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                       SECURITIES AND EXCHANGE COMMISSION
                              WASHINGTON, DC 20549

                                    FORM 10-K
                             ----------------------

                ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF
                       THE SECURITIES EXCHANGE ACT OF 1934

FOR THE FISCAL YEAR ENDED DECEMBER 31, 2001          COMMISSION FILE NO. 0-19394

                                   GTSI CORP.
             (Exact name of registrant as specified in its charter)

           DELAWARE                                             54-1248422
(State or other jurisdiction of                              (I.R.S. Employer
incorporation or organization)                            Identification Number)

            3901 STONECROFT BOULEVARD, CHANTILLY, VIRGINIA 20151-1010
               (Address of principal executive offices) (Zip Code)

       REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE:   (703) 502-2000

        SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:   NONE

           SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT:

                         COMMON STOCK, $0.005 PAR VALUE
                                (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
filing requirements for the past 90 days.

                              YES |X|    NO |_|

      Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. |X|

      The aggregate market value of the voting stock held by non-affiliates of
the registrant, based upon the closing price of the Common Stock on March 1,
2002, as reported on The Nasdaq Stock Market, was $62,277,531.

      The number of shares outstanding of the registrant's Common Stock on March
1, 2002, was 8,194,412.

                       DOCUMENTS INCORPORATED BY REFERENCE

      Portions of the registrant's definitive Proxy Statement to be delivered to
stockholders in connection with their Annual Meeting of Stockholders scheduled
to be held on May 9, 2002 are incorporated by reference into Part III of this
Form 10-K.

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                                     PART I

ITEM 1.    BUSINESS.

THE COMPANY

      GTSI Corp., a Delaware Corporation ("GTSI" or the "Company"), is a
recognized information technology ("IT") solutions leader, providing products
and services to federal, state and local government customers worldwide. (Unless
the context indicates otherwise, all references herein to the capitalized term
"Government" shall refer to the U.S. Federal Government, and all references
herein to the non-capitalized term "government" shall refer generally to any
federal, state or municipal government.) The Company was incorporated in 1983.

      GTSI offers its customers a convenient and cost-effective centralized
source for microcomputer, workstation, software and networking solutions through
its broad selection of popular products and services at competitive prices. The
Company specializes in understanding both the various IT needs and the
procurement processes of Government customers. GTSI sells to most departments
and agencies of the Government, state governments and systems integrators and
prime contractors selling to the government market. In 2001, GTSI's sales
directly to Government agencies, to prime contractors for resale to Government
agencies and to state and local government agencies accounted for 85%, 13% and
2% of sales, respectively.

      GTSI currently offers access to approximately 250,000 IT products from
approximately 1,200 manufacturers, including Hewlett-Packard Company
("Hewlett-Packard"), Microsoft Corporation ("Microsoft"), Panasonic Personal
Computer Company (a division of Matsushita Electric Corporation of America),
Compaq Computer Corporation ("Compaq"), Sun Microsystems, Inc. ("Sun"), Cisco
Systems, Inc. ("Cisco"), International Business Machines Corp. ("IBM"), Apple
Computer, Inc. ("Apple") and Toshiba America Information Systems, Inc.
("Toshiba"). The Company provides its partners with a low-cost marketing and
distribution channel to the many end-users constituting the government market,
while substantially insulating these partners from the complex government
procurement rules and regulations.

      GTSI fulfills most customer orders from its state-of-the-art 200,000
square-foot distribution center located in Chantilly, Virginia, near Dulles
International Airport and Washington, D.C. In addition to the normal
distribution functions, activities at the center include stocking of popular
items for fast delivery, customizing equipment through the integration of
various hardware and software components, and specialized services such as
providing source acceptance inspections and documentation. The distribution
center has the capability of supporting approximately $1.5 billion in shipments
per year. This includes the capacity to integrate hardware at an estimated rate
of 1,600 to 1,800 units per day, including functional and diagnostic testing of
all integrated components. In 1998, the Company's distribution and integration
operations achieved ISO 9002 certification. The Company also subleases a 10,000
square- foot distribution center in Chattanooga, Tennessee. In addition to being
able to ship overnight to any of the 48 contiguous states, the center's location
in the Washington, D.C. metropolitan area allows for expedited deliveries to
anywhere in the world.

      "GTSI" is a registered service mark of GTSI Corp. All other trademarks and
service marks are proprietary to their respective owners.



                                      -2-
<PAGE>

BUSINESS STRATEGY

      GTSI is committed to, and focused on, the government customer. The
Company's business strategy is to continue to focus on higher-end enterprise
solutions and to broaden its product offerings, while remaining a low-cost,
reliable provider of commodity products. The Company also focuses on bringing
new technologies to government customers by concentrating on the following
elements:

      FOCUS ON THE GOVERNMENT MARKET. Because of its historical focus on the
Government market, GTSI has developed the expertise and established the partner
and customer relationships necessary to be a leader in this market. As a result,
GTSI's marketing and sales force is effective at reaching and servicing the
Government market, which consists of procurement and contracting officers,
information resource managers, CIOs (Chief Information Officers) and Government
IT executives, systems integrators, value-added resellers ("VARs"), prime
contractors and a wide array of end-users. In addition, by focusing on the
Government market, the Company has avoided the significant costs of commercial
retail outlets and the potentially higher credit risk associated with selling
solely or primarily to commercial entities.

      PURSUE GOVERNMENT CONTRACTS. GTSI pursues Government contracts ranging in
size from as small as a few hundred dollars to as large as hundreds of millions
of dollars in sales. The Company holds a wide range of Government contracts,
including multimillion dollar, multiyear contracts with the Department of
Defense ("DoD") and certain civilian agencies, as well as several multiple award
schedules and blanket purchasing agreements ("BPA's") with a variety of DoD and
civilian agencies (generally, "contract vehicles"). GTSI also serves as a
subcontractor providing products and services to companies holding Government
contracts, the two largest of which are supporting Lockheed Martin Corporation
on the NASA Outsourcing Desktop Initiative and Jet Propulsion Laboratory
contracts and DynCorp on the FBI's Trilogy contract. The Company intends to
continue to identify and pursue those contract vehicles that best leverage
GTSI's broad product selection, services, distribution capabilities and partner
relationships.

      FOCUS ON INFORMATION TECHNOLOGY. GTSI focused initially on the rapidly
growing market for microcomputer applications software and expanded successively
into the complementary office automation market segments of peripherals,
microcomputers and networking products, including LANs (local area network) and
WANs (wide area network). In 1996, GTSI began focusing on internet and intranet
products and services and entered into an agreement with Hewlett-Packard to add
its Unix-Based server products. In 1998, GTSI began offering a full range of
professional services to Government agencies. These services include project
management, help desk support, LAN management support, basic hardware support,
continuous training support, asset management, IT planning as well as technical
assessment and evaluation. The Company adds other complementary IT products and
expanded systems integration services as business needs dictate.

      FOCUS ON CUSTOMER SERVICE. In the Company's process orientation and
interaction with its many customers, Company employees focus on providing high
quality customer services associated with the order, delivery, installation and
repair of microcomputer and workstation products. By following a "one person -
one transaction - one time" approach to customer service, the Company's
employees strive to ensure customer satisfaction and thereby increase the
possibilities for future business.

      PROVIDE A CENTRALIZED SOURCE FOR PROCURING IT PRODUCTS AND SERVICES. In
addition to offering a full line of microcomputer hardware, software and
peripheral products as well as the leading brand of workstations, GTSI offers
its customers pre- and post-sale technical support and assistance in the
selection, configuration, installation and maintenance of the products and
systems that GTSI sells. Furthermore, by offering a wide range of microcomputer
and workstation products through a variety of procurement mechanisms, GTSI
offers its customers the convenience, flexibility and cost savings of


                                      -3-
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purchasing from a centralized source. GTSI believes that its convenient
"one-stop shop" for microcomputer and workstation products is an important
factor in its success in the government market.

      MAINTAIN COMPETITIVE PRICING AND IMPROVE OPERATING EFFICIENCIES. The
government market is price-sensitive. GTSI, therefore, focuses both on offering
competitive pricing to its customers and on constantly improving operating
efficiencies.

      ESTABLISH AND MAINTAIN STRONG PARTNER RELATIONSHIPS. To provide a
centralized source of products and solutions for its customers, GTSI maintains
strong relationships with leading hardware, software and service partners. GTSI
offers its partners a wide range of marketing and sales services, which provide
them with access to the millions of end-users constituting the government
market. In addition, the Company substantially insulates its partners from the
procurement regulatory complexities, costs, extensive paperwork and complicated
billing requirements associated with the government market.

THE GOVERNMENT PROCUREMENT PROCESS

      The Company's 2001 revenues were derived primarily from sales directly to
government departments and agencies and to prime contractors reselling to the
government market. The Company achieves these sales primarily through contracts
with the government and through open market sales. Company contracts with the
government include General Services Administration ("GSA") schedule contracts,
BPA and indefinite delivery/indefinite quantity contracts ("IDIQ").

      GSA SCHEDULE CONTRACTS

      In 2001, GTSI held the GSA IT Schedule and Schedule 36 contracts. Products
offered under the IT Schedule contract include workstations, desktops, laptops,
notebooks, servers, laser printers, color printers, scanners, monitors, modems,
hard drives, memory, networking products, facsimile products, internet and
intranet products, video teleconferencing, maintenance, training and services.
GTSI's IT Schedule was to expire on March 31, 2002, however, in late March 2002
the Government formally exercised its first five-year option (there are three
five-year options) to extend the IT Schedule through 2007. Schedule 36 is for
the supply of Hewlett-Packard printer toner cartridges. Schedule 36 expired on
September 30, 2001 and the Company consolidated the product offering from
Schedule 36 onto the IT Schedule contract prior to its expiration.

      The GSA, which is the central procurement agency of the Executive Branch
of the Government, negotiates Schedule contracts. Although Government agencies
are not required to purchase products under GSA Schedule contracts, these
contracts provide all Government agencies, certain international organizations
and authorized prime contractors with an efficient and cost-effective means for
buying commercial products. Government agencies and other authorized purchasers
(collectively, "GSA Schedule Purchasers") may purchase goods under GSA Schedule
contracts at predetermined ceiling prices, terms and conditions. GSA Schedule
Purchasers may place unlimited orders for products under GSA Schedule contracts.
Agencies, however, are instructed to seek lower prices for orders exceeding a
"maximum order" threshold. This threshold is $25,000 per order for classroom
training, $50,000 per order for shrink-wrap software and $500,000 per order for
other software and hardware.

      GSA Schedule contract awards are based on numerous factors, the most
important of which are compliance with applicable Government regulations and the
prices of the products to be sold. Any number of competing partners may be
awarded a GSA Schedule contract for a given product although manufacturers may
enter into exclusive relationships. GSA Schedule contracts require that each
bidder must either be the manufacturer of the product covered by the contract or
furnish evidence of capability to provide a manufacturer's product for the
period of the GSA Schedule contract. Products may be added to


                                      -4-
<PAGE>

a GSA Schedule contract during its term under certain circumstances with the
consent of both the contractor and Government. GSA Schedule contracts include a
GSA administrative fee calculated on the product price. This fee is collected by
the Company and is remitted quarterly to the GSA.

      GTSI's GSA Schedule contracts require the Government to pay for product
shipped under the contracts within 30 days of acceptance by the Government. The
GSA Schedule contracts also permit payment by Government-issued credit cards.
When payment is made by credit card, the Company usually receives payment within
30 days. The Government may require GTSI to accept returns only of incorrectly
shipped product. GTSI's GSA Schedule contracts require GTSI to pass on to the
customers the partner's warranty and to provide for on-site or depot maintenance
at a prepaid fixed fee. GTSI's GSA Schedule contracts also contain price
reduction clauses requiring that GTSI pass on to Government customers certain
reduced prices GTSI may receive from its partners during a contract's term, but
prohibits GTSI from passing on partner price increases for a period of one year.
To mitigate the potential adverse impact of any such price increase, the Company
requires substantially all partners acting as suppliers to GTSI under its GSA
Schedule contracts to provide GTSI with supply and price protection. The GSA
Schedule includes an economic price adjustment clause that permits the Company
to increase contract prices if certain conditions have been satisfied after a
period of one year.

      BLANKET PURCHASE AGREEMENTS

      Historically, the Company has held numerous BPA's with federal agencies. A
BPA is a simplified, but non-mandatory, fixed price, IDIQ contract (the contract
provides no preset delivery schedules or minimum purchase levels) for the
Government to purchase products, usually by establishing charge accounts with
qualified sources. Agencies typically enter into BPA's for similar products with
several companies. BPA's generally include a list of products at established
prices, individual purchase limits for authorized purchasers, and other
pre-negotiated terms and conditions. Purchases under BPA's are often paid for
with Government-issued credit cards.

      GSA-authorized BPA's incorporate many terms and conditions of the GSA
Schedule contracts, and incorporate many products offered on GSA Schedule
contracts, often at lower prices than available on the GSA Schedules. The
Company normally enters into separate agreements with partners to offer reduced
BPA prices to the Government. The BPA sales vehicle allows the Company to focus
specific partner relationships on specific customers.

      FORMAL BIDS

      Many Government purchases of computer products and services are made under
contracts or purchase orders awarded through formal competitive bids and
negotiated procurements. In addition to its GSA Schedule and open market
business, GTSI pursues formal Government bids. Substantially all of these bids
are awarded on a "best value" to the Government basis (which, depending on the
bid, can be a combination of price, technical expertise, past performance on
other Government contracts and other factors). GTSI seeks to use its partner
contacts, purchasing power, distribution strength and procurement expertise to
compete successfully for the business. These major procurements may equal
millions of dollars in total revenues, span many years, and provide a purchasing
vehicle for many agencies. The vast majority of the contracts pursued by GTSI
have been fixed-price (i.e., at the time of initial award, the end-user selling
prices are set for the contract term at a specified level or at specified levels
varying over time) and IDIQ. In some cases, various government agencies levy a
fee on purchases made by departments outside of the agency that awarded the
contract. These fees are collected by the Company and, as under the GSA Schedule
contract, remitted to the respective agency on a contract specified payment
schedule.


                                      -5-
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      GTSI's bids group is responsible for evaluating bid opportunities,
identifying key products or services needed to respond to bids, negotiating
favorable agreements with suppliers and subcontractors, preparing written
responses to the solicitation document, satisfying all mandatory technical
requirements and, in general, successfully managing the proposal effort. GTSI's
competitors for these contracts typically include major systems integrators,
computer manufacturers and a variety of other systems integrators, VARs (value
added resellers) and commercial resellers.

      OPEN MARKET

      Many microcomputer and workstation products may also be sold by GTSI
through open market procurements. These procurements are separate and apart from
GSA Schedules or formal competitive bids and include simplified acquisition
procedures, requests for quotes, invitations for bids and requests for
proposals. The Company is on most Government bid lists relevant to its product
offerings and responds with proposals to hundreds of such bid solicitations each
year. When awarding contracts, the Company's customers often evaluate, in
addition to price, which is typically the most important factor, a number of
other factors, such as the partner's experience, performance record, service,
support and financial strength. Unless purchasing electronically, Government
agencies procuring products not on a schedule or other contract vehicle must
typically publicize their procurements with a value in excess of $25,000 to
allow competitors to submit price quotes. The Company also sells to Government
prime contractors, including systems integrators, typically through open market
procurements and negotiates subcontracts with the prime contractors when either
the volume of business or relationship timeframe dictates the need. As a result
of recent legislative changes, the Government is encouraged to make purchases
under $2,500 by credit card and often without competition.

      STATE AND LOCAL CONTRACTS

      Most purchases in the state government market are made through individual
competitive procurements, although many state governments issue invitations for
bid for statewide computer term contracts. State and local procurements
typically require formal responses and the posting of "bid bonds" or
"performance bonds" to ensure complete and proper service by a prospective
bidder. Each state maintains a separate code of procurement regulations that
must be understood and complied with to market and sell successfully to that
state. GTSI currently maintains several state and local microcomputer contracts,
submits oral and written bids to state and local governments each month and is
on a number of state and local government bid lists.

      GOVERNMENT MARKET CONSIDERATIONS

      A substantial portion of the Company's contracts are fixed-price and IDIQ.
The uncertainties related to future contract performance costs, product life
cycles, quantities to be shipped and delivery dates, among other factors, make
it difficult to predict the future sales and profits, if any, that may result
from such contracts.

      Under applicable Government regulations, GTSI qualified as a "small
business" under several of the contracts and BPAs it held during 2001 by virtue
of it being a non-manufacturing entity with a rolling average over the prior 12
months of 500 or fewer employees at the time of contract award. As a small
business, GTSI enjoyed a number of significant benefits, including being able to
compete for designated small business set-aside contracts; bid pursuant to
preferential small purchase procedures for open market purchases under $100,000
directed to non-manufacturer small businesses; qualify as a small business
subcontractor to prime contractors on contracts over $500,000 in which the prime
contractor must submit to the Government a small business subcontracting plan;
offer Government agencies the advantage of having their purchases from GTSI
count toward fulfilling their internal small purchase goals; and avoid


                                      -6-
<PAGE>

having to establish small business subcontracting plans to compete for certain
large Government contracts.

      GTSI no longer qualifies as a small business for new contract awards.
Although most government contracts entered into before February 1998 will not be
affected by this business size change, the Company cannot predict the effect, if
any, of this change on its operations. GTSI has a number of possible actions
available to it to seek to mitigate an adverse impact to GTSI of the future loss
of its small business status. Such actions include increasing sales through the
large number of Government contracts which are not subject to small purchase
procedures; aggressively implementing GTSI's low-cost, one-stop shop strategy to
economically encourage customers to continue to place orders with GTSI;
expanding its sales to prime contractors qualifying as small or minority-owned
businesses; and increasing its sales to state and other markets not subject to
Government small business regulations. Currently, GTSI cannot quantify the
extent of the effect, if any, on its future results from a loss of its small
business status.

      Noncompliance with Government procurement regulations or contract
provisions could result in termination of Government contracts, substantial
monetary fines or damages, suspension or debarment from doing business with the
Government and civil or criminal liability. During the term of any suspension or
debarment by any Government agency, the contractor could be prohibited from
competing for or being awarded any contract by any Government agency. In
addition, substantially all of the Company's Government contracts are terminable
at any time at the Government's convenience or upon default. Upon termination of
a Government contract for default, the Government may also seek to recover from
the defaulting contractor the increased costs of procuring the specified goods
and services from a different contractor. The effect of any of these possible
Government actions or the adoption of new or modified procurement regulations or
practices could adversely affect the Company.

      The Company has historically experienced and expects to continue to
experience significant seasonal fluctuations in its operations as a result of
Government buying and funding patterns. Although these patterns have
historically led to sales being concentrated in the Company's third and fourth
quarters, the seasonality and the unpredictability of the factors affecting such
seasonality make GTSI's quarterly and yearly financial results difficult to
predict and subject to significant fluctuation.

      The industry in which the Company conducts its business, as well as the
geographic location of the Company's headquarters near the nation's capitol and
the concomitant density of high technology companies headquartered nearby,
results in a limited pool of qualified employees. Although the Company believes
that its compensation and benefits are competitive, such competition and
geography may from time to time adversely affect the Company's ability to
attract and retain a competent and productive workforce.

PRODUCTS, SOLUTIONS AND SERVICES

      GTSI is the leading, dedicated Business-to-Government provider of IT
solutions. Founded in 1983, GTSI has over 19 years of government-focused
experience making it one of the most experienced, stable IT solutions providers
to federal, state and local agencies. GTSI's complete product and solution
offering, technical expertise, logistics strengths, extensive contracts
portfolio, sales knowledge, customer relationships, and proven performance
record make GTSI equally valuable to government customers and technology
partners. A pioneer in government-focused electronic commerce, GTSI also offers
simplified buying through its website, WWW.GTSI.COM. The Company continuously
monitors sales of existing and emerging technologies to ensure that it offers
its customer's state-of-the-art technology products and solutions.


                                      -7-
<PAGE>

      HARDWARE. GTSI has strong strategic relationships with established global
market leaders including Hewlett-Packard, Compaq, Panasonic, IBM, EMC, Xerox,
SONY, Sun Microsystems, Apple, and Cisco. In addition to reselling platform
solutions, peripherals carried by the Company include disk drives, CD-ROM and
DVD drives, printers, monitors, modems and related products. GTSI's networking
products, including LANs, WANs, MANs (metropolitan area network) and PANs
(personal area network), are supplemented by the Company's services, which
include assisting customers in selecting, configuring, installing and
maintaining networks.

      SOFTWARE. The Company remarkets computer software solutions from
substantially every leading Windows-based software publisher, as well as leading
UNIX, Linux and Apple products. The Company's software partners include
Microsoft, Symantec, IBM/Lotus, Art Technology Group ("ATG"), Veritas,
MicroStrategy, Adobe, and Citrix. The Company has subset specialization in web
development and personalization software.

      SOLUTIONS. The Company has 13 technology and solutions teams, each
including technical, business development and management professionals dedicated
to selling and supporting systems and solutions in a specific technology area
(such as enterprise storage, mobile and wireless, and web portal and internet
technology) or for a particular partner product line (such as Sun Microsystems,
Compaq, HP and Microsoft).

MARKETING AND SALES

      The Company's marketing personnel develop and manage the Company's
marketing, branding and positioning activities on a worldwide basis. These
activities communicate the Company's capabilities and value proposition in an
effort to acquire new customers and improve retention of existing customers.
Most marketing activities are funded by the Company's partners. Each marketing
activity is integrated to provide comprehensive awareness, brand consistency and
maximize return on investment.

      The Company's marketing activities include sponsorship of major trade
shows and customer events, advertising in government-focused publications and
broadcast media, direct marketing of catalogs and brochures, management of a
commerce web site located at gtsi.com, e-mail marketing, outbound telemarketing,
field sales campaigns and various sales-related incentive programs.

      GTSI recognizes that the size and diversity of the government market made
it imperative to identify and understand the needs of customers. Through years
of intensive effort, GTSI has compiled and continuously updates one of the most
comprehensive databases of federal, state and local government IT
decision-makers. The Company conducts frequent customer surveys to assess the
opinions and interests of our customer base. The Company utilizes the Siebel
Customer Relationship Management application for managing its customer database
and for maintaining customer relationship information. This database contains an
extensive list of agency procurement and contracting officers, information
resource managers, senior policy makers, technology influencers, end-users,
systems integrators, VARs and prime contractors. GTSI uses this database, among
other things, for targeting its marketing efforts and data-mining for various
market research purposes.





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PARTNER RELATIONSHIPS

      To offer its customers a centralized source for their microcomputer and
workstation needs, the Company establishes and maintains relationships with key
partners and offers them a number of profitable opportunities to expand their
sales to the government market, including:


      o     Access to the government market through a significant number of
            diverse contract vehicles;

      o     Substantial relief from the cost of compliance with procurement
            regulations involved in selling directly to the government market;

      o     Lower operating costs related to reduction or elimination of selling
            and marketing programs and elimination of non-commercial billing and
            collection costs related to the government market; and

      o     Participation in value-added services, including numerous
            government-specific marketing programs and end-user technical
            support.

      The terms of the Company's agreements with its partners vary widely, but
typically permit the Company to purchase product for resale to at least the
government market. Virtually none of the Company's partner agreements requires
the Company to purchase any specified quantities of product. The Company
typically requires partners acting as suppliers to GTSI under its term
Government contracts to provide GTSI with supply and price protection for the
duration of such contracts. Other than supply agreements under term Government
contracts, the Company's partner agreements are typically terminable by the
partner on short notice, at will or immediately upon default by GTSI and may
contain limitations on partner liability. These partner agreements also
generally permit GTSI to return previous product purchases at no charge within
certain time limits for a restocking fee or in exchange for other products of
such partner. The Company also purchases some products from independent
distributors.

      Partners provide the Company with various forms of marketing and sales
assistance, including sales incentives and market development funds. Partners
provide sell-through and other sales incentives in connection with certain
product promotions. Additionally, key partners participate with the Company in
cooperative advertising and sales events and typically provide funding which
partially offsets the costs of such efforts. A reduction in or discontinuance of
any of these incentives or significant delays in receiving reimbursements could
have a material adverse effect on the Company. The Company must continue to
obtain products at competitive prices from leading partners to provide a
centralized source of price-competitive products for its customers and to be
awarded government contracts. Although almost all of GTSI's partners currently
do not have all of their own computer products on a GSA Schedule contract, one
or more may elect to apply for its own GSA Schedule contract and may do so at
lower end-user selling prices than those GTSI currently offers or could
profitably offer. GTSI believes its relationships with its key partners to be
good. The Company, however, could be adversely affected if one or more key
partners determined to sell directly to the Government (especially if at
significantly lower prices than GTSI), to sell their products to GTSI's
competitors on more favorable terms than to GTSI, to allow additional resellers
to represent their products on a GSA Schedule contract, to restrict or terminate
GTSI's rights to sell their products or to restrict their products from being
carried on a GSA Schedule contract.




                                      -9-
<PAGE>

CUSTOMERS

      The Company's customers are primarily federal, state and local government
agencies and prime contractors to the Government, including systems integrators.
In 2001, the Company sold products or services to thousands of different
customers, including to most agencies and major departments of the Government,
to many state governments and to hundreds of prime contractors. Although no
single government customer (agency) accounted for greater than 5% of the
Company's 2001 sales, aggregate 2001 sales to the Government's Departments of
the Army, Navy and Air Force were 17.2%, 9.6% and 20.1%, respectively, of GTSI's
2001 sales.

      The Company's sales are highly dependent on the Government's demand for
microcomputer and workstation products. Although the Company does not believe
that the loss of any single customer would have a materially adverse effect on
it, a material decline in its overall sales to the Government as a whole or to
certain key agencies thereof could have such an effect. Reductions in DoD or
other Government outlays could occur and may adversely affect the Company.
Furthermore, legislation is periodically introduced in Congress that, if
enacted, may change the Government's current procurement processes. GTSI cannot
predict whether any such legislative or regulatory proposals will be adopted or,
if adopted, the impact upon its operating results. Changes in the structure,
composition or buying patterns of the Government could affect the Company's
future operating results.

BACKLOG

      At February 28, 2002 and December 31, 2001, the Company's total backlog of
orders was approximately $99.6 million and $76.6 million, respectively, as
compared with approximately $54.8 million and $71.0 million at February 28, 2001
and December 31, 2000, respectively. Total backlog consists of written purchase
orders received and accepted by GTSI but not yet recognized as revenue. Backlog
fluctuates significantly from quarter to quarter because of the seasonality of
Government ordering patterns and the periodic inventory shortages resulting from
constrained products.

SERVICE AND WARRANTY

      For certain products that it sells, GTSI provides post-sale field service
through subcontractors and to a limited extent through the Company's in-house
technical staff. The Company typically warrants products sold to the Government
and certain other customers for the same term as the manufacturer's warranty
period although many IDIQ contracts include provisions for warranties that
extend beyond those offered by the manufacturer. The Company also sells extended
warranties on many of the government contracts. Product repaired while under the
manufacturer's warranty is at the manufacturer's expense; product repaired after
expiration of the manufacturer's and GTSI's warranty, if longer, is at the
customer's expense. GTSI outsources to third parties a significant portion of
its extended warranty obligations.

COMPETITION

      The government microcomputer and workstation market is very competitive
and subject to rapid change. GTSI competes with certain leading microcomputer or
workstation hardware manufacturers, which sell to the government market directly
and through representatives other than the Company, and with a number of systems
integrators, government and commercial resellers and commercial computer retail
chains, distributors and VARs (including companies qualifying as minority-owned,
disadvantaged or small businesses under applicable Government regulations)
seeking to enter or expand their presence in the government market. In 2001,
certain manufacturers selling directly to the Government have gained


                                      -10-
<PAGE>

market share in the GSA Schedule market. A number of GTSI's existing and
potential competitors have greater financial, sales, marketing and technological
resources than the Company.

      The Company believes that the principal competitive factors in the
government microcomputer market are price, expertise in the applicable
government procurement processes, breadth of product line, customer and partner
relationships, financial strength, the technical and other skills of marketing
and sales personnel, distribution capability, available inventory and customer
service and support. The Company believes that the principal competitive factors
in the government workstation market are essentially the same, except that
technical expertise and customer service and support are often more important
and breadth of product line and available inventory are often less important.
The Company believes that it competes favorably on each of these factors,
although to a lesser degree with respect to technical expertise. GTSI also
believes that it has a competitive advantage over certain of its competitors
because of its procurement expertise and avoidance of costly overhead related to
selling into multiple market segments and maintaining numerous retail outlets.
In addition, the Company's ability to offer a centralized source for purchases
of a wide variety of leading computer products from numerous manufacturers often
provides a competitive advantage over manufacturers which sell only their own
line of products directly to the government.

EMPLOYEES

      At March 4, 2002, the Company had 608 employees, including 377 in sales,
marketing and contract management; 164 in operations; and 67 in executive,
finance, information technology, human resources and legal. None of the
Company's employees is represented by a labor union, and the Company has
experienced no labor-related work stoppages.

ITEM 2.    PROPERTIES.

      The Company's executive offices are located in an approximately 100,500
square-foot facility in Chantilly, Virginia under a lease expiring in November
2008, with one five-year option. GTSI's warehousing and distribution operations
are also located in Chantilly, Virginia in a separate 200,000 square-foot
facility under a lease expiring in December 2006. The Company also has a branch
sales office occupying 139 square meters in Mannheim, Germany. The Company also
subleases a 10,000 square-foot distribution center in Chattanooga, Tennessee
under a sublease, which expires on March 31, 2002, with two one-year options.

ITEM 3.    LEGAL PROCEEDINGS.

      The Company is occasionally a defendant in litigation incidental to its
business. The Company believes that the litigation currently pending against it
will not individually or in the aggregate have a material adverse effect on the
Company's financial condition or results of operations.


ITEM 4.    SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.

                                  Inapplicable.




                                      -11-
<PAGE>

                                     PART II

ITEM 5.    MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
           MATTERS.

      STOCK DATA. The Company's common stock trades on The Nasdaq Stock Market
under the symbol "GTSI." As of December 31, 2001, there were 199 record holders
of the Company's common stock. As of March 15, 2002, there were 236 record
holders and approximately 3,200 beneficial holders of the Company's common
stock. The following table sets forth, for the periods indicated, the high and
low closing prices for the Company's common stock based on information updated
by the Nasdaq Stock Market.

                         ----------------------- ------------------------

                                   2001                   2000
             ------------ ----------- ---------- ----------- ------------

               Quarter       High        Low        High        Low

             ------------ ----------- ---------- ----------- ------------

               First         6.25        3.34       6.75        2.75

             ------------ ----------- ---------- ----------- ------------

               Second        7.06        5.09       3.75        2.63

             ------------ ----------- ---------- ----------- ------------

               Third         7.10        5.70       5.13        2.63

             ------------ ----------- ---------- ----------- ------------

               Fourth        9.47        6.00       4.13        2.75

             ------------ ----------- ---------- ----------- ------------


      The Company has never paid cash dividends. It is the current policy of the
Company to retain earnings to finance the growth and development of its
business, and, therefore, the Company does not anticipate paying cash dividends
on its common stock in the foreseeable future. Furthermore, certain financial
covenants in the Company's bank credit agreement restrict the Company's ability
to pay cash dividends.

      ADDITIONAL INVESTOR RELATIONS INFORMATION. All of the Company's current
required filings with the Securities and Exchange Commission, as well as press
releases and other investor relations information, may be found at
HTTP://WWW.GTSI.COM on the internet's world wide web. For those without internet
access, such information may be obtained without charge by request to the
Company addressed to: Investor Relations, GTSI Corp., 3901 Stonecroft Boulevard,
Chantilly, Virginia 20151-1010.

      TRANSFER AGENT. The Company's transfer agent is First Union National Bank,
Shareholder Services Group, 1525 West W.T. Harris Blvd., 3C3, Charlotte, NC
28288-1153; telephone 1-800-829-8432.

      ANNUAL MEETING. The Annual Meeting of Stockholders is scheduled to be held
at 9:00 a.m. on Thursday, May 9, 2002, at the Company's headquarters located at
3901 Stonecroft Boulevard in Chantilly, Virginia.

ITEM 6.    SELECTED FINANCIAL DATA.

      The selected financial data for the three years ended December 31, 2001,
2000, and 1999 are derived from, and are qualified in their entirety by
reference to, the Company's audited consolidated Financial Statements and Notes
thereto included elsewhere in this Form 10-K. The December 31, 2001,


                                      -12-
<PAGE>

2000, and 1999, Consolidated Financial Statements of the Company have been
audited by Arthur Andersen LLP, independent accountants, as indicated in their
report, which is also included elsewhere in this Form 10-K. The selected
financial data for all other periods are derived from the Company's audited
consolidated financial statements, which are not included in this Form 10-K.

<TABLE>
<CAPTION>

(In thousands, except per share amounts)                           Twelve months ended December 31,
                                                     2001          2000          1999          1998         1997
                                                 -------------- -------------- ------------ ------------ ------------
<S>                                               <C>            <C>           <C>          <C>          <C>
INCOME STATEMENT DATA:
Sales                                             $  783,496     $  677,755    $  660,570   $  593,571   $  486,377
Cost of sales                                        718,370        617,622       610,463      541,934      450,454
                                                 -------------- -------------- ------------ ------------ ------------
Gross margin                                          65,126         60,133        50,107       51,637       35,923
                                                 -------------- -------------- ------------ ------------ ------------
Operating Expense:
     Selling, general and administrative              57,002         49,382        44,931       44,660       36,940
     Depreciation and  amortization                    4,407          3,934         3,584        3,661        3,539
                                                 -------------- -------------- ------------ ------------ ------------
Total operating expenses                              61,409         53,316        48,515       48,321       40,479
                                                 -------------- -------------- ------------ ------------ ------------
Income (loss) from operations                          3,717          6,817         1,592        3,316       (4,556)
Interest (income) expense, net                        (3,707)        (2,259)       (1,090)         977          548
                                                 -------------- -------------- ------------ ------------ ------------
Income (loss) before taxes                             7,424          9,076         2,682        2,339       (5,104)
Income tax provision (benefit)                         2,938         (2,008)            -            -            -
                                                 -------------- -------------- ------------ ------------ ------------
Net income (loss) before cumulative effect of
SAB No. 101 adoption                                   4,486         11,084         2,682        2,339       (5,104)
Cumulative effect of SAB 101 adoption                      -            467             -            -            -
                                                 -------------- -------------- ------------ ------------ ------------
Net income (loss)                                 $    4,486     $   10,617    $    2,682   $    2,339   $   (5,104)
                                                 ============== ============== ============ ============ ============
Net income per common share
     Basic:
        Basic net income (loss) per share
        before cumulative effect of
        SAB No. 101 adoption                      $     0.55     $     1.23    $     0.29   $     0.27   $    (0.76)
        Cumulative effect per share of
        SAB No. 101 adoption                               -          (0.05)            -            -            -
                                                 -------------- -------------- ------------ ------------ ------------
        Basic net income (loss) per share         $     0.55     $     1.18    $     0.29   $     0.27   $    (0.76)
                                                 ============== ============== ============ ============ ============
    Diluted:
          Diluted net income (loss) per share
          before cumulative effect of
          SAB No. 101 adoption                    $     0.50     $     1.20    $     0.29   $     0.26   $    (0.76)
          Cumulative effect per share of
          SAB No. 101 adoption                             -          (0.05)            -            -            -
                                                 -------------- -------------- ------------ ------------ ------------
          Diluted net income (loss) per share     $     0.50     $     1.15    $     0.29   $     0.26   $    (0.76)
                                                 ============== ============== ============ ============ ============

Weighted average common shares
outstanding
     Basic                                             8,144          9,021         9,271        8,700        6,733
                                                 ============== ============== ============ ============ ============
     Diluted                                           9,049          9,225         9,314        8,909        6,733
                                                 ============== ============== ============ ============ ============
</TABLE>


                                      -13-
<PAGE>
<TABLE>
<CAPTION>

(In thousands)                                                                  December 31,
                                                     2001           2000          1999         1998          1997
                                                 -------------- -------------- ------------ ------------ ------------
<S>                                               <C>            <C>           <C>          <C>          <C>
BALANCE SHEET DATA:
Working capital                                   $   34,968     $   43,659    $   44,350   $   42,206   $   30,860
Total assets                                         252,452        227,065       186,333      161,090      137,464
Notes payable to banks                                20,186         11,925         9,479       14,889       21,569
Total liabilities                                    189,387        168,585       133,137      105,766       97,590
Stockholders' equity                                  63,065         58,480        53,196       55,324       39,874
</TABLE>


ITEM 7.    MANAGEMENT'S DISCUSSION AND ANALYSIS OF
           FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

      The following discussion and analysis is provided to increase the
understanding of, and should be read in conjunction with, the Consolidated
Financial Statements and Notes. Historical results and percentage relationships
among any amounts in the Consolidated Financial Statements are not necessarily
indicative of trends in operating results for any future period.

OVERVIEW

      GTSI is a recognized information technology (IT) solutions leader,
providing products and services to federal, state, and local government
customers worldwide. For nearly two decades GTSI has served the public sector by
teaming up with global IT leaders such as Hewlett - Packard, Panasonic,
Microsoft, IBM, Sun and Cisco. GTSI seeks to deliver maximum value through its
broad range of products, extensive contract portfolio, and ISO 9000-registered
logistics. Through its Technology Teams, GTSI delivers "best of breed" products
and services to help its customers realize strong value for their IT
investments. The Technology Teams consist of technical experts that analyze,
design, install and support a wide range of integrated IT solutions in such
areas as high performance computing, advanced networking, mobile and wireless
solutions, web portals, high availability storage and information assurance.
GTSI continues to broaden its leadership in electronic commerce and procurement
through its federally focused website, gtsi.com that provides customized
shopping zones to meet customers' personalized needs. GTSI is headquartered in
Northern Virginia, outside of Washington, D.C.

      Changes in sales throughout the Company's history have been attributable
to increased or decreased unit sales, to expansion of the Company's product
offerings (e.g., peripherals, microcomputers and networking, Unix
servers/workstation and internet products), to the addition/removal of vendors
(e.g., the addition of Cisco, EMC, Tachyon, RIM, and the removal of Nexar and
Everex), and to the addition or expiration of sales contract vehicles (e.g., the
addition of the SEWP III, ADMC, IT2 and the MMAD Contracts, and the expiration
of the SEWP II, PC-3, SII PC/LAN, and Portables 3 Contracts). The Company's
financial results have fluctuated seasonally, and may continue to do so in the
future, because of the Government's buying patterns which have historically
favorably affected the last two calendar quarters and adversely affected the
first two calendar quarters.

      The Company's business strategy is to continue to focus on higher-end
product-based solutions, to broaden its product offering, and to remain a
low-cost, and high-reliability provider of commodity products. The Company also
focuses on bringing new technologies to government customers.



RESULTS OF OPERATIONS


                                      -14-
<PAGE>

      The following table sets forth, for the years indicated, the percentages
that selected items within the income statement bear to sales, and the annual
percentage changes in the dollar amounts of such items.

<TABLE>
<CAPTION>

                                                            Percentage of Sales                 Percentage Change
                                                   --------------------------------------  ----------------------------
                                                         Years Ended December 31,           Years Ended December 31,
                                                   --------------------------------------  ----------------------------
                                                        2001        2000        1999       2000 to 2001   1999 to 2000
                                                   ------------ ------------ ------------  ------------- --------------
<S>                                                      <C>          <C>         <C>              <C>            <C>
INCOME STATEMENT DATA:
Sales                                                    100.0%       100.0%      100.0%           15.6%          2.6%
Cost of sales                                             91.7%        91.1%       92.4%           16.3%          1.2%
                                                   ------------ ------------ ------------
Gross margin                                               8.3%         8.9%        7.6%            8.3%         20.0%
Operating expense:
     Selling, general and administrative                   7.2%         7.3%        6.8%           15.4%          9.9%
     Depreciation and amortization                         0.6%         0.6%        0.5%           12.0%          9.8%
                                                   ------------ ------------ ------------
Total operating expenses                                   7.8%         7.9%        7.3%           15.2%          9.9%
                                                   ------------ ------------ ------------
Income from operations                                     0.5%         1.0%        0.3%          -45.5%        328.2%
Interest (income) expense, net                            -0.5%        -0.3%       -0.2%           64.1%        107.2%
                                                   ------------ ------------ ------------
Income before taxes                                        1.0%         1.3%        0.5%          -18.2%        238.4%
Income tax provision (benefit)                             0.4%        -0.3%        0.0%         -246.3%       -100.0%
                                                   ------------ ------------ ------------
Net income before
cumulative effect of SAB 101 adoption                      0.6%         1.6%        0.5%          -59.5%        313.3%
Cumulative effect of SAB 101 adoption                      0.0%         0.0%        0.0%         -100.0%        100.0%
                                                   ------------ ------------ ------------
Net income                                                 0.6%         1.6%        0.5%          -57.7%        295.9%
                                                   ============ ============ ============
</TABLE>

         The following tables set forth, for the periods indicated, the
approximate sales by product, by contract vehicle and by vendor, along with
related percentages of total sales.

<TABLE>
<CAPTION>

Product Category
                         ---------------------------   ----------------------------  ----------------------------
(Dollars in millions)               2001                          2000                          1999
                         ---------------------------   ----------------------------  ----------------------------

<S>                           <C>             <C>            <C>             <C>           <C>             <C>
Hardware                      $570.3          72.8%          $507.0          74.8%         $514.4          77.9%
Software                       158.3          20.2%           131.5          19.4%          123.7          18.7%
Services                        54.9           7.0%            39.3           5.8%           22.5           3.4%
                         ------------   ------------   -------------  -------------  -------------  -------------
Total                         $783.5           100%          $677.8           100%         $660.6           100%
                         ============   ============   =============  =============  =============  =============

</TABLE>



                                      -15-
<PAGE>
<TABLE>
<CAPTION>

Contract Vehicles
                                 ----------------------------  ----------------------------  ----------------------------
(Dollars in millions)                       2001                          2000                          1999
                                 ----------------------------  ----------------------------  ----------------------------

<S>                                    <C>             <C>           <C>             <C>           <C>             <C>
GSA Schedules                          $238.4          30.4%         $230.6          34.0%         $261.6          39.6%
IDIQ                                    355.5          45.4%          327.1          48.2%          307.3          46.5%
Open Market                             133.3          17.0%           79.7          11.8%           76.8          11.6%
Other Contracts                          56.3           7.2%           40.4           6.0%           14.9           2.3%
                                 -------------  -------------  -------------  -------------  -------------   ------------
Total                                  $783.5           100%         $677.8           100%         $660.6           100%
                                 =============  =============  =============  =============  =============   ============

<CAPTION>

Vendor Category
                       ---------------------------   ----------------------------  ----------------------------
(Dollars in millions)               2001                          2000                          1999
                       ---------------------------   ----------------------------  ----------------------------

<S>                         <C>             <C>            <C>             <C>          <C>              <C>
Hewlett-Packard             $135.0          17.2%          $160.0          23.6%        $166.40          25.2%
Panasonic                     92.4          11.8%            93.3          13.7%           68.5          10.4%
Microsoft                     88.0          11.2%            63.7           9.4%           75.8          11.5%
Cisco                         80.4          10.3%            37.2           5.5%           34.0           5.1%
Sun                           63.0           8.0%            53.4           7.9%           47.5           7.2%
Compaq                        53.5           6.8%            41.3           6.1%           51.6           7.8%
EMC2                          47.5           6.1%             4.0           0.6%            0.1           0.0%
Dell                          31.9           4.1%             6.5           1.0%           11.3           1.7%
IBM                           20.7           2.6%            18.4           2.7%            9.2           1.4%
Other                        171.1          21.8%           200.0          29.5%          196.2          29.7%
                       ------------   ------------   -------------  -------------  -------------  -------------
Total                       $783.5           100%          $677.8           100%         $660.6           100%
                       ============   ============   =============  =============  =============  =============
</TABLE>


2001 COMPARED WITH 2000

      SALES. Sales consist of revenues from products delivered and services
rendered, net of allowances for customer returns and credits. Net sales in 2001
increased $105.7 million, or 15.6% over 2000. Sales increased in all product
categories and contract vehicles. The largest increase was an approximately
$53.6 million, or 67.3%, increase in sales sold under open market conditions.
Indefinite delivery/indefinite quantity ("IDIQ") contracts increased $28.4
million, or 8.7%. The Other Contract sales category showed an increase of $15.9
million, or 39.4% and sales under the Company's GSA schedules increased $7.8
million, or 3.4%.

      Sales sold under Open Market contracts were up $53.6 million due to
several large orders with Civilian and State and Local customers and prime
contractors and the wider product breadth offered under open market conditions.

      IDIQ contract sales were up $28.7 million led by increased sales on the
Scientific and Engineering Workstation Procurement ("SEWP") contract due to the
wide product offering and the ability of all Government agencies to purchase
under this contract. Sales on the Army PC-3 and Portable 3 vehicles were down
$46.1 million combined year over year due to the expiration of the Portable 3
vehicle and the Army switching its buying patterns to the new Army Desktop and
Mobile Commuting ("ADMC") vehicle which the Company treats as a GSA schedule
type contract.


                                      -16-
<PAGE>

      Sales on Other Contracts were up $15.9 million led by strong sales to new
prime contractor of $29.7 million offset by decreased sales in the Company's
Panasonic distribution business of $11.0 million.

      The increase of $7.7 million in the Company's GSA schedules is due to
sales on the newly awarded Army ADMC BPA and Federal Reserve Bank BPA's. Net
sales directly off the GSA Schedule fell $17.6 million due to less reliance on
the GSA schedule as a result of a broader contract base which gave the Company
and its customers greater flexibility.

      Total booked backlog at December 31, 2001, was approximately $76.6 million
compared to $71.0 million at December 31, 2000. Total booked backlog was $99.6
million at February 28, 2002, compared to $54.8 million at February 28, 2001.
Total booked backlog consists of written purchase orders received and accepted
by GTSI but not yet recognized as revenue. Backlog fluctuates significantly from
quarter to quarter because of the seasonality of Government ordering patterns
and the periodic inventory shortages resulting from constrained products.

      GROSS MARGIN. Gross margin increased $5.0 million, or 8.3%, to $65.1
million from $60.1 million in 2000. Gross margin as a percentage of sales
decreased to 8.3% in 2001, as compared to a gross margin of 8.9% in 2000. Gross
margin as a percentage of sales was lower in 2001 versus 2000 due to a shift
from higher margin customer-specific IDIQ contracts to lower margin GSA contract
vehicles, government wide acquisition contracts ("GWACs"), and other lower
margin contracts. Margins were also affected by a shift in contract vehicles
from sole-source and dual award IDIQ vehicles to vehicles where multiple vendors
are on contract, increasing competition. Warranty administration, inventory
management, and freight costs as a percentage of sales were substantially
unchanged for the year ending December 31, 2001, compared with the previous
year.

      OPERATING EXPENSES. Total operating expenses for 2001 increased $8.1
million, or 15.2%, to $61.4 million from $53.3 million in 2000, however they
decreased as a percentage of sales to 7.8% from 7.9%. This increase in operating
expense primarily reflects the Company's implementation of its plan to hire
additional sales personnel intended to achieve increased sales in 2001 and
beyond.

      INTEREST INCOME. Net interest income is the amount of interest income and
prompt payment discounts partially offset by interest expense on borrowings. Net
interest income increased by $1.4 million, from $2.3 million to $3.7 million, or
64.1%, in 2001 compared to 2000. Interest income increased by $1.3 million and
interest expense decreased $153,000 over 2000. The increase in interest income
is primarily due to a $1.6 million increase in interest income from lease
receivables partially offset by a $280,000 decrease in other interest income.

      INCOME TAXES. The Company's effective tax rate in 2001 was 39.6% resulting
in a tax provision of $2.9 million in 2001. The Company anticipates that its
ongoing effective tax rate will be approximately 40%.

2000 COMPARED WITH 1999

      SALES. Sales consist of revenues from product delivered and services
rendered, net of allowances for customer returns and credits. Net sales in 2000
increased $17.2 million, or 2.6% over 1999. The primary reason for the increase
was an approximately $19.8 million, or 6.4%, increase in sales under the
Company's IDIQ contracts and $25.5 million, or 171.1%, increase in Other
Contract sales. Increased sales in the IDIQ and Other Contract sales categories
were partially offset by lower sales under the Company's GSA schedules of
approximately $31.0 million, or 11.9%.


                                      -17-
<PAGE>

      Sales on Other Contracts were up $25.5 million led by strong sales to a
new prime contractor of $12.3 million and increased sales in the Company's
Panasonic distribution business, up $6.7 million. Miscellaneous state contracts
and the Tennessee State Sun contract were up a combined $3.7 million and the
Immigration and Naturalization vehicle was up $1.6 million.

      IDIQ contract sales were up $19.8 million partially as a result of
increased sales on the combined SEWP contract vehicles of $49.6 million. The
increase in SEWP contract sales can be attributed to a wide product offering on
this vehicle and the ability of all Government agencies to purchase off of this
contract. Ruggedized Portables was another vehicle that experienced increased
sales, rising $4.3 million from 1999, as the contract did not begin until the
third quarter of 1999. Sales on the Army Portable 2 and Portable 3 vehicles were
up a net $2.8 million year over year. These increases were partially offset by a
decrease in the PC 2 and PC 3 contract vehicles and the Stamis contract of $15.4
million and $13.1 million, respectively, from the prior year as the Army shifted
spending to non-IT priorities. The State Department contract vehicle was $3.2
lower than last year due to the State Department's lower operating budget and
IC4I was down $2.9 million as this contract vehicle expired in late 1999.

      The decline in sales under the Company's GSA Schedules is due to lower
sales on the GSA Schedule B/C of $25.8 million. Sales on the GTSI-PA vehicle
decreased $11.0 million as large one-time orders from several customers were
received in 1999. Sales were also lower on the TDA-Bridge contract by $22.1
million due to the cancellation of the IRS contract.

      During the fourth quarter of 2000, the Company adopted the provisions of
the Securities and Exchange Commission's Staff Accounting Bulletin ("SAB") No.
101, "Revenue Recognition in Financial Statements," retroactive to January 1,
2000. The impact of adoption of SAB No. 101 is generally to defer the
recognition of sales from two to seven days as compared to the Company's
previous revenue recognition policy. The impact of adoption of SAB No. 101 on
the year 2000 was to reduce revenues by $2.5 million and decrease gross margin
by $358,000. The Company implemented the guidance set forth in SAB No. 101 by
recording a charge of $467,000 for the cumulative effect of adoption on January
1, 2000.

      Total booked backlog at December 31, 2000 was approximately $71.0 million
compared to $54.9 million at December 31, 1999. Total booked backlog was $54.8
million at February 28, 2001, compared to $55.0 million at February 29, 2000.
Total booked backlog consists of written purchase orders received and accepted
by GTSI but not yet recognized as revenue. Backlog fluctuates significantly from
quarter to quarter because of the seasonality of Government ordering patterns
and the periodic inventory shortages resulting from constrained products.

      GROSS MARGIN. Gross margin increased $10.0 million, or 20.0%, to $60.1
million from $50.1 million in 1999. Gross margin as a percentage of sales
increased to 8.9% in 2000, as compared to a gross margin of 7.6% in 1999. The
increase in gross margin percentage is due to better contract margins, more
effective inventory management and better warranty experience. A favorable
geographical mix of contracts, which lowered freight costs, also helped gross
margin.

      Sales contract margins were higher in 2000 versus 1999 due to a shift from
lower margin GSA contract vehicles to higher margin IDIQ contract vehicles and
the maturation of IDIQ contract vehicles, for example the PC3 and Portables 3
contracts which were awarded in 1999. More effective warranty administration,
inventory management, and lower freight costs contributed to improved margins.
Maintenance costs were $1.8 million lower and freight costs were $2.1 million
lower than in 1999. Freight costs decreased from 1.2% of sales in 1999 to 0.86%
of sales in 2000. Inventory management costs, net of product liquidations, were
$1.5 million lower than last year. Cumulatively, these costs were $6.6 million
dollars lower than last year.


                                      -18-
<PAGE>

      OPERATING EXPENSES. Total operating expenses for 2000 increased $4.8
million, or 9.9%, to $53.3 million from $48.5 million in 1999, and increased to
7.9% from 7.3% as a percentage of sales. Total personnel costs and
infrastructure costs increased by $4.1 million, or 8.4%, due primarily to
increased personnel costs to support increased emphasis on customer relationship
selling. Other factors contributing to the increase in operating expenses
include increased legal costs of $316,000 to defend various contract awards and
protests and $470,000 in increased bad debt allowance over 1999.

      INTEREST INCOME. Net interest income is the amount of interest income and
prompt payment discounts partially offset by interest expense on borrowings. Net
interest income increased by $1.2 million, from $1.1 million to $2.3 million, or
107.2%, in 2000 compared to 1999. Interest income increased by $1.9 million, but
was partially offset by an increase in interest expense of $708,000 over 1999.
The increase in interest income is primarily due to a greater utilization of
cash discounts earned on prompt payments of vendor invoices.

      INCOME TAXES. The Company's effective tax rate in 2000 was favorably
affected by the recognition of its previously reserved tax assets, which
resulted in a $2.0 million income tax benefit in the fourth quarter and full
year 2000. The Company anticipates that its ongoing effective tax rate will be
approximately 39%.

CRITICAL ACCOUNTING POLICIES

      We have included below our policies, which are both important to our
financial condition and operating results and require management's most
difficult, subjective and complex judgments in determining the underlying
estimates and assumptions. These estimates and assumptions affect the reported
amounts of assets and liabilities and disclosure of contingent assets and
liabilities at the date of the consolidated financial statements and the
reported amounts of revenue and expenses during the reporting period. Actual
results could differ from those estimates, as they require assumptions that are
inherently uncertain.

      REVENUE RECOGNITION. We recognize revenue from hardware product sales when
the title to the products sold passes to the customer, with provisions
established for estimated product returns. Based on our standard shipping terms,
title generally passes upon the customer's receipt of the products. We recognize
revenues under sales type lease arrangements in accordance with the provisions
of Statement of Financial Accounting Standards No. 13, "Accounting for Leases."
We recognize revenue from software products in accordance with the provisions of
American Institute of Certified Public Accountants Statement of Position 97-2,
"Software Revenue Recognition." Revenue from software product sales is
recognized when persuasive evidence of an arrangement exists, the software has
been delivered, the fee is fixed or determinable and collection is probable. We
recognize net revenues from sales of third party software maintenance contracts
at the time of the sale.

      ALLOWANCE FOR DOUBTFUL ACCOUNTS. We continuously monitor collections and
payments from our customers and maintain an allowance for doubtful accounts
based upon our historical experiences and any specific customer collection
issues that we have identified. While such losses have historically been within
our expectations and the provisions established, we cannot guarantee that we
will continue to experience the same loss rates that we have in the past.

      SALES OF LEASE RECEIVABLES. We periodically sell lease receivables to
unrelated financing companies. We account for our sales of lease receivables in
accordance with SFAS No. 140 "Accounting for Transfers and Servicing of
Financial Assets and Extinguishments of Liabilities - a Replacement of FASB
Statement No. 125." In accordance with the criteria set forth in SFAS No. 140,
lease receivables


                                      -19-
<PAGE>

amounting to $39.8 million and $6.7 million, in 2001 and 2000 respectively, were
accounted for as sales and, as a result, the related receivables have been
excluded from the accompanying balance sheets.

      INVENTORIES. We value our inventory at the lower of average cost or market
value of the inventory. Whenever possible, we try to order inventory only as
needed. However, we do maintain inventory related to certain products or
vendors. We regularly review inventory quantities on hand and record a provision
for excess and obsolete inventory based on assumptions about future demand and
market conditions. Our estimates of future product demand may prove to be
inaccurate, in which case we may have understated or overstated the provision
required for excess or obsolete inventory. In the future, if our inventory is
determined to be overvalued, we will be required to recognize such costs in our
cost of goods sold at the time of such determination. Therefore, although we
make every effort to ensure the accuracy of our forecasts of future product
demand, any significant unanticipated changes in demand or technological
developments could have a significant impact on the value of our inventory and
our reported operating results.

      LONG-LIVED ASSETS. Long-lived assets, consisting primarily of property and
equipment and capitalized software, are currently reviewed for impairment
whenever events or changes in circumstances indicate that the carrying amount
should be addressed pursuant to Statement of Financial Accounting Standards No.
121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to be Disposed Of." We determine impairment by comparing the carrying
value of these long-lived assets to the estimated undiscounted future cash flows
expected to result from the use of these assets and their eventual disposition.
The cash flow projection used to make this assessment is consistent with the
cash flow projections we use internally to assist us in making key decisions. In
the event we determine that an impairment exists, a loss would be recognized
based on the amount by which the carrying value exceeds the fair value of the
assets, which is generally determined by using quoted market prices or valuation
techniques such as the discounted present value of expected future cash flows,
appraisals, or other pricing models as appropriate.

      WARRANTIES. We offer warranties on sales under certain products specific
to the terms of the customer agreements. Our standard warranties require us to
repair or replace defective products reported to us during such warranty period
at no cost to the customer. We record an estimate for warranty related costs
based on our actual historical return rates and repair costs at the time of
sale. While our warranty costs have historically been within our expectations
and the provisions established, we cannot guarantee that we will continue to
experience the same warranty return rates or repair costs that we have in the
past. A significant increase in product return rates, or a significant increase
in the costs to repair products sold, could have a material adverse impact on
our operating results for the period or periods in which such events occur.


NEW ACCOUNTING PRONOUNCEMENTS

      In June 2001, the Financial Accounting Standards Board (FASB) approved
SFAS No. 141, "Business Combinations," and SFAS No. 142, "Goodwill and Other
Intangible Assets." SFAS No. 141 prospectively prohibits the pooling of interest
method of accounting for business combinations initiated after June 30, 2001.
SFAS No. 142 requires companies to cease amortizing goodwill that existed at
June 30, 2001. The amortization of existing goodwill will cease on December 31,
2001. Any goodwill resulting from acquisitions completed after June 30, 2001
will not be amortized. SFAS No. 142 also establishes a new method of testing
goodwill and certain intangibles for impairment on an annual basis or on an
interim basis if an event occurs or circumstances change that would reduce the
fair value of a reporting unit below its carrying value. The adoption of these
standards will not have a material effect on the company's consolidated
financial statements or its results of operations.


                                      -20-
<PAGE>

      In June 2001, the FASB issued SFAS No. 143, "Accounting for Asset
Retirement Obligations." This statement addresses financial accounting and
reporting for obligations associated with the retirement of tangible long-lived
assets and the associated asset retirement costs. The purpose of this statement
is to develop consistent accounting for asset retirement obligations and related
costs in the financial statements and provide more information about future cash
outflows, leverage and liquidity regarding retirement obligations and the gross
investment in long-lived assets. This statement is effective for financial
statements issued for fiscal years beginning after June 15, 2002. The Company
will be required to implement SFAS No. 143 on January 1, 2003. The Company does
not believe that adoption of this standard will have a material effect on its
consolidated financial statements or its results of operations.

      In October 2001, the FASB issued SFAS No. 144, "Accounting for the
Impairment or Disposal of Long-lived Assets," which supersedes SFAS No. 121
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to
Be Disposed Of." Though it retains the basic requirements of SFAS No. 121
regarding when and how to measure an impairment loss, SFAS No. 144 provides
additional implementation guidance. SFAS No. 144 applies to long-lived assets to
be held and used or to be disposed of, including assets under capital leases of
lessees; assets subject to operating leases of lessors; and prepaid assets. SFAS
No. 144 also expands the scope of a discontinued operation to include a
component of an entity, and eliminates the current exemption to consolidation
when control over a subsidiary is likely to be temporary. This statement is
effective for fiscal years beginning after December 15, 2001. The Company does
not believe that adoption of this standard will have a material effect on its
consolidated financial statements or results of its operations.


EFFECT OF INFLATION

      The Company believes that inflation has not had a material effect on its
operations. If, however, inflation increases in the future it could temporarily
adversely affect the profitability of GTSI's sales under its Government
fixed-price contracts, which generally preclude the Company from passing on
inflation-related or other increases in product costs to Government customers
during the term of a pre-existing contract. The Company mitigates this risk in
part by often obtaining agreements from certain of its suppliers prohibiting
them from increasing their prices to GTSI during the term of fixed-price
contracts.

SEASONAL FLUCTUATIONS AND OTHER RISK FACTORS

      The Company has historically experienced and expects to continue to
experience significant seasonal fluctuations in its operations as a result of
Government buying and funding patterns, which also affect the buying patterns of
GTSI's prime contractor customers. These buying and funding patterns
historically have had a significant positive effect on GTSI's bookings in the
third quarter ending September 30 each year (the Government's fiscal year end),
and consequently on sales and net income in the third and fourth quarters of
each year. Quarterly financial results are also affected by the timing of the
award of and shipments of products under government contracts, price competition
in the microcomputer and workstation industries, the addition of personnel or
other expenses in anticipation of sales growth, product line changes and
expansions, and the timing and costs of changes in customer and product mix. In
addition, customer order deferrals in anticipation of new product releases by
leading microcomputer and workstation hardware and software manufacturers,
delays in vendor shipments of new or existing products, a shift in sales mix to
more complex requirements contracts with more complex service costs, and vendor
delays in the processing of incentives and credits due GTSI, have occurred (all
of which are also likely to occur in the future) and have adversely affected the
Company's operating performance in particular periods. The seasonality and the
unpredictability of the factors affecting such seasonality make


                                      -21-
<PAGE>

GTSI's quarterly and yearly financial results difficult to predict and subject
to significant fluctuation. The Company's stock price could be adversely
affected if any such financial results fail to meet the financial community's
expectations.

      Additionally, legislation is periodically introduced in Congress that may
change the Government's procurement practices. GTSI cannot predict whether any
legislative or any regulatory proposals will be adopted or, if adopted, the
impact upon its operating results. Changes in the structure, composition and/or
buying patterns of the Government, either alone or in combination with
competitive conditions or other factors, could adversely affect future results.

      As of December 31, 2001, the Company holds in its inventory approximately
$1.7 million of business intelligence software. Contractually, the Company has
the right to sell this business intelligence software to various Government
agencies through June 30, 2003. The Company purchased this software in December,
1999. Through December 31, 2001, the Company has made no sales of this product.
At this time, management believes that the Company will recover the cost of the
business intelligence software inventory through sales in the normal course of
business. If management is unable to sell the software, this would result in an
impairment of all or a portion of the $1.7 million inventory balance.


LIQUIDITY AND CAPITAL RESOURCES

      During 2001, the Company's operating activities used approximately $3.2
million of cash, compared to $7.6 million provided by operations in 2000.
Significant factors affecting cash used in operating activities in 2001 include
increases in accounts receivable of $6.6 million, lease receivables of $20.4
million, and inventories of $7.9 million, offset by a corresponding increase in
accounts payable of $17.3 million, a decrease in other assets of $7.1 million,
and a decrease of $3.3 million in other liabilities. The increase in accounts
receivable was primarily attributed to an increase of $6.0 million in various
receivables due from vendors. Trade accounts receivables are substantially
unchanged year-over-year despite increased sales due to improved collection
practices throughout 2001. The increase in lease receivables is due primarily to
equipment leases to a prime contractor in support of its seat management
contract with government agencies. The decrease in other assets was primarily
due to a decrease in prepaid inventory of $7.0 million. The increase in accounts
payable was primarily due to an increase in trade accounts payable of $18.7
million due to increased shipments in the period.

      Investing activities used cash of approximately $3.6 million in 2001
primarily for the Company's investment in a proprietary fulfillment system,
designed to improve efficiency throughout the Company.

      The Company's financing activities provided approximately $6.9 million of
cash during 2001 due to an increase in the Company's outstanding borrowing under
its line-of-credit of $8.3 million and $2.9 million in proceeds from stock
options exercised, partially offset by $2.8 million used to repurchase the
common stock of the Company, and payment of $1.5 million on the remaining
balance of notes payable.

      On May 2, 1996, the Company executed a three-year credit facility with a
bank (the "Principal Lender") for $40.0 million and a one-year credit facility
with the other lenders (collectively, the "Lenders") for an additional $55.0
million (collectively, the "Credit Facility"). Additionally, on June 27,


                                      -22-
<PAGE>

1996, the Company executed a separate $10.0 million facility with the Principal
Lender for inventory financing of vendor products (the "Wholesale Financing
Facility").

      On July 28, 1997, the Company and its banks executed the Second Amended
and Restated Business Credit and Security Agreement (the "Credit Agreement") to
modify some of the terms and conditions, as well as the amounts available under
the Credit Facility and the Wholesale Financing Facility. These modifications
included the revision of the Credit Facility's term to one year with a one year
automatic renewal.

      On March 31, 1999, the Second Amended and Restated Business Credit
Agreement of July 28, 1997 was amended to make the Tangible Net Worth
requirement for the Company an amount no less than $40 million at all times
beginning the calendar quarter ending March 31, 1999 and each calendar quarter
thereafter. All other material terms of the Credit Agreement remained the same.

      On November 24, 1999, the Company and its banks executed separate
amendments for the continuation of the Credit Agreement through November 30,
2000, with an automatic one year renewal, and adjusting, among other things, the
seasonality of the amount available under the Credit Facility. The limit of the
Credit Facility is $50 million during the period July 1 through January 31.
During the period February 1 through April 30, the total amount available under
the Credit Facility is limited to $30 million. During the period May 1 though
June 30, the total amount available under the Credit Facility is $20 million. In
addition, the interest rate under the Credit Facility is a rate of the London
Interbank Offered Rate (LIBOR) plus 1.75%. The Wholesale Financing Facility was
also amended effective December 1, 1999 to $50.0 million throughout the fiscal
year.

      On November 17, 2000, the Company and its banks executed the fourth
amendment to the Credit Agreement for the continuation of the Credit Agreement.
The termination provisions of the agreement were modified to provide for a
90-day written termination notice upon receipt by either party. The amendment
also provided for, among other things, increasing the Company's stock repurchase
authorization from third-party shareholders to $6.1 million, up from $5.25
million in the previous amendment. All other material terms of the Credit
Agreement remained the same.

      On February 28, 2001, the Company and its banks executed the fifth
amendment, effective March 7, 2001, which gave SunTrust Bank the right to
establish a $7.5 million reserve to facilitate Automated Clearing House ("ACH")
transfers. Consent was also given to authorize the Company's stock repurchase
from third-party stockholders in an additional amount not to exceed $4.7 million
provided the aggregate amount of stock held by the Company did not exceed $12.9
million. All other material terms of the Credit Agreement remained the same.

      As of December 31, 2001, 2000, and 1999, respectively, the Company's
interest rate on the Credit Facility was 3.68%, 8.40%, and 8.24%, respectively.
Amounts due to the Lenders of $20.2 million as of December 31, 2001 are
classified as current liabilities up from $11.9 million as of December 31, 2000.
The available portion of the Credit Facility was approximately $29.8 million at
December 31, 2001, down from $38.1 million at December 31, 2000.

      Borrowing is limited to 85% of eligible accounts receivable. The Credit
Facility is secured by substantially all of the Company's operating assets.
Current obligations are first funded and then all cash receipts are
automatically applied to reduce outstanding borrowings. The Credit Facility also
contains certain covenants that include restrictions on the payment of dividends
and the purchase of the Company's Common Stock, as well as provisions specifying
compliance with certain quarterly and annual financial ratios. At December 31,
2001, the Company was in compliance with all financial covenants set forth in
the credit facility.


                                      -23-
<PAGE>

ITEM 7A.    QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

      The Company has a $50.0 million Credit Facility indexed at LIBOR plus
1.75%. This variable rate Credit Facility subjects the Company to cash flow
exposure resulting from changes in interest rates.

"SAFE HARBOR" STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF
1995

      Except for historical information, all of the statements, expectations and
assumptions contained in the foregoing material are "forward-looking statements"
(within the meaning of the Private Securities Litigation Reform Act of 1995, as
amended) that involve a number of risks and uncertainties. All such
forward-looking statements are intended to be subject to the safe harbor
protection provided by the Private Securities Reform Act of 1995, as amended,
and by other applicable securities laws. It is possible that the assumptions
made by management -- including, but not limited to, those relating to favorable
gross margins, a favorable mix of contracts, benefits of a more efficient
operation, future contract awards, returns on new product programs,
profitability, and increased control of operating costs -- may not materialize.
Actual results may differ materially from those projected or implied in any
forward-looking statements. Readers are cautioned not to place undue reliance on
these forward-looking statements, which reflect management's analysis only as of
the date hereof. The Company undertakes no obligation to revise publicly the
forward-looking statements to reflect events or circumstances that arise after
the date hereof. Readers should carefully review the risks factors described in
other documents the Company files from time to time with the Securities and
Exchange Commission, including the Quarterly Reports on the Form 10-Q to be
filed by the Company subsequent to this Annual Report on Form 10-K and any
Current Reports on Form 8-K filed by the Company.


                                      -24-
<PAGE>

ITEM 8.           FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.

      The Consolidated Financial Statements and Schedule of GTSI Corp. and
Subsidiary are filed as part of this Form 10-K. Supplemental unaudited quarterly
financial data is included in Note 11 of Notes to Consolidated Financial
Statements.

<TABLE>
<CAPTION>

Index to Financial Statements and Schedule                                                       Page
------------------------------------------                                                       ----

FINANCIAL STATEMENTS:

<S>                                                                                              <C>
      Report of Independent Public Accountants                                                    26

      Consolidated Balance Sheets as of December 31, 2001 and 2000                                27

      Consolidated Statements of Operations for the years ended December 31, 2001,
      2000 and 1999                                                                               28

      Consolidated Statements of Changes in Stockholders' Equity for the years ended              29
      December 31, 2001, 2000 and 1999

      Consolidated Statements of Cash Flows for the years ended December 31, 2001,                30
      2000 and 1999


      Notes to Consolidated Financial Statements                                                 31-46

SCHEDULE:

      Schedule II - Valuation and Qualifying Accounts                                             47
</TABLE>

Schedules not listed above have been omitted because they are not applicable or
the information required to be set forth therein is included in the financial
statements or notes thereto.


                                      -25-
<PAGE>

                    REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To GTSI Corp.:

      We have audited the accompanying consolidated balance sheets of GTSI Corp.
and subsidiary (GTSI Corp., formerly Government Technology Services, Inc., a
Delaware corporation) as of December 31, 2001 and 2000, and the related
consolidated statements of operations, changes in stockholders' equity and cash
flows for each of the three years in the period ended December 31, 2001. These
financial statements are the responsibility of GTSI Corp.'s management. Our
responsibility is to express an opinion on these financial statements based on
our audits.

      We conducted our audits in accordance with auditing standards generally
accepted in the United States. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.

      In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of GTSI Corp. and subsidiary as
of December 31, 2001 and 2000, and the results of their operations and their
cash flows for each of the three years in the period ended December 31, 2001, in
conformity with accounting principles generally accepted in the United States.

      Our audits were made for the purpose of forming an opinion on the basic
financial statements taken as a whole. The schedule listed in the index of
financial statements is presented for purposes of complying with the Securities
and Exchange Commission's rules and is not part of the basic financial
statements. This schedule has been subjected to the auditing procedures applied
in the audits of the basic financial statements and, in our opinion, fairly
states in all material respects the financial data required to be set forth
therein in relation to the basic financial statements taken as a whole.


                                                /S/ ARTHUR ANDERSEN LLP



Vienna, Virginia
February 14, 2002


                                      -26-
<PAGE>

                            GTSI CORP. AND SUBSIDIARY
                           CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>

                                                                                        December 31,
(In thousands, except share amounts)                                                   2001              2000
                                                                                ------------------ -----------------
<S>                                                                             <C>                  <C>
ASSETS

Current assets:
      Cash                                                                      $             114  $             79
      Accounts receivable, net                                                            138,385           131,780
      Lease receivables, current                                                           11,781             5,401
      Merchandise inventories                                                              61,434            53,570
      Other current assets                                                                 10,238            18,269
                                                                                ------------------ -----------------
              Total current assets                                                        221,952           209,099

Property and equipment, net                                                                11,974            12,830
Lease receivables, net of current portion                                                  17,378             3,367
Other assets                                                                                1,148             1,769
                                                                                ------------------ -----------------
              Total assets                                                      $         252,452  $        227,065
                                                                                ================== =================

LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:
      Notes payable to banks                                                    $          20,186  $         11,925
      Note payable, current                                                                     -               500
      Accounts payable                                                                    151,379           134,071
      Accrued liabilities                                                                   8,977            10,249
      Accrued warranty liabilities                                                          6,442             8,695
                                                                                ------------------ -----------------
              Total current liabilities                                                   186,984           165,440

Note payable, net of current portion                                                            -             1,000
Other liabilities                                                                           2,403             2,145
                                                                                ------------------ -----------------
              Total liabilities                                                           189,387           168,585
                                                                                ------------------ -----------------

Commitments and contingencies
Stockholders' equity
      Preferred stock -  $0.25 par value, 680,850 shares authorized;
      none issued or outstanding                                                                -                 -
      Common stock - $0.005 par value 20,000,000 shares authorized, 9,806,084
      issued and 8,162,612 outstanding at December 31, 2001; and 20,000,000
      shares authorized, 9,806,084 issued and 7,956,272 outstanding at
      December 31, 2000                                                                        49                49
      Capital in excess of par value                                                       43,434            43,484
      Retained earnings                                                                    27,419            22,933
      Treasury stock, 1,643,472 shares at December 31, 2001, and 1,849,812
      shares at December 31, 2000, at cost                                                 (7,837)           (7,986)
                                                                                ------------------ -----------------
                    Total stockholders' equity                                             63,065            58,480
                                                                                ------------------ -----------------
                    Total liabilities and stockholders' equity                   $        252,452  $        227,065
                                                                                ================== =================


                          The accompanying notes are an integral part of these consolidated balance sheets.
</TABLE>


                                      -27-
<PAGE>

                                      GTSI CORP. AND SUBSIDIARY
                                 CONSOLIDATED STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
                                                                                   For the years ended December 31,
(In thousands, except per share amounts)                                             2001        2000        1999
                                                                                  ------------ ------------ ----------
<S>                                                                                <C>         <C>          <C>
Sales                                                                              $  783,496   $  677,754   $660,570

Cost of sales                                                                         718,370      617,621    610,463
                                                                                  ------------ ------------ ----------

Gross margin                                                                           65,126       60,133     50,107

Operating expenses                                                                     61,409       53,316     48,515
                                                                                  ------------ ------------ ----------

Income from operations                                                                  3,717        6,817      1,592

     Interest and financing income                                                     (4,501)      (3,206)    (1,742)
     Interest expense                                                                     794          947        652
                                                                                  ------------ ------------ ----------
Interest income, net                                                                   (3,707)      (2,259)    (1,090)
                                                                                  ------------ ------------ ----------

Income before income taxes and cumulative effect of SAB No. 101 adoption                7,424        9,076      2,682

Income tax provision (benefit)                                                          2,938       (2,008)         -
                                                                                  ------------ ------------ ----------

Net income before cumulative effect of SAB No. 101 adoption                             4,486       11,084      2,682

Cumulative effect of SAB No. 101 adoption                                                   -         (467)         -
                                                                                  ------------ ------------ ----------

Net income                                                                         $    4,486   $   10,617   $  2,682
                                                                                  ============ ============ ==========

Net income per common share
     Basic
       Basic net income per share before cumulative effect of SAB No. 101
          adoption                                                                 $     0.55   $     1.23   $   0.29
       Cumulative effect per share of SAB No. 101 adoption                                  -        (0.05)         -
                                                                                  ------------ ------------ ----------
       Basic net income per share                                                  $     0.55   $     1.18   $   0.29
                                                                                  ============ ============ ==========
     Diluted
       Diluted net income per share before cumulative effect of SAB No. 101
          adoption                                                                 $     0.50   $     1.20   $   0.29
       Cumulative effect per share of SAB No. 101 adoption                                  -        (0.05)         -
                                                                                  ------------ ------------ ----------
       Diluted net income per share                                                $     0.50   $     1.15   $   0.29
                                                                                  ============ ============ ==========

Weighted average common shares outstanding
     Basic                                                                              8,144       9,021       9,271
                                                                                  ============ ============ ==========
     Diluted
                                                                                        9,049       9,225       9,314
                                                                                  ============ ============ ==========

               The accompanying notes are an integral part of these consolidated financial statements.
</TABLE>

                                                        -28-
<PAGE>
<TABLE>
<CAPTION>

                               GTSI CORP. AND SUBSIDIARY
                  CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY

                                            For the years ended December 31, 2001, 2000, and 1999
                                   ----------------------------------------------------------------------------------------

                                    Preferred Stock    Common Stock
                                   ------------------------------------   Capital                               Total
                                    Shares            Shares              Excess of    Retained   Treasury   Stockholders'
(In thousands)                      Issued   Amount   Issued    Amount    Par Value    Earnings     Stock      Equity
                                   ----------------------------------------------------------------------------------------

<S>                                <C>       <C>      <C>      <C>       <C>          <C>        <C>         <C>
Balance, December 31, 1998              -    $   -     9,806    $  49     $ 45,712     $  9,634   $   (71)    $   55,324

Stock options exercised                 -        -         -        -          (81)           -       178             97

BTG settlement - purchase of
Treasury stock and repurchase
option                                  -        -         -        -       (1,944)           -    (2,963)        (4,907)

Net income                              -        -         -        -            -        2,682         -          2,682
                                   -----------------------------------------------------------------------------------------

Balance, December 31, 1999              -    $   -     9,806    $  49     $ 43,687     $ 12,316   $(2,856)    $   53,196

Stock options exercised                 -        -         -        -         (203)           -       916            713

Common stock repurchase                 -        -         -        -            -            -    (6,046)        (6,046)

Net income                              -        -         -        -            -       10,617         -         10,617
                                   -----------------------------------------------------------------------------------------

Balance, December 31, 2000              -    $   -     9,806     $  49    $ 43,484     $ 22,933   $(7,986)    $   58,480
                                   =========================================================================================

Stock options exercised                 -        -         -         -         (50)           -     2,996          2,946

Common stock repurchase                 -        -         -         -           -            -    (2,847)        (2,847)

Net income                              -        -         -         -           -        4,486         -          4,486
                                   -----------------------------------------------------------------------------------------

Balance, December 31, 2001              -    $   -     9,806     $  49    $ 43,434     $ 27,419   $(7,837)    $   63,065
                                   =========================================================================================

               The accompanying notes are an integral part of these consolidated  financial statements.

</TABLE>



                                      -29-

<PAGE>

                                    GTSI CORP. AND SUBSIDIARY
                              CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
                                                                           For the years ended December 31,
(In thousands)                                                            2001           2000           1999
                                                                     -------------- -------------- --------------
<S>                                                                   <C>            <C>            <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income                                                            $     4,486    $   10,617     $    2,682
Adjustments to reconcile net income to net cash (used in)
provided by operating activities:
          Cumulative effect of SAB No. 101 adoption                             -           467              -
          Depreciation and amortization                                     4,407         3,934          3,584
          Loss on disposal of property and equipment                           26           134            288
          Deferred income tax provision (benefit)                           1,572        (4,334)          (440)
         (Decrease) increase in cash due to changes in
          assets and liabilities:
                    Accounts receivable, net                               (6,605)      (12,404)       (21,702)
                    Lease receivables                                     (20,391)       (8,768)             -
                    Merchandise inventories                                (7,864)       (6,751)        (4,939)
                    Other assets                                            7,080        (8,809)           223
                    Accounts payable                                       17,308        30,200         28,389
                    Accrued liabilities and warranty liabilities           (3,525)        4,276          1,553
                    Other liabilities                                         258          (974)           657
                                                                     -------------- -------------- --------------
Net cash (used in) provided by operating activities:                       (3,248)        7,588         10,295
                                                                     -------------- -------------- --------------

CASH FLOWS FROM INVESTING ACTIVITIES:
          Purchase of property and equipment                               (3,577)       (4,271)        (5,004)
          Payments from BTG settlement                                          -             -            132
                                                                     -------------- -------------- --------------
Net cash used in investing activities:                                     (3,577)       (4,271)        (4,872)
                                                                     -------------- -------------- --------------

CASH FLOWS FROM FINANCING ACTIVITIES:
          Proceeds from (payment of) bank notes, net                        8,261         2,446         (5,410)
          Payment of note payable                                          (1,500)         (500)             -
          Common stock repurchase                                          (2,847)       (6,046)             -
          Proceeds from stock options exercised                             2,946           713             97
                                                                     -------------- -------------- --------------
Net cash provided  by (used in)  financing activities:                      6,860        (3,387)        (5,313)
                                                                     -------------- -------------- --------------

Net increase (decrease) in cash                                                35           (70)           110
Cash at beginning of year                                                      79           149             39
                                                                     -------------- -------------- --------------
Cash at end of year                                                   $       114    $       79     $      149
                                                                     ============== ============== ==============

Supplemental disclosures of cash flow information:
          Cash paid during the year for:
                    Interest                                          $       907    $    1,429     $      571
                    Income taxes                                      $     2,509    $        -     $        -

               The accompanying notes are an integral part of these consolidated financial statements.
</TABLE>
                                                       -30-
<PAGE>

                            GTSI CORP. AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


     GTSI Corp. ("GTSI", or the "Company", formerly named Government Technology
Services, Inc.) operates in a single business segment and resells microcomputer
and workstation hardware, software and peripherals to agencies of federal, state
and local governments (the "Government"). Business activities also include sales
to systems integrators, prime contractors and other companies reselling
information technology to various government agencies. In August 1994, GTSI
acquired all of the outstanding shares of common stock of Falcon Microsystems,
Inc. ("Falcon"). GTSI and Falcon are hereinafter referred to as the "Company."

     On February 12, 1998, the Company entered into and closed on an Asset
Purchase Agreement with BTG, Inc., and two of its subsidiaries (collectively,
"BTG") under which the Company acquired substantially all of the assets of the
BTG division that resells computer hardware, software and integrated systems to
the Government (the "BTG Division"). The acquisition was financed by the payment
of cash of approximately $9.7 million and the issuance of 15,375 shares of
Series C 8% Cumulative Redeemable Preferred Stock ("Series C Preferred Stock"),
having a liquidation preference of $15.4 million. On May 12, 1998, the Company's
stockholders approved a proposal to convert the Series C Preferred Stock into
3,000,000 shares of Common Stock valued at $5.125 per share. The acquisition of
the BTG Division was accounted for using the purchase method of accounting. The
financial statements include the results of operation of the BTG Division since
the acquisition date.

     On February 10, 1999, the Company entered into subsequent agreements with
BTG related to the reacquisition of a portion of GTSI common stock from BTG, the
terms of certain contracts and the relationship of the parties going forward.
Pursuant to the agreements, GTSI reacquired 600,000 shares of its common stock
of which 200,000 were tendered to GTSI at no cost and 400,000 were purchased by
GTSI for $5.00 per share, in exchange for a three-year, 8% interest bearing note
from BTG with the principal due in three annual installments of $500,000,
$500,000 and $1,000,000, respectively. The final payment under this note was
made on July 16, 2001. Additionally, on October 23, 2000, the Company purchased
the remaining 1.3 million shares of GTSI stock held by BTG for $4.25 a share or
$5.53 million.

1.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

     CONSOLIDATION. The consolidated financial statements include the accounts
of GTSI and its wholly-owned subsidiary, Falcon. All significant intercompany
accounts and transactions are eliminated in consolidation.

     ACCOUNTING ESTIMATES. The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the dates of
the financial statements, and the reported amounts of revenues and expenses
during the reporting periods. Actual results could differ from those estimates.
The most significant estimates include the allowance for doubtful accounts,
reserves for excess or obsolete inventory, reserves for asset impairment, and
reserves for future costs to be incurred under the Company's warranty programs.

     REVENUE RECOGNITION. Revenue from hardware product sales is generally
recognized when title to the products sold passes to the customer, with
provisions established for estimated product returns. Based upon the Company's
standard shipping terms, title generally passes upon the customer's receipt of
the products. The Company also recognizes revenue under sales-type lease
arrangements in accordance with the provisions of Statements of Financial
Accounting Standards ("SFAS") No. 13, "Accounting for Leases." Revenue from
software product sales is recognized in accordance with the provisions of
American Institute of Certified Public Accountants Statement of Position 97-2,
"Software Revenue Recognition." Revenue from the sale of software products is
recognized when persuasive evidence of an

                                      -31-
<PAGE>

arrangement exists, the software has been delivered, the fee is fixed or
determinable and collection is probable. Net revenues from sales of third party
software maintenance contracts are recognized at the time of sale.

     In December 1999, the Securities and Exchange Commission issued Staff
Accounting Bulletin ("SAB") No. 101, "Revenue Recognition in Financial
Statements." SAB No. 101 provides guidance on the application of generally
accepted accounting principles to revenue recognition issues in financial
statements. SAB No. 101 clarifies the appropriate timing of revenue recognition
when products are shipped to customers. The impact to the Company of the
adoption of SAB No. 101 was to generally defer the recognition of revenue from
two to seven days as compared to the Company's previous method. During the
fourth quarter of 2000, the Company adopted the provisions of SAB No. 101
retroactive to January 1, 2000. The Company implemented the guidance set forth
in SAB No. 101 by recording a charge to income of $467,000, representing the
cumulative effect of adopting SAB No. 101 on January 1, 2000.

     The Emerging Issues Task Force ("EITF") has issued EITF Issue No. 99-19,
"Reporting Revenue Gross as a Principal versus Net as an Agent." Consistent with
the requirements under SAB No. 101, EITF No. 99-19 provides guidance regarding
the income statement presentation of revenue based on either (a) the gross
amount billed to a customer because it has earned revenue from the sale of the
goods or services or (b) the net amount retained (that is, the amount billed to
a customer less the amount paid to a supplier) because it has earned a
commission or fee. Beginning with the fourth quarter of 2000, and on a
retroactive basis for all periods presented, the accompanying financial
statements have been reclassified to reflect the provisions of EITF No. 99-19.
Adoption of EITF No. 99-19 had no impact on our reported gross margin or net
income, but merely resulted in the reduction of previously reported sales and
cost of sales for our resold software maintenance agreements of approximately
$13.4 million and $7.9 million for 2000 and 1999 respectively.

     FAIR VALUE OF FINANCIAL INSTRUMENTS. At December 31, 2001 and 2000, the
recorded values of financial instruments such as accounts receivable and payable
and notes payable to banks approximated their fair values, based on the
short-term maturities of these instruments. As of December 31, 2001 and 2000,
the Company believes the carrying amount of its current and long-term lease
receivables approximates its fair value since the lease receivables are
discounted at an interest rate that approximates market.

     ACCOUNTS RECEIVABLE. Accounts receivable principally represents amounts
collectible from the Government and prime contractors to the Government. Other
accounts receivable result from items billed to suppliers under various
agreements involving the sale of their products. The Company performs ongoing
credit evaluations of its non-governmental customers but generally does not
require collateral to support any outstanding obligation owed to GTSI.
Allowances for potential uncollectible amounts are estimated and deducted from
total accounts receivable.

     LEASE RECEIVABLES. The Company sells products to certain customers under
sales-type lease arrangements. The Company accounts for its sales-type leases
according to the provisions of SFAS No. 13, "Accounting for Leases," and
accordingly, has recognized a current and long-term receivable, net of unearned
finance income on the accompanying balance sheets.

     SALES OF LEASE RECEIVABLES. The Company periodically sells lease
receivables to various, unrelated, financing companies. The Company accounts for
its sales of lease receivables in accordance with SFAS No. 140, "Accounting for
Transfers and Servicing of Financial Assets and Extinguishments of Liabilities -
a Replacement of FASB Statement No. 125." In accordance with the criteria set
forth in SFAS No. 140, lease receivables amounting to $39.8 million and $6.7
million, in 2001 and 2000

                                      -32-
<PAGE>

respectively, were accounted for as sales and, as a result, the related
receivables have been excluded from the accompanying balance sheets.

     MERCHANDISE INVENTORIES. Merchandise inventories are valued at the lower of
cost or market. Cost is determined using a weighted average method.

     PROPERTY AND EQUIPMENT. Property and equipment are stated at cost less
accumulated depreciation. Depreciation and amortization are calculated using the
straight-line method over estimated useful lives ranging from three to ten
years. Leasehold improvements are amortized using the straight-line method over
the terms of the leases or their estimated useful lives, whichever is shorter.

     INTANGIBLE ASSETS. Intangible assets are recorded at cost and amortized
using the straight-line method over their estimated useful lives. Included in
operating expenses for the years ended December 31, 2001, 2000, and 1999, is
amortization expense of $ -, $ -, and $114,000, respectively.

     IMPAIRMENT OF LONG-LIVED ASSETS. Long-lived assets, consisting primarily of
property and equipment and capitalized software, are reviewed for impairment
whenever events or changes in circumstances indicate that the carrying amount
should be addressed pursuant to Statement of Financial Accounting Standards No.
121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to be Disposed Of." The Company determines impairment by comparing the
carrying value of these long-lived assets to the estimated undiscounted future
cash flows expected to result from the use of these assets and their eventual
disposition. In the event the Company determines that an impairment exists, a
loss would be recognized based on the amount by which the carrying value exceeds
the fair value of the assets, which is generally determined by using quoted
market prices or valuation techniques such as the discounted present value of
expected future cash flows, appraisals, or other pricing models as appropriate.

     ACCRUED WARRANTY LIABILITIES. The Company offers warranties on sales under
certain products specific to the terms of the customer agreements. Standard
warranties require repair or replacement of defective products reported during
the warranty period at no cost to the customer. The Company records an estimate
for warranty expenses related to costs based on its actual historical return
rates and repair costs at the time of sale.

     INCOME TAXES. The Company accounts for income taxes in accordance with SFAS
No. 109, "Accounting for Income Taxes." Under SFAS No. 109, deferred tax assets
and liabilities are computed based on the estimated future tax effects of
temporary differences between the carrying amounts of assets and liabilities for
financial reporting purposes and the amounts used for income tax purposes. SFAS
No. 109 requires that a valuation allowance be established when necessary to
reduce deferred tax assets to amounts expected to be realized.

     EARNINGS PER SHARE. In accordance with SFAS No. 128, "Earnings Per Share,"
the Company presents basic and diluted earnings per share on the face of the
statements of operations for all periods presented. Basic earnings per share
excludes dilution and is computed by dividing income available to common
stockholders by the weighted average number of common shares outstanding for the
period. Diluted earnings per share reflects the potential dilution that could
occur if securities or other contracts to issue common stock were exercised or
converted into common stock or resulted in the issuance of common stock that
then shared in the earnings of the entity. For the years ended December 31,
2001, 2000 and 1999, diluted weighted average common shares outstanding includes
the dilutive effect of options if exercised of 905,000, 204,000 and 43,000
shares respectively.


                                      -33-
<PAGE>

     INTEREST AND FINANCING INCOME. For the years ended December 31, 2001, 2000,
and 1999, interest and financing income includes $2.2 million, $2.1 million, and
$1.0 million, respectively, of financing income earned on prompt payment of
vendor invoices and $1.7 million, $0.1 million, and $ -, respectively, of
interest income from lease receivables.

     MARKETING DEVELOPMENT AND COOPERATIVE ADVERTISING FUNDS. Certain vendors
provide the Company with sales incentive programs. Generally, the funds received
under these programs are determined based on the Company's purchases and/or
sales of the vendor's product. The funds are earned upon performance of specific
promotional programs or upon completion of predetermined objectives dictated by
the vendor. Once earned, the funds reduce associated expenses of promotional
programs.

     CONCENTRATION OF CREDIT RISK. The Company's customers are primarily
federal, state and local government agencies and prime contractors to the
Government, including systems integrators. In 2001, the Company sold products or
services to thousands of different customers, including to most agencies and
major departments of the Government, to many state governments and to hundreds
of prime contractors. Although no single customer (agency) accounted for greater
than 5% of the Company's 2001 sales, aggregate 2001 sales to the Government's
Departments of the Army, Navy and Air Force were 17.2%, 9.6% and 20.1%,
respectively, of GTSI's 2001 sales.

     OUTSTANDING CHECKS. Included in accounts payable at December 31, 2001 and
2000, are approximately $11.9 million and $14.0 million, respectively, which
represent checks that have been issued but have yet to clear the bank.

     RECLASSIFICATIONS. Certain amounts from prior years have been reclassified
to conform to the current year financial statement presentation.

     NEW ACCOUNTING PRONOUNCEMENTS. In June 2001 the Financial Accounting
Standards Board (FASB) approved SFAS No. 141, "Business Combinations," and SFAS
No. 142, "Goodwill and Other Intangible Assets." SFAS No. 141 prospectively
prohibits the pooling of interest method of accounting for business combinations
initiated after June 30, 2001. SFAS No. 142 requires companies to cease
amortizing goodwill that existed at June 30, 2001. The amortization of existing
goodwill will cease on December 31, 2001. Any goodwill resulting from
acquisitions completed after June 30, 2001 will not be amortized. SFAS No. 142
also establishes a new method of testing goodwill and certain intangibles for
impairment on an annual basis or on an interim basis if an event occurs or
circumstances change that would reduce the fair value of a reporting unit below
its carrying value. The Company's adoption of these standards will not have a
material effect on its consolidated financial statements or its results of
operations.

     In June 2001, the FASB issued SFAS No. 143, "Accounting for Asset
Retirement Obligations." This statement addresses financial accounting and
reporting for obligations associated with the retirement of tangible long-lived
assets and the associated asset retirement costs. The purpose of this statement
is to develop consistent accounting for asset retirement obligations and related
costs in the financial statements and provide more information about future cash
outflows, leverage and liquidity regarding retirement obligations and the gross
investment in long-lived assets. This statement is effective for financial
statements issued for fiscal years beginning after June 15, 2002. The Company
will be required to implement SFAS No. 143 on January 1, 2003. The Company does
not believe that adoption of this standard will have a material effect on its
consolidated financial statements or its results of operations.

     In October 2001, the FASB issued SFAS No. 144, "Accounting for the
Impairment or Disposal of Long-lived Assets," which supersedes SFAS No. 121
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to
Be Disposed Of." Though it retains the basic requirements of SFAS


                                      -34-
<PAGE>

No. 121 regarding when and how to measure an impairment loss, SFAS No. 144
provides additional implementation guidance. SFAS No. 144 applies to long-lived
assets to be held and used or to be disposed of, including assets under capital
leases of lessees; assets subject to operating leases of lessors; and prepaid
assets. SFAS No. 144 also expands the scope of a discontinued operation to
include a component of an entity, and eliminates the current exemption to
consolidation when control over a subsidiary is likely to be temporary. This
statement is effective for fiscal years beginning after December 15, 2001. The
Company does not believe that adoption of this standard will have a material
effect on its consolidated financial statements or results of its operations.

2.   ACCOUNTS RECEIVABLE

     The composition of accounts receivable as of December 31, 2001 and 2000, is
as follows (in thousands):

<TABLE>
<CAPTION>
                                                                     2001             2000
                                                                ---------------  ---------------
<S>                                                              <C>              <C>
     Trade accounts receivable                                   $    117,815     $    116,825
     Vendor and other receivables                                      21,983           16,664
                                                                ---------------  ---------------

                                                                      139,798          133,489
            Less: Allowance for uncollectible accounts                 (1,413)          (1,709)
                                                                ---------------  ---------------

     Accounts receivable, net                                    $    138,385     $    131,780
                                                                ===============  ===============
</TABLE>

3.   LEASE RECEIVABLES

     The Company sold products to certain customers under sales-type lease
arrangements. Leasing arrangements were for two to three years and carry market
interest rates ranging from 7.83 to 10.20 percent. Total future minimum lease
payments and unearned finance income due under the sales-type leases are as
follows (in thousands):

<TABLE>
<CAPTION>
                                                                   Unearned
                                               Total Lease          Finance         Net Principal
                                              Payments Due           Income              Due
                                            ------------------   ---------------  ------------------

<S>                                                <C>                <C>                <C>
             2002                                  $    14,007        $    2,226         $    11,781
             2003                                       12,939             1,165              11,774
             2004                                        5,830               227               5,604
                                            ------------------   ---------------  ------------------
            Total lease receivables                $    32,776        $    3,617         $    29,159
                                            ==================   ===============  ==================
</TABLE>

     At December 31, 2001, 97.5% of the lease receivables were due from one
customer.

4.   PROPERTY AND EQUIPMENT

     The composition of property and equipment as of December 31, 2001 and 2000,
is as follows (in thousands):

                                      -35-
<PAGE>
<TABLE>
<CAPTION>
                                                                                    2001             2000
                                                                               ---------------  ----------------
<S>                                                                             <C>              <C>
            Office furniture and equipment                                      $     11,066     $      10,286
            Computer software and website development costs                           15,289            12,685
            Leasehold improvements                                                     4,832             4,797
                                                                               ---------------  ----------------

                                                                                      31,187            27,768
            Less accumulated depreciation and amortization                           (19,213)          (14,938)
                                                                               ---------------  ----------------

            Property and equipment, net                                         $     11,974     $      12,830
                                                                               ===============  ================

            Depreciation and amortization expense                               $      4,407     $       3,934
                                                                               ===============  ================
</TABLE>

     Depreciation and amortization expense on property and equipment and
leasehold improvements was $4,407, $3,934, and $3,470, in 2001, 2000, and 1999
respectively.

5.   NOTES PAYABLE TO BANKS

     On May 2, 1996, the Company executed a three-year credit facility with a
bank (the "Principal Lender") for $40.0 million and a one-year credit facility
with the other lenders (collectively, the "Lenders") for an additional $55.0
million (collectively, the "Credit Facility"). Additionally, on June 27, 1996,
the Company executed a separate $10.0 million facility with the Principal Lender
for inventory financing of vendor products (the "Wholesale Financing Facility").

     On July 28, 1997, the Company and its banks executed the Second Amended and
Restated Business Credit and Security Agreement (the "Credit Agreement") to
modify some of the terms and conditions, as well as the amounts available under
the Credit Facility and the Wholesale Financing Facility. These modifications
included the revision of the Credit Facility's term to one year with a one year
automatic renewal.

     On March 31, 1999, the Credit Agreement of July 28, 1997 was amended to
make the Tangible Net Worth requirement for the Company an amount no less than
$40 million at all times beginning the calendar quarter ending March 31, 1999
and each calendar quarter thereafter. All other material terms of the Credit
Agreement remained the same.

     On November 24, 1999, the Company and its banks executed separate
amendments, effective December 1, 1999, for the continuation of the Credit
Agreement through November 30, 2000, with an automatic one year renewal, and
adjusting, among other things, the seasonality of the amount available under the
Credit Facility. The limit of the Credit Facility is $50 million during the
period July 1 through January 31. During the period February 1 through April 30,
the total amount available under the Credit Facility is limited to $30 million.
During the period May 1 though June 30, the total amount available under the
Credit Facility is $20 million. In addition, the interest rate under the Credit
Facility is a rate of the London Interbank Offered Rate (LIBOR) plus 1.75%. The
Wholesale Financing Facility was also amended effective December 1, 1999 to
$50.0 million throughout the fiscal year.

     On November 17, 2000, the Company and its banks executed an amendment,
effective December 1, 2000, for the continuation of the Credit Agreement with a
90-day written termination notice upon receipt by either party and, among other
things, increased the Company's stock repurchase authorization from third-party
stockholders to $6.1 million, up from $5.25 million in the previous amendment.
All other material terms of the Credit Agreement remained the same.

                                      -36-
<PAGE>

     On February 28, 2001, the Company and its banks executed the fifth
amendment, effective March 7, 2001, which gave SunTrust Bank the right to
establish a $7.5 million reserve to facilitate Automated Clearing House ("ACH")
transfers. Consent was also given to authorize the Company's stock repurchase
from third-party stockholders in an additional amount not to exceed $4.7 million
provided the aggregate amount of stock held by the Company did not exceed $12.9
million. All other material terms of the Credit Agreement remained the same.

     As of December 31, 2001, 2000, and 1999, respectively, the Company's
interest rate on the Credit Facility was 3.68%, 8.40%, and 8.24%, respectively.
Amounts due to the Lenders of $20.2 million as of December 31, 2001, are
classified as current liabilities up from $11.9 million as of December 31, 2000,
and the available portion of the Credit Facility was approximately $29.8 million
at December 31, 2001, up from $38.1 million at December 31, 2000.

     Borrowing is limited to 85% of eligible accounts receivable. The Credit
Facility is secured by substantially all of the operating assets of the Company.
Current obligations are first funded and then all cash receipts are
automatically applied to reduce outstanding borrowings. The Credit Facility also
contains certain covenants that include restrictions on the payment of dividends
and the repurchase of the Company's Common Stock, as well as provisions
specifying compliance with certain quarterly and annual financial ratios. At
December 31, 2001, the Company was in compliance with all financial covenants
set forth in the Credit Facility. The following information pertains to the
notes payable to banks for the years ended December 31, 2001, 2000, and 1999
(dollars in thousands):

<TABLE>
<CAPTION>
                                                                2001          2000          1999
                                                            -----------    -----------   -----------
<S>                                                       <C>            <C>           <C>
         Weighted average interest rate...................        5.7%           8.2%          7.5%
         Weighted average borrowings......................   $ 13,500       $  9,600      $  4,100
</TABLE>

6.   INCOME TAXES

     The components of the provision (benefit) for income taxes for the years
ended December 31, 2001, 2000, and 1999 are as follows (in thousands):

<TABLE>
<CAPTION>
                                                    2001             2000             1999
                                            ---------------  ---------------   --------------
<S>                                         <C>              <C>              <C>
     Current taxes :
                        Federal                  $   1,079        $   1,923        $     370
                        State                          287              403               70
                                            ---------------  ---------------   --------------

                                                     1,366            2,326              440
     Deferred taxes:
                        Federal                      1,398           (4,063)            (397)
                        State                          174             (271)             (43)
                                            ---------------  ---------------   --------------

                                                     1,572           (4,334)            (440)
                                            ---------------  ---------------   --------------

     Income tax provision (benefit)              $   2,938        $  (2,008)       $       -
                                            ===============  ===============   ==============
</TABLE>

     Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities and the amounts recorded
for income tax purposes. As of December 31, 1999, the Company had a valuation
allowance of $5.0 million against its net deferred tax assets. In the fourth
quarter of 2000, the Company, after its third consecutive year of positive
earnings, concluded that a valuation allowance against its net deferred tax
assets was no longer necessary as the future realizability

                                      -37-
<PAGE>

of these assets was now more likely than not. Accordingly, the valuation
allowance was eliminated. Significant components of the Company's deferred taxes
as of December 31, 2001 and 2000 were as follows (in thousands):

<TABLE>
<CAPTION>
                                                                                December 31,
                                                                         ----------------------------
                                                                             2001          2000
                                                                         ----------------------------
<S>                                                                       <C>          <C>
            Deferred tax assets:
                      Accounts receivable and inventory allowances        $      546   $       864
                      Intangible assets                                        1,512         1,682
                      Accrued warranty                                         2,460         2,985
                      Bid and proposal costs                                     502           446
                      Vacation accrual                                           388           326
                      Depreciation                                               368            61
                      Rent abatement                                              97            96
                      Other reserves                                             526           692
                                                                         ----------------------------
                                 Total deferred tax assets                     6,399         7,152
                                                                         ----------------------------
            Deferred tax liabilities:

                      Web site development costs and capitalized software      1,457           638
                                                                         ----------------------------
                                 Total deferred tax liabilities                1,457           638
                                                                         ----------------------------

            Net deferred tax assets reported                              $    4,942   $     6,514
                                                                         ============================

</TABLE>

     The Company's effective tax rate for the years ended December 31, 2001,
2000, and 1999 differs from the statutory rate for federal income taxes as a
result of the following factors:

<TABLE>
<CAPTION>
                                                                 2001                 2000               1999
                                                          -------------------    ---------------   ----------------
<S>                                                                    <C>                <C>                <C>
     Statutory rate                                                    34.0%              34.0%              34.0%
     State income taxes, net of Federal tax benefit                     4.6%               4.5%               4.0%
     Valuation allowance                                                0.0%             -59.3%             -39.8%
     Other                                                              1.0%              -1.3%               1.8%
                                                          -------------------    ---------------   ----------------
                                                                       39.6%             -22.1%                -
                                                          ===================    ===============   ================
</TABLE>

7.   STOCKHOLDERS' EQUITY

     STOCK OPTIONS AND WARRANTS. The Company has two combination incentive and
non-statutory stock option plans, the "1996 Plan" and the "1994 Plan," that
provide for the granting of options to employees (both plans) and non-employee
directors (only under the 1996 Plan) to purchase up to 2,500,000 and 300,000
shares, respectively, of the Company's common stock. In addition, in May 1997
the Company's Board of Directors adopted the 1997 Non-Officer Stock Option Plan
(the "1997 Plan"). The 1997 Plan provides for the granting of non-statutory
stock options only to employees other than officers and directors to purchase up
to 300,000 shares of the Company's common stock. Until its expiration on March
15, 1996, the Company had another combination incentive and non-statutory stock
option plan, the "1986 Plan," that provided for the granting of options to
employees to purchase up to 1,100,000 shares of the Company's common stock.
Under the 1997, 1996, 1994 and 1986 Plans, options have a term of up to ten
years, generally vest over four years and option prices are required to be at
not

                                      -38-
<PAGE>

less than 100% of the fair market value of the Company's common stock at the
date of grant and, except in the case of non-employee directors, must be
approved by the Board of Directors or its Compensation Committee. Options under
the 1997, 1996, 1994 and 1986 Plans were as follows:

<TABLE>
<CAPTION>
                                                                                                             Weighted
                                                                                             Weighted        Average
                                                      Number of Option   Exercise Price   Average Exercise  Remaining
                                                           Shares          Per Share      Price Per Share      Life
------------------------------------------------------------------------------------------------------------------------
<S>                                                        <C>             <C>                <C>          <C>
1997 PLAN:
            Outstanding at December 31, 1998               296,175         $3.63-5.38         $4.90
                       Granted                              74,000          2.88-3.75          3.48
                       Forfeited or canceled               (94,250)         3.75-5.31          4.90
                       Exercised                                 -                  -             -
            Outstanding at December 31, 1999               275,925          2.88-5.38          4.52
                       Granted                              57,000          3.25-5.22          3.60
                       Forfeited or canceled               (49,625)         3.31-5.31          4.70
                       Exercised                            (3,333)              2.88          2.88
            Outstanding at December 31, 2000               279,967          2.88-5.38          4.23
                       Granted                                   -
                       Forfeited or canceled               (13,792)         2.88-4.88          3.41
                       Exercised                          (112,917)         2.88-5.38          4.42
            Outstanding at December 31, 2001               153,258         $2.88-5.25         $4.16           4.3
------------------------------------------------------------------------------------------------------------------------
1996 PLAN:
            Outstanding at December 31, 1998               572,750         $4.50-5.44         $5.05
                       Granted                             826,000          2.88-4.94          3.72
                       Forfeited or canceled              (144,750)         3.75-5.25          4.63
                       Exercised                                 -                  -             -
            Outstanding at December 31, 1999             1,254,000          2.88-5.44          4.22
                       Granted                             463,000          2.81-3.31          3.21
                       Forfeited or canceled              (254,000)         2.88-5.25          4.24
                       Exercised                           (10,750)         3.13-3.75          3.62
            Outstanding at December 31, 2000             1,452,250          2.81-5.44          3.91
                       Granted                             233,000          4.00-6.40          6.03
                       Forfeited or canceled               (55,916)         2.88-4.00          3.46
                       Exercised                          (252,084)         2.88-5.25          3.82
            Outstanding at December 31, 2001             1,377,250         $2.81-6.40         $4.30           5.4
------------------------------------------------------------------------------------------------------------------------



1994 PLAN:
            Outstanding at December 31, 1998               271,500         $3.25-13.44        $6.83
                       Granted                              84,000           2.88-3.75         3.03
                       Forfeited or canceled               (74,000)          5.00-5.25         5.14
                       Exercised                                 -              -                 -
            Outstanding at December 31, 1999               281,500          2.88-13.44         6.13
                       Granted                              35,000                3.31         3.31
                       Forfeited or canceled               (60,500)         4.81-13.44         7.71
</TABLE>

                                      -39-
<PAGE>
<TABLE>
<CAPTION>

<S>                                                      <C>               <C>          <C>             <C>
                       Exercised                            (6,500)               2.88         2.88
            Outstanding at December 31, 2000               249,500          2.88-12.88         5.70
                       Granted                                   -                   -            -
                       Forfeited or canceled                     -                   -            -
                       Exercised                           (34,500)          2.88-3.50         3.24
            Outstanding at December 31, 2001               215,000         $2.88-12.88       $ 6.10           3.8
------------------------------------------------------------------------------------------------------------------------
1986 PLAN:
            Outstanding at December 31, 1998                64,500         $3.50-14.25       $ 5.48
                       Granted                                   -                   -            -
                       Forfeited or canceled                (7,500)              14.25        14.25
                       Exercised                                 -                  -             -
            Outstanding at December 31, 1999                57,000          3.50-10.25         4.33
                       Granted                                   -                   -            -
                       Forfeited or canceled               (50,000)               3.50         3.50
                       Exercised                                 -                   -            -
            Outstanding at December 31, 2000                 7,000               10.25        10.25
                       Granted                                   -                   -            -
                       Forfeited or canceled                (7,000)              10.25        10.25
                       Exercised                                 -                   -            -
            Outstanding at December 31, 2001                     -         $         -       $    -           -
------------------------------------------------------------------------------------------------------------------------
NONSTATUTORY STOCK OPTIONS:
            Outstanding at December 31, 1998             1,316,000         $3.75-10.50       $ 4.61
                       Granted                             150,000           3.13-4.63         4.13
                       Forfeited or canceled              (321,000)          4.63-5.38         5.05
                       Exercised                                 -                   -            -
            Outstanding at December 31, 1999             1,145,000          3.13-10.50         4.42
                       Granted                                   -                   -            -
                       Forfeited or canceled               (50,000)         3.13-10.50         4.41
                       Exercised                          (100,000)               3.75         3.75
            Outstanding at December 31, 2000               995,000          3.13-10.50         4.47
                       Granted                             400,000           3.81-6.76         4.73
                       Forfeited or canceled               (87,500)          3.81-5.25         4.34
                       Exercised                          (147,500)          3.75-5.25         4.21
            Outstanding at December 31, 2001             1,160,000         $3.13-10.50       $ 4.60           4.5
------------------------------------------------------------------------------------------------------------------------
FOR ALL PLANS:
            Outstanding at December 31, 2001             2,905,508         $2.81-12.88       $ 4.55           4.9
</TABLE>


                                      -40-
<PAGE>

<TABLE>
<CAPTION>
                       OUTSTANDING AND EXERCISABLE BY PRICE RANGE AS OF DECEMBER 31, 2001

                            OPTIONS OUTSTANDING                                       OPTIONS EXERCISABLE
-----------------------------------------------------------------------------  ----------------------------------
                                              WEIGHTED
                                               AVERAGE           WEIGHTED                            WEIGHTED
                          NUMBER              REMAINING           AVERAGE           NUMBER           AVERAGE
 RANGE OF EXERCISE     OUTSTANDING AT        CONTRACTUAL         EXERCISE       EXERCISABLE AT       EXERCISE
      PRICES              12/31/01           LIFE(YEARS)           PRICE           12/31/01           PRICE
--------------------  -----------------   ------------------   --------------  ------------------  --------------
<S>                          <C>               <C>               <C>                  <C>            <C>
        $1.43 - 2.85            75,000            5.4               2.81                 75,000         2.81
         2.85 - 4.28         1,853,083            4.9               3.61              1,236,415         3.68
           4.28-5.70           465,425            4.5               5.06                449,675         5.06
           5.70-7.13           352,000            6.4               6.27                 73,000         6.23
           7.13-8.55             9,000            2.0               7.31                  9,000         7.31
          9.98-11.40           100,000            2.6              10.50                100,000        10.50
         11.40-12.83            48,000            0.0              12.50                 48,000        12.50
         12.83-14.25             3,000            2.4              12.88                  3,000        12.88
--------------------  -----------------   ------------------   --------------  ------------------  --------------

       $1.43- 14.25          2,905,508            4.9               4.55              1,994,090         4.64
====================  =================   ==================   ==============  ==================  ==============
</TABLE>

     The Company follows the disclosure requirements of SFAS No. 123,
"Accounting for Stock-Based Compensation." The Company applies Accounting
Principles Board Opinion No. 25 and related interpretations in accounting for
its plans, as allowed under SFAS No. 123. Accordingly, no compensation cost has
been recognized for stock option and stock purchase plans. If compensation cost
for the Company's stock-based compensation plans had been determined based on
the fair value at the grant dates for awards under those plans consistent with
the method in SFAS No. 123, the Company's net income and net income per share
would have changed to the pro forma amounts (in thousands, except net income per
share amounts) indicated below.

<TABLE>
<CAPTION>
                                                        2001           2000            1999
                                                    ------------   ------------   -------------
<S>                                                     <C>            <C>             <C>
         Net income - pro forma                         $3,425         $9,697          $1,340
         Net income per share - pro forma (basic)         0.42           1.08            0.14
         Net income per share - pro forma (diluted)       0.38           1.05            0.14
</TABLE>

     The fair value of each option is estimated on the date of grant using the
Black-Scholes option-pricing model with the following assumptions:

<TABLE>
<CAPTION>
                                             2001              2000              1999
                                        ---------------   ---------------   ---------------
<S>                                          <C>               <C>               <C>
         Average expected life               4.4 years         5.0 years         7.0 years
         Risk free interest rate                 4.50%             4.95%             6.00%
         Volatility                             75.9%             75.9%             68.0%
         Dividend yield                           -                 -                 -
</TABLE>

     At December 31, 2001, in the 1997 Plan, options for 95,925 shares were
exercisable and 30,492 options were available for grant; in the 1996 Plan,
options for 848,666 shares were exercisable and 859,916 options were available
for grant; in the 1994 Plan, options for 161,999 shares were exercisable and
26,300 options were available for grant; and in the 1986 Plan, no options for
shares were exercisable.

                                      -41-
<PAGE>

     STOCK PURCHASE PLAN. The Company has established an Employee Stock Purchase
Plan ("ESPP"). Eligible employees may elect to set aside, through payroll
deduction, up to 15% of their compensation to purchase common stock of the
Company. The maximum number of shares that an eligible employee may purchase
during any offering period is equal to 5% of such employee's compensation for
the 12 calendar-month period prior to the commencement of an offering period
divided by 85% of the fair market value of a share of common stock on the first
day of the offering period. The ESPP is implemented through one offering during
each six-month period beginning January 1 and July 1. The ESPP purchase price is
85% of the lower of the fair market value of a share of common stock on the
first day or the last day of the offering period. In the offering periods ended
June 30, 2001 and December 31, 2001, employees purchased 68,465 and 57,563
shares, respectively, at prices of $2.68 and $5.02, respectively. In the
offering periods ended June 30, 2000 and December 31, 2000, employees purchased
27,221 and 43,007, respectively, at prices of $2.34 and $2.66, respectively. In
the offering periods ended June 30, 1999 and December 31, 1999, employees
purchased 11,912 and 23,641 shares, respectively, at prices of $3.51 and $2.34,
respectively. The weighted average fair market value of shares under the ESPP
was $3.75, $2.53, and $2.73 in 2001, 2000, and 1999, respectively. The Company
has reserved 750,000 shares of common stock for the ESPP, of which 344,147 were
available for future issuance as of December 31, 2001.

8.   COMMITMENTS AND CONTINGENCIES

     The Company is occasionally a defendant in litigation incidental to its
business. The Company believes that none of such litigation currently pending
against it, individually or in the aggregate, will have a material adverse
effect on the Company's financial condition or results of operations.

     As of December 31, 2001, the Company holds in its inventory approximately
$1.7 million of business intelligence software. Contractually, the Company has
the right to sell this business intelligence software to various Government
agencies through June 30, 2003. The Company purchased this software in December,
1999. Through December 31, 2001, the Company has made no sales of this product.
At this time, management believes that the Company will recover the cost of the
business intelligence software inventory through sales in the normal course of
business. If management is unable to sell the software, this would result in an
impairment of all or a portion of the $1.7 million inventory balance.

     The Company leases office and warehouse space and various equipment under
noncancelable operating leases.

     In October 1997, the Company executed a ten-year lease for an
administrative facility consisting of approximately 100,500 square feet of new
office space in Chantilly, Virginia. The agreement has one five-year option
period and commenced on December 1, 1998. The Company is obligated under the
lease agreement to provide to the landlord a letter of credit in the amount of
$2.0 million as a security deposit for all tenant requested improvements
associated with the lease. This deposit will be reduced by 10%, per year, over
the life of the lease. The Company recorded leasehold improvements in the amount
of $2.0 million, as well as a liability for deferred rent of $2.0 million in
conjunction with the build-out improvements. The asset and liability are being
amortized over the life of the lease. The Company leases a warehouse and
distribution facility in Chantilly, Virginia, in a separate 200,000 square-foot
facility under a lease expiring in December 2006. The Company also entered into
a lease agreement on April 1, 1999 for a 20,000 square-foot distribution center
in Chattanooga, Tennessee. The Company has exercised


                                      -42-
<PAGE>

its one year lease renewal option for the Chattanooga facilities effective April
1, 2001. Rent expense for the years ended December 31, 2001, 2000, and 1999 was
approximately $2.1 million, $2.0 million, and $2.1 million, respectively. The
Company also maintains a sales office in Germany and has entered into a lease
agreement as of January 1, 1999 for a term of two years ending on December 31,
2000. The Company renewed this lease commitment as of January 1, 2001 and 2002
for one year terms ending on December 31, 2001 and 2002, respectively.

     Collective future minimum lease payments as of December 31, 2001, are as
follows (in thousands):

                                                               Operating
            YEAR ENDING DECEMBER 31,                             Leases
            ------------------------                        --------------

                      2002                                   $      2,017
                      2003                                          2,041
                      2004                                          2,049
                      2005                                          2,095
                      2006                                          2,081
                      Thereafter                                    2,515
                                                            --------------

            Total minimum lease payments                     $     12,798
                                                            ==============

9.   401(K) PLAN

     Effective April 1991, the Company adopted the Employees' 401(k) Investment
Plan (the "Plan"), a savings and investment plan intended to be qualified under
Section 401 of the Internal Revenue Code of 1986, as amended (the "Code"). All
employees of the Company who are at least 21 years of age and have completed at
least six months of employment with the Company are eligible to participate. The
Plan is voluntary and allows participating employees to make pretax
contributions, subject to limitations under the Code, of a percentage (not to
exceed 15%) of their total compensation. Employee contributions are fully vested
at all times. The Company, in its sole discretion, may make contributions in
amounts, if any, as may be determined by the Board of Directors for the benefit
of all participants. In 2001, 2000, and 1999 the Company contributed a total of
$799,847, $662,164, and $242,917 to the Plan, respectively.

10.  SEGMENT REPORTING

     In June 1997, the Financial Accounting Standards Board issued SFAS No. 131,
"Disclosures about Segments of an Enterprise and Related Information," which
requires certain information about operating segments to be presented in the
financial statements and in condensed financial statements of interim periods.
The Company has determined that through December 31, 2001, it operated as one
business segment as defined by SFAS No. 131. In addition, the Company aggregates
and reports revenues from products which have similar economic characteristics
in their nature, production, and distribution process. The primary customer of
the Company is the Federal Government, which under SFAS No. 131 is considered a
single customer.


                                      -43-
<PAGE>


11.  QUARTERLY FINANCIAL DATA (UNAUDITED)

     The following tables set forth selected unaudited quarterly financial data
and the percentages such items represent of sales. The quarterly financial data
reflect, in the opinion of the Company, all normal and recurring adjustments
necessary to present fairly the results of operations for such periods. Results
of any one or more quarters are not necessarily indicative of annual results or
continuing trends.

<TABLE>
<CAPTION>
                                                                        2001 QUARTERS ENDED
                                      -----------------------------------------------------------------------------------------
                                            MARCH 31,              JUNE 30,           SEPTEMBER 30,          DECEMBER 31,
                                      --------------------- ---------------------- --------------------- -------------------------
<S>                                       <C>        <C>        <C>         <C>        <C>        <C>        <C>        <C>
(In thousands, except per share data)

Sales                                     $ 149,288  100.0%     $ 151,090   100.0%     $ 203,077  100.0%     $ 280,041  100.0%
Cost of sales                               136,523   91.4%       138,250    91.5%       186,899   92.0%       256,698   91.7%
Gross margin                                 12,765    8.6%        12,840     8.5%        16,178    8.0%        23,343    8.3%
Operating expenses                           15,358   10.3%        15,697    10.4%        14,853    7.3%        15,501    5.5%
(Loss) income from operations               (2,593)   -1.7%       (2,857)    -1.9%         1,325    0.7%         7,842    2.8%
Interest income, net                          (655)   -0.4%         (679)    -0.4%       (1,945)   -1.0%         (428)   -0.2%
(Loss) income before income taxes           (1,938)   -1.3%       (2,178)    -1.4%         3,270    1.6%         8,270    3.0%
Income tax (benefit) provision                (747)   -0.5%         (839)    -0.6%         1,260    0.6%         3,264    1.2%
Net (loss) income                           (1,191)   -0.8%       (1,339)    -0.9%         2,010    1.0%         5,006    1.8%
Net (loss) income per common share
    Basic                                 $  (0.15)             $  (0.16)              $    0.24             $    0.62
                                      =============         =============          ===============       =============
    Diluted                               $  (0.15)             $  (0.16)              $    0.22             $    0.54
                                      =============         =============          ===============       =============

Weighted average common shares
outstanding
     Basic                                    8,042                 8,157                  8,256                 8,119
                                      =============         =============         ==============         =============
     Diluted                                  8,042                 8,157                  9,225                 9,258
                                      =============         =============         ==============         =============
</TABLE>


                                      -44-
<PAGE>

<TABLE>
<CAPTION>
                                                                      2000 QUARTERS ENDED
                                    -----------------------------------------------------------------------------------------
                                          MARCH 31,              JUNE 30,           SEPTEMBER 30,          DECEMBER 31,
                                    --------------------- ---------------------- --------------------- ----------------------
(In thousands, except per share
data)

<S>                                    <C>        <C>        <C>         <C>       <C>         <C>        <C>        <C>
Sales (1) (a)                           $ 121,133  100.0%     $ 136,468   100.0%    $ 185,246   100.0%     $ 234,907  100.0%
Cost of sales (a)                         111,964   92.4%       123,929    90.8%      168,391    90.9%       213,337   90.8%
Gross margin (2)                            9,169    7.6%        12,539     9.2%       16,855     9.1%        21,570    9.2%
Operating expenses                         12,094   10.0%        11,978     8.8%       13,740     7.4%        15,504    6.6%
(Loss) income from operations             (2,925)   -2.4%           561     0.4%        3,115     1.7%         6,066    2.6%
Interest income, net                        (739)   -0.6%         (154)    -0.1%      (1,049)    -0.6%         (317)   -0.1%
(Loss) income before income taxes         (2,186)   -1.8%           715     0.5%        4,164     2.3%         6,383    2.7%
Income tax benefit                              -       -             -        -            -        -       (2,008)   -0.9%
(Loss) income prior to cumulative
effect of SAB No. 101 adoption            (2,186)   -1.8%           715     0.5%        4,164     2.3%         8,391    3.6%
Cumulative effect of SAB No. 101
Adoption                                    (467)   -0.4%             -        -            -        -             -       -
Net (loss) income (2)                     (2,653)   -2.2%           715     0.5%        4,164     2.3%         8,391    3.6%
Net income per common share
  Basic:
    Basic net (loss) income per
     share before cumulative effect
     of SAB No. 101 adoption            $  (0.24)             $    0.08             $    0.45              $    1.02
    Cumulative effect per share of
    SAB No. 101 adoption                   (0.05)                     -                     -                      -
                                        ---------             ---------             ---------              ---------
    Basic net (loss) income per
     share                              $  (0.29)             $    0.08             $    0.45              $    1.02
                                        =========             =========             =========              =========
  Diluted:
    Diluted net (loss) income per
     share before cumulative effect
     of SAB No. 101 adoption            $  (0.24)             $    0.08             $    0.45              $    1.01
    Cumulative effect per share of
    SAB No. 101 adoption                   (0.05)                     -                     -                      -
                                        ---------             ---------             ---------              ---------
    Diluted net (loss) income per
     share                              $  (0.29)             $    0.08             $    0.45              $    1.01
                                        =========             =========             =========              =========

Weighted average common shares
outstanding
    Basic                                   9,281                 9,336                 9,256                  8,219
                                        =========             =========             =========              =========
    Diluted                                 9,281                 9,351                 9,305                  8,281
                                        =========             =========             =========              =========
</TABLE>

Due to the adoption of SAB No. 101 and EITF No. 99-19, the quarterly financial
data reflected above differs from amounts previously reported in the Company's
2000 filings on Forms 10-Q as follows:

(1) Adjustment to quarterly sales of ($7,136), $7,122, and ($17,548) for the
first through the third quarter of 2000, respectively, due to the adoption of
SAB No. 101.
(2) Adjustment to quarterly gross margin and net income or loss of ($611), $441
and ($1,493) for the first through the third quarter of 2000, respectively, due
to the adoption of SAB No. 101. (a) Reclassification of $993, $7,267, $3,632,
and $1,481 in costs against sales due to the adoption of EITF No. 99-19 for the
first through the fourth quarter of 2000, respectively.


                                      -45-
<PAGE>


                            GTSI CORP. AND SUBSIDIARY

                 SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS

<TABLE>
<CAPTION>

(In thousands)                             Balance at         Charged to                               Balance
                                           Beginning           Costs and                               at end
              Description                  of Period           Expenses         Deductions (1)        of Period
----------------------------------------   ---------           --------         --------------        ---------
<S>                                        <C>                 <C>              <C>                   <C>
Year ended December 31, 2001:
          Allowance for bad debts          $   1,709           $    171         $        (467)        $   1,413

Year ended December 31, 2000:
          Allowance for bad debts          $   2,556           $    (10)        $        (837)        $   1,709

Year ended December 31, 1999:
          Allowance for bad debts          $   5,980           $   (902)        $      (2,522)        $   2,556
</TABLE>

(1)   Adjustments and amounts written off during the period.


ITEM 9.    CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
           FINANCIAL DISCLOSURE.

      None.













                                      -46-
<PAGE>

                                    PART III

ITEM 10.   DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.

       The information required by this Item is incorporated by reference to the
sections of the Registrant's definitive Proxy Statement for the Annual Meeting
of Stockholders scheduled to be held on May 9, 2002 entitled "Election of
Directors," "Executive Officers" and "Common Stock Ownership of Principal
Stockholders and Management -Section 16(a) Beneficial Ownership Reporting
Compliance," to be filed with the Commission.

ITEM 11.   EXECUTIVE COMPENSATION.

       The information required by this Item is incorporated by reference to the
sections of the Registrant's definitive Proxy Statement for the Annual Meeting
of Stockholders scheduled to be held on May 9, 2002 entitled "Election of
Directors - Compensation of Directors" and "Executive Compensation and Other
Information," to be filed with the Commission.

ITEM 12.   SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.

       The information required by this Item is incorporated by reference to the
section of the Registrant's definitive Proxy Statement for the Annual Meeting of
Stockholders scheduled to be held on May 9, 2002, entitled "Common Stock
Ownership of Principal Stockholders and Management," to be filed with the
Commission.

ITEM 13.   CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

       The information required by this Item is incorporated by reference to the
sections of the Registrant's definitive Proxy Statement for the Annual Meeting
of Stockholders scheduled to be held on May 9, 2002, entitled "Election of
Directors - Class 2 Nominees" and "Compensation of Directors" and "Executive
Compensation and Other Information-Employment Agreements and Termination of
Employment and Change of Control Arrangements," to be filed with the Commission.


                                     PART IV

ITEM 14.   EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K.

     (A)   (1)    FINANCIAL STATEMENTS


                  See the Index included in Item 8 on Page 25 of this Form 10-K.

           (2)    FINANCIAL STATEMENT SCHEDULES

                  See the Index included in Item 8 on Page 25 of this Form 10-K.

           (3)    EXHIBITS

     3.1   Restated Certificate of Incorporation (23)


                                      -47-
<PAGE>

     3.2   Bylaws, as amended (12)

     10.1  Amended and Restated 1986 Stock Option Plan, (3), including forms of
           Stock Option Agreements and Stock Purchase Agreement (1)(2)

     10.2  Employee Stock Purchase Plan, as amended to date (1)(5)

     10.3  Officer Severance Plan, as amended to date (14)

     10.4  GTSI Employees' 401(k) Investment Plan (2); and Amendment No. 1 (4);
           Amendment No. 2 and Amendment No. 3 thereto (14)

     10.5  Lease dated August 11, 1995 between the Registrant and Security
           Capital Industrial Trust covering new distribution center facility
           (14)

     10.6  Letter agreement dated January 16, 1996 between the Registrant and
           Microsoft Corporation (14)

     10.7  1994 Stock Option Plan, as amended to date (17)

     10.8  1996 Stock Option Plan (17)

     10.9  Lease dated December 10, 1997 between the Registrant and Petula
           Associates, Ltd. covering new headquarters facility (excluding
           attachments and exhibits) (17)

     10.10 Second Amended and Restated Business Credit and Security Agreement,
           dated as of July 28, 1997, among the Registrant, Certain Lenders
           Named in such agreement, and Deutsche Financial Services Corporation,
           as a Lender and as Agent (excluding attachments and exhibits) (17)

     10.11 Amendment, dated as of July 2, 1998, to Second Amended and Restated
           Business Credit and Security Agreement, dated as of July 28, 1997,
           among the Registrant, Certain Lenders Named [in such agreement], and
           Deutsche Financial Services Corporation, as a Lender and as Agent
           (21)

     10.12 Amendment, dated as of July 2, 1998, to Agreement for Wholesale
           Financing dated as of June 27, 1996, among the Registrant and
           Deutsche Financial Services Corporation (21)

     10.13 Amendment, dated as of November 24, 1999 to Second Amended and
           Restated Business Credit and Security Agreement, dated July 28, 1997,
           among the Registrant, certain lenders named in such agreement and
           Deutsche Financial Services Corp., as a Lender and Agent (22)

     10.14 Addendum, dated as of November 23, 1999 to Agreement for Wholesale
           Financing dated June 27, 1996, among the Registrant and Deutsche
           Financial Services Corp. (22)

     10.15 Amendment, dated as of November 17, 2000 to Second Amended and
           Restated Business Credit and Security Agreement, dated July 28, 1997,
           among the Registrant, certain lenders named in such agreement and
           Deutsche Financial Services Corp., as a Lender and Agent (23)


                                      -48-
<PAGE>

     10.16 Employment Agreement dated January 1, 2001 between the Registrant and
           M. Dendy Young (1)(23)

     10.17 Offer Letter dated November 29, 2000 between the Registrant and John
           T. Spotila (1)(23)

     10.18 Offer Letter dated March 29, 1999 between the Registrant and Robert
           D. Russell (1)(23)

     10.19 Separation Agreement dated October 8, 2001 between Registrant and
           Joel A. Lipkin (1)

     10.20 Offer Letter dated June 28, 2001 between Registrant and Terri Allen
           (1)

     23.1  Consent of Arthur Andersen LLP

     99    Confirmation Letter













                                      -49-
<PAGE>

(1)    Constitutes a management contract or compensatory plan or arrangement
       required to be filed as an exhibit to this Form 10-K.

(2)    Incorporated by reference to the Registrant's Registration Statement on
       Form S-1 (Registration No. 33-41351) filed with the Commission on June
       21, 1991.

(3)    Incorporated by reference to Pre-effective Amendment No. 3 to the
       Registrant's Registration Statement on Form S-1 (Registration No.
       33-41351) filed with the Commission on September 20, 1991.

(4)    Incorporated by reference to the Registrant's Registration Statement on
       Form S-8 (Registration No. 33-55090) filed with the Commission on
       November 25, 1992.

(5)    Incorporated by reference to the Registrant's Annual Report on Form 10-K
       (File No. 0-19394) for the year ended December 31, 1992.

(6)    Incorporated by reference to the Registrant's Quarterly Report on Form
       10-Q (File No. 0-19394) for the quarter ended March 31, 1993.

(7)    Incorporated by reference to the Registrant's Quarterly Report on Form
       10-Q (File No. 0-19394) for the quarter ended September 30, 1993.

(8)    Incorporated by reference to the Registrant's Annual Report on Form 10-K
       (File No. 0-19394) for the year ended December 31, 1993.

(9)    Incorporated by reference to the Registrant's Quarterly Report on Form
       10-Q (File No. 0-19394) for the quarter ended March 31, 1994.

(10)   Incorporated by reference to the Registrant's Current Report on Form 8-K
       filed with the Commission on August 31, 1994, as amended by Form 8-K/A
       No. 1 filed with the Commission on October 31, 1994.

(11)   Incorporated by reference to the Registrant's Annual Report on Form 10-Q
       (File No. 0-19394) for the year ended December 31, 1994.

(12)   Incorporated by reference to the Registrant's Current Report on Form 10-K
       (File No. 0-19394) for the year ended December 31, 1996.

(13)   Incorporated by reference to the Registrant's Current Report on Form 8-K
       filed with the Commission on January 17, 1995.

(14)   Incorporated by reference to the Registrant's Quarterly Report on Form
       10-Q (File No. 0-19394) for the quarter ended June 30, 1995.

(15)   Incorporated by reference to the Registrant's Annual Report on Form 10-K
       (File No. 0-19394) for the year ended December 31, 1995.

(16)   Incorporated by reference to the Registrant's Quarterly Report on Form
       10-Q (File No. 0-19394) for the quarter ended March 31, 1996.

(17)   Incorporated by reference to the Registrant's Annual Report on Form 10-K
       (File No. 0-19394) for the year ended December 31, 1997.

                                      -50-
<PAGE>

(18)   Incorporated by reference to the Registrant's Current Report on Form 8-K
       filed with the Commission on May 18, 1998.

(19)   Incorporated by reference to the Registrant's Current Report on Form 8-K
       filed with the Commission on May 21, 1998.

(20)   Incorporated by reference to the Registrant's Current Report on Form 8-K
       filed with the Commission on August 5, 1998.

(21)   Incorporated by reference to the Registrant's Quarterly Report on Form
       10-Q (File No. 0-19394) for the quarter ended June 30, 1998.

(22)   Incorporated by reference to the Registrant's Annual Report on Form 10-K
       (File No. 0-19394) for the year ended December 31, 1999.

(23)   Incorporated by reference to the Registrant's Annual Report on Form 10-K
       (File No. 0-19394) for the year ended December 31, 2000.

(B)    REPORTS ON FORM 8-K

No reports on Form 8-K have been filed by the Registrant during the last quarter
of the period covered by this Form 10-K.

(C)    EXHIBITS

See the list of Exhibits in Item 14(a)(3) beginning on Pages 47 of this Form
10-K.

(D)    FINANCIAL STATEMENT SCHEDULES

See the Index included in Item 8 on Page 25 of this Form 10-K.






                                      -51-
<PAGE>

                                   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, in the City of Chantilly,
Commonwealth of Virginia.

                                      GTSI CORP.

Dated:  March 29, 2002                By:   /s/ M. Dendy Young
                                           ---------------------------
                                           M. Dendy Young,
                                           Chairman and Chief Executive Officer

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

<TABLE>
<CAPTION>

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

<S>                                                  <C>                          <C>
         /s/ M. Dendy Young                          Chairman and                       March 29, 2002
------------------------------------                 Chief Executive Officer
         M. Dendy Young                              (Principal Executive Officer)
                                                     and a Director

         /s/ Robert D. Russell                       Senior Vice President and          March 29, 2002
------------------------------------                 Chief Financial Officer
         Robert D. Russell                           (Principal Financial and
                                                     Accounting Officer)

         /s/  Lee Johnson                            Director                           March 29, 2002
------------------------------------
         Lee Johnson


         /s/  Steven Kelman                          Director                           March 29, 2002
------------------------------------
         Steven Kelman, Ph.D.


         /s/  James J. Leto                          Director                           March 29, 2002
------------------------------------
         James J. Leto


         /s/  Lawrence J. Schoenberg                 Chairman Emeritus                  March 29, 2002
------------------------------------
         Lawrence J. Schoenberg


         /s/  John M. Toups                          Director                           March 29, 2002
------------------------------------
         John M. Toups


         /s/  Daniel R. Young                        Director                           March 29, 2002
------------------------------------
         Daniel R. Young
</TABLE>


                                      -52-