AZTEC TECHNOLOGY PARTNERS INC /DE/, 10-K/A, 1999-08-04

AZTEC TECHNOLOGY PARTNERS INC /DE/
10-K/A, 1999-08-04
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SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549
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FORM 10-K/A
AMENDMENT NO. 1

/ / ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
/X/ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934

FOR THE TRANSITION PERIOD FROM APRIL 26, 1998 TO DECEMBER 31, 1998

COMMISSION FILE NUMBER: 0-24417

AZTEC TECHNOLOGY PARTNERS, INC.

(Exact name of registrant as specified in its charter)
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<S> <C>
DELAWARE 04-3408450
(State or other jurisdiction of (I.R.S. Employer Identification
incorporation) No.)

50 BRAINTREE HILL OFFICE PARK, SUITE 220
BRAINTREE, MASSACHUSETTS 02184
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
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Registrant's telephone number, including area code: (781) 849-1702
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Securities registreed pursuant to Section 12(b) of the Act: None

Securities registered pursuant to Section 12(g) of the Act:

Common Stock, par value $.001 per share

Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes /X/ No / /

Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in the definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. / /

The aggregate market value of voting stock of the registrant held by
non-affiliates of the registrant as of March 26, 1999 was approximately
$35,319,650. As of March 26, 1999, 22,017,314 shares of the registrant's common
stock were outstanding.

On May 17, 1999, the registrant announced that it had restated its
consolidated financial statements for the thirty-five week period ended December
31, 1998 to recognize compensation expense related to certain employment
incentive agreements, which were signed with key personnel prior to the spin-off
from U.S. Office Products. This amended Annual Report on Form 10-K/A contains
restated financial information and disclosures for the thirty-five week period
ended December 31, 1998 (See Note 3 to the Consolidated Financial Statements).

Unless otherwise stated, information in the originally filed Form 10-K for
the thirty-five week period ended December 31, 1998 is presented as of the
original filing date, and has not been updated in this amended filing. Financial
statement information and related disclosures included in this amended filing
reflect, where appropriate, changes as a result of the restatement.

DOCUMENTS INCORPORATED BY REFERENCE

The registrant intends to file a definitive proxy statement pursuant to
Regulation 14A within 120 days of the end of the fiscal year ended December 31,
1998. Portions of such proxy statement are incorporated by reference into Part
III of this report.

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CAUTIONARY STATEMENTS UNDER THE PRIVATE SECURITIES
LITIGATION REFORM ACT OF 1995

THIS TRANSITION REPORT AND OUR 1998 ANNUAL REPORT TO SHAREHOLDERS CONTAIN
SOME FORWARD-LOOKING STATEMENTS. FORWARD-LOOKING STATEMENTS GIVE OUR CURRENT
EXPECTATIONS OR FORECASTS OF FUTURE EVENTS. YOU CAN IDENTIFY THESE STATEMENTS BY
THE FACT THAT THEY DO NOT RELATE STRICTLY TO HISTORICAL OR CURRENT FACTS. THEY
USE WORDS SUCH AS "ANTICIPATE," "ESTIMATE," "EXPECT," "PROJECT," "INTEND,"
"PLAN," "BELIEVE," AND OTHER WORDS AND TERMS OF SIMILAR MEANING IN CONNECTION
WITH ANY DISCUSSION OF FUTURE OPERATING OR FINANCIAL PERFORMANCE. IN PARTICULAR,
THESE INCLUDE STATEMENTS RELATING TO OUR ANTICIPATED OPERATING RESULT FOR THE
QUARTER ENDED MARCH 31, 1999, AND THE FULL YEAR ENDED DECEMBER 31, 1999, AND OUR
ANTICIPATED CASH FLOW, AND TO FUTURE ACTIONS, FUTURE PERFORMANCE OR RESULTS OF
CURRENT AND ANTICIPATED SALES AND MARKETING EFFORTS, EXPENSES, THE OUTCOME OF
CONTINGENCIES SUCH AS LEGAL PROCEEDINGS, AND OTHER FINANCIAL RESULTS. FROM TIME
TO TIME, WE ALSO MAY PROVIDE ORAL OR WRITTEN FORWARD-LOOKING STATEMENTS IN OTHER
MATERIALS WE RELEASE TO THE PUBLIC.

ANY OR ALL OF OUR FORWARD-LOOKING STATEMENTS IN THIS REPORT, IN THE 1998
ANNUAL REPORT AND IN ANY OTHER PUBLIC STATEMENTS WE MAKE MAY TURN OUT TO BE
WRONG. THEY CAN BE AFFECTED BY INACCURATE ASSUMPTIONS WE MIGHT MAKE OR BY KNOWN
OR UNKNOWN RISKS AND UNCERTAINTIES. MANY FACTORS MENTIONED IN THE DISCUSSION
BELOW--FOR EXAMPLE, THE COMPETITIVE ENVIRONMENT--WILL BE IMPORTANT IN
DETERMINING FUTURE RESULTS. CONSEQUENTLY, NO FORWARD-LOOKING STATEMENT CAN BE
GUARANTEED. ACTUAL FUTURE RESULTS MAY VARY MATERIALLY.

WE UNDERTAKE NO OBLIGATIONS TO PUBLICLY UPDATE ANY FORWARD-LOOKING
STATEMENTS, WHETHER AS A RESULT OF NEW INFORMATION, FUTURE EVENTS OR OTHERWISE.
YOU ARE ADVISED, HOWEVER, TO CONSULT ANY FURTHER DISCLOSURES WE MAKE ON RELATED
SUBJECTS IN OUR 10-Q, 8-K AND OTHER REPORTS TO THE SEC. ALSO NOTE THAT WE
PROVIDE CAUTIONARY DISCUSSION OF RISKS, UNCERTAINTIES AND POSSIBLY INACCURATE
ASSUMPTIONS RELEVANT TO OUR BUSINESS UNDER THE SECTION ENTITLED "MANAGEMENT'S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS--FACTORS THAT MAY AFFECT FUTURE RESULTS." THESE ARE FACTORS THAT WE
THINK COULD CAUSE OUR ACTUAL RESULTS TO DIFFER MATERIALLY FROM EXPECTED AND
HISTORICAL RESULTS. OTHER FACTORS BESIDES THOSE LISTED COULD ALSO ADVERSELY
AFFECT THE COMPANY.

PART I

ITEM 1. BUSINESS

Aztec Technology Partners, Inc. ("Aztec" or the "Company") was a
wholly-owned subsidiary of U.S. Office Products Co. ("USOP") prior to a spin-off
on June 9, 1998, which was effected through a distribution of Aztec shares to
USOP stockholders (the "Distribution").

On June 30, 1998, the Board of Directors approved a change in our fiscal
year to December 31. We previously reported results on a fiscal year ending on
the last Saturday in April. This Transition Report covers the 1998 interim
fiscal year which began on April 26, 1998, and ended on December 31, 1998.

THE COMPANY

Aztec is a single-source provider of a broad range of information technology
("IT") business solutions. Our clients consist of middle market and Fortune 1000
companies in a wide range of industries, such as communications, health care,
financial services, government, manufacturing, pharmaceuticals, professional
services, and technology.

We specialize in the following areas of enterprise-wide computing and
communications: (1) web and network design and implementation; (2) software
development and customization; (3) voice and data infrastructure, design and
integration; and (4) IT consulting, support and outsourcing. We provide our
services principally in the Northeast region of the United States, and, to a
lesser extent, in other regions of the United States. We provide IT services and
support for a variety of operating systems (NT, UNIX, Netware and OS/2) on a
variety of manufacturers' hardware platforms (Sun, HP and IBM) and support our
clients' hardware and software needs related to the World Wide Web (the "Web")
and high-end

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telephony systems. The solutions we develop for our customers often include
hardware, which we resell to customers on behalf of manufacturers.

MARKET AND INDUSTRY OVERVIEW

Since the mid-1980's, dramatic changes have occurred in the delivery of IT
solutions to end users. The rapid growth of Web-enabled systems and
client/server technology is changing the nature of the IT industry from
servicing personal computer network systems to servicing large, super-powered
servers with open platforms, scalable architectures, integrated applications,
and security, back-up and failsafe operability issues. As the complexities of
acquiring, sharing and managing information become a business-within-a-business
for mid-sized companies, the corporate approach to IT management and deployment
is changing significantly.

Businesses increasingly turn to outside organizations such as Aztec for the
design, development, and implementation of their IT systems. The United States
market for IT services is expected to grow from approximately $85 billion in
1998 to approximately $150 billion in 2001. Due in part to the rapid pace of
technological change coupled with a scarcity of skilled IT professionals,
business solutions frequently are too sophisticated and complex for a business
enterprise to undertake by itself. The increased use of outside IT solutions
firms is also being driven by competitive pressures requiring rapid
implementation of new systems and the adverse effects of selecting inappropriate
or outdated technology. Many companies have made strategic decisions to focus on
their core competencies, minimize their fixed costs, reduce their workforce, and
not invest in large IT staffs.

We believe that Aztec is well positioned to capitalize on these developments
by providing focused IT expertise in a cost-effective manner to existing and
potential clients, and by identifying and acquiring complementary businesses in
the IT services industry.

THE AZTEC SOLUTION

We offer our clients a single source for IT business solutions and services
on a national and regional basis. We seek to foster a relationship with our
clients that will allow us to become our clients' "one-stop shop" for total IT
business solutions. The four principal sectors of our business and the services
provided within each sector are:

WEB AND NETWORK DESIGN AND IMPLEMENTATION

Acquiring, sharing and managing information--efficiently and securely across
a widely distributed organization--requires a well planned, expertly implemented
computing infrastructure. Our IT consultants design, implement and support Web
and network-based solutions with extensive expertise in:

- Internet/Intranet/Extranet

- Local Area Networking ("LAN")

- Wide Area Networking ("WAN")

- E-Commerce

- Data Communications

- Connectivity and Security

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SOFTWARE DEVELOPMENT AND CUSTOMIZATION

The emergence of new technologies drives the demand for custom software
applications tailored to perform in specific business environments. Our IT
consultants provide a range of applications capabilities in:

- Knowledge Management Solutions

- Web-based Applications

- E-Commerce Solutions

- Data Warehousing

- n-tier Client Server Applications

- Groupware

VOICE AND DATA INFRASTRUCTURE, DESIGN AND INTEGRATION

Today's economy requires that telecommunication systems provide rapid access
to an increasing number of people and a vast amount of information. We integrate
voice and data technologies into enterprise-wide communications systems,
providing solutions that give clients new ways to perform. This sector is
divided into two areas: "Telephony" (voice and connectivity integration) and
"Infrastructure".

TELEPHONY

Our IT consultants integrate voice technology to function in a client's
current environment as well as in the global communication system. We specialize
in:

- Telecommunications Systems

- Video and Audio Conferencing

- Unified Messaging

- Computer Telephony Integration ("CTI"), Integrated Voice Response ("IVR"),
Voice Over Internet Protocol ("VOIP")

INFRASTRUCTURE

We provide our clients with a full range of infrastructure solutions,
including integrating communications cabling and designing topologies, including
shared media and switch-based architecture. We specialize in:

- Data Center Design and Construction

- Copper and Fiber Optic Cabling

- Integrated Services Digital Networks ("ISDN")

- Asynchronous Transfer Mode ("ATM"), Digital Subscriber Line ("DSL") and
Frame Relay

IT CONSULTING, SUPPORT AND OUTSOURCING

Our IT consultants help clients improve their operating efficiency and
profitability as well as become more competitive by using leading edge
technology to re-engineer their business processes. We help our clients fulfill
both short- and long-term needs across all IT disciplines by providing a broad
range of IT

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support services from on-site engagements to remote management, project
management, troubleshooting, hotline technical support, and maintenance and
repair. We specialize in:

- Knowledge Management and Transfer

- Policy Planning and Implementation

- IT Needs Analysis and Audits

- Enterprise Resource Planning ("ERP")

- System Documentation

THE REORGANIZATION PROCESS

Following the spin-off from USOP in June 1998, we have initiated a
restructuring and consolidation of our component companies to strengthen our
operations and better service the middle market and Fortune 1000 companies. We
believe that these customers and prospective customers demand the breadth and
stability of a large provider and the personal attention and responsiveness of a
local partner. Accordingly, in the fourth quarter of 1998, we embarked on a
restructuring of our business model by offering local account management to our
clients (including sales, service and support), while coordinating service
delivery from the particular subsidiary or business unit within the Company that
has the relevant technical expertise for the assignment.

The restructuring activity has initially focused on the Northeast where the
Company offers the full range of our services and where the Company derives its
principal revenue. In December 1998, we substantially completed the
consolidation of our Northeast subsidiaries into two regional organizations--
Aztec Technology Partners of New England and Aztec Technology Partners of the
Tri-State (New York, New Jersey and Connecticut), with national and regional
practice areas.

Outside of the Northeast, our remaining subsidiaries continue to operate as
separate companies under the Aztec umbrella. We intend to market the services
offered by these divisions and subsidiaries under the "Aztec" brand name, in an
effort to increase the brand awareness throughout the country. With each of
these operating units, we will be working to add technical capabilities and
resources to strengthen their operations. We expect to leverage our technical
capabilities developed within particular operating centers by marketing these
products and solutions nationwide through our regional and local offices.

AZTEC'S REGIONAL OPERATIONS AND OPERATING COMPANIES

AZTEC TECHNOLOGY PARTNERS--NEW ENGLAND REGION

The New England Region was established as an operating division of the
Company in the fourth quarter of 1998 and was created by the integration of the
sales and engineering capabilities of Bay State Computer Group, L.L.C., Mahon
Communications Corporation and Solutions E.T.C., Inc., which were founded in
1984, 1979 and 1988, respectively. The combined expertise of the three companies
enables Aztec to deliver the full suite of its IT solutions throughout New
England. The Aztec New England Region is headquartered in Boston, Massachusetts.

AZTEC TECHNOLOGY PARTNERS--TRI-STATE REGION

The Tri-State Region was established as an operating division of the Company
in the fourth quarter of 1998 and was created by the integration of the sales,
engineering and development capabilities of Digital Network Associates, L.L.C.,
Professional Computer Solutions Inc., Professional Network Services, Inc. and
the New Jersey office of Bay State Computer Group, L.L.C., which were founded in
1986, 1985, 1989, and 1990, respectively. The combined expertise of the four
companies enables Aztec to deliver the full suite of

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its IT solutions throughout the Tri-State region. The Aztec Tri-State Region is
headquartered in New York, New York, and has offices in Hackensack, New Jersey,
Edison, New Jersey, and Trumbull, Connecticut.

AZTEC INTERNATIONAL, L.L.C.

Aztec International provides telephony design and integration services with
expertise in the restoration and maintenance of telecommunications equipment,
providing OEM rework, secondary telecommunications equipment sales, and repair
for key systems, telephone PBX, telephones and printed circuit boards. Founded
in 1983, Aztec International has facilities strategically positioned across the
United States. Aztec International is headquartered in South Norwalk,
Connecticut.

COMPEL, L.L.C.

Compel provides a broad spectrum of solutions to integrate data, voice and
video. With its staff of communications distribution designers, Compel offers
cabling services and structured wiring systems including the installation of
fiber optic networks; physical layering expertise for designing network
topologies; data and network center construction services including power and
electrical systems; back-up power supplies; project management; and on-site
support. Founded in 1977, Compel is headquartered in Sante Fe Springs,
California.

ENTRA COMPUTER CORP.

Entra Computer provides Web and Network solutions including designing and
integrating client enterprises and providing vertical market, integrated
applications. Entra's engineering staff includes a dedicated team that provides
training for operating systems and applications. Founded in 1984, Entra is
headquartered in Canfield, Ohio.

FORTRAN CORP.

Fortran provides voice and data solutions and has experience in developing
client-specific systems ranging from simple turnkey phone systems to complex,
integrated voice and data communications systems. Fortran engineers have
expertise in building ISDN, and in integrating LAN, voice and data, video
conferencing, voicemail and voice processing functions. Founded in 1983, Fortran
is headquartered in Newington, Virginia.

MCDOWELL TUCKER & CO., INC.

McDowell Tucker provides staffing services with highly-trained and
experienced IT professionals for both outsourced and contract positions.
McDowell Tucker recruits engineering talent domestically and internationally for
placement on IT staffs in U.S. companies, especially for ERP applications,
client/server and Internet/intranet, and software training needs. Founded in
1989, McDowell Tucker is headquartered in Dallas, Texas.

OFFICE EQUIPMENT SERVICE, INC.

Office Equipment Service provides individual businesses with systems
integration, data communications, document management, and IT support services.
Using a variety of diagnostic methods and tools ranging from user surveys to
sophisticated enterprise-monitoring devices that pinpoint areas for improvement,
Office Equipment Service provides IT consulting for enterprise-wide solutions.
Founded in 1972, Office Equipment Service is headquartered in Memphis,
Tennessee.

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PCM, INC.

PCM provides enterprise-wide services including network integration and
management, LAN installation and administration, software and database
development, training in network and software applications, and on-site IT
support. Founded in 1985, PCM is headquartered in Chicago, Illinois.

OPERATIONS

MANAGEMENT

To better serve our client base and increase the range of services offered
to existing and prospective clients, we undertook a number of key changes in the
fourth quarter of 1998. We formed an Executive Technology Committee chaired by
Dr. Benjamin Tandowski, the Company's Chief Technology Officer and founder of
our Web-based and client/server applications development business. We believe
that the Technology Committee will be critical in ensuring a continuously
evolving suite of technology deliverables. We created a Financial Systems Group
which specializes in the unique needs of financial services clients with live
data feed environments. Additionally, we hired a Director of Strategic
Development who will implement our national expansion of certain programs,
including network operating centers ("NOCs") and IT help desks. We hired an
Enterprise Solutions Manager who is focused on solving client business issues
from the CIO perspective and expanding the applications development and
consulting business in New England.

SALES AND MARKETING

We focus our sales and marketing efforts on middle market and Fortune 1000
companies in the U.S. where we believe the demand for outsourced IT consulting
services is strong. To accommodate the needs of these clients and build
long-term, synergistic relationships, we employ an "Account Management" approach
which provides our clients with a single point of contact in order to reduce
problems for the client and increase client satisfaction.

To generate awareness of our solutions and expertise, we use a combination
of marketing events including trade shows to maintain industry visibility,
executive seminars and direct mail to educate clients on innovative solutions,
and media advertising to sustain our presence among our customers. We have also
developed our own Web-site (www.aztectech.com) and are building extranets to
make Aztec's resources available to our sales and IT consultants throughout the
organization and to provide direct access to information for our clients. We
also market our services through the publication of white papers, attendance at
forums to address the IT industry, and participation in beta projects which
provide advance hands-on experience with new technologies.

We have built strong relationships with many of the industry's leading
technology manufacturers and we have received numerous awards for achievement
and performance on many technology platforms. These vendors provide a source of
leads for the Company, augment our technical sales expertise, and offer
additional name recognition for marketing events and programs.

COMPETITION

The IT solutions market is very competitive, subject to rapid change, and
includes a large number of participants whose expertise covers an expansive
range. We face extensive competition from providers who specialize in one or
more of Aztec's solutions sets. Among those competitors are companies such as
Condor Technologies, International Network Services Solutions, Whittman-Hart,
Inc., Lucent Technologies Inc., Sapient Corporation, and Cambridge Technology
Partners (Massachusetts), Inc., most of which have significantly greater
financial, technical and marketing resources, generate substantially higher
revenues than Aztec, and have greater name recognition. We believe that our
ability to compete successfully against such companies depends in part on a
number of factors both within and outside of our

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control, including our ability to hire, retain and motivate senior IT
consultants, the price at which we and others offer comparable services, and the
extent of Aztec's and our competitors' responsiveness to customer needs. There
can be no assurance that the Company will be able to compete successfully with
its competitors in the future.

CUSTOMERS

Our clients include middle market and Fortune 1000 companies in a wide range
of industries (including communications, health care, financial services,
government, manufacturing, pharmaceuticals, professional services, and
technology).

HUMAN RESOURCES

As a service provider, we view our employees as our most valuable asset and
have implemented a continuously evolving program to encourage and sustain
long-term employee retention. We offer competitive compensation, stock options,
an employee stock purchase program, a professional education policy, a
progressive human resources program, and other competitive benefits designed to
enhance long-term employee retention.

As of December 31, 1998, the Company had a total staff of 1,363 employees,
comprised of 961 technical professionals, 176 sales and marketing personnel, and
226 administrative personnel. Of our employees, 257 are represented by a labor
union or subject to a collective bargaining agreement. We believe that our
employee relations generally are good.

Our success will depend in large part upon our ability to attract, retain
and motivate highly-skilled employees. Qualified technical professionals are in
great demand and are likely to remain a scarce resource for the foreseeable
future. However, we believe that we have been successful in our efforts to
attract, develop and retain the high-quality professionals needed to support
present operations and future growth. Although we expect to continue to attract
sufficient numbers of highly-skilled employees and to retain our senior
personnel for the foreseeable future, there can be no assurance that the Company
will be able to continue to do so.

PATENTS AND OTHER INTELLECTUAL PROPERTY RIGHTS

Aztec and our operating companies rely on a combination of nondisclosure and
other contractual arrangements and patent, trade secret, copyright, and
trademark laws to protect our proprietary rights and the proprietary rights of
third parties. We enter into confidentiality agreements with our key employees,
and limit the distribution of proprietary information.

SPIN-OFF OF AZTEC FROM U.S. OFFICE PRODUCTS

We became an independent, publicly-traded company upon our spin-off from
USOP in June 1998 in the Distribution. Each holder of shares of USOP Common
Stock of record on June 9, 1998 (the "Record Date") received one share of Aztec
Common Stock for every five shares of USOP Common Stock held on the Record Date.
The Aztec Common Stock was distributed on behalf of USOP by American Stock
Transfer & Trust Company as the Distribution Agent. No certificates or scrip
representing fractional shares of Aztec Common Stock were issued. Fractional
share interests were aggregated and sold by the Distribution Agent at such time
as it determined in open-market transactions effected through broker-dealers
selected by it. Certificates representing shares of Aztec Common Stock were
distributed on June 15, 1998.

Aztec holds substantially all of the business and assets of, and is
responsible for substantially all of the liabilities associated with the USOP
Technology Solutions Division. Immediately prior to the Distribution,

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USOP held all of the issued and outstanding shares of Aztec Common Stock.
Approximately 21,938,000 shares of Aztec Common Stock were distributed to USOP
stockholders in the Distribution.

ITEM 2. PROPERTIES

Aztec's corporate headquarters are located at leased office space in
Braintree, Massachusetts. In addition to its headquarters, Aztec leases office
and warehouse space in a number of locations across the United States. Aztec
does not believe that any of these locations are material to its operations. The
leases expire at various times between 1999 and 2004.

ITEM 3. LEGAL PROCEEDINGS

On March 3, 1999, a lawsuit was filed against the Company, along with USOP
and one of our directors, by Professional Network Services, Inc. ("PNS"), an
Aztec subsidiary, Philip Arturi, the President of PNS, and Bruce Torello, a PNS
employee. Arturi and Torello claim a total of $2 million in damages in
connection with the sale of their company to USOP in September, 1997. (PNS was
one of the business units that was spun off from USOP as part of Aztec in June
1998 and was a wholly-owned subsidiary of USOP prior to the spin-off.) The
plaintiffs claim that USOP failed to disclose certain material facts during
USOP's acquisition of the business and that they were given assurances that they
would be compensated for damages from the drop in the value of the USOP stock
received in consideration for the sale of the Company. Some or all of the claims
may be subject to indemnification by the Company and the other Spin-Off
Companies under the terms of the distribution agreement that was executed in
connection with USOP's strategic restructuring plan. It is also possible that
the Company could seek indemnity from USOP for these claims.

In connection with the acquisition of Aztec International, a lawsuit was
filed in February 1999 against USOP, and James Claypoole and Jonathan Ledecky,
as employees of USOP, by Jack Meehan, Fran Meehan, Christopher Meehan, Beth
Meehan, Gordon Tingets, Les Asher, Michael Dickens, and William Durniak. A
number of the plaintiffs are officers and directors of Aztec International. The
lawsuit alleges that USOP (and Claypoole and Ledecky as its employees) failed to
disclose certain material facts during USOP's acquisition of the business. The
lawsuit further alleges that the plaintiffs were given assurances that they
would be compensated for damages resulting from a drop in the value of the USOP
stock that they received in connection with the sale. The plaintiffs claim
damages of $9.5 million. Some or all of the claims may be subject to
indemnification by the Company and the other Spin-off Companies under the terms
of the distribution agreement that was executed in connection with USOP's
strategic restructuring plan.

On March 1, 1999, Aztec recovered $10.55 million of the $10.8 million
acquisition price it had paid for Solutions E.T.C., Inc. on October 2, 1998. In
November 1998, Aztec had filed a lawsuit against the former owner and president
of Solutions E.T.C., seeking damages in connection with the acquisition. Aztec
believes that the shareholder created a false set of books and records which
materially misrepresented the finances and size of the company. In addition, the
shareholder has been indicted on federal charges of mail and wire fraud and
money laundering and Aztec will continue to cooperate with the U.S. Attorney's
office in this matter.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

The Company did not submit any matters to a vote of security holders during
the fourth quarter of 1998.

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PART II

ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED
STOCKHOLDER MATTERS

The Company's Common Stock is listed on the Nasdaq National Market under the
trading symbol "AZTC". The shares were first listed on June 10, 1998. The
following table sets forth, on a per share basis for the periods shown, the
range of high and low sales prices of the Company's Common Stock:

<TABLE>
<CAPTION>
TRANSITION YEAR 1998: HIGH LOW
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<S> <C> <C>
June 10, 1998--June 30, 1998................................................ $ 11.00 $ 7.50
July 1, 1998--September 30, 1998............................................ $ 10.12 $ 4.75
October 1, 1998--December 31, 1998.......................................... $ 7.00 $ 2.37
</TABLE>

STOCKHOLDERS

As of March 26, 1999, there were approximately 3,710 stockholders of record.

DIVIDEND POLICY

The Company has never paid any cash dividends on its Common Stock. The
Company intends to retain future earnings for use in its business and does not
anticipate paying cash dividends in the foreseeable future. Aztec's ability to
pay dividends is restricted by its credit facility with BankBoston, N.A. (the
"Credit Facility").

ITEM 6. SELECTED FINANCIAL DATA

The following table presents selected financial data for Aztec derived from
its financial statements for the thirty-five week periods ended December 31,
1997 and 1998, and for the fiscal years ended March 31, 1994, 1995 and 1996, and
April 26, 1997 and April 25, 1998. The historical Selected Financial Data for
the thirty-five week period ended December 31, 1998, and for the fiscal years
ended April 25, 1998, April 26, 1997, and March 31, 1996, have been derived from
Aztec's consolidated financial statements that have been audited by
PricewaterhouseCoopers LLP and are included elsewhere in this Transition Report.
The PricewaterhouseCoopers LLP report on the financial statements is based in
part on reports of other independent accountants, which appear elsewhere in this
Transition Report. The historical Selected Financial Data for the fiscal year
ended March 31, 1995, has been derived from Aztec's consolidated financial
statements that have been audited. The historical Selected Financial Data for
the thirty-five weeks ended December 31, 1997, and for the fiscal year ended
March 31, 1994, have been derived from unaudited consolidated financial
statements. The consolidated financial statements for the fiscal years ended
March 31, 1995 and 1994, are not included in this Transition Report. The
unaudited consolidated financial statements have been prepared on the same basis
as the audited consolidated financial statements and, in the opinion of
management, contain all adjustments, consisting only of normal recurring
accruals, necessary for a fair presentation of the financial position and
results of operations for the period presented.

The Selected Financial Data provided herein should be read in conjunction
with the historical financial statements, including the notes thereto,
"Business" and "Management's Discussion and Analysis of Financial Condition and
Results of Operations" that appear elsewhere in this Transition Report.

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SELECTED FINANCIAL DATA(1)
(IN THOUSANDS, EXCEPT PER SHARE DATA)

<TABLE>
<CAPTION>
FISCAL YEAR ENDED, THIRTY-FIVE THIRTY-FIVE
FISCAL YEAR ENDED MARCH 31, ------------------------ WEEKS ENDED WEEKS ENDED
------------------------------- APRIL 26, APRIL 25, DECEMBER 31, DECEMBER 31,
1994 1995 1996 1997 1998 1997 1998(3)
--------- --------- --------- ----------- ----------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Statement of Income Data:
Revenues................................ $ 58,979 $ 88,999 $ 114,055 $ 136,278 $ 208,341 $ 122,186 $ 229,356
Cost of revenues........................ 43,630 65,858 84,113 102,129 158,317 91,971 174,779
--------- --------- --------- ----------- ----------- ------------- -------------
Gross profit............................ 15,349 23,141 29,942 34,149 50,024 30,215 54,577
Selling, general and administrative
expense............................... 11,218 14,942 20,510 21,525 35,185 20,159 37,885
Amortization of intangibles............. 840 282 2,389
Strategic restructuring costs........... 1,750 4,330
Non-recurring acquisition costs......... 2,274
--------- --------- --------- ----------- ----------- ------------- -------------
Operating income........................ 4,131 8,199 9,432 10,350 12,249 9,774 9,973
Interest expense........................ 297 331 420 324 807 358 2,662
Interest income......................... (54) (118) (416) (168) (785) (316) (172)
Other income............................ (75) (111) (964) (53) (44) (8) (186)
--------- --------- --------- ----------- ----------- ------------- -------------
Income before provision for income
taxes................................. 3,963 8,097 10,392 10,247 12,271 9,740 7,669
Provision for income taxes(2)........... 232 401 750 3,524 5,797 4,169 3,512
--------- --------- --------- ----------- ----------- ------------- -------------
Net income.............................. $ 3,731 $ 7,696 $ 9,642 $ 6,723 $ 6,474 $ 5,571 $ 4,157
--------- --------- --------- ----------- ----------- ------------- -------------
--------- --------- --------- ----------- ----------- ------------- -------------
Per share amounts:
Basic................................... $ 0.42 $ 0.84 $ 0.71 $ 0.37 $ 0.27 $ 0.25 $ 0.18
--------- --------- --------- ----------- ----------- ------------- -------------
--------- --------- --------- ----------- ----------- ------------- -------------
Diluted................................. $ 0.42 $ 0.84 $ 0.71 $ 0.37 $ 0.27 $ 0.24 $ 0.18
--------- --------- --------- ----------- ----------- ------------- -------------
--------- --------- --------- ----------- ----------- ------------- -------------
Weighted average shares outstanding:
Basic................................... 8,852 9,112 13,509 18,005 23,911 22,637 22,839
Diluted................................. 8,852 9,141 13,675 18,352 24,385 23,120 22,974
</TABLE>
<TABLE>
<CAPTION>
MARCH
------------------------------- APRIL 26, APRIL 25,
1994 1995 1996 1997 1998
--------- --------- --------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Balance Sheet Data:
Working capital............................................ $ 5,623 $ 10,669 $ 8,664 $ 13,268 $ 36,292
Total assets............................................... 16,423 28,106 33,945 37,311 141,445
Long-term debt, less current portion....................... 461 1,524 799 167 309
Long-term payable to USOP.................................. 4,786
Stockholders' equity....................................... 6,745 11,062 10,497 11,626 105,319

DECEMBER 31,
1998(3)
-------------
<S> <C>
Balance Sheet Data:
Working capital............................................ $ 58,431
Total assets............................................... 260,519
Long-term debt, less current portion....................... 90,218
Long-term payable to USOP..................................
Stockholders' equity....................................... 106,966
</TABLE>

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

(1) The historical financial information of the five companies acquired by Aztec
during the period from October 1996 through April 1997 in acquisitions
accounted for under the pooling-of-interests method of accounting (the
"Pooled Companies") has been combined on an historical cost basis in
accordance with GAAP to present this financial data as if the Pooled
Companies had always been members of the same operating group. The financial
information of the eight companies acquired prior to December 31, 1998, in
acquisitions accounted for under the purchase method of accounting (the
"Purchased Companies") is included from the dates of their respective
acquisitions. See Note 5 of Notes to the Consolidated Financial Statements
for a description of the number and accounting treatment of the acquisitions
by the Company.

(2) Certain Pooled Companies were organized as subchapter S corporations prior
to the closing of acquisitions by the Company and as a result, the federal
tax on their income was the responsibility of the individual stockholders.
Accordingly, those specific Pooled Companies provided no federal income tax
expense prior to their acquisitions by the Company.

(3) As restated. See Note 3 to the Consolidated Financial Statements.

11
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS

THE FOLLOWING DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS CONTAIN SOME FORWARD-LOOKING STATEMENTS. FORWARD-LOOKING STATEMENTS
GIVE OUR CURRENT EXPECTATIONS OR FORECASTS OF FUTURE EVENTS. YOU CAN IDENTIFY
THESE STATEMENTS BY THE FACT THAT THEY DO NOT RELATE STRICTLY TO HISTORICAL OR
CURRENT FACTS. THEY USE WORDS SUCH AS "ANTICIPATE," "ESTIMATE," "EXPECT,"
"PROJECT," "INTEND," "PLAN," "BELIEVE," AND OTHER WORDS AND TERMS OF SIMILAR
MEANING IN CONNECTION WITH ANY DISCUSSION OF FUTURE OPERATING OR FINANCIAL
PERFORMANCE. IN PARTICULAR, THESE INCLUDE STATEMENTS RELATING TO OUR ANTICIPATED
OPERATING RESULTS FOR THE QUARTER ENDED MARCH 31, 1999, AND THE FULL YEAR ENDED
DECEMBER 31, 1999, AND OUR ANTICIPATED CASH FLOW, AND TO FUTURE ACTIONS, FUTURE
PERFORMANCE OR RESULTS OF CURRENT AND ANTICIPATED SALES AND MARKETING EFFORTS,
EXPENSES, THE OUTCOME OF CONTINGENCIES SUCH AS LEGAL PROCEEDINGS, AND OTHER
FINANCIAL RESULTS. FROM TIME TO TIME, WE ALSO MAY PROVIDE ORAL OR WRITTEN
FORWARD-LOOKING STATEMENTS IN OTHER MATERIALS WE RELEASE TO THE PUBLIC.

ANY OR ALL OF OUR FORWARD-LOOKING STATEMENTS IN THIS REPORT, IN THE 1998
ANNUAL REPORT AND IN ANY OTHER PUBLIC STATEMENTS WE MAKE MAY TURN OUT TO BE
WRONG. THEY CAN BE AFFECTED BY INACCURATE ASSUMPTIONS WE MIGHT MAKE OR BY KNOWN
OR UNKNOWN RISKS AND UNCERTAINTIES. MANY FACTORS MENTIONED IN THE DISCUSSION
BELOW WILL BE IMPORTANT IN DETERMINING FUTURE RESULTS. CONSEQUENTLY, NO
FORWARD-LOOKING STATEMENT CAN BE GUARANTEED. ACTUAL FUTURE RESULTS MAY VARY
MATERIALLY.

OVERVIEW

Aztec is a single-source provider of a broad range of information technology
business solutions which derives its revenue principally from (i) fees for
services rendered to customers for Web and network design and implementation,
software development and customization, voice and data infrastructure, design
and integration, and IT consulting, support and outsourcing, and (ii) sales of
products to customers within these business sectors (including telephony systems
and network and systems hardware and software).

Aztec's consolidated financial statements give retroactive effect to the
five business combinations accounted for under the pooling-of-interests method
during the period from October 1996 through April 1997 (the "Pooled Companies")
and include the results of eight companies acquired from September 1997 to
December 31, 1998, in business combinations accounted for under the purchase
method (the "Purchased Companies") from their respective acquisition dates.
Prior to their respective dates of acquisition by USOP, the Pooled Companies
reported results for years ending on March 31 or December 31. Upon acquisition
by USOP, and effective for the fiscal year ended April 26, 1997, the Pooled
Companies changed their year-ends from March 31 and December 31 to conform to
USOP's fiscal year, which ended on the last Saturday in April. On June 30, 1998,
the Company changed its fiscal year to December 31. In the following discussion,
"fiscal 1996," "fiscal 1997," "fiscal 1998" and the "thirty-five weeks ended
December 31, 1998," refer to the Company's fiscal years ended March 31, 1996,
April 26, 1997, April 25, 1998 and the transition period from April 26, 1998,
through December 31, 1998, respectively.

The following discussion includes unaudited financial statements for the
thirty-five week period ended December 31, 1997, representing the previous
period most comparable to the thirty-five week period ended December 31, 1998.
The discussion should be read in conjunction with Aztec's consolidated financial
statements and related notes thereto appearing elsewhere in this Transition
Report.

12
<PAGE>
RECENT INFORMATION

As discussed in Note 3 of the Notes to the Consolidated Financial
Statements, the Company has restated its previously issued consolidated
financial statements as of and for the thirty five week period ended December
31, 1998 to recognize compensation expense related to certain employment
incentive agreements, which were signed with key personnel prior to the spin-off
from USOP. This compensation expense results from options with a three-year
guaranteed appreciation beginning May 14, 1998 and certain bonus agreements.
During the quarter ended March 31, 1999, the Company concluded that compensation
expense related to these agreements should be recognized over the term of the
agreements, including amounts related to the thirty five week period ended
December 31, 1998. Accordingly, compensation expense increased by $949 for the
thirty five week period ended December 31, 1998.

On March 24, 1999, based on a review of preliminary first quarter results,
the Company announced that it will report lower than expected earnings for both
the first quarter of 1999 and for the year ended December 31, 1999. The Company
announced that the reduction in expected earnings was caused by three factors:
the effect of continued competitive pressure on product margins not offset by
higher service growth; a slowdown in the cabling portion of its voice and data
business unit in Southern California; and higher overhead at one of its
subsidiaries that increased staffing in anticipation of fulfilling service
revenue which has not materialized. The Board of Directors has recently created
two committees of the Board. The first, a Strategic Committee, to explore and
evaluate financial and strategic alternatives for increasing shareholder value,
including ways of repositioning the Company in higher margin business and other
alternatives such as strategic alliances, recapitalizations, taking the Company
private, or merger. The second, a Search Committee, to hire an outside search
firm to help hire additional senior operating management to augment existing
management.

RESULTS OF OPERATIONS

The following table sets forth various items as a percentage of revenues for
fiscal 1996, 1997 and 1998, and the thirty-five week periods ended December 31,
1997 (unaudited), and December 31, 1998.

<TABLE>
<CAPTION>
FISCAL YEAR ENDED THIRTY-FIVE THIRTY-FIVE
-------------------------- WEEKS ENDED WEEKS ENDED
MARCH 31, APRIL 26, APRIL 25, DECEMBER 31, DECEMBER 31,
1996 1997 1998 1997 1998(1)
------------- ----------- ------------- --------------- ---------------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Statement of Income Data:
Revenues....................................... 100.0% 100.0% 100.0% 100.0% 100.0%
Cost of revenues............................... 73.7% 74.9 76.0 75.3 76.2
----- ----- ----- ----- -----
Gross profit................................. 26.3 25.1 24.0 24.7 23.8
Selling, general and administrative expense.... 18.0 15.8 16.9 16.5 16.5
Amortization of intangibles.................... 0.4 .2 1.0
Strategic restructuring costs.................. 0.8 1.9
Non-recurring acquisition costs................ 1.7
----- ----- ----- ----- -----
Operating income............................. 8.3 7.6 5.9 8.0 4.4
Interest expense, net.......................... 0.1 1.1
Other income................................... (0.8) (.1)
----- ----- ----- ----- -----
Income before provision for income taxes..... 9.1 7.5 5.9 8.0 3.4
Provision for income taxes..................... 0.6 2.6 2.8 3.4 1.6
----- ----- ----- ----- -----
Net income................................... 8.5% 4.9% 3.1% 4.6% 1.8%
----- ----- ----- ----- -----
----- ----- ----- ----- -----
</TABLE>

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

(1) As restated. See Note 3 to the Consolidated Financial Statements.

13
<PAGE>
COMPARISON OF THE THIRTY-FIVE WEEK PERIODS ENDED DECEMBER 31, 1998 TO DECEMBER
31, 1997

REVENUES. Consolidated revenues increased 87.7% from $122.2 million for the
thirty-five week period ended December 31, 1997, to $229.4 million for the
thirty-five week period ended December 31, 1998. This increase was due primarily
to revenue from Aztec's expanded customer base, resulting from revenues of
companies acquired during September and October 1997 and during the second-half
of calendar 1998. In addition, increased revenue from existing companies,
primarily in the Web and network integration sector and the software development
and customization sector, contributed to the Company's revenue growth.

GROSS PROFIT. Gross profit increased 80.6% from $30.2 million, or 24.7% of
revenues, for the thirty-five week period ended December 31, 1997, to $54.6
million, or 23.8% of revenues, for the thirty-five week period ended December
31, 1998. The decrease in gross profit as a percentage of revenues was due
primarily to the acquisition of companies in September and October 1997 with
lower gross margins than the Company average, offset, in part, by increased
percentage of revenues in the services area which have higher gross margins.

SELLING, GENERAL AND ADMINISTRATIVE. Selling, general and administrative
expenses increased 87.9%, from $20.2 million, or 16.5% of revenues, for the
thirty-five week period ended December 31, 1997, to $37.9 million, or 16.5% of
revenues, for the thirty-five week period ended December 31, 1998. This increase
was due primarily to incremental general and administrative expenses of acquired
companies and corporate overhead costs associated with the spin-off from U.S.
Office Products, including the costs associated with being an independent,
publicly-traded company. As a percentage of revenues, selling, general and
administrative expenses for the thirty-five week period ended December 31, 1998
were flat as compared with the thirty-five week period ended December 31, 1997.

AMORTIZATION OF INTANGIBLES. Amortization of intangibles of $2.4 million in
the thirty-five weeks ended December 31, 1998, has increased $2.1 million from
$282,000 in the thirty-five weeks ended December 31, 1997, due to including a
full thirty-five weeks of amortization of companies acquired in September and
October 1997 and the acquisition of companies in the second half of Calendar
1998.

STRATEGIC RESTRUCTURING COSTS. Strategic restructuring costs of $3.2
million in the thirty-five week period ended December 31, 1998, represent the
Company's portion of the costs incurred related to the spin-off from U.S. Office
Products, including compensation related costs associated with U.S. Office
Products, buyback of certain employee options during its tender offer on June 1,
1998. In addition, the Company incurred a cost of $1.1 million related to the
restructuring of its Northeast regions in the fourth quarter of 1998.

INTEREST EXPENSE. Interest expense, net of interest income, increased $2.4
million from net interest expense of $42,000 in the thirty-five week period
ended December 31, 1997, to $2.5 million in the thirty-five week period ended
December 31, 1998. The increase was primarily due to the Company's financing of
its acquisitions in the second half of 1998 through its Credit Facility.

OTHER INCOME. Other income increased $178,000, from $8,000 in the
thirty-five weeks ended December 31, 1997, to $186,000 in the thirty-five weeks
ended December 31, 1998, primarily as a result of rental income from subleases.

PROVISION FOR INCOME TAXES. Provision for income taxes decreased from $4.2
million for the thirty-five week period ended December 31, 1997, to $3.5 million
for the thirty-five week period ended December 31, 1998, reflecting effective
tax rates of 42.8% and 45.8%, respectively. The higher effective tax rate for
the thirty-five week period ended December 31, 1998, is the result of the
increase in non-deductible goodwill amortization related to the Company's
acquisitions in September and October 1997.

14
<PAGE>
COMPARISON OF FISCAL 1998 TO FISCAL 1997

REVENUES. Consolidated revenues increased 52.9% from $136.3 million for
fiscal 1997, to $208.3 million for fiscal 1998. This increase was primarily due
to sales to new accounts and increased sales to existing customers in the
consulting and engineering services sector, the systems and network integration
sector, and the telephony integration services sector of the business resulting
from the expansion of Aztec's customer base. Revenues in these sectors have a
higher concentration of service related revenue. In addition, revenues of
Purchased Companies acquired during fiscal 1998 contributed to the increase in
revenues. The majority of the Purchased Companies' revenues are service-related.

GROSS PROFIT. Gross profit increased 46.5% from $34.1 million, or 25.1% of
revenues, for fiscal 1997 to $50.0 million, or 24.0% of revenues, for fiscal
1998. This decrease in gross profit as a percentage of revenues was due to a
higher concentration of business in the systems and network design and
implementation services sector, which has inherently lower gross margin
percentages than the other sectors.

SELLING, GENERAL AND ADMINISTRATIVE. Selling, general and administrative
expenses increased 63.5% from $21.5 million, or 15.8% of revenues, for fiscal
1997 to $35.2 million, or 16.9% of revenues, for fiscal 1998. The increase in
selling, general and administrative expenses as a percentage of revenues was
primarily due to increases in corporate overhead at one of the operating
companies of Aztec, compensation related earnouts paid at three operating
companies acquired in September and October 1997, an increased level of general
bad debt reserves, and increased Aztec corporate overhead due to the strategic
restructuring.

STRATEGIC RESTRUCTURING COSTS. Strategic restructuring costs represent the
Company's portion of the costs incurred by USOP as a result of USOP's
restructuring plan including costs incurred related to the Company's withdrawn
initial public offering.

NON-RECURRING ACQUISITION COSTS. Aztec incurred non-recurring acquisition
costs of $2.3 million for fiscal 1997 in conjunction with five business
combinations accounted for under the pooling-of-interests method. These
non-recurring acquisition costs included accounting, legal and investment
banking fees, real estate and environmental assessments and appraisals, and
various regulatory fees. Generally accepted accounting principles require Aztec
to expense all acquisition costs (both those paid by Aztec and those paid by the
sellers of the acquired companies) related to business combinations accounted
for under the pooling-of-interests method.

INTEREST EXPENSE. Interest expense, net of interest income, decreased
$134,000 from net interest expense of $156,000 in fiscal 1997, to $22,000 in
fiscal 1998. The decrease was due primarily to the Company's pay down of debt
due to an increase in cash flows from operations during fiscal 1998.

PROVISION FOR INCOME TAXES. Provision for income taxes increased from $3.5
million for fiscal 1997 to $5.8 million for fiscal 1998, reflecting effective
tax rates of 34.4% and 47.2%, respectively. The higher effective tax rate for
fiscal 1998 is the result of goodwill amortization and certain acquisition costs
not being deductible for tax purposes. The lower effective income tax rate for
fiscal 1997, compared to the federal statutory rate of 35.0% plus state taxes,
is the result of certain companies included in the results, which were acquired
in business combinations accounted for under the pooling-of-interests method,
not being subject to federal income taxes on a corporate level as they had
elected subchapter S corporation treatment prior to being acquired by Aztec.

COMPARISON OF FISCAL 1997 TO FISCAL 1996

REVENUES. Consolidated revenues increased 19.5%, from $114.1 million in
fiscal 1996 to $136.3 million in fiscal 1997. This increase was primarily due to
increased sales to existing customers and sales to new customers in the
consulting and engineering services sector, the systems and network integration
sector, and the software development and integration services sector of the
business.

15
<PAGE>
GROSS PROFIT. Gross profit increased 14.1%, from $29.9 million, or 26.3% of
revenues, in fiscal 1996 to $34.1 million, or 25.1% of revenues, in fiscal 1997.
The decrease in gross profit as a percentage of revenues was due primarily to a
higher concentration of business in the systems and network design and
implementation services sector which has inherently lower gross margin
percentages than the other sectors.

SELLING, GENERAL AND ADMINISTRATIVE. Selling, general and administrative
expenses increased 4.9%, from $20.5 million, or 18.0% of revenues, in fiscal
1996 to $21.5 million, or 15.8% of revenues, in fiscal 1997. The decrease in
selling, general and administrative expenses as a percentage of revenues was due
primarily to operating efficiencies employed at Aztec and Aztec's ability to
increase its revenue base without a corresponding increase in fixed operating
costs.

NON-RECURRING ACQUISITION COSTS. Aztec incurred non-recurring acquisition
costs of $2.3 million in fiscal 1997 in conjunction with five business
combinations accounted for under the pooling-of-interests method.

INTEREST EXPENSE. Interest expense, net of interest income, increased
$152,000, from $4,000 in fiscal 1996 to $156,000 in fiscal 1997. The net
increase was due primarily to the reduction in interest income related to
short-term investments at one of the Pooled Companies. The proceeds from the
short-term investments were used to fund other working capital needs.

OTHER INCOME. Other income decreased $911,000, from $964,000 in fiscal 1996
to $53,000 in fiscal 1997. In fiscal 1996, other income consisted primarily of a
gain on the sale of a non-core line of business at one of the Pooled Companies
prior to its acquisition by Aztec.

PROVISION FOR INCOME TAXES. Provision for income taxes increased from
$750,000 in fiscal 1996 to $3.5 million in fiscal 1997, reflecting effective
income tax rates of 7.2% and 34.4%, respectively. The low effective income tax
rate for fiscal 1996, compared to the federal statutory tax rate of 35.0% plus
state taxes, is the result of certain companies included in the results, which
were acquired in business combinations accounted for under the
pooling-of-interests method, not being subject to federal income taxes on a
corporate level as such companies had elected to be treated as subchapter S
corporations prior to being acquired by Aztec.

LIQUIDITY AND CAPITAL RESOURCES

At December 31, 1998, Aztec had cash of $8.8 million and working capital of
$58.4 million. Aztec's capitalization, defined as the sum of long-term debt and
stockholders' equity, at December 31, 1998, was $197.4 million.

During the thirty-five week period ended December 31, 1998, net cash
provided by operating activities was $4.1 million. Net cash used in investing
activities was $76.0 million, which consisted primarily of $73.4 million used
for three acquisitions during the period. Net cash provided by financing
activities was $78.7 million primarily related to borrowings from the Company's
$140 million Credit Facility partially offset by $8.7 million paid to USOP
related to the spin-off from USOP.

During fiscal 1998, net cash used in operating activities was $6.9 million.
Net cash used in investing activities was $2.9 million, which consisted
primarily of $2.6 million used for additions of property, plant and equipment.
Net cash provided by financing activities was $10.6 million, including $15.3
million of capital contributed by USOP in anticipation of a strategic
restructuring, $818,000 that was advanced by USOP as part of USOP's centralized
cash management process, $1.3 million in dividends paid by one of the Pooled
Companies, and the repayment of $4.2 million in short-term and long-term debt.

During fiscal 1997, net cash provided by operating activities was $6.3
million. Net cash used in investing activities was $3.9 million, which consisted
primarily of $1.8 million in payments of non-recurring acquisition costs in
conjunction with the acquisitions of certain Pooled Companies and a tax deposit
at one of the Pooled Companies of $1.3 million. Net cash used in financing
activities of $6.8 million resulted from

16
<PAGE>
the repayment of $5.5 million in short-term debt and $4.3 million in dividends
paid by certain of the Pooled Companies. These cash outflows were partially
offset by $3.6 million in advances from USOP.

Aztec's anticipated capital expenditures budget for the next twelve months
is approximately $4.0 million. The largest items include approximately $1.5
million for Year 2000 compliance, and other amounts for infrastructure
improvements including computer equipment and service vehicles.

The Distribution Agreement with USOP called for the allocation to Aztec of
$5.0 million of debt by USOP resulting in a contribution to capital of $12.8
million through December 31, 1998, which has been reflected in the consolidated
financial statements as an increase in stockholders' equity. On July 27, 1998,
Aztec entered into the Credit Facility in the aggregate amount of $140 million,
up to $15 million of which may be used for working capital and other general
corporate purposes, and up to $125 million may be used to fund permitted
acquisitions. The Credit Facility has a maturity date of July 27, 2003; is
secured by all material assets of Aztec; and is subject to terms and conditions
customary for facilities of this kind, including certain financial covenants.
Interest rate options are available to Aztec depending on the satisfaction of
certain specified financial ratios.

The Company anticipates that its working capital line of credit and cash
flow from operations will be sufficient to meet the Company's liquidity
requirements for its existing operations through the end of calendar 1999. Since
the spin-off, the Company has acquired entities as part of its growth strategy.
However, the Company does not believe that new acquisitions will constitute a
part of its growth strategy in the near future.

Aztec does not believe that inflation has had a material impact on its
results of operations during the thirty-five weeks ended December 31, 1998, and
the fiscal years 1996, 1997 or 1998.

YEAR 2000 READINESS DISCLOSURE STATEMENTS

Historically, many computer programs have been written using two digits
rather than four to define the applicable year. This could lead, in many cases,
to a computer recognizing a date ending in "00" as 1900 rather than the year
2000. This phenomenon could result in major computer system failures or
miscalculations, and is generally referred to as the "Year 2000" problem.

The Company is currently in the process of completing its assessment of its
exposure to the Year 2000 problem and has established a detailed response to
that exposure. Generally, the Company has Year 2000 exposure in three areas: (1)
Information Technology ("IT") Related Systems--financial and management
computerized operating systems used to manage the Company's business; (2) Non-IT
Related Systems-- equipment with "embedded chips" used by the Company, including
telephone and building security systems; and (3) Third Parties--computer systems
used by third parties, in particular customers and suppliers of the Company.

IT RELATED SYSTEMS

The Company has initiated a Year 2000 readiness plan for its financial and
management computerized operating systems. This plan includes assessment,
solution evaluation, implementation, results monitoring, and contingency
planning. Assessment includes determining if the current systems are Year 2000
compliant and whether they meet the Company's business needs. The solution
evaluation phase involves the review of the remediation alternatives including
modification, upgrading or replacement of certain IT systems. The result of this
phase is the determination of the remediation effort involved. Implementation of
the solution includes extensive testing and verification. The results of the
remediation efforts must be monitored once the implementation phase is complete.
Contingency planning begins once a solution is determined and continues until
completion of the entire remediation effort. To date, the Company has completed
the assessment phase for all IT Systems used by the business, solution
evaluation is complete for most IT Systems used by the business, and the
implementation phase has begun. The Company utilizes

17
<PAGE>
primarily packaged software and has determined that certain systems will be
upgraded and others will be replaced in order to meet Year 2000 requirements.
The Company anticipates that critical systems will be Year 2000 compliant during
1999.

NON-IT RELATED SYSTEMS

The Company is currently in the process of assessing its exposure to Year
2000 problems related to Non-IT systems. Major Non-IT systems utilized by the
Company include telephone and building security systems as well as other
equipment with "embedded chips". If the Company determines that any Non-IT
related systems are not Year 2000 compliant, it will be necessary to adjust the
estimates of the cost of Year 2000 remediation and determine a Year 2000 plan
including solution evaluation, implementation, results monitoring, and
contingency planning. Assurances regarding Year 2000 compliance for Non-IT
related system vendors are being handled in the same manner as other third
parties (see discussion below). The Company expects to complete its assessment
of Year 2000 compliance for Non-IT related systems in the first half of 1999 and
will then determine the Year 2000 plan.

THIRD PARTIES

The Company is seeking assurances from its suppliers and customers that
their systems and products are Year 2000 compliant. The determination of
compliance will include assessments by the Company of their exposure to Year
2000 Issues, anticipated risks, their responses to those risks, and their
contingency plans. To date, the Company is not aware of any Year 2000 problems
at any of its customers or suppliers that would materially impact the Company's
results of operations, liquidity or capital resources. However, the Company has
no means of ensuring that these suppliers and customers will be Year 2000 ready,
and the Company believes that customers and prospective customers may defer
non-critical IT projects in order to devote necessary resources to fixing their
own Year 2000 problems. The inability of those parties to become Year 2000
compliant on a timely basis could materially impact the Company. The Company has
not developed contingency plans in the event of a Year 2000 failure caused by a
supplier, customer or third party, although, should the Company learn of any
issues, it will do so.

COST OF REMEDIATION

The Company estimates that the total cost of remediation for all three
categories of year 2000 problems will be approximately $2.2 million, of which,
to date, approximately $695,000 has been incurred. The majority of these costs
represent implementation of new systems and thus, have been capitalized as of
December 31, 1998. The source of funds for the Company's Year 2000 plan is from
operating cash flows. No other IT projects have been deferred by the Company due
to Year 2000 efforts.

RISKS

Although the Company, based on its analysis to date, does not believe that
it will incur any material costs or experience material disruptions in its
business, related to the Year 2000 problem, there can be no assurances that the
Company or its third parties, customers or suppliers will successfully become
Year 2000 compliant on a timely basis and thus will not experience serious
unanticipated negative consequences or material costs. Undetected errors or
defects in the technology used for the Company's systems, which include hardware
and software, and defects in the systems of the Company's third parties, could
cause these consequences. The most likely worst case scenario would include 1)
hardware failure, 2) software failure resulting in an inability to receive
orders from customers or shipments from suppliers or to bill customers and pay
suppliers, and 3) failure of infrastructure services provided by third parties
(such as phone systems and building security systems).

18
<PAGE>
CONTINGENCY PLANS

The Company is in the process of developing a contingency plan in the event
of a Year 2000 failure which will depend on results of evaluation and testing of
remediation. The Company expects to complete a plan by the third quarter of
1999, although such plan will evolve as the Company obtains more information.
The company expects its contingency plans to include, among other things, manual
and programmatic solutions to correct issues not imbedded in third party
hardware and software.

FACTORS THAT MAY AFFECT FUTURE RESULTS

THE FOLLOWING IMPORTANT FACTORS, AMONG OTHERS, COULD CAUSE ACTUAL RESULTS TO
DIFFER FROM THOSE INDICATED IN FORWARD-LOOKING STATEMENTS MADE IN THIS
TRANSITION REPORT AND PRESENTED ELSEWHERE BY MANAGEMENT FROM TIME TO TIME. THE
FOLLOWING FACTORS CONTAIN SOME FORWARD LOOKING STATEMENTS. FORWARD-LOOKING
STATEMENTS GIVE OUR CURRENT EXPECTATIONS OR FORECASTS OF FUTURE EVENTS. YOU CAN
IDENTIFY THESE STATEMENTS BY THE FACT THAT THEY DO NOT RELATE STRICTLY TO
HISTORICAL OR CURRENT FACTS. THEY USE WORDS SUCH AS "ANTICIPATE," "ESTIMATE,"
"EXPECT," "PROJECT," "INTEND," "PLAN," "BELIEVE," AND OTHER WORDS AND TERMS OF
SIMILAR MEANING IN CONNECTION WITH ANY DISCUSSION OF FUTURE OPERATING OR
FINANCIAL PERFORMANCE. IN PARTICULAR, THESE INCLUDE STATEMENTS RELATING TO OUR
ANTICIPATED OPERATING RESULTS FOR THE QUARTER ENDED MARCH 31, 1999, AND THE FULL
YEAR ENDED DECEMBER 31, 1999, AND OUR ANTICIPATED CASH FLOW AND TO FUTURE
ACTIONS, FUTURE PERFORMANCE OR RESULTS OF CURRENT AND ANTICIPATED SALES AND
MARKETING EFFORTS, EXPENSES, THE OUTCOME OF CONTINGENCIES SUCH AS LEGAL
PROCEEDINGS, AND OTHER FINANCIAL RESULTS. FROM TIME TO TIME, WE ALSO MAY PROVIDE
ORAL OR WRITTEN FORWARD-LOOKING STATEMENTS IN OTHER MATERIALS WE RELEASE TO THE
PUBLIC.

ANY OR ALL OF OUR FORWARD-LOOKING STATEMENTS IN THIS REPORT, IN THE 1998
ANNUAL REPORT AND IN ANY OTHER PUBLIC STATEMENTS WE MAKE MAY TURN OUT TO BE
WRONG. THEY CAN BE AFFECTED BY INACCURATE ASSUMPTIONS WE MIGHT MAKE OR BY KNOWN
OR UNKNOWN RISKS AND UNCERTAINTIES. MANY FACTORS MENTIONED IN THE DISCUSSION
BELOW WILL BE IMPORTANT IN DETERMINING FUTURE RESULTS. CONSEQUENTLY, NO
FORWARD-LOOKING STATEMENT CAN BE GUARANTEED. ACTUAL FUTURE RESULTS MAY VARY
MATERIALLY.

LISTING OF COMMON STOCK ON THE NASDAQ NATIONAL MARKET

The Company's shares of Common Stock have been listed and have traded on the
Nasdaq National Market since June 1998. On January 13, 1999, the Company
received a notice from Nasdaq advising the Company of its failure to satisfy the
Nasdaq National Market continued listing standards.

Nasdaq requires that as a condition of continued listing, companies must
satisfy at least one of the two maintenance standards relating to a company's
financial condition, results of operations and trading market for its listed
securities. Since the Company carries substantial goodwill on its books related
to companies acquired in business combinations accounted for under the purchase
method, and has acquired a number of subsidiaries through the issuance of debt
rather than securities, the Company's net tangible assets are substantially
below the threshold requirements under one of the maintenance standards. The
alternative standard requires, among other items, that the minimum bid price for
the listed securities be at least $5.00 per share. At the time of the receipt of
the notice from Nasdaq, the Company's Common Stock had been trading, over the
prior 30 calendar days, from a high closing price of $4.06 per share to a low
closing price of $3.50 per share. The closing price of the Company's Common
Stock on March 26, 1999, was $2.00 per share.

Nasdaq has agreed to exempt the Company from the $5.00 per share minimum bid
price requirement until May 17, 1999. If the share price does not meet the $5.00
per share requirement by such date, the Company would then apply before a Nasdaq
hearing panel for a further extension. If such application were

19
<PAGE>
to be unsuccessful the Company's shares of Common Stock would cease to be listed
on the Nasdaq National Market, which could adversely affect the liquidity of the
Company's Common Stock, the ability of the Company to raise capital and the
ability of the Company to attract and retain employees. In such event, the
Company intends to make application for listing on the Nasdaq SmallCap Market.
If not approved for listing on the Nasdaq SmallCap Market, the shares of Common
Stock will likely be quoted in the "pink sheets" maintained by the National
Quotation Bureau, Inc. or the OTC Bulletin Board. In such an event, the spread
between the bid and ask price of the shares of Common Stock is likely to be
greater than at present, and stockholders may experience a greater degree of
difficulty in engaging in trades of shares of Common Stock.

In addition, low trading prices of the Company's Common Stock may have an
adverse impact upon the efficient operation of the trading market in the
securities. In particular, brokerage firms often charge a greater percentage
commission on low-priced shares than that which would be charged on a
transaction in the same dollar amount of securities with a higher per share
price. A number of brokerage firms will not recommend purchases of low-priced
stock to their clients or make a market in such shares, which tendencies may
adversely affect the Company.

ABSENCE OF HISTORY AS A STAND-ALONE COMPANY

Prior to June 9, 1998, Aztec had not operated as an independent entity. The
operations of Aztec as a stand-alone, consolidated entity have placed, and will
continue to place, significant demands on Aztec's management, operational, and
technical resources. Prior to the spin-off from USOP, certain administrative
functions relating to Aztec's business (including some legal and accounting
services) were handled by USOP. Aztec's future performance will depend on its
ability to function as a stand-alone entity, to integrate the operations of the
consolidated companies, to finance and manage expanding operations, and to adapt
its information systems to changes in its business.

RISKS RELATED TO ACQUISITIONS

Integration of acquisitions may involve a number of risks that could have a
material adverse effect on Aztec's operating results and financial condition,
including: restructuring charges associated with the acquisitions and other
expenses associated with a change of control, non-recurring acquisition costs,
such as accounting and legal fees, investment banking fees, amortization of
acquired intangible assets, recognition of transaction-related obligations, and
various other acquisition-related costs; diversion of management's attention;
difficulties with retention, hiring and training of key personnel; and risks of
incurring unanticipated problems or legal liabilities.

Although Aztec conducts due diligence, hires outside independent financial
and accounting consultants, and generally requires representations, warranties
and indemnifications from the former owners of acquired companies, there can be
no assurance that such owners will have accurately represented the financial and
operating conditions of their companies. If an acquired company's financial or
operating results were misrepresented, or the acquired company otherwise fails
to perform as anticipated, the acquisition could have a material adverse effect
on the operating results and financial condition of Aztec. See "Legal
Proceedings."

VARIABILITY OF QUARTERLY OPERATING RESULTS

The Company has experienced, and may in the future continue to experience,
fluctuations in its quarterly operating results. Factors that may cause the
Company's quarterly operating results to vary include the number of active
client projects, the requirements of client projects, the termination of major
client projects, the loss of major clients, the timing of new client
engagements, and the timing of personnel cost increases. Certain of these
factors may also affect the Company's personnel utilization rates which may
cause further variation in quarterly operating results. The timing of revenues
is difficult to forecast

20
<PAGE>
because the Company's sales cycle is relatively long and the Company's services
are impacted by both the financial condition and management decisions of its
clients and general economic conditions. Because a high percentage of the
Company's expenses are relatively fixed at the beginning of any period and the
Company's general policy is to not adjust its staffing levels based upon what it
views as short-term circumstances, a variation in the timing of the initiation
or the completion of client assignments, particularly at or near the end of any
quarter, can cause significant variations in operating results from quarter to
quarter and could result in losses for any particular period. In addition, many
of the Company's engagements are, and may be in the future, terminable by its
clients without penalty. A termination of a major project could require the
Company to maintain under-utilized employees, resulting in a higher than
expected percentage of unassigned professionals, or to terminate the employment
of excess personnel. Due to all of the foregoing factors, there can be no
assurance that the Company's results of operations will not be below the
expectations of investors for any given fiscal period.

ATTRACTION AND RETENTION OF EMPLOYEES

Aztec's business involves the delivery of professional services and is labor
intensive. Aztec's success depends in large part on its ability to attract,
develop, motivate, and retain technical professionals. At December 31, 1998
approximately 71% of Aztec's employees were technical professionals. Qualified
technical professionals are in great demand and are likely to remain a limited
resource for the foreseeable future. There can be no assurance that Aztec will
be able to attract and retain sufficient numbers of technical professionals in
the future. An increase in turnover rates could have a material adverse effect
on Aztec's business, including its ability to secure and complete engagements
and obtain new business, which could have a material adverse effect on Aztec's
operating results and financial condition.

RELIANCE ON KEY PERSONNEL

Aztec's operations depend on the continued efforts of James E. Claypoole,
its Chairman and Chief Executive Officer, Benjamin Tandowski, its Chief
Technology Officer, Douglas R. Johnson, its Executive Vice President and Chief
Financial Officer, Ira Cohen, its Chief Operating Officer, and the senior
management of certain of its regional operations and operating companies. If any
of these people becomes unable to continue in his or her present role, or if
Aztec is unable to attract and retain other skilled professionals, its business
could be adversely affected. Aztec does not currently maintain key man life
insurance policies for any of its officers or other personnel.

RAPID TECHNOLOGICAL CHANGE

As with all IT solutions companies, Aztec's success will depend in part on
its ability to develop IT solutions that keep pace with continuing changes in
IT, evolving industry standards and changing client preferences. There can be no
assurance that Aztec will be successful in adequately addressing these
developments on a timely basis or that, if these developments are addressed,
Aztec will be successful in the marketplace. In addition, there can be no
assurance that products or technologies developed by others will not render
Aztec's services uncompetitive or obsolete. Aztec's failure to address these
developments could have a material adverse effect on Aztec's operating results
and financial condition.

POTENTIAL CONFLICTS IN THE DISTRIBUTION

Aztec, USOP, and the other companies spun-off by USOP on June 9, 1998,
(together with Aztec, the "Spin-Off Companies") entered into a distribution
agreement, tax allocation agreement, and employee benefits agreement. The
Spin-Off Companies also entered into a tax indemnification agreement. These
agreements provide for, among other things, USOP and Aztec to indemnify each
other from tax and other liabilities relating to their respective businesses
prior to and following the Distribution.

21
<PAGE>
Certain indemnification obligations of Aztec and the other Spin-Off
Companies to USOP are joint and several. Therefore, if one of the other Spin-Off
Companies fails to satisfy its indemnification obligations to USOP when such a
loss occurs, Aztec may be required to indemnify USOP for all or a portion of the
losses that otherwise would have been allocated to such other Spin-Off Company.
In addition, the agreements allocate certain liabilities, including general
corporate and securities liabilities of USOP not specifically related to the
specific businesses to be conducted by the Spin-Off Companies and
post-Distribution USOP, among USOP and each of the Spin-Off Companies. Adverse
developments involving USOP or the other Spin-Off Companies, or material
disputes with USOP following the Distribution, could have a material adverse
effect on Aztec.

The terms of the agreements that govern the relationships among Aztec, USOP
and the other Spin-Off Companies were established by USOP in consultation with
management of Aztec and the other Spin-Off Companies prior to the Distribution
and while Aztec and the other Spin-Off Companies were wholly-owned subsidiaries
of USOP. The terms of these agreements, including the allocation of general
corporate and securities liabilities among USOP, Aztec and the other Spin-Off
Companies, may not be the same as they would be if the agreements were the
result of arms'-length negotiations. Accordingly, there can be no assurance that
the terms and conditions of the agreements are not more or less favorable to
Aztec than those that might have been obtained from unaffiliated third parties.

On the Distribution Date, Jonathan J. Ledecky, then-Chairman of the USOP
Board of Directors, received options for 1,660,500 shares of Aztec common stock
and options for shares of each of the other Spin-Off Companies exercisable for
7.5% of the common stock of each of the other Spin-Off Companies. As a result of
the receipt of the options, Mr. Ledecky had interests in the Distribution that
differed in certain respects from the interests of other stockholders of USOP
and Aztec.

POTENTIAL LIABILITY FOR TAXES RELATED TO THE DISTRIBUTION

In connection with the Distribution, Aztec entered into a tax allocation
agreement with USOP and the other Spin-Off Companies, which provides that Aztec
and the other Spin-Off Companies will jointly and severally indemnify USOP for
any losses associated with taxes related to the Distribution ("Distribution
Taxes") if an action or omission (an "Adverse Tax Act") of any of the Spin-Off
Companies materially contributes to a final determination that any or all of the
spin-offs in the Distribution are taxable. Aztec also entered into a tax
indemnification agreement with the other Spin-Off Companies under which the
Spin-Off Company that is responsible for the Adverse Tax Act will indemnify the
other Spin-Off Companies for any liability to indemnify USOP under the tax
allocation agreement. As a consequence, Aztec will be liable for any
distribution taxes resulting from any Adverse Tax Act by Aztec and will be
liable (subject to indemnification by the other Spin-Off Companies) for any
distribution taxes resulting from an Adverse Tax Act by the other Spin-Off
Companies. If there is a final determination that any or all of the
distributions are taxable and it is determined that there has not been an
Adverse Tax Act by either USOP or any of the Spin-Off Companies, USOP and each
of the Spin-Off Companies will be liable for its pro rata portion of the
Distribution Taxes based on the value of each company's common stock after the
Distribution. As a result, Aztec could become liable for a pro rata portion for
Distribution Taxes with respect to not only its own spin-off but to the
spin-offs of the other Spin-Off Companies.

RISKS RELATED TO ALLOCATION OF CERTAIN LIABILITIES IN THE DISTRIBUTION

Under the Distribution Agreement, Aztec is liable for (i) any liabilities
arising out of or in connection with the business conducted by it or its
subsidiaries, (ii) its liabilities under the employee benefits agreement, tax
allocation agreement and related agreements, and (iii) certain liabilities under
the securities laws related to the Distribution. Each of the other Spin-Off
Companies is similarly obligated to USOP. Aztec and the other Spin-Off Companies
have also agreed to bear a pro rata portion of (i) USOP liabilities under the
securities laws (other than claims relating solely to a specific Spin-Off
Company or relating specifically to the continuing businesses of USOP) and (ii)
USOP's general corporate liabilities

22
<PAGE>
(other than debt, except for that specifically allocated to the Spin-Off
Companies) incurred prior to the Distribution (i.e., liabilities not related to
the conduct of a particular distributed or retained subsidiary's business) (the
"Shared Liabilities"). If one of the other Spin-Off Companies defaults on an
obligation owed to USOP, the other non-defaulting Spin-Off Companies will be
obligated on a pro rata basis to pay such obligation ("Default Liability"). As a
result of the Shared Liabilities and Default Liability, Aztec could be obligated
to USOP in respect of obligations and liabilities not related to its business or
operations and over which neither it nor its management has or has had any
control or responsibility. The aggregate of the Shared Liabilities and Default
Liability for which any Spin-Off Company may be liable is, however, limited to
$1.75 million.

POSSIBLE LIMITATIONS ON ISSUANCES OF COMMON STOCK

Section 355(e) of the Internal Revenue Code of 1986, as amended, generally
provides that a company that distributes shares of a subsidiary in a spin-off
that is otherwise tax-free will incur federal income tax liability if 50% or
more, by vote or value, of the capital stock of either the company making the
distribution or the spun-off subsidiary is acquired by one or more persons
acting pursuant to a plan or series of related transactions that include the
spin-off. Stock acquired by certain related persons is aggregated in determining
whether the 50% test is met. There is a presumption that any acquisition
occurring two years before or after the spin-off is pursuant to a plan that
includes the spin-off. However, the presumption may be rebutted by establishing
that the spin-off and such acquisition are not part of a plan or series of
related transactions. As a result of the provisions of Section 355(e), there can
be no assurance that issuances of stock by Aztec, including issuances in
connection with an acquisition of another business by Aztec, will not create a
tax liability for USOP.

Aztec entered into a Tax Allocation Agreement and a Tax Indemnification
Agreement pursuant to which Aztec will be liable to USOP and the other Spin-Off
Companies if its actions or omissions materially contribute to a final
determination that the Distribution is taxable. This limitation could adversely
affect the pace of Aztec's acquisitions and its ability to issue Aztec Common
Stock for other purposes, including equity offerings.

MATERIAL AMOUNT OF GOODWILL AND INTANGIBLES

As of December 31, 1998, approximately $129.8 million, or 50.0% of Aztec's
total assets, and 121.3% of Aztec's stockholders' equity constituted goodwill
and intangibles. Goodwill represents the excess of cost over the fair market
value of net tangible and identified intangible assets acquired in business
combinations accounted for under the purchase method of accounting. Aztec
currently amortizes goodwill on a straight line method over a period ranging
from 15-40 years and identified intangible assets are amortized on a straight
line basis, generally over four years with the amount amortized in a particular
period constituting a non-cash expense that reduces Aztec's net income.
Amortization of goodwill resulting from certain past acquisitions, and
additional goodwill recorded in certain future acquisitions, may not be
deductible for tax purposes. In addition, Aztec will be required to periodically
evaluate the recoverability of goodwill by reviewing the anticipated
undiscounted future cash flows from the operations of the acquired companies and
comparing such cash flows to the carrying value of the associated goodwill. If
goodwill becomes impaired, Aztec would be required to write down the carrying
value of the goodwill and incur a related charge to its income. A reduction in
net income resulting from the amortization or write down of goodwill could have
a material and adverse impact upon the market price of Aztec Common Stock.

INABILITY TO USE POOLING-OF-INTERESTS ACCOUNTING

Generally accepted accounting principles require that an entity be
autonomous for a period of two years before it is eligible to complete business
combinations accounted for under the pooling-of-interests method. As a result of
Aztec being a wholly-owned subsidiary of USOP prior to the Distribution, Aztec
is

23
<PAGE>
precluded from completing business combinations accounted for under the
pooling-of-interests method for a period of two years following the Distribution
and any business combinations completed by Aztec during such period will be
accounted for under the purchase method resulting in the recording of goodwill.
The amortization of the goodwill will reduce income reported by Aztec below that
which would have been reported if the pooling-of-interests method had been used
by Aztec, and may adversely affect Aztec's ability to successfully compete for
acquisition targets.

EFFECT OF ANTI-TAKEOVER PROVISIONS

The Aztec Board has the authority to issue up to 1,000,000 shares of
preferred stock and to determine the price, rights, preferences and privileges
of those shares without any further vote or action by Aztec stockholders. The
rights of the holders of Aztec Common Stock will be subject to, and may be
adversely affected by, the rights of the holders of preferred stock. While Aztec
has no present intention to issue shares of preferred stock, such issuance,
while providing desired flexibility in connection with possible acquisitions or
other corporate purposes, could have the effect of delaying, deferring or
preventing a change in control of Aztec and entrenching current management. In
addition, such preferred stock may have other rights, including economic rights
senior to those of the Aztec Common Stock, and, as a result, the issuance
thereof could have a material adverse effect on the market value of the Aztec
Common Stock.

A number of provisions of Aztec's Amended and Restated Certificate of
Incorporation and Amended and Restated By-Laws and the Delaware General
Corporation Law relating to matters of corporate governance, certain rights of
directors, and the issuance of preferred stock without stockholder approval, may
be deemed to have and may have the effect of making more difficult, and thereby
discourage a merger, tender offer, proxy contest or assumption of control and
change of incumbent management, even when stockholders other than Aztec's
management or principal stockholders consider such a transaction to be in their
best interest.

INTELLECTUAL PROPERTY RIGHTS

The success of certain of Aztec's operating companies is dependent in part
on certain methodologies these companies use in designing, installing and
integrating computer software and systems and other proprietary intellectual
property rights. These operating companies rely on a combination of
nondisclosure and other contractual arrangements and patent, trade secret,
copyright, and trademark laws to protect their proprietary rights and the
proprietary rights of third parties, enter into confidentiality agreements with
their key employees, and limit distribution of proprietary information. There
can be no assurance that the steps taken by these operating companies in this
regard will be adequate to deter misappropriation of proprietary information or
that these operating companies will be able to detect unauthorized use and take
appropriate steps to enforce their intellectual property rights.

Although Aztec believes that its services do not infringe the intellectual
property rights of others and that it has all rights necessary to utilize the
intellectual property employed in its business, Aztec is subject to the risk of
claims alleging infringement of third-party intellectual property rights. Any
such claims could require Aztec to spend significant sums in litigation, pay
damages, develop non-infringing intellectual property, or acquire licenses to
the intellectual property that is the subject of an asserted infringement claim.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKS

The Company is exposed to interest rate change market risk principally with
respect to its Credit Facility which is priced based on certain interest rate
alternatives. At December 31, 1998, approximately $89.9 million was outstanding
under the Credit Facility. Changes in the prime interest rate during calendar
year 1999 could have a positive or negative effect on the Company's interest
expense. The Company does not engage in financial transactions for trading or
speculative purposes.

24
<PAGE>
The Company does not believe that it faces primary market risk exposure that
is material to its operations.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

See the Index to the Company's Consolidated Financial Statements and
Financial Statement Schedule and the accompanying consolidated financial
statements, notes and schedules which are filed as part of this Transition
Report following the signature page.

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE

None.

25
<PAGE>
PART III

Anything herein to the contrary notwithstanding, in no event are the
sections entitled "Comparative Stock Performance" and "Report of the
Compensation Committee on Executive Compensation" to be incorporated by
reference herein from the Company's definitive proxy statement for the Company's
1999 Annual Meeting of Stockholders which will be filed with the Commission
within 120 days after the close of the fiscal year (the "1999 Proxy Statement").

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

Information required by this Item appears in the sections captioned
"Nominees for Terms Expiring in 1999 (Class II Directors)," "Directors Whose
Term Expires in 2000 (Class III Directors)," "Director Whose Term Expires in
2001 (Class I Director)," "Executive Officers" and "Section 16(a) Beneficial
Ownership Reporting Compliance" in the Company's 1999 Proxy Statement. Such
information is incorporated herein by reference.

ITEM 11. EXECUTIVE COMPENSATION

Information required by this Item appears in the sections captioned
"Director Compensation," "Compensation Committee Interlocks and Insider
Participation," "Executive Compensation," "Employment Contracts," "Stock Option
Grants,"and "Option Exchange"in the 1999 Proxy Statement. Such information is
incorporated herein by reference.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

Information required by this Item appears in the section captioned "Security
Ownership of Certain Beneficial Owners and Management" in the 1999 Proxy
Statement. Such information is incorporated herein by reference.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

Information required by this Item appears in the sections captioned
"Director Compensation" in the 1999 Proxy Statement. Such information is
incorporated herein by reference.

26
<PAGE>
PART IV

ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULE AND REPORTS ON FORM 8-K

(a) Documents filed as part of this Transition Report

1. Consolidated Financial Statements. The Consolidated Financial
Statements listed in the Index to Consolidated Financial Statements and
Financial Statement Schedule are filed as part of this Transition Report.

2. Financial Statement Schedule. The Financial Statement Schedule listed
in the Index to Consolidated Financial Statements and Financial Statement
Schedule is filed as part of this Transition Report.

3. Exhibits. The Exhibits listed in the Exhibit Index immediately
preceding such Exhibits are filed as part of this Transition Report.

(b) Reports on Form 8-K.

The Registrant filed a Current Report on Form 8-K/A on October 13, 1998, to
amend and restate Item 7 of the Current Report on Form 8-K filed August 12,
1998, so that amended and restated Item 7 included audited financial statements
of PCM, Inc. together with the report thereon by Blackman Kallick Bertelstein,
LLP.

<TABLE>
<CAPTION>
EXHIBIT DESCRIPTION
- ------------ ----------------------------------------------------------------------------------------------------
<C> <S>
3.1** Amended and Restated Certificate of Incorporation

3.2**** Amended and Restated By-laws

4.1* Form of certificate representing shares of Common Stock

10.1** Agreement and Plan of Distribution dated June 9, 1998, among U.S. Office Products, Workflow
Management, Inc., Aztec Technology Partners, Inc., Navigant International, Inc., and School
Specialty, Inc.

10.2** Tax Allocation Agreement dated June 9, 1998, among U.S. Office Products, Workflow Management, Inc.,
Aztec Technology Partners, Inc., Navigant International, Inc., and School Specialty, Inc.

10.4*+ Ledecky Services Agreement, as amended

10.6** Tax Indemnification Agreement dated June 9, 1998, among U.S. Office Products, Workflow Management,
Inc., Aztec Technology Partners, Inc., Navigant International, Inc., and School Specialty, Inc.

10.7**+ Employee Benefits Services and Liabilities Agreement dated June 9, 1998 among U.S. Office Products,
Workflow Management, Inc., Aztec Technology Partners, Inc., Navigant International, Inc., and School
Specialty, Inc.

10.8**+ 1998 Stock Incentive Plan

10.9*+ Form of Employment Agreement between Aztec and Jonathan Ledecky

10.10**+ Employment Agreement between Aztec and James Claypoole

10.11*+ Form of Employment Agreement between Aztec and Douglas Johnson

10.12*+ Form of Employment Agreement between Aztec and Ira Cohen
</TABLE>

27
<PAGE>

<TABLE>
<CAPTION>
EXHIBIT DESCRIPTION
- ------------ ----------------------------------------------------------------------------------------------------
<C> <S>
10.13**+ 1998 Non-Employee Director Stock Option Plan.

10.14*** Agreement and Plan of Reorganization By and Among the Registrant, PCM Merger Corporation, PCM, Inc.,
Avi Shaked, Babs Waldman and Benjamin Beiler, dated as of July 27, 1998.

10.15***c Revolving Credit Agreement By and Among the Registrant and BankBoston, N.A. as agent, dated as of
July 27, 1998.

21***** Subsidiaries of Registrant

23.1 Consent of PricewaterhouseCoopers LLP

23.2 Consent of Rubin, Koehmstedt and Nadler

27 Financial data schedule
</TABLE>

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

* Incorporated herein by reference to the Company's
Registration Statement on Form S-1
(File No. 333-46533) filed on June 10, 1998.

** Incorporated herein by reference to the Company's Form 10-K
filed on July 24, 1998.

*** Incorporated herein by reference to the Company's Form 10-Q
filed on November 16, 1998.

**** Incorporated herein by reference to the Company's Form
10-K/A filed on October 8, 1998.

***** Incorporated herein by reference to the Company's Form 10-K
filed on March 31, 1999.

+ Denotes management contract or compensatory plan or
arrangement.

c Confidential materials were omitted and filed separately
with the Securities and Exchange Commission.

The exhibits listed above are not contained in the copy of the Transition
Report distributed to stockholders. Exhibits which are incorporated herein by
reference can be inspected and copied at the public reference facilities
maintained by the Securities and Exchange Commission, 450 Fifth Street, N.W.,
Room 1024, Washington, D.C., and at the Securities and Exchange Commission's
regional offices at 219 South Dearborn Street, Room 1204, Chicago, Illinois; 26
Federal Plaza, Room 1102, New York, New York and 5757 Wilshire Boulevard, Suite
1710, Los Angeles, California. Copies of such material can also be obtained from
the Public Reference Section of the Securities and Exchange Commission, 450
Fifth Street, N.W., Washington, D.C. 20549 at prescribed rates.

28
<PAGE>
SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized, on July 27, 1999.

AZTEC TECHNOLOGY PARTNERS, INC.

By:
-----------------------------------------
James E. Claypoole
CHAIRMAN OF THE BOARD OF DIRECTORS
AND CHIEF EXECUTIVE OFFICER

Pursuant to the requirements of the Securities Exchange Act of 1934, this
Report has been signed below by the following persons on behalf of the
registrant the capacities and on the dates indicated.

SIGNATURE TITLE DATE
- ------------------------------ --------------------------- -------------------
Chairman of the Board of
Directors and Chief
- ------------------------------ Executive Officer July 27, 1999
James E. Claypoole (Principal Executive
Officer)

Vice President Finance and
Chief Financial Officer
- ------------------------------ (Principal Financial July 27, 1999
Ross J. Weintraub Officer and Principal
Accounting Officer)

Director
- ------------------------------ July 27, 1999
Lawrence M. Howell

Director
- ------------------------------ July 27, 1999
Jonathan J. Ledecky

Director
- ------------------------------ July 27, 1999
Clifford Mitman, Jr.

Director
- ------------------------------ July 27, 1999
Benjamin Tandowski

29
<PAGE>
AZTEC TECHNOLOGY PARTNERS, INC.

INDEX TO FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
PAGE
---------
<S> <C>
Report of PricewaterhouseCoopers LLP, Independent Accountants.............................................. F-2
Report of Rubin, Koehmstedt and Nadler, Independent Auditors............................................... F-3
Consolidated Balance Sheet as of December 31, 1998 (restated), April 25, 1998 and
April 26, 1997........................................................................................... F-4
Consolidated Statement of Income for the thirty-five weeks from April 26, 1998 to
December 31, 1998 (restated), and fiscal years ended April 25, 1998, April 26, 1997 and March 31, 1996... F-5
Consolidated Statement of Stockholders' Equity for the thirty-five weeks from April 26, 1998 to December
31, 1998 (restated), and fiscal years ended April 25, 1998, April 26, 1997 and March 31, 1996............ F-6
Consolidated Statement of Cash Flows for the thirty-five weeks from April 26, 1998 to December 31, 1998
(restated), and fiscal years ended April 25, 1998, April 26, 1997 and March 31, 1996..................... F-7
Notes to Consolidated Financial Statements................................................................. F-9
Financial Statement Schedules:
Schedule II--Valuation and Qualifying Accounts and Reserves.............................................. F-33
All other schedules are omitted because they are not applicable.
</TABLE>

F-1
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS

To the Board of Directors and Stockholders
of Aztec Technology Partners, Inc.

In our opinion, the consolidated financial statements listed in the
accompanying index on page F-1 after the restatement described in Note 3,
present fairly, in all material respects, the financial position of Aztec
Technology Partners, Inc. ("Aztec") and its subsidiaries at December 31, 1998,
April 25, 1998 and April 26, 1997, and the results of their operations and their
cash flows for the thirty-five weeks ended December 31, 1998 and for the fiscal
years ended April 25, 1998, April 26, 1997 and March 31, 1996, in conformity
with generally accepted accounting principles. In addition, in our opinion, the
financial statement schedules listed in the accompanying index on page F-1,
present fairly, in all material respects, the information set forth therein when
read in conjunction with the related consolidated financial statements. These
financial statements and financial statement schedules are the responsibility of
Aztec's management; our responsibility is to express an opinion on these
financial statements and financial statement schedules based on our audits. We
did not audit the financial statements of Fortran Corp., a wholly-owned
subsidiary, which statements reflect total revenues of $20,775,000 for the
fiscal year ended March 31, 1996. Those statements were audited by other
auditors whose report thereon has been furnished to us, and our opinion
expressed herein, insofar as it relates to the amounts included for Fortran
Corp., is based solely on the report of the other auditors. We conducted our
audits of these statements in accordance with generally accepted auditing
standards which 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, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for the opinion expressed above.

PricewaterhouseCoopers LLP
Boston, Massachusetts
March 3, 1999, except for
Note 3, as to which the date
is July 21, 1999

F-2
<PAGE>
REPORT OF INDEPENDENT AUDITORS

To the Stockholders and Board of Directors
Fortran Corp.
Newington, Virginia

We have audited the accompanying balance sheet of Fortran Corp. as of March
31, 1996, and 1995 and the related statements of earnings, changes in
stockholders' equity, and cash flows for the year ended March 31, 1996 (not
presented separately herein). These financial statements are the responsibility
of the Company's management. Our responsibility is to express an opinion on
these financial statements based on our audit.

We conducted our audit 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 audit provides a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Fortran Corp. as of March
31, 1996, and 1995 and the results of its operations and its cash flows for the
year ended March 31, 1996 in conformity with generally accepted accounting
principles.

As described in Note 9 to the financial statements, on August 21, 1996, the
Company entered into a letter of intent to exchange all of its issued and
outstanding shares of common stock for shares of U.S. Office Products Company
common stock.

RUBIN, KOEHMSTEDT AND NADLER
Springfield, Virginia
June 7, 1996, except for Note 9,
as to which the date is
October 24, 1996

F-3
<PAGE>
AZTEC TECHNOLOGY PARTNERS, INC.

CONSOLIDATED BALANCE SHEET

(IN THOUSANDS)

<TABLE>
<CAPTION>
DECEMBER 31, APRIL 25, APRIL 26,
1998 1998 1997
------------ --------- ---------
(RESTATED,
SEE NOTE 3)
<S> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents.................. $ 8,763 $ 1,976 $ 1,106
Accounts receivable, less allowance for
doubtful accounts of $2,610, $1,626 and
$351, respectively....................... 74,138 48,924 22,342
Inventories................................ 11,323 9,443 3,904
Receivable from U.S. Office Products....... 1,216
Unbilled percentage of completion
revenues................................. 5,922 4,557 2,871
Other receivable........................... 10,550
Prepaid expenses and other current
assets................................... 10,232 6,184 1,704
------------ --------- ---------
Total current assets................... 120,928 71,084 33,143
Property and equipment, net.................. 7,603 5,957 2,163
Intangibles, net............................. 129,792 63,828
Other assets................................. 2,196 576 2,005
------------ --------- ---------
Total assets........................... $260,519 $ 141,445 $ 37,311
------------ --------- ---------
------------ --------- ---------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current maturities of long-term debt....... $ 216 $ 303 $ 76
Payable to U.S. Office Products............ 4,388
Accounts payable........................... 43,937 16,380 11,803
Accrued compensation....................... 5,791 4,692 1,651
Deferred revenue........................... 4,732 4,843 2,499
Accrued subchapter S corporation
distributions............................ 1,320
Other accrued liabilities.................. 7,821 4,186 2,526
------------ --------- ---------
Total current liabilities.............. 62,497 34,792 19,875
Long-term debt............................... 90,218 309 167
Long-term payable to U.S. Office Products.... 4,786
Deferred income taxes........................ 141 1,025 857
Other long-term liabilities.................. 697
------------ --------- ---------
Total liabilities...................... 153,553 36,126 25,685
------------ --------- ---------
Commitments and contingencies--Note 11
Stockholders' equity:
Common stock--$.001 par value; 150,000,000
shares authorized, 22,017,759 issued and
outstanding.............................. 22
Additional paid-in capital................. 93,584
Divisional equity.......................... 96,116 8,897
Retained earnings.......................... 13,360 9,203 2,729
------------ --------- ---------
Total stockholders' equity............. 106,966 105,319 11,626
------------ --------- ---------
Total liabilities and stockholders'
equity............................... $260,519 $ 141,445 $ 37,311
------------ --------- ---------
------------ --------- ---------
</TABLE>

See accompanying notes to consolidated financial statements.

F-4
<PAGE>
AZTEC TECHNOLOGY PARTNERS, INC.

CONSOLIDATED STATEMENT OF INCOME

(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

<TABLE>
<CAPTION>
35 WEEKS FOR THE FISCAL YEAR ENDED
FROM APRIL 26, -------------------------------------
1998 TO APRIL 25, APRIL 26, MARCH 31,
DECEMBER 31, 1998 1997 1996
1998 --------- --------- ---------
--------------
(RESTATED,
SEE NOTE 3)
<S> <C> <C> <C> <C>
Revenues:
Products............................................. $120,949 $ 116,998 $ 97,253 $78,948
Services............................................. 108,407 91,343 39,025 35,107
-------------- --------- --------- ---------
Total revenues..................................... 229,356 208,341 136,278 114,055
-------------- --------- --------- ---------

Cost of revenues:
Products............................................. 104,964 100,137 85,506 66,984
Services............................................. 69,815 58,180 16,623 17,129
-------------- --------- --------- ---------
Total cost of revenues............................. 174,779 158,317 102,129 84,113
-------------- --------- --------- ---------

Gross profit....................................... 54,577 50,024 34,149 29,942
Selling, general and administrative expenses........... 37,885 35,185 21,525 20,510
Amortization of intangibles............................ 2,389 840
Strategic restructuring costs.......................... 4,330 1,750
Non-recurring acquisition costs........................ 2,274
-------------- --------- --------- ---------
Operating income................................... 9,973 12,249 10,350 9,432

Other expense (income):
Interest expense..................................... 2,662 807 324 420
Interest income...................................... (172) (785) (168) (416)
Other................................................ (186) (44) (53) (964)
-------------- --------- --------- ---------
Income before provision for income taxes............... 7,669 12,271 10,247 10,392
Provision for income taxes............................. 3,512 5,797 3,524 750
-------------- --------- --------- ---------
Net income............................................. $ 4,157 $ 6,474 $ 6,723 $ 9,642
-------------- --------- --------- ---------
-------------- --------- --------- ---------

Weighted-average shares outstanding:
Basic................................................ 22,839 23,911 18,005 13,509
Diluted.............................................. 22,974 24,385 18,352 13,675

Per share amounts:
Basic................................................ $ 0.18 $ 0.27 $ 0.37 $ 0.71
-------------- --------- --------- ---------
-------------- --------- --------- ---------
Diluted.............................................. $ 0.18 $ 0.27 $ 0.37 $ 0.71
-------------- --------- --------- ---------
-------------- --------- --------- ---------
</TABLE>

See accompanying notes to consolidated financial statements.

F-5
<PAGE>
AZTEC TECHNOLOGY PARTNERS, INC.

CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY

(IN THOUSANDS)

<TABLE>
<CAPTION>
ADDITIONAL TOTAL
COMMON PAID-IN DIVISIONAL RETAINED STOCKHOLDERS'
STOCK CAPITAL EQUITY EARNINGS EQUITY
----------- ----------- ----------- --------- ------------
<S> <C> <C> <C> <C> <C>
Balance at March 31, 1995............................. $ $ $ 148 $ 10,914 $ 11,062
Cash dividends at pooled companies.................. (7,389) (7,389)
Adjustments to conform the fiscal year-ends of
pooled companies.................................. (2,818) (2,818)
Net income.......................................... 9,642 9,642
----------- ----------- ----------- --------- ------------

Balance at April 30, 1996............................. 148 10,349 10,497
Transactions of pooled companies:
Undistributed earnings of subchapter
S Corporations.................................. 8,749 (8,749)
Cash dividends declared and paid.................. (5,594) (5,594)
Net income.......................................... 6,723 6,723
----------- ----------- ----------- --------- ------------

Balance at April 26, 1997............................. 8,897 2,729 11,626
Issuance of U.S. Office Products common stock in
conjunction with acquisitions..................... 71,921 71,921
Capital contribution by U.S. Office Products........ 15,298 15,298
Net income.......................................... 6,474 6,474
----------- ----------- ----------- --------- ------------

Balance at April 25, 1998............................. 96,116 9,203 105,319
Reduction of capital contribution by U.S. Office
Products.......................................... (2,510) (2,510)
Spin-off from U.S. Office Products.................. 22 93,584 (93,606)
Net income (Restated, See Note 3)................... 4,157 4,157
----------- ----------- ----------- --------- ------------

Balance at December 31, 1998
(Restated, See Note 3).............................. $ 22 $ 93,584 $ $ 13,360 $ 106,966
----------- ----------- ----------- --------- ------------
----------- ----------- ----------- --------- ------------
</TABLE>

See accompanying notes to consolidated financial statements.

F-6
<PAGE>
AZTEC TECHNOLOGY PARTNERS, INC.

CONSOLIDATED STATEMENT OF CASH FLOWS

(IN THOUSANDS)

<TABLE>
<CAPTION>
35 WEEKS FROM FOR THE FISCAL YEAR ENDED
APRIL 26, 1998 -------------------------------------
TO APRIL 25, APRIL 26, MARCH 31,
DECEMBER 31, 1998 1997 1996
1998 ----------- ----------- -----------
---------------
(RESTATED,
SEE NOTE 3)
<S> <C> <C> <C> <C>
Cash flows from operating activities:
Net income...................................................... $ 4,157 $ 6,474 $ 6,723 $ 9,642
Adjustments to reconcile net income to net cash provided by (used
in) operating activities:
Depreciation and amortization expense......................... 3,535 1,992 541 494
Amortization of debt issuance costs........................... 172
Non-recurring acquisition costs............................... 2,274
Gain on sale of division at pooled company.................... (761)
Deferred income taxes......................................... (1,122) 123 645 (66)
Stock option tender offer..................................... 1,774
Write-off of Solutions ETC purchase........................... 320
Changes in current assets and liabilities (net of assets
acquired and liabilities assumed in business combinations
accounted for under the purchase method):
Accounts receivable........................................... (18,815) (10,125) (2,376) (5,441)
Inventories................................................... (1,777) 964 547 595
Prepaid expenses and other current assets..................... (14,990) (7) (3,120) (585)
Accounts payable.............................................. 26,996 (4,074) 997 (475)
Accrued liabilities........................................... 3,864 (2,230) 20 867
------- ----------- ----------- -----------
Net cash provided by (used in) operating activities........... 4,114 (6,883) 6,251 4,270
------- ----------- ----------- -----------
Cash flows from investing activities:
Cash (paid) received in acquisitions............................ (73,379) 182
Additions to property and equipment............................. (2,644) (2,599) (949) (552)
Payments of non-recurring acquisition costs..................... (460) (1,814)
Deposits........................................................ (1,312) (421)
Cash received in sale of division at pooled company............. 1,275
Other........................................................... 161 4
------- ----------- ----------- -----------
Net cash (used in) provided by investing activities........... (76,023) (2,877) (3,914) 306
------- ----------- ----------- -----------
Cash flows from financing activities:
Proceeds from (payments of) short-term debt, net................ (654) (2,332) (5,504) 3,683
Proceeds from issuance of long-term debt........................ 89,900 305 1,196
Payments of long-term debt...................................... (78) (1,834) (937) (698)
Deferred debt issuance costs.................................... (1,800)
Payments of dividends at pooled companies....................... (1,320) (4,274) (7,389)
(Payments to) advances from U.S. Office Products................ (4,388) 818 3,570
(Reduction) increase of capital contribution by U.S. Office
Products...................................................... (4,284) 15,298
Net change in cash due to conforming fiscal year-ends of certain
pooled companies.............................................. 176
------- ----------- ----------- -----------
Net cash provided by (used in) financing activities........... 78,696 10,630 (6,840) (3,032)
------- ----------- ----------- -----------
Net increase (decrease) in cash and cash equivalents.............. 6,787 870 (4,503) 1,544
Cash and cash equivalents at beginning of period.................. 1,976 1,106 5,609 4,065
------- ----------- ----------- -----------
Cash and cash equivalents at end of period........................ $ 8,763 $ 1,976 $ 1,106 $ 5,609
------- ----------- ----------- -----------
------- ----------- ----------- -----------
</TABLE>

See accompanying notes to consolidated financial statements.

F-7
<PAGE>
AZTEC TECHNOLOGY PARTNERS, INC.

CONSOLIDATED STATEMENT OF CASH FLOWS

(IN THOUSANDS)

<TABLE>
<CAPTION>
35 WEEKS FROM
APRIL 26, 1998 FOR THE FISCAL YEAR ENDED
TO -------------------------------------
DECEMBER 31, APRIL 25, APRIL 26, MARCH 31,
1998 1998 1997 1996
--------------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Supplemental disclosures of cash flow information:
Interest paid................................................. $ 2,133 $ 759 $ 282 $ 526
Income taxes paid............................................. $ 5,136 $ 9,305 $ 2,460 $ 452
</TABLE>

The Company utilized its Credit Facility and issued common stock in
connection with certain business combinations during the thirty-five weeks ended
December 31, 1998 and the fiscal year ended April 25, 1998. The fair values of
the assets and liabilities of the acquired companies at the dates of the
acquisitions are presented as follows:

<TABLE>
<CAPTION>
35 WEEKS FROM FOR THE
APRIL 26, 1998 FISCAL
TO YEAR ENDED
DECEMBER 31, APRIL 25,
1998 1998
--------------- -------------
<S> <C> <C>
Accounts receivable............................................................... $ 6,399 $ 16,457
Inventories....................................................................... 103 6,503
Prepaid expenses and other current assets......................................... 100 2,608
Property and equipment............................................................ 147 2,347
Intangibles....................................................................... 68,672 64,668
Other assets...................................................................... 627 174
Short-term debt................................................................... (654) (2,332)
Accounts payable.................................................................. (561) (8,651)
Accrued liabilities............................................................... (1,454) (7,832)
Long-term debt.................................................................... (2,203)
------- -------------
Net assets acquired............................................................. $ 73,379 $ 71,739
------- -------------
------- -------------
The acquisitions were funded as follows:
Long-term debt.................................................................. $ 73,816 $
Common stock.................................................................... 71,921
Cash received................................................................... (437) (182)
------- -------------
Total....................................................................... $ 73,379 $ 71,739
------- -------------
------- -------------
</TABLE>

See accompanying notes to consolidated financial statements.

F-8
<PAGE>
AZTEC TECHNOLOGY PARTNERS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(DOLLARS IN THOUSANDS)

NOTE 1--BACKGROUND

Aztec Technology Partners, Inc. (the "Company") is a Delaware Corporation
which was a wholly-owned subsidiary of U.S. Office Products Company ("U.S.
Office Products") prior to the Company's spin-off from U.S. Office Products on
June 9, 1998. This transaction was effected through the distribution of shares
of the Company to U.S. Office Products shareholders (the "Distribution"). Prior
to the Distribution, U.S. Office Products contributed its equity interests in
certain wholly-owned subsidiaries associated with U.S. Office Products'
Technology Solutions division to the Company. U.S. Office Products and the
Company also entered into a number of agreements to facilitate the Distribution
and the transition of the Company to an independent business enterprise (see
Note 11). At the date of their Distribution, U.S. Office Products allocated
$5,000 in debt to the Company which was paid upon the completion of the
Distribution.

The Technology Solutions division was created by U.S. Office Products in
October 1996 and completed five business combinations accounted for under the
pooling-of-interests method during the period from October 1996 to April 1997
(the "Pooled Companies"). As a result of these business combinations being
accounted for under the pooling-of-interests method, the results of the Company
prior to the completion of such business combinations represent the combined
results of the Pooled Companies operating as separate autonomous entities. The
Company made eight acquisitions accounted for under the purchase method during
the period from September 1997 to October 1998 (the "Purchase Companies"). The
results of these acquisitions have been included in the Company's results from
their respective dates of acquisition.

The Company is a provider of a broad range of information technology
business solutions principally to corporate customers. The Company provides this
broad range of services in the Northeast region of the United States and certain
of these services in other regions of the United States.

NOTE 2--BASIS OF PRESENTATION

For periods prior to the spin-off from U.S. Office Products on June 9, 1998,
the consolidated financial statements reflect the assets, liabilities,
divisional equity, revenues and expenses that were directly related to the
Company as it was operated within U.S. Office Products. In cases involving
assets and liabilities not specifically identifiable to any particular business
of U.S. Office Products, only those assets and liabilities transferred to the
Company prior to the Distribution were included in the Company's separate
consolidated balance sheet. The Company's statement of income includes all of
the related costs of doing business including an allocation of certain general
corporate expenses of U.S. Office Products which were not directly related to
these businesses including certain corporate executives' salaries, accounting
and legal fees, departmental costs for accounting, finance, legal, purchasing,
marketing, human resources as well as other general overhead costs. These
allocations were based on a variety of factors, dependent upon the nature of the
costs being allocated, including revenues, number and size of acquisitions and
number of employees. Management believes these allocations were made on a
reasonable basis.

U.S. Office Products used a centralized approach to cash management and the
financing of its operations. As a result, no cash and cash equivalents and
$5,000 of debt were allocated to the Company at the time of the Distribution.
The consolidated statement of income includes an allocation of interest expense
on all debt allocated to the Company. See Note 8 for further discussion of
interest expense.

F-9
<PAGE>
AZTEC TECHNOLOGY PARTNERS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(DOLLARS IN THOUSANDS)

NOTE 3--RESTATEMENT

During the quarter ended March 31, 1999, the Company concluded that
compensation expense related to certain employment incentive agreements, which
were signed with key personnel prior to the spin-off from USOP, should be
recognized over the term of the agreements, including amounts related to the
thirty five week period ended December 31, 1998. This compensation expense
results from options with a three-year guaranteed appreciation beginning May 14,
1998 and certain bonus agreements. Accordingly, compensation expense increased
by $949 for the thirty five week period ended December 31, 1998. The effects of
the restatement on the Company's consolidated financial statements are as
follows:

<TABLE>
<CAPTION>
PREVIOUSLY
REPORTED RESTATED
---------- ----------
<S> <C> <C>
As of December 31, 1998:

Accrued compensation.................................................. $ 5,539 $ 5,791
Deferred income taxes................................................. 460 141
Other long-term liabilities........................................... -- 697
Total liabilities..................................................... 153,038 153,553
Total stockholders' equity............................................ 107,481 106,966

Thirty-five week period ended December 31, 1998:

Selling, general and administrative expenses.......................... $ 36,936 $ 37,885
Net income............................................................ 4,672 4,157

Net income per share:
Basic............................................................... $ 0.20 $ 0.18
Diluted............................................................. $ 0.20 $ 0.18
</TABLE>

NOTE 4--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

USE OF 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 the
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.

CHANGES IN FISCAL YEAR

Prior to their respective dates of acquisition by U.S Office Products, the
Pooled Companies reported results on years ending March 31 and December 31. Upon
acquisition by U.S. Office Products and effective for the fiscal year ended
April 26, 1997, the Pooled Companies changed their year-ends from March 31 and
December 31 to conform to U.S. Office Products' fiscal year, which ended on the
last Saturday in April. On June 30, 1998, after the spin-off from U.S. Office
Products, the Board of Directors of the Company voted to change the Company's
fiscal year end from the last Saturday in April, to December 31.

F-10
<PAGE>
AZTEC TECHNOLOGY PARTNERS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(DOLLARS IN THOUSANDS)

NOTE 4--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
The following table sets forth the results for the transition period for the
thirty-five weeks ended December 31, 1998 and the unaudited results for the
thirty-five weeks ended December 31, 1997, the prior period comparable to the
transition period.

<TABLE>
<CAPTION>
35 WEEKS FROM 35 WEEKS FROM
APRIL 26, 1998 TO APRIL 27, 1997 TO
DECEMBER 31, 1998(1)(2) DECEMBER 31, 1997
----------------------- -----------------
(UNAUDITED)
<S> <C> <C>
Revenues:
Products............................................. $120,949 $80,270
Services............................................. 108,407 41,916
-------- -------
Total revenues................................... 229,356 122,186
-------- -------
Cost of revenues:
Products............................................. 104,964 67,952
Services............................................. 69,815 24,019
-------- -------
Total cost of revenues........................... 174,779 91,971
-------- -------
Gross profit..................................... $ 54,577 $30,215
-------- -------
-------- -------
Operating income....................................... $ 9,973 $ 9,774
-------- -------
-------- -------
Net income............................................. $ 4,157 $ 5,571
-------- -------
-------- -------
Per share amounts:
Basic................................................ $ 0.18 $ 0.25
-------- -------
-------- -------
Diluted.............................................. $ 0.18 $ 0.24
-------- -------
-------- -------
</TABLE>

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

(1) Results for the thirty-five weeks from April 26, 1998 to December 31, 1998
include strategic restructuring costs of $4,330.

(2) As restated. See Note 3 to the Consolidated Financial Statements.

DEFINITION OF FISCAL YEAR

As used in these consolidated financial statements and related notes to
consolidated financial statements, the "thirty-five weeks ended December 31,
1998", "fiscal 1998", "fiscal 1997" and "fiscal 1996" refer to the Company's
transition period from April 26, 1998 to December 31, 1998 and the fiscal years
ended April 25, 1998, April 26, 1997 and March 31, 1996, respectively.

PRINCIPLES OF CONSOLIDATION

The consolidated financial statements include the accounts of the Company
and its wholly-owned subsidiaries. All significant intercompany transactions and
accounts are eliminated in consolidation.

F-11
<PAGE>
AZTEC TECHNOLOGY PARTNERS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(DOLLARS IN THOUSANDS)

NOTE 4--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
CASH AND CASH EQUIVALENTS

The Company considers temporary cash investments with original maturities of
three months or less from the date of purchase to be cash equivalents.

CONCENTRATION OF CREDIT RISK

Financial instruments which potentially subject the Company to
concentrations of credit risk consist primarily of trade accounts receivable.
Receivables arising from sales to customers are generally not collateralized
and, as a result, management continually monitors the financial condition of its
customers to reduce the risk of loss.

INVENTORIES

Inventories are stated at the lower of cost or market with cost determined
on a first-in, first-out (FIFO) basis and consist primarily of products held for
sale.

PROPERTY AND EQUIPMENT

Property and equipment are stated at cost. Additions and improvements are
capitalized. Maintenance and repairs are expensed as incurred. Depreciation of
property and equipment is calculated using the straight-line method over the
estimated useful lives of the respective assets. The estimated useful lives
range from 25 to 40 years for buildings and its components and 3 to 15 years for
furniture, fixtures and equipment. Property and equipment leased under capital
leases is being amortized over the lesser of its useful life or its lease terms.

INTANGIBLES

Goodwill represents the excess of the cost of acquired businesses over the
fair market value of their net tangible and identified intangible assets.
Goodwill is amortized on a straight line basis over estimated useful lives of
15-40 years and identified intangible assets are amortized on a straight line
basis generally over four years. Management periodically evaluates the
recoverability of goodwill, which would be adjusted for a permanent decline in
value, if any, by comparing anticipated undiscounted future cash flows from
operations to net book value.

FAIR VALUE OF FINANCIAL INSTRUMENTS

The carrying amounts of the Company's financial instruments including cash
and cash equivalents, accounts receivable, accounts payable and long-term debt
approximate fair value.

INCOME TAXES

As a division of U.S. Office Products, the Company did not file separate
federal income tax returns but rather was included in the federal income tax
returns filed by U.S. Office Products and its subsidiaries from the respective
dates that the entities within the Company were acquired by U.S. Office
Products. For purposes of the consolidated financial statements for periods
prior to June 9, 1998, the Company's allocated share of U.S. Office Products'
income tax provision was based on the "separate return" method.

F-12
<PAGE>
AZTEC TECHNOLOGY PARTNERS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(DOLLARS IN THOUSANDS)

NOTE 4--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Certain companies acquired in pooling-of-interests transactions elected to be
taxed as Subchapter S corporations, and accordingly, no federal income taxes
were recorded by those companies for periods prior to their acquisition by U.S.
Office Products.

REVENUE RECOGNITION

Revenue from hardware and packaged software sales is recognized upon
shipment provided there are no uncertainties regarding customer acceptance and
collectibility of related receivable is considered probable.

Revenue from software development contracts is recognized as work is
performed on a "time and materials" basis.

Revenues related to fixed-price contracts are recognized using the
percentage-of-completion method, measured by the percentage of cost incurred to
date to the estimated total cost at completion. This method is used because
management considers accumulated costs to be the best available measure of
progress on these contracts. The cumulative impact of any revision in estimates
of the percent complete is reflected in the period in which the changes become
known. Losses on projects in progress are recognized when known. Revenues
related to fixed-price contracts which include both product and service
components are recorded as service revenues.

Service revenues from consulting, installation and maintenance is recognized
ratably over the contract period or as the service is provided.

Payments received by the Company in advance of product delivery or
performance of services are deferred until earned.

ADVERTISING COSTS

The Company expenses advertising costs when the advertisement occurs.
Advertising costs are included in the consolidated statement of income as a
component of selling, general and administrative expenses. Advertising expense
for the thirty-five weeks ended December 31, 1998, and fiscal years 1998, 1997
and 1996 was $710, $1,666, $661 and $480, respectively. The Company also earns
co-op funds from certain vendors which can be used for advertising, trade shows
and telemarketing campaigns. These funds are included in the consolidated
statement of income as a credit to the corresponding selling, general and
administrative expenses. Co-op funds for the thirty-five weeks ended December
31, 1998, and fiscal years 1998, 1997 and 1996 were $(2,011), $(1,812), $(1,453)
and $(789), respectively.

RESEARCH AND DEVELOPMENT COSTS

Research and development costs are charged to operations in the year
incurred. Research and development costs are included in the consolidated
statement of income as a component of selling, general and administrative
expenses.

STRATEGIC RESTRUCTURING COSTS

For the thirty-five weeks ended December 31, 1998, strategic restructuring
costs represent the costs incurred related to the Company's spin-off from U.S.
Office Products, including costs incurred related to

F-13
<PAGE>
AZTEC TECHNOLOGY PARTNERS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(DOLLARS IN THOUSANDS)

NOTE 4--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
the withdrawn initial public offering, compensation related costs associated
with U.S. Office Products buy backs of certain employee options during its
tender offer on June 1, 1998, and the restructuring of its Northeast region.

For fiscal 1997, strategic restructuring costs represent the Company's
portion of the costs incurred by U.S. Office Products as a result of U.S. Office
Products' comprehensive restructuring plan including costs incurred related to
the Company's withdrawn initial public offering (see Note 1).

NON-RECURRING ACQUISITION COSTS

For fiscal 1997, non-recurring acquisition costs represent acquisition costs
incurred by the Company in business combinations accounted for under the
pooling-of-interests method. These costs include accounting, legal, and
investment banking fees, real estate and environmental assessments and
appraisals, various regulatory fees and recognition of transaction related
obligations. Generally accepted accounting principles require the Company to
expense all acquisition costs (both those paid by the Company and those paid by
the sellers of the acquired companies) related to business combinations
accounted for under the pooling-of-interests method.

NET INCOME PER SHARE

Net income per share is calculated in accordance with the Statement of
Financial Accounting Standards ("SFAS") No. 128, "Earnings Per Share".

DISTRIBUTION RATIO

On May 14, 1998, the U.S. Office Products Board of Directors approved the
distribution ratio for the Company in connection with the Distribution. At the
date of Distribution, the Company issued to U.S. Office Products shareholders
one share of its common stock for every five shares of U.S. Office Products
common stock held by each respective shareholder. The share data reflected in
the accompanying financial statements represents the historical share data for
U.S. Office Products for the period or as of the date indicated, and has been
retroactively adjusted to give effect to the one for five distribution ratio.

NOTE 5--BUSINESS COMBINATIONS

POOLING-OF-INTERESTS METHOD

In fiscal 1997, the Company issued 955,151 shares of common stock to acquire
the Pooled Companies.

F-14
<PAGE>
AZTEC TECHNOLOGY PARTNERS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(DOLLARS IN THOUSANDS)

NOTE 5--BUSINESS COMBINATIONS (CONTINUED)
The Pooled Companies and the number of shares issued are as follows:

<TABLE>
<CAPTION>
NUMBER OF
COMPANY NAME SHARES ISSUED
- ------------------------------------------------------------------------------- -------------
<S> <C>
Bay State Computer Group....................................................... 181,315
Digital Network Associates, Inc................................................ 152,389
Fortran Corp................................................................... 330,000
Office Equipment Service, Inc.................................................. 132,331
Professional Computer Solutions, Inc........................................... 159,116
-------------
Total shares issued...................................................... 955,151
-------------
-------------
</TABLE>

The Company's consolidated financial statements give retroactive effect to
the acquisitions of the Pooled Companies for all periods presented. All of the
Pooled Companies previously reported on fiscal years ending other than April 26,
1997. Upon completion of the acquisitions of the Pooled Companies, their
year-ends were changed to U.S. Office Products' year-end of the last Saturday in
April.

Commencing on May 1, 1996, the year-ends of the Pooled Companies were
changed to April 26, 1997, resulting in adjustment to retained earnings of
$(2,818) during the fiscal year ended April 30, 1996. This adjustment consisted
of revenues, costs and expenses and dividends of $17,294, $15,026 and $5,086,
respectively, during the period of time between the Pooled Companies
most-recently completed year-end and April 30, 1996.

The following presents the separate results, in each of the periods
presented, of the Company (excluding the results of Pooled Companies prior to
the dates on which they were acquired), and the Pooled Companies up to the dates
on which they were acquired:

<TABLE>
<CAPTION>
AZTEC
TECHNOLOGY
PARTNERS, POOLED
INC. COMPANIES COMBINED
------------ ----------- ----------
<S> <C> <C> <C>
Fiscal 1997:
Revenues............................................. $ 57,656 $ 78,622 $ 136,278
Net Income........................................... $ 2,109 $ 4,614 $ 6,723

Fiscal 1996:
Revenues............................................. $ $ 114,055 $ 114,055
Net Income........................................... $ $ 9,642 $ 9,642
</TABLE>

PURCHASE METHOD

During the thirty-five weeks ended December 31, 1998, the Company made three
acquisitions accounted for under the purchase method for an aggregate purchase
price of $73,379, net of cash acquired of $437, financed principally through its
Credit Facility (See Note 8). The total assets related to these acquisitions
were $76,048, including intangible assets of $68,672.

During fiscal 1998, the Company made five acquisitions accounted for under
the purchase method for an aggregate purchase price of $71,739, consisting of
651,021 shares of common stock with a market value

F-15
<PAGE>
AZTEC TECHNOLOGY PARTNERS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(DOLLARS IN THOUSANDS)

NOTE 5--BUSINESS COMBINATIONS (CONTINUED)
of $71,921, net of $182 of cash acquired. The total assets related to these
acquisitions were $92,757, including intangible assets of $64,668.

The results of these acquisitions have been included in the Company's
results from their respective dates of acquisition.

The following presents the unaudited pro forma financial data of the Company
for the thirty-five weeks ended December 31, 1998, and fiscal 1998 and 1997 and
includes the Company's consolidated financial statements and the results of the
Purchased Companies as if all such purchase acquisitions had been made at the
beginning of each period presented. The results presented below include certain
pro forma adjustments to reflect the amortization of intangible assets,
adjustments in executive compensation and interest expense:

<TABLE>
<CAPTION>
35 WEEKS ENDED
DECEMBER 31, 1998(1) FISCAL 1998 FISCAL 1997
-------------------- ----------- -----------
<S> <C> <C> <C>
(UNAUDITED) (UNAUDITED) (UNAUDITED)
Revenues..................................... $ 240,125 $ 301,509 $ 259,080
Net income................................... 4,173 10,041 6,916
Per Share amounts:
Basic...................................... 0.18 0.46 0.31
Diluted.................................... 0.18 0.45 0.31
</TABLE>

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

(1) As restated. See Note 3 to the Consolidated Financial Statements.

The unaudited pro forma results of operation are prepared for comparative
purposes only and do not necessarily reflect the results that would have
occurred had the acquisitions occurred at the beginning of each period presented
or the results which may occur in the future.

NOTE 6--PROPERTY AND EQUIPMENT

Property and equipment consists of the following:

<TABLE>
<CAPTION>
DECEMBER 31, APRIL 25, APRIL 26,
1998 1998 1997
------------ --------- ---------
<S> <C> <C> <C>
Land...................................................... $ 143 $ 143 $ 143
Buildings................................................. 374 374 374
Furniture and fixtures.................................... 9,572 6,740 3,184
Warehouse equipment....................................... 945 669 272
Equipment under capital leases............................ 320 774 252
Leasehold improvements.................................... 605 467 155
------------ --------- ---------
11,959 9,167 4,380
Less: Accumulated depreciation and amortization........... (4,356) (3,210) (2,217)
------------ --------- ---------
Net property and equipment................................ $ 7,603 $ 5,957 $ 2,163
------------ --------- ---------
------------ --------- ---------
</TABLE>

Depreciation expense for the thirty-five weeks ended December 31, 1998, and
fiscal years 1998, 1997 and 1996 was $1,146, $1,152, $541 and $494,
respectively.

F-16
<PAGE>
AZTEC TECHNOLOGY PARTNERS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(DOLLARS IN THOUSANDS)

NOTE 7--INTANGIBLE ASSETS

Intangible assets consist of the following:

<TABLE>
<CAPTION>
DECEMBER 31, APRIL 25,
1998 1998
------------ ---------
<S> <C> <C>
Goodwill............................................................. $ 131,445 $ 64,668
Other intangible assets.............................................. 1,576
Less: Accumulated amortization....................................... (3,229) (840)
------------ ---------
Intangibles, net..................................................... $ 129,792 $ 63,828
------------ ---------
------------ ---------
</TABLE>

Amortization expense for the thirty-five weeks ended December 31, 1998 and
fiscal 1998 was $2,389 and $840, respectively. There was no amortization expense
for fiscal years 1997 and 1996.

NOTE 8--CREDIT FACILITIES

LONG-TERM DEBT

Long-term debt consists of the following:

<TABLE>
<CAPTION>
DECEMBER 31, APRIL 25, APRIL 26,
1998 1998 1997
------------ ----------- -----------
<S> <C> <C> <C>
Credit Facility........................................... $ 89,900 $ $
Notes payable, secured by certain assets of the Company,
interest rates ranging from 7.8% to 8.4%................ 211 180 111
Capital lease obligations................................. 323 432 132
------------ --- -----
90,434 612 243
Less: Current maturities of long-term debt................ (216) (303) (76)
------------ --- -----
Total long-term debt................................ $ 90,218 $ 309 $ 167
------------ --- -----
------------ --- -----
</TABLE>

MATURITIES OF LONG-TERM DEBT

Maturities on long-term debt, including capital lease obligations, are as
follows:

<TABLE>
<S> <C>
1999............................................................... $ 246
2000............................................................... 182
2001............................................................... 69
2002............................................................... 37
2003............................................................... 89,900
---------
Total maturities of long-term debt........................... $ 90,434
---------
---------
</TABLE>

The Company entered into a $140 million credit facility with a group of five
banks on July 27, 1998 (the "Credit Facility"). The agreement provides that up
to $15 million of the Credit Facility may be used for working capital and other
general corporate purposes and up to $125 million may be used to fund permitted
acquisitions. The Credit Facility matures on July 27, 2003 and its obligations
are secured by all of

F-17
<PAGE>
AZTEC TECHNOLOGY PARTNERS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(DOLLARS IN THOUSANDS)

NOTE 8--CREDIT FACILITIES (CONTINUED)

the Company's assets. The Credit Facility provides for interest rate options to
the Company at rates which approximate prime or LIBOR, and in both cases, plus
an applicable margin based on certain leverage ratios. The weighted average
interest rate from inception of the Credit Facility to December 31, 1998
approximated 6.96%. The Credit Facility calls for a commitment fee of 0.375%,
payable quarterly, in arrears, based on the average daily unused portion. In
addition, the Company incurred $1,800 of costs associated with the issuance of
the Credit Facility which are being amortized over the term of the agreement and
which are included in interest expense. The amount of amortization for the
thirty-five weeks ended December 31, 1998, was $172. The Credit Facility is
subject to the terms and conditions customary for agreements of this kind
including certain financial and restrictive covenants, restrictions on the
payment of dividends and the repurchase of the Company's stock, and events of
default. The Company was in compliance with its financial covenants at December
31, 1998. As of December 31, 1998, the total outstanding amount under the Credit
Facility was $89,900, comprised of $10,000 for working capital purposes and
$79,900 for permitted acquisitions.

PAYABLE TO U.S. OFFICE PRODUCTS

The long-term payable to U.S. Office Products primarily represents payments
made by U.S. Office Products on behalf of the Company and a reasonable
allocation by U.S. Office Products of certain general corporate expenses. An
analysis of the activity in this account is as follows:

<TABLE>
<S> <C>
Balance at April 30, 1996......................................... $
Payments of long-term debt of Pooled Companies upon
acquisition................................................... 1,710
Payments of acquisition costs................................... 1,362
Allocated corporate expenses.................................... 388
Operating costs paid by U.S. Office Products.................... 1,326
---------
Balance at April 26, 1997......................................... 4,786
Payments of long-term debt of Purchased Companies upon
acquisition................................................... 1,159
Payments of acquisition costs................................... 2,501
Allocated corporate expenses.................................... 1,758
Operating costs paid by U.S. Office Products.................... 2,009
Income taxes paid by U.S. Office Products....................... 7,473
Capital contribution by U.S. Office Products.................... (15,298)
---------
Balance at April 25, 1998......................................... 4,388
USOP stock option tender offer.................................. 1,774
Operating costs paid by U.S. Office Products.................... 662
U.S. Office Products Cash Management............................ (4,946)
Reduction of capital contribution by U.S. Office Products....... 2,510
Payment to U.S. Office Products for allocated debt.............. (4,388)
---------
Balance at December 31, 1998...................................... $
---------
---------
</TABLE>

Interest has been allocated to the Company based upon the Company's average
outstanding payable balance with U.S. Office Products at U.S. Office Products'
weighted average interest rate during such period.

F-18
<PAGE>
AZTEC TECHNOLOGY PARTNERS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(DOLLARS IN THOUSANDS)

NOTE 8--CREDIT FACILITIES

The receivable from U.S. Office Products was generated by the Company
primarily as a result of U.S. Office Products sweeping the Company's excess cash
through the centralized cash management system, which involved daily advances or
sweeps of cash to keep the cash balance at or near zero on a daily basis. The
Company earned interest based upon the average outstanding receivable from U.S.
Office Products at the weighted average interest rate of U.S. Office Products in
effect during the periods.

The Company's financial statements include allocations of net interest
expense from U.S. Office Products totaling $7, $8 and $130 for the thirty-five
weeks ended December 31, 1998, fiscal year 1998 and fiscal year 1997,
respectively.

The Distribution Agreement allocated $5,000 of U.S. Office Products' debt
outstanding under its credit facilities to the Company and required the Company,
prior to the Distribution, to obtain credit facilities, to borrow funds under
such facilities and to use the proceeds of such borrowings to pay off the U.S.
Office Products' debt so allocated. Prior to the Distribution, the Company
entered into the Credit Facility and at the time of the Distribution borrowed
$5,000 under the facility to pay off debt of U.S. Office Products.

F-19
<PAGE>
AZTEC TECHNOLOGY PARTNERS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(DOLLARS IN THOUSANDS)

NOTE 9--INCOME TAXES

The provision for income taxes consists of:

<TABLE>
<CAPTION>
35 FOR THE FISCAL YEAR ENDED
WEEKS ENDED -------------------------------------
DECEMBER 31, APRIL 25, APRIL 26, MARCH 31,
1998(1) 1998 1997 1996
------------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Income taxes currently payable:
Federal..................................... $ 3,611 $ 4,484 $ 2,102 $ 485
State....................................... 1,023 1,190 777 331
------ ----------- ----------- -----
4,634 5,674 2,879 816
------ ----------- ----------- -----
Deferred income tax (benefit) expense......... (1,122) 123 645 (66)
------ ----------- ----------- -----
Total provision for income taxes........ $ 3,512 $ 5,797 $ 3,524 $ 750
------ ----------- ----------- -----
------ ----------- ----------- -----
</TABLE>

Deferred taxes are comprised of the following:

<TABLE>
<CAPTION>
DECEMBER 31, APRIL 25, APRIL 26,
1998 (1) 1998 1997
------------- ----------- -----------
<S> <C> <C> <C>
Current deferred tax assets:
Inventory............................................... $ 381 $ 400 $ 105
Allowance for doubtful accounts......................... 729 650 49
Accrued liabilities..................................... 1,354 1,176 124
------ ----------- -----
Total current deferred tax assets................... 2,464 2,226 278
------ ----------- -----
Long-term deferred tax assets (liabilities):
Intangibles............................................. (176)
Other................................................... 35 (1,025) (857)
------ ----------- -----
Total long-term deferred tax liabilities............ (141) (1,025) (857)
------ ----------- -----
Net deferred tax asset (liability).................. $ 2,323 $ 1,201 $ (579)
------ ----------- -----
------ ----------- -----
</TABLE>

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

(1) As restated. See Note 3 to the Consolidated Financial Statements.

F-20
<PAGE>
AZTEC TECHNOLOGY PARTNERS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(DOLLARS IN THOUSANDS)

NOTE 9--INCOME TAXES (CONTINUED)
The Company's effective income tax rate varied from the U.S. federal
statutory tax rate as follows:

<TABLE>
<CAPTION>
35 FOR THE FISCAL YEAR ENDED
WEEKS ENDED -------------------------------------
DECEMBER 31, APRIL 25, APRIL 26, MARCH 31,
1998 1998 1997 1996
--------------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
U.S. federal statutory rate................... 34.0% 35.0% 35.0% 35.0%
State income taxes, net of federal income tax
benefit..................................... 6.5 6.4 5.9 3.0
Subchapter S corporation income not subject to
corporate level taxation.................... (20.8) (30.8)
Nondeductible goodwill........................ 4.3 2.4
Nondeductible acquisition costs............... 2.8 7.8
Other......................................... 1.0 0.6 6.5
--- --- ----- -----
Effective income tax rate..................... 45.8% 47.2% 34.4% 7.2%
--- --- ----- -----
--- --- ----- -----
</TABLE>

Certain Pooled Companies were organized as subchapter S corporations prior
to the closing of their acquisitions by the Company and, as a result, the
federal tax on their income was the responsibility of their individual
stockholders. Accordingly, the specific Pooled Companies provided no federal
income tax expense prior to their acquisitions by the Company.

NOTE 10--LEASE COMMITMENTS

The Company leases various types of warehouse and office facilities and
equipment, furniture and fixtures under noncancelable lease agreements which
expire at various dates. Future minimum lease payments under noncancelable
capital and operating leases are as follows:

<TABLE>
<CAPTION>
CAPITAL OPERATING
LEASES LEASES
----------- -----------
<S> <C> <C>
1999..................................................................... $ 203 $ 3,167
2000..................................................................... 123 2,932
2001..................................................................... 40 2,124
2002..................................................................... 12 1,587
2003..................................................................... 1,422
Thereafter............................................................... 22
----- -----------
Total minimum lease payments............................................. 378 $ 11,254
-----------
-----------
Less: Amounts representing interest...................................... (55)
-----
Present value of net minimum lease payments.............................. $ 323
-----
-----
</TABLE>

Rent expense for all operating leases for the thirty-five weeks ended
December 31, 1998, and fiscal years 1998, 1997 and 1996 was $1,643, $999, $871
and $778, respectively.

F-21
<PAGE>
AZTEC TECHNOLOGY PARTNERS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(DOLLARS IN THOUSANDS)

NOTE 11--COMMITMENTS AND CONTINGENCIES

LITIGATION

On March 3, 1999, a lawsuit was filed against the Company, along with USOP
and one of the Company's directors, by Professional Network Services, Inc.
("PNS"), a Company subsidiary, and certain employees of PNS. The claim is for $2
million in damages in connection with the sale of PNS to USOP in September 1997.
The sellers claim that USOP failed to disclose certain material facts during the
acquisition of PNS and that the sellers were provided assurances that they would
be compensated for damages from the decrease in value of the USOP stock received
upon the sale of PNS. Some or all of the claims may be subject to
indemnification by the Company and the other Spin-Off companies under the terms
of the Distribution agreement that was executed in connection with USOP's
strategic restructuring plan. It is possible the Company could seek indemnity
from USOP for these claims.

In connection with the acquisition of Aztec International, a Company
subsidiary, a lawsuit was filed in February 1999 against USOP, and two of the
current directors of the Company, by certain individuals, one of whom is
currently an officer of Aztec International. The lawsuit alleges that USOP, and
the two directors of the Company, as former employees of USOP failed to disclose
certain material facts during USOP's acquisition of the business. The lawsuit
further alleges that the sellers were given assurances that they would be
compensated for damages resulting from a decrease in the value of USOP's stock
they received in connection with the sale. The lawsuit does not specify damages.
Under the terms of the Distribution agreement between the Company and USOP, the
Company may be required to indemnify USOP for all or part of the damages.

Due to the preliminary nature of this action it is not possible at this time
to assess the outcome of the claims. In accordance with SFAS No. 5, "Accounting
for Contingencies," no provision has been recorded in the accompanying financial
statements.

POSTEMPLOYMENT BENEFITS

The Company has entered into employment agreements with several employees
that would result in payments to these employees upon a change of control or
certain other events. No amounts have been accrued at December 31, 1998, April
25, 1998 or April 26, 1997 related to these agreements, as no change of control
has occurred or is probable.

DISTRIBUTION

At the date of the distribution, the Company, U.S. Office Products and the
other Spin-Off Companies entered into the Distribution Agreement, the Tax
Allocation Agreement and the Employee Benefits Agreement, and the Spin-Off
Companies entered into the Tax Indemnification Agreement. These agreements
provided, among other things, for U.S. Office Products and the Company to
indemnify each other from tax and other liabilities relating to their respective
businesses prior to and following the Distribution. Certain of the obligations
of the Company and the other spin-off companies to indemnify U.S. Office
Products are joint and several. Therefore, if one of the other spin-off
companies fails to indemnify U.S. Office Products when such a loss occurs, the
Company may be required to reimburse U.S. Office Products for all or a portion
of the losses that otherwise would have been allocated to other spin-off
companies. In addition, the agreements allocated liabilities, including general
corporate and securities liabilities of U.S.

F-22
<PAGE>
AZTEC TECHNOLOGY PARTNERS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(DOLLARS IN THOUSANDS)

NOTE 11--COMMITMENTS AND CONTINGENCIES (CONTINUED)
Office Products not specifically related to the technology business, between
U.S. Office Products and each spin-off company.

NOTE 12--EMPLOYEE BENEFIT PLANS

Effective upon the Distribution, the Company implemented a 401(k) Retirement
Plan (the "401(k) Plan") which allows employee contributions in accordance with
Section 401(k) of the Internal Revenue Code. The Company matches a portion of
employee contributions and all full-time employees are eligible to participate
in the 401(k) Plan after one year of service.

Certain subsidiaries of the Company have, or had prior to implementation of
the 401(k) Plan, qualified defined contribution benefit plans, which allow for
voluntary pre-tax contributions by the employees. The subsidiaries paid all
general and administrative expenses of the plans and in some cases made matching
contributions on behalf of the employees. For the thirty-five weeks ended
December 31, 1998, and the fiscal years 1998, 1997 and 1996, the subsidiaries
incurred expenses totaling $240, $429, $390 and $367, respectively, related to
these plans.

F-23
<PAGE>
AZTEC TECHNOLOGY PARTNERS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(DOLLARS IN THOUSANDS)

NOTE 13--STOCKHOLDERS' EQUITY

EARNINGS PER SHARE

In February 1997, the FASB issued SFAS No. 128, "Earnings Per Share." SFAS
No. 128 establishes standards for computing and presenting earnings per share
("EPS"). SFAS No. 128 requires the dual presentation of basic and diluted EPS on
the face of the consolidated statement of income. Basic EPS excludes dilution
and is computed by dividing income available to common shareholders by the
weighted average number of common shares outstanding for the period. Diluted EPS
reflects the potential dilution that could occur if securities or other
contracts to issue common stock were exercised or converted into common stock.
The following information presents the Company's computations of basic and
diluted EPS from continuing operations for the periods presented in the
consolidated statement of income (In thousands, except per share data):

<TABLE>
<CAPTION>
INCOME SHARES
(NUMERATOR) (DENOMINATOR) PER SHARE
------------- ------------- -----------
<S> <C> <C> <C>
THIRTY-FIVE WEEKS ENDED DECEMBER 31, 1998(1):
Basic EPS.......................................... $ 4,157 22,838,806 $ 0.18
Effect of dilutive employee stock options.......... 134,802
------ ------------- -----
Diluted EPS........................................ $ 4,157 22,973,608 $ 0.18
------ ------------- -----
------ ------------- -----

FISCAL 1998:
Basic EPS.......................................... $ 6,474 23,911,206 $ 0.27
Effect of dilutive employee stock options.......... 474,229
------ ------------- -----
Diluted EPS........................................ $ 6,474 24,385,435 $ 0.27
------ ------------- -----
------ ------------- -----

FISCAL 1997:
Basic EPS.......................................... $ 6,723 18,005,142 $ 0.37
Effect of dilutive employee stock options.......... 347,012
------ ------------- -----
Diluted EPS........................................ $ 6,723 18,352,154 $ 0.37
------ ------------- -----
------ ------------- -----

FISCAL 1996:
Basic EPS.......................................... $ 9,642 13,508,937 $ 0.71
Effect of dilutive employee stock options.......... 165,824
------ ------------- -----
Diluted EPS........................................ $ 9,642 13,674,761 $ 0.71
------ ------------- -----
------ ------------- -----
</TABLE>

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

(1) As restated. See Note 3 to the Consolidated Financial Statements.

CAPITAL CONTRIBUTION BY U.S. OFFICE PRODUCTS

During the fiscal year ended April 25, 1998, U.S. Office Products
contributed $15,298 of capital to the Company. The contribution reflects the
forgiveness of intercompany debt by U.S. Office Products, as it was agreed that
the Company would be allocated only $5,000 of debt upon the Distribution. This
contribution to capital was reduced by $4.3 million to $11.0 million in the
thirty-five week period ended December 31,

F-24
<PAGE>
AZTEC TECHNOLOGY PARTNERS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(DOLLARS IN THOUSANDS)

NOTE 13--STOCKHOLDERS' EQUITY (CONTINUED)
1998, due to cash paid to U.S. Office Products after April 25, 1998, as part of
U.S. Office Products' centralized cash management process.

EMPLOYEE STOCK PLANS

STOCK INCENTIVE PLAN

The Company's 1998 Stock Incentive Plan (the "Stock Incentive Plan"),
provides for the granting of incentive stock options, non-qualified stock
options and other stock-based awards to employees and other individuals
performing services on behalf of the Company. The Compensation Committee (the
"Committee") appointed by the Board of Directors, has the authority to
administer the Stock Incentive Plan. The Committee determines the term of each
option, option price, number of shares for which each option is granted, whether
restrictions will be imposed on the shares subject to options and the rate at
which each option is exercisable. The exercise price for incentive stock options
granted may not be less than 100% of the fair market value per share of the
underlying common stock on the date granted (110% for options granted to holders
of more than 10% of the voting stock of the Company). The term of options
granted under the Stock Incentive Plan cannot exceed ten years (five years for
options granted to holders of more than 10% of the voting stock of the Company).
A maximum of 10 million shares of common stock are reserved for issuance in
accordance with the terms of the Stock Incentive Plan. At December 31, 1998,
5,374,300 shares were available for future grant.

Prior to the Distribution, certain employees of the Company participated in
the U.S. Office Products 1994 Long-Term Incentive Plan covering employees of
U.S. Office Products. The Company adopted the Stock Incentive Plan at
approximately the time of the Distribution. Upon the Distribution, the Company
replaced the options to purchase shares of common stock of U.S. Office Products
held by employees with options to purchase shares of common stock of the
Company.

In order to keep the option holders in the same economic position
immediately before and after the Distribution, the number of U.S. Office
Products' options held by Company personnel was multiplied by 1.4177 and the
exercise price of these options was divided by 1.4177 for purposes of the
replacement options. The vesting provisions and option period of the original
grants were not changed. All option data reflected below has been retroactively
restated to reflect the effects of the Distribution.

On December 14, 1998, the Company exchanged 3,728,434 options with exercise
prices ranging from $5.00 to $17.61 per share for 1,918,140 options at a price
of $3.97 per share. Employees had the option not to exchange certain options
previously granted. The repriced options were subject to the same vesting
schedule as the previous options.

NON-EMPLOYEE DIRECTOR OPTION PLAN

During 1998, the Company's Board of Directors approved a stock option plan
for the non-employee directors of the Company (the "Non-Employee Director Option
Plan"). Under the Non-Employee Director Option Plan, in consideration of their
first election to the Board of Directors, an eligible director receives an
option to purchase 25,000 shares of common stock and receives options to
purchase an additional 10,000 shares of common stock on the date of each
subsequent Annual Meeting of Stockholders of the Company, provided that they are
serving as a Director immediately following such Annual Meeting. In addition, in
consideration of their first appointment as chairperson of a Committee of the
Board of

F-25
<PAGE>
AZTEC TECHNOLOGY PARTNERS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(DOLLARS IN THOUSANDS)

NOTE 13--STOCKHOLDERS' EQUITY (CONTINUED)
Directors, an eligible director receives an option to purchase 5,000 shares of
common stock and receives options to purchase an additional 5,000 shares of
common stock on the date of each subsequent Annual Meeting of Stockholders of
the Company, provided that they are serving as chairperson of said Committee of
the Board of Directors immediately following such Annual Meeting. Options to
purchase 105,000 shares of common stock have been granted under this plan. A
maximum of 300,000 shares of common stock are reserved for issuance in
accordance with the terms of the Non-Employee Director Option Plan.

EMPLOYEE STOCK PURCHASE PLAN

On June 7, 1998 the Company approved the 1998 Employee Stock Purchase Plan
(the "ESPP"). Under the plan, employees may purchase shares of common stock at
85% of the lower of the fair market value on the first or last day of each
six-month offering period. Employees may authorize the Company to withhold up to
15% of their compensation during any offering period, subject to certain
limitations. A maximum of 1,000,000 shares of common stock are reserved for
issuance in accordance with the terms of the ESPP. For the thirty-five weeks
ended December 31, 1998, 51,880 shares were issued under the plan at $3.08 per
share. At December 31, 1998, 948,120 shares were available for future grant.

The Company accounts for options issued in accordance with APB Opinion No.
25. Accordingly, because exercise prices of the options equaled the market price
on the date of grant, no compensation expense was recognized for the options
granted. Had compensation expense been recognized based upon the fair value of
the stock options on the date of grant under the methodology prescribed by SFAS
No. 123, "Accounting for Stock-Based Compensation," the Company's net income and
net income per share would have been impacted as indicated in the following
table.

<TABLE>
<CAPTION>
FOR THE FISCAL YEAR
ENDED
35 WEEKS ENDED ------------------------
DECEMBER 31, APRIL 25, APRIL 26,
1998(1) 1998 1997
-------------- ----------- -----------
<S> <C> <C> <C>
Net Income:
As reported............................................ $ 4,157 $ 6,474 $ 6,723
Pro forma.............................................. (1,292) 5,364 6,615

Per share:
As reported:
Basic................................................ $ 0.18 $ 0.27 $ 0.37
Diluted.............................................. 0.18 0.27 0.37
Pro Forma:
Basic.................................................. $ (0.06) $ 0.22 $ 0.37
Diluted................................................ (0.06) 0.22 0.36
</TABLE>

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

(1) As restated. See Note 3 to the Consolidated Financial Statements.

F-26
<PAGE>
AZTEC TECHNOLOGY PARTNERS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(DOLLARS IN THOUSANDS)

NOTE 13--STOCKHOLDERS' EQUITY (CONTINUED)
The fair value of options granted (which is amortized to expense over the
option vesting period in determining the pro forma impact) is estimated on the
date of grant using the Black-Scholes option pricing model with the following
weighted average assumptions:

<TABLE>
<CAPTION>
FOR THE FISCAL YEAR
ENDED
35 WEEKS ENDED ------------------------
DECEMBER 31, APRIL 25, APRIL 26,
1998 1998 1997
-------------- ----------- -----------
<S> <C> <C> <C>
Expected life of option.................................. 6 years 7 years 7 years
Risk free interest rate.................................. 5.00% 6.36% 6.66%
Expected volatility...................................... 52.5% 44.1% 44.0%
</TABLE>

The weighted-average fair value of options granted was $2.99, $6.59 and
$4.55 for the thirty-five weeks ended December 31, 1998, and fiscal 1998 and
1997, respectively.

A summary of option transactions follows:

<TABLE>
<CAPTION>
WEIGHTED-
AVERAGE
WEIGHTED-AVERAGE OPTIONS EXERCISE
OPTIONS EXERCISE PRICE EXERCISABLE PRICE
----------- ----------------- ----------- -----------
<S> <C> <C> <C> <C>
Balance at April 30, 1996
Granted............................. 928,032 $ 8.03
Exercised...........................
Canceled............................ (21,887) 11.30
----------- -----
Balance at April 26, 1997............. 906,145 7.96 197,967 $ 0.29
Granted............................. 681,351 12.22
Exercised........................... (116,734) 0.29
Canceled............................ (122,189) 10.19
----------- -----
Balance at April 25, 1998............. 1,348,573 10.57 127,995 4.31
Granted............................. 7,422,264 6.36
Exercised
Canceled............................ (4,145,137) 10.54
----------- ----- ----------- -----
Balance at December 31, 1998.......... 4,625,700 $ 4.36 152,060 $ 8.28
----------- ----- ----------- -----
----------- ----- ----------- -----
</TABLE>

The following table summarizes information about stock options outstanding
at December 31, 1998:

<TABLE>
<CAPTION>
WEIGHTED-AVERAGE OPTIONS EXERCISABLE
RANGE OF REMAINING CONTRACTUAL ----------------------------
EXERCISE LIFE WEIGHTED-AVERAGE WEIGHTED-AVERAGE
PRICES OPTIONS OPTIONS OUTSTANDING EXERCISE PRICE OPTIONS EXERCISE PRICE
- ---------------- ---------- ------------------------- ----------------- --------- -----------------
<S> <C> <C> <C> <C> <C>
$2.81-$ 4.00 3,741,338 9.9 $ 3.42 52,750 $ 3.97
$5.00-$ 5.50 345,601 9.7 5.03 6,667 5.50
$9.88-$12.58 538,761 8.7 10.49 92,643 10.94
---------- ---------
$2.81-$12.58 4,625,700 9.8 $ 4.36 152,060 $ 8.28
---------- ---------
---------- ---------
</TABLE>

F-27
<PAGE>
AZTEC TECHNOLOGY PARTNERS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(DOLLARS IN THOUSANDS)

NOTE 13--STOCKHOLDERS' EQUITY (CONTINUED)
Non-qualified options granted to employees are generally exercisable
beginning one year from the date of grant in cumulative yearly amounts of 25% of
the shares under option and generally expire ten years from the date of grant.

Under a services agreement entered into with Jonathan J. Ledecky ("the
Ledecky Services Agreement"), the Board of Directors of U.S. Office Products
agreed that Jonathan J. Ledecky receive a stock option for Company common stock
from the Company as of the date of the Distribution. The U.S. Office Products
Board intended the option to be compensation for Mr. Ledecky's services as a
director of the Company, and certain services as an employee of the Company. The
fair value option covered 7.5% of the outstanding Company common stock
determined as of the date of the Distribution, with no anti-dilution provisions
in the event of issuance of additional shares of Common Stock (other than with
respect to stock splits or reverse stock splits).

Immediately following the effective date of the registration statements
filed in connection with the Distribution, the Company's Board of Directors
granted options covering approximately 1.3 million options covering the
Company's common stock to certain executive management personnel and
non-employee directors. The fair value options were granted under the Stock
Incentive Plan and the Non-Employee Director Option Plan.

F-28
<PAGE>
AZTEC TECHNOLOGY PARTNERS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(DOLLARS IN THOUSANDS)

NOTE 14--QUARTERLY FINANCIAL DATA (UNADUITED)

The following presents certain unaudited quarterly financial data for the 35
weeks ended December 31, 1998, and fiscal years 1998 and 1997:

<TABLE>
<CAPTION>
THIRTY-FIVE WEEKS ENDED DECEMBER 31, 1998(1)
----------------------------------------------------------
<S> <C> <C> <C> <C>
9 WEEKS QUARTER QUARTER
ENDED ENDED ENDED
JUNE 30(1) SEPTEMBER 30(1) DECEMBER 31(1) TOTAL(1)
----------- ---------------- --------------- ----------
Revenues......................... $ 50,708 $ 78,102 $ 100,546 $ 229,356
Gross profit..................... 12,367 19,405 22,805 54,577
Operating income................. 411 5,860 3,702 9,973
Net income....................... 209 2,957 991 4,157

Per share amounts:
Basic.......................... 0.01 0.13 0.05 0.18
Diluted........................ 0.01 0.13 0.05 0.18
</TABLE>

<TABLE>
<CAPTION>
FISCAL YEAR ENDED APRIL 25, 1998
------------------------------------------------------
<S> <C> <C> <C> <C> <C>
FIRST SECOND THIRD FOURTH TOTAL
--------- --------- --------- --------- ----------
Revenues.............................. $ 42,730 $ 36,875 $ 62,907 $ 65,829 $ 208,341
Gross profit.......................... 9,047 9,718 15,852 15,407 50,024
Operating income...................... 2,749 3,687 4,816 997 12,249
Net income............................ 1,636 2,233 2,703 (98) 6,474

Per share amounts:
Basic............................... 0.08 0.10 0.11 (0.01) 0.27
Diluted............................. 0.08 0.10 0.10 (0.01) 0.27
</TABLE>

<TABLE>
<CAPTION>
FISCAL YEAR ENDED APRIL 26, 1998
------------------------------------------------------
<S> <C> <C> <C> <C> <C>
FIRST SECOND THIRD FOURTH TOTAL
--------- --------- --------- --------- ----------
Revenues.............................. $ 34,263 $ 31,898 $ 35,134 $ 34,983 $ 136,278
Gross profit.......................... 7,982 7,608 9,656 8,903 34,149
Operating income...................... 2,695 1,779 3,229 2,647 10,350
Net income............................ 2,617 1,315 1,625 1,166 6,723

Per share amounts:
Basic............................... 0.16 0.08 0.09 0.06 0.37
Diluted............................. 0.16 0.07 0.09 0.06 0.37
</TABLE>

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

(1) As restated. See Note 3 to the Consolidated Financial Statements.

The Company recorded strategic restructuring costs of $1,750 during the
fourth quarter of fiscal 1998, $3,196 in the nine weeks ended June 30, 1998 and
$1,134 in the quarter ended December 31, 1998.

F-29
<PAGE>
AZTEC TECHNOLOGY PARTNERS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(DOLLARS IN THOUSANDS)

NOTE 15--RELATED PARTY TRANSACTIONS

During fiscal 1998, product sales of approximately $4.5 million were made at
cost to a company owned by an officer of the Company.

NOTE 16--SEGMENT DATA

The Company manages its business segments primarily on a geographic basis.
The Company's reportable segments are comprised of the New England, Tri-State,
Northeast Telephony, and Western regions of the United States. Other operating
segments are located in other sections of the country. Each operating segment
provides products and services as described in Note 1.

The accounting policies of the various segments are the same as those
described in the "Summary of Significant Accounting Policies" in Note 4. The
Company evaluates the performance of its segments based on operating income.
Operating income for each segment includes selling, general and administrative
expenses directly attributable to the segment and excludes certain expenses
which are managed outside of the reportable segments. Costs excluded from
segments' operating income primarily consist of corporate expenses including
administrative expenses, amortization of intangibles, interest and income taxes,
as well as other non-recurring restructuring and acquisition related costs.
Segment assets exclude corporate assets which primarily consist of cash and cash
equivalents, certain deferred assets, intangibles and investments in
subsidiaries. Capital expenditures for long-lived assets are not a significant
activity of the reportable operating segments and, as such, not a primary focus
of management in reviewing operating segment performance.

F-30
<PAGE>
AZTEC TECHNOLOGY PARTNERS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(DOLLARS IN THOUSANDS)

NOTE 16--SEGMENT DATA (CONTINUED)
Summary information by segment for the thirty-five weeks ended December 31,
1998 and fiscal years 1998, 1997, and 1996 is as follows:

<TABLE>
<CAPTION>
NORTHEAST
NEW ENGLAND TRI-STATE TELEPHONY WEST OTHER TOTAL
------------ --------- ---------- --------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
THIRTY-FIVE WEEKS ENDED
DECEMBER 31, 1998(1)
Revenue:
Products....................................... $ 79,882 $ 15,013 $ 5,944 $ $ 20,110 $ 120,949
Services....................................... 23,008 21,730 24,274 28,490 10,905 108,407
------------ --------- ---------- --------- ---------- ----------
Total...................................... $ 102,890 $ 36,743 $ 30,218 $ 28,490 $ 31,015 $ 229,356
Gross margin..................................... $ 17,005 $ 10,396 $ 12,352 $ 6,812 $ 8,012 $ 54,577
Operating income(1).............................. $ 6,759 $ 2,655 $ 5,880 $ 2,323 $ 3,706 $ 21,323
Depreciation..................................... $ 282 $ 315 $ 166 $ 258 $ 116 $ 1,137
Assets........................................... $ 48,105 $ 18,389 $ 14,443 $ 11,789 $ 14,669 $ 107,395
------------ --------- ---------- --------- ---------- ----------
------------ --------- ---------- --------- ---------- ----------

FISCAL 1998
Revenue:
Products....................................... $ 86,337 $ 15,882 $ 3,614 $ $ 11,165 $ 116,998
Services....................................... 19,734 20,478 21,432 24,228 5,471 91,343
------------ --------- ---------- --------- ---------- ----------
Total...................................... $ 106,071 $ 36,360 $ 25,046 $ 24,228 $ 16,636 $ 208,341
Gross margin..................................... $ 19,244 $ 11,157 $ 11,154 $ 4,807 $ 3,662 $ 50,024
Operating income................................. $ 5,832 $ 2,738 $ 4,290 $ 2,232 $ 972 $ 16,064
Depreciation..................................... $ 273 $ 259 $ 279 $ 278 $ 63 $ 1,152
Assets........................................... $ 31,508 $ 16,773 $ 12,074 $ 12,502 $ 4,451 $ 77,308
------------ --------- ---------- --------- ---------- ----------
------------ --------- ---------- --------- ---------- ----------
FISCAL 1997
Revenue:
Products....................................... $ 78,811 $ 9,707 $ $ $ 8,735 $ 97,253
Services....................................... 10,179 13,408 13,168 2,270 39,025
------------ --------- ---------- --------- ---------- ----------
Total...................................... $ 88,990 $ 23,115 $ 13,168 $ 11,005 $ 136,278
Gross margin..................................... $ 16,243 $ 8,195 $ 7,101 $ 2,610 $ 34,149
Operating income................................. $ 5,964 $ 2,728 $ 3,420 $ 899 $ 13,011
Depreciation..................................... $ 279 $ 151 $ 71 $ 40 $ 541
Assets........................................... $ 17,995 $ 8,007 $ 6,407 $ 3,203 $ 35,612
------------ --------- ---------- --------- ---------- ----------
------------ --------- ---------- --------- ---------- ----------
</TABLE>

F-31
<PAGE>
AZTEC TECHNOLOGY PARTNERS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(DOLLARS IN THOUSANDS)

NOTE 16--SEGMENT DATA (CONTINUED)

<TABLE>
<CAPTION>
NORTHEAST
NEW ENGLAND TRI-STATE TELEPHONY WEST OTHER TOTAL
------------ --------- ---------- --------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
FISCAL 1996
Revenue:
Products....................................... $ 60,663 $ 11,791 $ $ $ 6,494 $ 78,948
Services....................................... 2,481 9,723 20,775 2,128 35,107
------------ --------- ---------- --------- ---------- ----------
Total...................................... $ 63,144 $ 21,514 $ 20,775 $ 8,622 $ 114,055
Gross margin..................................... $ 9,641 $ 7,163 $ 11,168 $ 1,970 $ 29,942
Operating income................................. $ 1,265 $ 1,575 $ 7,909 $ (1,317) $ 9,432
Depreciation..................................... $ 275 $ 114 $ 85 $ 20 $ 494
Assets........................................... $ 15,131 $ 8,715 $ 7,586 $ 2,513 $ 33,945
------------ --------- ---------- --------- ---------- ----------
------------ --------- ---------- --------- ---------- ----------
</TABLE>

A reconciliation of the Company's reportable segment operating income and
segment assets to the corresponding consolidated amounts as of and for the
thirty-five weeks ended December 31, 1998 and as of and for the fiscal years
ended April 25, 1998, April 26, 1997 and March 31, 1996 is as follows:

<TABLE>
<CAPTION>
DECEMBER 31, APRIL 25, APRIL 26, MARCH 31,
1998(1) 1998 1997 1996
------------ ---------- --------- -----------
<S> <C> <C> <C> <C>
Segment operating income.................... $ 21,323 $ 16,064 $ 13,011 $ 9,432
Corporate expenses.......................... 4,631 1,225 387
Amortization of intangibles................. 2,389 840
Strategic restructuring costs............... 4,330 1,750
Non-recurring acquisition costs............. 2,274
------------ ---------- --------- -----------
Total operating income...................... $ 9,973 $ 12,249 $ 10,350 $ 9,432
------------ ---------- --------- -----------
------------ ---------- --------- -----------
Segment assets.............................. $ 107,395 $ 77,308 $ 35,612 $ 33,945
Corporate assets............................ 23,332 309 1,699
Intangible assets........................... 129,792 63,828
------------ ---------- --------- -----------
Total assets................................ $ 260,519 $ 141,445 $ 37,311 $ 33,945
------------ ---------- --------- -----------
------------ ---------- --------- -----------
</TABLE>

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

(1) As restated. See Note 3 to the Consolidated Financial Statements.

NOTE 17--SUBSEQUENT EVENTS

On March 1, 1999, the Company recovered $10.55 million of the $10.8 million
acquisition price it had paid for Solutions E.T.C., Inc. on October 2, 1998. In
November 1998, the Company had filed a lawsuit against the former owner and
president of Solutions E.T.C., seeking damages in connection with the
acquisition. The Company believes that the shareholder created a false set of
books and records which materially misrepresented the finances and size of
Solutions E.T.C.. In addition, the shareholder has been indicted on Federal
charges of mail and wire fraud and money laundering and the Company will
continue to cooperate with the U.S. Attorney's office in this matter.

F-32
<PAGE>
FINANCIAL STATEMENT SCHEDULE

SCHEDULE II--VALUATION AND QUALIFYING ACCOUNTS AND RESERVES

<TABLE>
<CAPTION>
CHARGES TO CHARGED TO
BALANCE AT COSTS AND OTHER DEDUCTIONS/ BALANCE AT
DESCRIPTION MAY 1, 1995 EXPENSES ACCOUNTS WRITE-OFFS APRIL 30, 1996
- --------------------------------------- ------------- ------------ ----------- ----------- -----------------
<S> <C> <C> <C> <C> <C>
Allowance for doubtful accounts........ $ 106,000 $ 22,000 $ (5,000) $ -- $ 123,000
Accumulated amortization of
intangibles.......................... -- -- -- -- --
</TABLE>

<TABLE>
<CAPTION>
CHARGES TO CHARGED TO
BALANCE AT COSTS AND OTHER DEDUCTIONS/ BALANCE AT
DESCRIPTION MAY 1, 1996 EXPENSES ACCOUNTS WRITE-OFFS APRIL 26, 1997
- --------------------------------------- ------------- ------------ ----------- ----------- -----------------
<S> <C> <C> <C> <C> <C>
Allowance for doubtful accounts........ $ 123,000 $ 250,000 -- $ 22,000 $ 351,000
Accumulated amortization of
intangibles.......................... -- -- -- -- --
</TABLE>

<TABLE>
<CAPTION>
BALANCE AT CHARGES TO CHARGED TO
APRIL 27, COSTS AND OTHER DEDUCTIONS/ BALANCE AT
DESCRIPTION 1997 EXPENSES ACCOUNTS WRITE-OFFS APRIL 25, 1998
- --------------------------------------- ------------- ------------ ----------- ----------- -----------------
<S> <C> <C> <C> <C> <C>
Allowance for doubtful accounts........ $ 351,000 $ 1,142,000 $ 209,000 $ 76,000 $ 1,626,000
Accumulated amortization of
intangibles.......................... -- 840,000 -- -- 840,000
</TABLE>

<TABLE>
<CAPTION>
BALANCE AT CHARGES TO CHARGED TO
APRIL 26, COSTS AND OTHER DEDUCTIONS/ BALANCE AT
DESCRIPTION 1998 EXPENSES ACCOUNTS WRITE-OFFS DECEMBER 31, 1998
- --------------------------------------- ------------- ------------ ----------- ----------- -----------------
<S> <C> <C> <C> <C> <C>
Allowance for doubtful accounts........ $ 1,626,000 $ 944,000 $ (40,000) $ 2,610,000
Accumulated amortization of
intangibles.......................... 840,000 2,389,000 -- -- 3,229,000
</TABLE>

F-33

<PAGE>

Exhibit 23.1

CONSENT OF INDEPENDENT ACCOUNTANTS

We hereby consent to the incorporation by reference in the Registration
Statements on Form S-8 (Nos. 333-58315, 333-58319, 333-58323) of Aztec
Technology Partners, Inc. of our report dated March 3, 1999, except for
Note 3, as to which the date is July 21, 1999, appearing on page F-2 of this
Form 10-K/A.

PricewaterhouseCoopers LLP
Boston, Massachusetts
August 2, 1999

<PAGE>

Exhibit 23.2

CONSENT OF INDEPENDENT ACCOUNTANTS

We hereby consent to the incorporation by reference in the Registration
Statements on Form S-8 (Nos. 333-58315, 333-58319, 333-58323) of Aztec
Technology Partners, Inc. of our report dated June 7, 1996, except for Note
9, as to which the date is October 24, 1996, relating to the financial
statements of Fortran Corp., appearing on page F-3 of this Form 10-K/A.

Rubin, Koehmstedt and Nadler
Springfield, Virginia
August 2, 1999

<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM BALANCE
SHEET AND INCOME STATEMENT AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<RESTATED>
<MULTIPLIER> 1,000

<S> <C>
<PERIOD-TYPE> 8-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> APR-26-1998
<PERIOD-END> DEC-31-1998
<CASH> 8,763
<SECURITIES> 0
<RECEIVABLES> 76,748
<ALLOWANCES> 2,610
<INVENTORY> 11,323
<CURRENT-ASSETS> 120,928
<PP&E> 12,039
<DEPRECIATION> 4,436
<TOTAL-ASSETS> 260,519
<CURRENT-LIABILITIES> 62,497
<BONDS> 0
0
0
<COMMON> 22
<OTHER-SE> 106,944
<TOTAL-LIABILITY-AND-EQUITY> 260,519
<SALES> 120,949
<TOTAL-REVENUES> 229,356
<CGS> 104,964
<TOTAL-COSTS> 174,779
<OTHER-EXPENSES> 44,604<F1>
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,490
<INCOME-PRETAX> 7,669
<INCOME-TAX> 3,512
<INCOME-CONTINUING> 4,157
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 4,157
<EPS-BASIC> .18
<EPS-DILUTED> .18
<FN>
<F1>INCLUDES $4.3 MILLION RESTRUCTURING
</FN>

</TABLE>