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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 April 30, 2005

                                       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)
                               50 Marcus Boulevard
                            Hauppauge, New York 11788
              (Address of registrant's principal executive offices)

                                 (631) 951-8100
              (Registrant's telephone number, including area code)



(Former  Name,  Former  Address  and Former  Fiscal  Year if Changed  Since Last
Report)

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 June 3, 2005 there were 8,542,448 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
                     April 30, 2005 (unaudited) and July 31, 2004             3

              Condensed Consolidated Statements of Income for the
                     Three Months and Nine Months Ended
                        April 30, 2005 and 2004 (unaudited)                   4

              Condensed Consolidated Statements of Cash Flows for the
                     Nine Months Ended April 30, 2005 and 2004 (unaudited)    5

              Notes to Unaudited Condensed Consolidated Financial Statements  6

Item 2.       Management's Discussion and Analysis of Financial
                     Condition and Results of Operations                     11

Item 3.       Quantitative and Qualitative Disclosures About Market Risk     19

Item 4.       Controls and Procedures                                        19


PART II.      OTHER INFORMATION


 Item 4.      Submission of Matters to a Vote of Security Holders            20
 Item 5.      Other Information                                              20
 Item 6.      Exhibits                                                       21

















<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>

                                                                  April 30, 2005      July 31, 2004
                                                                    (Unaudited)       -------------
<S>                                                                     <C>               <C>

                        Assets
                        ------
Current assets:
     Cash and cash equivalents                                          $20,476           $16,881
     Accounts receivable, net of allowance for
      doubtful accounts of $1,525 and $2,848, respectively               15,799            15,530
     Inventory                                                           21,166            20,301
     Deferred income taxes                                                1,212             1,212
     Prepaid taxes                                                          655               916
     Prepaid expenses and other current assets                            1,111             1,266
                                                                          -----             -----

                      Total current assets                               60,419            56,106

Property and equipment, net                                               7,487             9,890
Goodwill, net                                                             3,735             3,735
Deferred income taxes                                                     1,728             1,728
Other assets                                                                113               183
                                                                          -----           -------

                      Total assets                                      $73,482           $71,642
                                                                         ======            ======

                          Liabilities and Shareholders' Equity
                          ------------------------------------

Current liabilities:
     Accounts payable and accrued expenses                              $20,899           $21,492
     Current portion of capital lease obligations                           213               246
                                                                         ------          --------

                      Total current liabilities                          21,112            21,738

Deferred compensation payable                                                98                98
Capital lease obligations, net of current portion                         5,836             7,683
                                                                          -----             -----

                                Total liabilities                        27,046            29,519
                                                                         ------            ------

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, 8,542 and 8,163 shares issued
        and outstanding                                                      85                82
     Additional paid-in capital                                          21,293            19,597

     Retained earnings                                                   25,058            22,444
                                                                         ------            ------

                      Total shareholders' equity                         46,436            42,123
                                                                         ------            ------

                      Total liabilities and shareholders' equity        $73,482           $71,642
                                                                         ======            ======
</TABLE>

See notes to unaudited condensed consolidated financial statements.

                                       3
<PAGE>


                 Manchester Technologies, Inc. and Subsidiaries
                   CONDENSED CONSOLIDATED STATEMENTS OF INCOME
                    (in thousands, except per share amounts)
                                   (Unaudited)

<TABLE>
<CAPTION>
                                                 Three months ended April 30,             Nine months ended April 30,
                                                     2005          2004                       2005                2004
                                                     ----          ----                       ----                ----
<S>                                                <C>            <C>                      <C>                 <C>
Revenue                                            $41,902        $42,448                  $128,072            $132,943

Cost of Revenue                                     36,649         38,509                   111,906             119,712
                                                    ------         ------                   -------             -------
       Gross profit                                  5,253          3,939                    16,166              13,231

Selling, general and
    administrative expenses                          4,608          3,149                    12,317               9,735

Loss on buy-out of capital lease                       666              -                       666                   -
                                                       ---           ----                       ---                ----

       Income (loss) from operations                   (21)           790                     3,183               3,496
Interest and other income (expense), net                46            (70)                      179                (166)
                                                        --            ----                      ---                -----
       Income from continuing operations
           before income taxes                          25            720                     3,362               3,330
Income tax provision                                    11            288                     1,345               1,312
                                                        --           ----                     -----               -----
Income from continuing operations                       14            432                     2,017               2,018
                                                        --           ----                     -----               -----

Discontinued operations
       Income (loss) from operations of
           discontinued component                        -           (714)                      995              (2,314)
       Income tax (provision) benefit                    -            285                      (398)                905
                                                      ----            ---                      ----              ------

       Income (loss)  from discontinued operations       -           (429)                      597              (1,409)
                                                      ----           -----                      ---              -------

Net income                                            $ 14       $      3                    $2,614            $    609
                                                       ===        =======                     =====             =======

Income per share from continuing operations
   Basic                                             $0.00          $0.05                     $0.24               $0.25
                                                      ====           ====                      ====                ====

   Diluted                                           $0.00          $0.05                     $0.24               $0.24
                                                      ====           ====                      ====                ====

Income loss per share from discontinued operations
   Basic                                             $0.00         $(0.05)                    $0.07              $(0.18)
                                                      ====          =====                      ====               =====

   Diluted                                           $0.00         $(0.05)                    $0.07              $(0.17)
                                                      ====          =====                      ====               =====

Net income per share
   Basic                                             $0.00          $0.00                     $0.32               $0.08
                                                      ====           ====                      ====                ====

   Diluted                                           $0.00          $0.00                     $0.31               $0.07
                                                      ====           ====                      ====                ====

Weighted average
  shares outstanding

  Basic                                              8,486          8,070                     8,289               8,017
                                                     =====          =====                     =====               =====
  Diluted                                            8,772          8,533                     8,519               8,364
                                                     =====          =====                     =====               =====
</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>
                                                                                           Nine months ended
                                                                                     April 30,          April 30,
                                                                                       2005                2004
                                                                                       ----                ----
<S>                                                                                 <C>                 <C>

Cash flows from operating activities:
   Net income                                                                       $2,614              $    609
  (Income) loss from discontinued operations                                          (597)                1,409
                                                                                      -----                -----
   Income from continuing operations                                                 2,017                 2,018

   Adjustments to reconcile net income to net cash from operating activities:
       Depreciation and amortization                                                   777                 1,315
       Provision for doubtful accounts                                                 305                   489
       Equity based compensation expense                                                53                    24
       Loss on buyout of capital lease                                                 666                     -
       Tax benefit from exercise of stock options                                      290                     -

      Changes in assets and liabilities, net of effects of discontinued
operations:
        Accounts receivable                                                         (3,389)                1,331
        Inventory                                                                     (865)              (16,200)
        Prepaid income taxes                                                           261                 1,662
        Prepaid expenses and other current assets                                      155                     6
        Other assets                                                                    70                   144
        Accounts payable and accrued expenses                                        1,984                15,551
        Deferred service contract revenue                                                -                  (666)
                                                                                  --------                   ----

           Net cash provided by continuing operations                                2,324                 5,674
           Net cash provided (used) by discontinued operations                         835                  (361)
                                                                                    ------                   ----
           Net cash provided by operating activities                                 3,159                 5,313
                                                                                     -----                 -----
Cash flows from investing activities:
      Capital expenditures                                                            (190)                 (760)
                                                                                    -------              -------

           Net cash used in investing activities                                      (190)                 (760)
                                                                                    -------              --------
Cash flows from financing activities:
      Proceeds from exercise of stock options                                        1,356                   284
      Payments for buyout of capital lease obligation                                 (550)                    -
      Payments on capital lease obligations                                           (180)                 (149)
                                                                                    -------               -------

           Net cash provided by financing activities                                   626                   135
                                                                                    ------                 -----
Net increase in cash and cash equivalents                                            3,595                 4,688

Cash and cash equivalents at beginning of period                                    16,881                 8,553
                                                                                    ------                 -----
Cash and cash equivalents at end of period                                         $20,476               $13,241
                                                                                    ======                ======
Income taxes paid during the period                                                $    93               $   292
                                                                                    ======               =======
Reduction of property and equipment from
  termination of capital lease obligation                                          $ 1,700             $       -
                                                                                    ======              ========
</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 per share data)
                                   (Unaudited)

1.       Organization and Basis of Presentation

     Manchester  Technologies,  Inc. and its  subsidiaries  ("the Company") is a
distributor of display technology solutions and plasma display monitors, through
its subsidiary Electrograph Systems, Inc. ("Electrograph Systems"), 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.

     The accompanying  financial  information should be read in conjunction with
the financial  statements,  including the notes  thereto,  for the annual period
ended July 31, 2004.  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 nine month
periods ended April 30, 2005 are not necessarily indicative of the results to be
expected for future interim periods or the entire year.

     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.

2.       Definitive Merger Agreement

     On April 17, 2005, the Company entered into a definitive  merger  agreement
under   which   entities   associated   with   Caxton-Iseman    Capital,    Inc.
("Caxton-Iseman") will acquire all of the Company's outstanding shares in an all
cash  transaction  valued at approximately  $55 million.  Under the terms of the
agreement,  which was unanimously  approved by the Company's Board of Directors,
Manchester shareholders will receive $6.40 per share in cash for each share they
own at the effective time of the merger.


     Consummation of the merger, which is expected to occur in the third quarter
of calendar  year 2005,  is subject to approval by the holders of  two-thirds of
the shares of the Company's outstanding common stock,  expiration or termination
of the applicable waiting period under the Hart-Scott-Rodino  Act, completion of
debt  financing by  Caxton-Iseman  and customary  closing  conditions.  Barry R.
Steinberg,  Chief Executive Officer of the Company,  who holds approximately 55%
of the Company's outstanding shares, has agreed to vote his

                                       6
<PAGE>

shares in favor of the  transaction.  In  connection  with the  merger,  various
members of management will receive  severance  payments and other  benefits.  In
addition,  non-management directors will receive bonuses in recognition of their
services in connection  with the merger.  If the merger  agreement is terminated
under certain circumstances, the Company would be obligated to pay Caxton-Iseman
$2.5 million. Any stock options outstanding  immediately prior to the completion
of  the  merger  will  be  terminated  and  canceled  immediately  prior  to the
completion of the merger. Each holder of a cancelled option that has an exercise
price per  share  less than  $6.40 and that is vested  immediately  prior to the
completion  of the  merger,  shall have the right to receive  from the Company a
cash payment (less applicable federal,  state and local withholding taxes) in an
amount  equal to $6.40  minus  the  applicable  exercise  price per share of the
option, multiplied by the number of shares of common stock for which such option
was  exercisable  immediately  prior  to its  cancellation.  Each  option  that,
immediately  prior to the  completion  of the  merger,  is not vested or that is
vested  but has an  exercise  price  greater  than or  equal  to  $6.40  will be
automatically cancelled without compensation at the completion of the merger.

 3.    Discontinued Operations

     On May 28, 2004, the Company sold its 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 the Company's  employees  involved in the business.  The  transaction did not
include, and the Company retained,  the inventory and accounts receivable of the
IT Business.

     As of  April  30,  2005,  all of the  accrued  liabilities  related  to the
discontinued  operations  were  discharged  by payments in amounts  equal to the
accruals.

     In accordance with SFAS 144,  "Accounting for the Impairment or Disposal of
Long-Lived  Assets",  the  results of  operations  of the  end-user  information
technology  fulfillment and professional services business have been recorded as
discontinued operations in the accompanying condensed consolidated statements of
operations.  The revenue from discontinued operations was $0 and $34,976 for the
three  months  ended April 30, 2005 and 2004,  respectively.  The pretax  income
(loss) from operations of the  discontinued  component was $0 and $(714) for the
three  months  ended April 30,  2005 and 2004,  respectively.  The revenue  from
discontinued  operations  was $0 and $98,975 for the nine months ended April 30,
2005 and 2004,  respectively.  The pretax income  (loss) from  operations of the
discontinued component was $995 and $(2,314) for the nine months ended April 30,
2005 and 2004, respectively. The 2005 pre-tax income resulted from recoveries of
previously  written  off  accounts  receivable  related to the  discontinued  IT
Business.  For the  nine  months  ended  April 30 2005,  net  cash  provided  by
discontinued  operations  of $835  was  comprised  of  collections  of  accounts
receivable of $2,815 plus net income from  discontinued  operations of $597 less
payments of accounts payable and accrued  expenses of $2,577,  all of which were
related to the sold IT Business.

4.        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. As of April 30, 2005 potentially  dilutive common
stock  equivalents  consisting of 2,000  outstanding stock options were excluded
from the calculation of net income per share. The following table reconciles the
denominators of the basic and diluted per share  computations.  For each period,
the numerator is the net income from  continuing  operations as reported and the
per share amounts below represent income per share from continuing operations.

                                       7

<PAGE>

<TABLE>
<CAPTION>

                             Three months ended April 30,                    Nine months ended April 30,
                                2005                  2004                      2005                   2004
                                ----                  ----                      ----                   ----
                                   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           8,486      $  -         8,070      $0.05        8,289        $0.24        8,017    $0.25
                                     ===                    =====                      ====                  ====


         Effect of
          dilutive
           options         286                     463                     230                       347
                           ---                     ---                     ---                       ---

         Diluted         8,772      $  -         8,533      $0.05        8,519        $0.24        8,364    $0.24
                         =====       ===         =====       ====        =====         ====        =====     ====

</TABLE>

 5.       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 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 No. 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 the grant.  SFAS 123  requires  that the  Company  provide pro forma
information  regarding  net income  and net income 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.  The following table illustrates
the effect on net income and net income per share if the  Company  had  measured
the  compensation  cost for the Company's  stock option  programs under the fair
value method in each period presented.

                                       8


<PAGE>
<TABLE>
<CAPTION>

                                                 Three Months Ended April 30,       Nine Months Ended April 30,
                                                        2005           2004           2005               2004
                                                        ----           ----           ----               ----

<S>                                                      <C>                <C>        <C>                  <C>
      Net income, as reported                            $14                $3         $2,614               $609


      Add (deduct): Stock-based compensation
        expense (income) included in net income
       net of related tax effects                        (33)               14             32                 14


      Deduct:  Total stock-based
       employee compensation expense
       determined under fair value
       method for all awards, net of
       related tax effects                               (77)             (119)          (306)              (405)
                                                         ----             -----          -----              -----


      Net income (loss) - pro forma                     $(96)            $(102)        $2,340               $218
                                                         ====              ====         =====                ===


      Net income (loss) per share:
       Basic - as reported                             $0.00              $0.00         $0.32              $0.08
                                                        ====               ====          ====               ====

       Basic - pro forma                              $(0.01)            $(0.01)        $0.28              $0.03
                                                      ======              =====          ====              =====

       Diluted - as reported                           $0.00              $0.00         $0.31              $0.07
                                                        ====               ====          ====               ====

       Diluted - pro forma                            $(0.01)            $(0.01)        $0.27              $0.03
                                                       ======             =====          ====               ====
</TABLE>

6.       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 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."

     SFAS No. 142 requires that the Company,  on an annual basis,  test 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.

     As of April 30,  2005 and July 31,  2004,  the  Company  had no  intangible
assets, other than goodwill.


7.       Line of Credit

     The Company has available a line of credit with a financial  institution in
the aggregate amount of $15,000, which expires on January 31, 2008. At April 30,
2005, no amounts were  outstanding  under this line. The line of credit facility
requires the Company to maintain  certain  financial  ratios and  covenants.  At
April 30, 2005, the Company was in compliance with all the financial  ratios and
covenants that it is required to maintain.

                                       9
<PAGE>

8.       Leases and Subleases

     As  part  of the  sale  to  ePlus  of the  Company's  end-user  information
technology  fulfillment and  professional  services  business in May 2004, ePlus
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. The Company
and ePlus agreed to extend one sublease  agreement for an additional  two months
for one 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  required
payments under its lease.

     On April 11, 2005, the Company  terminated its lease for the fifth floor in
the  building  located at 469  Seventh  Avenue,  New York,  NY.  Pursuant to the
Surrender  Agreement  with 469  Owners,  LLC  (the  "Landlord"),  successors  in
interest to First Willow,  LLC, the lease  terminated  effective as of March 31,
2005 as compared to the prior termination date of October 31, 2007, resulting in
a  reduction  of  approximately  $1.1  million in rental  obligations  and other
payments  otherwise due under the lease.  The Surrender  Agreement  required the
Company to pay an early  termination  fee of $325,000 to the  Landlord  which is
included in selling, general and administrative expenses.

     Effective April 19, 2005  Electrograph  Systems  assigned its lease for the
real property  known as 40 Marcus  Boulevard,  Hauppauge,  N.Y. to the landlord.
Pursuant  to the  Assignment  and  Assumption  Agreement  entered  into with the
landlord,  Electrograph Systems assigned all right, title and interest in and to
the lease for the remainder of the lease term,  whereupon  Electrograph  Systems
was released from any and all obligations and liabilities under the lease by the
landlord in exchange for a payment of $550,000.  The lease buy-out resulted in a
decrease of property, plant and equipment,  net, of approximately $1,816,000 and
a reduction of capital  lease  obligations  of  approximately  $1,700,000.  As a
result  of the  lease  buy-out  the  Company  recorded  a loss of  approximately
$666,000,  including $116,000 for the write-down of capital improvements at this
location.

9.       Major Vendors

     The Company's top three vendors accounted for  approximately  29%, 16%, and
16% of total product  purchases from  continuing  operations for the nine months
ended  April  30,  2005.   The  Company's   top  three  vendors   accounted  for
approximately  33%,  16%, and 15% of total  product  purchases  from  continuing
operations  for the nine months ended April 30, 2004.  The  Company's  top three
vendors accounted for approximately  36%, 17% and 14% of total product purchases
from  continuing  operations  for the three  months  ended April 30,  2005.  The
Company's top three  vendors  accounted  for  approximately  37%, 17% and 16% of
total product  purchases from  continuing  operations for the three months ended
April 30, 2004.

10.     Incentive Compensation Plan

     On March 10, 2005, at the Company's  annual  meeting of  shareholders,  the
Company's  shareholders approved the Company's 2005 Incentive  Compensation Plan
(the "2005 Plan").  The 2005 Plan provides the Company with the  flexibility  to
grant  other  forms  of  compensation  to its  directors,  officers,  employees,
consultants,  agents,  advisors and third party service providers in addition to
that which was formerly  available under the Company's Amended and Restated 1996
Incentive and Non-Incentive Stock Option Plan. The 2005 Plan permits the Company
to issue up to 1,000,000 shares of common stock for the grant of options,  share
appreciation  rights,  restricted  shares,  restricted share units,  performance
awards,  annual  incentive  awards and other share based  awards and  cash-based
awards.  The 2005 Plan is  intended  to comply with  applicable  securities  law
requirements,  permit the performance-based  awards to qualify for deductibility
under Section 162(m) of the Internal  Revenue Code and allow for the issuance of
incentive stock options.

                                       10

<PAGE>



ITEM 2. -  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 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, 2004.

General

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

     On April 17, 2005, the Company entered into a definitive  merger  agreement
under   which   entities   associated   with   Caxton-Iseman    Capital,    Inc.
("Caxton-Iseman") will acquire all of the Company's outstanding shares in an all
cash  transaction  valued at approximately  $55 million.  Under the terms of the
agreement,  which was unanimously  approved by the Company's Board of Directors,
Manchester shareholders will receive $6.40 per share in cash for each share they
own at the effective time of the merger.


     Consummation of the merger, which is expected to occur in the third quarter
of calendar  year 2005,  is subject to approval by the holders of  two-thirds of
the shares of the Company's outstanding common stock,  expiration or termination
of the applicable waiting period under the Hart-Scott-Rodino  Act, completion of
debt  financing by  Caxton-Iseman  and customary  closing  conditions.  Barry R.
Steinberg,  Chief Executive Officer of the Company,  who holds approximately 55%
of the Company's  outstanding  shares, has agreed to vote his shares in favor of
the  transaction.  In connection with the merger,  various members of management
will receive severance payments and other benefits. In addition,  non-management
directors  will receive  bonuses in  recognition of their services in connection
with  the  merger.   If  the  merger   agreement  is  terminated  under  certain
circumstances, the Company would be obligated to pay Caxton-Iseman $2.5 million.
Any stock options outstanding  immediately prior to the completion of the merger
will be  terminated  and canceled  immediately  prior to the  completion  of the
merger.  Each holder of a cancelled  option that has an exercise price per share
less than $6.40 and that is vested  immediately  prior to the  completion of the
merger,  shall have the right to receive from the Company a cash  payment  (less
applicable  federal,  state and local  withholding  taxes) in an amount equal to
$6.40 minus the applicable exercise price per share of the option, multiplied by
the  number of shares of common  stock for which  such  option  was  exercisable
immediately  prior to its cancellation.  Each option that,  immediately prior to
the  completion  of the  merger,  is not  vested  or that is  vested  but has an
exercise  price greater than or equal to $6.40 will be  automatically  cancelled
without compensation at the completion of the merger.

     In  connection  with the merger,  the  Company  filed a  preliminary  proxy
statement with the Securities  and Exchange  Commission  ("SEC") on May 24, 2005
and  intends to file  additional  relevant  material  with the SEC,  including a
definitive  proxy  statement.  BECAUSE THOSE  DOCUMENTS  WILL CONTAIN  IMPORTANT
INFORMATION,  HOLDERS OF SHARES OF THE COMPANY'S  COMMON STOCK ARE URGED TO READ
THEM, IF AND WHEN THEY BECOME  AVAILABLE.  When filed with the SEC, they will be
available  for free (along  with any other  documents  and reports  filed by the
Company  with  the  SEC)  at  its  website,   www.sec.gov,   and  the  Company's
shareholders  will receive  information at an appropriate  time on how to obtain
the definitive  proxy statement for free from the Company.  A special meeting of
the Company's  shareholders  will be convened as soon as  practicable  after the
filing of definitive  proxy materials with the SEC.

     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
                                       11
<PAGE>

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  existing  customers,  corporate
shoppers  and others to find product  specifications,  compare  products,  check
prices  and  purchase  products  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,  a leading
provider of enterprise cost management, in an all cash transaction. The proceeds
from the sale of the IT  Business  were  $3,555,000  net of related  expenses of
$1,445,000.  The Company  recorded a gain,  included in loss from  operations of
discontinued  component  in the fiscal 2004 (ended July 31,  2004)  statement of
operations,  of  approximately  $876,000  as a result of the  transaction.  This
amount  represented  the excess of the net  proceeds  over a payable to ePlus of
$469,000 for service contracts they assumed and the $2,210,000 carrying value of
the net  assets  sold,  consisting  of  goodwill  of  $2,704,000,  property  and
equipment,  net of $195,000 and deferred revenue of $689,000.  The loss from the
operations of the  discontinued IT Business was $8,492,000 in fiscal 2004, which
included the following charges in the fourth quarter of fiscal 2004:


      Employee severance and other employee costs               $1,016,000
      Provision for doubtful accounts receivable                 1,250,000
      Fixed asset impairments                                    2,639,000
      Other                                                         50,000
                                                                 ---------

      Total                                                     $4,955,000
                                                                ==========

     As of  April  30,  2005,  all of the  accrued  liabilities  related  to the
discontinued  operations  were  discharged  by payments in amounts  equal to the
accruals.

Disclosure Regarding Forward-Looking Statements

     This  report  on  Form  10-Q  contains   statements   that  may  constitute
forward-looking statements pursuant to the safe harbor provisions of the Private
Securities Litigation Reform Act of 1995. These  forward-looking  statements are
based on  currently  available  information  and  represent  the  beliefs of our
management.  These statements are subject to risks and uncertainties  that could
cause actual results to differ  materially,  including,  but not limited to, our
inability  to  attract  and  retain  highly  skilled  sales  representatives  or
technical  personnel  necessary to maintain our current operations and implement
our growth  strategies;  our inability to maintain good  relationships  with our
vendors  and  customers;  not  being  successful  in our  efforts  to  focus  on
higher-margin products and services and not being able to rapidly respond to new
product  offerings;  not managing our inventory  successfully;  being  adversely
affected by continued intense competition in the technology industry,  including
competition  from  competitors   with  greater   resources;   being  subject  to
potentially  adverse  business  conditions  that our  industry  is  subject  to,
including, without limitation, pricing pressures involving distribution 12
<PAGE>

channels, market consolidation,  a potential short supply of products, continued
deterioration  in average  selling  prices of  personal  computers  and  display
technologies, and a decrease in the growth of the display technology market; the
risk  that  our  success  is  highly  dependent  upon a select  group of  senior
management  and  that  our  revenues  and  operating   results  are  subject  to
fluctuation from quarter to quarter;  the failure of our information  technology
systems to function properly;  the failure of our actions to enhance shareholder
value; failure to consummate the merger;  failure of the Company's  shareholders
to adopt the merger agreement and the merger; the occurrence or existence of any
event, fact or set of circumstances that has had or would reasonably be expected
to have,  individually or in the aggregate,  a "company material adverse effect"
as such term is defined in the merger agreement;  failure of the Company and the
acquiror   to  obtain   the   required   consents   and   approvals   under  the
Hart-Scott-Rodino  Act;  the  imposition  of any  government  conditions  to the
closing of the proposed transaction;  the failure by the Company or the acquiror
to satisfy other  conditions to the completion of the merger as set forth in the
merger  agreement;  the  failure  of the  acquiror  to  obtain  debt and  equity
financing;  the  failure  of the  Company  to  collect  from  Caxton-Iseman  the
termination  fee of $2.5  million  following  an  event  that  gives  rise to an
obligation to pay such  termination  fee; or the  Company's  obligation to pay a
termination  fee of $2.5 million to the  acquiror  following an event that gives
rise to an obligation to pay such  termination  fee. For further  information on
certain of these risks and others  affecting us, please see our Annual Report on
Form 10-K for the year  ended  July 31,  2004,  and those set forth from time to
time in our other filings with the SEC. Each of these  documents is on file with
the SEC and is available free of charge.  Readers of this report are referred to
such filings. The forward-looking statements herein speak only as of the date of
this report.  We do not undertake to update any  forward-looking  statement that
may be made from time to time by us or on our behalf.


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,
2004  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.


     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 our 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.

                                       13
<PAGE>


     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

      Results of Operations

     The  following  table sets forth,  for the periods  indicated,  information
derived from the Company's condensed consolidated statements of income expressed
as a percentage of related revenue or total revenue.
<TABLE>
<CAPTION>

                                                                            Percentage of Revenue
                                                     Three Months Ended                Nine Months Ended
                                                              April 30,                     April 30,

                                                        2005           2004           2005            2004
                                                        ----           -----          ----            -----

<S>                                                    <C>             <C>           <C>             <C>
Revenue                                                100.0%          100.0%        100.0%          100.0%

Cost of Revenue                                         87.5            90.7          87.4            90.0
                                                        ----            ----          ----            ----
       Gross profit                                     12.5             9.3          12.6            10.0

Selling, general and
    administrative expenses                             11.0             7.4           9.6             7.3
Loss on buy-out of capital lease                         1.6             0.0           0.5             0.0
                                                         ---             ---           ---             ---
       Income (loss) from operations                    (0.1)            1.9           2.5             2.6
Interest and other income (expense), net                 0.1            (0.2)          0.1            (0.1)
                                                         ---             ----          ---             ----
       Income from continuing operations
          before income taxes                            0.1             1.7           2.6             2.5
Income tax provision                                     0.0             0.7           1.1             1.0
                                                         ---            ----           ---             ---
Income from continuing operations                        0.0             1.0           1.6             1.5
                                                         ---            ----           ---             ---

Discontinued operations
       Income (loss) from operations of
           discontinued component                        0.0            (1.7)          0.8            (1.7)
       Income tax (provision) benefit                    0.0             0.7          (0.3)            0.7
                                                         ---             ---          -----            ---

       Income (loss) from discontinued operations       0.0             (1.0)          0.5            (1.1)
                                                        ---             -----          ---            -----

Net income                                               0.0%            0.0%          2.0%            0.5%
                                                         ====          =====           ====            ====
</TABLE>


Three  Months  Ended April 30, 2005  Compared  with Three Months Ended April 30,
2004

     Revenue.  Revenue  decreased by $0.5 million or 1% to $41.9 million for the
three months ended April 30, 2005 from $42.4  million for the three months ended
April 30, 2004. The decrease in revenue is primarily a result of decreased sales
of computer hardware to dealers and systems integrators.  Such sales of computer
hardware decreased by approximately 38% compared to last year as a result of the
Company's  inability to procure products at previous levels for this line of its
business.  The decrease in computer  hardware  sales was partially  offset by an
increase in sales of display  technology  solutions of approximately 4% compared
to last year resulting from the increase in unit sales of display technology

                                       14
<PAGE>

solutions,  primarily large screen flat panel displays,  partially offset by the
ongoing decline in average selling prices.

     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 $1.3 million or 33%,  from
$3.9  million for the three  months ended April 30, 2004 to $5.3 million for the
three months ended April 30, 2005 and as a percentage  of revenue,  gross profit
increased  from 9.3% for the three  months ended April 30, 2004 to 12.5% for the
three months ended April 30, 2005.  The increase in gross profit  percentage  is
primarily  attributable to special product offerings received from manufacturers
with higher margins,  volume discounts  received from manufacturers and sales of
higher margin products.

     Selling,  General  and  Administrative   Expenses.   Selling,  general  and
administrative  expenses increased by $1.5 million, or 46% from $3.1 million for
the three months ended April 30, 2004 to $4.6 million for the three months ended
April 30,  2005.  The  increase is  principally  due to an increase in salaries,
commissions and other personnel costs of approximately $328,000,  reflecting the
increase  in  employee  headcount  and  associated  costs  with  respect  to the
continuing  growth of the  display  technology  business,  $325,000  of  charges
related to  obtaining a release  from the rental  obligation  for the  Company's
leased  property in New York City,  increased  legal and  professional  costs of
approximately  $280,000  primarily  as a result  of the  increased  legal  costs
associated with the Company's  entering into a definitive  merger  agreement and
the adoption of the Company's 2005 Incentive  Compensation  Plan approved by our
shareholders  and an  increase  in bad debt  expense of  approximately  $220,000
primarily  due to a recovery  in the prior  year.  As a  percentage  of revenue,
selling,  general and administrative  expenses increased from 7.4% for the three
months ended April 30, 2004 to 11.0% for the three months ended April 30, 2005.

     Loss on Buy-Out of Capital  Lease.  Effective  April 19, 2005  Electrograph
Systems,  Inc., a subsidiary of the Company ("Electrograph  Systems"),  assigned
its lease for the real property known as 40 Marcus Boulevard, Hauppauge, N.Y. to
the landlord.  Pursuant to the Assignment and Assumption  Agreement entered into
with the landlord,  Electrograph  Systems assigned all right, title and interest
in and to the lease for the remainder of the lease term, whereupon  Electrograph
Systems was released  from any and all  obligations  and  liabilities  under the
lease by the landlord in exchange for a payment of $550,000.  As a result of the
lease buy-out, the Company recorded a loss of approximately $666,000,  including
$116,000 for the write-down of capital improvements at this location.

     Interest  and Other  Income  (Expense),  net.  Interest  and  other  income
(expense),   net,  increased  by  approximately  $116,000  from  an  expense  of
approximately  $70,000  for the three  months  ended April 30, 2004 to income of
approximately  $46,000 for the three months ended April 30, 2005. The amount for
the three months ended April 30, 2004 included approximately $85,000 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  $15,000.
The  amount  for the three  months  ended  April 30,  2005  included  $84,000 of
interest  expense  related to the  interest  portion of the  capital  leases and
interest  income  of  approximately   $130,000  earned  on  the  Company's  cash
investments which had higher average balances than during the prior year period.

     Income Tax Provision. Our effective tax rate was 42.4% for the three months
ended April 30, 2005 and 40.0% for the three months ended April 30, 2004.

     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 income. The net income (loss) from discontinued  operations was $0
and $(429,000) for the three months ended April 30, 2005 and 2004, respectively.

                                       15
<PAGE>

   Nine Months Ended April 30, 2005 Compared to Nine Months Ended April 30, 2004

     Revenue.  Revenue decreased by $4.9 million or 4% to $128.1 million for the
nine months  ended April 30, 2005 from $132.9  million for the nine months ended
April 30, 2004. The decrease in revenue is primarily a result of decreased sales
of computer hardware to dealers and systems integrators.  Such sales of computer
hardware decreased by approximately 49% compared to last year as a result of the
Company's  inability to procure products at previous levels for this line of its
business.  The decrease in computer  hardware  sales was partially  offset by an
increase in sales of display  technology  solutions of approximately 3% compared
to last year  resulting  from the  increase in unit sales of display  technology
solutions,  primarily large screen flat panel displays,  partially offset by the
ongoing decline in average selling prices.

     Gross  Profit.  Gross profit  increased by $2.9 million or 22%,  from $13.2
million for the nine months  ended April 30, 2004 to $16.2  million for the nine
months  ended  April 30,  2005 and as a  percentage  of  revenue,  gross  profit
increased  from 10.0% for the nine months  ended April 30, 2004 to 12.6% for the
nine months ended April 30, 2005.  The  increase in gross profit  percentage  is
primarily  attributable to special product offerings received from manufacturers
with higher margins,  volume discounts  received from manufacturers and sales of
higher margin products.

     Selling,  General  and  Administrative   Expenses.   Selling,  general  and
administrative  expenses  increased by approximately  $2.6 million,  or 27% from
$9.7 million for the nine months  ended April 30, 2004 to $12.3  million for the
nine months ended April 30, 2005. The increase is principally due to an increase
in salaries,  commissions and other personnel costs of  approximately  $796,000,
reflecting the increase in employee  headcount and associated costs with respect
to the continuing growth of the display technology business, $325,000 of charges
related to  obtaining a release  from the rental  obligation  for the  Company's
leased  property in New York City,  increased  legal and  professional  costs of
approximately  $736,000  primarily  as a result of the Company  entering  into a
definitive  merger  agreement and the increased legal costs  associated with the
adoption of the  Company's  2005  Incentive  Compensation  Plan  approved by our
shareholders,  increased sales personnel expenses of approximately  $180,000 due
to the  increased  participation  in trade shows and  increased  rent expense of
approximately  $147,000.  As a  percentage  of  revenue,  selling,  general  and
administrative  expenses increased from 7.3% for the nine months ended April 30,
2004 to 9.6% for the nine months ended April 30, 2005.

     Loss on Buy-Out of Capital  Lease.  Effective  April 19, 2005  Electrograph
Systems  assigned its lease for the real property known as 40 Marcus  Boulevard,
Hauppauge,  N.Y. to the  landlord.  Pursuant to the  Assignment  and  Assumption
Agreement  entered into with the  landlord,  Electrograph  Systems  assigned all
right,  title and  interest in and to the lease for the  remainder  of the lease
term,  whereupon  Electrograph Systems was released from any and all obligations
and  liabilities  under the lease by the  landlord in exchange  for a payment of
$550,000.  As a result of the lease  buy-out,  the  Company  recorded  a loss of
approximately  $666,000,  including  $116,000  for  the  write-down  of  capital
improvements at this location.

     Interest  and Other  Income  (Expense),  net.  Interest  and  other  income
(expense),   net,  increased  by  approximately  $345,000  from  an  expense  of
approximately  $166,000  for the nine  months  ended April 30, 2004 to income of
approximately  $179,000 for the nine months ended April 30, 2005. The amount for
the nine months ended April 30, 2004 included approximately $258,000 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  $92,000.
The amount  for the nine  months  ended  April 30,  2005  included  $252,000  of
interest  expense  related to the  interest  portion of the  capital  leases and
interest  income  of  approximately   $431,000  earned  on  the  Company's  cash
investments which had higher average balances than during the prior year period.

     Income Tax Provision (Benefit).  Our effective tax rate was 40.0% and 39.4%
for the nine months ended April 30, 2005 and April 30, 2004, respectively.

                                       16
<PAGE>

     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 income.  The net income (loss) from  discontinued  operations  was
$597,000  and $(1.4)  million for the nine months ended April 30, 2005 and 2004,
respectively. The income in the 2005 period resulted from a recovery of accounts
receivable related to the IT Business.

      Liquidity and Capital Resources

      Working Capital

     Our  primary  source  of cash and cash  equivalents  have  been  internally
generated  working capital from  profitable  operations.  The Company's  working
capital at April 30, 2005 and July 31, 2004 was approximately  $39.3 million and
$34.4 million, respectively.

      Cash Flows

     Operating  activities  for the nine  months  ended April 30, 2005 and 2004,
resulted in an  increase  in cash and cash  equivalents  of  approximately  $3.2
million  and  $5.3  million,   respectively.   Continuing   operations  provided
approximately  $2.3  million of cash in the nine  months  ended  April 30,  2005
primarily  resulting  from  operating  cash  flows of $6.6  million  principally
derived  from net  income and the  increase  in  accounts  payable  and  accrued
expenses  exceeding  an  increase  in  accounts   receivable  and  inventory  of
approximately   $4.3   million.   Discontinued   operations   provided  cash  of
approximately  $835,000  in the nine  months  ended  April  30,  2005  primarily
resulting  from the  collection  of  retained  receivables  net of  payments  of
accounts  payable 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.

     Investing activities for the nine months ended April 30, 2005 and 2004 used
cash  of  approximately  $190,000  and  $760,000,  respectively.  These  amounts
consisted solely of additions to property and equipment.


     Financing  activities  for the nine  months  ended  April 30, 2005 and 2004
provided cash of approximately $626,000 and $135,000, respectively. For the nine
months ended April 30, 2005, this amount consisted of proceeds from the exercise
of stock options of approximately  $1.4 million  partially offset by $180,000 of
payments on capitalized  lease  obligations  and a $550,000  payment to obtain a
release  from one of our capital  lease  obligations.  For the nine months ended
April 30, 2004 this amount  consisted  of  proceeds  from the  exercise of stock
options of  approximately  $284,000  partially offset by $149,000 of payments on
capitalized lease obligations.

Line of Credit

     We have  available  a line of credit with a  financial  institution  in the
aggregate  amount of $15.0 million,  which expires on January 31, 2008. At April
30,  2005,  no amounts  were  outstanding  under  this line.  The line of credit
facility   requires  the  Company  to  maintain  certain  financial  ratios  and
covenants.  At April  30,  2005,  the  Company  was in  compliance  with all the
financial ratios and covenants that it is required to maintain.

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 for at least the next twelve months. The only material  commitments
for capital  expenditures  are  operating  and capital  leases for the Company's
facilities and certain  tangible  property.  Future capital  requirements of the
Company  include those for the growth of working  capital items such as accounts

                                       17

<PAGE>

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  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.  The
Company and ePlus agreed to extend one sublease  agreement for an additional two
months for one 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,  Hauppauge, N.Y. The terms of
the sublease  extend through  February 2018 and cover  substantially  all of the
Company's  required  payments under its lease,  amounting to approximately  $2.8
million.

     On April 11, 2005, the Company  terminated its lease for the fifth floor in
the  building  located at 469  Seventh  Avenue,  New York,  NY.  Pursuant to the
Surrender  Agreement  with 469  Owners,  LLC  (the  "Landlord"),  successors  in
interest to First Willow,  LLC, the lease  terminated  effective as of March 31,
2005 as compared to the prior termination date of October 31, 2007, resulting in
a  reduction  of  approximately  $1.1  million in rental  obligations  and other
payments  otherwise due under the lease.  The Surrender  Agreement  required the
Company to pay an early  termination  fee of $325,000 to the  Landlord  which is
included in selling, general and administrative expenses.

     Effective April 19, 2005  Electrograph  Systems  assigned its lease for the
real property  known as 40 Marcus  Boulevard,  Hauppauge,  N.Y. to the landlord.
Pursuant  to the  Assignment  and  Assumption  Agreement  entered  into with the
landlord,  Electrograph Systems assigned all right, title and interest in and to
the lease for the remainder of the lease term,  whereupon  Electrograph  Systems
was released from any and all obligations and liabilities under the lease by the
landlord in exchange for a payment of $550,000.  The lease buy-out resulted in a
decrease of property, plant and equipment,  net, of approximately $1,816,000 and
a reduction of capital  lease  obligations  of  approximately  $1,700,000.  As a
result  of the  lease  buy-out  the  Company  recorded  a loss of  approximately
$666,000,  including $116,000 for the write-down of capital improvements at this
location.

     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
April 30, 2005 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              $6,049          $213         $   834        $   748            $4,254
       Operating leases             1,869           404           1,148            317                 -
                                    -----         -----        --------           ----          --------

       Total                       $7,918          $617          $1,982         $1,065            $4,254
                                    =====           ===           =====          =====             =====
</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.
                                       18
<PAGE>

Impact of Recently Issued Accounting Standards

     In December 2004, the FASB issued SFAS No. 123 (R),  "Share-Based  Payment"
("SFAS No. 123 (R)").  This  statement  replaces SFAS No. 123,  "Accounting  for
Stock-Based  Compensation"  and  supersedes  APB No. 25,  "Accounting  for Stock
Issued to Employees."  SFAS 123 (R) requires all stock-based  compensation to be
recognized  as an  expense  in the  financial  statements  and that such cost be
measured according to the grant-date fair value of stock options or other equity
instruments.  SFAS 123 (R) will be effective for annual periods  beginning after
June 15, 2005. While the Company  currently  provides the pro forma  disclosures
required by SFAS No. 148, "Accounting for Stock-Based  Compensation - Transition
and  Disclosure," on a quarterly basis (see "Note 5 - Accounting for Stock-Based
Compensation"),  it is currently  evaluating the impact this statement will have
on its consolidated financial statements.

     In November  2004,  the FASB issued  SFAS No.  151,  "Inventory  Costs - an
amendment of ARB No. 43, Chapter 4" ("SFAS No. 151").  SFAS No. 151 requires all
companies to  recognize a  current-period  charge for  abnormal  amounts of idle
facility expense,  freight,  handling costs and wasted materials. This statement
also requires that the allocation of fixed  production  overhead to the costs of
conversion be based on the normal  capacity of the production  facilities.  SFAS
No. 151 will be effective for fiscal years  beginning  after June 15, 2005.  The
Company  believes that this  statement  will have no effect on its  consolidated
financial statements.

Inflation

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


ITEM 3. 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  primarily of short-term
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

(a) Evaluation of Disclosure Controls and Procedures

     As of the  end  of  the  period  covered  by  this  report,  the  Company's
management  conducted  an  evaluation,   under  the  supervision  and  with  the
participation  of  the  principal  executive  officer  and  principal  financial
officer,  of the Company's  disclosure  controls and  procedures  (as defined in
Rules 13a-15(e) and 15d-15(e) under the Exchange Act). Based on this evaluation,
the principal  executive officer and principal financial officer concluded that,
as of the end of the period  covered by this report,  the  Company's  disclosure
controls and procedures are effective.  Notwithstanding the foregoing, a control
system,  no matter how well designed and operated,  can provide only reasonable,
not  absolute,  assurance  that it will  detect or uncover  failures  within the
Company to disclose material  information  otherwise required to be set forth in
the Company's periodic reports.

(b) Changes in Internal Controls

     There  was no change  in the  Company's  internal  control  over  financial
reporting (as such term is defined in Rules  13a-15(f)  and 15d-15(f)  under the
Exchange Act) during the Company's most recently  completed  fiscal quarter that
has  materially  affected,  or is reasonably  likely to materially  affect,  the
Company's internal control over financial reporting.

                                       19

<PAGE>


      PART II - OTHER INFORMATION

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

         At our Annual Meeting of Shareholders held on March 10, 2005, the
      following proposals were adopted by the margins indicated:

       (1) Elect seven Directors to serve until the 2006 Annual Meeting of
Shareholders;

<TABLE>
<CAPTION>
                                                                                        Broker
         Nominee                        For            Withheld         Abstain         Non-votes
         --------------                 ---            --------         -------         ---------
<S>                                  <C>                  <C>               <C>            <C>
      Barry R. Steinberg             5,436,508            911,381           0              0
      Seth Collins                   5,435,708            912,181           0              0
      Joel G. Stemple                5,437,458            910,431           0              0
      Joel Rothlein                  5,421,058            926,831           0              0
      Michael E. Russell             5,772,885            575,004           0              0
      Yacov A. Shamash               5,772,885            575,004           0              0
      Jeffrey Melnick                5,776,035            571,854           0              0
</TABLE>

(2)      Vote on the approval of the Company's 2005 Incentive Compensation Plan.
<TABLE>
<CAPTION>
                                                                                            Broker
                           For              Against                   Abstain              Non-votes
                           ---              -------                   -------              ---------
<S>                       <C>                 <C>                      <C>                  <C>
                          5,372,633           969,578                  5,678                0
</TABLE>

(3)        Vote on the ratification of the reappointment of KPMG LLP as
           independent auditors of the Company for the year ending July 31,
           2005.
<TABLE>
<CAPTION>
                                                                                            Broker
                           For              Against                   Abstain              Non-votes
                           ---              -------                   -------              ---------
<S>                       <C>                     <C>                  <C>                  <C>
                          6,345,388               801                  1,700                0
</TABLE>

     No other  items  were voted on at the Annual  Meeting  of  Shareholders  or
during the quarter ended April 30, 2005.

ITEM 5. OTHER INFORMATION.

     As of March 15, 2005,  Electrograph  Systems entered into a Lease Agreement
with Harsch Investment  Properties - Nevada,  LLC for office and warehouse space
at a building  located at 470 Mirror  Court,  Suite 102-103 (the  "Lease").  The
Lease commenced on April 1, 2005 and terminates on July 31, 2010. The Company is
a guarantor of Electrograph Systems' obligations under the Lease.

     As of May 11, 2005, Electrograph Systems and Harsch Investment Properties -
Nevada, LLC entered into a first amendment to the Lease (the "First Amendment").
The First Amendment, among other things, increased the amount of space leased by
Electrograph  Systems from  approximately  26,431  square feet to  approximately
37,072  square feet,  and also  increased  the amount of monthly base rent to be
paid by  Electrograph  Systems  by $5,465  per month for the period of June 2005
through April 2006, with additional increases thereafter.

         Both the Lease and the First Amendment are attached hereto as Exhibits
10.1 and 10.2 respectively.

                                       20
<PAGE>








      ITEM  6. EXHIBITS

      Exhibits


     10.1 - Lease Agreement,  dated as of March 15, 2005,  between  Electrograph
          Systems, Inc. and Harsch Investment Properties - Nevada, LLC.

     10.2 -  First  Amendment  to  Lease,  dated  as of May  11,  2005,  between
          Electrograph  Systems, Inc. and Harsch Investment Properties - Nevada,
          LLC.

     31.1 - Certification of Chief Executive Officer, pursuant to Rule 13a-14(a)
          under the Securities and Exchange Act of 1934, as adopted  pursuant to
          Section 302 of the Sarbanes-Oxley Act of 2002.

     31.2 - Certification of Chief Financial Officer, pursuant to Rule 13a-14(a)
          under the Securities and Exchange Act of 1934, as adopted  pursuant to
          Section 302 of the Sarbanes-Oxley Act of 2002.

     32.1 - Certification of Chief Executive  Officer pursuant to Rule 13a-14(b)
          under the  Securities  and Exchange Act of 1934 and 18 U.S. C. Section
          1350, as adopted pursuant to Section 906 of the  Sarbanes-Oxley Act of
          2002.

     32.2 - Certification of Chief Financial  Officer pursuant to Rule 13a-14(b)
          under the  Securities  and Exchange Act of 1934 and 18 U.S. C. Section
          1350, as adopted pursuant to Section 906 of the  Sarbanes-Oxley Act of
          2002.

                                       21
<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:   June 10, 2005            /S/   Barry  R. Steinberg
                                -------------------------------
                                 Barry R. Steinberg
                                 Chief Executive Officer



DATE:   June 10, 2005            /S/ Elan Yaish
                                 --------------------------------------------

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

                                       22