SECURITIES AND EXCHANGE COMMISSION
                              WASHINGTON, DC 20549

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


                                  ANNUAL REPORT
                     PURSUANT TO SECTIONS 13 OR 15(d) OF THE
                         SECURITIES EXCHANGE ACT OF 1934



                   For the fiscal year ended December 31, 1998


                           Commission File No. 0-27042



                            ALPHANET SOLUTIONS, INC.
                            ------------------------
             (Exact Name of Registrant as Specified in Its Charter)


             New Jersey                                22-2554535
             ----------                                ----------
(State of Other Jurisdiction              (I.R.S. Employer Identification No.)
of Incorporation or Organization)


               7 Ridgedale Avenue, Cedar Knolls, New Jersey 07927
               --------------------------------------------------
           (Address of Principal Executive Office, including Zip Code)


                                 (973) 267-0088
                                 --------------
                         (Registrant's telephone number
                              including area code)



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

                                      None
                                      ----




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


                          Common Stock, $.01 par value
                          ----------------------------
                                (Title of Class)


<PAGE>


         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 ]


         At February 26, 1999,  6,245,610  shares of Common Stock of the Company
were   outstanding.   The  aggregate  market  value  of  Common  Stock  held  by
non-affiliates on February 26, 1999, based on the last sales price on such date,
was approximately $13,826,800.



                       DOCUMENTS INCORPORATED BY REFERENCE


         The following  documents are incorporated by reference into this Annual
Report on Form 10-K: Portions of the Registrant's definitive Proxy Statement for
its 1999 Annual Meeting of Shareholders  are incorporated by reference into Part
III of this Report.


<PAGE>


                                TABLE OF CONTENTS

                     Item                                                  Page

PART I            1.  Business................................................2

                  2.  Properties.............................................14

                  3.  Legal Proceedings......................................14

                  4.  Submission of Matters to a Vote of Security Holders....15


PART II           5.  Market for the Company's Common Equity
                      and Related Shareholder Matters........................16

                  6.  Selected Financial Data................................17

                  7.  Management's Discussion and Analysis of
                      Results of Operations and Financial Condition..........19

                  7A. Quantitative and Qualitative Disclosure About Market
                      Risk...................................................33

                  8.  Financial Statements and Supplementary Data............33

                  9.  Changes in and Disagreements with Accountants
                      on Accounting and Financial Disclosure.................33


PART III          10. Directors and Executive Officers of the Company........34

                  11. Executive Compensation.................................34

                  12. Security Ownership of Certain Beneficial
                      Owners and Management..................................34

                  13. Certain Relationships and Related Transactions.........34


PART IV           14. Exhibits, Financial Statement Schedules
                      and Reports on Form 8-K................................35

EXHIBIT INDEX................................................................36

FINANCIAL DATA AND SCHEDULES................................................F-1

SIGNATURE

                                       1

<PAGE>


                                     PART I

Item 1.  Business.
------------------

General
-------

         AlphaNet Solutions, Inc. (the "Company") is a single-source provider of
information technology ("IT") products, services and support to Fortune 1000 and
other   large   and   mid-sized   companies   located   primarily   in  the  New
York-to-Philadelphia    corridor.    The   Company   is   authorized   by   many
industry-leading  manufacturers  of IT products,  including 3Com, Cisco Systems,
Compaq, Hewlett-Packard, IBM, Intel, Lucent Technologies, Microsoft, NEC, Nortel
Networks,  Novell and Sun  Microsystems  to resell  their  products  and provide
related services.  Such products include workstations,  servers,  networking and
communications   equipment,   enterprise   computing  products  and  application
software.  Through its  established  vendor  alliances  with Ingram Micro,  Inc.
("Ingram") and Pinacor, Inc., an affiliate of MicroAge, Inc. ("Pinacor"),  major
aggregators  of  computer  hardware  and  software,  the  Company  provides  its
customers with competitive  pricing and value-added  services such as electronic
product  ordering,  product  configuration,  testing,  warehousing and delivery.
Additionally,  since 1990, the Company has been  developing  related IT services
and  currently  offers  network  consulting,   workstation  support,  education,
application development,  communications  installation,  help desk, IT staffing,
remote network  management and  internet-related  services.  The Company's major
customers  include KPMG LLP, Nabisco,  PSE&G,  Polo-Ralph  Lauren,  Summit Bank,
Credit Suisse First Boston,  Goldman Sachs & Co., MTA New York City Transit,  an
agency  of the  Metropolitan  Transportation  Authority,  State of New York (the
"MTA"), Mercedes-Benz of North America and Innovex.

         The Company, a New Jersey  corporation,  was incorporated in 1984 under
the name AlphaTronics Associates,  Inc. In December 1995 the Company changed its
name  to  AlphaNet  Solutions,  Inc.  The  address  of the  Company's  principal
executive offices is 7 Ridgedale Avenue, Cedar Knolls, New Jersey 07927, and its
telephone number is (973) 267-0088.

         "AlphaNet  Solutions" and the Company's logo are registered  trademarks
of the Company. All other trade names,  trademarks or service marks appearing in
this Annual Report on Form 10-K are the property of their respective  owners and
are not the property of the Company.

Forward-Looking Statements
--------------------------

         Certain  statements  are  included in this  Annual  Report on Form 10-K
which are not  historical  and are  "forward-looking,"  and may be identified by
such terms as "expect", "believe", "may", "will", and "intend" or similar terms.
These forward looking  statements may include,  without  limitation,  statements
regarding the anticipated  growth in the IT products and services  markets,  the
continuation  of the  trends  favoring  outsourcing  of  management  information
systems  ("MIS")  functions by large and mid-sized  companies,  the  anticipated
growth in the services  and support  component of the  Company's  business,  the
timing of the  development  and  implementation  of the  Company's  new  service
offerings and the utilization of such services by the Company's  customers,  the
Company's objective to grow through strategic acquisitions, and trends in future

                                       2

<PAGE>

operating performance,  are forward-looking statements within the meaning of The
Private  Securities   Litigation  Reform  Act  of  1995.  Such   forward-looking
statements include risks and uncertainties,  including,  but not limited to: (i)
the substantial  variability of the Company's quarterly operating results caused
by a variety of  factors,  some of which are not within the  Company's  control,
including (a) the short-term nature of the Company's customers' commitments, (b)
patterns of capital  spending  by  customers,  (c) the  timing,  size and mix of
product  and  service  orders  and  deliveries,  (d) the  timing and size of new
projects,  (e) pricing changes in response to various competitive  factors,  (f)
market factors affecting the availability of qualified technical personnel,  (g)
the timing and customer  acceptance  of new product and service  offerings,  (h)
changes in trends  affecting  outsourcing  of IT  services,  (i)  disruption  in
sources of supply, (j) changes in product,  personnel and other operating costs,
and (k)  industry  and general  economic  conditions;  (ii) changes in technical
personnel  billing  and  utilization  rates  which are  likely  to be  adversely
affected  during  periods of rapid and  concentrated  hiring;  (iii) the intense
competition  in the markets for the Company's  products and  services;  (iv) the
Company's  ability to manage  its growth  effectively  which  will  require  the
Company to continue  developing  and  improving its  operational,  financial and
other internal systems,  including a major upgrade of the Company's internal MIS
infrastructure;  (v) the  Company's  ability to develop,  market,  provide,  and
achieve  market  acceptance  of  new  service  offerings  to  new  and  existing
customers;  (vi) the  Company's  ability to  attract,  hire,  train,  and retain
qualified technical personnel in an increasingly  competitive market;  (vii) the
Company's substantial reliance on a concentrated number of key customers; (viii)
uncertainties relating to potential  acquisitions,  if any, made by the Company,
such as its ability to integrate acquired operations and to retain key customers
and personnel of the acquired business;  (ix) the Company's dependence on vendor
authorizations  to resell  certain  computer  products  and to  provide  related
services;  (x) the Company's dependence on certain aggregators for a substantial
portion of its products acquired for resale;  (xi) the Company's reliance on the
continued  services of key executive  officers and  salespersons;  and (xii) the
possibility that the currently installed computer systems,  software products or
other  business  systems of the Company or its  distributors,  manufacturers  or
customers,  working  either  alone or in  conjunction  with  other  software  or
systems,  will not accept input of,  store,  manipulate  and output dates in the
year  2000  or  thereafter  without  error  or  interruption.   Such  risks  and
uncertainties  may cause the Company's actual results to differ  materially from
the  results  discussed  in the  forward-looking  statements  contained  in this
Report.

Industry Background
-------------------

         Many  organizations have become  increasingly  dependent on information
technology as a competitive  tool in today's business  environment.  The need to
access and distribute data on a real-time basis  throughout an organization  and
between  organizations  has  led  to  the  rapid  growth  in  network  computing
infrastructures,  which connect numerous and geographically  dispersed end users
via local and wide area  networks.  This growth has been driven by the emergence
of industry standard hardware, software and communications tools, as well as the
significant  improvement  in the  performance,  capacity  and  utility  of  such
network-based equipment and applications.

         The acquisition,  development and  implementation  of computer networks
have  become  increasingly  complex  for many  organizations  due to  rapid  and
continual change in information  technology.  Organizations must determine:  (i)
the  type  of  workstation   platform,   computer   peripherals,   and  software

                                       3

<PAGE>

applications  to  purchase  among a vast  array of product  offerings;  (ii) the
optimal design of the network,  allowing for both the integration of new systems
and the upgrade of and migration from existing  systems;  and (iii) the level of
ongoing  support  required by the network and end users. As  organizations  rely
more  heavily  on IT as a key  component  of their  operations  and as end users
demand the latest technologies,  MIS departments must continually adapt to rapid
change and the increasing complexity of designing,  implementing and maintaining
networks and related applications.

         As a result of the rapid  changes  in the IT  products  market  and the
risks  associated with large capital  expenditures,  organizations  increasingly
rely on companies which offer and have knowledge of a wide variety of networking
products  and  the  ability  to  perform   related   technical   services  in  a
cost-effective manner.  Additionally,  many businesses are increasingly electing
to outsource some or all of the management  and support of their  networks.  The
Company believes that the trend of outsourcing IT management functions is driven
by the significant costs associated with maintaining a full-service internal MIS
staff.  Such  organizations  increasingly  require MIS  personnel  with  diverse
technology skill sets to effectively adapt to such constant change. As a result,
the costs of hiring,  maintaining  and  continually  educating an MIS department
have grown  significantly  as demand for qualified  personnel  has  intensified.
These factors have  motivated  organizations  to focus their  resources on their
core  businesses and seek the expertise of independent  providers of IT products
and services.

         The Company  believes that by working with a single-source  provider of
IT  products,  services and  support,  organizations  will be able to adapt more
quickly to  technological  changes  and  reduce  their  overall IT costs.  Those
companies  which  provide  a broad  range  of  product  and  service  offerings,
including  network  consulting,   workstation  support,  education,  application
development,  communications  installation,  help desk,  IT  staffing  services,
remote network management and internet-related  services, as well as the ability
to work as integral  members of their customers'  internal MIS teams,  should be
well positioned to take advantage of the  anticipated  growth of the IT products
and services industry.

Products
--------

         The Company resells IT products from leading hardware manufacturers and
software developers.  In 1998, 68.2% of the Company's net sales and 43.2% of its
gross  profits  were  generated  from  product  sales.   Such  products  include
workstations,  servers,  networking  and  communications  equipment,  enterprise
computing  products and application  software.  Through its  established  vendor
alliances with Ingram and Pinacor,  major  aggregators of computer  hardware and
software,  the Company  provides  its  customers  with  competitive  pricing and
value-added services such as electronic product ordering, product configuration,
testing,  warehousing and delivery.  The Company resells  products from numerous
industry-leading  manufacturers  of computer  hardware,  software and networking
equipment. Such manufacturers include:


3Com                Dell               Lexmark                Oracle
APC                 Epson              Lotus                  Seagate
Apple               FORE Systems       Lucent Technologies    Storage Dimensions
AST                 Hayes              Microsoft              Sun Microsystems
Nortel Networks     Hewlett-Packard    NEC                    Sybase
Cisco Systems       IBM                Network Associates     Symantec
Citrix              Intel              Novell                 Tektronix
Compaq              Kingston           Okidata                Toshiba

                                       4

<PAGE>

         The Company obtains products from such manufacturers  primarily through
its  relationships  with Ingram and Pinacor.  The  Company's  relationship  with
Ingram and Pinacor  allow it to  minimize  inventory  risk by ordering  products
primarily on an as-needed  basis.  The Company believes that, in most instances,
the cost-plus  purchases  from Ingram and Pinacor are at prices lower than those
which could be obtained  independently from the various  manufacturers and other
vendors.  The Company  utilizes  electronic  ordering  and pricing  systems that
provide real-time status checks on the aggregators' extensive  inventories.  The
Company maintains  electronic data interchange links to other suppliers as well,
enabling the Company's sales team to schedule shipments accurately,  arrange for
product configuration services and provide online pricing.

Services
--------

         The  Company's  breadth  of  services   includes  network   consulting,
workstation  support,   education,   application   development,   communications
installation,   IT  staffing,   help  desk,   remote   network   management  and
internet-related  services.  In  1998,  services  accounted  for  31.8%  of  the
Company's net sales and 56.8% of its gross profit.

Network Consulting Services
---------------------------

         The  Company's  network  consultants  ("Network  Consultants")  provide
customers  with a wide  array  of IT and  network  consulting,  integration  and
support  services,  including network design,  implementation,  installation and
administration.  The Network  Consultants  also provide  technical  staffing and
project management services,  including LAN/WAN performance analyses, and system
migration  and  upgrade  services.  The  Network  Consultants  also  provide new
technology  feasibility  and impact  analyses,  as well as end-user  group needs
studies and analyses.  The Company provides its network  consulting  services 24
hours a day, seven days a week, on an as-needed basis.

         The Network  Consultants provide advanced network services and support,
utilizing products of many industry-leading manufacturers including 3Com, Nortel
Networks, Cisco Systems, Compaq, Hewlett-Packard,  IBM, Intel, Microsoft, Novell
and Sun  Microsystems.  The Company's  Network  Consultants  have  knowledge and
experience in such LAN/WAN  platforms as Microsoft  Windows NT, Novell  NetWare,
UNIX and IBM OS/2; and support both long and short-term  engagements at customer
locations.  As of December 31, 1998, most of the Company's  Network  Consultants
were on-site at various  customer  locations.  The Company believes that as many
large  and  mid-sized  corporations  continue  to  outsource  many of their  MIS
requirements,  there is an  opportunity  to expand the  services  it provides to
companies in its target markets.

         During the 1998 fiscal year,  the Company  instituted  a  comprehensive
management  training program for its Network Consultants  ("Screamin'  Eagles"),
pursuant to which the Company  provides  professional,  sales and  marketing and
management  development  skills.  Currently,  26 employees  participate  in this
year-long training program, which the Company believes is unique in the industry
and adds significant value to its network consulting offerings.

                                       5

<PAGE>

Workstation Support Services
----------------------------

         The Company's  workstation support personnel  ("Workstation  Analysts")
provide  customers  with a wide array of IT  services  for end users,  including
hardware and software installations,  system upgrades and enhancements, remedial
and preventive  maintenance,  and management services.  Several of the Company's
largest  customers  require the  Workstation  Analysts  to be at the  customers'
facilities  on a fully  dedicated  basis.  As of December 31, 1998,  most of the
Company's  Workstation  Analysts  were  on-site  at  customer  locations.  Other
customers of the Company  rely on the  Company's  ability to provide  dispatched
on-site services in response to customer  requests for service.  Such support is
available  24 hours a day,  seven  days a week,  depending  on the  needs of the
customer.  The Company's Customer Technology Center ("CTC") in East Hanover, New
Jersey,   allows  the  Company's   Workstation   Analysts  to  provide   product
warehousing,  customized  configuration  and  testing,  and depot,  or drop off,
repair  services.  The Company  tracks  service  requests  through its  customer
database, which maintains current status reports and historical logs of customer
communications.  The Company's capabilities include call dispatching,  tracking,
and escalation.  The Workstation Analysts also provide customized  configuration
of software  and  hardware  for  workstations  and  servers  and  perform  asset
deployment services to customer sites.

         The  Workstation  Analysts  are  authorized  by  many  industry-leading
manufacturers,  including  AST,  Compaq,  Dell,  Hewlett-Packard,  IBM,  NEC and
Toshiba,  to perform  both in- and  out-of-warranty  maintenance  services.  The
Company offers a warranty  upgrade program to provide faster response and repair
times,   additional  hours  of  coverage,   warranty   extensions  and  warranty
administration  services for customers who desire broader service offerings than
those of the  manufacturer.  Most of the  Workstation  Analysts  employed by the
Company are "A+  Certified".  The A+  Certification  Program is sponsored by the
Microcomputer Industry Association and is recognized by leading manufacturers as
the industry-wide standard of professional  competency for Workstation Analysts.
The  Company's  Workstation  Analysts  service and support a wide  variety of IT
products, including microcomputers, printers and associated peripherals.

Education Services
------------------

         The Company operates five education  facilities  ("Learning  Centers"),
offering  technical  education courses for customers,  employees and the general
public.  The Company's Learning Centers offer authorized  Microsoft,  Novell and
Lotus training classes on network operating  systems,  network hardware products
and application  software.  These Learning  Centers are utilized by a variety of
customers  including network  administrators,  MIS executives,  professional and
administrative end users, as well as the Company's own technical staff.

         The Company is a Microsoft  Authorized  Technical  Education Center and
provides   advanced   education   courses   which  lead  to  various   Microsoft
certifications  based on  specific  areas of  technical  expertise.  Novell  has
designated the Company as a Novell Authorized Education Center to offer training
to NetWare,  UnixWare and  GroupWise  engineers  and  administrators.  Through a
series of exams,  these  professionals  have the  opportunity  to obtain various
levels  of Novell  Certifications.  The  Company  is also  certified  as a Lotus
Authorized   Education   Center   and   provides   training   for  Lotus   Notes

                                       6

<PAGE>

administrators, developers and end users. Additionally, the Company participates
with another training organization to provide Cisco training classes for network
administrators,  network  specialists and engineers who configure and/or support
multiple protocol  internetworks.  The Learning Centers are Prometric Authorized
Testing Centers which provide  independent  testing  services  required for many
training courses that lead to various industry certifications.

         The  Learning  Centers  provide  ancillary  benefits  to  the  Company,
reducing the cost to train Network Consultants, Help Desk Analysts,  Application
Development  Consultants  and Workstation  Analysts,  providing the Company with
highly trained  individuals.  The Company believes that its education  services,
coupled  with its IT  staffing  services,  provide  it with a  talented  pool of
available  Network  Consultants,  Help Desk  Analysts,  Application  Development
Consultants and Workstation Analysts.

Application Development Services
--------------------------------

         As part of an  enterprise  management  solution,  the Company  provides
application  development  consulting services,  including customized application
design and  development,  enterprise  resource  planning,  object  oriented  and
client/server  development,  and database  development  services.  The Company's
staff of Application  Development  Consultants are highly trained  professionals
with extensive  experience in proven  methodologies for application  development
and project management. When developing applications, specific methodologies are
implemented for successful and timely completion of all projects.  The Company's
staff of Application Development Consultants assist customers through all phases
of  the   application   development   process   including   gathering   business
requirements, writing specifications, programming, testing and documenting.

Communications Installation Services
------------------------------------

         As part of its strategy to offer customers a single-source solution for
their IT needs, the Company provides  telecommunications and data system cabling
services, often in conjunction with other services. The Company's communications
technicians  are  certified  by  Berk-Tek,  Ortronics,  Leviton or Hubbell.  The
Company's  communications engineers design and install cabling networks for LANs
and telecommunication equipment, including voice, data and video.

         Additionally,    the   Company    sells,    installs    and    services
telecommunications  systems  including  the full  line of  Lucent  Technologies'
Enterprise  Communications  Systems.  The Company frequently  coordinates with a
regional   telephone   service   company  to  provide  for  customers'   service
requirements.

Help Desk Services
------------------

         The Company's Help Desk offers two distinct services, Help Desk Support
and Help Desk Consulting, providing advanced technical support and comprehensive
software  application support to corporate  end-users.  The Help Desk is staffed
with experienced  network consultants ("Help Desk Analysts") trained in multiple
software, hardware and networking products.

         Help Desk Support provides  corporate  end-users with telephone support
on software,  hardware and networking products.  Help Desk Support is capable of
providing  global  coverage  and its  breadth  of  services  includes  automatic

                                       7

<PAGE>

dispatching of on-site support,  flexible  staffing for coverage 24 hours a day,
seven days a week and advanced call reporting.

         The Company tracks and maintains Help Desk Support service calls with a
customized call management system.  This system allows the Help Desk Analysts to
provide advanced support and dispatch on-site  services.  The Help Desk Analysts
coordinate  with major vendor support systems on a regular basis and have access
to large  volumes of technical  information  and  documentation,  personnel  and
diagnostic techniques.

         The  Company's  Help Desk  Consulting  services  help  customers  fully
realize the benefits of their own internal Help Desk. The Company  establishes a
solutions-oriented  support  system  which  encompasses  a  phased  approach  to
analyzing,  designing  and building  complete Help Desks.  Help Desk  Consulting
services  includes a support system audit,  development  of a strategic  design,
integration of the solution and post-implementation review.

IT Staffing Services
--------------------

         The Company  offers  recruiting  and  placement  services for technical
personnel for temporary  assignments  and permanent  positions. 

Internet Services
-----------------

         The  Company  provides  internet-related  services,   including  secure
Internet access, web site design,  development and maintenance and training.  As
an  Internet  Service   Provider,   the  Company's   customers'  web  sites  are
independently  maintained  on a  secure  network  using  technologies  including
firewalls  and  encryption  devices.  Additionally,  the  Company  provides  the
necessary  consulting,  hardware  and  software  installation  services  so  the
customer has direct access to the Internet while maintaining the web site at the
customer's location.

         The  Company  offers  web  site  design,  development  and  maintenance
services,  including user interface  design,  web site graphic  design,  content
creation and management. Through customized courses at its Learning Centers, the
Company  also  provides   Internet  training  classes  on  Internet  access  and
navigation.

Remote Network Management Services
----------------------------------

         As part of its  overall  mission to offer  complete IT  solutions,  the
Company's  Remote  Network   Management  Center   ("Center"),   located  at  its
headquarters in Cedar Knolls,  New Jersey,  provides remote network  monitoring,
resolution  management,  performance  reporting,  desktop  management and system
administration  services  by  means  of  dedicated  communication  links  to its
customers' networks. As a single-point-of-contact  installation, the Center is a
central  component of the Company's total system  management and support service
offerings.  The Center is  operational  24 hours a day, seven days a week and is
staffed with highly trained and experienced Network Consultants.

<PAGE>

         The  Center  offers  proactive  problem  resolution  by (i)  monitoring
components of a customer's network,  including file servers,  routers,  database
servers, concentrators,  workstations and printers; (ii) managing the customers'
networks to maximize their  efficiency and minimize  system  downtime,  promptly
notifying  customers of problems as they occur and remedying such problems.  The
customers then focus on their own core business,  while the Company monitors and
manages  the  day-to-day  operations  of  the  customers'  network.  The  Center
represents the Company's  continued  investment in  leading-edge  technology and
dedication to providing its customers with advanced IT solutions.

         The Company  provides  end-to-end  network services to remote locations
from a single  point in New  Jersey.  The  Center  will  allow  the  Company  to
productize and market its services to virtually any networked organization.  The
high  demand  for  technical  resources,  coupled  with an  increasing  need for
operational  efficiency and network  security,  will lead many  organizations to
explore  remote  network  service  options  as a way  to  maximize  their  labor
resources and ensure greater security,  while realizing cost savings at the same
time.

Sales and Marketing
-------------------

         The Company  currently focuses its sales and marketing efforts on major
corporations in its target markets  through its sales and marketing  departments
consisting of 114 people as of December 31, 1998. The Company  believes that its
direct sales and support personnel  provide  effective  account  penetration and
management,   enhanced  communications  and  long-term  relationships  with  its
existing  customers.  To date,  the Company has focused its sales and  marketing
efforts  on  Fortune  1000 and  other  large  and  mid-sized  companies  located
primarily in the New  York-to-Philadelphia  corridor. Given the concentration of
major  corporations  in such region and the trend to outsourcing of IT services,
the Company does not anticipate  the need to expand the geographic  scope of its
sales and marketing  efforts outside of its  traditional  sales area in the near
future.

         The Company  has  concentrated  its efforts  over the past few years on
increasing  the size and quality of its direct sales force,  expanding its sales
support  infrastructure  and  developing  a marketing  department  dedicated  to
supporting the efforts of the Company's  various  business units.  The Company's
direct  sales force is  comprised  of 49 sales  persons as of December 31, 1998.
Each  salesperson's  compensation is commission  based.  Sales personnel  derive
sales leads from individual business contacts,  leads generated by the marketing
department's efforts and customer referrals from suppliers and vendors.

         The Company  continues to support the growth of its network  consulting
and other services  businesses through the hiring of additional direct sales and
support  personnel.  The  Company's  sales and marketing  focus  continues to be
technology  driven,  with  its  Network  Consultants  and  Workstation  Analysts
participating  with its direct  sales  personnel as part of the  Company's  team
approach to sales.  The Company's sales  personnel also  participate in training
programs  designed by manufacturers to introduce their new and upgraded products
as well as to provide industry information and sales technique instruction.  The
Company  believes  that it  maintains a  competitive  advantage  by  continually
educating its sales force on the latest  technologies  and through the increased
role of high-level technical personnel in the sales process.

<PAGE>

         The Company's marketing  department is responsible for coordinating the
various  sales and  technical  personnel  that may be required in  soliciting  a
particular  project.  The Company's  marketing  efforts include the creation and
production of Company  brochures,  direct mail programs,  new business marketing
strategies and sales presentation materials for prospects.

Customers
---------

         The Company's major customers include many Fortune 1000 corporations in
a variety of industries. The Company's major customers include:

       KPMG LLP                              Credit Suisse First Boston
       Nabisco                               Goldman, Sachs & Co.
       PSE&G                                 MTA of New York
       Polo-Ralph Lauren                     Mercedes-Benz of North America
       Summit Bank                           Innovex

         During 1998, KPMG LLP accounted for  approximately 15% of the Company's
net sales.  During the fiscal  year ended  December  31,  1997,  two  customers,
Nabisco and KPMG LLP,  accounted  for  approximately  31% of the  Company's  net
sales,  16% and 15%,  respectively.  During the fiscal year ended  December  31,
1996,  Nabisco  accounted for  approximately  17% of the Company's net sales. No
other customer accounted for more than 10% of the Company's net sales during the
three years ended  December 31, 1998.  Sales to the  Company's top ten customers
totaled  approximately  63%,  69% and 66% of net sales for the three years ended
December 31, 1998,  respectively.  In December 1997, the Company  entered into a
four-year,  $20.4 million  contract ("MTA Contract") with the MTA to furnish and
install local and wide-area  computer  network  components  throughout the MTA's
over 200 locations,  including subway stations, electrical power substations and
a  diverse  group  of  train  car  maintenance  facilities.   See  "Management's
Discussion and Analysis of Results of Operations and Financial Condition."

         In general,  there are no ongoing  written  commitments by customers to
purchase products from the Company. All product sales by the Company are made on
a purchase order basis. In addition,  the Company normally ships products within
30 days of  receiving  an order  and,  therefore,  does not  customarily  have a
significant backlog. However, in December 1997, the Company entered into the MTA
Contract,  under  which the  Company  is the prime  contractor  responsible  for
project management, systems procurement and installation.

         A  significant  reduction in orders from any of the  Company's  largest
customers  could  have a material  adverse  effect on the  Company's  results of
operations.  There can be no assurance that the Company's largest customers will
continue to place orders with the Company, or that orders by such customers will
continue at their previous  levels.  Although the Company has service  contracts
with many of its customers to provide  systems  integration  and other services,
such service  contracts  generally are terminable upon relatively  short notice.
There can be no assurance that the Company's  service customers will continue to
enter into service  contracts  with the Company or that existing  contracts will
not be terminated.

                                       10

<PAGE>

Suppliers
---------

         The  Company  relies  on  manufacturers  and  aggregators  of  computer
hardware, software and peripherals to develop, manufacture and supply all of the
computer  components  sold and  serviced by the Company.  The Company  primarily
utilizes  Ingram  and  Pinacor,  major  aggregators  of  computer  hardware  and
software, to procure the majority of its products for resale to its customers.

         The Company has  purchased  products on a cost-plus  basis from Pinacor
since the  Company's  inception in 1984. In July 1994,  the Company  renewed its
agreement  with  Pinacor.  Under such  agreement,  the  Company is  required  to
purchase a minimum of $100,000  of products  from  Pinacor per  quarter.  During
1996, 1997 and 1998, the Company purchased from Pinacor  approximately  48%, 36%
and 29%,  respectively,  of the  products  sold by the Company.  Such  purchases
totaled  approximately $46.3 million,  $47.0 million,  and $ 30.1 million during
such respective periods.  The Pinacor agreement may be terminated by the Company
with or without cause upon 90 days prior written notice and may be terminated by
Pinacor  under limited  circumstances  upon 90 days prior  written  notice.  The
Company also purchases  computer  products from Ingram on a cost-plus basis. The
Company's  relationship with Ingram was initiated by the Company in late 1994 to
help ensure its customers of product  availability and competitive  pricing. The
Company's  purchases from Ingram accounted for approximately 35%, 50% and 47% of
the Company's total product purchases in 1996, 1997 and 1998, respectively. Such
purchases totaled  approximately $33.9 million,  $65.1 million and $48.4 million
during such respective periods. The agreement with Ingram may be terminated with
or  without  cause by  either  party  upon 30 days  prior  written  notice.  The
Company's  agreements with Pinacor and Ingram provide for discounted pricing and
rebates provided that the Company meets agreed-upon  purchase level targets. The
balance of the Company's purchased products were obtained from multiple sources,
none of which accounted for 10% or more of the products sold by the Company.

         In  addition to its  agreements  with  Pinacor and Ingram,  the Company
maintains standard authorized  dealership  agreements directly with many leading
manufacturers  of  computer  hardware  and  software.  Under  the terms of these
agreements,  the  Company  is  authorized  to resell  to end  users and  provide
warranty service on the products of such manufacturers.  The Company's status as
an authorized  reseller is essential to the operation of the Company's business.
In  general,  the  agreements  do not  require  minimum  purchases  and  include
termination provisions ranging from immediate termination to termination upon 90
days prior written notice.  Many of such agreements are based upon the Company's
continued  relationships  with  authorized  aggregators.  The Company,  however,
generally does not purchase products directly from these  manufacturers  because
the Company believes that Pinacor and Ingram provide it with several advantages,
including   competitive   pricing,   limited   inventory  risk,   ready  product
availability, product quality assurance, access to the various vendors which may
be  required on a  particular  project,  electronic  product  ordering,  product
configuration,  testing and  warehousing.  The Company has not entered  into any
long-term contracts with its suppliers, electing to purchase computers, computer
systems,  components and parts on a purchase order basis. As a result, there can
be no assurance  that such products will be available as required by the Company
at prices or on terms acceptable to the Company.

                                       11

<PAGE>

Competition
-----------

         The markets for the Company's  products and services are  characterized
by intense  competition.  The Company  believes that the  principal  competitive
factors in the market for IT  products  and  services  include  price,  customer
service,  breadth  of  product  and  service  offerings,  product  availability,
technical expertise, the availability of skilled technical personnel,  adherence
to  industry  standards,  financial  stability  and  reputation.  The  Company's
competitors  include established  computer product  manufacturers (some of which
supply products to the Company), distributors,  aggregators,  computer resellers
(many of which are able to purchase  products at prices lower than the Company),
systems integrators and IT service providers.  Many of the Company's current and
potential  competitors  have longer  operating  histories and financial,  sales,
marketing, technical and other resources substantially greater than those of the
Company.  As a  result,  the  Company's  competitors  may be able to adapt  more
quickly to changes in customer  needs or to devote  greater  resources  than the
Company to the sales of IT  products  and the  provision  of IT  services.  Such
competitors  could also  attempt to increase  their  presence  in the  Company's
markets by forming  strategic  alliances with other  competitors or customers of
the  Company,  offer new or improved  products  and  services  to the  Company's
customers or increase  their  efforts to gain and retain  market  share  through
competitive  pricing.  As  the  market  for  IT  products  has  matured,   price
competition  has  intensified  and is likely to  continue to  intensify  and has
resulted in continued  industry-wide  downward  pricing  pressure.  In addition,
competition  for  quality  technical   personnel  has  continued  to  intensify,
resulting  in  increased  personnel  costs for many IT service  providers.  Such
competition in IT products and services has adversely affected,  and likely will
continue to adversely affect,  the Company's gross profits,  margins and results
of operations. Furthermore, the Company believes there are low barriers to entry
into its markets which enable new  competitors to offer  competing  products and
services. There can be no assurance that the Company will be able to continue to
compete successfully with existing or new competitors.

         The Company believes that it competes with its competitors by providing
a  single-source  solution for its customers' IT products and services needs and
by providing a wider range of high quality  services to the MIS  departments and
end  users  of its  corporate  customers.  The  Company  also  believes  that it
distinguishes  itself  from  its  competition  on the  basis  of  its  technical
expertise, competitive pricing, vendor alliances,  relationships with Ingram and
Pinacor,  direct sales strategy and customer service  orientation.  Based on the
level of the Company's recurring business with many of its large customers,  the
Company  believes  that it compares  favorably to many of its  competitors  with
respect to the principal competitive factors set forth above.

Employees
---------

         As of December 31, 1998, the Company employed 694 full-time  employees,
of whom 483 were technical personnel (consisting of 331 Network Consultants, 123
Workstation  Analysts,  18 Communications  Technicians and 11 Instructors),  114
were  engaged  in  sales  and  marketing,   and  97  were  engaged  in  finance,
administration and management.  The total number of technical  personnel engaged
by the Company has grown  significantly in recent years, from 38 at December 31,
1992, or 36% of its then  workforce,  to 483 at December 31, 1998, or 70% of its
current workforce.  There was, however, a reduction in technical personnel as of
December 31, 1998 compared to December 31, 1997 of 62 technical  personnel.  The
Company implemented a reduction-in-force in June 1998 due to lower-than-expected
demand for the Company's services from certain clients. In addition,  in January
1999,  the Company  implemented  a second  reduction,  eliminating  42 positions
consisting principally of persons supporting products.

                                       12

<PAGE>

         None  of  the  Company's  employees  are  represented  by a  collective
bargaining agreement. Substantially all of the Company's employees have executed
an invention assignment and confidentiality  agreement. In addition, the Company
requires  that all new  employees  execute  such  agreement  as a  condition  of
employment by the Company.  The Company  believes that it has been successful in
attracting and retaining skilled and experienced personnel.  There is increasing
competition  for  experienced  sales  and  marketing   personnel  and  technical
professionals. The Company considers relations with its employees to be good.

         The Company's success depends in part on its ability to attract,  hire,
train and  retain  qualified  managerial,  technical  and  sales  and  marketing
personnel,  particularly for systems integration, support services and training.
Competition with other service providers and internal  corporate MIS departments
for such personnel is intense,  as many of the Company's larger  competitors are
aggressively  hiring  technical  personnel  on a large  scale.  There  can be no
assurance  that the Company will be successful  in attracting  and retaining the
technical   personnel   it  requires  to  conduct  and  expand  its   operations
successfully.  The  Company's  ability to  implement  its strategy to expand and
broaden the services  component  of its  business and its results of  operations
could be  materially  adversely  affected if the Company were unable to attract,
hire, train and retain qualified technical personnel.

                                       13

<PAGE>


Item 2.  Properties.
--------------------

     The  Company  currently  leases or  subleases  all of its  facilities.  The
Company  leases  its  headquarters  in  Cedar  Knolls,   New  Jersey,   totaling
approximately  54,000 square feet of office  space,  of which 16,000 square feet
was  subleased  to the Company in fiscal 1998  pursuant to a sublease  agreement
expiring in  September  2000.  The lease for the  remaining  38,000  square feet
expires in  September  2003 and  contains  renewal  options  for two  additional
five-year  terms.  In addition,  during fiscal 1998, the Company  entered into a
lease for approximately 4,700 square feet of space at a facility adjacent to the
Company's  headquarters,  which space the Company has subsequently  sublet.  The
Company  also leases a facility in  Parsippany,  New Jersey,  which totals 5,253
square  feet which the  Company  has  sublet  pursuant  to a sublease  agreement
expiring in May 2001.  Additionally,  the Company  leases  office  space for two
Learning Centers in Iselin and Saddle Brook,  New Jersey,  as well as its 15,000
square foot Customer Technology Center located in East Hanover,  New Jersey. The
Company  leases  approximately  5,410  square  feet of  office  space in King of
Prussia,  Pennsylvania  for the  Company's  Philadelphia-area  sales  office and
Learning Center.  In addition,  the Company leases  approximately  19,000 square
feet of office  space in  Manhattan  for its New York City area sales office and
Learning  Center,  approximately  9,400  square feet of which space has recently
been sublet.  The Company  believes its  headquarters,  sales offices,  Learning
Centers and Customer Technology Center are adequate to support its current level
of operations. See Note 8 of Notes to Consolidated Financial Statements.

Item 3.  Legal Proceedings.
---------------------------

     On February 13, 1996, the Company, as plaintiff, filed a complaint and jury
demand in the Superior  Court of New Jersey  Chancery  Division:  Morris County,
against  two  former  employees  of  the  Company  and  their  current  employer
(together,  the  "Defendants").  Such  complaint  relates to a civil  action for
damages, a temporary  restraining order and preliminary and permanent injunctive
relief against the  Defendants  and alleges theft of services,  theft of Company
property,  theft of corporate opportunity and unauthorized use of Company credit
cards by the Defendants.  The Company is seeking restitution from certain of the
Defendants  and  additional  compensatory  damages from another  Defendant.  The
Defendants have asserted certain  counterclaims  against the Company and certain
of its directors  with respect to which the Company and such  directors  believe
they have  meritorious  defenses.  The Company intends to vigorously  pursue all
available  remedies  against  the  Defendants.  The  parties  consented  to  the
suspension of discovery pending mediation of all claims.  Therefore, the Company
is currently  unable to evaluate the  likelihood of a favorable  outcome for the
Company. The Company believes that some or all of its damages in connection with
the  litigation  may be  covered by  insurance.  In any  event,  Stan Gang,  the
Company's  Chairman  of the Board,  President  and Chief  Executive  Officer and
principal  shareholder,  has agreed to  indemnify  the  Company  for any and all
losses which the Company may sustain, up to $1,000,000, arising from or relating
to the alleged wrongful conduct of the Defendants.  In connection therewith, Mr.
Gang has paid  $675,000 of his personal  funds to the Company.  The Company will
reimburse  Mr.  Gang in the event and to the extent  that the Company is awarded
and  collects  damages  from the  Defendants,  receives  sums as a  result  of a
settlement between the Company and the Defendants, or receives proceeds under an
insurance policy.

                                       14

<PAGE>

   On June 30, 1998,  Bruce  Flitcroft  ("Flitcroft"),  the  Company's  former
Corporate Vice President,  Technology Services, filed suit in the Superior Court
of New Jersey, Morris County, against the Company and its Chairman of the Board,
President  and CEO  alleging,  among  other  things,  breach by the  Company  of
Flitcroft's  employment  agreement  and failure to pay an alleged  bonus arising
from the Company's 1990 acquisition of Datar IDS Corp.  and/or pay,  pursuant to
an alleged oral promise, an alleged one million-dollar severance payment in lieu
of such bonus.  The Company  believes  Flitcroft's  claims are without merit and
intends to fully and vigorously  defend such claims while pursuing all available
remedies.  On July 16, 1998,  without  knowledge of the suit filed by Flitcroft,
the  Company  filed  suit  against  Flitcroft  and  Alliant  Technologies,  Inc.
("Alliant"),  a company  believed  to be owned  and/or  operated  by  Flitcroft,
alleging,  among  other  things,  breach of  contract  and  conspiracy  to usurp
corporate assets and opportunities.  The Company seeks to enforce its employment
agreement with Flitcroft  including (i) enjoining  Flitcroft's  employment  with
Alliant;  (ii) Flitcroft's  solicitation of Company  employees;  (iii) Flitcroft
from  disclosing  Company  confidential  information;  and (iv)  Flitcroft  from
soliciting Company customers.  The Court has directed  arbitration of the claims
in dispute in this  matter,  and such  arbitration  proceedings  commenced as of
March 1999. The Company has obtained  insurance  coverage for some of the claims
in dispute.  The Company's  Board of Directors  authorized the Company to defend
the Chairman, President and CEO and approved his indemnification by the Company.
Given the  preliminary  nature of this matter,  the Company cannot  determine at
this time whether its  resolution or the expenses  likely to be incurred in this
matter will have a material adverse impact on the Company's  financial position,
results of operations or cash flow.

     To the Company's  knowledge,  there is no other material litigation pending
to which the Company is a party or to which any of its property is subject.


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

         No matter was  submitted to a vote of the security  holders  during the
fourth quarter of the fiscal year ended December 31, 1998.

                                       15

<PAGE>

                                     PART II


Item 5.  Market for the Company's Common Equity and Related Shareholder Matters.
--------------------------------------------------------------------------------

     The Company's  Common Stock is traded on the Nasdaq  National  Market under
the symbol ALPH. The following table sets forth, for the periods indicated,  the
high and low sales  prices per share of Common  Stock as  reported by the Nasdaq
National Market.


Quarter ended
-------------
                                     1997                        1998
                               High       Low               High       Low
---------------------------   -------   -------           -------    ---------
March 31 (1st qtr.)           $17 1/4   $11 3/4           $14 5/8    $11 1/2

June 30 (2nd qtr.)             20 1/2     11 7/8            14 3/8     9 1/2

September 30 (3rd qtr.)        17 7/8     13 1/4            11 3/8     4 3/8

December 31 (4th qtr.)         15 7/8      9 5/8             5 7/8     2 7/8


         The prices shown above represent  quotations among securities  dealers,
do not include retain  markups,  markdowns or commissions  and may not represent
actual transactions.

         On February  26,  1999,  the closing sale price for the Common Stock on
the Nasdaq  National  Market was $4.00 per share.  As of February 26, 1999,  the
approximate  number of  holders  of record of the  Common  Stock was 335 and the
approximate number of beneficial holders of the Common Stock was 3,900.

         Prior to the  consummation of the Company's  initial public offering of
its Common  Stock in March  1996,  the Company had elected to be treated as an S
Corporation  for federal  income tax purposes from 1986 and for New Jersey State
income tax purposes  from 1994.  As a result,  the net income of the Company for
federal and certain  state income tax purposes for such periods was reported by,
and taxed  directly to, the  Company's  then current  shareholders.  In 1995 and
1996,  the  Company  made  distributions  to such  shareholders  in the  form of
dividends ($8.6 million) and net loan payments  ($719,000) totaling $9.3 million
(of which $3.1 million was to fund their 1994, 1995 and 1996 tax liabilities and
$6.2 million represented substantially all of the Company's previously taxed but
undistributed  S  Corporation  earnings).  See Note 10 of Notes to  Consolidated
Financial  Statements.  Since  such  distributions  and the  termination  of the
Company's S Corporation status, the Company has applied and currently intends to
continue to apply its retained and current  earnings toward the  developments of
its business and to finance the growth of the Company. Consequently, the Company
currently does not anticipate  paying cash dividends in the foreseeable  future.
See "Management's Discussion and Analysis of Results of Operations and Financial
Condition - Liquidity and Capital Resources."

                                       16

<PAGE>


Item 6.  Selected Financial Data.
---------------------------------

     The selected  consolidated  financial data presented below has been derived
from  the   consolidated   financial   statements  of  the  Company  audited  by
PricewaterhouseCoopers LLP, independent accountants. Consolidated balance sheets
at December 31, 1997 and 1998 and the related consolidated statements of income,
changes in  shareholders'  equity and cash flows for each of the three  years in
the period ended  December 31, 1998 and notes thereto  appear  elsewhere in this
Annual  Report on Form 10-K.  The selected  financial  data  presented  below at
December 31, 1994,  1995 and 1996 and for the years ended  December 31, 1994 and
1995 has been derived from audited  financial  statements of the Company,  which
are not included in this Annual Report on Form 10-K.

     The selected consolidated  financial data set forth below should be read in
conjunction   with,   and  is  qualified  in  its  entirety  by,  the  Company's
consolidated financial statements, related notes and other financial information
included elsewhere in this Annual Report on Form 10-K.

                                       17

<PAGE>

<TABLE>
<CAPTION>



                                                            Year Ended December 31,
                                        -----------------------------------------------------------------
                                                  1994        1995      1996(1)     1997(2)     1998
                                                      (in thousands, except per share data)
   <S>                                        <C>         <C>          <C>         <C>        <C>
   Statement of Income Data:
   Net sales:
     Product sales.....................       $ 62,365    $ 62,516     $ 99,468    $147,602    $116,908
     Services and support..............          8,103      11,500       20,137      43,790      54,628
                                                 -----      ------       ------      ------      ------
                                                70,468      74,016      119,605     191,392     171,536
                                                 -----      ------       ------      ------      ------
   Cost of sales:                                                 
     Product sales.....................         54,445      54,579       88,218     130,314     103,522
     Services and support..............          5,127       6,869       12,915      29,013      37,058
                                                 -----      ------       ------      ------      ------
                                                59,572      61,448      101,133     159,327     140,580
                                                 -----      ------       ------      ------      ------
   Gross profit:                                                  
     Product sales.....................          7,920       7,937       11,250      17,288      13,386
     Services and support..............          2,976       4,631        7,222      14,777      17,570
                                                 -----      ------       ------      ------      ------
                                                10,896      12,568       18,472      32,065      30,956
                                                 -----      ------       ------      ------      ------
   Operating expenses:                                            
     Selling expenses..................          3,946       4,468        7,301      13,224      14,602
     General and administrative                  3,767       3,925        5,446       9,537      12,903
   expenses............................
     Write-off  of capitalized asset (3)           -           -            -           -         2.476
                                                 -----      ------       ------      ------      ------
                                                  7713        8393       12,747      22,761      29,981
                                                 -----      ------       ------      ------      ------
   Operating income....................          3,183       4,175        5,725       9,304         975
   Other income (expense), net.........           (107)        (86)         129          61         359
                                                 -----      ------       ------      ------      ------
   Income before income taxes..........          3,076       4,089        5,854       9,365       1,334
   Provision for income taxes(4).......             89         124        1,970       3,844         623
                                                 -----      ------       ------      ------      ------
   Net income..........................         $2,987      $3,965      $ 3,884     $ 5,521       $ 711
                                                ======      ======       ======      ======      ======
   Earnings per share - Basic..........         $ 0.88      $ 1.17       $ 0.83      $ 0.97      $ 0.11
                                                ======      ======       ======      ======      ======
   Weighted average shares outstanding.          3,400       3,400        4,690       5,719       6,272
                                                ======      ======       ======      ======      ======

   Earnings per share - Diluted........         $ 0.88      $ 1.17       $ 0.82     $ 0.93       $ 0.11
                                                ======      ======       ======      ======      ======
   Weighted average shares outstanding.          3,400       3,400        4,737      5,905        6,331
                                                ======      ======       ======      ======      ======

<CAPTION>

                                                               As of December 31,
                                         ----------------------------------------------------------------
                                                  1994       1995          1996         1997       1998
                                                  ----       ----          ----         ----       ----
                                                                (in thousands) 
   Balance Sheet Data:
     Working capital....................        $4,524     $5,033      $14,407      $33,123     $35,375
     Total assets.......................        16,697     18,770       43,647       72,541      61,894
     Long term debt and capital lease
   obligations,                                  1,455        590           41          -            49
       less current portion.............
     Shareholders' equity...............         3,909      6,574       18,921       41,722      42,536

</TABLE>

(1) On July 24, 1996, the Company  acquired  certain assets of Lior,  Inc., in a
    business  combination  accounted  for under the  purchase  method,  for $1.1
    million,  including  acquisition  costs,  financed  with  a  portion  of the
    proceeds from the Company's initial public offering.  The operations related
    to the acquired assets of Lior are included in the accompanying consolidated
    financial  statements  subsequent  to July 24, 1996.  See Note 2 of Notes to
    Consolidated Financial Statements.

(2) On August 1, 1997, the Company consummated the acquisition of certain assets
    and assumed  certain  liabilities  of the Lande  Group,  Inc.  ("Lande"),  a
    computer  equipment reseller and provider of systems  integration  services,
    for $1.5 million,  including  acquisition  costs.  The original  acquisition
    price was $1.8 million,  subsequently reduced by the return of $250,000 held
    in escrow.  The operations related to the acquired assets and liabilities of
    Lande are included in the  accompanying  consolidated  financial  statements
    subsequent to August 1, 1997. See Note 2 of Notes to Consolidated  Financial
    Statements.

(3) Reflects a one-time  write-off of capitalized  software and consulting  fees
    associated  with  the  Company's  termination  of an  integrated  accounting
    software program and implementation thereof.

(4) Prior to March 19,  1996,  the  Company  had  elected  to be treated as an S
    Corporation  for federal and, in certain  cases,  state income tax purposes.
    Therefore, no provision for federal and a reduced provision for state income
    taxes was recorded prior to that date. See Note 10 of Notes to  Consolidated
    Financial Statements.

                                       18

<PAGE>

Item 7. Management's Discussion and Analysis of Results of Operations and 
        Financial Condition.
-------------------------------------------------------------------------

General
-------

     The  Company is a  single-source  provider  of IT  products,  services  and
support  to  Fortune  1000 and  other  large  and  mid-sized  companies  located
primarily in the New  York-to-Philadelphia  corridor.  The Company was formed in
1984 as an authorized  reseller of computer hardware and software products,  and
since 1990 has been developing and offering  related IT services.  To date, most
of the Company's net sales have been derived from IT product sales. In 1998, net
product  sales were 68.2% and  services  and  support  revenue  was 31.8% of the
Company's  net sales,  compared with net product sales of 77.1% and services and
support revenue of 22.9% in 1997.

     The  Company  has  entered  into  distribution  agreements  with Ingram and
Pinacor,  two of the  nation's  largest  aggregators,  to acquire most of its IT
products for resale.  The Company's  relationship with Pinacor commenced in 1984
and,  as  customer  demand for IT  products  grew,  the  Company  initiated  its
relationship  with Ingram in 1994. The distribution  agreements with Pinacor and
Ingram give the Company access to such  aggregators'  extensive  inventories and
provide the Company with electronic ordering capability,  product  configuration
and  testing,  warehousing  and  delivery.  In general,  the  Company  orders IT
products,  including  workstations,   servers,  enterprise  computing  products,
networking and  communications  equipment,  and applications  software from such
aggregators on an as-needed basis,  thereby reducing the Company's need to carry
large inventories.  During 1998, the Company acquired  approximately 47% and 29%
of its products for resale from Ingram and Pinacor, respectively.

     Except for the MTA  Contract  entered  into in December  1997,  in general,
there are no ongoing written  commitments by customers to purchase products from
the  Company  and  all  product  sales  are  made  on a  purchase  order  basis.
Furthermore,  as the market for IT products has matured,  price  competition has
intensified  and is likely to continue to intensify.  During 1998, the Company's
gross profits, margins and results of operations were adversely affected by such
continued  product  pricing  pressure and by a significant  reduction in product
purchase orders from the Company's customers.  In addition,  the Company's gross
profits,  margins and results of  operations  could be  adversely  affected by a
disruption in the Company's sources of product supply.

     The Company offers network consulting,  workstation  support,  applications
development,  communications installation,  education, help desk, remote network
management,  IT staffing  and  internet-related  services.  Services and support
revenue is  recognized  as such services are  performed.  The Company's  network
consulting,  workstation  support and communications  installation  services are
billed on a time and materials  basis.  The Company's  education and IT staffing
services are fee-based on a per-course and  per-placement  basis,  respectively.
Generally,  the  Company's  service  arrangements  with  its  customers  may  be
terminated by such customers with limited advance notice and without significant
penalty.  The most  significant  cost relating to the services  component of the
Company's  business is personnel  costs which consist of salaries,  benefits and
payroll-related  expenses.  Thus,  the  financial  performance  of the Company's
service business is based primarily upon billing margins  (billable hourly rates
less the costs to the Company of such service  personnel on an hourly basis) and
utilization rates (billable hours divided by paid hours).  The future success of

                                       19

<PAGE>

the services  component of the Company's business will depend in large part upon
its ability to maintain high  utilization  rates at profitable  billing margins.
The  competition  for quality  technical  personnel  has  continued to intensify
resulting in increased personnel costs for the Company and many other IT service
providers,  which has adversely  affected the  Company's  billing  margins.  The
Company implemented a reduction-in-force in June 1998 due to lower-than-expected
demand for the Company's services from certain clients. In addition,  in January
1999,  the Company  implemented  a second  reduction,  eliminating  42 positions
consisting principally of persons supporting product sales.

     The Company may  receive  manufacturer  rebates  resulting  from  equipment
sales. In addition,  the Company  receives volume discounts and other incentives
from  certain of its  suppliers.  Except  for  products  in transit or  products
awaiting  configuration at a Company  facility,  the Company  generally does not
maintain large inventory balances.  The Company's primary vendors have announced
or  instituted  changes  in their  price  protection  and  inventory  management
programs  as a direct  result of  changes  in such  policies  by  manufacturers.
Specifically,  they have announced that they will (i) limit price  protection to
that provided by the manufacturer,  generally less than 30 days, rather than the
unlimited protection  previously  available;  and (ii) restrict product returns,
other than defective  returns,  to a percentage (the percentage varies depending
on the  vendor  and when the  return  is made) of  product  purchased,  during a
defined period, at the lower of the invoiced price or the current price, subject
to the specific  manufacturer's  requirements and  restrictions.  At the present
time,  the Company does not believe  these  changes in the vendor  policies will
have a  material  impact on its  business.  Other  than  changes  in such  price
protection and return policies, the Company is unaware that any of its suppliers
or manufacturers have changed or intend to further change these programs.  There
can be no  assurances  that any  such  rebates,  discounts  or  incentives  will
continue  at  historical  levels,  if  at  all.  Further  adverse  modification,
restriction or reduction in such programs  could have a material  adverse effect
on the Company's financial position, results of operations, or cash flows.

     The  Company's  cost of sales  includes  primarily,  in the case of product
sales, the cost to the Company of products acquired for resale,  and in the case
of services  and support  revenue,  salaries  and related  expenses for billable
technical  personnel.  The  Company's  selling  expenses  consist  primarily  of
personnel costs, including sales commissions earned by employees involved in the
sales of IT products,  services  and support.  These  personnel  include  direct
sales, sales support and marketing personnel.  Sales commissions are recorded as
revenue is recognized.  General and administrative expenses consist of all other
operating   expenses,   including   primarily  salaries  and  related  expenses,
depreciation and occupancy costs.

     During the last three fiscal years,  the gross  margins  earned on services
and support sales  decreased  from 35.9% for 1996, to 33.7% for 1997,  and 32.2%
for  1998.   This  decline  in  gross  margins  is   attributable  to  increased
competition,  lower  utilization  rates,  the  impact  of the MTA  Contract  and
services and support revenue  increasing at a slower rate than related personnel
and recruiting costs. Recent declines in product and services support sales have
resulted in lower  utilization  rates and margins.  In response to these trends,
the Company is emphasizing its higher margin,  value-added  services and support
offerings,  including, among other services,  network integration,  applications

                                       20

<PAGE>

development and internet-related  offerings. If these trends continue into 1999,
the Company will examine the advisability of additional reductions-in-force.

     The Company believes that its ability to provide a broad range of technical
services,  coupled with its traditional strength in satisfying its customers' IT
product  requirements  and its  long-term  relationships  with large  customers,
positions  the  Company  to  continue  to grow  the  services  component  of its
business.  As such, the Company anticipates that an increasing percentage of its
gross  profits  in the future  will be derived  from the  services  and  support
component of its business.  However, in the near term, the Company believes that
product  sales  will  continue  to  generate  a  significant  percentage  of the
Company's gross profit. The Company's ability to be a single-source  provider of
IT  products,  services and support  enables it to earn  margins  higher than it
would earn if it sold products only.

    The Company's net sales, gross profit,  operating income and net income have
varied  substantially  from  quarter to quarter and are expected to do so in the
future. Many factors,  some of which are not within the Company's control,  have
contributed  and may in the  future  contribute  to  fluctuations  in  operating
results.   These  factors  include:  the  short-term  nature  of  the  Company's
customers' commitments;  patterns of capital spending by customers;  the timing,
size, and mix of product and service orders and deliveries;  the timing and size
of new projects;  pricing  changes in response to various  competitive  factors;
market factors  affecting the  availability  of qualified  technical  personnel;
timing and customer acceptance of new product and service offerings;  changes in
trends  affecting  outsourcing of IT services;  disruption in sources of supply;
changes in product,  personnel,  and other  operating  costs;  and  industry and
general economic  conditions.  Operating results have been and may in the future
also be  affected  by the  cost,  timing  and  other  effects  of  acquisitions,
including  the mix of product and service  revenues of acquired  companies.  The
Company believes,  therefore,  that past operating results and  period-to-period
comparisons  should  not be relied  upon as an  indication  of future  operating
performance.

      The Company  experienced  negative  operating  results  during the quarter
ended  September 30, 1998 primarily due to the one time write-off of capitalized
software and consulting  fees  associated  with the Company's  termination of an
integrated  accounting software program and implementation  thereof.  During the
quarter ended  December 31, 1998,  the Company  experienced  negative  operating
results primarily due to reduced unit volume and lower average selling prices on
product  sales.  In  addition,  reduced  demand  by  certain  customers  for the
Company's  services  and  support  offerings  lowered the  utilization  rates of
billable  personnel during the quarter,  and the effect of the MTA Contract (see
below) negatively impacted gross profits.

     The Company's  operating  results have been and in the future will continue
to be impacted by changes in technical  personnel billing and utilization rates.
Many of the Company's  costs,  particularly  costs  associated with services and
support revenue, such as administrative  support personnel and facilities costs,
are for the most part fixed costs.  The  Company's  expense  levels are based in
part on expectations of future revenues.  Technical personnel  utilization rates
have been and are expected to continue to be adversely  affected  during periods
of rapid and concentrated  hiring.  Depending upon the availability of qualified
technical personnel, during periods of rapid growth the Company has utilized and

                                       21

<PAGE>

in the  future is likely to utilize  contract  personnel,  which also  adversely
affects  gross  margins.  Due to these  and other  factors,  if the  Company  is
successful  in  expanding  its  service   offerings  and  revenue,   periods  of
variability  in  utilization  are likely to reoccur.  In  addition,  during such
periods  the  Company  is  likely to incur  greater  technical  training  costs.
Quarterly   results   also  may  be  impacted  due  to  the  fact  that  certain
compensation-based  employment  taxes are limited per employee per calendar year
and, as a result,  the Company  experienced a decrease in employment  taxes as a
percentage of revenue during the calendar year.

     In December  1997,  the Company  entered  into a four-year,  $20.4  million
contract  with the MTA to  furnish  and  install  local and  wide-area  computer
network components including network and  telecommunication  hardware,  software
and cabling  throughout  the MTA's over 200  locations to extend the benefits of
automation to the MTA's operations,  including subway stations, electrical power
substations and a diverse group of train car maintenance facilities. The Company
is the prime contractor responsible for project management,  systems procurement
and  installation.  The work is grouped in  contiguous  locations and payment is
predicated  upon  achieving  specific  milestone  events.  While the  Company is
currently  performing in  accordance  with the contract  terms,  there can be no
assurances  that any such events  would not occur.  In the event of default,  in
addition to all other  remedies at law,  the MTA reserves the right to terminate
the services of the Company and complete  the contract  itself at the  Company's
cost.  In the  event of  unexcused  delay by the  Company,  the  Company  may be
obligated to pay, as  liquidated  damages,  the sum of $100 per day. In addition
the contract is a fixed unit price contract, and the quantities are approximate,
for which the MTA has expressly reserved the right, for each item, to direct the
amount of  equipment  be  increased,  decreased  or omitted  entirely on 30 days
notice. Further, the MTA has the right to suspend the work on 10 days notice for
up to 90 days and/or terminate the contract, at any time, on notice, paying only
for the work performed to the date of termination. The project is subject to the
prevailing wage rate and classification for telecommunication  workers,  managed
by the New York City Controller's office, over which the Company has no control,
and which is  generally  adjusted in June of each year and may be so adjusted in
the future.

     The Company has performed  services and supplied  products to the MTA since
the  inception  of the MTA  Contract.  The work  performed  to date has required
greater than estimated  labor and other costs to complete.  Such increased labor
and other costs may also be incurred at other sites.  The Company has  requested
the MTA for an equitable  adjustment in the contract amount and terms.  However,
there can be no assurance the MTA will approve,  either in whole or in part, any
equitable  adjustment in the contract  amount or terms requested by the Company.
There can be no assurance  that the Company can  complete  the contract  without
incurring a loss.  Currently,  the Company is recording  revenues  under the MTA
Contract equal to costs  incurred.  However,  if the Company is  unsuccessful in
obtaining equitable adjustments, realizing increased performance efficiencies or
otherwise  improving  its margins,  the Company  believes it will sustain a loss
under the contract. The aggregate revenues generated and costs incurred from the
MTA Contract for the fiscal year ended December 31, 1998 were  approximately  $6
million.

Year 2000 Readiness Disclosure
------------------------------

         Historically,  certain  computer  programs  have been written using two
digits  rather than four to define the  applicable  year,  which could result in
computer  recognizing  a date using "00" as the year 1900  rather  than the year
2000. This, in turn,  could result in major system failures or  miscalculations,

                                       22

<PAGE>

and is generally referred to herein as the "Year 2000 Problem". Computer systems
that are able to deal  correctly  with dates after 1999 are referred to as "Year
2000-Compliant". Over the past several years, based upon its business needs, the
Company has purchased and installed  hardware and software  which is represented
by the  manufacturers  to be Year  2000-Compliant.  The Company has reviewed its
state of readiness and has determined  that, with the exception of the Company's
current integrated  accounting systems,  which is not Year  2000-Compliant,  the
Company believes its installed base of computer hardware and software systems to
be Year  2000-Compliant.  With respect to the  Company's  integrated  accounting
system,  in October of 1998 the Company  announced  the purchase of Platinum SQL
Software,  to replace the current integrated accounting system. The project plan
establishes  May  1999  for  completion  of   implementation.   Based  upon  the
representations  of the  manufacturers  of  hardware  and  software  used by the
Company,  and the provider of the Platinum SQL  Software,  the Company  believes
upon  implementation  of Platinum SQL, the Company's  internal business systems,
including its computer  systems,  will be Year  2000-Compliant.  There can be no
assurance, however, that the Year 2000 Problem relating to the Company's systems
will not adversely affect its business, financial position, results of operation
or cash flows.

         During  the  fourth  quarter  of 1998,  the  Company  initiated  formal
communications  with its significant  suppliers and large customers to determine
the extent to which the  Company is  vulnerable  to the  failure of those  third
parties to  remediate  their own Year 2000  Problem.  The Company  expects to be
receiving and reviewing the responses to these  communications  and following up
with such suppliers and customers as needed or appropriate.  The Company expects
this  phase to be  substantially  completed  by  approximately  June  30,  1999.
However,  there can be no guarantee that the systems of other companies on which
the  Company's  system  relies will be remedied  in a timely  manner,  or that a
failure to remedy by another company will not have a material  adverse effect on
the Company.

         The Company resells IT products of leading hardware  manufacturers  and
software  developers.  As  a  result,  the  Company  has  no  control  over  the
developments of computer  systems,  software  products or other business systems
developed by such third  parties.  Consequently,  there can be no assurance that
the computer  systems,  software  products or other business systems sold by the
Company will accept input of, store,  manipulate and/or output dates in the Year
2000 or thereafter without error or interruption. As a result, the Company, as a
reseller,  may be liable  for such  failures.  Given the  Company's  role in the
distribution of such products,  the Company is not able to accurately  determine
the extent, if any, of such potential liability.

         In addition,  the  purchasing  patterns of the Company's  customers and
potential  customers  may be  affected by issues  associated  with the Year 2000
Problem.   As   companies   devote   significant   resources   to  become   Year
2000-Compliant,  these  expenditures  may result in reduced  funds  available to
purchase products or obtain services such as those offered by the Company. There
can be no assurance  that the Year 2000 Problem  will not  adversely  affect the
Company's business, financial position, results of operations or cash flows.

         The total cost of the  Company's  Year 2000  compliance is being funded
through  operating  cash  flows.  The  estimated  cost to  purchase  and install
Platinum SQL is approximately $600,000. Excluding costs associated with Platinum

                                       23

<PAGE>

SQL and the  write-off of the  capitalized  software and  consulting  fees,  the
Company has expended  approximately $2 million on hardware and software upgrades
for its Year 2000 compliance.  The Company does not currently anticipate that it
will incur any additional  material  expenditures for such Year 2000 compliance.
The  aforementioned  costs do not  include any costs  associated  with any third
party  being  Year  2000  non-compliant,  nor do  such  costs  include  internal
personnel costs  (primarily  salaries and benefits),  which the Company does not
separately  track.  Such costs also do not include any contingency plan costs at
this point.

         The  Company  has not  developed  a  contingency  plan in the event the
Platinum SQL project is not  completed in a timely manner or with respect to any
additional  Year  2000-Compliant  issues  which  may  arise as a  result  of the
Company's inquiries of its suppliers and customers.  Such plans may be developed
as and if the need for any such plans arise.

         Statements  included  in  this  Year  2000  Readiness   Disclosure  are
forward-looking   statements  within  the  meaning  of  The  Private  Securities
Litigation Reform Act of 1995. Such forward-looking statements include risks and
uncertainties,  including but not limited to the possibility  that the currently
installed  computer systems,  software products or other business systems of the
Company or its distributors, manufacturers or customers, working either alone or
in conjunction with other software or systems,  will not accept input of, store,
manipulate  and/or output dates in the year 2000 or thereafter  without error or
interruption.  Such  risks and  uncertainties  may cause  the  Company's  actual
results to differ materially from the results  discussed in the  forward-looking
statements contained in this Report.

                                       24

<PAGE>

Results of Operations
---------------------

         The  following  table sets forth,  for the periods  indicated,  certain
financial data as a percentage of net sales,  and the  percentage  change in the
dollar amount of such data compared to the prior year:

<TABLE>
<CAPTION>


                                                                                                 Percentage
                                                      Percentage of Net Sales                     Increase
                                                      Year Ended December 31,                    (Decrease)
                                                 -----------------------------------     ---------------------------
                                                                                               1997          1998
                                                                                               Over          Over
                                                  1996(1)     1997(2)        1998              1996          1997
                                                  -------     -------        ----              ----          ----
<S>                                                <C>         <C>          <C>                <C>          <C> 
Net Sales:
     Product Sales                                   83.2%       77.1%       68.2%             48.4%       (20.8)%
     Services and support......................      16.8        22.9        31.8             117.5         24.7
                                                     ----        ----        ----             -----         ----
                                                    100.0       100.0       100.0              60.0        (10.4)
Cost of sales..................................      84.6        83.2        82.0              57.5        (11.8)
                                                     ----        ----        ----             -----         ----
Gross profit...................................      15.4        16.8        18.0              73.6         (3.5)
                                                     ----        ----        ----             -----         ----
Operating expenses:
     Selling expense:..........................       6.1         6.9         8.5              81.1         10.4
     General and administrative expenses.......       4.5         5.0         7.5              75.1         35.3
     Write-off of capitalized asset (3)........         -           -         1.4                 -          100
                                                     ----        ----        ----             -----         ----
                                                     10.6        11.9        17.4              78.6         31.7

Operating income...............................       4.8         4.9         0.6              62.5        (89.5)
Other income (expense), net....................       0.1         0.0         0.2            (52.7)        488.5
                                                     ----        ----        ----             -----         ----
Income before pro forma income taxes...........       4.9         4.9         0.8              60.0        (85.8)
Pro forma provision for income taxes (4).......       2.0         2.0         0.4              95.1        (83.8)
                                                     ----        ----        ----             -----         ----
Pro forma net income...........................       2.9%        2.9%        0.4%             42.1        (87.1)
                                                     ====        ====        ====             =====         ====
Gross profit (as a percentage of related net sales):
     Product sales.............................      11.3%       11.7%       11.5%             53.7%       (22.6)%
     Service and support.......................      35.9%       33.7%       32.2%            104.6%        18.9%

</TABLE>

(1) On July 24, 1996, the Company  acquired  certain assets of Lior,  Inc., in a
    business  combination  accounted  for under the  purchase  method,  for $1.1
    million,  including  acquisition  costs,  financed  with  a  portion  of the
    proceeds from the Company's initial public offering.  The operations related
    to the acquired assets of Lior are included in the accompanying consolidated
    financial  statements  subsequent  to July 24, 1996.  See Note 2 of Notes to
    Consolidated Financial Statements.

(2) On August 1, 1997, the Company consummated the acquisition of certain assets
    and assumed  certain  liabilities  of the Lande  Group,  Inc.  ("Lande"),  a
    computer  equipment reseller and provider of systems  integration  services,
    for $1.5 million,  including  acquisition  costs.  The original  acquisition
    price was $1.8 million,  subsequently reduced by the return of $250,000 held
    in escrow.  The operations related to the acquired assets and liabilities of
    Lande are included in the  accompanying  consolidated  financial  statements
    subsequent to August 1, 1997. See Note 2 of Notes to Consolidated  Financial
    Statements.

(3) Reflects a one-time  write-off of capitalized  software and consulting  fees
    associated  with  the  Company's  termination  of an  integrated  accounting
    software program and implementation thereof.

(4) Prior to March 19,  1996,  the  Company  had  elected  to be treated as an S
    Corporation  for federal and, in certain  cases,  state income tax purposes.
    Therefore, no provision for federal and a reduced provision for state income
    taxes was recorded prior to that date. See Note 10 of Notes to  Consolidated
    Financial  Statements.  In the above table,  for comparative  purposes,  pro
    forma income taxes have been  provided as if the Company was a C Corporation
    for periods prior to March 19, 1996.


Comparison of Years Ended December 31, 1998 and 1997
----------------------------------------------------

     Net Sales.  Net sales  decreased by 10.4%,  or $19.9  million,  from $191.4
million in 1997 to $171.5 million in 1998.  Product sales decreased by 20.8%, or
$30.7  million,  from  $147.6  million in 1997 to $116.9  million in 1998.  This
decline in product sales was primarily  attributable  to increased  competition,
reduced  unit  volume  and lower  average  selling  prices.  This trend has been
accelerated  by the ability of  customers  to  purchase  directly  from  certain
manufacturers at discounted  prices.  Services and support revenue  increased by
24.7%,  or $10.8  million,  from $43.8 million in 1997 to $54.6 million in 1998.

                                       25

<PAGE>

This increase was primarily  attributable to increased  demand for the Company's
services and support offerings,  particularly its network  consulting  services,
and an increase in the number and size of customer projects. Notwithstanding the
year-to-year increase in services and support revenue, the Company experienced a
decline in such revenue in the fourth  quarter of 1998 as compared to the fourth
quarter of 1997.  This decline was primarily  attributable  to decreased  demand
from certain  customers.  In  response,  the Company is  emphasizing  its higher
margin,  value-added  services  and support  offerings,  including,  among other
services,  network  integration,  applications  development and internet-related
offerings.  In 1998,  sales to KPMG LLP accounted for  approximately  15% of the
Company's net sales.  There can be no assurance that such customer will continue
to place  orders with the Company or engage the Company to perform  services and
support at existing levels.

     Gross Profit. The Company's gross profit declined by 3.5%, or $1.1 million,
from $32.1 million in 1997 to $31.0 million in 1998. The Company's overall gross
profit  margin  increased  from  16.8%  of net  sales  in 1997 to  18.0% in 1998
primarily  due to the  improved  sales mix  resulting  from higher  services and
support  revenue.  Gross profit margin  attributable  to product sales decreased
from  11.7%  in 1997 to  11.5%  in 1998  due to  downward  pricing  pressure  on
products.  The Company is addressing  this trend by  increasing  its emphasis on
comprehensive,  higher-margin  solution-based  offerings.  Gross  profit  margin
attributable  to services and support  revenue  decreased from 33.7% of services
and support  revenue in 1997 to 32.2% in 1998.  This  decrease was  attributable
primarily  to lower  utilization  of billable  personnel,  the effect of the MTA
Contract,  several  long-term  staffing  contracts,  which typically yield lower
gross margins than projects,  and services and support  revenue  increasing at a
slower rate than related personnel and recruiting costs.

     Selling  Expenses.  Selling  expenses  increased by 10.4%, or $1.4 million,
from $13.2 million in 1997 to $14.6 million in 1998,  and from 6.9% of net sales
in 1997 to 8.5% in 1998.  The increase in selling  expenses in absolute  dollars
was primarily  attributable  to increased sales salaries and other support costs
and the increase in sales and marketing  efforts  associated  with the Company's
services and support offerings. The increase in selling expenses as a percentage
of net sales was primarily due to the decrease in net sales in 1998.

     General and Administrative  Expenses.  General and administrative  expenses
increased by 35.3%, or $3.4 million,  from $9.5 million in 1997 to $12.9 million
in 1998, an increase from 5.0% to 7.5% of net sales, respectively.  The increase
in general and  administrative  expenses in absolute dollars and as a percentage
of net sales was due  primarily  to  personnel  and related  expenses,  training
costs,  professional  fees,  depreciation and amortization  charges,  additional
leased facilities and related costs, communication costs and insurance premiums.
The increase in general and administrative expenses as a percentage of net sales
was also due to the decrease in net sales in 1998.

     Write-off of Capitalized  Software and Consulting  Fees. In connection with
the one-time  write-off of capitalized  software and consulting  fees associated
with the Company's  termination of  implementation  of an integrated  accounting
software program, the Company recorded a charge of $2.5 million.

                                       26

<PAGE>

Comparison of Years Ended December 31, 1997 and 1996
----------------------------------------------------

     Net sales.  Net Sales  increased by 60.0%,  or $71.8  million,  from $119.6
million in 1996 to $191.4 million in 1997.  Product sales increased by 48.4%, or
$48.1  million,  from  $99.5  million in 1996 to $147.6  million  in 1997.  This
increase  was  attributable  primarily to  increased  demand from the  Company's
established  customer  base and to product  sales  resulting  from the Company's
August 1997 acquisition of certain assets and liabilities of Lande. Services and
support  revenue  increased by 117.5%,  or $23.7 million,  from $20.1 million in
1996 to $43.8  million in 1997.  This  increase  was  attributable  primarily to
increased demand for the Company's services and support offerings,  particularly
its network  consulting  services,  due to an increase in the number and size of
customer projects. In 1997, sales to Nabisco and KPMG LLP, the Company's largest
customers  accounted for approximately 16% and 15% respectively of the Company's
net sales.  There can be no assurance that such customers will continue to place
product  orders with the Company or engage the Company to perform  services  and
support at existing levels.

     Gross  profit.  The  Company's  gross profit  increased by 73.6%,  or $13.6
million,  from $18.5  million in 1996 to $32.1  million in 1997.  The  Company's
overall  gross profit margin  increased due to the improved  sales mix resulting
from higher  services and support  revenue.  Total gross margins  increased from
15.4%  of net  sales  in  1996  to  16.8%  in 1997  primarily  due to  increased
manufacturer  rebates and increased  volume  discounts earned resulting from the
higher sales volume. Gross profit margin attributable to product sales increased
from 11.3% in 1996 to 11.7% in 1997. However,  the Company expects that downward
pricing  pressure on products will  continue and there can be no assurance  that
the Company will be able to sustain its margins on product  sales in the future.
Gross profit margin  attributable to services and support revenue decreased from
35.9% of services and support  revenue in 1996 to 33.7% in 1997. The decrease in
such gross profit margin was  attributable  primarily to the addition of several
long-term  staffing  contracts,  which  typically yield lower gross margins than
projects,  and to the fact that  services  and support  revenue  increased  at a
slower  rate  than  related  personnel  and  recruiting  costs,  as the  Company
accelerated  the hiring and training of technical  personnel in  anticipation of
the  increased  demand for its  services.  The  Company  increased  its staff of
billable  technical  personnel  from 242 at December 31, 1996 to 545 at December
31, 1997.

     Selling  expenses.  Selling  expenses  increased by 81.1%, or $5.9 million,
from $7.3 million in 1996 to $13.2 million in 1997 and from 6.1% in 1996 to 6.9%
in 1997 of net sales.  The increase in selling  expenses in absolute dollars was
attributable  primarily to increased  salesperson  commissions and other support
costs due to the  increase in net sales,  the  increase  in sales and  marketing
efforts  associated  with the Company's  services and support  offerings and the
costs  associated with the Company's new services  offerings.  The increase as a
percentage of net sales was due primarily to increased  salesperson  commission,
additional support personnel and related personnel costs.

     General and administrative  expenses.  General and administrative  expenses
increased by 75.1% or $4.1 million, from $5.4 million in 1996 to $9.5 million in
1997, and increase from 4.5% to 5.0% of net sales,  respectively.  The increases
in absolute dollar terms were primarily in personnel  expenses,  training costs,
professional fees,  accounts  receivable  allowances,  depreciation  charges and

                                       27

<PAGE>

insurance premiums.  The increase as a percentage of net sales was due primarily
to the additional personnel costs and depreciation.

Pro Forma Adjustments for Income Taxes
--------------------------------------

     Prior to the  consummation of the Company's  initial public offering of its
Common Stock in March 1996, the Company had elected S Corporation  treatment for
federal  income  tax  purposes  from 1986 and for New  Jersey  state  income tax
purposes from 1994. As a result,  for such tax periods,  the Company's  earnings
were taxed directly to the Company's then current  shareholders.  The historical
financial statements for the years 1992 through 1995, therefore,  do not include
a provision  for federal and state  income  taxes for such  periods,  except for
certain state income taxes imposed at the corporate level. Accordingly, for such
periods and for the period  January 1 through  March 19, 1996 (the date on which
the Company  terminated  its S Corporation  status and became subject to federal
and state income taxes at applicable C  Corporation  income tax rates) pro forma
adjustments  for income taxes were  calculated  as if the Company had been fully
subject to federal  and state  income  taxes based on the tax laws in effect for
the  respective  periods  using the  criteria  established  under  Statement  of
Financial  Accounting  Standards No. 109 "Accounting for Income Taxes".  The pro
forma  effective tax rates for the years ended December 31, 1994,  1995 and 1996
were 40.5%, 40.4% and 40.8%, respectively.  See Note 10 of Notes to Consolidated
Financial Statements.

Recently Issued Accounting Standards
------------------------------------

    In June 1997, the Financial  Accounting Standards Board issued Statement No.
131 "Disclosures about Segments of an Enterprise and Related Information" ("SFAS
No.  131").  SFAS No. 131 applies to all public  companies  and is effective for
fiscal years  beginning  after  December 15,  1997.  SFAS No. 131 requires  that
business segment financial  information be reported in the financial  statements
utilizing the management  approach.  The  management  approach is defined as the
manner in which  management  organizes the segments  within the  enterprise  for
making operating decisions and assessing  performance.  The adoption of SFAS No.
131 did not have a material impact on the financial statements.

Liquidity and Capital Resources
-------------------------------

     In March and April 1996, the Company consummated an initial public offering
of  2,200,000  shares of its Common Stock at a price to the public of $10.50 per
share. Of the 2,200,000 shares sold,  1,700,000 shares (including 100,000 shares
issued  and  sold  by  the  Company  upon  the  exercise  of  the  underwriters'
over-allotment  option)  were issued and sold by the Company and 500,000  shares
were sold by The Gang  Annuity  Trust.  The  Company  did not receive any of the
proceeds from the sale of shares by such selling  shareholder.  The net proceeds
to the Company were $15.7 million.

     On June 18, 1997, the Company  consummated a follow-on  public  offering of
2,000,000  shares of its  Common  Stock at a price to the  public of $16.50  per
share.  Of such  shares,  1,150,000  were  issued and sold by the Company and an
aggregate  of 850,000  shares  were sold by Stan Gang,  the  Company's  founder,
Chairman, President and Chief Executive Officer, and The Gang Annuity Trust. The
Company received $15.51 per share,  before offering  expenses,  resulting in net
proceeds of approximately $17.2 million.

                                       28

<PAGE>

     Since its inception,  the Company has funded its operations  primarily from
cash generated by operations,  as well as with funds from  borrowings  under the
Company's  credit  facilities  and the net proceeds  from the  Company's  public
offerings of its Common  Stock  referenced  above.  The  Company's  cash used in
operations  from the fiscal year ended December 31, 1997 was $11.9 million which
consisted  primarily of an increase in accounts receivable from increased sales.
However,  the Company's  cash  provided by operations  for the fiscal year ended
December  31, 1998 was $14.6  million.  Accounts  receivable  decreased by $17.3
million during 1998, primarily attributable to the decrease in net sales and the
timing  of  collection  of  accounts  receivable.   As  measured  in  day  sales
outstanding,  the  Company's  accounts  receivable  decreased  from  80  days at
December  31, 1997 to 78 days at December  31,  1998.  During  fiscal year 1998,
accounts payable and accrued  expenses  decreased by $12.3 million due to timely
payment of expenses.

     The net income for fiscal year 1998 of $711,000  includes  non-cash charges
of $5.1 million,  consisting of depreciation  and  amortization  expense of $2.6
million and the write-off of capitalized  software and  consulting  fees of $2.5
million.

     The  Company's  working  capital  was $33.1  million  and $35.4  million at
December 31, 1997 and 1998, respectively.

     The Company invested $3.1 million, $3.8 million and $4.0 million in capital
equipment and leasehold improvements in 1996, 1997 and 1998,  respectively.  The
increase  in 1998  primarily  related to  purchases  and  upgrades  of  computer
equipment  and  software  utilized  in-house  and  consulting  fees  relating to
implementation  of the Company's  MIS.  Except for the purchase of Platinum SQL,
there are no other  material  commitments  for  capital  expenditures  currently
outstanding. The Company anticipates additional capital expenditures to continue
the expansion of the services  component of its business and for the enhancement
of its MIS infrastructure.

     The Company  repurchased  136,800 shares of its common stock during 1998 at
an average per share cost of $4.87.  The shares are held in treasury at cost. As
of December 31, 1998, a total of 136,800 shares had been  repurchased  under the
225,000 share stock repurchase program announced in August 1998.

     As of December 31, 1998, a total of 80,888  shares of common stock had been
sold to employees  under the 500,000 share Employee Stock Purchase Plan approved
by the Company's shareholders in May 1998. The Company has received an aggregate
of $508,953 from such sales.

     Since  December  1996,  the Company  expended  approximately  $450,000  for
software,  $2.1 million for consultant fees, and $571,000 for Company  personnel
in  implementing a third party  developed  enterprise-wide  data and information
system (the  "System"),  as the foundation for the Company's MIS. The complexity
of the project and the lack of trained and  knowledgeable  personnel  conversant
with the System resulted in significant  project delays and increased  costs. In
addition,  the Company  experienced delays in financial reporting and processing
of vendor  invoices.  During  the third  quarter  of fiscal  1998,  the  Company
determined that successful  implementation  of the System was uncertain and that
an adequate  alternative  system  should be installed.  Accordingly,  in October
1998, the Company terminated implementation of the System and purchased Platinum

                                       29

<PAGE>

SQL. It is presently  anticipated that implementation of the Platinum SQL system
will be completed by June 1999. The Company  estimates the costs to purchase and
install Platinum SQL  (approximately  $600,000) are substantially  less than the
costs to have completed implementation of the System. At the present time, there
can be no assurance  that the costs to complete  implementation  of Platinum SQL
will not exceed the  estimate  or that the amount of any such excess will not be
material.

     The Company  purchases  certain  inventory and equipment  through financing
arrangements with Finova Capital  Corporation.  At December 31, 1998, there were
outstanding balances of $6.7 million for Finova Capital Corporation and $668,000
for IBM Credit  Corporation  under  such  arrangements.  Obligations  under such
financing  arrangements are collateralized by substantially all of the assets of
the Company.  In connection with the Loan and Security Agreement entered into on
September 30, 1998 with First Union National Bank (the "Bank"), the Bank entered
into an intercreditor  agreement with respect to their relative interests in the
aforementioned collateral.

     On June 30,  1997,  the Company and the Bank  executed a Loan and  Security
Agreement  whereby the Bank expanded the Company's credit facility to enable the
Company to borrow, based upon eligible accounts receivable,  up to $15.0 million
for short-term  working capital purposes.  Such facility includes a $2.5 million
sublimit  for  letters of credit and a $5.0  million  sublimit  for  acquisition
advances.  Under the  facility,  the  Company  may  borrow,  subject  to certain
post-closing  conditions and covenants by the Company,  (i) for working  capital
purposes  at the  Bank's  prime rate less 0.50% or LIBOR plus 1.25% and (ii) for
acquisitions  at the  Bank's  prime rate less  0.25% or LIBOR  plus  1.50%.  The
Company's obligations under such facility are collateralized by a first priority
lien on the Company's  accounts  receivable and inventory,  except for inventory
for which the Bank has or will have  subordinated  its position to certain other
lenders pursuant to intercreditor agreements. On September 30, 1998, the Company
and the Bank  executed a Loan and Security  Agreement  whereby the Bank extended
the Company's credit facility for an additional year through September 30, 1999.

     The Company believes that its available  funds,  together with existing and
anticipated  credit  facilities,  will be  adequate  to satisfy  its current and
planned operations for at least the next 24 months.

     In 1997 and 1998,  the Company was  notified by the taxing  authorities  of
several jurisdictions concerning the Company's failure to meet certain reporting
and compliance  requirements of such jurisdictions with respect to the Company's
tax  obligations.  During 1998, the Company  implemented  aggressive  actions to
resolve any tax reporting and compliance delinquencies by properly reporting and
paying its obligations. The Company has recorded an amount for any unpaid taxes,
interest  and/or  penalties.  The Company  believes that the resolution of these
matters will not have a material  impact on the  Company's  financial  position,
results of operations, or cash flows.

     The  Company  and its  independent  auditors  have  identified  significant
deficiencies in the design and operation of its internal control structure.  The
Company's independent auditors have determined such deficiencies are "reportable
conditions".  The Company has  implemented and is in the process of implementing
additional policies, procedures and controls to correct these deficiencies.  The
Company does not believe that such  deficiencies  have had a material  effect on
the Company's  reported financial  results.  However,  there can be no assurance
that such  deficiencies will not have a material adverse effect on the Company's
ability to record, process, summarize and/or report its financial information.

                                       30

<PAGE>

               SELECTED UNAUDITED QUARTERLY RESULTS OF OPERATIONS

     The  table on the  following  page  presents  certain  condensed  unaudited
quarterly  financial  information  for each of the eight most recent quarters in
the period ended December 31, 1998.  This  information is derived from unaudited
consolidated financial statements of the Company that include, in the opinion of
the Company, all adjustments  (consisting only of normal recurring  adjustments)
necessary for a fair  presentation  of results of  operations  for such periods,
when read in conjunction with the audited  Consolidated  Financial Statements of
the Company and notes thereto appearing  elsewhere in this Annual Report on Form
10-K.












                      [This space left blank intentionally]

                                       31

<PAGE>

<TABLE>
<CAPTION>


                                      ------------------------------------------------------------------------------
                                                                     Quarter Ended
                                      ------------------------------------------------------------------------------
Statement of Income Data:                                (in thousands, except per share data)
                                      Mar. 31,  June 30,   Sept. 30,  Dec. 31,  Mar. 31,  June 30,  Sept. 30, Dec. 31,
                                        1997      1997      1997(1)    1997      1998      1998       1998    1998
                                      -------  ---------- ----------  -------   --------  --------  --------- ------
<S>                                    <C>      <C>      <C>        <C>      <C>        <C>       <C>      <C>   
Net sales:                                                                                                  
  Product sales....................    $38,768  $31,609   $34,590   $42,635   $31,297   $29,823   $30,388  $25,400
  Services and support.............      7,733   10,201    11,902    13,954    14,194    15,099    13,212   12,123
                                         -----   ------    ------    ------    ------    ------    ------   ------
                                        46,501   41,810    46,492    56,589    45,491    44,922    43,600   37,523
                                         -----   ------    ------    ------    ------    ------    ------   ------
Cost of sales:
  Product sales....................     34,493   28,003    30,477    37,341    27,377    26,300    26,669   23,176
  Services and support.............      5,028    6,736     7,962     9,287     9,395    10,424     8,661    8,578
                                         -----   ------    ------    ------    ------    ------    ------   ------
                                        39,521   34,739    38,439    46,628    36,772    36,724    35,330   31,754
                                         -----   ------    ------    ------    ------    ------    ------   ------
Gross profit:
  Product sales....................      4,275    3,606     4,113     5,294     3,920     3,523     3,719    2,224
  Services and support.............      2,705    3,465     3,940     4,667     4,799     4,675     4,551    3,545
                                         -----   ------    ------    ------    ------    ------    ------   ------
                                         6,980    7,071     8,053     9,961     8,719     8,198     8,270    5,769
                                         -----   ------    ------    ------    ------    ------    ------   ------
Operating expenses:
  Selling expenses.................      2,918    2,943     3,547     3,816     3,967     3,749     3,830    3,056
  General and administrative expenses    2,036    2,197     2,242     3,062     2,595     3,287     3,369    3,652
  Write-off of capitalized asset (2)       -        -         -         -         -         -       2,476      -
                                         -----   ------    ------    ------    ------    ------    ------   ------
                                         4,954    5,140     5,789     6,878     6,562     7,036     9,675    6,708
                                         -----   ------    ------    ------    ------    ------    ------   ------

Operating income (loss)............      2,026    1,931     2,264     3,083     2,157     1,162    (1,405)    (939)
Other income (expense), net........        (58)     (67)      140        46        73       129        81       76
Income (loss) before income taxes..      1,968    1,864     2,404     3,129     2,230     1,291    (1,324)    (863)
Provision (benefit) for income taxes.      807      764       986     1,287       914       529      (543)    (277)
                                         -----   ------    ------    ------    ------    ------    ------   ------
Net income.........................     $1,161   $1,100    $1,418    $1,842    $1,316      $762     $(781)   $(586)
                                         =====   ======    ======    ======    ======    ======    ======   ======
Net income (loss) per share (diluted)    $0.22    $0.20     $0.22     $0.29     $0.21     $0.12    $(0.12)  $(0.09)
                                         =====   ======    ======    ======    ======    ======    ======   ======
As a Percentage of Net Sales:
Net sales:
  Product sales....................       83.4%    75.6%     74.4%     75.3%     68.8%     66.4%     69.7%    67.7%
  Services and support.............       16.6%    24.4%     25.6%     24.7%     31.2%     33.6%     30.3%    32.3%
                                         -----   ------    ------    ------    ------    ------    ------   ------
                                         100.0%   100.0%    100.0%    100.0%    100.0%    100.0%    100.0%   100.0%
Cost of sales......................       85.0%    83.1%     82.7%     82.4%     80.8%     81.8%     81.0%    84.6%
                                         -----   ------    ------    ------    ------    ------    ------   ------
Gross profit.......................       15.0%    16.9%     17.3%     17.6%     19.2%     18.2%     19.0%    15.4%
                                         -----   ------    ------    ------    ------    ------    ------   ------
Operating expenses:
  Selling expenses.................        6.3%     7.0%      7.7%      6.7%      8.7%      8.3%      8.8%     8.1%
  General and administrative expenses      4.4%     5.3%      4.8%      5.5%      5.7%      7.3%      7.7%     9.7%
  Write-off of capitalized asset (2)       -        -         -         -         -         -         5.7%     -
                                         -----   ------    ------    ------    ------    ------    ------   ------
                                          10.7%    12.3%     12.5%     12.2%     14.4%     15.7%     22.2%    17.9%
                                         -----   ------    ------    ------    ------    ------    ------   ------
Operating income (loss)............       4.3%     4.6%       4.8%      5.4%      4.7%      2.6%     (3.2)%   (2.5)%
Other income (expense), net........      (0.1)%   (0.2)%      0.3%      0.1%      0.2%      0.3%      0.2%     0.2%
                                         -----   ------    ------    ------    ------    ------    ------   ------
Income before income taxes.........       4.2%     4.4%       5.1%      5.5%      4.9%      2.9%     (3.0)%   (2.3)%
Provision for income taxes.........       1.7%     1.8%       2.1%      2.3%      2.0%      1.2%     (1.2)%   (0.7)%
                                         -----   ------    ------    ------    ------    ------    ------   ------
Net income.........................       2.5%     2.6%       3.0%      3.2%      2.9%      1.7%     (1.8)%   (1.6)%
                                         =====   ======    ======    ======    ======    ======    ======   ======
Gross profit (as a percentage of
related net sales):
  Product sales (3)................       11.0%    11.4%    11.9%     12.4%      12.5%     11.8%    12.2%     8.8%
  Services and support.............       35.0%    34.0%    33.1%     33.4%      33.8%     31.0%    34.4%    29.2%

</TABLE>

(1)  On August 1, 1997 the Company consummated the acquisition of certain assets
     and assumed  certain  liabilities  of the Lande Group,  Inc.  ("Lande"),  a
     computer equipment reseller and provider of systems  integration  services,
     for $1.5 million,  including  acquisition  costs. The original  acquisition
     price was $1.8 million, subsequently reduced by the return of $250,000 held
     in escrow. The operations related to the acquired assets and liabilities of
     Lande are included in the accompanying  consolidated  financial  statements
     subsequent to August 1, 1997. See Note 2 of Notes to Consolidated Financial
     Statements.

(2)  Reflects a one-time  write-off of capitalized  software and consulting fees
     associated  with the  Company's  termination  of an  integrated  accounting
     software program and implementation thereof.

(3)  Quarter ended December 31, 1998 reflects a year-end adjustment to reduce
     inventory by $450,000.

                                       32

<PAGE>


Item 7A. Quantitative and Qualitative Disclosure About Market Risk
------------------------------------------------------------------

     Not applicable.


Item 8.  Financial Statements and Supplementary Data.
-----------------------------------------------------

    Reference  is  made  to Item  14(a)(1)  and  (2) on  page  35 for a list of
financial  statements  and  supplementary  data required to be filed pursuant to
this Item 8.

     Reference  is made to  Item 7  "Management's  Discussion  and  Analysis  of
Results of Operations  and Financial  Condition - Selected  Unaudited  Quarterly
Results of Operations" on pages 31-32 for selected unaudited quarterly financial
data.

Item 9. Changes in and Disagreements with Accountants on Accounting and 
        Financial Disclosure.
------------------------------------------------------------------------

        Not applicable.

                                       33

<PAGE>



                                    PART III


Item 10. Directors and Executive Officers of the Company.
---------------------------------------------------------

         The  information  called for by this Item 10 relating to the  Company's
directors  and  executive  officers,  which will be included  under the headings
"Election of Directors"  and  "Executive  Officers" in the Company's  definitive
proxy statement for the 1999 Annual Meeting of Shareholders,  to be filed within
120 days after the end of the Company's  fiscal year, is incorporated  herein by
reference to such proxy statement.


Item 11. Executive Compensation.
--------------------------------

         The  information  called for by this Item 11,  which  will be  included
under the heading  "Executive  Compensation"  in the Company's  definitive proxy
statement for the 1999 Annual  Meeting of  Shareholders,  to be filed within 120
days after the end of the  Company's  fiscal  year,  is  incorporated  herein by
reference to such proxy statement.


Item 12. Security Ownership of Certain Beneficial Owners and Management.
------------------------------------------------------------------------

         The  information  called for by this Item 12,  which  will be  included
under  the  heading  "Security   Ownership  of  Certain  Beneficial  Owners  and
Management"  in the  Company's  definitive  proxy  statement for the 1999 Annual
Meeting  of  Shareholders,  to be filed  within  120 days  after  the end of the
Company's  fiscal  year,  is  incorporated  herein by  reference  to such  proxy
statement.


Item 13. Certain Relationships and Related Transactions.
--------------------------------------------------------

         The  information  called for by this Item 13,  which  will be  included
under the  heading  "Certain  Relationships  and  Related  Transactions"  in the
Company's   definitive   proxy   statement  for  the  1999  Annual   Meeting  of
Shareholders,  to be filed within 120 days after the end of the Company's fiscal
year, is incorporated herein by reference to such proxy statement.

                                       34

<PAGE>


                                     PART IV


Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K.
--------------------------------------------------------------------------

(a)    (1)        Financial Statements.

                  Reference  is  made to the  Index  to  Consolidated  Financial
Statements on page F-1.

(a)    (2)        Financial Statement Schedules and Supplementary Data.

                  All  financial  statement  schedules  are omitted  because the
                  information is not required,  or is otherwise  included in the
                  Consolidated   Financial   Statements  or  the  notes  thereto
                  included in this Annual Report on Form 10-K.

 (a)    (3)       Exhibits.

                  Reference is made to the Index to Exhibits on pages 36-38.

(b)               Reports on Form 8-K.

                  The  Company  filed no Current  Reports on Form 8-K during the
last quarter of the period covered by this Annual Report.

                                       35

<PAGE>


                                  EXHIBIT INDEX

Exhibit           Description of
   No.            Exhibit
------            -----------

3.1*              Amended and Restated Certificate of Incorporation.

3.2*              Amended and Restated Bylaws.

4.1*#             1995 Stock Plan of the Company.

4.2*#             1995 Non-Employee Director Stock Option Plan.

4.3*#             401(k) Plan, adopted October 1991.

10.1*#            Employment Agreement dated October 1, 1995 between the
                  Company and Stan Gang.

10.2*#            Employment Agreement dated October 1, 1995 between the
                  Company and Bruce Flitcroft.

10.3*#            Employment Agreement dated October 1, 1995 between the
                  Company and Philip M. Pfau.

10.4*#            Employment Agreement dated October 1, 1995 between the
                  Company and Dennis Samuelson.

10.5*#            Employment Agreement dated October 1, 1995 between the
                  Company and Lawrence Mahon.

10.6*#            Employment Agreement dated October 1, 1995 between the
                  Company and John Centinaro.

10.7*#            Employment Agreement dated October 1, 1995 between the
                  Company and John Crescenzo.

10.8*#            Employment Agreement effective November 1, 1995 between
                  the Company and Gary S. Finkel.

10.9*             Lease dated June 27, 1994 by and between Sutman Associates
                  and the Company, as amended.

10.10*            Form of Invention Assignment and Confidentiality Agreement.

10.11*            Agreement dated July 1, 1994 by and between the Company
                  and MicroAge Computer Centers, Inc., as amended.

                                       36

<PAGE>

10.12*            Reseller Agreement dated November 7, 1994 by and between
                  the Company and Ingram Alliance Reseller Company, a division
                  of Ingram Micro, Inc. as amended.

10.13*            Agreement for Wholesale Financing dated May 20, 1988
                  by and between the Company and IBM Credit Corporation.

10.14+            Dealer Loan and Security Agreement by and between the
                  Company and Finova Capital Corporation dated December
                  20, 1996.

10.15*            Agreement by Stan Gang dated February 19, 1996 to indemnify
                  the Company for certain losses.

10.16|            Asset Purchase Agreement dated July 18, 1996 by and between
                  Stan Gang and Lior, Inc.

10.17|            Assignment of Asset Purchase Agreement dated July 24, 1996 by
                  and between Stan Gang and the Company.

10.18**           Loan and Security Agreement dated June 30, 1997 by and
                  between First Union National Bank and AlphaNet Solutions, Inc.

10.19**           Asset Purchase Agreement dated August 1, 1997 by and
                  between the Company and The Lande Group, Inc.

10.20##           Assignment of lease dated August 1, 1997 by and
                  between The Lande Group, Inc., 460 West 34th
                  Street Associates, and the Company of a lease dated December
                  23, 1996 by and between 460 West 34th Street Associates and
                  The Lande Group, Inc.

10.21##           Form of Indemnification Agreement entered into by past and
                  present Directors and Officers.

10.22***          First Amendment to and Reaffirmation of Loan Document dated
                  September 30, 1998 by and between First Union National Bank
                  and AlphaNet Solutions, Inc.

10.23***          Revolving Note dated September 30, 1998 by and between First
                  Union National Bank and AlphaNet Solutions, Inc.

10.24****         Sublease, American International Recovery, Inc. to AlphaNet
                  Solutions, Inc.

10.25*****        Employee Stock Purchase Plan.

                                       37

<PAGE>

21+               Subsidiaries of the Company.

23                Consent of PricewaterhouseCoopers LLP.

27                Financial Data Schedule.

---------

*        Incorporated  by reference to the Company's  Registration  Statement of
         Form S-1 (Registration  Statement No. 33-97922)  declared  effective on
         March 20, 1996.

**       Incorporated  by reference to the Company's Form 10-Q for the quarterly
         period ended June 30,  1997,  filed with the  Commission  on August 13,
         1997.

***      Incorporated  by reference to the  Company's  Amended Form 10-Q for the
         quarterly period ended September 30, 1998, filed with the Commission on
         November 25, 1998.

****     Incorporated  by reference to the Company's Form 10-Q for the quarterly
         period ended June 30, 1998,  filed with the  Commission  on August 14 ,
         1998.

*****    Incorporated  by reference to the Company's  Registration  Statement on
         Form S-8 dated June 29, 1998.

|        Incorporated by reference to the Company's  Current Report on Form 8-K,
         filed with the Commission on August 5, 1996.

#        A management  contract or compensatory plan or arrangement  required to
         be filed as an exhibit pursuant to Item 14(c) of Form 10-K.

         All other exhibits are filed herewith.

+        Incorporated by reference to the Company's Form 10-K for the year ended
         December 31, 1996 filed with the Commission on March 27, 1997.

                                       38

<PAGE>

<TABLE>
<CAPTION>
                            ALPHANET SOLUTIONS, INC.

                   INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

                                                                                                        Page
<S>                                                                                                       <C>

Report of Independent Accountants......................................................................   F-2

Consolidated balance sheets as of December 31, 1997 and 1998...........................................   F-3

Consolidated statements of income for the years ended December 31, 1996, 1997, and 1998 ...............   F-4

Consolidated statements of changes in shareholders' equity for the years ended December 31, 1996,
1997 and 1998..........................................................................................   F-5

Consolidated statements of cash flows for the years ended December 31, 1996, 1997 and 1998 ............   F-6

Notes to consolidated financial statements.............................................................   F-7

</TABLE>

                                      F-1

<PAGE>



                        REPORT OF INDEPENDENT ACCOUNTANTS

To the Board of Directors and Shareholders of AlphaNet Solutions, Inc.:


     In our  opinion,  the  accompanying  consolidated  balance  sheets  and the
related  consolidated  statements of income, of changes in shareholders'  equity
and of cash flows  present  fairly,  in all  material  respects,  the  financial
position of AlphaNet Solutions, Inc. and its subsidiary at December 31, 1998 and
1997,  and the results of their  operations and their cash flows for each of the
three years in the period ended December 31, 1998, in conformity  with generally
accepted   accounting   principles.   These   financial   statements   are   the
responsibility of the Company's management;  our responsibility is to express an
opinion on these  financial  statements  based on our audits.  We conducted  our
audits of these  statements  in  accordance  with  generally  accepted  auditing
standards which 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,   assessing  the
accounting  principles  used and significant  estimates made by management,  and
evaluating the overall  financial  statement  presentation.  We believe that our
audits provide a reasonable basis for the opinion expressed above.




PRICEWATERHOUSECOOPERS LLP
Florham Park, NJ

March 30, 1999

                                      F-2
<PAGE>

<TABLE>
<CAPTION>


                            ALPHANET SOLUTIONS, INC.

                           CONSOLIDATED BALANCE SHEETS
                        (in thousands, except share data)

                                                                                       December 31,
                                                                                  -----------------------
                                                                                    1997           1998
                                                                                    ----           ----
                                 ASSETS

<S>                                                                              <C>            <C>       
Current assets:
     Cash and cash equivalents...........................................        $ 2,689        $13,377
     Accounts receivable, net............................................         50,388         33,057
     Inventories.........................................................          4,941          3,505
     Deferred income tax asset...........................................          1,651          1,761
     Prepaid expenses and other current assets...........................          3,598          2,309
                                                                                  ------         ------
          Total current assets...........................................         63,267         54,009

Property and equipment, net..............................................          6,386          5,491
Other assets ............................................................          2,888          2,394
                                                                                  ------         ------
          Total assets...................................................        $72,541        $61,894
                                                                                  ======         ======
                  LIABILITIES AND SHAREHOLDERS' EQUITY

Current liabilities:
     Current portion of capital lease obligations........................          $  44          $  17
     Accounts payable....................................................         17,921         11,072
     Accrued expenses....................................................         12,179          6,730
     Billings in excess of costs.........................................            -              815
                                                                                  ------         ------
          Total current liabilities......................................         30,144         18,634

Advance from principal shareholder.......................................            675            675
Capital lease obligations................................................            -               49
                                                                                  ------         ------
          Total liabilities..............................................         30,819         19,358
                                                                                  ------         ------
Commitments and contingencies (Note 8)...................................
Shareholders' equity:
     Preferred stock -- $0.01 par value; authorized 3,000,000 shares,
        none issued......................................................            -               -
     Common stock-- $0.01 par value; authorized 15,000,000 shares,
        6,257,610 and 6,366,228 shares issued and outstanding in 1997
        and 1998, respectively...........................................             63             63
     Additional paid-in capital..........................................         33,172         33,942
     Retained earnings...................................................          8,487          9,198
     Treasury stock-- at cost; 136,800 shares in 1998....................            -             (667)
                                                                                  ------         ------
          Total shareholders' equity.....................................         41,722         42,536
                                                                                  ------         ------
          Total liabilities and shareholders' equity.....................        $72,541        $61,894
                                                                                  ======         ======

</TABLE>

          See accompanying notes to consolidated financial statements.

                                      F-3
<PAGE>

<TABLE>
<CAPTION>


                            ALPHANET SOLUTIONS, INC.

                        CONSOLIDATED STATEMENTS OF INCOME
                    (in thousands, except per share amounts)

                                                                            Year Ended December 31,
                                                                      -------------------------------------
                                                                       1996            1997          1998
                                                                       ----            ----          ----
<S>                                                                <C>             <C>           <C>       
Net sales:
     Product sales...........................................      $ 99,468        $147,602      $116,908
     Services and support....................................        20,137          43,790        54,628
                                                                    -------         -------       -------
                                                                    119,605         191,392       171,536
                                                                    -------         -------       -------
Cost of sales:
     Product sales...........................................        88,218         130,314       103,522
     Services and support....................................        12,915          29,013        37,058
                                                                    -------         -------       -------
                                                                    101,133         159,327       140,580
                                                                    -------         -------       -------

Gross profit.................................................        18,472          32,065        30,956
                                                                    -------         -------       -------
Operating expenses:
     Selling expenses........................................         7,301          13,224        14,602
     General and administrative expenses.....................         5,446           9,537        12,903
     Write-off of capitalized asset..........................           -               -           2,476
                                                                    -------         -------       -------
                                                                     12,747          22,761        29,981
                                                                    -------         -------       -------
Operating income.............................................         5,725           9,304           975
                                                                    -------         -------       -------
Other income (expense):
     Interest income.........................................           217             219           436
     Interest expense........................................          (106)           (158)          (77)
                                                                    -------         -------       -------
     Gain on sale of marketable securities...................            18             -              -
                                                                    -------         -------       -------
                                                                        129              61           359
                                                                    -------         -------       -------
Income before income taxes...................................         5,854           9,365         1,334
Provision for income taxes...................................         1,970           3,844           623
                                                                    -------         -------       -------
Net income...................................................        $3,884          $5,521         $ 711
                                                                    =======         =======       =======
Earnings per share - Basic...................................         $0.83           $0.97         $0.11
                                                                    =======         =======       =======
Weighted average shares outstanding..........................         4,690           5,719         6,272
                                                                    =======         =======       =======
Earnings per share -Diluted..................................         $0.82           $0.93         $0.11
                                                                    =======         =======       =======
Weighted average shares and share equivalents outstanding....         4,737           5,905         6,331
                                                                    =======         =======       =======

</TABLE>



          See accompanying notes to consolidated financial statements.

                                      F-4
<PAGE>

<TABLE>
<CAPTION>


                            ALPHANET SOLUTIONS, INC.

           CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
                                 (in thousands)

                                     Common        Common     Treasury     Treasury     Paid-In     Retained
                                     Shares         Stock      Shares        Stock      Capital     Earnings       Total
                                   ----------  ------------ ----------- ------------ ------------ ------------ -----------
  <S>                                 <C>            <C>        <C>           <C>         <C>        <C>         <C>   
  Balance at January 1, 1996......    3,400          $ 34          -          $ -       $   156      $ 6,384     $ 6,574
       Sales of common stock......    1,700            17          -            -        15,722           -       15,739
       Exercise of stock options..        3            -           -            -            26           -           26
       Distributions to S
  Corporation shareholders........       -             -           -            -            -        (7,302)     (7,302)
       Net income.................       -             -           -            -            -         3,884       3,884
                                      ----          ----         ---          ---        -----         -----       -----

  Balance at December 31, 1996....    5,103            51          -            -        15,904        2,966      18,921

       Sales of common stock......    1,150            12          -            -        17,200           -       17,212
       Exercise of stock options..        4            -           -            -            68           -           68
       Net income.................       -             -           -            -            -         5,521       5,521
                                      ----          ----         ---          ---        -----         -----       -----
  Balance at December 31, 1997....    6,257            63          -            -        33,172        8,487      41,722

       Exercise of stock options..       28            -           -            -           261           -          261
       Employee stock purchases...       81            -           -            -           509           -          509
       Purchase of treasury stock.       -             -         (137)        (667)          -            -         (667)
       Net income.................       -             -           -            -            -           711         711
                                      -----         -----        ----         ----       ------        -----      ------
  Balance at December 31, 1998....    6,366          $ 63        (137)       ($667)    $ 33,942      $ 9,198     $42,536
                                      =====         =====        ====         ====       ======        =====      ======

</TABLE>


          See accompanying notes to consolidated financial statements.

                                      F-5
<PAGE>

<TABLE>
<CAPTION>


                            ALPHANET SOLUTIONS, INC.

                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (in thousands)

                                                                                    Year Ended December 31,
                                                                                ---------------------------------
                                                                                  1996        1997        1998
                                                                                  ----        ----        ----
<S>                                                                            <C>          <C>           <C>   
Cash flows from operating activities:
   Net income.............................................................     $ 3,884      $ 5,521       $ 711
   Adjustments to reconcile net income to net cash provided by (used in)
     operating activities:
     Depreciation and amortization........................................         651        1,671       2,662
     Deferred income taxes................................................        (445)      (1,206)       (110)
     Gain on sale of marketable securities................................         (18)          -           -
     Write-off of capitalized asset.......................................          -            -        2,476
     Increase (decrease) from changes in:
        Accounts receivable...............................................     (15,963)     (17,978)     17,331
        Inventories.......................................................      (3,863)          35       1,436
        Prepaid expenses and other current assets.........................      (1,288)      (1,652)      1,289
        Other assets......................................................        (255)         302         324
        Accounts payable..................................................      10,647       (4,392)     (6,849)
        Accrued expenses..................................................       2,030        5,820      (5,449)
        Billing in excess of costs........................................          -            -          815
                                                                                -------     --------     ------
     Net cash provided by (used in) operating activities..................      (4,620)     (11,879)     14,636
                                                                                -------     --------     ------

Cash flows from investing activities:
   Proceeds from sale of marketable securities............................          26           -           -
   Property and equipment expenditures....................................      (3,087)      (3,842)     (3,999)
   Acquisition of businesses..............................................      (1,060)        (380)         -
   Receipt of loan repayments.............................................         413           -           -
                                                                                -------     --------     ------
     Net cash used in investing activities................................      (3,708)      (4,222)     (3,999)
                                                                                -------     --------     ------
Cash flows from financing activities:
   Repayment of long-term debt............................................        (736)          -           -
   Repayment of capital lease obligations.................................         (86)        (100)        (52)
   Advance from principal shareholder.....................................         675           -           -
   Distributions paid to S Corporation shareholders.......................      (7,302)          -           -
   Net proceeds from sales of common stock................................      16,138       17,212         509
   Exercise of stock options..............................................          26           68         261
   Purchase of treasury stock.............................................          -            -         (667)
                                                                                -------     --------     ------
     Net cash provided by financing activities............................       8,715       17,180          51
                                                                                -------     --------     ------
Net increase in cash and cash equivalents.................................         387        1,079      10,688
Cash and cash equivalents, beginning of period............................       1,223        1,610       2,689
                                                                                -------     --------     ------
Cash and cash equivalents, end of period..................................     $ 1,610      $ 2,689     $13,377
                                                                                =======     ========     ======
</TABLE>


          See accompanying notes to consolidated financial statements.

                                      F-6
<PAGE>


                            ALPHANET SOLUTIONS, INC.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. Summary of Significant Accounting Policies:
----------------------------------------------

   Nature of Business:
   -------------------

     AlphaNet Solutions, Inc. and its wholly-owned subsidiary (the "Company") is
a  single-source  provider of  information  technology  products,  services  and
support.  The Company  markets  computer  products and provides a broad range of
information  technology services,  including network consulting,  remote network
management,  workstation  support,  education,  communications  installation and
technical  placement  services  to Fortune  1000 and other  large and  mid-sized
companies    in   various    industries    located    primarily   in   the   New
York-to-Philadelphia  corridor.   Intercompany  balances  and  transactions  are
eliminated in consolidation.

     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 date of the financial
statements  and the  reported  amounts  of  revenues  and  expenses  during  the
reporting period.  Actual results could differ from those estimates.


   Basis of Consolidation:
   -----------------------

     The  consolidated  financial  statements  include the  accounts of AlphaNet
Solutions,  Inc. and its  wholly-owned  subsidiary.  All  material  intercompany
accounts and transactions have been eliminated in consolidation.

   Cash and Cash Equivalents:
   --------------------------

     The Company  considers  all highly  liquid  investments  purchased  with an
original  maturity of three months or less to be cash  equivalents.  The Company
has bank  balances,  including  cash  equivalents,  which at  times  may  exceed
federally insured limits.

   Inventories:
   ------------

     Inventories,  consisting  entirely of goods for  resale,  are stated at the
lower of cost or market with cost determined on the weighted average method.

   Property and Equipment:
   -----------------------

     Property and  equipment are stated at cost less  accumulated  depreciation.
Repairs and maintenance costs which do not extend the useful lives of the assets
are expensed as incurred.  The Company provides for depreciation on property and
equipment,  except for leasehold improvements,  on the straight-line method over
the  estimated  useful  lives of the  assets,  generally  three to seven  years.
Leasehold  improvements  are  amortized  on the  straight-line  method  over the
shorter of the estimated useful lives of the assets or the remaining term of the
applicable lease.

                                      F-7

<PAGE>

     Costs of computer software developed or obtained for internal use and costs
associated with technology under  development are capitalized and amortized over
the  estimated  useful  lives  of the  assets,  generally  three-to-five  years.
Capitalization  of costs begins when conceptual and design  activities have been
completed,  and when  management has authorized and committed to fund a project.
Costs capitalized include external direct costs of materials and services. Costs
associated with training and general and administrative  activities are expensed
as incurred.

   Recoverability of Long-Lived Assets:
   ------------------------------------

     The  Company  reviews  the  recoverability  of its  long-lived  assets on a
periodic  basis in order to identify  business  conditions  which may indicate a
possible impairment.  The assessment for potential impairment is based primarily
on the Company's  ability to recover the  unamortized  balance of its long-lived
assets from expected  future cash flows from its  operations on an  undiscounted
basis.

   Stock-Based Compensation:
   -------------------------

     In 1995, the Financial Accounting Standards Board issued Statement No. 123,
"Accounting for Stock-Based  Compensation"  ("FAS 123") which requires companies
to measure stock compensation plans based on the fair value method of accounting
or to continue to apply APB No. 25,  "Accounting  for Stock Issued to Employees"
("APB  25"),  and provide pro forma  footnote  disclosures  under the fair value
method.  Effective  January 1, 1996,  the Company  adopted  the  disclosure-only
provisions of FAS 123 and continues to follow APB 25 and related interpretations
to account for the Company's stock compensation plans.

   Leases:
   -------

     Leases which meet certain criteria evidencing  substantive ownership by the
Company are capitalized  and the related capital lease  obligations are included
in current and long-term  liabilities.  Amortization and interest are charged to
expense,  with rent  payments  being  treated as payments  of the capital  lease
obligation.  All other leases are accounted for as operating  leases,  with rent
payments being charged to expense as incurred.

   Revenue Recognition:
   --------------------

     The Company  recognizes sales of products when the products are shipped and
services and support  revenue is  recognized  when the  applicable  services are
rendered.  The Company  recognizes  revenue on service  contracts  on a prorated
basis  over the life of the  contracts.  Revenues  under  the MTA  Contract  are
recognized on the percentage-of-completion  method based on total costs incurred
relative to total estimated costs. Currently, total contract costs are estimated
to be equal to the total contract revenue. Prepaid fees related to the Company's
training  programs are deferred and amortized to income over the duration of the
applicable  training  program.  Deferred revenue is included in accrued expenses
and represents the unearned portion of each service contract and the unamortized
balance of prepaid training fees received as of the balance sheet date.

                                      F-8

<PAGE>

   Income Taxes:
   -------------

     The Company accounts for income taxes under the asset and liability method.
Under the asset and liability  method,  deferred tax assets and  liabilities are
recognized  based upon  differences  arising  from the  carrying  amounts of the
Company's assets and liabilities for tax and financial  reporting purposes using
enacted tax rates in effect for the year in which the  differences  are expected
to reverse. The effect on deferred tax assets and liabilities of a change in tax
rates is  recognized  in income in the  period  when the  change in tax rates is
enacted.

     Prior to March 19, 1996, the Company, with the consent of its shareholders,
had elected to be taxed under the  Subchapter S of the Internal  Revenue Code as
an S Corporation  for federal income tax purposes.  In lieu of corporate  income
taxes,  the  shareholders of an S Corporation  are taxed on their  proportionate
share of the Company's taxable income. As a result,  the Company was not subject
to federal  income taxes prior to March 19, 1996. The Company had also elected S
Corporation  status  in the  State of New  Jersey.  The  accompanying  financial
statements  include  provisions  for certain  state and local income taxes which
were imposed at the corporate level.

     On March 19, 1996,  the Company  terminated  its status as an S Corporation
and became subject to federal and state income taxes  thereafter at applicable C
Corporation income tax rates.

   Retirement Plan:
   ----------------

     The Company  adopted a 401(k)  retirement  plan in 1991.  Employees  of the
Company who have attained the age of 21 are eligible to participate in the plan.
Employees  can elect to  contribute up to 15% of their gross salary to the plan.
The Company may make  discretionary  matching cash contributions up to 2% of the
salary  of the  participating  individual  employee.  Participants  vest  in the
Company's  contributions  to the plan over a six-year period based upon years of
service.   Participants  are  fully  vested  at  all  times  in  their  employee
contributions to the plan. The Company incurred $117,000,  $277,000 and $446,000
of expenses related to this plan in 1996, 1997 and 1998, respectively.

   Financial Instruments:
   ----------------------

     Fair Value of Financial  Instruments  - The carrying  value of  significant
financial   instruments   approximates  fair  value.  The  Company's   financial
instruments are cash, cash equivalents,  accounts receivable,  accounts payable,
and accrued expenses.  The Company does not have any off-balance sheet financial
instruments or derivatives.

                                      F-9

<PAGE>


   Net Income per Share:
   ---------------------

     In February 1997, the Financial Accounting Standards Board issued Statement
No. 128, "Earnings per Share" ("SFAS No. 128"), which specifies the computation,
presentation  and  disclosure  requirements  for earnings  per share  ("EPS") of
entities  with  publicly  held  common  stock or  potential  common  stock.  The
statement defines two earnings per share  calculations,  basic and diluted.  The
objective  of basic EPS is to  measure  the  performance  of an entity  over the
reporting  period by dividing  income  available to common stock by the weighted
average shares outstanding. The objective of diluted EPS is consistent with that
of basic EPS, that is to measure the performance of an entity over the reporting
period,  while giving effect to all dilutive  potential  common shares that were
outstanding  during the  period.  The  calculation  of diluted EPS is similar to
basic EPS except  both the  numerator  and  denominator  are  increased  for the
conversion of potential  common  shares.  In February  1998,  the Securities and
Exchange  Commission  staff issued Staff  Accounting  Bulletin No. 98 ("SAB 98")
revising  previously  issued  statements to become  consistent with SFAS No. 128
(Earnings  per Share)  and No.  130  (Reporting  Comprehensive  Income).  SAB 98
requires the Company to revise its EPS  computations  to present  historical EPS
including pre-IPO periods. The computations set forth in Note 11 incorporate SAB
98.

2. Business Combinations
------------------------

     On July 24,  1996,  the  Company  acquired  certain  assets  of Lior,  Inc.
("Lior"),  a Pinacor  affiliate  located in Paramus,  New Jersey,  in a business
combination  accounted for under the purchase method,  for $1,060,000  including
acquisition  costs,  financed  through the proceeds raised in its initial public
offering.  Intangible  assets of $1,060,000  which are included in other assets,
are being  amortized  on the  straight-line  method over  periods not  exceeding
fifteen years.

     On August 1, 1997,  the  Company  consummated  the  acquisition  of certain
assets and assumed certain  liabilities of The Lande Group,  Inc.  ("Lande"),  a
computer equipment reseller and provider of systems integration services located
in New York City. The Company purchased, among other assets, the entire customer
list,  accounts  receivable  and  inventory  of Lande  for a  purchase  price of
$850,000, of which $750,000 was paid at closing. An additional $100,000 was paid
to Lande in two  installments in August 1998 and February 1999. The Company also
assumed certain liabilities, including certain trade debt, which was paid by the
Company at closing, accounts payable and accrued expenses, and obligations under
a lease which  expires in April 2008,  for New York City office space which will
serve as the Company's New York headquarters. Intangible assets of approximately
$1.5  million,  which are included in other assets,  are being  amortized on the
straight-line  method over periods not  exceeding  fifteen  years.  The original
acquisition  price  was $1.8  million,  subsequently  reduced  by the  return of
$250,000 held in escrow.

     Amortization  of intangible  assets for the years ended  December 31, 1996,
1997, and 1998 was $42,000, $101,000 and $170,000,  respectively. The operations
related  to  the  acquired  assets  of  Lior  and  Lande  are  included  in  the
accompanying  consolidated  financial statements  subsequent to their respective
dates of acquisition.

                                      F-10
<PAGE>

3. Accounts Receivable, net
---------------------------


     Accounts receivable, net consists of the following:

<TABLE>
<CAPTION>
                                                                                            -----------------------
                                                                                                December 31,
                                                                                               (in thousands)
                                                                                            -----------------------

                                                                                              1997           1998
                                                                                              ----           ----
     <S>                                                                                   <C>            <C>
     Accounts receivable..........................................................         $51,643        $34,357
     Less: Allowance for doubtful accounts........................................           1,255          1,300
                                                                                             -----          -----
                                                                                           $50,388        $33,057
                                                                                            ======          =====
<CAPTION>

4. Property and Equipment, net
------------------------------

     Property and equipment, net consists of the following:

                                                                                            -----------------------
                                                                                                December 31,
                                                                                               (in thousands)
                                                                                            -----------------------
                                                                                              1997           1998
                                                                                              ----           ----
     Furniture, fixtures and equipment............................................          $5,665         $9,035
     Transportation equipment.....................................................             109            157
     Leasehold improvements.......................................................             632            912
     Construction in progress.....................................................           2,564            397
                                                                                             -----          -----
                                                                                             8,970         10,501
     Less-- Accumulated depreciation and amortization.............................           2,584          5,010
                                                                                             -----          -----
                                                                                            $6,386         $5,491
                                                                                            ======          =====
<CAPTION>

     Depreciation  expense and  amortization of leasehold  improvements  for the
years ended  December  31, 1996,  1997 and 1998 were  $609,000,  $1,570,000  and
$2,492,000, respectively.

5. Accrued Expenses
-------------------

     Accrued expenses consist of the following:

                                                                                             ----------------------
                                                                                                 December 31,
                                                                                                (in thousands)
                                                                                             ----------------------
                                                                                              1997           1998
                                                                                              ----           ----
     Wages and benefits payable....................................................         $4,063         $1,880
     Deferred revenue..............................................................          2,031          1,888
     Sales taxes...................................................................          1,425            986
     Licensing fees payable........................................................            483            342
     Sales commissions.............................................................          1,152            618
     Income taxes payable..........................................................          1,498            -
     Other.........................................................................          1,527          1,016
                                                                                             -----          -----
                                                                                           $12,179         $6,730
                                                                                            ======          =====
</TABLE>

                                      F-11

<PAGE>

6. Debt and Capital Lease Obligations
-------------------------------------

   Notes Payable -- Bank:
   ----------------------

     On June 30,  1997,  the  Company  and First Union  National  Bank  ("Bank")
executed a Loan and Security  Agreement  whereby the Bank expanded the Company's
credit  facility to enable the Company to borrow,  based upon eligible  accounts
receivable,  up to $15.0 million for short-term  working capital purposes.  Such
facility  matured  on June  30,  1998  and  was  subsequently  extended  through
September  30,  1999.  The Loan and Security  Agreement  includes a $2.5 million
sublimit  for  letters of credit and a $5.0  million  sublimit  for  acquisition
advances. Under the current facility, the Company may borrow, subject to certain
post-closing  conditions and covenants by the Company,  (i) for working  capital
purposes  at the  Bank's  prime rate less 0.50% or LIBOR plus 1.25% and (ii) for
acquisitions  at the  Bank's  prime rate less  0.25% or LIBOR  plus  1.50%.  The
Company's obligations under such facility are collateralized by a first priority
lien on the Company's  accounts  receivable and inventory,  except for inventory
for which the Bank has or will have  subordinated  its position to certain other
lenders  pursuant to  intercreditor  agreements.  As of December 31,  1998,  the
Company had no outstanding balance under such credit facility.

   Capital Lease Obligations:
   --------------------------

     During 1998,  the Company  assumed the  telephone  lease  obligation of the
Lande Group,  Inc. from Dana Commercial  Credit Corp. At December 31, 1998, this
capital lease obligation totaled $66,000.  Depreciation  expense related to this
asset for the year ended December 31, 1998 was $8,200.

7. Stock Ownership and Compensation Plans
-----------------------------------------

     At December 31, 1998, the Company had two stock-based  compensation  plans.
The Company  applies APB 25 and related  interpretations  in accounting  for its
plans.  During 1996, 1997 and 1998, no compensation cost has been recognized for
its stock option plans,  which are described below.  Had compensation  cost been
determined  based on the fair value of the options at the grant dates consistent
with the method prescribed under FAS 123, the Company's pro forma net income and
pro forma  earnings  per share would have been reduced to the adjusted pro forma
amounts indicated below:

<TABLE>
<CAPTION>

                                                                         1996               1997               1998
                                                                         ----               ----               ----
                                                                       (in thousands, except per share amounts)
<S>                                                                    <C>                <C>                  <C>
Net income
     As reported............................................           $3,884             $5,521               $711
     As adjusted for FAS 123 method.........................            3,414              4,843                223
Earnings per share - diluted
     As reported............................................             0.82               0.93               0.11
     As adjusted for FAS 123 method.........................             0.72               0.82               0.04

</TABLE>

     The fair value of each option grant is estimated on the date of grant using
the Black-Scholes option pricing model with the following  assumptions for 1996,
1997 and 1998:  dividend yield of 0%; expected  volatility of approximately 67%;
risk free interest rates of approximately  6%; and an expected holding period of
six years.

                                      F-12
<PAGE>

   1995 Stock Plan:
   ----------------

     On August 25, 1995,  the Company's 1995 Stock Plan (the "Plan") was adopted
by the Board of Directors  and approved by the  shareholders  of the Company.  A
total of 747,100  shares are  reserved  for  issuance  upon  exercise of options
granted or to be granted  under the Plan.  The  options,  which expire ten years
after the date of grant,  become  exercisable in five equal annual  installments
commencing one year after the date of grant  provided that the optionee  remains
an employee at the time of vesting of the installments.

   1995 Non-Employee Director Stock Option Plan:
   ---------------------------------------------

     In 1995,  the Board of  Directors  adopted and the  Company's  shareholders
approved the  Company's  1995  Non-Employee  Director  Stock Option Plan,  which
provides  for the grant of  options to  purchase a maximum of 100,000  shares of
Common  Stock of the Company to  non-employee  Directors  of the  Company.  Each
person who is or who becomes a Director of the Company after the effective  date
of the  Company's  initial  public  offering  and who is not also an employee or
officer of the Company shall be granted,  on the  effective  date or the date on
which he or she becomes a Director,  whichever  is later,  an option to purchase
20,000 shares of Common Stock,  at an exercise price per share equal to the then
fair market value of the shares.  The options,  which expire ten years after the
date of grant, become exercisable in five equal annual  installments  commencing
one year  after the date of grant  provided  that the  optionee  then  remains a
Director at the time of vesting of the installments.

     A summary of the stock options granted under the Plan and 1995 Non-Employee
Director  Stock Plan as of and for the year ended  December 31,  1996,  1997 and
1998 is presented below:

<TABLE>
<CAPTION>

                                                                   Year Ended December 31,

                                                    1996                      1997                    1998
                                            -----------------------    --------------------    ---------------------
                                                          Weighted                Weighted                Weighted
                                                           Average                Average                 Average
                                               Shares     Exercise       Shares   Exercise       Shares   Exercise
                                                (000)       Price        (000)     Price         (000)      Price
<S>                                              <C>        <C>            <C>      <C>          <C>        <C>   
Outstanding at beginning of year..........       260        $9.00           539    $ 9.44           670     $10.58
Granted...................................       290         9.82           203     14.05            63       6.72
Exercised.................................        (3)        9.00            (5)     9.00           (28)      9.32
Forfeited.................................        (8)        9.00           (67)    11.90          (163)      4.27
                                                 ---                        ---                     ---           
Outstanding at end of year................       539         9.44           670     10.58           542       5.15
                                                 ===                        ===                     ===           
Options exercisable at end of year........        47         9.00           143      9.36           213       5.04

</TABLE>

                                      F-13
<PAGE>

<TABLE>
<CAPTION>



                                       Options Outstanding                                Options Exercisable
                      -------------------------------------------------------      -----------------------------------

         Range of         Number              Average              Weighted              Number       Weighted Average
         Exercise     Outstanding at         Remaining              Average            Exercisable     Aveerage
          Prices        at 12/31/98       Contractual Life       Exercise Price         at 12/31/98     Exercise Price
          ------        -----------       ----------------       --------------         -----------     --------------
          <S>          <C>                      <C>                 <C>                  <C>                 <C> 
          $ 4.27       471,160                  7.59                $ 4.27              189,420             $  4.27
           11.38        28,000                  5.35                 11.38               16,000               11.38
           10.50        20,000                  7.22                 10.50                8,000               10.50
           12.00        20,000                  9.41                 12.00                  -                  -
            4.00         2,500                  9.78                  4.00                  -                  -
            4.27       -------                                                         -------
                       541,660                                                         213,420
                       =======                                                         =======
</TABLE>


     The  weighted-average  fair value of options  granted during 1996, 1997 and
1998 was $6.56, $9.35 and $4.26, respectively.  Effective December 15, 1998, all
stock  options were  repriced to $4.27 per share,  except stock  options  issued
pursuant to the 1995  Non-Employee  Director  Stock Option Plan and 2,500 shares
previously issued at $4.00.

8. Commitments and Contingencies
--------------------------------

     The Company  occupies eight  facilities under operating leases which expire
at various  dates  through April 2008 and call for annual base rentals plus real
estate taxes.  The future  minimum  payments under  non-cancelable  leases as of
December 31, 1998 are as follows:

<TABLE>
<CAPTION>

                                                                                                              Net
                                                                    Lease             Sublease              Lease
                                                                 Obligations          Rentals            Obligations
                                                                                  (in thousands)
                                                              -------------------------------------------------------
<S>                                                                   <C>               <C>                 <C>  
1999.........................................................         $1,212               $268               $944
2000.........................................................          1,172                275                897
2001.........................................................          1,146                247                899
2002.........................................................            979                215                764
2003.........................................................            616                174                442
Thereafter...................................................          1,267                348                919
                                                                      ------             ------             ------
                                                                      $6,392             $1,527             $4,865
                                                                      ======             ======             ======
</TABLE>

     Rent expense, including real estate taxes, for the years ended December 31,
1996, 1997 and 1998 was $688,000, $922,000, and $1,177,000 respectively.

     The Company has obtained  financing  terms from IBM Credit  Corporation and
Finova Capital Corporation for the purchase of inventory.  In exchange for these
terms,  and subject to the  intercreditor  agreements  with First Union National
Bank, the payables are  collateralized  by  substantially  all the assets of the
Company.  The balances  included in accounts  payable at December 31, 1996, 1997
and 1998 were $13,085,000, $15,981,000 and $7,407,000, respectively.

     On February 13, 1996, the Company, as plaintiff,  filed a complaint against
two former  employees of the Company and their current employer  (together,  the
"Defendants").  Such complaint alleges theft of services, theft of the Company's

                                      F-14

<PAGE>

property,  theft of corporate opportunity and unauthorized use of Company credit
cards by the Defendants.  The Company is seeking restitution from certain of the
Defendants  and  additional  compensatory  damages from another  Defendant.  The
Defendants have asserted certain  counterclaims  against the Company and certain
of its directors,  with respect to which the Company and such directors  believe
they have  meritorious  defenses.  The Company intends to vigorously  pursue all
available  remedies  against  the  Defendants.  The  parties  consented  to  the
suspension of discovery pending mediation of all claims.  Therefore, the Company
currently is unable to evaluate the  likelihood  of a favorable  outcome for the
Company. The Company believes that some or all of its damages in connection with
the  litigation  may be  covered by  insurance.  In any  event,  Stan Gang,  the
Company's founder,  Chairman of the Board, President and Chief Executive Officer
and principal  shareholder,  has agreed to indemnify the Company for any and all
losses which the Company may sustain,  up to $1,000,000 arising from or relating
to the alleged wrongful conduct of the Defendants.  In connection therewith, Mr.
Gang has paid $675,000 of his personal funds to the Company, which is classified
as an  advance  from the  principal  shareholder.  Pursuant  to the terms of the
agreement between the Company and Mr. Gang, the Company shall reimburse Mr. Gang
in the event and to the extent that the Company is awarded and collects  damages
from the  Defendants,  receives  sums as a result of a  settlement  between  the
Company and the  Defendants,  or receives  proceeds  under an insurance  policy.
Management is of the opinion that the ultimate  disposition  of this matter will
not have a material  adverse  effect on the results of  operations  or financial
position of the Company.

     On June 30, 1998,  Bruce  Flitcroft  ("Flitcroft"),  the  Company's  former
Corporate Vice President,  Technology Services, filed suit in the Superior Court
of New Jersey, Morris County, against the Company and its Chairman of the Board,
President  and CEO,  alleging,  among  other  things,  breach by the  Company of
Flitcroft's  employment  agreement  and failure to pay an alleged  bonus arising
from the Company's 1990 acquisition of Datar IDS Corp. and/or pay pursuant to an
alleged oral promise, an alleged one-million dollar severance payment in lieu of
such  bonus.  The Company  believes  Flitcroft's  claims are  without  merit and
intends to fully and vigorously defend while pursuing all available remedies. On
July 16, 1998,  without  knowledge of the suit filed by  Flitcroft,  the Company
filed suit against  Flitcroft  and Alliant  Technologies,  Inc.  ("Alliant"),  a
company believed to be owned and/or operated by Flitcroft,  alleging among other
things,  breach  of  contract  and  conspiracy  to usurp  corporate  assets  and
opportunities.  The  Company  seeks to enforce  its  employment  agreement  with
Flitcroft,  including  enjoining (i) Flitcroft's  employment with Alliant;  (ii)
Flitcroft's  solicitation of Company employees;  (iii) Flitcroft from disclosing
Company  confidential  information;  and (iv) Flitcroft from soliciting  Company
customers.  The Court has directed  arbitration of the claims in dispute in this
matter, and such arbitration proceedings commenced as of March 1999. The Company
has obtained insurance coverage for some of the claims in dispute. The Company's
Board of Directors authorized the Company to defend the Chairman,  President and
CEO and  approved his  indemnification  by the  Company.  Given the  preliminary
nature of this  matter,  the Company  cannot  determine at this time whether its
resolution  or the  expenses  likely to be  incurred  in this matter will have a
material  adverse  impact  on  the  Company's  financial  position,  results  of
operation, or cash flow.

     To the Company's  knowledge,  there is no other material litigation pending
to which the Company is a party or to which any of its property is subject.

                                      F-15

<PAGE>

9. Supplementary Cash Flow Information
--------------------------------------

     Following is a summary of supplementary cash flow information for the years
ended December 31, 1996, 1997 and 1998:

<TABLE>
<CAPTION>

                                                                                 Year Ended December 31,
                                                                                      (in thousands)
                                                                             ----------------------------------

                                                                                  1996        1997       1998
                                                                             ----------  ----------  ----------
     <S>                                                                         <C>         <C>         <C>          
     Interest paid....................................................            $ 97        $159         $ 77
     Income taxes paid................................................           1,977       3,917       2,678
     Non cash investing and financing activities:
        Equipment acquired under capital lease........................            -           -             74

</TABLE>

10. Income Taxes
----------------

     The Company  accounts for income taxes under the asset and liability method
which requires the  recognition of deferred tax assets and  liabilities  for the
expected future tax consequences of differences between the carrying amounts and
the tax bases of the assets and liabilities.

     The  components of the  provision for income taxes for 1996,  1997 and 1998
are as follows:

<TABLE>
<CAPTION>

                                                                                       Year Ended December 31,
                                                                                           (in thousands)
                                                                             ---------------------------------------------

                                                                                   1996              1997           1998
                                                                             ------------    --------------  -------------
     <S>                                                                        <C>                <C>              <C>
     Current:
          Federal........................................................        $1,733            $3,692           $547
          State and local................................................           682             1,358            186
                                                                                 ------            ------           ----
                                                                                  2,415             5,050            733
                                                                                 ------            ------           ----
     Deferred:
          Federal........................................................          (178)             (841)           (82)
          State and local................................................           (57)             (365)           (28)
          Benefit as a result of change in tax status....................          (210)              -              -
                                                                                 -------           ------           -----
                                                                                   (445)           (1,206)          (110)
                                                                                 ------            ------           -----
                                                                                 $1,970            $3,844           $623
                                                                                 ======            ======           =====
</TABLE>

     Prior to March 19, 1996, the Company had elected under the Internal Revenue
Code to be an S  Corporation  for federal  income and, in certain  cases,  state
income tax purposes.

     A reconciliation of the Federal  statutory rate to the Company's  effective
tax rate for 1996, 1997 and 1998 is as follows:

                                      F-16

<PAGE>

<TABLE>
<CAPTION>

                                                                                         Year Ended December 31,  
                                                                                   ---------------------------------------

                                                                                         1996          1997         1998
                                                                                   ------------  ------------  -----------
     <S>                                                                                <C>          <C>           <C> 
     Taxes at statutory rate.................................................           34.0%        34.0%         34.0%
     State and local income taxes, net of federal tax benefit................            6.1%         6.7%          7.8%
     Income from S Corporation not subject to federal and state income
        taxes................................................................          (37.4%)       (7.2%)          -
     Other, net..............................................................            0.3%         0.2%          4.9%
                                                                                       ------        -----         -----
     Effective tax rate......................................................            3.0%        33.7%         46.7%
                                                                                       ======        =====         =====
</TABLE>

     The tax  effects of  temporary  differences  that give rise to  significant
portions of the net deferred  income tax asset at December 31, 1997 and 1998 are
as follows:

<TABLE>
<CAPTION>

                                                                                                         Year Ended
                                                                                                    December 31,

                                                                                                    1997            1998
                                                                                             -------------   -------------
<S>                                                                                                 <C>             <C>
Accounts receivable allowances............................................................          $515            $540
Inventory reserves........................................................................           259             428
Accrual for compensated absences..........................................................           478             520
Accumulated depreciation and amortization.................................................          (118)            (11)
Other accruals............................................................................           517             284
                                                                                                   -----           -----
                                                                                                  $1,651          $1,761
                                                                                                  ======          ======
</TABLE>

11. Earnings Per Share
----------------------

     As described in Note 1 of Notes to Consolidated  Financial Statements,  the
Company  has  adopted  the  provisions  of SFAS No. 128 and SAB No. 98. In 1998,
68,000  potential  common shares were excluded from the  computations of diluted
earnings per share because the effect would have been anti-dilutive.  There were
no anti-dilutive  common stock  equivalents in 1996 and 183,300 such equivalents
in  1997.  The  following  table  is  a  reconciliation  of  the  numerator  and
denominator  used in the calculation of basic and diluted  earnings per share as
required:

<TABLE>
<CAPTION>

                                                                                     Year Ended December 31, 1996
                                                                                            (in thousands,
                                                                                       except per share amounts)
                                                                                -----------------------------------------
                                                                                                             Per Share
                                                                                                                 Amount
                                                                                     Income       Shares
                                                                                -------------   ----------   ------------
     <S>                                                                             <C>           <C>            <C>   
     Basic EPS:
     Net income applicable to common shares..................................        $3,884        4,690          $0.83
     Assuming Dilution:
        Stock Options........................................................           -             47
                                                                                     ------        -----
                                                                                     $3,884        4,737          $0.82
                                                                                     ======        =====
</TABLE>

                                      F-17

<PAGE>

<TABLE>
<CAPTION>


                                                                                     Year Ended December 31, 1997
                                                                                            (in thousands,
                                                                                       except per share amounts)
                                                                                -----------------------------------------
                                                                                                             Per Share
                                                                                                                 Amount
                                                                                     Income       Shares
                                                                                -------------   ----------   ------------
     <S>                                                                             <C>            <C>           <C>     
     Basic EPS:
     Net income applicable to common shares..................................        $5,521         5,719         $0.97
     Assuming Dilution:
        Stock Options........................................................           -            186
                                                                                     ------        -----
                                                                                     $5,521        5,905          $0.93
                                                                                     ======        =====
<CAPTION>

                                                                                     Year Ended December 31, 1998
                                                                                            (in thousands,
                                                                                       except per share amounts)
                                                                                -----------------------------------------
                                                                                                             Per Share
                                                                                                                 Amount
                                                                                     Income       Shares
                                                                                -------------   ----------   ------------
     Basic EPS:
     Net income applicable to common shares..................................          $711        6,272          $0.11
     Assuming Dilution:
        Stock Options........................................................           -            59
                                                                                     ------        -----
                                                                                       $711        6,331          $0.11
                                                                                     ======        =====
</TABLE>


12. Employee Stock Purchase Plan
--------------------------------

      On December 31, 1997, the Company  adopted an Employee Stock Purchase Plan
(the  "Plan") for  employees of the Company and its  subsidiaries.  The Plan was
approved by the Company's  shareholders at its 1998 Annual Meeting. The Plan was
adopted  to  provide a further  incentive  for  employees  to  promote  the best
interests of the Company and to encourage  stock ownership by employees in order
to participate in the Company's potential economic progress.  A total of 500,000
shares of common stock are authorized for issuance pursuant to the Plan.

     In general,  the Plan  provides  for  eligible  employees  to  designate in
advance of specified purchase periods (monthly) a percentage of compensation (up
to 10%) to be withheld  from their pay and applied  toward the  purchase of such
number of whole  shares of Common Stock as can be purchased at a price of 85% of
the  stock's  trading  price at the end of each such  period.  No  employee  can
purchase  more  than  $15,000  worth of  stock  annually,  and no  stock  can be
purchased by any person which would result in the purchaser  owning five percent
or more of the total  combined  voting power or value of all classes of stock of
the Company.

     The Plan is intended to satisfy the  requirements  of Section 423(b) of the
Internal Revenue Code of 1986, as amended, which requires that it be approved by
shareholders  within  one year of the  earlier of its  adoption  by the Board of
Directors or the plan's  effective  date.  In addition,  the Plan is intended to
comply with certain requirements of Rule 16b-3 under the Securities Exchange Act
of 1934, as amended.

      During  1998,  employees  purchased  80,888  shares  under the Plan for an
aggregate purchase price of $508,953.

                                      F-18

<PAGE>

13. Stock Repurchase Program
----------------------------

     The Company's Board of Directors  approved a 225,000 share stock repurchase
program in August 1998. As of December 31, 1998, a total of 136,800 shares at an
average per-share cost of $4.87 have been  repurchased.  The Company has paid an
aggregate of approximately $667,000 for such purchases.

14. Significant Customers and Vendors
-------------------------------------

         During 1998, KPMG LLP accounted for  approximately 15% of the Company's
net sales.  During the fiscal  year ended  December  31,  1997,  two  customers,
Nabisco and KPMG LLP,  accounted  for  approximately  31% of the  Company's  net
sales,  16% and 15%,  respectively.  During the fiscal year ended  December  31,
1996, Nabisco accounted for approximately 17% of the Company's net sales.

         The Company  purchases the majority of its products  primarily from two
aggregators of computer  hardware,  software and  peripherals.  Agreements  with
these aggregators provide for, among other things,  certain discount pricing for
meeting agreed-upon purchase levels and minimum purchase commitments.

                                      F-19

<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,

                                    ALPHANET SOLUTIONS, INC.




                                    By:  STAN GANG
                                    --------------------------------------------
                                         Stan Gang, Chairman of the Board,
                                         President and Chief Executive
                                         Officer (Principal Executive Officer)

                                         March 31, 1999


         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/Stan Gang                        Chairman of the Board, President and
-----------------------------       Chief Executive Officer (Principal                   March 31, 1999
Stan Gang                           Executive Officer)

/s/Robert G. Petoia                 Vice President and Chief Financial
-----------------------------       Officer (Principal Financial and                     March 31, 1999
Robert G. Petoia                    Accounting Officer)

/s/ Michael Gang                    Director          
-----------------------------                                                            March 31, 1999
Michael Gang

/s/Michael R. Bruce                 Director
-----------------------------
    Michael R. Bruce                                                                     March 31, 1999

/s/Richard Miller                   Director
-----------------------------
    Richard Miller                                                                       March 31, 1999

/s/Susan Wolford                    Director
-----------------------------
    Susan Wolford                                                                        March 31, 1999

</TABLE>