25


                                  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, 2003

                                       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

As of March 5, 2003 there were 7,990,215  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, 2003  (unaudited) and July 31, 2002                3

            Condensed Consolidated Statements of Operations for the
               Three Months  and Six Months Ended
               January 31, 2003 and 2002 (unaudited)                          4

            Condensed Consolidated Statements of Cash Flows for the
               Six Months Ended January 31, 2003 and 2002 (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                                          19


PART II.    OTHER INFORMATION

Item 4.     Submission of Matters to a Vote of Security Holders              20


Item 6.     Exhibits and Reports                                             20



<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, 2003        July 31, 2002
                                                                  (Unaudited)
                                                                  -----------         -----------
<S>                                                                     <C>            <C>
Assets
Current assets:
  Cash and cash equivalents                                             $13,271        $8,963
  Accounts receivable, net                                               34,507        32,561
  Inventory                                                              13,072        11,165
  Deferred income taxes                                                     403           403
  Prepaid income taxes                                                      709           426
  Prepaid expenses and other current assets                                 712           526
                                                                            ---           ---

         Total current assets                                            62,674        54,044

Property and equipment, net                                               6,343         7,012
Goodwill, net                                                             8,311         8,311
Deferred income taxes                                                       803           803
Other assets                                                                219           491
                                                                            ---           ---

Total assets                                                            $78,350       $70,661
                                                                        =======       =======

Liabilities and shareholders' equity
Current liabilities:
  Accounts payable and accrued expenses                                 $31,047       $23,078
  Deferred service contract revenue                                         555           868
                                                                            ---           ---

         Total current liabilities                                       31,602        23,946

Deferred compensation payable                                               203           203
                                                                            ---           ---

         Total liabilities                                               31,805        24,149
                                                                         ------        ------

Shareholders' equity:
  Preferred stock, $.01 par value; 5,000  shares
  authorized, none issued                                                     -             -
  Common stock, $.01 par value; 25,000  shares authorized,
     7,990 and 7,990   issued and outstanding                                80            80
  Additional paid-in capital                                             18,942        18,942
  Deferred compensation                                                     (23)          (23)
  Retained earnings                                                      27,546        27,513
                                                                         ------        ------

         Total shareholders' equity                                      46,545        46,512
                                                                         ------        ------

         Total liabilities and shareholders' equity                     $78,350       $70,661
                                                                        =======       =======
</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,
                                            2003             2002               2003                 2002
                                            ----             ----               ----                 ----
<S>                                         <C>           <C>                   <C>                 <C>
Revenue
       Products                             $74,283       $65,287               $138,998            $124,159
       Services                               6,259         2,812                  9,829               5,506
                                              -----         -----                  -----               -----
                                             80,542        68,099                148,827             129,665
                                             ------        ------                -------             -------

Cost of revenue
       Products                              66,979        55,818                123,897             107,079
       Services                               5,088         2,214                  7,491               4,025
                                              -----         -----                  -----               -----
                                             72,067        58,032                131,388             111,104
                                             ------        ------                -------             -------

       Gross profit                           8,475        10,067                 17,439              18,561

Selling, general and
    administrative expenses                   8,711         9,394                 17,551              17,789
                                              -----         -----                 ------              ------

       Income (loss) from operations           (236)          673                   (112)                772

Interest and other income, net                   28            47                    168                 122
                                                 --            --                    ---                 ---

       Income (loss) before income taxes       (208)          720                     56                 894

Income tax provision (benefit)                  (83)          287                     23                 357
                                                ---           ---                     --                 ---

       Net income (loss)                    $  (125)      $   433                $    33            $    537
                                            =======       =======                =======            ========

Net income (loss) per share
   Basic                                   $  (0.02)      $  0.05                $  0.00            $   0.07
                                           ========       =======                =======            ========
   Diluted                                 $  (0.02)      $  0.05                $  0.00            $   0.07
                                           ========       =======                =======            ========

Weighted average
  shares outstanding
    Basic                                     7,990         7,990                  7,990               7,990
                                              =====         =====                  =====               =====
    Diluted                                   7,990         7,991                  7,991               7,990
                                              =====         =====                  =====               =====

</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,
                                                                                   2003                 2002
                                                                                   ----                 ----

<S>                                                                               <C>                   <C>

Cash flows from operating activities:
   Net cash from operations after adjustment for non-cash items                   $ 1,132               $ 1,731
      Changes in assets and liabilities (net of effects of acquisitions):
        Accounts receivable                                                        (1,987)               (4,355)
        Inventory                                                                  (1,907)               (5,069)
        Prepaid income taxes                                                         (283)                  (66)
        Prepaid expenses and other current assets                                    (186)                 (228)
        Other assets                                                                  272                   (35)
        Accounts payable and accrued expenses                                       7,969                 6,504
        Deferred service contract revenue                                            (313)                 (255)
                                                                                     ----                  ----

           Net cash  provided by (used in) operating activities                     4,697                (1,773)
                                                                                    -----                ------

Cash flows from investing activities:
      Capital expenditures                                                           (389)                 (990)
      Payment for acquisitions, net of cash acquired                                    -                (1,613)
                                                                                      ---                ------

           Net cash used in investing activities                                     (389)               (2,603)
                                                                                     ----                ------

Cash flows from financing activities:
      Payments on notes payable - bank                                                  -                  (515)
      Payments on notes payable - other                                                 -                   (43)
                                                                                      ---                   ---

           Net cash used in financing activities                                        -                  (558)
                                                                                      ---                  ----

Net increase (decrease) in cash and cash equivalents                                4,308                (4,934)

Cash and cash equivalents at beginning of period                                    8,963                14,493
                                                                                    -----                ------
Cash and cash equivalents at end of period                                        $13,271               $ 9,559
                                                                                  =======               =======
</TABLE>



See notes to unaudited condensed consolidated financial statements.
                                       5
<PAGE>


                 Manchester Technologies, Inc. and Subsidiaries
         Notes to Unaudited Condensed Consolidated Financial Statements


 1.    Organization and Basis of Presentation

     Manchester Technologies, Inc. ("Manchester," "we," "us," or "the Company"),
is a  single-source  solutions  provider  specializing  in hardware and software
procurement,  custom networking,  storage, display technology 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. The Company operates in a single segment.

     Sales of hardware,  software and networking  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  consolidated  financial  statements,  including the notes thereto,  for the
annual period ended July 31, 2002. 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.  The results
of operations for the three and six month periods ended January 31, 2003 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  847,000 and 916,000  shares for the three months ended January 31,
2003 and 2002,  respectively,  and 781,000 and 925,000 shares for the six months
ended  January  31, 2003 and 2002,  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,
                                2003               2002                      2003                   2002
                                ----               ----                      ----                   ----
                                   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     $(0.02)       7,990      $0.05        7,990        $0.00        7,990    $0.07
                                    ======                  =====                     =====                 =====
         Effect of
          dilutive
           options           -                       1                       1                         -
                                                  ----                     ---                       ---


         Diluted         7,990      $(0.02)      7,991      $0.05        7,991        $0.00        7,990    $0.07
                         =====      ======       =====      =====        =====        =====        =====    =====

</TABLE>
                                       6
<PAGE>


                 Manchester Technologies, Inc. and Subsidiaries
         Notes to Unaudited Condensed Consolidated Financial Statements


3.    Acquisitions

 Donovan Consulting Group, Inc.

     On August 29, 2001, the Company  acquired all of the  outstanding  stock of
Donovan Consulting Group, Inc. ("Donovan"), a Delaware corporation headquartered
near  Atlanta,  Georgia.  Donovan is a  technical  services  firm that  delivers
Wireless LAN solutions to customers nationwide. The acquisition,  which has been
accounted  for as a purchase,  consisted  of a cash payment of  $1,500,000  plus
potential future contingent  payments.  Contingent  payments of up to $1,000,000
may be  payable  on each of  November  2, 2002 and  November  2, 2003 based upon
Donovan achieving certain agreed-upon increases in revenue and pre-tax earnings.
No  contingent  payment  was made on November 2, 2002.  In  connection  with the
acquisition, the Company assumed approximately $435,000 of bank debt and $43,000
of other debt, which were subsequently repaid.  Donovan was acquired in order to
strengthen the Company's position in the Wireless LAN arena.  Donovan allows the
Company  to  offer  total  Wireless  LAN  solutions  including  state of the art
products  as well as the  services  necessary  to have  those  products  operate
optimally.

     Operating  results of Donovan are  included in the  condensed  consolidated
statements of operations from the acquisition  date. The estimated fair value of
tangible   assets  and   liabilities   acquired  was   $497,000  and   $869,000,
respectively. The excess of the aggregate purchase price over the estimated fair
value of the tangible  net assets  acquired was  approximately  $1,872,000.  The
factors that  contributed  to the  determination  of the purchase  price and the
resulting  goodwill include the significant  growth expected in this area due to
the combination of the Company's long history of strong customer  relationships,
financial  strength and stability  coupled with Donovan's  product offerings and
highly skilled technical staff. The $1,872,000 has not been amortized;  however,
it is subject to impairment  testing in accordance  with  Statement of Financial
Accounting Standards ("SFAS") No. 142, "Goodwill and Other Intangible Assets."

     The presentation of supplemental pro forma financial  information is deemed
immaterial.

e.Track Solutions, Inc.

     On November 9, 2001, the Company  acquired all of the outstanding  stock of
e.Track Solutions,  Inc.  ("e.Track"),  a New York corporation  headquartered in
Pittsford,  New York.  e.Track is a business  and  software  services  firm that
delivers business,  Internet and information  technology  solutions to customers
nationwide.  The  acquisition,  which  has  been  accounted  for as a  purchase,
consisted of cash payments of $290,000  (including debt assumed and subsequently
repaid).  e.Track  was  acquired  in order to allow  the  Company  to offer  our
customers  customized  software  solutions  along with the products and services
that we have traditionally offered.

     Operating  results of e.Track are  included in the  condensed  consolidated
statements of operations from the acquisition  date. The estimated fair value of
tangible assets and liabilities acquired was $116,000 and $192,000 respectively.
The excess of  aggregate  purchase  price over the  estimated  fair value of the
tangible net assets acquired was $291,000.  The factors that  contributed to the
determination  of the  purchase  price and the  resulting  goodwill  include the
expectation  that the combination of e.Track's  highly skilled  technical staff,
coupled with the Company's  financial strength and customer base, will result in
significant  growth  at  e.Track  going  forward.  The  $291,000  has  not  been
amortized;  however, it is subject to impairment testing in accordance with SFAS
No. 142, "Goodwill and Other Intangible Assets."

     The presentation of supplemental pro forma financial  information is deemed
immaterial.
                                       7
<PAGE>

                 Manchester Technologies, Inc. and Subsidiaries
         Notes to Unaudited Condensed Consolidated Financial Statements

4.       Recently Issued Accounting Standards

     In July 2001, the Financial  Accounting  Standards  Board  ("FASB")  issued
Statement of Financial  Accounting  Standards ("SFAS") No. 143,  "Accounting for
Asset Retirement  Obligations"  ("SFAS 143"). SFAS 143 establishes an accounting
standard  requiring  the recording of the fair value of  liabilities  associated
with the  retirement  of  long-lived  assets  in the  period  in which  they are
incurred. The Company has adopted the provisions of SFAS 143 effective August 1,
2002.  The  adoption  of SFAS  143  did not  have a  significant  effect  on the
Company's results of operations or its financial position.

     In  October  2001,  the FASB  issued  SFAS  No.  144,  "Accounting  for the
Impairment  of  Long-Lived  Assets"  ("SFAS  144"),  which  addresses  financial
accounting  and reporting for the  impairment or disposal of long-lived  assets.
This  statement  supersedes  SFAS No. 121,  "Accounting  for the  Impairment  of
Long-Lived  Assets and for Long-Lived Assets to Be Disposed Of," while retaining
the fundamental  recognition and measurement provisions of that statement.  SFAS
144 requires that a long-lived  asset to be  abandoned,  exchanged for a similar
productive  asset or distributed  to owners in a spin-off to be considered  held
and used until it is disposed of.  However,  SFAS 144 requires  that  management
consider revising the depreciable life of such long-lived asset. With respect to
long-lived  assets to be disposed of by sale, SFAS 144 retains the provisions of
SFAS No. 121 and, therefore,  requires that discontinued operations no longer be
measured  on a net  realizable  value  basis and that  future  operating  losses
associated with such discontinued operations no longer be recognized before they
occur.  SFAS 144 is effective for all fiscal  quarters of fiscal years beginning
after  December 15, 2001.  The Company has adopted the provisions of SFAS 144 as
of August 1, 2002.  The  adoption of SFAS 144 did not have a material  impact on
the Company's condensed consolidated financial statements.

     In April 2002, the FASB issued SFAS No. 145, "Rescission of SFAS Statements
No. 4, 44, and 64,  Amendment of SFAS No. 13 and Technical  Corrections"  ("SFAS
145").  SFAS  145  updates,   clarifies  and  simplifies   existing   accounting
pronouncements  by rescinding  Statement 4, which  required all gains and losses
from extinguishments of debt to be aggregated and, if material, classified as an
extraordinary  item, net of related income tax effect. As a result, the criteria
in Opinion 30 will now be used to classify those gains and losses. Additionally,
the  Statement  requires  that certain  lease  modifications  that have economic
effects  similar to  sale-leaseback  transactions  be accounted  for in the same
manner as sale-leaseback transactions. The Company has adopted the provisions of
SFAS 145 as of August 1, 2002.  The adoption of SFAS 145 did not have a material
impact on the Company's condensed consolidated financial statements.

     In July  2002,  the  FASB  issued  SFAS  No.  146,  "Accounting  for  Costs
Associated with Exit or Disposal  Activities" ("SFAS 146"). SFAS 146 will spread
out the reporting of expenses  related to  restructurings  initiated after 2002,
because commitment to a plan to exit an activity or dispose of long-lived assets
will no  longer  be enough to  record a  liability  for the  anticipated  costs.
Instead,  companies will record exit and disposal costs when they are "incurred"
and can be  measured  at fair  value,  and they  will  subsequently  adjust  the
recorded  liability for changes in estimated cash flows. The Company has adopted
the  provisions of SFAS 146 as of January 1, 2003.  The adoption of SFAS 146 did
not have a material  impact on the Company's  condensed  consolidated  financial
statements.

     In November 2002, the FASB issued FASB  interpretation No. 45, "Guarantor's
Accounting  and  Disclosure  Requirements  for  Guarantees,  Including  Indirect
Guarantees  of  Indebtedness  of Others"  ("FIN 45").  FIN 45 requires that upon
issuance of a guarantee,  a guarantor  must  recognize a liability  for the fair
value  of an  obligation  assumed  under  a  guarantee.  FIN  45  also  requires
additional  disclosures  by a  guarantor  in its  interim  and annual  financial
statements  about  the  obligations   associated  with  guarantees  issued.  The
recognition  provisions of FIN 45 will be effectrive for any guarantees that are
issued or modified  after  December  31,  2002.  Management  does not expect the
adoption of FIN 45 to have a material impact on the Company's financial position
or results of operations.

     In  December  2002,  the  FASB  issued  SFAS  No.  148,   "Accounting   for
Compensation-Transition  and  Disclosure-an  amendment of FAS 123" ("SFAS 148").
This statement  amends SFAS No. 123,  "Accounting for Stock-Based  Compensation"
("SFAS  123"),  to provide  alternative  methods of  transition  for a voluntary
change to the fair value based method of  accounting  for  stock-based  employee
compensation  and  amends  the  disclosure  requirements  to SFAS 123 to require
prominent  disclosures in both annual and interim financial statements about the
method of accounting for stock-based employee compensation and the effect of the
method used on reported results. The transition and annual disclosure provisions
of SFAS 148 are effective for interim periods beginning after December 15, 2002.
Accordingly,  the Company will adopt the disclosure requirements of SFAS 148 for
the quarter ended April 30, 2003.

                                       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, 2002. 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
Annual Report on Form 10-K for the year ended July 31, 2002, and those set forth
in the  Company's  other  filings  from  time to time  with the  Securities  and
Exchange Commission.

General

     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.

Certain Trends and Uncertainties

     The computer  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  hardware
manufacturers  may result in reduced per unit revenue and declining gross profit
margins.  As a result of the intense price competition  within our industry,  we
have experienced,  and expect to continue  experiencing,  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.

     An integral  part of our strategy is to increase our  value-added  services
revenue.  These services  generally  provide higher operating 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.


                                       9
<PAGE>


     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 computer 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  computer
manufacturers  that market through direct sales forces and/or the Internet.  The
computer industry has recently experienced 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.  Moreover,  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 computer
industry.  Many aspects of our business are affected by our  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.   On  May  3,  2002,   the
Hewlett-Packard Company and Compaq Computer Corporation merged.  Manchester sold
the products of both  companies and we believe that we had strong  relationships
with both companies and continue to have a strong  relationship  with the merged
company. While we do not believe that there will be a material adverse effect on
our business,  financial condition and results of operations as a result of this
merger,  there can be no assurance that such a material  adverse effect will not
occur.

     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

                                       10
<PAGE>

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
computer  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
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,  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 computer  industry has experienced
rapid declines in average selling prices of personal  computers and peripherals.
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.

     Acquisitions.  Our strategy  envisions  that part of our future growth will
come from acquisitions  consistent with our strategy.  There can be no assurance
that we will be able to  identify  suitable  acquisition  candidates  and,  once
identified,  to negotiate  successfully their acquisition at a price or on terms
and conditions  favorable to us, or to integrate the operations of such acquired

                                       11
<PAGE>

businesses  with  our  operations.  Certain  of  these  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.  In particular,  over
the last  several  years,  we have  increased  certain  of our  fixed  operating
expenses, including a significant increase in personnel, as part of our strategy
to increase our focus on providing  systems  integration and other higher margin
and  value  added  services.  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.

     Microsoft  Litigation.  Most of the  personal  computers  we  sell  utilize
operating  systems  developed  by  Microsoft  Corporation.   The  United  States
Department  of  Justice  has  brought  a  successful  antitrust  action  against
Microsoft.  On November  12,  2002,  the United  States  District  Court for the
District of Columbia issued an order entering a final judgment in the action. We
believe  that the  final  judgment,  if  implemented,  will not have a  material
adverse effect on our business,  results of operations and financial  condition.
However, the final judgment has been appealed, and we cannot predict the outcome
of the appeal or the effect that any  modifications  to the final judgment would
have on our business, results of operations or financial condition.

     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.

     Stock Repurchase  Program.  The Company's Board of Directors has authorized
the  Company  to  repurchase  up  to $1  million  of  its  common  stock,  which
authorization is effective until the first Board of Directors  meeting following
the close of our 2003 fiscal year,  unless earlier  terminated by the Board. The
extent  to which  the  Company  repurchases  its  stock  and the  timing of such
purchases will depend upon market conditions and other corporate  considerations
to be evaluated by the Executive  Committee of the Board. The repurchase program
does not obligate the Company to repurchase any specific  number of shares,  and
repurchases  pursuant to the program may be  suspended or resumed at any time or
from  time to time  without  further  notice  or  announcement.  There can be no
assurance as to the effect, if any, that the adoption of the repurchase  program
or the making of  repurchases  thereunder  will have on the market  price of our
common stock.


E-Commerce

     We utilize a website and electronic  commerce system.  The site, located at
www.e-manchester.com  allows 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>

Acquisitions

         Donovan Consulting Group, Inc.
         ------------------------------

     On August 29, 2001, the Company  acquired all of the  outstanding  stock of
Donovan, a Delaware corporation  headquartered near Atlanta, Georgia. Donovan is
a technical  services  firm that  delivers  Wireless LAN  solutions to customers
nationwide.  The  acquisition,  which  has  been  accounted  for as a  purchase,
consisted of a cash  payment of  $1,500,000  plus  potential  future  contingent
payments.  Contingent  payments  of up to  $1,000,000  may be payable on each of
November  2, 2002 and  November  2, 2003 based upon  Donovan  achieving  certain
agreed-upon increases in revenue and pre-tax earnings. No contingent payment was
made on  November  2, 2002.  In  connection  with the  acquisition,  the Company
assumed  approximately  $435,000 of bank debt and  $43,000 of other debt,  which
were  subsequently  repaid.  Donovan  was  acquired in order to  strengthen  the
Company's  position in the  Wireless  LAN arena.  Donovan  allows the Company to
offer total Wireless LAN solutions  including  state of the art products as well
as the services necessary to have those products operate optimally.

     Operating  results of Donovan are  included in the  condensed  consolidated
statements of operations from the acquisition  date. The estimated fair value of
tangible   assets  and   liabilities   acquired  was   $497,000  and   $869,000,
respectively. The excess of the aggregate purchase price over the estimated fair
value of the tangible  net assets  acquired was  approximately  $1,872,000.  The
factors that  contributed  to the  determination  of the purchase  price and the
resulting  goodwill include the significant  growth expected in this area due to
the combination of the Company's long history of strong customer  relationships,
financial  strength and stability  coupled with Donovan's  product offerings and
highly skilled technical staff. The $1,872,000 has not been amortized;  however,
it is subject to impairment  testing in accordance with SFAS No. 142,  "Goodwill
and Other Intangible Assets."

         e.Track Solutions, Inc.
         -----------------------

     On November 9, 2001, the Company  acquired all of the outstanding  stock of
e.Track, a New York corporation headquartered in Pittsford, New York. e.Track is
a business and  software  services  firm that  delivers  business,  Internet and
information technology solutions to customers nationwide. The acquisition, which
has been  accounted  for as a purchase,  consisted of cash  payments of $290,000
(including debt assumed and subsequently repaid).  e.Track was acquired in order
to allow the Company to offer our customers  customized software solutions along
with the products and services that we have traditionally offered.

     Operating  results of e.Track are  included in the  condensed  consolidated
statements of operations from the acquisition  date. The estimated fair value of
tangible   assets  and   liabilities   acquired  was   $116,000  and   $192,000,
respectively.  The excess of aggregate  purchase  price over the estimated  fair
value of the  tangible  net assets  acquired  was  $291,000.  The  factors  that
contributed  to the  determination  of the  purchase  price  and  the  resulting
goodwill  include the  expectation  that the  combination  of  e.Track's  highly
skilled  technical  staff,  coupled with the  Company's  financial  strength and
customer base, will result in significant  growth at e.Track going forward.  The
$291,000 has not been amortized; however, it is subject to impairment testing in
accordance with SFAS No. 142, "Goodwill and Other Intangible Assets."

Critical Accounting Policies

     Financial  Reporting  Release No. 60, which was released by the  Securities
and Exchange Commission,  encourages all registrants,  including the Company, to
include a discussion  of "critical"  accounting  policies or methods used in the
preparation of financial statements. 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, 2002 describes the significant  accounting policies and methods used in

                                       13
<PAGE>

the preparation of the  consolidated  financial  statements.  Estimates are used
for, but not limited to, the accounting for the allowance for doubtful accounts,
inventory allowances, and goodwill impairments. Actual results could differ from
these  estimates.  The  following  critical  accounting  policies  are  impacted
significantly by judgments, assumptions and estimates used in the preparation of
the condensed consolidated financial statements.

     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 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.

     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.

                                       14
<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             Six Months Ended
                                                                         January 31,                   January 31,
                                                                         -----------                   -----------
                                                                     2003             2002          2003         2002
                                                                     ----             ----          ----         ----
          <S>                                                       <C>              <C>         <C>            <C>
           Revenue
                Product sales                                        92.2%            95.9%       93.4%          95.8%
                Services                                              7.8              4.1         6.6            4.2
                                                                      ---              ---         ---            ---
           Total revenue                                            100.0            100.0       100.0          100.0
                                                                    -----            -----       -----          -----

           Cost of revenue
               Products                                              90.2             85.5        89.1           86.2
               Services                                              81.3             78.7        76.2           73.1
                                                                     ----             ----        ----           ----

           Total cost of revenue                                     89.5             85.2        88.3           85.7
                                                                     ----             ----        ----           ----

           Gross profit
               Products                                               9.8             14.5        10.9           13.8
               Services                                              18.7             21.3        23.8           26.9
                                                                     ----             ----        ----           ----

           Total gross profit                                        10.5             14.8        11.7           14.3

           Selling, general and
              administrative expenses                                10.8             13.8        11.8           13.7
                                                                     ----             ----        ----           ----

           Income (loss) from operations                             (0.3)             1.0        (0.1)           0.6

           Interest and other income, net                             0.0              0.0         0.1            0.1
                                                                      ---              ---         ---            ---

           Income (loss) before income taxes                         (0.3)             1.0         0.0            0.7

           Income tax provision (benefit)                            (0.1)             0.4         0.0            0.3
                                                                     ----              ---         ---            ---

           Net income (loss)                                         (0.2)%            0.6%        0.0%           0.4%
                                                                     ====              ===         ===            ===

</TABLE>

Three Months Ended January 31, 2003 Compared with Three Months Ended January 31,
2002

     Revenue. Revenue increased by $12.4 million or 18% to $80.5 million for the
three  months  ended  January 31, 2003 from $68.1  million for the three  months
ended  January 31,  2002.  Revenue  from the sale of products  increased by $9.0
million or 14% while revenue from service offerings increased by $3.4 million or
123%. The increase in product  revenue is primarily a result of increased  sales
of  display  monitors,  primarily  large  screen  flat  panel  displays,  by our
Electrograph  subsidiary  and increased  shipments of computers and  peripherals
somewhat  offset by lower per unit prices.  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.

                                       15
<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 market  development  funds related to volume purchases
provided by  manufacturers.  All other  operating costs are included in selling,
general  and  administrative   expenses,   offset  in  part  by  certain  market
development  funds  provided by  manufacturers.  Gross profit  decreased by $1.6
million or 16%,  from $10.1  million for the three months ended January 31, 2002
to $8.5 million for the three months ended  January 31, 2003 and as a percentage
of revenue, gross profit decreased from 14.8% for the three months ended January
31, 2002 to 10.5% for the three months ended January 31, 2003. Gross profit from
product  sales  decreased by $2.2 million or 23% while gross profit from service
offerings increased by $573,000 or 96%. As a percentage of revenue, gross profit
from the sale of  products  decreased  from  14.5%  for the three  months  ended
January 31, 2002 to 9.8% for the three months ended  January 31, 2003  primarily
due to  increased  competition  and  pricing  pressure  as well  as the  current
economic and market forces  affecting our industry.  In addition,  the amount of
special product  opportunities  received from manufacturers and vendors of which
the  Company is  generally  able to take  advantage  decreased  during the three
months ended  January 31, 2003 as compared to the three months ended January 31,
2002.  As a  percentage  of  revenue,  gross  profit  from the sale of  services
declined from 21.3% for the three months ended January 31, 2002 to 18.7% for the
three  months  ended  January 31, 2003 as a result of  increased  sales of lower
margin services.

     Selling,  General  and  Administrative   Expenses.   Selling,  general  and
administrative  expenses decreased by $683,000,  or 7% from $9.4 million for the
three months  ended  January 31, 2002 to $8.7 million for the three months ended
January 31, 2003. The decrease is principally  due to a decrease in salaries and
personnel  costs in the amount of  approximately  $520,000  reflecting  the cost
reduction  measures  instituted by the Company,  decreased sales  commissions of
approximately  $160,000  due to the lower  gross  margins  earned  on  revenues,
decreased  travel and  entertainment  and automobile  expenses of  approximately
$100,000  and  lower  promotional  expenses  of  approximately   $90,000.  These
decreases were partially offset by increased telephone expenses of approximately
$100,000 and increased advertising costs of approximately $80,000,  primarily as
a  result  of  decreased  market  development  activities,   such  as  training,
advertising and other pre-approved market development activities,  received from
manufacturers.  As a percentage of revenue,  selling, general and administrative
expenses  decreased  from 13.8% for the three months  ended  January 31, 2002 to
10.8% for the three months ended January 31, 2003.

     Interest and Other Income,  net. Interest and other income,  net, decreased
by $19,000 from  $47,000 for the three months ended  January 31, 2002 to $28,000
for the three  months  ended  January  31, 2003  primarily  as a result of lower
interest rates available in the marketplace.

     Income Tax  Provision  (Benefit).  Our effective tax rate was 39.9% for the
three months ended January 31, 2003 and January 31, 2002.

Six Months Ended January 31, 2003 Compared to Six Months Ended January 31, 2002

     Revenue.  Revenue  increased by $19.2 million or 15% to $148.8  million for
the six months  ended  January 31,  2003 from $129.7  million for the six months
ended  January 31, 2002.  Revenue  from the sale of products  increased by $14.8
million or 12% while revenue from service offerings increased by $4.3 million or
79%. The increase in product revenue is primarily a result of increased sales of
display   monitors,   primarily  large  screen  flat  panel  displays,   by  our
Electrograph  subsidiary  as  well  as  increased  shipments  of  computers  and
peripherals  offset by lower per unit prices. 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.

     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 market  development  funds related to volume purchases
provided by  manufacturers.  All other  operating costs are included in selling,
general  and  administrative   expenses,   offset  in  part  by  certain  market
development  funds  provided by  manufacturers.  Gross profit  decreased by $1.1

                                       16
<PAGE>

million or 6%, from $18.6  million for the six months ended  January 31, 2002 to
$17.4  million for the six months ended  January 31, 2003 and as a percentage of
revenue,  gross profit decreased from 14.3% for the six months ended January 31,
2002 to 11.7% for the six months  ended  January  31,  2003.  Gross  profit from
product  sales  decreased by $2.0 million or 12% while gross profit from service
offerings increased by $857,000 or 58%. As a percentage of revenue, gross profit
from the sale of products  decreased from 13.8% for the six months ended January
31, 2002 to 10.9% for the six months  ended  January 31, 2003  primarily  due to
increased  competition and pricing  pressure as well as the current economic and
market forces affecting our industry.  As a percentage of revenue,  gross profit
from the sale of services  declined  from 26.9% for the six months ended January
31,  2002 to 23.8% for the six  months  ended  January  31,  2003 as a result of
increased sales of lower margin services.

     Selling,  General  and  Administrative   Expenses.   Selling,  general  and
administrative  expenses decreased by $238,000, or 1% from $17.8 million for the
six months  ended  January  31, 2002 to $17.6  million for the six months  ended
January 31, 2003. The decrease is principally  due to a decrease in salaries and
personnel  costs in the amount of  approximately  $410,000  reflecting  the cost
reduction  measures  instituted by the Company,  decreased sales  commissions of
approximately  $350,000 due to the lower gross margins  earned on revenues,  and
lower  promotional  expenses of  approximately  $128,000.  These  decreases were
partially offset by increased  telephone expenses of approximately  $200,000 and
increased advertising costs of approximately $400,000,  primarily as a result of
decreased market development activities, such as training, advertising and other
pre-approved market development  activities,  received from manufacturers.  As a
percentage of revenue,  selling,  general and administrative  expenses decreased
from 13.7% for the six months ended January 31, 2002 to 11.8% for the six months
ended January 31, 2003.

     Interest and Other Income,  net. Interest and other income,  net, increased
by $46,000 from  $122,000 for the six months ended  January 31, 2002 to $168,000
for the six months ended January 31, 2003 primarily as a result of the Company's
receipt of insurance  proceeds in the amount of $113,000 in the six months ended
January 31, 2003  partially  offset by lower  interest  rates  available  in the
marketplace.

     Income Tax Provision (Benefit).  Our effective tax rate was 41.1% and 39.9%
for the six months ended January 31, 2003 and January 31, 2002, respectively.

Liquidity and Capital Resources

     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, 2003 and July 31, 2002 was  approximately  $31.1  million
and $30.1 million, respectively.

     Operations for the six months ended January 31, 2003 and 2002, after adding
back  non-cash  items,  provided  cash of  approximately  $1.1  million and $1.7
million,  respectively.  During such periods,  other changes in working  capital
provided  (used)  cash  of  approximately   $3.6  million  and  $(3.5)  million,
respectively, resulting in cash being provided by (used in) operating activities
of  approximately  $4.7 million and $(1.8) million,  respectively.  Our accounts
receivable  and  accounts  payable  balances,  as  well  as  our  investment  in
inventory,  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 six months  ended  January 31, 2003 and 2002
used cash of approximately $389,000 and $2.6 million,  respectively. For the six
months  ended  January 31, 2003 this amount  consisted  solely of  additions  to
property and equipment.  For the six months ended January 31, 2002 these amounts
included  additions to property and equipment of approximately  $1.0 million and
the  payment for  acquisitions,  net of cash  acquired,  of  approximately  $1.6
million.

     Financing  activities  did not  provide  or use any cash for the six months
ended  January 31,  2003.  For the six months ended  January 31, 2002  financing
activities used cash of approximately  $550,000. This amount consisted solely of
                                       17
<PAGE>

net repayments of bank loans and other debt in connection with the  acquisitions
in fiscal 2002.

     We have  available  a line of credit with a  financial  institution  in the
aggregate  amount of $15.0  million.  At  January  31,  2003,  no  amounts  were
outstanding under this line.

     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  2003  which  ends on July 31,
2003. We currently have no material commitments for capital expenditures,  other
than  operating  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 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.

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 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.

                                       18

<PAGE>

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.


                                       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 January  22,  2003,  the
following proposals were adopted by the margins indicated:

(1)  Elect  seven   Directors  to  serve  until  the  2004  Annual   Meeting  of
     Shareholders;
<TABLE>
<CAPTION>

                                                                                             Broker
             Nominee                        For            Withheld         Abstain         Non-votes
             -------                        ---            --------         -------         ---------
<S>                                      <C>                   <C>              <C>            <C>
          Barry R. Steinberg             7,821,110             99,660           0              0
          Joel G. Stemple                7,821,110             99,660           0              0
          Joel Rothlein                  7,821,110             99,660           0              0
          Bert Rudofsky                  7,821,110             99,660           0              0
          Michael E. Russell             7,821,110             99,660           0              0
          Julian Sandler                 7,821,110             99,660           0              0
          Robert J. Valentine            7,821,110             99,660           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, 2003.

 <TABLE>
<CAPTION>
                                                                                    Broker
                           For              Against           Abstain              Non-votes
                           ---              -------           -------              ---------
<S>                       <C>               <C>                  <C>                   <C>
                          7,851,610         69,160               0                     0
</TABLE>

     No other  items  were voted on at the Annual  Meeting  of  Shareholders  or
during the quarter ended January 31, 2003.

Item 6. Exhibits and Reports

(a)      Exhibits
         --------

          99.1 - Certification  of Principal  Executive  Officer  Pursuant to 18
               U.S.C.  Section 1350,  as Adopted  Pursuant to Section 906 of the
               Sarbanes-Oxley Act of 2002.

          99.2 - Certification  of Principal  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 6, 2002 disclosing  Press Release dated December 6,
     2002 reporting earnings for the first quarter ended October 31, 2002.

2.   Form 8-K filed February 3, 2003 disclosing  Press Release dated January 31,
     2003  announcing  the  appointment  of Seth Collins to the position of Vice
     President of Operations and Elan Yaish to the position of Vice President of
     Finance.

                                       20
<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, 2003                    /S/ Barry R. Steinberg
                                          -----------------------
                                           Barry R. Steinberg
                                           President and Chief Executive Officer



DATE:   March 11, 2003                   /S/ Elan Yaish
                                         ---------------
                                         Elan Yaish
                                         Vice President Finance, Chief Financial
                                         Officer and Assistant Secretary

                                       21
<PAGE>


                                  CERTIFICATION

I, Barry R.  Steinberg,  President  and Chief  Executive  Officer of  Manchester
Technologies, Inc, certify that:

1.   I  have  reviewed  the   quarterly   report  on  Form  10-Q  of  Manchester
     Technologies, Inc.;

2.   Based on my knowledge,  this  quarterly  report does not contain any untrue
     statement of a material fact or omit to state a material fact  necessary to
     make the statements  made, in light of the  circumstances  under which such
     statements  were made, not misleading with respect to the period covered by
     this quarterly report;

3.   Based on my  knowledge,  the  financial  statements,  and  other  financial
     information  included  in this  quarterly  report,  fairly  present  in all
     material respects the financial  condition,  results of operations and cash
     flows of the  registrant  as of, and for,  the  periods  presented  in this
     quarterly report;

4.   The  registrant's  other  certifying  officers  and I are  responsible  for
     establishing and maintaining disclosure controls and procedures (as defined
     in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:

     (a)  Designed  such  disclosure  controls  and  procedures  to ensure  that
          material  information  relating  to  the  registrant,   including  its
          consolidated subsidiaries,  is made known to us by others within those
          entities,  particularly  during  the  period in which  this  quarterly
          report is being prepared;

     (b)  Evaluated the  effectiveness of the registrant's  disclosure  controls
          and procedures as of a date within 90 days prior to the filing date of
          this quarterly report (the "Evaluation Date"); and

     (c)  Presented  in  this  quarterly   report  our  conclusions   about  the
          effectiveness  of the disclosure  controls and procedures based on our
          evaluation as of the Evaluation Date;

5.   The registrant's other certifying  officers and I have disclosed,  based on
     our most recent  evaluation,  to the  registrant's  auditors  and the audit
     committee of  registrant's  board of directors (or persons  performing  the
     equivalent functions):

     (a)  All  significant  deficiencies  in the design or operation of internal
          controls  which could  adversely  affect the  registrant's  ability to
          record,  process,   summarize  and  report  financial  data  and  have
          identified for the  registrant's  auditors any material  weaknesses in
          internal controls; and

     (b)  Any fraud, whether or not material,  that involves management or other
          employees who have a  significant  role in the  registrant's  internal
          controls; and

6.   The  registrant's  other  certifying  officers and I have indicated in this
     quarterly  report  whether  there  were  significant  changes  in  internal
     controls  or in other  factors  that could  significantly  affect  internal
     controls  subsequent to the date of our most recent  evaluation,  including
     any corrective actions with regard to significant deficiencies and material
     weaknesses.

Date: March 11, 2003

/S/      Barry R. Steinberg
---------------------------
Barry Steinberg
Chief Executive Officer

                                       22
<PAGE>


                                  CERTIFICATION

I, Elan Yaish, Chief Financial Officer of Manchester Technologies,  Inc, certify
that:

1.   I  have  reviewed  the   quarterly   report  on  Form  10-Q  of  Manchester
     Technologies, Inc.;

2.   Based on my knowledge,  this  quarterly  report does not contain any untrue
     statement of a material fact or omit to state a material fact  necessary to
     make the statements  made, in light of the  circumstances  under which such
     statements  were made, not misleading with respect to the period covered by
     this quarterly report;

3.   Based on my  knowledge,  the  financial  statements,  and  other  financial
     information  included  in this  quarterly  report,  fairly  present  in all
     material respects the financial  condition,  results of operations and cash
     flows of the  registrant  as of, and for,  the  periods  presented  in this
     quarterly report;

4.   The  registrant's  other  certifying  officers  and I are  responsible  for
     establishing and maintaining disclosure controls and procedures (as defined
     in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:

     (a)  Designed  such  disclosure  controls  and  procedures  to ensure  that
          material  information  relating  to  the  registrant,   including  its
          consolidated subsidiaries,  is made known to us by others within those
          entities,  particularly  during  the  period in which  this  quarterly
          report is being prepared;

     (b)  Evaluated the  effectiveness of the registrant's  disclosure  controls
          and procedures as of a date within 90 days prior to the filing date of
          this quarterly report (the "Evaluation Date"); and

     (c)  Presented  in  this  quarterly   report  our  conclusions   about  the
          effectiveness  of the disclosure  controls and procedures based on our
          evaluation as of the Evaluation Date;

5.   The registrant's other certifying  officers and I have disclosed,  based on
     our most recent  evaluation,  to the  registrant's  auditors  and the audit
     committee of  registrant's  board of directors (or persons  performing  the
     equivalent functions):

     (a)  All  significant  deficiencies  in the design or operation of internal
          controls  which could  adversely  affect the  registrant's  ability to
          record,  process,   summarize  and  report  financial  data  and  have
          identified for the  registrant's  auditors any material  weaknesses in
          internal controls; and

     (b)  Any fraud, whether or not material,  that involves management or other
          employees who have a  significant  role in the  registrant's  internal
          controls; and

6.   The  registrant's  other  certifying  officers and I have indicated in this
     quarterly  report  whether  there  were  significant  changes  in  internal
     controls  or in other  factors  that could  significantly  affect  internal
     controls  subsequent to the date of our most recent  evaluation,  including
     any corrective actions with regard to significant deficiencies and material
     weaknesses.

Date: March 11, 2003

/S/      Elan Yaish
-------------------
Elan Yaish
Chief Financial Officer


                                       23
<PAGE>