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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended January 31, 2004
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from __________ to ____________
COMMISSION FILE NUMBER 0-21695
Manchester Technologies, Inc.
(Exact name of registrant as specified in its charter)
New York 11-2312854
(State or other jurisdiction of (I.R.S. Employer
Incorporation or organization) Identification Number)
160 Oser Avenue
Hauppauge, New York 11788
(Address of registrant's principal executive offices)
(631) 435-1199
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
[X] Yes [ ] No
Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Exchange Act).
[ ] Yes [X] No
As of March 3, 2004 there were 8,068,301 outstanding shares of the registrant's
Common Stock.
MANCHESTER TECHNOLOGIES, INC. AND SUBSIDIARIES
Table of Contents
PART I. FINANCIAL INFORMATION Page
- ------- --------------------- ----
Item 1. Condensed Consolidated Balance Sheets as of
January 31, 2004 (unaudited) and July 31, 2003 3
Condensed Consolidated Statements of Operations for the
Three Months and Six Months Ended
January 31, 2004 and 2003 (unaudited) 4
Condensed Consolidated Statements of Cash Flows for the
Six Months Ended January 31, 2004 and 2003 (unaudited) 5
Notes to Unaudited Condensed Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 9
Item 3. Quantitative and Qualitative Disclosures About Market Risk 18
Item 4. Controls and Procedures 18
PART II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders 19
Item 6. Exhibits and Reports on Form 8-K 19
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)
January 31, 2004 July 31, 2003
(Unaudited) -------------
-----------
Assets
Current assets:
Cash and cash equivalents $ 3,866 $ 8,553
Accounts receivable, net 33,710 35,117
Inventory 18,352 9,605
Deferred income taxes 603 603
Prepaid taxes 1,832 1,704
Prepaid expenses and other current assets 703 709
--------- --------
Total current assets 59,066 56,291
Property and equipment, net 13,556 13,985
Goodwill, net 6,439 6,439
Deferred income taxes 757 757
Other assets 177 278
---- --------
Total assets $79,995 $77,750
====== ======
Liabilities and shareholders' equity
Current liabilities:
Accounts payable and accrued expenses $26,524 $24,752
Deferred service contract revenue 606 666
Current portion of capital lease obligations 228 212
--- ---------
Total current liabilities 27,358 25,630
Deferred compensation payable 263 263
Capital lease obligations, net of current portion 7,811 7,923
----- --------
Total liabilities 35,432 33,816
------ -------
Shareholders' equity:
Preferred stock, $.01 par value; 5,000 shares
authorized, none issued - -
Common stock, $.01 par value; 25,000 shares authorized,
7,990 issued and outstanding 80 80
Additional paid-in capital 18,965 18,942
Deferred compensation (13) (13)
Retained earnings 25,531 24,925
------ ------
Total shareholders' equity 44,563 43,934
------ ------
Total liabilities and shareholders' equity $79,995 $77,750
====== =======
See notes to unaudited condensed consolidated financial statements.
3
Manchester Technologies, Inc. and Subsidiaries
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share amounts)
(Unaudited)
Three months ended January 31, Six months ended January 31,
2004 2003 2004 2003
---- ---- ---- ----
Revenue
Products $72,869 $74,283 $143,321 $138,998
Services 6,925 6,259 11,173 9,829
----- ------- ------ ---------
79,794 80,542 154,494 148,827
------ ------ ------- -------
Cost of revenue
Products 64,611 66,979 127,337 123,897
Services 5,634 5,088 8,712 7,491
----- ------- ----- ---------
70,245 72,067 136,049 131,388
------ ------ ------- -------
Gross profit 9,549 8,475 18,445 17,439
Selling, general and
administrative expenses 8,990 8,711 17,280 17,551
----- ------- ------ --------
Income (loss) from operations 559 (236) 1,165 (112)
Interest and other income (expense), net (68) 28 (155) 168
---- -------- ---- ---------
Income (loss) before income taxes 491 (208) 1,010 56
Income tax provision (benefit) 196 (83) 404 23
--- -------- --- --------
Net income (loss) $ 295 $ (125) $ 606 $ 33
=== ====== ===== =======
Net income (loss) per share
Basic $0.04 $ (0.02) $0.08 $ 0.00
==== ======= ==== ======
Diluted $0.04 $ (0.02) $0.07 $ 0.00
==== ======= ==== ======
Weighted average
shares outstanding
Basic 7,990 7,990 7,990 7,990
===== ===== ===== =====
Diluted 8,299 7,990 8,265 7,991
===== ===== ===== =====
See notes to unaudited condensed consolidated financial statements.
4
Manchester Technologies, Inc. and Subsidiaries
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(Unaudited)
Six months ended
January 31, January 31,
2004 2003
---- ----
Cash flows from operating activities:
Net income $ 606 $ 33
Adjustments to reconcile net income to net cash
from operating activities:
Depreciation and amortization 1,271 1,058
Provision for doubtful accounts 295 41
Equity based compensation expense 23 -
Changes in assets and liabilities:
Accounts receivable 1,112 (1,987)
Inventory (8,747) (1,907)
Prepaid taxes (128) (283)
Prepaid expenses and other current assets 6 (186)
Other assets 101 272
Accounts payable and accrued expenses 1,772 7,969
Deferred service contract revenue (60) (313)
---- -------
Net cash provided by (used in) operating activities (3,749) 4,697
------- -------
Cash flows from investing activities:
Capital expenditures (842) (389)
---- ----
Net cash used in investing activities (842) (389)
------- -------
Cash flows from financing activities:
Payments on capital lease obligations (96) -
------ -------
Net cash used in financing activities (96) -
------- ----------
Net increase (decrease) in cash and cash equivalents (4,687) 4,308
Cash and cash equivalents at beginning of period 8,553 8,963
----- -------
Cash and cash equivalents at end of period $3,866 $13,271
===== =======
See notes to unaudited condensed consolidated financial statements.
5
Manchester Technologies, Inc. and Subsidiaries
Notes to Unaudited Condensed Consolidated Financial Statements
(in thousands, except share and per share data)
(Unaudited)
1. Organization and Basis of Presentation
Manchester Technologies, Inc. and its subsidiaries ("Manchester," "we,"
"us," or "the Company") is a single-source solutions provider specializing in
hardware and software procurement, display technology, custom networking,
security, IP telephony, remote management, application development/e-commerce,
storage, and enterprise and Internet solutions. The Company offers its customers
single-source solutions customized to their information systems needs by
integrating its analysis, design and implementation services with hardware,
software, networking products and peripherals from leading vendors. In addition,
we offer a complete line of products and peripherals for our customers' display
technology requirements. The Company operates in a single segment.
Sales of hardware and software products comprise the majority of the
Company's revenues. The Company has entered into agreements with certain
suppliers and manufacturers that may provide the Company favorable pricing and
price protection in the event the vendor reduces its prices.
The accompanying financial information should be read in conjunction with
the financial statements, including the notes thereto, for the annual period
ended July 31, 2003. The financial information included herein is unaudited;
however, such information reflects all adjustments (consisting solely of normal
recurring adjustments) that are, in the opinion of management, necessary for a
fair statement of results for the interim periods. In the opinion of management,
the accompanying unaudited condensed consolidated financial statements have been
prepared in accordance with U.S. generally accepted accounting principles
("GAAP") for interim financial information and with the instructions to Rule
10-01 of Regulation S-X. The results of operations for the three and six month
periods ended January 31, 2004 are not necessarily indicative of the results to
be expected for future interim periods or the entire year.
2. Net Income (Loss) Per Share
Basic net income (loss) per share has been computed by dividing net income
(loss) by the weighted average number of common shares outstanding. Diluted net
income (loss) per share has been computed by dividing net income (loss) by the
weighted average number of common shares outstanding, plus the assumed exercise
of dilutive stock options, less the number of treasury shares assumed to be
purchased from the proceeds of such exercises using the average market price of
the Company's common stock during each respective period. Stock options
representing 545,000 and 847,000 shares for the three months ended January 31,
2004 and 2003, respectively, and 593,000 and 781,000 shares for the six months
ended January 31, 2004 and 2003, respectively, have been excluded from the
calculation of diluted net income (loss) per share as they are antidilutive. The
following table reconciles the denominators of the basic and diluted per share
computations. For each period, the numerator is the net income (loss) as
reported.
Three months ended January 31, Six months ended January 31,
2004 2003 2004 2003
---- ---- ---- ----
Per share Per share Per share Per share
Shares amount Shares amount Shares amount Shares amount
------ ------ ------ ------ ------ ------ ------ ------
(shares in thousands)
Basic 7,990 $0.04 7,990 $(0.02) 7,990 $0.08 7,990 $0.00
==== ====== ==== =====
Effect of
dilutive
options 309 - 275 1
--- ------ --- -------
Diluted 8,299 $0.04 7,990 $(0.02) 8,265 $0.07 7,991 $0.00
===== ===== ===== ====== ===== ===== ===== =====
6
3. Accounting for Stock-Based Compensation
The Company records compensation expense for employee stock options if the
current market price of the underlying stock exceeds the exercise price on the
date of the grant. On August 1, 1996, the Company adopted Statement of Financial
Accounting Standards ("SFAS") No. 123, "Accounting for Stock-Based Compensation"
("SFAS 123"). The Company has elected not to implement the fair value based
accounting method for employee stock options, but has elected to disclose the
pro forma net income and net income per share for employee stock option grants
as if such method had been used to account for stock-based compensation cost as
described in SFAS 123.
The Company applies Accounting Principles Board Opinion No. 25, "Accounting
for Stock Issued to Employees" ("APB 25"), and related interpretations for stock
options and other stock-based awards while disclosing pro forma net income and
net income per share as if the fair value method had been applied in accordance
with SFAS 123.
The Company applies the intrinsic value method as outlined in APB 25, and
related interpretations in accounting for stock options granted. Under the
intrinsic value method, no compensation expense is recognized if the exercise
price of the Company's employee stock options equals or exceeds the market price
of the underlying stock on the date of grant. Since the Company has issued all
stock option grants at market value, no compensation cost has been recognized at
the time of grant. For 50,000 options that were repriced subsequent to their
date of grant, the Company is applying variable accounting to those options. The
related equity-based compensation expense was $23 for the six months ended
January 31, 2004. SFAS 123 requires that the Company provide pro forma
information regarding net income (loss) and net income (loss) per share as if
compensation cost for the Company's stock option programs had been determined in
accordance with the fair value method prescribed therein. During fiscal 2003,
the Company adopted the disclosure portion of SFAS No. 148, "Accounting for
Stock-Based Compensation - Transition and Disclosure" requiring quarterly SFAS
123 pro forma disclosure. The following table illustrates the effect on net
income (loss) and net income (loss) per share as if the Company had measured the
compensation cost for the Company's stock option programs under the fair value
method in each period presented.
Three Months Ended January 31, Six Months Ended January 31,
2004 2003 2004 2003
Net income (loss), as reported $295 $(125) $606 $ 33
Add: Stock-based compensation
expense included in net income
(loss) net of related tax effects 14 - 14 -
Deduct: Total stock-based
employee compensation expense
determined under fair value
method for all awards, net of
related tax effects (120) (95) (286) (255)
--- ---- ----- -----
Net income (loss) - pro forma $189 $(220) $334 $(222)
=== ==== === ====
Net income (loss) per share:
Basic - as reported $0.04 $(0.02) $0.08 $0.00
==== ===== ==== ====
Basic - pro forma $0.02 $(0.03) $0.04 $(0.03)
==== ===== ==== =====
Diluted - as reported $0.04 $(0.02) $0.07 $0.00
==== ===== ==== ====
Diluted - pro forma $0.02 $(0.03) $0.04 $(0.03)
==== ===== ==== =====
7
4. Goodwill and Other Intangible Assets
In July 2001, the Financial Accounting Standards Board ("FASB") issued SFAS
No. 142, "Goodwill and Other Intangible Assets" ("SFAS No. 142"). SFAS No. 142
requires that goodwill and intangible assets with indefinite useful lives no
longer be amortized, but instead be tested for impairment at least annually.
This pronouncement also requires that intangible assets with estimable useful
lives be amortized over their respective estimated useful lives and reviewed for
impairment in accordance with SFAS No. 144, "Accounting for the Impairment or
Disposal of Long-Lived Assets."
The Company adopted the provisions of SFAS No. 142 as of August 1, 2001. In
accordance with SFAS No. 142, goodwill is allocated to reporting units, which
are either the operating segment or one reporting level below the operating
segment. The Company determined that its reporting unit for purposes of applying
the provisions of SFAS No. 142 was its operating segment. The Company's initial
impairment review indicated that there was no impairment as of the date of
adoption. Fair value for goodwill was determined based on discounted cash flows.
Also required by SFAS No. 142, on an annual basis, the Company tests
goodwill and other intangible assets for impairment. To determine the fair value
of these intangible assets, there are many assumptions and estimates used that
directly impact the results of the testing. In making these assumptions and
estimates, the Company uses set criteria that are reviewed and approved by
various levels of management, and the Company estimates the fair value of its
reporting unit by using discounted cash flow analyses.
Accumulated amortization for the Company's goodwill was approximately
$1,116 at both January 31, 2004 and July 31, 2003. In accordance with SFAS No.
142, no goodwill amortization expense was recorded for the three months and six
months ended January 31, 2004 and 2003.
As of January 31, 2004 and July 31, 2003, the Company had no intangible
assets other than goodwill.
5. Recently Issued Accounting Standards
In April 2003, the FASB determined that stock-based compensation should be
recognized as a cost in the financial statements and that such cost be measured
according to the fair value of the stock options. The FASB has not as yet
determined the methodology for calculating fair value and plans to issue an
accounting standard that would become effective in 2005. The Company will
continue to monitor communications on this subject from the FASB in order to
determine the impact on the Company's consolidated financial statements.
In December 2003, the FASB issued a revised version of FASB Interpretation
No. 46, "Consolidation of Variable Interest Entities," ("FIN 46R"), which
addresses how a business enterprise should evaluate whether it has a controlling
interest in an entity through means other than voting rights and, accordingly,
should consolidate the entity. FIN 46R replaced FASB Interpretation No. 46,
"Consolidation of Variable Interest Entities," which was issued in January,
2003. FIN 46R applies immediately to variable interest entities created after
December 31, 2003 and to variable interest entities in which an enterprise
obtains an interest after that date. For variable interest entities created or
acquired prior to January 1, 2004, the provisions of FIN 46R, must be applied
beginning on April 30, 2004. The Company does not believe that the adoption of
FIN 46R will have a significant impact on the Company's consolidated financial
statements.
In December 2003, the Securities and Exchange Commission ("SEC") issued
Staff Accounting Bulletin No. 104, "Revenue Recognition," ("SAB 104"), which
updates the previously issued revenue recognition guidance in SAB 101, based on
the Emerging Issues Task Force Issue 00-21, "Revenue Arrangements with Multiple
Deliverables," ("EITF 00-21"). According to EITF 00-21, if the deliverables in a
sales arrangement constitute separate units of accounting, as defined, the
revenue recognition policy must be determined for each identified unit. If the
arrangement is a single unit of accounting under the separation criteria, as
defined, the revenue recognition policy must be determined for the entire
arrangement. The application of SAB 104 did not have a significant impact on the
Company's consolidated financial statements.
8
ITEM 2. - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Forward Looking Statements
The following discussion and analysis of financial condition and results of
operations of the Company should be read in conjunction with the condensed
consolidated financial statements and notes thereto appearing elsewhere in this
report and with the Company's annual report on Form 10-K for the year ended July
31, 2003. The following discussion contains certain forward-looking statements
within the meaning of the Securities Act of 1933, as amended, and Section 21E of
the Securities and Exchange Act of 1934, as amended, which statements are made
pursuant to the safe harbor provisions of The Private Securities Litigation
Reform Act of 1995. Forward-looking statements are generally identifiable by the
use of the words "believes," "intends," "expects," "will," "plans,"
"anticipates," or similar expressions. Forward looking statements are not
historical facts, are based on the Company's beliefs and expectations as of the
date of this report, and involve risks and uncertainties that could cause actual
results to differ materially from the results anticipated in those
forward-looking statements. These risks and uncertainties include, but are not
limited to, those set forth below and the risk factors described in the
Company's other filings from time to time with the Securities and Exchange
Commission. Readers are cautioned not to place undue reliance on any
forward-looking statements, which reflect management's opinions only as of the
date hereof. We undertake no obligation to revise or publicly release the
results of any revision to any forward-looking statements.
Overview
We are an integrator and reseller of computer hardware, software and
networking products, primarily for commercial customers, and a distributor of
display technology solutions and plasma display monitors, primarily to dealers
and system integrators. We offer our customers single-source solutions,
customized to their information systems needs, by integrating analysis, design
and implementation services with hardware, software, networking products and
peripherals from leading vendors. To date, most of our revenues have been
derived from product sales. We generally do not develop or sell software
products. However, certain computer hardware products sold by us are loaded with
prepackaged software products.
Revenue for the quarter was $79.8 million as compared with $80.5 million
for the comparable quarter last year and $74.7 million in the first quarter of
this fiscal year. The Company reported net income for the quarter of $295,000 or
$0.04 per diluted share as compared with a net loss of $125,000 or $0.02 per
diluted share reported a year ago and net income of $311,000, or $0.04 per
diluted share, for the first quarter of this fiscal year.
Revenue for the six months ended January 31, 2004 was $154.5 million as
compared with $148.8 million for the first six months of last year. Net income
for the six months was $606,000 or $0.07 per diluted share as compared with
$33,000 or $0.00 per diluted share reported a year ago.
Our second quarter reflects the increase in technology spending resulting
from the lack of capital spending over the past few years. Revenues for the
quarter increased sequentially as compared to our first quarter of fiscal 2004
and were slightly lower as compared to last year. However, we are pleased that
our service revenues increased by 11% as compared to the second quarter of last
year and 14% as compared to the first half of last year. In addition, revenues
from sales of display solutions increased by 8% as compared to the second
quarter of last year and 15% as compared to the first half of last year. We
continue focusing on our strategy of providing business solutions, services,
product fulfillment and display technologies that meet all of our customer's
needs.
Certain Trends and Uncertainties
General. The technology industry is characterized by a number of
potentially adverse business conditions, including pricing pressures, evolving
distribution channels, market consolidation and a decline in the rate of growth
in sales of personal computers. Heightened price competition among various
9
manufacturers, integrators or resellers of technology products may result in
reduced per unit revenue and declining gross profit margins. As a result of the
intense price competition within our industry, we have experienced increasing
pressure on our gross profit and operating margins with respect to our sale of
products. Our inability to compete successfully on the pricing of products sold,
or a continuing decline in gross margins on products sold due to adverse
industry conditions or competition, may have a material adverse effect on our
business, financial condition and results of operations.
Value-Added Services. An integral part of our strategy is to increase our
value-added services revenue. These services generally provide higher gross
margins than those associated with the sale of products. This strategy requires
us, among other things, to attract and retain highly skilled technical employees
in a competitive labor market, provide additional training to our sales
representatives and enhance our existing service management system. We cannot
predict whether we will be successful in increasing our focus on providing
value-added services, and the failure to do so may have a material adverse
effect on our business, results of operations and financial condition.
Geographic Considerations. On September 11, 2001, the World Trade Center in
New York City and the Pentagon in Washington, D.C. were the subjects of
terrorist attacks. A significant part of our business is generated from our New
York City and Baltimore/Washington, D.C. offices. We cannot predict the impact
that potential future attacks may have on our business, results of operations
and financial condition. In addition, given the concentration of our business in
these geographic areas, our business could be materially affected by economic
conditions and other significant events in the New York City and
Baltimore/Washington, D.C. areas.
Management of Growth. Our strategy, encompassing the expansion of service
offerings, the expansion of existing offices, and the establishment of new
regional offices, has challenged and will continue to challenge our senior
management and infrastructure. We cannot predict our ability to respond to these
challenges. If we fail to effectively manage our planned growth, there may be a
material adverse effect on our business, results of operations and financial
condition.
Personnel Issues. The success of our strategy depends in large part upon
our ability to attract and retain highly skilled technical personnel and sales
representatives, including independent sales representatives, in a very
competitive labor market. The loss of a significant number of our existing
technical personnel or sales representatives, difficulty in hiring or retaining
additional technical personnel or sales representatives, or reclassification of
our sales representatives as employees may have a material adverse effect on our
business, results of operations and financial condition.
Competition. The technology industry is characterized by intense
competition. We directly compete with local, regional and national systems
integrators, value-added resellers and distributors as well as with certain
technology manufacturers that market through direct sales forces and/or the
Internet. The technology industry has recently experienced, and may continue to
experience, a significant amount of consolidation through mergers and
acquisitions, and manufacturers of personal computers may increase competition
by offering a range of services in addition to their current product and service
offerings. In the future, we may face further competition from new market
entrants and possible alliances between existing competitors. In addition,
certain suppliers and manufacturers have been, and additional suppliers and
manufacturers may choose, to market products directly to end users through a
direct sales force and/or the Internet rather than or in addition to channel
distribution, and may also choose to market services directly to end users. Some
of our competitors have or may have, greater financial, marketing and other
resources, and may offer a broader range of products and services, than us. As a
result, they may be able to respond more quickly to new or emerging technologies
or changes in customer requirements, benefit from greater purchasing economies,
offer more aggressive hardware and service pricing or devote greater resources
to the promotion of their products and services. We may not be able to compete
successfully in the future with these or other current or potential competitors.
Vendor Relationships and Product Availability. Our business is dependent
upon our relationships with major manufacturers and distributors in the
technology industry. Many aspects of our business are affected by our
10
relationships with major manufacturers, including product availability, pricing
and related terms, and reseller authorizations. The increasing demand for
display technology solutions and ancillary equipment has resulted in significant
product shortages from time to time, because manufacturers have been unable to
produce sufficient quantities of certain products to meet demand. In addition,
many manufacturers have adopted "just in time" manufacturing principles that can
reduce the immediate availability of a wide range of products at any one time.
We cannot predict that manufacturers will maintain an adequate supply of these
products to satisfy all the orders of our customers or that, during periods of
increased demand, manufacturers will provide products to us, even if available,
or at discounts previously offered to us. In addition, we cannot assure you that
the pricing and related terms offered by major manufacturers will not adversely
change in the future. Our failure to obtain an adequate supply of products, the
loss of a major manufacturer, the deterioration of our relationship with a major
manufacturer or our inability in the future to develop new relationships with
other manufacturers may have a material adverse effect on our business,
financial condition and results of operations.
Certain manufacturers offer market development funds, cooperative
advertising and other promotional programs to systems integrators, distributors
and computer resellers. We rely on these funds for many of our advertising and
promotional campaigns. In recent years, manufacturers have generally reduced
their level of support with respect to these programs, which has required us to
increase spending of our own funds to obtain the same level of advertising and
promotion. If manufacturers continue to reduce their level of support for these
programs, or discontinue them altogether, we would have to further increase our
advertising and promotion spending, which may have a material adverse effect on
our business, financial condition and results of operations.
Our profitability has been affected by our ability to obtain volume
discounts from certain manufacturers, which has been dependent, in part, upon
our ability to sell large quantities of products to computer resellers,
including value added resellers. Our sales to resellers have been made at profit
margins generally less favorable than our sales directly to commercial
customers. Our inability to sell products to computer resellers and thereby
obtain the desired volume discounts from manufacturers or to expand our sales to
commercial customers sufficiently to offset our need to rely on sales to
computer resellers may have a material adverse effect on our business, financial
condition and results of operations.
Changing Technology; Inventory Risk. The markets for our products and
services are characterized by rapidly changing technology and frequent
introduction of new hardware and software products and services. This may render
many existing products and services noncompetitive, less profitable or obsolete.
Our continued success will depend on our ability to keep pace with the
technological developments of new products and services and to address
increasingly sophisticated customer requirements. Our success will also depend
upon our abilities to address the technical requirements of our customers
arising from new generations of computer technologies, to obtain these new
products from present or future suppliers and vendors at reasonable costs, to
educate and train our employees as well as our customers with respect to these
new products or services and to integrate effectively and efficiently these new
products into both our internal systems and systems developed for our customers.
We may not be successful in identifying, developing and marketing product and
service developments or enhancements in response to these technological changes.
Our failure to respond effectively to these technological changes may have a
material adverse effect on our business, financial condition and results of
operations.
Rapid product improvement and technological change characterize the
technology industry. This results in relatively short product life cycles and
rapid product obsolescence, which can place inventory at considerable valuation
risk. Certain of our suppliers provide price protection to us, which is intended
to reduce the risk of inventory devaluation due to price reductions on current
products. Certain of our suppliers also provide stock balancing to us pursuant
to which we are able to return unsold inventory to a supplier as a partial
credit against payment for new products. There are often restrictions on the
dollar amount of inventory that we can return at any one time. Price protection
and stock balancing may not be available to us in the future, and, even if
available, these measures may not provide complete protection against the risk
of excess or obsolete inventories. Certain manufacturers have reduced the period
for which they provide price protection and stock balancing rights. Although we
maintain a sophisticated proprietary inventory management system, we cannot
11
assure you that we will continue to successfully manage our existing and future
inventory. Our failure to successfully manage our current or future inventory
may have a material adverse effect on our business, financial condition and
results of operations.
As a result of the rapid changes that are taking place in computer,
networking and display technologies, product life cycles are short. Accordingly,
our product offerings change constantly. Prices of products change frequently,
with generally higher prices early in the life cycle of the product and lower
prices near the end of the product's life cycle. The technology industry has
experienced rapid declines in average selling prices of personal computers,
peripherals and display technology. In some instances, we have been able to
offset these price declines with increases in units shipped. There can be no
assurance that average selling prices will not continue to decline or that we
will be able to offset declines in average selling prices with increases in
units shipped.
Management. The Company is highly dependent upon the services of the
members of its senior management team, particularly Barry R. Steinberg, the
Company's founder, Chairman of the Board, President and Chief Executive Officer.
The loss of any member of the Company's senior management team may have a
material adverse effect on its business.
Maximizing Shareholder Value. The Company periodically considers methods of
enhancing shareholder value, including, without limitation, acquisitions,
divestitures, business combinations, and strategic partnering. There can be no
assurance that we will consummate any such transactions, be able to identify
suitable candidates for any such transactions or to negotiate successfully such
transactions at a price or on terms and conditions favorable to us and our
shareholders. Acquisitions may be of significant size and may include assets
that are outside our geographic territories or are ancillary to our core
business strategy.
Quarterly Variations. Our quarterly revenue and operating results have
varied significantly in the past and are expected to continue to do so in the
future. Quarterly revenue and operating results generally fluctuate as a result
of the demand for our products and services, the introduction of new hardware
and software technologies with improved features, the introduction of new
services by us and our competitors, changes in the level of our operating
expenses, competitive conditions and economic conditions. As a result, we
believe that period-to-period comparisons of our operating results should not be
relied upon as an indication of future performance. In addition, the results of
any quarterly period are not necessarily indicative of results to be expected
for a full fiscal year.
Information Technology Systems. Our success is dependent in part on the
accuracy, proper utilization and continuing development of our information
technology systems, including our business application systems, Internet servers
and telephony system. The quality and our utilization of the information
generated by our information technology systems affects, among other things, our
ability to conduct business with our customers, manage our inventory and
accounts receivable, purchase, sell, ship and invoice our products efficiently
and on a timely basis and maintain cost-efficient operations. While we have
taken steps to protect our information technology systems from a variety of
threats, including computer viruses and malicious hackers, we cannot guarantee
that such steps will be effective. If there is a disruption to or an
infiltration of our information technology systems, it could significantly harm
our business and results of operations.
This discussion of uncertainties is by no means exhaustive, but is designed
to highlight important factors that may impact the Company's outlook and
results.
E-Commerce
We utilize two websites each incorporating an electronic commerce system.
The sites, located at www.e-manchester.com and www.electrograph.com allow both
existing customers, corporate shoppers and others to find product
specifications, compare products, check price and availability and place and
track orders quickly and easily 24 hours a day seven days a week. We have made,
and expect to continue to make, significant investments and improvements in our
e-commerce capabilities. There can be no assurance that we will be successful in
enhancing and increasing our business through our expanded Internet presence.
12
Critical Accounting Policies
The Company's discussion and analysis of its financial condition and
results of operations is based on its consolidated financial statements, which
have been prepared in accordance with accounting principles generally accepted
in the United States. The preparation of financial statements and related
disclosures in conformity with accounting principles generally accepted in the
United States of America requires management to make judgments, assumptions and
estimates that affect the amounts reported in the consolidated financial
statements and accompanying notes. Note 1 to the consolidated financial
statements in the Annual Report on Form 10-K for the fiscal year ended July 31,
2003 describes the significant accounting policies and methods used in the
preparation of the consolidated financial statements. The following critical
accounting policies are impacted significantly by judgments, assumptions and
estimates used in the preparation of the consolidated financial statements.
Revenue Recognition. Revenue from product sales is recognized when title
and risk of loss are passed to the customer, which is generally at the time of
shipment to the customer. Revenue from services is recognized when the related
services are performed. When product sales and services are bundled, revenue is
generally recognized separately upon delivery of the product and completion of
the installation. Service contract fees are deferred and recognized as revenue
ratably over the period of the applicable contract. Deferred service contract
revenue represents the unearned portion of service contract fees. The Company
generally does not develop software products. However, certain computer hardware
products sold by the Company are loaded with prepackaged software products. The
net impact on the Company's financial statements of product returns, primarily
for defective products, has been insignificant.
Allowance for Doubtful Accounts. The allowance for doubtful accounts is
based on our assessment of the collectibility of specific customer accounts and
the aging of the accounts receivable. If there is a deterioration of a major
customer's credit worthiness or actual defaults are higher than our historical
experience, our estimates of the recoverability of amounts due us could be
adversely affected.
Inventory. Inventory purchases and commitments are based upon future demand
forecasts. If there is a sudden and significant decrease in demand for our
products or there is a higher risk of inventory obsolescence because of rapidly
changing technology and customer requirements, we may be required to increase
our inventory allowances and our gross margin could be adversely affected.
Goodwill. We perform goodwill impairment tests on an annual basis and
between annual tests in certain circumstances. In assessing the recoverability
of the Company's goodwill, the Company must make various assumptions regarding
estimated future cash flows and other factors in determining the fair values of
the respective assets. If these estimates or their related assumptions change in
the future, the Company may be required to record impairment charges for these
assets in future periods. Any such resulting impairment charges could be
material to the Company's results of operations.
13
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.
Percentage of Revenue
Three Months Ended January 31, Six Months Ended January 31,
2004 2003 2004 2003
---- ----- ---- -----
Revenue
Products 91.3% 92.2% 92.8% 93.4%
Services 8.7 7.8 7.2 6.6
----- ----- ---- -----
Total revenue 100.0 100.0 100.0 100.0
----- ----- ----- -----
Cost of revenue
Products 88.7 90.2 88.8 89.1
Services 81.4 81.3 78.0 76.2
---- ---- ---- ----
Total cost of revenue 88.0 89.5 88.1 88.3
---- ---- ---- ----
Gross profit
Products 11.3 9.8 11.2 10.9
Services 18.6 18.7 22.0 23.8
---- ---- ---- ----
Total gross profit 12.0 10.5 11.9 11.7
Selling, general and
administrative expenses 11.3 10.8 11.2 11.8
---- ---- ---- ----
Income (loss) from operations 0.7 (0.3) 0.8 (0.1)
Interest and other income (expense), net (0.1) 0.0 (0.1) 0.1
----- ---- ----- ----
Income (loss) before income taxes 0.6 (0.3) 0.7 0.0
Income tax provision (benefit) 0.2 (0.1) 0.3 0.0
--- ----- --- ----
Net income (loss) 0.4% (0.2)% 0.4% 0.0%
=== ====== === ====
Three Months Ended January 31, 2004 Compared with Three Months Ended January 31,
2003
Revenue. Revenue decreased by $0.7 million or 1% to $79.8 million for the
three months ended January 31, 2004 from $80.5 million for the three months
ended January 31, 2003. Revenue from the sale of products decreased by $1.4
million or 2% while revenue from service offerings increased by $0.7 million or
11%. The decrease in product revenue is primarily a result of decreased sales of
computers and peripherals partially offset by increased sales of display
monitors, primarily large screen flat panel displays, the market for which
should continue to grow. The increase in service revenue is primarily
attributable to the Company's continued focus on growing its sales of services
and solutions to its existing customer base and to new customers.
14
Gross Profit. Cost of revenue includes the direct costs of products sold,
freight and the personnel costs associated with providing technical services,
offset in part by certain rebates provided by manufacturers related to volume
incentives and/or targets achieved by the Company and/or specific sales. All
other operating costs are included in selling, general and administrative
expenses, which are offset in part by certain market development funds provided
by manufacturers. Gross profit increased by $1.1 million or 13%, from $8.5
million for the three months ended January 31, 2003 to $9.5 million for the
three months ended January 31, 2004 and as a percentage of revenue, gross profit
increased from 10.5% for the three months ended January 31, 2003 to 12.0% for
the three months ended January 31, 2004. Gross profit from product sales
increased by $1.0 million or 13% while gross profit from service offerings
increased by $120,000 or 10%. As a percentage of revenue, gross profit from the
sale of products increased from 9.8% for the three months ended January 31, 2003
to 11.3% for the three months ended January 31, 2004 primarily due to increased
sales of higher margin products. As a percentage of revenue, gross profit from
the sale of services was relatively constant at 18.7% for the three months ended
January 31, 2003 and 18.6% for the three months ended January 31, 2004.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses increased by approximately $280,000, or 3% from $8.7
million for the three months ended January 31, 2003 to $9.0 million for the
three months ended January 31, 2004. The increase is principally due to an
increase in salaries and other personnel costs in the amount of approximately
$200,000 reflecting the increase in employee headcount and associated costs as
the Company needed to increase personnel as a result of the overall economic
recovery and the increase in technology spending, increased sales commissions
paid of approximately $115,000 due to the higher gross margins earned on
revenues, increased depreciation and amortization expense of approximately
$170,000, and increased insurance costs of approximately $120,000 due to an
increase in insurance rates in the market. These increases were partially offset
by decreased rent expense of approximately $290,000 as a result of the capital
leases entered into by the Company in March 2003. As a percentage of revenue,
selling, general and administrative expenses increased from 10.8% for the three
months ended January 31, 2003 to 11.3% for the three months ended January 31,
2004.
Interest and Other Income (Expense), net. Interest and other income
(expense), net, decreased by approximately $96,000 from income of approximately
$28,000 for the three months ended January 31, 2003 to an expense of
approximately $68,000 for the three months ended January 31, 2004. The amount
for the three months ended January 31, 2004 included approximately $154,000 of
interest expense related to the interest portion of the capital leases entered
into by the Company in March 2003 offset by interest income of approximately
$50,000 earned on the Company's cash investments and other income of
approximately $36,000 related to referral income received by the Company from
manufacturers, vendors, or other resellers. The amount for the three months
ended January 31, 2003 consisted of interest income of approximately $28,000
earned on the Company's cash investments.
Income Tax Provision (Benefit). Our effective tax rate was 39.9% for the
three months ended January 31, 2004 and January 31, 2003.
Six Months Ended January 31, 2004 Compared to Six Months Ended January 31,
2003
Revenue. Revenue increased by $5.7 million or 4% to $154.5 million for the
six months ended January 31, 2004 from $148.8 million for the six months ended
January 31, 2003. Revenue from the sale of products increased by $4.3 million or
3% while revenue from service offerings increased by $1.3 million or 14%. The
increase in product revenue is primarily a result of increased sales of display
monitors, primarily large screen flat panel displays, partially offset by lower
sales of computers and peripherals. The increase in service revenue is primarily
attributable to the increase in sales of services that are delivered by
manufacturers or vendors.
Gross Profit. Gross profit increased by $1.0 million or 6%, from $17.4
million for the six months ended January 31, 2003 to $18.4 million for the six
months ended January 31, 2004 and as a percentage of revenue, gross profit
increased from 11.7% for the six months ended January 31, 2003 to 11.9% for the
six months ended January 31, 2004. Gross profit from product sales increased by
$0.9 million or 6% while gross profit from service offerings increased by
15
$123,000 or 5%. As a percentage of revenue, gross profit from the sale of
products increased from 10.9% for the six months ended January 31, 2003 to 11.2%
for the six months ended January 31, 2004 primarily due to increased sales of
higher margin products. As a percentage of revenue, gross profit from the sale
of services declined from 23.8% for the six months ended January 31, 2003 to
22.0% for the six months ended January 31, 2004 as a result of increased sales
of lower margin services, primarily services that are delivered by manufacturers
or vendors.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses decreased by approximately $270,000, or 2% from $17.6
million for the six months ended January 31, 2003 to $17.3 million for the six
months ended January 31, 2004. The decrease is principally due to a decrease in
rent expense of approximately $590,000 as a result of the capital leases entered
into by the Company in March 2003, decreased telephone expenses of approximately
$215,000, and decreased advertising and promotional costs of approximately
$225,000, primarily as a result of market development funds received from
manufacturers for pre-approved market development activities. These decreases
were partially offset by increased salaries and other personnel costs of
approximately $130,000 reflecting the increase in employee headcount and
associated costs at the Company as a result of the overall economic recovery and
the increase in technology spending, increased sales commissions paid of
approximately $180,000 due the higher gross margins earned on revenues,
increased insurance costs of approximately $160,000 due to an increase in
insurance rates in the market, increased bad debt expense of approximately
$450,000, primarily due to one customer, and increased depreciation and
amortization expense of approximately $210,000. As a percentage of revenue,
selling, general and administrative expenses decreased from 11.8% for the six
months ended January 31, 2003 to 11.2% for the six months ended January 31,
2004.
Interest and Other Income (Expense), net. Interest and other income
(expense), net, decreased by approximately $320,000 from income of $168,000 for
the six months ended January 31, 2003 to an expense of approximately $155,000
for the six months ended January 31, 2004. The amounts for the six months ended
January 31, 2004 included approximately $309,000 of interest expense related to
the interest portion of the capital leases entered into by the Company in March
2003 offset by interest income of approximately $77,000 earned on the Company's
cash investments and other income of approximately $77,000 related to referral
income received by the Company from manufacturers, vendors, or other resellers.
The amount for the six months ended January 31, 2003 included the receipt of
insurance proceeds in the amount of $113,000 and interest income of
approximately $55,000 earned on the Company's cash investments.
Income Tax Provision (Benefit). Our effective tax rate was 40.0% and 41.1%
for the six months ended January 31, 2004 and January 31, 2003, respectively.
Liquidity and Capital Resources
Working Capital
---------------
Our primary sources of cash and cash equivalents have been internally
generated working capital from profitable operations. The Company's working
capital at January 31, 2004 and July 31, 2003 was approximately $31.7 million
and $30.7 million, respectively.
Cash Flows
----------
Operations for the six months ended January 31, 2004 and 2003, after adding
back non-cash items, provided cash of approximately $2.2 million and $1.1
million, respectively. During such periods, other changes in working capital
provided (used) cash of approximately $(5.9) million and $3.6 million,
respectively, resulting in cash being provided by (used in) operating activities
of approximately $(3.7) million and $4.7 million, respectively. Our accounts
receivable and accounts payable balances, as well as our inventory balances, can
fluctuate significantly from one period to the next due to the receipt of large
customer orders or payments or variations in product availability and vendor
shipping patterns at any particular date. The increase in inventory during the
six months ended January 31, 2004 of approximately $8.7 million as compared to
16
the six months ended January 31, 2003, is a result of the increase in sales in
the period, as well as increased inventory purchases due to special product
offerings and volume discounts received from manufacturers.
Investing activities for the six months ended January 31, 2004 and 2003
used cash of approximately $842,000 and $389,000, respectively. For the six
months ended January 31, 2004 and 2003 these amounts consisted solely of
additions to property and equipment.
For the six months ended January 31, 2004 financing activities used cash of
approximately $96,000. This amount consisted solely of payments on capitalized
lease obligations. Financing activities did not provide or use any cash for the
six months ended January 31, 2003.
Line of Credit
--------------
We have available a line of credit with a financial institution in the
aggregate amount of $15.0 million. At January 31, 2004, no amounts were
outstanding under this line which expires on January 31, 2005. The line of
credit facility requires the Company to maintain certain financial ratios and
covenants. At January 31, 2004, the Company was in compliance with all the
specified financial ratios and covenants.
Financial Commitments
---------------------
We believe that our current balances in cash and cash equivalents, expected
cash flows from operations and available borrowings under the line of credit
will be adequate to support current operating levels for the foreseeable future,
specifically through at least the end of fiscal 2004 which ends on July 31,
2004. We currently have no material commitments for capital expenditures, other
than operating and capital leases that the Company has committed to for its
facilities and certain tangible property. Future capital requirements of the
Company include those for the growth of working capital items such as accounts
receivable and inventory, the purchase of equipment, expansion of facilities, as
well as the possible opening of new offices, potential acquisitions and
expansion of the Company's service and e-commerce capabilities. In addition,
there are no transactions, arrangements and other relationships with
unconsolidated entities or other persons that are reasonably likely to affect
liquidity or the availability of, or requirements for, capital resources.
The following table represents the Company's financial commitments as of
January 31, 2004:
Less than 1 - 3 4 - 5 After
Total 1 Year Years Years 5 Years
-------------------------------------------------------------------------
(in thousands)
Capital leases $8,039 $228 $ 910 $829 $6,072
Operating leases 2,484 622 1,598 128 136
----- ----- ----- --- ---
Total $10,523 $850 $2,508 $957 $6,208
====== === ===== === =====
The Company regularly examines opportunities for strategic acquisitions of
other companies or lines of business and anticipates that it may issue debt
and/or equity securities either as direct consideration for such acquisitions or
to raise additional funds to be used (in whole or in part) in payment for
acquired securities or assets. The issuance of such securities could be expected
to have a dilutive impact on the Company's shareholders, and there can be no
assurance as to whether or when any acquired business would contribute positive
operating results commensurate with the associated investment.
Recently Issued Accounting Standards
In April 2003, the FASB determined that stock-based compensation should be
recognized as a cost in the financial statements and that such cost be measured
according to the fair value of the stock options. The FASB has not as yet
17
determined the methodology for calculating fair value and plans to issue an
accounting standard that would become effective in 2005. The Company will
continue to monitor communications on this subject from the FASB in order to
determine the impact on the Company's consolidated financial statements.
In December 2003, the FASB issued a revised version of FASB Interpretation
No. 46, "Consolidation of Variable Interest Entities," ("FIN 46R"), which
addresses how a business enterprise should evaluate whether it has a controlling
interest in an entity through means other than voting rights and, accordingly,
should consolidate the entity. FIN 46R replaced FASB Interpretation No. 46,
"Consolidation of Variable Interest Entities," which was issued in January,
2003. FIN 46R applies immediately to variable interest entities created after
December 31, 2003 and to variable interest entities in which an enterprise
obtains an interest after that date. For variable interest entities created or
acquired prior to January 1, 2004, the provisions of FIN 46R, must be applied
beginning on April 30, 2004. The Company does not believe that the adoption of
FIN 46R will have a significant impact on the Company's consolidated financial
statements.
In December 2003, the Securities and Exchange Commission ("SEC") issued
Staff Accounting Bulletin No. 104, "Revenue Recognition," ("SAB 104"), which
updates the previously issued revenue recognition guidance in SAB 101, based on
the Emerging Issues Task Force Issue 00-21, "Revenue Arrangements with Multiple
Deliverables," ("EITF 00-21"). According to EITF 00-21, if the deliverables in a
sales arrangement constitute separate units of accounting, as defined, the
revenue recognition policy must be determined for each identified unit. If the
arrangement is a single unit of accounting under the separation criteria, as
defined, the revenue recognition policy must be determined for the entire
arrangement. The application of SAB 104 did not have a significant impact on the
Company's consolidated financial statements.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company is not exposed to significant market risks. The Company
primarily invests its cash in mutual funds consisting of U.S. Government and
Government Agency Securities, Municipal Bonds and Corporate Fixed Income
securities. Neither a 100 basis point increase nor decrease from current
interest rates would have a material effect on the Company's financial position,
results of operations or cash flows.
ITEM 4. CONTROLS AND PROCEDURES
Within 90 days prior to the filing of this report, the Company's
management, including the Company's Chief Executive Officer and Chief Financial
Officer, evaluated the effectiveness of the design and operation of the
Company's disclosure controls and procedures as defined in Rule 14(c) under the
Securities Exchange Act of 1934 (the "Exchange Act"). Based upon the evaluation,
the Chief Executive Officer and the Chief Financial Officer concluded the
Company's disclosure controls and procedures were effective, in all material
respects, in timely alerting them to material information relating to the
Company (including its consolidated subsidiaries) and to ensure that the
information required to be disclosed in the reports the Company files and
submits under the Exchange Act is recorded, processed, summarized and reported
as and when required.
There have been no significant changes in the Company's internal
controls or in other factors subsequent to the date of the evaluation that could
significantly affect these controls.
18
PART II - OTHER INFORMATION
ITEM 4. Submission of Matters to a Vote of Security Holders
At our Annual Meeting of Shareholders held on January 21, 2004, the
following proposals were adopted by the margins indicated:
(1) Elect seven Directors to serve until the 2005 Annual Meeting of
Shareholders;
Broker
Nominee For Withheld Abstain Non-votes
-------------- --- -------- ------- ---------
Barry R. Steinberg 7,499,098 420,073 0 0
Joel G. Stemple 7,499,098 420,073 0 0
Joel Rothlein 7,499,098 420,073 0 0
Bert Rudofsky 7,523,898 395,273 0 0
Michael E. Russell 7,523,898 395,273 0 0
Julian Sandler 7,523,898 395,273 0 0
Yacov A. Shamash 7,523,898 395,273 0 0
(2) Vote on the ratification of the reappointment of KPMG LLP as
independent auditors of the Company for the year ending July 31,
2004.
Broker
For Against Abstain Non-votes
--- ------- ------- ---------
7,831,836 37,335 50,000 0
No other items were voted on at the Annual Meeting of Shareholders or
during the quarter ended January 31, 2004.
ITEM 6. Exhibits and Reports on Form 8-K
(a) Exhibits
10.21- Fifth Amendment to $15,000,000 Revolving Credit Facility Agreement
dated January 30, 2004 between Registrant and Citibank, as Agent.
31.1 - Certification by Barry R. Steinberg, Chief Executive Officer,
Pursuant to 18 U.S. C. Section 1350, as Adopted Pursuant to Section
302 of the Sarbanes-Oxley Act of 2002.
31.2 - Certification by Elan Yaish, Chief Financial Officer, Pursuant to 18
U.S. C. Section 1350, as Adopted Pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002.
32.1 - Certification by Barry R. Steinberg, Chief Executive Officer,
Pursuant to 18 U.S. C. Section 1350, as Adopted Pursuant to Section
906 of the Sarbanes-Oxley Act of 2002.
32.2 - Certification by Elan Yaish, Chief Financial Officer, Pursuant to 18
U.S. C. Section 1350, as Adopted Pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.
(b) Reports on Form 8-K
1. Form 8-K filed December 11, 2003 disclosing Press Release dated
December 11, 2003 reporting earnings for the first quarter ended
October 31, 2003.
2. Form 8-K filed December 19, 2003 disclosing Press Release dated
December 19, 2003 announcing the resignation of Robert Valentine from
its Board and the appointment of Yacov A. Shamash to fill the vacancy
created by such resignation.
19
MANCHESTER TECHNOLOGIES, INC.
Signatures
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
MANCHESTER TECHNOLOGIES, INC.
(Registrant)
DATE: March 11, 2004 /S/ Barry R. Steinberg
----------------------------------
Barry R. Steinberg
President and Chief Executive Officer
DATE: March 11, 2004 /S/ Elan Yaish
-------------------------------------
Elan Yaish
Vice President Finance, Chief Financial
Officer and Assistant Secretary
20