MLC HOLDINGS INC, S-1/A, 1996-11-08

MLC HOLDINGS INC
S-1/A, 1996-11-08
FINANCE LESSORS

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<PAGE> 1

AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON NOVEMBER 8, 1996

REGISTRATION NO. 333-11737
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------

PRE-EFFECTIVE AMENDMENT NUMBER 3

FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------

MLC HOLDINGS, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

11150 SUNSET HILLS ROAD
SUITE 110
RESTON, VIRGINIA 20190-5321
(703) 834-5710
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)

<TABLE>
<S> <C> <C>
DELAWARE 6172 54-1817218
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER IDENTIFICATION NUMBER)
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER)
</TABLE>

PHILLIP G. NORTON
CHAIRMAN, CHIEF EXECUTIVE OFFICER AND PRESIDENT
MLC HOLDINGS, INC.
11150 SUNSET HILLS ROAD
SUITE 110
RESTON, VIRGINIA 20190-5321
(703) 834-5710
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
------------------------

COPIES TO:

<TABLE>
<S> <C>
BENTON BURROUGHS, JR., ESQ. FRANK M. CONNER, III, ESQ.
ROBERT B. WEBB, III, ESQ. JONATHAN H. TALCOTT, ESQ.
HAZEL & THOMAS, P.C. ALSTON & BIRD
3110 FAIRVIEW PARK DRIVE 601 PENNSYLVANIA AVENUE,
SUITE 1400 N.W.
FALLS CHURCH, VIRGINIA 22042 SUITE 250, NORTH BUILDING
(703) 641-4200 WASHINGTON, D.C. 20004
(202) 508-3300
</TABLE>

------------------------

APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE OF THE SECURITIES TO THE
PUBLIC: As soon as practicable after the effective date of this Registration
Statement.
------------------------

If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. / /

If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. / /

If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / /

If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. / /
------------------------

THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933, OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
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<PAGE> 2

INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR
MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT
BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR
THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE
SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE
UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS
OF ANY SUCH STATE.

SUBJECT TO COMPLETION, DATED NOVEMBER 8, 1996

PROSPECTUS
[MLC LOGO]

1,000,000 SHARES

MLC HOLDINGS, INC.

COMMON STOCK
------------------------

All of the shares of common stock, $0.01 par value per share (the "Common
Stock"), offered hereby (the "Offering") are being sold by MLC Holdings, Inc.
(together with its subsidiaries, the "Company"). It is currently estimated that
the price of the Common Stock to be sold in the Offering will be between $7.00
and $9.00 per share.

Prior to the Offering, there has been no public market for the Common
Stock. See "Underwriting" for information relating to the factors considered in
determining the initial public offering price. The Common Stock has been
approved for quotation on the Nasdaq National Market under the symbol "MLCH."

SEE "RISK FACTORS" ON PAGES 9 THROUGH 18 OF THIS PROSPECTUS FOR INFORMATION
THAT SHOULD BE CONSIDERED BY PROSPECTIVE PURCHASERS OF THE COMMON STOCK OFFERED
HEREBY.
------------------------

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO
THE CONTRARY IS A CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------
UNDERWRITING
PRICE TO DISCOUNTS AND PROCEEDS TO
PUBLIC COMMISSIONS(1) COMPANY(2)
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<S> <C> <C> <C>
Per Share................................ $ $ $
Total(3)................................. $ $ $
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</TABLE>

(1) See "Underwriting" for information regarding indemnification of the
Underwriters.

(2) Before deducting expenses payable by the Company estimated to be $ .

(3) The Company has granted the Underwriters an option, exercisable within 30
days of the date hereof, to purchase from the Company up to 150,000
additional shares of Common Stock solely to cover over-allotments, if any.
To the extent that the option is exercised, the Underwriters will offer the
additional shares at the Price to Public shown above. If the option is
exercised in full, the total Price to Public, Underwriting Discounts and
Commissions and Proceeds to Company will be $ , $ and
$ , respectively. See "Underwriting."

The shares of Common Stock are offered by the Underwriters, subject to
prior sale, when, as and if delivered to and accepted by them, and subject to
the right of the Underwriters to reject any order in whole or in part. It is
expected that delivery of the shares of Common Stock will be made against
payment therefor at the offices of Friedman, Billings, Ramsey & Co., Inc.,
Arlington, Virginia, the representative of the several Underwriters (the
"Representative"), or in book entry form, through the book entry facilities of
the Depository Trust Company on or about , 1996.
------------------------

FRIEDMAN, BILLINGS, RAMSEY & CO., INC.
The date of this Prospectus is , 1996.
<PAGE> 3

AVAILABLE INFORMATION

The Company has filed with the Securities and Exchange Commission (the
"Commission") a Registration Statement on Form S-1 (together with all exhibits
and schedules thereto, the "Registration Statement") under the Securities Act of
1933, as amended (the "Securities Act"), with respect to the Common Stock
offered hereby. This Prospectus does not contain all of the information set
forth in the Registration Statement. For further information with respect to the
Company and the Common Stock, reference is hereby made to such Registration
Statement. Although statements contained in this Prospectus as to the contents
of any contract or other document are believed by the Company to set forth all
material elements of the contract or document as to which such statements
relate, in each instance, reference is made to the copy of such contract or
document filed as an exhibit to the Registration Statement, each such statement
being qualified in all respects by such reference. Copies of the Registration
Statement can be inspected and copied at the public reference facilities
maintained by the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549,
and at the regional offices of the Commission located at 500 West Madison
Street, Room 1400, Chicago, Illinois 60606, and at 7 World Trade Center, Suite
1300, New York, New York 10048. Copies of such material can be obtained from the
Public Reference Section of the Commission at 450 Fifth Street, Washington, D.C.
20549, at prescribed rates. The Commission also maintains a web site on the
World Wide Web that contains reports, proxy and information statements and other
information regarding registrants that file electronically with the Commission,
including the Company, and the address is http://www.sec.gov.

The Company intends to furnish to its stockholders annual reports
containing audited consolidated financial statements and an opinion thereon
expressed by the Company's independent auditors as well as quarterly reports for
the first three fiscal quarters of each fiscal year containing unaudited
consolidated condensed financial statements. The Company also intends to provide
annual financial statements to each person to whom a copy of this Prospectus has
been delivered, upon the request of such person.

IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE COMMON STOCK AT
A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH
TRANSACTIONS MAY BE EFFECTED ON THE NASDAQ NATIONAL MARKET. SUCH STABILIZING, IF
COMMENCED, MAY BE DISCONTINUED AT ANY TIME.

No action has been or will be taken in any jurisdiction by the Company or
by any Underwriter that would permit a public offering of the Common Stock or
possession or distribution of this Prospectus in any jurisdiction where action
for that purpose is required, other than in the United States. Persons outside
the United States into whose possession this Prospectus comes are required by
the Company and the Underwriters to inform themselves about and to observe any
restriction as to the offering of the Common Stock and the distribution of this
Prospectus.

2
<PAGE> 4

PROSPECTUS SUMMARY

The following summary is qualified in its entirety by, and should be read
in conjunction with, the more detailed information and financial statements,
including the notes thereto, appearing elsewhere in this Prospectus. Prospective
purchasers of the shares of Common Stock offered hereby should carefully
consider the factors set forth under "Risk Factors." This Prospectus gives
effect to the reorganization of the Company, pursuant to which MLC Group, Inc.,
a Virginia corporation ("MLC Group"), became, effective September 1, 1996, a
wholly-owned subsidiary of MLC Holdings, Inc. ("MLC Holdings"), a newly formed
Delaware corporation. All references to the "Company" shall be deemed to include
and refer to MLC Holdings and its subsidiaries, including MLC Group.

This Prospectus contains certain statements of a forward-looking nature
relating to future events or the future financial performance of the Company.
Prospective purchasers of the shares of Common Stock offered hereby are
cautioned that such statements are only predictions and that actual events or
results may differ materially. In evaluating such statements, prospective
purchasers of the shares of Common Stock should specifically consider the
various factors identified in this Prospectus, including the matters set forth
under "Risk Factors," which would cause actual results to differ materially from
those indicated by such forward-looking statements.

THE COMPANY

The Company specializes in leasing and financing information technology
assets and providing asset management services to commercial customers with
annual sales revenue of between $10 million and $500 million ("middle market
customers"), select Fortune 1000 firms, federal, state and local governments and
vendors. The assets leased by the Company include personal computers, client
server systems, networks, mid-range and mainframe computer equipment,
telecommunications equipment and software.

The Company also leases and finances equipment, software and services
through relationships with vendors, equipment manufacturers and systems
integrators. These vendor clients represent a variety of high technology
industries and include, among others, in alphabetical order: Cisco Systems,
Inc.; EMC Corporation; Systems & Computer Technology Corporation; and Sterling
Software, Inc. The Company has also provided financing for other vendors'
customers for transactions ranging in size from $50,000 to $21.0 million based
upon the purchase price of the assets.

The Company seeks to differentiate itself from its competitors by offering
its customers asset management services and asset trading capabilities, which
may be customized to meet the client's desires. The Company believes that its
ability and willingness to personalize its relationships and customize its
services to meet the specific financial and managerial needs of each customer
enable it to compete effectively against larger equipment leasing and finance
companies. The Company further believes that, by providing asset management
services and asset trading capabilities as well as other services to its
customers, it has a competitive advantage over smaller competitors which lack
the resources and expertise to provide such services.

3
<PAGE> 5

residual values when pricing leasing transactions, dispose efficiently of
off-lease equipment and offer customers a way to dispose of or acquire
previously owned information technology equipment. Asset management services,
which are offered primarily to enhance customer service, is a general term used
to describe the provision of asset inventory and tracking services, software and
record keeping programs to customers. The asset management services provided by
the Company allow the customers to better track their information technology
assets. The asset management services include a software system maintained by
the Company which generates reports and allows customers to dial up and receive
information on a real time basis.

The Company's management team is led by Phillip G. Norton, Chairman, Chief
Executive Officer and President, and Bruce M. Bowen, a director, the Chief
Financial Officer and Executive Vice President, each of whom has extensive
experience in the leasing and finance industries, and who have worked together
for three different companies over the past 20 years. Mr. Norton began his
business career in 1970 with Memorex Corporation, and started his leasing career
in 1975 as National Sales Manager of Federal Leasing, Inc. Mr. Norton founded
Systems Leasing Corporation in 1978, which grew to approximately $75 million in
assets by the time it was sold to PacifiCorp Capital, Inc. in 1986. Mr. Norton
served as President of PacifiCorp Capital, Inc. through 1990, ultimately
managing approximately 225 employees and approximately $700 million in assets.
Mr. Bowen began his leasing career in 1975 with Federal Leasing, Inc. where he
worked until 1978. In 1982, Mr. Bowen joined Mr. Norton at Systems Leasing
Corporation as Director of Finance and later became a Senior Vice President of
PacifiCorp Capital, Inc., the successor to Systems Leasing Corporation. In 1990,
Mr. Bowen left PacifiCorp Capital, Inc. and founded the Company.

The extensive experience of the Company's management in leasing and
financing information technology equipment has enabled the Company to manage its
residual portfolio to achieve superior returns. Since the Company's organization
in November, 1990 through March 31, 1996, on matured leases, the Company has
realized a return of 139% of the amount originally recorded as residual values
for its equipment. As part of its underwriting and risk management efforts, the
Company's management seeks to structure lease transactions so that they can be
financed or sold to third parties on a nonrecourse basis, even if the Company
ultimately retains an equity interest in the lease. The Company's underwriting
approach has resulted in no credit losses in its leasing operations since its
organization. The Company believes that its historical approach to estimating
residuals, pricing and underwriting leases and managing relationships among
vendors, customers and financial partners provides a foundation for the Company
to grow and profitably deploy new capital.

Completion of the Offering will substantially increase the Company's equity
base, enabling the Company to service a larger volume of business. The proceeds
of the Offering will also enable the Company to: (i) reduce its borrowing costs
by decreasing the amounts outstanding and negotiating for lower interest rates
and fees on its line-of-credit borrowings; (ii) reduce its reliance on joint
ventures for certain transactions; and (iii) implement a securitization program
for its lease receivables.

The Company was founded in November, 1990. The Company has 39 full-time
employees and eight part-time employees and operates through ten offices. The
Company's principal executive offices are located at 11150 Sunset Hills Road,
Suite 110, Reston, Virginia 20190-5321, and its telephone number is (703)
834-5710.

STRATEGY

Based on industry trends and the Company's historical results, the Company
will continue to implement and improve upon a three-pronged strategy designed to
increase its customer base by: (i) providing continuing superior customer
service while marketing to middle market and select Fortune 1000 end-users of
information technology equipment and assets; (ii) purchasing companies in key
regional markets with pre-existing customer bases; and (iii) further developing
vendor leasing programs. Through its marketing strategy, the Company emphasizes
cross-selling to the different groups of clients and attempts to reach the
maximum number of potential end-users.

4
<PAGE> 6

While the Company is pursuing and intends to continue to pursue the
forgoing strategies, there can be no assurance that the Company will be able to
successfully implement such strategies. The Company's ability to implement these
strategies may be limited by a number of factors. See "Risk Factors."

End-User Marketing Focus. The Company's target customers include middle
market and select Fortune
1000 firms which are significant users of information technology and
telecommunications equipment and other assets, which also may need other
services provided by the Company, such as asset management. By targeting a
potential customer base that is broader than just the Fortune 1000 companies,
the Company believes that there is less competition from the larger equipment
finance companies, as their marketing forces are typically more focused on
Fortune 1000 customers. The Company markets through its principal executive
offices and nine regional offices. The ability to identify and establish
customer relationships with such firms will be critical to the Company's
strategy. There can be no assurance that the Company will be able to
successfully locate such customers. See "Risk Factors -- Dependence on
Creditworthy Customers."

Acquisition of Related Companies. The Company believes that significant
opportunities exist to expand its target customer base in key regional markets
through the acquisition of strategically selected companies in related lines of
business. The Company's acquisition strategy will focus on acquiring new
customers in the top 50 regional markets in the country. The Company believes
that it can successfully acquire companies and maintain and expand customer
relationships by providing acquired companies with a lower cost of capital,
additional cross-selling opportunities and financial structuring expertise. In
addition, the Company can provide the owners of privately-held companies with an
opportunity to realize their company's value. The Company believes that
decentralized marketing and centralized operations, along with operating
synergies, will make it successful in lowering the operational costs while
expanding the customer base of each firm it acquires. The ability to identify
and acquire such firms on prices and terms that are attractive to the Company
and which avoid dilution of earnings for existing stockholders is crucial to the
successful implementation of this strategy. In addition, after consummating any
acquisitions, the Company must be able to successfully integrate the acquired
business with the Company to achieve the cost savings and marketing benefits
sought by the Company. There is, however, no assurance that the Company will be
able to successfully acquire such companies, or, if acquired, successfully
implement the foregoing strategy. See "Risk Factors -- Potential Acquisitions"
and "-- Management of Growth."

Increasing Focus on Vendors. Over the last several years, major
manufacturers of information technology and telecommunications equipment have
moved away from providing financing to end-user customers through captive
finance organizations and have increasingly outsourced this equipment financing
function to independent leasing companies. From the perspective of the large
end-user of information technology and telecommunications equipment, outsourcing
equipment financing can simplify and centralize the financing of multiple
products from different vendors, particularly as most captive finance
organizations will service only their manufacturer's products. Through its
participation in vendor marketing programs, the Company is able to leverage its
marketing efforts by using the sales force of the vendor. The vendor's sales
organization provides the Company with access to an extensive and diversified
end-user customer base while saving the Company the cost of establishing these
independent customer relationships. The Company uses its relationships with
these vendors and end-users to create new customer relationships to which other
products and services of the Company can be marketed directly. The ability to
successfully establish such vendor and end user relationships is essential to
the successful implementation of this strategy. There can be, however, no
assurance that the Company will be able to successfully establish such
relationships. See "Risk Factors -- Dependence on Major Relationships."

RISK FACTORS

The Company and its business are subject to varying risks which are (i) a
dependence on the ability to obtain creditworthy customers; (ii) a dependence on
major relationships; (iii) asset ownership resulting from the majority of the
Company's lease transactions; (iv) a dependence upon the Company's ability to
obtain financing; (v) substantial competition including numerous national and
regional companies selling, leasing and financing similar or same or equivalent
products; (vi) risk associated with the pursuit and integration of acquisitions;
(vii) a dependence upon the efforts, abilities and relationships of a few key
management

5
<PAGE> 7

personnel; (viii) control of a majority of the Company's Common Stock by a
single individual, Phillip G. Norton; (ix) risk associated with contractual
"termination rights" in leases to government customers; (x) the inability to
timely and at a competitive price obtain equipment for lease; (xi) management's
ability to manage the Company's rapid growth; (xii) potential changes in tax
laws which may make leasing less desirable for potential customers; (xiii)
potential changes in accounting practices which may make leasing less attractive
to potential customers; (xiv) interest rate fluctuations; (xv) provisions of the
Company's governing documents and Delaware law, coupled with control by insiders
and a staggered board which may make it more difficult for a third party to
acquire control of the Company without approval of the Company's Board of
Directors; (xvi) absence of prior public market for the Common Stock; (xvii)
absence of dividend history or intention to pay dividends in the foreseeable
future; (xviii) immediate and substantial book value dilution to investors in
the Common Stock purchased in the Offering; (xix) fluctuations in quarterly
operating results; (xx) potential for a larger number of additional shares held
by current stockholders to become eligible for sale and thereby adversely impact
the market price of the Common Stock; and (xxi) broad discretion by the Company
as to the use of a substantial portion (96%) of the net proceeds.

6
<PAGE> 8

THE OFFERING

Common Stock Offered by the
Company.................. 1,000,000 shares

Common Stock to be
Outstanding After the
Offering................. 5,000,000 shares

Use of Proceeds............ The Company intends to use the proceeds of the
Offering: (i) to repay approximately $275,000 of
outstanding indebtedness currently owed to two
stockholders of the Company; (ii) to reduce the
then outstanding balance of the Company's
$2,000,000 revolving loan facility, with
NationsBank, N.A. (the "NationsBank Facility"),
which had an outstanding balance of $1,350,000 as
of June 30, 1996 and no outstanding balance as of
September 30, 1996; (iii) to reduce the then
outstanding balance of the Company's $5,000,000
revolving term loan facility, with First Union
National Bank of Virginia (the "First Union
Facility"), which had no outstanding balance as
of June 30, 1996 and no outstanding balance as of
September 30, 1996; and (iv) for general
corporate purposes, including purchases of
equipment for lease or re-sale, acquisitions of
existing portfolio equipment and related leases
and acquisitions of related businesses or new
joint ventures. See "Use of Proceeds,"
"Business -- Strategy," "-- Financing" and
"Certain Transactions."

Proposed Nasdaq National
Market Symbol............ MLCH
------------------------

Unless otherwise indicated, all information in this Prospectus assumes no
exercise of the Underwriters' over-allotment option and excludes 400,000 shares
of Common Stock reserved for issuance under various stock plans or employment
agreements of the Company, of which options for 380,000 shares will have been
granted upon closing of the Offering. See "Management -- Executive Compensation
and Other Information -- Compensation Arrangements and Employment Arrangements,"
"Description of Capital Stock" and "Underwriting." In addition, unless otherwise
indicated and except as set forth in the Consolidated Financial Statements, all
information in this Prospectus has been adjusted to give effect to the
reorganization of the Company, pursuant to which MLC Group became a wholly-owned
subsidiary of MLC Holdings, effective September 1, 1996.

7
<PAGE> 9

SUMMARY CONSOLIDATED FINANCIAL DATA

The summary consolidated financial data set forth below should be read in
conjunction with the Consolidated Financial Statements of the Company, and
related notes thereto, the information included under "Selected Consolidated
Financial Data" and "Management's Discussion and Analysis of Results of
Operations and Financial Condition," included elsewhere herein. The consolidated
financial data, as of and for, the quarters ended June 30, 1995 and June 30,
1996, have not been audited, but in the opinion of management of the Company all
adjustments (consisting only of normal recurring accruals) necessary for a fair
presentation have been included. The results of operations for the quarter ended
June 30, 1996 are not necessarily indicative of the results of operations that
may be expected for the entire year. See "Selected Consolidated Financial Data,"
"Management's Discussion and Analysis of Results of Operations and Financial
Condition" and "Business."

<TABLE>
<CAPTION>
QUARTER ENDED
YEAR ENDED MARCH 31, JUNE 30,
----------------------------------- ----------------------
1994 1995 1996 1995 1996
--------- --------- --------- --------- ---------
(UNAUDITED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
EARNINGS STATEMENT DATA:
Total revenues.............................. $ 27,613 $ 40,819 $ 42,800 $ 3,775 $ 12,896
Total costs and expenses.................... 27,233 40,207 40,309 3,134 12,097
--------- --------- --------- --------- ---------
Earnings before provision for income
taxes..................................... 380 612 2,491 641 799
Provision for income taxes.................. 59 198 881 227 284
--------- --------- --------- --------- ---------
Net earnings................................ $ 321 $ 414 $ 1,610 $ 414 $ 515
========= ========= ========= ========= =========
Net earnings per common share............... $ 0.08 $ 0.10 $ 0.40 $ 0.10 $ 0.13
========= ========= ========= ========= =========
Shares used in computing per common share
amounts................................... 4,000,000 4,000,000 4,000,000 4,000,000 4,000,000
</TABLE>

<TABLE>
<CAPTION>
AS OF MARCH 31, AS OF JUNE 30,
----------------------------------- ----------------------
1994 1995 1996 1995 1996
--------- --------- --------- --------- ---------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Investment in leases........................ $ 10,310 $ 13,998 $ 26,493 $ 14,728 $ 22,611
Total assets................................ 13,238 17,481 29,836 17,975 27,521
Recourse notes payable...................... 2,144 1,815 1,285 1,419 1,485
Nonrecourse notes payable................... 8,116 10,162 18,351 11,255 16,564
Retained earnings........................... 801 1,215 2,825 1,628 3,340
Stockholders' equity........................ 851 1,264 2,875 1,678 3,390
</TABLE>

RECENT DEVELOPMENTS

For the quarter ended September 30, 1996, the Company's preliminary summary
unaudited earnings data is as shown below, as compared with the results of
operations for the quarter ended June 30, 1996:

<TABLE>
<CAPTION>
QUARTER ENDED
-----------------------------------
JUNE 30, 1996 SEPTEMBER 30, 1996
------------- ------------------
(UNAUDITED)
(DOLLARS IN THOUSANDS, EXCEPT PER
SHARE DATA)
<S> <C> <C>
Total revenues.............................................. $ 12,896 $ 11,705
Total costs and expenses.................................... 12,097 10,803
------------ --------
Earnings before provision for income taxes.................. 799 902
Provision for income taxes.................................. 284 323
------------ --------
Net earnings................................................ 515 $ 579
============ =================
Net earnings per common share............................... $ 0.13 $ 0.14
============ =================
Shares used in computing per common share amounts........... 4,000,000 4,000,000
</TABLE>

Revenues, costs and earnings of the Company remained relatively constant for
the quarter ended September 30, 1996, as compared with the quarter ended June
30, 1996. Revenues for the quarter ended September 30, 1996 decreased $1.2
million from $12.9 million for the quarter ended June 30, 1996 to $11.7 million.
Total costs and expenses for the quarter ended September 30, 1996 decreased $1.3
million from $12.1 million for the quarter ended June 30, 1996 to $10.8 million,
resulting in a slight increase in quarterly earnings from $515,000 for the
quarter ended June 30, 1996 to $579,000. The Company is not aware of the
occurrence of any events during the quarter ended September 30, 1996 which would
have a material adverse effect upon its business, financial condition or results
of operations.

8
<PAGE> 10

RISK FACTORS

An investment in the shares of Common Stock offered hereby involves a high
degree of risk. In addition to other information in this Prospectus, the
following risk factors should be considered carefully by potential purchasers in
evaluating an investment in the Common Stock offered hereby. Except for
historical information contained herein, the discussion in this Prospectus
contains forward-looking statements that involve risks and uncertainties, such
as statements of the Company's plans, objectives, expectations and intentions.
The cautionary statements made in this Prospectus should be read as being
applicable to all related forward-looking statements wherever they appear in
this Prospectus. The Company's actual results could differ materially from those
discussed herein. Factors that could cause or contribute to such differences
include those discussed below, as well as those discussed elsewhere herein.

DEPENDENCE ON CREDITWORTHY CUSTOMERS

Historically, the credit quality of the Company's customers, and the
Company's credit loss experience, have enabled the Company to raise sufficient
amounts of debt and equity capital to fund its equipment purchases. In the event
the actual or perceived credit quality of the Company's customer base materially
decreases, or the Company has a material increase in its credit loss experience,
the Company may find it difficult to continue to obtain the capital it requires,
resulting in a material adverse effect on its business, financial condition and
results of operations. See "Risk Factors -- Dependence on Availability of
Financing." Furthermore, a material increase in the Company's delinquency and
default experience would, alone, have a material adverse effect on its business,
financial condition and results of operations.

DEPENDENCE ON MAJOR RELATIONSHIPS

As of June 30, 1996, the Company's portfolio consisted of leases with 109
customers. During fiscal year 1996, the Company originated commercial leasing
transactions with 66 customers, ten of which accounted for approximately 65% of
the aggregate purchase price of equipment leased by the Company to those 66
customers. In the event any of the Company's major customers ceases to lease
additional equipment or materially reduces the amount of equipment it leases
from the Company, this cessation or reduction could have a material adverse
effect upon the Company's business, financial condition and results of
operations. See "Business -- Leasing, Financing and Sales Activities." For
fiscal year 1996, the Company did not have any revenue sources which alone
accounted for more than 10% of the Company's revenues except for the Company's
relationship with GATX Capital Corporation ("GATX"), as discussed below.

In addition to its dependence on a limited number of substantial customers,
the Company also obtains a significant source of its equity financing for
transactions and, for fiscal year 1996, its revenue, through two joint venture
arrangements: (i) MLC/GATX Limited Partnership I, a Colorado limited
partnership, which is used for financing mainframe and peripheral computer
equipment; and (ii) MLC/CLC LLC, a Virginia limited liability company, which is
used for financing personal computers and client server equipment.

The partners in MLC/GATX Limited Partnership I are: the Company, with a
9.5% limited partnership interest; GATX, with an 89.5% limited partnership
interest; and MLC/GATX Leasing Corporation, a Colorado corporation, which is
equally owned by the Company and GATX and which is a general partner with a 1%
general partnership interest. During fiscal year 1996, revenue recognized from
sales to MLC/GATX Limited Partnership I was $13.1 million or 31% of the
Company's total revenues. The Company's investment in MLC/GATX Limited
Partnership I accounted for by the use of the cost method was $394,000, as of
June 30, 1996. MLC/GATX Limited Partnership I does not purchase any lease
transactions from anyone other than the Company.

GATX, which is based in San Francisco, California and which is not
affiliated with the Company, has been in the equipment leasing and financing
market for over 25 years, and has assets of approximately $7.5 billion. GATX is
a publicly held corporation which files periodic reports with the Commission
pursuant to the Securities Exchange Act of 1934, as amended.

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The members of MLC/CLC LLC are the Company, with a 5% membership interest,
and Cargill Leasing Corporation, a Delaware corporation, with a 95% membership
interest. MLC Group serves as the manager for MLC/CLC LLC. For fiscal year 1996,
revenue recognized from the sales to MLC/CLC LLC was $1.3 million or 3% of the
Company's total revenues. The Company's investment in MLC/CLC LLC accounted for
by the use of the cost method was $52,149, as of June 30, 1996. MLC/CLC LLC does
not purchase any lease transactions from anyone other than the Company.

Cargill Leasing Corporation, located in Minnetonka, Minnesota, is a
subsidiary of Cargill, Inc., and is not affiliated with the Company. Cargill,
Inc. has been reported by Forbes Magazine to be one of the largest privately
owned companies in the United States. Cargill Leasing Corporation has been in
the equipment leasing and financing business for over ten years. As privately
held companies, neither Cargill, Inc. or Cargill Leasing Corporation makes
financial information available to the public and neither company issues an
annual report to the general public. Cargill, Inc. has released the following
financial data for its most recent fiscal year ended May 31, 1996: sales were
$56 billion, net income was $902 million, total assets were $21 billion, net
worth was $5.9 billion, and employees numbered over 76,000 people worldwide.

The loss or dissolution of either of these joint venture arrangements, and
in particular, the MLC/GATX Limited Partnership I, would have a material adverse
effect upon the Company's ability to finance lease transactions and thus on the
Company's business, financial condition and results of operations. See "Risk
Factors -- Dependence on Availability of Financing."

In addition to the relationships described above, the Company, as part of
its strategy, intends to seek to establish both formal and informal
relationships with vendors, and by such participation in vendor marketing
programs, leverage the Company's marketing efforts by using the sales force of
the vendor. There can be no assurance that the Company will be able successfully
to establish such relationships, or if established, that they will provide the
sales leverage desired by the Company. The failure to establish such
relationships would have a material adverse effect upon the Company's ability to
increase its volume of transactions financed and thus on the Company's business,
financial condition and results of operations.

ASSET OWNERSHIP RISK OF TECHNOLOGICAL OBSOLESCENCE, INABILITY TO RE-LEASE OR
RE-SELL, OR FLUCTUATING MARKET CONDITIONS

The Company has historically emphasized fair market value ("FMV") leases,
i.e., operating and direct finance leases, where the Company will own the leased
asset at the expiration of the lease term and will sell or re-lease the asset at
that time at market rates either to the existing lessee or to another party. FMV
leases require the Company to re-lease or re-sell the equipment in its portfolio
in a timely manner upon termination of the lease in order to minimize off-lease
time and recover its original investment in the equipment, and a failure to do
so places the Company at a risk of not recovering its entire investment in the
equipment ("residual risk").

At the inception of each FMV lease, the Company has historically estimated
a residual value for the leased equipment. A decrease in the market value of
such equipment at a rate greater than the rate expected by the Company, whether
due to rapid technological obsolescence or other factors, would adversely affect
the residual values of such equipment. Consequently, there can be no assurance
that the Company's estimated residual value for equipment will be realized.

If the Company's estimated residual values are reduced or not achieved in
the future, its business, financial condition and results of operations could be
materially adversely affected. As of June 30, 1996, the total net unrealized
residual value of the Company's leased equipment was approximately $2.8 million.
Similarly, if the Company is unable to re-lease or re-sell equipment on
favorable terms, its business, financial

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<PAGE> 12

condition and results of operations could be materially adversely affected. See
"Management's Discussion and Analysis of Results of Operations and Financial
Condition -- Revenue Recognition and Lease Accounting" and "Business -- Leasing,
Financing and Sales Activities."

The Company also engages in the short-term trading of equipment in the
aftermarket. To the extent the Company purchases equipment without having a firm
commitment for its re-lease or re-sale or if a firm commitment for re-lease or
re-sale were to exist but not be consummated for whatever reason, the Company
would be subject to all the risks of ownership of the equipment as described
above. See "Business -- Industry Overview."

DEPENDENCE ON AVAILABILITY OF FINANCING

The business in which the Company is engaged is a capital intensive
business. The Company's business involves both the leasing and the financing of
assets. The leasing business is characterized by ownership of the assets
residing with the Company or its assigns. The financing business is
characterized by the beneficial ownership of assets residing with the asset user
or customer. Several different types of financing, each of which is described
below, are important to the conduct of the Company's leasing and financing
business. An inability to obtain any of these types of financing would have a
material adverse effect upon the Company's business, financial condition and
results of operations.

The typical lease transaction requires both nonrecourse debt and an equity
investment by the Company at the time the equipment is purchased. The typical
financing transaction is dependent upon the nonrecourse financing described
below. The Company's equity investment in the typical lease transaction
generally ranges between 5% and 20% of the equipment cost (but sometimes ranges
as high as 35%). The balance of the equipment cost, or the nonrecourse debt
portion, is typically financed with a lender on a nonrecourse basis to the
Company. The Company's equity investment must come from: (i) equity investments
from third parties (including MLC/GATX Limited Partnership I and MLC/CLC LLC);
(ii) internally generated funds; (iii) the net proceeds of the sale of the
Company's securities; or (iv) recourse borrowings. Accordingly, the Company's
ability to successfully execute its business strategy and to sustain its growth
is dependent largely on its ability to obtain each of the foregoing types of
financing.

Information relating to the sources of each of such sources of financing
for equipment acquisitions is as follows:

Nonrecourse Financing. The credit standing of the Company's customers must
be of such a quality as to allow the Company to finance most of its leasing or
financing transactions on a nonrecourse basis. Under a nonrecourse loan, the
Company borrows an amount equal to the committed lease payments under the
financed lease, discounted at a fixed interest rate. The lender is entitled to
receive the payments under the financed lease in repayment of the loan, and
takes a security interest in the related equipment but has no recourse against
the Company. The Company retains ownership of such equipment, subject to the
lender's security interest. Interest rates under this type of financing are
negotiated on a transaction-by-transaction basis and reflect the financial
condition of the lessee, the term of the lease and the amount of the loan. As of
June 30, 1996, the Company had aggregate outstanding nonrecourse borrowings of
approximately $16.6 million.

The Company's objective is to enter into leasing or financing transactions
with creditworthy customers whose credit standing will permit the Company to
finance such leases with banks or other financial institutions on a nonrecourse
basis to the Company. The Company's customers which do not have a credit rating
of Baa or better generally are creditworthy non-rated companies that may be
publicly or privately owned. The Company has had success in meeting this
objective in the past, but there is no assurance that banks or other financial
institutions will be willing or able to continue to finance the Company's lease
transactions on a nonrecourse basis, that the Company will continue to be able
to attract customers that meet the credit standards for nonrecourse financing
required by the Company's financing sources or that those standards will not
change in the future.

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<PAGE> 13

taxes. The Company assigns its tax-exempt leases to institutional investors,
banks and investment banks which can utilize tax-free income, and has a number
of such entities which regularly purchase the transactions. The Company also
originates financings involving various agencies of the U.S. Government. In
addition to the usual risks associated with commercial transactions, these
financings may be subject to numerous termination provisions (see "Risk
Factors -- Government Termination Risk") and may also contain risks associated
with a vendor's inability to meet contractual obligations to provide specified
goods or services as specified on an ongoing basis. Historically, there have
been a limited number of financial institutions which have provided financing
for these contracts, and although the Company maintains favorable relationships
with a few, there can be no assurance that the Company will be able to replace
these relationships or find other lenders in the event existing relationships
are terminated.

Lease Assignment Financing. Access to nonrecourse financing is also
important to the Company's lease sales revenue and fee income. The Company
enters into many transactions involving government leases which it immediately
assigns and sells, on a nonrecourse basis to third parties and records any gain
or loss from the transaction as lease revenue. Unavailability of persons willing
to acquire such government leases on such a nonrecourse basis could materially
adversely affect the Company's ability to consummate such sales transactions and
thus have a material adverse effect upon the Company's business, financial
condition and results of operations. See "Business -- Financing."

Equity Joint Ventures. Through MLC/GATX Limited Partnership I and MLC/CLC
LLC, the Company has formal joint venture arrangements with two institutional
investors which provide the equity investment financing for certain of the
Company's transactions. GATX, an unaffiliated company which beneficially owns
90% of MLC/GATX Limited Partnership I, is a publicly listed company with
stockholders' equity in excess of $332 million, as of June 30, 1996. Cargill
Leasing Corporation, an unaffiliated investor which owns 95% of MLC/CLC LLC, is
affiliated with Cargill, Inc., a privately held company that was reported by
Forbes Magazine to have 1995 earnings in excess of $900 million. See "Risk
Factors -- Dependence on Major Relationships."

For fiscal year 1996, approximately 31% of the Company's total revenue was
attributable to sales of lease transactions to MLC/GATX Limited Partnership I.
Transactions involving the use or placement of equity from these joint ventures
require the consent of the relevant joint venture partner, and if financing from
those sources were to be withheld or were to become unavailable, it would limit
the amount of equity available to the Company and have a material adverse effect
upon the Company's business, financial condition and results of operations. See
"Business -- Financing."

Equity Capital and Internal Financing. Occasionally the Company finances
leases and related equipment internally, rather than with financing provided by
lenders. These internal lease financings typically occur in cases where the
financed amounts are not sufficiently large to be attractive to lenders or where
the credit rating of the lessee is not acceptable to lenders. The Company also
temporarily finances selected leases internally, generally for less than 90
days, until permanent outside nonrecourse financing is obtained.

If the Company significantly increases its leasing and financing volumes as
a result of new vendor relationships or substantially increases the size of its
leasing portfolio or if other unforeseen developments occur, the Company may
require the proceeds of additional equity financings within the next 12 to 18
months. Additional equity may also be necessary in order for the Company to have
a sufficient equity position to meet debt-to-equity ratios required by its
recourse lenders in the future. There can be no assurances that the Company will
be able to generate operating cash flow or raise additional equity at that time
or at any time in the future or that the Company will be able to raise such
equity on terms which do not cause significant dilution to its stockholders. See
"Business -- Financing."

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<PAGE> 14

established a third line of credit for borrowings of $2 million with NationsBanc
Leasing Corporation, an affiliate of NationsBank, N.A. (the "NationsBanc Leasing
Facility"). Availability under the revolving lines of credit may be limited by
the asset value of equipment purchased by the Company and may be further limited
by certain covenants and terms and conditions of the facilities. In the event
that Company is unable to sell the equipment or unable to finance the equipment
on a permanent basis within a certain period of time, the availability of credit
under the lines could be diminished or eliminated. Furthermore, in the event
that receivables collateralizing the line are uncollectible, the Company would
be responsible for repayment of the lines of credit. Accordingly, such a default
could have a material adverse effect on the business, financial condition and
results of operations of the Company, particularly if the then fair market value
of the equipment is insufficient to satisfy the obligations due to the bank.

The First Union Facility expires on April 30, 1997. The NationsBank
Facility expires on December 1, 1996 and the NationsBanc Leasing Facility
expires on January 31, 1997. There can be no assurance that the Company will be
able to renew, extend or replace these credit facilities and a failure to renew,
extend or replace any of these facilities would have a material adverse effect
upon the Company's business, financial condition and results of operations.

With respect to the long-term recourse notes to finance certain leases, the
availability of such recourse borrowing is dependent on both the
creditworthiness of the customer, as described above under "Risk
Factors -- Dependence on Availability of Financing -- Nonrecourse Financing,"
and the creditworthiness of the Company, including the Company's ability to meet
certain debt-to-equity ratios often required by recourse lenders. The Company's
ability to increase the amount of its recourse debt has been limited by its
capital position and the personal guarantees and collateral provided by its
stockholders. While the Company expects that the increase in its stockholders'
equity resulting from the sale of the Common Stock in the Offering will make
available to it, as necessary, additional recourse borrowing, the Company plans
to use this increased stockholders' equity, in part, to enable the Company to
reduce or eliminate the personal guarantees and collateral provided by its
stockholders on such recourse debt. No assurances can be given that the Company
will not experience difficulty in obtaining recourse debt in the future, whether
because lenders change their credit standards for providing such financing, the
stockholders cease to provide personal guarantees or collateral, or because the
Company increases its recourse borrowing to a level where it cannot meet such
debt-to-equity ratio requirements or other financial covenants. The
unavailability of such recourse financing would have a material adverse effect
on the ability of the Company to finance lease transactions and, thus, have a
material adverse effect upon the Company's business, financial condition and
results of operations. See "Business -- Financing."

COMPETITION

The Company faces substantial competition in connection with the purchase,
sale and lease of new and used computer systems, computer peripheral equipment,
upgrades and parts. Among its competitors are numerous national and regional
companies selling, leasing and financing the same or equivalent products. Many
of these competitors are well established, have substantially greater financial,
marketing, technical and sales support than the Company and have established
reputations for success in the purchase, sale and lease of computer-related
products. In addition, many computer manufacturers may sell or lease directly to
the Company's customers, and the Company's continued ability to compete
effectively may be affected by the policies of such manufacturers. The Company
also faces competition from other financial service firms such as investment
banking firms which underwrite municipal bonds to finance large municipal
acquisitions, national finance companies which finance equipment in the
governmental and commercial sectors, banks which finance local customers and
also engage in lease transactions to obtain favorable tax benefits, as well as
other financial intermediaries similar to the Company which may focus
specifically on geography, asset-type or customer profiles. There can be no
assurance that the Company will be able to compete successfully or that it will
maintain profitability in the future. See "Business -- Competition."

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POTENTIAL ACQUISITIONS

As part of its long-term business strategy, the Company intends to pursue
acquisitions of other companies. Future acquisitions may result in potentially
dilutive issuances of equity securities, the incurrence of additional debt and
the amortization of expenses related to goodwill and other intangible assets,
all of which could have a material adverse effect on the Company's business,
financial condition and results of operations. Future acquisitions would involve
numerous additional risks, including: difficulties in the assimilation of the
operations, services, products and personnel of the acquired company; the
diversion of management's attention from other business concerns; entering
markets in which the Company has little or no direct prior experience; and the
potential loss of key employees of the acquired company. The Company currently
has no agreements or understandings with regard to any acquisitions. See
"Business -- Strategy."

DEPENDENCE ON CURRENT MANAGEMENT

The operations and future success of the Company are dependent upon the
efforts, abilities and relationships of the Company's Chairman, Chief Executive
Officer and President, Phillip G. Norton, and its founder, Chief Financial
Officer and Executive Vice President, Bruce M. Bowen, who also serves as a
director of the Company, and its Secretary and Treasurer, Kleyton L. Parkhurst.
The loss of any of these key management officers would materially adversely
affect the business, financial condition and results of operations of the
Company. Each of these officers has entered into an employment agreement with
the Company. The Company maintains key-man life insurance on Mr. Norton in the
form of two separate policies, one with the Prudential Life Insurance Company
and the second with TransAmerica Life Co., each in the amount of $5,000,000 and
on Mr. Bowen with CNA Insurance Company in the amount of $1,000,000. See
"Management -- Executive Compensation and Other Information -- Compensation
Arrangements and Employment Agreements."

CONTROL BY PRINCIPAL STOCKHOLDERS

Upon completion of the Offering, one of the Company's current principal
stockholders, Phillip G. Norton, Chairman, Chief Executive Officer and President
of the Company, will directly and indirectly control approximately 56.2% of the
Company's outstanding Common Stock. Phillip G. Norton also has the option to
acquire an additional 130,000 shares of Common Stock of which options to acquire
32,500 shares of Common Stock are immediately exercisable upon completion of the
Offering. In the event of the death of Phillip G. Norton, Patricia A. Norton, if
then living, would succeed to his rights under the Irrevocable Proxy and Stock
Rights Agreement. See "Management -- Executive Compensation and Other
Information" and "Principal Stockholders."

Similarly, upon completion of the Offering, another of the Company's
current principal stockholders, Bruce M. Bowen, a director, the Chief Financial
Officer and Executive Vice President of the Company, will directly and
indirectly control approximately 15.3% of the Company's outstanding Common
Stock. See "Management -- Executive Compensation and Other Information" and
"Principal Stockholders."

Because of their ownership positions, Messrs. Norton and Bowen will have a
substantial influence on the election of all of the Company's directors, and,
therefore, substantial control of the direction of the affairs of the Company.
Mr. Norton, acting alone, or in concert with Mr. Bowen, will effectively control
the election of a majority of the members of the Company's Board of Directors
and will effectively be able to determine all corporate actions, including
amendments to the Company's charter documents, or take other actions which could
adversely affect minority stockholders. In addition, the Company's stockholders
do not have the right to cumulative voting in the election of directors, the
absence of which has the effect of making it unlikely that the public
stockholders will be able to cause any director to be elected to the Company's
Board of Directors, other than those supported by Mr. Norton, individually, or,
if Mr. Norton's ownership position should decrease, those supported by Messrs.
Norton and Bowen. See "Description of Capital Stock."

GOVERNMENT TERMINATION RISK

Virtually all of the Company's lease volume with government customers is
pursuant to leases which are "subject to appropriation," or, with respect to
federal government leases, "also subject to termination for convenience or the
risk of non-renewal at the end of each fiscal year." A lease which is subject to
termination

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<PAGE> 16

for convenience may also be terminated by the government at any time prior to
expiration of the fiscal year on various grounds in which event, while the
Company or its assignee through the contractor may submit a claim for losses, if
any, associated therewith, the timing and amount of a settlement upon such a
claim can be uncertain. In addition, most federal government leases are written
over several fiscal years and give the government the option not to renew at the
end of each fiscal year for any reason, even if funds have been appropriated. In
the case of a lease which is "subject to appropriation," the obligation of the
lessor is subject to and contingent upon appropriation of funding for that lease
in future fiscal years and if such funding is not appropriated, then the
governmental lessee has no obligation to continue the lease. The Company has
historically sought and been able to pass these appropriation, non-renewal and
termination for convenience risks to financial institutions by financing such
leases on a "nonrecourse" basis; however, there can be no assurance that the
Company will be able to obtain such financing in the future. A material increase
in either industry-wide termination experience or in the Company's termination
due to non-appropriation, non-renewal or termination for convenience experience
would make it more difficult for the Company to obtain nonrecourse financing for
similar "subject to appropriation" governmental leases in the future and would
have a material adverse effect on the Company's business, financial condition
and results of operations.

As of the end of fiscal year 1996, the Company had $6.8 million of assets
leased to governmental units. All of these leases are subject to termination
rights by the governmental units as described above. As of the end of fiscal
year 1996, approximately $5.35 million of this amount was financed through
non-recourse financing and the termination risk passed to the lender. Of the
remaining approximately $1.4 million, $800,000 or 55% was sold to non-recourse
lending sources in the first quarter of fiscal year 1997.

DEPENDENCE UPON AVAILABILITY OF EQUIPMENT

A substantial portion of the Company's sales and lease revenues are derived
from equipment which the Company obtains in the computer "aftermarket." As a
supplier of used International Business Machines Corporation ("IBM") and
IBM-compatible computer equipment and other equipment, the Company must
constantly identify sources for products at costs which permit the Company to
re-sell or re-lease such equipment on a competitive and profitable basis.
Technological advances and shifts in customer preferences may require the
Company to offer additional or different products not available through its
current network of product suppliers and could render a portion of the Company's
inventory and lease portfolio unmarketable or marketable only at lower prices or
rates. From time-to-time, the Company and its competitors have experienced
shortages in the availability of certain products.

The Company obtains aftermarket equipment primarily to fill orders for such
equipment by its customers. The computer market is characterized by a number of
different types of customers. Certain customers seek only the newest or most
sophisticated equipment while other customers are far more price sensitive.
While the risk of technological obsolescence means that one customer may no
longer have need for a specific type of equipment, it may still be useful to
another customer. Similarly due to changes in customer preferences a customer
may no longer wish to continue leasing a particular piece of equipment. When the
Company is forced to move equipment from one customer to another, there can be
no assurance that the Company will be able to find a new customer for that
equipment or if a new customer is identified, that the price it will be able to
sell or lease the equipment does not result in a loss to the Company. The
occurrence of technological obsolescence or change in preference may cause a
decline in the economic value of equipment.

Like any market, the computer marketplace is subject to product shortages
from time to time. The principal effect on the Company would be on timely
locating computer equipment in the aftermarket. The Company may receive an order
from a customer for a piece of computer equipment that it must obtain in the
aftermarket and be unable to do so in the required time frame.

The occurrence of these shortages in the future would have a material
adverse effect on the Company's business, financial condition and results of
operations. As of June 30, 1996, the Company's inventory of information
technology equipment was $67,267, and the highest inventory level at the end of
any quarter during fiscal year 1996 was $531,732 on June 30, 1995. See
"Business -- Competition."

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MANAGEMENT OF GROWTH

In order to support the anticipated growth of its business, the Company has
added new personnel in 1995 and 1996 and expects to add additional personnel in
1997. The Company is absorbing, and will continue to absorb in the future, the
effects of additional personnel costs and the implementation of new systems
necessary to manage such growth. The Company's future operating results will
depend on its ability to attract, hire and retain skilled employees and on the
ability of its officers and key employees to continue to implement and improve
its operational and financial control systems and to train and manage its
employees. If the Company is unable to manage growth effectively, or attract and
retain the personnel it requires, the Company's business, financial condition
and results of operations would be materially adversely affected.

RISK OF CHANGES IN TAX LAWS

The Company's leasing activities generate significant depreciation
allowances that provide the Company with substantial tax deductions on an
ongoing basis. Many of the Company's lessees currently enjoy favorable tax
treatment by entering into operating leases. In addition, parties financing
certain leases to state and local governments enjoy favorable tax treatment
based upon their interest income not being subject to certain income taxes. Any
change to current tax laws that makes existing operating lease financing or
municipal lease financing less attractive could materially adversely affect the
Company's business, financial condition and results of operations.

RISK OF CHANGES IN ACCOUNTING PRACTICES

Many of the Company's lessees currently enjoy favorable accounting
treatment of operating leases. Any change to current accounting principles that
make operating lease financing less attractive could materially adversely affect
the Company's business, financial condition and results of operations. See
"Management's Discussion and Analysis of Results of Operations and Financial
Condition" for a discussion of the impact of a recently promulgated financial
accounting staff bulletin.

INTEREST RATE RISK

During the marketing and bid process for new lease transactions, the
Company typically provides a proposal to the customer based upon market
conditions at the time of the proposal. While the proposal in many instances
will provide the Company with the ability to reprice its bid under certain
conditions, in general terms, between the time the proposal is issued by the
Company and the time the lease transaction is ultimately financed by the
Company, the Company is exposed to interest rate risk to the extent interest
rates increase.

In addition, prior to obtaining long-term financing for its leases and the
related equipment, the Company sometimes finances the purchase of those assets
through lines of credit which bear interest at variable rates. See "Risk
Factors -- Dependence on Availability of Financing -- Recourse Financing" and
"Business -- Financing." The Company is exposed to interest rate risk on leases
financed through the NationsBank Facility, the First Union Facility and the
NationsBanc Leasing Facility to the extent interest rates increase between the
time the leases are initially financed and the time they are permanently
financed.

ANTI-TAKEOVER EFFECTS OF GOVERNING DOCUMENTS, CONTROL BY INSIDERS, DELAWARE LAW
AND STAGGERED BOARD

The Company's Certificate of Incorporation and Bylaws contain certain
provisions that could have the effect of making it more difficult for a party to
acquire, or of discouraging a party from attempting to acquire, control of the
Company without approval of the Company's Board of Directors.

Under the Company's Certificate of Incorporation, the Board of Directors
has authority to issue up to 2,000,000 shares of $.01 par value preferred stock
of the Company, in one or more series, having such rights and privileges,
including, without limitation, voting rights, as the Board of Directors may
determine in its sole discretion. No consent of the holders of shares of Common
Stock is required to authorize the issuance of any class of preferred stock of
the Company. The rights of the holders of shares of Common Stock will be subject
to, and may be adversely affected by, the rights of the holders of any preferred
stock that may be issued in the future. While the Company has no present
intention to issue shares of preferred stock, such issuance could have the
effect of making it more difficult for a third party to acquire a majority of
the outstanding voting stock of the Company. See "Description of Capital Stock."

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The Company's Certificate of Incorporation and Bylaws further provide for
the Company's Board of Directors to be divided into three classes, with
directors in each class elected for three-year staggered terms, except for the
initial directors. This classification of the Board of Directors could make it
more difficult for a third party to acquire control of the Company, because it
would require more than one annual meeting of the stockholders to elect a
majority of the Board of Directors.

Upon completion of the Offering, one of the Company's current principal
stockholders, Phillip G. Norton, Chairman, Chief Executive Officer and President
of the Company, will control approximately 56.2% of the Common Stock, and thus
will probably be able to prevent a third party from acquiring control of the
Company. See "Risk Factors -- Control by Principal Stockholders."

The Company is a Delaware corporation and is subject to the anti-takeover
provisions of Section 203 of the Delaware General Corporation Law ("DGCL"). In
general, Section 203 prevents an "interested stockholder" (defined generally as
a person owning 15% or more of the Company's outstanding voting stock) from
engaging in a "business combination" with the Company for three years following
the date that the person became an interested stockholder unless the business
combination is approved in a prescribed manner. This statute could make it more
difficult for a third party to acquire control of the Company. See "Description
of Capital Stock -- Certain Anti-takeover Provisions."

ABSENCE OF PRIOR PUBLIC MARKET FOR STOCK

The Common Stock has not been previously traded on an established market;
thus, there exists a degree of uncertainty as to the volume and the price at
which sustained market trading will occur.

The initial public offering price of the Common Stock has been determined
by negotiations among the Company and the Representative and may not reflect the
market price of the Common Stock after the Offering. See "Underwriting" for a
discussion of factors considered in determining the initial public offering
price. The assumed initial public offering price of $8.00 per share is
substantially in excess of the pro forma net book value of $0.85 per share,
derived from the Company's June 30, 1996 balance sheet. See "Dilution" and
"Underwriting."

The market price of the Common Stock, like that of the securities of other
equipment leasing and financing companies, may be highly volatile. In the
future, there may be significant volatility in the market price of the Common
Stock due to factors that may or may not relate to the Company's performance.
For example, the market price may be significantly affected by the following,
and other factors: actual or anticipated financial results of the Company; the
market price of stocks of other capital equipment leasing and financing
companies; fluctuations and trends in prevailing money market interest rates;
announcements from vendors of the Company's leased equipment regarding new
products or technological innovations; equipment price changes; changes in
government regulations; accounting principles or tax laws applicable to the
Company; the operating results or financial condition of the Company's vendors
or principal customers; or acquisitions affecting the Company's vendors or
principal customers.

ABSENCE OF DIVIDENDS

The Company has never paid a cash dividend to stockholders and does not
anticipate paying dividends on the Common Stock in the foreseeable future, as
the Company's Board of Directors intends to retain the Company's earnings for
use in the business. In addition, the First Union Facility includes a covenant
which prohibits the Company from paying any dividends. See "Dividend Policy."

IMMEDIATE AND SUBSTANTIAL DILUTION

An investor in the Common Stock will experience immediate and substantial
dilution. As of June 30, 1996, the Company had a net book value of approximately
$3.4 million or $0.85 per share of Common Stock, based upon 4,000,000 shares of
Common Stock outstanding. After giving effect to the sale of the Common Stock in
the Offering at an assumed initial public offering price of $8.00 per share, and
after deducting the underwriting discount and commissions and estimated expenses
of the Offering, the Company's pro forma net book value would have been
approximately $9.9 million or $1.98 per share of Common Stock, as of June 30,
1996, based on 5,000,000 shares of Common Stock outstanding. The result will be
an immediate increase in

17
<PAGE> 19

net book value of $1.13 share of Common Stock to existing stockholders and an
immediate dilution to new investors of $6.02 per share of Common Stock
(representing a 75% dilution from the assumed initial public offering price per
share). As a result, new investors will bear most of the risk of loss since
their shares are being purchased at a cost substantially above the price that
existing stockholders acquired their shares. See "Dilution."

POTENTIAL FLUCTUATIONS IN QUARTERLY OPERATING RESULTS

The Company's future quarterly operating results may fluctuate. In the
event the Company's revenues or earnings for any quarter are less than the level
expected by securities analysts or the market in general, such shortfall could
have an immediate and significant adverse impact on the market price of the
Common Stock. Any such adverse impact could be greater if any such shortfall
occurs near the time of any material decrease in any widely followed stock index
or in the market price of the stock of one or more public equipment leasing and
financing companies or major customers of the Company.

The Company's quarterly results of operations are susceptible to
fluctuations for a number of reasons, including, without limitation, any
reduction of expected residual values related to the equipment the Company
leases, timing of specific transactions and other factors. Quarterly operating
results could also fluctuate as a result of the sale by the Company of equipment
in its lease portfolio, at the expiration of a lease term or prior to such
expiration, to the lessee or to a third party. Such sales of equipment may have
the effect of increasing revenues and net income during the quarter in which the
sale occurs, and reducing revenues and net income otherwise expected in
subsequent quarters. See "Risk Factors -- Asset Ownership Risk of Technological
Obsolescence, Inability to Re-lease or Re-sell or Fluctuating Market Conditions"
and "Management's Discussion and Analysis of Results of Operations and Financial
Condition."

Given the possibility of such fluctuations, the Company believes that
comparisons of the results of its operations for one quarter should not be
relied upon as an indication of future performance.

SHARES ELIGIBLE FOR FUTURE SALE MAY ADVERSELY AFFECT THE MARKET PRICE OF COMMON
STOCK

Upon the completion of the Offering, 5,000,000 shares of Common Stock
(including the 1,000,000 shares sold in the Offering ) will be outstanding. Of
this amount, 1,000,000 shares of Common Stock will be freely tradable without
restriction. The remaining 4,000,000 shares of Common Stock will be subject to a
lock-up agreement described below. Under the lock-up agreements, each of the
Company's directors, officers and shareholders including Messrs. Norton and
Bowen, has agreed not to sell, without the prior written consent of the
Underwriters, any shares owned by such person, directly or indirectly, within
the 360-day period after the date of this Prospectus. While at the end of such
360-day period, the 4,000,000 shares subject to such lock-up agreement will no
longer be subject to such agreement, such shares will be required to be sold
pursuant to provisions of Rule 144 under the Securities Act. Sales of any such
shares after such periods could adversely affect the market price of the Common
Stock. See "Description of Capital Stock -- Shares Eligible for Future Sale" and
"Underwriting."

BROAD DISCRETION IN USE OF PROCEEDS

A substantial portion ($6.25 million or 96%) of the net proceeds of the
Offering have been allocated to general corporate purposes, and will be used for
such purposes as the Company's management may determine. The Company has not
identified specific uses of a substantial portion of the net proceeds to be
received by it from the Offering. Accordingly, the Company's management will
have broad discretion with respect to the expenditure of a significant portion
of the net proceeds of the Offering without any action or approval of the
Company's stockholders. Thus, purchasers of the Common Stock offered hereby will
be entrusting their funds to the Company's management, upon whose judgment the
investors must depend, with only limited information concerning management's
specific intentions. See "Use of Proceeds."

18
<PAGE> 20

THE COMPANY

The Company is a recently formed Delaware corporation which, pursuant to a
reorganization effected September 1, 1996, serves as the holding company for MLC
Group and other subsidiaries. The Company holds no other assets and engages in
no other business other than serving as the parent holding company for MLC Group
and MLC Capital, Inc. MLC/GATX Leasing Corporation is a 50% owned subsidiary of
MLC Group.

MLC Group, a Virginia corporation, founded in 1990 and originally named
Municipal Leasing Corporation, currently conducts all business activity of the
Company. MLC Capital, Inc., is an NASD-registered broker-dealer and as of the
date of this Prospectus has conducted no business transactions. The Company does
not have any plans at present to engage in business through MLC Capital, Inc.
MLC Group obtains a significant source of its equity financing for transactions
through two joint venture arrangements: (i) MLC/GATX Limited Partnership I; and
(ii) MLC/CLC LLC. MLC Group has a 9.5% limited partnership ownership interest in
MLC/GATX Limited Partnership I and owns 50% of the stock of MLC/ GATX Leasing
Corporation, which serves as general partner of MLC/GATX Limited Partnership I
with a 1% general partnership interest. MLC Group has a 5% membership interest
in MLC/CLC LLC and serves as its manager. See "Risk Factors -- Dependence on
Major Relationships" and "Business -- Financing."

The Company's principal executive offices are located at 11150 Sunset Hills
Road, Suite 110, Reston, Virginia 20190-5321 and its telephone number at such
address is (703) 834-5710. The Company operates through 10 offices, including
its principal executive offices and seven regional sales offices which are
located in the following metropolitan areas: Philadelphia, Pennsylvania; Dallas,
Texas; Stamford, Connecticut; Sacramento, California; Raleigh, North Carolina;
Atlanta, Georgia; San Diego, California. In addition the Company also has
arrangements with two independent contractors who work primarily for the Company
in Columbus and Cincinnati, Ohio.

The Company currently employs 39 full-time employees and eight part-time
employees, of which 27 of such employees work at the Company's principal
executive offices and the remaining 20 work at the various regional offices of
the Company.

USE OF PROCEEDS

The net proceeds to the Company from the sale of the 1,000,000 shares of
Common Stock offered hereby are estimated to be approximately $6.5 million after
deducting the Underwriter's discount and commissions and estimated expenses of
the Offering payable by the Company ($7.6 million if the Underwriters' over-
allotment option is exercised in full for an additional 150,000 shares).

The net proceeds of the Offering will be used as follows: (i) approximately
$275,000 will be used to repay outstanding indebtedness currently owed to two
stockholders of the Company; (ii) any outstanding indebtedness on the
NationsBank Facility and the First Union Facility will be retired (the aggregate
amount outstanding under both facilities, as of June 30, 1996, was $1.4 million
and there was no indebtedness outstanding as of September 30, 1996); and (iii)
the balance, which based on amount of indebtedness outstanding under the two
facilities as of September 30, 1996, would be approximately $6.25 million or 96%
of the net proceeds ($7.35 million or 97% if the Underwriters' over-allotment
option is exercised in full for an additional 150,000 shares), will be used for
general corporate purposes. The Company's management will have complete
discretion to apply this amount towards general corporate purposes. Such general
corporate purposes include purchases of equipment for lease or re-sale,
acquisitions of existing portfolio equipment and related leases and acquisitions
of related businesses or new joint ventures. The Company does not have any
agreements or understandings with respect to any acquisitions of existing
portfolio equipment and related leases and acquisitions of related businesses or
new joint ventures at the present time. Further, the Company cannot currently
predict the amount of its short-term debt, if any, that it will repay with such
proceeds, and in any event, expects that it may reborrow all or a portion of any
such amount within 90 days after it has been repaid to repurchase equipment for
lease or sale. See "Risk Factors -- Broad Discretion in Use of Proceeds."

19
<PAGE> 21

The indebtedness to be retired with the proceeds of the Offering consists
of: (i) approximately $275,000 outstanding pursuant to two separate demand
notes, one of which is held by Bruce M. Bowen, in the amount of $175,000, and
the other of which is held by William J. Slaton, in the amount of $100,000, each
dated March 1, 1995, and each accruing interest at the rate of 10% per annum and
due in full on March 3, 1998; (ii) any balance outstanding, as of closing under
the NationsBank Facility, a $2 million revolving loan facility, bearing interest
at prime plus 1% and expiring December 1, 1996 (which balance was $1.4 million
as of June 30, 1996 and zero as of September 30, 1996); and (iii) the amount
outstanding, if any, under the First Union Facility, a $5 million revolving term
loan facility, with advances bearing interest at LIBOR plus 275 basis points and
expiring April 30, 1997, which had no outstanding balance, as of June 30, 1996
or as of September 30, 1996.

Pending such uses, the Company expects to invest the net proceeds in United
States government agency secured investments or other short-term investment
grade securities.

DIVIDEND POLICY

The Company has never paid a cash dividend to stockholders and the current
policy of the Company's Board of Directors is to retain the earnings of the
Company for use in the business. In addition, the First Union Facility prohibits
the Company from paying any dividends. Therefore, the payment of cash dividends
on the Common Stock is unlikely in the foreseeable future. Any future
determination concerning the payment of dividends will depend upon the
elimination of these restrictions and the absence of similar restrictions in
other agreements to which the Company is a party, the Company's financial
condition, the Company's results of operations and any other factors deemed
relevant by the Board of Directors.

20
<PAGE> 22

CAPITALIZATION

The following table sets forth the capitalization of the Company as of June
30, 1996 on an actual basis and on an adjusted basis giving effect to (i) the
sale of 1,000,000 shares of Common Stock offered by the Company at an assumed
initial public offering price of $8.00 per share of Common Stock (the mid-point
of the price range set forth on the cover page of this Prospectus) after
deducting underwriting discounts and commissions and estimated expenses of the
Offering and (ii) the repayment by the Company of certain indebtedness. See "Use
of Proceeds" and "Certain Transactions."

<TABLE>
<CAPTION>
AT JUNE 30, 1996
----------------------
ACTUAL AS ADJUSTED
------- -----------
(UNAUDITED)
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Nonrecourse notes payable............................................... $16,564 $16,564
Recourse notes payable.................................................. 1,485 135
Loans from stockholders................................................. 275 --
------- -------
Total......................................................... 18,324 16,699
Stockholders' equity:
Preferred stock, $0.01 par value -- 2,000,000 shares authorized;
none issued or outstanding........................................ -- --
Common stock, $0.01 par value -- 10,000,000 shares authorized;
4,000,000 shares issued and outstanding (actual), 5,000,000
shares; issued and outstanding (as adjusted)(1)................... 40 50
Additional paid-in capital......................................... 10 6,500
Retained earnings.................................................. 3,340 3,340
------- -------
Total stockholders' equity.................................... 3,390 9,890
------- -------
Total capitalization.......................................... $21,714 $26,589
======= =======
</TABLE>

- ------------------
(1) Excludes a total of 400,000 shares of Common Stock reserved for issuance
under various employment agreements and certain stock option plans of the
Company as follows: (i) 30,000 shares of Common Stock reserved for issuance
upon exercise of options granted to nonemployee directors under the 1996
Outside Director Stock Plan with an exercise price equal to the initial
public offering price and 45,000 shares of Common Stock reserved for
issuance under future options to be granted under the 1996 Outside Director
Stock Plan at an exercise price equal to the market price at the time of
grant; (ii) 100,000 shares of Common Stock reserved for issuance upon
exercise of options granted Kleyton L. Parkhurst under an employment
agreement with an exercise price equal to $6.40 per share of Common Stock;
(iii) 15,000 shares of Common Stock issuable upon exercise of options
granted Bruce M. Bowen under an employment agreement with an exercise price
equal to the initial public offering price; (iv) 130,000 shares of Common
Stock reserved for issuance upon exercise of options granted to Phillip
Norton under an employment agreement with an exercise price equal to the
initial public offering price; (v) 60,000 shares of Common Stock issuable
upon exercise of options granted other employees under the 1996 Incentive
Stock Option Plan with an exercise price equal to the initial public
offering price; and (vi) 20,000 additional shares of Common Stock reserved
for issuance under the 1996 Stock Incentive Plan. See
"Management -- Executive Compensation and Other Information -- Compensation
Arrangements and Employment Agreements" and "-- 1996 Stock Incentive Plan"
and "Underwriting."

21
<PAGE> 23

DILUTION

The net book value of the Company, as of June 30, 1996, was approximately
$3.4 million or $0.85 per share of Common Stock. Net book value represents the
amount of the Company's stockholder's equity.

Dilution per share to new investors represents the difference between the
amount per share paid by purchasers of shares of Common Stock in the Offering
and the pro forma net book value per share of Common Stock immediately after
completion of the Offering. After giving effect to the sale of the Common Stock
at an estimated initial public offering price of $8.00 per share of Common Stock
(the mid-point of the price range set forth on the cover page of this
Prospectus) and after deduction of the underwriting discount and commissions and
estimated expenses of the Offering, the adjusted pro forma net book value, as of
June 30, 1996, would have been approximately $9.9 million or $1.98 per share of
Common Stock. This represents an immediate increase in net book value of $1.13
per share to existing stockholders and an immediate dilution of $6.02 per share
to new investors purchasing the Common Stock. The following table illustrates
the pro forma per share dilution, as of June 30, 1996:

<TABLE>
<S> <C> <C>
Estimated initial public offering price per share(1).................. $8.00
Net book value per share at June 30, 1996........................ $0.85
Increase per share in pro forma net book value attributable to
new investors................................................... 1.13
-----
Pro forma net book value per share after the Offering(2).............. 1.98
-----
Dilution per share to new investors................................... $6.02
=====
</TABLE>

- ---------------
(1) Before deducting estimated underwriting discounts and commissions and
estimated expenses of the Offering payable by the Company.

(2) Excludes 400,000 shares of Common Stock reserved for issuance upon the
exercise of options granted or to be granted or reserved for future grant
pursuant to employment agreements and the 1996 Stock Incentive Plan. See
"Management -- Executive Compensation and Other Information."

The following table sets forth, on a pro forma basis as of June 30, 1996,
the number of shares of Common Stock purchased from the Company, the total
consideration paid to the Company and the average price per share paid by the
existing stockholders for shares of Common Stock held prior to the Offering and
paid by the new investors for shares of Common Stock purchases in the Offering,
based upon the estimated initial public offering price of $8.00 per share of
Common Stock (the mid-point of the price range set forth on the cover page of
this Prospectus) before deduction of the underwriting discount and estimated
expenses of the Offering:

<TABLE>
<CAPTION>
SHARES OWNED
AFTER THE OFFERING TOTAL CONSIDERATION
-------------------- --------------------- AVERAGE PRICE
NUMBER PERCENT AMOUNT PERCENT PER SHARE
--------- ------- ---------- ------- -------------
<S> <C> <C> <C> <C> <C>
Existing stockholders............ 4,000,000 80.00% $ 49,592 0.62% $0.01
New investors.................... 1,000,000 20.00 8,000,000 99.38 8.00
--------- ------- ---------- -------
Total.................. 5,000,000 100.00% $8,049,592 100.00%
======== ====== ========= ======
</TABLE>

22
<PAGE> 24

SELECTED CONSOLIDATED FINANCIAL DATA

The selected consolidated financial data set forth below should be read in
conjunction with the consolidated financial statements of the Company and
related notes thereto and "Management's Discussion and Analysis of Results of
Operations and Financial Condition," included elsewhere herein. The consolidated
financial data as of and for the quarters ended June 30, 1995 and June 30, 1996,
have not been audited, but in the opinion of management of the Company all
adjustments (consisting only of normal recurring accruals) necessary for a fair
presentation have been included. The results of operations for the quarter ended
June 30, 1996 are not necessarily indicative of the results of operations that
may be expected for the entire year. See "Management's Discussion and Analysis
of Results of Operations and Financial Condition" and "Business."

<TABLE>
<CAPTION>
QUARTER ENDED
YEAR ENDED MARCH 31, JUNE 30,
------------------------------------------ --------------------
STATEMENTS OF EARNINGS 1992(1) 1993 1994 1995 1996 1995 1996
--------- --------- --------- --------- --------- --------- ---------
(UNAUDITED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
REVENUE:
Sales of Equipment................. $ 6,183 $ 24,357 $ 18,737 $ 26,940 $ 18,524 $ 2,091 $ 4,178
Sales of Leased Equipment.......... -- -- 5,940 9,958 16,318 -- 6,234
Lease revenues..................... 377 1,219 1,577 2,968 5,900 968 1,791
Net margin on sales-type leases.... -- 193 380 277 86 75 --
Fee and other income............... 47 694 979 676 1,972 641 693
--------- --------- --------- --------- --------- --------- ---------
Total revenues................ 6,607 26,463 27,613 40,819 42,800 3,775 12,896
--------- --------- --------- --------- --------- --------- ---------
COSTS AND EXPENSES:
Cost of sales...................... 5,635 22,750 23,155 34,353 31,202 1,454 9,894
Direct lease costs................. -- 140 344 841 2,863 286 781
Professional and other fees........ 388 770 595 633 687 49 128
Salaries and benefits.............. 313 1,403 1,734 2,631 2,962 846 665
General and administrative
expenses......................... 185 526 994 759 1,018 191 259
Interest and financing costs....... 43 251 411 990 1,577 308 370
--------- --------- --------- --------- --------- --------- ---------
Total costs and expenses...... 6,564 25,840 27,233 40,207 40,309 3,134 12,097
--------- --------- --------- --------- --------- --------- ---------
EARNINGS BEFORE PROVISION FOR
INCOME TAXES......................... 43 623 380 612 2,491 641 799
PROVISION FOR INCOME TAXES............. -- 185 59 198 881 227 284
--------- --------- --------- --------- --------- --------- ---------
NET EARNINGS........................... $ 43 $ 438 $ 321 $ 414 $ 1,610 $ 414 $ 515
========= ========= ========= ========= ========= ========= =========
NET EARNINGS PER COMMON SHARE.......... $ 0.02 $ 0.11 $ 0.08 $ 0.10 $ 0.40 $ 0.10 $ 0.13
========= ========= ========= ========= ========= ========= =========
SHARES USED IN COMPUTING PER COMMON
SHARE AMOUNTS........................ 1,800,000 4,000,000 4,000,000 4,000,000 4,000,000 4,000,000 4,000,000
</TABLE>

- ---------------
(1) Includes financial results for the period November 8, 1990 (organization) to
March 31, 1992

23
<PAGE> 25

<TABLE>
<CAPTION>
AS OF MARCH 31, AS OF JUNE 30,
--------------------------------------------- -----------------
BALANCE SHEETS 1992 1993 1994 1995 1996 1995 1996
------ ------ ------- ------- ------- ------- -------
(DOLLARS IN THOUSANDS) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
ASSETS:
Cash and cash equivalents............... $ 834 $ 106 $ 929 $ 253 $ 358 $ 355 $ 446
Accounts receivable..................... 162 465 964 2,138 1,273 1,087 1,962
Notes receivable........................ -- 34 87 37 92 2 1,046
Inventories............................. 138 456 231 138 86 532 67
Net investment in direct financing and
sales-type leases -- net.............. 1,302 2,577 10,146 12,124 16,273 12,129 14,372
Investment in operating lease
equipment -- net...................... -- 2,104 164 1,874 10,220 2,599 8,239
Other assets............................ -- 40 334 548 1,178 935 1,046
All other assets........................ 55 82 383 369 356 336 343
------ ------ ------- ------- ------- ------- -------
TOTAL ASSETS................................ $2,491 $5,864 $13,238 $17,481 $29,836 $17,975 $27,521
====== ====== ======== ======== ======== ======== ========
LIABILITIES:
Accounts payable -- equipment........... $ 441 $2,107 $ 1,091 $ 3,014 $ 4,973 $ 1,425 $ 3,392
Accounts payable -- trade............... 136 113 466 395 605 963 303
Salaries and commissions payable........ 125 122 131 118 62 200 131
Recourse notes payable.................. 828 634 2,144 1,815 1,285 1,419 1,485
Nonrecourse notes payable............... 600 1,917 8,116 10,162 18,351 11,255 16,564
All other liabilities................... 317 441 439 713 1,685 1,035 2,256
------ ------ ------- ------- ------- ------- -------
Total liabilities.................. 2,447 5,334 12,387 16,217 26,961 16,297 24,131
------ ------ ------- ------- ------- ------- -------
TOTAL STOCKHOLDERS' EQUITY.................. 44 530 851 1,264 2,875 1,678 3,390
------ ------ ------- ------- ------- ------- -------
TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY.................................... $2,491 $5,864 $13,238 $17,481 $29,836 $17,975 $27,521
====== ====== ======== ======== ======== ======== ========
</TABLE>

24
<PAGE> 26

MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS
OF OPERATIONS AND FINANCIAL CONDITION

The following discussion and analysis of results of operations and
financial condition of the Company should be read in conjunction with the
Consolidated Financial Statements and the related Notes thereto included
elsewhere in this Prospectus.

REVENUE RECOGNITION AND LEASE ACCOUNTING

The Company's principal line of business is the leasing, financing and sale
of equipment. The manner in which these lease finance transactions are
characterized and reported for accounting purposes has a major impact upon the
Company's reported revenue, net earnings and the resulting financial measures.
Lease accounting methods significant to the Company's business are discussed
below.

The Company classifies its lease transactions, as required by the Statement
of Financial Accounting Standards No. 13, Accounting for Leases ("FASB No. 13")
as: (i) direct financing; (ii) sales-type; or (iii) operating leases. Revenues
and expenses between accounting periods for each lease term will vary depending
upon the lease classification.

For financial statement purposes, the Company includes revenue from all
three classifications in lease revenues, and costs related to these leases in
direct lease costs.

Direct Financing and Sales-Type Leases. Direct financing and sales-type
leases transfer substantially all benefits and risks of equipment ownership to
the customer. A lease is a direct financing or sales-type lease if the
creditworthiness of the customer and the collectibility of lease payments are
reasonably certain and it meets one of the following criteria: (i) the lease
transfers ownership of the equipment to the customer by the end of the lease
term; (ii) the lease contains a bargain purchase option; (iii) the lease term at
inception is at least 75% of the estimated economic life of the leased
equipment; or (iv) the present value of the minimum lease payments is at least
90% of the fair market value of the leased equipment at inception of the lease.

Direct finance leases are recorded as investment in direct finance leases
upon acceptance of the equipment by the customer. At the inception of the lease,
unearned lease income is recorded which represents the amount by which the gross
lease payments receivable plus the estimated residual value of the equipment
exceeds the equipment cost. Unearned lease income is recognized, using the
interest method, as lease revenue over the lease term.

Sales-type leases include a dealer profit (or loss) which is recorded by
the lessor at the inception of the lease. The dealer's profit (or loss)
represents the difference, at the inception of the lease, between the fair value
of the leased property and its cost or carrying amount. The equipment subject to
such leases may be obtained in the secondary marketplace, but most frequently is
the result of releasing the Company's own portfolio. This profit (or loss) which
is recognized at lease inception, is included in net margin on sales-type
leases. Interest earned on the present value of the lease payments and residual
value is recognized over the lease term using the interest method and is
included as part of the Company's lease revenue.

Operating Leases. All leases that do not meet the criteria to be
classified as direct financing or sales-type leases are accounted for as
operating leases. Rental amounts are accrued evenly over the lease term and are
recognized as lease revenue. The Company's cost of the leased equipment is
recorded on the balance sheet as investment in operating lease equipment and is
depreciated on a straight-line basis over the lease term to the Company's
estimate of residual value. Revenue, depreciation expense and resultant profit
for operating leases are recorded evenly over the life of the lease.

As a result of these three classifications of lease for accounting
purposes, the revenues resulting from the "mix" of lease classifications during
an accounting period will affect the profit margin percentage for such period
with such profit margin percentage generally increasing as revenues from direct
financing and sales-type leases increase. Should a lease be financed, the
interest expense declines over the term of the financing as the principal is
reduced.

25
<PAGE> 27

Residual Values. Residual values represent the Company's estimated value
of the equipment at the end of the initial lease term. The residual values for
direct financing and sales-type leases are recorded in investment in direct
financing and sales-type leases, on a net present value basis. The residual
values for operating leases are included in the leased equipment's net book
value and are recorded in investment in operating lease equipment. The estimated
residual values will vary, both in amount and as a percentage of the original
equipment cost, and are recorded in investment in operating lease equipment,
depending upon several factors, including the equipment type, manufacturer's
discount, market conditions and the term of the lease.

The Company evaluates residual values on an ongoing basis and records any
required changes in accordance with FASB No. 13. Residual values are affected by
equipment supply and demand and by new product announcements and price changes
by manufacturers. In accordance with generally accepted accounting principles,
residual values can only be adjusted downward.

The Company seeks to realize the estimated residual value at lease
termination through: (i) renewal or extension of the original lease; (ii) sale
of the equipment either to the lessee or the secondary market; or (iii) lease of
the equipment to a new user. The difference between the proceeds of a sale and
the remaining estimated residual value is recorded as a gain or loss in lease
revenues when title is transferred to the lessee, or, if the equipment is sold
on the secondary market, in sales revenues and cost of sales when title is
transferred to the buyer. The proceeds from any subsequent lease are accounted
for as lease revenues at the time such transaction is entered into.

Initial Direct Costs. Initial direct costs related to the origination of
sales-type, direct finance or operating leases, are capitalized and recorded as
part of the investment in direct financing and sales-type leases, net or as
operating lease equipment, net and are amortized over the lease term.

Sales. Sales revenue includes the following types of transactions: (i)
equipment sales to customers involve the sale to customers of new and/or used
equipment that is not subject to any type of lease; (ii) leased equipment sales,
to investors relate to equipment being leased for which, the Company is the
lessor, and the transfer of any financing related to the specific lease or
equipment; and (iii) sales of equipment which was previously leased involve
sales are of equipment which the Company was the lessor whether to the original
lessee or to a new user.

Other Sources of Revenue. Fee and other income results from (i) income
events that occur after the initial sale of a financial asset such as
escrow/prepayment income, (ii) remarketing fees, (iii) brokerage fees earned for
the placement of financing transactions and (iv) interest and other
miscellaneous income. These revenues are included in fee and other income on the
Company's statement of earnings.

RESULTS OF OPERATIONS FOR THE QUARTER ENDED JUNE 30, 1996
COMPARED TO THE QUARTER ENDED JUNE 30, 1995

Revenue. Total revenues increased 241.6% from $3.8 million in the fiscal
year first quarter ended June 30, 1995 to $12.9 million in the fiscal year first
quarter ended June 30, 1996 principally as a result of an increase in the leased
equipment sales from $0 to $6.2 million. This increase was due to an increased
volume in personal computer equipment leases, which is expected to continue and
the sale to one of the Company's joint ventures, MLC/CLC LLC, which purchased
approximately $4.8 million of the $6.2 million of leased equipment sold during
the quarter. The Company expects to continue to sell leased equipment to its
joint ventures and expects the level of the sales to increase from year to year,
although not necessarily quarter to quarter (See "Risk Factors -- Dependence on
Major Relationships," "-- Dependence on Availability of Financing," "The
Company," and "Business -- Financing.") Excluding leased equipment sales, other
revenues increased by 76.5%, including equipment sale revenue which increased
99.8% from $2.1 million to $4.2 million. Lease revenue was up 85% for the
quarter from $968,074 to $1.8 million. This increase was primarily attributable
to the increase in the Company's leasing activity and lease portfolio. The
Company expects its leasing volume and size of its portfolio to continue to
grow. Other revenues increased 8.1% from $640,630 to $692,468 and in the first
quarter of the fiscal year 1997 includes $75,000 from a gain related to the
settlement of a note payable at less than its recorded value.

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Expenses. Total expenses increased from $3.1 million to $12.1 million as a
result of increased costs related to the higher volumes of leased equipment
sales and equipment sales. The cost of leased equipment sales increased from $0
to $6.2 million and the cost of equipment sales increased from $1.5 million to
$3.6 million. Direct lease related expenses increased as a result of higher
lease activity and the growth of the Company's lease assets which increased from
$14.7 million to $22.6 million, or 53.5%. Depreciation related to the operating
lease equipment portfolio increased from $217,854 to $491,394, or 125.6%.

Non-transaction related expenses (general and administrative, salaries and
benefits, business and travel, professional and other fees) decreased from $1.1
million to $1 million or 3.1%.

Interest and financing costs increased from $308,118 to $370,238 or 20.2%
due to higher levels of recourse and nonrecourse debt.

Net Earnings. Net earnings increased from $413,376 to $515,199 for an
increase of 24.6% for the period.

RESULTS OF OPERATIONS FOR THE THREE YEARS ENDED MARCH 31, 1996

REVENUES

Total revenues increased $13.2 million or 47.8%, from $27.6 million in
fiscal year 1994 to $40.8 million in fiscal year 1995. In fiscal year 1996,
total revenues increased $2 million, or 4.9% from fiscal year 1995, to $42.8
million. Lease revenue increased $1.4 million, or 88.2%, from $1.6 million in
fiscal year 1994 to $3 million in fiscal year 1995, and $2.9 million, or 98.8%,
to $5.9 million in fiscal year 1996, as a result of the increase of operating
leases and direct financing leases originated or acquired by the Company during
the periods. This trend is expected to continue as the Company increases its
sales activity in the area of acquiring leased equipment. Sales revenue
increased 49.5% from $24.7 million in fiscal year 1994 to $36.9 million in
fiscal year 1995 as a result of a 43.1% increase in equipment sales from $18.8
million to $26.9 million and a 69.5% increase in leased equipment sales from
$5.9 million to $10 million. Sales revenues declined 5.6% in fiscal year 1996 to
$34.8 million as a result of a 31.2% decline in equipment sales to $18.5 million
partially offset by a 63.9% increase in leased equipment sales to $16.3 million,
leased equipment sales to MLC/GATX Limited Partnership I was $13.1 million of
the total $16.3 million. As leasing volume grows, leased equipment sales are
expected to grow as well. The decline in sales revenues in fiscal year 1996 is
attributable to the Company's focus on higher margin transactions rather than on
volume.

Net margin on sales-type leases revenue decreased $103,758, or 27.3%, from
$380,446 in fiscal year 1994 to $276,688 in fiscal year 1995, and $191,098, or
69.1%, to $85,590 in fiscal year 1996 as a result of a decrease in the
origination of leases qualifying as sales-type leases. This downward trend is
expected to continue as the Company decreases its emphasis in this area.

Fee and Other Income. Fee and other income totaled $979,451 in fiscal year
1994 which consisted of several significant transactions including $298,500 from
a fee relating to the brokerage of a municipal lease transaction and $155,000
from the settlement of a dispute. Fee and other income decreased $302,714, or
30.9%, from $979,451 in fiscal year 1994 to $676,737 in fiscal year 1995 and
increased $1.3 million, or 191.7% to $2 million in fiscal year 1996. Fees earned
in fiscal year 1996 included $440,570 from the financing of federal lease
transactions and $327,627 from the brokerage of various municipal leases of
lottery equipment. The Company expects that fee and other income will vary
considerably due to the uncertainty of completion and the timing of specific
transactions. See "Management's Discussion and Analysis of Results of Operation
and Financial Condition-- Fluctuations in Quarterly Operating Results."

EXPENSES

Cost of Sales. Cost of sales increased $11.2 million or 48.4% from $23.2
million in fiscal year 1994 to $34.4 million in fiscal year 1995, and decreased
$3.2 million or 9.2% to $31.2 million in fiscal year 1996. The increase in
fiscal year 1995 and the decrease in fiscal year 1996 relate directly to the
volume of sales in each of those years.

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Depreciation and Operating Leases. Depreciation increased $398,576, or
295.4%, from $134,943 in fiscal year 1994 to $533,519 in fiscal year 1995, and
$1.5 million, or 286%, to $2.1 million in fiscal year 1996. The increase in
depreciation for both years is due to the increased level of operating leases
originated and acquired by the Company and increases in the Company's operating
lease assets over the three-year period.

Selling, General and Administrative Expenses. Selling, general and
administrative expenses increased $698,764, or 21.1%, from $3.3 million in
fiscal year 1994 to $4 million in fiscal year 1995, and increased $645,295, or
16%, to $4.7 million in fiscal year 1996. The increases during the three-year
period are due primarily to increased level of business and selling activity.

Interest Expense. Interest and other financing expenses increased
$578,921, or 140.7%, from $411,392 in fiscal year 1994 to $990,313 in fiscal
year 1995, and increased $586,049 or 59.2%, to $1.6 million in fiscal year 1996.
The increase in interest expense during the periods resulted from the Company's
increased level of leasing and business activity, including an increase in
recourse and nonrecourse debt from $10.3 million in fiscal year 1994 to $12
million in fiscal year 1995 to $19.6 million in fiscal year 1996. The weighted
average interest rate for the Company's nonrecourse debt outstanding as of March
31, 1996 was 7.8%

Income Taxes. The provision for taxes was 15.6%, 32.4% and 35.4% of
earnings before income taxes for the fiscal years 1994, 1995 and 1996,
respectively. The lower rate in fiscal year 1994 is attributable to a higher
percentage of nontaxable items and lower percentage of nondeductible items in
relation to earnings before taxes for that year.

Net Earnings. On a consolidated basis, net earnings and net earnings per
share increased in each of the fiscal years 1994, 1995 and 1996. Net earnings
increased $93,022, or 29%, from $320,533 in fiscal year 1994 to $413,555 in
fiscal year 1995. From fiscal year 1995 to fiscal year 1996, net earnings
increased $1.2 million, or 288.9%, to $1.6 million. The increases result from
the fluctuation in revenues and expenses discussed in the above paragraphs.

Management of Interest Rate Expense. The Company manages interest rate
expense by pricing its transactions based upon the market rates at the time of
the transaction. Most transactions are funded with matching term debt thereby
locking in the interest costs to match the cash flows from the lease over its
term.

FLUCTUATIONS IN QUARTERLY OPERATING RESULTS

The Company's quarterly results of operations are susceptible to
fluctuations for a number of reasons, including, without limitation, differences
between estimated residual values and actual amounts realized related to the
equipment the Company leases. Quarterly operating results could also fluctuate
as a result of the sale by the Company of equipment in its lease portfolio prior
to the expiration of the lease term to the lessee or to a third party. Such
sales of leased equipment prior to the expiration of the lease term may have the
effect of increasing revenues and net earnings during the quarter in which the
sale occurs, and reducing revenues and net earnings otherwise expected in
subsequent quarters.

FINANCIAL CONDITION

At the start of fiscal year 1994 the Company's financial resources
consisted of its stockholders' equity of $530,000 and lines of credit of $2
million. During fiscal year 1994 the Company entered into its partnership with
GATX which gave it access to additional financial resources to finance the
equity investment in its lease transactions. See "Risk Factors -- Dependence on
Major Relationships," "-- Dependence on Availability of Financing," "The
Company" and "Business -- Financing"). Through this partnership, the Company was
able to compete on a larger volume of lease transactions than it could have
without this facility. As a result of fiscal year 1994 net earnings of $321,000
stockholders' equity increased to $851,000 at the end of fiscal year 1994.

During fiscal year 1995 the Company put into place an additional line of
credit facility in the amount of $3 million giving the Company a total warehouse
credit facility of $5 million. As a result of fiscal year 1995 net earnings of
$414,000 stockholders' equity increased to $1.3 million at March 31, 1995.

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During fiscal year 1996, the Company replaced its $3 million bank facility
with the First Union Facility. The Company believes First Union, a larger bank,
has a greater capacity to meet the Company's future needs. In fiscal year 1996,
the Company also entered into an equity joint venture with Cargill Leasing
Corporation, a transaction which positioned the Company to compete more
effectively in the growing area of personal computer and network leasing. See
"Risk Factors -- Dependence on Major Relationships," " -- Dependence on
Availability of Capital," "The Company," and "Business -- Financing." As a
result of fiscal year 1996 net earnings of $1.6 million, stockholders' equity
increased to $2.9 million at March 31, 1996.

During the three year period ended March 31, 1996, the Company increased
its financial condition and available financial resources in the following ways:
(i) available lines of credit increased from $2.0 million to $7 million; (ii)
stockholders' equity increased from $530,000 to $2.9 million; and (iii) the
Company entered into two equity joint ventures which substantially increased its
ability to finance its lease transactions. All of the above factors have allowed
the Company to be able to support the higher levels of sales and leasing
activity reflected in its financial statements.

As part of its ongoing business activity, the Company generates new
equipment leases and also engages in leased equipment sales. From fiscal year
1995 to fiscal year 1996 the minimum lease payments for direct financing and
sales type leases increased from $13.7 million to $18.2 million, or 33.2%. For
the quarter ended June 30, 1996, the minimum lease payments for direct financing
and sales type leases decreased from the end of the fiscal year 1996 from $18.2
million to $16 million, or 12.3%. This decrease is a result of the Company's
leased equipment sales activity which were in excess of its new lease activity.
The future minimum lease payments fluctuate, depending on sales and new lease
activity from year to year and quarter to quarter, making it impractical to
accurately trend the minimum lease payments. See, Management's Discussion and
Analysis of Results of Operations and Financial Condition -- Fluctuations in
Quarterly Operating Results.

LIQUIDITY AND CAPITAL RESOURCES

Cash Flow from Operations. The Company generated cash flow from operating
activities of $6.4 million for fiscal year 1996. Cash flow from operations in
fiscal year 1996 was higher than net earnings of $1.6 million, primarily as a
result of non-cash expenses, such as depreciation and amortization of $2.1
million, increase in accounts payable of $2.2 million, increase in accrued
expenses of $547,093 and was offset by gain on sale of operating lease equipment
of $323,422, payments from leases directly to lenders of $884,389 and other
sources and uses of cash from operations totaling $1.1 million. In addition,
cash flow used for investing activities primarily related to leases was $30.2
million. Financing activities produced $24 million for fiscal year 1996. The net
result of all of the above activities was an increase in cash of $104,606 for
fiscal year 1996.

Cash Flow from Borrowings. To date, the financing necessary to support the
Company's leasing and financing activities has been provided principally from
nonrecourse borrowings, and to a lesser extent, recourse borrowings. The Company
anticipates that future leasing and financing activities will be financed in a
similar manner, as well as from the net proceeds of the Offering and cash flow
from operations.

Historically, the Company has obtained recourse and nonrecourse borrowings
from money center banks, regional banks, insurance companies, finance companies
and financial intermediaries.

In order to take advantage of the most favorable long-term financing
arrangements available to it, the Company often finances equipment purchases and
the related leases on an interim basis with short-term, recourse debt, and
accumulates such leases until it has a portfolio large enough (generally at
least $1.0 million, based on the aggregate balance of periodic lease payments
under such leases) to warrant obtaining long-term financing for such leases
either through nonrecourse borrowings or a sales transactions. Such interim
financing is usually obtained through secured, "warehouse" lines of credit,
which generally have a term of one year. The Company's maximum available credit
under such lines of credit totaled $7.0 million as of June 30, 1996. A brief
description of each line of credit presently in place as of June 30, 1996
follows: (i) the NationsBank Facility is a $2.0 million revolving facility with
NationsBank, N.A. ($1.4 million was outstanding as of June 30, 1996), expiring
December 1, 1996. Borrowings under the NationsBank Facility bear interest at the
bank's prime rate plus 1%; and (ii) the First Union Facility is a $5,000,000
revolving facility provided by First Union National Bank of Virginia (no amounts
were outstanding as of June 30, 1996), with borrowing

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available through April 30, 1997, and repayments due 90 days after borrowing.
Borrowings under the First Union Facility bear interest at LIBOR plus 275 basis
points.

Borrowings under the above-described lines of credit are generally secured
by lease receivables and the underlying equipment financed under the facility.
At June 30, 1996, the aggregate outstanding balance under these lines of credit
was $1.4 million. The agreements for the lines of credit contain covenants
regarding leverage (a maximum debt to net worth ratio of 6.5 to 1.0 and a
minimum consolidated tangible net worth of $1,500,000 as well as interest
coverage, minimum net worth and profitability and a limitation on the payment of
dividends). At June 30, 1996, the Company had a recourse liabilities to equity
ratio of 2.2 to 1.0

In July, 1996, the Company entered into the NationsBanc Leasing Facility,
under which NationsBanc Leasing Corporation may lend up to $2.0 million in
various notes of terms of up to 60 months. The facility, but not transactions
financed thereunder, expires January 31, 1997. Borrowings under the facility
bear interest at a fixed or floating basis, at the Company's option at the time
of each borrowing, as follows: fixed, where the underlying lessee is investment
grade, at U.S. Treasury Notes plus 250 basis points; fixed, where the underlying
lessee is below investment grade, at U.S. Treasury Notes plus 295 basis points;
floating, at the bank's prime rate plus 1%.

The Company has borrowed $275,000 from two stockholders at a rate of 10%
per annum. The loans are repayable at any time without premium or penalty and
are due in full on or before March 1, 1998. It is anticipated that these
borrowings will be paid off with a portion of the proceeds of the Offering.

The Company obtains long-term, nonrecourse financing for individual
significant lease transactions at the time it purchases the related equipment.
The Company borrowed an aggregate of $5.1 million under such arrangements during
the quarter ended June 30, 1996. An aggregate of $16.6 million remained
outstanding under all such arrangements as of June 30, 1996.

Payments under the Company's borrowings and the maturities of its long-term
borrowings are typically structured to match the payments due under the leases
securing the borrowings.

The Company's nonrecourse debt financing activities typically provide a
significant portion of the purchase price of the equipment purchased by the
Company for lease to its customers. The balance of the purchase price (the
Company's equity investment in equipment), is financed from a variety of
sources. See "Business -- Financing." Although the Company believes that the
credit quality of its lessees will continue to allow it to obtain such debt
financing, no assurances can be given that such financing will be available at
acceptable terms or at all.

ADEQUACY OF CAPITAL RESOURCES

The Company's current lines of credit, if renewed or replaced, and its
expected access to the public and private debt securities markets (including
financings for its equity investment in leases) and its estimated cash flow from
operations are anticipated to provide adequate capital to fund the Company's
operations, including acquisitions and financings under its relationships with
vendors, for at least the next 12 months. Although no assurances can be given,
the Company expects to be able to renew or replace its existing short-term lines
of credit and to continue to have access to the public and private securities
markets, both for debt and for equity financings.

NEW ACCOUNTING PRONOUNCEMENTS

The Financial Accounting Standards Board issued SFAS No. 121, "Accounting
for the Impairment of Long-Lived Assets and for Long-Lived Assets To Be Disposed
Of," in March 1995, and SFAS No. 125, "Accounting for Transfers and Servicing of
Financial Assets and Extinguishments of Liabilities," in June 1996. These
standards will be effective for the Company beginning in fiscal year 1997 and
are not expected to have a significant impact on the Company's financial
statements.

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BUSINESS

GENERAL

The Company specializes in leasing and financing information technology
assets and providing asset management services to middle market commercial
customers, select Fortune 1000 firms, federal, state and local governments and
vendors. The assets leased by the Company include personal computers, client
server systems, networks, mid-range and mainframe computer equipment,
telecommunications equipment and software.

The ten largest commercial customers of the Company by purchase price of
the equipment leased by the Company, for fiscal year 1996, are, in alphabetical
order: America Online, Inc.; Bakery and Confectionary Union and Industry
International Health Benefits and Pension Fund; Cable & Wireless, Inc.; Corning
Incorporated; Long Island Lighting Company; Lutheran Brotherhood; MCI
Telecommunications Corporation; Nationwide Mutual Insurance Company; Progressive
Casualty Insurance Company; and Strawbridge & Clothier. The three largest
government customers, based upon purchase price of the equipment leased by the
Company for fiscal year 1996, are, in alphabetical order: the City of Raleigh,
North Carolina; the State of Missouri; and the United States Department of
Transportation. None of the above customers constituted more than 10% of the
Company's revenues for fiscal year 1996. Strawbridge & Clothier accounted for
2.9% of the Company's new commercial lease volume during fiscal year 1996 but
was acquired during fiscal year 1997. Strawbridge & Clothier paid off all of its
leases with the Company during the second quarter of fiscal year 1997. The
Company does not anticipate any additional business from the successor to the
business operations of Strawbridge & Clothier.

The Company's asset trading activity involves the purchase and resale of
previously owned information technology equipment. By offering asset trading
capabilities, the Company is able to develop and maintain knowledge of current
market trends and values which enables the Company to predict more accurately
residual values when pricing leasing transactions, dispose efficiently of
off-lease equipment and offer customers a way to dispose of or acquire
previously owned information technology equipment. Asset management services,
which are offered primarily to enhance customer service, is a general term used
to describe the provision of asset inventory and tracking services, software and
record keeping programs to customers. The asset management services provided by
the Company allow the customers to better track their information technology
assets. The asset management services include a software system maintained by
the Company which generates reports and allows customers to dial up and receive
information on a real time basis, thus better utilizing their assets.

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Corporation, and started his leasing career in 1975 as National Sales Manager of
Federal Leasing, Inc. Mr. Norton founded Systems Leasing Corporation in 1978,
which grew to approximately $75 million in assets by the time it was sold to
PacifiCorp Capital, Inc. in 1986. Mr. Norton served as President of PacifiCorp
Capital, Inc. through 1990, ultimately managing approximately 225 employees and
approximately $700 million in assets. Mr. Bowen began his leasing career in 1975
with Federal Leasing, Inc. where he worked until 1978. In 1982, Mr. Bowen joined
Mr. Norton at Systems Leasing Corporation as Director of Finance and later
became a Senior Vice President of PacifiCorp Capital, Inc., the successor to
Systems Leasing Corporation. In 1990, Mr. Bowen left PacifiCorp Capital, Inc.
and founded the Company.

The extensive experience of the Company's management in leasing and
financing information technology and equipment has enabled the Company to manage
its residual portfolio to achieve superior returns. Since the Company's
organization in November, 1990 through March 31, 1996, on matured leases, the
Company has realized a return of 139% of the amount originally recorded as
residual values for its equipment. As part of its underwriting and risk
management efforts, the Company's management seeks to structure lease
transactions so that they can be financed or sold to third parties on a
nonrecourse basis, even if the Company ultimately retains an equity interest in
the lease. The Company's underwriting approach has resulted in no credit losses
in its leasing operations since its organization. The Company believes that its
historical approach to estimating residuals, pricing and underwriting leases and
managing relationships among vendors, customers and financial partners provides
a foundation for the Company to grow and profitably deploy new capital.

INDUSTRY OVERVIEW

The Company believes that its market is undergoing rapid changes and
expansion which present significant opportunities for growth. The primary
structural changes in the market are the result of customer end-user, technology
and vendor marketing trends.

Customer End-Users -- Commercial. The equipment leasing industry in the
United States is a significant factor in financing capital expenditures of
businesses. According to research by the Equipment Leasing Association of
America ("ELA"), using United States Department of Commerce data, approximately
$160.7 billion of the $571 billion spent on productive assets in 1995 was
financed by means of leasing. The ELA estimates that 80% of all U.S. businesses
use leasing or financing to acquire capital assets.

Leasing enables a company to obtain the equipment it needs, while
preserving cash flow and receiving favorable accounting and tax treatment.
Leasing, particularly through operating leases, also provides a lessee with
greater flexibility than ownership in the event it outgrows the equipment or
requires upgrades of its equipment to higher performance levels. As more
customers become aware of the economic benefits of leasing, they often turn to
independent leasing companies. Independent lessors, such as the Company, offer
tailored financing and can deliver financing for mixed systems from different
vendors.

Management believes the fastest growing market segment of the leasing
industry is information technology leasing. These assets include computers,
telecommunication equipment, software, integration services and client server
equipment. According to the ELA, computers and telecommunications equipment
accounted for 26% of the assets leased in 1995.

Customer End-Users -- Government. According to G2 Research, Inc., in 1994,
of $328.6 billion in total information technology spending, $27.3 billion was
spent by the federal government and $34.5 billion was

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spent by state and local governments, with the remainder spent by commercial
customers. G2 Research, Inc. further estimated that this market segment will
maintain a 10% growth rate through the year 2000 as governments convert to
client server systems.

As reported by G2 Research, Inc., state and local governments spent over
$34 billion on information services and systems in 1994. The Company believes
that state and local governments have realized that information technology can
provide tremendous gains in productivity and a decrease in overall costs.
However, state and local governments are increasingly limited by budgetary
constraints in their efforts to acquire goods and services; therefore, leasing
is more favorable since it allows the immediate use of the asset while the cost
is incurred over the asset's useful life. Moreover, leasing may facilitate the
timely acquisition of equipment when compared to the lengthy process and many
levels of approval necessary for bond referendums. An additional obstacle facing
state and local governments in the upcoming years is the shift in program
responsibility from the federal government to the state and local governments.
The Company believes that this shift will require more information technology
investment by state and local governments.

Technology Trends. A major trend toward using client server networks in
corporate applications began in the late 1980s. This trend was driven by the
proliferation of personal computers as personal computers changed from
stand-alone units which accommodated one or two specialized functions to a
multi-application unit and the development of networking applications that
distribute computer power to the desktop. Client server computing provides an
alternative to the highly centralized, mainframe and mini-computer systems that
connect multiple terminals to a central processor and which were the mainstay of
the computing world until this decade. The transition from the mainframe to the
personal computer has enabled smaller corporations to utilize more extensively
information technology and telecommunications equipment in the operation of
their businesses. In addition, as technology increasingly changes, companies are
more frequently acquiring and upgrading information technology and
telecommunications equipment.

The transition from the mainframe to the more complicated client server
applications has also placed a premium on the efficient planning, tracking,
procurement and disposal of each unit. The Gartner Group estimates that the
average cost of a corporate customer acquiring, maintaining, supporting and
disposing of the desktop asset is approximately $41,000 over a five-year period
as compared to the average capital cost of each unit of $2,500. The above
changes have increased the need for the specialized asset management services
such as those provided by the Company because the procurement and management
functions of many end-users are oriented to the acquisition of a high-priced,
centralized unit and not to the management of numerous small-ticket items in
multiple locations.

Vendor Distribution and Marketing. As hardware manufacturers face
increasing competition, many manufacturers have outsourced their distribution
channels to other companies rather than rely solely on their own sales force.
This has led many vendors to develop re-seller relationships with financiers
such as the Company, and the Company intends to enter into or acquire value
added re-seller relationships with selected vendors.

The opening up of the distribution channels has forced vendors to support
used equipment and sell parts and refurbishment services to end-users and
third-party lessors such as the Company. This has created a more fluid and
sustainable secondary market for certain equipment, which allows the Company to
trade the equipment, make equity investments and compete more effectively with
the vendor or vendor's captive financing companies.

STRATEGY

Based on industry trends and the Company's historical results, the Company
will continue to implement and improve upon a three-pronged strategy designed to
increase its customer base by: (i) providing continuing superior customer
service while marketing to middle market and select Fortune 1000 end-users of
information technology equipment and assets; (ii) purchasing companies in key
regional markets with pre-existing customer bases; and (iii) further developing
vendor leasing programs. Through its marketing strategy, the Company emphasizes
cross selling to the different groups of clients and attempts to reach the
maximum number of potential end-users.

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End-User Marketing Focus. The Company's target customers include middle
market and select Fortune 1000 firms which are significant users of information
technology and telecommunications equipment and other assets, which also may
need other services provided by the Company, such as asset management. By
targeting a potential customer base that is broader than just the Fortune 1000
companies, the Company believes that there is less competition from the larger
equipment finance companies, as their marketing forces are typically more
focused on Fortune 1000 customers. The ability to identify and establish
customer relationships with such firms will be critical to the Company's
strategy. There can be no assurance that the Company will be able to
successfully locate such customers. See "Risk Factors -- Dependence on
Creditworthy Customers."

Acquisition of Related Companies. The Company believes that significant
opportunities to expand its target customer base in key regional markets can be
realized through the acquisition of strategically selected companies in related
lines of business. The Company's acquisition strategy will focus on acquiring
new customers in the top 50 regional markets in the country. The Company
believes that it can successfully acquire companies and maintain and expand
customer relationships by providing acquired companies with a lower cost of
capital, additional cross-selling opportunities and financial structuring
expertise. In addition, the Company can provide the owners of privately-held
companies with an opportunity to realize their company's value. The Company
believes that decentralized marketing and centralized operations, along with
other operating synergies, will make it successful in lowering the operational
costs while expanding the customer base of each firm it acquires. The ability to
identify and acquire such firms on prices and terms that are attractive to the
Company and which avoid dilution of earnings for existing stockholders is
crucial to the successful implementation of this strategy. In addition, after
consummating any acquisition, the Company must be able to successfully integrate
the acquired business with the Company to achieve the cost savings and marketing
benefits sought by the Company. There is, however, no assurance that the Company
will be able to successfully acquire such companies, or, if acquired,
successfully implement the foregoing strategy. See "Risk Factors -- Potential
Acquisitions" and "-- Management of Growth."

Increasing Focus on Vendors. Over the last several years, major
manufacturers of information technology and telecommunications equipment have
moved away from providing financing to end-user customers through captive
finance organizations and have increasingly outsourced this equipment financing
function to independent leasing companies. From the perspective of the large
end-user of information technology and telecommunications equipment, outsourcing
equipment financing can simplify and centralize the financing of multiple
products from different vendors, particularly as most captive finance
organizations will service only their manufacturer's products. Through its
participation in vendor marketing programs, the Company leverages its marketing
efforts by utilizing the sales force of the vendor. The vendor's sales
organization provides the Company access to an extensive and diversified
end-user customer base while saving the Company the cost of establishing these
independent customer relationships. The Company uses its relationships with
these vendors and end-users to create new customer relationship to which other
products and services of the Company can be marketed directly. The ability to
successfully establish such vendor and end user relationships is essential to
the successful implementation of this strategy. There can be, however, no
assurance that the Company will be able to successfully establish such
relationships. See "Risk Factors -- Dependence on Major Relationships."

LEASING, FINANCING AND SALES ACTIVITIES

The Company is in the business of leasing and financing equipment and
assets. Although the majority of the transactions are leases, the use of the
phrase "lease," "leases," "leasing" or "financing" may refer to transactions
involving: equipment leases; conditional sales contracts; installments purchase
contracts; software and services contracts; municipal and federal government
contracts; notes; operating leases; customer agreements; direct financial
leases; receivables; factoring; tax exempt leases; true leases; leases with
option to purchase; leases to purchase; vendor agreements; sales-type leases;
leveraged leases; computer leases; capital leases; private label agreements;
financing agreements; or energy management contracts.

34
<PAGE> 36

Business Development. The Company conducts its business development
efforts through its marketing staff of both employees and independent
representatives which includes 25 individuals located in nine regional offices
and the Company's principal executive offices. The Company believes that one of
its major strengths is its professional and dedicated sales organization and
back office organization which gives it the ability to customize its programs to
meet its customers' specific objectives.

Products and Services. The information technology and communications
equipment that the Company presently purchases for lease or re-sale includes:
(i) personal computers; (ii) laser printers; (iii) telecommunication
controllers; (iv) tape and disk products; (v) file servers; (vi) mainframe
computers; and (vii) mid-range computers. The software and services financed by
the Company include off-the-shelf products and applications, database products,
utilities and specific application products.

The manufacturers and vendors of the above assets include IBM, EMC
Corporation, Hewlett-Packard Company, Toshiba, Cisco Systems, Inc., Digital
Equipment Corporation, Gateway 2000, Inc., Compaq Computer Corporation,
Microsoft Corporation, Amdahl Corporation, Dell Computer Corporation, Hitachi
Data Systems Corporation, Sterling Software, Inc. and Systems & Computer
Technology Corporation.

The services and support provided by the Company include: (i) custom lease
and financing payment streams and structures; (ii) asset sales and trade-ins;
(iii) upgrade and add-on leasing and financing; (iv) renewal and re-marketing;
(v) personalized invoicing; and (vi) asset management and reporting.

Lease Terms and Conditions. Substantially all of the Company's lease
transactions are net leases with a specified non-cancelable lease term. These
noncancelable leases have a "hell-or-high-water" provision which requires the
lessee to make all lease payments regardless of any lessee dissatisfaction with
its equipment. A net lease requires the lessee to make the full lease payment
and pay any other expenses associated with the use of equipment, such as
maintenance, casualty and liability insurance, sales or use taxes and personal
property taxes.

Re-marketing. In anticipation of the expiration of the initial term of a
lease, the Company initiates the re-marketing process for the related equipment.
The Company's goal is to maximize revenues by: (i) re-marketing the equipment in
place either by (a) re-leasing it to the initial lessee, (b) renting on a
month-to-month basis or (c) selling it to the initial lessee; (ii) selling or
leasing the equipment to a different customer; or (iii) selling the equipment to
equipment brokers or dealers. The results of the re-marketing process
significantly impact the degree of profitability of a lease transaction.
Procedures and obligations of the Company and its vendors with respect to
re-marketing are defined through the Company's equipment purchase and
re-marketing agreements with vendors. To assist the Company in its re-marketing
efforts, the Company sometimes provides incentives to vendors and their sales
personnel through payment of a re-marketing fee and a sharing of residual
profits where appropriate.

The re-marketing process is intended to enable the Company to recover its
equity investment in the re-marketed equipment (i.e., the purchase price of the
equipment, less the debt obtained to finance the purchase of such equipment) and
enables the Company to receive additional proceeds.

Numerous factors, many of which are beyond the control of the Company, may
have an impact on the Company's ability to re-lease or re-sell equipment on a
timely basis. Among the factors are general market conditions, regulatory
changes, variations in the supply or cost of comparable equipment and
technological improvements that lead to the risk of technological obsolescence.
In particular, the computer and telecommunications industries have been
characterized by significant and rapid technological advances. The equipment
owned and leased by the Company is subject to rapid technological obsolescence,
which is typical of information technology and telecommunications equipment.
Furthermore, decreases in the manufacturer's pricing for equipment may adversely
affect the market value of such equipment under lease. Changes in values or
systems and components may require the Company to liquidate its inventory of
certain products at significant markdowns and write down the residual value of
its leased assets, which may result in substantial losses. Further, the value of
a particular used piece of equipment may vary greatly depending upon its
condition and the degree to which any custom configuration of the equipment must
be altered before reuse.

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<PAGE> 37

At the inception of each FMV lease, the Company has historically estimated
a residual value for the leased equipment based on the terms of the related
lease and which will permit the transaction to be financed or sold by means of
external, generally nonrecourse, sources. This estimate is approved by the
Company's investment committee, which acts by a signature process instead of
conducting formal meetings. A decrease in the market value of such equipment at
a rate greater than the rate expected by the Company, whether due to rapid
technological obsolescence or other factors, would adversely affect the residual
values of such equipment. Consequently, there can be no assurance that the
Company's estimated residual value for equipment will be realized.

PROCESS CONTROL AND ADMINISTRATIVE SYSTEMS

The Company has developed and maintains an administration system and
controls, featuring a series of checks and balances. The Company's system helps
protect against entering into lease transactions that may have undesirable
economics or unacceptable levels of risk, without impeding the flow of business
activity or preventing its sales organization from being creative and responsive
to the needs of vendors and customers.

Due in part to the Company's strategy of focusing on a few equipment
categories, the Company generally has extensive product knowledge, historical
re-marketing information and experience. This knowledge assists the Company in
setting and adjusting, on a timely basis, the residual values it assumes on each
lease financing. Prior to the Company entering into any lease agreement, each
transaction is evaluated based on the Company's pre-determined standards in each
of the following areas:

Residual Value. Residual value guidelines for the equipment leased by the
Company are established and reviewed by the Company's investment committee,
which also approves the residual value recorded for specific transactions. The
investment committee typically acts by a signature process instead of conducting
formal meetings. The investment committee also must approve the pricing,
including residual values, for all transactions involving $100,000 or more in
product value. The investment committee is composed of the Chief Executive
Officer, the Chief Financial Officer and the Treasurer of the Company.

Structure Review. Every transaction is reviewed by the Director of
Contracts and the Treasurer of the Company in an effort to ensure that the
transaction meets the minimum profit expectations of the Company and that the
risks associated with any unusual aspects of the lease have been determined and
factored into the economic analysis.

Documentation Review. Once the Company commits to a lease transaction, its
contract administrators initiate a process of systematically preparing and
gathering relevant lease information and lease documentation. The contract
administrators are also responsible for monitoring the documentation through the
Company's home office documentation and review process. Every transaction into
which the Company enters is reviewed by the Director of Contracts of the Company
and if necessary, the Company's outside attorneys to identify any proposed lease
modifications or other contractual provisions that may introduce risks in a
transaction which the Company has not anticipated.

Credit Review. Every transaction into which the Company enters is reviewed
by the Treasurer of the Company to determine whether the lease payment stream
can be financed on a nonrecourse basis, or must be financed through partial or
total recourse borrowing, and that the financial condition of the lessee meets
the Company's credit standards.

FINANCING

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<PAGE> 38

financing described below. The Company's equity investment in the typical lease
transaction generally ranges between 5% and 20% of the equipment cost (but
sometimes ranges as high as 35%). The balance of the equipment cost, or the
nonrecourse debt portion, is typically financed with a lender on a nonrecourse
basis to the Company. The Company's equity investment must come from: (i) equity
investments from third parties (including MLC/GATX Limited Partnership I and
MLC/CLC LLC); (ii) internally generated funds; (iii) the net proceeds of the
sale of its securities; or (iv) recourse borrowings. Accordingly, the Company's
ability to successfully execute its business strategy and to sustain its growth
is dependent, in part, on its ability to obtain each of the foregoing types of
financing for both senior debt and equity investment.

Information relating to the sources of each of such sources of financing
for equipment acquisitions are as follows:

The Company is not liable for the repayment of nonrecourse loans unless the
Company breaches certain limited representations and warranties in the loan
agreements. The lender assumes the credit risk of each such lease, and its only
recourse, upon a default under a lease, is against the lessee and the equipment
which is being leased thereunder.

The Company's personnel in charge of the financing function are responsible
for maintaining a diversified list of qualified nonrecourse debt sources so that
the financing of transactions is not impaired by a lack of competitively-priced
nonrecourse debt. The Company receives nonrecourse financing from many different
sources, offering various terms and conditions. These debt sources include
regional commercial banks, money-center banks, finance companies, insurance
companies and financial intermediaries.

Government Financing. The Company also originates tax-exempt state and
local lease transactions in which the interest income is exempted from federal
income taxes, and to some degree, certain state income taxes. The Company
assigns its tax-exempt leases to institutional investors, banks and investment
banks which can utilize tax-free income, and has a number of such entities which
regularly purchase the transactions.

Leasing Assignment Financing. Access to nonrecourse financing is also
important to the Company's lease sales revenue and fee income. The Company
enters into many transactions involving government leases which it immediately
assigns, syndicates or sells, on a nonrecourse basis to third parties and books
any gain from the transaction as sales or fee income.

The Company plans to utilize the public debt securities market in the
future to provide a portion of the nonrecourse debt it requires. The Company
believes that its utilization of the public debt securities markets is likely to
reduce the Company's effective interest cost for its nonrecourse debt and to
provide for a more efficient financing arrangement, than is presently provided
by its existing financing arrangements, to fund its

37
<PAGE> 39

nonrecourse borrowing requirements. See "Management's Discussion and Analysis of
Results of Operations and Financial Condition -- Liquidity and Capital
Resources."

Equity Joint Ventures. Through MLC/GATX Limited Partnership I and MLC/CLC
LLC, the Company has formal joint venture arrangements with two institutional
investors which provide the equity investment financing for certain of the
Company's transaction. GATX, an unaffiliated company which beneficially owns 90%
of MLC/GATX Limited Partnership I, is a publicly listed company with
stockholders' equity in excess of $332 million, as of June 30, 1996. Cargill
Leasing Corporation, an unaffiliated investor which owns 95% of MLC/CLC LLC, is
affiliated with Cargill, Inc., a privately held business that was reported by
Forbes Magazine to have 1995 earnings in excess of $900 million. These joint
venture arrangements enable the Company to invest in a significantly greater
portfolio of business than the Company's limited capital base would otherwise
allow. See "Risk Factors -- Dependence on Major Relationships."

MLC/GATX Limited Partnership I and MLC/CLC LLC provide the majority of the
Company's equity investment from third parties as referenced above. During
fiscal year 1995, the Company's investment in MLC/GATX Limited Partnership I
increased due to the Company's capital contributions for its share of the
partnership's equity investment in leased equipment and partnership expenses.
During fiscal year 1996, out of total leased equipment sales of approximately
$16.3 million, sales to MLC/GATX Limited Partnership I were $13.1 million or 80%
and sales to MLC/CLC LLC were approximately $1.3 million or 8%. For the quarter
ending June 30, 1996, out of leased equipment sales of $6.2 million, MLC/GATX
Limited Partnership I represented $850,000 or 14% and MLC/CLC LLC represented
$4.8 million or 77%. MLC/GATX Limited Partnership I does not purchase any lease
transactions from anyone other than the Company. MLC/CLC LLC does not purchase
any lease transactions from anyone other the Company.

Equity Capital and Internal Financing. Occasionally the Company finances
leases and related equipment internally, rather than with financing provided by
lenders. These internal lease financing typically occur in cases where the
financed amounts are not sufficiently large to be attractive to lenders or where
the credit rating of the lessee is not acceptable to lenders. The Company also
temporarily finances selected leases internally, generally for less than 90
days, until permanent outside nonrecourse financing is obtained. The Company
believes that the net proceeds from the Offering will substantially increase the
Company's ability to finance lease transactions, either internally or with
recourse borrowings.

Recourse Financing. The Company relies on recourse borrowing in the form
of revolving lines of credit, under the NationsBank Facility and the First Union
Facility, for working capital to acquire equipment to be resold in its trading
operation and to acquire equipment for leases and, to a lesser extent, the
Company uses recourse financing for long term financing of leases. As of June
30, 1996, the Company had aggregate outstanding recourse borrowings of
approximately $1.5 million of which approximately $1.4 million was borrowed
under the NationsBank Facility and $135,165 was borrowed pursuant to long term
recourse notes payable. In addition, the Company recently established a third
line of credit, NationsBanc Leasing Facility, for borrowings up to $2 million.
Availability under the revolving lines of credit may be limited by the asset
value of equipment purchased by the Company and may be further limited by
certain covenants and terms and conditions of the facilities. See "Management's
Discussion and Analysis of Results of Operations and Financial
Condition -- Liquidity and Capital Resources."

The debt under the First Union Facility bears interest at a rate of LIBOR
plus two and three-quarters percent and, the NationsBank Facility bears interest
at a floating rate of one percent above the NationsBank, N.A. "Prime Rate."
Borrowings under the NationsBanc Leasing Facility bear interest at a fixed or
floating basis, at the Company's option, at the time of each borrowing, as
follows: fixed, at U.S. Treasury Notes plus 250 basis points where the
underlying lessee is investment grade; fixed, at U.S. Treasury Notes plus 295
basis points, or

38
<PAGE> 40

where the underlying lessee is below investment grade; or floating, at the
NationsBank, N.A. "Prime Rate" plus 1%.

DEFAULT AND LOSS EXPERIENCE

From the organization of the Company in 1990 through June 30, 1996, the
Company has not taken any write-offs due to credit losses with respect to lease
transactions financed by the Company though no assurance can be given about what
the Company's future credit loss experience will be.

PROPERTIES

The Company's principal executive offices are located in leased space of
4,517 square feet at 11150 Sunset Hills Road, Suite 110, Reston, Virginia
20190-5321. The Company also leases office space for its regional offices in
Philadelphia, Pennsylvania; Dallas, Texas; Stamford, Connecticut; Sacramento,
California; Raleigh, North Carolina; Atlanta, Georgia; and San Diego,
California. As of March 31, 1996, the aggregate monthly rent under all of the
Company's office leases was approximately $12,000. The Company has an aggregate
of approximately 9,147 square feet of office space under lease with an average
remaining lease term of two years.

COMPETITION

The Company competes in the information technology and telecommunications
equipment leasing and financing market with bank-affiliated lessors, captive
lessors and other independent leasing or financing companies. The Company's
product and market focus often limits direct competition with many of these
types of companies. Bank affiliated lessors typically do not directly compete in
the operating lease segment of the leasing industry. Captive leasing companies,
such as IBM Credit Corporation, typically finance only their parent company's
products. The Company competes directly with various independent leasing
companies, such as El Camino Resources, Ltd., Comdisco, Inc., Leasing Solutions,
Inc. and General Electric Capital Corporation. Many of the Company's competitors
have substantially greater resources and capital and longer operating histories.

The Company believes it competes on the basis of price, responsiveness to
customer needs, flexibility in structuring lease transactions, relationships
with its vendors and knowledge of its vendors' products. The Company has found
it most effective to compete on the basis of providing a high level of customer
service and by structuring custom relationships with vendors and lease
transactions that meet the needs of its vendors and customers. Other important
elements that affect the Company's competitiveness are the high degree of
knowledge and competence of its key employees, specifically relating to
information technology and telecommunications equipment and operating lease
financing. Many of the Company's competitors are well established and have
substantially greater financial, marketing, technical and sales support than the
Company. See "Risk Factors -- Competition."

EMPLOYEES

As of June 30, 1996, the Company had 39 full time employees and eight part
time employees. Of these, 27 worked in the Company's principal executive offices
and the remaining 20 worked in the various regional offices of the Company.
Regional offices are generally staffed with one or more account representatives
who have daily contact with lessees and vendors.

The Company has assigned its employees to the following functional areas,
with the number of employees in each area indicated in parenthesis:
administrative (1); sales and marketing (22); buy/sell (6); accounting (7);
executive (2); finance (3); and operations (6).

LITIGATION

The Company is not involved in any legal proceedings, and is not aware of
any pending or threatened legal proceedings that would have a material adverse
effect upon the Company's business, financial condition or results of
operations.

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<PAGE> 41

MANAGEMENT

DIRECTORS, EXECUTIVE OFFICERS AND KEY EMPLOYEES

The Board of Directors of the Company is divided into three classes: (i)
Class I (initial term ending after 1997 annual stockholders meeting); (ii) Class
II (initial term ending after 1998 annual stockholders meeting); and (iii) Class
III (initial term ending after 1999 annual stockholders meeting). After his or
her initial term, each director serves for a term ending after the third annual
meeting following the annual meeting at which such director is elected and until
his or her successor is elected. The following table sets forth the name, age
and position with the Company of each person who is an executive officer,
director or significant employee.

<TABLE>
<CAPTION>
NAME AGE POSITION CLASS
- ------------------------------------------------ --- ------------------------------------ -----
<S> <C> <C> <C>
Phillip G. Norton............................... 52 Chairman of the Board, Chief III
Executive Officer and President
Bruce M. Bowen.................................. 45 Director, Chief Financial Officer III
and Executive Vice President
Jonathan J. Ledecky............................. 37 Future Director I
Terrence O'Donnell.............................. 52 Future Director II
Carl J. Rickersten.............................. 36 Future Director II
Kleyton L. Parkhurst............................ 33 Secretary and Treasurer
Barbara J. Simmonds............................. 36 Vice President and Controller
Kevin M. Norton................................. 40 Vice President of Brokerage
Operations
William J. Slaton............................... 48 Vice President of Marketing
Thomas K. McNamara.............................. 52 Vice President
</TABLE>

Each individual named as a Future Director in the foregoing table has been
elected as a Director of the Company effective upon the completion of the
Offering and has consented to be named as such herein.

The name and business experience during the past five years of each
director and executive officer of the Company are described below.

Phillip G. Norton joined the Company in March, 1993 and has served since
then as its Chairman of the Board and Chief Executive Officer. Mr. Norton has
also served as President of the Company since September 1, 1996. From October,
1990 through March, 1993, Mr. Norton was an investor and devoted the majority of
his time to managing his personal investments. From October, 1992 to March,
1993, Mr. Norton served as a consultant to the Company and engaged in private
investment activity. Prior to 1990, Mr. Norton was President and Chief Executive
Officer of PacifiCorp Capital, Inc. (formerly Systems Leasing Corporation), a
wholly owned indirect subsidiary of PacifiCorp, Inc., an information technology
leasing company and an SEC reporting entity. Mr. Norton started his leasing
career as the National Sales Manager at Federal Leasing, Inc. Mr. Norton is a
1966 graduate of the U. S. Naval Academy. Phillip G. Norton and Kevin M. Norton
are brothers.

Bruce M. Bowen founded the Company in 1990 and served as its President
until September 1, 1996. Since September 1, 1996, Mr. Bowen has served as a
director, the Chief Financial Officer and Executive Vice President of the
Company. Mr. Bowen has been a director of the Company since it was formed. Prior
to founding the Company, from 1986 through 1990, Mr. Bowen was Senior Vice
President of PacifiCorp Capital, Inc. Prior to his tenure at PacifiCorp Capital
Inc., Mr. Bowen was with Systems Leasing Corporation and Federal Leasing, Inc.,
where his leasing career started in 1975. Mr. Bowen is a past President of the
Association of Government Leasing and Finance and currently serves as
Vice-Chairman for the State and Local Public Enterprise Committee of the
Information Technology Association of America. Mr. Bowen is a 1973 graduate of
the University of Maryland and in 1978 received a Masters of Business
Administration from the University of Maryland.

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<PAGE> 42

Jonathan J. Ledecky will join the Company's Board of Directors upon the
completion of the Offering. Mr. Ledecky is the founder of U.S. Office Products
Company, a Nasdaq National Market company and has served as Chairman and Chief
Executive Officer of U.S. Office Products Company since its organization in
October of 1994. Prior to founding U.S. Office Products Company, Mr. Ledecky
served as the President of The Legacy Fund, Inc. from 1989 through 1994 and as
President and Chief Executive Officer of Legacy Dealer Capital, Inc., a wholly
owned subsidiary of Steelcase Inc., and the nation's largest manufacturer of
office furniture products from 1991 through 1994. Prior to his tenure at The
Legacy Fund, Inc., Mr. Ledecky was a partner at Adler and Company and a Senior
Vice President at Allied Capital Corporation, a publicly traded investment
management company. Mr. Ledecky is a 1979 graduate of Harvard College, and in
1983, received a Masters of Business Administration from Harvard Graduate School
of Business Administration.

Terrence O'Donnell will join the Company's Board of Directors upon the
completion of the Offering. Mr. O'Donnell is a partner with the law firm of
Williams & Connolly in Washington, D.C. Mr. O'Donnell has practiced law with
Williams & Connolly since 1977, with the exception of the period from 1989
through 1992 when he served as general counsel to the U.S. Department of
Defense. Prior to commencing his law practice, Mr. O'Donnell served as Special
Assistant to President Ford from 1974 through 1976 and as Deputy Special
Assistant to President Nixon from 1972 through 1974. Mr. O'Donnell presently
also serves as a director of IGI, Inc., a Nasdaq National Market company. Mr.
O'Donnell is a 1966 graduate of the U.S. Air Force Academy, and in 1971,
received a Juris Doctor from Georgetown University Law Center.

Carl J. Rickersten will join the Company's Board of Directors upon the
completion of the Offering. Mr. Rickersten is a partner in Thayer Capital
Partners, a $364 million institutional private equity fund based in Washington,
D.C. Mr. Rickersten has been with Thayer Capital Partners since September 1994.
Prior to his tenure at Thayer Capital Partners, Mr. Rickersten acted as a
private financial consultant from 1993 through 1994 and was a partner of Hancock
Park Associates, an institutional investment advisor, from 1989 through 1993.
Prior to that, Mr. Rickersten was associated with Brentwood Associates from 1987
through 1989 and was a Financial Analyst with Morgan Stanley & Co., Incorporated
from 1983 through 1985. Mr. Rickersten is a 1983 graduate of Stanford University
and, in 1987, received a Masters of Business Administration from Harvard
Graduate School of Business Administration.

Kleyton L. Parkhurst joined the Company in 1991 as Director of Finance and,
since September 1, 1996, has served as Secretary and Treasurer of the Company.
Mr. Parkhurst is responsible for all of the Company's financing activities,
credit review procedures and manages the Company's bank facilities. Mr.
Parkhurst has syndication expertise in commercial nonrecourse debt, federal
government leases, state and local taxable and tax-exempt leases, and computer
lease equity placements. From 1988 through 1991, Mr. Parkhurst was an Assistant
Vice President of PacifiCorp Capital, Inc. Mr. Parkhurst is a 1985 graduate of
Middlebury College.

Barbara J. Simmonds, a certified public accountant, joined the Company in
1992, has served since then as Controller and, since September 1, 1996, has
served as a vice president of the Company. From 1982 through 1990, Ms. Simmonds
was an Assistant Controller for PacifiCorp Capital, Inc. Ms. Simmonds is a 1982
graduate of the University of Virginia.

Kevin M. Norton joined the Company in 1991 and has served since then as
Vice President of Brokerage Operations. Mr. Norton is responsible for all of the
Company's equipment brokerage activities. He has a wide variety of equipment
experience including mainframes and peripheral equipment. Prior to joining the
Company, he was employed in a similar capacity with PacifiCorp Capital, Inc. Mr.
Norton is a 1979 graduate of the University of North Carolina. Kevin M. Norton
and Phillip G. Norton are brothers.

William J. Slaton joined the Company in 1991 and has served since then as
Vice President of Marketing. His primary responsibility is the management of the
Company's marketing of its public sector finance products. From 1986 through
1991 and from 1980 through 1986, Mr. Slaton held various marketing positions,
specializing in technology financing for local and state government agencies,
with PacifiCorp Capital, Inc. and Systems Leasing Corporation. From 1969 through
1977, Mr. Slaton held various marketing positions with IBM, also, focusing on
state and local government customers in Texas and California. Mr. Slaton is a
1969 graduate of the University of Texas at Austin.

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<PAGE> 43

Thomas K. McNamara joined the Company in 1994 upon the acquisition by the
Company of the business assets of Pilot Associates and serves as Vice President
and Regional Manager of the Pilot Associates division. In 1989, Mr. McNamara
co-founded and was responsible for sales at Pilot Associates. Prior to founding
Pilot Associates, Mr. McNamara served as Sales Representative with Memorex
Corporation from 1974 through 1989. Mr. McNamara was also previously with
Computer Communication, Inc., from 1970 through 1974 and with Philco Ford, Inc.
from 1966 through 1970. Mr. McNamara is a 1966 graduate of the Philco Technical
Institute.

COMMITTEES AND MEETINGS

Audit Committee. Upon closing of the Offering, the Board of Directors will
establish an audit committee (the "Audit Committee"). The Audit Committee will
be responsible for making recommendations to the Board concerning the engagement
of independent public accountants, monitoring and reviewing the quality and
activities of the Company's internal and external audit functions and monitoring
the adequacy of the Company's operating and internal controls as reported by
management and the external or internal auditors. The members of the Audit
Committee are anticipated to be Terrence O'Donnell, Jonathan J. Ledecky and Carl
J. Rickersten.

Compensation Committee. Upon closing of the Offering, the Board of
Directors will establish a compensation committee (the "Compensation
Committee"). The Compensation Committee will be responsible for reviewing the
salaries, benefits and other compensation, excluding stock based compensation,
of Mr. Norton and Mr. Bowen and will make recommendations to the Board based on
its review. The members of the Compensation Committee are anticipated to be
Terrence O'Donnell, Jonathan J. Ledecky and Carl J. Rickersten. Mr. Norton and
Mr. Bowen, as directors, will not vote on any matters affecting their personal
compensation. Mr. Bowen and Mr. Norton will be responsible for reviewing and
establishing salaries, benefits and other compensation for other directors and
all other employees.

Stock Incentive Committee. Upon the closing of the Offering, the Board of
Directors will establish a stock incentive committee (the "Stock Incentive
Committee"). The Stock Incentive Committee will be authorized to issue stock,
stock option and "phantom stock" or stock appreciation rights ("SARS") based
compensation grants under the Company's 1996 Stock Incentive Plan. See
"Management -- Executive Compensation and Other Arrangements -- 1996 Stock
Incentive Plan." The initial members of the Stock Incentive Committee will be
Phillip G. Norton and Bruce M. Bowen. Except for options granted to Mr. Norton
and Mr. Bowen under the employment agreements described in this Prospectus, and
grants that are approved by a majority of the disinterested members of the Board
of Directors, no member of the Stock Incentive Committee is eligible to receive
grants under the Stock Incentive Plan.

DIRECTOR COMPENSATION

Directors do not currently receive any compensation nor other services as
members of the Board of Directors. The outside directors will receive $500 for
each board meeting which they attend and $500 for each committee meeting which
they attend. All directors will be reimbursed for their out-of-pocket expenses
incurred to attend board or committee meetings. The Company has adopted the 1996
Outside Director Stock Option Plan, which provides for the award and exercise of
certain options to nonemployee directors on a formula basis based upon length of
service. Immediately prior to closing the Offering, under the 1996 Outside
Director Stock Option Plan, the Company will grant options to its nonemployee
directors to purchase an aggregate of 30,000 shares of Common Stock at an
exercise price equal to the initial public offering price, 50% of which may be
exercised after the first year of service and the remaining 50% of which may be
exercised after the second year of service, provided they continue to serve as
directors. The 1996 Outside Director Stock Option Plan also provides for the
grant of options for shares to each nonemployee director (15,000 annually in the
aggregate) on the second, third and fourth anniversary of service, at an
exercise price equal to the market price as of the date of grant, with each
option being exercisable as to 50% of the shares on the first anniversary of
grant and the remaining 50% of the shares on the second anniversary of grant.
See "Management -- Executive Compensation and Other Information -- 1996 Stock
Incentive Plan" for a description of option grants to nonemployee directors.

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<PAGE> 44

EXECUTIVE COMPENSATION AND OTHER INFORMATION

Summary Compensation Table. The following table provides certain summary
information concerning the compensation earned, for services rendered in all
capacities to the Company, by the Company's Chief Executive Officer and certain
other executive officers (together with the Chief Executive Officer, the "Named
Executive Officers") of the Company for the fiscal year ended March 31, 1996.
Certain columns have been omitted from this summary compensation table as they
are not applicable.

<TABLE>
<CAPTION>
ANNUAL COMPENSATION
--------------------------------------
OTHER
BONUS/ ANNUAL ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY COMMISSION COMPENSATION COMPENSATION
- ----------------------------------- ---- -------- ---------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Phillip G. Norton.................. 1996 $ 984 $ -- $ -- $120,000(1)
Chairman, Chief Executive 1995 376 -- -- --
Officer and President 1994 -- -- 5,497(2) --

Bruce M. Bowen..................... 1996 120,000 40,000 13,206(2)(3) 1,000(4)
Director, Chief Financial Officer
and 1995 120,000 16,000 11,500(2)(3) 1,000(4)
Executive Vice President 1994 120,000 25,000 11,500(2)(3) 250(4)

Kevin M. Norton.................... 1996 -- 347,023 3,087(2) --
Vice President of 1995 -- 348,944 1,068(2) --
Brokerage Operations 1994 -- 227,993 1,368(2) --

Kleyton L. Parkhurst............... 1996 -- 169,352 1,356(2) --
Secretary and Treasurer 1995 -- 237,153 1,500(2) --
1994 -- 189,505 1,137 --
Thomas K. McNamara................. 1996 42,000 98,257 3,234(2) --
Vice President 1995 42,000 335,699 1,500(2) --
1994 -- -- -- --
</TABLE>

- ---------------
(1) Represents guarantee fees paid to Mr. Norton's spouse, Patricia Norton. See
"Certain Transactions -- Guarantee Fees."

(2) Employer 401(k) plan match (only annual amounts in excess of $10,000 of Mr.
Bowen's compensation represents a 401(k) plan match).

(3) Includes $10,000 of interest paid on loans by Mr. Bowen to the Company.

(4) Represents the personal use of the Company's country club membership.

Compensation Arrangements and Employment Agreements. The Company has
entered into employment agreements with Phillip G. Norton, Bruce M. Bowen,
Kleyton L. Parkhurst and William J. Slaton, each effective as of September 1,
1996. Each employment agreement provides for an initial term of three years, and
is subject to an automatic one-year renewal at the expiration thereof unless the
Company or the employee provides notice of an intention not to renew at least
three months prior to expiration. Under each employment agreement, the employee
will receive, commencing with the first day of the first calendar month after
closing the Offering, an annual base salary ($200,000 in the case of Phillip G.
Norton; $150,000 in the case of Bruce M. Bowen and $120,000 in the case of
Kleyton L. Parkhurst and William J. Slaton) and will be eligible for commissions
or performance bonuses. The performance bonus for Phillip G. Norton for each
fiscal year will be equal to 5% of the increase in the Company's net income
before taxes over net income before taxes for the preceding fiscal year, not to
exceed $150,000 for any fiscal year. The performance bonus for Bruce M. Bowen
for each fiscal year will be equal to 5% of the increase in the Company's net
income before taxes over net income before taxes for the preceding fiscal year,
not to exceed $100,000 for any fiscal year. The performance bonus for Kleyton L.
Parkhurst and William J. Slaton will be paid based upon performance criteria
established by Phillip G. Norton and Bruce M. Bowen, not to exceed $80,000 each
per fiscal year. Pending closing of the Offering, Messrs. Norton, Bowen,
Parkhurst and Slaton will continue to be compensated based on current
arrangements. Thomas K. McNamara is compensated pursuant to the Company's
commission program which is generally based on the profitability of business
produced.

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<PAGE> 45

Under the employment agreements, each will receive certain other benefits
including medical, insurance, death and long term disability benefits, 401(k),
and reimbursement of employment related expenses. Mr. Bowen's country club dues
are paid by the Company. The employment agreements of Messrs. Norton, Bowen and
Slaton contain a covenant not to compete on the part of each, whereby in the
event of a voluntary termination of employment, upon expiration of the term of
the agreement or upon the termination of employment by the Company for cause,
each will be subject to restrictions upon acquiring, consulting with or
otherwise engaging in or assisting in the providing of capital needs for
competing business activities or entities within the United States for a period
of one year after the date of such termination or expiration of the term of the
employment agreement.

Under his employment agreement, Phillip G. Norton was granted options to
acquire 130,000 shares of Common Stock at a price per share equal to the initial
public offering price. These options have a ten year term, and will be
exercisable and vest 25% immediately upon completion of the Offering, and the
balance in 25% increments over three years beginning on the first anniversary of
the closing date of the Offering, subject to acceleration upon certain
conditions. The Company also pays a $120,000 annual guarantee fee payable in
$10,000 monthly payments to Patricia A. Norton, wife of Phillip G. Norton, in
consideration of providing certain guarantees and collateral for the NationsBank
Facility. See "Certain Transactions -- Guarantee Fees."

Under his employment agreement, Bruce M. Bowen was granted options to
acquire 15,000 shares of Common Stock at a price equal to the initial public
offering price. These options have a ten year term, and will be exercisable and
vest 25% immediately upon completion of the Offering, and the balance in 25%
increments over three years beginning on the first anniversary of the closing
date of the Offering, subject to acceleration upon certain conditions.

Under his employment agreement, Kleyton L. Parkhurst was granted options to
acquire 100,000 shares of Common Stock at a price per share equal to $6.40 per
share. These options have a ten year term, and will be exercisable and vest 25%
immediately upon completion of the Offering, and the balance in 25% increments
over three years beginning on the first anniversary of the closing date of the
Offering, subject to acceleration upon certain conditions.

The Company maintains key-man life insurance on Mr. Norton in the amount of
$10 million and on Mr. Bowen in the amount of $1 million. The Company maintains
key-man life insurance on Mr. Norton in the form of two separate policies, one
with the Prudential Life Insurance Company and the second with TransAmerica Life
Co., each in the amount of $5 million and on Mr. Bowen with CNA Insurance
Company in the amount of $1 million.

1996 Stock Incentive Plan. The Company has established a stock incentive
program (the "Stock Incentive Plan") to provide an opportunity for directors,
executive officers, independent contractors, key employees, and other employees
of the Company to participate in the ownership of the Company. The Stock
Incentive Plan provides for the award to eligible directors, employees, and
independent contractors of the Company, of a broad variety of stock-based
compensation alternatives such as incentive stock options for employees under
the 1996 Incentive Stock Option Plan, formula length of service based
nonqualified options to nonemployee directors under the 1996 Outside Director
Stock Plan, and nonqualified stock options under the 1996 Nonqualified Stock
Option Plan, as well as other restrictive stock and performance based stock
awards and programs which may be established by the Board of Directors.
Currently, the Company has reserved a total of 400,000 shares of Common Stock
for issuance upon exercise of options under: (i) the employment agreements with
Messrs. Norton, Bowen and Parkhurst (under which options for an aggregate of
245,000 shares have been granted); (ii) the 1996 Outside Director Stock Plan
(under which options for an aggregate of 75,000 shares of Common Stock are
reserved for grant under a formula plan based upon length of service and for
which 30,000 shares of Common Stock will be granted upon completion of the
Offering); (iii) the 1996 Incentive Stock Option Plan (under which options for
an aggregate of 60,000 shares will be granted immediately upon completion of the
Offering); (iv) the 1996 Nonqualified Stock Option Plan (under which no options
have been granted); and (v) 20,000 additional shares of Common Stock reserved
for issuance under the 1996 Stock Incentive Plan.

44
<PAGE> 46

The Stock Incentive Plan is to be administered by the Stock Incentive
Committee, which will be authorized to select from among the eligible
participants the individuals to whom options, restricted stock purchase rights
and performance awards are to be granted and to determine the number of shares
to be subject thereto and the terms and conditions thereof. The Stock Incentive
Committee will also be authorized to adopt, amend and rescind the rules relating
to the administration of the Stock Incentive Plan. Except for grants that are
approved by a majority of the Company's Board of Directors, no member of the
Stock Incentive Committee will be eligible to participate future in grants of
options in the Stock Incentive Plan.

Incentive stock options issued under the 1996 Incentive Stock Option Plan
will be designed to comply with the provisions of the Internal Revenue Code of
1986, as amended (the "Code"), and will be subject to restrictions contained in
the Code, including a requirement that exercise prices be equal to at least 100%
of fair market value of the shares of Common Stock on the grant date and a
ten-year restriction on the option term. The incentive stock options may be
subsequently modified to disqualify them from treatment as incentive stock
options. Under the Stock Incentive Plan and the Code, non-employee directors are
not permitted to receive incentive stock options. The Company intends, upon
closing of the Offering, to grant options totaling 60,000 shares of Common Stock
to employees other than those receiving options under employment agreements or
nonqualified stock options as described above. Each of the foregoing incentive
stock option grants will be at the initial public offering price and will be
exercisable in 20% increments over five years beginning on the first anniversary
of the closing date of the Offering, subject to continued employment and subject
to acceleration upon certain conditions.

Nonqualified stock options issued under the 1996 Stock Incentive Plan, may
be granted to directors, officers, independent contractors and employees and
will provide for the right to purchase shares of Common Stock at a specified
price which may be less than fair market value on the date of grant, and usually
will become exercisable in installments after the grant date. Nonqualified stock
options may be granted for any reasonable term.

Under the 1996 Outside Director Stock Option Plan, each of the three
nonemployee directors will be granted options, immediately upon the completion
of the Offering to purchase an aggregate of 30,000 shares of Common Stock, 50%
of which may be exercised after the first year of service and the remaining 50%
of which may be exercised after the second year of service provided they
continue to serve as directors. The 1996 Outside Director Stock Option Plan also
provides for the grant of options for shares to each nonemployee director
(15,000 annually in the aggregate) on the second, third and fourth anniversary
of service, at an exercise price equal to the market price as of the date of
grant, with each option being exercisable as to 50% of the shares on the first
anniversary of grant and the remaining 50% of the shares as the second
anniversary of grant. Options for 15,000 shares becoming exercisable after the
second, third and fourth anniversaries of grants.

Compensation Committee Interlocks and Insider Participation. For the year
ended March 31, 1996, all decisions regarding executive compensation were made
by Mr. Bowen as President. None of the executive officers of the Company
currently serves on the Compensation Committee of another entity or any other
committee of the board of directors of another entity performing similar
functions. For a description of transactions between the Company and Mr. Bowen,
see "Certain Transactions."

LIMITATION OF LIABILITY AND INDEMNIFICATION

Indemnification Agreements. Prior to the completion of the Offering, the
Company will enter into separate but identical indemnification agreements (the
"Indemnification Agreements") with each director and executive officer of the
Company and expects to enter into Indemnification Agreements with persons who
become directors or executive officers in the future. The Indemnification
Agreements provide that the Company will indemnify the director or officer (the
"Indemnitee") against any expenses or liabilities incurred by the Indemnitee in
connection with any proceeding in which such Indemnitee may be involved as a
party or otherwise, by reason of the fact that such Indemnitee is or was a
director or officer of the Company or by reason of any action taken by or
omitted to be taken by such Indemnitee while acting as an officer or director of
the Company, provided that such indemnity shall only apply if (i) the Indemnitee
was acting in good faith

45
<PAGE> 47

and in a manner the Indemnitee reasonably believed to be in the best interests
of the Company and, with respect to any criminal action, had no reasonable cause
to believe the Indemnitee's conduct was unlawful, (ii) the claim was not made to
recover profits made by such Indemnitee in violation of Section 16(b) of the
Securities Exchange Act of 1934, as amended, or any successor statute, (iii) the
claim was not initiated by the Indemnitee, (iv) the claim was not covered by
applicable insurance, or (v) the claim was not for an act or omission of a
director of the Company from which a director may not be relieved of liability
under Section 102(b)(7) of the DGCL. Each Indemnitee will undertake to repay the
Company for any costs or expenses paid by the Company if it shall ultimately be
determined that such Indemnitee is not entitled to indemnification under the
Indemnification Agreements.

Provisions of Certificate of Incorporation. As allowed by the DGCL, the
Company's Certificate of Incorporation provides for the limitation of the
liability of the directors of the Company for monetary damages to the fullest
extent permissible under Delaware law. This is intended to limit the personal
liability of a director to monetary damages incurred in an action brought by or
in the right of the Company for breach of a director's duties to the Company or
its stockholders: (i) for acts or omissions that involve intentional misconduct
or a knowing and culpable violation of law; (ii) for any breach of the
director's duty of loyalty to the Company or its stockholders; (iii) for any
transaction from which a director has derived an improper personal benefit; and
(iv) as expressly imposed by statute, for approval of certain improper
distributions to stockholders or the wasting of Company assets.

Bylaws. The Company's Bylaws also permit the Company to indemnify its
officers and directors to the fullest extent permitted by law.

Directors and Officers Insurance. The Company has obtained directors and
officers liability and company reimbursement insurance pursuant to a policy in
effect (the "D&O Policy") with the Lexington Insurance Company, a wholly owned
subsidiary of the American International Group. Pursuant to the D&O Policy,
Lexington will pay, on behalf of directors and officers of the Company, certain
losses ("Losses") incurred as a result of a wrongful act (a "Wrongful Act") by
such persons, for which they are not indemnified by the Company. In addition,
Lexington will reimburse the Company for Losses over $100,000 incurred as a
result of the Company's indemnification of an officer or director in connection
with a Wrongful Act. The D&O Policy provides that Lexington's aggregate
liability to the Company with respect to a single policy year shall not exceed
$1.0 million and is subject to customary exclusions.

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<PAGE> 48

CERTAIN TRANSACTIONS

GUARANTEES OF NATIONSBANK FACILITY

The NationsBank Facility is presently guaranteed by Phillip G. Norton,
Patricia A. Norton, Bruce M. Bowen, Elizabeth D. Bowen, William J. Slaton,
Margaret Newton, Kevin M. Norton, Brianna Norton and Patrick J. Norton. In
addition, this line is secured by a pledge of approximately $1.5 million of cash
collateral pledged by Phillip G. Norton and his spouse Patricia A. Norton. See
"Business -- Financing." Upon closing of the Offering, the Company intends to
apply proceeds of the Offering towards repayment of the line. See "Use of
Proceeds." The Company anticipates that after the closing of the Offering, the
Company will pursue new or modified warehouse lines of credit and the
NationsBank Facility will be either terminated or renegotiated in such a manner
as to remove all stockholders' personal guarantees and release all stockholders'
assets pledged as collateral for the NationsBank Facility.

GUARANTEES OF FIRST UNION FACILITY

The First Union Facility is presently guaranteed by Phillip G. Norton,
Patricia A. Norton, Bruce M. Bowen, Elizabeth D. Bowen, William J. Slaton, Kevin
M. Norton and Patrick J. Norton, each of whom is a beneficial owner of Common
Stock. In addition, this line is secured by cash and securities having a value
of approximately $1,200,000, pledged as collateral by Patricia A. Norton, as
trustee for the Phillip G. Norton Jr. Trust, the Andrew L. Norton Trust and the
Jeremiah O. Norton Trust. See "Business -- Financing." Upon closing of the
Offering, the Company intends to apply proceeds of the Offering towards
repayment of the line. See "Use of Proceeds." The Company anticipates that after
closing of the Offering, the Company will pursue new or modified warehouse lines
of credit and the First Union Facility will be either terminated or renegotiated
in such a manner as to remove all personal guarantees by stockholders and
release all assets pledged by stockholders as collateral for the First Union
Facility.

GUARANTEES OF NATIONSBANC LEASING FACILITY

The NationsBanc Leasing Facility is presently guaranteed by Phillip G.
Norton and Bruce M. Bowen. See "Business -- Financing." The Company anticipates
that after closing of the Offering, the Company will pursue new or modified
warehouse lines of credit and the NationsBanc Leasing Facility will be either
terminated or renegotiated in such a manner as to remove all stockholder
personal guarantees and release all stockholder assets pledged as collateral for
the NationsBanc Leasing Facility.

STOCKHOLDER LOANS

The Company currently has a total of $275,000 in outstanding borrowings
from stockholders; $175,000 from Bruce M. Bowen and $100,000 from William J.
Slaton. Each of these loans is evidenced by a promissory note dated March 1,
1995, bearing interest at the rate of 10% per annum, and are due March 1, 1998.
The Company paid $17,500 and $10,000 to Messrs. Bowen and Slaton, respectively,
in interest for fiscal year 1996, and will pay interest monthly until these
loans are repaid. The Company intends to repay these loans with a portion of the
proceeds of the Offering.

NEW ENERGY LEASING CORPORATION OBLIGATIONS

The Company is a party to an agreement entered into in 1994 with New Energy
Leasing Corporation ("New Energy"), of which Bruce M. Bowen is a 45%
stockholder. Under that arrangement, the Company has sold leases to New Energy
under which the Company remains obligated to manage the lease and to provide
remarketing or asset disposition services upon expiration or other termination
of the lease. The Company recognized revenue for such transactions of
approximately $1.9 million and $1.3 million, for the years ended March 31, 1995
and 1996, respectively, and the basis of the equipment sold was approximately
$1.3 million and $1.6 million, respectively. At June 30, 1996, the Company owed
$31,337 to New Energy, had a $16,352 note receivable and a $57,380 equity
investment resulting from transactions with New Energy. New Energy is entitled
to the first $75,000 of proceeds from any remarketing or sale of the assets,
with the Company being

47
<PAGE> 49

entitled to 90% of any proceeds above that amount. This agreement and the lease
transactions to which it relates are slated to expire in 1999. The Company will
not enter into any further lease sale transactions with New Energy.

GUARANTEE FEES

From April 1, 1995 through June 30, 1996, the Company paid a total of
$150,000 of guarantee fees, $10,000 per month, to Patricia A. Norton, the spouse
of Phillip G. Norton, as consideration for her providing personal guarantees and
pledging personal assets for the NationsBank Facility. Payment of these
guarantee fees will continue until the release of Patricia A. Norton's guarantee
and collateral. Upon the closing of the Offering, the Company intends to attempt
to renegotiate the NationsBank Facility to obtain the release of the guarantee
and collateral of Patricia A. Norton; however, there can be no assurance that
the Company will be able to renegotiate successfully the NationsBank Facility.

ADVANCES TO STOCKHOLDERS

The Company has, in the past, provided non-interest bearing advances
against anticipated sales commissions to certain stockholder employees, Kevin M.
Norton and Patrick J. Norton. These advances, which are made when transactions
are executed but the Company has not yet collected payment for such
arrangements, are repayable from sales commissions earned by the stockholder
employees on completion and collection of payment for successful sales or
financing arrangements obtained on behalf of the Company. These advances totaled
$77,759 as of June 30, 1996 and $76,349, $14,353 and $33,275 as of the end of
fiscal year 1996, 1995 and 1994, respectively. The aggregate amount of these
advances equals $49,275, $61,583 and $139,500 for fiscal years 1994, 1995 and
1996, respectively. Advances of $26,000, $80,505 and $82,612 were repaid for
fiscal years 1994, 1995 and 1996, respectively. For Patrick J. Norton, the only
advance was $3,204 in May, 1995 which was repaid in June, 1995. All other
advances were paid to Kevin M. Norton. As of September 30, 1996, the amount of
outstanding advances was $22,240, all of which were paid to Kevin M. Norton.
This amount, which represents an advance repayable from sales commissions, will
be repaid when the Company receives payment and the sales commission is earned.

LOANS TO STOCKHOLDERS

In 1994, the Company loaned $40,000 to Kevin M. Norton, a stockholder of
the Company, pursuant to a promissory note dated February 15, 1994 bearing
interest at 8% per annum and due July 31, 1995. Kevin M. Norton paid interest of
$2,048 and $382 during fiscal years 1995 and 1996, respectively and made
principal repayments of $25,505 and $14,495 during fiscal years 1995 and 1996,
respectively. The Company's $40,000 loan to Kevin M. Norton was repaid in full
during fiscal year 1996.

In 1995, the Company loaned $74,115 to William J. Slaton, a stockholder of
the Company, pursuant to a promissory note dated January 5, 1995 bearing no
interest and due on demand. Mr. Slaton repaid this note in full in 1995.

In 1995, the Company loaned $54,000 to Patrick J. Norton, a stockholder of
the Company, pursuant to a promissory note dated November 17, 1995, bearing
interest at 8% per annum. Patrick J. Norton paid interest of $1,608 and made
principal repayments of $8,392 during fiscal year 1996. The Company's loan to
Patrick J. Norton had a balance of $45,608, as of the end of fiscal year 1996,
and a balance of $47,455 as of September 30, 1996.

INDEMNIFICATION AGREEMENTS

Prior to the completion of the Offering, the Company will enter into
separate but identical indemnification agreements (the "Indemnification
Agreements") with each director and execute officer of the Company and expects
to enter into Indemnification Agreements with persons who become directors or
executive officers in the future. The Indemnification Agreements provide that
the Company will indemnify the director or officer (the "Indemnitee") against
any expenses or liabilities in connection with any proceeding in which such
Indemnitee may be involved as a party or otherwise, by reason of the fact that
such Indemnitee is or was a

48
<PAGE> 50

director or officer of the Corporation or by reason of any action taken by or
omitted to betaken by such Indemnitee while acting as an officer or director of
the Corporation, provided that such indemnity shall only apply if (i) the
Indemnitee was acting in good faith and in a manner the Indemnitee reasonably
believed to be in the best interests of the Corporation, and, with respect to
any criminal action, had no reasonable cause to believe the Indemnitee's conduct
was unlawful, (ii) the claim was not made to recover profits made by such
Indemnitee in violation of Section 16(b) of the Securities Exchange Act of 1934,
as amended, or any successor statute, (iii) the claim was not initiated by the
Indemnitee, or (iv) the claim was not covered by applicable insurance, or (v)
the claim was not for an act or omission of a director of the Company from which
a director may not be relieved of liability under Section 103(b)(7) of the DGCL.
Each Indemnitee has undertaken to repay the Company for any costs or expenses
paid by the Company if it shall ultimately be determined that such Indemnitee is
not entitled to indemnification under the Indemnification Agreements. For more
information on director and officer liability see "Management -- Limitation of
Liability and Indemnification."

FUTURE TRANSACTIONS

Certain of the transactions described above may be on terms more favorable
to officers, directors and principal stockholders than they could obtain in a
transaction with an unaffiliated party. The Company intends to adopt a policy
requiring that all material transactions between the Company and its officers,
directors or other affiliates must (i) be approved by a majority of the
disinterested members of the Board of Directors of the Company, and (ii) be on
terms no less favorable to the Company than could be obtained from unaffiliated
third parties.

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<PAGE> 51

PRINCIPAL STOCKHOLDERS

GENERAL

The following table sets forth certain information, as of June 30, 1996,
regarding the beneficial ownership of the Common Stock, and the sale by the
Company of the shares of Common Stock offered hereby, with respect to (i) each
director of the Company, (ii) each person who is known by the Company to own
beneficially 5% or more of the Common Stock, (iii) each of the named executive
officers and (iv) all directors and executive officers of the Company as a
group. The table also sets forth the number and percentage of the outstanding
shares projected to be beneficially owned by each of such stockholders after
adjustment for the Offering, assuming the sale in the Offering of 1,000,000
shares of Common Stock by the Company.

<TABLE>
<CAPTION>
SHARES BENEFICIALLY SHARES BENEFICIALLY
OWNED PRIOR TO OWNED AFTER
OFFERING OFFERING(2)
---------------------- ----------------------
NAME AND ADDRESS OF BENEFICIAL OWNER(1) NUMBER PERCENT NUMBER PERCENT
- ---------------------------------------------- --------- ------- --------- -------
<S> <C> <C> <C> <C>
Phillip G. Norton(3).......................... 2,825,500 70.0% 2,825,500 56.2%
1019 Basil Road
McLean, Virginia 22101
Bruce M. and Elizabeth D. Bowen(4)............ 763,750 19.1 763,750 15.3
10895 Lake Windermere Drive
Great Falls, Virginia 22066
William J. Slaton............................. 400,000 10.0 400,000 8.0
1810 Maple Glen
Sacramento, California 95864
Kevin M. Norton(5)............................ 376,500 9.4 376,500 7.5
5920 Royal Palm
Plano, Texas 75093
Patrick J. Norton(5).......................... 376,500 9.4 376,500 7.5
705 Brookfield Road
Raleigh, North Carolina 27615
Kleyton L. Parkhurst(6)....................... 68,000 1.7 68,000 1.3
605 Abbott Lane
Falls Church, Virginia 22046
All directors and executive officers as a
group (8 individuals)....................... 4,057,250 100.0% 4,057,250 80.2%
</TABLE>

- ---------------
(1) Unless otherwise indicated and subject to community property laws where
applicable, each of the stockholders named in this table has sole voting and
investment power with respect to the shares shown as beneficially owned by
such stockholder. A person is deemed to be the beneficial owner of
securities that can be acquired by such person within 60 days from the date
of this Prospectus upon exercise of options and warrants. Each beneficial
owner's percentage ownership is determined by assuming options that are held
by such person (but not those held by any other person) and that are
exercisable within sixty days from the date of this Prospectus have been
exercised.

(2) Assumes no exercise of the Underwriters' over-allotment option and gives no
effect to any purchases that may be made in the Offering.

(3) Includes 2,040,000 shares held by J.A.P. Investment Group, L.P., a Virginia
limited partnership, of which J.A.P., Inc., a Virginia corporation, is the
sole general partner, and Patricia A. Norton, trustee for the benefit of
Phillip G. Norton, Jr., u/a dated as of July 20, 1983, Patricia A. Norton,
trustee for the benefit of Andrew L. Norton u/a dated as of July 20, 1983,
Patricia A. Norton, trustee for the benefit of Jeremiah O. Norton u/a dated
as of July 20, 1983, and Patricia A. Norton are the limited partners.
Patricia A. Norton, spouse of Phillip G. Norton, is the sole stockholder of
J.A.P., Inc. and Phillip G. Norton is the sole director and President of
J.A.P., Inc. Phillip G. Norton holds sole voting rights as to all

50
<PAGE> 52

of the shares of Common Stock and as to all shares of voting stock acquired
in the future held by J.A.P. Investment Group, L.P., Kevin M. Norton and
Patrick J. Norton, Jr. under the Irrevocable Proxy and Stock Rights
Agreement. See "Principal Stockholders-- Irrevocable Proxy and Stock Rights
Agreement." Also includes 32,500 shares of Common Stock that Phillip G.
Norton has rights to acquire pursuant to options, which vest upon
completion of the Offering and which are immediately exercisable upon
completion of the Offering and excludes 97,500 options to acquire shares of
Common Stock which are not vested and not immediately exercisable. See
"Principal Stockholders-- Irrevocable Proxy and Stock Rights Agreement" and
"Management -- Executive Compensation and Other Arrangements --
Compensation Arrangements and Employment Agreements."

(4) Includes 600,000 shares held by Bruce M. And Elizabeth D. Bowen, as tenants
by the entirety, and includes 160,000 shares held by Bowen Holdings L.C., a
Virginia limited liability company composed of Bruce M. Bowen and three
minor children, Daniel Bowen, Sarah Bowen and Margaret Bowen, of whom Bruce
M. Bowen is legal guardian and for which Bruce M. Bowen serves as manager.
Also includes 3,750 shares of Common Stock that Bruce M. Bowen has rights to
acquire pursuant to options which vest upon completion of the Offering and
which are immediately exercisable upon completion of the Offering and
excludes 11,250 options to acquire Common Stock which are not vested and not
immediately exercisable. See "Management -- Executive Compensation and Other
Arrangements -- Compensation Arrangements and Employment Agreements."

(5) Phillip G. Norton holds sole voting rights as to all of the foregoing shares
of Common Stock under an Irrevocable Proxy and Stock Rights Agreement. See
"Principal Stockholders-- Irrevocable Proxy and Stock Rights Agreement."

(6) Includes 13,000 shares held by Kleyton L. Parkhurst, 30,000 shares held by
three minor children of Kleyton L. Parkhurst, Charlotte A. Parkhurst,
Madeline M. Parkhurst, and Kleyton L. Parkhurst, Jr., all of which are voted
by Kleyton L. Parkhurst, Custodian, under the Virginia Uniform Gift to
Minors Act and 25,000 shares of Common Stock that Kleyton L. Parkhurst has
option rights to acquire, which vest upon completion of the Offering and
which are immediately exercisable upon completion of the Offering and
excludes 75,000 options to acquire Common Stock which are not vested and not
immediately exercisable. See "Management -- Executive Compensation and Other
Arrangements -- Compensation Arrangements and Employment Agreements."

IRREVOCABLE PROXY AND STOCK RIGHTS AGREEMENT

Phillip G. Norton and J.A.P. Investments Group, L.P., Kevin M. Norton and
Patrick J. Norton have entered into an agreement entitled "Irrevocable Proxy and
Stock Rights Agreement" pursuant to the terms of which (i) each of J.A.P.
Investments, L.P., Kevin M. Norton and Patrick J. Norton have granted Phillip G.
Norton an irrevocable proxy to vote their shares of Common Stock, which proxy
terminates only upon the death or mental incapacity of Phillip G. Norton or in
the event of his death or mental incapacity, then to Patricia A. Norton, if then
living, or upon the sale or transfer to a third party of the shares of Common
Stock and (ii) Kevin M. Norton or Patrick J. Norton have granted Phillip G.
Norton a first right to buy their shares of Common Stock in the event they
desire to sell or transfer any shares of Common Stock to a third party. The
foregoing first right to buy is at 85% of the market value, or if sold for less,
for a period of three years from the date of closing of the Offering and at 95%
of the market value thereafter. Phillip G. Norton may assign his first right to
buy to a third party, and if exercised, the terms of the Irrevocable Proxy and
Stock Rights Agreement provide for a deferred purchase money note to finance the
purchase. Any shares of Common Stock which Kevin M. Norton or Patrick J. Norton
offers to Phillip G. Norton and which are subsequently sold or transferred to a
third party after Phillip G. Norton's nonexercise of his first right to buy,
will no longer be subject to the Irrevocable Proxy and Stock Rights Agreement.

51
<PAGE> 53

DESCRIPTION OF CAPITAL STOCK

The following summary description of the capital stock of the Company is
qualified in its entirety by reference to applicable provisions of Delaware law
and the Certificate of Incorporation and the Bylaws of the Company, which are
exhibits to the Registration Statement on file with the Commission.

COMMON STOCK

The Company's Certificate of Incorporation authorizes the issuance of up to
10,000,000 shares of Common Stock. Each holder of Common Stock on the applicable
record date is entitled to receive such dividends as may be declared by the
Board of Directors out of funds legally available therefore and in the event of
dissolution, to share pro rata in any distribution of the Company's assets after
payment or providing for the payments of the Company's liabilities. Each holder
of Common Stock is entitled to one vote for each share held of record on the
applicable record date on all matters presented to a vote of the stockholders.
Holders of Common Stock have no preemptive rights to purchase or subscribe for
any stock or other securities, and there are no conversion rights or redemption
or sinking fund provisions with respect to the Common Stock. All outstanding
shares of Common Stock and the shares of Common Stock issued pursuant to the
Offering will be, when issued, fully paid and non-assessable.

PREFERRED STOCK

The Certificate of Incorporation authorizes the Board of Directors of the
Company to issue up to 2,000,000 shares of $.01 par value preferred stock of the
Company (the "Preferred Stock"), in one or more series, having such rights and
preferences including, without limitation, voting rights, as the Board of
Directors may determine, in its sole discretion. No consent of the holders of
Common Stock is required to authorize the issuance of any class of Preferred
Stock. The rights of the holders of the Preferred Stock may be senior to the
holders of the Common Stock. The Board of Directors currently has no plans to
issue any class of Preferred Stock.

CERTAIN ANTI-TAKEOVER PROVISIONS

Certain provisions of Delaware law and the Company's Certificate of
Incorporation and Bylaws could make more difficult the acquisition of the
Company by means of a tender offer, proxy contest or otherwise, and the removal
of incumbent officers and directors.

There has been a recent trend towards the accumulation of substantial stock
positions in public companies by third parties as a prelude to proposing a
takeover or a restructuring or sale of all or part of a company or other similar
extraordinary corporate action. Such actions are often undertaken by the third
party without advance notice to or consultation with management of the company.
In many cases, the purchaser seeks representation on the company's board of
directors in order to increase the likelihood that its proposal will be
implemented by the company. If the company resists the efforts of the purchaser
to obtain representation on the company's board, the purchaser may commence a
proxy contest to have the purchaser or its nominees elected to the board in
place of certain directors, or the entire board.

The Board of Directors of the Company believes that an imminent threat of
removal of the Company's management severely curtails its ability to negotiate
effectively with such purchasers. Under such a threat, management is deprived of
the time and information necessary to evaluate the takeover proposal, to study
alternative proposals and to help ensure that the best price is obtained in any
transaction which may ultimately be undertaken. Takeovers or changes in
management of the Company which may be proposed and effected without prior
consultation and negotiation with the Company's management would not be
necessarily detrimental to the Company and its stockholders. However, the Board
feels that the benefits of seeking to protect its ability to negotiate with the
proponent of an unfriendly or unsolicited proposal to take over or restructure
the Company outweigh the disadvantages of discouraging such proposals.

The provisions of the Certificate of Incorporation and Bylaws described
herein would make more difficult or discourage a proxy contest or the assumption
of control by a holder of a substantial block of the Company's

52
<PAGE> 54

Common Stock or the removal of the incumbent Board, and thus could have the
effect of perpetuating the incumbent management. At the same time, the
provisions would help ensure that the Board, if confronted by a surprise
proposal from a third party who has recently acquired a block of the Company's
voting stock, will have sufficient time to review the proposal and appropriate
alternatives to the proposal and to seek a premium price for the stockholders.
These provisions are thus intended to encourage persons seeking to acquire
control of the Company to initiate such an acquisition through arms-length
negotiations with the Company's management and Board of Directors. The
provisions are permitted under Delaware law and are consistent with the rules of
the Nasdaq National Market.

These provisions are not in response to any efforts of which the Company is
aware to accumulate the Company's voting stock or to obtain control of the
Company. The Board of Directors does not presently contemplate recommending to
the stockholders for their approval any further measures which would affect the
ability of third parties to change control of the Company.

The following discussion is a general summary of material provisions of the
Company's Certificate of Incorporation and Bylaws, as currently in effect, and
certain other regulatory provisions, which may be deemed to have an
"anti-takeover" effect. The following description of certain of these provisions
is necessarily general and, with respect to provisions contained in the
Company's Certificate of Incorporation and Bylaws, as currently in effect,
reference should be made in each case to the document in question, each of which
is part of the Registration Statement filed with the Commission. See "Available
Information."

Directors. Certain provisions of the Certificate of Incorporation and
Bylaws will impede changes in majority control of the Board of Directors. The
Company's Certificate of Incorporation provides that the Board of Directors of
the Company are divided into three classes, with directors in each class elected
for three-year staggered terms except for the initial directors. This
classification of the Board of Directors could make it more difficult for a
third party to acquire control of the Company, because it would require more
than one annual meeting of stockholders to elect a majority of the directors.
The Company's Bylaws provide that any vacancy occurring in the Board of
Directors, including a vacancy created by an increase in the number of
directors, shall be filled for the remainder of the unexpired term by a majority
vote of the directors then in office. The number of directors constituting the
Board will initially be five.

Restrictions on Call of Special Meetings. The Bylaws provide that a
special meeting of stockholders may be called only by the Board of Directors,
the Chairman of the Board, the President, or the Executive Vice President, and
for the transaction of any proper business. Holders of Common Stock, in their
capacity as stockholders, are not authorized to call a special meeting.

Absence of Cumulative Voting. The Certificate of Incorporation does not
provide for cumulative voting rights in the election of directors.

Authorization of Preferred Stock. The Certificate of Incorporation
authorizes 2,000,000 shares of Preferred Stock. The Company is authorized to
issue Preferred Stock from time to time in one or more series subject to
applicable provisions of law, and the Board of Directors is authorized to fix
the designations, powers, preferences and rights of such share, including voting
rights and conversion rights. In the event of a proposed merger, tender offer or
other attempt to gain control of the Company that the Board of Directors does
not approve, it might be possible for the Board of Directors to authorize the
issuance of a series of Preferred Stock with rights and preferences that would
impede the completion of such a transaction. An effect of the possible issuance
of Preferred Stock, therefore, may be to deter a future takeover attempt. The
Board of Directors has no present plans or understandings for the issuance of
any Preferred Stock, and does not intend to issue any Preferred Stock except on
terms which the Board deems to be in the best interests of the Company and its
stockholders.

Amendment to Certificate of Incorporation and Bylaws. Amendments to the
Certificate of Incorporation requires the approval by a majority vote of the
Company's Board of Directors and also by a majority vote of the outstanding
shares of the Company's stock entitled to vote thereon.

The Bylaws may be amended by a majority vote of the Board of Directors or
the affirmative vote of a majority of the outstanding shares of the Company's
stock entitled to vote thereon.

53
<PAGE> 55

Delaware Anti-Takeover Statute. Generally, Section 203 of the DGCL
prevents an "interested stockholder" (defined generally as a person owning 15%
or more of the outstanding voting stock of a Delaware corporation, such as the
Company) from engaging in a "business combination" with such corporation for
three years following the date that the person became an interested stockholder.
However, the takeover can be completed if (i) the buyer, while acquiring the 15%
interest, acquires at least 85% of the Company's outstanding stock (the 85%
requirement excludes shares held by directors who are also officers and certain
shares held under employee stock plans), or (ii) the takeover is approved by the
target corporation's board of directors and two-thirds of the shares of
outstanding stock of the Company (excluding shares held by the bidder). Section
203 could make it more difficult for a third party to acquire control of the
Company. Section 203 does not apply to Delaware corporations which do not have a
class of voting stock listed on a national exchange, authorized for quotation on
an inter-dealer quotation system of a registered national securities association
or held of record by more than 2,000 stockholders. The Company may exempt itself
from the requirements of the statute by adopting an amendment to its Certificate
of Incorporation or Bylaws electing not to be governed by this provision. At the
present time, the Board of Directors does not intend to propose any such
amendment.

SHARES ELIGIBLE FOR FUTURE SALE

Upon the completion of this Offering, the Company will have issued and
outstanding 5,000,000 shares of Common Stock. Of these shares, the 1,000,000
shares sold in the Offering will be freely tradable without restriction under
the Securities Act, unless such shares are held by "affiliates" of the Company,
as that term is defined in Rule 144 under the Securities Act. The remaining
4,000,000 shares of Common Stock outstanding upon completion of the Offering
will be "restricted securities" as that term is defined in Rule 144 ("Restricted
Shares"). Restricted Shares may be sold in the public market only if registered
or if the sale transaction qualifies for an exemption from registration, such as
that provided by Rule 144 under the Securities Act, which is summarized below.
Sales of Restricted Shares in the public market, or the availability of such
shares for sale, could adversely affect the market price of the Common Stock.

All officers, directors and current stockholders of the Company have
entered into contractual "lock-up" agreements providing that they will not
offer, sell, contract to sell or grant any option to purchase or otherwise
dispose of the shares of Common Stock, any options or warrants to acquire shares
of Common Stock or any securities exercisable for or convertible into the
Company's Common Stock owned by them or acquired in the Offering for a period of
360 days from the date of this Prospectus, without the prior written consent of
the Underwriters. As a result of these contractual restrictions, shares subject
to lock-up agreements will not be saleable until such agreements expire or are
waived by the Underwriters. All of the Restricted Shares will be available for
sale in the public market 360 days after the date of this Prospectus, subject to
the provisions of Rule 144.

In general, unless an exemption applies, under Rule 144 as currently in
effect, a person (or persons whose shares are aggregated) who has beneficially
owned Restricted Shares for at least two years (including the holding period of
any prior owner except an affiliate) would be entitled to sell within any
three-month period a number of shares that does not exceed the greater of (i)
one percent of the then outstanding shares of Common Stock or (ii) the average
weekly trading volume in the Common Stock in the Nasdaq National Market during
the four calendar weeks preceding the filing of the date on which notice of such
sale is filed. In addition, under Rule 144(k), a person who is not an affiliate
and has not been an affiliate for at least three months prior to the sale and
who has beneficially owned Restricted Shares for at least three years may sell
such shares without compliance with the foregoing requirements. Sales under Rule
144 are also subject to certain manner of sale provisions and notice
requirements and to the availability of current public information about the
Company.

Prior to the Offering, there has been no public market for the Common Stock
of the Company and no predictions can be made as to the effect, if any, that
future sales of shares of Common Stock will have on the market price of the
Common Stock prevailing from time to time. Nevertheless, sales of significant
numbers of shares of the Common Stock in the public market could adversely
affect the market price of the Common Stock and could impair the Company's
future ability to raise capital through an offering of its equity securities.

54
<PAGE> 56

Transfer Agent and Registrar. The transfer agent and registrar of the
common stock is First Union National Bank.

Reports to Stockholders. The Company will furnish each stockholder with
annual reports containing financial statements audited by independent
accountants and quarterly reports for the first three quarters of each year
containing unaudited financial statements.

55
<PAGE> 57

UNDERWRITING

Subject to the terms and conditions of the Underwriting Agreement, the
Underwriters named below (the "Underwriters") through their Representative, have
severally agreed to purchase from the Company the following respective number of
shares of Common Stock at the initial public offering price less the
underwriting discounts and commissions set forth on the cover page of this
Prospectus:

<TABLE>
<CAPTION>
UNDERWRITER NUMBER OF SHARES
--------------------------------------------------------------------- ----------------
<S> <C>
Friedman, Billings, Ramsey & Co., Inc................................
---------
Total...................................................... 1,000,000
=========
</TABLE>

The Underwriting Agreement provides that the obligations of the
Underwriters are subject to certain conditions precedent and that the
Underwriters will purchase all of the shares of the Common Stock offered hereby
if any of such shares of Common Stock are purchased.

The Company has been advised by the Underwriters that the Underwriters
propose to offer the shares of Common Stock to the public at the initial public
offering price set forth on the cover page of this Prospectus and to certain
securities dealers at such price less a concession not in excess of $
per share. The Underwriters may allow, and such dealers may reallow, a
concession not in excess of $ per share to certain other dealers. After
the Offering, the initial public offering price, concession, allowance and
reallowance may be changed by the Representative.

The Company has granted to the Underwriters an option, exercisable not
later than 30 days after the date of this Prospectus, to purchase up to 150,000
additional shares of Common Stock at the initial public offering price less the
underwriting discounts and commissions set forth on the cover page of this
Prospectus. To the extent that the Underwriters exercise such option, each of
the Underwriters will have a firm commitment to purchase approximately the same
percentage thereof that the number of shares of Common Stock to be purchased by
it shown in the above table bears to 1,000,000 and the Company will be
obligated, pursuant to the option, to sell such shares to the Underwriters. The
Underwriters may exercise such option only to cover over-allotments made in
connection with the sale of Common Stock offered hereby. If purchased, the
Underwriters will offer such additional shares on the same terms as those on
which the 1,000,000 shares of Common Stock are being offered.

Prior to the Offering, there has been no public trading market for the
Common Stock. The Common Stock has been approved for listing on the Nasdaq
National Market; however, there can be no assurance that an active trading
market for the Common Stock will develop after the Offering, or if developed,
that such a market will be sustained. See "Risk Factors -- Absence of Prior
Public Market for Stock."

The initial public offering price for the Common Stock has been determined
by negotiations between the Company and the Representative. Among the factors
considered in determining the initial public offering price were prevailing
market conditions, revenue and earnings of the Company, estimates of the
business potential and prospects of the Company, the present state of the
Company's business operations, an assessment of the Company's management and the
consideration of the above factors in relation to the market valuation of
certain publicly traded companies in comparable lines of business.

The executive officers, directors and all current stockholders of the
Company have agreed that they will not offer, sell, contract to sell, or grant
an option to purchase, loan, pledge or otherwise dispose of any shares of the
Common Stock, options or warrants to acquire shares of Common Stock or any
securities exercisable for or convertible into Common Stock owned by them or
acquired in the Offering, in the open market or otherwise, for a period of 360
days from the date of this Prospectus, without the prior written consent of the
Underwriters. The Company has agreed not to offer, sell or issue any shares of
Common Stock, options or

56
<PAGE> 58

warrants to acquire Common Stock or securities exercisable for or convertible
into shares of Common Stock for a period of 360 days after the date of this
Prospectus, without the prior written consent of the Underwriters, except that
the Company may issue securities pursuant to the Company's stock option plans.
See "Management -- Executive Compensation and Other Information."

The Representative has informed the Company that the Underwriters do not
intend to confirm sales to any accounts over which they exercise discretionary
authority.

The initial public offering will be conducted pursuant Rule 2720 of the
NASD Conduct Rules.

The Company, Phillip G. Norton and Bruce M. Bowen have agreed to indemnify
the Underwriters and controlling persons, if any, against certain losses,
claims, damages or liabilities including liabilities under the Securities Act or
will contribute to payments that the Underwriters or any such controlling
persons may be required to make in respect thereof. However, the aggregate
liability of Phillip G. Norton and Bruce M. Bowen may not exceed three million
dollars.

The Representative intends to make a market in the Common Stock on
completion of the Offering, as permitted by applicable laws and regulations. The
Representative, however, is not obligated to make a market in such shares, and
any such market making may be discontinued at any time at the sole discretion of
the Representative.

LEGAL MATTERS

The legality of the Common Stock being offered hereby has been passed upon
for the Company by Hazel & Thomas, P.C., Falls Church, Virginia, counsel to the
Company. Certain legal matters will be passed upon for the Underwriters by
Alston & Bird, Washington, D.C., counsel to the Underwriters.

EXPERTS

The consolidated financial statements of the Company as of March 31, 1995
and 1996 and for each of the three years in the period ended March 31, 1996
included in this Prospectus have been audited by Deloitte & Touche LLP,
independent auditors, as stated in their report appearing herein, and has been
so included in reliance upon the report of such firm given upon their authority
as experts in accounting and auditing.

57
<PAGE> 59

MLC HOLDINGS, INC., AND SUBSIDIARIES

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

<TABLE>
<S> <C>
Independent Auditors' Report..................................................... F-2
Consolidated Balance Sheets as of March 31, 1995 and 1996, and June 30, 1996
(unaudited) ................................................................... F-3
Consolidated Statements of Earnings for the Years Ended March 31, 1994, 1995 and
1996, and for the Quarters Ended June 30, 1995 and 1996 (unaudited)............ F-4
Consolidated Statements of Stockholders' Equity for the Years Ended March 31,
1994, 1995 and 1996, and for the Quarter Ended June 30, 1996 (unaudited)....... F-5
Consolidated Statements of Cash Flows for the Years Ended March 31, 1994, 1995
and 1996, and for the Quarters Ended June 30, 1995 and 1996 (unaudited)........ F-6
Notes to Consolidated Financial Statements....................................... F-7
</TABLE>

F-1
<PAGE> 60

INDEPENDENT AUDITORS' REPORT

To The Board of Directors and Stockholders of
MLC Holdings, Inc.
Reston, Virginia

We have audited the accompanying consolidated balance sheets of MLC Holdings,
Inc. and subsidiaries as of March 31, 1996 and 1995, and the related
consolidated statements of earnings, stockholders' equity, and cash flows for
each of the three years in the period ended March 31, 1996. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion, such consolidated financial statements present fairly, in all
material respects, the financial position of MLC Holdings, Inc. and subsidiaries
as of March 31, 1996 and 1995, and the results of their operations and their
cash flows for each of the three years in the period ended March 31, 1996, in
conformity with generally accepted accounting principles.

/s/ Deloitte & Touche LLP

Deloitte & Touche LLP

Washington, D.C.

September 1, 1996

F-2
<PAGE> 61

MLC HOLDINGS, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
AS OF MARCH 31,
-------------------------- AS OF
1995 1996 JUNE 30, 1996
----------- ----------- -------------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
Cash and cash equivalents............................. $ 253,475 $ 357,881 $ 445,981
Accounts receivable................................... 2,137,829 1,272,707 1,962,353
Notes receivable...................................... 36,769 91,857 1,045,902
Employee advances..................................... 14,353 76,349 77,759
Inventories........................................... 137,765 86,280 67,267
Refundable income taxes............................... 48,946 -- --
Investment in direct financing and sales-type
leases -- net....................................... 12,123,754 16,273,218 14,371,589
Investment in operating lease equipment -- net........ 1,874,354 10,219,826 8,238,558
Property and equipment -- net......................... 152,235 280,468 265,599
Deferred taxes........................................ 154,000 -- --
Other assets(1)....................................... 548,192 1,177,629 1,046,412
----------- ----------- -------------
TOTAL ASSETS.......................................... $17,481,672 $29,836,215 $27,521,420
========== ========== ==========
<CAPTION>
LIABILITIES AND STOCKHOLDERS' EQUITY
<S> <C> <C> <C>
LIABILITIES:
Accounts payable -- equipment.................... $ 3,014,447 $ 4,972,979 $ 3,392,173
Accounts payable -- trade........................ 395,385 604,650 303,454
Salaries and commissions payable................. 117,706 61,910 131,091
Accrued expenses and other liabilities........... 388,222 935,315 1,271,825
Income taxes payable............................. -- 6,332 218,808
Recourse notes payable........................... 1,814,855 1,284,742 1,485,165
Nonrecourse notes payable........................ 10,161,758 18,351,579 16,563,997
Loans from stockholders.......................... 325,000 275,000 275,000
Deferred taxes................................... -- 469,000 490,000
----------- ----------- -------------
Total liabilities........................... 16,217,373 26,961,507 24,131,513
COMMITMENTS AND CONTINGENCIES......................... -- -- --
STOCKHOLDERS' EQUITY:
Preferred stock, $.01 par value -- 2,000,000
shares authorized; none issued or
outstanding.................................... -- -- --
Common stock, $.01 par value -- 10,000,000 shares
authorized; 4,000,000 shares issued and
outstanding.................................... 40,000 40,000 40,000
Additional paid-in capital....................... 9,592 9,592 9,592
Retained earnings................................ 1,214,707 2,825,116 3,340,315
----------- ----------- -------------
Total stockholders' equity.................. 1,264,299 2,874,708 3,389,907
----------- ----------- -------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY............ $17,481,672 $29,836,215 $27,521,420
========== ========== ==========
</TABLE>

- ---------------
(1) Includes amounts with related parties of $9,499 and $678,393 as of March 31,
1995 and 1996, and $525,950 as of June 30, 1996 (unaudited).

See notes to consolidated financial statements.

F-3
<PAGE> 62

MLC HOLDINGS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF EARNINGS

<TABLE>
<CAPTION>
YEAR ENDED MARCH 31, QUARTER ENDED JUNE 30,
----------------------------------------- -------------------------
1994 1995 1996 1995 1996
----------- ----------- ----------- ---------- -----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
REVENUES:
Sales................................ $24,676,478 $36,897,774 $34,841,823 $2,090,708 $10,412,026
Lease revenues....................... 1,577,008 2,967,450 5,900,349 968,074 1,791,458
Net margin on sales-type leases...... 380,446 276,688 85,590 75,174 --
Fee and other income................. 979,451 676,737 1,972,439 640,630 692,468
----------- ----------- ----------- ---------- -----------
Total revenues(1).................. 27,613,383 40,818,649 42,800,201 3,774,586 12,895,952
----------- ----------- ----------- ---------- -----------
COSTS AND EXPENSES:
Cost of sales........................ 23,154,569 34,353,344 31,202,228 1,453,788 9,894,315
Direct lease costs................... 344,326 841,345 2,862,815 285,979 780,788
Professional and other fees.......... 595,028 632,369 687,276 49,069 127,785
Salaries and benefits................ 1,733,988 2,630,660 2,962,177 845,784 665,078
General and administrative
expenses........................... 994,312 759,063 1,017,934 191,472 258,549
Interest and financing costs......... 411,392 990,313 1,576,362 308,118 370,238
----------- ----------- ----------- ---------- -----------
Total costs and expenses(2)........ 27,233,615 40,207,094 40,308,792 3,134,210 12,096,753
----------- ----------- ----------- ---------- -----------
EARNINGS BEFORE PROVISION FOR INCOME
TAXES................................ 379,768 611,555 2,491,409 640,376 799,199
PROVISION FOR INCOME TAXES............. 59,235 198,000 881,000 227,000 284,000
----------- ----------- ----------- ---------- -----------
NET EARNINGS........................... $ 320,533 $ 413,555 $ 1,610,409 $ 413,376 $ 515,199
=========== =========== =========== ========== ===========
NET EARNINGS PER COMMON SHARE.......... $ 0.08 $ 0.10 $ 0.40 $ 0.10 $ 0.13
=========== =========== =========== ========== ===========
</TABLE>

- ---------------
(1) Includes amounts from related parties of $1,901,192 and $15,758,510 for the
fiscal years ended March 31, 1995 and 1996 and $5,693,653 for the quarter
ended June 30, 1996 (unaudited).

(2) Includes amounts to related parties of $281,709, $1,619,830 and $15,001,141
for the fiscal years ended March 31, 1994, 1995 and 1996, and $30,000 and
$5,698,742 for the quarters ended June 30, 1995 and 1996 (unaudited).

See notes to consolidated financial statements.

F-4
<PAGE> 63

MLC HOLDINGS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

YEARS ENDED MARCH 31, 1994, 1995, AND 1996 AND THE
QUARTER ENDED JUNE 30, 1996 (UNAUDITED)

<TABLE>
<CAPTION>
PREFERRED STOCK COMMON STOCK ADDITIONAL
---------------------- ---------------------- PAID-IN RETAINED
SHARES PER VALUE SHARES PAR VALUE CAPITAL EARNINGS TOTAL
--------- --------- --------- --------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance, April 1, 1993...... -- $ -- 4,000,000 $40,000 $9,592 $ 480,619 $ 530,211
Net earnings............ -- -- -- -- -- 320,533 320,533
--------- ------- --------- ------- ------- ---------- ----------
Balance, March 31, 1994..... -- -- 4,000,000 40,000 9,592 801,152 850,744
Net earnings............ -- -- -- -- -- 413,555 413,555
--------- ------- --------- ------- ------- ---------- ----------
Balance, March 31, 1995..... -- -- 4,000,000 40,000 9,592 1,214,707 1,264,229
Net earnings............ -- -- -- -- -- 1,610,409 1,610,409
--------- ------- --------- ------- ------- ---------- ----------
Balance, March 31, 1996..... -- -- 4,000,000 40,000 9,592 2,825,116 2,874,708
Net earnings
(unaudited).......... -- -- -- -- -- 515,199 515,199
--------- ------- --------- ------- ------- ---------- ----------
Balance, June 30, 1996
(unaudited)............... -- $ -- 4,000,000 $40,000 $9,592 $3,340,315 $3,389,907
========= ======= ========= ======= ======= ========== ==========
</TABLE>

See notes to consolidated financial statements.

F-5
<PAGE> 64

MLC HOLDINGS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
YEAR ENDED MARCH 31, QUARTER ENDED JUNE 30,
------------------------------------------- --------------------------
1994 1995 1996 1995 1996
----------- ------------ ------------ ----------- -----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings....................................... $ 320,533 $ 413,555 $ 1,610,409 $ 413,376 $ 515,199
Adjustments to reconcile net earnings to net cash
provided by (used in) operating activities:
Depreciation and amortization.................. 164,068 580,088 2,136,217 231,528 528,544
(Gain)/loss on sale of operating lease
equipment(1)................................. (108,017) (48,235) (323,422) 545 17,180
Payments from lessees directly to lenders...... (38,034) (217,375) (884,389) (101,826) (388,623)
Loss on disposal of property and equipment..... -- 974 4,489 -- --
Deferred taxes................................. (180,000) 26,000 623,000 -- 21,000
Changes in:
Accounts receivable.......................... (499,122) (1,173,898) 865,122 1,051,148 (689,646)
Notes receivable............................. (53,417) 50,150 (55,088) 34,611 (954,045)
Employee advances............................ (23,275) 18,922 (61,996) (6,819) (1,410)
Inventories.................................. 225,346 93,140 51,485 (393,967) 19,013
Refundable income taxes...................... (13,204) (35,742) -- 48,946 --
Other assets(2).............................. (135,413) (50,335) (299,866) (365,797) 38,284
Accounts payable -- equipment................ (1,015,293) 1,922,938 1,958,532 (1,589,146) (1,580,806)
Accounts payable -- trade.................... 353,153 (71,001) 209,265 567,266 (301,196)
Salaries and commissions payable............. 8,753 (12,845) (55,796) 82,340 69,181
Accrued expenses and other liabilities....... 56,454 198,766 547,093 190,611 336,510
Income taxes payable......................... (57,810) -- 55,278 131,380 212,476
----------- ------------ ------------ ----------- -----------
Net cash provided by (used in) operating
activities............................... (995,278) 1,695,102 6,380,333 294,196 (2,158,339)
----------- ------------ ------------ ----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sale of operating lease
equipment(3)..................................... 4,062,511 73,072 1,383,677 13,173 850,099
Purchase of operating lease equipment.............. (2,149,299) (2,268,792) (13,919,193) (957,744) (3,653,553)
Increase in investment in direct financing and
sales-type leases(4)............................. (5,118,266) (9,766,564) (17,169,201) (1,047,711) 27,844
Proceeds from sale of property and equipment....... -- 1,588 9,049 -- --
Purchases of property and equipment................ (114,843) (43,451) (207,150) (21,219) (6,240)
Decrease (increase) in other assets(5)............. (158,808) (164,020) (329,571) (21,526) 92,934
----------- ------------ ------------ ----------- -----------
Net cash used in investing activities...... (3,478,705) (12,168,167) (30,232,389) (2,035,027) (2,688,916)
----------- ------------ ------------ ----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings:
Nonrecourse...................................... 3,675,084 10,217,530 25,678,168 2,369,762 5,051,925
Recourse......................................... -- 184,359 67,103 -- --
Repayments:
Nonrecourse...................................... -- (348,373) (1,144,023) (131,816) (316,991)
Recourse......................................... -- (44,972) (62,688) (17,525) (16,541)
Proceeds of loans from stockholders................ -- 75,000 -- -- --
Repayments of notes payable........................ (90,000) -- -- -- --
Repayments of loans from stockholder............... -- -- (50,000) -- --
Proceeds (repayments) from lines of credit......... 1,711,000 (285,532) (532,098) (378,270) 216,962
----------- ------------ ------------ ----------- -----------
Net cash provided by financing
activities............................... 5,296,084 9,798,012 23,956,462 1,842,151 4,935,355
----------- ------------ ------------ ----------- -----------
NET INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS........................................ 822,101 (675,053) 104,606 101,320 88,100
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD....... 106,427 928,528 253,475 253,475 357,881
----------- ------------ ------------ ----------- -----------
CASH AND CASH EQUIVALENTS, END OF PERIOD............. $ 928,528 $ 253,475 $ 357,881 $ 354,795 $ 445,981
========== =========== =========== ========== ==========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Interest paid...................................... $ 77,931 $ 161,667 $ 183,220 $ 58,614 $ 46,242
========== =========== =========== ========== ==========
Income taxes paid.................................. $ 310,249 $ 219,573 $ 202,864 $ 4,466 $ 50,523
========== =========== =========== ========== ==========
</TABLE>

- ---------------
(1) Includes amounts provided by (used by) related parties of ($172,956) for the
fiscal year ended March 31, 1996 and $21,644 for the quarter ended June 30,
1996 (unaudited).

(2) Includes amounts provided by (used by) related parties of ($46,017),
$234,090, ($398,034) for the fiscal years ended March 31, 1994, 1995 and
1996 and ($133,862) and $187,540 for the quarters ended June 30, 1995 and
1996 (unaudited).

(3) Includes amounts provided by related parties of $1,073,427 for the fiscal
year ended March 31, 1996 and $717,029 for the quarter ended June 30, 1996
(unaudited).

(4) Includes amounts provided by (used by) related parties of ($235,180),
$259,857 for the fiscal years ended March 31, 1995 and 1996 and $106,102 for
the quarter ended June 30, 1996 (unaudited).

(5) Includes amounts provided by (used by) related parties of ($30,824),
($153,826) and ($270,860) for the fiscal years ended March 31, 1994, 1995
and 1996 and ($21,771) and ($35,097) for the quarters ended June 30, 1995
and 1996 (unaudited).

See notes to consolidated financial statements.

F-6
<PAGE> 65

MLC HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

YEARS ENDED MARCH 31, 1996, 1995, AND 1994 AND
THE QUARTERS ENDED JUNE 30, 1995 AND 1996 (UNAUDITED)

1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation -- Effective September 1, 1996, MLC Holdings, Inc.,
(incorporated August 27, 1996), became the holding company for MLC Group, Inc.,
and MLC Capital, Inc. (MLC Holdings, Inc. together with its subsidiaries
collectively, "MLC" or "the Company"). The accompanying consolidated financial
statements include the accounts of the wholly-owned subsidiary companies at
historical amounts as if the combination had occurred on March 31, 1993, in a
manner similar to a pooling of interests. MLC was formed on November 8, 1990,
and is a dealer of information technology equipment, and a finance and leasing
company serving federal, state, and local governments, as well as commercial
customers. The Company specializes in financing information technology,
equipment, software, and services. MLC also maintains an active presence in the
secondary market for computer hardware.

All significant intercompany balances and transactions have been
eliminated.

Revenue Recognition -- MLC sells information technology equipment to its
customers and recognizes revenue from equipment sales at the time equipment is
accepted by the customer. MLC is the lessor in a number of its transactions and
these are accounted for in accordance with Financial Accounting Standards No.
13, "Accounting for Leases." Each lease is classified as either a direct
financing lease, sales-type lease, or operating lease, as appropriate. Under the
direct financing and sales-type lease methods, MLC records the net investment in
leases, which consists of the sum of the minimum lease payments, initial direct
costs, and unguaranteed residual value (gross investment) less the unearned
income. The difference between the gross investment and the cost of the leased
equipment for direct finance leases is recorded as unearned income at the
inception of the lease. The unearned income is amortized over the life of the
lease using the interest method. Under sales-type leases the difference between
the fair value and cost of the leased property (net margins) is recorded as
revenue at the inception of the lease.

Lease revenues consist of rentals due under operating leases and
amortization of unearned income on direct financing and sales-type leases.
Equipment under operating leases is recorded at cost and depreciated on a
straight-line basis over the lease term to the Company's estimate of residual
value.

Management reviews lease receivables to determine the amount of allowance,
if any, needed to provide for on problem accounts. Management considers various
factors including age of receivable and loss experience. At such time an
allowance is considered necessary, interest income will cease to be recognized.

The Company assigns all rights, title, and interests in a number of its
leases to third party financial institutions without recourse. These assignments
are accounted for as sales since MLC has completed its obligations at the
assignment date and the Company retains no ownership interest in the equipment
under lease.

Cash and Cash Equivalents -- Cash and cash equivalents include short-term
repurchase agreements with an original maturity of three months or less.

Inventories -- Inventories are stated at the lower of cost (specific
identification basis) or market.

Property and Equipment -- Property and equipment are stated at cost, net of
accumulated depreciation and amortization. Depreciation and amortization are
computed using the straight-line method over the estimated useful lives of the
related assets, which range from three to five years.

Income Taxes -- Deferred income taxes are provided for in accordance with
Financial Accounting Standards (SFAS) No. 109, "Accounting for Income Taxes."
Under this method, deferred income tax liabilities and assets are based on the
difference between financial statement and tax bases of assets and liabilities,
using tax rates currently in effect.

F-7
<PAGE> 66

MLC HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -- (CONTINUED)

Estimates -- The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
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. Actual results could differ from those estimates.

New Accounting Pronouncements -- The Financial Accounting Standards Boards
issued SFAS No. 121, "Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to Be Disposed Of," in March 1995, and SFAS No. 125,
"Accounting for Transfers and Servicing of Financial Assets and Extinguishments
of Liabilities," in June 1996. These standards will be effective for the Company
beginning in fiscal year 1997 and are not expected to have a significant impact
on the Company's financial statements.

Interim Financial Statements (Unaudited) -- In the opinion of management,
the accompanying unaudited financial statements contain all adjustments
(consisting on of various normal accruals) necessary to present fairly the
Company's financial position, results of earnings and cash flows. The results of
earnings for the quarter ended June 30, 1996 are not necessarily indicative of
the results of earnings to be expected for the full year.

Reclassifications -- Certain items have been reclassified in the March 31,
1994 and 1995 financial statements to conform to the March 31, 1996
presentation.

2. INVESTMENT IN DIRECT FINANCING AND SALES-TYPE LEASES

The Company's investment in direct financing and sales-type leases consists
of the following components:

AS OF MARCH 31, AS OF
-------------------------- JUNE 30,
1995 1996 1996
----------- ----------- -----------
(UNAUDITED)
<S> <C> <C> <C>
Minimum lease payments........................ $13,674,866 $18,212,328 $15,972,246
Estimated unguaranteed residual value......... 154,710 347,811 317,846
Initial direct costs, net of amortization of
$217,476 and $590,058, at March 31, 1995 and
1996, and $806,268 (unaudited) at June 30,
1996........................................ 203,397 1,538,756 1,545,561
Less: Unearned lease income................... (1,909,219) (3,825,677) (3,464,064)
----------- ----------- -----------
Investment in direct financing and sales-type
leases -- net............................... $12,123,754 $16,273,218 $14,371,589
=========== =========== ===========
</TABLE>

Future scheduled minimum lease rental payments, as of March 31, 1996, are
as follows:

<TABLE>
<CAPTION>
YEAR ENDING MARCH 31,
-------------------------------------------------------------
<S> <C>
1997.................................................. $ 6,953,688
1998.................................................. 5,055,287
1999.................................................. 3,394,892
2000.................................................. 1,785,775
2001 and thereafter................................... 1,022,686
-----------
Total............................................ $18,212,328
===========
</TABLE>

F-8
<PAGE> 67

MLC HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

2. INVESTMENT IN DIRECT FINANCING AND SALES-TYPE LEASES -- (CONTINUED)

The Company's net investment in direct financing and sales-type leases is
collateral for nonrecourse and recourse equipment notes (see Note 6).

3. SALES-TYPE LEASES

The detail for the sales-type leases consists of the following:
<TABLE>
<CAPTION>
YEAR ENDED MARCH 31, QUARTER ENDED JUNE 30,
--------------------------------------- ------------------------
1994 1995 1996 1995 1996
----------- ----------- --------- --------- -----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Gross minimum lease
payments................ $ 3,550,942 $ 3,451,993 $ 559,256 $ 440,600 $ --
Estimated unguaranteed
residual value.......... -- 3,296 -- -- --
Gross cost of sales....... (2,598,056) (2,628,983) (375,287) (292,515)
Unearned lease income..... (572,440) (549,618) (98,379) (72,911) --
--
------------ ------------ ---------- ---------- --------
Net margin................ $ 380,446 $ 276,688 $ 85,590 $ 75,174 $ --
============ ============ ========== ========== ========
</TABLE>

4. INVESTMENT IN OPERATING LEASE EQUIPMENT

Investment in operating leases represents primarily equipment leased for
two to three years. The components of the net investment in operating lease
equipment, are as follows:
<TABLE>
<CAPTION>
AS OF MARCH 31, AS OF
------------------------- JUNE 30,
1995 1996 1996
---------- ----------- -----------
(UNAUDITED)
<S> <C> <C> <C>
Cost of equipment under operating
lease................................ $2,398,725 $11,411,105 $ 9,000,073
Initial direct costs................... 7,019 54,217 524,427
Accumulated depreciation and
amortization......................... (531,390) (1,245,496) (1,285,942)
---------- ----------- ------------
Investment in operating
leases -- net................... $1,874,354 $10,219,826 $ 8,238,558
========== =========== ============
</TABLE>

5. PROPERTY AND EQUIPMENT

Property and equipment consists of:

<TABLE>
<CAPTION>
AS OF MARCH 31,
---------------------
1995 1996
-------- ---------
<S> <C> <C>
Furniture and equipment................................ $182,192 $ 241,859
Capitalized software................................... 35,399 158,666
Leasehold improvements................................. 14,613 14,613
-------- ---------
232,204 415,138
Accumulated depreciation............................... (79,969) (134,670)
-------- ---------
$152,235 $ 280,468
======== =========
</TABLE>

F-9
<PAGE> 68

MLC HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

6. RECOURSE AND NONRECOURSE NOTES PAYABLE

<TABLE>
<CAPTION>
AS OF MARCH 31, AS OF
-------------------------- JUNE 30,
1995 1996 1996
----------- ----------- -----------
(UNAUDITED)
<S> <C> <C> <C>
Revolving line of credit with a maximum
balance of $250,000, bearing interest at the
prime rate (8.25% at March 31, 1996) plus
1.5% payable on demand, secured by equipment
purchases................................... $ 175,000 $ 175,000 $ --
Revolving line of credit with a maximum
balance of $2,000,000, bearing interest at
the prime rate (8.25% at March 31, 1996)
plus 1%, and personally guaranteed by an
employee/stockholder........................ 983,778 592,000 1,350,000
Revolving line of credit with a maximum
balance of $5,000,000, bearing interest at
the LIBOR rate (5.5% at March 31, 1996) plus
2.75%, secured by the Company's assets and
personal guarantees from
employees/stockholders...................... -- 360,000 --
Revolving line of credit with a maximum
balance of $3,000,000, bearing interest at
the prime rate plus 1.5%.................... 479,446 -- --
Recourse equipment notes with varying interest
rates ranging from 7.5% to 8.53%, and 8.17%
to 8.53%, respectively, secured by related
investments in leases....................... 139,387 141,373 124,831
Noncollateralized recourse note bearing
interest at 8.05%........................... 37,244 16,369 10,334
----------- ----------- -----------
$ 1,814,855 $ 1,284,742 $ 1,485,165
========== ========== ==========
Nonrecourse equipment notes with varying
interest rates ranging from 6.25% to 14.39%,
and 5.85% to 14.39%, secured by related
investments in leases....................... $10,161,758 $18,351,579 $16,563,997
========== ========== ==========
</TABLE>

Principal and interest payments on the recourse and nonrecourse notes
payable are generally due monthly in amounts that are approximately equal to the
total payments due from the lessee under the leases that collateralize the notes
payable. Under recourse financing, in the event of a default by a lessee, the
lender has recourse against the lessee, the equipment servicing as collateral,
and the borrower. Under nonrecourse financing, in the event of a default by a
lessee, the lender generally only has recourse against the lessee, and the
equipment serving as collateral, but not against the borrower.

Borrowings under the $2,000,000 and $5,000,000 lines of credit above
contain covenants regarding maximum recourse debt to worth ratio, minimum
consolidated tangible net worth, fixed charge coverage ratio and prohibit the
payment of dividends.

Unaudited -- The lender of the $175,000 payable shown above was in
receivership by the Federal Deposit Insurance Corporation ("FDIC"). The FDIC
sold the note to a third party and during the quarter ended June 30, 1996, the
Company negotiated to settle the amount due of $175,000 plus accrued interest of
$69,000 for $169,000. The gain of $75,000 is included in fee and other income in
the accompanying consolidated statement of earnings for the quarter ended June
30, 1996.

F-10
<PAGE> 69

MLC HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

6. RECOURSE AND NONRECOURSE NOTES PAYABLE -- (CONTINUED)

Recourse and nonrecourse notes payable, as of March 31, 1996, mature as
follows:

<TABLE>
<CAPTION>
NONRECOURSE RECOURSE
NOTES PAYABLE NOTES PAYABLE
------------- -------------
<S> <C> <C>
1997............................................... $ 7,024,397 $ 1,209,704
1998............................................... 5,900,895 33,889
1999............................................... 3,594,811 14,983
2000............................................... 1,296,557 16,160
2001............................................... 534,919 10,006
----------- ----------
$ 18,351,579 $ 1,284,742
=========== ==========
</TABLE>

7. RELATED PARTY TRANSACTIONS

Loans From Stockholders/Officers:

<TABLE>
<CAPTION>
AS OF MARCH 31,
--------------------
1995 1996
-------- --------
<S> <C> <C>
Note payable to stockholder bearing interest at 10%,
maturing March 1, 1998................................ $175,000 $175,000
Note payable to stockholder bearing interest at 10%,
maturing March 1, 1998................................ $150,000 $100,000
-------- --------
$325,000 $275,000
======== ========
</TABLE>

Other:

MLC provided advances to employees/stockholders aggregating a total of
$49,275, $61,583, and $139,500, for the years ended March 31, 1994, 1995,
and 1996, respectively. Such balances are to be repaid, plus interest, from
commissions earned by the employees/stockholders on successful sales or
financing arrangements obtained on behalf of the Company. Repayments on
these advances have been made as follows:

- Advances of $26,000, $80,505, and $82,612 were repaid for the
years ended March 31, 1994, 1995, and 1996, respectively. No interest
was charged on these advances.

- During the year ended March 31, 1996, an employee/stockholder
repaid the entire amount due the Company under a promissory note with a
maximum amount of $40,000 (loaned in 1994) bearing interest at a rate of
8%. In addition, the Company loaned a stockholder $54,000 pursuant to a
promissory note bearing interest at a rate of 8%. Under the terms of the
note interest and principal of $1,608 and $8,392, respectively, were
paid to the Company during the year ended March 31, 1996.

During the years ended March 31, 1995 and 1996, MLC sold leased
equipment to a company in which an employee/stockholder has a 45% ownership
interest. Revenue recognized from the sale was $1,855,010 and $1,300,448
respectively, and the basis of the equipment sold was $1,619,830 and
$1,271,729 respectively. At March 31, 1996, accrued expenses and other
liabilities include $26,575 due to the related company, notes receivable
include $17,511 due from the company and other assets include $73,421 which
represents MLC's investment in lease deals with the company.

During the year ended March 31, 1996, MLC paid a stockholder $120,000
in exchange for the pledge of personal assets made to secure one of the
Company's revolving line-of-credit agreements.

F-11
<PAGE> 70

MLC HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

7. RELATED PARTY TRANSACTIONS -- (CONTINUED)

During the year ended March 31, 1994, the Company sold its 49%
interest in MLC Federal. Subsequent to the sale, accounts receivable of
$281,709 from MLC Federal were determined to be uncollectible. The related
bad debt expense is included in general and administrative expenses in the
accompanying statement of earnings for the year ended March 31, 1994.

During the year ended March 31, 1996, the Company sold leased
equipment to MLC/GATX Limited Partnership I (the "Partnership"), which
amounted to 31% of the Company's revenues. The Company has a 9.5% limited
partnership interest in the Partnership and owns a 50% interest in the
corporation that owns a 1% general partnership interest in the Partnership.
Revenue recognized from the sales was $13,079,433, and the basis of the
equipment sold was $12,273,527. Other assets include $188,073 due to and
$209,961 due from the Partnership for the years ended March 31, 1995 and
1996, respectively. The Company's investment balance in the Partnership,
accounted for using the cost method, included in other assets is $197,572
and $380,757 at March 31, 1995 and 1996, respectively. In addition, the
Company received $2,711, $46,182, and $122,111 for the years ended March
31, 1994, 1995, and 1996, respectively, for accounting and administrative
services provided to the Partnership.

During the year ended March 31, 1996, the Company sold leased
equipment to MLC/CLC LLC, in which the Company has a 5% ownership interest.
Revenue recognized from the sales was $1,256,518, and the basis of the
equipment sold was $1,335,885. Other assets includes an investment of
$14,254 accounted for using the cost method.

8. COMMITMENTS AND CONTINGENCIES

MLC leases office space and a telephone system for the conduct of its
business. As of March 31, 1996, the future minimum lease payments are due as
follows:

<TABLE>
<CAPTION>
YEAR ENDING MARCH 31,
------------------------------------------------------------------
<S> <C>
1997....................................................... $ 99,065
1998....................................................... 89,454
1999....................................................... 45,056
--------
$233,575
========
</TABLE>

As of March 31, 1996, the Company has guaranteed $172,565 of the residual
value for equipment owned by another entity.

F-12
<PAGE> 71

MLC HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

9. INCOME TAXES

A reconciliation of income tax computed at the statutory Federal rate to
the provision for income tax included in the consolidated statements of earnings
is as follows:
<TABLE>
<CAPTION>
YEAR ENDED MARCH 31,
-------------------------------- QUARTER ENDED
1994 1995 1996 JUNE 30, 1996
-------- -------- -------- -------------
(UNAUDITED)
<S> <C> <C> <C> <C>
Statutory Federal income tax rate........ 34% 34% 34% 34%
========= ======== ======== ========
Income tax expense computed at the
statutory Federal rate................. $129,121 $207,929 $847,079 $ 272,000
State income tax expense, net of Federal
tax expense............................ 3,797 6,115 24,643 32,000
Nontaxable interest income............... (73,683) (95,000) (79,342) (30,000)
Nondeductible expenses................... -- 78,956 88,620 10,000
--------- -------- -------- --------
Provision for income taxes............... $ 59,235 $198,000 $881,000 $ 284,000
========= ======== ======== ========
Effective tax rate....................... 15.6% 32.4% 35.4% 35.5%
========= ======== ======== ========
</TABLE>

The components of the provision for income taxes are as follows:
<TABLE>
<CAPTION>
YEAR ENDED MARCH 31,
--------------------------------- QUARTER ENDED
1994 1995 1996 JUNE 30, 1996
--------- -------- -------- -------------
(UNAUDITED)
<S> <C> <C> <C> <C>
Current:
Federal.................... $ 198,766 $154,000 $231,000 $ 201,000
State...................... 40,469 18,000 27,000 62,000
--------- -------- -------- -------------
239,235 172,000 258,000 263,000
--------- -------- -------- -------------
Deferred:
Federal.................... (170,000) 17,000 557,000 15,000
State...................... (10,000) 9,000 66,000 6,000
--------- -------- -------- -------------
(180,000) 26,000 623,000 21,000
--------- -------- -------- -------------
$ 59,235 $198,000 $881,000 $ 284,000
========= ======== ======== ==========
</TABLE>

The components of the deferred tax expense (benefit) resulting from net
temporary differences are as follows:

<TABLE>
<CAPTION>
YEAR ENDED MARCH 31,
-----------------------------------
1994 1995 1996
--------- --------- ---------
<S> <C> <C> <C>
Alternative minimum tax.................... $(229,000) $(158,000) $(200,000)
Lease revenue recognition.................. 49,000 184,000 823,000
---------- ------- --------
Total................................. $(180,000) $ 26,000 $ 623,000
========== ======= ========
</TABLE>

F-13
<PAGE> 72

MLC HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

9. INCOME TAXES -- (CONTINUED)

Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes. The tax effects of items
comprising the Company's deferred taxes consist of the following:

<TABLE>
<CAPTION>
YEAR ENDED MARCH 31,
------------------------------------
1994 1995 1996
-------- --------- -----------
<S> <C> <C> <C>
Alternative minimum tax................... $230,000 $ 388,000 $ 619,000
Lease revenue recognition................. (50,000) (234,000) (1,088,000)
-------- --------- -----------
Net deferred asset (liability)............ $180,000 $ 154,000 $ (469,000)
======== ========= ===========
</TABLE>

10. NONCASH INVESTING AND FINANCING ACTIVITIES

The Company recognized a reduction in recourse and nonrecourse notes
payable (Note 6) associated with its deferred finance and operating lease
activities from payments made directly by customers to the third-party lenders
amounting to $1,608,023, $6,150,983, and $4,796,306 for the years ended March
31, 1994, 1995, and 1996, respectively. In addition, the Company realized a
reduction in recourse and nonrecourse notes payable from the sale of the
associated assets and liabilities amounting to $819,518, $1,855,010, and
$11,550,446, for the years ended March 31, 1994, 1995, and 1996, respectively.

On January 1, 1994, the assets and liabilities of Pilot Associates, Inc.
(another leasing company) were acquired. The purchase price was $40,000 plus the
assumption of certain leases and related debt which resulted in an increase in
net investment in direct financing and sales type leases, and in nonrecourse
debt of approximately $4.8 million The acquisition was recorded using the
purchase method of accounting and the results of operations related to this
acquisition are included in the accompanying financial statements beginning
January 1, 1994. Proforma information as if the purchase had taken place April
1, 1993, has not been presented because the impact on operations would not have
been significant.

11. PROFIT SHARING PLAN

The Company provides its employees with a contributory 401(k) profit
sharing plan which was adopted during the year ended March 31, 1995. All
employees age 21 and older become eligible to participate in the plan as of the
first day of the month after which a minimum of 20 hours of service per week,
during a consecutive six-month period has been completed. Full vesting occurs
after the fourth consecutive year of plan participation. Employer contribution
percentages are to be determined by the Company and are discretionary each year.

The Company's expense for the plan was $3,925, and $46,307, for the years
ended March 31, 1995 and 1996, respectively.

12. FAIR VALUE OF FINANCIAL INSTRUMENTS

The following disclosure of the estimated fair value of the Company's
financial instruments is in accordance with the provisions of SFAS No. 107,
Disclosures About Fair Value of Financial Instruments. The valuation methods
used by the Company are set forth below.

F-14
<PAGE> 73

MLC HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

12. FAIR VALUE OF FINANCIAL INSTRUMENTS -- (CONTINUED)

The accuracy and usefulness of the fair value information disclosed herein
is limited by the following factors:

- These estimates are subjective in nature and involved uncertainties
and matters of significant judgment and therefore cannot be determined with
precision. Changes in assumptions could significantly affect the estimates.

- These estimates do not reflect any premium or discount that could
result from offering for sale at one time the Company's entire holding of a
particular financial asset.

- SFAS No. 107 excludes from its disclosure requirements lease
contracts and various significant assets and liabilities that are not
considered to be financial instruments.

Because of these and other limitations, the aggregate fair value amounts
presented in the following table do not represent the underlying value of the
Company.

The carrying amounts and estimated fair values of the Company's financial
instruments are as follows:

<TABLE>
<CAPTION>
AS OF MARCH 31, 1996 AS OF JUNE 30, 1996
-------------------------- --------------------------
CARRYING FAIR CARRYING FAIR
AMOUNT VALUE AMOUNT VALUE
----------- ----------- ----------- -----------
(UNAUDITED)
<S> <C> <C> <C> <C>
ASSETS:
Cash......................... $ 357,881 $ 357,881 $ 445,981 $ 445,981
LIABILITIES:
Nonrecourse notes payable.... $18,351,579 $18,406,230 $16,563,997 $16,592,093
Recourse notes payable....... 1,284,742 1,286,120 $ 1,485,165 $ 1,485,803
</TABLE>

The following methods and assumptions were used by the Company in computing
the estimated fair value in the above table:

Cash -- The carrying amounts of these financial instruments
approximated their fair value.

Recourse and Nonrecourse Notes Payable -- The fair value of recourse
and nonrecourse debt is based on the borrowing rates currently available to
the Company for debt with similar terms and average maturities.

13. SUBSEQUENT EVENT

During July 1996, the Company entered into a Credit Agreement with
NationsBanc Leasing Corporation, (NationsBanc) an affiliate of NationsBank, N.A.
Under the terms of the Agreement, NationsBanc may lend up to $2,000,000 in
various notes of terms of up to sixty months. The facility, but not transactions
financed thereunder, expires January 31, 1997. Borrowings under the facility
bear interest on a fixed or floating basis at the Company's option.

* * * * * *

F-15
<PAGE> 74

- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------

NO PERSON HAS BEEN AUTHORIZED IN CONNECTION WITH THE OFFERING MADE HEREBY
TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATION NOT CONTAINED IN THIS
PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE
RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY OR ANY UNDERWRITER. THIS
PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION TO BUY ANY OF
THE SECURITIES OFFERED HEREBY TO ANY PERSON OR BY ANYONE IN ANY JURISDICTION IN
WHICH IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION. NEITHER THE DELIVERY OF
THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES,
CREATE ANY IMPLICATION THAT THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF
ANY DATE SUBSEQUENT TO THE DATE HEREOF.

---------------------------
TABLE OF CONTENTS
---------------------------

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Available Information................. 2
Prospectus Summary.................... 3
Risk Factors.......................... 9
The Company........................... 19
Use of Proceeds....................... 19
Dividend Policy....................... 20
Capitalization........................ 21
Dilution.............................. 22
Selected Consolidated Financial
Data................................ 23
Management's Discussion and Analysis
of Results of Operations and
Financial Condition................. 25
Business.............................. 31
Management............................ 40
Certain Transactions.................. 47
Principal Stockholders................ 50
Description of Capital Stock.......... 52
Underwriting.......................... 56
Legal Matters......................... 57
Experts............................... 57
Index to Consolidated Financial
Statements.......................... F-1

UNTIL , 1996 (25 DAYS
AFTER THE DATE OF THE PROSPECTUS) ALL
DEALERS EFFECTING TRANSACTIONS IN THE COMMON
STOCK, WHETHER OR NOT PARTICIPATING IN THIS
DISTRIBUTION, MAY BE REQUIRED TO DELIVER A
PROSPECTUS. THIS IS IN ADDITION TO THE
OBLIGATION OF DEALERS TO DELIVER A
PROSPECTUS WHEN ACTING AS UNDERWRITERS AND
WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR
SUBSCRIPTION.
</TABLE>

[MLC LOGO]
1,000,000 SHARES

MLC HOLDINGS, INC.

COMMON STOCK
--------------------

PROSPECTUS
--------------------

FRIEDMAN, BILLINGS,
RAMSEY & CO., INC.
, 1996

- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE> 75

PART II

INFORMATION NOT REQUIRED IN PROSPECTUS

ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION

The following sets forth the various expenses expected to be incurred by
the Registrant in connection with the sale and distribution of the securities
being registered hereby other than underwriting discounts and commissions. All
amounts are estimated except the Securities and Exchange Commission registration
fee and the NASD filing fee.

<TABLE>
<S> <C>
SEC registration fee.............................................. $ 3,569
NASD filing fee................................................... $ 1,535
Nasdaq listing fee................................................ $ 30,000
Transfer Agent fees and expenses.................................. $ 2,500
Printing and engraving expenses................................... $100,000
Legal fees and expenses........................................... $250,000
Blue Sky fees and expenses........................................ $ 15,000
Accounting fees and expenses...................................... $125,000
Directors and Officers insurance premiums......................... $100,000
Miscellaneous..................................................... $ 50,000
--------
Total................................................... $677,604
========
</TABLE>

ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS

Article Ninth of the Certificate of Incorporation of the Registrant
provides:

"No person shall be personally liable to the Corporation or its
stockholders for monetary damages for breach of fiduciary duty as a
director; provided, however, that the foregoing shall not eliminate or
limit the liability of a director (i) for any breach of the director's duty
of loyalty to the Corporation or its stockholders, (ii) for acts or
omissions not in good faith or which involve intentional misconduct or a
knowing violation of law, (iii) under Section 174 of the Delaware General
Corporation Law, or (iv) for any transaction from which the director
derived an improper personal benefit."

Article Tenth of the Certificate of Incorporation of the Registrant
provides:

"The Corporation shall indemnify, in the manner and to the fullest
extent permitted by the Delaware General Corporation Law (and in the case
of any amendment thereto, to the extent that such amendment permits the
Corporation to provide broader indemnification rights than permitted prior
thereto), any person (or the estate of any person) who is or was a party
to, or is threatened to be made a party to, any threatened, pending or
completed action, suit or proceeding, whether or not by or in the right of
the Corporation, and whether civil, criminal, administrative, investigative
or otherwise, by reason of the fact that such person is or was a director
or officer of the Corporation, or is or was serving at the request of the
Corporation as a director or officer of another corporation, partnership,
joint venture, trust or other enterprise including service with respect to
an employee benefit plan. The Corporation may, to the fullest extent
permitted by the Delaware General Corporation Law, purchase and maintain
insurance on behalf of any such person against any liability which may be
asserted against such person. To the fullest extent permitted by the
Delaware General Corporation Law, the indemnification provided herein may
include expenses (including attorneys' fees), judgments, fines and amounts
paid in settlement and any such expenses may be paid by the Corporation in
advance of the final disposition of such action, suit or proceeding upon
receipt of an undertaking by or on behalf of the person seeking
indemnification to repay such amounts if it is ultimately determined that
he or she is not entitled to be indemnified. The indemnification provided
herein shall not be deemed to limit the right of the Corporation to
indemnify any other person for any such expenses to the fullest extent
permitted by the Delaware General Corporation Law, nor shall it be deemed
exclusive of any other rights to which any person seeking

II-1
<PAGE> 76

indemnification from the Corporation may be entitled under any agreement,
the Corporation's Bylaws, vote of stockholders or disinterested directors,
or otherwise, both as to action in such person's official capacity and as
to action in another capacity while holding such office. The Corporation
may, but only to the extent that the Board of Directors may (but shall not
be obligated to) authorize from time to time, grant rights to
indemnification and to the advancement of expenses to any employee or agent
of the Corporation to the fullest extent of the provisions of this Article
Tenth as they apply to the indemnification and advancement of expenses of
directors and officers of the Corporation."

Section 145 of the Delaware General Corporation Law empowers the Registrant
to indemnify its officers and directors under certain circumstances. The
pertinent provisions of that statute read as follows:

"(a) A corporation may indemnify any person who was or is a party or
is threatened to be made a party to any threatened, pending or completed
action, suit or proceeding, whether civil, criminal, administrative or
investigative (other than an action by or in the right of the corporation)
by reason of the fact that he is or was a director, officer, employee or
agent of the corporation, or is or was serving at the request of another
corporation, partnership, joint venture, trust or other enterprise, against
expenses (including attorneys' fees), judgments, fines and amounts paid in
settlement actually and reasonably incurred by him in connection with such
action, suit or proceeding if he acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interests of the
corporation, and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his conduct was unlawful. The termination of
any action, suit or proceeding by judgment, order, settlement, conviction,
or upon a plea of nolo contendere or its equivalent, shall not, of itself,
create a presumption that the person did not act in good faith and in a
manner which he reasonably believed to be in or not opposed to the best
interests of the corporation, and, with respect to any criminal action or
proceeding, had reasonable cause to believe that his conduct was unlawful.

(b) A corporation may indemnify any person who was or is a party or is
threatened to be a party to any threatened, pending or completed action or
suit by or in the right of the corporation to procure a judgment in its
favor by reason of the fact that he is or was a director, officer, employee
or agent of the corporation, or is or was serving at the request of the
corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise against
expenses (including attorneys' fees) actually and reasonably incurred by
him in connection with the defense or settlement of such action or suit if
he acted in good faith and in a manner he reasonably believed to be in or
not opposed to the best interests of the corporation and except that no
indemnification shall be made in respect of any claim, issue or matter as
to which such person shall have been adjudged to be liable to the
corporation unless and only to the extent that the Court of Chancery or the
court in which such action or suit was brought shall determine upon
application that, despite the adjudication of liability but in view of all
the circumstances of the case, such person is fairly and reasonably
entitled to indemnity for such expenses which the Court of Chancery or such
other court shall deem proper.

(c) To the extent that a director, officer, employee or agent of a
corporation has been successful on the merits or otherwise in defense of
any action, suit or proceeding referred to in subsections (a) and (b) of
this section, or in defense of any claim, issue or matter therein, he shall
be indemnified against expenses (including attorneys' fees) actually and
reasonably incurred by him in connection therewith.

(d) Any indemnification under subsections (a) and (b) of this section
(unless ordered by a court) shall be made by the corporation only as
authorized in the specific case upon a determination that indemnification
of the director, officer, employee or agent is proper in the circumstances
because he has met the applicable standard of conduct set forth in
subsections (a) and (b) of this section. Such determination shall be made
(1) by a majority vote of the directors who are not parties to such action,
suit or proceeding, even though less than a quorum, or (2) if there are no
such directors, or if such directors so direct, by independent legal
counsel in a written opinion, or (3) by the stockholders.

(e) Expenses (including attorneys' fees) incurred by an officer or
director in defending any civil, criminal, administrative or investigative
action, suit or proceeding may be paid by the corporation in advance of the
final deposition of such action, suit or proceeding upon receipt of an
undertaking by or on

II-2
<PAGE> 77

behalf of such director or officer to repay such amount if it shall
ultimately be determined that he is not entitled to be indemnified by the
corporation as authorized in this section. Such expenses (including
attorneys' fees) incurred by other employees and agents may be so paid upon
such terms and conditions, if any, as the board of directors deems
appropriate.

(f) The indemnification and advancement of expenses provided by, or
granted pursuant to, the other subsections of this section shall not be
deemed exclusive of any other rights to which those seeking indemnification
or advancement of expenses may be entitled under any bylaw, agreement, vote
of stockholders or disinterested directors or otherwise, both as to action
in his official capacity and as to action in another capacity while holding
such office.

(g) A corporation shall have power to purchase and maintain insurance
on behalf of any person who is or was a director, officer, employee or
agent of the corporation, or is or was serving at the request of the
corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise against
any liability asserted against him and incurred by him in any such
capacity, or arising out of his status as such, whether or not the
corporation would have the power to indemnify him against such liability
under this section.

(h) For purposes of this section, references to "the corporation"
shall include, in addition to the resulting corporation, any constituent
corporation (including any constituent of a constituent) absorbed in a
consolidation or merger which, if its separate existence had continued,
would have had power and authority to indemnify its directors, officers,
and employees or agents, so that any person who is or was a director,
officer, employer or agent of such constituent corporation, or is or was
serving at the request of such constituent corporation as a director,
officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, shall stand in the same position under
this section with respect to the resulting or surviving corporation as he
would have with respect to such constituent corporation if its separate
existence had continued.

(i) For purposes of this section, references to "other enterprises"
shall include employee benefit plans; references to "fines" shall include
any excise taxes assessed on a person with respect to any employee benefit
plan; and references to "serving at the request of the corporation" shall
include any service as a director, officer, employee or agent of the
corporation which imposes duties on, or involves services by, such
director, officer, employee or agent with respect to an employee benefit
plan, its participants or beneficiaries; and a person who acted in good
faith and in a manner he reasonably believed to be in the interest of the
participants and beneficiaries of an employee benefit plan shall be deemed
to have acted in a manner "not opposed to the best interests of the
corporation" as referred to in this section.

(j) The indemnification and advancement of expenses provided by, or
granted pursuant to, this section shall, unless otherwise provided when
authorized or ratified, continue as a person who has ceased to be a
director, officer, employee or agent and shall inure to the benefit of the
heirs, executors and administrators of such a person.

(k) The Court of Chancery is hereby vested with exclusive jurisdiction
to hear and determine all actions for advancement of expenses or
indemnification brought under this section or under any bylaw, agreement,
vote of stockholders or disinterested directors, or otherwise. The Court of
Chancery may summarily determine a corporation's obligation to advance
expenses (including attorneys' fees)."

The Registrant has purchased a directors' and officers' liability insurance
contract which provides, within stated limits, reimbursement either to a
director or officer whose actions in his capacity result in liability, or to the
Registrant, in the event it has indemnified the director or officer.

Insofar as indemnification for liabilities arising under the Act may be
permitted to directors, officers and controlling persons of the Registrant
pursuant to the provisions referenced in Item 12 of this Registration Statement
or otherwise, the Registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public policy
as expressed in the Act, and is, therefore, unenforceable. In the event that a
claim for indemnification against such liabilities (other than the payment by
the Registrant of expenses incurred or paid by director, officer, or controlling
person of the Registrant in the

II-3
<PAGE> 78

successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered hereunder, the Registrant will, unless in the opinion of its counsel
the matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Act and will be governed by the final
adjudication of such issue.

ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES

The Registrant did not sell any securities which were not registered under
the Securities Act during the three year period ended June 30, 1996.

ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

a. Exhibits:

<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------ ----------------------------------------------------------------------------------
<C> <S>
*1.1 Form of Underwriting Agreement
*3.1 Certificate of Incorporation of Registrant, as currently in effect
*3.2 Bylaws of Registrant
*4.1 Specimen Certificate of Common Stock of the Company
*5.1 Opinion of Hazel & Thomas, P.C. regarding legality
*10.1 1996 Stock Incentive Plan
*10.2 1996 Outside Director Stock Option Plan
*10.3 1996 Nonqualified Stock Option Plan
*10.4 1996 Incentive Stock Option Plan
*10.5 Form of Indemnification Agreement entered into between Registrant and its
directors and officers
*10.6 Lease dated July 14, 1993 for principal executive office located in Reston,
Virginia, together with amendment thereto dated March 18, 1996
*10.7 Form of Employment Agreement between the Registrant and Phillip G. Norton
*10.8 Form of Employment Agreement between the Registrant and Bruce M. Bowen
*10.9 Form of Employment Agreement between the Registrant and William J. Slaton
*10.10 Form of Employment Agreement between the Registrant and Kleyton L. Parkhurst
*10.11 Form of Irrevocable Proxy and Stock Rights Agreement
*10.12 Commitment and Loan Agreement by and between the Company and NationsBank, N.A.
*10.13 Credit Agreement by and between the Company and First Union Bank of Virginia
*10.14 First Amended and Restated Business Loan and Security Agreement by and between the
Company and NationsBanc Leasing Corporation
*10.15 Loan Modification and Extension Agreement
*21.1 Subsidiaries of the Company
23.1 Consent of Deloitte & Touche LLP, independent auditors
*23.2 Consent of Hazel & Thomas, P.C. (included in Exhibit 5.1)
*24.1 Power of Attorney (see Page II-5)
*27.1 Financial Data Schedule
*99.1 Consent of Jonathan J. Ledecky (future director)
*99.2 Consent of Terrence O'Donnell (future director)
*99.3 Consent of Carl J. Rickersten (future director)
</TABLE>

- ---------------

* Previously filed.

II-4
<PAGE> 79

b. Financial Statement Schedules.

All financial statement schedules are omitted because the information is
not required, is not material or is otherwise included in the Consolidated
Financial Statements and Notes thereto of the Company.

ITEM 17. UNDERTAKINGS

Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the registrant of expenses incurred
or paid by a director, officer or controlling person of the registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.

The undersigned registrant hereby undertakes that:

(1) For purposes of determining any liability under the Act, the
information omitted from the form of prospectus filed as part of this
Registration Statement in reliance upon Rule 430A and contained in a form of
prospectus filed by the Registrant pursuant to Rule 424(b)(1) or (4) or 497(h)
under the Act shall be deemed to be part of this Registration Statement as of
the time it was declared effective.

(2) For the purpose of determining any liability under the Act, each
post-effective amendment that contains a form of prospectus shall be deemed to
be a new registration statement relating to the securities offered therein, and
the offering of such securities at that time shall be deemed to be the initial
bona fide offering thereof.

The undersigned Registrant hereby undertakes to provide to the Underwriters
at the Closing, as specified in the Underwriting Agreement, certificates in such
denomination and registered in such names as required by the Underwriters to
permit prompt delivery to each purchaser.

II-5
<PAGE> 80

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Amendment Number 2 to the Registration Statement to be
signed on its behalf by the undersigned, thereunder authorized, in the County of
Fairfax, Commonwealth of Virginia, on this 8th day of November, 1996.

MLC HOLDINGS, INC.

By: /s/ PHILLIP G. NORTON*
------------------------------------
Phillip G. Norton, Chairman

Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities and on the dates indicated.

<TABLE>
<CAPTION>
SIGNATURE CAPACITY DATE
- ------------------------------------------ ------------------------------ -----------------
<S> <C> <C>
/s/ PHILLIP G. NORTON* Chairman of the Board, Chief November 8, 1996
- ------------------------------------------ Executive Officer and
Phillip G. Norton President
(Principal Executive Officer)

/s/ BRUCE M. BOWEN Director, Chief Financial November 8, 1996
- ------------------------------------------ Officer and Executive Vice
Bruce M. Bowen President
(Principal Financial Officer)

/s/ BARBARA J. SIMMONDS* Controller November 8, 1996
- ------------------------------------------ (Vice President and Principal
Barbara J. Simmonds Accounting Officer)
</TABLE>

* Bruce M. Bowen, by signing his name hereto, does sign this document on behalf
of the persons indicated above for whom he is attorney-in-fact pursuant to a
power of attorney duly executed by such person and filed with the Securities and
Exchange Commission.

By: /s/ BRUCE M. BOWEN
------------------------------------
Bruce M. Bowen, Attorney-in-Fact

II-6
<PAGE> 81

EXHIBIT INDEX

<TABLE>
<CAPTION>
SEQUENTIAL
EXHIBIT PAGE
NUMBER DESCRIPTION NUMBER
- ------ ------------------------------------------------------------------------- ----------

<C> <S>
*1.1 Form of Underwriting Agreement...........................................
*3.1 Certificate of Incorporation of Registrant, as currently in effect.......
*3.2 Bylaws of Registrant.....................................................
*4.1 Specimen Certificate of Common Stock of the Company......................
*5.1 Opinion of Hazel & Thomas, P.C. regarding legality.......................
*10.1 1996 Stock Incentive Plan................................................
*10.2 1996 Outside Director Stock Option Plan..................................
*10.3 1996 Nonqualified Stock Option Plan......................................
*10.4 1996 Incentive Stock Option Plan.........................................
*10.5 Form of Indemnification Agreement entered into between Registrant and its
directors and officers.................................................
*10.6 Lease dated July 14, 1993 for principal executive office located in
Reston, Virginia, together with amendment thereto dated March 18,
1996...................................................................
*10.7 Form of Employment Agreement between the Registrant and Phillip G.
Norton.................................................................
*10.8 Form of Employment Agreement between the Registrant and Bruce M. Bowen...
*10.9 Form of Employment Agreement between the Registrant and William J.
Slaton.................................................................
*10.10 Form of Employment Agreement between the Registrant and Kleyton L.
Parkhurst..............................................................
*10.11 Form of Irrevocable Proxy and Stock Rights Agreement.....................
*10.12 Commitment and Loan Agreement by and between the Company and NationsBank,
N.A. ..................................................................
*10.13 Credit Agreement by and between the Company and First Union Bank of
Virginia...............................................................
*10.14 First Amended and Restated Business Loan and Security Agreement by and
between the Company and NationsBanc Leasing Corporation................
*10.15 Loan Modification and Extension Agreement................................
*21.1 Subsidiaries of the Company..............................................
23.1 Consent of Deloitte & Touche LLP, independent auditors...................
*23.2 Consent of Hazel & Thomas, P.C. (included in Exhibit 5.1)................
*24.1 Power of Attorney (see Page II-5)........................................
*27.1 Financial Data Schedule..................................................
*99.1 Consent of Jonathan J. Ledecky (future director).........................
*99.2 Consent of Terrence O'Donnell (future director)..........................
*99.3 Consent of Carl J. Rickersten (future director)..........................
</TABLE>

- ---------------

* Previously filed.

<PAGE> 1

EXHIBIT 23.1

INDEPENDENT AUDITORS' CONSENT

We consent to the use in this Pre-Effective Amendment Number 3 to Registration
Statement No. 333-11737 of MLC Holdings, Inc. of our report dated September 1,
1996, appearing in the Prospectus, which is part of such Registration
Statement, and to the reference to us under the heading "Experts" in such
Prospectus.

/s/
Deloitte & Touche LLP
Washington, D.C.
November 8, 1996