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                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                    FORM 10-Q

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

                 For the quarterly period ended January 31, 2004

                                       or

[ ]  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)                      Identification Number)

                                 160 Oser Avenue
                            Hauppauge, New York 11788
              (Address of registrant's principal executive offices)

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

Indicate by check mark whether the registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.

                                 [X] Yes [ ] No

Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Exchange Act).

                                 [ ] Yes [X] No


As of March 3, 2004 there were 8,068,301  outstanding shares of the registrant's
Common Stock.



<PAGE>


                 MANCHESTER TECHNOLOGIES, INC. AND SUBSIDIARIES



                                Table of Contents

PART I.        FINANCIAL INFORMATION                                       Page
-------        ---------------------                                       ----

Item 1.        Condensed Consolidated Balance Sheets as of
                  January 31, 2004  (unaudited) and July 31, 2003             3

               Condensed Consolidated Statements of Operations for the
                  Three Months  and Six Months Ended
                  January 31, 2004 and 2003 (unaudited)                       4

               Condensed Consolidated Statements of Cash Flows for the
                  Six Months Ended January 31, 2004 and 2003 (unaudited)      5

               Notes to Unaudited Condensed Consolidated Financial Statements 6

Item 2.        Management's Discussion and Analysis of Financial
                  Condition and Results of Operations                         9

Item 3.        Quantitative and Qualitative Disclosures About Market Risk    18

Item 4.        Controls and Procedures                                       18


PART II.       OTHER INFORMATION

Item 4.        Submission of Matters to a Vote of Security Holders           19

Item 6.        Exhibits and Reports on Form 8-K                              19

















<PAGE>


PART I - FINANCIAL INFORMATION

ITEM 1.   Condensed Consolidated Financial Statements

                 Manchester Technologies, Inc. and Subsidiaries
                      CONDENSED CONSOLIDATED BALANCE SHEETS
                    (in thousands, except per share amounts)
<TABLE>
<CAPTION>

                                                                January 31, 2004        July 31, 2003
                                                                    (Unaudited)         -------------
                                                                    -----------
<S>                                                                  <C>                   <C>
Assets
Current assets:
  Cash and cash equivalents                                           $ 3,866               $ 8,553
  Accounts receivable, net                                             33,710                35,117
  Inventory                                                            18,352                 9,605
  Deferred income taxes                                                   603                   603
  Prepaid taxes                                                         1,832                 1,704
  Prepaid expenses and other current assets                               703                   709
                                                                     ---------             --------

         Total current assets                                          59,066                56,291

Property and equipment, net                                            13,556                13,985
Goodwill, net                                                           6,439                 6,439
Deferred income taxes                                                     757                   757
Other assets                                                              177                   278
                                                                          ----             --------

         Total assets                                                 $79,995               $77,750
                                                                       ======                ======

Liabilities and shareholders' equity
Current liabilities:
  Accounts payable and accrued expenses                               $26,524               $24,752
   Deferred service contract revenue                                      606                   666
   Current portion of capital lease obligations                           228                   212
                                                                          ---             ---------

         Total current liabilities                                     27,358                25,630

Deferred compensation payable                                             263                   263
Capital lease obligations, net of current portion                       7,811                 7,923
                                                                        -----              --------

         Total liabilities                                             35,432                33,816
                                                                       ------               -------

Shareholders' equity:
  Preferred stock, $.01 par value; 5,000  shares
   authorized, none issued                                                  -                     -
  Common stock, $.01 par value; 25,000  shares authorized,
   7,990 issued and outstanding                                            80                    80
  Additional paid-in capital                                           18,965                18,942
  Deferred compensation                                                   (13)                  (13)
  Retained earnings                                                    25,531                24,925
                                                                       ------                ------

         Total shareholders' equity                                    44,563                43,934
                                                                       ------                ------

         Total liabilities and shareholders' equity                   $79,995               $77,750
                                                                       ======               =======
</TABLE>

See notes to unaudited condensed consolidated financial statements.

                                       3
<PAGE>



                 Manchester Technologies, Inc. and Subsidiaries
                 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                    (in thousands, except per share amounts)
                                   (Unaudited)
<TABLE>
<CAPTION>

                                     Three months ended January 31,   Six months ended January 31,
                                           2004           2003            2004          2003
                                           ----           ----            ----          ----
<S>                                     <C>             <C>          <C>             <C>
Revenue
       Products                          $72,869         $74,283      $143,321        $138,998
       Services                            6,925           6,259        11,173           9,829
                                           -----         -------        ------       ---------
                                          79,794          80,542       154,494         148,827
                                          ------          ------       -------         -------
Cost of revenue
       Products                           64,611          66,979       127,337         123,897
       Services                            5,634           5,088         8,712           7,491
                                           -----         -------         -----       ---------
                                          70,245          72,067       136,049         131,388
                                          ------          ------       -------         -------

        Gross profit                       9,549           8,475        18,445          17,439

Selling, general and
    administrative expenses                8,990           8,711        17,280          17,551
                                           -----         -------        ------        --------

       Income (loss) from operations         559            (236)        1,165            (112)

Interest and other income (expense), net     (68)             28          (155)            168
                                             ----       --------          ----       ---------

       Income (loss) before income taxes     491            (208)        1,010              56

Income tax provision (benefit)               196             (83)          404              23
                                             ---         --------          ---        --------

       Net income (loss)                   $ 295          $ (125)       $  606        $     33
                                             ===           ======        =====         =======
Net income (loss) per share
   Basic                                   $0.04         $ (0.02)        $0.08         $  0.00
                                            ====          =======         ====          ======
   Diluted                                 $0.04         $ (0.02)        $0.07         $  0.00
                                            ====          =======         ====          ======

Weighted average
  shares outstanding
     Basic                                 7,990           7,990         7,990           7,990
                                           =====           =====         =====           =====
      Diluted                              8,299           7,990         8,265           7,991
                                           =====           =====         =====           =====

</TABLE>



See notes to unaudited condensed consolidated financial statements.

                                       4
<PAGE>


                 Manchester Technologies, Inc. and Subsidiaries
                 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (in thousands)
                                   (Unaudited)
<TABLE>
<CAPTION>
                                                                          Six months ended
                                                                   January 31,         January 31,
                                                                      2004                 2003
                                                                      ----                 ----

<S>                                                                  <C>                  <C>
Cash flows from operating activities:
   Net income                                                        $ 606                $   33
   Adjustments to reconcile net income to net cash
    from operating activities:
       Depreciation and amortization                                 1,271                 1,058
       Provision for doubtful accounts                                 295                    41
       Equity based compensation expense                                23                     -

      Changes in assets and liabilities:
        Accounts receivable                                          1,112                (1,987)
        Inventory                                                   (8,747)               (1,907)
        Prepaid taxes                                                 (128)                 (283)
        Prepaid expenses and other current assets                        6                  (186)
        Other assets                                                   101                   272
        Accounts payable and accrued expenses                        1,772                 7,969
        Deferred service contract revenue                              (60)                 (313)
                                                                       ----               -------
           Net cash  provided by (used in) operating activities     (3,749)                4,697
                                                                    -------              -------
Cash flows from investing activities:
      Capital expenditures                                            (842)                 (389)
                                                                      ----                  ----
           Net cash used in investing activities                      (842)                 (389)
                                                                    -------               -------
Cash flows from financing activities:
      Payments on capital lease obligations                            (96)                    -
                                                                    ------               -------

           Net cash used in financing activities                       (96)                    -
                                                                    -------           ----------
Net increase (decrease) in cash and cash equivalents                (4,687)                4,308

Cash and cash equivalents at beginning of period                     8,553                 8,963
                                                                     -----               -------

Cash and cash equivalents at end of period                          $3,866               $13,271
                                                                     =====               =======


</TABLE>



See notes to unaudited condensed consolidated financial statements.
                                       5

<PAGE>


                 Manchester Technologies, Inc. and Subsidiaries
         Notes to Unaudited Condensed Consolidated Financial Statements
                 (in thousands, except share and per share data)
                                   (Unaudited)

1.       Organization and Basis of Presentation

     Manchester  Technologies,  Inc. and its subsidiaries  ("Manchester,"  "we,"
"us," or "the Company") is a single-source  solutions  provider  specializing in
hardware  and  software  procurement,  display  technology,  custom  networking,
security, IP telephony, remote management,  application  development/e-commerce,
storage, and enterprise and Internet solutions. The Company offers 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. In addition,
we offer a complete line of products and peripherals for our customers'  display
technology requirements. The Company operates in a single segment.

     Sales of  hardware  and  software  products  comprise  the  majority of the
Company's  revenues.  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.

     The accompanying  financial  information should be read in conjunction with
the financial  statements,  including the notes  thereto,  for the annual period
ended July 31, 2003.  The financial  information  included  herein is unaudited;
however, such information reflects all adjustments  (consisting solely of normal
recurring  adjustments) that are, in the opinion of management,  necessary for a
fair statement of results for the interim periods. In the opinion of management,
the accompanying unaudited condensed consolidated financial statements have been
prepared  in  accordance  with U.S.  generally  accepted  accounting  principles
("GAAP") for interim  financial  information  and with the  instructions to Rule
10-01 of Regulation  S-X. The results of operations  for the three and six month
periods ended January 31, 2004 are not necessarily  indicative of the results to
be expected for future interim periods or the entire year.

2.        Net Income (Loss) Per Share

     Basic net income  (loss) per share has been computed by dividing net income
(loss) by the weighted average number of common shares outstanding.  Diluted net
income  (loss) per share has been  computed by dividing net income (loss) 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  545,000 and 847,000  shares for the three months ended January 31,
2004 and 2003,  respectively,  and 593,000 and 781,000 shares for the six months
ended  January  31, 2004 and 2003,  respectively,  have been  excluded  from the
calculation of diluted net income (loss) per share as they are antidilutive. The
following table  reconciles the  denominators of the basic and diluted per share
computations.  For each  period,  the  numerator  is the net  income  (loss)  as
reported.
<TABLE>
<CAPTION>

                             Three months ended January 31,                  Six months ended January 31,
                                2004               2003                      2004                   2003
                                ----               ----                      ----                   ----
                                   Per share              Per share                 Per share             Per share
                       Shares      amount      Shares    amount        Shares      amount       Shares   amount
                       ------      ------      ------    ------        ------      ------       ------   ------
                                                  (shares in thousands)
<S>                      <C>          <C>        <C>       <C>           <C>          <C>          <C>      <C>
         Basic           7,990        $0.04      7,990     $(0.02)       7,990        $0.08        7,990    $0.00
                                       ====                ======                      ====                 =====

         Effect of
          dilutive
           options         309                       -                     275                         1
                           ---                  ------                     ---                   -------

         Diluted         8,299        $0.04      7,990     $(0.02)       8,265        $0.07        7,991    $0.00
                         =====        =====      =====     ======        =====        =====        =====    =====
</TABLE>
                                       6


<PAGE>



3.        Accounting for Stock-Based Compensation

     The Company records  compensation expense for employee stock options if the
current market price of the  underlying  stock exceeds the exercise price on the
date of the grant. On August 1, 1996, the Company adopted Statement of Financial
Accounting Standards ("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 and net income 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 123.

     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 while disclosing pro forma net income and
net income per share as if the fair value method had been applied in  accordance
with SFAS 123.

     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 grant.  For 50,000  options that were  repriced  subsequent to their
date of grant, the Company is applying variable accounting to those options. The
related  equity-based  compensation  expense  was $23 for the six  months  ended
January  31,  2004.  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 net 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>

                                                 Three Months Ended January 31,    Six Months Ended January 31,
                                                        2004           2003             2004                2003

<S>                                                     <C>              <C>            <C>                <C>
      Net income (loss), as reported                    $295             $(125)         $606               $ 33

      Add: Stock-based compensation
        expense included in net income
       (loss) net of related tax effects                  14                 -            14                  -

      Deduct:  Total stock-based
       employee compensation expense
       determined under fair value
       method for all awards, net of
       related tax effects                              (120)              (95)         (286)              (255)
                                                         ---               ----         -----              -----

      Net income (loss) - pro forma                     $189             $(220)         $334              $(222)
                                                         ===               ====          ===                ====

      Net income (loss) per share:
       Basic - as reported                             $0.04            $(0.02)        $0.08              $0.00
                                                        ====              =====         ====               ====
       Basic - pro forma                               $0.02            $(0.03)        $0.04             $(0.03)
                                                        ====              =====         ====               =====
       Diluted - as reported                           $0.04            $(0.02)        $0.07              $0.00
                                                        ====              =====         ====               ====
       Diluted - pro forma                             $0.02            $(0.03)        $0.04             $(0.03)
                                                        ====              =====         ====               =====
</TABLE>

                                       7
<PAGE>

4.       Goodwill and Other Intangible Assets

     In July 2001, the Financial Accounting Standards Board ("FASB") issued 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. In
accordance with SFAS No. 142,  goodwill is allocated to reporting  units,  which
are either the  operating  segment or one  reporting  level below the  operating
segment. The Company determined that its reporting unit for purposes of applying
the provisions of SFAS No. 142 was its operating segment.  The Company's initial
impairment  review  indicated  that  there was no  impairment  as of the date of
adoption. Fair value for goodwill was determined 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 unit by using discounted cash flow analyses.

     Accumulated  amortization  for the  Company's  goodwill  was  approximately
$1,116 at both January 31, 2004 and July 31, 2003. In  accordance  with SFAS No.
142, no goodwill  amortization expense was recorded for the three months and six
months ended January 31, 2004 and 2003.

     As of January 31,  2004 and July 31,  2003,  the Company had no  intangible
assets other than goodwill.

5.        Recently Issued Accounting Standards

     In April 2003, the FASB determined that stock-based  compensation should be
recognized as a cost in the financial  statements and that such cost be measured
according  to the  fair  value  of the  stock  options.  The FASB has not as yet
determined  the  methodology  for  calculating  fair value and plans to issue an
accounting  standard  that would  become  effective  in 2005.  The Company  will
continue to monitor  communications  on this  subject  from the FASB in order to
determine the impact on the Company's consolidated financial statements.

     In December 2003, the FASB issued a revised version of FASB  Interpretation
No. 46,  "Consolidation  of Variable  Interest  Entities,"  ("FIN  46R"),  which
addresses how a business enterprise should evaluate whether it has a controlling
interest in an entity  through means other than voting rights and,  accordingly,
should  consolidate  the entity.  FIN 46R replaced FASB  Interpretation  No. 46,
"Consolidation  of  Variable  Interest  Entities,"  which was issued in January,
2003. FIN 46R applies  immediately to variable  interest  entities created after
December  31, 2003 and to  variable  interest  entities  in which an  enterprise
obtains an interest after that date. For variable  interest  entities created or
acquired  prior to January 1, 2004,  the  provisions of FIN 46R, must be applied
beginning on April 30,  2004.  The Company does not believe that the adoption of
FIN 46R will have a significant impact on the Company's  consolidated  financial
statements.

     In December 2003, the  Securities  and Exchange  Commission  ("SEC") issued
Staff Accounting  Bulletin No. 104, "Revenue  Recognition,"  ("SAB 104"),  which
updates the previously issued revenue recognition  guidance in SAB 101, based on
the Emerging Issues Task Force Issue 00-21,  "Revenue Arrangements with Multiple
Deliverables," ("EITF 00-21"). According to EITF 00-21, if the deliverables in a
sales  arrangement  constitute  separate  units of accounting,  as defined,  the
revenue  recognition  policy must be determined for each identified unit. If the
arrangement  is a single unit of accounting  under the separation  criteria,  as
defined,  the  revenue  recognition  policy  must be  determined  for the entire
arrangement. The application of SAB 104 did not have a significant impact on the
Company's consolidated financial statements.

                                       8
<PAGE>



ITEM 2. -  MANAGEMENT'S  DISCUSSION  AND  ANALYSIS OF  FINANCIAL  CONDITION  AND
           RESULTS OF OPERATIONS

Forward Looking Statements

     The following discussion and analysis of financial condition and results of
operations  of the  Company  should be read in  conjunction  with the  condensed
consolidated  financial statements and notes thereto appearing elsewhere in this
report and with the Company's annual report on Form 10-K for the year ended July
31, 2003. The following discussion 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.  Forward  looking  statements  are not
historical  facts, are based on the Company's beliefs and expectations as of the
date of this report, and involve risks and uncertainties that could cause actual
results  to  differ   materially   from  the   results   anticipated   in  those
forward-looking  statements.  These risks and uncertainties include, but are not
limited  to,  those  set  forth  below  and the risk  factors  described  in the
Company's  other  filings  from time to time with the  Securities  and  Exchange
Commission.   Readers  are  cautioned  not  to  place  undue   reliance  on  any
forward-looking  statements,  which reflect management's opinions only as of the
date  hereof.  We  undertake  no  obligation  to revise or publicly  release the
results of any revision to any forward-looking statements.


Overview

     We are an  integrator  and  reseller of  computer  hardware,  software  and
networking products,  primarily for commercial  customers,  and a distributor of
display technology  solutions and plasma display monitors,  primarily to dealers
and  system  integrators.   We  offer  our  customers  single-source  solutions,
customized to their information systems needs, by integrating  analysis,  design
and implementation  services with hardware,  software,  networking  products and
peripherals  from  leading  vendors.  To date,  most of our  revenues  have been
derived  from  product  sales.  We  generally  do not  develop or sell  software
products. However, certain computer hardware products sold by us are loaded with
prepackaged software products.

     Revenue for the quarter was $79.8  million as compared  with $80.5  million
for the  comparable  quarter last year and $74.7 million in the first quarter of
this fiscal year. The Company reported net income for the quarter of $295,000 or
$0.04 per  diluted  share as  compared  with a net loss of $125,000 or $0.02 per
diluted  share  reported  a year ago and net  income of  $311,000,  or $0.04 per
diluted share, for the first quarter of this fiscal year.

     Revenue for the six months  ended  January  31, 2004 was $154.5  million as
compared with $148.8  million for the first six months of last year.  Net income
for the six months was  $606,000  or $0.07 per diluted  share as  compared  with
$33,000 or $0.00 per diluted share reported a year ago.

     Our second quarter reflects the increase in technology  spending  resulting
from the lack of  capital  spending  over the past few years.  Revenues  for the
quarter  increased  sequentially as compared to our first quarter of fiscal 2004
and were slightly lower as compared to last year.  However,  we are pleased that
our service revenues  increased by 11% as compared to the second quarter of last
year and 14% as compared to the first half of last year.  In addition,  revenues
from  sales of  display  solutions  increased  by 8% as  compared  to the second
quarter of last year and 15% as  compared  to the first  half of last  year.  We
continue  focusing on our strategy of providing  business  solutions,  services,
product  fulfillment  and display  technologies  that meet all of our customer's
needs.

Certain Trends and Uncertainties

     General.   The  technology   industry  is  characterized  by  a  number  of
potentially adverse business conditions,  including pricing pressures,  evolving
distribution channels,  market consolidation and a decline in the rate of growth
in sales of personal computers. Heightened price competition among various

                                       9
<PAGE>

manufacturers,  integrators  or resellers of  technology  products 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.

     Value-Added  Services.  An integral part of our strategy is to increase our
value-added  services  revenue.  These services  generally  provide higher gross
margins than those associated with the sale of products.  This strategy requires
us, among other things, to attract and retain highly skilled technical employees
in a  competitive  labor  market,  provide  additional  training  to  our  sales
representatives  and enhance our existing service  management  system. We cannot
predict  whether we will be  successful  in  increasing  our focus on  providing
value-added  services,  and the  failure  to do so may have a  material  adverse
effect on our business, results of operations and financial condition.

     Geographic Considerations. On September 11, 2001, the World Trade Center in
New York  City and the  Pentagon  in  Washington,  D.C.  were  the  subjects  of
terrorist  attacks. A significant part of our business is generated from our New
York City and  Baltimore/Washington,  D.C. offices. We cannot predict the impact
that potential  future  attacks may have on our business,  results of operations
and financial condition. In addition, given the concentration of our business in
these geographic  areas,  our business could be materially  affected by economic
conditions   and   other   significant   events   in  the  New  York   City  and
Baltimore/Washington, D.C. areas.

     Management of Growth.  Our strategy,  encompassing the expansion of service
offerings,  the  expansion of existing  offices,  and the  establishment  of new
regional  offices,  has  challenged  and will  continue to challenge  our senior
management and infrastructure. We cannot predict our ability to respond to these
challenges.  If we fail to effectively manage our planned growth, there may be a
material  adverse  effect on our business,  results of operations  and financial
condition.

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

     Competition.   The  technology   industry  is   characterized   by  intense
competition.  We directly  compete with local,  regional  and  national  systems
integrators,  value-added  resellers  and  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,  and manufacturers of personal computers may increase  competition
by offering a range of services in addition to their current product and service
offerings.  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, and may also choose to market services directly to end users. Some
of our  competitors  have or may have,  greater  financial,  marketing and other
resources, and may offer a broader range of products and services, 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 and service pricing or devote greater  resources
to the promotion of their  products and services.  We may not be able to compete
successfully in the future with these or other current or potential competitors.

     Vendor  Relationships and Product  Availability.  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

                                       10
<PAGE>

relationships with major manufacturers,  including product availability, pricing
and related  terms,  and  reseller  authorizations.  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.  In recent years,  manufacturers  have generally reduced
their level of support with respect to these programs,  which has required us to
increase  spending of our own funds to obtain the same level of advertising  and
promotion.  If manufacturers continue to reduce their level of support for these
programs, or discontinue them altogether,  we would have to further 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 sales to resellers have been made at profit
margins   generally  less  favorable  than  our  sales  directly  to  commercial
customers.  Our  inability to sell  products to computer  resellers  and thereby
obtain the desired volume discounts from manufacturers or to expand our sales to
commercial  customers  sufficiently  to  offset  our  need to rely on  sales  to
computer resellers may have a material adverse effect on our business, financial
condition and results of operations.

     Changing  Technology;  Inventory  Risk.  The markets for our  products  and
services  are   characterized  by  rapidly  changing   technology  and  frequent
introduction of new hardware and software products and services. This may render
many existing products and services noncompetitive, less profitable or obsolete.
Our  continued  success  will  depend  on our  ability  to keep  pace  with  the
technological   developments  of  new  products  and  services  and  to  address
increasingly  sophisticated customer requirements.  Our success will also depend
upon our  abilities  to address  the  technical  requirements  of our  customers
arising  from new  generations  of computer  technologies,  to obtain  these new
products from present or future  suppliers and vendors at reasonable  costs,  to
educate and train our employees as well as our  customers  with respect to these
new products or services and to integrate  effectively and efficiently these new
products into both our internal systems and systems developed for our customers.
We may not be successful in  identifying,  developing and marketing  product and
service 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 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  as a partial
credit against  payment for new products.  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

                                       11
<PAGE>

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  computer,
networking and 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 personal  computers,
peripherals  and display  technology.  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.

     Management.  The  Company  is highly  dependent  upon the  services  of the
members of its senior  management  team,  particularly  Barry R. Steinberg,  the
Company's founder, Chairman of the Board, President and Chief Executive Officer.
The  loss of any  member  of the  Company's  senior  management  team may have a
material adverse effect on its business.

     Maximizing Shareholder Value. 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.

     Quarterly  Variations.  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 and services,  the  introduction  of new hardware
and software  technologies  with  improved  features,  the  introduction  of new
services  by us and our  competitors,  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.

     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.


      E-Commerce

     We utilize two websites each  incorporating an electronic  commerce system.
The sites, located at www.e-manchester.com and  www.electrograph.com  allow both
existing   customers,   corporate   shoppers   and   others   to  find   product
specifications,  compare  products,  check price and  availability and place 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.

                                       12
<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  in the Annual Report on Form 10-K for the fiscal year ended July 31,
2003  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 generally at the time of
shipment to the customer.  Revenue from services is recognized  when the related
services are performed.  When product sales and services are bundled, revenue is
generally  recognized  separately upon delivery of the product and completion of
the  installation.  Service contract fees are deferred and recognized as revenue
ratably over the period of the applicable  contract.  Deferred  service contract
revenue  represents the unearned  portion of service  contract fees. The Company
generally does not develop 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.

     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.

                                       13

<PAGE>


      Results of Operations

     The  following  table sets forth,  for the periods  indicated,  information
derived from the  Company's  condensed  consolidated  statements  of  operations
expressed as a percentage of related revenue or total revenue.
<TABLE>
<CAPTION>
                                                                                    Percentage of Revenue
                                                                 Three Months Ended January 31,  Six Months Ended January 31,
                                                                     2004             2003          2004         2003
                                                                     ----             -----         ----         -----
<S>                                                                 <C>              <C>         <C>            <C>
           Revenue
               Products                                             91.3%            92.2%       92.8%          93.4%
               Services                                               8.7              7.8         7.2            6.6
                                                                    -----            -----        ----          -----

           Total revenue                                            100.0            100.0       100.0          100.0
                                                                    -----            -----       -----          -----

           Cost of revenue
               Products                                              88.7             90.2        88.8           89.1
               Services                                              81.4             81.3        78.0           76.2
                                                                     ----             ----        ----           ----

           Total cost of revenue                                     88.0             89.5        88.1           88.3
                                                                     ----             ----        ----           ----
           Gross profit
               Products                                              11.3              9.8        11.2           10.9
               Services                                              18.6             18.7        22.0           23.8
                                                                     ----             ----        ----           ----

           Total gross profit                                        12.0             10.5        11.9           11.7

           Selling, general and
              administrative expenses                                11.3             10.8        11.2           11.8
                                                                     ----             ----        ----           ----

           Income (loss) from operations                              0.7             (0.3)        0.8           (0.1)

           Interest and other income (expense), net                  (0.1)             0.0        (0.1)           0.1
                                                                     -----            ----        -----          ----

           Income (loss) before income taxes                          0.6             (0.3)        0.7            0.0


           Income tax provision (benefit)                             0.2             (0.1)        0.3            0.0
                                                                      ---             -----        ---           ----


           Net income (loss)                                          0.4%            (0.2)%       0.4%           0.0%
                                                                      ===            ======        ===           ====
</TABLE>


Three Months Ended January 31, 2004 Compared with Three Months Ended January 31,
2003

     Revenue.  Revenue  decreased by $0.7 million or 1% to $79.8 million for the
three  months  ended  January 31, 2004 from $80.5  million for the three  months
ended  January 31,  2003.  Revenue  from the sale of products  decreased by $1.4
million or 2% while revenue from service offerings  increased by $0.7 million or
11%. The decrease in product revenue is primarily a result of decreased sales of
computers  and  peripherals  partially  offset  by  increased  sales of  display
monitors,  primarily  large  screen  flat panel  displays,  the market for which
should   continue  to  grow.  The  increase  in  service  revenue  is  primarily
attributable  to the Company's  continued focus on growing its sales of services
and solutions to its existing customer base and to new customers.
                                       14
<PAGE>

     Gross Profit.  Cost of revenue  includes the direct costs of products sold,
freight and the personnel costs  associated with providing  technical  services,
offset in part by certain rebates  provided by  manufacturers  related to volume
incentives  and/or targets  achieved by the Company and/or specific  sales.  All
other  operating  costs are  included  in selling,  general  and  administrative
expenses,  which are offset in part by certain market development funds provided
by  manufacturers.  Gross profit  increased  by $1.1  million or 13%,  from $8.5
million for the three  months  ended  January  31, 2003 to $9.5  million for the
three months ended January 31, 2004 and as a percentage of revenue, gross profit
increased  from 10.5% for the three months  ended  January 31, 2003 to 12.0% for
the three  months  ended  January 31,  2004.  Gross  profit from  product  sales
increased  by $1.0  million or 13% while  gross  profit from  service  offerings
increased by $120,000 or 10%. As a percentage of revenue,  gross profit from the
sale of products increased from 9.8% for the three months ended January 31, 2003
to 11.3% for the three months ended January 31, 2004  primarily due to increased
sales of higher margin products.  As a percentage of revenue,  gross profit from
the sale of services was relatively constant at 18.7% for the three months ended
January 31, 2003 and 18.6% for the three months ended January 31, 2004.

     Selling,  General  and  Administrative   Expenses.   Selling,  general  and
administrative  expenses  increased by approximately  $280,000,  or 3% from $8.7
million for the three  months  ended  January  31, 2003 to $9.0  million for the
three months  ended  January 31, 2004.  The  increase is  principally  due to an
increase in salaries and other  personnel  costs in the amount of  approximately
$200,000  reflecting the increase in employee  headcount and associated costs as
the Company  needed to increase  personnel  as a result of the overall  economic
recovery and the increase in technology  spending,  increased sales  commissions
paid of  approximately  $115,000  due to the  higher  gross  margins  earned  on
revenues,  increased  depreciation  and  amortization  expense of  approximately
$170,000,  and increased  insurance  costs of  approximately  $120,000 due to an
increase in insurance rates in the market. These increases were partially offset
by decreased rent expense of  approximately  $290,000 as a result of the capital
leases  entered into by the Company in March 2003.  As a percentage  of revenue,
selling,  general and administrative expenses increased from 10.8% for the three
months ended  January 31, 2003 to 11.3% for the three  months ended  January 31,
2004.

     Interest  and Other  Income  (Expense),  net.  Interest  and  other  income
(expense),  net, decreased by approximately $96,000 from income of approximately
$28,000  for  the  three  months  ended  January  31,  2003  to  an  expense  of
approximately  $68,000 for the three months ended  January 31, 2004.  The amount
for the three months ended January 31, 2004 included  approximately  $154,000 of
interest  expense related to the interest  portion of the capital leases entered
into by the  Company in March 2003 offset by  interest  income of  approximately
$50,000  earned  on  the  Company's  cash   investments   and  other  income  of
approximately  $36,000  related to referral  income received by the Company from
manufacturers,  vendors,  or other  resellers.  The amount for the three  months
ended January 31, 2003  consisted of interest  income of  approximately  $28,000
earned on the Company's cash investments.

     Income Tax  Provision  (Benefit).  Our effective tax rate was 39.9% for the
three months ended January 31, 2004 and January 31, 2003.

     Six Months Ended  January 31, 2004 Compared to Six Months Ended January 31,
2003

     Revenue.  Revenue increased by $5.7 million or 4% to $154.5 million for the
six months ended  January 31, 2004 from $148.8  million for the six months ended
January 31, 2003. Revenue from the sale of products increased by $4.3 million or
3% while  revenue from service  offerings  increased by $1.3 million or 14%. The
increase in product  revenue is primarily a result of increased sales of display
monitors,  primarily large screen flat panel displays, partially offset by lower
sales of computers and peripherals. The increase in service revenue is primarily
attributable  to the  increase  in  sales of  services  that  are  delivered  by
manufacturers or vendors.

     Gross  Profit.  Gross  profit  increased  by $1.0 million or 6%, from $17.4
million for the six months ended  January 31, 2003 to $18.4  million for the six
months  ended  January 31, 2004 and as a  percentage  of revenue,  gross  profit
increased  from 11.7% for the six months ended January 31, 2003 to 11.9% for the
six months ended January 31, 2004.  Gross profit from product sales increased by
$0.9  million or 6% while  gross  profit from  service  offerings  increased  by
                                       15
<PAGE>

$123,000  or 5%. As a  percentage  of  revenue,  gross  profit  from the sale of
products increased from 10.9% for the six months ended January 31, 2003 to 11.2%
for the six months ended January 31, 2004  primarily  due to increased  sales of
higher margin products.  As a percentage of revenue,  gross profit from the sale
of services  declined  from 23.8% for the six months  ended  January 31, 2003 to
22.0% for the six months ended  January 31, 2004 as a result of increased  sales
of lower margin services, primarily services that are delivered by manufacturers
or vendors.

     Selling,  General  and  Administrative   Expenses.   Selling,  general  and
administrative  expenses decreased by approximately  $270,000,  or 2% from $17.6
million for the six months ended  January 31, 2003 to $17.3  million for the six
months ended January 31, 2004. The decrease is principally  due to a decrease in
rent expense of approximately $590,000 as a result of the capital leases entered
into by the Company in March 2003, decreased telephone expenses of approximately
$215,000,  and decreased  advertising  and  promotional  costs of  approximately
$225,000,  primarily  as a result  of market  development  funds  received  from
manufacturers for pre-approved  market development  activities.  These decreases
were  partially  offset  by  increased  salaries  and other  personnel  costs of
approximately  $130,000  reflecting  the  increase  in  employee  headcount  and
associated costs at the Company as a result of the overall economic recovery and
the  increase  in  technology  spending,  increased  sales  commissions  paid of
approximately  $180,000  due  the  higher  gross  margins  earned  on  revenues,
increased  insurance  costs of  approximately  $160,000  due to an  increase  in
insurance  rates in the  market,  increased  bad debt  expense of  approximately
$450,000,  primarily  due  to  one  customer,  and  increased  depreciation  and
amortization  expense of  approximately  $210,000.  As a percentage  of revenue,
selling,  general and  administrative  expenses decreased from 11.8% for the six
months  ended  January  31, 2003 to 11.2% for the six months  ended  January 31,
2004.

     Interest  and Other  Income  (Expense),  net.  Interest  and  other  income
(expense),  net, decreased by approximately $320,000 from income of $168,000 for
the six months ended  January 31, 2003 to an expense of  approximately  $155,000
for the six months ended January 31, 2004.  The amounts for the six months ended
January 31, 2004 included  approximately $309,000 of interest expense related to
the interest  portion of the capital leases entered into by the Company in March
2003 offset by interest income of approximately  $77,000 earned on the Company's
cash investments and other income of  approximately  $77,000 related to referral
income received by the Company from manufacturers,  vendors, or other resellers.
The amount for the six months  ended  January 31, 2003  included  the receipt of
insurance   proceeds  in  the  amount  of  $113,000  and   interest   income  of
approximately $55,000 earned on the Company's cash investments.

     Income Tax Provision (Benefit).  Our effective tax rate was 40.0% and 41.1%
for the six months ended January 31, 2004 and January 31, 2003, respectively.

      Liquidity and Capital Resources

      Working Capital
      ---------------

     Our  primary  sources  of cash and cash  equivalents  have been  internally
generated  working capital from  profitable  operations.  The Company's  working
capital at January 31, 2004 and July 31, 2003 was  approximately  $31.7  million
and $30.7 million, respectively.

      Cash Flows
      ----------

     Operations for the six months ended January 31, 2004 and 2003, after adding
back  non-cash  items,  provided  cash of  approximately  $2.2  million and $1.1
million,  respectively.  During such periods,  other changes in working  capital
provided  (used)  cash  of  approximately   $(5.9)  million  and  $3.6  million,
respectively, resulting in cash being provided by (used in) operating activities
of  approximately  $(3.7) million and $4.7 million,  respectively.  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 the
six months ended January 31, 2004 of  approximately  $8.7 million as compared to

                                       16
<PAGE>

the six months ended  January 31, 2003,  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.

     Investing  activities  for the six months  ended  January 31, 2004 and 2003
used cash of  approximately  $842,000 and  $389,000,  respectively.  For the six
months  ended  January  31,  2004 and 2003  these  amounts  consisted  solely of
additions to property and equipment.

     For the six months ended January 31, 2004 financing activities used cash of
approximately  $96,000.  This amount consisted solely of payments on capitalized
lease obligations.  Financing activities did not provide or use any cash for the
six months ended January 31, 2003.

      Line of Credit
      --------------

     We have  available  a line of credit with a  financial  institution  in the
aggregate  amount of $15.0  million.  At  January  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 January 31,  2004,  the Company  was in  compliance  with all the
specified financial ratios and covenants.

      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  2004  which  ends on July 31,
2004. 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,  potential  acquisitions  and
expansion of the Company's  service and  e-commerce  capabilities.  In addition,
there  are  no   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
January 31, 2004:
<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              $8,039          $228          $  910           $829            $6,072
       Operating leases             2,484           622           1,598            128               136
                                    -----         -----           -----            ---               ---

       Total                      $10,523          $850          $2,508           $957            $6,208
                                   ======           ===           =====            ===             =====
</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.

      Recently Issued Accounting Standards

     In April 2003, the FASB determined that stock-based  compensation should be
recognized as a cost in the financial  statements and that such cost be measured
according  to the  fair  value  of the  stock  options.  The FASB has not as yet


                                       17
<PAGE>

determined  the  methodology  for  calculating  fair value and plans to issue an
accounting  standard  that would  become  effective  in 2005.  The Company  will
continue to monitor  communications  on this  subject  from the FASB in order to
determine the impact on the Company's consolidated financial statements.

     In December 2003, the FASB issued a revised version of FASB  Interpretation
No. 46,  "Consolidation  of Variable  Interest  Entities,"  ("FIN  46R"),  which
addresses how a business enterprise should evaluate whether it has a controlling
interest in an entity  through means other than voting rights and,  accordingly,
should  consolidate  the entity.  FIN 46R replaced FASB  Interpretation  No. 46,
"Consolidation  of  Variable  Interest  Entities,"  which was issued in January,
2003. FIN 46R applies  immediately to variable  interest  entities created after
December  31, 2003 and to  variable  interest  entities  in which an  enterprise
obtains an interest after that date. For variable  interest  entities created or
acquired  prior to January 1, 2004,  the  provisions of FIN 46R, must be applied
beginning on April 30,  2004.  The Company does not believe that the adoption of
FIN 46R will have a significant impact on the Company's  consolidated  financial
statements.

     In December 2003, the  Securities  and Exchange  Commission  ("SEC") issued
Staff Accounting  Bulletin No. 104, "Revenue  Recognition,"  ("SAB 104"),  which
updates the previously issued revenue recognition  guidance in SAB 101, based on
the Emerging Issues Task Force Issue 00-21,  "Revenue Arrangements with Multiple
Deliverables," ("EITF 00-21"). According to EITF 00-21, if the deliverables in a
sales  arrangement  constitute  separate  units of accounting,  as defined,  the
revenue  recognition  policy must be determined for each identified unit. If the
arrangement  is a single unit of accounting  under the separation  criteria,  as
defined,  the  revenue  recognition  policy  must be  determined  for the entire
arrangement. The application of SAB 104 did not have a significant impact on the
Company's consolidated financial statements.


ITEM 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

     The  Company is not  exposed  to  significant  market  risks.  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.


ITEM 4.  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.


                                       18
<PAGE>


      PART II - OTHER INFORMATION

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

     At our  Annual  Meeting  of  Shareholders  held on January  21,  2004,  the
following proposals were adopted by the margins indicated:

     (1) Elect  seven  Directors  to serve  until  the 2005  Annual  Meeting  of
Shareholders;
<TABLE>
<CAPTION>

                                                                                             Broker
             Nominee                        For            Withheld         Abstain         Non-votes
             --------------                 ---            --------         -------         ---------
<S>                                      <C>                  <C>               <C>            <C>
          Barry R. Steinberg             7,499,098            420,073           0              0
          Joel G. Stemple                7,499,098            420,073           0              0
          Joel Rothlein                  7,499,098            420,073           0              0
          Bert Rudofsky                  7,523,898            395,273           0              0
          Michael E. Russell             7,523,898            395,273           0              0
          Julian Sandler                 7,523,898            395,273           0              0
          Yacov A. Shamash               7,523,898            395,273           0              0
</TABLE>

(2)        Vote on the ratification of the reappointment of KPMG LLP as
           independent auditors of the Company for the year ending July 31,
           2004.
<TABLE>
<CAPTION>
                                                                       Broker
              For              Against            Abstain              Non-votes
              ---              -------            -------              ---------
<S>          <C>                <C>                <C>                  <C>
             7,831,836          37,335             50,000               0
</TABLE>

     No other  items  were voted on at the Annual  Meeting  of  Shareholders  or
during the quarter ended January 31, 2004.

      ITEM 6.     Exhibits and Reports on Form 8-K

(a)      Exhibits

     10.21- Fifth Amendment to $15,000,000  Revolving Credit Facility  Agreement
          dated January 30, 2004 between Registrant and Citibank, as Agent.

     31.1 -  Certification  by  Barry R.  Steinberg,  Chief  Executive  Officer,
          Pursuant to 18 U.S. C. Section  1350,  as Adopted  Pursuant to Section
          302 of the Sarbanes-Oxley Act of 2002.

     31.2 - Certification by Elan Yaish, Chief Financial Officer, Pursuant to 18
          U.S.  C.  Section  1350,  as Adopted  Pursuant  to Section  302 of the
          Sarbanes-Oxley Act of 2002.

     32.1 -  Certification  by  Barry R.  Steinberg,  Chief  Executive  Officer,
          Pursuant to 18 U.S. C. Section  1350,  as Adopted  Pursuant to Section
          906 of the Sarbanes-Oxley Act of 2002.

     32.2 - Certification by Elan Yaish, Chief Financial Officer, Pursuant to 18
          U.S.  C.  Section  1350,  as Adopted  Pursuant  to Section  906 of the
          Sarbanes-Oxley Act of 2002.

      (b)     Reports on Form 8-K

     1.   Form 8-K filed  December  11,  2003  disclosing  Press  Release  dated
          December  11, 2003  reporting  earnings  for the first  quarter  ended
          October 31, 2003.

     2.   Form 8-K filed  December  19,  2003  disclosing  Press  Release  dated
          December 19, 2003 announcing the resignation of Robert  Valentine from
          its Board and the  appointment of Yacov A. Shamash to fill the vacancy
          created by such resignation.

                                       19
<PAGE>



                          MANCHESTER TECHNOLOGIES, INC.

                                   Signatures

Pursuant  to the  requirements  of the  Securities  Exchange  Act of  1934,  the
Registrant  has duly  caused  this  report  to be  signed  on its  behalf by the
undersigned, thereunto duly authorized.



                                      MANCHESTER TECHNOLOGIES, INC.
                                      (Registrant)


DATE:   March 11, 2004                /S/   Barry  R. Steinberg
                                         ----------------------------------
                                      Barry R. Steinberg
                                      President and Chief Executive Officer



DATE:   March 11, 2004                /S/ Elan Yaish
                                       -------------------------------------
                                       Elan Yaish
                                       Vice President Finance, Chief Financial
                                       Officer and Assistant Secretary




                                       20