Microsoft Word 10.0.2627;17


                                  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, 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 March 3, 2005 there were 8,440,948  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, 2005  (unaudited) and July 31, 2004                 3

          Condensed Consolidated Statements of Income for the
             Three Months  and Six Months Ended
             January 31, 2005 and 2004 (unaudited)                           4

          Condensed Consolidated Statements of Cash Flows for the
             Six Months Ended January 31, 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                             10

Item 3.   Quantitative and Qualitative Disclosures About Market Risk        17

Item 4.   Controls and Procedures                                           17


PART II.  OTHER INFORMATION


 Item 6.  Exhibits                                                          18

















<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, 2005  July 31, 2004
                                                                                      (Unaudited)    ------------
                                                                                      -----------
                                              Assets
                                              ------
<S>                                                                                  <C>              <C>
Current assets:
     Cash and cash equivalents                                                        $17,399         $16,881
     Accounts receivable, net of allowance for doubtful accounts
        of $1,420 and $2,848, respectively                                             14,848          15,530
     Inventory                                                                         18,566          20,301
     Deferred income taxes                                                              1,212           1,212
     Prepaid taxes                                                                        655             916
     Prepaid expenses and other current assets                                          1,066           1,266
                                                                                        -----           -----
                      Total current assets                                             53,746          56,106

Property and equipment, net                                                             9,505           9,890
Goodwill, net                                                                           3,735           3,735
Deferred income taxes                                                                   1,728           1,728
Other assets                                                                              105             183
                                                                                       ------         -------

                      Total assets                                                    $68,819         $71,642
                                                                                       ======          ======


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

Current liabilities:
     Accounts payable and accrued expenses                                            $14,869         $21,492

     Current portion of capital lease obligations                                         260             246
                                                                                      -------        --------

                      Total  current liabilities                                       15,129          21,738


Deferred compensation payable                                                              98              98
Capital lease obligations, net of current portion                                       7,551           7,683
                                                                                        -----           -----

                                Total liabilities                                      22,778          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, 8,428 and 8,163 shares issued
        and outstanding                                                                    84              82
     Additional paid-in capital                                                        20,913          19,597

     Retained earnings                                                                 25,044          22,444
                                                                                       ------          ------

                      Total shareholders' equity                                       46,041          42,123
                                                                                       ------          ------

                      Total liabilities and shareholders' equity                      $68,819         $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 January 31,   Six months ended January 31,
                                                          2005          2004           2005           2004
                                                          ----          ----           ----           ----

<S>                                                      <C>          <C>            <C>            <C>
Revenue                                                  $39,289      $45,117        $86,170        $90,495
Cost of revenue                                           34,408       40,559         75,257         81,203
                                                          ------       ------         ------         ------
       Gross profit                                        4,881        4,558         10,913          9,292

Selling, general and
    administrative expenses                                4,580        3,246          7,709          6,586
                                                           -----        -----          -----          -----

       Income from operations                                301        1,312          3,204          2,706

Interest and other income (expense), net                     118          (75)           133            (95)
                                                             ---          ----           ---            ---
       Income from continuing operations
            before income taxes                              419        1,237          3,337          2,611
Income tax provision                                         167          494          1,334          1,024
                                                             ---          ---          -----          -----
       Income from continuing operations                     252          743          2,003          1,587
                                                             ---          ---          -----          -----
Discontinued operations
       Income (loss) from operations
            of discontinued component                          -         (745)           995         (1,600)
       Income tax (provision) benefit                          -          297           (398)           619
                                                            ----          ---           -----           ---

       Income (loss) from discontinued operations              -         (448)           597           (981)
                                                            ----         -----           ---           -----
Net income                                                  $252        $ 295         $2,600         $  606
                                                             ===          ===          =====          =====
Income per share from continuing operations
   Basic                                                   $0.03        $0.09          $0.24          $0.20
                                                            ====         ====           ====           ====
   Diluted                                                 $0.03        $0.09          $0.24          $0.19
                                                            ====         ====           ====           ====

Income (loss) per share from discontinued operations
    Basic                                                   $  -       $(0.06)         $0.07         $(0.12)
                                                             ===         =====          ====          ======
    Diluted                                                 $  -       $(0.06)         $0.07         $(0.12)
                                                             ===         =====          ====          ======

Net income per share
   Basic                                                   $0.03        $0.04          $0.31          $0.08
                                                            ====         ====           ====           ====
   Diluted                                                 $0.03        $0.04          $0.31          $0.07
                                                            ====         ====           ====           ====

Weighted average  shares outstanding
     Basic                                                 8,364        7,990          8,295          7,990
                                                           =====        =====          =====          =====
     Diluted                                               8,560        8,299          8,497          8,265
                                                           =====        =====          =====          =====
</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,
                                                                       2005           2004
                                                                       ----           ----


<S>                                                                  <C>              <C>
Cash flows from operating activities:
   Net income                                                        $2,600           $ 606
   Income from discontinued operations                                  597
                                                                        ---
   Income from continuing operations                                  2,003

   Adjustments to reconcile net income to net cash
    from operating activities:
       Depreciation and amortization                                    527           1,271
       Provision for doubtful accounts                                  167             295
       Equity based compensation expense                                108              23
       Tax benefits from exercise of stock options                      240               -
       Changes in assets and liabilities, net of the
        effects of discontinued operations in 2005:
        Accounts receivable                                          (1,892)          1,112
        Inventory                                                     1,735          (8,747)
        Prepaid taxes                                                   261            (128)
        Prepaid expenses and other current assets                       200               6
        Other assets                                                     78             101
        Accounts payable and accrued expenses                        (4,337)          1,772
        Deferred service contract revenue                                 -             (60)
                                                                    -------             ----

           Net cash used in continuing operations                      (910)         (3,749)
           Net cash provided by discontinued operations                 718               -
                                                                        ---          ------
            Net cash used in operating activities                      (192)         (3,749)
                                                                       -----         -------
Cash flows from investing activities:
      Capital expenditures                                             (142)           (842)
                                                                        ---            ----
           Net cash used in investing activities                       (142)           (842)
                                                                       -----         -------
Cash flows from financing activities:
      Payments on capital lease obligations                            (118)            (96)
      Proceeds from exercise of stock options                           970               -
                                                                        ---            ----

         Net cash provided by (used in) financing activities            852             (96)
                                                                        ---          -------
Net increase (decrease) in cash and cash equivalents                    518          (4,687)

Cash and cash equivalents at beginning of period                     16,881           8,553
                                                                     ------           -----

Cash and cash equivalents at end of period                          $17,399          $3,866
                                                                     ======           =====

Income taxes paid during the period                                    $ 30           $ 208
                                                                       ====            ====
</TABLE>

See notes to unaudited condensed consolidated financial statements.

                                       5
<PAGE>


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

1.       Organization and Basis of Presentation

     Manchester  Technologies,  Inc. and its  subsidiaries  ("the Company") is a
distributor of display technology solutions and plasma display monitors, through
its subsidiary  Electrograph  Systems,  Inc., 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 six month
periods ended January 31, 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.      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.

     In the  fourth  quarter  of fiscal  2004,  the  Company  accrued  $1,016 of
employee  severance and other employee costs associated with the discontinued IT
Business.  As of January 31, 2005  approximately  $150 of the employee severance
and other employee costs and $141 of amounts payable to ePlus,  inc. for assumed
service  contracts were included in accounts  payable and accrued expenses which
will be paid in fiscal 2005, which ends July 31, 2005.

                                       6
<PAGE>

     In accordance with SFAS 144,  "Accounting for the Impairment or Disposal of
Long-Lived  Assets",  the results of  operations  from the end-user  information
technology  fulfillment and professional services business have been recorded as
discontinued  operations in the accompanying  consolidated statements of income.
The revenue from discontinued operations was $0 and $34,677 for the three months
ended  January 31, 2005 and 2004,  respectively,  and $0 and $63,999 for the six
months ended January 31, 2005 and 2004, respectively.  The pre-tax income (loss)
from operations of the discontinued  component was $0 and $(745),  for the three
months ended January 31, 2005 and 2004, respectively,  and $995 and $(1,600) for
the six months ended January 31, 2005 and 2004,  respectively.  The 2005 pre-tax
income  resulted from recoveries of previously  written off accounts  receivable
related to the discontinued IT Business.

     The  presentation  of the statement of operations  for the three months and
six months ended January 31, 2004 has been reclassified to reflect  discontinued
operations.  The  statement of cash flows for the six months  ended  January 31,
2004 has not been reclassified to reflect discontinued operations.

3.        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 January 31,  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 and the
per share amounts below represent income per share from continuing operations.
<TABLE>
<CAPTION>

                            Three months ended January 31,                  Six months ended January 31,
                            ------------------------------                  ---------------------------
                                   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           8,364      $0.03      7,990      $0.09        8,295     $0.24     7,990    $0.20
                                     ====                  ====                   ====               ====

         Effect of
          dilutive
           options         196                   309                     202                 275
                           ---                   ---                     ---                 ---
         Diluted         8,560      $0.03      8,299      $0.09        8,497     $0.24     8,265    $0.19
                         =====       ====      =====       ====        =====      ====     =====     ====
</TABLE>


                                       7

<PAGE>



4.        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.
<TABLE>
<CAPTION>

                                                 Three Months Ended January 31,  Six Months Ended January 31,
                                                        2005       2004            2005        2004
                                                        ----       ----            ----        ----


<S>                                                     <C>        <C>           <C>            <C>
      Net income, as reported                           $252       $295          $2,600         $606

      Add: Stock-based compensation
        expense included in net income
        net of related tax effects                        56         14              65           14

      Deduct:  Total stock-based
       employee compensation expense
       determined under fair value
       method for all awards, net of
       related tax effects                              (104)      (120)           (229)        (286)
                                                        -----       ---            -----        -----

      Net income - pro forma                            $204       $189          $2,436         $334
                                                         ===        ===           =====          ===
      Net income  per share:
       Basic - as reported                             $0.03      $0.04           $0.31        $0.08
                                                        ====       ====            ====         ====
       Basic - pro forma                               $0.02      $0.02           $0.29        $0.04
                                                        ====       ====            ====         ====
      Diluted - as reported                            $0.03      $0.04           $0.31        $0.07
                                                        ====       ====            ====         ====

       Diluted - pro forma                             $0.02      $0.02           $0.29        $0.04
                                                        ====       ====            ====         ====
</TABLE>

5.       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."

                                       8
<PAGE>

     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 January 31,  2005 and July 31,  2004,  the Company had no  intangible
assets, other than goodwill.

6.       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 March 18, 2005. At January
31, 2005, no amounts were outstanding under this line. The line of credit
facility requires the Company to maintain certain financial ratios and
covenants. At January 31, 2005, the Company was not in compliance with all the
financial ratios and covenants that it is required to maintain.

7.         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.  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.

8.     Major Vendors

     The Company's top three vendors accounted for  approximately  23%, 16%, and
14% of total product  purchases  from  continuing  operations for the six months
ended  January  31,  2005.  The  Company's  top  three  vendors   accounted  for
approximately  33%,  16%, and 16% of total  product  purchases  from  continuing
operations  for the six months ended  January 31, 2004.  The Company's top three
vendors accounted for approximately  35%, 20% and 16% of total product purchases
from  continuing  operations  for the three months ended  January 31, 2005.  The
Company's top three  vendors  accounted  for  approximately  36%, 16% and 15% of
total product  purchases from  continuing  operations for the three months ended
January 31, 2004.

9.       Subsequent Event

     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.

                                       9
<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 May 28, 2004, we sold our end-user  information  technology  fulfillment
and professional  services business ("IT Business") to ePlus, inc.  ("ePlus") in
an all  cash  transaction.  The  transaction  included  the sale to ePlus of the
customer list of the business and certain related  equipment,  the assumption by
ePlus of certain  contracts and  liabilities  pertaining to the business and the
hiring  by  ePlus  of the  majority  of  Manchester  employees  involved  in the
business.  The transaction did not include,  and we retained,  the inventory and
accounts receivable of the business.

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

E-Commerce

     We utilize a website incorporating an electronic  communication system. The
site,  located at  www.electrograph.com  allows  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 $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:
<TABLE>


<S>                                                                 <C>
          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
                                                                    ==========
</TABLE>
                                       10
<PAGE>


     As of January 31, 2005 approximately $150,000 of the employee severance and
other employee costs and $141,000 of amounts payable to ePlus,  inc. for assumed
service  contracts were included in accounts payable and accrued expenses in the
accompanying  balance sheet located elsewhere in this report, which will be paid
in fiscal 2005, which ends July 31, 2005.


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
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; not
being  able to  identify  suitable  acquisition  candidates  and  integrate  the
acquired companies;  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;  and the  failure of our  actions to
enhance  shareholder  value.  For further  information on 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
Securities and Exchange  Commission  (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.
                                       11
<PAGE>

     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.

     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.

                                       12
<PAGE>


      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 revenue.

<TABLE>
<CAPTION>

                                                                                Percentage of Revenue
                                                                   ---------------------------------------------------
                                                                     Three Months Ended             Six  Months Ended
                                                                         January 31,                   January 31,
                                                                     2005             2004        2005          2004
                                                                     ----             -----       ----          -----

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

           Cost of revenue                                           87.6             89.9        87.3           89.7
                                                                     ----             ----        ----           ----

               Gross profit                                          12.4             10.1        12.7           10.3

           Selling, general and
              administrative expenses                                11.7              7.2         8.9            7.3
                                                                     ----              ---         ---            ---

               Income from operations                                 0.8              2.9         3.7            3.0

           Interest and other income (expense), net                   0.3             (0.2)        0.2           (0.1)
                                                                      ---             -----        ---           -----
               Income from continuing operations
                 before income taxes                                  1.1              2.7         3.9            2.9
           Income tax provision                                       0.4              1.1         1.5            1.1
                                                                      ---              ---         ---            ---

               Income from continuing operations                      0.6              1.6         2.3            1.8
                                                                      ---              ---         ---            ---

           Discontinued operations
               Income (loss) from operations of
                  discontinued component                                -             (1.7)        1.2           (1.8)
               Income tax (provision) benefit                           -              0.7        (0.5)           0.7
                                                                     ----              ---        -----           ---

               Income (loss) from discontinued operations               -             (1.0)        0.7           (1.1)
                                                                     ----             -----        ---           -----

           Net income                                                 0.6%             0.7%        3.0%           0.7%
                                                                     ====              ===         ====           ===

</TABLE>

Three Months Ended January 31, 2005 Compared with Three Months Ended January 31,
2004

     Revenue.  Revenue decreased by $5.8 million or 13% to $39.3 million for the
three  months  ended  January 31, 2005 from $45.1  million for the three  months
ended  January  31,  2004.  The  decrease  in revenue is  primarily  a result of
decreased sales of computer  hardware to dealers and systems  integrators.  Such
sales  decreased by  approximately  63% 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  Company is  currently  reviewing  its  strategy  related to this
business line. In addition,  while unit sales of display  technology  solutions,
primarily  large screen flat panel displays,  continue to increase,  the ongoing
decline in average  selling prices resulted in a 5% decrease in revenue from the
sale of display technology solutions as compared to last year.

     Gross  Profit.  Cost of revenue  includes the direct costs of products sold
and freight.  All other  operating  costs are  included in selling,  general and

                                       13
<PAGE>

administrative  expenses.  Gross  profit  increased by $300,000 or 7%, from $4.6
million for the three  months  ended  January  31, 2004 to $4.9  million for the
three months ended January 31, 2005 and as a percentage of revenue, gross profit
increased  from 10.1% for the three months  ended  January 31, 2004 to 12.4% for
the three months ended January 31, 2005. The increase in gross profit percentage
is  primarily   attributable   to  special  product   offerings   received  from
manufacturers with higher margins, volume discounts from manufacturers and sales
of higher margin products.

     Selling,  General  and  Administrative   Expenses.   Selling,  general  and
administrative  expenses increased by $1.3 million, or 41% from $3.2 million for
the three  months  ended  January 31, 2004 to $4.6  million for the three months
ended  January  31,  2005.  The  increase is  principally  due to an increase in
salaries,  commissions  and other  personnel  costs of  approximately  $514,000,
reflecting the increase in employee  headcount and associated costs with respect
to the continuing growth of the display technology  business and the increase in
gross  profit  and  increased  legal  and  professional  costs of  approximately
$456,000.  As a  percentage  of revenue,  selling,  general  and  administrative
expenses  increased  from 7.2% for the three  months  ended  January 31, 2004 to
11.7% for the three months ended January 31, 2005.

     Interest  and Other  Income  (Expense),  net.  Interest  and  other  income
(expense),   net,  increased  by  approximately  $194,000  from  an  expense  of
approximately  $76,000 for the three months ended  January 31, 2004 to income of
approximately  $118,000 for the three months ended January 31, 2005.  The amount
for the three months ended  January 31, 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
$9,000.  The amount for the three months ended January 31, 2005 included $83,000
of interest  expense  related to the interest  portion of the capital leases and
interest  income  of  approximately   $201,000  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  approximately
40% for the three months ended January 31, 2005 and January 31, 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   $(448,000)  for  the  three  months  ended  January  31,  2005  and  2004,
respectively.  The statement of operations for the period ended January 31, 2004
has been reclassified to present discontinued operations.


     Six Months Ended  January 31, 2005 Compared to Six Months Ended January 31,
     2004

     Revenue.  Revenue  decreased by $4.3 million or 5% to $86.2 million for the
six months  ended  January 31, 2005 from $90.5  million for the six months ended
January 31,  2004.  The  decrease in revenue is  primarily a result of decreased
sales of  computer  hardware  to dealers  and  systems  integrators.  Such sales
decreased  by  approximately  54%  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  Company is  currently  reviewing  its  strategy  related to this
business line. This decrease was partially  offset by increased sales of display
technology   solutions,   primarily  large  screen  flat  panel   displays,   of
approximately  3% as  compared  to last year,  due to an  increase in unit sales
offset somewhat by the ongoing decline in average selling prices.

     Gross  Profit.  Gross profit  increased  by $1.6 million or 17%,  from $9.3
million for the six months ended  January 31, 2004 to $10.9  million for the six
months  ended  January  31,  2005.  As a  percentage  of revenue,  gross  profit
increased  from 10.3% for the six months ended January 31, 2004 to 12.7% for the
six months ended  January 31, 2005.  The increase in gross profit  percentage is
primarily  attributable to special product offerings received from manufacturers
with higher margins,  volume  discounts from  manufacturers  and sales of higher
margin products.
                                       14
<PAGE>

     Selling,  General  and  Administrative   Expenses.   Selling,  general  and
administrative  expenses  increased by approximately  $1.1 million,  or 17% from
$6.6 million for the six months  ended  January 31, 2004 to $7.7 million for the
six months  ended  January  31,  2005.  The  increase is  principally  due to an
increase in salaries,  commissions and other  personnel  costs of  approximately
$467,000,  reflecting the increase in employee  headcount and  associated  costs
with  respect  to the  continuing  growth of the  display  technology  business,
increased legal and professional costs of approximately  $456,000, and increased
trade show costs of $257,000. These costs were partially offset by a decrease in
bad debt expense of  approximately  $474,000 as compared to the six months ended
January 31,  2004,  which  period  included  an expense of  $370,000  due to one
customer.  As a  percentage  of revenue,  selling,  general  and  administrative
expenses  increased  from 7.3% for the six months ended January 31, 2004 to 8.9%
for the six months ended January 31, 2005.

     Interest  and Other  Income  (Expense),  net.  Interest  and  other  income
(expense),   net,  increased  by  approximately  $228,000  from  an  expense  of
approximately  $95,000  for the six months  ended  January 31, 2004 to income of
approximately $133,000 for the six months ended January 31, 2005. The amount for
the six months  ended  January  31,  2004  included  approximately  $173,000  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
$78,000 earned on the Company's cash investments.  The amount for the six months
ended  January 31, 2005  included  $168,000 of interest  expense  related to the
interest  portion of the capital  leases and  interest  income of  approximately
$301,000  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 39.2%
for the six months ended January 31, 2005 and January 31, 2004, respectively.

     Discontinued  Operations.  In accordance with SFAS 144, "Accounting for the
Impairment or Disposal of Long-Lived Assets",  the results of operations for the
end-user information  technology  fulfillment and professional services business
have been recorded as discontinued  operations in the accompanying  consolidated
statements of income.  The net income (loss) from  discontinued  operations  was
$597,000  and  $(981,000)  for the six months  ended  January 31, 2005 and 2004,
respectively. The income in the 2005 period resulted from a recovery of accounts
receivable  related to the IT  Business.  The  statement of  operations  for the
period  ended  January 31, 2004 has been  reclassified  to present  discontinued
operations.

Liquidity and Capital Resources

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

       Our primary source of cash and cash equivalents has been internally
generated working capital from profitable operations. The Company's working
capital at January 31, 2005 and July 31, 2004 was approximately $38.6 million
and $34.4 million, respectively.

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

       Operating activities for the six months ended January 31, 2005 and 2004,
resulted in a decrease in cash of approximately $192,000 and $3.7 million,
respectively. Continuing operations used approximately $910,000 of cash in the
six months ended January 31, 2005 primarily resulting from payments to reduce
accounts payable and accrued expenses of $4.3 million exceeding operating cash
flows of $3.4 million principally derived from net income. Discontinued
operations provided cash of approximately $718,000 in the six months ended
January 31, 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 six months  ended  January 31, 2005 and 2004
used cash of approximately  $142,000 and $842,000,  respectively.  These amounts
consisted solely of additions to property and equipment.

                                       15
<PAGE>

     Financing  activities  for the six months  ended  January 31, 2005 and 2004
provided (used) cash of approximately $852,000 and $(96,000),  respectively. For
the three months ended January 31, 2005, this amount  consisted of proceeds from
the exercise of stock  options of  approximately  $970,000  partially  offset by
$118,000 of payments on capitalized lease obligations.  For the six months ended
January 31, 2004 this amount consisted  solely 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 March 18, 2005. At January
31,  2005,  no amounts  were  outstanding  under  this line.  The line of credit
facility   requires  the  Company  to  maintain  certain  financial  ratios  and
covenants.  At January 31, 2005, the Company was not in compliance  with all the
financial ratios and covenants that it is required to maintain. We are currently
in the process of  negotiating  with this  financial  institution  a new line of
credit agreement.

Financial Commitments

     We believe that our current balances in cash and cash equivalents, expected
cash flows from  operations  and available  borrowings  under the line of credit
will be adequate to support current operating levels for the foreseeable future,
specifically  through  at least the end of fiscal  2005  which  ends on July 31,
2005. 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 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.  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,   amounting  to
approximately $2.8 million.  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
January 31, 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              $7,811          $260          $1,036           $932            $5,583
       Operating leases             1,552           467           1,085              -                 -
                                    -----         -----           -----            ---          --------

       Total                       $9,363          $727          $2,121           $932            $5,583
                                    =====           ===           =====            ===             =====
</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.

                                       16
<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  quarterly  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 4 - 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.

                                       17
<PAGE>

      PART II - OTHER INFORMATION

      ITEM 6.     Exhibits

      Exhibits


              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.


                                       18

<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   14, 2005
                                      /s/ Barry R. Steinberg
                                      ----------------------
                                      Barry R. Steinberg
                                      Chief Executive Officer



DATE:   March  14, 2005
                                      /S/ Elan Yaish
                                      --------------
                                      Elan Yaish
                                      Vice President Finance, Chief Financial
                                       Officer and Assistant Secretary


                                       19
<PAGE>
























Form 10q 013105