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                                  UNITED STATES
..                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549
                            ------------------------

                                    FORM 10-K

X      ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
-
         ACT OF 1934
..
                     For the fiscal year ended July 31, 2004

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


            For the transition period from _______________ to _______________

                         Commission File Number 0-21695

                          MANCHESTER TECHNOLOGIES, INC.
             (Exact name of Registrant as specified in its charter)

          New York                                             11-2312854
(State or other jurisdiction of                              (I.R.S. Employer
 incorporation or organization)                              I. D. Number)

                   160 Oser Avenue, Hauppauge, New York, 11788
              (Address of principal executive offices and Zip Code)

       Registrant's telephone number, including area code: (631) 435-1199

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

Indicate by check mark whether Registrant (1) has filed all reports to be filed
by Section 13 or 15(d) of the Securities Exchange Act of 1934 (the "Act") during
the preceding 12 months (or for such shorter period that 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 the 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. [ ]

Indicate by check mark whether Registrant is an accelerated filer (as defined in
Rule 12b-2 of the Act). Yes [ ] No [ X ]

The  aggregate  market  value of the  common  stock  held by  non-affiliates  of
Registrant as of January 31, 2004 was $11,052,486 (2,600,585 shares at a closing
sale price of $4.25).

As of October 14, 2004, 8,263,584 shares of Common Stock ($.01 par value) of
Registrant were issued and outstanding.
                               -------------------

                       DOCUMENTS INCORPORATED BY REFERENCE
                                      None

<PAGE>


                          MANCHESTER TECHNOLOGIES, INC.

                                    FORM 10-K
                            YEAR ENDED JULY 31, 2004
                                TABLE OF CONTENTS

Part I

Item 1.      Business                                                         3
Item 2.      Properties                                                       7
Item 3.      Legal Proceedings                                                7
Item 4.      Submission of Matters to a Vote of Security Holders              7


Part II

Item 5.   Market for the  Registrant's  Common  Equity,  Related  Stockholder
          Matters and Issuer Purchases of Equity Securities                   8
Item 6.   Selected Consolidated Financial Data                                9
Item 7.   Management's  Discussion  and Analysis of Financial  Condition and
          Results of Operations                                              10

Item 7A.  Quantitative and Qualitative Disclosures about Market Risk         17
Item 8.   Financial Statements and Supplementary Data                        17
Item 9.   Changes in and Disagreements with Accountants on Accounting
           and Financial Disclosure                                          18
Item 9A   Controls and Procedures                                            18
Item 9B   Other Information                                                  18

Part III

Item 10.  Directors and Executive Officers of the Registrant                 19
Item 11.  Executive Compensation                                             20
Item 12.  Security Ownership of Certain Beneficial Owners and Management
           and Related Stockholder Matters                                   23
Item 13.  Certain Relationships and Related Transactions                     24
Item 14.  Principal Accounting Fees and Services                             24

Part IV

Item 15.  Exhibits, Financial Statement Schedules and Reports on Form 8-K    25

             Signatures
             Certifications

<PAGE>


PART I

ITEM 1. Business

Our Company

     Manchester Technologies,  Inc., a New York corporation  ("Manchester" "we,"
"us," "our," or the "Company"), is a distributor of display technology solutions
and plasma display monitors through its  wholly-owned  subsidiary,  Electrograph
Systems,  Inc.,  a  New  York  corporation  ("Electrograph").   Manchester  also
distributes computer hardware,  primarily to dealers and system integrators.  We
offer our customers solutions,  customized to their display technology needs, by
offering a complete line of products and peripherals for our customers'  display
technology  requirements.   We  have  forged  long-standing  relationships  with
customers, manufacturers and suppliers and capitalized on the rapid developments
in the technology industry.

     On May 28,  2004,  the Company  sold its  end-user  information  technology
fulfillment  and  professional  services  business (the "IT Business") to ePlus,
inc. ("ePlus"), a leading provider of Enterprise Cost Management, in an all cash
transaction.  The transaction included the sale to ePlus of the customer list of
the business and certain related  equipment,  the assumption by ePlus of certain
contracts and liabilities  pertaining to the business and the hiring by ePlus of
the majority of Manchester  employees involved in the business.  The transaction
did not include, and Manchester retained,  the inventory and accounts receivable
of the IT Business.

     Prior to the sale of the IT Business,  Manchester  specialized  in hardware
and software procurement,  display technology,  custom networking,  security, IP
telephony, remote management, application  development/e-commerce,  storage, and
enterprise  and  Internet  solutions,   offering  its  customers   single-source
solutions  customized  to their  information  systems needs by  integrating  its
analysis, design and implementation services with hardware, software, networking
products and  peripherals  from leading  vendors.  Subsequent to such sale,  the
Company has  continued  distributing  display  technology  solutions  and plasma
display  monitors and computer  hardware,  but no longer  provides  professional
services.

     Manchester  was  incorporated  in New  York  in 1973  and  has  two  active
wholly-owned  subsidiaries:  Electrograph Systems and Manchester  International,
Ltd.,  a New York  corporation,  which sells  computer  hardware,  software  and
networking products to resellers domestically and internationally.

Industry

     The display  industry,  as a whole, has experienced  tremendous growth over
the past  decade.  Specific  products  included  in this market  include  Liquid
Crystal Display ("LCD")  Projectors,  LCD Flat panel displays and plasma display
panels.  Specifically,  the flat panel display market is currently  experiencing
accelerated growth, including growth in the consumer market.

     The display  market has moved from the early  adopter  stage of the product
cycle and has moved and continues to move into both the consumer and  commercial
markets.  The flat panel display market covers numerous  markets  including home
theater,   professional  audio-visual  and  information  technology.  The  total
worldwide  plasma display panel market is expected to continue to grow as market
acceptance  increases.  Industry-wide  sales of flat panel display  products and
projectors  are  expected to be in the  hundreds of  thousands of units over the
next few years.

Our Mission

     With  our  display   technology   solutions,   we  are   committed  to  the
multi-faceted  support  of our  reseller  partners.  Our  mission  is to deliver
value-added  technical product support and customization that differentiates the
Company from the competition,  which will allow our reseller partners to be more
competitive and ultimately more profitable.  Our VAP (Value-Added Plus) extended
warranty  program  offers  the  reseller  channel  an  extensive   "value-added"
distribution product.

Our  Products

     Through our  "value-added"  business model and philosophy we have been able
to capitalize on the display industry growth, penetrate new markets and increase
the Company's  overall  market  share.  For over twenty years  Electrograph  has
provided  resellers with a spectrum of "value-added"  technical  product support
and product  customization.  These include our strategically  located nationwide
sales offices, a nationwide inside sales support staff,  nationwide  warehousing
for efficient product  logistics,  product  customization and factory authorized
service and repair. In addition,  the Company also offers  marketing,  technical
and installation support,  custom integrated solutions,  touch screen solutions,
custom cabinet painting and digital signage  solutions,  as well as a line up of
peripheral products.

                                       3
<PAGE>

     We offer a wide variety of display  technology  solutions and  peripherals,
including CRT Display Monitors, LCD Flat Panel Monitors, LCD Projectors,  Plasma
Display   Monitors  and  Supplies  and   Accessories.   We  have   long-standing
relationships with many  manufacturers,  which we believe assist us in procuring
desired  products on a timely basis and on desirable  financial  terms.  We sell
products  from  most  major  manufacturers,   including,   Pioneer  Corporation,
Panasonic, Sony Corporation,  NEC Solutions, Inc., NEC-Mitsubishi,  Inc, Hitachi
America,  Ltd.,  Philips  Electronics,  N.V.  and  Toshiba  America  Information
Systems, Inc.

     We also offer a wide range of product repair  services for both in warranty
and out of warranty products for our customers' display technology requirements.
The  Company  is an  authorized  service  and  repair  facility  for most of the
manufacturers  that  we  represent.  We also  provide  extensive  technical  and
installation support to both resellers and end users. Additional revenue is also
being  generated  as a  result  of the  fees  received  for the  Electrograph  -
Value-Added  Plus(R)  Extended  Warranty  Program,  which is a  product  that is
provided by an insured third party warranty provider.

     The Company  also offers  custom  integrated  solutions,  including  custom
cabinet painting and touch screen solutions. Such services are performed for the
customer prior to product shipment.  Our custom integrated solutions are used in
numerous  market segments  including  digital  signage,  public display point of
purchase and point of sale  applications.  These  solutions  help to improve the
Company's unique focus on the value-added  niche,  further  differentiating  the
Company from the competition and improving the Company's market penetration.

         As part of our goal to make our products more accessible to our
customers, we are in the process of implementing an electronic ordering system.
This ordering system will enable participating customers to access the Company
via the Internet, review various products and systems offered by us, and place
and track their orders on-line. Customers will also be able to obtain immediate
customized information regarding products and systems that meet their specific
requirements. The ordering system will produce a matrix of alternative fully
compatible packages, together with their availability and related costs, based
on parameters indicated by the customer. Customers will not be granted access to
this system without prior credit clearance and proper reseller authorization.

         In addition, we have continuously upgraded and expanded our electronic
communication system. Our website, located at www.electrograph.com, allows
existing customers, corporate shoppers and others to find product
specifications, compare products, check price and track orders quickly and
easily 24 hours a day, seven days a week. We have made, and expect to continue
to make, significant investments and improvements in our e-commerce
capabilities.

     For the fiscal year ended July 31, 2004, sales of products  manufactured by
Pioneer,   NEC  and  Panasonic   comprised   approximately  24%,  16%  and  14%,
respectively,  of our revenue. For the fiscal year ended July 31, 2003, sales of
products manufactured by Pioneer, NEC and Panasonic comprised approximately 29%,
12% and 11%,  respectively,  of our revenue.  For the fiscal year ended July 31,
2002, sales of products manufactured by NEC and Pioneer comprised  approximately
25% and 24%, respectively, of our revenue.

Relationships with Manufacturers

     We  have  entered  into  agreements   with  our  principal   suppliers  and
manufacturers that include provisions providing for periodic renewals and permit
termination by the vendor  without  cause,  generally upon 30 to 90 days written
notice,   depending  upon  the  vendor.   While  our  principal   suppliers  and
manufacturers have regularly renewed their respective  agreements with us, there
can be no assurance that the regular  renewal of our  agreements  will continue.
The  termination,  or  non-renewal,  of any or all  of  these  agreements  would
materially  adversely  affect our business.  We,  however,  are not aware of any
reason for the  termination,  or  non-renewal,  of any of those  agreements  and
believe that our  relationships  with our principal  suppliers and manufacturers
are satisfactory.

     We  are  dependent   upon  the  continued   supply  of  products  from  our
manufacturers,  particularly Pioneer,  Panasonic and NEC. Occasionally,  certain
suppliers and manufacturers  experience shortages of select products that render
them  unavailable or necessitate  product  allocations.  We believe that product
availability  issues occur as a result of the present dynamics of the technology
industry as a whole,  which include varied customer  product  demand,  shortened
product life cycles and increased  frequency of new product  introductions  into
the marketplace.  While there can be no assurance that product unavailability or
product  allocation,  or both,  will not increase in fiscal 2005,  the impact of
such an interruption is not expected to be unduly troublesome due to the breadth
of alternative product lines available to the Company.

     We seek to obtain volume  discounts for large customer orders directly from
manufacturers.  Many of our major product  manufacturers provide stock balancing
rights and price  protection  for a limited  time  period,  by way of credits or
refunds,  for  price  reductions  by the  manufacturer  between  the time of the
initial  sale to the  Company  and the  subsequent  sale by the  Company  to our
customers.  There can be no assurance that  manufacturers will not further limit
or eliminate price protection and stock balancing rights in the future.

                                       4
<PAGE>

Customers

     We believe that we benefit from our long-standing  relationships  with many
of our customers,  providing  opportunities for continued sales. We believe that
our broad range of  capabilities  with respect to our products is  attractive to
companies of all sizes. For the fiscal years ended July 31, 2004, 2003 and 2002,
no one customer accounted for more than 10% of our total revenue.

     We grant  credit to  customers  meeting  specified  criteria and maintain a
credit  department  that reviews  credit  applications.  Accounts are  regularly
monitored for  collectibility and appropriate action is taken upon indication of
credit risk.

     Our return policy generally  allows  customers to return products,  without
restocking  charges,  within 30 days of the original  invoice  date,  subject to
advance  approval,  our  ability to return the product to our vendor and certain
other conditions. We are generally able to return defective merchandise returned
from customers to the vendor for repair or replacement.

Sales and Marketing

     Sales   are   generated   primarily   by  our  29   sales   and   marketing
representatives. Our sales representatives generally are responsible for meeting
all of our  customers'  product needs and are  supervised by sales managers with
significant  industry  experience.   The  sales  managers  are  responsible  for
overseeing  sales  representative  training,  establishing  sales objectives and
monitoring account management  principles and procedures.  Sales representatives
attend seminars  conducted by manufacturers'  representatives,  at which our new
and existing product offerings are discussed.

     We  believe  that  our  name  is  widely   recognized   for  high  quality,
competitively  priced products.  We promote name recognition and the sale of our
products  through  national and regional  business  directories,  trade magazine
advertisements, direct mailings and e-mailings to customers and participation in
trade shows and special events. We also promote interest in our products through
our website on the Internet,  and have expanded website functionality to provide
an electronic catalog of our products.  Several  manufacturers offer cooperative
advertising and other promotional  programs,  on which we rely to partially fund
many of our advertising and promotional campaigns.

Management Information Systems

     We currently use an IBM AS/400 and a Hewlett  Packard  storage area network
in our integrated  management  information  system,  which enable  instantaneous
access.  We  maintain  proprietary  management  systems on our  computer  system
pursuant  to which  product  purchases  and sales are  continually  tracked  and
analyzed.  Our  computer  system  is  also  used  for  accounting,  billing  and
invoicing.  We utilize  experienced  in-house technical personnel to upgrade and
integrate additional functions into our management information systems.

     Our information system assists management in maintaining  controls over our
inventory and  receivables.  For  continuing  operations,  Manchester's  average
inventory  turnover was 10, 14, and 13 times for the fiscal years ended July 31,
2004, 2003, and 2002, respectively,  and we experienced bad debt expense of less
than 0.5% of revenue in each of these years.

Competition

     The  technology  industry  is  characterized  by  intense  competition.  We
directly compete with local,  regional and national distributors as well as with
certain  manufacturers  that  market  through  direct  sales  forces  and/or the
Internet. The technology industry has recently experienced,  and may continue to
experience,   a  significant   amount  of  consolidation   through  mergers  and
acquisitions.  In the future,  we may face further  competition  from new market
entrants and  possible  alliances  between  existing  competitors.  In addition,
certain  suppliers and  manufacturers  have been, and  additional  suppliers and
manufacturers  may choose,  to market products  directly  through a direct sales
force and/or the Internet rather than, or in addition to, channel  distribution.
Some of our  competitors  have, or may have,  greater  financial,  marketing and
other resources, and may offer a broader range of products than us. As a result,
they may be able to respond  more  quickly to new or  emerging  technologies  or
changes in customer  requirements,  benefit from greater  purchasing  economies,
offer  more  aggressive  product  pricing  or devote  greater  resources  to the
promotion of their products.

     Our ability to compete  successfully depends on a number of factors such as
breadth of product  offerings,  sales and marketing efforts and product pricing.
In addition,  product margins may decline due to pricing to win new business and
increasing  pricing  pressures from  competition.  We believe that gross margins
will continue to be reactive to industry-wide changes. Future profitability will
depend on our ability to increase focus on providing  technical  product support
to  customers,  competition,  manufacturer  pricing  strategies,  as well as our

                                        5
<PAGE>

control of operating expenses, product availability,and effective utilization of
vendor  programs.  It will also  depend on the  ability  to  attract  and retain
quality sales representatives while effectively managing the utilization of such
representatives.  There can be no assurance  that we will be able to attract and
retain such skilled  representatives.  The loss of a  significant  number of our
existing sales  representatives or difficulty in hiring or retaining  additional
sales  representatives  could have a material  adverse  effect on our  business,
results of operations and financial condition.

Employees

     On August 31, 2004,  we had 96 full-time  employees  consisting of 29 sales
and marketing  representatives,  23 management and supervisory  personnel and 44
administrative  and  other  personnel.  We are  not a  party  to any  collective
bargaining agreements and believe our relations with our employees are good.

     We offer an experienced and  geographically  comprehensive  sales team. The
Company offers on site demonstrations by our nationwide outbound sales force. In
addition, the Company employs an extensive inside sales support department.  The
combination of the nationwide  outbound sales force and the inside sales support
staff  enable  the  Company  to take a  proactive  approach  to the  traditional
distribution sales business model, which ultimately provides the reseller with a
high level of sales and support.

Intellectual Property

     We own, or have pending,  several federally  registered  service marks with
respect to our name and logo. Most of our various  agreements permit us to refer
to  ourselves  as  an  "authorized   distributor"   of  the  products  of  those
manufacturers  and to  use  their  trademarks  and  trade  names  for  marketing
purposes.  We  consider  the use of  these  trademarks  and  trade  names in our
marketing to be important to our business.


Discontinued Operations

     On May 28, 2004, the Company sold its IT Business to ePlus, inc., a leading
provider  of  Enterprise  Cost  Management,  in an  all  cash  transaction.  The
transaction  included the sale to ePlus of the customer list of the business and
certain  related  equipment,  the  assumption by ePlus of certain  contracts and
liabilities  pertaining  to the business and the hiring by ePlus of the majority
of  Manchester  employees  involved in the  business.  The  transaction  did not
include, and Manchester  retained,  the inventory and accounts receivable of the
IT Business.

     The proceeds from the sale of the IT Business  were $3,555,  net of related
expenses  of $1,445.  The  Company  recorded a gain of  approximately  $876 as a
result of the transaction, which represented the excess of the net proceeds over
a payable to ePlus,  inc. of $469 for  service  contracts  they  assumed and the
$2,210 carrying value of the net assets sold,  consisting of goodwill of $2,704,
property and equipment, net of $195 and deferred revenue of $689.

     Prior  to such  sale,  Manchester  specialized  in  hardware  and  software
procurement,  display  technology,  custom networking,  security,  IP telephony,
remote management, application  development/e-commerce,  storage, and enterprise
and  Internet  solutions,   offering  its  customers   single-source   solutions
customized  to their  information  systems  needs by  integrating  its analysis,
design and implementation services with hardware, software,  networking products
and peripherals from leading vendors.

Available Information

     We make our annual,  quarterly and current  reports,  and any amendments to
these   reports,   available   free   of   charge   through   our   website   at
www.manchesterequipment.com/Manchester+Overview/About+Manchester/Investors/
default.aspx as soon as reasonably  practicable after we file such document with
the Securities and Exchange Commission. The information contained on our website
is not  incorporated  by  reference  into  this  Form  10-K  and  should  not be
considered to be part of this Form 10-K.

                                       6



<PAGE>


ITEM 2. Properties

Properties

         We currently have sales branches nationwide, including the corporate
headquarters located in Hauppauge, New York. The following table identifies the
principal leased facilities.
<TABLE>
<CAPTION>

                                                            Approximate
                                                          Square Footage                    Lease
Facility              Location                       Office            Warehouse        Expiration Date
--------              --------                       ------            ---------        ---------------

<S>                   <C>                            <C>                <C>                 <C>
Corporate             160 Oser Avenue  (1)
Headquarters          Hauppauge, NY                  30,000                 -               March 2018

Electrograph          50 Marcus Blvd.
Corporate HQ,          Hauppauge, NY                 10,000              30,000             March 2018
Warehouse and
Service Center

Electrograph          40 Marcus Blvd (2)
                      Hauppauge, NY                  10,000              13,000             March 2018

Timonium, MD          1818  Pot Spring Rd.
Sales Office          Timonium, MD                     4,416                -               November 2007

Seattle, WA           1800 Westlake Ave. N
Sales Office          Seattle, WA                        650                -               May 2004

Las Vegas, NV         6255 McLeod Dr.
Sales Office          Las Vegas, NV                      718                -               April 2006

Madeira Beach, FL     13222 Gulf Blvd.
Sales Office          Madeira Beach, FL                1,000                -               Month-to-Month
</TABLE>

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

1.   In  connection  with  the  sale  of  the IT  Business,  on  May  28,  2004,
     approximately  24,000  square  feet  of  this  facility  was  sublet  to an
     unrelated third party through July 31, 2005 pursuant to which the subtenant
     will be  responsible  for  substantially  all of the Company's  obligations
     under this lease through such period.

2.   On August 20, 2004,  this  facility was sublet to an unrelated  third party
     for a term expiring  February 2018 pursuant to which the subtenant  will be
     responsible for substantially  all of the Company's  obligations under this
     lease.

For further information on the Company's  properties and lease obligations,  see
Item 7, "Management's Discussion and Analysis of Financial Condition and Results
of Operations" and Note 7 of the Notes to the Consolidated  Financial Statements
in Item 15.

ITEM 3. Legal Proceedings

     We are involved in various claims and legal actions arising in the ordinary
course of business. In the opinion of management, based on advice from its legal
counsel,  the  ultimate  disposition  of these  matters will not have a material
adverse  effect on the Company's  financial  position,  results of operations or
cash flows.

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

     No matters were submitted to a vote of the security  holders during quarter
ended July 31, 2004.

                                       7

<PAGE>


                                     PART II

ITEM 5. Market for the Registrant's  Common Equity,  Related Stockholder Matters
     and Issuer Purchases of Equity Securities

         Our Common Stock is traded on the NASDAQ National Market(R) under the
symbol MANC. The following table sets forth the quarterly high and low sale
prices for the Common Stock as reported by the NASDAQ National Market.
<TABLE>
<CAPTION>


                Fiscal Year 2003                      High             Low
                -----------------                     ----             ---
<S>                                                   <C>              <C>
                First Quarter                         2.430            1.699
                Second Quarter                        2.240            1.759
                Third Quarter                         2.090            1.610
                Fourth Quarter                        2.500            1.710

                Fiscal Year 2004
                ----------------
                First Quarter                         3.500            2.160
                Second Quarter                        4.330            2.840
                Third Quarter                         5.750            3.450
                Fourth Quarter                        4.910            3.210
</TABLE>


     On October 14, 2004, the closing sale price for the Company's  Common Stock
was $4.70 per share. As of October 14, 2004 there were 47 shareholders of record
of the Company's  Common Stock. The Company believes that there are in excess of
500 beneficial holders of its common stock.

     Manchester  has never  declared or paid any dividends to  shareholders.  At
this  time we intend to  continue  our  policy  of  retaining  earnings  for the
continued development and expansion of our business.

                                       8
<PAGE>



ITEM 6.  Selected Financial Data

                      SELECTED CONSOLIDATED FINANCIAL DATA
                    (in thousands, except per share amounts)

     The following  selected  financial data is qualified in its entirety by the
Consolidated Financial Statements of the Company (and the related Notes thereto)
contained  in Item 15 and  should  be read  in  conjunction  with  "Management's
Discussion  and Analysis of Financial  Condition and Results of  Operations"  in
Item 7. The operating results and financial position data for each of the fiscal
years set forth below have been derived from the Company's audited  Consolidated
Financial Statements.
<TABLE>
<CAPTION>
                                                           Fiscal Year Ended July 31,
                                                           --------------------------
                                             2004          2003         2002          2001       2000
                                             ----          ----         ----          ----       ----
<S>                                        <C>           <C>          <C>            <C>        <C>
Income Statement Data from Continuing Operations:

Revenue                                    $173,040      $164,156     $133,749       $146,759   $140,353
Cost of revenue                             156,354       147,672      117,656        132,343    129,273
                                            -------       -------      -------        -------    -------
Gross profit                                 16,686        16,484       16,093         14,416     11,080
Selling, general and
    administrative expenses                  12,892        12,214       11,142         10,848      8,433
                                             ------        ------       ------         ------      -----

Income from operations                        3,794         4,270        4,951          3,568      2,647
Interest and other income (expense), net        (20)          115          184            512        681
Income tax provision                          1,490         1,775        2,054          1,667      1,331
                                              -----         -----        -----          -----      -----

Net income                                   $2,284        $2,610       $3,081         $2,413     $1,997
                                             ======         =====        =====          =====      =====
Net income (loss) per share:
   Basic                                      $0.28         $0.33        $0.39          $0.30      $0.25
                                               ====         ====          ====           ====       ====
   Diluted                                    $0.28         $0.33        $0.39          $0.30      $0.24
                                              =====         =====        =====          =====      =====


Weighted average shares of common stock outstanding:
    Basic                                     8,077         7,990        7,990          8,036      8,108
                                              =====         =====        =====          =====      =====
    Diluted                                   8,210         8,007        7,991          8,058      8,228
                                              =====         =====        =====          =====      =====

                                                                      July 31,
                                              2004         2003         2002          2001        2000
                                              ----         ----         ----          ----        ----
Balance Sheet Data:
  Working capital                           $34,368       $30,661      $30,098        $31,972    $30,453

  Total assets                               71,642        77,750       70,661         61,783     74,573
  Shareholders' equity                       42,123        43,934       46,512         45,555     44,263

</TABLE>
                                       9

<PAGE>


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

     This  Management's  Discussion  and  Analysis of  Financial  Condition  and
Results of  Operations  ("MD&A")  should be read in  conjunction  with the other
sections of this Annual Report on Form 10-K, including "Item 1: Business"; "Item
6: Selected Financial Data"; and "Item 8: Financial Statements and Supplementary
Data." Our MD&A includes  forward-looking  statements  that are subject to risks
and uncertainties.  Actual results may differ  substantially from the statements
we make in this section due to a number of factors that are discussed throughout
this  filing  and  particularly  in  the  section  entitled  "Risk  Factors  and
Cautionary Statement for Purposes of the "Safe Harbor" Provisions of the Private
Securities Litigation Reform Act of 1995" beginning on page 17.

General

     We are a distributor  of display  technology  solutions and plasma  display
monitors and computer hardware,  primarily to dealers and system integrators. To
date,  most of our revenues  have been derived  from  product  sales.  We do not
develop or sell software products.

     On May 28, 2004, we sold our end-user  information  technology  fulfillment
and professional  services business ("IT Business") to ePlus, inc.  ("ePlus") in
an all  cash  transaction.  The  transaction  included  the sale to ePlus of the
customer list of the business and certain related  equipment,  the assumption by
ePlus of certain  contracts and  liabilities  pertaining to the business and the
hiring  by  ePlus  of the  majority  of  Manchester  employees  involved  in the
business.  The transaction did not include,  and we retained,  the inventory and
accounts receivable of the business.

     Prior to this sale, we  specialized  in hardware and software  procurement,
display  technology,   custom  networking,   security,   IP  telephony,   remote
management,  application  development/e-commerce,  storage,  and  enterprise and
Internet  solutions.  Subsequent  to the sale,  we have  continued  distributing
display technology  solutions and plasma display monitors and computer hardware,
but no longer provide professional services.

       E-Commerce

     We utilize a website incorporating an electronic  communication system. The
site, located at www.electrograph.com allows both existing customers,  corporate
shoppers  and others to find product  specifications,  compare  products,  check
price and track orders  quickly and easily 24 hours a day seven days a week.  We
have  made,  and  expect  to  continue  to  make,  significant  investments  and
improvements in our e-commerce  capabilities.  There can be no assurance that we
will be successful in enhancing and increasing our business through our expanded
Internet presence.


Discontinued Operations

     On May 28, 2004, the Company sold its IT Business to ePlus, inc., a leading
provider of Enterprise Cost Management, in an all cash transaction. The proceeds
from the sale of the IT Business were $3,555, net of related expenses of $1,445.
The Company  recorded a gain,  included in loss from  operations of discontinued
component  in  the  accompanying   fiscal  2004  statement  of  operations,   of
approximately $876 as a result of the transaction,  which represented the excess
of the net proceeds over a payable to ePlus,  inc. of $469 for service contracts
they assumed and the $2,210 carrying value of the net assets sold, consisting of
goodwill of $2,704, property and equipment,  net of $195 and deferred revenue of
$689. The loss from the operations of the discontinued IT Business was $8,492 in
fiscal 2004,  which  included  the  following  charges in the fourth  quarter of
fiscal 2004 associated with the discontinued IT Business:
<TABLE>
<S>                                                                   <C>

            Employee severance and other employee costs               $1,016
            Provision for doubtful accounts receivable                 1,250
            Fixed asset impairments                                    2,639
            Other                                                         50
                                                                    --------

            Total                                                     $4,955
                                                                      ======
</TABLE>



       As of July 31, 2004 approximately $491 of the employee severance and
other employee costs were included in accounts payable and accrued expenses in
the accompanying balance sheet located elsewhere in this report, which will be
paid in fiscal 2005, ending July 31, 2005.

                                       10
<PAGE>

Critical Accounting Policies

     The  Company's  discussion  and  analysis of its  financial  condition  and
results of operations is based on its consolidated  financial statements,  which
have been prepared in accordance with accounting  principles  generally accepted
in the United  States.  The  preparation  of  financial  statements  and related
disclosures in conformity with accounting  principles  generally accepted in the
United States of America requires management to make judgments,  assumptions and
estimates  that  affect  the  amounts  reported  in the  consolidated  financial
statements  and  accompanying  notes.  Note  1  to  the  consolidated  financial
statements   appearing  elsewhere  in  this  report  describes  the  significant
accounting  policies and methods  used in the  preparation  of the  consolidated
financial  statements.  The following critical  accounting policies are impacted
significantly by judgments, assumptions and estimates used in the preparation of
the consolidated financial statements.

     Revenue  Recognition.  Revenue from product sales is recognized  when title
and risk of loss are passed to the customer, which is at the time of shipment to
the customer.  The Company does not develop or sell software products.  However,
certain  computer  hardware  products  sold  by  the  Company  are  loaded  with
prepackaged  software  products.  The  net  impact  on the  Company's  financial
statements  of product  returns,  primarily  for  defective  products,  has been
insignificant.

     Revenue from services,  which is included in  discontinued  operations,  is
recognized  when the related  services are  performed.  When  product  sales and
services are bundled,  revenue is  recognized  upon  delivery of the product and
completion of the installation.  Service contract fees are recognized as revenue
ratably over the period of the applicable  contract.  Deferred  service contract
revenue represents the unearned portion of service contract fees.

     Allowance for Doubtful  Accounts.  The  allowance for doubtful  accounts is
based on our assessment of the  collectibility of specific customer accounts and
the aging of the accounts  receivable.  If there is a  deterioration  of a major
customer's  credit  worthiness or actual defaults are higher than our historical
experience,  our  estimates  of the  recoverability  of amounts  due us could be
adversely affected.

     Inventory. Inventory purchases and commitments are based upon future demand
forecasts.  If there is a sudden  and  significant  decrease  in demand  for our
products or there is a higher risk of inventory  obsolescence because of rapidly
changing  technology and customer  requirements,  we may be required to increase
our inventory allowances and our gross margin could be adversely affected.

     Goodwill.  We  perform  goodwill  impairment  tests on an annual  basis and
between annual tests in certain  circumstances.  In assessing the recoverability
of the Company's goodwill,  the Company must make various assumptions  regarding
estimated  future cash flows and other factors in determining the fair values of
the respective assets. If these estimates or their related assumptions change in
the future,  the Company may be required to record impairment  charges for these
assets  in  future  periods.  Any such  resulting  impairment  charges  could be
material to the Company's results of operations.

                                       11
<PAGE>


Results of Operations

The following table sets forth, for the periods indicated, information derived
from the Company's consolidated statements of operations expressed as a
percentage of related revenue or total revenue.
<TABLE>
<CAPTION>
                                                             Percentage of Revenue for
                                                             the Year Ended July 31,
                                                           2004         2003          2002
                                                           ----         ----          ----
<S>                                                       <C>          <C>           <C>
Revenue                                                   100.0%       100.0%        100.0%

Cost of Revenue                                            90.4         90.0          88.0
                                                           ----         ----          ----


         Gross profit                                       9.6         10.0          12.0
                                                            ---

Selling, general and administrative expenses                7.5          7.4           8.3
                                                            ---          ---           ---

Income from operations                                      2.2          2.6           3.7

Interest and other income (expense), net                      -          0.1           0.1
                                                          -----          ----          ---

Income from continuing operations before income taxes       2.2          2.7           3.8

Income tax provision                                        0.9          1.1           1.5
                                                            ---          ---           ---

Income from continuing operations                           1.3          1.6           2.3
                                                            ---          ---           ---

Discontinued operations:
         Loss from operations of discontinued component    (4.4)        (4.9)         (2.7)
         Income tax benefit                                (1.6)        (1.7)         (1.1)
                                                           -----         ----          ----

         Loss on discontinued operations                   (2.8)        (3.2)         (1.6)
                                                           -----        -----         -----

Net income (loss)                                          (1.4)%       (1.6)%         0.7%
                                                           =====        ======         ====
</TABLE>

Year Ended July 31, 2004 Compared to Year Ended July 31, 2003

     Revenue.  Revenue increased by $8.9 million or 5% to $173.0 million for the
year ended July 31, 2004 or fiscal  2004 from $164.2  million for the year ended
July 31, 2003 or fiscal  2003.  The increase in revenue is primarily a result of
an increase in unit sales of display  technology  solutions,  primarily sales of
large  screen  flat panel  displays,  as a result of the growth in the  industry
which is anticipated to continue to grow. This increase was partially  offset by
a decrease in average  selling  prices of large screen flat panel displays and a
decrease in sales of computer hardware to dealers and systems integrators.

     Gross  Profit.  Cost of revenue  includes the direct costs of products sold
and freight.  All other  operating  costs are  included in selling,  general and
administrative expenses. Gross profit increased by $0.2 million or 1% from $16.5
million in fiscal  2003 to $16.7  million in fiscal  2004.  As a  percentage  of
revenue,  gross  profit was 9.6% in fiscal  2004 as  compared to 10.0% in fiscal
2003. The decrease in the gross profit  percentage is directly  attributable  to
the more  accelerated  decrease in average selling prices of display  technology
solutions, primarily sales of flat panel displays, than the decrease in the cost
of purchasing the products.

     Selling,  General  and  Administrative   Expenses.   Selling,  general  and
administrative  expenses  increased by $0.7 million or 6% from $12.2  million in
fiscal 2003 to $12.9 million in fiscal 2004. The increase is principally  due to
an increase in salaries  and other  personnel  costs of  approximately  $429,000
reflecting the increase in employee  headcount and associated costs with respect
to the  continuing  growth  of the  business,  increased  sales  commissions  of
approximately $238,000 and increased tradeshow costs of approximately  $111,000.
These  increases  were partially  offset by lower rent expense of  approximately
$114,000  as a result of the capital  leases  entered  into in March 2003.  As a
percentage of revenue,  selling,  general and administrative  expenses increased
from approximately 7.4% in fiscal 2003 to 7.5% in fiscal 2004.

     Interest  and Other  Income  (Expense),  net.  Interest  and  other  income
(expense),  net, decreased by $135,000 from income of approximately  $115,000 in
fiscal 2003 to an expense of approximately  $20,000 in fiscal 2004. The decrease
in fiscal 2004 as compared to fiscal 2003 is primarily a result of the Company's
receipt of insurance proceeds in the amount of $113,000 in fiscal 2003.

                                       12
<PAGE>

     Income Tax Provision. Our effective tax rate was 39.5% and 40.5% for fiscal
2004 and fiscal 2003, respectively.

     Discontinued  Operations.  In accordance with SFAS 144, "Accounting for the
Impairment or Disposal of Long-Lived Assets",  the results of operations for the
end-user information  technology  fulfillment and professional services business
have been recorded as discontinued  operations in the accompanying  consolidated
statements of  operations.  The net loss from  discontinued  operations was $4.8
million  and $5.2  million for fiscal  2004 and fiscal  2003  respectively.  The
statement of operations  for the year ended July 31, 2003 has been  reclassified
to present discontinued operations.

Year Ended July 31, 2003 Compared to Year Ended July 31, 2002

     Revenue.  Revenue  increased by $30.4 million or 23% to $164.2  million for
fiscal 2003 from $133.7 million for the year ended July 31, 2002 or fiscal 2002.
The  increase  in revenue is  primarily a result of an increase in unit sales of
display  technology  solutions,  primarily  sales of  large  screen  flat  panel
displays, as a result of the growth in the industry.

     Gross  Profit.  Gross  profit  increased  by $0.4  million or 2% from $16.1
million in fiscal  2002 to $16.5  million in fiscal  2003.  As a  percentage  of
revenue,  gross  profit was 10.0% in fiscal  2003 as compared to 12.0% in fiscal
2002. The decrease in the gross profit  percentage is directly  attributable  to
the more  accelerated  decrease in average selling prices of display  technology
solutions, primarily sales of flat panel displays, than the decrease in the cost
of purchasing the products.

     Selling,  General  and  Administrative   Expenses.   Selling,  general  and
administrative  expenses  increased by $1.1 million or 10% from $11.1 million in
fiscal 2002 to $12.2 million in fiscal 2003. The increase is principally  due to
an increase in salaries  and other  personnel  costs of  approximately  $412,000
reflecting the increase in employee  headcount and associated costs with respect
to the  continuing  growth  of the  business,  increased  telephone  expense  of
approximately  $144,000,  increased bad debt expense of  approximately  $145,000
resulting  from  the  increase  in sales  and  increased  depreciation  costs of
approximately  $104,000.  As a  percentage  of  revenue,  selling,  general  and
administrative expenses decreased from approximately 8.3% in fiscal 2002 to 7.4%
in fiscal 2003.

     Interest  and Other  Income  (Expense),  net.  Interest  and  other  income
(expense),  net,  decreased by $69,000 from income of approximately  $184,000 in
fiscal 2002 to income of approximately  $115,000 in fiscal 2003. The decrease in
fiscal 2003 as compared  to fiscal  2002 is  primarily a result of the  interest
expense portion of the capital leases of approximately $117,000, entered into by
the  company in March 2003 offset by the  receipt of  insurance  proceeds in the
amount of $113,000 in fiscal 2003 and  decreased  income earned on the Company's
investments of approximately $65,000.

     Income Tax Provision. Our effective tax rate was 40.5% and 40.0% for fiscal
2003 and fiscal 2002, respectively.

     Discontinued  Operations.  In accordance with SFAS 144, "Accounting for the
Impairment or Disposal of Long-Lived Assets",  the results of operations for the
end-user information  technology  fulfillment and professional services business
have been recorded as discontinued  operations in the accompanying  consolidated
statements of  operations.  The net loss from  discontinued  operations was $5.2
million  and $2.1  million for fiscal  2003 and fiscal  2002  respectively.  The
statement of operations for the years ended July 31, 2003 and July 31, 2002 have
been reclassified to present discontinued operations.

Liquidity and Capital Resources

Working Capital

       Our primary source of cash and cash equivalents has been internally
generated working capital from profitable operations. The Company's working
capital at July 31, 2004 and July 31, 2003 was approximately $34.4 million and
$30.7 million, respectively.

Cash Flows

     Operating  activities for fiscal 2004, 2003 and 2002,  provided (used) cash
of approximately  $4.5 million,  $0.9 million and $(0.7) million,  respectively.
The increase in cash in fiscal 2004 was primarily  related to changes  resulting
from the  sale of the IT  Business.  Discontinued  operations  provided  cash of
approximately  $8.9  million  in  fiscal  2004  primarily   resulting  from  the
collection of retained  receivables and sale of retained inventory subsequent to
the sale of the IT  Business.  Our  accounts  receivable  and  accounts  payable
balances,  as well as our inventory balances,  can fluctuate  significantly from
one period to the next due to the receipt of large  customer  orders or payments
or  variations  in product  availability  and vendor  shipping  patterns  at any
particular  date. The increase in inventory  during fiscal 2004 of approximately
$12.3  million,  is a result of the increase in sales in the period,  as well as
increased  inventory  purchases  due to  special  product  offerings  and volume
discounts  received from  manufacturers.  The $5.7 million  increase in accounts
payable is a result of the increase of inventory purchases in the period.

                                       13
<PAGE>

     Continuing investing activities for fiscal 2004, 2003 and 2002 used cash of
approximately $100,000, $1.3 million and $4.2 million,  respectively. For fiscal
2004 and 2003 these  amounts  consisted  solely of  additions  to  property  and
equipment.  For fiscal 2002 this amount included  approximately  $2.6 million of
additions  to  property  and  equipment  and  approximately   $1.6  million  for
acquisitions,  net of cash acquired.  Discontinued investing activities provided
cash of  approximately  $3.6 million in fiscal 2004,  which  represented the net
proceeds from the sale of the discontinued IT Business.

     Financing activities for fiscal 2004, 2003 and 2002 provided (used) cash of
approximately $343,000, $(65,000) and $(558,000), respectively. For fiscal 2004,
this  amount  consisted  of  proceeds  from the  exercise  of stock  options  of
approximately  $549,000  partially offset by $206,000 of payments on capitalized
lease  obligations.  For fiscal 2003 this amount consisted solely of payments on
capitalized lease  obligations.  For fiscal 2002 this amount consisted solely of
net  repayments of bank loans and other debt from  acquisitions  made during the
period.

Line of Credit

     We have  available  a line of credit with a  financial  institution  in the
aggregate amount of $15.0 million. At July 31, 2004, no amounts were outstanding
under this line which expires on January 31, 2005.  The line of credit  facility
requires the Company to maintain certain financial ratios and covenants. At July
31, 2004,  the Company was not in compliance  with all the financial  ratios and
covenants that it is required to maintain in connection with its line of credit.
The Company  received a waiver  waiving its  requirements  from its bank for the
period ended July 31, 2004.

Financial Commitments

     We believe that our current balances in cash and cash equivalents, expected
cash flows from  operations  and available  borrowings  under the line of credit
will be adequate to support current operating levels for the foreseeable future,
specifically  through  at least the end of fiscal  2005  which  ends on July 31,
2005. We currently have no material commitments for capital expenditures,  other
than  operating  and capital  leases,  that the Company has committed to for its
facilities and certain  tangible  property.  Future capital  requirements of the
Company  include those for the growth of working  capital items such as accounts
receivable and inventory, the purchase of equipment, expansion of facilities, as
well as the possible opening of new offices and potential acquisitions.

     As part of the sale to ePlus,  inc. of the Company's  end-user  information
technology  fulfillment and professional  services  business in May 2004, ePlus,
inc. entered into sublease and lease assignment  agreements with the Company for
up to a one year term with respect to certain of the  Company's  facilities.  In
addition,  in August 2004 the Company entered into a sublease  agreement with an
unrelated third party for its office and warehouse space at 40 Marcus Boulevard.
The terms of the sublease extend through  February 2018 and cover  substantially
all  of the  Company's  responsibility  under  its  lease.  There  are no  other
transactions,  arrangements and other relationships with unconsolidated entities
or  other  persons  that  are  reasonably  likely  to  affect  liquidity  or the
availability of, or requirements for, capital resources.

     The following table  represents the Company's  financial  commitments as of
July 31, 2004 without taking into account any sublease rental income:
<TABLE>
<CAPTION>

                                               Less than        1 - 3              4 - 5         After
                                 Total         1 Year           Years              Years         5 Years
                                 -------------------------------------------------------------------------
                                                                  (in thousands)
<S>                                <C>             <C>           <C>              <C>             <C>
       Capital leases              $7,929          $246          $  972           $879            $5,832
       Operating leases             1,598           306           1,292              -                 -
                                     ----         -----           -----            ---          --------

       Total                       $9,527          $552          $2,264           $879            $5,832
                                   ======          ====          ======           ====            ======
</TABLE>


     The Company regularly examines  opportunities for strategic acquisitions of
other  companies  or lines of business  and  anticipates  that it may issue debt
and/or equity securities either as direct consideration for such acquisitions or
to  raise  additional  funds to be used (in  whole  or in part) in  payment  for
acquired securities or assets. The issuance of such securities could be expected
to have a dilutive  impact on the  Company's  shareholders,  and there can be no
assurance as to whether or when any acquired business would contribute  positive
operating results commensurate with the associated investment.

Impact of Recently Issued Accounting Standards

     The FASB recently issued a proposed  accounting standard that would require
stock-based  employee  compensation  to be  recorded  as a  charge  to  earnings
beginning in calendar 2005. The Company will continue to monitor the progress of
the issuance of this standard as well as evaluate the impact on the Company.

                                       14
<PAGE>

     In January 2003, the FASB issued  Interpretation No. 46,  "Consolidation of
Variable  Interest  Entities,"  ("Int. No. 46") an interpretation of ARB No. 51.
Int. No. 46 addresses consolidation by business enterprises of variable interest
entities.  Int. No. 46 applies immediately to variable interest entities created
after January 31, 2003 and to variable  interest entities in which an enterprise
obtains an interest  after that date.  Int.  No. 46, as revised,  applies in the
first year or interim  period  beginning  after  December  15,  2003 to variable
interest  entities  in which an  enterprise  holds a variable  interest  that it
acquired  before  February 1, 2003.  The Company  adopted  Int. No. 46 in fiscal
2004, which had no impact on its consolidated financial statements.

     In  November  2002,  the  Emerging  Issues  Task Force  reached a consensus
opinion on EITF 00-21,  Revenue  arrangements  with Multiple  Deliverables.  The
consensus provides that revenue  arrangements with multiple  deliverables should
be divided into separate  units of  accounting if certain  criteria are met. The
consideration  for the arrangement  should be allocated to the separate units of
accounting based on their relative fair values, with different provisions if the
fair value of all  deliverables  is not known or if the fair value is contingent
on delivery of specified  items or performance  conditions.  Applicable  revenue
recognition  criteria should be considered  separately for each separate unit of
accounting.  EITF 00-21 is effective  for revenue  arrangements  entered into in
fiscal periods  beginning after June 15, 2003.  Entities may elect to report the
change as a cumulative  effect  adjustment  in  accordance  with APB Opinion 20,
Accounting Changes.  The Company adopted EITF 00-21 in fiscal 2004 which did not
have a  significant  impact on the  Company's  financial  position or results of
operations.

Inflation

     We do  not  believe  that  inflation  has  had a  material  effect  on  our
operations.

Risk  Factors  and  Cautionary  Statement  for  Purposes  of the  "Safe  Harbor"
Provisions of the Private Securities Litigation Reform Act of 1995

     This report contains certain forward-looking  statements within the meaning
of the Securities Act of 1933, as amended, and Section 21E of the Securities and
Exchange Act of 1934, as amended, which statements are made pursuant to the safe
harbor  provisions  of The  Private  Securities  Litigation  Reform Act of 1995.
Forward-looking  statements are generally  identifiable  by the use of the words
"believes,"  "intends,"  "expects,"  "will," "plans,"  "anticipates," or similar
expressions.  Where any  forward-looking  statement  includes a statement of the
assumptions or bases underlying the forward-looking  statement, we caution that,
while we believe these  assumptions or bases to be reasonable and in good faith,
assumed  facts  or  bases  almost  always  vary  from the  actual  results,  and
differences  between  assumed facts or bases and actual results can be material,
depending upon the circumstances.  Where, in any forward-looking  statement,  we
express an  expectation  or belief as to future  results,  that  expectation  or
belief is expressed in good faith and is believed to have a reasonable basis. We
cannot assure you,  however,  that the statement of  expectation  or belief will
result or be achieved or  accomplished,  and readers are  cautioned not to place
undue  reliance on any  forward-looking  statements,  which reflect our opinions
only as of the date hereof. All of our forward-looking  statements are expressly
qualified by these  cautionary  statements and any other  cautionary  statements
that may accompany such forward-looking  statements.  We undertake no obligation
to revise or publicly release the results of any revision to any forward-looking
statements.

Our Industry is Subject to Numerous Potentially Adverse Business Conditions

     The technology industry is characterized by a number of potentially adverse
business conditions, including pricing pressures, evolving distribution channels
and  market   consolidation.   Heightened   price   competition   among  various
manufacturers  may result in reduced per unit revenue and declining gross profit
margins.  As a result of the intense price competition  within our industry,  we
have experienced  increasing  pressure on our gross profit and operating margins
with respect to our sale of products.  Our inability to compete  successfully on
the  pricing of  products  sold,  or a  continuing  decline in gross  margins on
products  sold due to adverse  industry  conditions or  competition,  may have a
material  adverse  effect on our  business,  financial  condition and results of
operations.

Our Success is Dependent, in Part, on Maintaining a Highly Skilled Sales Force

     Our  success  depends in large part upon our  ability to attract and retain
highly skilled sales  representatives  in a very competitive  labor market.  The
loss  of  a  significant  number  of  our  existing  sales  representatives,  or
difficulty in hiring or retaining additional sales  representatives,  may have a
material  adverse  effect on our business,  results of operations  and financial
condition.

                                       15
<PAGE>

Our Industry is Highly  Competitive,  with Other  Competitors  Having Greater
Resources

     The  technology  industry  is  characterized  by  intense  competition.  We
directly compete with local,  regional and national distributors as well as with
certain technology  manufacturers that market through direct sales forces and/or
the Internet. The technology industry has recently experienced, and may continue
to  experience,  a  significant  amount of  consolidation  through  mergers  and
acquisitions.  In the future,  we may face further  competition  from new market
entrants and  possible  alliances  between  existing  competitors.  In addition,
certain  suppliers and  manufacturers  have been, and  additional  suppliers and
manufacturers  may choose,  to market  products  directly to end users through a
direct  sales force  and/or the  Internet  rather than or in addition to channel
distribution.  Some of our  competitors  have or may  have,  greater  financial,
marketing  and other  resources,  and may offer a broader range of products than
us. As a result,  they may be able to respond  more  quickly to new or  emerging
technologies  or  changes  in  customer   requirements,   benefit  from  greater
purchasing  economies,  offer more aggressive hardware pricing or devote greater
resources  to the  promotion  of their  products.  We may not be able to compete
successfully in the future with these or other current or potential competitors.

We Rely on Maintaining Good Relationships with Our Vendors, and Certain Products
We Sell May Be in Short Supply

     Our business is dependent upon our relationships  with major  manufacturers
and  distributors in the technology  industry.  Many aspects of our business are
affected  by our  relationships  with  major  manufacturers,  including  product
availability,  pricing  and related  terms.  The  increasing  demand for display
technology solutions and ancillary equipment has resulted in significant product
shortages from time to time,  because  manufacturers have been unable to produce
sufficient  quantities  of certain  products to meet demand.  In addition,  many
manufacturers  have adopted  "just in time"  manufacturing  principles  that can
reduce the immediate  availability  of a wide range of products at any one time.
We cannot predict that  manufacturers  will maintain an adequate supply of these
products to satisfy all the orders of our customers or that,  during  periods of
increased demand,  manufacturers will provide products to us, even if available,
or at discounts previously offered to us. In addition, we cannot assure you that
the pricing and related terms offered by major  manufacturers will not adversely
change in the future. Our failure to obtain an adequate supply of products,  the
loss of a major manufacturer, the deterioration of our relationship with a major
manufacturer  or our inability in the future to develop new  relationships  with
other  manufacturers  may  have a  material  adverse  effect  on  our  business,
financial condition and results of operations.

     Certain   manufacturers   offer  market  development   funds,   cooperative
advertising and other promotional programs to systems integrators,  distributors
and computer  resellers.  We rely on these funds for many of our advertising and
promotional campaigns.  If manufacturers reduce their level of support for these
programs,  or  discontinue  them  altogether,  we  would  have to  increase  our
advertising and promotion spending,  which may have a material adverse effect on
our business, financial condition and results of operations.

     Our  profitability  has been  affected  by our  ability  to  obtain  volume
discounts from certain  manufacturers,  which has been dependent,  in part, upon
our  ability  to sell  large  quantities  of  products  to  computer  resellers,
including  value added  resellers.  Our  inability to sell  products to computer
resellers and thereby obtain the desired volume discounts from manufacturers may
have a material adverse effect on our business,  financial condition and results
of operations.

We Must  Rapidly  Respond to New  Product  Offerings  and  Manage Our  Inventory
Carefully

     The  markets  for  our  products  are  characterized  by  rapidly  changing
technology  and  frequent  introduction  of new  products.  This may render many
existing  products  noncompetitive,  less profitable or obsolete.  Our continued
success  will  depend  on our  ability  to  keep  pace  with  the  technological
developments of new products and to address increasingly  sophisticated customer
requirements.  Our success  will also depend upon our  abilities to obtain these
new products  from  present or future  manufacturers  and vendors at  reasonable
costs,  to educate and train our employees as well as our customers with respect
to these new products and to integrate  effectively  and  efficiently  these new
products  into  both  our  internal  systems.   We  may  not  be  successful  in
identifying,  developing and marketing  product  developments or enhancements in
response to these technological  changes.  Our failure to respond effectively to
these technological  changes may have a material adverse effect on our business,
financial condition and results of operations.

     Rapid  product  improvement  and  technological   change  characterize  the
technology  industry.  This results in relatively  short product life cycles and
rapid product obsolescence,  which can place inventory at considerable valuation
risk. Certain of our suppliers and manufacturers provide price protection to us,
which is  intended  to reduce  the risk of  inventory  devaluation  due to price
reductions  on current  products.  Certain of our  suppliers  also provide stock
balancing  to us pursuant to which we are able to return  unsold  inventory to a
supplier or  manufacturer  as a partial credit against payment for new products.

                                       16
<PAGE>

There are often  restrictions  on the  dollar  amount of  inventory  that we can
return  at any  one  time.  Price  protection  and  stock  balancing  may not be
available to us in the future,  and, even if available,  these  measures may not
provide complete protection against the risk of excess or obsolete  inventories.
Certain  manufacturers  have  reduced  the period for which they  provide  price
protection  and stock  balancing  rights.  Although we maintain a  sophisticated
proprietary  inventory  management  system,  we cannot  assure  you that we will
continue to successfully  manage our existing and future inventory.  Our failure
to  successfully  manage  our  current or future  inventory  may have a material
adverse effect on our business, financial condition and results of operations.

     As a  result  of the  rapid  changes  that  are  taking  place  in  display
technologies,  product life cycles are short. Accordingly, our product offerings
change constantly.  Prices of products change frequently,  with generally higher
prices  early in the life cycle of the product and lower  prices near the end of
the product's life cycle. The technology industry has experienced rapid declines
in average selling prices of display technology and computer  hardware.  In some
instances,  we have been able to offset these price  declines with  increases in
units shipped.  There can be no assurance  that average  selling prices will not
continue  to  decline  or that we will be able to  offset  declines  in  average
selling prices with increases in units shipped.

We Are Highly Dependent on a Select Group of Senior Management

     We are highly  dependent  upon the  services  of the  members of our senior
management team. The loss of any member of the senior management team may have a
material adverse effect on our business.

We May,  From Time to Time,  Take Actions to Enhance  Shareholder  Value,  Which
Actions May Not be Successful

     The Company periodically  considers methods of enhancing shareholder value,
including,   without   limitation,    acquisitions,    divestitures,    business
combinations,  and strategic partnering.  There can be no assurance that we will
consummate any such  transactions,  be able to identify suitable  candidates for
any such transactions or to negotiate  successfully such transactions at a price
or on terms and conditions  favorable to us and our  shareholders.  Acquisitions
may be of  significant  size  and  may  include  assets  that  are  outside  our
geographic  territories  or are  ancillary  to our core  business  strategy.  In
addition,  there can be no assurance that the  divestiture of our IT Business or
any other  action  taken with the  intent of  enhancing  shareholder  value will
result  in an  increase  in our  revenues  or  earnings  or  otherwise  increase
shareholder value.

Our Revenues and Operating Results Fluctuate From Quarter to Quarter

     Our quarterly  revenue and operating  results have varied  significantly in
the past and are expected to continue to do so in the future.  Quarterly revenue
and  operating  results  generally  fluctuate  as a result of the demand for our
products,  the introduction of new hardware with improved  features,  changes in
the  level  of our  operating  expenses,  competitive  conditions  and  economic
conditions.  As a result,  we believe that  period-to-period  comparisons of our
operating  results  should  not  be  relied  upon  as an  indication  of  future
performance.   In  addition,  the  results  of  any  quarterly  period  are  not
necessarily indicative of results to be expected for a full fiscal year.

We  Rely on the  Continued  Proper  Functioning  of our  Information  Technology
Systems

     Our success is dependent in part on the accuracy,  proper  utilization  and
continuing  development of our  information  technology  systems,  including our
business application systems, Internet servers and telephony system. The quality
and our utilization of the information  generated by our information  technology
systems  affects,  among other things,  our ability to conduct business with our
customers,  manage our inventory and accounts receivable,  purchase,  sell, ship
and  invoice  our  products  efficiently  and on a  timely  basis  and  maintain
cost-efficient operations.  While we have taken steps to protect our information
technology  systems from a variety of threats,  including  computer  viruses and
malicious  hackers,  we cannot  guarantee that such steps will be effective.  If
there  is a  disruption  to or an  infiltration  of our  information  technology
systems, it could significantly harm our business and results of operations.

     This discussion of uncertainties is by no means exhaustive, but is designed
to  highlight  important  factors  that may impact  the  Company's  outlook  and
results.

ITEM 7A.  Quantitative and Qualitative Disclosures About Market Risk

     The  Company  is not  exposed  to  significant  market  risk.  The  Company
primarily  invests its cash in mutual funds  consisting of U.S.  Government  and
Government  Agency  Securities,  Municipal  Bonds  and  Corporate  Fixed  Income
securities.  Neither  a 100 basis  point  increase  nor  decrease  from  current
interest rates would have a material effect on the Company's financial position,
results of operations or cash flows.



                                       17
<PAGE>

ITEM 8.  Financial Statements and Supplementary Data

     The information required by this item is contained in a separate section of
this  Report  beginning  on  page  F-1.  See  Index  to  Consolidated  Financial
Statements  beginning  on page  F-1.

ITEM 9.  Changes  In  and  Disagreements  with  Accountants  on  Accounting  and
     Financial Disclosure

         None.

ITEM 9A.  Controls and Procedures

     Within  90  days  prior  to  the  filing  of  this  report,  the  Company's
management,  including the Company's Chief Executive Officer and Chief Financial
Officer,  evaluated  the  effectiveness  of  the  design  and  operation  of the
Company's  disclosure controls and procedures as defined in Rule 14(c) under the
Securities Exchange Act of 1934 (the "Exchange Act"). Based upon the evaluation,
the Chief  Executive  Officer  and the Chief  Financial  Officer  concluded  the
Company's  disclosure  controls and procedures were  effective,  in all material
respects,  in timely  alerting  them to  material  information  relating  to the
Company  (including  its  consolidated  subsidiaries)  and to  ensure  that  the
information  required to be  disclosed  in the  reports  the  Company  files and
submits under the Exchange Act is recorded,  processed,  summarized and reported
as and when required.


     There have been no significant  changes in the Company's  internal controls
or in  other  factors  subsequent  to the  date  of the  evaluation  that  could
significantly affect these controls.

ITEM 9B.  Other Information

         None.

                                       18
<PAGE>


PART III

ITEM 10.  Directors and Executive Officers of the Registrant

         The following table sets forth information concerning each of the
directors and executive officers of the Company:
<TABLE>
<CAPTION>

Name                         Age        Position
----                         ---        --------

<S>                          <C>        <C>
Barry R. Steinberg           62         Chairman of the Board, President, Chief
                                        Executive Officer and Director

Seth Collins                 37         Executive Vice President and Secretary

Elan Yaish                   34         Vice President Finance, Chief  Financial
                                          Officer and Assistant Secretary

Joel G. Stemple, Ph.D.       62         Director

Joel Rothlein, Esq.          75         Director

Bert Rudofsky                71         Director

Michael E. Russell           57         Director

Julian Sandler               60         Director

Yacov A. Shamash, Ph.D.      54         Director
</TABLE>

     Barry R. Steinberg,  the founder of the Company, has served as its Chairman
of the Board,  President  and Chief  Executive  Officer and as a director  since
Manchester's  formation in 1973. Mr.  Steinberg  previously  served as a systems
analyst for Sleepwater, Inc. and Henry Glass and Co.

     Seth Collins has served as Executive  Vice  president and  Secretary  since
August 1, 2004.  Prior to that he served as Vice  President of Operations  since
January 2003 and Director of  Operations  since  joining the Company in February
1999. Prior to joining Manchester in February 1999, Mr. Collins was a manager in
the financial  services  consulting  group of Oracle.  Previously,  Mr.  Collins
worked for FleetBoston and Andersen Consulting. Mr. Collins is the son-in-law of
Barry R. Steinberg.

     Elan Yaish has served as Vice  President  Finance since January 2003 and as
the Company's Chief Financial Officer and Assistant Secretary since August 2002.
From February 2000 until joining the Company, Mr. Yaish served as Assistant Vice
President of Finance for Comverse Technology, Inc. From June 1996 until February
2000,  Mr. Yaish was employed as Vice  President of Finance and  Controller  for
Trans-Resources,  Inc. Mr. Yaish is a Certified Public  Accountant,  a member of
the American  Institute of Certified  Public  Accountants and the New York State
Society of Certified Public Accountants.

     Joel G.  Stemple,  Ph.D.  has served as a Director  since August  1982.  He
served as Executive Vice President of the Company from September 1996 until July
31, 2004 and prior to that as Vice  President  since  August 1982.  Dr.  Stemple
previously performed consulting services for the Company and, from 1966 to 1982,
served as Assistant and Associate  Professor of Mathematics  at Queens  College,
City University of New York.

     Joel Rothlein,  Esq. has been a director of the Company since October 1996.
Mr. Rothlein is a partner in the law firm of Kressel Rothlein Walsh & Roth, LLC,
at Massapequa, New York. Kressel Rothlein Walsh & Roth, LLC, and its predecessor
firms,  have acted as outside general counsel to the Company since the inception
of the Company.

     Bert  Rudofsky  became a director  on July 15,  1998.  Mr.  Rudofsky is the
founder and president of Bert Rudofsky and Associates,  a management  consulting
firm  specializing in the computer  industry.  Mr. Rudofsky was a founder of MTI
Systems  Corp.,  a leading edge,  technical,  value-added  distribution  company
specializing in computer and data communications  products. Mr. Rudofsky was CEO
of MTI from 1968 until MTI was sold in 1990.

     Michael E.  Russell  became a director  on July 15,  1998.  Mr.  Russell is
presently a Director of Investments at Wachovia  Securities and has held several
distinguished  positions as a member of the business  community,  as a member of
the  New  York  State  Metropolitan  Transportation  Authority  (1987-1989),  as
commissioner of the New York State  Commission on Cable  Television  (1989-1991)
and  as  Special  Assistant  to  the  New  York  State  Senate  Majority  Leader
(1991-1994).

                                       19
<PAGE>

     Julian  Sandler became a director on December 2, 1996. Mr. Sandler is Chief
Executive  Officer of  Rent-a-PC,  Inc., a  full-service  provider of short-term
computer  rentals,  which Mr.  Sandler  founded in 1984. Mr. Sandler is also the
founder  and was the  President  from 1974 to 1993 of  Brookvale  Associates,  a
national  organization  specializing in the remarketing of hardware manufactured
by Digital Equipment  Corporation.  Mr. Sandler also co-founded and from 1970 to
1973 was Vice President of Periphonics Corporation, a developer and manufacturer
of voice response systems.

     Yacov A.  Shamash,  Ph.D.  became a Director of the Company on December 17,
2003,  and has been the Dean of  Engineering  and Applied  Sciences at the State
University of New York campus at Stony Brook since 1992. Dr.  Shamash  developed
and directed the NSF  Industry/University  Cooperative  Research  Center for the
Design of Analog/Digital  Integrated  Circuits from 1989 to 1992 and also served
as Chairman of the Electrical and Computer Engineering  Department at Washington
State  University from 1985 until 1992. Dr. Shamash also serves as a Director of
Key Tronic Corporation, Netsmart Technologies, and American Medical Alert Corp.

Audit Committee Composition

     The  Company  has  a   separately-designated   standing   audit   committee
established in accordance  with Section  3(a)(58)(A) of the Securities  Exchange
Act of 1934, as amended (the "Exchange Act"). Bert Rudofsky,  Michael E. Russell
and Julian Sandler are the members of our audit committee.

Audit Committee Financial Experts

     The  audit  committee  plays  an  important  role  in  promoting  effective
corporate  governance,  and it is imperative that members of the audit committee
have  requisite  financial  literacy and  expertise.  Our Board of Directors has
determined that in its judgment,  each of Bert Rudofsky,  Michael E. Russell and
Julian Sandler qualifies as an "audit committee  financial expert" in accordance
with  the  applicable  rules  and  regulations  of the SEC.  An audit  committee
financial expert is a person who has (1) an understanding of generally  accepted
accounting  principles and financial  statements;  (2) the ability to assess the
general  application  of such  principles in connection  with the accounting for
estimates, accruals and reserves; (3) experience preparing,  auditing, analyzing
or  evaluating  financial  statements  that  present  a  breadth  and  level  of
complexity of accounting issues that are generally comparable to the breadth and
complexity  of  issues  that can  reasonably  be  expected  to be  raised by the
registrant's  financial  statements,  or experience actively  supervising one or
more  persons  engaged in such  activities;  (4) an  understanding  of  internal
controls and procedures for financial  reporting;  and (5) an  understanding  of
audit committee functions.

Section 16(a) Beneficial Ownership Reporting Compliance

     Section 16 of the  Securities  Exchange Act of 1934,  as amended,  requires
that  officers,  directors  and  holders  of more than 10% of the  Common  Stock
(collectively,  "Reporting Persons") file reports of their trading in our equity
securities  with the  Securities and Exchange  Commission.  Based on a review of
Section 16 forms  filed by the  Reporting  Persons  during the fiscal year ended
July 31, 2004, we believe that the Reporting  Persons  timely  complied with all
applicable Section 16 filing  requirements,  with the exception of Mr. Rudofsky,
who filed  Form 4  reporting  the  issuance  of  options  to him by the  Company
approximately two weeks late, and Mr. Valentine,  who filed Form 4 reporting the
issuance of options to him by the Company approximately five weeks late.

Code of Ethics

     The  Company  has  adopted  a Code of  Ethics  (as  defined  in Item 406 of
Regulation  S-K) that applies to our Chief  Executive  Officer,  Chief Financial
Officer,  and members of our Finance Department.  The Company has also adopted a
Code of Business Conduct and Ethics that applied to all of our employees as well
as  our  Board  of  Directors.   These  Codes  are  posted  on  our  website  at
www.manchesterequipment.com/Manchester+Overview/About+Manchester/Investors/
default.aspx  under the heading  "Code of Ethics" and "Code of Business  Conduct
and  Ethics."  We intend to satisfy the  disclosure  requirement  regarding  any
amendment  to,  or a waiver  of,  a  provision  of our  Codes  by  posting  such
information at the same location on our website.

ITEM 11.      Executive Compensation.

     The  following  table  sets  forth a summary  of the  compensation  paid or
accrued by the Company  during the fiscal years ended July 31, 2004,  2003,  and
2002 to the Company's Chief  Executive  Officer and to its next five most highly
compensated    executive   officers   whose   compensation   exceeded   $100,000
(collectively, the "Named Executive Officers"):

                                       20
<PAGE>
                           Summary Compensation Table
<TABLE>
<CAPTION>
                                                                                      Long Term
                                                                                      Compensation
                                                                                      ------------
                                       Annual Compensation                            Common Stock
Name and                                                           Other Annual       Underlying     All Other
Principal Position              Year       Salary       Bonus      Compensation(1)    Options        Compensation
------------------              ----       ------       -----      -----------------------           ------------
<S>                             <C>        <C>         <C>           <C>                   <C>         <C>
Barry R. Steinberg,             2004       $650,000                  $55,808 (2)             -          -
  President  and Chief          2003       $650,000            -     $47,931 (2)             -          -
  Executive Officer             2002       $650,000            -     $49,429 (2)             -          -

Seth Collins,                   2004       $225,000     $150,000     $13,500 (3)             -          -
  Executive Vice President      2003       $171,202            -     $20,700 (3)             -          -
  and Secretary(8)

Elan Yaish,                     2004       $225,000     $150,000     $21,950 (4)             -          -
  Chief Financial Officer, Vice 2003       $200,782    $  25,000     $12,433 (4)             -          -
  President -  Finance and
  Assistant Secretary

Joel G. Stemple,                2004       $225,000            -     $35,066 (5)             -          -
  Executive Vice President      2003       $225,000            -     $33,649 (5)             -          -
  and Secretary (9)             2002       $375,000            -     $33,349 (5)             -          -

Laura Fontana,                  2004       $225,000     $150,000    $  9,901 (6)             -          -
  Vice President - Technical    2003       $227,630            -     $30,744 (6)             -          -
  Services (10)                 2002       $196,794    $  20,406     $35,744 (6)             -          -

Rob Sbarra                      2004       $225,000     $ 35,000     $26,952 (7)
 Vice President - Sales
  and Marketing (11)
</TABLE>

No restricted stock awards,  stock  appreciation  rights or long-term  incentive
plan  awards  (all  as  defined  in the  proxy  regulations  promulgated  by the
Securities and Exchange  Commission)  were awarded to, earned by, or paid to the
Named Executive Officers during the fiscal year ended July 31, 2004.
------------------
(1)  Includes in fiscal 2004 employer  matching  contributions  to the Company's
     defined contribution plan of $6,150 for each of Messrs. Steinberg, Collins,
     Yaish and Stemple,  $4,152 for Mr.  Sbarra and $3,053 for Ms.  Fontana,  in
     fiscal  2003  employer  matching  contributions  to the  Company's  defined
     contribution plan of $6,000 for each of Messrs.  Steinberg,  Collins, Yaish
     and  Stemple,  and  $4,500 for Ms.  Fontana,  and in fiscal  2002  employer
     matching contributions of $6,000 for each of Messrs. Steinberg, Stemple and
     Ms. Fontana.
(2)  Includes  $42,302 in 2004 and $34,575 in 2003 and 2002, of premiums paid by
     the Company for a whole life insurance  policy in the name of Mr. Steinberg
     having a face value of $2,600,000 and under which his daughters, on the one
     hand,  and the  Company,  on the other hand,  are  beneficiaries  and share
     equally in the death benefits payable under the policy.
(3)  Includes $5,000 in 2004 and $11,250 in 2003  representing the present value
     of benefits earned under the Company's deferred compensation plan.
(4)  Includes  $8,000 in 2004 and $1,333 in 2003  representing the present value
     of benefits earned under the Company's deferred compensation plan.
(5)  Includes  $10,575 in 2004 and $17,286 in 2003 and 2002 of premiums  paid by
     the Company for a whole life  insurance  policy in the name of Mr.  Stemple
     having a face  value of  $1,300,000  and  under  which his  spouse  and the
     Company  are  beneficiaries  and are  entitled to  $600,000  and  $700,000,
     respectively, of the death benefits payable under the policy.
(6)  Includes $1,944 in 2003, and $1,943 in 2002 of premiums paid by the Company
     for a whole life insurance  policy in the name of Ms. Fontana having a face
     value of  $589,000  and under  which her minor  child and the  Company  are
     beneficiaries and are entitled to $200,000 and $389,000,  respectively,  of
     death benefits payable under the policy.  Also includes $15,000 and $20,000
     in 2003 and 2002, respectively,  representing the present value of benefits
     earned under the Company's deferred compensation plan.
(7)  Includes $15,000 in 2004  representing the present value of benefits earned
     under the Company's deferred compensation plan.
(8)  Mr. Collins was promoted to Executive  Vice President and Secretary  August
     1, 2004.
(9)  Mr. Stemple served as Executive Vice President and Secretary until July 31,
     2004.
(10) Ms.  Fontana  served as Vice  President - Technical  Services until June 1,
     2004.
(11) Mr.  Sbarra served as Vice  President - Sales and Marketing  until July 31,
     2004.


                                       21
<PAGE>


Aggregated Options/SAR Exercises and Fiscal Year-end Options/SAR Value Table

     The following table sets forth  information  with respect to the number and
value of exercisable  and  unexercisable  options granted to the Named Executive
Officers as of July 31, 2004. The Named Executive  Officers did not exercise any
options  during the fiscal year ended July 31, 2004. The Company has not granted
any stock appreciation rights.
<TABLE>
<CAPTION>

                                                       Number of Securities             Value of
                        Shares                         Underlying Unsecured             Unexercised In-the-Money
                        Acquired                       Options/SAR's at                 Options/SAR's at
                        on             Value           July 31, 2004                    July 31, 2004(1)
         Name           Exercise       Realized        Exercisable/Unexercisable        Exercisable/Unexercisable
         ----           --------       --------        -------------------------        -------------------------

<S>                           <C>         <C>                   <C>                       <C>
Seth Collins                   -           -                     31,000/75,000             $85,870/$207,750
Elan Yaish                     -           -                     25,000/75,000             $69,250/$207,750
</TABLE>

--------
(1)  Based on the closing sale price of common stock as of July 31, 2004 ($4.61
     per share) minus the applicable exercise price.

Compensation of Directors

     Pursuant  to  the  Company's  compensation  plan  for  its  directors,  all
non-employee  directors  receive  a  $20,000  annual  stipend,  payable  in four
quarterly  installments.  In  addition,  each  non-employee  director is granted
annually on August 1, an option under the  Company's  Amended and Restated  1996
Incentive  and Non Incentive  Stock Option Plan to purchase  10,000 shares at an
exercise  price  equal to the fair  market  value of the common  stock as of the
close of business on the last  business day preceding  such close.  Such options
are for a term of five years and are exercisable immediately upon such grant. On
August 1, 2003,  each of Joel Rothlein,  Bert  Rudofsky,  Michael E. Russell and
Julian Sandler, who are non-employee directors, and Robert J. Valentine, who was
a  non-employee  director,  received  non-incentive  options to purchase  10,000
shares at an  exercise  price of $2.13 per share (the fair  market  value of the
common stock on that date).

Employment Contracts

     Mr. Steinberg.  We do not have an employment  agreement with Mr. Steinberg.
We  continue  to  make  available  to  Mr.   Steinberg  the  auto  and  deferred
compensation  benefits that he has  historically  received.  Mr.  Steinberg also
participates  in  other  benefits  that  we  make  generally  available  to  our
employees, such as medical and other insurance, and Mr. Steinberg is eligible to
participate under the Company's stock option plan. In the event Mr.  Steinberg's
employment with us was terminated, he would not be precluded from competing with
us.

     Dr.  Stemple.  We had an employment  agreement  with Joel G. Stemple,  PhD,
which  terminated  on July 31,  2004.  Under  the  employment  agreement,  which
commenced on August 1, 2003, Dr. Stemple received a base salary of $225,000, and
was entitled to an automobile and certain  deferred  compensation  benefits,  as
well as medical and other benefits generally offered by us to our employees. Dr.
Stemple also was able to  participate  in our stock option plan. The Company and
Dr.  Stemple have entered into a Severance and Release  Agreement,  which became
effective upon the termination of Dr. Stemple's  employment by the Company.  See
Item 13, "Certain Relationships and Related Transactions."

Compensation Committee Interlocks and Insider Participation

     The members of our Compensation  Committee are Joel Rothlein,  Esq., Julian
Sandler, and Bert Rudofsky.  Mr. Rothlein is a partner of Kressel Rothlein Walsh
& Roth, LLC, which, with its predecessor firms, has acted as our outside general
counsel  since  our  inception.  We paid  Kressel  Rothlein  Walsh  & Roth,  LLC
approximately  $555,000,  $257,000,  and $208,000,  for legal fees in the fiscal
years ended July 31, 2004, 2003 and 2002, respectively.  In addition, during the
years ended July 31, 2004, 2003 and 2002, we recorded  revenue of  approximately
$303,000,  $164,000, and $45,000,  respectively,  in connection with the sale of
equipment to a company controlled by Mr. Sandler.

     Our stock option plan is administered  by the Board of Directors.  Barry R.
Steinberg is President and Chief Executive Officer and until July 31, 2004, Joel
G. Stemple was Executive  Vice President of the Company and each of them remains
a member of the Board.  As members  of the Board,  they could vote on  executive
compensation  issues  before  the  Board  pertaining  to the  granting  of stock
options.  Although the issue has not arisen to date,  each of Messrs.  Steinberg
and Stemple has agreed to abstain  from voting on the grant of stock  options to
him or to the other of them.

                                       22

<PAGE>


ITEM 12.  Security Ownership of Certain Beneficial Owners and Management

     The following  table sets forth certain  information as of October 14, 2004
(except  as  otherwise  indicated)  with  respect to the number of shares of the
Company's  common  stock  beneficially  owned by each person who is known to the
Company to  beneficially  own more than 5% of the common  stock,  together  with
their respective  addresses,  the number of shares of common stock  beneficially
owned by each  director of the Company and each Named  Executive  Officer of the
Company,  and the  number of shares of common  stock  beneficially  owned by all
named  executive  officers and  directors  of the Company as a group.  Except as
otherwise indicated,  each such shareholder has sole voting and investment power
with respect to the shares beneficially owned by such shareholder.
<TABLE>
<CAPTION>

                                                        Shares Beneficially       Percent of Shares
      Name and Address                                         Owned(1)             Outstanding
      -----------------------------------------------------------------------------------------
<S>                                                         <C>                      <C>
      Barry R. Steinberg(2) (3)                              4,690,201                56.8%
      Joel G. Stemple(2)                                       626,263                 7.6
      Seth Collins(2) (4) (5)                                   90,000                 1.1
      Elan Yaish(2) (5)                                         25,000                  *
      Joel Rothlein (5)                                         62,666                  *
      Bert Rudofsky (5)                                         55,000                  *
      Michael E. Russell (5)                                    50,000                  *
      Julian Sandler(5)                                         56,000                  *
      Yacov A. Shamash (5)                                      10,000                  *
      Dimensional Fund Advisors, Inc. (6)                      553,200                 6.7 (8)
      1299 Ocean Ave. 11th Fl., Santa Monica, CA 90401
      Bjurman, Barry and Associates (7)                        441,000                 5.3 (8)
      10100 Santa Monica Boulevard, Suite 1200,
      Los Angeles, CA 90067
      All executive officers and directors as a group
        (9 persons) (9)                                      5,665,130                66.4%
</TABLE>

      * Less than 1%.

(1)  For purposes of determining  the aggregate  amount and percentage of shares
     deemed  beneficially owned by directors and Named Executive Officers of the
     Company  individually  and by all directors,  nominees and Named  Executive
     Officers as a group,  exercise of all options  exercisable  at or within 60
     days listed in the footnotes hereto is assumed. For such purposes 8,529,584
     shares of Common Stock are deemed to be outstanding.
(2)   Address is 160 Oser Avenue, Hauppauge, New York 11788.
(3)  Excludes  59,000  shares  owned  by  Mrs.  Collins,  the  daughter  of  Mr.
     Steinberg, which shares were purchased with the proceeds of a loan from Mr.
     Steinberg. As reported on Schedule 13D filed on March 24, 1997, as amended,
     Mr.  Steinberg and Mrs. Collins each disclaim  beneficial  ownership of the
     common stock owned by the other.
(4)  Includes 59,000 shares owned by Mrs. Collins, Mr. Collins' wife.
(5)  Includes options exercisable at or within 60 days to purchase 25,000 shares
     (Mr.  Yaish);  31,000 shares (Mr.  Collins);  50,000 shares (Mr.  Sandler);
     50,000 shares (Mr. Rudofsky);  50,000 shares (Mr. Rothlein);  50,000 shares
     (Mr. Russell); and 10,000 shares (Mr. Shamash).
(6)  Based upon a Schedule 13G filed with Securities and Exchange  Commission as
     of February 6, 2004.
(7)  Based upon a Schedule 13G filed with Securities and Exchange  Commission as
     of April 7, 2004.
(8)  Based on 8,263,584 shares of common stock issued and outstanding on October
     14, 2004.
(9)  See Notes 1 through 5 above.


                                       23
<PAGE>


ITEM 13.  Certain Relationships and Related Transactions

     Our  Hauppauge,  New York  facilities  were  formerly  leased from entities
affiliated  with  certain of our  executive  officers,  directors  or  principal
shareholders. In March 2003, the owners sold these facilities to an unaffiliated
company.   In  connection   with  the  sale,  the  Company  entered  into  three
fifteen-year  leases, each expiring on March 31, 2018, with the new owner. Lease
terms include a lower base rent in the first year,  annual rent increases of two
percent and four five-year renewal options.

     Joel  Rothlein,  Esq., a director of the  Company,  is a partner of Kressel
Rothlein Walsh & Roth, LLC,  which,  with its  predecessor  firms,  has acted as
outside general counsel to the Company since our inception.  During fiscal 2004,
2003, and 2002, $555,000, $257,000 and $208,000,  respectively, was paid to such
firm for legal fees.

     During the years ended July 31, 2004, 2003, and 2002, we recorded
revenue of $303,000, $164,000 and $45,000, respectively, in connection with the
sale of equipment to a company controlled by Julian Sandler, a director of the
Company.

     In the ordinary  course of its business  with  customers  and vendors,  the
Company utilizes a restaurant  owned by Ilene  Steinberg,  the daughter of Barry
Steinberg  for catering,  dining and  entertainment  services.  During the years
ended July 31,  2004,  2003 and 2002,  the Company paid  approximately  $42,000,
$49,000 and $109,000, respectively, for such services.

     The Company and Joel Stemple,  a director of the Company,  are parties to a
certain Severance and Release Agreement, pursuant to which the Company agreed to
pay to Dr.  Stemple  the sum of $62,000 per annum  during  each of fiscal  years
2005, 2006 and 2007,  agreed to provide certain medical  insurance  benefits and
agreed to release Dr.  Stemple  from certain  claims,  and pursuant to which Dr.
Stemple  agreed to  release  the  Company  from  certain  claims,  agreed not to
disclose certain information  pertaining to the Company's business,  and, during
the severance period, to not compete with the Company,  solicit its employees or
interfere with its relationships with its customers.

ITEM 14.  Principal Accounting Fees and Services

     Audit Fees. The aggregate fees billed by KPMG LLP for professional services
rendered  for the  audit of our  annual  financial  statements  set forth in our
Annual Report on Form 10-K for the fiscal years ended July 31, 2004 and July 31,
2003  and the  reviews  of the  interim  financial  statements  included  in our
Quarterly Reports on Form 10-Q for such fiscal years were $121,000 and $100,000,
respectively.

     Audit-Related Fees. The aggregate fees billed by KPMG LLP for Audit-Related
services  for the  fiscal  year ended July 31,  2004 were  $125,000.  These fees
related to professional  services  rendered for carve-out  audits required under
SEC  rules in  connection  with  the  sale of the  Company's  IT  Business.  The
aggregate fees billed by KPMG LLP for Audit-Related services for the fiscal year
ended July 31, 2003 were  $3,500.  These fees  related to services  performed by
KPMG LLP in connection with the new leases entered into by the Company following
the  sale  of  the  Company's  Hauppauge,  New  York  facilities.  See  "Certain
Relationships and Related Transactions" above.

     Tax Fees. The Company did not pay any fees to KPMG LLP for tax  compliance,
tax advice,  and tax  planning  during the fiscal  years ended July 31, 2004 and
July 31, 2003.

     All Other Fees.  The Company did not pay any fees to KPMG LLP for any other
professional  services  during the fiscal years ended July 31, 2004 and July 31,
2003.

     Policy for Approval of Audit and  Non-Audit  Fees.  During 2004,  the Audit
Committee  approved all the types of audit and non-audit services which KPMG LLP
was to  perform  during  the  year  and the  range  of fees  for  each of  these
categories,  as required under  applicable  law. The Audit  Committee's  current
practice is to consider for  pre-approval  annually all  categories of audit and
non-audit  services proposed to be provided by our independent  auditors for the
fiscal year. The Audit  Committee will also consider for  pre-approval  annually
the range of fees and the manner in which the fees are  determined for each type
of  pre-approved  audit and  non-audit  services  proposed to be provided by our
independent  auditors for the fiscal year. The Audit  Committee must  separately
pre-approve any service that is not included in the approved list of services or
any proposed services  exceeding  pre-approved cost levels.  The Audit Committee
has not  delegated  pre-approval  authority  to any of its  members or any other
person.  In selecting KPMG LLP as our independent  auditor,  the Audit Committee
believes the provision of the audit and non-audit  services rendered by KPMG LLP
is compatible with maintaining that firm's independence.

     The Audit  Committee  has  considered  whether the  provision  of non-audit
services by KPMG LLP is compatible with maintaining auditor independence and has
determined that auditor independence has not been compromised.

                                       24
<PAGE>

                                     PART IV

ITEM 15.  Exhibits, Financial Statement Schedules and Reports on Form 8-K

(a) The following documents are filed as part of this Report:

     (1)  Financial  Statements (See Index to Consolidated  Financial Statements
          on page F-1 of this Report);

     (2)  Financial Statement Schedule

          Schedule II - Valuation and Qualifying Accounts

          All other schedules are omitted because they are not applicable or the
          required  information  is  included  in  the  consolidated   financial
          statements or notes thereto.

     (3)  Exhibits  required by Securities  and Exchange  Commission  Regulation
          S-K, Item 601: "*" denotes management contract or compensatory plan or
          arrangement required to be filed as an Exhibit to this Form 10-K

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

     2    Asset  Purchase and Sale  Agreement by and between  ePlus  Technology,
          Inc.   and   Manchester   Technologies,   Inc.   dated  May  28,  2004
          (incorporated by reference to Exhibit 2 of Registrant's Form 8-K filed
          on June 10, 2004).

     2.1  Services   Agreement  by  and  between  ePlus  Technology,   Inc.  and
          Manchester  Technologies,  Inc.  dated May 28, 2004  (incorporated  by
          reference  to Exhibit 2.1 of  Registrant's  Form 8-K filed on June 10,
          2004).

     2.2  Escrow  Agreement by and between ePlus  Technology,  Inc.,  Manchester
          Technologies,  Inc. and Joel Rothlein,  as Escrow Agent, dated May 28,
          2004  (incorporated  by reference to Exhibit 2.2 of Registrant's  Form
          8-K filed on June 10, 2004).

    3.1.a Restated   Certificate   of   Incorporation   filed  October  1,  1996
          (incorporated   by   reference  to  Exhibit   3.1.c  of   Registrant's
          Registration Statement on Form S-1 as filed on October 3, 1996).

    3.1.b Certificate  of  Amendment  of  Certificate  of  Incorporation   filed
          January  30,  2001  (incorporated  by  reference  to Exhibit  3.1.d of
          Registrant's Form 8-K filed on February 6, 2001).

     3.2  Bylaws of  Registrant  (incorporated  by  reference  to Exhibit 3.2 of
          Registrant's Registration Statement on Form S-1 as filed on October 3,
          1996).

     10.1 1996  Incentive  and  Non-Incentive  Stock  Option Plan of  Registrant
          (incorporated   by   reference   to  Exhibit   10.1  of   Registrant's
          Registration Statement on Form S-1 as filed on October 3, 1996).

     10.2 Agreement  dated  September  24, 1996 between  Registrant  and Michael
          Bivona  (incorporated  by reference  to Exhibit  10.2 of  Registrant's
          Registration Statement on Form S-1 as filed on October 3, 1996).

    10.3* Modification  of Employment  Agreement  dated January 29, 2003 between
          Registrant and Joel G. Stemple  (incorporated  by reference to Exhibit
          10.3 of the Registrant's  Form 10-K for the fiscal year ended July 31,
          2003 as filed on October 29, 2003).

  10.3.a * Severance  and Release  Agreement  dated  January 29, 2003 between
          Registrant and Joel G. Stemple  (incorporated  by reference to Exhibit
          10.3.a of the  Registrant's  Form 10-K for the fiscal  year ended July
          31, 2003 as filed on October 29, 2003).

   10.4*  Agreement of  Employment  dated April 1, 2003 between  Registrant  and
          Robert  Sbarra  (incorporated  by  reference  to  Exhibit  10.4 of the
          Registrant's  Form 10-K for the fiscal  year  ended  July 31,  2003 as
          filed on October 29, 2003).

 10.5.a.1 Lease dated June 23, 1997 between Registrant and First Willow, LLC
          (incorporated by reference to Exhibit 10.5.h of the Registrant's  Form
          10-K for the fiscal  year ended July 31,  1997 as filed on October 28,
          1997).

 10.5.a.2 Sub-Lease by and between Manchester  Technologies,  Inc. and ePlus
          Technology,  Inc.,  dated May 28, 2004  (incorporated  by reference to
          Exhibit 2.4 of Registrant's  Form 8-K filed on June 10, 2004).

                                       25

<PAGE>

  10.5.b  Lease dated September 9, 2002 between Electrograph Systems, Inc. and
          Pot Spring Center Limited  Partnership  (incorporated  by reference to
          Exhibit 10.5.q of the Registrant's Form 10-K for the fiscal year ended
          July 31, 2002 as filed on October 28, 2002).

 10.5.c.1 Lease dated March 14, 2003 between Registrant and General Electric
          Capital Business Asset Funding Corporation  (incorporated by reference
          to Exhibit 10.5.r of the Registrant's Form 10-Q for the fiscal quarter
          ended April 30, 2003 as filed on June 16, 2003)

  10.5.c.2 Sub-Lease by and between Manchester  Technologies,  Inc. and ePlus
          Technology,  Inc.,  dated May 28, 2004  (incorporated  by reference to
          Exhibit 2.3 of Registrant's Form 8-K filed on June 10, 2004).

   10.5.d Lease dated March 14, 2003 between  Registrant and General  Electric
          Capital Business Asset Funding Corporation  (incorporated by reference
          to Exhibit 10.5.s of the Registrant's Form 10-Q for the fiscal quarter
          ended April 30, 2003 as filed on June 16, 2003).

   10.5.e Lease dated March 14, 2003 between  Electrograph  Systems,  Inc. and
          General   Electric   Capital   Business   Asset  Funding   Corporation
          (incorporated by reference to Exhibit 10.5.t of the Registrant's  Form
          10-Q for the fiscal  quarter ended April 30, 2003 as filed on June 16,
          2003).

   10.5.f Lease dated May 1, 2003 between  Registrant and FSP Gateway Crossing
          Limited  Partnership  (incorporated  by reference to Exhibit 10.5.u of
          the Registrant's Form 10-Q for the fiscal quarter ended April 30, 2003
          as filed on June 16, 2003).

     10.6 Reseller   Agreement   dated  May  1,  1990  between  Toshiba  America
          Information Systems, Inc. and Registrant (incorporated by reference to
          Exhibit  10.9 of  Registrant's  Registration  Statement on Form S-1 as
          filed on October 3, 1996).

     10.7 Agreement  for  Authorized  Resellers  dated  March  1,  1996  between
          Hewlett-Packard  Company and Registrant  (incorporated by reference to
          Exhibit  10.10  of  Registrant's   Amendment  No.  1  to  Registration
          Statement on Form S-1 as filed on November 7, 1996).

     10.8 Asset  Purchase  Agreement  dated  April 15,  1997 among  Electrograph
          Systems, Inc., Bitwise Designs, Inc., Electrograph  Acquisition,  Inc.
          and  Registrant  (incorporated  by reference  to Exhibit  10.10 of the
          Registrant's  Form 10-Q for the fiscal quarter ended April 30, 1997 as
          filed on June 13, 1997).

     10.9.a $15,000,000  Revolving Credit Facility Agreement dated June 25, 1999
          between  Registrant  and EAB, as Agent  (incorporated  by reference to
          Exhibit 10.14 of the Registrant's  Form 10-K for the fiscal year ended
          July 31, 1999 as filed on October 29, 1999).

     10.9.b Third Amendment to $15,000,000  Revolving Credit Facility  Agreement
          dated  October 10, 2001  between  Registrant  and  Citibank,  as Agent
          (incorporated by reference to Exhibit 10.18 of the  Registrant's  Form
          10-K for the fiscal  year ended July 31,  2002 as filed on October 28,
          2002).

     10.9.c Fourth Amendment to $15,000,000  Revolving Credit Facility Agreement
          dated  July  30,  2002  between  Registrant  and  Citibank,  as  Agent
          (incorporated by reference to Exhibit 10.19 of the  Registrant's  Form
          10-Q  for the  fiscal  quarter  ended  October  31,  2002 as  filed on
          December 12, 2002).

     10.9.d Fifth Amendment to $15,000,000  Revolving Credit Facility  Agreement
          dated  January 30, 2004  between  Registrant  and  Citibank,  as Agent
          (incorporated by reference to Exhibit 10.21 of the  Registrant's  Form
          10-Q for the fiscal  quarter  ended January 31, 2004 as filed on March
          12, 2004).

    10.10 Indemnification  Agreement dated September 18, 2003 between Registrant
          and Elan Yaish  (incorporated  by  reference  to Exhibit  10.20 of the
          Registrant's  Form 10-K for the fiscal  year  ended  July 31,  2003 as
          filed on October 29, 2003).

     21   Subsidiaries of the Registrant.

     23   Consent of Independent Registered Public Accounting Firm.

     31.1 Certification of Chief Executive Officer Pursuant to Rule 13a-14(a) of
          the Exchange Act

     31.1.1 Certification  of Chief Financial  Officer and Principal  Accounting
          Officer Pursuant to Rule 13a-14(a) of the Exchange Act

     32.1.1  Certification  of the Chief  Executive  Officer and Chief Financial
          Officer and Principal Accounting Officer Pursuant to Rule 13a-14(b) of
          the Exchange Act and 18 U.S.C.  Section 1350,  as Adopted  Pursuant to
          Section 906 of the Sarbanes-Oxley Act of 2002

                                       26
<PAGE>

(b) Reports on Form 8-K

     Form 8-K filed May 28, 2004,  disclosing  press release dated May 28, 2004,
     announcing the sale of the Company's IT fulfillment, professional services,
     and enterprise software development and operations consulting business.

     Form 8-K filed June 10,  2004,  with regard to certain  agreements  entered
     into  by the  Company  with  respect  to the  sale  of its IT  fulfillment,
     professional  services,  and enterprise software development and operations
     consulting business.

     Form 8-K filed June 17, 2004,  disclosing press release date June 17, 2004,
     reporting earnings for the third quarter ended April 30, 2004.

     Form 8-K filed July 19, 2004, disclosing press release dated July 19, 2004,
     announcing  further financial details with respect to the Company's sale of
     its  IT  fulfillment,   professional   services,  and  enterprise  software
     development and operations consulting business.


                                       27
<PAGE>




                                Items 8 and 14(A)
                   INDEX TO CONSOLIDATED FINANCIAL STATEMENTS


                                                                        Page
Report of Independent Registered Public Accounting Firm                  F-2
Consolidated Financial Statements:
         Balance Sheets as of July 31, 2004 and 2003                     F-3
         Statements of Operations for the years ended
          July 31, 2004, 2003, and 2002                                  F-4
         Statements of Shareholders' Equity for the years ended
          July 31, 2004, 2003, and 2002                                  F-5
         Statements of Cash Flows for the years ended July 31,
          2004, 2003, and 2002                                           F-6
         Notes to Consolidated Financial Statements                      F-7

Schedule II - Valuation and Qualifying Accounts                          F-20































                                       F-1


<PAGE>








             Report of Independent Registered Public Accounting Firm


The Board of Directors and Shareholders
Manchester Technologies, Inc.:


We have audited the accompanying consolidated balance sheets of Manchester
Technologies, Inc. and subsidiaries as of July 31, 2004 and 2003, and the
related consolidated statements of operations, shareholders' equity and cash
flows for each of the years in the three-year period ended July 31, 2004. In
connection with our audits of the consolidated financial statements, we also
audited the consolidated financial statement schedule as listed in the
accompanying index. These consolidated financial statements and the consolidated
financial statement schedule are the responsibility of the Company's management.
Our responsibility is to express an opinion on these consolidated financial
statements and the consolidated financial statement schedule based on our
audits.

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

In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Manchester
Technologies, Inc. and subsidiaries as of July 31, 2004 and 2003, and the
results of their operations and their cash flows for each of the years in the
three-year period ended July 31, 2004, in conformity with U.S. generally
accepted accounting principles. Also in our opinion, the related consolidated
financial statement schedule, when considered in relation to the basic
consolidated financial statements taken as a whole, presents fairly, in all
material respects, the information set forth therein.


Melville, New York
October 13, 2004

                                      F-2

<PAGE>



                 Manchester Technologies, Inc. and Subsidiaries
                           CONSOLIDATED BALANCE SHEETS
                             July 31, 2004 and 2003
<TABLE>
<CAPTION>

                                   Assets                            2004               2003
                                   ------                            ----               ----
                                                                     (in thousands, except per share amounts)
Current assets:
<S>                                                                    <C>             <C>
     Cash and cash equivalents                                         $16,881         $ 8,553
     Accounts receivable, net of allowance for doubtful accounts
        of $2,848 and $1,426, respectively                              15,530          35,117
     Inventory                                                          20,301           9,605
     Deferred income taxes                                               1,212             603
     Prepaid taxes                                                         916           1,704
     Prepaid expenses and other current assets                           1,266             709
                                                                         -----          ------
                      Total current assets                              56,106          56,291

Property and equipment, net                                              9,890          13,985
Goodwill, net                                                            3,735           6,439
Deferred income taxes                                                    1,728             757
Other assets                                                               183             278
                                                                       -------         -------

                      Total assets                                     $71,642         $77,750
                                                                        ======          ======


                          Liabilities and Shareholders' Equity

Current liabilities:
    Accounts payable and accrued expenses                              $21,492         $24,752
    Deferred service contract revenue                                        -             666
    Current portion of capital lease obligations                           246             212
                                                                      --------        --------

                      Total  current liabilities                        21,738          25,630

Deferred compensation payable                                               98             263
Capital lease obligations, net of current portion                        7,683           7,923
                                                                         -----           -----

                                Total liabilities                       29,519          33,816
                                                                        ------          ------

Commitments and contingencies

Shareholders' equity:
     Preferred stock, $.01 par value; 5,000 shares
        authorized, none issued                                              -               -
     Common stock, $.01 par value; 25,000 shares
        authorized, 8,163 and 7,990 shares issued
        and outstanding                                                     82              80
     Additional paid-in capital                                         19,597          18,942
     Deferred compensation                                                   -             (13)
     Retained earnings                                                  22,444          24,925
                                                                        ------          ------

                      Total shareholders' equity                        42,123          43,934
                                                                        ------          ------

                      Total liabilities and shareholders' equity       $71,642         $77,750
                                                                        ======          ======
</TABLE>

See accompanying notes to consolidated financial statements.


                                      F-3

<PAGE>



                 Manchester Technologies, Inc. and Subsidiaries
                      CONSOLIDATED STATEMENTS OF OPERATIONS
                    Years ended July 31, 2004, 2003 and 2002
<TABLE>
<CAPTION>

                                                                   2004           2003                2002
                                                                   ----           ----                ----         -
                                                                 (in thousands, except per share amounts)
<S>                                                              <C>            <C>                 <C>
Revenue                                                          $173,040       $164,156            $133,749

Cost of Revenue                                                   156,354        147,672             117,656
                                                                  --------       -------             -------
       Gross profit                                                16,686         16,484              16,093

Selling, general and
    administrative expenses                                        12,892         12,214              11,142
                                                                   ------         ------              ------

       Income from operations                                       3,794          4,270               4,951

Interest and other income (expense), net                              (20)           115                 184
                                                                      ----           ---                 ---

       Income from continuing operations
           before income taxes                                      3,774          4,385               5,135

Income tax provision                                                1,490          1,775               2,054
                                                                    -----          -----               -----

Income from continuing operations                                   2,284          2,610               3,081
                                                                    -----          -----               -----

Discontinued operations:
    Loss from operations of
    discontinued component                                         (7,616)        (8,005)             (3,593)
Income tax benefit                                                 (2,851)        (2,807)             (1,454)
                                                                   -------         ------              ------

Loss from discontinued operations                                  (4,765)        (5,198)             (2,139)
                                                                    ------         -----               ------

Net income (loss)                                                $ (2,481)       $(2,588)            $   942
                                                                  ========        =======             ======
Income per share from continuing operations
   Basic                                                            $0.28          $0.33               $0.39
                                                                     ====           ====                =====
   Diluted                                                          $0.28          $0.33               $0.39
                                                                     ====           ====                ====

Loss per share from discontinued operations
   Basic                                                           $(0.59)        $(0.65)             $(0.27)
                                                                    ======          =====               =====
   Diluted                                                         $(0.59)        $(0.65)             $(0.27)
                                                                    ======          =====               =====

Net income (loss) per share
   Basic                                                           $(0.31)        $(0.32)              $0.12
                                                                    =====          ======              =====
   Diluted                                                         $(0.31)        $(0.32)              $0.12
                                                                    =====          ======              =====

Weighted average  shares outstanding
  Basic                                                             8,077          7,990               7,990
                                                                    =====          =====               =====
  Diluted                                                           8,210          8,007               7,991
                                                                    =====          =====               =====
</TABLE>




See accompanying notes to consolidated financial statements.

                                      F-4

<PAGE>




                 Manchester Technologies, Inc. and Subsidiaries
                 CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
                    Years ended July 31, 2004, 2003 and 2002

<TABLE>
<CAPTION>
                                                            Additional
                                        Common     Par      Paid-in       Deferred       Retained
                                        Shares     Value    Capital       Compensation   Earnings      Total
                                        ------     -----    -------       ------------   --------      -----
                                                                  (in thousands)

<S>               <C> <C>                  <C>      <C>       <C>              <C>       <C>           <C>
     Balance July 31, 2001                 7,990    $ 80      $ 18,942         $ (38)    $ 26,571      $ 45,555

     Stock award compensation expense          -       -             -            15            -            15
     Net income                                -       -             -             -          942           942
                                        --------    ----    ----------         -----     --------      --------
     Balance July 31, 2002                 7,990      80        18,942           (23)      27,513        46,512


     Stock award compensation expense          -       -             -            10            -            10
     Net loss                                  -       -             -             -       (2,588)       (2,588)
                                        --------    ----    ----------         -----       -------       -------
     Balance July 31, 2003                 7,990      80        18,942           (13)      24,925        43,934


     Stock award compensation expense          -       -             -            13            -            13
     Equity based compensation expense         -       -            43             -            -            43
     Stock issued in connection with
        exercise of stock options            173       2           547             -            -           549
     Tax benefit from exercise
       of stock options                        -       -            65             -            -            65
     Net loss                                  -       -             -             -       (2,481)       (2,481)
                                          ------   -----         -----         -----        -----         ------
       Balance July 31, 2004               8,163     $82       $19,597         $   -      $22,444       $42,123
                                           =====      ==        ======          ====       ======        ======

</TABLE>


















     See accompanying notes to consolidated financial statements.

                                        5
<PAGE>



                 Manchester Technologies, Inc. and Subsidiaries
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                    Years ended July 31, 2004, 2003, and 2002
<TABLE>
<CAPTION>

                                                                     2004         2003           2002
                                                                     ----         ----           ----
                                                                             (in thousands)
<S>                                                                <C>           <C>            <C>
     Cash flows from operating activities:
     Net income (loss)                                              $(2,481)     $(2,588)        $   942
     Loss from discontinued operations                                4,765
                                                                      -----
     Income (loss) from continuing operations                         2,284

     Adjustments to reconcile net income (loss) to net cash
        from operating activities:
           Depreciation and amortization                                928        2,265           2,012
           Provision for doubtful accounts                              683        1,545             613
           Impairment of goodwill and write-off of related assets         -        2,481               -
           Non-cash compensation and commission expense                  13           10              15
           Deferred income taxes                                     (1,580)        (154)             95
           Equity based compensation expense                             43            -               -
           Tax benefit from exercise of stock options                    65            -               -
           Change in assets and liabilities, net of the effects of
             acquisitions and in 2004 discontinued operations:
              Accounts receivable                                      (136)      (4,266)         (7,773)
              Inventory                                             (12,291)       1,402          (3,482)
              Prepaid taxes                                             136       (1,278)           (383)
              Prepaid expenses and other current assets                (129)        (201)            (92)
              Other assets                                               95          213             (88)
              Accounts payable and  accrued expenses                  5,702        1,649           7,298
              Deferred service contract revenue                           -         (202)             61
              Deferred compensation payable                            (165)          61              41
                                                                       -----          --              --
                Net cash provided by (used in) continuing operations (4,352)         937            (741)
                Net cash provided by discontinued operations          8,882            -               -
                                                                      ------     -------          ------

                Net cash provided by (used in) operating activities   4,530          937            (741)
                                                                      -----          ---            -----

     Cash flows from investing activities:
         Capital expenditures                                          (100)      (1,282)         (2,618)
         Payment for acquisitions, net of cash acquired                   -            -          (1,613)
         Net  proceeds from the sale of  discontinued operations      3,555            -               -
                                                                      -----     --------        --------

                Net cash provided by (used in) investing activities   3,455       (1,282)         (4,231)
                                                                      -----       -------          -----

     Cash flows from financing activities:
       Net repayments of borrowings from bank                             -            -            (515)
       Payments on capitalized lease obligations                       (206)         (65)              -
       Payments on notes payable - other                                  -            -             (43)
       Proceeds from exercise of stock options                          549            -               -
                                                                        ---        -----            -----
                Net cash provided by (used in)  financing activities    343          (65)           (558)
                                                                        ---          ----           -----

     Net increase (decrease) in cash  and cash equivalents            8,328         (410)         (5,530)

         Cash and cash equivalents at beginning of year               8,553        8,963          14,493
                                                                      -----        -----          ------
     Cash and cash equivalents at end of year                       $16,881       $8,553          $8,963
                                                                     ======        =====           =====

     Cash paid during the year for:
          Interest                                                     $614         $208         $     -
                                                                        ===          ===          ======
          Income taxes                                                 $422         $320            $723
                                                                        ===          ===             ===
     Capital lease obligations incurred to acquire buildings        $     -       $8,200         $    -
                                                                     ======        =====           =====
</TABLE>


     See accompanying notes to consolidated financial statements.
                                      F-6
<PAGE>

                 Manchester Technologies, Inc. and Subsidiaries
                   Notes to Consolidated Financial Statements
                          July 31, 2004, 2003 and 2002
                 (in thousands, except share and per share data)

(1)  Operations and Summary of Significant Accounting Policies

      (a)  The Company

          Manchester Technologies,  Inc. and its subsidiaries ("the Company") is
     a distributor of display  technology  solutions and plasma display monitors
     and  computer  hardware  primarily  to dealers and system  integrators.  As
     discussed further in Note 2, on May 28, 2004, the Company sold its end-user
     information  technology fulfillment and professional services business (the
     "IT Business").  Prior to such sale, Manchester specialized in hardware and
     software procurement,  display technology, custom networking,  security, IP
     telephony, remote management, application development/e-commerce,  storage,
     and enterprise and Internet solutions, offering its customers single-source
     solutions  customized to their information systems needs by integrating its
     analysis,  design and  implementation  services  with  hardware,  software,
     networking  products and peripherals  from leading  vendors.  Subsequent to
     such sale, the Company continued  distributing display technology solutions
     and plasma display  monitors and computer  hardware and no longer  provides
     any professional services. The Company operates in a single segment.

          The Company has entered into  agreements  with certain  suppliers  and
     manufacturers  that may  provide the  Company  favorable  pricing and price
     protection in the event the vendor reduces its prices.

      (b)  Principles of Consolidation

          The  consolidated  financial  statements  include the  accounts of the
     Company  and  its  wholly-owned  subsidiaries.  All  material  intercompany
     transactions and balances are eliminated in consolidation.

      (c)  Cash Equivalents

          The Company  considers  all highly  liquid  investments  with original
     maturities  at the  date of  purchase  of three  months  or less to be cash
     equivalents.  Cash  equivalents  of $14,632 and $6,120 at July 31, 2004 and
     2003, respectively, consisted of money market mutual funds.

      (d)  Revenue Recognition

          Revenue from product sales is  recognized  when title and risk of loss
     are  passed  to the  customer,  which  is at the  time of  shipment  to the
     customer. The Company does not develop or sell software products.  However,
     certain  computer  hardware  products  sold by the  Company are loaded with
     prepackaged  software products.  The net impact on the Company's  financial
     statements of product returns,  primarily for defective products,  has been
     insignificant.

          Revenue from services,  which is included in discontinued  operations,
     is recognized when the related  services are performed.  When product sales
     and  services  are  bundled,  revenue is  recognized  upon  delivery of the
     product and  completion  of the  installation.  Service  contract  fees are
     recognized as revenue  ratably over the period of the applicable  contract.
     Deferred  service  contract  revenue  represents  the  unearned  portion of
     service contract fees.

      (e) Market Development  Funds and Advertising Costs

          Related to the discontinued IT Business,  the Company received various
     market  development  funds  including  cooperative  advertising  funds from
     certain vendors,  principally  based on volume  purchases of products.  The
     Company  records  such  amounts  related to volume  purchases  as  purchase
     discounts which reduce cost of revenue,  and other  incentives that require
     specific  incremental action on the part of the Company,  such as training,
     advertising or other  pre-approved  market  development  activities,  as an
     offset to the related costs included in selling, general and administrative
     expenses.  Total market  development  funds amounted to $598,  $1,189,  and
     $1,118,  for the years ended July 31,  2004,  2003 and 2002,  respectively,
     which  is  included  in   discontinued   operations  in  the  statement  of
     operations.

         The Company expenses all advertising costs as incurred.


                                      F-7
<PAGE>


                 Manchester Technologies, Inc. and Subsidiaries
                   Notes to Consolidated Financial Statements
                          July 31, 2004, 2003 and 2002
                 (in thousands, except share and per share data)

(f) Inventory

     Inventory, consisting of hardware, software and related supplies, is valued
at the lower of cost (first-in, first-out) or market value.

 (g) Property and Equipment

     Property and equipment are stated at cost.  Depreciation  is provided using
the straight-line and accelerated methods over the economic lives of the assets,
generally from five to seven years.  Leasehold  improvements  are amortized over
the shorter of the underlying lease term or asset life.

 (h)  Goodwill

     In July 2001, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards ("SFAS") No. 142, "Goodwill and
Other Intangible Assets" ("SFAS No. 142"). SFAS No. 142 requires that goodwill
and intangible assets with indefinite useful lives no longer be amortized, but
instead be tested for impairment at least annually. This pronouncement also
requires that intangible assets with estimable useful lives be amortized over
their respective estimated useful lives and reviewed for impairment in
accordance with SFAS No. 144 "Accounting for the Impairment or Disposal of
Long-Lived Assets."

     The Company  adopted the  provisions  of SFAS No. 142 as of August 1, 2001.
The Company's  initial  impairment review indicated that there was no impairment
as of the date of adoption.  Fair value of goodwill was based on discounted cash
flows.

     Also  required  by SFAS No.  142, on an annual  basis,  the  Company  tests
goodwill and other intangible assets for impairment. To determine the fair value
of these intangible  assets,  there are many assumptions and estimates used that
directly  impact the results of the  testing.  In making these  assumptions  and
estimates,  the Company  uses set  criteria  that are  reviewed  and approved by
various  levels of management,  and the Company  estimates the fair value of its
reporting units by using discounted cash flow analyses.

     Accumulated amortization was approximately $647 and $1,116 at July 31,
2004 and 2003, respectively. In accordance with SFAS No. 142, no goodwill
amortization expense was recorded for the three years ended July 31, 2004.

     As discussed in Note 2, $2,704 of  goodwill,  which was net of  accumulated
amortization of $469, was associated with the sale of the Company's discontinued
IT  Business.  The  amount of the  goodwill  allocated  to the  discontinued  IT
Business was based on a relative fair value approach in accordance with SFAS No.
142.

     In July 2003, the Company closed the operations of its subsidiary,  Donovan
Consulting  Group,  Inc.  ("Donovan")  and  recorded  a charge of $1,872 for the
impairment of goodwill  associated with the acquisition of Donovan (see Note 3).
There was no accumulated amortization associated with this goodwill.

     As of July 31, 2004 and 2003, there were no intangible  assets,  other than
goodwill.

(i) Impairment of Long-Lived Assets and Long-Lived Assets to be Disposed of

     Effective August 1, 2002, the Company adopted SFAS No. 144, "Accounting for
the Impairment or Disposal of Long-Lived Assets",  which establishes  accounting
and  reporting  standards for the  impairment or disposal of long-lived  assets.
SFAS No. 144 removes  goodwill  from its scope and retains the  requirements  of
SFAS No. 121 regarding the recognition of impairment losses on long-lived assets
held for use.

                                      F-8

<PAGE>


                 Manchester Technologies, Inc. and Subsidiaries
                   Notes to Consolidated Financial Statements
                          July 31, 2004, 2003 and 2002
                 (in thousands, except share and per share data)



     Long-lived assets are reviewed for impairment whenever events or changes in
circumstances  indicate  that  the  carrying  amount  of an  asset  may  not  be
recoverable.  Recoverability  of  assets  to be held and used is  measured  by a
comparison of the carrying  amount of an asset to future  undiscounted  net cash
flows expected to be generated by the asset.  Recoverability  of assets held for
sale is  measured  by  comparing  the  carrying  amount  of the  assets to their
estimated fair market value.  If such assets are considered to be impaired,  the
impairment  to be  recognized  is measured  by the amount by which the  carrying
amount of the assets exceed the fair value of the assets.  Assets to be disposed
of are reported at the lower of the carrying  amount or fair value less costs to
sell.

     As a result of closing  the  operations  of Donovan  (see Note 4) in fiscal
2003, the Company recorded a write-off of certain assets in the amount of $609.

 (j)  Income Taxes

     Deferred taxes are recognized for the future tax consequences  attributable
to temporary  differences between the carrying amounts of assets and liabilities
for  financial  statement  purposes and income tax purposes  using enacted rates
expected to be in effect when such amounts are  realized or settled.  The effect
on deferred taxes of a change in tax rates is recognized in income in the period
that includes the enactment date.

(k)  Net Income Per Share

     Basic net income per share has been  computed by dividing net income by the
weighted  average  number of common shares  outstanding.  Diluted net income per
share has been computed by dividing net income by the weighted average number of
common shares outstanding,  plus the assumed exercise of dilutive stock options,
less the number of treasury  shares assumed to be purchased from the proceeds of
such  exercises  using the average  market price of the  Company's  common stock
during each respective period. Stock options representing approximately 355,000,
1,302,000,  and 887,000 shares for the years ended July 31, 2004, 2003 and 2002,
respectively,  were not  included in the  computation  of diluted net income per
share  because  to do so would  have  been  antidilutive.  The  following  table
reconciles the denominators of the basic and diluted per share computations. For
each year,  the numerator is the net income from  continuing  operations and the
per share amounts below represent income per share from continuing operations.
<TABLE>
<CAPTION>

                                             2004                 2003                          2002
                                             ----                 ----                          ----
                                            Per Share                  Per Share                 Per Share
                                    Shares  Amount            Shares   Amount           Shares   Amount
                                    ------  ------            ------   ------           ------   ------

<S>                              <C>           <C>          <C>          <C>          <C>            <C>
           Basic EPS             8,077,000     $0.28        7,990,000    $0.33        7,990,000      $0.39
                                                ====                     =====                        ====
           Effect of dilutive
            options                133,000                     17,000                     1,000
                                   -------                     ------                     -----

           Diluted EPS           8,210,000     $0.28        8,007,000    $0.33        7,991,000      $0.39
                                 =========      ====        =========     ====        =========       ====
</TABLE>

(l)  Accounting for Stock-Based Compensation

         The Company applies Accounting Principles Board Opinion No. 25,
"Accounting for Stock Issued to Employees" ("APB 25"), and related
interpretations for stock options and other stock-based awards and records
compensation expense for employee stock options if the market price of the
underlying common stock exceeds the exercise price on the date of the grant. On
August 1, 1996, the Company adopted SFAS No. 123, "Accounting for Stock-Based
Compensation" ("SFAS 123"). The Company has elected not to implement the fair
value based accounting method for employee stock options, but has elected to
disclose the pro forma net income (loss) and net income (loss) per share for
employee stock option grants as if such method had been used to account for
stock-based compensation cost as described in SFAS No. 123.

                                      F-9

<PAGE>



                 Manchester Technologies, Inc. and Subsidiaries
                   Notes to Consolidated Financial Statements
                          July 31, 2004, 2003 and 2002
                 (in thousands, except share and per share data)

     The Company  applies the intrinsic  value method as outlined in APB 25, and
related  interpretations  in  accounting  for stock options  granted.  Under the
intrinsic value method,  no  compensation  expense is recognized if the exercise
price of the Company's employee stock options equals or exceeds the market price
of the underlying  stock on the date of grant.  Since the Company has issued all
stock option grants at market value, no compensation cost has been recognized at
the time of the grant.  SFAS 123  requires  that the  Company  provide pro forma
information  regarding  net income  (loss) and net income (loss) per share as if
compensation cost for the Company's stock option programs had been determined in
accordance with the fair value method  prescribed  therein.  During fiscal 2003,
the Company  adopted the  disclosure  portion of SFAS No. 148,  "Accounting  for
Stock-Based  Compensation - Transition and Disclosure"  requiring quarterly SFAS
123 pro forma  disclosure.  The following  table  illustrates  the effect on net
income  (loss) and income  (loss) per share as if the Company had  measured  the
compensation  cost for the Company's  stock option programs under the fair value
method in each period presented.

<TABLE>
<CAPTION>

                                                        2004              2003         2002
                                                        ----              ----         ----

<S>                                                    <C>             <C>             <C>
      Net income (loss), as reported                   $(2,481)        $(2,588)         $  942
      Add: Stock based compensation expense
        included in net income, net of related
        tax effects                                         34               -              -
      Deduct:  Total stock-based
       employee compensation expense
       determined under fair value
       method for all awards, net of
       related tax effects                                (318)           (361)          (365)
                                                          -----          ------          -----

      Net income (loss) - pro forma                    $(2,765)        $(2,949)        $  577
                                                        =======         =======           ===

      Net income (loss) per common share:
       Basic - as reported                              $(0.31)       $  (0.32)        $ 0.12
       Basic - pro forma                                $(0.34)       $  (0.37)        $ 0.07

       Diluted - as reported                            $(0.31)       $  (0.32)        $ 0.12
       Diluted - pro forma                              $(0.34)       $  (0.37)        $ 0.07
</TABLE>

         The fair value of options granted was estimated using the Black-Scholes
option pricing model with the following weighted average assumptions:
<TABLE>
<CAPTION>

                                                 2004        2003         2002
                                                 ----        ----         ----
<S>                                                <C>        <C>          <C>
     Expected dividend yield                       0%         0%           0%
     Expected stock volatility                    57%        54%          59%
     Risk free interest rate                       3%         3%           3%
     Expected option term until exercise (years)   5.00       5.00         5.00
</TABLE>

     The per share weighted  average fair value of stock options  granted during
fiscal 2004, 2003 and 2002 was $1.44, $1.27, and $1.79, respectively.

      (m)  Use of Estimates

     Management  of the Company has made a number of estimates  and  assumptions
relating  to the  reporting  of assets and  liabilities  and the  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 to
prepare these  financial  statements in conformity  with  accounting  principles
generally accepted in the United States of America.  Actual results could differ
from those estimates.

                                      F-10
<PAGE>

                 Manchester Technologies, Inc. and Subsidiaries
                   Notes to Consolidated Financial Statements
                          July 31, 2004, 2003 and 2002
                 (in thousands, except share and per share data)

 (n)  Fair Value of Financial Instruments

     The fair values of  accounts  receivable,  prepaid  expenses  and  accounts
payable and accrued expenses are estimated to approximate the carrying values at
July 31, 2004 due to the short maturities of such instruments.

(o) Reclassifications

         Certain prior year amounts have been reclassified to conform to the
manner of presentation in the current year.

(2)      Discontinued Operations

     On May 28, 2004, the Company sold its IT Business to ePlus, inc., a leading
provider  of  Enterprise  Cost  Management,  in an  all  cash  transaction.  The
transaction  included the sale to ePlus of the customer list of the business and
certain  related  equipment,  the  assumption by ePlus of certain  contracts and
liabilities  pertaining to the business, and the hiring by ePlus of the majority
of  Manchester  employees  involved in the  business.  The  transaction  did not
include, and Manchester  retained,  the inventory and accounts receivable of the
IT Business.

     The proceeds from the sale of the IT Business  were $3,555,  net of related
expenses  of  $1,445.  The  Company  recorded  a gain,  included  in  loss  from
operations of discontinued  component in the accompanying  fiscal 2004 statement
of  operations,  of  approximately  $876 as a result of the  transaction,  which
represented the excess of the net proceeds over a payable to ePlus, inc. of $469
for service  contracts  they  assumed and the $2,210  carrying  value of the net
assets sold,  consisting of goodwill of $2,704,  property and equipment,  net of
$195  and  deferred  revenue  of  $689.  The loss  from  the  operations  of the
discontinued IT Business was $8,492 in fiscal 2004, which included the following
charges in the fourth quarter of fiscal 2004 associated with the discontinued IT
Business:

            Employee severance and other employee costs           $1,016
            Provision for doubtful accounts receivable             1,250
            Fixed asset impairments                                2,639
            Other                                                     50
                                                                --------

            Total                                                 $4,955
                                                                  ======

     As of July 31, 2004  approximately $491 of the employee severance and other
employee costs and $422 of amounts  payable to ePlus,  inc. for assumed  service
contracts were included in accounts  payable and accrued  expenses which will be
paid in fiscal 2005, ending July 31, 2005.

     In accordance with SFAS 144,  "Accounting for the Impairment or Disposal of
Long-Lived  Assets",  the results of  operations  from the end-user  information
technology  fulfillment and professional services business have been recorded as
discontinued   operations  in  the  accompanying   consolidated   statements  of
operations. The revenue from discontinued operations was $112,534,  $122,288 and
$128,261 for the years ended July 31,  2004,  2003 and 2002,  respectively.  The
loss from operations of the  discontinued  component was $(7,616),  $(8,005) and
$(3,593) for the years ended July 31, 2004, 2003 and 2002, respectively.

     The  presentation  of the statement of operations  for the years ended July
31, 2003 and 2002 have been reclassified to reflect discontinued operations. The
balance  sheet as of July 31, 2003 and the statement of cash flows for the years
ended July 31, 2003 and 2002 have not been reclassified to reflect  discontinued
operations.


                                      F-11
<PAGE>



                 Manchester Technologies, Inc. and Subsidiaries
                   Notes to Consolidated Financial Statements
                          July 31, 2004, 2003 and 2002
                 (in thousands, except share and per share data)


(3)  Property and Equipment

         Property and equipment at July 31, consist of the following:
<TABLE>
<CAPTION>

                                                    2004             2003
                                                    ----             ----
<S>                                                 <C>              <C>
      Furniture and fixtures                        $2,037           $2,242
      Machinery and equipment                        1,804           12,131
      Transportation equipment                         263              567
      Leasehold improvements                         3,149            3,226
      Capital leases                                 8,200            8,200
                                                     -----            -----
                                                    15,453           26,366
 Less accumulated depreciation and amortization     (5,563)         (12,381)
                                                    -------          -------
                                                    $9,890          $13,985
                                                    ======          =======
</TABLE>

     Depreciation and amortization  expense from continuing  operations amounted
to $928,  $838,  and $734,  for the years  ended July 31,  2004,  2003 and 2002,
respectively.

(4)  Acquisitions

 Donovan Consulting Group, Inc.

     On August 29, 2001, the Company  acquired all of the  outstanding  stock of
Donovan, a Delaware corporation  headquartered near Atlanta, Georgia. Donovan is
a technical  services  firm that  delivers  Wireless LAN  solutions to customers
nationwide. The acquisition, which was accounted for as a purchase, consisted of
a cash  payment of $1,500.  In  connection  with the  acquisition,  the  Company
assumed  approximately  $435 of bank  debt and $43 of  other  debt,  which  were
subsequently  repaid.  Donovan was acquired in order to strengthen the Company's
position in the Wireless LAN arena.  Donovan  allowed the Company to offer total
Wireless  LAN  solutions  including  state  of the art  products  as well as the
services necessary to have those products operate optimally.

     Operating results of Donovan are included in the consolidated statements of
operations  from the  acquisition  date.  The  estimated  fair value of tangible
assets and liabilities acquired was $497 and $869,  respectively.  The excess of
the aggregate  purchase  price over the estimated fair value of the tangible net
assets acquired was  approximately  $1,872.  The factors that contributed to the
determination  of the  purchase  price and the  resulting  goodwill  include the
significant growth expected in this area due to the combination of the Company's
long history of strong customer relationships,  financial strength and stability
coupled with Donovan's product offerings and highly skilled technical staff. The
$1,872 was not  amortized  and was subject to  impairment  testing in accordance
with No. 142, "Goodwill and Other Intangible Assets " ("SFAS 142").

     In July 2003, the Company closed the operations of Donovan and sold certain
assets back to the former owners of Donovan.  The operations were closed because
the  synergies  that  were  anticipated  at the  time  of the  purchase  did not
materialize.  As a result,  the  Company  recorded  a charge  of $2,481  for the
impairment  of goodwill  and  write-off of related  assets of Donovan,  which is
included  in  the  loss  from  operations  of  discontinued   component  in  the
accompanying fiscal 2003 statement of operations.

e.Track Solutions, Inc.

     On November 9, 2001, the Company  acquired all of the outstanding  stock of
e.Track Solutions,  Inc.  ("e.Track"),  a New York corporation  headquartered in
Pittsford,  New York.  e.Track is a business  and  software  services  firm that
delivers business,  Internet and information  technology  solutions to customers
nationwide.  The  acquisition,  which  has  been  accounted  for as a  purchase,
consisted of cash  payments of $290  (including  debt  assumed and  subsequently
repaid).  e.Track was acquired in order to allow the Company to offer  customers
customized software solutions along with the products and services traditionally
offered.

                                      F-12
<PAGE>


                 Manchester Technologies, Inc. and Subsidiaries
                   Notes to Consolidated Financial Statements
                          July 31, 2004, 2003 and 2002
                 (in thousands, except share and per share data)


     Operating results of e.Track are included in the consolidated statements of
operations  from the  acquisition  date.  The  estimated  fair value of tangible
assets and liabilities acquired was $116 and $192,  respectively.  The excess of
aggregate  purchase  price over the  estimated  fair value of the  tangible  net
assets acquired was $291. The factors that  contributed to the  determination of
the purchase price and the resulting  goodwill  include the expectation that the
combination  of  e.Track's  highly  skilled  technical  staff,  coupled with the
Company's  financial  strength and  customer  base,  will result in  significant
growth at e.Track.  The $291 will not be amortized;  however, it will be subject
to impairment  testing in accordance with SFAS No. 142.  e.Track was included in
the IT Business sold in fiscal 2004.

     The  presentation  of  supplemental  pro forma  financial  information  was
omitted as the impact of the acquisitions was deemed immaterial.

(5)  Accounts Payable and Accrued Expenses

         Accounts payable and accrued expenses consist of the following:
<TABLE>
<CAPTION>
                                                          July 31,
                                                    2004           2003
                                                    ----           ----

<S>                                                 <C>            <C>
     Accounts payable, trade                        $19,070        $21,314
     Accrued salaries and wages                       1,187          1,932
     Customer deposits                                  218            778
     Other accrued expenses                           1,017            728
                                                      -----            ---
                                                    $21,492        $24,752
                                                    =======        =======
</TABLE>

         The Company has entered into financing agreements for the purchase of
inventory. These agreements are unsecured, generally allow for a 30-day
non-interest-bearing payment period and require the Company to maintain, among
other things, a certain minimum tangible net worth. In each of the years in the
three-year period ended July 31, 2004, the Company has repaid all balances
outstanding under these agreements within the non-interest- bearing payment
period. Accordingly, amounts outstanding under such agreements of $0 and $2,757
at July 31, 2004 and 2003, respectively, are included in accounts payable and
accrued expenses. As of July 31, 2004, under the terms of the agreement,
retained earnings available for dividends amounted to approximately $14,300.

(6)  Employee Benefit Plans

         The Company maintains a qualified defined contribution plan with a
salary deferral provision, commonly referred to as a 401(k) plan. The Company
matches 50% of employee contributions up to three percent of employees'
compensation. The Company's contribution related to continuing operations
amounted to $115, $120, and $112, for the years ended July 31, 2004, 2003, and
2002, respectively.

         The Company also has a deferred compensation plan that is available to
certain eligible key employees. The plan consists of a commitment by the Company
to pay a monthly benefit to an employee for a period of ten years commencing no
earlier than ten years from such employee's entrance into the plan. The Company
has chosen to purchase life insurance policies to provide funding for the
majority of these benefits. As of July 31, 2004 and 2003, the Company has
recorded an asset (included in other assets) of $183 and $278, respectively,
representing the prepaid premiums and cash surrender value of policies owned by
the Company and a liability of $98 and $263, respectively, relating to the
unvested portion of benefits due under the plan. For the years ended July 31,
2004, 2003 and 2002, the Company recorded income (expense) of $116, $(144), and
$(212), respectively, in connection with this plan, a portion of which relates
to terminated employees in the IT Business and is included in discontinued
operations.

                                      F-13
<PAGE>


                 Manchester Technologies, Inc. and Subsidiaries
                   Notes to Consolidated Financial Statements
                          July 31, 2004, 2003 and 2002
                 (in thousands, except share and per share data)

(7)  Commitments and Contingencies

     Leases

     Through  March 2003,  the Company  leased its  warehouse  and  distribution
center as well as its  corporate  offices  and  certain  sales  facilities  from
entities  owned or  controlled  by  shareholders,  officers or  directors of the
Company.  In March 2003, the owners sold the properties leased by the Company to
an unaffiliated  company.  In connection with the sale, the Company entered into
three fifteen-year  leases, each expiring on March 31, 2018, with the new owner.
Lease terms include a lower base rent in the first year,  annual rent  increases
of two percent and four five-year renewal options.

     The  Company  recorded  the new leases as capital  leases and  accordingly,
recorded an asset of approximately $8.2 million.  The asset is classified in the
balance  sheet as Property  and  equipment,  net,  (see Note 3) and is amortized
using the straight-line  method over the lease terms and the related obligations
are recorded as liabilities.

         The following represents the Company's commitment under capital leases
for each of the next five years ended July 31 and thereafter:

                      2005                                            $842
                      2006                                             859
                      2007                                             876
                      2008                                             894
                      2009                                             911
                      2010 and thereafter                            8,706
                                                                     -----
                      Total payments                                13,088
                      Amount representing interest at 7%            (5,159)
                                                                  ---------

                      Obligations under capital leases               7,929
                      Obligations due within one year                 (246)
                                                                 ----------
                      Long-term obligations under capital leases    $7,683
                                                                   =======

     On August 20, 2004, one of the buildings  under capital lease was sublet to
an unrelated third party for a term expiring February 2018 pursuant to which the
subtenant  will pay the Company $2,667 of the above total payments under capital
leases. In addition,  another building was sublet whereby the subtenant will pay
$370 of the above lease payments due in fiscal 2005.

     In addition,  the Company is obligated under operating lease agreements for
sales offices and additional  warehouse space.  Aggregate rent expense under all
these leases from continuing  operations amounted to $104, $218 and $277 for the
years ended July 31, 2004, 2003, and 2002, respectively.

     The following  represents the Company's  commitment  under operating leases
for each of the next five years ended July 31 and thereafter:

                                2005                      $306
                                2006                       525
                                2007                       521
                                2008                       246
                                2009                         -
                          Thereafter                         -
                                                         -----
                                                        $1,598
                                                        ======

Litigation

The Company is involved in various claims and legal actions arising in the
ordinary course of business. In the opinion of management, based on advice from
its legal counsel, the ultimate disposition of these matters will not have a
material adverse effect on the Company's financial position or results of
operations.

                                      F-14
<PAGE>


                 Manchester Technologies, Inc. and Subsidiaries
                   Notes to Consolidated Financial Statements
                          July 31, 2004, 2003 and 2002
                 (in thousands, except share and per share data)



 (8)   Line of Credit

     In July 1998, the Company entered into a revolving credit facility with its
banks, which was revised in June, 1999 to change  participating banks. Under the
terms of the  facility,  the  Company  may  borrow up to a maximum  of  $15,000.
Borrowings  under the facility  bear interest at variable  interest  rates based
upon several options available to the Company. The facility requires the Company
to maintain  certain  financial  ratios and  covenants.  At July 31,  2004,  the
Company was not in compliance  with all the financial  ratios and covenants that
it  is  required  to  maintain.  The  Company  received  a  waiver  waiving  its
requirements  from its banks for the period ended July 31, 2004.  As of July 31,
2004, there was no balance  outstanding  under this agreement,  which expires on
January 31, 2005.

 (9)  Income Taxes

         The provision (benefit) for income taxes for the years ended July 31,
2004, 2003 and 2002 consists of the following:
<TABLE>
<CAPTION>

                                                        2004              2003             2002
                                                        ----              ----             ----

<S>                                                    <C>            <C>                 <C>
              Current
                  Federal                               $    -         $(1,195)            $325
                  State                                    166             317              180
                                                           ---             ---              ---

                                                           166            (878)             505
                                                           ---            ----              ---
              Deferred
                  Federal                               (1,322)           (102)              70
                  State                                   (205)            (52)              25
                                                          ----             ---               --

                                                        (1,527)           (154)              95
                                                        ------            ----               --

                                                       $(1,361)        $(1,032)            $600
                                                        =======         =======             ===
</TABLE>

         The difference between the Company's effective income tax rate and the
statutory rate is as follows, for the years ended July 31,:

<TABLE>
<CAPTION>
                                                          2004            2003             2002
                                                          ----            ----             ----                 -

<S>                                                    <C>             <C>                 <C>
              Income taxes (benefit) at statutory rate $(1,306)        $(1,231)            $524
              State taxes, net of federal benefit         ( 96)            209              114
              Other                                         41             (10)             (38)
                                                            --             ---              ---

                                                       $(1,361)        $(1,032)            $600
                                                       =======         =======             ====
</TABLE>

              The income tax provision (benefit) is presented in the statements
of operations as follows:
<TABLE>
<CAPTION>

                                                          2004            2003             2002
                                                          ----            ----             ----
<S>                                                     <C>              <C>              <C>
              Income tax provision for
                 continuing operations                  $1,490          $1,775           $2,054
              Income tax benefit from
                discontinued operations                 (2,851)         (2,807)          (1,454)
                                                        -------         -------          -------
                                                       $(1,361)        $(1,032)            $600
                                                         ======         =======             ===
</TABLE>


                                      F-15
<PAGE>






                 Manchester Technologies, Inc. and Subsidiaries
                   Notes to Consolidated Financial Statements
                          July 31, 2004, 2003 and 2002
                 (in thousands, except share and per share data)


         The tax effects of temporary differences that give rise to significant
portions of the net deferred tax asset at July 31, 2004 and 2003 were as
follows:
<TABLE>
<CAPTION>

                                                    2004             2003
                                                    ----             ----
<S>                                                 <C>                <C>
      Deferred tax assets (liabilities):
        Allowance for doubtful accounts             $1,139             $583
        Deferred compensation                          555              605
        Net operating loss carryforwards             1,020              223
        Depreciation                                   441              162
        Other                                         (148)            (132)
                                                      ----             ----

                                                     3,007            1,441
      Less: Valuation Allowance                        (67)             (81)
                                                       ---               ---
         Net deferred tax asset                     $2,940           $1,360
                                                     =====            =====
</TABLE>

     As of  July  31,  2004,  the  Company  has a  Federal  net  operating  loss
carryforward of approximately $2,430 which expires in 2020 to 2024.

     Excluding  a  valuation  allowance  of $67 and $81 as of July 31,  2004 and
2003,  respectively,  related to net  operating  loss  carryforwards  subject to
Section  382  limitations,  a  valuation  allowance  has not  been  provided  in
connection with all other deferred tax assets since the Company believes,  based
upon its long  history  of  profitable  continuing  operations,  that it is more
likely than not that such deferred tax assets will be realized.

 (10)  Related Party Transactions

     Through  March 2003,  the Company  leased its  warehouse  and  distribution
center as well as its  corporate  offices  and  certain  sales  facilities  from
entities  owned or  controlled  by  shareholders,  officers or  directors of the
Company.  In March 2003, the owners sold the properties leased by the Company to
an unaffiliated  company.  In connection with the sale, the Company entered into
three fifteen-year  leases, each expiring on March 31, 2018, with the new owner.
Lease terms include a lower base rent in the first year,  annual rent  increases
of two percent and four  five-year  renewal  options.  Rent  expense paid to the
former owners for these facilities  aggregated $0, $610, and $932, for the years
ended July 31, 2004, 2003 and 2002, respectively.

     The  Company  paid  legal  fees to a law  firm in which a  director  of the
Company is a partner.  Such fees amounted to approximately $555, $257, and $208,
including disbursements, in the fiscal years ended July 31, 2004, 2003 and 2002,
respectively.

     During the fiscal  years  ended July 31,  2004,  2003 and 2002 the  Company
received  approximately  $303,  $164, and $45,  respectively,  in revenue from a
company controlled by a director of the Company.

     On  May  20,  2002  the  Company   loaned  its  chief   executive   officer
approximately  $965  bearing an interest  rate of 2.00%.  On May 30,  2002,  the
Company's chief  executive  officer repaid $585 of the loan and the remainder of
the loan was repaid on July 18, 2002 plus accrued interest.

     In the ordinary  course of its business  with  customers  and vendors,  the
Company utilizes a restaurant owned by a member of the chief executive officer's
family for catering,  dining and entertainment services.  During the years ended
July 31, 2004, 2003 and 2002 the Company paid  approximately $42, $49, and $109,
respectively, for such services.

                                      F-16
<PAGE>

                 Manchester Technologies, Inc. and Subsidiaries
                   Notes to Consolidated Financial Statements
                          July 31, 2004, 2003 and 2002
                 (in thousands, except share and per share data)

 (11)  Shareholders' Equity

      Stock Option Plan

     Under the Company's  Amended and Restated 1996 Incentive and  Non-Incentive
Stock Option Plan as amended, (the "Plan"),  which was approved by the Company's
shareholders  in October 1996, an aggregate of 2,600,000  shares of common stock
are reserved for issuance upon exercise of options  thereunder.  Under the Plan,
incentive stock options,  as defined in section 422 of the Internal Revenue Code
of 1986, as amended, may be granted to employees and non-incentive stock options
may be granted to  employees,  directors  and such other persons as the Board of
Directors may determine, at exercise prices equal to at least 100% (with respect
to  incentive  stock  options) and at least 85% (with  respect to  non-incentive
stock options) of the market value of the common stock on the date of grant.  In
addition to selecting the  optionees,  the Board of Directors will determine the
number of shares of common stock subject to each option,  the term of each stock
option up to a maximum  of ten years  (five  years  for  certain  employees  for
incentive  stock  options),  the time or times  when the  stock  option  becomes
exercisable,  and otherwise  administer  the Plan.  Generally,  incentive  stock
options  expire  three  months  from the  date of the  holder's  termination  of
employment with the Company other than by reason of death or disability. Options
may be exercised with cash or common stock previously owned for in excess of six
months. The following table summarizes stock option activity:
<TABLE>
<CAPTION>

                                                                     Weighted
                                                                     Average
                                                Options              Exercise
                                                Outstanding          Price

<S>                                             <C>                   <C>
         Balance July 31, 2001                   899,084               $3.95

           Granted                                81,800               $2.55
           Exercised                                   -                   -
           Cancelled                             (55,800)              $4.07
                                                 -------
         Balance July 31, 2002                   925,084               $3.81

           Granted                               665,250               $1.92
           Exercised                                   -                   -
           Cancelled                            (288,584)              $3.51
                                               ---------
         Balance July 31, 2003                 1,301,750               $2.91

           Granted                                68,000               $2.46
           Exercised                            (173,286)              $3.23
           Cancelled                             (77,650)              $3.25
                                                --------
         Balance July 31, 2004                 1,118,814               $2.81
                                               =========
</TABLE>

     At July 31, 2004, options with the following ranges of exercise prices were
outstanding:
<TABLE>
<CAPTION>

                                        Options Outstanding                      Options Currently Exercisable
     Range of                           -------------------                       -----------------------------
     Exercise                                         Weighted Average                         Weighted Average
     Prices            Number    Exercise Price          Remaining life         Number         Exercise Price
     ------            ------    ---------------         --------------         ------         --------------
<S>  <C>               <C>             <C>                <C>                   <C>               <C>
     $1.84 - $2.29     570,250         $1.89              8 Yrs.                183,333           $1.98
     $2.30 - $3.75     193,367         $2.87              6 Yrs.                106,566           $3.06
     $3.76 - $4.00     202,847         $3.86              3 Yrs                 202,847           $3.86
     $4.01 - $5.69     152,350         $4.77              5 Yrs.                152,350           $4.77
                       -------                                                  -------
     $1.84 - $5.69   1,118,814         $2.81              6 Yrs.                645,096           $3.41
                     =========                                                  =======
</TABLE>

                                      F-17
<PAGE>





                 Manchester Technologies, Inc. and Subsidiaries
                   Notes to Consolidated Financial Statements
                          July 31, 2004, 2003 and 2002
                 (in thousands, except share and per share data)


     All  options  granted  expire ten years  from the date of grant  except for
options granted to directors, which expire five years from the date of grant.

     There are 50,000  options that were  repriced  subsequent  to their date of
grant for which the Company is applying variable accounting.  The related equity
based compensation expense was $43 in fiscal 2004.

(12)  Major Customer and Vendors and Concentration of Credit Risk

     The Company sells products and provides services to customers in the United
States.

     The Company's top three vendors accounted for  approximately  31%, 15%, and
14%, respectively, of total product purchases from continuing operations for the
year  ended  July 31,  2004.  The  Company's  top three  vendors  accounted  for
approximately 25%, 12%, and 11%,  respectively,  of total product purchases from
continuing  operations  for the year ended July 31, 2003.  The Company's top two
vendors accounted for approximately 25% and 25%, respectively,  of total product
purchases from continuing operations for the year ended July 31, 2002.

     At July 31, 2004, one customer  accounted for 5% of the Company's  accounts
receivable.  At July 31, 2003,  two  customers  accounted for 12% and 5%, of the
Company's  accounts  receivable.  For the fiscal years ended July 31, 2004, 2003
and 2002, no one customer accounted for more than 10% of total revenue.

(13)  Impact of Recently Issued Accounting Standards

     The  FASB  recently  issued  an  exposure  draft  of a  standard  requiring
stock-based employee compensation to be recorded as a charge to earnings,  which
would be effective for the Company  commencing  August 1, 2005. The Company will
continue to monitor the FASB's progress on the issuance of this standard as well
as evaluate the Company's position with respect to current guidance.

     In January 2003, the FASB issued  Interpretation No. 46,  "Consolidation of
Variable  Interest  Entities,"  ("Int. No. 46") an interpretation of ARB No. 51.
Int. No. 46 addresses consolidation by business enterprises of variable interest
entities.  Int. No. 46 applies immediately to variable interest entities created
after January 31, 2003 and to variable  interest entities in which an enterprise
obtains an interest  after that date.  Int.  No. 46, as revised,  applies in the
first year or interim  period  beginning  after  December  15,  2003 to variable
interest  entities  in which an  enterprise  holds a variable  interest  that it
acquired  before  February 1, 2003.  The Company  adopted  Int. No. 46 in fiscal
2004, which had no impact on its consolidated financial statements.

     In  November  2002,  the  Emerging  Issues  Task Force  reached a consensus
opinion on EITF 00-21,  Revenue  arrangements  with Multiple  Deliverables.  The
consensus provides that revenue  arrangements with multiple  deliverables should
be divided into separate  units of  accounting if certain  criteria are met. The
consideration  for the arrangement  should be allocated to the separate units of
accounting based on their relative fair values, with different provisions if the
fair value of all  deliverables  is not known or if the fair value is contingent
on delivery of specified  items or performance  conditions.  Applicable  revenue
recognition  criteria should be considered  separately for each separate unit of
accounting.  EITF 00-21 is effective  for revenue  arrangements  entered into in
fiscal periods  beginning after June 15, 2003.  Entities may elect to report the
change as a cumulative  effect  adjustment  in  accordance  with APB Opinion 20,
Accounting Changes.  The Company adopted EITF 00-21 in fiscal 2004 which did not
have a  significant  impact on the  Company's  financial  position or results of
operations.

                                      F-18
<PAGE>



                 Manchester Technologies, Inc. and Subsidiaries
                   Notes to Consolidated Financial Statements
                          July 31, 2004, 2003 and 2002
                 (in thousands, except share and per share data)



(14) Quarterly Results - Continuing Operations (unaudited)
<TABLE>
<CAPTION>

                              Oct. 31     Jan 31     Apr. 30     July 31     Year
                              -------     ------     -------     -------     ----
      2004
<S>                              <C>        <C>       <C>         <C>       <C>
   Revenue                       $45,378    $45,117   $42,448     $40,097   $173,040
   Gross profit                    4,734      4,558     3,939       3,455     16,686
   Net income                        844        743       432         265      2,284
   Basic income  per share          0.11       0.09      0.05        0.03       0.28
   Diluted income  per share        0.10       0.09      0.05        0.03       0.28



      2003
   Revenue                       $39,899    $47,204   $36,533     $40,520   $164,156
   Gross profit                    4,553      5,255     3,396       3,280     16,484
   Net income (loss)               1,034      1,466       316        (206)     2,610
   Basic income (loss) per share    0.13       0.18      0.04       (0.03)      0.33
   Diluted income (loss) per share  0.13       0.18      0.04       (0.03)      0.33

</TABLE>

         Basic and diluted income (loss) per share for each of the quarters are
   based on the weighted-average number of shares outstanding in each period.
   Therefore, the sum of the quarters in a year may not necessarily equal the
   year's income (loss) per share.

                                      F-19

<PAGE>



                          Manchester Technologies, Inc.

                 Schedule II - Valuation and Qualifying Accounts
                             (dollars in thousands)
<TABLE>
<CAPTION>

                                        Column C-Additions
                         Column B-           (1)-         (2)-
Column A -               Balance at     Charged to    Charged to       Column D-       Column E-
Description              beginning of   costs and     other            Deductions-     Balance at
                         period         expenses      accounts            (a)          end of period
                         ------         --------      --------            ---          -------------


<S>                        <C>            <C>              <C>            <C>           <C>
Allowance for doubtful
accounts

Year ended:

    July 31, 2002          $1,100          $613              -            $757             $956

    July 31, 2003            $956         $1,545             -          $1,075           $1,426

    July 31, 2004          $1,426         $1,933             -            $511           $2,848
</TABLE>

(a) Write-off amounts against allowance provided.


                                      F-20
<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, thereunder duly authorized.

                                            Manchester Technologies, Inc.

Date:         October  28, 2004             By:     /S/ Barry R. Steinberg
                                            -------------------------------
                                                   Barry R. Steinberg
                                            President, Chief Executive Officer
                                            Chairman of the Board and Director

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

/S/ Barry R. Steinberg                               Date:   October 28, 2004
   -------------------
Barry R. Steinberg
President, Chief Executive Officer,
Chairman of the Board and Director
(Principal Executive Officer)


/S/ Elan Yaish                                       Date:   October 28, 2004
--------------
Elan Yaish,
Chief Financial Officer, Vice President Finance
 and Assistant Secretary
 (Principal Accounting Officer and Principal Financial
   Officer)


/S/ Joel G. Stemple                                  Date:   October 28, 2004
-------------------
Joel G. Stemple
Director


/S/ Joel Rothlein                                    Date:   October 28, 2004
-----------------
Joel Rothlein
Director

/S/ Michael Russell                                   Date:   October 28, 2004
-------------------
Michael Russell
Director

/S/ Bert Rudofsky                                     Date:   October 28, 2004
------------------
Bert Rudofsky
Director

/S/ Julian Sandler                                    Date:   October 28, 2004
------------------
Julian Sandler
Director

/S/ Yacov A. Shamash                                  Date:   October 28, 2004
--------------------
Yacov A. Shamash
Director

                                       28
<PAGE>







<PAGE>