UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K/A
AMENDMENT NO. 2
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended January 5, 2005

[ ] 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 (I.R.S. Employer
incorporation or organization) Identification No.)

1020 Petersburg Road, Hebron, Kentucky 41048
- -------------------------------------- -----
(Address of principal executive offices) (Zip Code)

Registrant's telephone number, including area code (859) 586-0600
--------------

Securities registered pursuant to Section 12(b) of the Act:

Title of each class Name of each exchange on which registered
------------------- -----------------------------------------
None None

Securities registered pursuant to Section 12(g) of the Act:

Common Stock, Par Value $.01
----------------------------
(Title of class)

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 [ ] NO [X]

Indicate by check mark whether the registrant is a large accelerated filer, an
accelerated filer or a non-accelerated filer. See definition of "accelerated
filer and large accelerated filer" in Rule 12b-2 of the Exchange Act. (Check
one): Large accelerated filer [ ] Accelerated filer [X]
Non-accelerated filer [ ]

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 aggregate market value of voting stock of the Registrant held by
non-affiliates was approximately $86.3 million as of July 5, 2004.

The number of shares of common stock outstanding as of February 28, 2005 was
12,487,464.

EXPLANATORY NOTE

This Amendment No. 2 on Form 10-K/A ("Form 10-K/A") amends our Annual Report on
Form 10-K for the fiscal year ended January 5, 2005, as initially filed with the
Securities and Exchange Commission (the "SEC") on April 5, 2005 (the "Original
Filing"), and as amended on May 5, 2005 (the "First Amended Filing"). The
Company hereby amends the "Liquidity and Capital Resources" section of Item 7,
of Part II of its Annual Report on Form 10-K for the year ending January 5,
2005, to revise its disclosures concerning working capital items included
therein.

Except for the matters discussed in this Explanatory Note, no other changes have
been made to the Original Filing or the First Amended Filing. This Form 10-K/A
does not reflect events occurring after the Original Filing or the First Amended
Filing and does not modify or update those disclosures affected by subsequent
events. Accordingly, this Form 10-K/A should be read in conjunction with the
Original Filing, the First Amended Filing and our other filings with the SEC
subsequent thereto.

POMEROY IT SOLUTIONS, INC.

FORM 10-K/A
AMENDMENT NO. 2

YEAR ENDED JANUARY 5, 2005

TABLE OF CONTENTS

Item 7 Management's Discussion and Analysis of Financial 1
Condition and Results of Operations (Amended)

SIGNATURES Chief Executive Officer and Directors 9

Exhibits Certification Pursuant to Section 302 of the Sarbanes- E-31.1
Oxley Act of 2002 - CEO
Certification Pursuant to Section 302 of the Sarbanes- E-31.2
Oxley Act of 2002 - CFO
Certification pursuant to 18 U.S.C. Section 1350, as E-32.1
adopted pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002 - CEO
Certification pursuant to 18 U.S.C. Section 1350, as E-32.2
adopted pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002 - CFO

ITEM 7.

MANAGEMENT'S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis of the Company's results of operation and
financial position should be read in conjunction with its consolidated financial
statements included elsewhere in this report. In addition, the Certain Business
Factor's described under "Business" should be considered in evaluating the
Company's outlook.

CRITICAL ACCOUNTING POLICIES
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. Management believes that it consistently applies judgments
and estimates and such consistent application results in financial statements
and accompanying notes that fairly represent all periods presented. However,
any errors in these judgments and estimates may have a material impact on the
Company's statement of operations and financial condition. Critical accounting
policies, as defined by the Securities and Exchange Commission, are those that
are most important to the portrayal of the Company's financial condition and
results of operations and require management's most difficult and subjective
judgments and estimates of matters that are inherently uncertain. The Company
considers its critical accounting policies to be (1) vendor and trade receivable
allowances, (2) valuation of long-lived assets and (3) income taxes.

Vendor and trade receivable allowances
Pomeroy maintains allowances for doubtful accounts on both vendor and trade
receivables for estimated losses resulting from the inability of its customers
or vendors to make required payments. The determination of a proper allowance
for vendor receivables is based on an ongoing analysis as to the recoverability
of the Company's vendor receivable portfolio based primarily on account aging.
The determination of a proper allowance for trade receivables is based on an
ongoing analysis as to the credit quality and recoverability of the Company's
trade receivable portfolio. Factors considered are account aging, historical
bad debt experience, current economic trends and others. The analysis is
performed on both vendor and trade receivable portfolios. A separate allowance
account is maintained based on each analysis.

Valuation of long-lived assets
Long-lived assets, including property and equipment, goodwill and other
intangible assets are reviewed for impairment when events or changes in facts
and circumstances indicate that their carrying amount may not be recoverable.
Events or changes in facts and circumstances that Pomeroy considers as
impairment indicators include the following:
- Significant underperformance of the Company's operating results
relative to expected operating results;
- Net book value compared to its market capitalization;
- Significant adverse economic and industry trends;
- Significant decrease in the market value of the asset;
- Significant changes to the asset since the Company acquired it;
- And the extent that the Company may use an asset or changes in the
manner that the Company may use it.

When the Company determines that one or more impairment indicators are present
for its long-lived assets, excluding goodwill, Pomeroy compares the carrying
amount of the asset to the net future undiscounted cash flows that the asset is
expected to generate. If the carrying amount of the asset is greater than the
net future undiscounted cash flows that the asset is expected to generate,
Pomeroy would recognize an impairment loss to the extent the carrying value of
the asset exceeds its fair value. An impairment loss, if any, would be reported
in the Company's future results of operations.

When the Company determines that one or more impairment indicators are present
for its goodwill, Pomeroy compares its reporting unit's carrying value to its
fair value. The Company has two reporting units for goodwill testing which are
a products reporting unit and a services reporting unit. The Company has adopted
January 6 as the valuation date for the annual testing. Currently, the Company
has engaged a third-party valuation specialist to perform the annual goodwill
impairment testing as of January 6, 2005. An impairment loss, if any, would be
reported in the Company's results of operations at the date it is determined.

Income taxes
Pomeroy is required to estimate income taxes in each of the jurisdictions in
which the Company operates. This process involves estimating the Company's
actual current tax exposure together with assessing temporary differences
resulting from differing treatment of items for tax and accounting purposes.
These differences result in deferred tax assets and liabilities, which are
included within the Company's consolidated balance sheet. The Company must then
assess the likelihood that the deferred tax assets will be recovered from future
taxable income and to the extent that the Company believes recovery is not
likely, the Company must establish a valuation allowance. To the extent the
Company establishes a valuation allowance in a period, the Company must include
an expense within the tax provision in the statement of operations. Pomeroy has
not recorded a valuation allowance to reduce the carrying amount of recorded
deferred tax assets representing future deductions, as the Company believes it
will have sufficient taxable income in the future to realize these deductions.
Pomeroy considers future taxable income and ongoing prudent and feasible tax
planning strategies in assessing the need for a valuation allowance. In the
event Pomeroy were to determine that it would not be able to realize its
deferred tax assets in the future, an adjustment to the deferred tax asset would
decrease income in the period such determination was made.

RESULTS OF OPERATIONS
The following table sets forth for the periods presented information derived
from our consolidated statements of income expressed as a percentage of net
sales and revenues:

Percentage of Net Sales and Revenues
Financial Results Fiscal Years ended January 5,
- ----------------------------------------- ----------- ------------- -------------
2005 2004 2003
----------- ------------- -------------

Net sales and revenues:
Equipment, supplies and leasing 73.4% 78.6% 81.3%
Service 26.6% 21.4% 18.7%
----------- ------------- -------------
Total net sales and revenues 100.0% 100.0% 100.0%
=========== ============= =============

Cost of sales and service:
Equipment, supplies and leasing 67.9% 72.7% 74.6%
Service 19.3% 15.5% 12.9%
----------- ------------- -------------
Total cost of sales and service 87.2% 88.2% 87.5%
=========== ============= =============

Gross profit:
Equipment, supplies and leasing 5.5% 5.9% 6.7%
Service 7.3% 5.9% 5.8%
----------- ------------- -------------
Total gross profit 12.8% 11.8% 12.5%
=========== ============= =============

Operating expenses:
Selling, general and administrative 8.9% 7.9% 7.3%
Rent 0.5% 0.5% 0.5%
Depreciation 0.5% 0.8% 0.6%
Amortization 0.1% 0.1% 0.2%
Provision for doubtful accounts 0.0% 0.0% 0.1%
Litigation settlement 0.0% 0.0% 0.0%
Provision for vendor receivables
and restructuring and severance charges 0.3% 0.0% 0.6%
----------- ------------- -------------
Total operating expenses 10.3% 9.3% 9.3%
=========== ============= =============

Income from operations 2.5% 2.5% 3.2%

Net other expense 0.0% 0.0% 0.1%

Income before income tax 2.5% 2.5% 3.1%
Income tax expense 1.0% 1.0% 1.0%

----------- ------------- -------------
Net income 1.5% 1.5% 2.1%
=========== ============= =============

FISCAL YEAR 2004 COMPARED TO FISCAL YEAR 2003

Total Net Sales and Revenues. Total net sales and revenues increased $143.9
million, or 24.0%, to $742.3 million in fiscal 2004 from $598.4 million in
fiscal 2003. This increase was a result primarily of increased industry-wide
technology spending and the acquisition of Alternative Resources Corporation
("ARC") on July 23, 2004. Excluding the acquisition completed in fiscal year
2004, total net sales and revenues increased 13.4%.

Products and leasing sales increased $74.6 million, or 15.9%, to $545.1 million
in fiscal 2004 from $470.5 million in fiscal 2003. Excluding acquisitions
completed in fiscal year 2004, total product and leasing net sales and revenues
increased 14.3%. Service revenues increased $69.3 million, or 54.2%, to $197.2
million in fiscal 2004 from $127.9 million in fiscal 2003. Excluding
acquisitions completed in fiscal year 2004, total service net sales and revenue
increased 10.2%. The net increase in products and leasing net sales and revenue
was primarily a result of increased industry-wide technology spending and the
increase in service revenue was primarily a result of the acquisition of
Alternative Resources Corporation on July 23, 2004.

Gross Profit. Gross profit margin was 12.8% in fiscal 2004 compared to 11.8% in
fiscal 2003. This increase in gross profit resulted primarily from the increase
in service revenues as a percentage of total revenues and the increase in
service gross margin as a percentage of total gross margins due to the
acquisition of Alternative Resources Corporation and by the adoption of EITF
02-16. On a forward looking basis, the Company expects to continue its
aggressive product pricing in order to gain existing market share which will
have a continued impact on product gross margin. The competitive environment
as well as less than maximum technical employee utilization rate has also
resulted in downward pressure on service margins. Additionally, the Company
expects to continue increasing the breadth and depth of its service offerings,
which will have a continued impact on service gross margin. Service gross margin
increased to 56.8% of total gross margin in fiscal 2004 from 49.6% in fiscal
2003. Factors that may have an impact on gross margin in the future include the
continued changes in hardware margins, change in technical employee utilization
rates, the mix of the type of products sold and services provided, the
percentage of equipment or service sales with lower-margin customers, the ratio
of service revenues to total net sales and revenues, and the Company's decision
to aggressively price certain products and services.

As a consequence of adopting EITF 02-16, the Company recorded approximately $734
thousand during fiscal 2004 of vendor considerations as a reduction of cost of
sales, which would previously have been recorded as a reduction of selling,
general and administrative expenses. Excluding the impact of EITF 02-16, and
therefore on a non-GAAP basis, the gross profit would have been 12.7% during
fiscal 2004 compared to 11.7% during fiscal 2003. The non-GAAP gross profit
margin is included in this discussion to provide meaningful comparison to prior
periods.

Operating Expenses. Selling, general and administrative expenses (including
rent expense and provision for doubtful accounts) expressed as a percentage of
total net sales and revenues increased to 9.4% in fiscal 2004 from 8.4% for
fiscal 2003. Total operating expenses expressed as a percentage of total net
sales and revenues increased to 10.3% in fiscal 2004 from 9.3% for fiscal 2003.
The increases are primarily the result of the acquisition of Alternative
Resources Corporation and recording a $2.4 million restructuring charge in the
third quarter of fiscal 2004 and the adoption of EITF 02-16 offset by higher net
sales and revenues in fiscal 2004 as compared to fiscal 2003. On a
forward-looking basis, the Company expects to continue monitoring its selling,
general and administrative expenses for strict cost controls.

As noted above, as a result of adopting EITF 02-16, the Company reclassified
approximately $734 thousand of vendor consideration to a reduction of cost of
sales, which would previously have been recorded as a reduction of selling,
general and administrative expenses. Excluding the impact of EITF 02-16, and
therefore on a non-GAAP basis, operating expenses would have been 10.2% during
fiscal 2004 as compared to 9.3% during fiscal 2003. This non-GAAP measurement
is included to provide a more meaningful comparison to prior periods.

Litigation Settlement. No litigation settlement expenses were recorded in
fiscal 2004. $0.2 million was recorded in fiscal 2003. For fiscal 2003, the
litigation settlement relates to a single bankruptcy preference claim.

Restructuring and Severance Charges. Restructuring and severance charges
reported were $2.4 million for fiscal 2004. During fiscal 2004, in connection
with certain strategic initiatives, the Company recorded restructuring and
severance charges of $1.0 million. The restructuring charge is associated with
costs of facilities and processes of Pomeroy that have or will become
duplicative or redundant as ARC operations are integrated into the Company. The
Company also recorded a non-recurring, one-time charge for severance in the
amount of $1.4 million related to the resignation of David B. Pomeroy II as CEO
of the Company. David B. Pomeroy II continues to serve as Chairman of the Board
of the Company.

Income from Operations. Income from operations increased $3.6 million, or
24.3%, to $18.4 million in fiscal 2004 from $14.8 million in fiscal 2003. The
Company's operating margin remained constant in fiscal 2004 and 2003 at 2.5%,
primarily due to the increase in gross margin, offset by increase in operating
expenses.

Net Interest Income/Expense. Net interest expense was $0.25 million during
fiscal 2004 as compared to interest income of $0.08 million during fiscal 2003.
This increase in net interest expense was a result of increased borrowings under
our credit facility relating to the ARC acquisition and lower interest rates on
invested funds.

Income Taxes. The Company's effective tax rate was 39.75% in fiscal 2004
compared to 39.0% in fiscal 2003. This increase was principally related to
the increase in state and local income taxes.

Net Income. Net income increased $1.8 million, or 19.8%, to $10.9 million in
fiscal 2004 from $9.1 million in fiscal 2003. The increase was a result of the
factors described above.

FISCAL YEAR 2003 COMPARED TO FISCAL YEAR 2002

Total Net Sales and Revenues. Total net sales and revenues decreased $104.4
million, or 14.9%, to $598.4 million in fiscal 2003 from $702.8 million in
fiscal 2002. This decrease was a result primarily of a continued industry-wide
slowdown in technology spending due to the general weakness in the U.S. economy
and the decrease in leasing revenue due to the sale of TIFS during fiscal 2002.
Further, the Company sometimes elects to take a commission from the
manufacturers for arranging sales transactions where it judges the gross profit
to be inadequate for its participation in the sales transaction. In fiscal year
2003, Pomeroy elected to take such commissions on transactions whose sales would
otherwise have been $10.6 million. Excluding acquisitions completed in fiscal
year 2003, total net sales and revenues decreased 19.3%

Products and leasing sales decreased $101 million, or 17.7%, to $470.5 million
in fiscal 2003 from $571.5 million in fiscal 2002. Excluding acquisitions
completed in fiscal year 2003, total product and leasing net sales and revenues
decreased 22.7%. Service revenues decreased $3.4 million, or 2.6%, to $127.9
million in fiscal 2003 from $131.3 million in fiscal 2002. Excluding
acquisitions completed in fiscal year 2003, total service net sales and revenues
decreased 4.6% These net decreases were primarily a result of an industry-wide
slowdown in technology spending due to the general weakness in the U.S. economy
and the sale of TIFS.

Gross Profit. Gross profit margin was 11.8% in fiscal 2003 compared to 12.5% in
fiscal 2002. This decrease in gross profit resulted primarily from the decrease
in hardware and service margins, but was offset somewhat by the adoption of EITF
02-16 and somewhat by the higher proportion of service gross margin to total
gross margin. The decrease in product and leasing gross margin is primarily
associated with the Company's strategic decision to aggressively price its
hardware business in order to maintain and capture market share and to the
weakened economic conditions of the IT industry, and offset somewhat by the
adoption of EITF 02-16. On a forward looking basis, the Company expects to
continue its aggressive product pricing in order to gain existing market share
which will have a continued impact on product gross margin. The competitive
environment as well as less than maximum technical employee utilization rate has
also resulted in downward pressure on service margins. Additionally, the Company
expects to continue increasing the breadth and depth of its service offerings,
which will have a continued impact on service gross margin. Service gross margin
increased to 49.6% of total gross margin in fiscal 2003 from 46.1% in fiscal
2002. Factors that may have an impact on gross margin in the future include the
continued changes in hardware margins, change in personnel utilization rates,
the mix of products sold and services provided, a change in unit prices, the
percentage of equipment or service sales with lower-margin customers, the ratio
of service revenues to total net sales and revenues, and the Company's decision
to aggressively price certain products and services.

As a consequence of adopting EITF 02-16, the Company recorded approximately $324
thousand during fiscal 2003 of vendor considerations as a reduction of cost of
sales, which would previously have been recorded as a reduction of selling,
general and administrative expenses. Excluding the impact of EITF 02-16, and
therefore on a non-GAAP basis, the gross profit would have been 11.7% during
fiscal 2003 compared to 12.5% during fiscal 2002. The non-GAAP gross profit
margin is included in this discussion to provide meaningful comparison to prior
periods.

As a result of adopting EITF 02-16, the Company reclassified approximately $324
thousand of vendor consideration to a reduction of cost of sales, which would
previously have been recorded as a reduction of selling, general and
administrative expenses. Excluding the impact of EITF 02-16, and therefore on a
non-GAAP basis, selling, general and administrative expenses would have been
8.3% during fiscal 2003 as compared to 7.9% during fiscal 2002. This non-GAAP
measurement is included to provide a more meaningful comparison to prior
periods.

Total operating expenses expressed as a percentage of total net sales and
revenues remained the same for fiscal 2003 and fiscal 2002 at 9.3%. However,
the composition of the fiscal 2003 total operating expenses changed from fiscal
2002. With the exception of depreciation expense, all other operating expenses
decreased in fiscal 2003 as compared to fiscal 2002. Excluding the impact of
EITF 02-16, and therefore on a non-GAAP basis, total operating expenses would
have been 9.2% during fiscal 2003 as compared to 9.3% during fiscal 2002. This
non-GAAP measurement is included to provide a more meaningful comparison to
prior periods. On a forward-looking basis, the Company expects to continue
monitoring its selling, general and administrative expenses for strict cost
controls.

Litigation Settlement. Litigation settlement expense decreased $0.1 million or
33.3% to $0.2 million in fiscal 2003 from $0.3 million in fiscal 2002. For both
fiscal 2003 and fiscal 2002, the litigation settlement relates to a single
bankruptcy preference claim.

Provision for Vendor Receivables and Restructuring Charge. In fiscal 2002 the
Company expensed $3.3 million to increase the vendor receivable reserve based on
the deterioration of the aging of the vendor receivables, the expected
resolution of the disputed vendor rebate claims and the general posture of the
OEMs regarding resolution. In fiscal 2002 the Company also recorded
restructuring expenses of $.7 million to consolidate and relocate operations in
various geographical locations. No such expenses were recorded in fiscal 2003.

Income from Operations. Income from operations decreased $7.4 million, or
33.3%, to $14.8 million in fiscal 2003 from $22.2 million in fiscal 2002. The
Company's operating margin decreased to 2.5% in fiscal 2003 from 3.2% in fiscal
2002. This decrease is primarily due to the decrease in gross margin and the
lower than expected total net sales and revenues , offset by decrease in
operating expenses.

Net Interest Income/Expense. Interest income was $0.08 million during fiscal
2003 as compared to interest expense of $0.5 million during fiscal 2002. This
change was due to reduced borrowings as a result of improved cash flow
management, the sale of certain TIFS assets and interest income earned on cash
balances.

Income Taxes. The Company's effective tax rate was 39.0% in fiscal 2003
compared to 31.0% in fiscal 2002. This increase was principally related to a
tax benefit of $1.6 million in fiscal 2002 associated with an increase in the
tax basis of leased assets as a result of an accounting method change for tax
purposes in fiscal 2002.

Net Income. Net income decreased $5.9 million, or 39.3%, to $9.1 million in
fiscal 2003 from $15.0 million in fiscal 2002. The increase was a result of the
factors described above.

Liquidity and Capital Resources

Cash provided by operating activities was $5.8 million in fiscal 2004. Cash used
in investing activities was $18.8 million, which included $16.4 million for
acquisitions completed in fiscal 2004 and prior years and $2.4 million for
capital expenditures. Cash used in financing activities was $9.5 million which
included $31.4 million of payments on notes payable, $0.5 million for the
purchase of treasury stock, and was offset by $20.2 million in proceeds from
short-term borrowings, $1.8 million from the exercise of stock options, and $0.4
million proceeds from the employee stock purchase plan.

The amount of cash derived from operating activities will vary based on a number
of business factors which may change from time to time, including terms of
available financing from vendors, downturns in the Company's business and/or
downturns in the businesses of the Company's customers. However, a growth or
decline in services revenue in conjunction with a change in the proportion of
services revenue to total revenue is an underlying driver of operating cash flow
during the period of change because a majority of the Company's services revenue
is generated based upon the billings of the Company's technicians. The cash
outlay for these labor/payroll costs is incurred bi-weekly with each pay period.
The invoicing for the service is generated on various billing cycles as dictated
by the customers, and 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
the services are performed. This differs from product revenue in that the time
period between the time that the Company incurs the cost to purchase the
products and collects the revenue from its customer is typically shorter,
usually from 0 to 60 days, and the Company primarily orders inventory for a
particular customer rather than stocking large amounts of inventory. The
Company anticipates an increase in services revenue and in the proportion of
services revenue to total revenue which, if it occurs, may result in a
significant decrease in cash flows from operating activities during periods of
significant growth or periods of excess technical capacity. In addition,
certain services, primarily outsourcing contracts for the Company's Life Cycle
Services, require that the Company maintain a stock of specific parts inventory
for servicing the customer; thus, an increase or decrease in the type of
services provided can impact inventory levels and operating cash flows.

Operating cash flows decreased in fiscal 2004 as a result of a number of
factors, specifically, a growth in business, a decision to aggressively pursue
cash discounts related to accounts payable and certain floor plan arrangements,
and the acquisition of Alternative Resources Corporation ("ARC"). Historically,
the Company consistently pursues cash discounts that enable the Company to
reduce costs by pre-paying or paying expenses earlier than due dates. In
conjunction with the ARC acquisition, late in 2004, the Company eliminated an
ARC factoring arrangement with a financial institution, related to a specific
customer. By eliminating this arrangement, the collection on these specific
receivables changed from credit terms of Net 10 to Net 45. During the
conversion of these credit terms, Pomeroy experienced a decrease of
approximately $7 million in operating cash flows.

There were significant changes in certain working capital accounts in 2004.
Trade receivables, inventory and trade payables all increased by significant
amounts comparable to the growth in business. These increases were primarily the
result of increased business volume in 2004 over 2003. Inventories increased at
a rate greater than that caused by increased business volume due to new
outsourcing contracts requiring a higher level of committed service parts
inventory.

A significant part of Pomeroy's inventories are financed by floor plan
arrangements with third parties. At January 5, 2005, these lines of credit
totaled $85.0 million, including $75.0 million with GE Commercial Distribution
Finance ("GECDF") and $10.0 million with IBM Credit Corporation ("ICC").
Borrowings under the GECDF floor plan arrangements are made on thirty-day notes.
Borrowings under the ICC floor plan arrangements are made on fifteen-day notes.
All such borrowings are secured by the related inventory. Financing on
substantially all of the arrangements is interest free due to subsidies by
manufacturers. Overall, the average rate on these arrangements is less than
1.0%. The Company classifies amounts outstanding under the floor plan
arrangements as accounts payable.

On June 28, 2004, the Company finalized a new $165 million Syndicated Credit
Facility Agreement with GECDF. The new credit facility has a three-year term
and its components include a maximum of $75 million for inventory financing and
a revolving line of credit, collateralized primarily by accounts receivable, of
up to $110 million; provided that the total amount outstanding at any time under
the inventory financing facility and the revolving line of credit may not exceed
$165 million. Under the new agreement, the credit facility provides a letter of
credit facility of $5 million. Under the credit facility, the interest rate is
based on the London InterBank Offering Rate ("LIBOR") and a pricing grid. As of
January 5, 2005 the adjusted LIBOR rate was 4.4%. This credit facility expires
June 28, 2007.

At January 5, 2005, the Company's balance outstanding under the credit facility
was approximately $20.2 million. At January 5, 2004, the Company did not have
an outstanding balance under its previous credit facility. The credit facility
is collateralized by substantially all of the assets of Pomeroy, except those
assets that collateralize certain other financing arrangements. Under the terms
of the credit facility, Pomeroy is subject to various financial covenants.
Pomeroy is not in violation of any financial covenants.

On July 23, 2004, the Company and Pomeroy Acquisition Sub, Inc. ("PAS"), a
wholly owned subsidiary of the Company, completed the acquisition of ARC. On
May 11, 2004, the parties entered into a definitive merger agreement for PAS to
acquire all of the issued and outstanding shares of capital stock of ARC. The
merger was approved by ARC shareholders at a meeting held on July 22, 2004. As
a result of the merger, ARC is now a wholly-owned subsidiary of the Company.
The cash consideration paid at closing, including the cost of all stock, stock
options and warrants purchased and the amount of ARC net debt retired, was
approximately $46.1 million, which was funded from cash on hand and borrowings
from Pomeroy's existing line of credit.

Pomeroy believes that the anticipated cash flow from operations and current
financing arrangements will be sufficient to satisfy Pomeroy's capital
requirements for the next twelve months. Historically, Pomeroy has financed
acquisitions using a combination of cash, earn outs, shares of its Common Stock
and seller financing. Pomeroy anticipates that future acquisitions will be
financed in a similar manner.

Off-Balance Sheet Arrangements and Contractual Obligations

Aggregated information about the Company's contractual obligations as of January
5, 2005 are presented in the following table:

Payments due by period
---------------------------------------------------------
LESS THAN MORE THAN 5
CONTRACTUAL OBLIGATIONS TOTAL 1 YEAR 1-3 YEARS 3-5 YEARS YEARS
- ---------------------------------------------------------------------------------------------

Acquisition notes $ 1,162 $ 912 $ 250 $ - $ -
Operating leases 17,522 5,632 6,412 4,650 828
---------------------------------------------------------
Total contractual cash obligations $18,684 $ 6,544 $ 6,662 $ 4,650 $ 828
---------------------------------------------------------

The operating leases, shown above, are not recorded on the consolidated balance
sheet. Operating leases are utilized in the normal course of business. The
expected timing or payment of obligations discussed above is estimated based on
current information. Timing of payments and actual amounts paid may be
different depending on changes to agreed-upon amounts for some obligations.

Impact of Recent Accounting Pronouncement

In December 2004, the FASB issued FAS 123R. This statement, which will be
effective for the Company beginning on July 6, 2005, will change how the Company
accounts for share-based compensation, and may have a significant impact on its
future results of operations and earnings per share. The Company currently
accounts for share-based payments to employees and directors using the intrinsic
value method. Under this method, the Company generally does not recognize any
compensation expense related to stock option grants it awards under its stock
option plans.

FAS 123R will require the Company to recognize share-based compensation as
compensation expense in the statement of operations based on the fair values of
such equity on the date of the grant, with the compensation expense recognized
over the period in which the recipient is required to provide service in
exchange for the equity award. This statement will also require the Company to
adopt a fair value-based method for measuring the compensation expense related
to share-based compensation. The Company has not yet completed its evaluation of
the impact of the adoption of FAS 123R on its results of operations. In
connection with evaluating the impact of FAS 123R, the Company is considering
the potential implementation of different valuation methods to determine the
fair value of share-based compensation.

SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.

By: /s/ Stephen E. Pomeroy
-------------------------------------------
Stephen E. Pomeroy
President and Chief Executive
Officer
Dated: April 14, 2006

Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed by the following persons on behalf of the Registrant and in the
capacities and on the date indicated.

Signature and Title Date
------------------- ----

By: /s/ David B. Pomeroy, II April 14,2006
- ----------------------------------
David B. Pomeroy, II Director

By: /s/ Stephen E. Pomeroy April 14,2006
- ----------------------------------
Stephen E. Pomeroy, Director

By: /s/ April 14,2006
- ----------------------------------
Kevin G. Gregory, Director

By: /s/ James H. Smith III April 14,2006
- ----------------------------------
James H. Smith III, Director

By: /s/ Ronald E. Krieg April 14,2006
- ----------------------------------
Ronald E. Krieg, Director

By: /s/ Debra E. Tibey April 14,2006
- ----------------------------------
Debra E. Tibey, Director

By: /s/ Edward E. Faber April 14,2006
- ----------------------------------
Edward E. Faber, Director

By: /s/ William H. Lomicka April 14,2006
- ----------------------------------
William H. Lomicka, Director

By: /s/ April 14,2006
- ----------------------------------
Kenneth R. Waters, Director

By: /s/ April 14,2006
- ----------------------------------
Vincent D. Rinaldi, Director