MLC HOLDINGS INC, POS AM, 1998-09-04

MLC HOLDINGS INC
POS AM, 1998-09-04
FINANCE LESSORS

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Filed with the Securities and Exchange Commission on September 4, 1998

Registration No. 333-44335
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

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

POST-EFFECTIVE AMENDMENT NO. 1 TO

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

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

<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>

11150 SUNSET HILLS ROAD, SUITE 110
RESTON, VIRGINIA 22090
(703) 834-5710

(Address, including zip code, and telephone number, including area code,
of Registrant's principal executive offices)

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

STEVEN J. MENCARINI
Chief Financial Officer
MLC HOLDINGS, INC.
11150 Sunset Hills Road, Suite 110
Reston, Virginia 22090
(703) 834-5710

(Name, address, including zip code, and telephone number,
including area code, of agent for service)

COPIES TO:

FRANK M. CONNER III
JONATHAN H. TALCOTT

ALSTON & BIRD LLP

601 Pennsylvania Avenue, N.W.
North Building, 11th Floor
Washington, D.C. 20004
(202) 756-3300

--------------------------
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. [X]

If this Form is filed to register additional securities for an
offering pursuant to Rule 462(b) under the Securities Act of 1933, 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 of 1933, 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(d) 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 THIS REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
================================================================================
<PAGE> 2

Information contained herein is subject to completion or amendment. A
registration statement and post-effective amendment thereto relating to these
securities have been filed with the Securities and Exchange Commission. These
securities may not be sold nor may offers to buy be accepted in the public
offering described in this prospectus prior to the time the post-effective
amendment 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 September 4, 1998

P R O S P E C T U S

2,964,305 shares

MLC HOLDINGS, INC.

Common Stock
------------------

This Prospectus relates to 2,000,000 shares (the "Acquisition Shares")
of common stock, $.01 par value (the "Common Stock"), which may be offered and
issued by MLC Holdings, Inc., a Delaware corporation (the "Company") from time
to time in connection with the merger with or acquisition by the Company of
other businesses or assets and which may be reserved for issuance pursuant to,
or offered, and issued upon exercise or conversions of, warrants, options,
convertible notes or similar instruments issued by the Company from time to
time in connection with any such merger or acquisition. It is expected that
the terms of acquisitions involving the issuance of securities covered by this
Prospectus will be determined by direct negotiations with the owners or
controlling persons of the businesses or assets to be merged with or acquired
by the Company, and that the shares of Common Stock issued will be valued at
prices reasonably related to market prices current either at the time of a
merger or acquisition are agreed upon or at or about the time of delivery of
shares. It is not expected that underwriting discounts or commissions will
be paid by the Company in connection with issuances of Common Stock under this
Prospectus, although finder's fees or broker's commissions may be paid from
time to time with respect to specific mergers or acquisitions through the
issuance of Common Stock covered by this Prospectus. Any person receiving any
such fees may be deemed to be an underwriter within the meaning of the
Securities Act of 1933, as amended (the "Securities Act").

This Prospectus also relates to 964,305 shares of issued and
outstanding Common Stock (the "Selling Stockholder Shares," the Acquisition
Shares and the Selling Stockholder Shares may sometimes hereinafter be
collectively referred to as the "Securities.") The Selling Stockholder Shares
will be offered and sold from time to time by the Selling Stockholders and the
Company will receive none of the proceeds of any such sales. Holders of the
Selling Stockholder Shares are referred to herein as the "Selling Stockholder."
All expenses of this offering will be paid by the Company. See "Use of
Proceeds" and "Selling Stockholders."

On August 24, 1998 the closing sale price of the Common Stock on the
Nasdaq National Market was $12.75 per share.

(Continued on next page)

SEE "RISK FACTORS" BEGINNING ON PAGE 9, FOR A DISCUSSION OF CERTAIN
FACTORS THAT SHOULD BE CONSIDERED BY PROSPECTIVE INVESTORS IN THE SECURITIES.

<PAGE> 3
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS
THE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.

THE DATE OF THIS PROSPECTUS IS __________, 1998.

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<PAGE> 4
So long as the Registration Statement of which this Prospectus forms a
part is effective and the disclosure set forth herein is current, the Selling
Stockholders may sell the Selling Stockholder Shares publicly. The Selling
Stockholder Shares offered by this Prospectus may be sold from time to time by
the Selling Stockholders. The distribution of the Selling Stockholder Shares
by the Selling Stockholders may be effected in one or more transactions that
may take place on the Nasdaq National Market including ordinary broker's
transactions, privately negotiated transactions or through sales to one or more
dealers for resale of such securities as principals at market prices prevailing
at the time of sale at prices related to such prevailing market prices or at
negotiated prices. Usual and customary or specially negotiated brokerage fees
or commissions may be paid by the Selling Stockholders in connection with sales
of such Selling Stockholder Shares.

The Selling Stockholders and intermediaries through whom such
securities are sold may be deemed to be "underwriters" within the meaning of
the Securities Act with respect to the securities offered and any profits
realized or commission received may be deemed underwriting compensation. The
Company has agreed to indemnify certain of the Selling Stockholders against
certain liabilities, including liabilities under the Securities Act.

AVAILABLE INFORMATION

The Company is subject to the informational requirements of the
Securities Exchange Act of 1934 (the "Exchange Act") and in accordance
therewith files reports, proxy statements, and other information (the "1934 Act
Filings") with the Securities and Exchange Commission (the "SEC" or the
"Commission"). In addition, the Company has filed with the SEC a Registration
Statement on Form S-1 (together with all amendments, exhibits, and schedules
thereto, the "Registration Statement") under the Securities Act, with respect
to the Securities 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 Securities, 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, including the exhibits thereto and the 1934 Act
Filings, 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.

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 Securities 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 to inform themselves about and to observe any restriction as to the
offering of the Securities and the distribution of this Prospectus.

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<PAGE> 5
PROSPECTUS SUMMARY

The following summary is qualified in its entirety by, and should be
read in conjunction with, the more detailed information and Consolidated
Financial Statements, including the Notes thereto, appearing elsewhere in this
Prospectus. Prospective purchasers of the Securities offered hereby should
carefully consider the factors set forth under "Risk Factors." The information
contained in this Prospectus reflects 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 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 Securities 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
Securities 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 was formed in 1996 and is a Delaware corporation which,
pursuant to a reorganization effected September 1, 1996, serves as the holding
company for MLC Group, a Virginia corporation founded in 1990, and other
subsidiaries. The Company engages in no other business other than serving as
the parent holding company for MLC Group, MLC Network Solutions, Inc. ("MLC
Network Solutions"); MLC Integrated, Inc. ("MLCI"); MLC Federal, Inc., MLC
Capital, Inc.; PC Plus, Inc. ("PC Plus"); and MLC Leasing, S.A. de C.V., (a
subsidiary wholly-owned by MLC Group and MLC Network Solutions,). In addition,
MLC Group owns 50% of MLC/GATX Leasing Corporation, the general partner of
MLC/GATX Limited Partnership I, and has a 5% membership interest in MLC/CLC LLC
and serves as its manager.

The Company specializes in leasing and financing information
technology assets, providing network services, software and personal computers
("PCs"), providing system design and upgrades, hardware maintenance, on-site
technical support, relocation services 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 or sold by the
Company include personal computers and peripherals, 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. MLC Network Solutions and MLCI were
acquired to provide a wide range of information technology services and
solutions to middle market organizations. The Company offers its clients a
single source for a comprehensive range of services, including procurement of
software, PC and communication equipment, desktop systems maintenance and
support, strategic planning and management consulting, integration and
installation of information technology systems, training and continuing
education. The Company focuses on marketing its comprehensive information
technology offerings to middle market organizations, which typically spend from
$250,000 to $25 million annually on their information technology needs. The
information technology service industry has evolved into a highly fragmented
environment with a small number of large, national service providers and a
large number of small- and medium-sized service providers, usually with a
regional

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<PAGE> 6
focus. Large information technology service providers typically address the
information technology needs of large organizations with substantial
information technology requirements for a wide range of services, whereas
smaller information technology service firms provide specialized services of
limited scope. Consequently, middle market organizations rely on multiple,
often specialized, smaller information technology service providers to help
implement and manage their systems. The Company believes that a single-source
information technology service provider will help middle market organizations
reduce cost and management complexity and increase the quality and
compatibility of information technology solutions. As part of its strategy, the
Company intends to leverage its high-level services to foster long-term
relationships with clients and to implement technology strategies in order to
achieve the clients' desired information technology solutions. The Company also
believes it can increase its revenues from existing clients by cross-selling
its services. Another key element of the Company's strategy is the expansion of
service offerings and the addition of new businesses in order to offer new and
existing clients access to a more complete range of services. The Company also
will operate with a decentralized management structure to provide focus on
superior client service and foster a motivating environment for its various
subsidiaries, and will seek to acquire additional companies to strengthen its
core competencies, to offer complementary services and to facilitate its
expansion into new regions.

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.

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.

The Company's acquisition strategy has resulted in the consummation of
several significant businesses. On July 24, 1997, the Company, through a
newly-formed wholly-owned subsidiary, MLC Network Solutions, acquired
Compuventures of Pitt County, Inc. ("Compuventures"). The outstanding shares
of Compuventures common stock were converted into 260,978 shares of the
Company's Common Stock, valued at $3,384,564. Compuventures is a value-added
reseller of PC's and related network equipment and software products and
provides various support services to its customers from facilities located in
Greenville, Raleigh and Wilmington, North Carolina. The merger was accounted
for as a pooling of interests. MLCI was acquired on September 29, 1997
through the merger of a newly-formed wholly-owned subsidiary of MLC Holdings
into MLCI with MLCI being the surviving entity. MLCI currently conducts a
network services and software and PC reselling business from its sole location
in Pottstown, Pennsylvania. The Company exchanged 498,998 shares of Common
Stock, valued

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<PAGE> 7

at $7,092,000, for the total capital stock of MLCI. This merger was accounted
for as a pooling of interests. On July 1, 1998, the Company, through a
wholly-owned subsidiary, MLC Network Solutions, acquired PC Plus. The shares
of PC Plus were acquired for a total merger consideration of $7,245,673,
through the exchange of 263,478 shares, valued at $13.75 per share, and
$3,622,836 of cash. This merger was accounted for as a purchase.

As of July 1, 1998, the Company's 209 full time and 11 part time
employees operate through 15 offices, including its principal executive offices
and regional sales offices which are located in the following metropolitan and
suburban locations); Reston, Virginia (2 offices); Dallas and Austin, Texas;
Sacramento and San Diego California; Greenville, Wilmington and Raleigh (2
offices), North Carolina; Richmond, Virginia; Pittsburgh, Pottstown and West
Chester, Pennsylvania; and Atlanta, Georgia. The Company also has arrangements
with two independent contractor entities that work primarily for the Company
from their own offices in Columbus, Ohio and Minneapolis, Minnesota.

The Company's principal executive office is located at 11150 Sunset
Hills Road, Suite 110, Reston, Virginia 20190-5321 and its telephone number at
such address is (703) 834-5710.

THE OFFERING

<TABLE>
<S> <C>
Common Stock offered by:
The Company 2,000,000 shares (1)
Selling Stockholders 964,305 shares (2)
Common Stock outstanding after this Offering 8,348,603 shares (3)

Nasdaq National Market Symbol MLCH
</TABLE>

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

(1) Such shares may be offered and issued from time to time in connection
with the merger with or acquisition by the Company of other businesses
or assets. In connection with its acquisition of PC Plus on July 1,
1998, the Company issued 263,478 shares of Common Stock registered
pursuant to the Registration Statement of which this Prospectus is a
part.

(2) Such shares are issued and outstanding and may be offered and sold
from time to time by the Selling Stockholders. Prior to the date of
this Prospectus, the Selling Stockholders have sold 168,802 shares
which were registered pursuant to the Registration Statement of which
this Prospectus is a part. See "Selling Stockholders."

(3) Excludes (i) a total of 1,269,720 shares of Common Stock reserved for
issuance under the Company's stock incentive program; (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. See "Management -- Executive
Compensation and Other Information -- Compensation Arrangements and
Employment Agreements."

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RISK FACTORS

The Company and its business are subject to varying risks which are:
(i) dependence on the ability to obtain creditworthy customers; (ii) dependence
on major relationships; (iii) asset ownership risk of technological
obsolescence, inability to re-lease or re-sell, or fluctuating market
conditions; (iv) a dependence upon the Company's ability to obtain financing;
(v) default and loss experience; (vi) competition; (vii) risks related to the
Company's acquisition strategy; (viii) dependence upon current management;
(viii) control by principal stockholders; (ix) government termination risk; (x)
dependence upon availability of equipment; (xi) management of growth; (xii)
risk of changes in tax laws; (xiii) changes in accounting practices; (xiv)
interest rate risk; (xv) year 2000 issue; (xvi) anti-takeover effects of
governing documents, Delaware Law and staggered board; (xvii) price volatility
of Common Stock; (xviii) absence of dividends; (xix) fluctuations in quarterly
operating results; (xx) shares eligible for sale may adversely affect the
market price of the Common Stock; and (xxi) the dependence on the continued
authorization to resell and provide manufacturer authorized equipment and
services.

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<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, and the information included under "Selected
Consolidated Financial Data" "Management's Discussion and Analysis of Results
of Operations and Financial Condition," and "Index to Consolidated Financial
Statements," included elsewhere herein.

The following summary consolidated balance sheets and statements of
earnings include the accounts and results of operations of the Company's two
recently acquired subsidiaries which were accounted for under the
pooling-of-interests method, but does not include any financial data of PC Plus
which was acquired on July 1, 1998. Although the balance sheets of the Company
as of March 31, 1994 and 1995, prior to the acquisitions, as well as the
balance sheets of MLC Network Solutions and MLCI as of March 31, 1995 have been
audited, the consolidated balance sheets of the Company as of March 31, 1994
and 1995 have been prepared by the Company, without audit. Additionally,
although the Company's statement of earnings for the year ended March 31,
1994, prior to acquiring the subsidiaries, has been audited, the consolidated
statement of earnings for the year ended March 31, 1994 has been prepared by
the Company without audit. The summary consolidated financial data as of and
for the quarters ended June 30, 1997 and June 30, 1998, has been derived from
unaudited financial information, which, in the opinion of management of the
Company, includes all adjustments (consisting only of normal recurring
accruals) necessary for a fair presentation. The Company elected to consolidate
the data presented for its year ended March 31, 1994, with the results of
operations of the two recently acquired subsidiary companies as of and for the
year ended December 31, 1993.

<TABLE>
<CAPTION>
AS OF AND FOR THE YEAR ENDED MARCH 31,
----------------------------------------------------------------------------------
1994 1995 1996 1997 1998
------------- ------------ ------------ ------------ -----------
(Dollar amounts in thousands, except per share data)
<S> <C> <C> <C> <C> <C>
EARNINGS STATEMENT DATA:

Total revenues $ 52,205 $ 64,364 $ 71,714 $ 86,212 $ 118,442
Total costs and expenses 51,477 63,581 68,134 81,361 109,712
---------- ---------- ---------- ---------- ----------
Earnings before provision for income 728 783 3,580 4,851 8,730
taxes
Provision for income taxes 59 198 881 1,360 2,691
---------- ---------- ---------- ---------- ----------
Earnings before extraordinary item 669 585 2,699 3,491 6,039
Extraordinary gain, net (1) -- -- 117 -- --
---------- ---------- ---------- ---------- ----------
Net earnings $ 669 $ 585 $ 2,816 $ 3,491 $ 6,039
========== ========== ========== ========== ==========
Earnings per common share before extra-
ordinary item $ 0.15 $ 0.13 $ 0.59 $ 0.67 $ 1.00
Extraordinary gain per common share -- -- 0.03 -- --
---------- ---------- ---------- ---------- ----------
Net earnings per common share - basic 0.15 0.13 0.62 0.67 1.00
========== ========== ========== ========== ==========
Pro forma net earnings (2) $ 545 $ 529 $ 2,389 $ 3,133 $ 5,426
========== ========== ========== ========== ==========
Pro forma net earnings per common share
- basic $ 0.12 $ 0.12 $ 0.52 $ 0.60 $ 0.90
========== ========== ========== ========== ==========
Weighted average common shares
outstanding 4,380,270 4,383,490 4,572,635 5,184,261 6,031,088
- basic

BALANCE SHEET DATA:
Investment in leases $ 10,310 $ 13,998 $ 26,493 $ 28,538 $ 39,792
Total assets 18,032 21,716 35,184 49,024 83,196
Recourse notes payable 3,113 2,597 2,106 439 13,037
Nonrecourse notes payable 8,116 10,162 18,352 19,705 13,028
Retained earnings 1,726 2,014 4,467 7,071 12,023
Stockholders' equity 2,348 2,801 5,232 16,477 23,544
</TABLE>

<TABLE>
<CAPTION>
AS OF AND FOR THE QUARTER ENDED JUNE 30,
----------------------------------------
1997 1998
------------- ------------
<S> <C> <C>
EARNINGS STATEMENT DATA:

Total revenues $ 40,146 $ 41,583
Total costs and expenses 37,522 39,143
---------- ----------
Earnings before provision for income 2,624 2,440
taxes
Provision for income taxes 460 976
---------- ----------
Net earnings $ 2,164 $ 1,464
========== ==========
Net earnings per common share - basic $ 0.37 $ 0.24
========== ==========
Pro forma net earnings (2) $ 1,699 $ 1,464
========== ==========
Pro forma net earnings per common share
- basic $ 0.29 $ 0.24
========== ==========
Weighted average common shares
outstanding 5,909,976 6,078,126
- basic

BALANCE SHEET DATA:
Investment in leases $ 29,376 $ 55,096
Total assets 61,299 98,938
Recourse notes payable 19,292 20,827
Nonrecourse notes payable 19,705 21,851
Retained earnings 8,334 13,487
Stockholders' equity 17,746 25,100
</TABLE>

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

(1) The extraordinary gain in fiscal year 1996 was the result of an
insurance settlement for a fire at a subsidiary of the Company.

(2) Pro forma net earnings as if companies which were subchapter S
corporations prior to their business combinations with the Company,
which were accounted for under the pooling-of-interests method, had
been subject to federal income tax throughout the periods presented.
<PAGE> 10
RISK FACTORS

An investment in the Securities 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 Securities 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, results of operations, and cash flows. 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, results of operations, and
cash flows. See "Business - Financing."

DEPENDENCE ON MAJOR RELATIONSHIPS

As of March 31, 1998, the Company's portfolio consisted of leases with
158 customers. During fiscal year 1998, the Company originated commercial
leasing transactions with 120 customers, ten of which accounted for
approximately 71% of the aggregate purchase price of equipment leased by the
Company to those 120 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,
results of operations, and cash flows. See "Business -- Leasing, Financing and
Sales Activities."

The Company, for the fiscal year ended March 31, 1998, had two
significant relationships. The loss of either of these two relationships could
have a material effect on the future results of the organization. The first is
a group of approximately 12 individual companies which are subsidiaries or
affiliates of a common parent company, Sprint, and which lease under a single
master lease agreement. Together, the companies represented approximately 37%
of the lease volume generated for the year ended March 31, 1998 which as a
group represents the largest single lessee of the Company. The second
significant relationship is with MLC/CLC, LLC, a joint venture of which Cargill
Leasing Corporation owns a 95% membership interest and the Company owns the
remaining 5% membership interest, and the Company serves as managing member.
During fiscal year 1998, the Company sold approximately $44.8 million of
commercial lease volume to MLC/CLC, LLC, Virginia limited liability company.

For fiscal year 1997 and fiscal year 1998, 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 Cargill Leasing
Corporation. For fiscal year 1998, of the Company's total revenue,
approximately 37.8% was attributable to sales of lease transactions to MLC/CLC
LLC. For fiscal year 1998, revenue

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<PAGE> 11
recognized from the sales to MLC/CLC LLC was $44.8 million of the Company's
total revenues of $118.4 millions. For the year ended March 31, 1997, out of
leased equipment sales of $21.6 million, MLC/CLC LLC represented $16.9 million
or 78.2%. For the year ended March 31, 1998, sales to MLC/CLC, LLC accounted
for 88.9%, or $44.8 million, of the $50.4 million of the Company's leased
equipment sales. Significantly, as described above, Sprint Communications
Company L.P. and affiliates was the lease customer in many of these lease
transactions.

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. nor 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 fiscal year ended May, 1997 as reported in Forbes
Magazine issue of December, 1997: sales were $56 billion, operating income was
$3.2 billion and net income was $814 million. On June 4, 1998, Firstar
Corporation and Cargill, Inc. jointly announced that they had signed a
definitive agreement for which Firstar Corporation to purchase 100% of the
common stock of Cargill Leasing Corporation. The transaction is expected to
close in the third quarter of calendar year 1998, subject to regulatory
approval. Firstar Corporation is a $20 billion bank holding company which is
publicly traded on the New York Stock Exchange under the symbol "FSR".

Transactions involving the use or placement of equity from the MLC/CLC
LLC joint venture requires the consent of the joint venture partner, and if
financing from this source were to be withheld or were to become unavailable,
it would limit the amount of equity available to the Company and may have a
material adverse effect upon the Company's business, financial condition,
results of operations, and cash flows. The Company does finance leases and
related equipment internally, rather than with financing provided by lenders.
These internal lease financings typically occur in cases where the financed
amounts, terms, collateral, or structures are not 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.
It is the Company's goal to retain ownership of the lease portfolio generated
to the extent that the current capital structure will allow. The increased
portfolio may increase the potential financial return and at the same time,
increase the risk inherent in the technological equipment. See "Asset
Ownership Risk of Technological Obsolescence, Inability to Re-Lease or Re-Sell,
or Fluctuating Market Conditions."

The loss or dissolution of this joint venture arrangement, would have
a material adverse effect upon the Company's ability to finance lease
transactions and thus on the Company's business, financial condition, results
of operations, and cash flows. See "Risk Factors -- Dependence on Availability
of Financing."

In addition to the relationships described above, the Company, as part
of its strategy, has established 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 maintain 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

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<PAGE> 12
transactions financed and thus on the Company's business, financial condition,
results of operations, and cash flows. See "Business - Strategy."

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, results of operations, and
cash flows could be materially adversely affected. As of March 31, 1998, the
total net unrealized residual value at the end of the initial lease term of the
Company's owned lease portfolio was approximately $7.99 million consisting of
$2.76 million of residual values of its operating lease portfolio and $5.23
million of residual values of its direct financing lease portfolio. Similarly,
if the Company is unable to re-lease or re-sell equipment on favorable terms,
its business, financial condition, results of operations, and cash flows 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
after market. 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."

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<PAGE> 13
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 can be as high as 35% depending on the lease term and equipment's
technological life. 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/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 type 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 March 31, 1998, the Company had aggregate outstanding nonrecourse borrowings
of approximately $13.0 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> 14
investment banks that 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 and
contractors with 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, results of operations, and cash flows. See
"Business -- Financing."

For fiscal year 1998, approximately $44.8 million or 37.8% of the
Company's total revenue was attributable to sales of lease transactions to the
MLC/CLC LLC entity. Transactions involving the use or placement of equity from
this joint venture requires the consent of the joint venture partner, and if
financing from this source was to be withheld or was 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, results of
operations, and cash flows. See "Business -- Financing."

The Company's relationship with MLC/GATX Limited Partnership I
terminated in August 1998 because the Company is no longer originating the types
of transactions which require equity provided by the partnership. During fiscal
years 1997 and 1998, revenue recognized from sales to MLC/GATX Limited
Partnership I was $3.5 million and $.4 million, respectively, of the Company's
total revenues.

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.

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<PAGE> 15
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."

Recourse Financing -- Bank Lines of Credit. The Company relies on
recourse borrowing in the form of revolving lines of credit 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 March 31, 1998, the Company
had aggregate outstanding recourse borrowings of $13,037,000, from various
lenders, primarily for the long term financing of leases.

On June 5, 1997, the Company entered into a $15,000,000 committed
recourse line of credit with First Union National Bank, N.A., successor by
merger on April 28, 1998 to CoreStates Bank, N.A. (the "First Union Facility").
The facility was amended by Amendment No. 1, dated September 5, 1997, which
increased the commitment from $15,000,000 to $25,000,000, and increased the
sublimit for Eligible Leases with Investment Grade Leases to $15,000,000 from
$10,000,000. The facility was further amended by Amendment No. 2 dated
December 19, 1997, which incorporated participation in the line by Riggs Bank,
N.A. and Bank Leumi USA each in the amount of $5,000,000, and extended the
facility to December 19, 1998. Under Amendment No. 3, effective on June 30,
1998, the available credit under the line was increased to $35,000,000, and
raised the inventory sublimit to $5,000,000 from $1,000,000. Borrowings under
the First Union Facility bear interest at LIBOR + 110 basis points, or, at the
Company's option, prime minus one percent. As of March 31, 1998, the balance
on the First Union Facility was $12.8 million. The First Union Facility is
made to MLC Group and guaranteed by MLC Holdings. The First Union Facility is
secured by certain of the Company's assets such as chattel paper (including
leases), receivables, inventory, and equipment. The availability of the line
is subject to a borrowing base, which consists of inventory, receivables,
purchased assets, and leases. 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 the 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. There can be no
assurance that the Company will be able to renew, extend or replace this credit
facility and a failure to renew, extend or replace any of this facility would
have a material adverse effect upon the Company's business, financial
condition, results of operations, and cash flows.

The Company's recently acquired subsidiaries, MLC Network Solutions,
MLCI, and PC Plus, have separate credit sources to finance their working
capital requirements, which the Company has guaranteed. Their traditional
business as value-added resellers of PC's and related network equipment and
software products is financed through agreements known as "floor planning"
financing where interest expense for the first 30 days is charged to the
supplier/distributor but not the reseller. These floor plan liabilities are
recorded under accounts payable because they are normally repaid within the 30
to 40 day time frame and represent an assigned accounts payable originally
generated by the supplier/distributor. If

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<PAGE> 16
the 30 to 40 day obligation is not timely liquidated, interest is then assessed
at stated contractual rates. As of March 31, 1998 MLC Network Solutions has
floor planning financing available of $1.35 million from Deutsche Financial,
Inc. and $225,000 from IBM Credit Corporation. The outstanding balances owed to
these respective suppliers were approximately $1.1 million and $29,160,
respectively, as of March 31, 1998. MLCI has floor planning financing
available of $1.5 million from FINOVA Capital Corporation, $750,000 from IBM
Credit Corporation, and $100,000 from Deutsche Financial, Inc. The outstanding
balances to these respective suppliers were $698,738, $104,011, and $0,
respectively, as of March 31, 1998. MLCI additionally has a line of credit in
place, expiring on July 31, 1998, with PNC Bank, N.A. to provide an asset based
credit facility. The line has a maximum credit limit of $2.5 million and
interest is based on the bank's prime rate. As of March 31, 1998, there was no
balance outstanding. PC Plus, has a floor planning financing agreement with
NationsCredit Distribution Finance, Inc. The line has a maximum credit limit
of $6 million and carries interest at prime plus 1.5%. As of July 16, 1998,
the outstanding balance was approximately $4.9 million.

Partial Recourse Borrowing Facilities. On March 12, 1997, the Company
finalized and executed documents establishing a $10 million credit facility
(the "Heller Facility"), with Heller Financial, Inc. ("Heller"), a Delaware
corporation. Under the terms of the Heller Facility, a maximum amount of $10
million is available to the Company, provided that each draw is subject to the
approval of Heller. The Heller Facility is evidenced by a Loan and Security
Agreement dated as of January 31, 1997"" and a First Amendment to Loan and
Security Agreement"" dated as of March 12, 1997. On March 12, 1998, the
commitment of Heller to fund additional advances under the line was allowed by
the Company to expire, and the Company and Heller are currently negotiating the
terms of a revised Heller Facility, although there can be no assurance that the
Company will negotiate acceptable terms and conditions for further advances.
The primary purpose of the Heller Facility was for the permanent fixed-rate
discounting of rents for commercial leases of information technology assets
with the Company's middle-market customers. As of March 31, 1998, the balance
on this account was approximately $1.2 million. Each advance under the
facility bears interest at an annual rate equal to the sum of the weekly
average U.S. Treasury Constant Maturities for a Treasury Note having
approximately an equal term as the weighted average term of the contracts
subject to the advance, plus an index ranging from 1.75% to 3.00%, depending on
the amount of the advance and the credit rating (if any) of the lessee. The
Heller Facility contains a number of covenants binding on the Company and is a
limited recourse facility, secured by a first-priority lien in the contracts
and chattel paper relating to each advance, the equipment subject to such
contracts, a 10% cross-collateralized first loss guarantee, and all books,
records and proceeds pertaining thereto. Under the Heller Facility, Heller
extends credit to MLC Group which is guaranteed by MLC Holdings. As compared to
a committed line of credit, lending under the Heller Facility is in Heller's
sole discretion, and is further subject to MLC Group's compliance with certain
conditions and procedures.

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 "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,
prior to the Company's initial public offering on November 20, 1996 (the
"Initial Public Offering"), the personal guarantees and collateral provided by
its stockholders. 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

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<PAGE> 17
lease transactions and, thus, have a material adverse effect upon the Company's
business, financial condition, results of operations, and cash flows. See
"Business -- Financing."

DEFAULT AND LOSS EXPERIENCE

Until the fiscal year ended March 31, 1998, when the Company incurred
a $17,350 credit loss, the Company had not taken any write-offs due to credit
losses with respect to lease transactions since inception. As of March 31,
1998, the Company had a consolidated reserve for credit losses on leases and
accounts receivable of $142,097 which it believes to be adequate at
March 31, 1998.

One of the Company's significant equipment sales and lease customers
has filed for voluntary bankruptcy protection. Allegheny Health Education &
Research Foundation ("AHERF") accounted for $8.1 million or approximately 6.8%
of MLC's revenue in the fiscal year ended March 31, 1998. AHERF is a
Pittsburgh based not-for-profit entity that owns multiple hospitals, the
largest of which include Hahnemann University Hospital, St. Christopher's
Hospital for Children, Medical College of Pennsylvania and Graduate Hospital,
all of which are located in Philadelphia, Pennsylvania. On July 21, 1998,
AHERF, and some but not all of its operating subsidiaries filed for bankruptcy
and agreed to sell its eight Philadelphia-area hospitals to Vanguard Health
Systems, Inc., a Tennessee based for-profit company, subject to court approval.
The Company's net lease and receivables balance relating to this customer is
approximately $1.9 million. The Company believes that the fair market value of
the equipment may be below its current balances, and, depending on the
assumption or rejection of the leases by the Bankruptcy Trustee and the
creditor status and ultimate repayment schedule of other claims, upon disposal
of the equipment and disposition of its claims, the Company could incur a loss
with respect to its current balances. The amount and timing of such losses
cannot be accurately estimated by the Company at this time. The Company is
vigorously pursuing all available remedies, and may enter into
debtor-in-possession sales and financings which have been approved by the
bankruptcy court. The Company believes that as of June 30, 1998, its allowance
for doubtful accounts having been increased to $673,000, is adequate to
provide for any potential loss resulting from this customer.

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., and Leasing Solutions, Inc. Many of the Company's competitors
have substantially greater resources and capital and longer operating
histories. 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 services

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<PAGE> 18
firms such as investment banking firms which underwrite municipal bonds to
finance large municipal acquisitions, national finance companies which finance
equipment in the government 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".

The market for the Company's value-added reseller of PC's and related
network equipment and software products and various support services is highly
competitive. The Company's competitors vary in size and in the range of the
products and services that they offer. Primary competitors include
participants from a variety of market segments, specifically other national and
regional value-added resellers of same or similar products, systems consulting
and implementation firms, computer equipment manufacturers, and other
information technology service providers. Many of the Company's competitors
have greater financial, development, technical, marketing and sales resources
than the Company. There can be no assurance that the Company will continue to
provide information technology services and products demanded by the market or
be able to compete successfully with existing or new competitors. An inability
to compete in its market effectively would have a material adverse effect on
the Company's results of operations, financial condition and business.

RISKS RELATED TO THE COMPANY'S ACQUISITION STRATEGY

General. 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, results of operations and cash
flows. There can be no assurance that the Company will be able to identify,
acquire or profitably manage additional businesses or successfully integrate
acquired businesses, if any, into the Company without substantial costs, delays
or other operational or financial problems. Further, acquisitions may involve
a number of special risks, including adverse effects on the Company's financial
condition, operating results, cash flows, diversion of management's attention,
failure to retain key acquired personnel, risks associated with unanticipated
events or circumstances or legal liabilities and amortization of acquired
intangible assets, some or all of which could have a material adverse effect on
the Company's business, financial condition, results of operations, and cash
flows. Client satisfaction or performance problems at a single acquired firm
could have a material adverse impact on the reputation of the Company as a
whole. In addition, there can be no assurance that acquired businesses, if
any, will achieve anticipated revenues and earnings.

The Company anticipates that it will also need additional funds to
implement its acquisition and internal growth strategies. The Company has a
line of credit facility for use for working capital and other general corporate
purposes, which may include acquisitions. There can be no assurance, however,
that the line of credit will be sufficient for the Company's needs. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Liquidity and Capital Resources," "Business -- Strategy" and "--
Acquisition of Related Companies."

Risks Related to Acquisition Financing. The Company currently intends
to finance future acquisitions by primarily using shares of its Common Stock,
including the Acquisition Shares offered by this Prospectus, for all or a
portion of the consideration to be paid. If the Common Stock does not maintain
a sufficient value, or potential acquisition candidates are unwilling to accept
Common Stock as part or all of the consideration for the sale of their
businesses, the Company may be required to use more of its cash

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<PAGE> 19
resources, if available, to initiate and maintain its acquisition program. If
the Company does not have sufficient cash resources, its growth could be
limited unless it is able to obtain additional capital through additional debt
or equity financing. There can be no assurance that the Company will be able
to obtain such financing if and when it is needed or that, if available, it
will be available on terms the Company deems acceptable. As a result, the
Company might be unable to successfully implement its acquisition strategy. The
inability of the Company to implement and manage its acquisition strategy
successfully may have an adverse effect on the future prospects of the Company.
See "Business -- Strategy" and "-- Acquisition of Related Companies."

The Company has financed two of its last three acquisitions by using
shares of its Common Stock for the total consideration. On July 24, 1997, the
Company, through a newly-formed wholly-owned subsidiary, MLC Network Solutions,
acquired Compuventures of Pitt County, Inc. ("Compuventures"). Compuventures
was merged into MLC Network Solutions effective July 24, 1997. The outstanding
shares of Compuventures common stock were converted into 260,978 shares, valued
at $3,384,564, of Common Stock. Educational Computer Concepts, Inc.
(previously defined as "MLCI" and dba "ECC Integrated, Inc."), was acquired on
September 29, 1997 by means of merging, a newly-formed wholly-owned subsidiary
of MLC Holdings, into MLCI with MLCI being the surviving entity. MLC Holdings
effectively exchanged 498,998 shares of its Common Stock, valued at $7,092,000,
for the total stock of MLCI. Each of the mergers was accounted for as a
pooling of interests. On July 1, 1998, the Company through a wholly-owned
subsidiary, MLC Network Solutions acquired PC Plus. The shares of PC Plus were
acquired for a total merger consideration of $7,245,673, through the exchange
of 263,478 shares, valued at $13.75 per share, and $3,622,836 of cash. This
merger was accounted for as a purchase.

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 and
Executive Vice President, Bruce M. Bowen, who also serves as a director of the
Company, Thomas B. Howard Jr., Vice President and Chief Operating Officer,
Steven J. Mencarini, Senior Vice President and Chief Financial Officer,
Kleyton L. Parkhurst, Senior Vice President, Secretary and Treasurer, Vincent
Marino, President of MLCI, William G. Garner, President of MLC Network
Solutions and Nadim Achi, President of PC Plus. The loss of any of these key
management officers and personnel would materially adversely affect the
business, financial condition, results of operations, and cash flows 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 First Colony Forge Life Insurance
Company and the second with CNA/Valley Forge Life Insurance Company Life Co.,
each in the amount of $5 million. See "Management -- Executive Compensation
and Other Information -- Compensation Arrangements and Employment Agreements."

CONTROL BY PRINCIPAL STOCKHOLDERS

One of the Company's current principal stockholders, Mr. Norton,
Chairman, Chief Executive Officer and President of the Company, directly and
indirectly controls approximately 44.5% of the Company's outstanding Common
Stock as of the date of this Prospectus and without giving effect to the
issuance of shares covered by this Prospectus. In the event of the death of
Mr. Norton, Patricia A. Norton, his wife, 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 --
Irrevocable Proxy and Stock Rights Agreement."

- 18 -
<PAGE> 20

Similarly, another of the Company's current principal stockholders,
Bruce M. Bowen, a director and Executive Vice President of the Company,
directly and indirectly controls approximately 12.1% of the Company's
outstanding Common Stock as of the date of this Prospectus and without giving
effect to the issuance covered by this Prospectus. 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 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 Messrs. Norton and
Bowen. See "Description of Capital Stock" and "Principal Stockholders."

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 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, results of operations, and cash
flows.

As of the end of fiscal year 1998, the Company had $4.0 million, of
assets leased to governmental units. All of these leases are subject to
termination rights by the governmental units as described above.

DEPENDENCE UPON AVAILABILITY OF EQUIPMENT

A material portion of the Company's sales and lease revenues are
derived from equipment which the Company obtains in the computer "after
market." 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

- 19 -
<PAGE> 21
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 after market 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 after market. The Company may receive
an order from a customer for a piece of computer equipment that it must obtain
in the after market 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, results of
operations, and cash flows. As of March 31, 1998, the Company's inventory of
information technology equipment was approximately $1.2 million. See
"Business -- Competition."

MANAGEMENT OF GROWTH

In order to support the anticipated growth of its business, the
Company has added new personnel in 1995, 1996, 1997 and 1998 and expects to
continue to add additional personnel in 1998 and 1999. 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, results of
operations, and cash flows 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, results of operations, and cash flows.

- 20 -
<PAGE> 22
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, results of operations, and
cash flows. See "Management's Discussion and Analysis of Results of Operations
and Financial Condition" for a discussion of the impact of new accounting
pronouncements.

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 First Union Facility to the extent interest rates increase
between the time the leases are initially financed and the time they are
permanently financed.

YEAR 2000 ISSUE

The Company has identified all significant internal software and
hardware applications that will require modifications to ensure Year 2000
compliance of the Company's IT and non-IT systems. Internal and external
resources are being used to make the required modifications and test Year 2000
compliance. The modification process of all significant internal applications
and operational systems is substantially complete. The Company plans on
completing the process of modifying all significant applications by December
31, 1998. The total cost to the Company of these Year 2000 compliance
activities has not been and is not anticipated to be material to its financial
position, results of operations or cash flows in any given year.

The Company is aware of general risks to third parties with whom it
deals on financial transactions from such parties' failure to remediate their
own year 2000 issues; however, due to the nature of the Company's business and
relationships, the Company believes that economy-wide year 2000 issues pose a
greater potential risk than issues arising from the specific nature of the
Company's business or relationships.

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

- 21 -
<PAGE> 23
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."

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. One of the Company's current principal
stockholders, Phillip G. Norton, Chairman, Chief Executive Officer and
President of the Company, controls approximately 44.5% of the Common Stock, and
thus will likely be able to prevent a third party from acquiring control of the
Company. See "-- 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."

PRICE VOLATILITY OF COMMON STOCK

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. See "Dividend Policy."

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.

- 22 -
<PAGE> 24
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

The Company has 6,348,603 shares of Common Stock outstanding as of the
date of this Prospectus. Of this amount, 1,359,794 shares of Common Stock are
freely tradable without restriction. The remaining 4,988,809 shares, unless
registered, including shares issued in the acquisitions of MLC Network
Solutions, and MLCI on July 24, 1997 and September 29, 1997, respectively, and
shares issued by the Company in a private placement on June 18, 1997 will be
required to be sold pursuant to provisions of Rule 144 under the Securities
Act. Sales of any such shares could adversely affect the market price of the
Common Stock. See "Description of Capital Stock -- Shares Eligible for Future
Sale." Of the remaining 4,988,809 shares, 964,305 are being registered for
resale pursuant to the Registration Statement of which this Prospectus forms a
part and, as of the date of this Prospectus, 181,104 of such Selling
Stockholder Shares have been sold. See "Selling Stockholders."

DEPENDENCE ON THE CONTINUED AUTHORIZATION TO RESELL AND PROVIDE MANUFACTURER
AUTHORIZED EQUIPMENT AND SERVICES

The Company's future success with information technology service
offerings and product sales depends in part on its continued authorization as a
service provider and its continued status as a certified reseller of certain
hardware and software products. Without such sales and service authorizations,
the Company would be severely restricted in its ability to provide the range of
services and products currently offered. In general, the agreements between
the Company and such manufacturers include termination provisions, some of
which are immediate. There can be no assurance that such manufacturers will
continue to authorize the Company as an approved reseller or service provider,
and the loss of one or more of such authorizations could have a material
adverse effect on the Company's results of operations, financial condition and
business. Although the Company has not experienced significant problems with
its suppliers of hardware, software and peripherals, there can be no assurance
that such relationships will continue or that, in the event of a termination
of its relationships with any given supplier, it would be able to obtain
alternative sources of supply without a material disruption in the Company's
ability to provide products and services to its clients. Furthermore, as is
typical in the industry, the Company receives credits or allowances from many
manufacturers for market development which are used to offset a portion of the
Company's cost of products sold. Changes in the availability, structure or
timing of these credits or allowances or any material disruption in the
Company's supply of products could have a material adverse effect on the
Company's results of operations, financial condition, cash flows, and business.

- 23 -
<PAGE> 25
THE COMPANY

The Company is a Delaware corporation which, pursuant to a
reorganization effected September 1, 1996, serves as the holding company for
MLC Group and other subsidiaries. The Company engages in no other business
other than serving as the parent holding company for MLC Group, MLC Capital,
Inc., MLC Federal, Inc., MLC Network Solutions, MLCI, PC Plus and MLC Leasing,
S.A. de C.V., (a subsidiary wholly-owned by MLC Group and MLC Network
Solutions. MLC Group, a Virginia corporation, founded in 1990 and originally
named Municipal Leasing Corporation, currently conducts the majority of all
business activity of the Company.

MLC Group has historically obtained a significant source of its equity
financing for transactions through two joint venture arrangements: (i) MLC/CLC
LLC; and (ii) MLC/GATX Limited Partnership I. MLC Group has a 5% membership
interest in MLC/CLC LLC and serves as its manager. 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. See
"Risk Factors -- Dependence on Major Relationships" and "Business --
Financing."

On July 24, 1997, the Company, through a newly-formed wholly-owned
subsidiary, MLC Network Solutions, acquired Compuventures. The outstanding
shares of Compuventures common stock were converted into 260,978 shares, valued
at $3,384,564, of the Company's Common Stock. Compuventures is a value-added
reseller of PC's and related network equipment and software products and
provides various support services to its customers from facilities located in
Greenville, Raleigh and Wilmington, North Carolina. The merger was accounted for
as a pooling of interests.

Educational Computer Concepts, Inc. was acquired on September 29, 1997
through a merger with MLCI, a newly-formed wholly-owned subsidiary of MLC
Holdings. MLCI currently conducts a network services and software and PC
reselling business from its sole location in Pottstown, Pennsylvania. MLC
Holdings exchanged 498,998 shares of its Common Stock, valued at $7,092,000, for
the total stock of MLCI. This transaction was also accounted for as a pooling of
interests.

On July 1, 1998, the Company through a wholly-owned subsidiary MLC
Network Solutions of Virginia, Inc., entered into an Agreement and Plan of
Merger with PC Plus. All of the outstanding shares of PC Plus were acquired
for a total merger consideration of $7,245,673, through the exchange of 263,478
shares valued at $13.75 per share, and $3,622,836 of cash. This merger was
accounted for as a purchase.

On July 1, 1997, the Company issued 161,329 shares of stock to a
single investor in a private placement for cash consideration of $2,000,000 (a
per share price of $12.40). The stock was priced, per a Stock Purchase
Agreement dated June 18, 1997, at a per share price equal to one-twentieth
(1/20) of the sum of the closing price per share of the Company's Common Stock
as reported on the Nasdaq National Market at the close of each of the last 20
business days immediately prior to the closing date (June 4 to July 1),
multiplied by .95.

MLC Capital, Inc. is an unregistered broker-dealer and, as of the
date of this report, has conducted no business transactions. The Company does
not have any plans, at present, to engage in business through MLC Capital, Inc.
MLC Federal, Inc. was incorporated on September 17, 1997 to handle future
business servicing the Federal government marketplace. On October 22, 1997,
the Company

- 24 -
<PAGE> 26
formed MLC Leasing, S.A. de C.V., a wholly-owned subsidiary of MLC Group and
MLC Network Solutions based in Mexico City, Mexico. To date, no business has
been conducted through the new subsidiary.

At July 1, 1998, the Company's 220 employees operate through 15
offices, including its principal executive office and 11 regional sales offices
which are located in the following metropolitan and suburban locations);
Reston, Virginia (2 offices); Dallas and Austin, Texas; Sacramento and San
Diego California; Greenville, Wilmington and Raleigh (2 offices), North
Carolina; Richmond, Virginia; Pittsburgh, Pottstown and West Chester,
Pennsylvania; and Atlanta, Georgia. The Company also has arrangements with two
independent contractor entities that work primarily for the Company from their
own offices in Columbus, Ohio and Minneapolis, Minnesota.

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.

USE OF PROCEEDS

The 2,000,000 Acquisition Shares to be offered and issued by the
Company will be issued from time to time in full or part consideration in
connection with the merger or the acquisition by the Company of other
businesses or assets and may be reserved for issuance pursuant to, or offered,
and issued upon exercise or conversions of, warrants, options, convertible
notes or similar instruments issued by the Company from time to time in
connection with any such merger or acquisition.

An additional 964,305 Selling Stockholder Shares being offered for
resale pursuant to this Prospectus have been previously issued to the Selling
Stockholders. The Company will not receive any of the proceeds from the sales
of the Selling Stockholders Shares.

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. 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
Company's financial condition, the Company's results of operations and any
other factors deemed relevant by the Board of Directors.

- 25 -
<PAGE> 27
CAPITALIZATION

The following table sets forth the capitalization of the Company as of
June 30, 1998.

<TABLE>
<CAPTION>
As of June 30, 1998
----------------------
(Dollars in thousands)
<S> <C>
Nonrecourse notes payable........................................ $21,851
Recourse notes payable........................................... 20,827
------
Total............................................................ 42,678
Stockholders' equity:
Preferred stock, $0.01 par value -- 2,000,000 shares
authorized; none issued or outstanding.................... --
Common stock, $0.01 par value - 25,000,000 shares
authorized; 6,071,305 shares issued and
outstanding (as adjusted)(1).............................. 61
Additional paid-in capital....................................... 11,552
Retained earnings................................................ 13,487
------
Total stockholders' equity.................................. 25,100
------
Total capitalization........................................ $67,778
======
</TABLE>

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

(1) Excludes (i) a total of 1,269,720 shares of Common Stock reserved for
issuance under the Company's stock incentive program; (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. See "Management -- Executive
Compensation and Other Information -- Compensation Arrangements and
Employment Agreements."

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 the information included under "Management's
Discussion and Analysis of Results of Operations and Financial Condition,"
included elsewhere herein. See "Management's Discussion and Analysis of
Results of Operations and Financial Condition" and "Business."

The following selected consolidated balance sheets and statements of
earnings include the accounts and results of operations of the Company's two
recently acquired subsidiaries which were accounted for under the
pooling-of-interests method, but does not include any financial data of PC Plus
which was acquired on July 1, 1998. Although the balance sheets of the Company
as of March 31, 1994 and 1995, prior to the acquisitions, as well as the
balance sheets of MLC Network Solutions and MLCI as of March 31, 1995 have been
audited, the consolidated balance sheets of the Company as of March 31, 1994
and 1995 have been prepared by the Company, without audit. Additionally,
although the Company's statement of earnings for the year ended March 31,
1994, prior to acquiring the subsidiaries, has been audited, the consolidated
statement of earnings for the year ended March 31, 1994 has been prepared by

- 26 -
<PAGE> 28

the Company without audit. The Company elected to consolidate the data
presented for its year ended March 31, 1994, to reflect the results of
operations of the two recently acquired subsidiary companies as of and for the
year ended December 31, 1993. The selected consolidated financial data as of
and for the quarters ended June 30, 1997 and 1998, has been derived from
unaudited financial information, which, in the opinion of management of the
Company, includes all adjustments (consisting only of normal recurring
accruals) necessary for a fair presentation.

<TABLE>
<CAPTION>
FOR THE QUARTER
FOR THE YEAR ENDED MARCH 31, ENDED JUNE 30,
------------------------------------------------------------------ --------------------------
1994 1995 1996 1997 1998 1997 1998
---------- ---------- --------- ---------- ----------- ---------- -----------
(Dollar amounts in thousands, except per share data)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF EARNINGS:
Revenue:
Sales of equipment $ 43,262 $ 50,471 $ 47,591 $ 52,167 $ 47,419 $ 15,132 $ 10,274
Sales of leased equipment 5,940 9,958 16,318 21,634 50,362 20,140 24,911
Lease revenues 1,577 2,968 5,842 9,908 14,882 3,523 4,985
Net margin on sales type
leases 380 277 86 -- -- -- --
Fee and other income 1,046 690 1,877 2,503 5,779 1,351 1,413
--------- --------- --------- --------- ---------- --------- ----------
Total revenues 52,205 64,364 71,714 86,212 118,442 40,146 41,583
--------- --------- --------- --------- ---------- --------- ----------

Costs and Expenses:
Cost of sales of equipment 37,924 44,157 38,782 42,180 37,423 11,980 8,284
Cost of sales of leased
equipment 5,698 9,463 15,522 21,667 49,669 19,912 24,813
Direct lease costs 344 841 2,697 4,761 5,409 1,391 1,992
Professional and other costs 628 657 709 577 1,073 214 197
Salaries and benefits 4,590 5,679 6,682 8,241 10,357 2,626 2,368
General and administrative
expenses 1,781 1,673 2,040 2,286 3,694 933 988
Interest and financing costs 512 1,111 1,702 1,649 1,837 466 501
Nonrecurring acquisition costs -- -- -- -- 250 -- --
--------- --------- --------- --------- ---------- --------- ----------
Total costs and expenses 51,477 63,581 68,134 81,361 109,712 37,522 39,143
--------- --------- --------- --------- ---------- --------- ----------

Earnings before provision for
income taxes 728 783 3,580 4,851 8,730 2,624 2,440
Provision for income taxes 59 198 881 1,360 2,691 460 976
--------- --------- --------- --------- ---------- --------- ----------
Net earnings before extraordinary
item 669 585 2,699 3,491 6,039 2,164 1,464
Extraordinary gain, net (1) -- -- 117 -- -- -- --
--------- --------- --------- --------- ---------- --------- ----------
Net earnings $ 669 $ 585 $ 2,816 $ 3,491 $ 6,039 $ 2,164 $ 1,464
========= ========= ========= ========= ========== ========= ==========
Earnings per common share,
before extra-ordinary item $ 0.15 $ 0.13 $ 0.59 $ 0.67 $ 1.00 $ 0.37 $ 0.24
Extraordinary gain per common
share $ -- $ -- $ 0.03 $ -- $ -- $ -- $ --
--------- --------- --------- --------- ---------- --------- ----------
Net earnings per common share
- basic $ 0.15 $ 0.13 $ 0.62 $ 0.67 $ 1.00 $ 0.37 $ 0.24
========= ========= ========= ========= ========== ========= ==========
Pro forma net earnings (2) $ 545 $ 529 $ 2,389 $ 3,133 $ 5,426 $ 1,699 $ 1,464
========= ========= ========= ========= ========== ========= ==========
Pro forma net earnings per
common share - basic $ 0.12 $ 0.12 $ 0.52 $ 0.60 $ 0.90 $ 0.29 $ 0.24
========= ========= ========= ========= ========== ========= ==========
Weighted average common shares
outstanding
- basic 4,380,270 4,383,490 4,572,635 5,184,261 6,031,088 5,909,976 6,078,126
</TABLE>

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

(1) The extraordinary gain in fiscal year 1996 was the result of an
insurance settlement for a fire at a subsidiary of the Company.

- 27 -
<PAGE> 29

<TABLE>
<CAPTION>
AS OF MARCH 31, AS OF JUNE 30,
----------------------------------------------------------------- ----------------------
1994 1995 1996 1997 1998 1997 1998
--------- --------- -------- -------- ---------- -------- ----------
(Dollar amounts in thousands)
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE SHEETS:
Assets:
Cash and cash equivalents $ 1,632 $ 276 $ 651 $ 6,654 $ 18,684 $ 3,929 $ 6,675
Accounts receivable 3,384 4,852 4,526 8,846 16,383 11,710 15,555
Other receivable 87 37 92 2,154 3,802 11,479 15,573
Inventories 1,692 1,294 965 1,278 1,214 2,809 1,807
Net investment in direct financing
and sales type leases, net 10,146 12,124 16,273 17,473 32,496 19,626 48,991
Investment in operating lease
equipment, net 164 1,874 10,220 11,065 7,296 9,750 6,105
Other assets 374 587 1,935 741 2,137 1,426 3,019
All other assets 553 672 522 813 1,184 570 1,213
-------- -------- ------- ------- -------- ------- -------
Total assets $ 18,032 $ 21,716 $ 35,184 $ 49,024 $ 83,196 $ 61,299 $ 98,938
======== ======== ======= ======= ======== ======= =======

Liabilities:
Accounts payable - equipment $ 1,092 $ 3,014 $ 4,973 $ 4,946 $ 21,284 $ 6,435 $ 21,418
Accounts payable - trade 1,970 1,890 2,215 3,007 6,865 4,590 4,172
Salaries and commissions payable 280 316 153 672 390 610 186
Recourse notes payable 3,113 2,597 2,106 439 13,037 8,639 20,827
Nonrecourse notes payable 8,116 10,162 18,352 19,705 13,028 18,472 21,851
All other liabilities 1,113 936 2,153 3,778 5,048 4,808 5,384
-------- -------- ------- ------- -------- ------- -------
Total liabilities 15,684 18,915 29,952 32,547 59,652 43,554 73,838
Total stockholders' equity 2,348 2,801 5,232 16,477 23,544 17,745 25,100
-------- -------- ------- ------- -------- ------- -------
Total liabilities and stockholders'
equity $ 18,032 $ 21,716 $ 35,184 $ 49,024 $ 83,196 $ 61,299 $ 98,938
======== ======== ======= ======= ======== ======= =======
</TABLE>

- 28 -
<PAGE> 30
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. See "Index to Consolidated Financial
Statements." The accompanying condensed consolidated balance sheets,
statements of earnings, and statements of cash flow include the accounts and
results of operations of the Company's two recently acquired subsidiaries, MLC
Network Solutions and MLCI, which were accounted for under the
pooling-of-interests method, and does not include PC Plus, acquired on July 1,
1998, using the purchase method of accounting.

REVENUE RECOGNITION AND LEASE ACCOUNTING

The Company's principal line of business is the leasing, financing,
sale of equipment and software and providing technical and asset management
services. 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.

As required by the Statement of Financial Accounting Standards No.
13, Accounting for Leases ("FASB No. 13"), the Company classifies its lease
transactions, as: (i) direct financing leases; (ii) sales-type leases; 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 an 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.

- 29 -
<PAGE> 31

The Company adopted Statement of Financial Accounting Standards No.
125 ("SFAS No. 125"), Accounting for Transfers and Servicing of Financial
Assets and Extinguishments of Liabilities as of January 1, 1997. SFAS No. 125
has changed the manner in which the Company determines and recognizes the gain
recorded upon the transfer of its interest in finance contracts subsequent to
December 31, 1996. Additionally, SFAS No. 125 requires the Company to record
gains or losses with respect to transfers of its interest in leases previously
accounted for as direct finance leases. SFAS No. 125 has also altered the
presentation in the Company's consolidated financial statements of revenues,
expenses and certain assets and liabilities associated with finance contracts
sold. Prior to this accounting pronouncement, proceeds received from assigning
receivables from direct financing leases prior to December 31, 1996 would have
been recorded as nonrecourse debt rather than the required new sale treatment.
As a result, certain aspects of the Company's financial statements as of
March 31, 1997 and 1998, and the years then ended may not be directly comparable
to the prior period financial statements based on the requirement that no
retroactive accounting was allowable.

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 leases 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.

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 as investments
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 as investments 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.

- 30 -
<PAGE> 32
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 involving the sale to customers of new
software and personal computers and/or used equipment that is not subject to
any type of lease; (ii) leased equipment sales to investors relating 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 involving sales 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, (iv) interest and other
miscellaneous income, (v) various technical support and maintenance fees and
(vi) educational training revenues. These revenues are included in fee and
other income on the company's statement of earnings.

The following discussion and analysis of the Company's results of operations
should be read in conjunction with the accompanying unaudited condensed
consolidated financial statements for the three month periods ended June 30,
1998 and 1997.

RESULTS OF OPERATIONS FOR THE QUARTERS ENDED JUNE 30, 1998 AND 1997

REVENUES

Total revenues generated by the Company during the three month period ended June
30, 1998 were $41,582,802, compared to revenues of $40,146,020 during the
comparable period in the fiscal prior year, an increase of 3.6%. The Company's
revenues are composed of sales and other revenue, and may vary considerably from
period to period. See "--POTENTIAL FLUCTUATIONS IN QUARTERLY OPERATING RESULTS".

Sales revenue, which includes sales of equipment and sales of leased equipment,
decreased slightly to $35,185,081 during the three month period ended June 30,
1998, as compared to $35,272,572 in the corresponding period in the prior fiscal
year. Sales of leased equipment increased $4,770,406 during the three month
period ended June 30, 1998. During the three months ended June 30, 1998 and
1997, sales to MLC/CLC, LLC, an institutional equity partner of the Company,
accounted for 100% and 89.1% of sales of leased equipment, respectively. Sales
to the Company's equity joint ventures require the consent of the relevant joint
venture partner. While management expects the continued availability of equity
financing through this joint venture, if such consent is withheld, or financing
from this entity otherwise becomes unavailable, it could have a material adverse
effect upon the Company's business, financial condition, results of

- 31 -
<PAGE> 33

operations, and cash flows until other equity financing arrangements are
secured. Sales of equipment, both new and used, are generated through the
Company's equipment brokerage and re-marketing activities, and through its
value-added reseller subsidiaries acquired during the second quarter of fiscal
1998. Sales of equipment decreased during the three month period $4,857,897
compared to the corresponding period in the prior fiscal year due to lower
sales volume. The Company's brokerage and re-marketing activities accounted for
5.22% and 14.33% of equipment sales during the three month period in 1998 and
1997, respectively. Brokerage and re-marketing revenue can vary significantly
from period to period, depending on the volume and timing of transactions, and
the availability of equipment for sale. Sales of equipment through the
Company's value-added reseller subsidiaries accounted for the remaining portion
of equipment sales.

The Company realized a gross margin on sales of equipment of 19.4% for the three
month period ended June 30, 1998 as compared to a gross margin of 20.8% realized
on sales of equipment generated during the same three month period in the prior
fiscal year. The Company's gross margin on sales of equipment can be effected by
the mix and volume of products sold.

The gross margin generated on sales of leased equipment represent the sale of
the equity portion of equipment placed under lease and can vary significantly
depending on the nature and timing of the sale, as well as the timing of any
debt funding recognized in accordance with SFAS No. 125. For example, a lower
margin or a loss on the equity portion of a transaction is often offset by
higher lease earnings and/or a higher gain on the debt funding recognized under
SFAS No. 125. Additionally, leases which have been debt funded prior to their
equity sale will result in a lower sales and cost of sale figure, but the net
earnings from the transaction will be the same as had the deal been debt funded
subsequent to the sale of the equity. During the three month period ended June
30, 1998, the Company recognized a gross margin of $97,580 on equity sales of
$24,910,646, as compared to a gross margin of $228,223 on equity sales of
$20,140,240 during the same period in the prior fiscal year.

The Company's lease revenues increased 41.52% to $4,985,087 for the three month
period ended June 30, 1998, compared with the corresponding period in the prior
fiscal year. This increase consists of increased lease earnings and rental
revenues reflecting a higher average investment in direct financing and
sales-type leases. The investment in direct financing and sales-type leases at
June 30, 1998 and March 31, 1998 were $48,990,849 and $32,495,594, respectively.
The June 30, 1998 balance represents an increase of $16,495,255 or 50.8% over
the balance as of March 31, 1998. In addition, lease revenue includes the gain
or loss on the sale of certain financial assets, as required under the
provisions of Financial Accounting Standard No. 125, "Accounting for Transfers
and Servicing of Financial Assets and Extinguishments of Liabilities," which was
effective begining January 1, 1997.

For the three months ended June 30, 1998, fee and other income increased 4.6%
over the comparable period in the prior fiscal year. This increase is
attributable to increases in revenues from adjunct services and fees, including
broker fees, support fees, warranty reimbursements, and learning center revenues
generated by the Company's value-added reseller subsidiaries. Included in the
Company's fee and other income are earnings from certain transactions which are
in the Company's normal course of business but there is no guarantee that
future transactions of the same nature, size or profitability will occur. The
Company's ability to consumate such transactions, and the timing thereof, may
depend largely upon factors outside the direct control of management. The
earnings from these types of transactions in a particular period may not be
indicative of the earnings that can be expected in future periods.

EXPENSES

The Company's direct lease costs increased 43.2% during the three month period
ended June 30, 1998 as compared to the same period in the prior fiscal year.
Although the largest component of direct lease costs is depreciation on
operating lease equipment, the increase is primarily attributable to an increase
in the allowance for doubtful accounts due to the increased business

- 32 -
<PAGE> 34

volume of leases and retained lease portfolio, increased amortization of initial
direct costs and to increased re-billable costs, including freight and
installation, which are re-billed to lessees.

Salaries and benefits expenses decreased 9.8% during the three month period
ended June 30, 1998 over the same period in the prior fiscal year which reflects
both the lower commission expenses in the value added reseller businesses and
the higher amount of capitalization under SFAS 13 of the initial direct costs in
generating the increased lease volume.

Interest and financing costs incurred by the Company for the three months ended
June 30, 1998 and 1997 amounted to $501,305 and $465,784, respectively, and
relate to interest costs on the Company's lines of credit and notes payable.
Payment for interest costs on the majority of non-recourse and certain recourse
notes are typically remitted directly to the lender by the lesee.

The Company's provision for income taxes increased to $975,797 for the three
months ended June 30, 1998 from $460,313 for the three months ended June 30,
1997, reflecting effective income tax rates of 40.0% and 17.5%, respectively.
The low effective income tax rate for June 30, 1997 was primarily due to the
inclusion of the net earnings of businesses acquired by the Company, which prior
to their combination with the Company had elected subchapter S corporation
status, and as such, were not previously subject to federal income tax. Pro
forma tax expense, adjusted as if the Company's subsidiaries which were
previously subchapter S corporations had been subject to income tax for the
three months ended June 30, 1997, would have increased the expense by
approximately $464,900.

The foregoing resulted in a 13.9% decrease in net earnings for the three month
period ended June 30, 1998 as compared to the same periods in the prior fiscal
year after taking into consideration the pro forma tax expense.

Basic and fully diluted earnings per common share were $.24 and $.23
respectively for the three months ended June 30, 1998 as compared to $.37 and
$.36 for the three months ended June 30, 1997, based on weighted average common
shares outstanding of 6,078,126 and 5,909,976 for basic earnings per share,
respectively, and fully diluted weighted average shares of 6,241,079 and
6,023,907.

LIQUIDITY AND CAPITAL RESOURCES

During the three month period ended June 30, 1998, the Company used cash flows
from operations of $10,736,444, and cash flows from investing activities of
$19,650,383. Cash flows generated by financing activities amounted to
$18,378,293 during the same period. The net effect of these cash flows was to
decrease cash and cash equivalents by $12,008,534 during the three month period.
During the same period, the Company's total assets increased $15,742,104, or
18.9%, primarily the result of increases in direct financing leases and accounts
receivable arising from equipment purchased on behalf of lessees but not yet
placed under an equipment schedule. The Company's net investment in operating
lease equipment decreased during the period, as the decrease in book value,
primarily due to depreciation, outpaced new investment in operating lease
equipment.

The financing necessary to support the Company's leasing activities has
principally been provided from non-recourse and recourse borrowings.
Historically, the Company has obtained recourse and non-recourse borrowings from
money centers, regional banks, insurance companies, finance companies and
financial intermediaries.

- 33 -
<PAGE> 35

The Company's "Accounts payable - equipment" represents equipment costs that
have been placed on a lease schedule, but for which the Company has not yet
paid. The balance of unpaid equipment cost can vary depending on vendor terms
and the timing of lease originations. As of June 30, 1998, the Company had
$21,417,573 of unpaid equipment cost, as compared to $21,283,582 at March 31,
1998.

Prior to the permanent financing of its leases, interim financing has been
obtained through short-term, secured, recourse facilities. On June 5, 1997, the
Company entered into the First Union Facility with First Union National Bank,
N.A., which is available through December 19, 1998, and bears interest at
LIBOR+110 basis points, or, at the Company's option, Prime minus one percent. On
June 30, 1998, the Company's First Union Facility was increased to a maximum
limit of $35 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.
As of June 30, 1998, the Company had an outstanding balance of $20,000,000 on
the First Union Facility. The First Union facility is made to MLC Group and
guaranteed by MLC Holdings. In addition, MLC Holdings has guaranteed the lines
of credit made to the Company's recently acquired subsidiaries.

The Company's recently acquired subsidiaries, MLC Network Solutions and MLCI
both have separate credit sources to finance their working capital requirements
for inventories and accounts receivable. Their traditional business as
value-added resellers of PC's and related network equipment and software
products is financed through agreements known as "floor planning" financing
where interest expense for the first thirty to forty days is charged to the
supplier/distributor but not the reseller. These floor plan liabilities are
recorded under accounts payable as they are normally repaid within the thirty
to forty day time frame and represent an assigned accounts payable originally
generated with the supplier/distributor. If the thirty to forty day obligation
is not timely liquidated, interest is then assessed at stated contractual
rates. As of June 30, 1998, MLC Network Solutions has floor planning
availability of $1,350,000 through Deutsche Financial, Inc. and $225,000 from
IBM Credit Corporation. The outstanding balances to these respective suppliers
were $538,964 and $20,248 as of June 30, 1998. MLCI has floor planning
availability of $1,500,000 from FINOVA Capital Corporation and $750,000 through
IBM Credit Corporation. The outstanding balances to these respective suppliers
were $1,347,317 and $592,224 as of June 30, 1998. In addition, MLCI has a line
of credit in place, expiring on September 30, 1998, with PNC Bank, N.A. to
provide an asset based credit facility. The Company is currently negotiating an
extension of this credit facility. The line has a maximum credit limit of
$2,500,000 and interest is based on the bank's prime rate. The outstanding
balance was $479,000 as of June 30,1998.

In March 1997, the Company established the Heller Facility, a $10,000,000
partial recourse credit facility agreement, with Heller Financial, Inc., Vendor
Finance Division. Under the terms of the Heller Facility, a maximum amount of
$10 million is available to the Company subject to the approval of Heller for
each draw. As of June 30, 1998, the principal balance due under the Heller
Facility was $2,105,786.

Through MLC/CLC, LLC, the Company has a formal joint venture agreement which
provides the equity investment financing for certain of the Company's
transactions. 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 1997 earnings in excess of $800
million. On June 4, 1998, Firstar Corporation and Cargill, Inc. jointly

- 34 -
<PAGE> 36

announced that they had signed a definitive agreement for Firstar Corporation to
purchase 100% of the common stock of Cargill Leasing Corporation. The
transaction is expected to close in the third quarter of calendar year 1998,
subject to regulatory approval. Firstar Corporation is a $20 billion bank
holding company which is publicly traded on the New York Stock Exchange under
the symbol "FSR". This joint venture arrangement enables the Company to invest
in a significantly greater portfolio of business than its limited capital base
would otherwise allow. A significant portion of the Company's revenue generated
by the sale of leased equipment is attributable to sales to MLC/CLC, LLC. (See
"RESULTS OF OPERATIONS"). The Company's relationship with GATX, an unaffiliated
company which beneficially owns 90% of MLC/GATX Limited Partnership I, was
terminated in August, 1998. This termination caused the Company to write off
approximately $154,500 in the current period representing its remaining joint
venture investment and miscellaneous receivables.

The Company's debt financing activities typically provide approximately 80% to
100% of the purchase price of the equipment purchased by the Company for lease
to its customers. Any balance of the purchase price (the Company's equity
investment in the equipment) must generally be financed by cash flow from its
operations, the sale of the equipment lease to MLC/CLC,LLC, or other internal
means of financing. Although the Company expects that the credit quality of its
leases and its residual return history will continue to allow it to obtain such
financing, no assurances can be given that such financing will be available, at
acceptable terms, or at all.

The Company anticipates that its current cash on hand, operations and additional
financing available under the Company's credit facilities will be sufficient to
meet the Company's liquidity requirements for its operations through the
remainder of the fiscal year. However, the Company is currently, and intends to
continue, pursuing additional acquisitions, which are expected to be funded
through a combination of cash and the issuance by the Company of shares of its
common stock. To the extent that the Company elects to pursue acquisitions
involving the payment of significant amounts of cash (to fund the purchase price
of such acquisitions and the repayment of assumed indebtedness), the Company is
likely to require additional sources of financing to fund such non-operating
cash needs.

POTENTIAL FLUCTUATIONS IN QUARTERLY OPERATING RESULTS

The Company's future quarterly operating results and the market price of its
stock 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 Company's 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 or
vendors 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 under the Company's 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 a 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.

- 35 -
<PAGE> 37

Given the possibility of such fluctuations, the Company believes that
comparisons of the results of its operations to immediately succeeding quarters
are not necessarily meaningful and that such results for one quarter should not
be relied upon as an indication of future performance.

RESULTS OF OPERATIONS FOR THE THREE YEARS ENDED MARCH 31, 1998

REVENUES

During the three years ended March 31, 1998, on a consolidated basis,
the Company experienced growth in total revenues reflecting an increased volume
of leasing and equipment sale transactions. In fiscal year 1998, total
revenues increased to $118.4 million from $86.2 million in fiscal year 1997, an
increase of $32.2 million or 37.4%. In fiscal year 1997 total revenues
increased $14.5 million or 20.2%, from $71.7 million in fiscal year 1996. Lease
revenue increased $4.0 million, or 67.1%, from $5.9 million in fiscal year 1996
to $9.9 million in fiscal year 1997, and $5.0 million, or 50.2%, to $14.9
million in fiscal year 1998, as a result of the increase of operating leases
and direct financing leases originated or acquired and retained 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.

Equipment sales revenue is generated through the sale of new and used
equipment via the Company's equipment brokerage and re-marketing activities and
through its recently acquired value added re-seller ("VAR") subsidiaries.
Sales revenue increased 15.5% from $63.9 million in fiscal year 1996 to $73.8
million in fiscal year 1997 as a result of a 32.6 % increase in sales of leased
equipment from $16.3 million to $21.6 million combined with a 9.6% increase in
sales of equipment from $47.6 million to $52.2 million. Sales revenue increased
32.5% from $73.8 million in fiscal year 1997 to $97.8 million in fiscal year
1998 as a result of a 132.8% increase in sales of leased equipment from $21.6
million to $50.4 million combined with a 9.1% decrease in sales of equipment
from $52.2 million to $47.4 million. The major component of the decrease in
sales of equipment was the reduction in sales revenue in the buy/sell area from
$21.7 million in fiscal year 1997 to $8.5 million in fiscal 1998. This
reflects the decrease in the business activity in reselling used equipment
purchased on the open market. Sales of leased equipment has become a major
revenue source for the Company and represents 22.8%, 25.1 % and 42.5 % of the
Company's revenues for the fiscal years ended 1996, 1997 and 1998.

Fee and Other Income. Fee and other income reflects the Company's
revenues from adjunct services and fees relating to the Company's lease
portfolio, as well as fees and other income generated by the Company's VAR
subsidiaries including support fees, warranty reimbursements, and learning
center revenues. Fee and other income accounted for 4.9%, 2.9% and 2.6% of
total revenues during the fiscal

- 36 -
<PAGE> 38
years 1998, 1997 and 1996, respectively. The increase in fee and other income
is largely attributable to an increased volume of fees relating to the
Company's lease portfolio and fees earned by the Company for the management of
leases which it has sold to an equity partner. Included in fee and other
income are certain transactions which, while in the normal course of business,
for which there can be no guarantee of future transactions of the same nature,
size or profitability. The Company's ability to consummate such transactions,
and the timing thereof, may depend largely on factors outside the control of
management, and as such, earnings from these transactions in one period may not
be indicative of earnings that can be expected in future periods. Fee and
other income totaled $1.9 million in fiscal year 1996 and increased $.6 million
or 33.4% to $2.5 million in fiscal year 1997. Fiscal year 1998 fee income was
$5.8 million, a 130.9% increase over the prior year. The increase in fee and
other income is attributable to higher levels of interest income, remarketing
fees, earnings from a prepay escrow fee, and higher levels of management fee
income earned from the equity joint ventures as compared to the same periods of
1997. 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 Operations and
Financial Condition -- Fluctuations in Quarterly Operating Results."

EXPENSES

Cost of Sales. Cost of sales increased from $54.3 million in fiscal
year 1996 to $63.8 million in fiscal year 1997, and increased $23.3 million or
36.4% to $87.1 million in fiscal year 1998 which related directly to the volume
of sales in each of those years.

Depreciation and Operating Leases. Depreciation increased from $2.1
million in fiscal year 1996 to $3.5 million, or 66.4 % in fiscal year 1997, and
$ 1.0 million, or 29.0 %, to $4.5 million in fiscal year 1998. 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 and internal equipment over the three-year period.

General and Administrative Expenses. General and administrative
expenses increased $.25 million or 12.1% to $2.29 million in fiscal year 1997
and $1.41 million, or 61.6% to $3.7 million in fiscal year 1998. The increases
during the two year period is due primarily to increased level of business and
selling activity.

Interest Expense. Interest and other financing expenses decreased
slightly from $1.70 million in fiscal year 1996 to $1.65 million in fiscal year
1997, and increased $.19 million or 11.4%, to $1.84 million in fiscal year
1998. 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 $20.1 million in fiscal year
1997 to $26.1 million in fiscal year 1998. The weighted average interest rate
for the Company's nonrecourse debt outstanding as of March 31, 1997 and 1998
was 7.8% and 7.2% respectively.

Income Taxes. The Company recognizes as income tax expense the amount
of estimated tax due on current period's income, whether that tax is to be paid
currently or in the future. The provision for taxes was 30.8%, 28.0% and 24.6%
of earnings before income taxes and extraordinary items for the fiscal years
1998, 1997 and 1996, respectively. The lower provision for income taxes, as
compared to earnings before tax and extraordinary items is the result of
earnings from the Company's VAR subsidiaries which prior to their combination
with the Company were sub-chapter S corporations. As such, the provision for
income tax for the three fiscal years ended March 31, 1998 relates only to
earnings of the Company, exclusive of

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VAR earnings generated prior to their business combinations. See Note (8) in
the accompanying consolidated financial statements.

Net Earnings. On a consolidated basis, net earnings and net earnings
per share increased in each of the fiscal years 1996, 1997 and 1998. Net
earnings increased in fiscal year 1997 $.67 million to $3.49 million, or 24%,
from $2.82 million in fiscal year 1996. In fiscal 1998 net income increased
72.9% to $6.04 million over the prior year. The increases result from the
fluctuation in revenues and expenses discussed in the above paragraphs. Pro
forma net earnings for the fiscal years 1996, 1997 and 1998 were $2.39 million,
$3.13 million, and $5.43 million, respectively.

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.

FINANCIAL CONDITION

At the start of fiscal year 1996 the Company's financial resources
consisted of its stockholders' equity of $2,801,286 and various lines of credit
and recourse loans. During fiscal year 1995, 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. 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 Financing," "The Company," and "Business -- Financing." As a
result of fiscal year 1996, 1997 and 1998 net earnings of $2.8 million, $3.5
million and $6.0 million respectively, stockholders' equity increased to $23.5
million at March 31, 1998.

During the three year period ended March 31, 1998, the Company
improved its financial condition and increased available financial resources in
the following ways: (i) available lines of credit increased from $2.4 million
to $31.4 million (increased to $41.4 effective June 30, 1998); (ii)
stockholders' equity increased from $2.8 million to $23.5 million from net
earnings, proceeds from the Initial Public Offering in November, 1996 and
subsequent over subscription in December, 1996, the acquisition of MLC Network
Solutions and MLC Integrated (both accounted for under the pooling-of-interests
method); 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.

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<PAGE> 40

As part of its ongoing business activity, the Company generates new
equipment leases and also engages in leased equipment sales. From fiscal year
1996 to fiscal year 1997 the minimum lease payments for direct financing and
sales type leases balance increased from $18.2 million to $18.8 million or 3%
and increased another 59.8% in the fiscal year 1998 to $30 million. 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 " -- Fluctuations in Quarterly Operating
Results."

LIQUIDITY AND CAPITAL RESOURCES

Cash Flow from Operations. The Company generated cash flow from
operating activities of $2.7 million for fiscal year 1997. Cash flow from
operations in fiscal year 1997 was lower than net earnings of $3.5 million,
primarily due to increases in accounts receivable of $4.3 million, notes
receivable of $2.1 million and payments from leases directly to lenders of $1.6
million, and increases in inventories of $.4 million and offset by increases in
accounts payable-trade of $.8 million, and increases in accrued expenses,
salaries and commissions payable of $2.3 million. In addition, cash flow used
for investing activities primarily related to leases was $31.6 million.
Financing activities from both recourse and nonrecourse borrowing produced $27
million for fiscal year 1997. The net result of all of the above activities was
an increase in cash of $6 million for fiscal year 1997. For fiscal year 1998,
the Company generated cash flow from operating activities of $20.7 million
which was higher than net earnings of $6.0 million. The difference was
primarily due to increase in accounts payable-equipment and trade which
increased $16.3 million and $3.9 million respectively and offset by increases
in accounts receivable of $7.5 million and notes receivable of $1.6 million.
Financing activities from both recourse and nonrecourse borrowing produced $4.7
million which was less than the prior year due to the accounting requirements
of SFAS 125. The Company adopted SFAS No. 125, "Accounting for Transfers and
Servicing of Financial Assets and Extinguishments of Liabilities" effective
January 1, 1997. This standard establishes new criteria for determining
whether a transfer of financial assets in exchange for cash or other
consideration should be accounted for as a sale or as a pledge of collateral in
a secured borrowing. Certain assignments of direct finance leases made on a
nonrecourse basis by the Company after December 31, 1996 meet the criteria for
surrender of control set forth by SFAS No. 125 and have therefore been treated
as sales for financial statement purposes. SFAS No. 125 prohibits the
retroactive restatement of transactions consummated prior to January 1, 1997
which would have otherwise met the requirements of a sale under the standard.

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 an increasing extent, recourse
borrowings. The buy/sell and new equipment and software sales are financed, in
part, with recourse lines of credit that require a borrowing base of
unencumbered receivables and inventory. The Company anticipates that future
leasing and financing activities will be financed in a similar manner, as well
as from cash flow from operations and proceeds from the previous stock
placements.

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 sales transactions. Such

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<PAGE> 41
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 $31.4 million as of March
31, 1998. A brief description of each line of credit presently in place as of
March 31, 1998 follows: the First Union Facility is an asset backed facility
secured by specific leases with a maximum loan of $25 million (increased to
$35 million in July, 1998) and bears interest at LIBOR +110 basis points, or,
at the Company's option, prime minus one percent, and the PNC Bank, N.A. asset
based credit facility has a maximum credit limit of $2.5 million and carries
interest at the bank's prime rate. The business segment of reselling PC's and
related network equipment is financed through agreements known as "floor
planning" facilities from IBM Credit Corporation, FINOVA Capital Corporation
and Deutsche Financial, Inc. These facilities, totaling a maximum limit of $3.9
million, are classified as trade payables as the interest for the liabilities
for the first 30 to 40 days is the responsibility of the supplier or
distributor. The Company feels that these agreements could be substituted with
the line of credit facilities noted above but will continue their use as long
as they carry beneficial short term rates.

The Company obtains long-term, nonrecourse financing for individual
significant lease transactions near or at the time it purchases the related
equipment. The Company entered into various nonrecourse financings during the
year ended March 31, 1998 most of which were accounted for under SFAS 125
(which was effective subsequent to December 31, 1996) and received sales
treatment. As such, these transactions were not recorded as nonrecourse debt
but were part of a period gain or loss. The transactions recorded as
nonrecourse loan additions for the year ended March 31, 1998 totaled $4.5
million compared to the year ended March 31, 1997 of $26.8 million. 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
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

In June 1997, the Financial Accounting Standards Board ("FASB") issued
SFAS No. 131, "Disclosures about Segments of an Enterprise and Related
Information". The Company will apply this statement beginning in Fiscal 1999
and reclassify its financial statements for earlier periods provided for
comparative purposes.

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<PAGE> 42

SFAS 131 established standards for the way that public business
enterprises report information about operating segments in annual financial
statements and requires that those enterprises report selected information
about operating segments in interim financial reports issued to stockholders.
It also establishes standards for related disclosures about products and
services, geographic areas, and major customers. This Statement supersedes
SFAS Statement No. 14, "Financial Reporting for Segments of a Business
Enterprise," but retains the requirement to report information about major
customers. It amends FASB No. 94, "Consolidation of All Majority-Owned
Subsidiaries," to remove the special disclosure requirements for previously
unconsolidated subsidiaries.

At this point, the Company has not determined the impact of adopting
SFAS 131.

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 Company is also a
value-added reseller, VAR, of PC's and related network equipment and software
products and provides various support services to its customers from facilities
located in Greenville, Raleigh and Wilmington, North Carolina and Pottstown,
Pennsylvania, located in the suburbs of Philadelphia. The Company's VAR
business is basically a desktop and network equipment distribution business and
service provider that requires minimal inventories and costs are variable to
the level of business.

The ten largest commercial customers of the Company by purchase price
of the equipment leased by the Company, for fiscal year 1998 were, (in
alphabetical order): American National Red Cross: Blue Cross Blue Shield of
North Carolina; BTG, Incorporated; Corning, Incorporated; E.I. du Pont de
Nemours and Company; Interealty Corporation; Nationwide Mutual Insurance
Company; PHP HealthCare Corporation; Sandia Corporation; Sprint Communications
Company L.P. and affiliates. The three largest customers of the network
services, software and PC reselling business for fiscal year 1998 were AHERF,
Catalytica Pharmaceutical, Incorporated, and Corning, Incorporated. The three
largest government customers, based upon purchase price of the equipment leased
by the Company for fiscal year 1998, are, in alphabetical order: Austin
Community College, Texas, Marin County, California and the State of California,
Department of Justice. On July 21, 1998, AHERF filed for bankruptcy and the
Company does not anticipate AHERF or its successor to continue to be a customer
of the Company for new equipment sales or leases.

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. 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.

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<PAGE> 43
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.

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.

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, 1998, on matured leases, the
Company has realized a return greater than originally estimated at lease
origination 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 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. See "Management."

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
$169.9 billion of the $566.2 billion spent on productive assets in 1996 was
financed by means of leasing. The ELA estimates that 80% of all U.S.
businesses are leasing or financing to acquire some of their 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.

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<PAGE> 44
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 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.

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 in
their May 9, 1996 statement on PC total cost of ownership under the "Windows 95
Model" 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
$5,500. 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.

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<PAGE> 45
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.

In the fiscal year 1998, the Company signed two agreements with Cisco
Systems Capital Corporation and Cisco Systems, Inc. (together, "Cisco"), which
name the Company as Cisco's preferred financing provider in the governmental
and educational market segment, and in the domestic commercial market segment
(excluding the high-risk/venture leasing segment). The agreements set forth
certain obligations of the Company, including the obligation to hire and retain
salesmen specifically to provide service to Cisco, and certain administrative
and remarketing obligations regarding transactions originated under the Cisco
program. The agreements grant Cisco the right to remarket the equipment at its
option, and the right to purchase all, but not less than all, of the Cisco
equipment portfolio at a certain return. The agreements are subject to
non-renewal and termination for several reasons, including non-performance by
the Company. During fiscal year 1998, the Company originated a nominal amount
of volume from the Cisco agreements.

In fiscal year 1998, the Company signed several exclusive teaming
agreements with various federal government resellers, in anticipation of the
acceptance of leasing terms and conditions by the General Services
Administration on vendors "GSA Schedules". Under the teaming agreements, the
Company will provide its leasing terms and conditions for inclusion on the
vendor's GSA Schedules in exchange for the first right of refusal to finance
any lease transactions.

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.

While the Company is pursuing and intends to continue to pursue the
foregoing 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 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."

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<PAGE> 46
Acquisition of Companies in Related Lines of Business. 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 - Risk Related to the Company's Acquisition Strategy" and "--
Management of Growth."

The Company's acquisition strategy has resulted in the consummation of several
significant businesses. On July 24, 1997, the Company, through a newly-formed
wholly-owned subsidiary, MLC Network Solutions, acquired Compuventures. The
outstanding shares of Compuventures common stock were converted into 260,978
shares of the Company's Common Stock, valued at $3,384,564. Compuventures is a
value-added reseller of PC's and related network equipment and software
products and provides various support services to its customers from facilities
located in Greenville, Raleigh and Wilmington, North Carolina. The merger was
accounted for as a pooling of interests. MLCI (dba "ECC Integrated, Inc."),
was acquired on September 29, 1997 through the merger of a newly-formed
wholly-owned subsidiary of MLC Holdings into MLCI with MLCI being the surviving
entity. MLCI currently conducts a network services and software and PC
reselling business from its sole location in Pottstown, Pennsylvania. The
Company exchanged 498,998 shares of Common Stock, valued at $7,092,000, for the
total capital stock of MLCI. This merger was accounted for as a polling of
interests. On July 1, 1998, the Company, through a wholly-owned subsidiary,
MLC Network Solutions of Virginia, Inc., acquired PC Plus. The shares of PC
Plus were acquired for a total merger consideration of $7,245,673, through the
exchange of 263,478 shares, valued at $13.75 per share, and $3,622,836 of cash.
This merger was accounted for as a purchase.

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 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."

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<PAGE> 47
LEASING, FINANCING AND SALES ACTIVITIES

The Company is in the business of leasing and financing equipment and
assets, and is also a value-added reseller of PC's and related network
equipment and software products, and provides various support service to its
customers. 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; installment 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.

Business Development. The Company conducts its business development
efforts through its marketing staff of both employees and independent
representatives which includes 64 individuals located in 14 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, Digital Equipment
Corporation, Gateway 2000, Inc., Compaq Computer Corporation, Microsoft
Corporation, Amdahl Corporation, Dell Computer Corporation, HitachiData 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

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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.

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 review
process, which also determines and reviews the residual value recorded for
specific transactions. The investment review process typically acts by a

- 47 -
<PAGE> 49

signature process instead of conducting formal meetings. The investment review
process approves the pricing, including residual values, for all transactions
involving $100,000 or more in product value. The investment review process is
conducted by the Chief Executive Officer, the Chief Operating Officer, the
Credit Manager and the Treasurer of the Company.

Structure Review. Every lease or financing 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

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.

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 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:

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

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<PAGE> 50

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 March 31, 1998,
the Company had aggregate outstanding nonrecourse borrowings of $13,027,676.

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.

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

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<PAGE> 51

Equity Joint Ventures. Through MLC/CLC LLC and MLC/GATX Limited
Partnership I, the Company has formal joint venture arrangements with two
institutional investors which provide the equity investment financing for
certain of the Company's transactions. 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
in December, 1997 to have sales of $56 billion, operating income of $3.2
billion and net income of $814 million for the fiscal year ended May 1997.
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 $806 million, as of June 30, 1997. These joint venture arrangements have
enabled 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
does not purchase any lease transactions from anyone other than the Company.
MLC/CLC LLC does not purchase any lease transactions from anyone other than the
Company.

MLC/GATX Limited Partnership I and MLC/CLC LLC have, over the last
three fiscal years, provided the majority of the Company's equity investment
from third parties as referenced above. For fiscal years 1997 and 1998,
approximately 23.6% and 38.2%, respectively, of the Company's total revenue was
attributable to sales of lease transactions to MLC/GATX Limited Partnership I
and to MLC/CLC LLC. However, the Company's relationship with MLC/GATX Limited
Partnership I will be terminated during the second quarter of the 1999 fiscal
year because the Company believes the relationship is no longer necessary.
During fiscal years 1997 and 1998, revenue recognized from sales to MLC/GATX
Limited Partnership I was $3.5 million and $.4 million, respectively, of the
Company's total revenues.

For fiscal year 1998, approximately $44.8 million or 37.8% of the
Company's total revenue was attributable to sales of lease transactions to the
MLC/CLC LLC entity. 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.

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.

Recourse Financing. Bank Lines of Credit. The Company relies on
recourse borrowing in the form of revolving lines of credit 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 March 31, 1998, the
Company had aggregate outstanding long-term recourse borrowings of $13,037,365,
from various lenders, primarily for the long term financing of leases.

On June 5, 1997, the Company entered into the First Union Facility, a
$15,000,000 committed recourse line of credit with First Union National Bank,
N.A. Borrowings under the First Union Facility, bear interest at LIBOR + 110
basis points, or, at the Company's option, prime minus one percent. On
September 5, 1997, the Company entered into Amendment No. 1 dated September 5,
1997. The Amendment No. 1 increases the loan commitment from $15,000,000 to
$25,000,000 and increases the

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<PAGE> 52
amount of investment grade paper which may qualify as eligible leases from
$10,000,000 to $15,000,000. In connection with the amendment, the Company made
and delivered to First Union Facility a $25,000,000 note dated September 5,
1997 to replace the $15,000,000 note existing under the credit agreement No. 1.
The facility was further amended by Amendment No. 2 dated December 19, 1997,
which provided for participation in the line by Riggs Bank, N.A. and Bank Leumi
USA, each in the amount of $5,000,000, and extended the facility to December
19, 1998. Effective June 30, 1998, Amendment No. 3 increased the facility to
$35,000,000. The First Union Facility is an extension of credit to MLC Group
and is guaranteed by MLC Holdings. The First Union Facility is secured by
certain of the Company's assets such as chattel paper (including leases),
receivables, inventory, and equipment. The availability of the line is subject
to a borrowing base which consists of inventory, receivables, purchased assets,
and leases. 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 the 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. There can be no assurance that the
Company will be able to renew, extend or replace this credit facility and a
failure to renew, extend or replace any of this facility would have a material
adverse effect upon the Company's business, financial condition and results of
operations.

The First Union Facility contains covenants and restrictions including
prohibitions against certain mergers or consolidations in which the Company is
not the surviving entity, creation of liens against the Company's property,
guarantees of obligations in excess of $10 million, use of proceeds to acquire
margin stock, certain purchases of stock or assets in the event a default
exists or is likely, sales, pledge or assignment of assets other than in the
ordinary course of business and certain redemptions, repurchases, dividends or
distributions of stock. As of the date of this Prospectus, the Company is in
compliance with all applicable financial ratios and covenants under the First
Union Facility.

The Company's recently acquired subsidiaries, MLC Network Solutions
and MLCI, both have separate credit sources to finance their working capital
requirements for inventories and accounts receivable, which the Company has
guaranteed. Their traditional business as value-added resellers of PC's and
related network equipment and software products is financed through agreements
known as "floor planning" financing where interest expense for the first 30
days is charged to the supplier/distributor but not the reseller. These floor
plan liabilities are recorded under accounts payable as they are normally
repaid within the 30-day time frame as they represent an assigned accounts
payable originally generated with the supplier/distributor. If the 30-day
obligation is not timely liquidated, interest is then assessed as stated
contractual rates. At March 31, 1998 MLC Network Solutions has floor planning
financing available of $1.35 million through Deutsche Financial, Inc. and
$225,000 from IBM Credit Corporation. The outstanding balances owed to these
suppliers were approximately $1.1 million and $29,160, respectively, as of
March 31, 1998. MLCI has floor planning financing available of $1.5 million
from FINOVA Capital Corporation, $750,000 from IBM Credit Corporation, and
$100,000 from Deutsche Financial, Inc. The outstanding balances owed to these
suppliers were $698,738, $104,011, and $0, respectively, as of March 31, 1998.
MLCI additionally has a line of credit in place with PNC Bank, N.A. to provide
an asset-based credit facility. The line has a maximum credit limit of $2.5
million and interest is based on the bank's prime rate. As of March 31, 1998,
there was no balance outstanding. PC Plus, has a floor planning financing
agreement with NationsCredit Distribution Finance, Inc. The line has a maximum
credit limit of $6 million and carries interest at prime plus 1.5%. As of
July 16, 1998, the outstanding balance was approximately

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<PAGE> 53
$4.9 million. 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.

Partial Recourse Borrowing Facilities. On March 12, 1997, the Company
finalized and executed documents establishing a $10 million credit facility,
the "Heller Facility", with Heller Financial, Inc."", a Delaware corporation.
Under the terms of the Heller Facility, a maximum amount of $10 million is
available to the Company, provided, that each draw is subject to the approval
of Heller. The Heller Facility is evidenced by a Loan and Security Agreement
dated as of January 31, 1997"" and a First Amendment to Loan and Security
Agreement"" dated as of March 12, 1997. The primary purpose of the Heller
Facility is for the permanent fixed-rate discounting of rents for commercial
leases of information technology assets with the Company's middle-market
customers. As of March 31, 1997, no advances under the Heller Facility had been
made. As of March 31, 1998, the principal balance due under the Heller Facility
was approximately $1.2 million. Each advance under the facility will bear
interest at an annual rate equal to the sum of the weekly average U.S. Treasury
Constant Maturities for a Treasury Note having approximately an equal term as
the weighted average term of the contracts subject to the advance, plus an
index ranging from 1.75% to 3.00%, depending on the amount of the advance and
the credit rating (if any) of the lessee. The Heller Facility contains a number
of covenants binding on the Company and is a limited recourse facility, secured
by a first-priority lien in the contracts and chattel paper relating to each
advance, the equipment subject to such contracts, a 10% cross-collateralized
first loss guarantee, and all books, records and proceeds pertaining thereto.
Under the Heller Facility, Heller extends credit to MLC Group which is
guaranteed by MLC Holdings. As compared to a committed line of credit, lending
under the Heller Facility is in Heller's sole discretion, and is further
subject to MLC Group's compliance with certain conditions and procedures. Under
the Heller Facility, upon not less than 60 days' prior notice, either Heller or
the Company may notify the other of its intention not to seek/provide any
further financing thereunder. There can be no assurance that the Company will
be able to renew, extend or replace this credit facility and a failure to
renew, extend or replace any of this facility 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 "-- 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,
prior to the Initial Public Offering, the personal guarantees and collateral
provided by its stockholders. 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,
results of operations, and cash flows. See "Business -- Financing."

DEFAULT AND LOSS EXPERIENCE

Until the fiscal year ended March 31, 1998, when the Company incurred
a $17,350 credit loss, the Company had not taken any write-offs due to credit
losses with respect to lease transactions since inception. The Company
currently has a consolidated reserve for credit losses on leases and accounts

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<PAGE> 54
receivable of $142,097. The Company believes that its reserve for credit
losses is adequate at March 31, 1998.

One of the Company's significant equipment sales and lease customers
has filed for voluntary bankruptcy protection. AHERF accounted for $8.1
million or approximately 6.8% of MLC's sales revenue in the fiscal year ended
March 31, 1998. AHERF is a Pittsburgh based not-for-profit entity that owns
multiple hospitals, the largest of which include Hahnemann University Hospital,
St. Christopher's Hospital for Children, Medical College of Pennsylvania and
Graduate Hospital, all of which are located in Philadelphia, Pennsylvania. On
July 21, 1998, AHERF, and some but not all of its operating subsidiaries filed
for bankruptcy and agreed to sell its eight Philadelphia-area hospitals to
Vanguard Health Systems, Inc., a Tennessee based for-profit company, subject to
court approval. The Company's net lease and receivables balance relating to
this customer is approximately $1,700,000. The Company believes that the fair
market value of the equipment may be below its current balances, and, depending
on the assumption or rejection of the leases by the Bankruptcy Trustee and the
creditor status and ultimate repayment schedule of other claims, upon disposal
of the equipment and disposition of its claims, the Company could incur a loss
with respect to its current balances. The amount and timing of such losses
cannot be accurately estimated by the Company at this time due to the recent
filing and unknown status of many of its claims. The Company is vigorously
pursuing all available remedies in bankruptcy court, and may enter into
debtor-in-possession sales and financings which have been approved by the
bankruptcy court. The Company believes that as of June 30, 1998, its allowance
for doubtful accounts having been increased to $673,000, is adequate to provide
for any potential loss resulting from this customer.

PROPERTIES

The Company has 14 leased office facilities with an aggregate of
approximately 40,255 square feet of office space under lease. The Company's
four largest offices are: its principal executive office, which is
approximately 6,625 square feet, located at 11150 Sunset Hills Road, Suite 110,
Reston, Virginia; MLCI's sole location, a 16,200 square foot facility, located
in Pottstown, Pennsylvania; and MLC Network Solutions' two main locations in
Greenville and Wilmington, North Carolina, which are 5,719 and 4,460 square
feet, respectively. The other regional offices in Austin, Texas; San Diego,
California; Dallas, Texas; Sacramento, California; Pittsburgh and West Chester,
Pennsylvania; Atlanta, Georgia; Richmond, Virginia; and Raleigh, North
Carolina, comprise a total of 7,251 square feet. As of March 31, 1998, the
aggregate monthly rent under all of the Company's office leases was
approximately $46,014. The Reston, Virginia office lease expires on November
19, 1998 and the Company believes it will be able to either renew its current
lease or obtain other office space in the same general area.

PC Plus has one office facility and one storage facility in Reston,
Virginia, totaling 13,258 square feet of space, at a monthly rental of $16,430.
The lease for its main location expires in February, 1999. The Company believes
it will be able to renew its current lease or obtain other office space in the
same general area.

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<PAGE> 55
COMPETITION

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 July 1, 1998, the Company had 220 employees. Of these, 62 work
in the Company's principal executive office in Reston, Virginia, 49 work at
MLCI from a single location in Pottstown, Pennsylvania, 62 of MLC Network
Solutions and marketing personnel work out of three locations in North
Carolina, 30 work at the PC Plus subsidiary in Reston, VA, and the remaining 17
work in the various regional offices of the Company. Regional offices are
generally staffed with one or more account representatives who have daily
contact with customers, lessees and vendors.

The Company has assigned its employees to the following functional
areas, with the number of employees in each area indicated in parentheses:
administrative and operations (28); sales and marketing (64); asset management
(9); contracts (18); accounting (22); technical support (67); executive (6);
finance (3); and operations (3). No employees of the Company are represented
by a labor union. The Company believes that its relations with its employees
are good.

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<PAGE> 56

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, results of
operations, or cash flows.

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<PAGE> 57
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 2000 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. Each officer of the Company
is chosen by the Board of Directors and holds his or her office until his or
her successor shall have been duly chosen and qualified or until his or her
death or until he or she shall resign or be removed as provided by the By-Laws.

The following table sets forth the name, age and position with the
Company of each person who served as an executive officer, director or
significant employee as of July 15, 1998.

<TABLE>
<CAPTION>
NAME AGE POSITION CLASS
- ---- --- -------- -----
<S> <C> <C> <C>
Phillip G. Norton(**) . . . . . . . . 54 Chairman of the Board,
President, and Chief
Executive Officer III

Thomas B. Howard, Jr. . . . . . . . . 51 Vice President; Executive
Vice President, and Chief
Operating Officer of MLC Group

Bruce M. Bowen . . . . . . . . . . . 46 Director and Executive Vice President III

Steven J. Mencarini . . . . . . . . . 43 Senior Vice President and
Chief Financial Officer

C. Thomas Faulders, III . . . . . . . 48 Director I

Terrence O'Donnell. . . . . . . . . . 53 Director II

Carl J. Rickertsen. . . . . . . . . . 38 Director II

Kleyton L. Parkhurst. . . . . . . . . 35 Senior Vice President, Secretary/Treasurer

Kevin M. Norton (**) . . . . . . . . 42 Vice President of Brokerage
Operations

William J. Slaton . . . . . . . . . . 50 Vice President of Marketing

Thomas K. McNamara. . . . . . . . . . 52 Vice President
</TABLE>

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

(**) Phillip G. Norton and Kevin M. Norton are brothers. All references
to a Mr. Norton contained herein refer to Mr. Phillip G. Norton unless
otherwise indicated.

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<PAGE> 58

The name and business experience during the past five years of each
director, executive officer and key employee of the Company as of July 15, 1998
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. Since
September 1, 1996, Mr. Norton has also served as President of the Company. 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 and Executive Vice President of the Company, and from September 1,
1996 to June 18, 1997, he also served as Chief Financial Officer. 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.

Thomas B. Howard, Jr. joined the Company in January of 1997 as Vice
President and Chief Operating Officer. Prior to joining the Company, Mr.
Howard was President of Allstate Leasing, Inc., a third party lessor, from 1995
to January, 1997. Mr. Howard has spent over 20 years in the banking industry,
most recently having served as President of Signet Leasing and a Senior Vice
President of Signet Bank. As President of Signet Leasing, Mr. Howard directed
all of the capital equipment financing and leasing products for commercial,
federal and municipal accounts at the leasing company. He oversaw a staff of 60
people and effectively led the Company's growth from approximately $25 million
in assets to approximately $650 million in assets in nine years, while
maintaining loan loss ratios which were less than industry standards. Mr.
Howard trained and motivated sales teams which greatly increased business
volumes and led the leasing division through three major reorganizations in
five years, and to increased profitability each year. Mr. Howard began his
career at Signet in 1975 as an Assistant Vice President at Union Trust Bancorp,
one of its predecessor banks. Mr. Howard, a member of the American Institute of
Certified Public Accountants, is a 1970 graduate of the University of Maryland
and received an MBA in Finance from Loyola College of Maryland.

C. Thomas Faulders, III joined the Board of Directors on July 14,
1998. Mr. Faulders is currently Chairman of the Board of Axiom, Inc. (Nasdaq:
AXIM), an information services company. From 1995 to 1998, Mr. Faulders was
Executive Vice President, Treasurer and Chief Financial Officer of BDM
International, Inc., a prominent systems integration company which is a
wholly-owned subsidiary of TRW, Inc. At BDM he was instrumental in company's
successful initial public offering and secondary offering, and its sale to TRW,
Inc. From 1992 to 1995, Mr. Faulders was Vice President and Chief Financial
Officer of Comsat Corporation. Prior to that, Mr. Faulders was Senior Vice
President, Business Marketing

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<PAGE> 59
and Vice President, and Vice President and Treasurer of MCI Communications
Corporation, and Treasurer of Satellite Business Systems. Mr. Faulders was in
the U.S. Navy from 1971 to 1979. He is a 1971 graduate of the University of
Virginia and has an MBA from the Wharton School of the University of
Pennsylvania, Class of 1981. Mr. Faulders is a member of the Board of
Directors of Intersolv, Inc. (Nasdaq: ISLI), Universal Technology and Systems,
Inc., and the Ronald Reagan Institute for Emergency Medicine.

Steven J. Mencarini joined the Company in June of 1997 as Senior Vice
President and Chief Financial Officer. Prior to joining the Company, Mr.
Mencarini was Controller of the Technology Management Group of Computer
Sciences Corporation ("CSC"), a New York Stock Exchange company and one of the
nation's three largest information technology outsourcing organizations. At
CSC, Mr. Mencarini supervised 72 people and was responsible for all financial
and tax reporting, financial review of MIS systems, financial planning and
approval for a $150 million capital annual budget, tax research, sales and
personal property tax, asset management of owned and leased equipment, and the
review and analysis of proposed work for outsourcing contracts which included
costing, pricing, residual analysis, lease financing, and equipment
liquidation. Mr. Mencarini joined CSC in 1991 as Director of Finance and was
promoted to Controller in 1996. Prior to working at CSC, Mr. Mencarini was the
Vice President-Finance of PacifiCorp Capital from 1981 to 1991, and was Senior
Auditor of Deloitte, Haskins & Sells from 1979 to 1981. Mr. Mencarini is a 1976
graduate of the University of Maryland and has a Masters of Taxation from
American University.

Terrence O'Donnell joined the Company's Board of Directors in
November, 1996 upon the completion of the Company's Initial Public 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 which manufactures
and markets a broad range of animal health products used in poultry production
and pet care. IGI also markets cosmetics, consumer products and human
pharmaceuticals. 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. Rickertsen joined the Company's Board of Directors in
November, 1996 upon the completion of the Company's Initial Public Offering.
Mr. Rickertsen is a partner in Thayer Capital Partners, a $364 million
institutional private equity fund based in Washington, D.C. Mr. Rickertsen has
been with Thayer Capital Partners since September, 1994. Prior to his tenure
at Thayer Capital Partners, Mr. Rickertsen acted as a private financial
consultant from 1993 through 1994 and was a partner of Hancock Park Associates,
a private equity investment firm, from 1989 through 1993. Prior to that, Mr.
Rickertsen was associated with Brentwood Associates from 1987 through 1989 and
was a Financial Analyst with Morgan Stanley & Co., Incorporated from 1983
through 1985. Mr. Rickertsen is a 1983 graduate of Stanford University and,
in 1987, received a Masters of Business Administration from Harvard Business
School.

Kleyton L. Parkhurst joined the Company in May, 1991 as Director of
Finance and, since September 1, 1996, has served as Secretary and Treasurer of
the Company. In July, 1998 Mr. Parkhurst was made Senior Vice President, for
Corporate Development. Mr. Parkhurst is responsible for all of the Company's
financing activities, credit review, and manages the Company's bank facilities.
Mr. Parkhurst has syndication expertise in commercial nonrecourse debt, federal
government leases, state and local

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<PAGE> 60
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.

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, Phillip G. Norton and Patrick J. Norton, Jr. 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,
respectively. 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.

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.

There are no material proceedings to which any director, officer of
affiliate of the Company, any owner of record or beneficially of more than five
percent of any class of voting securities of the Company, or any associate of
any such director, officer, affiliate of the Company or security holder is a
party adverse to the Company or any of its subsidiaries or has a material
interest adverse to the Company or any of its subsidiaries.

COMMITTEES AND MEETINGS

Audit Committee. The audit committee of the Board of Directors (the
"Audit Committee") is 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 external audit functions
and monitoring the adequacy of the Company's operating and internal controls as
reported by management and the external auditors. The members of the Audit
Committee are Terrence O'Donnell and Carl J. Rickertsen.

Compensation Committee. The compensation committee of the Board of
Directors (the "Compensation Committee") is 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 Terrence
O'Donnell, and Carl J. Rickertsen. 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

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<PAGE> 61

Stock Incentive Committee. The stock incentive committee of the Board
of Directors (the "Stock Incentive Committee") is authorized to award stock,
and various stock options and rights and other stock based compensation grants
under the Company's Master Stock Incentive Plan (formerly the 1996 Stock
Incentive Plan prior to an amendment and restatement effective May 14, 1997)
and its component plans, which include the Amended and Restated Incentive Stock
Option Plan (formerly the 1996 Incentive Stock Option Plan prior to an
amendment and restatement effective May 14, 1997), the Amended and Restated
Outside Director Stock Option Plan (formerly the 1996 Outside Director Stock
Option Plan prior to an amendment and restatement effective May 14, 1997), the
Amended and Restated Nonqualified Stock Option Plan (formerly the 1996
Nonqualified Stock Option Plan prior to an amendment and restatement effective
May 14, 1997), and the Employee Stock Purchase Plan (approved by the
stockholders in September, 1997, and was activated in April, 1998). See
"Executive Compensation -- 1996 Stock Incentive Plan." The members of the Stock
Incentive Committee presently are Phillip G. Norton and Bruce M. Bowen.
Except for options granted to Mr. Norton and Mr. Bowen under the employment
agreements, formula plan grants to the outside directors under the Amended and
Restated Outside Director Stock Option Plan 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.

The Company has no nominating committee or any committee serving a
similar function.

DIRECTOR COMPENSATION

Directors who are also employees of the Company do not currently
receive any compensation or other services as members of the Board of
Directors. Prior to May 14, 1997, the outside directors were paid $500 per
meeting. On May 14, 1997, the Board of Directors adopted a revised outside
director compensation program which provides for each outside director to
receive a $10,000 annual retainer, and $500 for each special committee meeting.
The $500 fee for regular Board meetings was terminated. All directors will be
reimbursed for their out-of-pocket expenses incurred to attend board or
committee meetings. The Company has adopted the Amended and Restated Outside
Director Stock Option Plan (formerly the 1996 Outside Director Stock Option
Plan prior to an amendment and restatement effective May 14, 1997), which
provides for the award and exercise of certain options to nonemployee directors
on a formula basis based upon length of service. In November, 1996, under the
1996 Outside Director Stock Option Plan, the Company granted options to its
nonemployee directors to purchase an aggregate of 30,000 shares of Common Stock
at an exercise price equal to $8.75 per share, 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 Amended and Restated Outside Director Stock Option Plan made the options
granted in November, 1996 immediately exercisable and also provides for the
grant of options for 10,000 shares of Common Stock to each nonemployee director
on the anniversary of each year of service as a director at an exercise price
equal to the market price as of the date of grant, with each option being
subject to a one-year vesting requirement. See "-- Executive Compensation and
Other Information -- Master Stock Incentive Plan" for a description of option
grants to nonemployee directors.

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

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<PAGE> 62
Officer, the "Named Executive Officers") of the Company for the fiscal year
ended March 31, 1998. Certain columns have been omitted from this summary
compensation table as they are not applicable.

<TABLE>
<CAPTION>
Annual Compensation
----------------------------------------------------------------
Annual All Other
Name and Principal Position Year Bonus Salary Commission Compensation Compensation
- ---------------------------------- ------ -------------- ------------ ---------------- ----------------

<S> <C> <C> <C> <C> <C>
Phillip G. Norton 1998 $200,000 $ $ 348 $ --
Chairman, Chief Executive 1997 67,265 -- 348 90,000(1)
Officer and President 1996 984 -- -- 120,000(1)

Bruce M. Bowen 1998 160,000 -- 1,500(2) --
Director, Chief Financial 1997 130,000 10,000 12,729(2)(3) --
Officer, Executive Vice 1996 120,000 40,000 13,206(2)(3) 1,000(4)
President

Kevin M. Norton 1998 135,000 183,421 1,500(2) --
Vice President of 1997 30,000(5) 249,015 1,500(2) --
Brokerage Operations 1996 -- 347,023 3,087(2) --

Kleyton L. Parkhurst 1998 140,000 -- 1,500(2) --
Senior Vice President, 1997 40,000(5) 117,567 1,500(2) --
Secretary/Treasurer 1996 -- 169,352 1,356(2) --

Thomas B. Howard, Jr. 1998 145,000 -- -- --
Chief Operating Officer, Executive 1997 27,083(6) -- -- --
Vice President 1996 -- -- -- --

Steven J. Mencarini 1998 97,596(6) -- -- --
Chief Financial Officer, Senior 1997 -- -- -- --
Vice President 1996 -- -- -- --

Thomas K. McNamara 1998 42,000 271,085 0 --
Vice President 1997 42,000 351,781 1,109 --
1996 42,000 98,257 3,234(2) --
</TABLE>

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

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

(2) Employer 401(k) plan match.

(3) Includes $11,229 in fiscal year 1997 and $10,000 in fiscal year 1996,
of interest paid on loans by Mr. Bowen to the Company; the balance
represents employer 401(k) plan match amounts.

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

(5) Until December 1, 1996 Kevin M. Norton and Kleyton L. Parkhurst were
paid on a commission basis and thereafter, pursuant to their
employment agreements, received base salaries, bonus plus commission.
See "-- Compensation Arrangements and Employment Agreements."

(6) Mr. Howard commenced employment in January 1997. See "-- Compensation
Arrangements and Employment Agreements." Mr. Mencarini commenced
employment in June 1997. See "-- Compensation Arrangements and
Employment Agreements."

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<PAGE> 63
OPTION GRANTS IN LAST FISCAL YEAR

The following table sets forth certain information with respect to
options granted during the last fiscal year ended March 31, 1998 to the Named
Executive Officers in the above Summary Compensation Table.

<TABLE>
<CAPTION>
Percent of Potential Realizable Value at
Number of Total Assumed Annual Rates of Stock Price
Securities Options/SARS Appreciation for Option
Underlying Granted to Exercise or Term (6)
Options/SARS Employees in Base Price Expiration ------------------------------------
Name Granted (#) Fiscal Year(5) ($/Sh) Date 5% 10%
- ---------------------- --------------- --------------- -------------- ------------ ---------------- -----------------

<S> <C> <C> <C> <C> <C> <C>
Phillip G. Norton 25,000 (1) 9.0% $12.65 02/05/2003 $50,681 $146,772
Bruce M. Bowen 15,000 (1) 5.4 11.50 02/05/2008 108,484 274,921
Kevin M. Norton -- -- -- -- -- --
Kleyton L. Parkhurst 10,000 (2) 3.6 11.50 02/05/2008 72,323 183,280
Thomas B. Howard, Jr. 30,000 (3) 10.8 10.75 04/25/2007 202,819 513,982
2,500 (2) 0.9 11.50 02/05/2008 18,081 45,820
Steven J. Mencarini 16,200 (3) 5.8 12.75 06/19/2007 129,898 329,188
5,100 (4) 1.8 13.25 09/08/2007 42,498 107,697
9,400 (4) 3.4 12.25 12/03/2007 72,417 183,519
5,000 (2) 1.8 11.50 02/05/2008 36,161 91,640
Thomas K. McNamara -- -- -- -- -- --
</TABLE>

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

(1) The options were granted to Mr. Norton and Mr. Bowen on February 5,
1998 in lieu of receiving a fiscal year end bonus. The options granted
to Mr. Norton were under the Incentive Stock Option Plan, a component
of the Company's Stock Incentive Plan, and are exercisable in four
annual installments beginning one year after date of grant. The
options granted to Mr. Bowen were under the NonQualified Stock Option
Plan, a component of the Company's Master Stock Option Plan, and are
exercisable in three annual installments beginning one year after date
of grant.

(2) The options were granted to Mr. Parkhurst, Mr. Howard and Mr.
Mencarini on February 5, 1998. These options were issued under the
Incentive Stock Option Plan, a component of the Company's Master Stock
Incentive Plan and are exerciseable in three annual installments
beginning one year after date of grant.

(3) The options were granted to Mr. Howard on April 25, 1997 and Mr.
Mencarini on June 19, 1997 in connection with their employment. The
options were granted under the Incentive Stock Option Plan, a
component plan of the Company's Stock Incentive Program. These
options become exercisable in five annual installments beginning one
year after grant.

(4) The options were granted to Mr. Mencarini on September 3, 1997 and
December 3, 1997, under the Incentive Stock Option Plan, a component
plan of the Company's Stock Incentive Program. These options become
exercisable in five annual installments beginning one year after
grant.

(5) Based on an aggregate of 277,200 shares granted during fiscal 1998 to
certain employees of the Company.

(6) Potential realizable value is calculated based on an assumption that
the price of the Company's Common Stock will appreciate at the assumed
annual rates shown (5% and 10%), compounded annually, from the date of
grant of the option until the end of the option term (10 years) and (5
years for Phillip G. Norton) The 5% and 10% assumed rates of
appreciation are required by the rules of the SEC and do not represent
the Company's estimate of future market prices of the Common Stock.

AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR (MARCH 31, 1998) AND FISCAL
YEAR-END (MARCH 31, 1998) OPTION/SAR VALUES

The following table sets forth certain information with respect to
options exercised during the Company's fiscal year ended March 31, 1998 by the
Named Executive Officers in the Summary Compensation Table, and with respect to
unexercised options held by such persons at the end of fiscal year 1998.

- 62 -
<PAGE> 64

<TABLE>
<CAPTION>
Number of Securities Value of Unexercised in the
Shares Underlying Unexercised Money Options/SARS at
Acquired Options/SARS at FY-End (#) FY-End ($)(1)
On Value ---------------------------- ----------------------------
Name Exercise Realized Exercisable Unexercisable Exercisable Unexercisable
- ----------------------- ------------ ---------- ------------- -------------- ------------ --------------

<S> <C> <C> <C> <C> <C> <C>
Phillip G. Norton -- -- 65,000 90,000 325,000 352,500
Bruce M. Bowen -- -- 7,500 22,500 37,500 71,250
Kevin M. Norton -- -- -- -- -- --
Kleyton L. Parkhurst -- -- 50,000 60,000 367,500 390,000
Thomas B. Howard, Jr. -- -- -- 32,500 -- 95,625
Steven J. Mencarini -- -- -- 35,700 -- 44,100
Thomas K. McNamara -- -- 2,000 8,000 8,000 32,000
</TABLE>

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

(1) Based on a closing bid price of $13.75 per share as of the close of
business on March 31, 1998.

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, with Thomas B. Howard, Jr. effective as of April 1, 1997, with Steven J.
Mencarini effective as of June 18, 1997, with William G. Garner, effective as
of July 24, 1997, and with Vincent W. Marino effective as of September 29,
1997. Each employment agreement, except for William G. Garner's who had a
one-year term, 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 is entitled
to receive an annual base salary ($200,000 in the case of Phillip G. Norton;
$150,000 in the case of Bruce M. Bowen; $150,000 in the case of Vincent W.
Marino; $120,000 in the case of Kleyton L. Parkhurst and William J. Slaton;
$125,000 in the case of Thomas B. Howard, Jr. and Steven J. Mencarini; and
$36,000 for William G. Garner who is under a part time requirement) and are
eligible for commissions or performance bonuses. The performance bonus for
Phillip G. Norton for each fiscal year is 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 is 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, William J. Slaton,
Thomas B. Howard, Jr. and Steven J. Mencarini are paid based upon performance
criteria established by Phillip G. Norton and Bruce M. Bowen, not to exceed
$80,000 each per fiscal year as to Kleyton L. Parkhurst and William Slaton, not
to exceed $100,000 for Thomas B. Howard, Jr. and not to exceed $25,000 for
Steven J. Mencarini. Thomas K. McNamara is compensated pursuant to the
Company's commission program which is generally based on the profitability of
business produced. Vincent W. Marino and William G. Garner are eligible for
annual discretionary bonuses determined by the Chief Executive Officer or the
Board of Directors.

Under the employment agreements, each receives 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, Slaton, Howard and Mencarini 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 are subject to restrictions upon
acquiring, consulting with or otherwise engaging in or assisting in the
providing of capital

- 63 -
<PAGE> 65
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. Both Mr. Marino and Mr. Garner have 24
month non-competition and non-solicitation clauses in their employment
agreements following termination of employment for any reason.

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 $8.75
per share. These options have a ten year term, and became exercisable and
vested 25% on November 20, 1996, and the balance will be exercisable and vest
in 25% increments over two years on November 20, 1998 and November 20, 1999,
respectively, subject to acceleration upon certain conditions.

Under his employment agreement, Bruce M. Bowen was granted options to
acquire 15,000 shares of Common Stock at a price equal to $8.75 per share.
These options have a ten year term, and became exercisable and vested 25% on
November 20, 1996 and 25% on November 20, 1997, and the balance will be
exercisable and vest in 25% increments over two years on November 20, 1998 and
November 20, 1999, respectively, 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 became exercisable and
vested 25% on November 20, 1996, and 25% on November 20, 1997, and the balance
will be exercisable and vest in 25% increments over two years on November 20,
1998, and November 20, 1999, respectively, subject to acceleration upon certain
conditions.

In connection with his employment, Thomas B. Howard, Jr. was granted
incentive stock options to acquire 30,000 shares of Common Stock at a price
equal to $11.00 per share. See "-- Executive Compensation and Other
Information -- Master Stock Incentive Plan." These options have a ten year
term, and will be exercisable and vest 20% at the end of each year of service,
and are subject to acceleration upon certain conditions.

In connection with his employment, Steven J. Mencarini was granted
incentive stock options to acquire 16,200 shares of Common Stock at a price
equal to $12.75 per share. See "-- Executive Compensation and Other
Information -- Master Stock Incentive Plan." These options have a ten year
term, and will be exercisable and vest 20% at the end of each year of service,
and are 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.

Master Stock Incentive Plan. The Company has established a stock
incentive program (the "Master Stock Incentive Plan") (formerly the 1996 Stock
Incentive Plan prior to amendment and restatement effective May 14, 1997 which
has been adopted by the Board of Directors and was ratified by stockholders at
the annual stockholder meeting on September 30, 1997) 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 Master 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 under a series of component plans. These
component plans include tax

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<PAGE> 66
advantaged incentive stock options for employees under the Incentive Stock
Option Plan (formerly the 1996 Incentive Stock Option Plan prior to amendment
and restatement effective May 14, 1997), formula length of service based
nonqualified options to nonemployee directors under the Outside Director Stock
Plan (formerly the 1996 Outside Director Stock Option Plan prior to amendment
and restatement effective May 14, 1997), nonqualified stock options under the
Nonqualified Stock Option Plan (formerly the 1996 Nonqualified Stock Option
Plan prior to amendment and restatement effective May 14, 1997), a program for
employee purchase of Common Stock of the Company at 85% of fair market value
under a tax advantaged Employee Stock Purchase Plan (approved by the Board of
Directors and ratified at the annual stockholder meeting on September 30,
1997), as well as other restrictive stock and performance based stock awards
and programs which may be established by the Board of Directors. (The
above-described amendments effective May 14, 1997 are hereinafter collectively
referred to as the "May 14, 1997 Amendments.") Prior to the May 14, 1997
Amendments which were ratified by stockholders in September, 1997, the Company
had reserved a total of 155,000 shares of Common Stock (subsequently increased
as described below) for issuance upon exercise of options under: (i) the 1996
Incentive Stock Option Plan (under which options for an aggregate of 265,000
shares were granted through March 31, 1998; (ii) the 1996 Outside Director
Stock Plan (under which options for an aggregate of 75,000 shares of Common
Stock were reserved for grant under a formula plan based upon length of
service, which reserved number was reduced to 30,000 shares which were
transferred to the Incentive Stock Option Plan by the Board of Directors on May
14, 1997, and under which options for 30,000 shares of Common Stock were
granted on November 20, 1996 and, November 20, 1997, respectively, and which
there are 50,000 option shares outstanding at March 31, 1998); and (iii) the
1996 Nonqualified Stock Option Plan (under which options for an aggregate of
5,000 shares of Common Stock were granted on January 8, 1997). The May 14, 1997
Amendments increase the aggregate number of shares reserved for grant under all
plans which are a part of the Master Stock Incentive Plan to a floating number
equal to 20% of the issued and outstanding stock of the Company (after giving
effect to pro forma assumed exercise of all outstanding options and purchase
rights). The number that may be subject to options granted under the Incentive
Stock Option Plan is also further capped at a maximum of 4,000,000 shares to
comply with IRS requirements for a specified maximum. As of March 31, 1998,
based on 6,071,305 shares outstanding and 611,900 shares of Common Stock for
which options have been granted, this 20% number would be 1,310,691 shares.

The Stock Incentive Plan is administered by the Stock Incentive
Committee, which is 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 is also 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 is eligible to participate in future grants of
options in the Stock Incentive Plan.

Incentive stock options issued under the 1996 Incentive Stock Option
Plan are designed to comply with the provisions of the Internal Revenue Code of
1986, as amended (the "Code"), and are 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.

Nonqualified stock options issued under the 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

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<PAGE> 67
usually will become exercisable in installments after the grant date.
Nonqualified stock options may be granted for any reasonable term.

Under the Outside Director Stock Option Plan, each of the three
nonemployee directors were granted options, on November 20, 1996, to purchase
an aggregate of 30,000 shares of Common Stock, which, as amended, became
immediately exercisable in May, 1997 and were granted options to purchase an
aggregate of 30,000 shares as of November 20, 1997. The Outside Director Stock
Option Plan also provides for the grant of options for 10,000 shares to each
nonemployee director (30,000 annually in the aggregate) on each anniversary of
service, at an exercise price equal to the market price as of the date of
grant, with each option being exercisable on the first anniversary of grant.

In May, 1997, the Board of Directors adopted a resolution to approve
an Employee Stock Purchase Plan which was ratified by the stockholders at the
annual meeting on September 30, 1997. Under the plan, employees will be
eligible to purchase up to the lesser of ten percent of their total
compensation or $5,000 of stock each six month period, subject to a $10,000
annual maximum, by purchasing the shares at the end of the quarter at a price
equal to 85% of the lesser of (a) the Fair Market Value of a share of Common
Stock on the first day of the six month period (or such other offering period
as the Board may adopt) or (b) the Fair Market Value of a share of Stock on the
last day of the six month period (or such other offering period as the Board
may adopt). As a part of the Employee Stock Purchase Plan employees will
participate via payroll withholding.

Compensation Committee Interlocks and Insider Participation. For the
year ended March 31, 1998, all decisions regarding executive compensation were
made by the Compensation Committee when applicable or by Mr. Norton 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. The Company has entered 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 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 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 Exchange
Act, 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.

- 66 -
<PAGE> 68
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 bound directors and
officers liability and company reimbursement insurance pursuant to a policy in
effect (the "D&O Policy") with the Genesis Insurance Company ("Genesis"), a
wholly-owned subsidiary of the American International Group. Pursuant to the
D&O Policy, Genesis 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, Genesis 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
Genesis' aggregate liability to the Company with respect to a single policy
year shall not exceed $3 million and is subject to customary exclusions.

CERTAIN TRANSACTIONS

GUARANTEES OF FIRST UNION FACILITY

Through June 10, 1997, the First Union Facility was 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, the facility was secured by cash
and securities having a value of approximately $1.2 million, 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. Upon
termination of the facility on June 10, 1997, all stockholders' personal
guarantees were removed and collateral pledges released. See "Business --
Financing."

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 $1.3 million for the year ended March 31, 1996, and the basis of
the equipment sold was approximately $1.3 million. During the years ended March
31, 1997 and March 31, 1998, the Company received remarketing fees from New
Energy in the amount of $224,126 and $216,828, respectively. New Energy is
entitled to the first $75,000 of proceeds from any remarketing or sale of the
assets, with the Company being entitled to 90% of any proceeds above that
amount. This agreement and the lease transactions to which it relates are
slated to

- 67 -
<PAGE> 69
expire in 1999. The Company does not intend to enter into any further lease
sale transactions with New Energy.

UNITED FEDERAL OBLIGATIONS

Marcella A. Dilworth and Donna O'Hear, sister-in-law of Phillip G.
Norton, two of the Company's employees, own 51% and 49% respectively of United
Federal Leasing, Inc. (formerly MLC Federal, Inc.), a woman-owned small
business which was purchased from the Company in 1992. The Company and United
Federal have entered into a Servicing Agreement which sets forth cost and
profit sharing and reimbursement for transactions which are jointly originated,
serviced, or financed by United Federal and/or the Company. The Company
expects to continue this relationship to originate various federal government
contracts and financing arrangements. In July, 1997, Marcella Dilworth gave
notice of her resignation from the Company but may continue to work with the
Company as an outside contractor.

As of March 31, 1996, 1997, and 1998, $152,606, $72,000, and $85,000,
respectively, was receivable from United Federal, the payment of which is
unlikely. As of March 31, 1997, the Company fully reserved for the receivable
from United Federal.

ADVANCES AND LOANS TO EMPLOYEES AND STOCKHOLDERS

The Company has in the past provided loans and advances to employees
and certain stockholders. Such balances are to be repaid from personal funds
or commissions earned by the employees/stockholders on successful sales or
financing arrangements obtained on behalf of the Company. Loans and advances
totaled $77,664, $70,612, and $53,582 for March 31, 1996, March 31, 1997, and
March 31, 1998, respectively.

LOANS TO STOCKHOLDERS

In 1994, the Company loaned $40,000 to Kevin M. Norton, an officer and
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, an officer
and 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 and
interest of $3,193 and principal payments of $14,507 during fiscal year 1997.
The Company's loan to Patrick J. Norton had balances of $33,657 and $31,101, as
of March 31, 1998 and 1997, respectively.

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<PAGE> 70
REIMBURSEMENT OF CERTAIN EXPENSES

The Company is reimbursed for certain general and administrative
expenses by a company owned, in part, by Mr. Garner, President, MLC Network
Solutions, a subsidiary of the Company. The reimbursements totaled $128,310,
$176,075 and $81,119 for the years ended March 31, 1996, 1997 and 1998. The
Company leases certain office space from Tidewater Lube Ventures which is
owned, in part, by Mr. Garner. During the years ended March 31, 1996, 1997,
and 1998, rent expense paid to these related parties was $132,111, $124,222 and
$306,479, respectively.

INDEMNIFICATION AGREEMENTS

Prior to the completion of the Initial Public Offering, the Company
entered 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 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
Corporation 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 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 Exchange Act, 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

The Company has adopted 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.

PRINCIPAL STOCKHOLDERS

GENERAL

The following table sets forth certain information, as of July 15,
1998, regarding the beneficial ownership of the Common Stock, 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.

- 69 -
<PAGE> 71

<TABLE>
<CAPTION>
Shares Beneficially Shares Beneficially
Owned Prior to Offering Owned After Offering (2)
Name and Address of ------------------------------ ----------------------------
Beneficial Owner (1) Number Percent Number Percent
- --------------------------------------- -------------- ------------ ------------- -----------

<S> <C> <C> <C> <C>
Phillip G. Norton (3) 2,865,730 44.5% 2,865,730 33.9%
MLC Holdings, Inc.
11150 Sunset Hills Road
Suite 10
Reston, VA 20190

Bruce M. and Elizabeth D. Bowen (4) 771,250 12.1 771,250 9.2
MLC Holdings, Inc.
11150 Sunset Hills Road
Suite 10
Reston, VA 20190

William J. Slaton 400,000 6.3 400,000 4.8
MLC Holdings, Inc.
1900 Point West Way
Suite 120
Sacramento, CA 95815

Kevin M. Norton (5) 376,500 5.9 376,500 4.5
MLC Holdings, Inc.
5220 Spring Valley
Suite 530
Dallas, TX 75240

Patrick J. Norton (5) 361,630 5.7 361,630 4.3
MLC Holdings, Inc.
6616 Six Forks Road
Suite 201
Raleigh, NC 27615

Steven J. Mencarini 4,260 * 4,260 *
MLC Holdings, Inc.
11150 Sunset Hills Road
Suite 110
Reston, VA 20190

Kleyton L. Parkhurst (6) 118,000 1.8 75,000 1.4
MLC Holdings, Inc.
11150 Sunset Hills Road
Suite 110
Reston, VA 20190

Thomas B. Howard, Jr. 6,000 * 6,000 *
MLC Holdings, Inc.
11150 Sunset Hills Road
Suite 110
Reston, VA 20190
</TABLE>

- 70 -
<PAGE> 72

<TABLE>
<S> <C> <C> <C> <C>
Terrence O'Donnell (7) 10,000 * 10,000 *
Williams & Connolly
725 12th Street, NW
Washington, DC 20004

Carl J. Rickertsen (7) 10,000 * 10,000 *
Thayer Capital Partners
1455 Pennsylvania Ave., NW
Suite 350
Washington, DC 20004

Laifer Capital Management (8) 532,500 8.1 532,500 49.1
114 West 47th Street
New York, New York 10036

All executive officers and 4,611,912 70.2 4,207,126 49.1
directors as a group (13 persons)
- -------------------------
</TABLE>

(*) Less than 1%.

(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 60
days from the date of this Prospectus have been exercised.

(2) Assumes the issuance of the entirety of the 2,000,000 shares subject
to this Prospectus to be issued by the Company and the sale by each
Selling Stockholder of the entirety of the Selling Stockholder Shares
included in the Registration Statement of which this Prospectus forms
a part.

(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. Includes the 728,230 shares as to which Phillip G. Norton holds
sole voting rights together with 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" and footnote (5). Also includes 97,500
shares of Common Stock that Phillip G. Norton has rights to acquire
pursuant to options, which are vested and which are immediately
exercisable and excludes 57,500 options to acquire shares of Common
Stock which are not vested and not exercisable. See "Management --
Executive Compensation and Other Information -- Compensation
Arrangements and Employment Agreements," and "Irrevocable Proxy and
Stock Rights Agreement,"

(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 of whom Bruce M. Bowen is legal
guardian and for which shares Bruce M. Bowen serves as manager. Also
includes 11,250 shares of Common Stock that Bruce M. Bowen has rights
to acquire pursuant to options and excludes 18,750 options to acquire
Common Stock which are not vested and not immediately exercisable. See
"Management -- Executive Compensation and Other Information --
Compensation Arrangements and Employment Agreements."

(5) Phillip G. Norton holds sole voting rights and certain rights to
acquire 376,500 shares of Kevin M. Norton's shares and 361,360 shares
of Patrick Norton's Common Stock under an Irrevocable Proxy and Stock
Rights Agreement. See "-- Irrevocable

- 71 -
<PAGE> 73
Proxy and Stock Rights Agreement." Includes 9,900 shares of stock
held by Kevin M. Norton's children. Includes 1,630 shares held by
Patrick J. Norton's children.

(6) Includes 13,000 shares held by Kleyton L. Parkhurst, 30,000 shares held
by three minor children of Kleyton L. Parkhurst, all of which shares
are voted by Kleyton L. Parkhurst, Custodian, under the Virginia
Uniform Gift to Minors Act and 75,000 shares of Common Stock that
Kleyton L. Parkhurst has rights to acquire pursuant to options which
are vested and immediately exercisable, and excludes 35,000 options to
acquire Common Stock which are not vested and not immediately
exercisable. See "Management -- Executive Compensation and Other
Information -- Compensation Arrangements and Employment Agreements."

(7) Represents shares of Common Stock issuable upon exercise of options
which are vested and immediately exercisable. Does not include
options to purchase 10,000 shares granted to each outside director in
November, 1997 and which are not vested or exercisable.

(8) The 532,500 shares of Common Stock beneficially owned by Laifer
Capital Management, Inc. includes: (i) 278,300 shares of Common Stock
beneficially owned by Laifer Capital Management, Inc. in its capacity
as General Partner and investment advisor to Hilltop Partners, L.P.;
and (ii) 254,200 shares of Common Stock beneficially owned by Laifer
Capital Management, Inc. in its capacity as investment advisor to
various other clients. These clients include: (i) various Wolfson
family entities ("Wolfson"), with an address at One State Street
Plaza, New York, New York 10004-1505, and (ii) Hilltop Offshore
Limited, a Cayman Islands company, with an address c/o Consolidated
Fund Management Limited, P.O. Box HM 2257, Par La Ville Place, 14 Par
La Ville Road, Hamilton HMJX, Bermuda. Lance Laifer, as president,
sole director and principal stockholder of Laifer Capital Management,
Inc., is deemed to have the same beneficial ownership as Laifer
Capital Management, Inc.

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 subject thereto 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 November
20, 1996 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.

- 72 -
<PAGE> 74

SELLING STOCKHOLDERS

The following table assumes that each Selling Stockholder is offering
for sale securities previously issued by the Company. The Company has agreed
to pay all expenses in connection therewith (other than brokerage commissions
and fees and expenses of their respective counsel). None of the Selling
Stockholders has ever held any position with the Company or had any other
material relationship with the Company except that Kleyton L. Parkhurst is
Senior Vice President, for Corporate Development, and Secretary and Treasurer
of the Company. Vincent M. Marino, President of Educational Computer Concepts,
Inc., and William G. Garner, President of Compuventures hold management
positions in wholly-owned subsidiaries of the Company. See "Risk Factors --
Dependence on Current Management" and "Management."

The following table sets forth the beneficial ownership of the Selling
Stockholder Shares by each person who is a Selling Stockholder. The Company
will not receive any proceeds from the sale of such Securities by the Selling
Stockholders.

<TABLE>
<CAPTION>
Name of Shares of Common Percentage of Common Stock Owned
Beneficial Owner (1) Being Offered (2) Before Offering (3) After Offering (4)
----------------------- ------------------- --------------------- --------------------

<S> <C> <C> <C>
Vincent W. Marino (5) 252,603 3.98% 0%

WIHL-IV, a Cayman Islands Corp.(6) 161,329 2.54 0

Elaine G. Denton (7) 119,927 1.89 0

William G. Garner (7) 99,400 1.57 0

Kleyton L. Parkhurst (8) 43,000 * 0

Ralph E. Marcellus (5) 32,649 * 0

Rodney Gamet (5) 27,985 * 0

Leslie H. Garner Jr (7) 21,635 * 0

Nan F. Spainhour (7) 6,814 * 0

David J. Rose III (7) 6,814 * 0

Susan P. Chatham (7) 6,388 * 0

Lucille DeFrancesco (5) 1,862 * 0

Mathew A. McBride (5) 933 * 0

David M. Winans (5) 1,862 * 0
</TABLE>

____________________

(*) Less than 1%.

- 73 -
<PAGE> 75
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 60
days from the date of this Prospectus have been exercised.

(2) Reflects the number of shares being offered as of the date of this
Prospectus.

(3) Reflects the ownership percentage as of the date of this Prospectus.

(4) Unless otherwise indicated, assumes the sale of the entirety of the
shares being offered by the noted stockholder.

(5) Represents a portion of a total of 498,998 shares issued by the
Company in the acquisition of MLCI on September 29, 1997. See "The
Company." An aggregate of 49,900 of such shares have been deposited
in escrow pursuant to the Agreement and Plan of Merger with MLCI until
the second anniversary of the merger to fund any indemnity claim made
by the Company. After registration of the shares was completed and
after the Company published the results for the quarter ended December
31, 1997 in its Form 10-Q on February 14, 1998, the shares, though
registered, will be subject to certain restrictions on transfer,
including (without limitation) that no more than 49.9% of such shares
may be transferred before October 1, 1998, and, in the case of Mr.
Marino, the further restriction that no more than 75% of his shares
may be transferred before October 1, 1999. Prior to the date of this
Prospectus, Mr. Marino has sold 110,000 shares, Mr. Marcellus has sold
30,000 shares, Mr. Garner has sold 27,873 shares, and Mr. McBride has
sold 929 shares which were registered pursuant to the Registration
Statement of which this Prospectus is a part.

(6) Represents stock issued in a private placement on July 1, 1997 which
provided the purchaser the right to request inclusion in any
subsequent registration of shares. See "The Company."

(7) Represents a portion of a total of 260,978 shares issued by the
Company in the acquisition of MLC Network Solutions on July 24, 1997.
See "The Company." An aggregate of 13,049 of such shares have been
deposited in escrow pursuant to the Agreement and Plan of Merger with
MLC Network Solutions until the second anniversary of the merger to
fund any indemnity claim made by the Company. The acquisition
agreement with MLC Network Solutions required the Company to register
one-half of the common shares issued in connection with the merger.
The shares, though registered, will be restricted for sale as follows:
(1) in the first year after registration up to 50% of the registered
shares may be sold and, (2) in subsequent years up to 25% each year
thereafter pursuant to an agreement with the Company.

(8) Includes 13,000 shares held by Kleyton L. Parkhurst, 30,000 shares
held by three minor children of Kleyton L. Parkhurst, all of which
shares are voted by Kleyton L. Parkhurst, Custodian, under the Virginia
Uniform Gift to Minors Act.

Stock Restriction Agreement. In January, 1998, the Company entered
into stock restriction agreements with each of Vincent Marino, Ralph Marcellus,
Rodney Gamet, David Winans, Lucille DeFrancesco and Matthew McBride, who were
stockholders of MLCI prior to the Company's acquisition of MLCI. In connection
with the acquisition, these stockholders received shares of MLC Holdings Common
Stock. See "BUSINESS -- Strategy -- Acquisition of Companies in Related Lines
of Business." The stock restriction agreements impose certain quantitative and
other restrictions on the ability of these stockholders to transfer their
shares of MLC Holdings Common Stock. Among other restrictions, these
stockholders may not transfer more than 49.9% of their shares before October 1,
1998, and certain of these stockholders are further prohibited from
transferring more than 75% of their shares before October 1, 1999. None of the
shares could be transferred until the later of February 16, 1998 or such date
as the Company shall have filed with the SEC financial statements covering at
least 30 days of post-merger combined results of the Company and MLCI. These
restrictions are intended to prevent any transfer that would disqualify the
merger as a reorganization for federal income tax purposes or as a pooling of
interests for financial reporting purposes, and to ensure compliance with
federal and state securities laws.

PRICE RANGE OF COMMON STOCK

The Company's Common Stock has traded on the Nasdaq National Market
since November 20, 1996 under the symbol "MLCH." The following table sets
forth the range of high and low closing sale prices for the Common Stock for
the quarterly periods after November 20, 1996.

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<PAGE> 76

<TABLE>
<CAPTION>
Quarter Ended High Low
--------------------------------- ------------ -----------
<S> <C> <C>
December 31, 1996 (*) $10.25 $ 8.75
March 31, 1997 14.50 9.37
June 30, 1997 14.00 10.75
September 30, 1997 14.75 12.75
December 31, 1997 14.75 11.75
March 31, 1998 13.75 11.75
June 30, 1998 14.50 13.00
September 30, 1998
(through August 24, 1998) 14.50 12.75
</TABLE>

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

(*) For the period November 20, 1996 to December 31, 1996.

On August 24, 1998, the last sale price of the Common Stock was $12.75
per share. As of June 17, 1998, there were approximately 36 stockholders of
record of the Company's Common Stock. Management believes there are over 400
beneficial holders of the Company's Common Stock and has been advised that
there are individual participants holding approximately 22% of the outstanding
Common Stock pursuant to security position listings furnished by Cede &
Company, New York, New York, registered clearing agency and depository.

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, as amended, authorizes the
issuance of up to 25,000,000 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
therefor 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 this Prospectus will be, when
issued, fully paid and non-assessable.

- 75 -
<PAGE> 77
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
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

- 76 -
<PAGE> 78
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.

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

- 77 -
<PAGE> 79
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

The Company has issued and outstanding 6,348,603 shares of Common
Stock. Of these shares, the 1,150,000 shares sold in the Initial Public
Offering, 195,973 shares sold pursuant to Rule 144 under the Securities Act,
3,121 shares and 13,821 shares issued pursuant to the Master Stock Incentive
Plan are 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 4,988,809 shares of Common
Stock outstanding are "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.

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 one year (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
two 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.

The 2,964,305 shares being offered by this Prospectus will generally
be freely tradable after their issuance, unless the sale thereof is
contractually restricted. 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. See "Selling Stockholders."

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

- 78 -
<PAGE> 80
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.

PLAN OF DISTRIBUTION

The Selling Stockholder Shares subject hereto are being offered for
sale by the Selling Stockholders. Consequently, the Selling Stockholders will
receive the proceeds from the sale of such securities pursuant to this
Prospectus. The Selling Stockholder Shares may be sold to purchasers from time
to time in privately negotiated transactions directly by and subject to the
discretion of the Selling Stockholders. The Selling Stockholders may from time
to time offer their respective securities for sale through underwriters,
dealers or agents, who may receive compensation in the form of underwriting
discounts, concessions or commissions from the Selling Stockholders and/or the
purchasers of such securities for whom they may act as agents. The Selling
Stockholders and any underwriter, dealer or agent who participates in the
distribution of such Selling Stockholders' securities may be deemed to be
"underwriters" under the Securities Act and any profit on the sale of such
securities by any of them and any discounts, commissions or concessions
received by any such underwriters, dealers or agents may be deemed to be
underwriting compensation under the Securities Act.

At the time a particular offer of the Selling Stockholder Shares is
made by or on the behalf of a Selling Stockholder, a Prospectus and a
Prospectus Supplement, to the extent required, will be distributed which will
set forth the number of securities being offered and the terms of the offering,
including the name or names of any underwriters, dealers or agents, the
purchase price paid by any underwriter for such securities purchased from the
Selling Stockholders, any discounts, commissions and other items constituting
compensation from the Selling Stockholders, any discounts, commissions or
concessions allowed, reallowed or paid to dealers, and the proposed selling
price to the public.

The Selling Stockholder Shares may be sold from time to time in one or
more transactions: (i) at an offering price which is fixed or which may vary
from transaction to transaction depending upon the time of sale; or (ii) at
prices otherwise negotiated at the time of sale. Such prices will be
determined by the Selling Stockholders or by agreement between the Selling
Stockholders and their underwriter.

In order to comply with the applicable securities laws, if any, of
certain states, the Securities may be offered or sold in such states through
registered or licensed brokers or dealers in those states. In addition, in
certain states, such securities may not be offered or sold unless they have
been registered or qualified for sale in such states or an exemption from such
registration or qualification requirement is available and is complied with.

Under applicable rules and regulations promulgated under the Exchange
Act, any person engaged in a distribution of securities may not simultaneously
bid for or purchase securities of the same class for a period of two business
days prior to the commencement of such distribution. In addition and without
limiting the foregoing, the Selling Stockholders will be subject to applicable
provisions of the Exchange Act and the rules and regulations thereunder,
including without limitation Rules 10b-5 and Regulation M, in connection with
transactions in the Selling Stockholder Shares during effectiveness of the
registration statement of which this Prospectus is a part. All of the
foregoing may affect the marketability of such securities.

- 79 -
<PAGE> 81
The Company has paid all of the expenses incident to the registration
of the foregoing securities (including registration pursuant to the securities
laws of certain states) other than: (i) any fees or expenses of any counsel
retained by any Selling Stockholder and any out-of-pocket expenses incurred by
any Selling Stockholder or any person retained by any Selling Stockholder in
connection with registration of the Selling Stockholder Shares; and (ii)
commissions, expenses, reimbursements and discounts of underwriters, dealers or
agents, if any.

LEGAL MATTERS

The legality of the Securities being offered hereby has been passed
upon for the Company by Alston & Bird LLP, Washington, D.C., counsel to
the Company.

EXPERTS

The consolidated financial statements of the Company and its
consolidated subsidiaries as of March 31, 1998 and 1997, and for each of the
three years in the period ended March 31, 1998 except ECC Integrated, Inc. for
the year ended March 31, 1996, included in this Prospectus and the related
financial statement schedule included elsewhere in the Registration Statement
have been audited by Deloitte & Touche LLP, as stated in their report appearing
herein and elsewhere in the Registration Statement. The financial statements
of ECC Integrated, Inc. (consolidated with those of the Company) for the year
ended March 31, 1996 have been audited by Herbein & Company, Inc. as stated in
their report included herein. Such financial statements of the Company and its
consolidated subsidiaries are included herein in reliance upon the respective
reports of such firms given upon their authority as experts in accounting and
auditing. Both of the foregoing firms are independent auditors.

- 80 -
<PAGE> 82

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Independent Auditors' Report . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-2

Consolidated Balance Sheets as of March 31, 1997 and 1998 . . . . . . . . . . . . . . . . . . . . . . F-3

Consolidated Statements of Earnings for the Years Ended
March 31, 1996, 1997, and 1998 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-4

Consolidated Statements of Stockholders' Equity for the Years
Ended March 31, 1996, 1997 and 1998 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-5

Consolidated Statements of Cash Flows for the Years Ended
March 31, 1996, 1997 and 1998 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-6

Notes to Consolidated Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-8

Condensed Consolidated Balance Sheets as of June 30, 1998
and March 31, 1998 (Unaudited) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-24

Condensed Consolidated Statements of Earnings for the Three Months Ended
June 30, 1998 and 1997 (Unaudited) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-25

Condensed Consolidated Statements of Cash Flows for the Three Months Ended
June 30, 1998 and 1997 (Unaudited) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-26

Notes to Unaudited Condensed Consolidated Financial Statements. . . . . . . . . . . . . . . . . . . . F-27

SCHEDULE

II-Valuation and Qualifying Accounts for the Three Years
Ended March 31, 1996, 1997 and 1998 and the Quarter Ended June 30, 1998 . . . . . . . . . . . . . S-1
</TABLE>

F-1
<PAGE> 83

INDEPENDENT AUDITORS' REPORT

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

We have audited the consolidated balance sheets of MLC Holdings, Inc. and
subsidiaries as of March 31, 1998 and 1997, and the related consolidated
statements of earnings, stockholders' equity, and cash flows for each of the
three years in the period ended March 31, 1998. Our audits also included the
financial statement schedule listed in the Index at F-1. These financial
statements and financial statement schedule are the responsibility of the
Company's management. Our responsibility is to express an opinion on the
financial statements based on our audits. The consolidated financial
statements give retroactive effect to the merger of MLC Holdings, Inc., ECC
Integrated, Inc. and Compuventures of Pitt County, Inc., which have been
accounted for as a pooling of interests as described in Note 1 to the
consolidated financial statements. We did not audit the statements of
earnings, stockholders' equity, and cash flows of ECC Integrated, Inc. for the
year ended March 31, 1996, which statements reflect total revenues of
$15,291,164 for the year ended March 31, 1996. Those statements were audited
by other auditors whose report has been furnished to us, and our opinion,
insofar as it relates to the amounts included for ECC Integrated, Inc. for
1996, is based solely on the report of such other auditors.

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 and the report of the other
auditors provide a reasonable basis for our opinion.

In our opinion, based on our audits and the report of the other auditors, the
consolidated financial statements referred to above present fairly, in all
material respects, the financial position of MLC Holdings, Inc. and
subsidiaries as of March 31, 1998 and 1997, and the results of their operations
and their cash flows for each of the three years in the period ended March 31,
1998 in conformity with generally accepted accounting principles. Also, in our
opinion, based on our audits, such financial statement schedule, when
considered in relation to the basic consolidated financial statements taken as
a whole, presents fairly in all material respects the information set forth
therein.

/s/ DELOITTE & TOUCHE LLP

McLean, Virginia
June 22, 1998

F-2
<PAGE> 84

MLC HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
AS OF MARCH 31,
-------------------------------------------
1997 1998
-------------------------------------------
<S> <C> <C>
ASSETS

Cash and cash equivalents $ 6,654,209 $ 18,683,796
Accounts receivable, net of allowances for doubtful
accounts of $35,251 in 1997 and $41,550 in 1998 8,846,426 16,383,314
Notes receivable (1) 2,154,250 3,801,808
Employee advances 70,612 53,582
Inventories 1,278,144 1,213,734
Investment in direct financing and sales type leases - net 17,473,069 32,495,594
Investment in operating lease equipment - net 11,065,159 7,295,721
Property and equipment - net 740,744 1,131,512
Other assets (2) 740,925 2,136,554
-------------------------------------------
TOTAL ASSETS $ 49,023,538 $ 83,195,615
===========================================

LIABILITIES AND STOCKHOLDERS' EQUITY

LIABILITIES
Accounts payable - trade $ 3,006,937 $ 6,865,419
Accounts payable - equipment 4,946,422 21,283,582
Salaries and commissions payable 671,899 390,081
Accrued expenses and other liabilities 2,256,884 3,560,181
Recourse notes payable 439,004 13,037,365
Nonrecourse notes payable 19,705,060 13,027,676
Deferred taxes 590,000 1,487,000
Income tax payable 930,587 --
-------------------------------------------
Total Liabilities 32,546,793 59,651,304

Commitments and contingencies (Note 7) -- --

STOCKHOLDERS' EQUITY

Preferred stock, $.01 par value; 2,000,000 shares
authorized; none issued or outstanding -- --
Common stock, $.01 par value; 10,000,000 authorized at
March 31, 1997; 25,000,000 authorized at March 31, 1998; 59,100 60,715
5,909,976 and 6,071,505 issued and outstanding at
March 31, 1997 and 1998, respectively
Additional paid-in capital 9,346,214 11,460,331
Retained earnings 7,071,431 12,023,265
-------------------------------------------
Total Stockholders' Equity 16,476,745 23,544,311
-------------------------------------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 49,023,538 $ 83,195,615
===========================================
</TABLE>

SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.

(1) Includes amounts with related parties of $1,835,214 and $3,709,508 as of
March 31, 1997 and 1998, respectively.

(2) Includes amounts with related parties of $338,226 and $732,051 as of March
31, 1997 and 1998, respectively.

F-3
<PAGE> 85

MLC HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS

<TABLE>
<CAPTION>
Year Ended March 31,
--------------------------------------------------------------------------
1996 1997 1998
--------------------------------------------------------------------------
<S> <C> <C> <C>
REVENUES

Sales of equipment $ 47,591,068 $ 52,166,828 $ 47,419,115
Sales of leased equipment 16,318,049 21,633,996 50,362,055
--------------------------------------------------------------------------
63,909,117 73,800,824 97,781,170

Lease revenues 5,928,228 9,908,469 14,882,420
Fee and other income 1,876,410 2,503,381 5,778,685
--------------------------------------------------------------------------
7,804,638 12,411,850 20,661,105

--------------------------------------------------------------------------
TOTAL REVENUES (1) 71,713,755 86,212,674 118,442,275
--------------------------------------------------------------------------

COSTS AND EXPENSES

Cost of sales, equipment 38,782,181 42,179,823 37,423,397
Cost of sales, leased equipment 15,522,469 21,667,197 49,668,756
--------------------------------------------------------------------------
54,304,650 63,847,020 87,092,153

Direct lease costs 2,696,627 4,761,227 5,409,338
Professional and other fees 709,350 576,855 1,072,691
Salaries and benefits 6,682,005 8,241,405 10,356,456
General and administrative expenses 2,039,970 2,285,878 3,694,309
Nonrecurring acquisition costs - - 250,388
Interest and financing costs 1,701,638 1,648,943 1,836,956
--------------------------------------------------------------------------
13,829,590 17,514,308 22,620,138

--------------------------------------------------------------------------
TOTAL COSTS AND EXPENSES (2) 68,134,240 81,361,328 109,712,291
--------------------------------------------------------------------------
EARNINGS BEFORE PROVISION FOR INCOME TAXES
AND EXTRAORDINARY ITEM 3,579,515 4,851,346 8,729,984
--------------------------------------------------------------------------

PROVISION FOR INCOME TAXES 881,000 1,360,000 2,690,890
--------------------------------------------------------------------------

EARNINGS BEFORE EXTRAORDINARY ITEMS 2,698,515 3,491,346 6,039,094

EXTRAORDINARY GAIN 117,044 - -
--------------------------------------------------------------------------

NET EARNINGS $ 2,815,559 $ 3,491,346 $ 6,039,094
==========================================================================
NET EARNINGS PER COMMON SHARE, BEFORE
EXTRAORDINARY ITEM 0.59 0.67 1.00
EXTRAORDINARY GAIN PER COMMON SHARE 0.03 - -
--------------------------------------------------------------------------

NET EARNINGS PER COMMON SHARE - BASIC $ 0.62 $ 0.67 $ 1.00
==========================================================================
NET EARNINGS PER COMMON SHARE - DILUTED $ 0.62 $ 0.66 $ 0.98
==========================================================================

PRO FORMA NET EARNINGS (Note 8) $ 2,389,418 $ 3,133,436 $ 5,425,833
==========================================================================

PRO FORMA NET EARNINGS PER COMMON SHARE - BASIC $ 0.52 $ 0.60 $ 0.90
==========================================================================
PRO FORMA NET EARNINGS PER COMMON SHARE - DILUTED $ 0.52 $ 0.60 $ 0.88
==========================================================================

WEIGHTED AVERAGE SHARES OUTSTANDING - BASIC 4,572,635 5,184,261 6,031,088
WEIGHTED AVERAGE SHARES OUTSTANDING - DILUTED 4,572,635 5,262,697 6,143,017
</TABLE>

SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.

(1) Includes amounts from related parties of $15,758,610, $21,051,453 and
$46,710,190 for the fiscal years ended March 31, 1996, 1997, and 1998,
respectively.

(2) Includes amounts from related parties of $15,055,141, $20,566,924 and
$44,831,701 for the fiscal years ended March 31, 1996, 1997,

F-4
<PAGE> 86

MLC HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

<TABLE>
<CAPTION>
Common Stock Treasury Stock
------------------------------ ----------------------------
Shares Par Value Shares Cost
------------------------------ ----------------------------
<S> <C> <C> <C> <C>
Balance March 31, 1995 4,386,658 $ 44,960 109,389 $ 5,854

Issuance of shares to owners 370,059 3,701 - -
Purchase of treasury shares (2,327) - 2,327 23,000
Distributions to owners - - - -
Net earnings - - - -
------------------------------ ----------------------------
Balance March 31, 1996 4,754,390 48,661 111,716 28,854

Compensation to outside directors - - - -
Distributions to owners - - - -
Sale of common shares 1,150,000 11,500 - -
Issuance of shares to owners 5,586 56 - -
Retirement of treasury shares - (1,117) (111,716) (28,854)
Net earnings - - - -

------------------------------ ----------------------------
Balance March 31, 1997 5,909,976 59,100 - -

Sale of common shares 161,329 1,613 - -
Issuance of shares for option exercise 200 2 - -
Compensation to outside directors - - - -
Distributions to owners - - - -
Net earnings - - - -

------------------------------ ----------------------------
Balance, March 31, 1998 6,071,505 $ 60,715 - $ -
============================== ============================
</TABLE>

<TABLE>
<CAPTION>
Additional
Paid-in Retained
Capital Earnings TOTAL
----------------- ---------------- ----------------
<S> <C> <C> <C>
Balance March 31, 1995 $ 748,186 $ 2,013,994 $ 2,801,286

Issuance of shares to owners (3,701) - -
Purchase of treasury shares - - (23,000)
Distributions to owners - (362,330) (362,330)
Net earnings - 2,815,559 2,815,559

----------------- ---------------- ----------------
Balance March 31, 1996 744,485 4,467,223 5,231,515

Compensation to outside directors 9,500 - 9,500
Distributions to owners - (859,378) (859,378)
Sale of common shares 8,592,262 - 8,603,762
Issuance of shares to owners (56) - -
Retirement of treasury shares 23 (27,760) -
Net earnings - 3,491,346 3,491,346

----------------- ---------------- ----------------
Balance March 31, 1997 9,346,214 7,071,431 16,476,745

Sale of common shares 1,998,387 - 2,000,000
Issuance of shares for option exercise 1,748 - 1,750
Compensation to outside directors 113,982 - 113,982
Distributions to owners - (1,087,260) (1,087,260)
Net earnings - 6,039,094 6,039,094

----------------- ---------------- ----------------
Balance, March 31, 1998 $ 11,460,331 $ 12,023,265 $ 23,544,311
================= ================ ================
</TABLE>

SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.

F-5
<PAGE> 87

HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
YEAR ENDED MARCH 31,
---------------------------------------------------
1996 1997 1998
---------------------------------------------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES

Net earnings $ 2,815,559 $ 3,491,346 $ 6,039,094
Adjustments to reconcile net cash provided by
operating activities:
Depreciation and amortization 2,199,722 3,650,248 4,628,272
Abandonment of assets 17,984 10,049 --
Provision for credit losses -- 66,000 (1,000)
Extraordinary gain (117,044) -- --
Loss (Gain) on sale of operating lease equipment (1) (323,422) 83,754 (55,881)
Impairment of operating lease residual values -- 153,434 --
Payments from lessees directly to lenders (884,389) (1,590,061) (1,788,611)
Loss (Gain) on disposal of property and equipment 4,489 (9,124) --
Deferred taxes 623,000 121,000 897,000
Compensation to outside directors - stock options -- 9,500 113,982
Changes in:
Accounts receivable 323,782 (4,343,319) (7,536,888)
Notes receivable (2) (55,088) (2,062,393) (1,647,558)
Employee advances (61,996) 28,537 17,030
Inventories (813,491) (400,046) 64,410
Other assets (3) (342,209) 457,169 (893,959)
Accounts payable - equipment 1,958,532 (26,557) 16,337,160
Accounts payable - trade 329,149 796,740 3,858,482
Salaries and commissions payable, accrued
expenses and other liabilities 638,690 2,286,921 629,380
---------------------------------------------------
Net cash provided by operating activities 6,313,268 2,723,198 20,660,913
---------------------------------------------------

CASH FLOWS FROM INVESTING ACTIVITIES

Proceeds from sale of operating equipment 1,383,677 4,992,050 726,714
Purchase of operating lease equipment (4) (13,919,193) (24,800,360) (2,065,079)
Increase in investment in direct financing and
sales-type leases (5) (17,169,201) (6,825,873) (18,833,704)
Proceeds from sale of property and equipment 9,049 9,124 800
Insurance proceeds received 750,000 512,044 --
Purchases of property and equipment (301,039) (266,061) (1,032,243)
(Increase) Decrease in other assets (6) (306,228) 226,530 (472,962)
---------------------------------------------------
Net cash used in investing activities (29,552,935) (26,152,546) (21,676,474)
---------------------------------------------------
</TABLE>

F-6
<PAGE> 88

MLC HOLDINGS INC., AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)

<TABLE>
<CAPTION>
Year Ended March 31,
-------------------------------------------------------
1996 1997 1998
-------------------------------------------------------
<S> <C> <C> <C>
CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings:
Nonrecourse 25,678,168 26,825,118 4,511,517
Recourse 67,103 220,768 174,894
Repayments:
Nonrecourse (1,144,023) (3,199,626) (4,872,557)
Recourse (231,273) (434,867) (307,819)
Repayments of loans from stockholders (50,000) (275,000) (10,976)
Distributions to shareholders of combined companies
prior to business combination (362,330) (859,378) (1,087,260)
Proceeds from issuance of capital stock, net of expenses - 8,603,762 2,001,750
Purchase of treasury stock (23,000) - -
Proceeds (Repayments) from lines of credit (252,098) (1,448,370) 12,635,599
-------------------------------------------------------
Net cash provided by financing activities 23,682,547 29,432,407 13,045,148
-------------------------------------------------------

NET INCREASE IN CASH AND CASH EQUIVALENTS 442,880 6,003,059 12,029,587

CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 208,270 651,150 6,654,209
-------------------------------------------------------

CASH AND CASH EQUIVALENTS, END OF PERIOD $ 651,150 $ 6,654,209 $ 18,683,796
=======================================================

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid for interest $ 302,214 $ 140,081 $ 347,757
=======================================================
Cash paid for income taxes $ 202,864 $ 315,137 $ 2,681,867
=======================================================
</TABLE>

SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.

1) Includes amounts (used by) provided by related parties of ($172,956),
$3,930, and $(35,540) for the fiscal years ended March 31, 1996, 1997 and
1998.

2) Includes amounts used by related parties of ($1,812,414) and $(1,897,094)
for the fiscal years ended March 31, 1997 and 1998.

3) Includes amounts (used by) provided by related parties of ($398,034),
$285,943, and $ 51,482 for the fiscal years ended March 31, 1996, 1997 and
1998.

4) Includes amounts provided by related parties of $1,073,427, $2,707,213, and
$935,737 for the fiscal years ended March 31, 1996, 1997 and 1998.

5) Includes amounts provided by (used by) related parties of $259,857,
($23,417), and $43,418,347 for the fiscal years ended March 31, 1996, 1997
and 1998.

6) Includes amounts (used by) provided by related parties of ($270,860),
$73,338, ($473,621) for the fiscal years ended March 31, 1996, 1997 and
1998.

F-7
<PAGE> 89

MLC HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AS OF AND FOR THE YEARS ENDED MARCH 31, 1996, 1997, AND 1998

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, 1995 in a
manner similar to a pooling of interest.

Business Combinations - On July 24, 1997, the Company, through a new wholly
owned subsidiary, MLC Network Solutions, Inc., issued 260,978 common shares,
valued at $3,384,564, in exchange for all outstanding common shares of
Compuventures of Pitt County, Inc. ("Compuventures"), a value-added reseller
of PC's and related network equipment and software products a provider of
various support services to its customers from facilities located in
Greenville, Raleigh and Wilmington, North Carolina. On September 29, 1997, the
Company issued 498,998 common shares, valued at $7,092,000, in exchange for all
outstanding common shares of Educational Computer Concepts, Inc. (dba "ECC
Integrated")("MLCI"), a network systems integrator and computer reseller
serving customers in eastern Pennsylvania, New Jersey and Delaware. ECC
Integrated subsequently changed its name to MLC Integrated ("MLCI"). These
business combinations have been accounted for as pooling of interests, and
accordingly, the consolidated financial statements for periods prior to the
combinations have been restated to include the accounts and results of
operations of the pooled companies. See Note 12.

New Subsidiaries - On September 17, 1997, the Company established MLC Federal,
Inc., a wholly owned subsidiary of MLC Holdings, Inc. The new subsidiary will
concentrate on the origination of leases to federal, state, and local
government entities. On October 22, 1997, the Company formed MLC Leasing, S.A.
de C.V., a wholly owned subsidiary of MLC Group, Inc. and MLC Network
Solutions, Inc., based in Mexico City, Mexico. To date, no business has been
conducted through MLC Leasing, S.A. de C.V.

All significant intercompany balances and transactions have been eliminated.

Revenue Recognition - The Company sells information technology equipment to its
customers and recognizes revenue from equipment sales at the time equipment is
accepted by the customer. The Company is the lessor in a number of its
transactions and these are accounted for in accordance with Statement of
Financial Accounting Standards ("SFAS") 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, the Company records the net investment in leases, which consists
of the sum of the minimum lease term 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. No sales type leases have been consummated during
the three years ended March 31, 1998. The Company adopted SFAS No. 125,
"Accounting for Transfers and Servicing of Financial

F-8
<PAGE> 90

Assets and Extinguishments of Liabilities" effective January 1, 1997. This
standard establishes new criteria for determining whether a transfer of
financial assets in exchange for cash or other consideration should be
accounted for as a sale or as a pledge of collateral in a secured borrowing.
Certain assignments of direct finance leases made on a nonrecourse basis by the
Company after December 31, 1996 meet the criteria for surrender of control set
forth by SFAS No. 125 and have therefore been treated as sales for financial
statement purposes. SFAS No. 125 prohibits the retroactive restatement of
transactions consummated prior to January 1, 1997 which would have otherwise
met the requirements of a sale under the standard.

Sales of leased equipment represents revenue from the sales of equipment
subject to a lease in which the Company is the lessor. If the rental stream on
such lease has nonrecourse debt associated with it, sales revenue is recorded
at the amount of consideration received, net of the amount of debt assumed by
the purchaser. If there is no nonrecourse debt associated with the rental
stream, sales revenue is recorded at the amount of gross consideration
received, and costs of sales is recorded at the book value 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.

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 the Company has completed its obligations at the
assignment date, and the Company retains no ownership interest in the equipment
under lease.

Residuals - Residual values, representing the estimated value of equipment at
the termination of a lease, are recorded in the financial statements at the
inception of each sales-type or direct financing lease as amounts estimated by
management based upon its experience and judgment. The residual values for
operating leases are included in the leased equipment's net book value.

The Company evaluates residual values on an ongoing basis and records any
required adjustments. In accordance with generally accepted accounting
principles, no upward revision of residual values is made subsequent to the
period of the inception of the lease. Residual values for sales-type and
direct financing leases are recorded at their net present value and the
unearned interest is amortized over the life of the lease using the interest
method.

Reserve for Credit Losses - The reserve for credit losses (the "reserve") is
maintained at a level believed by management to be adequate to absorb potential
losses inherent in the Company's lease and accounts receivable portfolio.
Management's determination of the adequacy of the reserve is based on an
evaluation of historical credit loss experience, current economic conditions,
volume, growth, the composition of the lease portfolio, and other relevant
factors. The reserve is increased by provisions for potential credit losses
charged against income. Accounts are either written off or written down when
the loss is both probable and determinable, after giving consideration to the
customer's financial condition, the value of the underlying collateral and
funding status (i.e., discounted on a nonrecourse or recourse basis).

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.

F-9
<PAGE> 91

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 seven years.

Income Taxes - Deferred income taxes are accounted for in accordance with 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.
The Company acquired two companies which were accounted for under the pooling
of interests method. Prior to their business combinations with the Company,
the two companies had elected to be taxed under the provisions of Subchapter
"S" of the Internal Revenue Code. Under this election, each company's income
or loss was included in the taxable income of the stockholders. See Note 8.

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.

Reclassifications - Certain items have been reclassified in the March 31, 1996
and 1997 financial statements to conform to the March 31, 1998 presentation.

Initial Public Offering - During November and December 1996, MLC consummated an
initial public offering ("the Offering") of 1,150,000 shares of its common
stock including the over allotment. The Company received proceeds of $9.4
million (gross proceeds of $10.1 million less underwriters expense of $0.7
million), and incurred $0.8 million in expenses. Of the net proceeds of
approximately $8.6 million, $0.3 million was used to repay outstanding
stockholder loans and the related accrued interest and the balance of $8.3
million was used for general corporate purposes.

Earnings Per Share - Earnings per share have been calculated in accordance with
SFAS No. 128, "Earnings per Share," issued in February, 1997 and effective
beginning in fiscal year 1998. Earnings per share amounts for fiscal years
prior to 1998 have been restated to comply with SFAS No. 128. Basic EPS
amounts were calculated based on weighted average shares outstanding of
4,572,635 in fiscal 1996, 5,184,261 in fiscal 1997, and 6,031,088 in fiscal
1998. Diluted EPS amounts were calculated based on weighted average shares
outstanding and common stock equivalents of 4,572,635 in fiscal 1996, 5,262,697
in fiscal 1997 and 6,143,017 in fiscal 1998. Additional shares included in the
diluted earnings per share calculations are attributable to incremental shares
issuable upon the assumed exercise of stock options.

F-10
<PAGE> 92

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:

<TABLE>
<CAPTION>
As of March 31,
1997 1998
-------------------------------
(In Thousands)
<S> <C> <C>
Minimum lease payments $ 18,752 $ 29,968
Estimated unguaranteed residual value 1,271 7,084
Initial direct costs, net of amortization (1) 1,237 760
Less: Unearned lease income (3,721) (5,270)
Reserve for credit losses (66) (46)
-------------------------------
Investment in direct finance and sales
type leases, net $ 17,473 $ 32,496
===============================
</TABLE>

----------------------------------
(1) Initial direct costs are shown net of amortization of $1,299 and
$1,592 at March 31, 1997 and 1998, respectively.

Future scheduled minimum lease rental payments as of March 31, 1998 are as
follows:

<TABLE>
<CAPTION>
Year ending March 31, (In Thousands)
---------------------------------- --------------------
<S> <C>
1999 $13,301
2000 9,119
2001 5,632
2002 1,618
2003 and thereafter 298
-------
$29,968
=======
</TABLE>

The Company's net investment in direct financing and sales-type leases is
collateral for nonrecourse and recourse equipment notes. See Note 5.

3. INVESTMENT IN OPERATING LEASE EQUIPMENT

Investment in operating leases primarily represents 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,
1997 1998
-------------------------------
(In Thousands)
<S> <C> <C>
Cost of equipment under operating leases $14,519 $13,990
Initial direct costs 42 51
Less: Accumulated depreciation and
amortization (3,496) (6,745)
-------------------------------
Investment in operating lease equipment, net $11,065 $ 7,296
===============================
</TABLE>

F-11
<PAGE> 93

As of March 31, 1998, future scheduled minimum lease rental payments are as
follows:

<TABLE>
<CAPTION>
Year Ending March 31, (In Thousands)
-------------------------- ---------------------
<S> <C>
1999 $ 3,320
2000 1,496
2001 50
2002 5
---------------------
$ 4,871
=====================
</TABLE>

Based on management's evaluation of estimated residual values included within
the Company's operating lease portfolio, certain recorded residuals were
written down to reflect revised market conditions. In accordance with SFAS No.
121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets To Be Disposed Of," an impairment loss of $153,435 was recognized in the
year ended March 31, 1997. Impairment losses are reflected as a component of
direct lease costs in the accompanying consolidated statements of earnings.

4. PROPERTY AND EQUIPMENT

Property and equipment consists of the following:

<TABLE>
<CAPTION>
As of March 31,
1997 1998
------------------------------
(In Thousands)
<S> <C> <C>
Furniture and fixtures $ 852 $ 1,157
Vehicles 142 138
Capitalized software 186 477
Leasehold improvements 23 24
Less: Accumulated depreciation and
amortization (462) (664)
------------------------------
Property and equipment, net $ 741 $ 1,132
==============================
</TABLE>

5. RECOURSE AND NONRECOURSE NOTES PAYABLE

Recourse and nonrecourse obligations consist of the following:

<TABLE>
<CAPTION>
As of March 31,
1997 1998
--------------------------------
(In Thousands)
<S> <C> <C>
Recourse equipment notes secured by related
investments in leases with varying interest
rates ranging from 8.53% to 8.75% in fiscal 1997
and 1998 $ 269 $ 272
</TABLE>

F-12
<PAGE> 94

As of March 31,
1997 1998
----------------------------------
(In Thousands)
<S> <C> <C>
Recourse line of credit with a maximum balance
of $25,000,000, bearing interest at the LIBOR
rate plus 1.1% or, at the Company's option, the _ 12,750
prime rate less 100 basis points

Recourse line of credit with a maximum balance
of $2,500,000 with an interest rate based on the
prime rate 110 _

Term bank obligations with interest rates
ranging from 8.25% to bank prime plus 75 basis
points 31 10

Capitalized equipment lease debt with interest
imputed at 9% 4 _

Loans from related parties with interest rates
ranging from 8% to 10% 25 5
----------------------------------

Total recourse obligations $ 439 $ 13,037
==================================

Nonrecourse equipment notes secured by related
investments in leases with interest rates
ranging from 6.30% to 9.90% in fiscal 1997 and
6.30% to 9.99% in fiscal 1998 $ 19,705 $ 13,028
=================================
</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 serving 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 Company's $25 million line of credit are subject to
certain covenants regarding minimum consolidated tangible net worth, maximum
recourse debt to worth ratio, and minimum interest expense coverage ratio.
Borrowings are limited to the Company's collateral base, consisting of
equipment, lease receivables and other current assets, up to a maximum of $25
million. In addition, the credit agreement restricts, and under some
circumstances prohibits the payment of dividends.

F-13
<PAGE> 95

Recourse and nonrecourse notes payable as of March 31, 1998, mature as follows:

<TABLE>
<CAPTION>
Recourse Notes Nonrecourse
Year Ending March 31, Payable Notes Payable
- ------------------------------------------ ----------------- -----------------
(In Thousands)
<S> <C> <C>
1999 $ 12,950 $ 7,606
2000 56 4,322

2001 31 1,006
2002 -- 94
-----------------------------------
$ 13,037 $ 13,028
===================================
</TABLE>

6. RELATED PARTY TRANSACTIONS

The Company provided loans and advances to employees and/or stockholders, the
balances of which amounted to $70,612 and $53,582 as of March 31, 1997 and
1998, respectively. Such balances are to be repaid from commissions earned on
successful sales or financing arrangements obtained on behalf of the Company,
or via scheduled payroll deductions.

As of March 31, 1997 and 1998, $72,000 and $85,020 was receivable from United
Federal Leasing, which is owned in part by an individual related to a Company
executive. As of March 31, 1997 and 1998, the Company had fully reserved for
the receivable. During the year ended March 31, 1998, the Company recognized
re-marketing fees of $561,000 from United Federal Leasing.

During the year ended March 31, 1996, the Company sold leased equipment to a
company in which an employee/stockholder has a 45% ownership interest. Revenue
recognized from the sales amounted to $1,300,448. The basis of the equipment
sold was $1,271,729. At March 31, 1998, accrued expenses and other liabilities
include $9,599 due to the related company. During the years ended March 31,
1997 and 1998, respectively, the Company recognized remarketing fees from the
company amounting to $224,126 and $216,828.

During the years ended March 31, 1996 and 1997, the Company paid a stockholder
$120,000 and $90,000, respectively, in exchange for the pledge of personal
assets made to secure one of the Company's revolving line-of-credit agreements.

During the years ended March 31, 1996, 1997 and 1998, the Company sold leased
equipment to MLC/GATX Limited Partnership I (the "Partnership"), which amounted
to 18%, 4% and 0.3% of the Company's revenues, respectively. 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, $3,452,902 and $406,159, and
the basis of the equipment sold was $12,273,527, $3,309,186 and $372,306 during
the years ended March 31, 1996, 1997 and 1998, respectively. Other assets
include $209,691 due from, $75,981 and $136,664 due to the Partnership as of
March 31, 1996, 1997 and 1998, respectively. Also reflected in other assets is
the Company's investment balance in the Partnership, which is accounted for
using the cost method, and amounts to $380,757, $226,835 and $132,351 as of
March 31, 1996, 1997 and 1998, respectively. In

F-14
<PAGE> 96

addition, the Company received $122,111, $148,590 and $104,277 for the years
ended March 31, 1996, 1997 and 1998, respectively, for accounting and
administrative services provided to the Partnership.

During the years ended March 31, 1997 and 1998 the recoverability of certain
capital contributions made by the Company to the Partnership was determined to
be impaired. As a result, the Company recognized a write-down of its recorded
investment balance of $195,897 and $105,719 to reflect the revised net
realizable value. These write-downs are included in cost of sales in the
accompanying consolidated statements of earnings.

During the years ended March 31, 1996, 1997 and 1998, the Company sold leased
equipment to MLC/CLC LLC, a joint venture in which the Company has a 5%
ownership interest, that amounted to 2%, 20%, and 38% of the Company's
revenues, respectively. Revenue recognized from the sales was $1,256,518,
$16,923,090 and $44,784,727, respectively. The basis for the equipment sold
was $1,335,885, $16,917,840, and $44,353,676, respectively. Notes receivable
includes $1,812,414 and $3,709,508 due from the partnership as of March 31,
1997 and 1998. Other assets reflects the investment in the joint venture of
$168,259 and $736,364, as of March 31, 1997 and 1998, respectively, accounted
for using the cost method. The Company receives an origination fee on leased
equipment sold to the joint venture. In addition, the Company recognized
$52,742 and $170,709 for the years ended March 31, 1997 and 1998 for accounting
and administrative services provided to MLC/CLC LLC.

During the year ended March 31, 1997, the Company recognized $250,000 in broker
fees for providing advisory services to a company which is owned in part by one
of the Company's outside directors.

The Company leases certain office space from entities which are owned, in part,
by executives of subsidiaries of the Company. During the years ended March 31,
1996, 1997, and 1998, rent expense paid to these related parties was $132,111,
$124,222 and $306,479, respectively.

The Company is reimbursed for certain general and administrative expenses by a
company owned, in part, by an executive of a subsidiary of the Company. The
reimbursements totaled $128,310, $176,075 and $81,119 for the years ended March
31, 1996, 1997 and 1998.

7. COMMITMENTS AND CONTINGENCIES

The Company leases office space and certain office equipment for the conduct of
its business. Rent expense relating to these operating leases was $396,829,
$347,553 and $505,032 for the years ended March 31, 1996, 1997, and 1998,
respectively. As of March 31, 1998, the future minimum lease payments are due
as follows:

<TABLE>
<CAPTION>
Year Ending March 31,
-------------------------------
<S> <C>
1999 $ 413,937
2000 270,876
2001 231,522
2002 232,780
2003 and thereafter 469,509
----------------
$ 1,618,624
================

</TABLE>

F-15
<PAGE> 97

As of March 31, 1998, the Company has guaranteed $172,565 of the residual value
for equipment owned by the MLC/GATX Limited Partnership I.

8. 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>
For the Year Ended March 31,
1996 1997 1998
------------------------------------------------
<S> <C> <C> <C>
Statutory Federal income tax rate 34% 34% 34%
Income tax expense computed at the statutory
Federal rate $1,217,035 $1,649,458 $2,968,195
Income tax expense based on the statutory
Federal rate for subsidiaries which were
Sub-S prior to their combination with the
Company (369,956) (343,658) (568,893)
State income tax expense, net of Federal tax 24,643 48,641 250,692
Non-taxable interest income (79,342) (33,023) (35,350)
Non-deductible expenses 88,620 38,582 76,246
------------------------------------------------
Provision for income taxes $ 881,000 $1,360,000 $2,690,890
================================================

Effective tax rate 24.6% 28.0% 30.8%
================================================

</TABLE>

The components of the provision for income taxes are as follows:

<TABLE>
<CAPTION>
For the Year Ended March 31,
1996 1997 1998
-----------------------------------------
(In Thousands)
<S> <C> <C> <C>
Current:
Federal $ 231 $ 1,152 $ 1,669
State 27 87 125
-----------------------------------------
258 1,239 1,794
-----------------------------------------

Deferred:
Federal 557 113 802
State 66 8 95
-----------------------------------------
623 121 897
-----------------------------------------

$ 881 $ 1,360 $ 2,691
=========================================
</TABLE>

F-16
<PAGE> 98

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

<TABLE>
<CAPTION>
For the Year Ended March 31,
1996 1997 1998
-----------------------------------------------
(In Thousands)
<S> <C> <C> <C>
Alternative minimum tax $ (200) $ 369 $ 18
Lease revenue recognition 823 (248) 797
Other _ _ 82
-----------------------------------------------
$ 623 $ 121 $ 897
===============================================
</TABLE>

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 tax liability consists of the following:

<TABLE>
<CAPTION>
As of March 31,
1997 1998
----------------------------------
(In Thousands)
<S> <C> <C>
Alternative minimum tax $ 250 $ 232
Lease revenue recognition (840) (1,637)
Other _ (82)
----------------------------------
$ (590) $ (1,487)
==================================
</TABLE>

During the year ended March 31, 1998, the Company entered into business
combinations with companies which, prior to their combination with the Company,
had elected to be treated as Sub-chapter "S" ("Sub-S") corporations. As Sub-S
corporations, taxable income and losses were passed through the corporate
entity to the individual shareholders. These business combinations were
accounted for using the pooling of interests method. Therefore, the
consolidated financial statements do not reflect a provision for income taxes
relating to the pooled companies for the periods prior to their combination
with the Company.

In accordance with Statement of Financial Accounting Standard No. 109,
"Accounting for Income Taxes," the following pro forma income tax information
is presented as if the pooled companies had been subject to federal income
taxes throughout the periods presented.

<TABLE>
<CAPTION>
For the Year Ended March 31,
1996 1997 1998
------------------------------------------
<S> <C> <C> <C>
Net earnings before pro forma adjustment $2,815,559 $3,491,346 $6,039,094
Additional provision for income taxes (426,141) (357,910) (613,261)
------------------------------------------
Pro forma net earnings $2,389,418 $3,133,436 $5,425,833
==========================================
</TABLE>

F-17
<PAGE> 99

9. NONCASH INVESTING AND FINANCING ACTIVITIES

The Company recognized a reduction in recourse and nonrecourse notes payable
(Note 5) associated with its direct finance and operating lease activities from
payments made directly by customers to the third-party lenders amounting to
$4,796,306, $4,214,444 and $5,258,955 for the years ended March 31, 1996, 1997,
and 1998, 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 $11,550,446, $18,057,569 and $1,057,389 for the
years ended March 31, 1996, 1997, and 1998, respectively.

10. BENEFIT AND STOCK OPTION PLANS

The Company provides its employees with contributory 401(k) profit sharing
plans. To be eligible to participate in the plan, employees must be at least
21 years of age and have completed a minimum service requirement. Full vesting
in the plans vary from after the fourth to the sixth consecutive year of plan
participation. Employer contributions percentages are determined by the Company
and are discretionary each year. The Company's expense for the plans was
$77,145, $56,291 and $80,291 for the years ended March 31, 1996, 1997 and 1998,
respectively.

The Company has established a stock incentive program (the "Master Stock
Incentive Plan")(formerly the 1996 Stock Incentive Plan prior to amendment and
restatement effective May 14, 1997 which has been adopted by the Board of
Directors and received on September 30, 1997 stockholder ratification) 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 Master 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 under a
series of component plans. These component plans include tax advantaged
incentive stock options for employees under the Incentive Stock Option Plan
(formerly the 1996 Incentive Stock Option Plan prior to amendment and
restatement effective May 14, 1997), formula length of service based
nonqualified options to nonemployee directors under the Outside Director Stock
Plan (formerly the 1996 Outside Director Stock Option Plan prior to amendment
and restatement effective May 14, 1997), nonqualified stock options under the
Nonqualified Stock Option Plan (formerly the 1996 Nonqualified Stock Option
Plan prior to amendment and restatement effective May 14, 1997), a program for
employee purchase of Common Stock of the Company at 85% of fair market value
under a tax advantaged Employee Stock Purchase Plan (approved by the Board of
Directors but which is not effective until stockholder ratification), as well
as other restrictive stock and performance based stock awards and programs
which may be established by the Board of Directors. The May 14, 1997 Amendments
increase the aggregate number of shares reserved for grant under all plans
which are a part of the Master Stock Incentive Plan to a floating number equal
to 20% of the issued and outstanding stock of the Company (after giving effect
to pro forma assumed exercise of all outstanding options and purchase rights).
The number that may be subject to options granted under the Incentive Stock
Option Plan is also further capped at a maximum of 4,000,000 shares to comply
with IRS requirements for a specified maximum. As of March 31, 1998 a total of
1,214,301 shares of common stock have been reserved for issuance upon exercise
of options granted under the Plan, which encompasses the following component
plans:

a) the Amended and Restated Incentive Stock Option Plan ("ISO
Plan"), under which 297,100 options are outstanding or have been exercised as
of March 31, 1998;

b) the Amended and Restated Nonqualified Stock Option Plan
("Nonqualified Plan"), under which 265,000 options are outstanding as of March
31, 1998;

F-18
<PAGE> 100

c) the Amended and Restated Outside Director Stock Option Plan
("Outside Director Plan"), under which 50,000 are outstanding as of March 31,
1998;

d) the Employee Stock Purchase Plan ("ESPP") under which no
shares have been issued as of March 31, 1998.

The weighted-average fair value of options granted during 1997 and 1998 was
$5.10 and $4.84, respectively. The exercise price of options granted under the
Master Stock Incentive Plan is equivalent to the fair market value of the
Company's stock on the date of grant, or, in the case of the ESPP, not less
than 85% of the lowest fair market value of the Company's stock during the
purchase period, which is generally six months. Options granted under the plan
have various vesting schedules with vesting periods ranging from one to five
years.

A summary of stock option activity during the two years ended March 31, 1998 is
as follows:

<TABLE>
<CAPTION>
Weighted
Number of Exercise Average
Shares Price Range Exercise Price
-------------- ------------------ ---------------
<S> <C> <C> <C>
Outstanding, April 1, 1996 _ _
Options granted 353,800 $6.40 - $10.75 $8.20
Options exercised _ _
Options forfeited _ _
--------------
Outstanding, March 31, 1997 353,800
==============
Exercisable, March 31, 1997 66,250
==============

Outstanding, April 1, 1997 353,800 _
Options granted 277,200 $10.75 - $13.25 11.94
Options exercised (200) $8.75 8.75
Options forfeited (18,900) $8.75 - $13.00 11.18
--------------
Outstanding, March 31, 1998 611,900
==============
Exercisable, March 31, 1998 199,540
==============
</TABLE>

Additional information regarding options outstanding as of March 31, 1998 is as
follows:

<TABLE>
<CAPTION>
Options Outstanding Options Exercisable
---------------------------------------------------------------- ---------------------------------------
Weighted Average
Number Remaining Weighted Average Weighted Average
Outstanding Contractual Life Exercise Price Number Exercisable Exercise Price
--------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
611,900 8.2 years $9.58 199,540 $8.81
</TABLE>

Effective April 1, 1996, the Company adopted SFAS No. 123, "Accounting for
Stock-Based Compensation." This Statement gave the Company the option of
either (1) continuing to account for stock-

F-19
<PAGE> 101

based employee compensation plans in accordance with the guidelines established
by Accounting Principles Board ("APB") No. 25, "Accounting for Stock Issued to
Employees" while providing the disclosures required under SFAS No. 123, or (2)
adopting SFAS No. 123 accounting for all employee and non-employee stock
compensation arrangements. The Company opted to continue to account for its
stock-based awards using the intrinsic value method in accordance with APB No.
25. Accordingly, no compensation expense has been recognized in the financial
statements for employee stock arrangements. Option grants made to
non-employees, including outside directors, have been accounted for using the
fair value method, which resulted in $9,500 and $113,982 in compensation
expense during the years ended March 31, 1997 and 1998, respectively. The
following table summarizes the pro forma disclosures required by SFAS No. 123
assuming the Company had adopted the fair value method for stock-based awards
to employees as of the beginning of fiscal year 1997:

<TABLE>
<CAPTION>
Year Ended March 31,
1997 1998
-----------------------------------
<S> <C> <C>
Net earnings, as reported $ 3,491,346 $ 6,039,094
Net earnings, pro forma 3,198,669 5,346,761

Basic earnings per share, as reported $0.67 $1.00
Basic earnings per share, pro forma 0.62 0.89

Diluted earnings per share, as reported $ 0.66 $ 0.98
Diluted earnings per share, pro forma 0.61 0.87

</TABLE>

Under SFAS No. 123, the fair value of stock-based awards to employees is
derived through the use of option pricing models which require a number of
subjective assumptions. The Company's calculations were made using the
Black-Scholes option pricing model with the following weighted average
assumptions:

<TABLE>
<CAPTION>
[ ] For the Year Ended March 31,

1997 1998
-----------------------------------
<S> <C> <C>
Options granted under the Incentive Stock
Option Plan:
Expected life of option 5 years 5 years
Expected stock price volatility 44.00% 30.95%
Expected dividend yield 0% 0%
Risk-free interest rate 5.81% 5.82%

Options granted under the Nonqualified
Stock Option Plan:
Expected life of option 8 years 8 years
Expected stock price volatility 44.00% 30.95%
Expected dividend yield 0% 0%
Risk-free interest rate 6.05% 5.62%
</TABLE>

F-20
<PAGE> 102

11. 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.

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, 1997 As of March 31, 1998
Carrying Fair Carrying Fair
Amount Value Amount Value
---------------------------------------------------
(In Thousands)
<S> <C> <C> <C> <C>
Assets:
Cash and cash equivalents $ 6,654 $ 6,654 $ 18,684 $ 18,684

Liabilities:
Nonrecourse notes payable 19,705 19,752 13,028 12,973
Recourse notes payable 439 465 13,037 13,033
</TABLE>

F-21
<PAGE> 103

12. BUSINESS COMBINATIONS

During the year ended March 31, 1998, the Company acquired Compuventures of
Pitt County, Inc. ("Compuventures") and Educational Computer Concepts, Inc.
("MLCI"), both value added resellers of personal computers and related network
equipment and software products. These business combinations have been
accounted for as pooling of interests, and accordingly, the consolidated
financial statements for periods prior to the combinations have been restated
to include the accounts and results of operations of the pooled companies. The
results of operations previously reported by the Company and the pooled
companies and the combined amounts presented in the accompanying consolidated
financial statements are presented below.

<TABLE>
<CAPTION>
For the Year Ended March 31,
1996 1997 1998
----------------------------------------------
(In Thousands)
<S> <C> <C> <C>
Revenues:
MLC Holdings, Inc. $ 42,634 $ 55,711 $ 77,178
Pooled companies 29,080 30,502 41,264
----------------------------------------------
Combined $ 71,714 $ 86,213 $ 118,442
==============================================

Net earnings:
MLC Holdings, Inc. $ 1,610 $ 2,481 $ 3,785
Pooled companies 1,205 1,010 2,254
----------------------------------------------
Combined $ 2,815 $ 3,491 $ 6,039
==============================================
</TABLE>

13. QUARTERLY DATA - UNAUDITED

Condensed quarterly financial information is as follows (amounts in thousands,
except per share amounts). Adjustments reflect the results of operations of
business combinations accounted for under the pooling of interests method and
the reclassification of certain prior period amounts to conform with current
period presentation.

F-22
<PAGE> 104

MLC HOLDINGS, INC. AND SUBSIDIARIES
CONDENSED QUARTERLY INFORMATION
(IN THOUSANDS)

<TABLE>
<CAPTION>
FIRST QUARTER SECOND QUARTER
Previously Adjusted Previously Adjusted
Reported Adjustments Amount Reported Adjustments Amount
------------------------------------------ ----------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Year Ended March 31, 1997
Sales $ 10,412 $ 6,978 $ 17,390 $ 8,635 $ 6,026 $ 14,661
Total revenues 12,896 7,267 20,163 11,705 6,284 17,989
Cost of sales 9,894 5,649 15,543 8,250 4,563 12,813
Total costs and expenses 12,097 7,189 19,286 10,803 5,979 16,782
Earnings before provision for income taxes 799 78 877 902 305 1,207
Provision for income taxes 284 - 284 322 - 322
Net earnings 515 78 593 580 305 885
========================================== ========================================
Net earnings per common share $ 0.13 $ 0.12 $ 0.15 $ 0.19
------------ ----------- ----------- -----------
Year Ended March 31, 1998
Sales $ 22,309 $ 12,964 $ 35,273 $ 22,407 $ - $ 22,407
Total revenues 26,763 13,383 40,146 27,253 (384) 26,869
Cost of sales 21,858 10,034 31,892 19,773 - 19,773
Total costs and expenses 25,379 12,120 37,499 25,719 (384) 25,335
Earnings before provision for income taxes 1,384 1,263 2,647 1,534 - 1,534
Provision for income taxes 460 - 460 412 - 412
Net earnings 924 1,263 2,187 1,122 - 1,122
========================================== ========================================
Net earnings per common share-Basic $ 0.18 $ 0.37 $ 0.19 $ 0.19
------------ ----------- ----------- -----------
</TABLE>

<TABLE>
<CAPTION>
THIRD QUARTER FOURTH QUARTER
Previously Adjusted Previously Adjusted
Reported Adjustments Amount Reported Adjustments Amount
------------------------------------- -------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Year Ended March 31, 1997
Sales $ 8,435 $ 8,106 $ 16,541 $ 15,836 $ 9,373 $ 25,209
Total revenues 11,800 8,345 20,145 19,747 8,169 27,916
Cost of sales 7,676 6,712 14,388 14,284 6,819 21,103
Total costs and expenses 10,810 7,957 18,767 18,597 7,929 26,526
Earnings before provision for income taxes 990 388 1,378 1,150 240 1,390
Provision for income taxes 349 - 349 405 - 405
Net earnings 641 388 1,029 745 240 985
===================================== =====================================
Net earnings per common share $ 0.14 $ 0.19 $ 0.14 $ 0.17
------------ ----------- ----------- -----------
Year Ended March 31, 1998
Sales $ 18,097 $ - $ 18,097 $ - $ - $ 22,004
Total revenues 23,563 (287) 23,276 - - 28,151
Cost of sales 15,625 - 15,625 - - 19,802
Total costs and expenses 21,435 (287) 21,148 - - 25,730
Earnings before provision for income taxes 2,128 - 2,128 - - 2,421
Provision for income taxes 851 - 851 - - 968
Net earnings 1,277 - 1,277 - - 1,453
===================================== =====================================
Net earnings per common share-Basic $ 0.21 $ 0.21 $ - $ 0.24
------------ ----------- ----------- -----------
</TABLE>

F-23
<PAGE> 105

The following pages F-24 to F-29 set forth the information contained in the
Quarterly Report on Form 10-Q of MLC Holding, Inc. for the quarter ended June
30, 1998.

MLC HOLDINGS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
As of March 31, 1998 As of June 30, 1998
(Unaudited)
-----------------------------------------------------
<S> <C> <C>
ASSETS

Cash and cash equivalents $ 18,683,796 $ 6,675,262
Accounts receivable 16,383,314 15,555,292
Other receivables 3,801,808 15,572,848
Employee advances 53,582 51,549
Inventories 1,213,734 1,806,835
Investment in direct financing and sales type leases - net 32,495,594 48,990,849
Investment in operating lease equipment - net 7,295,721 6,105,244
Property and equipment - net 1,131,512 1,160,872
Other assets 2,136,554 3,018,968
-----------------------------------------------------
TOTAL ASSETS $ 83,195,615 $ 98,937,719
=====================================================

LIABILITIES AND STOCKHOLDERS' EQUITY

LIABILITIES
Accounts payable - trade $ 6,865,419 $ 4,171,959
Accounts payable - equipment 21,283,582 21,417,573
Salaries and commissions payable 390,081 186,561
Accrued expenses and other liabilities 3,560,181 3,139,517
Recourse notes payable 13,037,365 20,827,000
Nonrecourse notes payable 13,027,676 21,850,861
Deferred taxes 1,487,000 1,487,000
Income tax payable - 757,381
-----------------------------------------------------
Total Liabilities 59,651,304 73,837,852

COMMITMENTS AND CONTINGENCIES - -

STOCKHOLDERS' EQUITY

Preferred stock, $.01 par value; 2,000,000 shares authorized;
none issued or outstanding - -
Common stock, $.01 par value; 25,000,000 authorized;
6,071,505 and 6,082,005 issued and outstanding at
March 31, 1998 and June 30, 1998, respectively 60,715 60,820
Additional paid-in capital 11,460,331 11,552,101
Retained earnings 12,023,265 13,486,946
-----------------------------------------------------
Total Stockholders' Equity 23,544,311 25,099,867
-----------------------------------------------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 83,195,615 $ 98,937,719
=====================================================
</TABLE>

SEE NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS.

F-24
<PAGE> 106

MLC HOLDINGS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS

<TABLE>
<CAPTION>
Three months ended
June 30,
1997 1998
(Unaudited) (Unaudited)
-------------------------------------------------
<S> <C> <C>
REVENUES

Sales of equipment $ 15,132,332 $ 10,274,435
Sales of leased equipment 20,140,240 24,910,646
-------------------------------------------------
35,272,572 35,185,081

Lease revenues 3,522,568 4,985,087
Fee and other income 1,350,880 1,412,634
-------------------------------------------------
4,873,448 6,397,721

-------------------------------------------------
TOTAL REVENUES 40,146,020 41,582,802
-------------------------------------------------

COSTS AND EXPENSES

Cost of sales, equipment 11,980,439 8,283,673
Cost of sales, leased equipment 19,912,017 24,813,066
-------------------------------------------------
31,892,456 33,096,739

Direct lease costs 1,390,755 1,991,828
Professional and other fees 214,590 196,965
Salaries and benefits 2,625,257 2,368,600
General and administrative expenses 932,923 987,872
Interest and financing costs 465,784 501,305
-------------------------------------------------
5,629,309 6,046,570

-------------------------------------------------
TOTAL COSTS AND EXPENSES 37,521,765 39,143,309
-------------------------------------------------

EARNINGS BEFORE PROVISION FOR INCOME TAXES 2,624,255 2,439,493
-------------------------------------------------

PROVISION FOR INCOME TAXES 460,313 975,797
-------------------------------------------------

NET EARNINGS $ 2,163,942 $ 1,463,696
=================================================

NET EARNINGS PER COMMON SHARE - BASIC $ 0.37 $ 0.24
=================================================
NET EARNINGS PER COMMON SHARE - DILUTED $ 0.36 $ 0.23
=================================================

PRO FORMA NET EARNINGS (See Note 4) $ 1,699,027 $ 1,463,696
=================================================

PRO FORMA NET EARNINGS PER COMMON SHARE - BASIC $ 0.29 $ 0.24
=================================================
PRO FORMA NET EARNINGS PER COMMON SHARE - DILUTED $ 0.28 $ 0.23
=================================================

WEIGHTED AVERAGE SHARES OUTSTANDING - BASIC 5,909,976 6,078,126
WEIGHTED AVERAGE SHARES OUTSTANDING - DILUTED 6,023,907 6,241,079
</TABLE>

SEE NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS.

F-25

<PAGE> 107

MLC HOLDINGS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
Three Months Ended
June 30,
1997 1998
(Unaudited) (Unaudited)
------------------------------------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings $ 2,163,942 $ 1,463,696
Adjustments to reconcile net earnings to net cash used by
operating activities:
Depreciation and amortization 1,235,202 1,276,822
Provision for credit losses (30,000) 500,000
Gain on sale of operating lease equipment (113,952) (2,500)
Adjustment of basis to fair market value of equipment and investments 231,000 268,506
Payments from lesees directly to lenders (641,730) (282,225)
Compensation to outside directors - stock options 6,300 -
Changes in:
Accounts receivable (2,841,758) 1,033,285
Other receivables (9,324,654) (11,771,040)
Employee advances (15,806) 2,073
Inventories (1,425,770) (589,916)
Other assets (570,343) 286,701
Accounts payable - equipment 1,489,123 (82,439)
Accounts payable - trade 2,436,814 (3,198,540)
Salaries and commissions payable, accrued
expenses and other liabilities 968,657 359,133
------------------------------------------
Net cash used by operating activities (6,432,975) (10,736,444)
------------------------------------------

CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sale of operating equipment 353,762 2,500
Purchase of operating lease equipment (1,018,137) -
Increase in investment in direct financing and sales-type leases (2,997,485) (18,385,823)
Purchases of property and equipment - (128,341)
Decrease (Increase) in other assets 69,143 (1,138,719)
------------------------------------------
Net cash used in investing activities (3,592,717) (19,650,383)
------------------------------------------

CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings:
Nonrecourse 2,004,927 11,608,867
Recourse 94,364 107,764
Repayments:
Nonrecourse (1,113,018) (1,112,890)
Recourse (246,236) (45,310)
Repayments of loans from stockholders (2,000) -
Distributions to shareholders of combined companies
prior to business combination (937,270) -
Proceeds from issuance of capital stock, net of expenses - 91,875
Proceeds from lines of credit 7,500,000 7,727,987
------------------------------------------
Net cash provided by financing activities 7,300,767 18,378,293
------------------------------------------

NET DECREASE IN CASH AND CASH EQUIVALENTS (2,724,925) (12,008,534)

CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 6,654,209 18,683,796
------------------------------------------

CASH AND CASH EQUIVALENTS, END OF PERIOD $ 3,929,284 $ 6,675,262
==========================================

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid for interest $ 41,167 $ 216,428
==========================================
Cash paid for income taxes $ 1,121,818 $ 324,446
==========================================
</TABLE>

SEE NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS.

F-26

<PAGE> 108

MLC HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

The condensed consolidated statement of earnings for the three month period
ended June 30, 1997, and the condensed consolidated statement of cash flows for
the three month period ended June 30, 1997 have been restated to include the
accounts and results of operations of the Company's two subsidiaries acquired
during the second quarter of fiscal 1998, which were accounted for under the
pooling-of-interests method. The condensed consolidated balance sheet as of June
30, 1998, the condensed consolidated statements of earnings for the three months
ended June 30, 1997 and 1998, and the condensed consolidated statements of cash
flows for the three months ended June 30, 1997 and 1998 have been prepared by
the Company without audit.

The quarterly financial information is submitted in response to the requirements
of Form 10-Q and does not purport to be financial statements prepared in
accordance with generally accepted accounting principles. Certain information
and footnote disclosures normally included in financial statements prepared in
accordance with generally accepted accounting principles have been condensed or
omitted. They therefore do not include all disclosures which might be associated
with such statements.

In the opinion of management, the accompanying unaudited financial statements
include all adjustments, consisting only of normal recurring accruals, necessary
to present fairly the Company's financial position at March 31, 1998 and
June 30, 1998, the results of operations for the three month periods ending June
30, 1997 and 1998, and the cash flows for the three month periods ended June 30,
1997 and 1998. These condensed consolidated financial statements should be read
in conjunction with the financial statements and notes thereto for the year
ended March 31, 1998 included in the Company's Annual Report on Form 10-K (No.
0-28926).

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:

<TABLE>
<CAPTION>
March 31, June 30,
1998 1998
------------------ ------------------
(In thousands)
<S> <C> <C>
Minimum lease payments $ 29,968 $ 46,826
Estimated unguaranteed residual value 7,084 9,442
Initial direct costs - net of amortization 760 1,156
Less: Unearned lease income (5,270) (7,887)
Reserve for credit losses (46) (546)
------------------ -------------------
Investment in direct financing and sales type leases - net $ 32,496 $ 48,991
================== ===================
</TABLE>

F-27
<PAGE> 109

3. INVESTMENT IN OPERATING LEASE EQUIPMENT

The components of the net investment in operating lease equipment are as
follows:

<TABLE>
<CAPTION>
March 31, June 30,
1998 1998
-------------------- --------------------
(In thousands)
<S> <C> <C>
Cost of equipment under operating leases $ 13,990 $ 13,715
Initial direct costs 51 29
Accumulated depreciation and amortization (6,745) (7,639)
-------------------- --------------------

Investment in operating leases - net $ 7,296 $ 6,105
==================== ====================
</TABLE>

4. UNAUDITED PRO FORMA INCOME TAX INFORMATION

The following unaudited pro forma income tax information is presented in
accordance with Statement of Financial Accounting Standard No. 109, "Accounting
for Income Taxes," as if the pooled companies, which were subchapter S
corporations prior to their business combinations with the Company, had been
subject to federal income taxes throughout the periods presented.

<TABLE>
<CAPTION>
Three months ended
June 30, 1997 June 30, 1998
-------------------- --------------------
(In thousands)
<S> <C> <C>
Net earnings before pro forma adjustment $ 2,164 $ 1,464
Additional provision for income tax (465) -
-------------------- --------------------
Pro forma net income $ 1,699 $ 1,464
==================== ====================
</TABLE>

5. NEW ACCOUNTING PRONOUCEMENT

Effective January 1, 1998, the Company adopted Statement of Financial Accounting
Standard ("SFAS") No. 130, "Reporting Comprehensive Income." SFAS No. 130
establishes standards for the reporting and presentation of comprehensive income
and its components in financial statements by requiring minimum pension
liability adjustments, unrealized gains or losses on available-for-sale
securities and foreign currency translation adjustments, which prior to adoption
were reported separately in shareholders' equity, to be included in other
comprehensive earnings. The Company currently has no items of other
comprehensive income to be reported.

F-28
<PAGE> 110

6. CONTINGENCY

One of the Company's equipment sales and lease customers has filed for voluntary
bankruptcy protection. Allegheny Health, Education & Research Foundation
("AHERF") is a Pittsburgh based not-for-profit entity that owns multiple
hospitals, the largest of which include Hahnemann University Hospital, St.
Christopher's Hospital for Children, Medical College of Pennsylvania and
Graduate Hospital, all of which are located in Philadelphia, Pennsylvania. On
July 21, 1998, AHERF, and some but not all of its operating subsidiaries filed
for bankruptcy and agreed to sell its eight Philadelphia-area hospitals to
Vanguard Health Systems, Inc., a Tennessee based for-profit company, subject to
court approval. As of August 12, 1998, the Company's net book value of leases to
AHERF is approximately $1.4 million and receivable balance is approximately
$500,000. The Company believes that the fair market value of the equipment may
be below its current balances, and, depending on the assumption or rejection of
the leases by the Bankruptcy Trustee and the creditor status and ultimate
repayment schedule of other claims, upon disposal of the equipment and
disposition of its claims, the Company could incur a loss with respect to its
current balances. The amount and timing of such losses cannot be accurately
estimated by the Company at this time due to the recent filing and unknown
status of many of its claims. The Company is vigorously pursuing all available
remedies in bankruptcy court. The Company believes that as of June 30, 1998, its
allowance for doubtful accounts, having been increased, is adequate to provide
for the potential loss resulting from this customer.

7. SUBSEQUENT EVENT

On July 1, 1998, the Company, through a new wholly owned subsidiary, MLC Network
Solutions of Virginia, Inc., issued 263,478 common shares, valued at $3,622,822,
and cash of $3,622,836 for all the outstanding common shares of PC Plus, Inc., a
value-added reseller of PC's, related network equipment and software products
and provides various support services to its customers from its facility in
Reston, Virginia. This business combination has been accounted for using the
purchase method of accounting.

F-29
<PAGE> 111
SCHEDULE II

MLC HOLDINGS, INC. AND SUBSIDIARIES
VALUATION AND QUALIFYING ACCOUNTS
FOR THE THREE YEARS ENDED MARCH 31,
1996, 1997 AND 1998
(IN THOUSANDS)

<TABLE>
<CAPTION>
Column C - Additions
-------------------------
(1)
Column B Charged (2) Column E
Balance at to costs Charged Balance at
beginning and to other Column D end of
Column A - Description of period expenses accounts Deductions period
-----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1998 Allowance for doubtful
accounts and credit losses $ 143 $ 56 $ _ $ 57 $ 142
==================================================================

1997 Allowance for doubtful
accounts and credit losses $ 8 $ 144 $ _ $ 9 $ 143
==================================================================

1996 Allowance for doubtful
accounts and credit losses $ 4 $ 15 $ _ $ 11 $ 8
==================================================================
</TABLE>

MLC HOLDINGS, INC. AND SUBSIDIARIES
VALUATION AND QUALIFYING ACCOUNTS
FOR THE QUARTER ENDED JUNE 30, 1998
(IN THOUSANDS)

<TABLE>
<CAPTION>
Column C - Additions
-------------------------
(1)
Column B Charged (2) Column E
Balance at to costs Charged Balance at
beginning and to other Column D end of
Column A - Description of period expenses accounts Deductions period
-----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1998 Allowance for doubtful
accounts and credit losses $ 142 $ 534 $ _ $ 3 $ 673
==================================================================
</TABLE>

S-1

<PAGE> 112
====================================================

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 . . . . . . . . . . . . 3
Prospectus Summary . . . . . . . . . . . . . . 4
Risk Factors . . . . . . . . . . . . . . . . . 9
The Company . . . . . . . . . . . . . . . . . . 24
Use of Proceeds . . . . . . . . . . . . . . . 25
Dividend Policy . . . . . . . . . . . . . . . 25
Capitalization . . . . . . . . . . . . . . . . 26
Selected Consolidated Financial Data . . . . . 26
Management's Discussion and Analysis of
Results of Operations and Financial
Condition . . . . . . . . . . . . . . . . . 29
Business . . . . . . . . . . . . . . . . . . . 41
Management . . . . . . . . . . . . . . . . . . 56
Certain Transactions . . . . . . . . . . . . . 67
Principal Stockholders . . . . . . . . . . . . 69
Selling Stockholders . . . . . . . . . . . . . 73
Price Range of Common Stock . . . . . . . . . 74
Description of Capital Stock . . . . . . . . . 75
Plan of Distribution . . . . . . . . . . . . . 79
Legal Matters . . . . . . . . . . . . . . . . . 80
Experts . . . . . . . . . . . . . . . . . . . . 80
Index to Consolidated Financial
Statements . . . . . . . . . . . . . . . . F-1
</TABLE>

====================================================

<PAGE> 113
====================================================

2,964,305 SHARES

MLC HOLDINGS, INC.

COMMON STOCK

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

PROSPECTUS

__________, 1998

====================================================
<PAGE> 114
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 Nasdaq listing fee.

<TABLE>
<S> <C>
SEC registration fee $ 10,494
Nasdaq listing fee $ 17,500
Printing and engraving expenses $ 3,500
Legal fees and expenses $ 55,000
Blue Sky fees and expenses $ 2,000
Accounting fees and expenses $ 25,000
Miscellaneous $ 3,000
--------

Total $116,494
========
</TABLE>

ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS

The Ninth Article 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."

The Tenth Article 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

II-1
<PAGE> 115
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 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

II-2
<PAGE> 116
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 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

II-3
<PAGE> 117
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 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

(a) The Company has sold the following unregistered securities
since its inception in 1996:

(i) On July 1, 1997, the Company issued 161,329 shares of
Common Stock in a private placement at a price of
$12.40 per share.

(ii) Effective July 24, 1997, the Company issued 260,978
shares of Common Stock pursuant to an Agreement and
Plan of Merger with Compuventures of Pitt

II-4
<PAGE> 118
County, Inc. ("Compuventures") in exchange for the
outstanding shares of Compuventures common stock.

(iii) Effective September 29, 1997 the Company issued
498,997 shares of Common Stock pursuant to an
Agreement and Plan of Merger with Educational
Computer Concepts, Inc. ("ECCI") in exchange for the
outstanding shares of ECCI common stock.

(iv) The Company has granted options to purchase an
aggregate of 482,150 shares of its Common Stock to
its officers, directors and employees pursuant to its
option and stock purchase plans as of December 3,
1997.

(b) There were no underwriters, brokers or finders employed in
connection with any of the transactions set forth in Item
15(a).

(c) The issuances described in Item 15(a) were deemed to be exempt
from registration under the Securities Act in reliance upon
Section 4(2) thereof as transactions not involving a public
offering.

ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

a. Exhibits

<TABLE>
<CAPTION>
Exhibit
Number Description
<S> <C>
2.1(1) Agreement and Plan of Merger dated July 24, 1997, by and among MLC Holdings,
Inc., MLC Network Solutions, Inc., Compuventures of Pitt County, Inc., and the
Stockholders of Compuventures of Pitt County, Inc.

2.2(2) Agreement and Plan of Merger dated September 29, 1997, by and among MLC
Holdings, Inc., MLC Acquisition Corp., Educational Computer Concepts, Inc. and
the Stockholders of Educational Computer Concepts, Inc.

2.3(3) Agreement and Plan of Merger dated July 1, 1998, by and among MLC Holdings,
Inc., MLC Network Solutions of Virginia, Inc., PC Plus, Inc., and the
Stockholders of PC Plus, Inc.

3.1(2) Certificate of Incorporation of the Company, as amended

3.2(4) Bylaws of the Company

4.1(4) Specimen certificate of Common Stock of the Company

5.1 Opinion of Alston & Bird LLP

10.1(4)(*) 1996 Stock Incentive Plan (see 10.21 below for amended version)
</TABLE>

II-5
<PAGE> 119

<TABLE>
<S> <C>
10.2(4)(*) 1996 Outside Directors Stock Option Plan (see 10.23 below for amended version)

10.3(4)(*) 1996 Nonqualified Stock Option Plan (see 10.24 below for amended version)

10.4(4)(*) 1996 Incentive Stock Option Plan (see 10.22 below for amended version)

10.5(4) Form of Indemnification Agreement entered into between the
Company and its directors and officers.

10.6(4) Lease dated July 14, 1993 for principal executive office located in Reston,
Virginia, together with amendment thereto dated March 18, 1996

10.7(4)(*) Form of Employment Agreement between the Registrant and Philip G. Norton

10.8(4)(*) Form of Employment Agreement between the Registrant and Bruce M. Bowen

10.9(4)(*) Form of Employment Agreement between the Registrant and William J. Slaton

10.10(4)(*) Form of Employment Agreement between the Registrant and Kleyton L. Parkhurst

10.11(4) Form of Irrevocable Proxy and Stock Rights Agreement

10.12(4) First Amended and Restated Business Loan and Security Agreement by and between
the Company and First Union Bank of Virginia, N.A.

10.13(4) Loan Modification and Extension Agreement by and between the Company and First
Union National Bank of Virginia, N.A.

10.14(4) Credit Agreement by and Between the Company and NationsBanc Leasing Corporation

10.15(4) Loan Modification and Extension Agreement

10.16(5) Text of Loan and Security Agreement dated January 31, 1997 between MLC Group,
Inc. and Heller Financial, Inc.

10.17(5) Text of First Amendment to Loan and Security Agreement dated March 12, 1997
between MLC Group, Inc. and Heller Financial, Inc.

10.18(6) Credit Agreement dated as of June 5, 1997, by and between MLC Group, and
CoreStates Bank, N.A.

10.19(6)(*) Form of Employment Agreement between the Registrant and Thomas B. Howard, Jr.
</TABLE>

II-6
<PAGE> 120

<TABLE>
<S> <C>
10.20(6)(*) Form of Employment Agreement between the Registrant and
Steven J. Mencarini

10.21(2)(*) MLC Master Stock Incentive Plan

10.22(2)(*) Amended and Restated Incentive Stock Option Plan

10.23(2)(*) Amended and Restated Outside Director Stock Option Plan

10.24(2)(*) Amended and Restated Nonqualified Stock Option Plan

10.25(2)(*) 1997 Employee Stock Purchase Plan

10.26(2) Amendment No. 1 dated September 5, 1997 to Credit Agreement dated June 5, 1997
between MLC Group, Inc. and CoreStates Bank, N.A.

10.27(3) Employment Agreement between the Company and Nadim Achi

10.28(3) Escrow Agreement between the Company, Crestar Bank, Nadim Achi as representative
of the PC Plus, Inc. shareholders dated July 1, 1998

10.29(3) Amendment No. 3 dated June 30, 1998, to Credit Agreement dated June 5, 1997,
between MLC Group, Inc. and First Union National Bank, sucessor to CoreStates
Bank, N.A.

10.30 Amendment No. 2 dated December 19, 1997, to Credit Agreement dated June 5, 1997,
between MLC Group, Inc. CoreStates Bank, N.A.

21.1 Subsidiaries of the Company

23.1 Consent of Deloitte & Touche LLP

23.2 Consent of Herbein & Company, Inc.

23.3 Consent of Alston & Bird LLP (Included in Exhibit 5.1)

24.1(7) Power of Attorney

27.1(8) Financial Data Schedule

99.1(7) Independent Auditor's Report of Herbein & Company, Inc. as to ECCI
- ---------------------------------
</TABLE>

(*) Indicates a management contract or compensatory plan or arrangement.

(1) Incorporated herein by reference to the indicated exhibit filed as
part of the registrant's Form 8-K filed on August 8, 1997.

(2) Incorporated herein by reference to the indicated exhibit filed as
part of the registrant's Form 10-Q filed on November 14, 1997.

(3) Incorporated herein by reference to the indicated exhibit filed as
part of the registrant's Form 8-K filed July 31, 1998.

II-7
<PAGE> 121

(4) Incorporated herein by reference to the indicated exhibit filed as
part of the registrant's Registration Statement on Form S-1 (No.
333-11737).

(5) Incorporated herein by reference to Exhibits 5.1 and 5.2 filed as part
of the registrant's Form 8-K filed March 28, 1997.

(6) Incorporated herein by reference to the indicated exhibit filed as
part of the registrant's Form 10-K filed on June 30, 1997.

(7) Previously filed.

(8) Incorporated herein by reference to the indicated exhibit filed as
part of the registrant's Form 10-K filed on June 29, 1998.

b. Financial Statements Schedule

S-1 Schedule II - Valuation and Qualifying Account for the Three
Years Ended March 31, 1996, 1997 and 1998 (included herein at page S-1 of the
prospectus included in this registration statement).

ITEM 17. UNDERTAKINGS

The undersigned registrant hereby undertakes:

(A) (1) To file, during any period in which offers or sales
are being made, a post-effective amendment to this registration statement:

(i) To include any prospectus required by Section
10(a)(3) of the Securities Act of 1933;

(ii) To reflect in the prospectus any facts or events
arising after the effective date of the registration statement (or the most
recent post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth in the
registration statement;

(iii) To include any material information with respect to
the plan of distribution not previously disclosed in the registration statement
or any material change to such information in the registration statement;

(2) That, for the purpose of determining any liability
under the Securities Act of 1933, each such post-effective amendment 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.

(3) To remove from registration by means of a
post-effective amendment any of the securities being registered which remain
unsold at the termination of the offering.

(B) 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

II-8
<PAGE> 122
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.

II-9
<PAGE> 123
SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, the Registrant has
duly caused this Post-Effective Amendment No. 1 to Registration Statement to be
signed on its behalf by the undersigned, thereunder authorized, in the County
of Fairfax, Commonwealth of Virginia, on this 31st day of August, 1998.

MLC HOLDINGS, INC.

By: /s/ Phillip G. Norton
---------------------
Phillip G. Norton, Chairman of the Board
and Chief Executive Officer

Pursuant to the requirements of the Securities Act of 1933, this
Post-Effective Amendment No. 1 to 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, President August 31, 1998
- -------------------------- and Chief Executive Officer
Phillip G. Norton (Principal Executive Officer)

(*) Executive Vice President and Chief August 31, 1998
- -------------------------- Operating Officer of MLC Group
Thomas B. Howard, Jr.

(*) Director and Executive Vice President August 31, 1998
- --------------------------
Bruce M. Bowen

/s/ Steven J. Mencarini Senior Vice President and August 31, 1998
- -------------------------- Chief Financial Officer
Steven J. Mencarini (Principal Financial and Accounting
Officer)

</TABLE>

II-10
<PAGE> 124

<TABLE>
<CAPTION>
Signature Capacity Date
- --------- -------- ----
<S> <C> <C>
(*) Director August 31, 1998
- ---------------------------
Terrence O'Donnell

(*) Director August 31, 1998
- ---------------------------
Carl J. Rickertsen

(*)By: /s/Phillip G. Norton August 31, 1998
----------------------
Phillip G. Norton
Attorney-in-Fact
</TABLE>

II-11
<PAGE> 125
INDEX TO EXHIBITS

<TABLE>
<CAPTION>
Exhibit No. Description
- ----------- -----------
<S> <C>
5.1 Opinion of Alston & Bird LLP

10.30 Amendment No. 2 dated December 19, 1997, to Credit
Agreement dated June 5, 1997 between MLC Group, Inc.
and Corestates Bank, N.A.

21.1 Subsidiaries of the Company

23.1 Consent of Deloitte & Touche LLP

23.2 Consent of Herbein & Company, Inc.
</TABLE>

II-12

<PAGE> 1
ALSTON & BIRD LLP
North Building, 11th Floor
601 Pennsylvania Avenue, N.W.
Washington, D.C. 20004-2601

202-756-3300

Fax: 202-756-3333 Telex: 54-2996

September 4, 1998

MLC Holdings, Inc.
Suite 110
11150 Sunset Hills Road
Reston, Virginia 22090

Re: Post-Effective Amendment No. 1 to
Registration Statement on Form S-1

Ladies and Gentlemen:

We have acted as special counsel for you, MLC Holdings, Inc., a
corporation organized and existing under the laws of the State of Delaware (the
"Company"), in connection with the preparation and filing of Post-Effective
Amendment no. 1 to the Company's shelf registration statement on Form S-1 under
the Securities Act of 1933, as amended ("Post-Effective Amendment No. 1").
Post-Effective Amendment No. 1 was filed on this date with the Securities and
Exchange Commission and relates to 2,964,305 shares (the "Shares") of the
Company's $.01 par value common stock. Certain of the Shares are currently
issued and outstanding and other of the Shares may be issued pursuant to merger
or acquisition transactions in which the Company may engage.

We have examined and are familiar with Post-Effective Amendment No. 1. We
have examined and are familiar with the Certificate of Incorporation and Bylaws
of the Company and the proceedings taken by the Company's Board of Directors in
connection with the Shares, and we have examined such other documents and
records as we have deemed relevant for purposes of rendering this opinion.

Based on the foregoing it is our opinion that the Shares either have been,
or when issued will be, duly authorized, validly issued, fully paid, and
non-assessable under the Delaware General Corporation Law.

We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and to the reference to Alston & Bird LLP under the
caption "Legal Matters" in the Prospectus forming a part of the Registration
Statement.

ALSTON & BIRD LLP

By: /s/ Frank M. Conner III
--------------------------------
Frank M. Conner III, a Partner

DC982100.023

<TABLE>
<S> <C> <C>
One Atlantic Center 3605 Glenwood Avenue
1201 West Peachtree 1211 East Morehead Street Post Office Drawer
Street Post Office Drawer 34009 31107
Atlanta, GA 30309-3424 Charlotte, NC 28234-4009 Raleigh, NC 27622-1107
(404) 881-7000 (704) 331-6000 (919) 420-2200
Fax: (404) 881-7777 Fax: (704) 334-2014 Fax: (919) 881-3175
</TABLE>

<PAGE> 1
EXHIBIT 10.30

[CORESTATES LOGO]

AMENDMENT NO. 2
TO
CREDIT AGREEMENT

Amendment No. 2 to Credit Agreement (the "AMENDMENT") is made as of
December 19, 1997 by and between MLC GROUP, INC., a Virginia corporation
("MLC") and CORESTATES BANK, N.A., a national banking association
("CORESTATES").

PRELIMINARY STATEMENT

WHEREAS, MLC and CoreStates are parties to that certain Credit
Agreement dated as of June 5, 1997 (the "INITIAL AGREEMENT"), pursuant to which
CoreStates agreed to make available to MLC, upon the terms and conditions
expressed in the Initial Agreement, a credit facility (the "CREDIT FACILITY")
in the principal amount of up to $15,000,000.

WHEREAS, pursuant to that certain Amendment No. 1 to Credit Agreement
dated September 5, 1997 (the "FIRST AMENDMENT") between CoreStates and MLC, the
maximum principal amount available to MLC under the Credit Facility was
increased to $25,000,000. The Initial Agreement and the First Amendment are,
together, the "CREDIT AGREEMENT". All capitalized terms used herein and not
otherwise defined shall have the respective meanings ascribed to them in the
Credit Agreement.

WHEREAS, Bank Leumi USA and Riggs Bank N.A. (the "PARTICIPANTS") have
obtained participation interests in the Credit Facility in the amount of up to
$5,000,000 for each Participant, with CoreStates acting as agent for the
Participants. The Participants, together with CoreStates, are the "BANKS").

WHEREAS, MLC has requested that the Credit Termination Date of the
Credit Facility be extended from June 5, 1998 to December 19, 1998.

WHEREAS, the Banks are willing to agree to such request on the terms
and conditions set forth herein.

Amendment No. 2 to
Credit Agreement - 1 - December 19, 1997
<PAGE> 2

NOW, THEREFORE, in consideration of the premises and promises
hereinafter set forth and intending to be legally bound hereby, the parties
hereto agree as follows:

1. SECTION 2.2 OF THE AGREEMENT. The third sentence of Section 2.2 of
the Initial Agreement is deleted and replaced in its entirety with the
following sentence:

The Note shall mature on the earliest to occur of (i) the date the
maturity of the Note is accelerated as provided in Section 8.1
hereof, or (ii) December 19, 1998.

2. EXHIBIT A TO THE CREDIT AGREEMENT. Exhibit A to the Credit
Agreement shall be and is hereby amended and restated in its entirety to be as
set forth in Exhibit A attached hereto. Upon delivery of the $25,000,000 Note,
dated December 19, 1997, to CoreStates, CoreStates shall mark the $25,000,000
Note, dated September 5, 1997, "canceled and replaced by $25,000,000 Note,
dated December 19, 1997."

3. REPRESENTATIONS AND WARRANTIES. MLC hereby restates the
representations and warranties made in the Credit Agreement, including but not
limited to Article 3 of the Initial Agreement, on and as of the date hereof as
if originally given on this date.

4. COVENANTS. MLC hereby represents and warrants that it is in
compliance and has complied with each and every covenant set forth in the
Credit Agreement, including but not limited to Articles 5 and 6 of the Initial
Agreement, on and as of the date hereof.

5. CORPORATE AUTHORIZATION AND DELIVERY OF DOCUMENTS. CoreStates
shall have received copies, certified as of the date hereof, of all action
taken by MLC and any other necessary Person to authorize this Amendment and
such other papers as CoreStates shall require.

6. AFFIRMATION. MLC hereby affirms its absolute and unconditional
promise to pay to CoreStates the Loans and all other amounts due under the
Credit Agreement and any other Loan Document on the maturity date(s) provided
in the Credit Agreement or any other Loan Document, as such documents may be
amended hereby.

7. EFFECT OF AMENDMENT. This Amendment amends the Credit Agreement
only to the extent and in the manner herein set forth, and in all other
respects the Credit Agreement is ratified and confirmed.

8. COUNTERPARTS. This Amendment may be signed in any number of
counterparts, each of which shall be an original, with the same effect as if
the signatures hereto were upon the same instrument.

Amendment No. 2 to
Credit Agreement - 2 - December 19, 1997
<PAGE> 3
IN WITNESS WHEREOF, the parties hereto have each caused this Amendment
to be duly executed by their duly authorized representatives as of the date
first above written.

MLC GROUP, INC.

By: /s/ PHILLIP G. NORTON
------------------------------
Name: Phillip G. Norton
Title: Chairman of the Board and
Chief Executive Officer

CORESTATES BANK, N.A.

By: /S/ MICHAEL J. LABRUM
------------------------------
Michael J. Labrum
Vice President

The undersigned, MLC Holdings, Inc. ("HOLDINGS"), the guarantor of the
obligations of MLC to CoreStates pursuant to that certain Guaranty Agreement
dated June 5, 1997 (the "GUARANTY"): (i) hereby consents to the making of this
Amendment (and to all prior amendments to the Loan Documents); (ii) confirms
the continuing validity of the Guaranty; and (iii) restates all of the
representations and warranties of Holdings made in any of the Loan Documents
(including, without limitation, those set forth in Section 4 of the Guaranty),
on and as of the date hereof as if originally given on this date.

MLC HOLDINGS, INC.

By: /S/ PHILLIP G. NORTON
------------------------------
Name: Phillip G. Norton
Title: Chairman of the Board and
Chief Executive Officer

Amendment No. 2 to
Credit Agreement - 3 - December 19, 1997
<PAGE> 4

EXHIBIT A

[CORESTATES LOGO]

NOTE

$25,000,000 Philadelphia, PA
December 19, 1997

For Value Received, MLC GROUP, INC., a Virginia corporation ("MLC"), hereby
promises to pay to the order of CORESTATES BANK, N.A. ("CORESTATES"), in
lawful currency of the United States of America in immediately available funds
at CoreStates' offices located at Broad and Chestnut Streets, Philadelphia,
Pennsylvania, on the earliest to occur of demand, acceleration of the maturity
date as provided in the Credit Agreement described below or the Credit
Termination Date, the principal sum of TWENTY FIVE MILLION DOLLARS
($25,000,000) or, if less, the then unpaid principal amount of all Loans made
by CoreStates pursuant to the Credit Agreement (defined below).

MLC promises also to pay interest on the unpaid principal amount hereof in like
money at such office from the date hereof until paid in full at the rates and
at the times provided in the Credit Agreement.

This Note is the Note referred to in, is entitled to the benefits of and is
secured by security interests referred to in the Credit Agreement, dated as of
June 5, 1997 (and as amended September 5, 1997 and December 19, 1997) by and
between MLC and CoreStates (as such may be further amended, modified,
supplemented, restated or replaced from time to time, the "CREDIT AGREEMENT")
and is a replacement Note substituted in its entirety for a Note dated
September 5, 1997 in the amount of $25,000,000, which was substituted in its
entirety for a Note dated June 5, 1997 in the amount of $15,000,000.
Capitalized terms used in this Note but not defined herein shall have the
meanings ascribed to such terms in the Credit Agreement. This Note is subject
to voluntary prepayment and mandatory repayment prior to demand, acceleration
of maturity or the Credit Termination Date, in whole or in part, as provided in
the Credit Agreement.

In case an Event of Default shall occur and be continuing, the maturity date of
the principal of and the accrued interest on this Note may be accelerated and
be declared to be due and payable in the manner and with the effect provided in
the Credit Agreement.

MLC hereby waives presentment, demand, protest or notice of any kind in
connection with this Note.

Notwithstanding the face amount of this Note, the undersigned's liability
hereunder shall be limited, at all times, to the actual aggregate outstanding
indebtedness relating to the Loans, including all principal and interest,
together with all fees and expenses as provided in the Credit Agreement, as
established by CoreStates' books and records which shall be conclusive absent
manifest error.

Note - 1 - December 19, 1997
<PAGE> 5
THIS NOTE SHALL BE CONSTRUED IN ACCORDANCE WITH AND BE GOVERNED BY THE LAW OF
THE COMMONWEALTH OF PENNSYLVANIA WITHOUT REGARD TO PENNSYLVANIA OR FEDERAL
PRINCIPLES OF CONFLICT OF LAWS.

MLC GROUP, INC.

By /s/ PHILLIP G. NORTON
------------------------------
Name Phillip G. Norton
Title Chairman pf the Board and Chief
Executive Officer

Note - 2 - December 19, 1997

<PAGE> 1
MLC Group, Inc., a Commonwealth of Virginia corporation, a wholly owned
subsidiary.

MLC Capital, Inc., a Commonwealth of Virginia corporation, a wholly owned
subsidiary.

MLC/GATX Leasing Corporation, a Colorado corporation, a 50% owned investment.

MLC Network Solutions, Inc., a Delaware corporation, a wholly owned subsidiary.

Educational Computer Concepts, Inc., a Commonwealth of Pennsylvania
corporation, a wholly owned subsidiary.

MCL Federal, Inc., a Commonwealth of Virginia corporation, a wholly owned
subsidiary.

MCL Leasing, S.A. de C.V., incorporated in Mexico, is a wholly owned subsidiary
of MCL Group, Inc. and MLC Network Solutions, Inc.

PCPlus, Inc., a Commonwealth of Virginia corporation, a wholly owned subsidiary.

<PAGE> 1
EXHIBIT 23.1

INDEPENDENT AUDITOR'S CONSENT

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

We consent to the use in this Post-Effective Amendment No. 1 to
Registration Statement No. 333-44335 of MLC Holdings, Inc. on Form S-1 of our
report dated June 22, 1998, appearing in the Prospectus, which is a part of
this Registration Statement, and to the reference to us under the heading
"Experts" in such Prospectus.

/s/ Deloitte & Touche LLP
McLean, Virginia
August 31, 1998

<PAGE> 1
EXHIBIT 23.2

INDEPENDENT AUDITOR'S CONSENT

September 4, 1998

MLC Holdings, Inc.
11150 Sunset Hills Road
Suite 110
Reston, Virginia 20190

Gentlemen:

We consent to the use in the Post-Effective Amendment No. 1 to the
Registration Statement on Form S-1 of MLC Holdings, Inc. of our report dated
October 24, 1997, appearing in the Prospectus, which is part of such
registration statement, and to the reference to us under the hearing "Experts"
in such prospectus.

/s/ Herbein & Company, Inc.