations for the three months ended November 30, 2009 and 2008.

EIS
STATEMENTS OF INCOME
(In thousands)

Three Months Ended November 30,
2009 2008 Change %
Revenues
Procurement services $ 59,382 $ 56,359 $ 3,023 5.4 %
Service and consulting 6,447 2,947 3,500 118.8 %
Total Revenues 65,829 59,306 6,523 11.0 %

Cost of Sales
Cost of procurement services 53,173 50,392 2,781 5.5 %
Service and consulting 3,484 2,227 1,257 56.4 %
Total Cost of Sales 56,657 52,619 4,038 7.7 %

Gross Profit
Procurement services 6,209 5,967 242 4.1 %
Procurement services % 10.5 % 10.6 %

Service and consulting 2,963 720 2,243 311.5 %
Service and consulting % 46.0 % 24.4 %

Total Gross Profit 9,172 6,687 2,485 37.2 %
Total Gross Profit % 13.9 % 11.3 %

Operating expenses:
Selling, general, and administrative expenses 6,295 5,070 1,225 24.2 %
Rent expense – related party 101 92 9 9.8 %
Depreciation and amortization 369 324 45 13.9 %
Total operating expenses 6,765 5,486 1,279 23.3 %
Percent of revenues 10.3 % 9.3 %

Operating income 2,407 1,201 1,206 100.4 %
Percent of revenues 3.7 % 2.0 %

Other expense (income):
Interest income – other (11 ) (3 ) (8 ) 266.7 %
Interest expense 87 138 (51 ) -37.0 %
Other (6 ) - (6 ) N/A

Income before income taxes 2,337 1,066 1,271 119.2 %
Provision (benefit) for income taxes 957 416 541 130.1 %
Net income $ 1,380 $ 650 $ 730 112.3 %
Percent of revenues 2.1 % 1.1 %



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Comparison of the Three Months Ended November 30, 2009 and 2008 - EIS

Revenues - EIS

EIS division’s total revenues increased $6.5 million, or 11.0%, to $65.8 million for the three months ended November 30, 2009, compared to $59.3 million for the three months ended November 30, 2008. EIS division’s total revenue includes revenues from the Company’s historical business, which we refer to as the Systems Division, and KOAN-IT, which was acquired on February 12, 2009, and includes the assets of EMS which were acquired on May 12, 2009. KOAN-IT’s total revenues (including revenues derived from the assets acquired from EMS) for the three months ended November 30, 2009 were $1.7 million. Without these acquisitions Systems Division’s revenue increased $4.8 million, or 8.1%, to $64.1 million for the three months ended November 30, 2009, compared to $59.3 million for the three months ended November 30, 2008.

Procurement services revenue increased $3.0 million, or 5.4%, to $59.4 million for the three months ended November 30, 2009, compared to $56.4 million for the three months ended November 30, 2008. This increase is primarily attributable to an increases in our education business attributable to various IT projects for school districts in Florida and Georgia and increase in various departments of the U.S. government, which was partially offset by a decrease in our clients’ IT spending, particularly in commercial business and various governmental agencies in the State of New Jersey. We believe that this decrease in commercial business can be attributed to the current economic downturn.

Services and consulting revenue for the Systems Division increased $3.5 million, or 118.8%, to $6.4 million for the three months ended November 30, 2009, compared to $2.9 million for the three months ended November 30, 2008. This increase is mainly attributable to various IT projects for school districts in Florida and Georgia and various departments of the U.S. government during the three months ended November 30, 2009.

Our EIS division’s revenues, by client type, are comprised of the following (in thousands):


For the Three Months Ended
November 30, 2009 November 30, 2008
Departments of the U.S. Government $ 41,400 62.9 % $ 40,195 67.8 %
Canada Government Agencies 349 0.5 % - 0.0 %
State and Local Governments 1,057 1.6 % 2,996 5.1 %
Commercial Companies 5,851 8.9 % 6,046 10.2 %
Education and other 17,172 26.1 % 10,069 17.0 %
Total Revenues $ 65,829 100.0 % $ 59,306 100.0 %



During the three months ended November 30, 2009 and 2008, U.S. governmental department and agency related revenues represented approximately 62.9% and 67.8% of total EIS division’s revenues, respectively. These clients include the Department of Defense, Department of Justice, Department of Homeland Security, Department of Health and Human Services, Department of Agriculture and Department of Commerce. Revenues from various civilian and military U.S. governmental departments and agencies increased by approximately $1.2 million during the three months ended November 30, 2009 compared with the three months ended November 30, 2008. This increase is primarily attributable to retooling of our federal sales force during fiscal 2009 to focus more on services.

The state and local government business remains uncertain due to the tight budgetary pressures within governmental agencies in the State of New Jersey. We expect that until tax revenues increase in state and local governments we will not see a large amount of growth from these clients.

Revenues from commercial clients decreased by approximately $195,000 during the three months ended November 30, 2009 compared with the three months ended November 30, 2008. This decrease is mainly due to the current economic downturn that caused reductions in technology and discretionary spending by our commercial clients.


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During the three months ended November 30, 2009, revenues from our education business increased by approximately $7.1 million compared with the three months ended November 30, 2008. This increase is attributable to the increase in various IT projects for school districts in Florida and Georgia during the three months ended November 30, 2009. During our fiscal years 2008 and 2009, we took steps to increase our business with our existing customers by outsourcing more of their infrastructure managed services needs and to increase our penetration with additional clients in this market. These steps increased the amount of long-term recurring revenue we have with these clients.


Gross Profit - EIS

Aggregate gross profit for our EIS division increased $2.5 million, or 37.2%, to $9.2 million for the three months ended November 30, 2009 as compared to $6.7 million for the three months ended November 30, 2008. This increase was mainly attributable to an increase in the gross profit derived from our services and consulting revenues of $2.2 million. This services gross profit increase includes an increase of $509,000 from KOAN-IT, which was acquired on February 12, 2009, and the assets of EMS, which were acquired on May 12, 2009.

Measured as a percentage of revenues, our gross profit margin for our EIS division increased to 13.9% of our EIS division’s revenues for the three months ended November 30, 2009 from 11.3% for the three months ended November 30, 2008. This increase is primarily a result of an increase in our service and consulting gross profit margin attributable to higher utilization of our engineering resources and increase in our services and consulting revenue associated with IT projects for school districts in Florida, Georgia and various departments of the U.S. government during the three months ended November 30, 2009.


Selling, General and Administrative Expenses -EIS

Selling, general and administrative expenses for our EIS division increased by $1.2 million, or 24.2% to $6.3 million for the three months ended November 30, 2009, compared to $5.1 million for the three months ended November 30, 2008.


EIS division’s selling, general and administrative expenses includes selling, general and administrative expenses from Systems Division and KOAN-IT which was acquired on February 12, 2009 and the assets of EMS, which were acquired on May 12, 2009. KOAN-IT’s selling, general and administrative expenses (including selling, general and administrative expenses related to the assets acquired from EMS) for the three months ended November 30, 2009 were $423,000. Without these acquisitions, Systems Division’s selling, general and administrative expenses increased by $802,000, or 15.3% to $5.9 million for the three months ended November 30, 2009, compared to $5.1 million for the three months ended November 30, 2008. Additionally, during the quarter ended November 30, 2008, the Company recovered $270,000 of previously expensed professional fees associated with defending the Company’s tax positions during the IRS’ 2003 and 2004 tax audits and appeals process, based on an indemnification right associated with the April 2004 Westwood merger. Without this one-time recovery of $270,000 recorded as a reduction of selling, general and administrative expenses in three months ended November 30, 2008, Systems Division’s selling, general and administrative expenses would have increased by $532,000, or 10.5%. This increase is mainly due to increase of $351,000 in bonus expense related to positive performance of the EIS division. The remaining increase of approximately $181,000 is mainly due to expense categories such as new hires, recruiting, marketing, professional fees and merger and acquisition related costs.


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Rent Expense-Related Party - EIS


We occupy approximately 42,000 square feet of office and warehouse space in Springfield, New Jersey. This space is leased from a limited liability company owned by a certain director of the Company and his related family members. The original lease term was through April 2009 with monthly base rent of $15,000. We exercised the option to extend the lease for an additional five year term through April 2014, with monthly base rent of $18,000. During the three months ended November 30, 2009 and 2008, we recorded $52,000 and $45,000 in expense under this lease, respectively.


We occupy approximately 26,000 square feet of office and warehouse space in a 70,000 square foot building in Suwannee, GA. This space is leased from a limited liability company in which a certain officer of our company is a passive investor with an approximately 10% equity interest. The lease term is for 5 years with monthly base rent of $16,000. During the three months ended November 30, 2009 and 2008, we recorded expense under this lease totaling $50,000 and $47,000, respectively.


Management believes the facilities noted above are being leased at rates consistent with the market rates.


Depreciation and Amortization - EIS


Depreciation and amortization expense for our EIS division increased by 13.9%, or $45,000, to $369,000 for the three months ended November 30, 2009, compared to $324,000 for the three months ended November 30, 2008. EIS division’s depreciation and amortization expense includes depreciation and amortization expense from Systems Division and KOAN-IT, which was acquired on February 12, 2009, and the assets of EMS which were acquired on May 12, 2009. KOAN-IT’s depreciation and amortization expense (including depreciation and amortization expense related to the assets acquired from EMS) for the three months ended November 30, 2009 was $69,000. Without these acquisitions, Systems Division’s depreciation and amortization expense decreased by $24,000.


As of November 30, 2009, intangible assets of the EIS division consisted of: the estimated value ascribed to customer relationships of $9.9 million less accumulated amortization of $2.7 million; the estimated value ascribed to non-competes of $29,000 less accumulated amortization of $5,000; and the estimated value ascribed to trademarks of $173,000 less accumulated amortization of $28,000. As of August 31, 2009 intangible assets of the EIS division consisted of: the estimated value ascribed to customer relationships of $9.9 million less accumulated amortization of $2.5 million; the estimated value ascribed to non-competes of $28,000 less accumulated amortization of $3,000; and the estimated value ascribed to trademarks of $169,000 less accumulated amortization of $19,000. The assets ascribed to customer relationships are being amortized on a straight-line basis over 6 to 15 years and non-compete covenants and trademarks are being amortized on a straight-line basis over 5 years. Amortization expense for the EIS division was $208,000, and $145,000 for the three months ended November 30, 2009 and 2008, respectively.


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Operating Income - EIS


Operating income for our EIS division for the three months ended November 30, 2009 increased by 100.4%, or $1.2 million, to $2.4 million, compared to operating income of $1.2 million for the three months ended November 30, 2008. EIS division’s operating income includes operating income from Systems Division and KOAN-IT, which was acquired on February 12, 2009, and the assets of EMS, which were acquired on May 12, 2009. KOAN-IT’s operating income (including operating income attributable to the assets acquired from EMS) for the three months ended November 30, 2009 was $40,000. Without these acquisitions Systems Division’s operating income would have increased $1.2 million, or 97.1%, to $2.4 million for the three months ended November 30, 2009, compared to $1.2 million for the three months ended November 30, 2008. This increase in operating income is mainly attributable to increased services and consulting revenue as discussed in the Total Revenue and Gross Profit sections above.


Interest expense - EIS


Interest expense for the EIS division decreased by 37.0%, or $51,000, to $87,000 for the three months ended November 30, 2009, compared to $138,000 for the three months ended November 30, 2008. We recorded approximately $20,000 in unused floor plan fees as interest expense during the three months ended November 30, 2009. Without this unused floor plan fee accrual under the credit facility with the Lender, our interest expense would have been decreased by $71,000. This is primarily attributable to lower balances on various notes payable and a lower average interest rate charged on the line of credit, which was attributable to a decrease in the prime rate during this period. The average interest rate charged on the line of credit by the Lender was approximately 3.6% and 4.0% for three months ended November 30, 2009 and 2008, respectively.


Provision for income taxes -EIS


We recorded income tax expense of $957,000 for the three months ended November 30, 2009 as compared to $416,000 for the three months ended November 30, 2008. The effective tax rate was 41.0% for the three months ended November 30, 2009 as compared to 39.1% for the three months ended November 30, 2008. The lower effective tax rate in the three months ended November 30, 2008 was primarily the result of over accruals of interest expense in prior periods that resulted in recognition of offsets to income tax expense for the three months ended November 30, 2008 due to net tax settlements during the period.


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Results of Operations –EGS

Most of the clients EGS serves are commercial clients. While our consultants are typically working on long- term projects, we believe that the general economic slowdown has impacted our ability to sell services the way these businesses had typically operated before the acquisitions. In addition, it has been our intention to convert these businesses to a new sales model and cross-sell their services across our organization. During 2009, we took steps to add additional sales resources in the U.S., to change our training methodologies of our consultants and to shift recruiting resources to an onshore/offshore model. We have also defined four practices within EGS that we are starting to sell as full service practice offerings using projects as opposed to typical staff augmentation.


The following discussion and analysis provides information that management believes is relevant to an assessment and understanding of our Results of Operations for the three months ended November 30, 2009 and 2008.


EGS
STATEMENTS OF INCOME
(In thousands)

Three Months Ended November 30,
2009 2008 Change %
Revenues
Service and consulting $ 7,748 $ 10,713 $ (2,965 ) -27.7 %
Total Revenues 7,748 10,713 (2,965 ) -27.7 %

Cost of Sales
Service and consulting 6,376 8,606 (2,230 ) -25.9 %
Total Cost of Sales 6,376 8,606 (2,230 ) -25.9 %

Gross Profit
Service and consulting 1,372 2,107 (735 ) -34.9 %
Service and consulting % 17.7 % 19.7 %

Total Gross Profit 1,372 2,107 (735 ) -34.9 %
Total Gross Profit % 17.7 % 19.7 %

Operating expenses:
Selling, general, and administrative expenses 983 1,108 (125 ) -11.3 %
Rent expense – related party 53 60 (7 ) -11.7 %
Depreciation and amortization 227 210 17 8.1 %
Total operating expenses 1,263 1,378 (115 ) -8.3 %
Percent of revenues 16.3 % 12.9 %

Operating income 109 729 (620 ) -85.0 %
Percent of revenues 1.4 % 6.8 %

Other expense (income):
Interest income – other - (2 ) 2 -100.0 %
Interest expense 58 116 (58 ) -50.0 %
Other (2 ) 4 (6 ) -146.2 %

Income before income taxes 53 611 (558 ) -91.3 %
Provision (benefit) for income taxes 26 254 (228 ) -89.8 %
Net income $ 27 $ 357 $ (330 ) -92.4 %
Percent of revenues 0.3 % 3.3 %



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Comparison of the Three Months Ended November 30, 2009 and 2008 - EGS

Revenues - EGS

EGS revenue consists of its ERP and Application Development practice and its Business Analysis and Quality Assurance practice. EGS division’s total revenues decreased $3.0 million, or 27.7%, to $7.7 million for the three months ended November 30, 2009, compared to $10.7 million for the three months ended November 30, 2008. This decline was caused by a 22.1% decrease in hours billed and a 7.2% decrease in the average hourly billing rate during the three months ended November 30, 2009 compared with the corresponding period in 2008. The decrease in billable hours is mainly due to decreases in our Business Analysis and Quality Assurance practices. Most of the clients EGS serves are commercial clients and we believe that this decrease in commercial business is primarily attributed to the current economic downturn.

Gross Profit - EGS

EGS division’s gross profit decreased $736,000, or 34.9%, to $1.4 million for the three months ended November 30, 2009, compared to $2.1 million for the three months ended November 30, 2008. We believe this decrease is mainly due to the economic downturn as discussed in the Revenue section above.


Measured as percentages of revenues, our gross profit margin for the EGS division decreased to 17.7% of our EGS division’s revenues for the three months ended November 30, 2009 from 19.7% for the three months ended November 30, 2008. We believe this decrease is mainly due to the decreased billing rate per hour, as a result of pricing pressure from our commercial clients.


Selling, General and Administrative Expenses - EGS


EGS division’s selling, general and administrative expenses decreased $125,000, or 11.3%, to $983,000 for the three months ended November 30, 2009, compared to $1.1 million for the three months ended November 30, 2008. This decrease in selling, general and administrative expenses is primarily attributable to the reduction of various expense categories including commissions due to lower gross profits, travel, lodging, recruiting, business insurance, rent for guesthouses, professional and consulting fees and training and others. Selling, general and administrative expenses for the three months ended November 30, 2009 includes $90,000 in retention bonuses paid to business development personnel.


Rent Expense-Related Party - EGS

We occupy approximately 20,000 square feet of office space in Fremont, CA. This space is leased from the spouse of the President of eBAS/Aveeva. The lease term is for 3 years with monthly base rent of $20,000. In March 2009, we subleased a portion of the building for a monthly rent of $3,000 on month-to-month basis to reduce costs. During the three months ended November 30, 2009 and 2008, we recorded $53,000 and $60,000 in expense under this lease.

Management believes the lease noted above is being leased at a rate consistent with the market rate.


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Depreciation and Amortization - EGS


EGS division’s depreciation and amortization expense increased $17,000, or 8.1%, to $227,000 for the three months ended November 30, 2009, compared to $210,000 for the three months ended November 30, 2008. The increase is due to depreciation expense associated with computer equipment we purchased for our training facility during three months ended August 31, 2009.


As of November 30, 2009, intangible assets of the EGS division consisted of the estimated value ascribed to customer relationships of $4.2 million less accumulated amortization of $1.0 million, and the estimated value ascribed to non-competes of $370,000 less accumulated amortization of $104,000. As of August 31, 2009, intangible assets of the EGS division consisted of the estimated value ascribed to customer relationships of $4.2 million less accumulated amortization of $820,000, and the estimated value ascribed to non-competes of $370,000 less accumulated amortization of $86,000. The assets ascribed to customer relationships are being amortized on a straight-line basis over 5 to 9 years and noncompete covenants and trademarks are being amortized on a straight-line basis over 5 years. Amortization expense for the EGS division was $200,000, and $200,000 for the three months ended November 30, 2009 and 2008, respectively.

Operating income -EGS


Operating income for our EGS division for the three months ended November 30, 2009 decreased by 85.2%, or $621,000, to $108,000, compared to operating income of $729,000 for the three months ended November 30, 2008. This decrease in operating income is mainly due to a decrease in services and consulting revenue as discussed in the Revenue and Gross Profit sections above. Additionally, during the three months ended November 30, 2009, we paid $90,000 in retention bonuses to business development personnel, which decreased our operating income.

Interest expense -EGS


Interest expense for our EGS division for the three months ended November 30, 2009 decreased by 50.0%, or $58,000, to $58,000, compared to interest expense of $116,000 for the three months ended November 30, 2008. This is primarily attributable to lower total interest on an 8% subordinated note payable, which was paid in full in September 2009 and a lower average interest rate charged on the line of credit attributable to a decrease in the prime rate during this period. The average interest rate charged on the line of credit by the Lender was approximately 3.6% and 4.0% for three months ended November 30, 2009 and 2008, respectively.


Provision for income taxes -EGS

We recorded an income tax expense of $25,000 for the three months ended November 30, 2009 as compared to $254,000 for the three months ended November 30, 2008. The effective tax rate was 48.1% for the three months ended November 30, 2009 as compared to 41.6% for the three months ended November 30, 2008. The higher effective tax rate in the three months ended November 30, 2009 was primarily the result of the effect of permanently non-deductible expenses on a smaller pre-tax income base.


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Recently Issued Accounting Standards

Noncontrolling Interests in Consolidated Financial Statements


We adopted the new accounting and presentation standards for noncontrolling interests in accordance with ASC 810 “Consolidation” effective September 1, 2009. This statement establishes accounting and reporting standards for the noncontrolling interests (minority interests) in a subsidiary and for the deconsolidation of a subsidiary. Effective September 1, 2009, noncontrolling interests will be classified as equity in the Company’s financial statements and income and comprehensive income attributed to the noncontrolling interests will be included in the Company’s income and comprehensive income. The provisions of this standard must be applied retrospectively upon adoption. The adoption of the new accounting and presentation standards did not have any effect on our financial statements since all of our existing subsidiaries are wholly-owned.


Business Combinations


We adopted the new accounting standard for business combinations in accordance with ASC 805 “Business Combinations.” The new standard establishes principles and requirements for how an acquirer in a business combination recognizes and measures the assets acquired, liabilities assumed and any noncontrolling interest in the acquiree. The new provisions of ASC 805 are effective for our business combinations occurring on or after September 1, 2009. There was no financial statement impact upon adoption of the provisions of ASC 805, but it may materially affect our accounting for future acquisitions.


Liquidity and Capital Resources

Cash at November 30, 2009 of $4.2 million represented an increase of $2.5 million from cash of $1.7 million at August 31, 2009. We are a net borrower; consequently, we believe our cash balance must be viewed along with the available balance on our line of credit. Borrowings under our line of credit at November 30, 2009 increased to $14.9 million from $9.0 million at August 31, 2009. As of November 30, 2009, our net working capital (defined as the excess of our current assets over our current liabilities) was $1.9 million higher than it was at August 31 2009. The increase in working capital is primarily attributable to net income of $1.4 million for the three months ended November 30, 2009.


The Company, Emtec NJ, Emtec LLC, Emtec Federal, Emtec Global, Luceo, eBAS and Aveeva (collectively, the “Borrower”), are parties to a Loan and Security Agreement with De Lage Landen Financial Services, Inc. (the “Lender”) pursuant to which the Lender provides the Borrower with a revolving credit loan and floor plan loan (the “Credit Facility”) until December 7, 2010. The Credit Facility provides for aggregate borrowings of the lesser of $32.0 million or 85% of Borrower’s eligible accounts receivable, plus 100% of unsold inventory financed by the Lender. The floor plan loan portion of the Credit Facility is for the purchase of inventory from approved vendors and for other business purposes. The Credit Facility subjects the Borrower to mandatory repayments upon the occurrence of certain events as set forth in the Credit Facility. For detailed information on terms of the Credit Facility, refer to footnote#5 – Line of Credit of the Condensed Consolidated Financial Statements in this Quarterly Report on the Form 10-Q for the three months ended November 30, 2009, or the annual financial statements and notes thereto included in the Company's Annual Report on Form 10-K for the fiscal year ended August 31, 2009.



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The Company had balances of $14.9 million and $9.0 million outstanding under the revolving portion of the Credit Facility, and balances of $9.5 million and $5.4 million (included in the Company’s accounts payable) outstanding plus $430,000 and $321,000 in open approvals under the floor plan portion of the Credit Facility at November 30, 2009 and August 31, 2009, respectively. Net availability was $9.8 million and $11.9 million under the revolving portion of the Credit Facility, and additionally $2.0 million and $5.4 million was available under the floor plan portion of the Credit Facility as of November 30, 2009 and August 31, 2009, respectively.


As of November 30, 2009, the Company determined that it was in compliance with its financial covenants under the Credit Facility.


As of November 30, 2009, we had open term credit facilities with our primary trade vendors, including aggregators and manufacturers, of approximately $41.0 million with outstanding principal of approximately $19.3 million. Under these lines, we are typically obligated to pay each invoice within 30-45 days from the date of such invoice. These credit lines could be reduced or eliminated without notice and this action could have a material adverse affect on our business, result of operations and financial condition.

Capital expenditures of approximately $129,000 during the three months ended November 30, 2009 related primarily to the purchase of computer equipment for internal use, purchase of automobile for our service technicians and software costs to upgrade various modules of our accounting systems.


We anticipate that our primary sources of liquidity in fiscal year 2010 will be cash generated from operations, trade vendor credit and cash available to us under our Credit Facility. Our future financial performance will depend on our ability to continue to reduce and manage operating expenses as well as our ability to grow revenues. Any loss of clients, whether due to price competition or technological advances, will have an adverse affect on our revenues. Our future financial performance could be negatively affected by unforeseen factors and unplanned expenses.

We believe that funds generated from operations, trade vendor credit and bank borrowings should be sufficient to meet our current operating cash requirements through the next twelve months. However, there can be no assurance that all of the aforementioned sources of cash can be realized.


Critical Accounting Policies

Our financial statements are prepared in accordance with accounting principles that are generally accepted in the United States. The methods, estimates, and judgments we use in applying our most critical accounting policies have a significant impact on the results we report in our financial statements. The SEC has defined critical accounting policies as policies that involve critical accounting estimates that require (i) management to make assumptions that are highly uncertain at the time the estimate is made, and (ii) different estimates that could have been reasonably used for the current period, or changes in the estimates that are reasonably likely to occur from period to period, which would have a material impact on the presentation of our financial condition, changes in financial condition or in result of operations. Based on this definition, our most critical policies include revenue recognition, allowance for doubtful accounts, inventory valuation reserve, the assessment of recoverability of long-lived assets, the assessment of recoverability of goodwill and intangible assets, rebates and income taxes.


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Revenue Recognition

We recognize revenue from the sales of products when risk of loss and title passes, which is upon client acceptance.

Product revenue represents sales of computer hardware and pre-packaged software. These arrangements often include software installations, configurations and imaging, along with delivery and set-up of hardware. We follow the criteria contained in Staff Accounting Bulletin 104 (“SAB 104”) in recognizing revenue associated with these transactions. We perform software installations, configurations and imaging services at our locations prior to the delivery of the product. Some client arrangements include “set-up” services performed at client locations where our personnel perform the routine tasks of removing the equipment from boxes, and setting up the equipment at client workstations by plugging in all necessary connections. This service is usually performed the same day as delivery. Revenue is recognized on the date of acceptance, except as follows:

§ In some instances, the “set-up” service is performed after date of delivery. We recognize revenue for the “hardware” component at date of delivery when the amount of revenue allocable to this component is not contingent upon the completion of “set-up” services and, therefore, our client has agreed that the transaction is complete as to the “hardware” component. In instances where our client does not accept delivery until “set-up” services are completed, we defer all revenue in the transaction until client acceptance occurs.


§ There are occasions when a client requests a transaction on a “bill & hold” basis. We follow the SAB 104 criteria and recognize revenue from these sales prior to date of physical delivery only when all the criteria of SAB 104 are met. We do not modify our normal billing and credit terms for these clients. The client is invoiced at the date of revenue recognition when all of the criteria have been met. As of November 30, 2009 and 2008, we did not have any bill & hold transactions.


We have experienced minimal client returns. Since some eligible products must be returned to us within 30 days from the date of the invoice, we reduce the product revenue and cost of goods in each accounting period based on the actual returns that occurred in the next 30 days after the close of the accounting period.

Revenue from the sale of warranties and support service contracts is recognized on a straight-line basis over the term of the contract.

We recognize revenue from sale arrangements that contain both procurement revenue and services and consulting revenue based on the relative fair value of the individual components. The relative fair value of individual components is based on historical sales of the components sold separately.

Revenues from the sale of third party manufacturer warranties and manufacturer support service contracts where the manufacturer is responsible for fulfilling the service requirements of the client are recognized immediately on their contract sale date. Manufacturer support service contracts contain cancellation privileges that allow our clients to terminate a contract with 90 days’ written notice. In this event, the client is entitled to a pro-rated refund based on the remaining term of the contract, and we would owe the manufacturer a pro-rated refund of the cost of the contract. However, we have experienced no client cancellations of any significance during our most recent 3-year history and we do not expect cancellations of any significance in the future. As the Company is not obligated to perform these services, we determined it is more appropriate to recognize the net amount of the revenue and related payments as net revenue at the time of sale.


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Service and consulting revenue includes time billings based upon billable hours charged to clients, fixed price short-term projects, and hardware maintenance contracts. These contracts generally are task specific and do not involve multiple deliverables. Revenues from time billings are recognized as services are delivered. Revenues from short-term fixed price projects are recognized using the proportionate performance method by determining the level of service performed based upon the amount of labor cost incurred on the project versus the total labor costs to perform the project because this is the most readily reliable measure of output. Revenues from hardware maintenance contracts are recognized ratably over the contract period.


Trade Receivables


We maintain an allowance for doubtful accounts for estimated losses resulting from the inability of our clients to make required payments. We base our estimates on the aging of our accounts receivable balances and our historical write-off experience, net of recoveries. If the financial condition of our clients were to deteriorate, additional allowances may be required. We believe the accounting estimate related to the allowance for doubtful accounts is a “critical accounting estimate” because changes in it can significantly affect net income.


Inventories


Inventory is stated at the lower of average cost or market. Inventory is entirely finished goods purchased for resale and consists of computer hardware, computer software, computer peripherals and related supplies. We provide an inventory reserve for products we determine are obsolete or where salability has deteriorated based on management’s review of products and sales.

Goodwill and Intangible Assets

Goodwill represents costs in excess of fair values assigned to the underlying net assets of acquired companies. In accordance with ASC 350 “Intangibles-Goodwill and Others”, goodwill is not amortized but tested for impairment annually, or more frequently if events or changes in circumstances indicate that the asset might be impaired. The Company has set an annual impairment testing date of June 1. The impairment determination is made at the reporting unit level and consists of two steps. First, the Company determines the fair value of the reporting unit and compares it to its carrying amount. Second, if the carrying amount of the reporting unit exceeds its fair value, an impairment loss is recognized for any excess of the carrying amount of the reporting unit’s goodwill over the implied fair value of that goodwill. The implied fair value of goodwill is determined by allocating the fair value of the reporting unit in a manner similar to a purchase price allocation, in accordance with ASC 805 “Business Combinations.” The residual fair value after this allocation is the implied fair value of the reporting unit goodwill. The Company’s policy is to perform its annual impairment testing for all reporting units as of June 1. An impairment charge will be recognized only when the implied fair value of a reporting unit, including goodwill, is less than its carrying amount.


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Intangible assets at November 30, 2009 and August 31, 2009 consisted of the value ascribed to customer relationships and noncompete covenants. The assets ascribed to customer relationships are being amortized on a straight-line basis over 5 to 15 years and five years for noncompete covenants. Intangible assets are tested for recoverability whenever events or changes in circumstances indicate that their carrying amount may not be recoverable in accordance with ASC 350 “Intangibles-Goodwill and Others.” Recoverability of long-lived assets is assessed by a comparison of the carrying amount to the estimated undiscounted future net cash flows expected to result from the use of the assets and their eventual disposition. If estimated undiscounted future net cash flows are less than the carrying amount, the asset is considered impaired and a loss would be recognized based on the amount by which the carrying value exceeds the fair value of the asset.


Rebates


Rebates are recorded in the accompanying consolidated statements of income as a reduction of the cost of revenues.


Income Taxes

Income taxes are accounted for under an asset and liability approach that requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been recognized in our financial statements or tax returns. In estimating future tax consequences, we generally consider all expected future events other than the enactment of changes in tax laws or rates. A valuation allowance is recognized if, on weight of available evidence, it is more likely than not that some portion or all of the deferred tax assets will not be realized.


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Item 3. Quantitative and Qualitative Information About Market Risk

We do not engage in trading market risk sensitive instruments and do not purchase hedging instruments or “other than trading” instruments that are likely to expose us to market risk, whether interest rate, foreign currency exchange, commodity price or equity price risk. We have entered into no forward or future contracts, purchased no options and entered into no swaps. Our primary market risk exposures are those of interest rate fluctuations. A change in interest rates would affect the rate at which we could borrow funds under our revolving credit facility. Our balance on the line of credit at November 30, 2009 was approximately $15.0 million. Assuming no material increase or decrease in such balance, a one percent change in the interest rate would change our interest expense by approximately $150,000 annually.


34
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Item 4T. Controls and Procedures

(a) Our management carried out an evaluation, with the participation of our Chief Executive Officer and Chief Financial Officer, of the effectiveness of our disclosure controls and procedures (as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) as of November 30, 2009. Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures including the accumulation and communication of disclosures to the Company’s Chief Executive Officer and Chief Financial Officer as appropriate to allow timely decision regarding required disclosure, were effective to provide reasonable assurance that information required to be disclosed by us in reports that we file or submit under the Exchange Act are recorded, processed, summarized and reported, within the time periods specified in the rules and forms of the SEC. It should be noted that the design of any system of controls is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving the stated goals under all potential future conditions, regardless of how remote.

(b) There has not been any change in our internal control over financial reporting in connection with the evaluation required by Rule 13a-15(d) under the Exchange Act that occurred during the quarter ended November 30, 2009 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.


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PART II – OTHER INFORMATION

Item 1. Legal Proceedings

During December 2007, we received a subpoena issued by the GSA Office of Inspector General, apparently as part of an ongoing, industry-wide investigation. We produced documents and data in response to the subpoena to the OIG during 2008. In September 2009, we became aware that the Company had been named along with several other prominent IT companies in a qui tam lawsuit entitled Christopher Crennen, et al., v. Dell Marketing, et al., filed in the United States District Court for the District of Massachusetts alleging violations of the False Claims Act related to the Company's obligations under the Buy American Act and the Trade Agreements Act. Qui tam lawsuits typically remain under seal (hence, usually unknown to the defendant) for some time while the government decides whether or not to intervene on behalf of a private qui tam plaintiff (known as a relator) and take the lead in the litigation. These lawsuits can involve significant monetary damages and penalties and award bounties to private plaintiffs who successfully bring the suits. The lawsuit, which was previously under seal, appears to have been the cause of the OIG subpoena. Despite its investigation, to date the government has declined to intervene in the lawsuit, however we can provide no assurance that the government will not intervene in this case or in any other qui tam suit against the Company in the future. The Company does not know whether the relators will pursue the qui tam lawsuit independently. We have filed a motion to dismiss the lawsuit. At this time, we are unable to predict the timing and outcome of this matter.

The Company is occasionally involved in various lawsuits, claims, and administrative proceedings arising in the normal course of business. Except as set forth above, the Company believes that any liability or loss associated with such matters, individually or in the aggregate, will not have a material adverse effect on the Company’s financial condition or results of operations.


36
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Item 6. Exhibits

Exhibit 10.1 – Employment Agreement between the Company and Stephen C. Donnelly dated September 21, 2009.(1)

Exhibit 10.2 – Employment Agreement between the Company and Sunil Misra dated November 6, 2009.(1)

Exhibit 10.3 – Employment Agreement between the Company and Samir Bhatt dated December 1, 2009.

Exhibit 10.4 – Second Amendment to Lease Agreement, dated as of May 1, 2009, between Westwood Properties Holdings LLC and Emtec Federal, Inc., for Springfield New Jersey facility.

Exhibit 31.1 - Rule 13a-14(a)/15d-14(a) Certification of Dinesh R. Desai, Principal Executive Officer, of Emtec, Inc. dated January 14, 2010.

Exhibit 31.2 - Rule 13a-14(a)/15d-14(a) Certification of Gregory P. Chandler, Principal Financial Officer, of Emtec, Inc. dated January 14, 2010.

Exhibit 32.1 - Section 1350 Certificate of Dinesh R. Desai, Principal Executive Officer, of Emtec, Inc. dated January 14, 2010.

Exhibit 32.2 - Section 1350 Certificate of Gregory P. Chandler, Principal Financial Officer, of Emtec, Inc. dated January 14, 2010.

(1) Previously filed as an exhibit to Registrant’s Form 10-K dated August 31, 2009, filed on November 25, 2009 and incorporated herein by reference.


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37
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SIGNATURES


Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this Report to be signed on its behalf by the undersigned thereunto duly authorized.


EMTEC, INC.

By: /s/ DINESH R. DESAI
Dinesh R. Desai
Chairman and Chief
Executive Officer
(Principal Executive Officer)

By: /s/ GREGORY P. CHANDLER
Gregory P. Chandler
Chief Financial Officer
(Principal Financial Officer)



Date: January 14, 2010

ETEC.. $1.09

Posted by: 10 bagger Date: Monday, January 04, 2010 2:00:58 PM
In reply to: 10 bagger who wrote msg# 2489 Post # of 2708

Bidding up on little volume.. hank

http://investorshub.advfn.com/boards/read_msg.aspx?message_id=44156357&txt2find=etec

ETEC.. $0.97

Posted by: 10 bagger Date: Thursday, December 03, 2009 1:54:21 PM
In reply to: None Post # of 2708

Emtec, Inc. Announces Fiscal 2009 Results

PR Newswire - Dec 03 at 13:11 NONE

Company Symbols: NASDAQ-OTCBB:ETEC

Services and consulting revenue increased by 171.5%; Earnings per share increased by 33.3%


MARLTON, N.J., Dec. 3 /PRNewswire-FirstCall/ -- Emtec, Inc. (OCT Bulletin Board: ETEC) ("Emtec" or the "Company") announced today that for the year ended August 31, 2009, consolidated operating income increased to $4.1 million, compared to $3.3 million in the prior year. Net income before interest, taxes, depreciation and amortization ("EBITDA") for the year ended August 31, 2009 increased to $6.4 million from $4.7 million in the prior year. Adjusted EBITDA, which is defined by management as net income before interest, taxes, depreciation, amortization, retention bonuses, non-essential overhead, stock based compensation, executive recruiting fees, severance, temporary wage reductions and the recovery of prior year expenses ("Adjusted EBITDA"), increased to $8.3 million in 2009 from $5.0 million in 2008. Net income for the year ended August 31, 2009 increased to $1.7 million, as compared to $1.3 million in the prior year. Earnings per share for the year ended August 31, 2009 increased $0.03 to $0.12 per share from $0.09 per share in the prior year. A reconciliation of EBITDA and Adjusted EBITDA to net income (loss) is attached to this press release.


(Logo: http://www.newscom.com/cgi-bin/prnh/20080414/EMTECLOGO )


EBITDA and Adjusted EBITDA are key financial metrics used by the Company's board of directors and management to evaluate and measure the Company's operating performance on a going forward basis. These metrics are not in conformity with generally accepted accounting principles in the United States of America ("GAAP"). Management's calculation of EBITDA eliminates the effect of charges primarily associated with financing decisions, tax regulations and capital investments. Adjusted EBITDA also eliminates certain non-recurring or unusual costs, reflects certain changes made by management during the year and makes adjustments which in the opinion of management are necessary to reflect the underlying ongoing operations of the business going forward. Net income (loss) is the most comparable GAAP measure of the Company's operating results presented in the Company's consolidated financial statements. We have made a reconciliation of these non-GAAP measures to net income (loss), the most closely comparable GAAP measure, for the years ended August 31, 2009 and 2008 and discussed these adjustments below. EBITDA and Adjusted EBITDA should not be considered as an alternative to net income (loss) or any other GAAP measure of performance or liquidity, and may not be comparable to other similarly titled measures of other companies. Management believes that the presentation of EBITDA and Adjusted EBITDA is important to investors because Adjusted EBITDA is used by management to evaluate financial performance and continuing operations and to determine resource allocation for each of our business segments.


Highlights for year ended August 31, 2009

-- Services and consulting revenue increased 171.5% from $20.6 million to
$55.8 million
-- Services and consulting revenue increased to 24.9% from 9.7% as a
percentage of total revenue
-- Overall gross margin rose to 14.7% from 12.8%
-- Adjusted EBITDA increased to $8.3 million from $5.0 million
-- Long term debt, including the current portion of long term debt, was
reduced by $2.4 million


The consolidated financial information for the year ended August 31, 2009 includes the accounts and transactions of KOAN-IT and EMS as of the respective acquisition dates of February 12, 2009 and May 12, 2009. The consolidated financial statement for the years ended August 31, 2009 and 2008 includes the accounts and transactions of Luceo and eBAS/Aveeva as of the respective acquisition dates of March 20, 2008 and August 13, 2008.


Adjusted EBITDA for the Emtec Infrastructure Services ("EIS') division increased $1.6 million to $6.1 million for the year ended August 31, 2009, compared to $4.5 million for the year ended August 31, 2008. This increase in Adjusted EBITDA is primarily attributable to increased gross profit from the growth in revenues from services and consulting and decreased selling, general and administrative expenses that resulted from cost-cutting measures we enacted during 2009. Except for retention bonuses all adjustments included in the calculation of Adjusted EBITDA set forth in the reconciliation table below were for this division. In addition, the EIS division incurred $238,000 in merger and acquisition expenses versus $296,000 in 2008 which are not included in the adjustments to EBITDA set forth in the reconciliation that appears below.


Adjusted EBITDA for the Emtec Global Services ("EGS") division increased $1.7 million to $2.2 million for the year ended August 31, 2009, compared to $502,000 for the year ended August 31, 2008. This increase in Adjusted EBITDA is primarily attributable to comparing a full year of operations in fiscal 2009 to a shorter stub period in the year ended August 31, 2008 and a reduction in selling, general and administrative costs as a percentage of revenue. The EGS adjustment included in the calculation of Adjusted EBITDA includes retention bonuses paid during 2009.


Net income on a consolidated basis increased by $397,000 to $1.7 million for the year ended August 31, 2009, compared to $1.3 million for the year ended August 31, 2008.


"In light of the continued economic downturn I am delighted to be able to report this improved annual performance once again," said Dinesh Desai, Chairman and Chief Executive Officer of Emtec. "Early in the year we took measures to preserve long term value for the Company and eliminate certain excess costs. During the second half of the year we were able to take advantage of our increasingly prominent position in the market to invest in our people and our clients. Our execution in our education market was extremely pleasing as we look to not only improve our stockholder value but to provide technology needs to improve the critically important education sector."


About Emtec:


Emtec, Inc., a Delaware corporation, was formed on January 17, 2001 (the "Company") and is an information technology ("IT") systems integrator, providing consulting, staffing, application services and infrastructure solutions to commercial, federal, education, state and local government clients. The Company's specific practices include IT consulting, communications, data management, enterprise computing, managed services, business service management solutions, training, storage and data center planning and development and staff augmentation solutions. The Company's client base is comprised of departments of the United States and Canada's federal, state and local governments, schools and commercial businesses throughout the United States and Canada.


Certain statements in this document constitute "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements involve known and unknown risks, uncertainties and other factors, which may cause the actual results, performance or achievements of the Company or industry results, to be materially different from any future results, performance, or achievements expressed or implied by such forward-looking statements. The Company's future operating results are dependent upon many factors, including but not limited to the Company's ability to: (i) obtain sufficient capital or a strategic business arrangement to fund its plan of operations when needed; (ii) build the management and human resources and infrastructure necessary to support the growth of its business; (iii) competitive factors and developments beyond the Company's control; and (iv) other risk factors discussed in the Company's periodic filings with the Securities and Exchange Commission which are available for review at www.sec.gov under "Search for Company Filings." We undertake no obligation to publicly update or revise any forward-looking statements to reflect changed assumptions, the occurrence of anticipated or unanticipated events, or changes to future results over time.



Consolidated Financial Statements






EMTEC, INC.
CONSOLIDATED STATEMENTS OF INCOME
(In thousands)

Years Ended August 31,
2009 2008 Change %
---- ---- ------ ---
Revenues
--------
Procurement services $168,020 $190,596 $(22,576) (11.8)%
Service and consulting 55,823 20,560 35,263 171.5%
-------- --------- --------- ------
Total Revenues 223,843 211,156 12,687 6.0%
--------------

Cost of Sales
-------------
Cost of procurement
services 149,631 168,850 (19,219) (11.4)%
Service and consulting 41,316 15,370 25,946 168.8%
-------- --------- --------- ------
Total Cost of Sales 190,947 184,220 6,727 3.7%
-------------------

Gross Profit
------------
Procurement services 18,389 21,746 (3,357) (15.4)%
Procurement services % 10.9% 11.4%

Service and consulting 14,507 5,190 9,317 179.5%
Service and consulting % 26.0% 25.2%

Total Gross Profit 32,896 26,936 5,960 22.1%
------------------
Total Gross Profit % 14.7% 12.8%
--------------------

Operating expenses:
Selling, general,
and administrative
expenses 25,883 21,892 3,991 18.2%
Rent expense -
related party 611 377 234 62.1%
Depreciation and
amortization 2,320 1,336 984 73.7%
-------- --------- --------- ------
Total operating expenses 28,814 23,605 5,209 22.1%
-------- --------- --------- ------

Percent of revenues 12.9% 11.2%

Operating income 4,082 3,331 751 22.5%
-------- --------- --------- ------
Percent of revenues 1.8% 1.6%

Other expense (income):
Interest income -
other (16) (89) 73 (82.0)%
Interest expense 1,117 998 119 11.9%
Other 30 1 29 N/A
-------- --------- --------- ------

Income before
income taxes 2,951 2,421 530 21.9%
Provision for
income taxes 1,233 1,100 133 12.1%
-------- --------- --------- ------
Net income $1,718 $1,321 $397 30.0%
======== ========= ========= ======
Percent of revenues 0.8% 0.6%



Reconciliation of net income to EBITDA and Adjusted EBITDA





EMTEC, INC.
RECONCILIATION OF NET INCOME TO EBITDA AND ADJUSTED EBITDA
(In thousands)

Years Ended August 31,
2009 2008 Change
------ ------ ------
Net income $1,718 $1,321 $397
Interest and other expense
(income): 1,131 910 221
Income taxes 1,233 1,100 133
Depreciation and amortization 2,320 1,336 984
------ ------ ------
EBITDA 6,402 4,667 1,735

Retention bonuses (1) 932 -
Elimination of non-
essential overhead (2) 950 -
Stock based compensation 161 287
Executive recruiting (3) 112 -
Severance 249 18
Temporary wage reductions-
reinstated (4) (274) -
Recovery of prior year
expenses (5) (270)
------ ------
Total Adjustments 1,860 305
------ ------ ------
Adjusted EBITDA $8,262 $4,972 $3,290
====== ====== ======



1) Expenses associated with retention bonuses which were agreed to in connection with the closing of the Company's acquisitions of EBAS/Aveeva and Luceo.


2) Elimination of non-essential overhead includes expenses incurred in 2009 which were eliminated by management during the year and will not recur on an ongoing basis. These charges included $149,000 paid to the former owners of Westwood under contracts that were not renewed (net of ongoing consulting costs paid to an owner), $399,000 paid to a senior executive under a contract that was not renewed and paid to other at-will employees whose positions were terminated and $402,000 in sales compensation changes implemented during the year.


3) Reflects executive recruiting fees incurred in connection with a management launched search for a senior executive in 2009. Management made a one-time decision to invest in the business by hiring new senior executives to grow the business in 2010 and thereafter.


4) Due to the uncertain economic situation in late calendar 2008, management reduced wages by $464,000 during the year and later reinstated full wages at the end of the year, resulting in a one-time cost savings of $464,000. This amount was netted against $190,000 in one-time bonuses paid out to employees after the prior wages we reinstated.


5) Offset from recovered professional fees which the Company previously recorded as an expense that were associated with defending the Company's tax positions during the IRS' 2003 and 2004 tax audit and appeal process.





Contact:

John P. Howlett
Vice Chairman Emeritus
Emtec, Inc.
Telephone 908-338-0043
Email johnhowlett@emtecinc.com
Web site www.emtecinc.com








SOURCE Emtec, Inc.

Emtec Names Gregory P. Chandler Chief Financial Officer and President of Emtec Global Services
Industry Veteran Joins Emtec Bringing Extensive Experience to Further Increase Company Growth
May 4, 2009 9:00:00 AM
Copyright Business Wire 2009


Email Story Discuss on ZenoBank

View Additional ProfilesMARLTON, N.J.--(BUSINESS WIRE)-- Emtec, Inc. (OTCBB: ETEC), an information technology systems and services company, today announced the appointment of Gregory P. Chandler as the company's Chief Financial Officer and President of Emtec Global Services. This division provides expertise in several areas including software development, software consulting, business analysis, quality assurance, and testing.

"I am pleased to be taking a much more meaningful role with an organization I have been proud to be a part of for the last four years," said Gregory P. Chandler, Chief Financial Officer and President of Emtec Global Services. "The company has continued to position itself to provide a breadth of services for its clients. I am looking forward to playing a major role as we continue to expand our footprint, execute and accelerate our growth. Management has done a great job providing a great culture that has served its clients and associates well. I look forward to helping build on the success."

Mr. Chandler brings extensive experience to Emtec, having previously served as the Managing Director and Group Head of Janney Montgomery Scott LLC's Business Services Investment Banking Practice. Prior to that, Mr. Chandler was a consultant at PricewaterhouseCoopers advising companies in restructuring their back office financial operations. Mr. Chandler received his MBA from Harvard Business School, a B.S. in Engineering from the United States Military Academy at West Point and is also a Certified Public Accountant. In addition, he has been a part of Emtec's Board serving as Chairman of the Audit Committee since the company merged with Westwood Computer Corporation in 2005. While he will no longer retain his position as Chairman of the Audit Committee, Mr. Chandler will continue to serve as a member of the Board of Directors.

"We are extremely pleased that Mr. Chandler has joined Emtec and believe he will be a great addition to our organization," said Dinesh Desai, chairman and chief executive officer, Emtec, Inc. "As he has spent considerable amounts of time in the past serving technology organizations like Emtec, we are happy to be adding his breadth and depth of experience to our expertise in corporate finance, mergers and acquisitions, and leadership for Emtec Global Services. He will play an important role in the continued planning and execution of Emtec's growth plan."

Emtec, Inc. is dedicated to optimizing information technology to support its customers organizational, financial and service level objectives. Emtec, Inc. has been delivering premier IT solutions for more than 40 years, enabling its clients to increase efficiency, productivity and competitiveness by better utilizing data. In addition, Emtec's service capabilities span the USA, Canada and countries around the globe. Through an international network of service organizations, Emtec provides support to clients, regardless of location.

About Emtec, Inc.

Emtec, Inc. established in 1964, is a systems integrator, providing services and products to the federal, state, local, education and commercial markets. Emtec operates two business segments: Emtec Systems Division and Emtec Global Services. Emtec's Systems Division provides IT transformation & optimization consulting, business service management, enterprise architecture, data management and integration services. Emtec Global Services' expertise includes software development, software consulting, business analysis, quality assurance, and testing. For more information visit www.emtecinc.com.




Source: Emtec, Inc.


----------------------------------------------
Media:
Emtec
David Singer
973-232-7880
DavidSinger@emtecinc.com
or
Welz & Weisel Communications
Nicole Nolte
703-218-3555
Nicole@w2comm.com

Chart
http://stockcharts.com/h-sc/ui?s=ETEC

http://www.emtecinc.com/index.asp

SEC LINK
http://www.sec.gov/cgi-bin/browse-edgar?action=getcompany&CIK=0000005117&owner=include&count=40

A little dusty over here...

Can't hurt to ask.

i'd like to see the company put out some press releases or go out on a roadshow. i think i'm gonna call the company at some point this week. i agree that $2.60 is ok for now, but i think etec is worth $3-4.

Market really seems to have settled on a price of $2.60 for the stock, which is fine by me. Just hope it doesn't fall too far back like it did the last time it popped up. Shouldn't, based on the numbers, but in this market you can never tell.

GREAT quarter!
this stock is CHEAP, CHEAP, CHEAP!
not selling 'til $5+

Guess the big run up was too much for them to resist. Even if you believe strongly in a company it is still prudent to take some money off the table. Fundamentals still look good, but don't think we can expect any real excitement from this one any time soon.

Has come down since last pot, but still looks good on fundamentals. Only one question---Why so much insider selling since the first of the year?

This stock has gone up almost 50% in the last week with no news. Nice little company with good earnings track record and looking for opinions as to why the big move.