FORM 10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

(Mark One)

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

For the quarterly period ended ~~April~~July 5, 2009

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

For the transition period from to

Commission file number 0-20022

POMEROY IT SOLUTIONS, INC.

(Exact name of registrant as specified in its charter)

DELAWARE

31-1227808

(State or other jurisdiction of incorporation (IRS Employer or organization) Identification No.)

1020 Petersburg Road, Hebron, KY 41048

(Address of principal executive offices)

(859) 586-0600

(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 requirements for the past 90 days.

YES x NO ¨

Indicate by check mark whether the registrant 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 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 ¨ NO ¨ (not yet applicable to registrant)

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 definition of “large accelerated filer”, “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer ¨ Accelerated filer ¨ Non-accelerated filer ¨ 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 ¨ NO x

The number of shares of common stock outstanding as of ~~May~~August 85, 2009 was 9,~~324~~322,~~247~~036.

POMEROY IT SOLUTIONS, INC.

TABLE OF CONTENTS

			Page
Part I.	Financial Information		3
	Item 1.	Financial Statements:	3
		Consolidated Balance Sheets as of April 5, 2009 and January 5, 2009	3
		Consolidated Balance Sheets as of July 5, 2009 and January 5, 2009	3
		Consolidated Statements of Operations for the Three Months Ended April 5, 2009 and 2008	5
		Consolidated Statements of Operations for the Three Months Ended July 5, 2009 and 2008	5
		Consolidated Statements of Comprehensive Income (Loss) for the Three Months Ended April 5, 2009 and 2008	6
		Consolidated Statements of Comprehensive Income for the Three Months Ended July 5, 2009 and 2008	6
		Consolidated Statements of Cash Flows for the Three Months Ended April 5, 2009 and 2008	7
		Consolidated Statements of Operations for the Six Months Ended July 5, 2009 and 2008	7
		Notes to Consolidated Financial Statements	8
		Consolidated Statements of Comprehensive Income (Loss) for the Six Months Ended July 5, 2009 and 2008	8
	Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	15
		Consolidated Statements of Cash Flows for the Six Months Ended July 5, 2009 and 2008	9
	Item 3.	Quantitative and Qualitative Disclosure about Market Risk	23
		Notes to Consolidated Financial Statements	10
	Item 4.	Controls and Procedures	23
	Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	19
Part II.	Other Information
	Item 3.	Quantitative and Qualitative Disclosure about Market Risk	28
	Item 1.	Legal Proceedings	24
	Item 4.	Controls and Procedures	28
	Item 1A.	Risk Factors	24
Part II.	Other Information		30
	Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	24
	Item 1.	Legal Proceedings	30
	Item 3.	Defaults Upon Senior Securities	24
	Item 1A.	Risk Factors	30
	Item 4.	Submission of Matters to a Vote of Security Holders	25
	Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	30
	Item 5.	Other Information	25
	Item 3.	Defaults Upon Senior Securities	31
	Item 6.	Exhibits	26
	Item 4.	Submission of Matters to a Vote of Security Holders	32
SIGNATURE			26
	Item 5.	Other Information	32
	Item 6.	Exhibits	33
SIGNATURE			34

PART I. FINANCIAL INFORMATION

ITEM 1. ~~FINANACIAL~~FINANCIAL STATEMENTS

POMEROY IT SOLUTIONS, INC.

CONSOLIDATED BALANCE SHEETS

(UNAUDITED)

(in thousands)
	April 5,		January 5,
	July 5,		January 5,
	2009		2009
ASSETS
Current Assets:
Cash and cash equivalents	$	3938,~~161~~065	$	30,787
Certificates of deposit		1,~~152~~159		1,142
Accounts receivable:
Trade, less allowance of $3,335 and $3,233, respectively		60,767		89,654
Trade, less allowance of $3,096 and $3,233, respectively		68,054		89,654
Vendor, less allowance of $293 and $293, respectively		1,432		1,299
Vendor, less allowance of $318 and $293, respectively		1,875		1,299
Net investment in leases		5534		74
Other		~~531~~327		622
Total receivables		6270,~~785~~290		91,649
Inventories		68,~~380~~809		7,890
Other		4,~~134~~231		3,861
Total current assets		~~113~~122,~~612~~554		135,329
Equipment and leasehold improvements:
Furniture, fixtures and equipment		1314,~~971~~564		14,040
Leasehold Improvements		5,~~293~~370		5,055
Total		19,~~264~~934		19,095
Less accumulated depreciation		1314,~~390~~012		12,748
Net equipment and leasehold improvements		5,~~874~~922		6,347
Intangible assets, net		~~680~~620		752
Other assets		~~462~~454		559
Total assets	$	~~120~~129,~~628~~550	$	142,987

(The accompanying notes are an integral part of the financial statements.)

POMEROY IT SOLUTIONS, INC.

CONSOLIDATED BALANCE SHEETS

(UNAUDITED)

(in thousands)
	April 5,			January 5,
	July 5,			January 5,
	2009			2009
LIABILITIES AND EQUITY
Current Liabilities:
Floor plan financing	$	717,~~412~~899		$	11,709
Accounts payable - trade		1620,~~582~~694			30,774
Deferred revenue		1,~~713~~648			1,557
Employee compensation and benefits		57,~~054~~072			7,081
Accrued facility closing cost and severance		~~762~~339			1,149
Other current liabilities		1715,~~550~~045			1823,~~839~~772
Total current liabilities		4962,~~073~~697			7176,~~109~~042
Equity:
Preferred stock, $.01 par value; authorized 2,000 shares,
Preferred stock, $.01 par value; authorized 2,000 shares, (no shares issued or outstanding)		-			-
(no shares issued or outstanding)		-			-
Common stock, $.01 par value; authorized 20,000 shares, (13,724 and 13,693 shares issued, respectively)		143			142
Common stock, $.01 par value; authorized 20,000 shares,
Paid in capital		94,252			93,858
(13,724 and 13,693 shares issued, respectively)		144			142
Accumulated other comprehensive income		4			13
Paid in capital		94,304			93,858
Accumulated deficit		(4,156	)		(3,889	)
Accumulated other comprehensive income		18			13
		90,243			90,124
Retained earnings		453			1,044
Less treasury stock, at cost (4,402 and 4,340 shares, respectively)		23,390			23,179
		94,919			95,057
Total equity		66,853			66,945
Less treasury stock, at cost (4,395 and 4,340 shares, respectively)		23,364			23,179
Total liabilities and equity	$	129,550		$	142,987
Total equity		71,555			71,878
Total liabilities and equity	$	120,628		$	142,987

(The accompanying notes are an integral part of the financial statements.)

POMEROY IT SOLUTIONS, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(UNAUDITED)

(in thousands, except per share data)	Three Months Ended
	April 5,			April 5,
	July 5,			July 5,
	2009			2008
Net revenues:
Product	$	5365,~~161~~483		$	8192,~~477~~678
Service		3635,~~299~~317			6362,~~692~~315
Total net revenues		89100,~~460~~800			~~145~~154,~~169~~993
Cost of revenues:
Product		4759,~~644~~232			7383,~~071~~243
Service		2826,~~856~~907			5652,~~422~~207
Total cost of revenues		7686,~~500~~139			~~129~~135,~~493~~450
Gross profit		1214,~~960~~661			1519,~~676~~543
Operating expenses:
Selling, general and administrative		1213,~~771~~708			1816,~~396~~630
Depreciation and amortization		~~703~~671			1,~~216~~218
Total operating expenses		1314,~~474~~379			1917,~~612~~848
Loss from operations		(514	)		(3,936	)
Income from operations		282			1,695
Other income (expense):
Interest income		86122			8542
Interest expense		(~~160~~111	)		(~~351~~247	)
Other		(431	)		-
Other income (expense), net		~~(78~~42	)		(~~266~~205	)
Loss before income tax		(592	)		(4,202	)
Income before income tax		324			1,490
Income tax expense (benefit)		-			-
Income tax expense		-			-
Net loss	$	(592	)	$	(4,202	)
Net income	$	324		$	1,490
Weighted average shares outstanding:
Basic		9,~~354~~760			12,~~061~~343
Diluted (1)		9,354			12,061
Diluted		9,760			12,343
Earnings (loss) per common share:
Earnings per common share:
Basic	$	(0.0603	)	$	(0.3512	)
Diluted (1)	$	(0.06	)	$	(0.35	)
Diluted	$	0.03		$	0.12

(1) Dilutive loss per common share for the 3 months ended April 5, 2009 and 2008 would have been anti-dilutive if the number of weighted average shares outstanding were adjusted to reflect the dilutive effect of outstanding stock options and unearned restricted shares.

(The accompanying notes are an integral part of the financial statements.)

POMEROY IT SOLUTIONS, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME ~~(LOSS)~~

(UNAUDITED)

(in thousands)	Three Months Ended
	Three Months Ended
	July 5,			July 5,
	April 5,			April 5,
	2009			2008
Net loss	$	(592	)	$	(4,202	)
Net income	$	324		$	1,490
Other comprehensive income (loss):
Foreign currency translation adjustment		5(14	)		(826	)
Comprehensive income (loss)	$	(587	)	$	(4,210	)
Comprehensive income	$	310		$	1,516

(The accompanying notes are an integral part of the financial statements.)

POMEROY IT SOLUTIONS, INC.

CONSOLIDATED STATEMENTS OF ~~CASH FLOWS~~OPERATIONS

(UNAUDITED)

(in thousands)
(in thousands, except per share data)	Six Months Ended
	Three Months Ended
	July 5,			July 5,
Cash Flows from (used in) Operating Activities:	April 5, 2009			April 5, 2008
	2009			2008
Net loss		(592	)		(4,202	)
Net revenues:
Adjustments to reconcile net loss to
Product	$	118,644		$	174,155
net cash flows from (used in) operating activities:
Service		71,616			126,007
Depreciation and amortization		715			1,250
Total net revenues		190,260			300,162
Stock option, restricted stock compensation and employee
Cost of revenues:
purchase plan expense		364			755
Product		106,876			156,314
Provision for doubtful accounts		66			300
Service		55,763			108,629
Amortization of unearned income		-			(2	)
Total cost of revenues		162,639			264,943
(Gain) loss on disposal of fixed assets		-			(2	)
Gross profit		27,621			35,219
Changes in working capital accounts:
Operating expenses:
Accounts receivable		28,778			18,775
Selling, general and administrative		26,479			35,026
Inventories		1,510			259
Depreciation and amortization		1,374			2,434
Other current assets		(273	)		(390	)
Total operating expenses		27,853			37,460
Net investment in leases		19			336
Loss from operations		(232	)		(2,241	)
Accounts payable trade		(14,192	)		(15,163	)
Other income (expense):
Deferred revenue		155			144
Interest income		208			127
Employee compensation and benefits		(2,026	)		(3,811	)
Interest expense		(271	)		(598	)
Other, net		(1,585	)		(2,539	)
Other		27			-
Net operating activities		12,939			(4,290	)
Other expense, net		(36	)		(471	)
Cash Flows used in Investing Activities:
Loss before income tax		(268	)		(2,712	)
Capital expenditures		(172	)		(1,244	)
Income tax expense		-			-
Net investing activities		(172	)		(1,244	)
Net loss	$	(268	)	$	(2,712	)
Cash Flows from (used in) Financing Activities:
Weighted average shares outstanding:
Increase in short-term debt, net		-			6,919
Basic		9,339			12,027
Net reduction in floor plan financing		(4,297	)		(11,760	)
Diluted (1)		9,339			12,027
Purchase of treasury stock		(185	)		(1,413	)
Earnings per common share:
Proceeds from issuance of common shares for employee
Basic	$	(0.03	)	$	(0.23	)
stock purchase plan		84			172
Diluted (1)	$	(0.03	)	$	(0.23	)
Net financing activities		(4,398	)		(6,082	)
Effect of exchange rate changes on cash and cash equivalents		5			(8	)
Increase (decrease) in cash and cash equivalents		8,374			(11,624	)
Cash and cash equivalents:
Beginning of period		30,787			13,282
End of period	$	39,161		$	1,658

(1)

Diluted loss per common share for the six month periods ending July 5, 2009 and 2008 would have been anti-dilutive if the number of weighted average shares outstanding were adjusted to reflect the dilutive effect of outstanding stock options and unvested restricted shares.

(The accompanying notes are an integral part of the financial statements.)

POMEROY IT SOLUTIONS, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(UNAUDITED)

(in thousands)	Six Months Ended
	July 5,			July 5,
	2009			2008

Net loss	$	(268	)	$	(2,712	)

Other comprehensive income (loss):
Foreign currency translation adjustment		(9	)		18

Comprehensive income (loss)	$	(277	)	$	(2,694	)

(The accompanying notes are an integral part of the financial statements.)

POMEROY IT SOLUTIONS, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

(in thousands)
	Six Months Ended
	July 5, 2009			July 5, 2008
Cash Flows from (used in) Operating Activities:
Net loss		(268	)		(2,712	)
Adjustments to reconcile net loss to net cash flows from (used in) operating activities:
Depreciation and amortization		1,397			2,499
Stock option, restricted stock compensation and employee purchase plan expense		311			1,237
Provision for doubtful accounts		67			600
Amortization of unearned income		-			(4	)
Changes in working capital accounts:
Accounts receivable		21,252			4,678
Inventories		(919	)		146
Other current assets		(370	)		3,462
Net investment in leases		40			424
Accounts payable trade		(10,080	)		(668	)
Deferred revenue		91			(291	)
Other, net		(9,430	)		(2,398	)
Net operating activities		2,091			6,973
Cash Flows used in Investing Activities:
Capital expenditures		(867	)		(2,386	)
Net investing activities		(867	)		(2,386	)
Cash Flows from (used in) Financing Activities:
Net increase (reduction) in floor plan financing		6,190			(6,631	)
Purchase of treasury stock		(211	)		(2,270	)
Proceeds from issuance of common shares for employee stock purchase plan		84			172
Net financing activities		6,063			(8,729	)
Effect of exchange rate changes on cash and cash equivalents		(9	)		18
Increase (decrease) in cash and cash equivalents		7,278			(4,124	)
Cash and cash equivalents:
Beginning of period		30,787			13,282
End of period	$	38,065		$	9,158

(The accompanying notes are an integral part of the financial statements.)

POMEROY IT SOLUTIONS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Basis of Presentation

The consolidated financial statements of Pomeroy IT Solutions, Inc. (“the Company”) have been prepared in accordance with accounting principles generally accepted in the United States of America (“US GAAP”) for interim financial information and with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. Accordingly, they do not include all the information and footnotes required by US GAAP for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) necessary for a fair presentation of the interim periods have been made. The Company has evaluated subsequent events through August 24, 2009, which is the date the financial statements were issued. The results of operations for the three and six month ~~period~~periods ended ~~April~~July 5, 2009 are not necessarily indicative of the results that may be expected for future interim periods or for the year ending January 5, 2010.

Use of Estimates in Financial Statements - In preparing financial statements in conformity with accounting principles generally accepted in the United States of America, management makes estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements, as well as the reported amounts of revenues and expenses during the reporting period. Accounting estimates in these financial statements include allowances for trade accounts receivable and vendor accounts receivable, unclaimed property liabilities, deferred tax valuation allowances and estimates related to assessing the impairment of long-lived assets. Such estimates and assumptions are subject to inherent uncertainties, which may result in actual amounts differing from reported amounts.

2. ~~Recent~~Pending ~~Accounting Pronouncements~~Merger

On May 19, 2009, the Company entered into an agreement and plan of merger (“Merger Agreement”) with Hebron LLC (“Parent”), Desert Mountain Acquisition Co. (“Desert”), a wholly-owned subsidiary of Parent, and with respect to only certain sections of the Merger Agreement, David B. Pomeroy, II. Parent and Desert are affiliates of Mr. Pomeroy, who is a Director of the Company and its largest stockholder. The Agreement was amended on June 8, 2009 and June 20, 2009. Pursuant to the Merger Agreement, as amended, Desert will merge with and into the Company (with the Company continuing as the surviving corporation), the Company will become a wholly-owned subsidiary of Parent, and each outstanding share of the Company’s common stock will be converted into the right to receive $6.00 in cash. The Merger Agreement, as amended, also provides that if the Company terminates the Merger Agreement to accept an acquisition proposal by another party, the Company would be required to pay a termination fee of up to $2.1 million to Parent.

The transaction, which is subject to shareholder approval, is expected to close in the fourth quarter of fiscal 2009.

Recent Accounting Pronouncements

During fiscal 2008, the Company adopted Statement of Financial Accounting Standards No. 157, Fair Value Measurements (“SFAS 157”). SFAS 157 establishes a framework for measuring fair value, and expands disclosure about such fair value measurements. The Company had only partially applied the provisions of SFAS 157 as management had elected the deferral provisions of FASB Staff Position (“FSP”) 157-2 which delayed the effective date of SFAS157 for non-financial assets and liabilities which are not measured at fair value on a recurring basis (at least annually) until January 6, 2009 for the Company. The major categories of assets and liabilities that are recognized or disclosed at fair value on a nonrecurring basis include intangible assets and equipment and leasehold improvements that may be reported at fair value as a result of impairment testing, and certain assets and liabilities recognized as a result of business combinations. There was no impact to the Company’s consolidated financial position, results of operations, or cash flows as a result of the adoption of SFAS 157 for non-financial assets and liabilities.

POMEROY IT SOLUTIONS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

In December 2007, the Financial Accounting Standards Board (“FASB”) issued SFAS No. 141(R), “Business Combinations” which replaces SFAS No. 141, “Business Combinations.” This Statement retains the fundamental requirements in SFAS No. 141 that the acquisition method of accounting (formerly referred to as purchase method) is to be used for all business combinations and that an acquirer is identified for each business combination. This Statement defines the acquirer as the entity that obtains control of one or more businesses in the business combination and establishes the acquisition date as of the date that the acquirer achieves control. This Statement requires an acquirer to recognize the assets acquired, the liabilities assumed, and any noncontrolling interest in the acquiree at the acquisition date, measured at their fair values. This Statement requires the acquirer to recognize acquisition-related costs and restructuring costs separately from the business combination as period expense. This Statement is effective for business combinations for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after December 15, 2008. The Company will implement SFAS No. 141(R) for any business combinations occurring subsequent to January 5, 2009.

In April 2009, the FASB issued FSP FAS 141(R)-1, “Accounting for Assets Acquired and Liabilities Assumed in a Business Combination That Arise from Contingencies.” The FSP amends SFAS 141(R) related to the accounting for assets and liabilities arising from contingencies in a business combination. The FSP requires that an asset or a liability arising from a contingency in a business combination be recognized at fair value if fair value can be reasonably determined and provides guidance on how to make that determination. If the fair value of an asset or liability cannot be reasonably determined, the FSP requires that an asset or liability be recognized at the amount that would be recognized in accordance with SFAS 5, “Accounting for Contingencies”, and FASB Interpretation 14, “Reasonable Estimation of the Amount of a Loss”, for liabilities and an amount using similar criteria for assets. The FSP is effective for business combinations for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after December 15, 2008. There was no material impact to the Company’s consolidated financial position, results of operations, or cash flows as a result of the adoption of SFAS 141(R)-1.

In April 2008, the FASB issued FSP FAS 142-3, “Determination of the Useful Life of Intangible Assets”. This FSP amends the factors that should be considered in developing renewal or extension assumptions used to determine the useful life of a recognized intangible asset under SFAS 142, “Goodwill and Other Intangible Assets”. The intent of this FSP is to improve the consistency between the useful life of a recognized intangible asset under SFAS 142 and the period of expected cash flows used to measure the fair value of the asset under SFAS 141R and other U.S. generally accepted accounting principles. This FSP became effective for the Company in fiscal year 2009. The adoption of this FSP had no impact on the consolidated financial statements.

8In June 2008, the FASB issued FSP No. EITF 03-6-1, “Determining Whether Instruments Granted in Share-Based Payment Transactions are Participating Securities.” FSP EITF 03-6-1 concludes that non-vested shares with non-forfeitable dividend rights are considered participating securities and, thus, subject to the two-class method pursuant to SFAS 128, “Earnings per Share”, when computing basic and diluted EPS. The Company adopted FSP EITF 03-6-1 effective January 6, 2009. Upon adoption, the Company is required to adjust all prior period EPS data on a retrospective basis to conform with the provisions of this FSP. Due to net losses incurred for the six month period ended July 5, 2008, for the nine month period ended October 5, 2008 and for the years ended January 5, 2009 and 2008, the Company’s previously-reported basic and diluted weighted average shares outstanding, and earnings (loss) per share, for these periods are not affected by the adoption of this Statement. For the three month period ended July 5, 2008, basic weighted average shares outstanding is adjusted from 11,946 to 12,343 with no impact on previously-reported basic earnings per share. No adjustment is necessary for diluted weighted average shares outstanding and diluted earnings per share for the three month period ended July 5, 2008. For the three month period ended October 5, 2008, basic and diluted weighted average shares outstanding are adjusted from 11,994 and 12,217, respectively, to 12,370 and 12,370, respectively, with no impact on previously-reported basic and diluted earnings per share. See additional discussion in Note 7 to the consolidated financial statements.

POMEROY IT SOLUTIONS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

In ~~June~~May ~~2008~~2009, the FASB issued ~~FSP~~SFAS ~~No. EITF 03-6-1~~165, “~~Determining~~Subsequent ~~Whether Instruments Granted in Share-Based Payment Transactions are Participating Securities~~Events.” ~~FSP~~ ~~EITF 03-6-1 concludes that non-vested shares with non-forfeitable dividend rights are considered participating securities and, thus, subject to the two-class method pursuant to~~ SFAS ~~128,~~165 ~~“Earnings per~~establishes ~~Share”,~~standards ~~when~~of ~~computing~~accounting ~~basic~~for and ~~diluted~~disclosure ~~EPS. The~~of ~~Company~~events ~~adopted~~that ~~FSP~~occur ~~EITF 03-6-1~~after ~~effective January 6, 2009. Upon adoption,~~ the ~~Company is required to~~ ~~adjust~~balance ~~all~~sheet ~~prior~~date ~~period~~but ~~EPS~~before ~~data~~financial onstatements aare ~~retrospective~~issued ~~basis~~or toare ~~conform with the~~available ~~provisions~~to ofbe ~~this FSP~~issued. ~~Due~~SFAS to165 ~~net~~is ~~losses~~effective ~~incurred~~ for ~~the~~interim ~~quarter~~and ~~ended~~annual ~~April 5,~~periods ~~2008,~~ending ~~for the six month period ended July 5, 2008, for the nine month period~~after ~~ended~~June ~~October 5~~15, ~~2008 and for the years ended January 5,~~ 2009. ~~and~~The ~~2008, the~~ Company’s ~~previously-reported~~adopted ~~basic and diluted weighted average shares outstanding, and earnings (loss) per share, for these periods are not affected by~~ the ~~adoption~~provisions of ~~this~~SFAS ~~Statement. For~~165 the three month period ended July 5, 2008, basic weighted average shares outstanding is adjusted from 11,946 to 12,343 with no impact on previously-reported basic earnings per share. No adjustment is necessary for ~~diluted weighted average shares outstanding and diluted earnings per share for~~ the ~~three month period ended July 5, 2008. For~~second ~~the~~quarter ~~three~~of ~~month~~fiscal ~~period ended October 5~~2009, ~~2008,~~in ~~basic~~accordance ~~and diluted weighted average shares outstanding are adjusted from 11,994 and 12,217, respectively, to 12,370 and 12,370, respectively,~~ with nothe ~~impact~~effective ~~on previously-reported basic and diluted earnings per share~~date. See ~~additional~~“Basis ~~discussion in Note 5 to the~~of ~~consolidated~~Presentation” ~~financial statements~~above.

3In April 2009, the FASB issued FSP FAS 107-1 and APB 28-1, “Interim Disclosures about Fair Value of Financial Instruments,” which enhances consistency in financial reporting by increasing the frequency of fair value disclosures. ~~Borrowing~~This ~~Arrangements~~FSP is effective for interim and annual periods ending after June 15, 2009, with early adoption permitted for interim and annual periods ending after March 15, 2009 subject to certain restrictions. The adoption of FSP FAS 107-1 and APB 28-1 did not have a material impact on the Company’s consolidated financial statements.

In June 2009, the FASB issued SFAS 168, “The FASB Accounting Standards Codification and the Hierarchy of Generally Accepted Accounting Principles.” SFAS 168 will become the single source of authoritative nongovernmental U.S. generally accepted accounting principles, superseding existing accounting literature. While not intended to change U.S. GAAP, the Codification significantly changes the way in which accounting literature is organized. SFAS 168 is effective for interim and annual periods ending after September 15, 2009. The adoption of SFAS 168 will not have an impact on the Company’s consolidated financial position, results of operations or cash flows. However, because the Codification completely replaces existing standards, it will affect the way U.S. GAAP is referenced in the Company’s consolidated financial statements.

Borrowing Arrangements

The Company has a Syndicated Credit Facility Agreement with GE Commercial Distribution Finance (“GECDF”), which became effective June 25, 2004 (the “Credit Facility”). The Credit Facility, which has been the subject of subsequent modifications, provides for a floor plan loan facility and a revolving loan commitment, both of which are collateralized primarily by the Company’s accounts receivable. The Credit Facility also provides for a letter of credit facility. The funds available for borrowing by the Company under the Credit Facility are reduced by an amount equal to outstanding advances made to the Company to finance inventory under the floor plan loan facility and the aggregate amount of letters of credit outstanding at any given time.

The maximum available borrowings under the Credit Facility total $80.0 million for inventory financing and the revolving loan. The Credit Facility ~~permits~~permitted distributions up to a maximum of $18 million for the period June 25, 2008 through June 25, 2009 only if specified criteria ~~are~~were met. The term distribution is defined in the Credit Facility and ~~includes~~included dividends, acquisitions of outstanding stock, reinvestment of debt securities and compensation to a shareholder in excess of normal compensation including performance bonuses. The agreement provides for a termination fee of up to $250 thousand to be paid by the Company in the event the Company terminates the agreement prior to the maturity date of the revolving loan commitment. The Credit Facility ~~expires~~was most recently amended on June 2524, 2009., ~~The~~which ~~Company intends~~extended toits ~~negotiate~~maturity adate ~~new~~to ~~credit~~October ~~facility~~30, ~~with~~2009 ~~terms~~and ~~sufficient~~set ~~for~~forth ~~its~~the ~~financing~~financial ~~needs~~covenants ~~and~~for ~~does~~the ~~not~~periods ~~anticipate~~subsequent ~~any~~to ~~problems securing a new credit facility before~~ June 25, 2009. ~~However, if the Company is unable to negotiate a new credit facility, it could adversely affect the Company’s ability to operate.~~

A significant part of the Company’s inventories are financed by floor plan arrangements with third parties. At ~~April~~July 5, 2009 and January 5, 2009, these lines of credit totaled $88.0 million, including $80.0 million with GE Commercial Distribution Finance (“GECDF”) and $8.0 million with IBM Credit Corporation (“ICC”). Borrowings under the GECDF floor plan arrangements are made on 30 day notes. Borrowings under the ICC floor plan arrangement are made on 15 day notes. All such borrowings are secured by the related inventory. The Company classifies amounts outstanding under the floor plan arrangements as floor plan financing liability which is a current liability in the consolidated balance sheets. Payments made under floor plan arrangements are classified as financing activities in the consolidated statements of cash flows. Outstanding amounts under the floor plan financing arrangements totaled $717.49 million at ~~April~~July 5, 2009 and $11.7 million at January 5, 2009. Interest was imputed on these borrowings at a rate of 6.0% per annum for the three and six month periods ended ~~April~~ July 5, 2009 and 2008. Related interest expense totaled $~~101~~63 thousand and $~~196~~164 thousand for the respective three and six month periods ended ~~April~~July 5, 2009, and $128 ~~2008,~~and $324 thousand for the respective three and six month periods ended July ~~respectively~~5, 2008.

912

POMEROY IT SOLUTIONS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

As of ~~April~~July 5, 2009 and January 5, 2009, there was no balance outstanding under the Credit Facility other than the floor plan financing liability. At ~~April~~July 5, 2009 and January 5, 2009, the amounts available under the Credit Facility were $2931.91 million and $50.2 million, respectively. Interest on outstanding borrowings under the credit facility is payable monthly based on the LIBOR rate and a pricing grid. As of ~~April~~July 5, 2009, the adjusted ~~LIBOR~~ LIBOR rate was 32.0181%. The credit facility is collateralized by substantially all the assets of Pomeroy, except those assets that collateralize certain other financing arrangements. Under the terms of the credit facility, the Company is subject to various financial covenants. As of ~~April~~July 5, 2009, Pomeroy was in compliance with these financial covenants.

4The Company’s credit facility expires October 30, 2009. ~~Stock-Based~~The ~~Compensation~~Company intends to negotiate a new credit facility with terms sufficient for its financing needs and does not anticipate any problems securing a new credit facility before October 30, 2009. However, if the Company is unable to negotiate a new credit facility, it could adversely affect the Company’s ability to operate.

Financial Instruments

The Company’s financial instruments consist primarily of cash and cash equivalents, certificates of deposit, and accounts receivable, as well as obligations under accounts payable, floor plan financing arrangements and the Company’s credit facility. The estimated fair values of the Company’s short-term financial instruments, including cash and cash equivalents, certificates of deposit, receivables, payables and floor plan financing arrangements arising in the ordinary course of business approximate their carrying amounts due to the relatively short period of time between origination and realization. The carrying amount of outstanding borrowings under the credit facility approximates fair value because the interest rates fluctuate with market interest rates

Stock-Based Compensation

Restricted Common Stock Awards

During the ~~three~~six months ended ~~April~~July 5, 2009, the Company awarded ~~158~~211,~~404~~884 shares of restricted common stock, which vest over a 4-year period. Restricted stock awards are valued at the closing market value of the Company’s common stock on the date of the grant, and the total value of the award is recognized as expense ratably over the vesting period. Total compensation expense recognized for unvested shares was $~~135~~11 thousand and $~~492~~228 thousand for the three months ended ~~April~~July 5, 2009 and 2008, respectively. Total compensation expense recognized for unvested shares was $146 thousand and $720 thousand for the six months ended July 5, 2009 and 2008, respectively. During the quarter ended July 5, 2009, forfeiture adjustments resulted in a reversal of previously-recognized expense totaling $161 thousand. As of ~~April~~July 5, 2009, the total amount of unrecognized compensation expense related to nonvested restricted stock awards was approximately $2.89 million, which is expected to be recognized over a weighted-average period of approximately 3.0 years.

				Weighted average
	Shares			Weighted average fair value at grant date
	Shares			fair value at grant date
Restricted common stock outstanding January 5, 2009		348,397		$	7.13
Granted		158,404			3.55
Vested		-			-
Forfeitures		(80,000	)		7.61
Restricted common stock outstanding April 5, 2009		426,801		$	5.57
Granted		53,480			4.79
Vested		-			-
Forfeitures		(21,721	)		5.90
Restricted common stock outstanding July 5, 2009		458,560		$	5.59

~~Stock Option Awards~~13

For the three months ended April 5, 2009, the Company granted 293,072 stock option awards to employees. The fair values range from $1.64 to $1.65, based upon the following assumptions: underlying price of stock ranging from $3.50 to $3.61; expected life ranging from 3.5 to 4.5 years; volatility ranging from 58.92% to 61.38%; risk-free interest rates ranging from 1.12% to 1.41%; and dividend yield of 0.00%.

For the three months ended April 5, 2009 and 2008, the Company recognized approximately $209 thousand and $232 thousand, respectively, in expense related to stock options. The approximate unamortized stock option compensation as of April 5, 2009, which will be recorded as expense in future periods, is $725 thousand. The weighted average time over which this expense will be recorded is approximately 2.3 years.

Employee Stock Purchase Plan

For the three months ended April 5, 2009 and 2008, the Company recognized approximately $20 thousand and $31 thousand, respectively, in expense related to the employee stock purchase plan being compensatory under FAS 123R.

POMEROY IT SOLUTIONS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

5.Stock ~~Earnings per Common Share~~Option Awards

For the three months ended July 5, 2009, the Company did not grant any stock option awards to employees. For the six months ended July 5, 2009, the Company granted 293,072 stock option awards to employees. The fair values range from $1.64 to $1.65, based upon the following assumptions: underlying exercise price ranging from $3.50 to $3.61; expected life ranging from 3.5 to 4.5 years; volatility ranging from 58.92% to 61.38%; risk-free interest rates ranging from 1.12% to 1.41%; and dividend yield of 0.00%.

For the three months ended July 5, 2009 and 2008, the Company recognized approximately $(84) and $222 thousand, respectively, in expense related to stock options. For the six months ended July 5, 2009 and 2008, the Company recognized approximately $125 thousand and $454 thousand, respectively, in expense related to stock options. During the quarter ended July 5, 2009, forfeiture adjustments resulted in a reversal of previously-recognized expense totaling $210 thousand. The approximate unamortized stock option compensation as of July 5, 2009, which will be recorded as expense in future periods, is $587 thousand. The weighted average time over which this expense will be recorded is approximately 2.2 years.

Employee Stock Purchase Plan

For the three months ended July 5, 2009 and 2008, the Company recognized approximately $20 thousand and $32 thousand, respectively, in expense related to the employee stock purchase plan being compensatory under FAS 123R. For the six months ended July 5, 2009 and 2008, the Company recognized approximately $40 thousand and $63 thousand, respectively, in expense related to the employee stock purchase plan.

7.	Earnings per Common Share

The following is a reconciliation of the number of shares used in the basic EPS and diluted EPS computations:

	Three Months Ended April 5,
	2009						2008
				Per Share						Per Share
	Shares			Amount			Shares			Amount
Basic EPS		9,354		$	(0.06	)		12,061		$	(0.35	)
Effect of dilutive stock options and unvested restricted shares		-	*		-	*		-	*		-	*
Diluted EPS		9,354		$	(0.06	)		12,061		$	(0.35	)

(in thousands, except per share data)

*Not presented herein since effect on loss per common share is anti-dilutive for the three months ended April 5, 2009 and 2008.

	Three Months Ended July 5,
	2009				2008
			Per Share				Per Share
	Shares		Amount		Shares		Amount
Basic EPS		9,760	$	0.03		12,343	$	0.12
Effect of dilutive stock options and unvested restricted shares		-		-		-		-
Diluted EPS		9,760	$	0.03		12,343	$	0.12

Effective January 6, 2009, the Company adopted FSP EITF 03-6-1, “Determining Whether Instruments Granted in Share-Based Payment Transactions are Participating Securities.” As a result of the adoption of FSP EITF 03-6-1, non-vested shares with non-forfeitable dividend rights are considered participating securities and, thus, subject to the two-class method pursuant to SFAS 128, “Earnings per Share”, when computing basic and diluted EPS. Losses are only allocable to participating securities if the holder has a contractual obligation to share in the losses of the Company as further defined in EITF 03-6-1, “Participating Securities and the Two-Class Method under FASB Statement No. 128.” The Company’s restricted stock awards contain non-forfeitable dividend rights but do not contractually obligate the holders to share in losses of the Company. Accordingly, during periods of net income unvested restricted shares are included in the determination of both basic and diluted earnings per share. During periods of net loss, these shares excluded from both basic and diluted earnings per share.

	Six Months Ended July 5,
	2009						2008
				Per Share						Per Share
	Shares			Amount			Shares			Amount
Basic EPS		9,339		$	(0.03	)		12,027		$	(0.23	)
Effect of dilutive stock options and unvested restricted shares		-	*		-	*		-	*		-
Diluted EPS		9,339		$	(0.03	)		12,027		$	(0.23	)

~~For the~~*Not ~~three~~presented ~~month~~herein ~~periods~~since ~~ended~~effect ~~April~~on 5,loss ~~2009~~per ~~and~~common ~~2008, a total of 426,801 and 365,351 unvested restricted~~ share ~~awards,~~is ~~respectively,~~anti-dilutive ~~were~~for ~~excluded from~~ the ~~basic and~~ ~~diluted~~six ~~EPS~~months ~~calculation due to net losses incurred for these periods. For the three month periods~~ ended ~~April~~July 5, 2009 and 2008~~, 1,360,172 and 1,463,986 stock options, respectively, were excluded from the diluted EPS calculations as their effect would have been anti-dilutive~~.

~~6. Treasury Stock~~14

On November 14, 2008, the Company announced that the Board of Directors of the Company had authorized a program to repurchase up to $5.0 million of its outstanding common stock. On November 19, 2008, the Board of Directors of the Company authorized a $5.0 million increase in its stock repurchase program, therefore authorizing the Company to purchase up to $10.0 million of its outstanding common stock under the program. All stock repurchases are to be made through open market purchases, block purchases or privately negotiated transactions as deemed appropriate by the Company within a period of one year from the date of the first purchase under the program. The Company has no obligation to repurchase shares under the program, and the timing, manner and actual number of shares repurchased will depend on a variety of factors including price, corporate and regulatory requirements and other market conditions. The Company intends to utilize available working capital to fund the stock repurchase program. The acquired shares will be held in treasury or cancelled. During fiscal 2008, the Company purchased 2,656,155 shares at a total cost of $7.9 million under this program. During the three month period ended April 5, 2009, the Company purchased an additional 55,804 shares at a total cost of $185 thousand under this program.

POMEROY IT SOLUTIONS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

7Effective January 6, 2009, the Company adopted FSP EITF 03-6-1, “Determining Whether Instruments Granted in Share-Based Payment Transactions are Participating Securities.” As ~~Supplemental~~a ~~Cash~~result ~~Flow~~of ~~Disclosures~~the adoption of FSP EITF 03-6-1, non-vested shares with non-forfeitable dividend rights are considered participating securities and, thus, subject to the two-class method pursuant to SFAS 128, “Earnings per Share”, when computing basic and diluted EPS. Losses are only allocable to participating securities if the holder has a contractual obligation to share in the losses of the Company as further defined in EITF 03-6-1, “Participating Securities and the Two-Class Method under FASB Statement No. 128.” The Company’s restricted stock awards contain non-forfeitable dividend rights but do not contractually obligate the holders to share in losses of the Company. Accordingly, during periods of net income unvested restricted shares are included in the determination of both basic and diluted earnings per share. During periods of net loss, these shares are excluded from both basic and diluted earnings per share.

For the three month periods ended July 5, 2009 and 2008, a total of 436,000 and 397,000 unvested restricted share awards, respectively, were included in the basic EPS calculation. For the six month periods ended July 5, 2009 and 2008, a total of 459,000 and 409,000 unvested share awards, respectively, were excluded from the basic and diluted EPS calculation due to net losses incurred for these periods. For the three and six month periods ended July 5, 2009, 1,011,000 and 1,310,000 stock options, respectively, were excluded from the diluted EPS calculations as their effect would have been anti-dilutive. For the six month period ended July 5, 2008, 1,474,000 stock options were excluded from the diluted EPS calculations as their effect would have been anti-dilutive.

Treasury Stock

On November 14, 2008, the Company announced that the Board of Directors of the Company had authorized a program to repurchase up to $5.0 million of its outstanding common stock. On November 19, 2008, the Board of Directors of the Company authorized a $5.0 million increase in its stock repurchase program, therefore authorizing the Company to purchase up to $10.0 million of its outstanding common stock under the program. All stock repurchases are to be made through open market purchases, block purchases or privately negotiated transactions as deemed appropriate by the Company within a period of one year from the date of the first purchase under the program. The Company has no obligation to repurchase shares under the program, and the timing, manner and actual number of shares repurchased will depend on a variety of factors including price, corporate and regulatory requirements and other market conditions. The Company intends to utilize available working capital to fund the stock repurchase program. The acquired shares will be held in treasury or cancelled. During fiscal 2008, the Company purchased 2,656,155 shares at a total cost of $7.9 million under this program. During the six month period ended July 5, 2009, the Company purchased an additional 62,705 shares at a total cost of $211 thousand under this program.

Supplemental Cash Flow Disclosures

Supplemental disclosures with respect to cash flow information and non-cash investing and financing activities are as follows:

(in thousands)	Six Months Ended July 5,
	Three Months Ended April 5,
	2009		2008
Interest paid	$	~~149~~252	$	~~351~~548
Income taxes paid	$	23	$	9
Income taxes paid (refunded)	$	82	$	(3,045	)

~~8. Contingencies~~15

POMEROY IT SOLUTIONS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

10.

Contingencies

The Company is party to various negotiations, customer bankruptcies and legal proceedings in the normal course of business. Management believes these matters will not have a material adverse effect on the Company's financial position or results of operations.

~~Recent~~As ~~competitor~~discussed ~~pronouncements~~in ~~and~~Note ~~industry~~2, ~~trends~~the ~~suggest~~Company ~~that~~entered ~~state~~into ~~governments~~a ~~are increasing~~Merger ~~audit~~Agreement ~~activity~~with toHebron ~~identify~~LLC (“Parent”), ~~unclaimed~~Desert ~~property~~Mountain ~~that~~Acquisition ~~might~~Co. ~~not~~(“Desert”), ~~have~~a wholly-owned ~~been~~subsidiary ~~remitted~~of Parent, and with respect to only certain sections of the ~~states~~Merger Agreement, ~~under~~David ~~unclaimed~~B. ~~property~~Pomeroy, ~~laws~~II. The ~~Company~~Merger isAgreement provides that Desert will ~~currently~~merge inwith and into the ~~process~~Company, ofwith ~~reviewing~~the ~~historical~~Company ~~practices~~continuing ~~related~~as tothe ~~unclaimed~~surviving ~~property~~corporation. The ~~Company~~Merger ~~may~~Agreement, ~~have~~as aamended, ~~potential~~provides ~~liability~~that ~~for~~if ~~unclaimed~~the ~~property.~~Company ~~However,~~terminates atthe ~~this~~Merger ~~time~~Agreement itto isaccept ~~premature~~an ~~for~~acquisition proposal by another party, the Company would be required to ~~estimate~~pay ~~any~~a ~~such~~termination fee of up to $2.1 ~~potential~~million ~~liability~~to Parent.

9The Company is party to change in control bonus agreements with executive officers of the Company whereby the Company may be required to pay a bonus equal to each executive officer’s base annual salary upon change in control prior to December 31, 2009. ~~Restructuring~~Furthermore, the agreements provide that bonuses are payable in certain circumstances if a termination of employment occurs prior to a change in control and ~~Severance~~in ~~Charges~~certain circumstances if a change in control occurs after December 31, 2009.

~~During~~On May 22, 2009, a purported class action complaint was filed in the ~~three~~Commonwealth ~~month~~of Kentucky ~~periods~~Boone ~~ended~~Circuit ~~April~~Court 5by Kenneth Hanninen, ~~2009~~an alleged Pomeroy stockholder, on behalf of himself and ~~2008~~all others similarly situated, ~~the~~against the Company ~~recorded charges~~and each of ~~$101~~its ~~thousand~~current directors as of the filing date: David G. Boucher, Keith R. Coogan, Ronald E. Krieg, David B. Pomeroy, II, Richard S. Press, Michael A. Ruffolo, Jonathan Starr and ~~$581~~Debra ~~thousand~~Tibey. Hebron LLC and Desert Mountain Acquisition Co., ~~respectively~~affiliates of Mr. Pomeroy, ~~for~~were ~~severance~~also ~~related~~named toas defendants in the ~~realignment~~lawsuit. The complaint alleges, among other things, that the directors of the Company are in breach of their fiduciary duties to stockholders in connection with the Company’s ~~operations.~~entry Asinto an agreement and plan of ~~April~~merger 5dated May 19, 2009 (the “Agreement”), ~~accrued~~with Hebron LLC, Desert ~~severance~~Mountain ~~charges~~Acquisition ~~totaled~~Co., ~~$88~~and, ~~thousand~~with respect to certain sections of the merger agreement only, ~~which~~David ~~will~~B. bePomeroy, ~~paid~~II. The ~~out~~complaint seeks, among other things, injunctive relief to enjoin the Company and its directors from consummating the transaction contemplated under the Agreement, along with attorneys’ fees and costs. The Company and its directors believe that the allegations in ~~fiscal~~the complaint are without merit and intend to vigorously ~~2009~~defend against the claims and causes of action asserted in this legal matter.

As of April 5, 2009, facility-related restructuring liabilities totaled $674 thousand, consisting primarily of the remaining liability recorded in fiscal 2004 in connection with the ARC acquisition for certain duplicative leased facilities11. Restructuring ~~The~~and ~~outstanding~~Severance ~~balance as of April 5, 2009 will be paid out in fiscal 2009.~~Charges

During the three month period ended July 5, 2008, the Company recorded charges of $308 thousand for severance related to the realignment of the Company’s operations. No severance charges related to a restructuring plan were recorded during the three month period ended July 5, 2009. During the six month periods ended July 5, 2009 and 2008, the Company recorded charges of $101 thousand and $889 thousand, respectively, for severance related to the realignment of the Company’s operations. As of July 5, 2009, all accrued severance charges have been paid.

As of July 5, 2009, facility-related restructuring liabilities totaled $339 thousand, consisting primarily of the remaining liability recorded in fiscal 2004 in connection with the ARC acquisition for certain duplicative leased facilities. The outstanding balance as of July 5, 2009 will be paid out in fiscal 2009.

The expenses associated with restructuring and severance charges are recorded in selling, general and administrative expenses in the Company’s consolidated statements of operations.

~~As of April 5, 2009, the restructuring and severance charge accrual, consisted of the following:~~16

(in thousands)
	Severance			Facilities			Total
Liability balance at January 5, 2009	$	78		$	1,071		$	1,149
Cash payments		(91	)		(397	)		(488	)
Charges accrued		101			-			101
Liability balance at April 5, 2009	$	88		$	674		$	762

POMEROY IT SOLUTIONS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

~~10.~~As ~~Income~~of July ~~Taxes~~5, 2009, the restructuring and severance charge accrual, consisted of the following:

For the three months ended April 5, 2009 and 2008, the Company had no income tax expense or income tax benefit. For the three months ended April 5, 2009 and 2008, the Company increased its tax valuation allowance by $200 thousand and $1.6 million, respectively. The tax valuation allowance totaled $21.8 million at April 5, 2009. The tax valuation allowance is due to the future uncertainty of the Company’s ability to utilize its deferred tax assets. For the three months ended April 5, 2009 and 2008, these adjustments to the tax valuation allowance offset what would have been an income tax benefit. The effective income tax rate would have been 33.9% and 37.5% for the three month periods ended April 5, 2009 and 2008, respectively, prior to the recording of the tax valuation reserves.

(in thousands)	Severance			Facilities			Total
Liability balance at January 5, 2009	$	78		$	1,071		$	1,149
Cash payments		(91	)		(397	)		(488	)
Charges accrued		101			-			101
Liability balance at April 5, 2009		88			674			762
Charges accrued		-			-			-
Cash payments		(88	)		(335	)		(423	)
Liability balance at July 5, 2009	$	-		$	339		$	339

~~As of April 5, 2009 there have been no material changes in the Company’s uncertain tax positions disclosures as provided in note 7 of the 2008 Annual Report on Form 10-K~~12. Income Taxes

~~The~~For the ~~Company~~three ~~includes~~and ~~interest~~six months ended July 5, 2009 and ~~penalties~~2008, ~~related~~the toCompany ~~gross~~had ~~unrecognized~~no income tax ~~benefits~~expense ~~within~~or income tax benefit. For the ~~provision~~three ~~for~~months ~~income~~ended ~~taxes~~July 5, 2009 and 2008, the Company decreased its tax valuation allowance by $93 thousand and $647 thousand. As ofFor ~~April~~the six months ended July 5, 2009 and 2008, the Company ~~had~~increased its ~~accrued~~tax valuation allowance by $~~351~~107 thousand and $931 thousand, respectively. The tax valuation allowance totaled $22.5 million at July 5, 2009. The tax valuation allowance is due to the future uncertainty of the Company’s ability to utilize its deferred tax assets. For the six months ended July 5, 2009 and 2008, these adjustments to the tax valuation allowance offset what would have been an income tax benefit. The effective income tax rate would have been 40.0% and 34.3% for ~~payment~~the six month periods ended July 5, 2009 and 2008, respectively, prior to the recording of ~~such~~the ~~interest~~tax valuation reserves.

~~The~~As of ~~Company~~July ~~and~~5, ~~its~~2009 ~~subsidiaries~~there ~~file~~have ~~income~~been ~~tax~~no ~~returns~~material changes in ~~various tax jurisdictions, including~~ the ~~United~~Company’s ~~States~~uncertain ~~and several U.S. states. The Company~~tax ~~has~~positions ~~substantially~~disclosures ~~concluded~~as ~~all~~provided ~~U.S.~~in ~~Federal~~note ~~and~~7 ~~State~~of ~~income~~the ~~tax~~2008 ~~matters~~Annual ~~for years~~Report upon ~~to and including 2004~~Form 10-K.

11The Company includes interest and penalties related to gross unrecognized tax benefits within the provision for income taxes. As ~~Segment~~of ~~Information~~July 5, 2009, the Company had accrued $815 thousand for payment of such interest.

The Company and its subsidiaries file income tax returns in various tax jurisdictions, including the United States and several U.S. states. The Company has substantially concluded all U.S. Federal and State income tax matters for years up to and including 2006.

13. Segment Information

The Company follows the provisions of SFAS No. 131, "Disclosures about Segments of an Enterprise and Related Information." This statement establishes standards for the reporting of information about operating segments in annual and interim financial statements. Operating segments are defined as components of an enterprise for which separate financial information is available that is evaluated regularly by the chief operating decision maker(s) in deciding how to allocate resources and in assessing performance. The Company is aligned into functional lines: Sales, Service Operations, Finance and Administrative. Management and the board of directors review operating results on a consolidated basis. As a result, the Company has one operating segment and the Company reports one reportable segment. The following is a summary of the two major components of service revenue as viewed by the chief decision makers of the Company.

(in millions)
Service Revenue:	For the Three Months Ended April 5,
	2009		2008
Technical Staffing Services	$	7.6	$	32.5
Infrastructure Services		28.7		31.2
Total Service Revenue	$	36.3	$	63.7
Service Cost of Revenues:	For the Three Months Ended April 5,
	2009		2008
Technical Staffing Services	$	6.4	$	29.9
Infrastructure Services		22.5		26.5
Total Service Cost of Revenues	$	28.9	$	56.4
Service Gross Profit:	For the Three Months Ended April 5,
	2009		2008
Technical Staffing Services	$	1.2	$	2.6
Infrastructure Services		6.2		4.7
Total Service Gross Profit	$	7.4	$	7.3

POMEROY IT SOLUTIONS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

12. Subsequent Event

(in millions)
	For the Three				For the Six
Service Revenue:	Months Ended July 5,				Months Ended July 5,
	2009		2008		2009		2008
Technical Staffing Services	$	7.3	$	31.6	$	14.9	$	64.1
Infrastructure Services		28.0		30.7		56.7		61.9
Total Service Revenue	$	35.3	$	62.3	$	71.6	$	126.0

	For the Three				For the Six
Service Cost of Revenues:	Months Ended July 5,				Months Ended July 5,
	2009		2008		2009		2008
Technical Staffing Services	$	5.9	$	28.0	$	12.3	$	57.9
Infrastructure Services		21.0		24.2		43.5		50.7
Total Service Cost of Revenues	$	26.9	$	52.2	$	55.8	$	108.6

	For the Three				For the Six
Service Gross Profit:	Months Ended July 5,				Months Ended July 5,
	2009		2008		2009		2008
Technical Staffing Services	$	1.4	$	3.6	$	2.6	$	6.2
Infrastructure Services		7.0		6.5		13.2		11.2
Total Service Gross Profit	$	8.4	$	10.1	$	15.8	$	17.4

The Company previously reported in its Form 10-K for the year ended January 5, 2009 that the Company had entered into an Aircraft Purchase Agreement, dated March 17, 2009, to sell the Company’s aircraft to an unrelated third party (the “Agreement”). The Company’s sale of the aircraft was completed on April 21, 2009, in accordance with the Agreement.18

The Company’s aircraft was leased under an agreement for which the Company provided the lessor with a residual value guarantee on the aircraft. The lease also provided the Company with the right and option to terminate the lease prior to the end of its term and purchase the aircraft from the lessor. Therefore, the Company effectively terminated the lease agreement on April 21, 2009, and exercised its right and option to purchase the aircraft from the lessor in order to simultaneously close on the sale of the aircraft on April 21, 2009, as contemplated under the Agreement.

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

Special Cautionary Notice Regarding Forward-Looking Statements

Certain of the matters discussed under the caption "Management's Discussion and Analysis of Financial Condition and Results of Operations" contain certain forward-looking statements regarding future financial results of the Company. The words “expect,” “estimate,” “anticipate,” “predict,” and similar expressions are intended to identify forward-looking statements. Such statements are forward-looking statements for purposes of the Securities Act of 1933 and the Securities Exchange Act of 1934, as amended, and as such may involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of the Company to be materially different from future results, performance or achievements expressed or implied by such forward-looking statements. Important factors that could cause the actual results, performance or achievements of the Company to differ materially from the Company's expectations are disclosed in our Annual Report on Form 10-K under “Item 1A Risk Factors” and in this document including, without limitation, those statements made in conjunction with the forward-looking statements under "Management's Discussion and Analysis of Financial Condition and Results of Operations." All written or oral forward-looking statements attributable to the Company are expressly qualified in their entirety by such factors.

1519

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

RESULTS OF OPERATIONS

The following table sets forth for the periods presented information derived from our consolidated statements of operations expressed as a percentage of net product and service revenues:

(in thousands)	For the Three Months Ended July 5,												For the Six Months Ended July 5,
	For the Three Months Ended April 5,
	2009			% of Revenues			2008			% of Revenues			2009			% of Revenues			2008			% of Revenues
	2009			% of Revenues			2008			% of Revenues
Net revenues:
Net revenues:
Product	$	65,483			65.0	%	$	92,678			59.8	%	$	118,644			62.4	%	$	174,155			58.0	%
Product	$	53,161			59.4	%	$	81,477			56.1	%
Service		35,317			35.0	%		62,315			40.2	%		71,616			37.6	%		126,007			42.0	%
Service		36,299			40.6	%		63,692			43.9	%
Total net revenues		100,800			100.0	%		154,993			100.0	%		190,260			100.0	%		300,162			100.0	%
Total net revenues		89,460			100.0	%		145,169			100.0	%
Gross profit
Gross profit
Product		6,251			6.2	%		9,435			6.1	%		11,768			6.2	%		17,841			5.9	%
Product		5,517			6.2	%		8,406			5.8	%
Service		8,410			8.3	%		10,108			6.5	%		15,853			8.3	%		17,378			5.8	%
Service		7,443			8.3	%		7,270			5.0	%
Total gross profit		14,661			14.5	%		19,543			12.6	%		27,621			14.5	%		35,219			11.7	%
Total gross profit		12,960			14.5	%		15,676			10.8	%
Gross profit %
Gross profit %
Product %		9.5	%					10.2	%					9.9	%					10.2	%
Product %		10.4	%					10.3	%
Service %		23.8	%					16.2	%					22.1	%					13.8	%
Service %		20.5	%					11.4	%
Operating expenses:
Operating expenses:
Selling, general and administrative		13,708			13.6	%		16,630			10.7	%		26,479			13.9	%		35,026			11.7	%
Selling, general and administrative		12,771			14.3	%		18,396			12.7	%
Depreciation and amortization		671			0.7	%		1,218			0.8	%		1,374			0.7	%		2,434			0.8	%
Depreciation and amortization		703			0.8	%		1,216			0.8	%
Total operating expenses		14,379			14.3	%		17,848			11.5	%		27,853			14.6	%		37,460			12.5	%
Total operating expenses		13,474			15.1	%		19,612			13.5	%
Income (loss) from operations		282			0.2	%		1,695			1.1	%		(232	)		-0.1	%		(2,241	)		-0.8	%
Loss from operations		(514	)		-0.6	%		(3,936	)		-2.7	%
Other income (expense):
Other income (expense):
Interest income		122			0.1	%		42			0.0	%		208			0.1	%		127			0.0	%
Interest income		86			0.1	%		85			0.1	%
Interest expense		(111	)		-0.1	%		(247	)		-0.2	%		(271	)		-0.1	%		(598	)		-0.2	%
Interest expense		(160	)		-0.2	%		(351	)		-0.2	%
Other		31			0.0	%		-			0.0	%		27			0.0	%		-			0.0	%
Other		(4	)		0.0	%		-			0.0	%
Other income (expense), net		42			0.0	%		(205	)		-0.2	%		(36	)		0.0	%		(471	)		-0.2	%
Other income (expense), net		(78	)		-0.1	%		(266	)		-0.1	%
Income (loss) before income tax		324			0.2	%		1,490			0.9	%		(268	)		-0.1	%		(2,712	)		-1.0	%
Loss before income tax		(592	)		-0.7	%		(4,202	)		-2.8	%
Income tax expense		-			0.0	%		-			0.0	%		-			0.0	%		-			0.0	%
Income tax expense (benefit)		-			0.0	%		-			0.0	%
Net income (loss)	$	324			0.2	%	$	1,490			0.9	%	$	(268	)		-0.1	%	$	(2,712	)		-1.0	%
Net loss	$	(592	)		-0.7	%	$	(4,202	)		-2.8	%

1620

POMEROY IT SOLUTIONS, INC.

MANAGEMENT'S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS

~~First~~Second Quarter 2009 versus ~~First~~Second Quarter 2008

Total Net Revenues: Total net revenues decreased $5554.72 million or 3835.40% in the ~~first~~second quarter of fiscal 2009, compared to the ~~first~~second quarter of fiscal 2008. For the ~~first~~second quarters of fiscal 2009 and fiscal 2008, the net revenues were $89100.58 million and $~~145~~155.20 million, respectively.

Product revenues were $5365.25 million in the ~~first~~second quarter of fiscal 2009, a decrease of $2827.32 million or 3429.83% from the ~~first~~second quarter of fiscal 2008. The decrease in revenue was primarily generated by a reduction in capital expenditures of large customers within the Financial, ~~Manufacturing~~Health Care and Retail markets. ~~These~~Many of these expenditures were previously approved in the current year budgets of our customers but were delayed due to ongoing economic uncertainty.

Service revenues were $3635.3 million in the ~~first~~second quarter of fiscal 2009, a decrease of $27.40 million or 43.03% from the ~~first~~second quarter of fiscal 2008. The Company ~~groups~~ groups services sales into Technical Staffing and Infrastructure Services. ~~Technical~~ Technical Staffing Services support clients’ project requirements, ensures regulatory and customer compliance requirements and fulfills interim and permanent staffing requirements of the staffing projects. Infrastructure Services help clients optimize the various elements of distributed computing environments. Encompassing the complete IT lifecycle, these services include desktop and mobile computing, server and network environments.

	(in millions)
	Quarter ended April 5,
	Quarter ended July 5,
Service Revenue	2009		2008
	2009		2008
Technical Staffing	$	7.6	$	32.5
Service Revenue
Infrastructure Services		28.7		31.2
Technical Staffing	$	7.3	$	31.6
Total Service Revenue	$	36.3	$	63.7
Infrastructure Services		28.0		30.7
Total Service Revenue	$	35.3	$	62.3

Technical Staffing revenue decreased $24.93 million, or 76.69%, in the ~~first~~second quarter of fiscal 2009. In June 2008, the Company elected not to renew a technical services contract with a major customer because the proposed terms would have been unprofitable for the Company. As a result of the loss of this business, we expect a decline of approximately $80 million in technical staffing revenue for the full year in fiscal 2009. Technical Staffing revenue accounted for approximately 2120.07% of total service revenues in the ~~first~~second quarter of fiscal 2009 compared to 5150.07% in the ~~first~~second quarter of fiscal 2008.

Infrastructure Service revenues decreased $2.57 million, or 8.08%, in the ~~first~~second quarter of ~~fiscal~~ fiscal 2009, primarily due to a decline in short-term project engagements and a ~~loss~~ loss contract which was exited at the end of the second quarter of fiscal 2008. Infrastructure Service revenues accounted for approximately 79.03% of total service revenues in the ~~first~~second quarter of fiscal 2009 compared to 49.03% in the ~~first~~second quarter of fiscal 2008.

Gross Profit: Gross profit was $1314.07 million in the ~~first~~second quarter of of fiscal 2009, compared to $1519.75 million in the ~~first~~second quarter of fiscal 2008. Gross profit margin, as a percentage of revenue, was 14.5% in the ~~first~~second quarter of fiscal 2009, compared to 1012.86% in the ~~first~~second quarter of fiscal 2008.

Product gross profit was $56.53 million in the ~~first~~second quarter of fiscal 2009, compared to $89.4 million in the ~~first~~second quarter of fiscal 2008. Product gross profit margin as as a percentage of product revenues ~~increased~~decreased ~~slightly~~ to 109.45% in the ~~first~~ second quarter of fiscal 2009, compared to 10.32% in the ~~first~~second quarter of fiscal 2008 as a result of transactions at lower gross profit margins in order to retain or gain market share.

Service gross profit was $78.4 million in the ~~first~~second quarter of fiscal 2009, compared to $710.31 million in the ~~first~~second quarter of fiscal 2008. Service gross profit margins were 2023.58% in the ~~first~~second quarter of fiscal 2009, compared to 11 16.42% in the ~~first~~second quarter of fiscal 2008.

1721

POMEROY IT SOLUTIONS, INC.

MANAGEMENT'S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS

	(in millions)
	Quarter ended April 5,
	Quarter ended July 5,
Service Gross Profit	2009		2008
	2009		2008
Technical Staffing	$	1.2	$	2.6
Service Gross Profit
Infrastructure Services		6.2		4.7
Technical Staffing	$	1.4	$	3.6
Total Service Gross Profit	$	7.4	$	7.3
Infrastructure Services		7.0		6.5
Total Service Gross Profit	$	8.4	$	10.1

Gross profit from Technical Staffing Services was $1.24 million for the ~~first~~second quarter of fiscal 2009, compared to $23.6 million for the ~~first~~second quarter of fiscal 2008. Gross profit margin increased to 1618.17% in the ~~first~~second quarter of fiscal 2009 from 811.05% in the ~~first~~second quarter of fiscal 2008. The decrease in gross profit dollars and increase in gross margin is primarily the result of the non-renewal of the technical services contract with a major customer in June 2008 which would have been unprofitable for the Company. We expect a decline in technical staffing gross profit of approximately $6.24 million for the full year in fiscal 2009.

Gross profit from Infrastructure Services was $67.20 million for the ~~first~~second quarter of fiscal 2009 compared to $46.75 million for the ~~first~~second quarter of fiscal 2008. Gross profit margin increased to 2125.72% in the ~~first~~second quarter of fiscal 2009 from 1521.01% in the ~~first~~second quarter of fiscal 2008. The increase in gross profit margin is the result of ~~engagements during the first quarter of fiscal 2008 that generated revenue of approximately $1.4 million at zero gross profit and~~ cost reductions in the second and third quarters of fiscal 2008 resulting in improved utilization and productivity of ~~the~~ technical resources.

Operating Expenses: Total operating expenses were $1314.54 million in the ~~first~~second quarter of fiscal 2009, compared to $1917.68 million in the ~~first~~second quarter of of fiscal 2008, a decrease of $63.14 million or 3119.34%. The decrease is primarily ~~the~~ the result of the following:

· InPayroll ~~the~~and ~~first~~payroll ~~quarter~~related ofexpenses ~~fiscal~~decreased ~~2008,~~approximately ~~the Company recorded a~~ $1.09 million ~~charge~~in ~~to reserve against~~ the ~~collection~~second quarter of ~~Technical~~fiscal ~~Staffing~~2009 ~~Services~~as ~~revenues~~compared ~~that~~to ~~were~~the ~~overbilled~~second byquarter ~~subcontractors~~of infiscal ~~2005~~2008 ~~and~~due ~~2006.~~to ~~During~~changes the ~~first~~company ~~quarter~~made ofin ~~fiscal~~order ~~2009,~~to right-size the ~~Company~~business ~~reversed~~as ~~$0.2~~a ~~million~~result of ~~this~~the ~~charge~~overall ~~after~~decline ~~reevaluating~~in ~~the amounts overbilled~~revenues.

· ~~Severance~~Selling ~~charges~~expenses ~~for~~were ~~the~~reduced ~~first~~by ~~quarter of fiscal 2009 totaled~~ $0.1.3 million ~~compared~~in tothe ~~severance~~second ~~charges~~quarter of ~~$0.5~~fiscal ~~million~~2009 ~~for~~as ~~the~~a ~~first~~result ~~quarter~~ of ~~fiscal~~decreased ~~2008~~revenues.

· ~~The~~Depreciation ~~provision~~expense ~~for bad debts~~ decreased ~~from~~ $0.35 million in the ~~first~~second quarter of fiscal ~~2008~~2009 toas ~~$0.1~~compared ~~million~~to in the ~~first~~second quarter of fiscal ~~2009~~2008 due to a significant asset being fully depreciated.

· ~~Selling~~The ~~expenses~~provision ~~were~~for ~~reduced~~bad bydebts decreased $0.93 million in the ~~first~~second quarter of fiscal 2009 as acompared ~~result~~to the second quarter of ~~decreased~~fiscal ~~revenues~~2008.

·The decreases ~~During~~in ~~the~~operating ~~first~~expenses ~~quarter~~described ofabove ~~fiscal~~were ~~2008,~~partially ~~the~~offset ~~Company~~by ~~recorded~~a ~~accruals~~$0.6 million ~~for~~increase ~~loss~~in ~~contracts~~professional offees ~~$0.3~~in ~~million,~~the assecond ~~well~~quarter asof afiscal ~~$0.3~~2009 associated ~~million~~with ~~start-up~~the ~~penalty~~proposed ~~for~~merger arelated ~~new contract~~activities.

·Income ~~Payroll~~from Operations: Income ~~and~~from ~~payroll~~operations ~~related expenses~~ decreased ~~approximately~~$1.4 million, to $30.23 million in the ~~first~~second quarter of fiscal 2009 asfrom ~~compared~~$1.7 tomillion in the second ~~first~~ quarter of fiscal 2008. ~~due~~The todecrease ~~reductions~~ in ~~staffing~~income ~~support~~from ~~resources~~operations ~~which~~is ~~were made as a~~ the result of the ~~non-renewal~~decrease ofin ~~the~~revenues ~~Technical~~and ~~Services~~gross ~~contract~~profit, ~~with~~offset aby ~~major customer in June 2008. In addition~~ the ~~Company~~decrease ~~made changes~~ in operating ~~order~~expenses, ~~to right-size the business~~ as adescribed ~~result of the overall decline in revenues~~above.

~~The~~Other income ~~decreases~~(expense): Net other income (expense) was income of $42 thousand in ~~operating~~the ~~expenses~~second ~~described~~quarter ~~above~~of ~~were~~fiscal ~~partially~~2009 ~~offset~~compared byto aexpense of $0.42 million ~~charge~~during in the ~~first~~second quarter of fiscal ~~2009~~2008. ~~associated~~The ~~with~~decrease in net other expense is primarily the result of a $0.1 million decrease in interest expense for outstanding borrowings under the Company’s credit facility during the second ~~leased~~quarter ~~aircraft~~of fiscal 2009 compared to the second quarter of fiscal 2008. The decrease in interest expense resulted from the timing of payments of accounts payable and payroll, as well as a lower outstanding floor plan liability during the second quarter of fiscal 2009 as compared to the second quarter of fiscal 2008.

~~Loss~~Income ~~from Operations~~Taxes: ~~Loss~~For the ~~from~~second ~~operations~~quarters ~~decreased~~of ~~$3.4~~fiscal ~~million,~~2009 toand ~~a loss~~fiscal of2008, ~~$0.5 million in~~ the ~~first~~Company ~~quarter~~had ofno ~~fiscal~~income tax ~~2009~~expense ~~from~~or ~~a loss of $3~~benefit.~~9 million~~ During in the ~~first~~second ~~quarter~~quarters of fiscal 2009 and 2008., ~~The~~the ~~decrease~~Company indecreased ~~loss~~its ~~from operations~~tax isvaluation ~~the~~allowance ~~result~~by of$0.1 ~~the~~million ~~decrease~~and in$0.6 million, ~~operating~~respectively, ~~expenses~~as ~~offset~~a byresult ~~the decrease~~of ingenerating ~~revenues,~~net asincome ~~described~~for ~~above~~these periods.

1822

POMEROY IT SOLUTIONS, INC.

MANAGEMENT'S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS

~~Other~~Net ~~income (expense)~~Income: Net income ~~other expense~~ was $0.13 million in the ~~first~~ second quarter of fiscal 2009, compared to $01.3 5 million ~~during~~in the ~~first~~second quarter of fiscal 2008. Although the Company has significant cash balances, the Company’s interest expense exceeds its interest income due primarily to outstanding balances under its floor plan and credit facilities at rates that exceed those rates earned on the Company’s cash and cash equivalents. The decrease in net ~~other~~income ~~expense~~ is ~~primarily~~a ~~the~~ result of ~~a $0.2 million decrease in interest expense for outstanding borrowings under~~ the ~~Company’s~~factors ~~credit~~described facility during the first quarter of fiscal 2009 compared to the first quarter of fiscal 2008 resulting from the timing of payments of accounts payable and payroll, as well as a lower outstanding floor plan liability during the first quarter of fiscal 2009 as compared to the first quarter of fiscal 2008above.

~~Income Taxes: For~~July ~~the first quarters of fiscal 2009 and fiscal 2008~~5, ~~the Company had no income tax expense or benefit. During the first quarters of fiscal~~ 2009 ~~and 2008,~~YTD ~~the~~versus ~~Company~~July ~~increased its tax valuation allowance by $200 thousand and $1.6 million~~5, ~~respectively,~~2008 ~~due to the future uncertainty of the Company’s ability to utilize its deferred tax assets.~~YTD

~~Net~~Total ~~Loss~~Net Revenues: ~~Net~~Total ~~loss was~~net revenues decreased $0109.69 million or 36.6% in the first ~~quarter~~six months of fiscal 2009, compared to ~~$4.2~~the ~~million~~first six months of infiscal 2008. For the first ~~quarter~~six months of fiscal ~~2008. The~~2009 ~~decrease~~and infiscal ~~net~~2008, ~~loss~~the ~~is a~~net ~~result~~revenues ofwere ~~the~~$190.3 ~~factors~~million ~~described~~and ~~above~~$300.2 million, respectively.

19Product revenues were $118.7 million in the first six months of fiscal 2009, a decrease of $55.5 million or 31.9% from the first six months of fiscal 2008. The decrease in revenue was primarily generated by a reduction in capital expenditures of large customers within the Financial, Manufacturing, Health Care and Retail markets. Many of these expenditures were previously approved in the current year budgets of our customers but were delayed due to ongoing economic uncertainty.

Service revenues were $71.6 million in the first six months of fiscal 2009, a decrease of $54.4 million or 43.2% from the first six months of fiscal 2008. The Company groups services sales into Technical Staffing and Infrastructure Services. Technical Staffing Services support clients’ project requirements, ensures regulatory and customer compliance requirements and fulfills interim and permanent staffing requirements of the staffing projects. Infrastructure Services help clients optimize the various elements of distributed computing environments. Encompassing the complete IT lifecycle, these services include desktop and mobile computing, server and network environments.

	(in millions)
	Six months ended July 5,
	2009		2008
Service Revenue
Technical Staffing	$	14.9	$	64.1
Infrastructure Services		56.7		61.9
Total Service Revenue	$	71.6	$	126.0

Technical Staffing revenue decreased $49.2 million, or 76.8%, in the first six months of fiscal 2009. In June 2008, the Company elected not to renew a technical services contract with a major customer because the proposed terms would have been unprofitable for the Company. As a result of the loss of this business, we expect a decline of approximately $80 million in technical staffing revenue for the full year in fiscal 2009. Technical Staffing revenue accounted for approximately 20.8% of total service revenues in the first six months of fiscal 2009 compared to 50.8% in the first six months of fiscal 2008.

Infrastructure Service revenues decreased $5.2 million, or 8.5%, in the first six months of fiscal 2009, primarily due to a decline in short-term project engagements and a loss contract which was exited at the end of the second quarter of fiscal 2008. Infrastructure Service revenues accounted for approximately 79.2% of total service revenues in the first six months of fiscal 2009 compared to 49.2% in the first six months of fiscal 2008.

Gross Profit: Gross profit was $27.6 million in the first six months of fiscal 2009, compared to $35.2 million in the first six months of fiscal 2008. Gross profit margin, as a percentage of revenue, was 14.5% in the first six months of fiscal 2009, compared to 11.7% in the first six months of fiscal 2008.

Product gross profit was $11.8 million in the first six months of fiscal 2009, compared to $17.8 million in the first six months of fiscal 2008. Product gross profit margin as a percentage of product revenues decreased slightly to 9.9% in the first six months of fiscal 2009, compared to 10.2% in the first six months of fiscal 2008 as a result of transactions with lower gross profit margins in order to retain or gain market share primarily in the second quarter of fiscal 2009.

POMEROY IT SOLUTIONS, INC.

MANAGEMENT'S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS

~~LIQUIDITY~~Service ~~AND~~gross ~~CAPITAL~~profit ~~RESOURCES~~was $15.8 million in the first six months of fiscal 2009, compared to $17.4 million in the first six months of fiscal 2008. Service gross profit margins were 22.1% in the first six months of fiscal 2009, compared to 13.8% in the first six months of fiscal 2008.

Cash generated by operating activities was $12.9 million for the first quarter of fiscal 2009. Cash used in investing activities was $0.2 million, consisting solely of capital expenditures. Cash used in financing activities was $4.4 million, which includes a $4.3 million net reduction in floor plan financing liability, $0.2 million for the purchase of treasury stock, offset by $0.1 million for the issuance of common shares.

	(in millions)
	Six months ended July 5,
	2009		2008
Service Gross Profit
Technical Staffing	$	2.6	$	6.2
Infrastructure Services		13.2		11.2
Total Service Gross Profit	$	15.8	$	17.4

~~The~~Gross ~~amount~~profit ~~of cash derived~~ from orTechnical ~~used~~Staffing byServices ~~operating~~was ~~activities~~$2.6 ~~will~~million ~~vary~~for ~~based~~the onfirst asix ~~number~~months of ~~business~~fiscal ~~factors~~2009, ~~which~~compared ~~may change from time~~ to ~~time,~~$6.2 ~~including~~million ~~terms of~~for ~~available financing from vendors, up or down turns in~~ the ~~Company’s~~first ~~business and~~six ormonths ~~up or down turns in the businesses~~ of ~~the Company’s~~ ~~customers~~fiscal 2008. ~~However,~~Gross aprofit ~~growth~~margin orincreased ~~decline~~to in17.4% ~~services revenue~~ in ~~conjunction~~ ~~with a change in~~ the ~~proportion~~first ~~of services revenue to total revenue~~six ismonths ~~an underlying driver~~ of ~~operating~~fiscal ~~cash~~2009 ~~flow~~from ~~during~~9.7% ain ~~period of growth because a majority of~~ the ~~Company’s~~first ~~service~~six ~~revenue~~months ~~is generated based upon the billings~~ of ~~the Company’s technicians~~fiscal 2008. The ~~cash~~decrease ~~outlay~~in ~~for~~gross ~~these~~profit ~~labor/payroll costs~~dollars isand ~~incurred~~increase ~~bi-weekly~~in ~~with each pay period. The invoicing for~~gross ~~the~~margin ~~service~~ is ~~generated~~primarily onthe ~~various~~result ~~billing~~of ~~cycles as dictated by~~ the ~~customers, and~~non-renewal ~~the respective cash inflow typically follows within 30 to 60 days~~ of ~~invoice date, which may be as long as 60 to 120 days from~~ the ~~time~~technical ~~the~~ services ~~are~~ ~~performed. Product~~contract ~~revenue~~with ~~has~~ a ~~shorter~~major ~~cash~~customer ~~outlay~~in ~~period,~~June as2008 ~~the time~~which ~~difference~~would ~~between~~have ~~paying~~been ~~vendors for products purchased and receiving cash~~unprofitable ~~from customers is typically 0 to 60 days. In addition, certain services, primarily outsourcing contracts~~ for the Company’s. ~~Life~~We ~~Cycle~~expect ~~Services, require that the Company maintain~~ a ~~specific~~decline ~~parts~~in ~~inventory~~technical ~~for~~staffing ~~servicing~~gross ~~the~~profit ~~customer;~~of ~~thus,~~approximately an$6.4 ~~increase~~million orfor ~~decrease in~~ the ~~type~~full ofyear ~~services~~in ~~provided~~fiscal ~~can impact inventory levels and operating cash flows~~2009.

~~Cash~~Gross ~~flows~~profit ~~generated~~from byInfrastructure ~~operating~~Services ~~activities~~was in$13.2 million for the first ~~quarter~~six months of fiscal 2009 ~~was $12.9 million,~~ compared to ~~cash flows used by operating activities of~~ $411.3 2 million, for the ~~same~~first ~~period~~six months of fiscal 2008. AGross ~~reduction~~profit inmargin ~~accounts receivable~~increased ~~and~~to ~~inventories generated $28~~23.83% ~~million and $1.5 million, respectively,~~ in ~~operating cash flows during~~ the first ~~quarter~~six months of fiscal 2009 ~~compared~~ tofrom $18.~~8 million and $~~0.3% ~~million,~~in ~~respectively, for~~ the first ~~quarter~~ six months of fiscal 2008. ~~Reductions~~The increase in ~~accounts~~gross ~~payable,~~profit ~~liabilities~~margin ~~for employee~~is ~~compensation~~the ~~and~~result ~~benefits and other assets and liabilities utilized cash~~ of ~~$14.2~~engagements ~~million, $2.0 million and $1.6 million, respectively,~~ during the ~~first~~ first quarter of fiscal ~~2009~~2008 ~~compared~~that togenerated ~~$15.2~~revenue ~~million,~~of approximately $31.84 million ~~and $2.5~~at ~~million,~~zero ~~respectively,~~gross inprofit ~~the~~and ~~first~~cost ~~quarter~~reductions ~~of fiscal 2008. The reduction~~ in ~~receivables is associated with~~ the ~~decline~~second inand ~~revenues~~third ~~during~~quarters ~~the first quarter~~ of fiscal ~~2009 compared to the first quarter of fiscal~~ 2008, ~~and the~~resulting ~~reduction~~ in ~~inventories~~improved isutilization ~~due~~and toproductivity ~~timing~~ of ~~shipments~~the technical resources.

~~The~~Operating ~~Company~~Expenses: Total ~~has~~operating aexpenses ~~Syndicated~~were ~~Credit~~$27.9 ~~Facility~~million ~~Agreement~~in ~~with GE Commercial~~the ~~Distribution~~first ~~Finance~~six ~~(“GECDF”),~~months ~~which~~of ~~became~~fiscal ~~effective June 25~~2009, ~~2004~~compared ~~(the “Credit~~to ~~Facility”)~~$37.5 ~~The~~million ~~Credit~~in ~~Facility, which has been~~ the ~~subject~~first ofsix ~~subsequent~~months ~~modifications,~~of ~~provides~~fiscal ~~for~~2008, a ~~floor~~decrease ~~plan~~of ~~loan facility and a revolving loan commitment~~$9.6 ~~The~~million ~~Credit~~or ~~Facility also provides for a letter of credit facility~~25.6%. The ~~funds~~decrease ~~available for borrowing by the Company under the~~is ~~Credit~~primarily ~~Facility are reduced by an amount equal to outstanding advances made to~~ the ~~Company~~result toof ~~finance inventory under~~ the ~~floor plan loan facility and the aggregate amount of letters of credit outstanding at any given time.~~following:

~~The maximum~~· ~~available~~In ~~borrowings under~~ the ~~Credit~~first ~~Facility~~quarter ~~total~~of ~~$80.0~~fiscal ~~million~~2008, ~~for inventory financing and~~ the ~~revolving~~Company ~~loan.~~recorded ~~The Credit Facility permits distributions up to~~ a ~~maximum of~~ $181.0 million ~~for~~charge ~~the~~to ~~period~~reserve ~~June~~against ~~25, 2008 through June 25, 2009 only if specified criteria are met. The term distribution is defined in~~ the ~~Credit~~collection ~~Facility and includes dividends, acquisitions~~ of ~~outstanding~~Technical ~~stock,~~Staffing ~~reinvestment~~Services ofrevenues ~~debt~~that ~~securities~~were ~~and compensation~~overbilled toby asubcontractors ~~shareholder~~ in ~~excess~~2005 ofand ~~normal compensation including performance bonuses~~2006. ~~The~~During ~~agreement~~the ~~provides~~first ~~for~~quarter ~~a termination fee~~ of upfiscal to2009, ~~$250 thousand to be paid by~~ the Company inreversed ~~the~~$0.2 ~~event~~million ~~the~~of ~~Company~~this ~~terminates~~charge ~~the agreement~~after ~~prior~~reevaluating to the ~~maturity~~amounts ~~date of the revolving loan commitment~~overbilled. ~~The Credit Facility expires on June 25, 2009.~~

20· Severance charges decreased $0.5 million in the first six months of fiscal 2009 compared to the first six months of fiscal 2008.

Depreciation expense decreased $1.1 million in the first six months of fiscal 2009 as compared to the first six months of fiscal 2008 due to a significant asset being fully depreciated.

The provision for bad debts decreased $0.5 million in the first six months of fiscal 2009 compared to the first six months of fiscal 2008.

Selling expenses were reduced by $2.2 million in the first six months of fiscal 2009 as a result of decreased revenues.

During the first quarter of fiscal 2008, the Company recorded accruals for loss contracts of $0.3 million, as well as a $0.3 million start-up penalty for a new contract.

Payroll and payroll related expenses decreased approximately $4.8 million in the first six months of fiscal 2009 as compared to the first six months of fiscal 2008 due to changes the Company made in order to right-size the business as a result of the overall decline in revenues.

The decreases in operating expenses described above were partially offset by a $0.4 million charge in the first quarter of fiscal 2009 associated with the Company’s leased aircraft and $0.6 million increase in professional fees in the second quarter of fiscal 2009 associated with the proposed merger related activities.

POMEROY IT SOLUTIONS, INC.

MANAGEMENT'S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Loss from Operations: Loss from operations decreased $2.0 million in the first six months of fiscal 2009 as compared to the first six months of fiscal 2008, from $2.2 million in the first six months of fiscal 2008 to $0.2 in the first six months of fiscal 2009. The decrease in loss from operations is the result of the decrease in operating expenses, offset by the decrease in revenues and gross profit, as described above.

Other income (expense): Net other expense was $36 thousand in the first six months of fiscal 2009 compared to $0.5 million during the first six months of fiscal 2008. Although the Company has significant cash balances, the Company’s interest expense exceeds its interest income due primarily to outstanding balances under its floor plan and credit facilities at rates that exceed those rates earned on the Company’s cash and cash equivalents. The decrease in net other expense is primarily the result of a $0.3 million decrease in interest expense for outstanding borrowings under the Company’s credit facility during the first six months of fiscal 2009 compared to the first six months of fiscal 2008 resulting from the timing of payments of accounts payable and payroll, as well as a lower outstanding floor plan liability during the first six months of fiscal 2009 as compared to the first six months of fiscal 2008.

Income Taxes: For the first six months of fiscal 2009 and fiscal 2008, the Company had no income tax expense or benefit. During the first six months of fiscal 2009 and 2008, the Company increased its tax valuation allowance by $0.1 million and $0.9 million, respectively, due to uncertainty of the Company’s ability to utilize its deferred tax assets.

Net Loss: Net loss was $0.3 million in the first six months of fiscal 2009, compared to $2.7 million in the first six months of fiscal 2008. The decrease in net loss is a result of the factors described above.

POMEROY IT SOLUTIONS, INC.

MANAGEMENT'S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS

LIQUIDITY AND CAPITAL RESOURCES

ACash ~~significant~~generated ~~part of the Company’s inventories are financed~~ by ~~floor~~operating ~~plan arrangements~~activities ~~with~~was ~~third parties~~$2.1 Atmillion ~~April~~for 5,the ~~2009~~first ~~and~~six ~~January~~months ~~5, 2009, these~~of ~~lines~~fiscal ~~of credit totaled $88~~2009.0 ~~million,~~Cash ~~including~~used ~~$80.0~~in ~~million~~investing ~~with~~activities ~~GE Commercial~~was ~~Distribution Finance (“GECDF”) and~~ $8.0.9 million, ~~with IBM Credit~~consisting ~~Corporation~~solely ~~(“ICC”).~~of ~~Borrowings~~capital ~~under the GECDF floor plan arrangements are made on 30 day notes~~expenditures. Cash ~~Borrowings~~generated ~~under~~by ~~the ICC floor plan arrangement are made on 15~~financing ~~day~~activities ~~notes.~~was ~~All such borrowings are secured by the related inventory~~$6.1 ~~The~~million, ~~Company classifies amounts outstanding under the floor plan arrangements as floor plan financing liability~~ which isincludes a ~~current liability in the consolidated balance sheets~~$6.2 ~~Payments~~million ~~made~~net ~~under~~increase ~~floor plan arrangements are classified as financing activities~~ in ~~the consolidated statements of cash flows. Outstanding amounts under the~~ floor plan financing ~~arrangements~~liability ~~totaled $7.4 million at April 5, 2009~~ and $110.71 million ~~at January 5, 2009. Interest was imputed on these borrowings at a rate of 6.0% per annum~~ for the ~~three~~issuance ~~month~~of ~~periods~~common ~~ended April 5~~shares, offset ~~2009~~by ~~and 2008~~$0.2 ~~Related~~million ~~interest expense totaled $101 thousand and $196 thousand~~ for the ~~three~~purchase ~~month~~of ~~periods~~treasury ~~ended April 5, 2009 and 2008, respectively~~stock.

AsThe amount of cash derived from or used by operating activities will vary based on a ~~April~~number 5,of ~~2009~~business ~~and~~factors ~~January~~which 5,may ~~2009~~change from time to time, ~~there~~including ~~was~~terms of noavailable ~~balance~~financing ~~outstanding~~from ~~under~~vendors, up or down turns in the Company’s business ~~Credit~~and ~~Facility~~up ~~other~~or ~~than~~down turns in the ~~floor~~businesses ~~plan~~of ~~financing~~the ~~liability~~Company’s customers. ~~At April 5~~However, ~~2009~~a ~~and~~growth ~~January~~or 5,decline ~~2009,~~in ~~the~~services ~~amounts~~revenue ~~available~~in conjunction ~~under~~with a change in the ~~Credit~~proportion of services revenue to total revenue ~~Facility~~is ~~were~~an ~~$29.9~~underlying ~~million~~driver ~~and~~of ~~$50.2~~operating ~~million,~~cash ~~respectively.~~flow ~~Interest~~during ona period of growth because ~~outstanding~~a ~~borrowings~~majority ~~under~~of the ~~credit~~Company’s ~~facility~~service revenue is ~~payable~~generated ~~monthly~~ based onupon the billings ~~LIBOR~~of ~~rate~~the ~~and~~Company’s ~~a pricing grid~~technicians. AsThe ofcash ~~April~~outlay 5,for ~~2009,~~these ~~the adjusted~~labor/payroll ~~LIBOR~~costs ~~rate~~is ~~was~~incurred 3bi-weekly with each pay period.~~01%.~~ The ~~credit~~invoicing ~~facility~~for the service is ~~collateralized~~generated on various billing cycles as dictated by ~~substantially~~ ~~all~~the customers, and the ~~assets~~respective cash inflow typically follows within 30 to 60 days of ~~Pomeroy~~invoice date, ~~except~~which ~~those~~may ~~assets~~be ~~that~~as ~~collateralize certain~~long ~~other~~as ~~financing~~60 ~~arrangements. Under~~to ~~the~~120 ~~terms~~days offrom the ~~credit~~time the services are ~~facility~~performed. Product revenue has a shorter cash outlay period, as the time ~~Company~~difference between paying vendors for products purchased and receiving cash from customers is ~~subject~~typically 0 to ~~various~~60 ~~financial covenants~~days. AsIn ofaddition, ~~April~~certain 5services, ~~2009~~primarily outsourcing contracts for the Company’s Life Cycle Services, ~~Pomeroy~~require that ~~was~~the Company maintain a specific parts inventory for servicing the customer; thus, an increase or decrease in ~~compliance~~the ~~with~~type ~~these~~of ~~financial~~services ~~covenants~~provided can impact inventory levels and operating cash flows.

~~The~~Cash ~~Company~~flows ~~previously~~generated ~~reported~~by operating activities in ~~its~~the ~~Form~~first ~~10-K~~six months of fiscal 2009 totaled $2.1 million, compared to $7.0 million for the ~~year~~same ~~ended~~period ~~January~~of 5,fiscal 2008. A reduction in accounts receivable generated $21.3 million in operating cash flows during the first six months of fiscal 2009 compared to $4.7 ~~that~~million for the ~~Company~~first ~~had~~six ~~entered~~months ~~into~~of anfiscal ~~Aircraft~~2008. Reductions ~~Purchase~~in accounts ~~Agreement,~~payable ~~dated~~and ~~March~~other assets and liabilities utilized cash of $10.1 million 17and $9.4 million, ~~2009~~respectively, toduring ~~sell~~ the ~~Company’s~~first ~~aircraft~~six months of fiscal 2009 compared to an$0.7 ~~unrelated~~million ~~third~~and ~~party~~$2.4 (million, respectively, in the first six months ~~“Agreement”).~~of fiscal 2008. The ~~Company’s~~reduction ~~sale~~in ofreceivables and payables is associated with the ~~aircraft~~decline ~~was~~in ~~completed~~revenues onduring ~~April~~the ~~21,~~first six months of fiscal 2009, incompared ~~accordance~~to ~~with~~ the ~~Agreement~~first six months of fiscal 2008.

The Company’s ~~aircraft~~has ~~was~~a ~~leased~~Syndicated ~~under~~Credit anFacility ~~agreement~~Agreement ~~for~~with ~~which~~GE ~~the Company provided~~Commercial ~~the~~Distribution ~~lessor~~Finance ~~with~~(“GECDF”), awhich ~~residual~~became ~~value~~effective ~~guarantee~~June on25, 2004 (the “Credit ~~aircraft~~Facility”). The ~~lease~~Credit ~~also provided~~Facility, ~~the~~which ~~Company~~has ~~with~~been the ~~right~~subject ~~and~~of subsequent ~~option~~modifications, toprovides ~~terminate~~for ~~the~~a ~~lease~~floor ~~prior~~plan ~~to the~~loan ~~end~~facility ofand ~~its~~a revolving ~~term~~loan ~~and~~commitment, ~~purchase~~both ~~the~~of ~~aircraft~~which ~~from~~are ~~the~~collateralized ~~lessor.~~primarily ~~Therefore,~~by the Company’s ~~effectively~~accounts ~~terminated~~receivable. ~~the~~The ~~lease~~Credit ~~agreement~~Facility onalso ~~April~~provides ~~21,~~for ~~2009,~~a ~~and~~letter of ~~exercised~~credit ~~its~~facility. ~~right~~The ~~and~~funds ~~option~~available tofor ~~purchase~~borrowing by the ~~aircraft~~Company ~~from~~under the Credit ~~lessor~~Facility inare ~~order to~~reduced ~~simultaneously~~by ~~close~~an onamount ~~the~~equal ~~sale~~to ofoutstanding ~~the~~advances ~~aircraft~~made onto the ~~April~~Company ~~21,~~to ~~2009,~~finance ~~as contemplated~~inventory under the ~~Agreement. The~~floor ~~net~~plan ~~cash~~loan ~~outflow~~facility ~~from~~and ~~this~~the ~~transaction~~aggregate isamount ~~$6.4~~of ~~million~~letters ~~which~~of ~~will~~credit beoutstanding ~~reflected~~at inany ~~the Company’s cash flows~~given ~~during second quarter of fiscal 2009~~time.

The ~~Company~~maximum ~~believes~~available ~~that~~borrowings under the ~~anticipated~~Credit ~~cash~~Facility ~~flow~~total ~~from~~$80.0 ~~operations~~million ~~and current~~for inventory financing ~~arrangements~~and ~~will~~the berevolving ~~sufficient~~loan. toThe ~~satisfy~~Credit ~~the~~Facility ~~Company’s capital~~permitted ~~requirements~~distributions ~~for~~up ~~the~~to ~~next~~a ~~twelve~~maximum ~~months.~~of ~~The~~$18 ~~Company’s~~million ~~credit~~for ~~facility~~the ~~expires~~period June 25, 2008 through June 25, 2009. only if specified criteria were met. The ~~Company~~term distribution ~~intends~~is todefined ~~negotiate~~in athe ~~new~~Credit ~~credit~~Facility ~~facility~~and ~~with~~included ~~terms~~dividends, ~~sufficient~~acquisitions ~~for~~of ~~its~~outstanding ~~financing~~stock, ~~needs~~reinvestment of debt securities and compensation ~~does~~to ~~not~~a ~~anticipate~~shareholder ~~any~~in ~~problems~~excess ~~securing~~of normal compensation including performance bonuses. The agreement provides for a ~~new~~termination ~~credit~~fee ~~facility~~of ~~before~~up ~~June~~to ~~25,~~$250 thousand ~~2009.~~to ~~However,~~be ifpaid by the Company isin ~~unable~~the event the Company terminates the agreement prior to the maturity date of the revolving loan ~~negotiate~~commitment. The aCredit ~~new~~Facility ~~credit~~was ~~facility~~most recently amended on June 24, 2009, itwhich ~~could~~extended ~~adversely~~its ~~affect~~maturity ~~the~~date ~~Company’s~~to ~~ability~~October 30, 2009 and set forth the financial covenants for the periods subsequent to ~~operate~~June 25, 2009.

As stated in the Contingencies section of the Notes to the Consolidated Financial Statements, the Company may have a potential liability for unclaimed property. If a liability is determined, it would require a cash outflow from the Company to the applicable state or a combination of states, customers or vendors.26

POMEROY IT SOLUTIONS, INC.

MANAGEMENT'S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS

LIQUIDITY AND CAPITAL RESOURCES

OnA ~~November~~significant ~~14,~~part ~~2008, the Board~~ of ~~Directors of~~ the Company’s ~~authorized~~inventories aare ~~program~~financed toby floor plan ~~repurchase~~arrangements upwith tothird $5parties.0 ~~million~~At ofJuly ~~its~~5, ~~outstanding~~2009 ~~common~~and ~~stock. On November~~January 195, ~~2008~~2009, ~~the~~these lines ~~Board~~ of ~~Directors~~credit oftotaled ~~the~~$88.0 ~~Company~~million, ~~authorized~~including a $580.0 million ~~increase~~under in its ~~stock repurchase program, therefore authorizing the~~Credit ~~Company~~Facility towith ~~purchase~~GECDF upand to $108.0 million ofwith ~~its~~IBM ~~outstanding~~Credit ~~common~~Corporation ~~stock~~(“ICC”). Borrowings under the ~~program. All~~GECDF ~~stock~~floor ~~repurchases~~plan arrangements are ~~to be~~ made ~~through~~on ~~open~~30 ~~market~~day notes. ~~purchases,~~Borrowings ~~block~~under ~~purchases~~the orICC ~~privately~~floor ~~negotiated~~plan ~~transactions~~arrangement asare ~~deemed appropriate~~made byon ~~the~~15 ~~Company~~day ~~within~~notes. aAll such ~~period~~borrowings ofare ~~one~~secured ~~year~~by ~~from~~ the ~~date~~related ofinventory. ~~the~~The Company classifies ~~first~~amounts ~~purchase~~outstanding under the ~~program. The~~floor ~~Company~~plan ~~has~~arrangements noas ~~obligation~~floor toplan financing ~~repurchase~~liability ~~shares~~which ~~under~~is ~~the~~a ~~program,~~current ~~and~~liability in the ~~timing,~~consolidated ~~manner~~balance ~~and actual number of~~sheets. ~~shares~~Payments ~~repurchased~~made ~~will~~under ~~depend~~floor onplan aarrangements ~~variety~~are ofclassified ~~factors~~as ~~including price,~~financing ~~corporate~~activities ~~and~~in ~~regulatory~~the ~~requirements~~consolidated ~~and~~statements ~~other~~of ~~market~~cash ~~conditions~~flows. ~~The~~Outstanding ~~Company~~amounts ~~intends~~under tothe ~~utilize~~floor ~~available~~plan ~~working~~financing ~~capital~~arrangements tototaled ~~fund~~$17.9 ~~the~~million ~~stock~~at ~~repurchase~~July 5, ~~program~~2009 and $11.7 ~~The~~million ~~acquired~~at ~~shares~~January ~~will~~5, be2009. ~~held~~Interest inwas ~~treasury~~imputed oron these ~~cancelled~~borrowings at a rate of 6. ~~During~~0% ~~fiscal~~per ~~2008,~~annum for the ~~Company~~three ~~purchased~~and ~~2,656,155~~six ~~shares~~month periods ended atJuly a5, ~~total~~2009 ~~cost~~and of2008. Related interest expense totaled $~~7.9~~63 ~~million~~thousand ~~under~~and ~~this~~$164 thousand ~~program. During~~for the respective three and six month ~~period~~periods ended ~~April~~July 5, 2009, ~~the~~and $128 ~~Company~~and ~~purchased~~$324 anthousand ~~additional~~for ~~55,804 shares~~the atrespective athree ~~total~~and ~~cost~~six ofmonth ~~$185~~periods ~~thousand~~ended ~~under~~July 5, ~~this program~~2008.

22As of July 5, 2009 and January 5, 2009, there was no balance outstanding under the Credit Facility other than the floor plan financing liability. At July 5, 2009 and January 5, 2009, the amounts available under the Credit Facility were $31.1 million and $50.2 million, respectively. Interest on outstanding borrowings under the credit facility is payable monthly based on the LIBOR rate and a pricing grid. As of July 5, 2009, the adjusted LIBOR rate was 2.81%. The credit facility is collateralized by substantially all the assets of Pomeroy, except those assets that collateralize certain other financing arrangements. Under the terms of the credit facility, the Company is subject to various financial covenants. As of July 5, 2009, Pomeroy was in compliance with these financial covenants.

The Company believes that the anticipated cash flow from operations and current financing arrangements will be sufficient to satisfy the Company’s capital requirements for the next twelve months. The Company’s credit facility expires October 30, 2009. The Company intends to negotiate a new credit facility with terms sufficient for its financing needs and does not anticipate any problems securing a new credit facility before October 30, 2009. However, if the Company is unable to negotiate a new credit facility, it could adversely affect the Company’s ability to operate.

As of July 5, 2009 and January 5, 2009, the Company has an unclaimed property liability approximating $5 million recorded in its consolidated balance sheets. This would require a cash outflow from the Company to the applicable state or a combination of states, customers or vendors. The Company estimates that the final settlement of this liability may take several months or possibly years as the Company remediates these credits with customers and vendors. The Company anticipates that the liability may ultimately be settled for less than the estimated $5 million. However, the Company cannot provide any assurance that the final settlement will be materially lower.

On November 14, 2008, the Company announced that the Board of Directors of the Company had authorized a program to repurchase up to $5.0 million of its outstanding common stock. On November 19, 2008, the Board of Directors of the Company authorized a $5.0 million increase in its stock repurchase program, therefore authorizing the Company to purchase up to $10.0 million of its outstanding common stock under the program. All stock repurchases are to be made through open market purchases, block purchases or privately negotiated transactions as deemed appropriate by the Company within a period of one year from the date of the first purchase under the program. The Company has no obligation to repurchase shares under the program, and the timing, manner and actual number of shares repurchased will depend on a variety of factors including price, corporate and regulatory requirements and other market conditions. The Company intends to utilize available working capital to fund the stock repurchase program. The acquired shares will be held in treasury or cancelled. During fiscal 2008, the Company purchased 2,656,155 shares at a total cost of $7.9 million under this program. During the six month period ended July 5, 2009, the Company purchased an additional 62,705 shares at a total cost of $211 thousand under this program.

Item 3-Quantitative and Qualitative Disclosures about Market Risk

The Company is exposed to interest rate risk primarily through its credit facility with GECDF. The Company did not experience a material impact from interest rate risk for the first ~~three~~six months of fiscal 2009.

Currently, the Company does not have any significant financial investments for trading or other speculative purposes or to manage interest rate exposure.

The recent global financial crisis affecting the banking system and financial markets and the going concern threats to investment banks and other financial institutions have resulted in a tightening in the credit markets. There could be a number of follow-on effects from the global financial crisis and resulting economic slowdown on our business, including lower overall demand, insolvency of suppliers resulting in product delays, inability of customers to obtain credit to finance purchases of our projects, payment delays by customers and/or customer insolvencies, more onerous credit and commercial terms from our suppliers, delays in accessing our current credit facilities or obtaining new credit facilities on terms we deem commercially reasonable or at all and an inability of GECDF to fulfill their funding obligations. In an extreme case of banking instability, wethe Company might not be able to access ~~our~~its cash accounts or money market investments. Any further deterioration of economic conditions ~~would~~ would likely exacerbate these adverse effects and could result in a wide-ranging ~~and~~ and prolonged impact on general business conditions, thereby negatively ~~impacting~~ impacting our operations, financial results and/or liquidity.

Item 4-Controls and Procedures

Management’s Evaluation of Disclosure Controls and Procedures

Our management, with the participation of our principal executive and principal financial officers, has evaluated the effectiveness of our disclosure controls and procedures over financial reporting designed to ensure that the information required to be disclosed in our filings under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms, and to ensure that such information is accumulated and communicated to management, including our principal executive and principal financial officers, as appropriate to allow timely decisions regarding required disclosure. ~~Based~~Despite onthe ~~such~~material ~~evaluation,~~weakness ~~our~~described ~~principal~~below, ~~executive~~management ~~and~~has ~~principal~~taken ~~financial~~subsequent ~~officers~~actions ~~have~~to ~~concluded~~ensure that ~~such~~the ~~disclosure~~financial ~~controls~~statements ~~and~~reported ~~procedures~~in ~~were~~this ~~effective,~~Quarterly Report on Form 10-Q as of ~~April~~ and for the quarter ended July 5, 2009, ~~(the~~fairly ~~end~~present, ofin ~~the~~all material ~~period~~respects, ~~covered~~the byconsolidated ~~this~~financial ~~Quarterly~~condition ~~Report~~and onresults ~~Form~~of ~~10-Q)~~operations of the Company for the periods presented.

Changes in Internal Control Over Financial Reporting

~~The~~On July 31, 2009, the Audit Committee of the Board of Directors concluded that the Company’s ~~Chief~~financial ~~Executive~~statements ~~Officer~~for fiscal years ended January 5, 2007, January 5, 2008 and ~~Chief~~January ~~Financial~~5, ~~Officer~~2009 ~~previously~~and for the quarter ended April 5, 2009 should no ~~concluded~~longer be relied upon due to errors in the Company’s ~~Annual~~historical ~~Report~~accounting treatment onsince ~~Form~~1991 ~~10-K~~of ~~filed~~certain onaged ~~March~~trade ~~20,~~credits ~~2009~~created in the ordinary ~~that~~course ~~material~~of ~~weaknesses~~business. ~~existed~~The inerrors relate primarily to the recognition in the Company’s ~~internal~~income ~~control~~statement ~~over~~(prior to the legal discharge of the underlying liabilities under applicable laws) of certain aged trade credits affecting accounts receivable, accounts payable and selling, general and administrative expenses. As a result of the errors identified, the Company restated the financial ~~reporting~~statements atincluded in its Annual Report on Form 10-K for the year ended January 5, 2009. ~~The~~and ~~specific~~in ~~material~~its ~~weaknesses~~Quarterly Report on Form 10-Q for the quarter ~~identified~~ended ~~were~~April as5, ~~follows:~~2009.

1.After evaluating ~~The~~the ~~Company~~nature ~~did~~of ~~not maintain effective internal control over~~ the ~~financial~~above ~~reporting~~error and ~~close~~the ~~function~~resulting torestatement, ~~appropriately~~the Company’s ~~apply~~Chief ~~generally~~Executive ~~accepted~~Officer ~~accounting~~and ~~principles~~Chief ~~ensuring~~Financial ~~the~~Officer ~~adequacy~~have ofconcluded that ~~amounts~~a ~~and~~material ~~completeness~~weakness ofas ~~disclosures~~discussed inbelow ~~the~~existed ~~consolidated financial statements, resulting~~ in the ~~previous~~Company’s ~~misclassification~~internal controls ofover ~~cash~~financial ~~flows~~reporting ~~from~~at ~~floor~~July ~~plan~~5, ~~financing~~2009.

2. The identified ~~Company~~material ~~did~~weakness ~~not~~in ~~maintain~~our ~~effective~~ internal control over financial reporting related to ~~ensure that all costs such as payroll costs and vendor incentive payments are appropriately classified in~~ the proper ~~financial~~disposition, ~~statement category. As a result~~reconciliation, ~~certain~~monitoring ~~cost~~and consequent accounting of ~~revenues~~aged ~~were~~trade ~~previously~~credits, ~~classified~~specifically ~~improperly~~as ~~in the financial statements.~~follows:

In1. ~~the first~~The ~~quarter~~Company did not have an adequate understanding of ~~fiscal~~its ~~2009,~~unclaimed ~~the~~property ~~following~~obligations ~~steps~~and ~~were~~utilized ~~taken,~~unsupported ~~which~~assumptions ~~remediated these~~regarding ~~material~~trade ~~weaknesses:~~credits.

12. ~~All~~Policies ~~finance~~and ~~agreements~~procedures ~~including~~were ~~floor~~not ~~plan~~adequate ~~arrangements~~to ~~are~~timely ~~reviewed~~determine by the ~~finance~~proper ~~group~~disposition ~~upon execution~~ of ~~such~~all ~~agreements~~overpayments and onduplicate apayments ~~quarterly~~received ~~basis~~from ~~to ensure activity under these agreements is being properly recorded and reported in the consolidated financial statements~~clients.

2. The Company has implemented a more detailed budgeting process and has carefully reviewed the financial statement classification of all significant costs as part of this process. The Company now performs more detailed budget to actual comparisons on a quarterly basis as an added control to ensure that costs are classified in the appropriate financial statement categories. In addition, any changes to general ledger account classification within the financial statements will be documented, reviewed and approved by qualified accounting personnel on a quarterly basis.28

233. Policies and procedures were not adequate to timely reconcile and determine the proper disposition of credit memos issued to clients in exchange for returned products, billing errors and other customer service reasons.

Policies and procedures were not adequate to timely determine the proper disposition of outstanding un-cashed client and personnel disbursements.

Pomeroy management has taken action to remediate this material weakness described above, including identification of the following remediation plan:

Discontinuing the practice of taking certain aged trade credits into the income statement unless the Company is released from its obligation or it is determined that there is an error (such that no credit or other obligation in fact exists). This has been implemented as of July 5, 2009.

Policies and procedures will be implemented to research and properly dispose of client credit balances or un-cashed disbursements. This has been implemented as of July 5, 2009.

System enhancements will be identified and implemented to strengthen control procedures including the automation of issuance of credit memos and statements to clients.

A comprehensive unclaimed property reporting methodology will be implemented to timely and accurately comply with applicable state laws.

Pomeroy management will assign the highest priority to the Company’s remediation efforts, with the goal of remediating the material weakness by the end of 2009. However, due to the nature of the remediation process and the need to allow adequate time after implementation to evaluate and test the effectiveness of the implemented controls, no assurance can be given as to the timing of achievement of remediation.

PART II - OTHER INFORMATION

Item 1-Legal Proceedings

As previously reported in the Company’s Current Report on Form 8-K filed August 20, 2009, on August 14, 2009, the Company entered into a Memorandum of Understanding concerning the settlement of certain litigation (the “Lawsuit”) relating to the Agreement and Plan of Merger, dated May 19, 2009, as amended by a First Amendment to Agreement and Plan of Merger, dated June 9, 2009, and a Second Amendment to Agreement and Plan of Merger, dated June 20, 2009 (collectively referred to as the “Merger Agreement”), among the Company and Hebron LLC, Desert Mountain Acquisition Co., and, with respect to certain sections of the Merger Agreement only, David B. Pomeroy, II. The Lawsuit was filed on May 22, 2009 in the Commonwealth of Kentucky Boone Circuit Court by plaintiff Keith Hanninen, an alleged stockholder of the Company on behalf of a putative class of the public stockholders of the Company, against the Company; the Company’s directors David G. Boucher, Ronald E. Krieg, Richard S. Press, Michael A. Ruffolo, Jonathan Starr, Debra E. Tibey and David B. Pomeroy, II; the Company’s former director, Keith R. Coogan; and Hebron LLC and Desert Mountain Acquisition Co. The purported class action complaint, which was amended on July 10, 2009, alleges among other things, that the Company’s directors were in breach of their fiduciary duties to stockholders in connection with the Company’s entry into the Merger Agreement. The amended complaint seeks, among other things, injunctive relief to enjoin the Company and its directors from consummating the transaction contemplated under the Merger Agreement (the “Merger”), along with attorneys' fees and costs.

The Memorandum of Understanding reflects an agreement in principle to settle the Lawsuit. The settlement includes the Company’s agreement to include certain additional disclosures relating to the Merger in the definitive proxy statement for the meeting of stockholders at which the stockholders will vote on Merger (the “Meeting”). All of such disclosures are included in the first amendment to the preliminary proxy statement filed by the Company with the SEC on August 20, 2009. The defendants in the Lawsuit, including the Company, each have denied, and continue to deny, any wrongdoing whatsoever in connection with the Merger, and the Company’s directors expressly maintain that they complied with their fiduciary duties. The defendants in the Lawsuit, including the Company, believe the Lawsuit is without merit and they entered into the Memorandum of Understanding solely to avoid the burdens and expense of further litigation. The Memorandum of Understanding is subject to customary conditions including completion of appropriate settlement documentation, completion of due diligence to confirm the fairness of the settlement, approval by the Boone County Circuit Court, and consummation of the Merger. If the settlement is consummated, the Lawsuit will be dismissed with prejudice and the defendants and other released persons will receive from or on behalf of all record holders and beneficial owners of the Company's common stock on May 20, 2009 through the date of consummation of the Merger a release of all claims relating to the Merger, the Merger Agreement and the transactions contemplated therein, other than rights provided to stockholders under Delaware law to seek appraisal of the value of their shares. Members of the purported plaintiff class will be sent notice of the proposed settlement, and a hearing before the Boone County Circuit Court will be scheduled regarding, among other things, approval of the proposed settlement and any application by plaintiffs’ counsel for an award of attorneys’ fees and expenses.

There can be no assurance that the parties will ultimately enter into a stipulation of settlement, that the Boone Circuit Court will approve the settlement even if the parties were to enter into such stipulation or the amount of the attorneys’ fees and expenses that plaintiffs’ counsel may be awarded. In the event the court does not approve the proposed settlement, the terms of the settlement contemplated under the Memorandum of Understanding may be terminated.

Item 1A-Risk Factors

~~There~~Other than as described below, there are no material changes in the risk factors previously disclosed in our annual report on Form 10-K for the fiscal year ended January 5, 2009.

Failure to complete the merger could negatively affect the stock price and the future business and financial results of the Company.

On May 19, 2009, the Company entered into a definitive merger agreement, as amended June 9, 2009 and June 22, 2009, pursuant to which Desert Mountain Acquisition Co., a wholly-owned subsidiary of Hebron LLC and an affiliate of David B. Pomeroy II, would merge with and into the Company for $6.00 per share. The merger is subject to the approval by the Company’s stockholders. In the event that the merger agreement is not approved by the stockholders or if the merger is not completed for any other reason, the Company’s stockholders will not receive any payment for their shares of Company common stock. Instead, the Company will continue to operate as a public company and Pomeroy’s stockholders will be subject to the same risks and opportunities as they are currently with respect to their ownership of Company common stock. If the merger is not completed, there is a risk that the market price of the Company’s common stock may decline to the extent that the current market price of the stock reflects a market assumption that the merger will be completed. In addition, in such case, there can be no assurance that any other transaction acceptable to the Company or its stockholders would be offered.

The Company may terminate the merger agreement subject to a termination fee of up to $2.1 million.

Item 2-Unregistered Sales of Equity Securities and Use of Proceeds

None

PART II - OTHER INFORMATION

Item 2-Unregistered Sales of Equity Securities and Use of Proceeds

Repurchase of Securities

							The maximum
					Total number of		amount
	Total				shares purchased		that may yet be
	number of		Average price		as part of		purchased under
	shares		paid		publicly announced		the plan (12)
Period	purchased		per share ($) (1)		plan (12)		($) (thousands)
January 6, 2009 - February 5, 2009		27,032	$	3.21		27,032	$	1,976
April 6, 2009 - May 5, 2009		4,690	$	3.47		4,690	$	1,862
February 6, 2009 - March 5, 2009		9,936	$	3.43		9,936	$	1,942
May 6, 2009 - June 5, 2009		2,211	$	3.52		2,211	$	1,852
March 6, 2009 - April 5, 2009		18,836	$	3.42		18,836	$	1,878
June 6, 2009 - July 5, 2009		-	$	0.00		-	$	1,852
		2,711,959	$	2.99		2,711,959	$	1,878
		6,901	$	3.48		6,901	$	1,852

(1) Average price includes transaction costs.

(2) All shares were repurchased pursuant to the repurchase program described above.

Item 3-Defaults Upon Senior Securities

None

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PART II - OTHER INFORMATION

Item 4-Submission of Matters to a Vote of Security Holders

~~None~~The Company’s 2009 Annual Meeting of Shareholders (the “Annual Meeting”) was held on May 27, 2009. Proxies for the Annual Meeting were solicited pursuant to Regulation 14A under the Exchange Act. At the meeting, two matters were submitted to the stockholders for a vote. The results were as follows:

Election of Directors

The following individuals were elected to serve as directors:

Directors	For	Withheld
David G. Boucher	7,531,919	1,627,408
Christopher C. Froman	8,988,686	170,641
Ronald E. Krieg	7,701,592	1,457,735
David B. Pomeroy, II	7,402,367	1,756,960
Richard S. Press	7,764,093	1,395,234
Michael A. Ruffolo	7,549,892	1,609,435
Jonathan Starr	7,694,221	1,465,106
Debra E. Tibey	7,686,185	1,473,142

The above individuals represent all of the directors of the Company. Mr. Froman was elected to replace Mr. Coogan who decided not to run for re-election due to personal reasons.

Ratify Appointment of BDO Seidman, LLP

The following number of shares were voted as indicated regarding approving the ratification of appointment of BDO Seidman, LLP as independent registered public accounting firm:

For	9,073,739
Against	20,252
Non-Votes	-
Abstain	65,336

Item 5-Other Information

(a)

Information Required to be Disclosed on Form 8-K that has not been reported.

None.

(b)

Material Changes to the Procedures by Which Shareholders May Recommend Nominees to the Board of Directors.

None.

(c)

Other Information

None.

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PART II - OTHER INFORMATION

Item 6-Exhibits

(a)		Exhibits
3(i)(a)1		Certification of Incorporation of Pomeroy Computer Resources, dated February, 1992 (incorporated by reference to Exhibit 3(i)(a)1 of the Company’s Form 10-Q filed August 11, 2000)
3(i)(a)2		Certificate of Amendment to Certificate of Incorporation, dated July 1997 (incorporated by reference to Exhibit 3(i)(a)2 of the Company’s Form 10-Q filed August 11, 2000)
3(i)(a)4		Certificate of Amendment to Certificate of Incorporation, dated August 2000 (incorporated by reference to Exhibit 3(i)(a)4 of the Company’s Form 10-Q filed August 11, 2000)
3(i)(a)5		Certificate of Amendment to Certificate of Incorporation for Pomeroy Computer Resources, Inc., dated June 19, 2003 (incorporated by reference to Exhibit 3(i)(a)5 of the Company’s Form 10-Q filed August 19, 2003)
3(i)(a)6		Certificate of Amendment to Certificate of Incorporation for Pomeroy Computer Resources Sales Company, Inc., dated June 19, 2003 (incorporated by reference to Exhibit 3(i)(a)6 of the Company’s Form 10-Q filed August 19, 2003)
3(ii)		Bylaws of the Company as amended on January 24, 2008 (incorporated by reference to Exhibit 3(ii) of the Company’s Form 10-Q filed on May 15, 2008)
11.1		Statement regarding computation of per share earnings (See Note 1 of Notes to Consolidated Financial Statements in the Company’s Form 10K for fiscal 2008, filed on March 20, 2009).
31.1		Section 302 CEO Certification
31.2		Section 302 CFO Certification
32.1		Section 906 CEO Certification
32.2		Section 906 CFO Certification

(a) Exhibits

2.1	Agreement and Plan of Merger dated May 19, 2009, by and among Pomeroy IT Solutions, Inc., Hebron LLC, Desert Mountain Acquisition Co., and David B. Pomeroy II (incorporated by reference to Exhibit 2.1 of the Company’s Form 8-K filed May 20, 2009)

2.1(a)	First Amendment to Agreement and Plan of Merger, dated June 8, 2009, by and among Pomeroy IT Solutions, Inc., Hebron LLC, Desert Mountain Acquisition Co. and David B. Pomeroy II (incorporated by reference to Exhibit 2.1 of the Company’s Form 8-K filed June 9, 2009)

2.1(b)	Second Amendment to Agreement and Plan of Merger, dated June 8, 2009, by and among Pomeroy IT Solutions, Inc., Hebron LLC, Desert Mountain Acquisition Co. and David B. Pomeroy II (incorporated by reference to Exhibit 2.1 of the Company’s Form 8-K filed June 22, 2009)

3(i)(a)1	Certificate of Incorporation of Pomeroy Computer Resources, dated February, 1992 (incorporated by reference to Exhibit 3(i)(a)1 of the Company’s Form 10-Q filed August 11, 2000)

3(i)(a)2	Certificate of Amendment to Certificate of Incorporation, dated July 1997 (incorporated by reference to Exhibit 3(i)(a)2 of the Company’s Form 10-Q filed August 11, 2000)

3(i)(a)4	Certificate of Amendment to Certificate of Incorporation, dated August 2000 (incorporated by reference to Exhibit 3(i)(a)4 of the Company’s Form 10-Q filed August 11, 2000)

3(i)(a)5	Certificate of Amendment to Certificate of Incorporation for Pomeroy Computer Resources, Inc., dated June 19, 2003 (incorporated by reference to Exhibit 3(i)(a)5 of the Company’s Form 10-Q filed August 19, 2003)

3(i)(a)6	Certificate of Amendment to Certificate of Incorporation for Pomeroy Computer Resources Sales Company, Inc., dated June 19, 2003 (incorporated by reference to Exhibit 3(i)(a)6 of the Company’s Form 10-Q filed August 19, 2003)

3(ii)	Bylaws of the Company as amended on January 24, 2008 (incorporated by reference to Exhibit 3(ii) of the Company’s Form 10-Q filed on May 15, 2008)

10.1	Amendment No. 8 to Amended and Restated Credit Facilities Agreement (incorporated by reference to Exhibit 10.1 to the Company’s Form 8-K Report filed on June 26, 2009)

10.1(a)	Form of Amended and Restated Special Change in Control Bonus Agreement approved May 18, 2009, entered into between Pomeroy IT Solutions, Inc. and each of Christopher Froman, Keith Blachowiak, Luther K. Kearns, Craig Propst and Peter Thelen

11.1	Statement regarding computation of per share earnings (See Note 1 of Notes to Consolidated Financial Statements in the Company’s Form 10K for fiscal 2008, filed on March 20, 2009).

31.1	Section 302 CEO Certification

31.2	Section 302 CFO Certification

32.1	Section 906 CEO Certification

32.2	Section 906 CFO Certification

SIGNATURE

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.

	POMEROY IT SOLUTIONS, INC.	~~POMEROY IT SOLUTIONS, INC.~~
	(Registrant)	~~(Registrant)~~
Date: May 18, 2009		By: /s/ Craig J. Propst
Date: August 24, 2009	By: /s/ Craig J. Propst
	Craig J. Propst	~~Craig J. Propst~~
		Senior Vice President, Treasurer and Chief
	Senior Vice President, Treasurer and Chief Financial Officer
		Financial Officer

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