POMEROY COMPUTER RESOURCES INC, S-3/A, 1997-02-24

POMEROY COMPUTER RESOURCES INC
S-3/A, 1997-02-24
COMPUTERS & PERIPHERAL EQUIPMENT & SOFTWARE

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<PAGE>

AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON FEBRUARY 24, 1997

REGISTRATION NO. 333-19249
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------

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

PRE-EFFECTIVE AMENDMENT NO. 5
TO

FORM S-3

REGISTRATION STATEMENT

UNDER

THE SECURITIES ACT OF 1933
------------------------
POMEROY COMPUTER RESOURCES, INC.
(Exact name of registrant as specified in its charter)

<TABLE>
<S> <C>
DELAWARE 31-1227808
(State or other jurisdiction (I.R.S. Employer
of incorporation or Identification
organization) Number)
</TABLE>

1020 PETERSBURG ROAD
HEBRON, KENTUCKY 41048
(606) 586-0600
(Address, including zip code, and telephone number, including area code, of
registrant's principal executive offices)
--------------------------

DAVID B. POMEROY, II
Chairman of the Board, President and Chief Executive Officer
Pomeroy Computer Resources, Inc.
1020 Petersburg Road
Hebron, Kentucky 41048
(606) 586-0600
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
--------------------------

COPIES TO:

WILLIAM G. KOHLHEPP, ESQ. STEPHEN A. OPLER, ESQ.
ELIZABETH A. HORWITZ, ESQ. MICHAEL R. MCALEVEY, ESQ.
Cors & Bassett Alston & Bird
1200 Carew Tower One Atlantic Center
441 Vine Street 1201 West Peachtree Street
Cincinnati, Ohio 45202 Atlanta, Georgia 30309-3424
(513) 852-8200 (404) 881-7000

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

APPROXIMATE DATE OF COMMENCEMENT OF THE PROPOSED SALE TO THE PUBLIC:
AS SOON AS PRACTICABLE AFTER THIS REGISTRATION STATEMENT BECOMES EFFECTIVE.
--------------------------

If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box [ ].
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act,
other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box [ ].
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box [ ].
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering [ ].
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering [ ].
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box [ ].
--------------------------

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

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

SUBJECT TO COMPLETION, DATED FEBRUARY 24, 1997

PROSPECTUS

1,100,000 SHARES

[LOGO]

COMMON STOCK

Of the 1,100,000 shares of $.01 par value common stock (the "Common Stock")
offered hereby, 1,020,000 shares are being sold by Pomeroy Computer Resources,
Inc. ("Pomeroy Computer Resources" or the "Company") and 80,000 shares are being
sold by a certain stockholder of the Company (the "Selling Stockholder"). See
"Principal and Selling Stockholders." The Company will not receive any of the
proceeds from the sale of shares of Common Stock by the Selling Stockholder.

The Company's Common Stock is traded on the Nasdaq Stock Market's National
Market (the "Nasdaq National Market") under the symbol "PMRY." On February 5,
1997, the last reported sale price for the Common Stock on the Nasdaq National
Market was $33.00 per share.

SEE "RISK FACTORS" BEGINNING ON PAGE 6 OF THIS PROSPECTUS FOR A DISCUSSION
OF CERTAIN FACTORS THAT SHOULD BE CONSIDERED BY PROSPECTIVE PURCHASERS OF THE
COMMON STOCK OFFERED HEREBY.

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

<TABLE>
<CAPTION>
PROCEEDS TO
PRICE TO UNDERWRITING PROCEEDS TO SELLING
PUBLIC DISCOUNT (1) COMPANY (2) STOCKHOLDER
<S> <C> <C> <C> <C>
Per Share............... $ $ $ $
Total (3)............... $ $ $ $
</TABLE>

(1) The Company and the Selling Stockholder have agreed to indemnify the
Underwriters against certain liabilities, including liabilities under the
Securities Act of 1933, as amended. See "Underwriting."

(2) Before deducting expenses estimated at $600,000 payable by the Company.

(3) The Company has granted to the Underwriters a 30-day option to purchase up
to 165,000 additional shares of Common Stock to cover over-allotments, if
any. See "Underwriting." If such option is exercised in full, the total
Price to Public, Underwriting Discount and Proceeds to Company will be
$ , $ and $ , respectively.

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

The shares of Common Stock are offered subject to receipt and acceptance by
the several Underwriters, to prior sale and to the Underwriters' right to reject
any order in whole or in part and to withdraw, cancel or modify the offer
without notice. It is expected that certificates for the shares will be
available for delivery on or about , 1997.

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

, 1997
<PAGE>
1. Photo of technicians in configuration room performing configuration and
packaging activity.

- -- Text below photo: "Configuration Services"

2. Picture of man sitting in front of a computer and monitor and another man
leaning over the computer.

- -- Text above photo: "On-site Services"

3. Photo of three people facing computers and monitors, with one leading
discussion.

- -- Text beside photo: "User Support Services"

4. Photo of a man working with computer cables.

- -- Text above photo: "Local & Wide Area Network Design, Integration and Support"

5. Photo of two men standing facing a projection screen with an Internet page
displayed.

- -- Text below photo: "Internet & Electronic Commerce Services"

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

IN CONNECTION WITH THIS OFFERING, CERTAIN UNDERWRITERS AND SELLING GROUP
MEMBERS MAY ENGAGE IN PASSIVE MARKET MAKING TRANSACTIONS IN THE COMPANY'S COMMON
STOCK ON THE NASDAQ NATIONAL MARKET IN ACCORDANCE WITH RULE 10b-6A UNDER THE
SECURITIES EXCHANGE ACT OF 1934. SEE "UNDERWRITING."
<PAGE>
PROSPECTUS SUMMARY

THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY THE MORE DETAILED
INFORMATION AND FINANCIAL STATEMENTS, INCLUDING NOTES THERETO, CONTAINED
ELSEWHERE IN THIS PROSPECTUS OR INCORPORATED BY REFERENCE HEREIN. PROSPECTIVE
INVESTORS SHOULD ALSO REVIEW CAREFULLY THE INFORMATION SET FORTH UNDER "RISK
FACTORS." UNLESS OTHERWISE INDICATED, THE INFORMATION IN THIS PROSPECTUS (I)
ASSUMES NO EXERCISE OF THE UNDERWRITERS' OVER-ALLOTMENT OPTION AND (II) HAS BEEN
ADJUSTED TO REFLECT A THREE-FOR-TWO SPLIT OF COMMON STOCK IN THE FORM OF A STOCK
DIVIDEND EFFECTED ON OCTOBER 4, 1996, AND A 10% STOCK DIVIDEND EFFECTED ON MAY
22, 1995. A GLOSSARY OF NAMES AND CERTAIN TECHNICAL TERMS IS LOCATED AFTER THE
FINANCIAL STATEMENTS IN THIS PROSPECTUS BEGINNING AT PAGE G-1.

THE COMPANY

Pomeroy Computer Resources, Inc. ("Pomeroy Computer Resources" or the
"Company") is the tenth largest network value-added reseller in the United
States, as calculated by Network VAR Magazine based on 1995 local area
networking revenues. As such, the Company offers a broad range of microcomputers
and related products and provides a comprehensive selection of integration and
support services including network and system design, equipment selection,
procurement, complex network configuration, integration, Internet and electronic
commerce services, depot repair, on-site maintenance, staffing and network
management. The Company provides its products and services to a wide variety of
commercial, health care, governmental, financial and educational customers. The
Company's operating strategy is to provide its customers with cost-efficient
comprehensive solutions that satisfy their information technology requirements.
To achieve this objective, the Company uses its (i) relationships with leading
computer hardware manufacturers, software developers and computer product
distributors and service providers to deliver and support quality products at
competitive prices, (ii) distribution skills to promptly and efficiently manage
inventory and deliver products, and (iii) technical expertise to provide a broad
range of value-added services.

The Company offers microcomputer products from an array of manufacturers
including Compaq, Hewlett-Packard, IBM, Lexmark and Toshiba. The Company sells
these products together with a broad selection of networking, integration and
software products from manufacturers including 3Com, Bay Networks, Intel,
Microsoft and Novell. Services provided by the Company allow customers to
outsource the selection, installation, integration and maintenance of their
microcomputer systems.

The Company, headquartered in northern Kentucky near Cincinnati, Ohio,
services and supports its customers through its 208 direct sales and sales
support representatives located in 15 regional offices in Kentucky, Iowa,
Tennessee, Florida, Alabama, Indiana, North Carolina and South Carolina. The
Company expects to open additional regional offices in Columbus, Ohio; Memphis,
Tennessee; and Montgomery, Alabama in the first quarter of fiscal 1997 and an
additional regional office in Tampa, Florida later in fiscal 1997. Pomeroy
Computer Resources has more than 12,000 customers, the largest of which include
Barnett Bank, Columbia/HCA, Commonwealth of Kentucky, GE, Principal Insurance
and Providian. As of January 5, 1997, the Company had approximately 3,800
service contracts in effect (one customer may have multiple contracts) and
employed approximately 470 service and technical personnel.

The continuous technological changes occurring in the computer industry,
combined with significant structural changes in the information technology
requirements of large companies, have facilitated the Company's growth. Factors
that influence organizations to seek the professional expertise of the Company
include: the need for information regarding technological advances in
microcomputer systems (such as Windows 95 and Windows NT); the reduced price and
increased power of PCs; the increasing usage of intranets, the Internet and the
World Wide Web; the emergence of open, distributed client/server systems (LANs
and WANs) as a viable alternative to mainframe systems; the increased use of
software products for such networks; the increased need to access information
from, and equip personnel at, remote sites and the continued effort by
organizations to reduce costs by outsourcing their information technology
requirements.

3
<PAGE>
ACQUISITIONS

Acquisitions have contributed significantly to the Company's growth. The
Company believes that acquisitions are one method of increasing its presence in
existing markets, expanding into new geographic markets, adding experienced
service personnel, gaining new product offerings and services, obtaining more
competitive pricing as a result of increased purchasing volumes of particular
products and improving operating efficiencies through economies of scale. In
recent years, there has been consolidation among providers of microcomputer
products and services and the Company believes that this consolidation will
continue, which, in turn, may present additional opportunities for the Company
to grow through acquisitions.

The following table provides a summary of the Company's acquisitions since
its initial public offering in April 1992.

<TABLE>
<CAPTION>
Name of Acquired Company Location(s) Date Acquired
- ----------------------------------------------------------- ------------------ --------------
<S> <C> <C>
C&N Corp................................................... Knoxville, TN December 1992
Jacksonville, FL
The Computer Store of Kentucky............................. Louisville, KY July 1993
d/b/a Connecting Point
Xenas Communications Corp.................................. Cincinnati, OH November 1994
d/b/a Envision
Cabling Unlimited, Inc..................................... Indianapolis, IN October 1995
The Computer Supply Store, Inc............................. Des Moines, IA March 1996
AA Microsystems, Inc....................................... Birmingham, AL August 1996
Communications Technology, Inc. ........................... Hickory, NC October 1996
d/b/a DILAN Charlotte, NC
Raleigh, NC
Winston-Salem, NC
Greenville, SC
</TABLE>

The Company is currently engaged in preliminary discussions with potential
acquisition candidates. Although it has no binding commitments to acquire such
candidates, management believes that the Company may acquire one or more of
these candidates in the future. See "Risk Factors--Rapid Growth", "Use of
Proceeds" and "Business--Acquisitions."

THE OFFERING

<TABLE>
<CAPTION>
Common Stock offered by the Company........................ 1,020,000 shares
<S> <C>
Common Stock offered by the Selling Stockholder............ 80,000 shares
Common Stock to be outstanding after the offering.......... 7,488,518 shares (1)
Use of proceeds............................................ Reduce indebtedness; general business
purposes and acquisitions. See "Use of
Proceeds."
Nasdaq National Market symbol.............................. PMRY
</TABLE>

- --------------------
(1) Excludes 292,175 shares subject to outstanding options at January 5, 1997 at
a weighted average exercise price of $7.27 per share. See Note 15 of the
Notes to Consolidated Financial Statements.

RECENT FINANCIAL RESULTS

The Company recently announced financial results for the fourth quarter and
the fiscal year ended January 5, 1997. Total net sales and revenues for the
fourth quarter ended January 5, 1997 increased $43.0 million, or 72.5%, to
$102.3 million from $59.3 million in the fourth quarter of fiscal 1995. Net
income for the fourth quarter of fiscal 1996 increased 136.0% to $3.1 million,
or $0.47 per fully diluted share from $1.3 milion, or $0.32 per fully diluted
share in the fourth quarter of fiscal 1995.

Total net sales and revenues increased $105.7 million, or 45.8%, to $336.4
million in fiscal 1996 from $230.7 million in fiscal 1995. Net income for fiscal
1996 increased 43% to $6.2 million, or $1.14 per fully diluted share from $4.4
million, or $1.08 per fully diluted share in fiscal 1995. Fiscal 1996 results
include an after tax charge of $2.6 million or $0.48 per share associated with
the settlement and related costs arising from the Vanstar litigation.

4
<PAGE>
SUMMARY CONSOLIDATED FINANCIAL AND OPERATING DATA
(IN THOUSANDS, EXCEPT PER SHARE DATA)

<TABLE>
<CAPTION>
FISCAL YEAR (1) NINE MONTHS ENDED OCTOBER 5,
---------------------------------------------- ------------------------------------
1995 1996
---------------------- ------------------------
PRO FORMA PRO FORMA
1993 1994 ACTUAL (2) 1995 ACTUAL (2)(3)
---------- ---------- ---------- ---------- ---------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF INCOME DATA:
Net sales and revenues................ $ 112,178 $ 144,575 $ 230,710 $ 291,209 $ 171,458 $ 234,035 $ 245,852
Gross profit.......................... 18,027 23,674 33,536 41,531 24,399 37,113 38,588
Income from operations................ 4,053 5,557 9,285 10,735 6,595 11,097 11,538
Net income............................ 1,900 2,727 4,367 4,794 3,048 3,117 3,371
Net income per share
(fully diluted)...................... $ 0.52 $ 0.75 $ 1.08 $ 1.14 $ 0.76 $ 0.61 $ 0.66
Weighted average shares outstanding
(fully diluted) (4).................. 3,651 3,644 4,044 4,194 4,019 5,086 5,124
</TABLE>

<TABLE>
<CAPTION>
AS OF OCTOBER 5, 1996
--------------------------
AS ADJUSTED
ACTUAL (5)
---------- --------------
<S> <C> <C>
BALANCE SHEET DATA:
Working capital...................................................................... $ 26,675 $ 57,800
Total assets......................................................................... 108,081 122,625
Total debt (6)....................................................................... 18,711 2,130
Stockholders' equity................................................................. 42,697 73,822
</TABLE>

- ------------------
(1) The Company's fiscal year ends on January 5th of the following year.
(2) The pro forma statement of income data is based on the historical financial
information of the Company and TCSS and includes pro forma adjustments to
reflect pro forma results of operations as if the acquisition of TCSS had
occurred on January 6, 1995. See "Selected Pro Forma Consolidated Financial
and Operating Data" and "Business--Acquisitions."
(3) The first nine months of 1996 actual and pro forma results reflect the
Vanstar litigation settlement and related costs of $4,392. Without this
charge, net income and fully diluted net income per share for the first nine
months of 1996, actual and pro forma, would have been $5,730 and $1.13, and
$5,984 and $1.17, respectively. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations."
(4) Reflects a 10% stock dividend effected on May 22, 1995 and a three-for-two
stock split effected as a stock dividend on October 4, 1996.
(5) Adjusted to reflect the sale by the Company of 1,020,000 shares of Common
Stock offered hereby at an assumed offering price of $33.00 per share and
the application of the estimated net proceeds therefrom. See "Use of
Proceeds" and "Capitalization."
(6) Total debt excludes floor plan financing, which is classified as accounts
payable. See Note 6 of the Notes to Consolidated Financial Statements.

SPECIAL CAUTIONARY NOTICE REGARDING FORWARD-LOOKING STATEMENTS

Certain of the matters discussed under the captions "Prospectus Summary,"
"Risk Factors," "Selected Pro Forma Consolidated Financial and Operating Data,"
"Management's Discussion and Analysis of Financial Condition and Results of
Operations," "Business," and elsewhere in this Prospectus and in documents
incorporated herein by reference may constitute forward-looking statements for
purposes of the Securities Act and the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), and as such may involve known and unknown risks,
uncertainties and other factors which may cause the actual results, performance
or achievements of the Company to be materially different from future results,
performance or achievements expressed or implied by such forward-looking
statements. Important factors that could cause the actual results, performance
or achievements of the Company to differ materially from the Company's
expectations are disclosed in this Prospectus and in documents incorporated
herein by reference ("Cautionary Statements"), including, without limitation,
those statements made in conjunction with the forward-looking statements
included under "Risk Factors" and otherwise herein. All written or oral
forward-looking statements attributable to the Company are expressly qualified
in their entirety by the Cautionary Statements.

5
<PAGE>
RISK FACTORS

IN ADDITION TO THE OTHER INFORMATION IN THIS PROSPECTUS, THE FOLLOWING RISK
FACTORS SHOULD BE CONSIDERED CAREFULLY IN EVALUATING THE COMPANY AND ITS
BUSINESS BEFORE PURCHASING SHARES OF THE COMMON STOCK OFFERED HEREBY.

DEPENDENCE ON MAJOR CUSTOMERS

For fiscal years 1994 and 1995, and the first nine months of fiscal 1996,
approximately 44%, 42% and 41% of the Company's total net sales and revenues,
respectively, were derived from its top 10 customers and four of the Company's
top 10 customers, Columbia/HCA, Barnett Bank, Commonwealth of Kentucky and
Champion were the same during each of those periods. Sales in those periods to
the single largest customer of each period comprised approximately 9%, 19%, and
13% of the Company's total net sales and revenues, respectively. The Company's
single largest customer was P&G in 1994 and Columbia/HCA in 1995 and 1996. A
loss of one or more of the Company's major customers could have a material
adverse effect on the Company's operations and financial results. There can be
no assurance that the Company will be able to retain its major customers. In
addition, there is no assurance that the Company will continue to attract
customers with roll-out projects. See "Business--Marketing and Customers."

PRODUCT SUPPLY

The increasing demand for microcomputers has resulted in significant product
supply shortages from time to time because manufacturers have been unable to
produce sufficient quantities of certain products to meet demand. There can be
no assurance that manufacturers will be able to maintain an adequate supply of
products in order for the Company to fulfill all of its customers' orders in a
timely manner. Failure to obtain adequate product supplies could have a material
adverse effect on the Company's operations and financial results. In addition,
the Company purchases products directly from certain manufacturers including
Compaq and IBM. If a manufacturer who sells directly to the Company discontinues
direct sales of its products to the Company, the Company would be required to
purchase the product from an aggregator or distributor. This could materially
and adversely affect the Company's ability to obtain products that are in great
demand or to obtain products at current costs. See "Business--Products."

RAPID GROWTH

The Company has experienced rapid growth both internally and through
acquisitions, and the Company intends to continue to pursue both types of growth
opportunities as part of its business strategy. There can be no assurance that
the Company will be successful in maintaining its rapid growth in the future.
The Company expects that more of its future growth will result from
acquisitions. In 1996, the Company completed three acquisitions and continues to
evaluate expansion and acquisition opportunities that would complement its
ongoing operations. There can be no assurance that the Company will be able to
identify, acquire or profitably manage additional companies or successfully
integrate such additional companies into the Company without substantial costs,
delays or other problems. In addition, there can be no assurance that companies
acquired in the future will be profitable at the time of their acquisition or
will achieve levels of profitability that justify the investment therein.
Acquisitions may involve a number of special risks, including, but not limited
to, adverse short-term effects on the Company's reported operating results,
diversion of management's attention, dependence on retaining, hiring and
training key personnel, risks associated with unanticipated problems or legal
liabilities and amortization of acquired intangible assets, some or all of which
could have a material adverse effect on the Company's operations and financial
results. See "Business--Acquisitions" and "--Operating and Growth Strategy."

6
<PAGE>
VENDOR REBATES AND VOLUME DISCOUNTS

The Company's profitability has been favorably affected by its ability to
obtain rebates and volume discounts from manufacturers and through aggregators
and distributors. Any change in the level of rebates, volume discount schedules
or other marketing programs offered by manufacturers that results in the
reduction or elimination of rebates or discounts currently received by the
Company could have a material adverse effect on the Company's operations and
financial results. In particular, a reduction or elimination of rebates related
to government and educational customers could adversely affect the Company's
ability to serve those customers profitably. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations -- General."

MANUFACTURER MARKET DEVELOPMENT FUNDS

Several manufacturers offer market development funds, cooperative
advertising and other promotional programs to computer resellers. These funds
are accounted for as a reduction in selling, general and administrative
expenses, thereby increasing net income. While such programs have been available
to the Company in the past, there is no assurance that these programs will be
continued. The dollar amount of funds awarded to the Company for fiscal years
1994 and 1995, and the first nine months of fiscal 1996, represented 1.3%, 1.3%
and 0.9% of total net sales and revenues, respectively. The dollar amount of
these funds decreased during the first nine months of 1996 due to the Company's
purchasing patterns and other pricing concessions being granted by
manufacturers, aggregators and distributors in lieu of market development funds.
Any discontinuance or material reduction of these programs could have an adverse
effect on the Company's operations and financial results. See "Management's
Discussion and Analysis of Financial Condition and Results of
Operations--General."

MANAGEMENT INFORMATION SYSTEM

The Company relies upon the accuracy and proper utilization of its
management information system to provide timely distribution services, manage
its inventory and track its financial information. To manage its growth, the
Company is continually evaluating the adequacy of its existing systems and
procedures and has recently implemented a new, integrated management information
system and continues to integrate additional functions. The Company anticipates
that it will regularly need to make capital expenditures to upgrade and modify
its management information system, including software and hardware, as the
Company grows and the needs of its business change. There can be no assurance
that the Company will anticipate all of the demands which its expanding
operations will place on its management information system. The occurrence of a
significant system failure or the Company's failure to expand or successfully
implement its systems could have a material adverse effect on the Company's
operations and financial results. See "Business--Operations."

MARKET CONDITIONS; POSSIBLE VOLATILITY OF STOCK PRICE

The market price of the Common Stock has risen substantially since the
Company's public offering in June 1996. The Common Stock has experienced
substantial price volatility and such volatility may occur in the future,
particularly as a result of quarter to quarter variations in the actual or
anticipated financial results of the Company or other companies in its industry
or in the markets served by the Company. In addition, in recent years the stock
market has experienced extreme price and volume fluctuations. This volatility
has had a significant effect on the market prices of securities issued by many
companies for reasons unrelated to their operating performance. See "Price Range
of Common Stock."

DEPENDENCE ON TECHNICAL EMPLOYEES

The success of the Company's services business, in particular its network
and integration services, depends in large part upon the Company's ability to
attract and retain highly skilled technical employees in

7
<PAGE>
competitive labor markets. There can be no assurance that the Company will be
able to attract and retain sufficient numbers of skilled technical employees.
The loss of a significant number of the Company's existing technical personnel
or difficulty in hiring or retaining technical personnel in the future could
have a material adverse effect on the Company's operations and financial
results. See "Business--Services" and "--Employees."

COMPETITION

The microcomputer market is highly competitive based on performance, quality
and price. The Company directly competes with local, regional, national and
international resellers and distributors and mail order providers of
microcomputer products and services, including but not limited to network
integrators and corporate divisions of superstores. While the Company's
competitors vary depending upon the particular market, some of the competitors
of the Company include CompuCom, Dataflex, Entex, InaCom, MicroAge, Sarcom and
Vanstar as to product sales and Andersen Consulting, EDS, ISSC, MicroAge,
Vanstar and XLConnect as to services. Also, the computer industry continues to
experience a significant amount of consolidation. In the future, the Company may
face further competition from new market entrants and possible alliances between
existing competitors. Certain computer superstores have expanded their marketing
efforts to target segments of the Company's customer base, which could have a
material adverse impact on the Company's operations and financial results. Some
of the Company's competitors have, or may have, greater financial, marketing and
other resources than the Company. As a result, they may be able to respond more
quickly to new or emerging technologies and changes in customer requirements,
benefit from greater purchasing economies, offer more aggressive hardware and
service pricing to their customers, and devote greater resources to the
promotion of their products and services. There can be no assurance that the
Company will be able to compete successfully in the future with such
competitors.

The Company also competes with microcomputer manufacturers which market
through direct sales forces and distributors. More aggressive competition by the
Company's principal manufacturers of microcomputer products, such as offering a
full range of services in addition to products, could have a material adverse
effect on the Company's operations and financial results. See
"Business--Competition."

DEPENDENCE ON KEY MANUFACTURERS' AUTHORIZATIONS

Authorization is required before the Company may sell certain manufacturers'
products. The Company is an authorized reseller for 35 manufacturers, and offers
the products of over 1,000 manufacturers. Sales of products manufactured by
Compaq, Hewlett-Packard and IBM during fiscal years 1994 and 1995 and the first
nine months of fiscal 1996, collectively comprised approximately 74%, 68% and
58% respectively, of the Company's total sales of equipment and supplies. The
loss of a significant manufacturer's authorization or the deterioration of the
Company's relationship with a significant manufacturer could have a material
adverse effect on the Company's operations and financial results. There can be
no assurance that the Company will continue as an authorized reseller for any
manufacturer or that the current terms offered by any manufacturer, including
pricing terms, will not adversely change in the future. Substantially all of the
Company's agreements may be terminated by the manufacturer without cause upon 30
to 90 days' notice or immediately upon the occurrence of certain events. See
"Business--Products."

RAPID TECHNOLOGICAL CHANGE

The microcomputer products market is characterized by rapidly changing
technology and frequent introductions of new products and product enhancements.
The Company's continued success will depend on its ability to keep pace with
technological developments of new products and services and its ability to
fulfill increasingly sophisticated customer requirements. There can be no
assurance that the Company's current manufacturers, suppliers and technical
employees will be able to provide the products and support necessary to remain
competitive. In addition, there can be no assurance that the Company will be
able to

8
<PAGE>
obtain authorizations from new manufacturers or for new products that gain
market acceptance. If the Company were to incur delays in sourcing and
developing new services and product and service enhancements, or delays in
obtaining new products, such delays could have a material adverse effect on the
Company's operations and financial results. See "Business--Industry Trends" and
"--Products."

INVENTORY MANAGEMENT

The PC industry is characterized by rapid product improvement and
technological change resulting in relatively short product life cycles and rapid
product obsolescence. While most of the inventory stocked by the Company is for
specific customer orders, inventory devaluation or obsolescence could have a
material adverse effect on the Company's operations and financial results.
Current industry practice among manufacturers is to provide price protection
intended to reduce the risk of inventory devaluation, although such policies are
subject to change at any time and there can be no assurance that such price
protection will be available to the Company in the future. Also, the Company
currently has the option of returning inventory to certain manufacturers and
distributors, subject to certain limitations. The amount of inventory that can
be returned to manufacturers without a restocking fee varies under the Company's
agreements and such return policies may provide only limited protection against
excess inventory. There can be no assurance that new product developments will
not have a material adverse effect on the value of the Company's inventory or
that the Company will successfully manage its existing and future inventory. In
addition, the Company stocks parts inventory for its services business. Parts
inventory is more likely to experience a decrease in valuation as a result of
technological change and obsolescence and there are no price protection
practices offered by manufacturers with respect to parts. See
"Business--Operations."

DEPENDENCE ON KEY PERSONNEL

The success of the Company is dependent on the services of David B. Pomeroy,
II, its Chairman of the Board, President and Chief Executive Officer and other
key personnel. The Company maintains $1.0 million in key man life insurance
insuring the life of Mr. Pomeroy. The loss of the services of Mr. Pomeroy or
other key personnel could have a material adverse effect on the Company's
business. The Company has entered into employment agreements with certain of its
key personnel, including Mr. Pomeroy. The Company's success and plans for future
growth will also depend on its ability to attract and retain highly skilled
personnel in all areas of its business. See "Management."

INDUSTRY CONDITIONS

The microcomputer industry has experienced volatility in recent years.
Although the current industry climate is generally favorable, in the past,
distributors and resellers in the industry have faced a number of adverse
business conditions, including pricing pressures, evolving distribution
channels, market consolidation and a decline in the rate of growth in sales of
microcomputers. In the past, these factors have caused a reduction in sales
growth and per unit revenue and a decline in gross profit margins for many
microcomputer resellers, including the Company. The recurrence of such adverse
business conditions could have a material adverse effect on the Company's
operations and financial results. See "Business--General" and "--Competition."

POTENTIAL FLUCTUATIONS IN QUARTERLY RESULTS

Quarterly results may fluctuate as a result of a number of factors
including: the timing of large roll-out projects; increased competition; changes
in pricing policy by the Company, its competitors or manufacturers; the timing
of new product introductions by manufacturers; and general economic conditions.
Acquisitions may also have a significant impact on quarterly results. Revenues
from the sales of product are recognized upon shipment to the customer. The
results for a particular quarter could vary significantly due to the timing of
large roll-out projects, since such projects are frequently subject to delays
associated with large capital expenditures and authorization procedures within
large companies and governmental entities.

9
<PAGE>
In addition, operating results are sensitive to changes in the mix of revenues
derived from the sale of products as compared to service revenues which
typically have higher gross margins than product sales. The Company's inability
to obtain rebates, other favorable pricing terms, or market development funds
also could have a material adverse effect on the Company's gross profit margins
or operating profit margins. Fluctuations in quarterly results could cause
volatility in the price of the Company's Common Stock. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations."

CONTROL BY PRINCIPAL STOCKHOLDER

Based on the number of shares of Common Stock that will be outstanding upon
completion of this offering, David B. Pomeroy, II will beneficially own 22.0% of
the outstanding Common Stock (approximately 21.6% if the Underwriters'
over-allotment option is exercised in full). As a result, Mr. Pomeroy will have
significant influence over the affairs of the Company. See "Principal and
Selling Stockholders."

EFFECT OF CERTAIN ANTI-TAKEOVER PROVISIONS

The Company's Certificate of Incorporation (the "Certificate") authorizes
the issuance of one or more series of Preferred Stock, the terms of which may be
fixed by the Board of Directors. Additionally, the Certificate limits the
ability of stockholders to call special meetings or to amend the Company's
Certificate or Bylaws. Each of these provisions, as well as the Delaware
business combination statute to which the Company is subject, could have the
effect of delaying or preventing a change in control of the Company.

10
<PAGE>
USE OF PROCEEDS

The net proceeds from the sale of 1,020,000 shares of Common Stock offered
by the Company hereby, after deducting the underwriting discount and estimated
offering expenses payable by the Company, are estimated to be approximately
$31.1 million (approximately $36.3 million if the Underwriters' over-allotment
option is exercised in full). The Company currently intends to use a portion of
the proceeds to pay the entire outstanding indebtedness under the Company's
credit arrangements with Star Bank (the "Credit Facility"), which indebtedness
totalled $21.9 million at January 5, 1997. The Credit Facility carries a
variable interest rate based on (i) Star Bank's prime rate less an incentive
pricing spread (the "Incentive Pricing Spread") based on certain financial
ratios of the Company or (ii) LIBOR plus the Incentive Pricing Spread, at the
Company's election. The Incentive Pricing Spread is adjusted quarterly. The
Credit Facility expires in April 1997.

The Company utilizes the Credit Facility primarily for working capital;
however, approximately $4.5 million was borrowed in March 1996 to finance a
portion of the purchase price for the Company's acquisition of TCSS, a total of
$3.3 million was borrowed in April and August 1996 to finance the settlement
payments to Vanstar and $5.4 million was borrowed in October 1996 to finance the
Company's acquisition of DILAN. See "Business--Acquisitions." The reduction in
indebtedness will increase the availability of bank credit for general business
purposes and possible future acquisitions.

The Company also intends to use certain of the net proceeds of this offering
for general business purposes. In addition, the Company may use a portion of the
proceeds of this offering for the acquisition of businesses, products, or
technologies of strategic importance to the Company. No portion of the proceeds
of this offering has been allocated to any specific acquisition, and the Company
has not entered into any agreements or letters of intent with respect to any
future acquisitions, although the Company continually seeks to identify and
evaluate potential acquisition candidates. The Company has entered into
preliminary discussions with a small network service provider and a small
computer reseller located in Indiana and Georgia, respectively. If consummated,
these acquisitions would not be material to the Company, either individually or
in the aggregate. See "Risk Factors--Rapid Growth" and "Business-- Operating and
Growth Strategy." The Company will not receive any of the proceeds from the sale
of the 80,000 shares of Common Stock by the Selling Stockholder. See "Principal
and Selling Stockholders."

11
<PAGE>
CAPITALIZATION

The following table sets forth the capitalization of the Company at October
5, 1996 and as adjusted to give effect to the receipt of the net proceeds from
the sale of 1,020,000 shares of Common Stock offered by the Company hereby at an
assumed offering price of $33.00 per share. This table should be read in
conjunction with the Company's Consolidated Financial Statements and Notes
thereto included herein.

<TABLE>
<CAPTION>
OCTOBER 5, 1996
----------------------
ACTUAL AS ADJUSTED
--------- -----------
(IN THOUSANDS)
<S> <C> <C>
Short-term debt (1)....................................................................... $ 17,187 $ 606
Long-term debt............................................................................ 1,524 1,524
Stockholders' equity:
Preferred stock: 2,000,000 shares authorized; none issued............................... -- --
Common stock: 10,000,000 shares authorized: 6,397,346 shares issued and outstanding and
7,417,346 shares issued and outstanding, pro forma as adjusted (2).................... 64 74
Additional paid-in capital................................................................ 33,622 64,737
Retained earnings......................................................................... 9,215 9,215
Less treasury stock, at cost (20,900 shares at October 5, 1996)........................... (204) (204)
--------- -----------
Total stockholders' equity............................................................ 42,697 73,822
--------- -----------
Total capitalization (3).............................................................. $ 61,408 $ 75,952
--------- -----------
--------- -----------
</TABLE>

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

(1) Short-term debt excludes floor plan financing which is classified as
accounts payable. See Note 6 of the Notes to Consolidated Financial
Statements.

(2) Excludes 311,853 shares reserved for additional option grants under the
Company's stock option plans and excludes 363,147 shares subject to
outstanding options at October 5, 1996. See Note 15 of the Notes to
Consolidated Financial Statements.

(3) Consists of short-term debt, long-term debt and total stockholders' equity.

12
<PAGE>
PRICE RANGE OF COMMON STOCK AND DIVIDEND POLICY

The following table sets forth, for the periods indicated, the high and low
sales price for the Common Stock for the quarters indicated as reported on the
Nasdaq National Market. The following prices have been adjusted to reflect the
10% stock dividend effected on May 22, 1995 and a three-for-two stock split in
the form of a stock dividend effected on October 4, 1996.

<TABLE>
<CAPTION>
PRICE RANGE
--------------------
HIGH LOW
--------- ---------
<S> <C> <C>
FISCAL 1995
First Quarter............................................................ $ 9.24 $ 5.61
Second Quarter........................................................... 12.67 7.88
Third Quarter............................................................ 13.83 10.50
Fourth Quarter........................................................... 12.33 7.50

FISCAL 1996
First Quarter............................................................ $ 10.50 $ 8.00
Second Quarter........................................................... 11.33 8.67
Third Quarter............................................................ 22.75 9.17
Fourth Quarter........................................................... 38.00 20.38

FISCAL 1997
First Quarter (through February 5, 1997)................................. $ 38.00 $ 27.00
</TABLE>

On February 5, 1997, the last reported sales price of the Common Stock on
the Nasdaq National Market was $33.00. As of January 31, 1997, there were
approximately 217 holders of record of the Common Stock.

Since its initial public offering of Common Stock on April 3, 1992, the
Company has not paid any cash dividends on the Common Stock. The Company
currently intends to retain earnings for use in the operation and expansion of
its business and therefore does not anticipate paying cash dividends in the
foreseeable future. In addition, the Credit Facility prohibits the payment of
cash dividends.

13
<PAGE>
SELECTED CONSOLIDATED FINANCIAL AND OPERATING DATA
(IN THOUSANDS, EXCEPT PER SHARE DATA)

The following table summarizes certain selected consolidated financial
information for each of the last five fiscal years and for the nine months ended
October 5, 1996 derived from the Consolidated Financial Statements of the
Company. The selected consolidated financial information for the nine months
ended October 5, 1995 is derived from the unaudited financial statements of the
Company. In the opinion of management, the unaudited results of operations for
the nine months ended October 5, 1995 include all adjustments, consisting only
of normal recurring accruals necessary for a fair presentation of such
information. The results of operations for the nine months ended October 5, 1996
are not necessarily indicative of the results that may be expected for the full
fiscal year. The information set forth below should be read in conjunction with
the Consolidated Financial Statements of the Company and the Notes thereto and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" appearing elsewhere in this Prospectus or incorporated by reference
herein.

<TABLE>
<CAPTION>
NINE MONTHS ENDED
FISCAL YEARS (1) OCTOBER 5,
------------------------------------------------------- --------------------
1991 1992 (2) 1993 1994 (3) 1995 1995 1996 (4)
--------- ----------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF INCOME DATA:
Net sales and revenues:
Equipment and supplies......................... $ 43,492 $ 53,752 $ 102,442 $ 130,270 $ 211,150 $ 157,418 $ 214,092
Services and other............................. 6,464 7,637 9,736 14,305 19,560 14,040 19,943
--------- ----------- --------- --------- --------- --------- ---------
Total net sales and revenues..................... 49,956 61,389 112,178 144,575 230,710 171,458 234,035

Cost of equipment and supplies................... 36,217 46,839 92,358 117,594 192,839 143,736 192,541
Cost of services and other....................... 1,371 1,337 1,793 3,307 4,335 3,324 4,381
--------- ----------- --------- --------- --------- --------- ---------
Total cost of sales and revenues............. 37,588 48,176 94,151 120,901 197,174 147,060 196,922
--------- ----------- --------- --------- --------- --------- ---------
Gross profit..................................... 12,368 13,213 18,027 23,674 33,536 24,398 37,113
Operating expenses:
Selling, general and administrative............ 8,653 9,225 12,969 17,231 23,247 17,130 24,313
Royalty expense................................ 1,485 1,732 605 -- -- -- --
Depreciation and amortization.................. 149 203 400 886 1,004 673 1,703
--------- ----------- --------- --------- --------- --------- ---------
Total operating expense...................... 10,287 11,160 13,974 18,117 24,251 17,803 26,016
--------- ----------- --------- --------- --------- --------- ---------
Income from operations........................... 2,081 2,053 4,053 5,557 9,285 6,595 11,097
Other expense (income):
Interest expense............................... 754 604 850 1,031 1,999 1,507 1,594
Litigation settlement and related costs........ -- -- -- -- -- -- 4,392
Miscellaneous.................................. 26 (54) (57) (57) (64) (34) (133)
--------- ----------- --------- --------- --------- --------- ---------
Total other expense.......................... 780 550 793 974 1,935 1,473 5,853
--------- ----------- --------- --------- --------- --------- ---------
Income from continuing operations before income
taxes (5)........................................ 1,301 1,503 3,260 4,583 7,350 5,122 5,244
Income tax expense................................. 40 523 1,360 1,856 2,983 2,074 2,127
--------- ----------- --------- --------- --------- --------- ---------
Net income from continuing operations.............. $ 1,261 $ 980 $ 1,900 $ 2,727 $ 4,367 $ 3,048 $ 3,117
--------- ----------- --------- --------- --------- --------- ---------
--------- ----------- --------- --------- --------- --------- ---------
Net income from continuing operations per share
(fully diluted) (6).............................. $ 0.57 $ 0.31 $ 0.52 $ 0.75 $ 1.08 $ 0.76 $ 0.61
--------- ----------- --------- --------- --------- --------- ---------
--------- ----------- --------- --------- --------- --------- ---------
Pro forma income from continuing operations
(7)............................................ $ 702 $ 917 $ 1,900 $ 2,727 $ 4,367 $ 3,048 $ 3,117
Pro forma net income (7)......................... 684 702 1,900 2,727 4,367 3,048 3,117
Pro forma net income per share
(fully diluted) (6)(7)......................... $ 0.31 $ 0.22 $ 0.52 $ 0.75 $ 1.08 $ 0.76 $ 0.61
</TABLE>

14
<PAGE>

<TABLE>
<CAPTION>
AS OF FISCAL YEAR END AS OF OCTOBER 5,
----------------------------------------------------- --------------------
1991 1992 1993 1994 1995 1995 1996
--------- --------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Working capital................................ $ 301 $ 5,768 $ 6,522 $ 6,556 $ 10,340 $ 10,233 $ 26,675
Total assets................................... 18,852 26,813 34,086 57,061 63,985 72,895 108,081
Total debt (8)................................. 6,729 7,053 9,124 16,031 17,386 16,807 18,711
Stockholders' equity........................... 2,766 8,616 10,594 13,130 19,200 17,550 42,697
</TABLE>

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

(1) On December 30, 1992, the Company changed its fiscal year from a 52 or
53-week period ending on the first Saturday following December 31 to a
12-month period ending January 5.

(2) During fiscal 1992, the Company acquired the outstanding stock of C&N Corp.
and discontinued the Company's retail operations.

(3) During fiscal 1994, the Company acquired the outstanding stock of Xenas. See
Note 12 of Notes to Consolidated Financial Statements.

(4) In March 1996, the Company acquired the assets of TCSS. See Note 12 of Notes
to Consolidated Financial Statements.

(5) The first nine months of 1996 reflect the Vanstar litigation settlement and
related costs of $4,392. Without this charge, net income would have been
$5,730 and fully diluted net income per share would have been $1.13 for the
first nine months of 1996.

(6) Net income per share from continuing operations and pro forma per share
amounts are calculated using pro forma weighted average shares outstanding
adjusted for the three-for-two stock split in the form of a stock dividend
effective on October 4, 1996.

(7) The pro forma data compares the net operating results of the Company for
fiscal years 1991 and 1992 with the comparable results for fiscal years 1993
through 1995 as if the Company had been taxed as a C Corporation on all
income in fiscal 1991 and 1992 at an effective rate of 39%. The net
operating results for 1991 do not include a charge for compensation of the
Company's principal stockholder.

(8) Total debt excludes floor plan financing which is classified as accounts
payable. See Note 6 of Notes to Consolidated Financial Statements.

15
<PAGE>
SELECTED PRO FORMA CONSOLIDATED FINANCIAL AND OPERATING DATA
(IN THOUSANDS, EXCEPT PER SHARE DATA)

The selected pro forma consolidated financial data presented below are
derived from the Company's Consolidated Financial Statements and related Notes
included elsewhere in this Prospectus or incorporated by referenced herein, as
adjusted to give effect to the acquisition of TCSS. See "Business--
Acquisitions." The selected pro forma statement of income data give effect to
the acquisition of TCSS as if it had occurred on January 6, 1995. The pro forma
adjustments are based upon available information and certain assumptions that
the Company believes are reasonable. The pro forma financial data do not purport
to represent what the Company's results of operations would actually have been
had the acquisition of TCSS in fact occurred on such date, or to project the
Company's results of operations for any future period. The selected pro forma
consolidated financial data should be read in conjunction with "Management's
Discussion and Analysis of Financial Condition and Results of Operations,"
"Business-- Acquisitions," the Company's Consolidated Financial Statements and
the Notes thereto appearing elsewhere in this Prospectus or incorporated by
reference herein and the Pro Forma Consolidated Condensed Statement of Income.

<TABLE>
<CAPTION>
PRO FORMA CONSOLIDATED
FINANCIAL AND OPERATING DATA
------------------------------
YEAR ENDED NINE MONTHS
JANUARY 5, ENDED OCTOBER
1996 5, 1996
-------------- --------------
<S> <C> <C>
STATEMENT OF INCOME DATA:
Net sales and revenues:
Equipment and supplies....................................................... $ 270,532 $ 225,669
Services and other........................................................... 20,677 20,183
-------------- --------------
Total net sales and revenues............................................... 291,209 245,852

Cost of equipment and supplies................................................. 245,068 202,836
Cost of services and other..................................................... 4,610 4,428
-------------- --------------
Total cost of sales and revenues........................................... 249,678 207,264
-------------- --------------
Gross profit................................................................... 41,531 38,588
Operating expenses:
Selling, general and administrative.......................................... 29,050 25,194
Depreciation and amortization................................................ 1,746 1,856
-------------- --------------
Total operating expenses................................................... 30,796 27,050
-------------- --------------
Income from operations......................................................... 10,735 11,538
Other expenses (income):
Interest expense............................................................. 2,724 1,609
Litigation settlement and related costs...................................... -- 4,392
Miscellaneous................................................................ (59) (131)
-------------- --------------
Total other expenses....................................................... 2,665 5,870
-------------- --------------
Income from continuing operations before income taxes............................ 8,070 5,668
Income tax expense............................................................... 3,276 2,297
-------------- --------------
Net income from continuing operations............................................ $ 4,794 $ 3,371(1)
-------------- --------------
-------------- --------------
Net income from continuing operations per share (fully diluted).................. $ 1.14 $ 0.66(1)
-------------- --------------
-------------- --------------
</TABLE>

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

(1) The first nine months of 1996 pro forma results reflect the Vanstar
litigation settlement and related costs of $4,392. Without this charge, pro
forma net income would have been $5,984 and pro forma fully diluted net
income per share would have been $1.17.

16
<PAGE>
RECENT FINANCIAL RESULTS

The Company recently announced financial results for the fourth quarter and
the fiscal year ended January 5, 1997. The following table presents selected
unaudited historical financial information of the Company for the periods
indicated. Such historical financial information, in the opinion of management,
includes all adjustments (consisting of normal occurring accruals) necessary for
a fair presentation of results of operations for these periods.

<TABLE>
<CAPTION>
QUARTER ENDED YEAR ENDED
JANUARY 5, JANUARY 5,
--------------------- ----------------------
1997 1996 1997 1996
---------- --------- ---------- ----------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)
<S> <C> <C> <C> <C>
Net sales and revenues............................................ $ 102,323 $ 59,252 $ 336,358 $ 230,710
Net income........................................................ $ 3,115 $ 1,319 $ 6,232 $ 4,367
Net Income per fully-diluted common share:........................ $ 0.47 $ 0.32 $ 1.14 $ 1.08
</TABLE>

Total net sales and revenues for the fourth quarter ended January 5, 1997
increased $43.0 million, or 72.5%, to $102.3 million from $59.3 million in the
fourth quarter of fiscal 1995. This increase was primarily attributable to the
acquisitions of TCSS and DILAN and, to a lesser extent, increased sales to
existing and new customers. After eliminating fiscal 1996 revenues from the TCSS
and DILAN acquisitions, total net sales and revenues for the fourth quarter
increased approximately 32.0%. Net income for the fourth quarter of fiscal 1996
increased 136% to $3.1 million, or $0.47 per fully diluted share, from $1.3
million, or $0.32 per fully diluted share, in the fourth quarter of fiscal 1995.
The increase in net income was primarily attributable to improvement in gross
profit margins which offset any increases in operating expenses. The improvement
in gross profit margins can be attributed to the Company's increased purchasing
power, which allowed it to negotiate lower costs from its suppliers. In
addition, service revenues, which have a higher gross profit margin, increased
as a percentage of total net sales and revenues.

Total net sales and revenues increased $105.7 million, or 45.8%, to $336.4
million in fiscal 1996 from $230.7 million in fiscal 1995. This increase was
primarily attributable to the TCSS and DILAN acquisitions and, to a lesser
extent, increased sales to existing and new customers. After eliminating (i)
fiscal 1995 revenues relating to the Kingsport, Tennessee branch, which was
closed in September 1995, and P&G, which ceased to purchase products and
services from the Company in September 1995, and (ii) fiscal 1996 revenues from
the TCSS and DILAN acquisitions, total net sales and revenues for fiscal 1996
increased approximately 27.1%. Net income for fiscal 1996 increased 43.0% to
$6.2 million, or $1.14 per fully diluted share, from $4.4 million, or $1.08 per
fully diluted share, in fiscal 1995. Fiscal 1996 results include an after tax
charge of $2.6 million ($0.48 per share) for the settlement and related costs
associated with the Vanstar litigation. The increase in net income was primarily
attributable to improvement in gross profit margins which offset any increases
in operating expenses. The improvement in gross profit margins can be attributed
to the Company's increased purchasing power, which allowed it to negotiate lower
costs from its suppliers. In addition, service revenues, which have a higher
gross profit margin, increased as a percentage of total net sales and revenues.

17
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

GENERAL

The Company has experienced significant growth in recent years as total net
sales and revenues have increased to $293.3 million for the twelve months ended
October 5, 1996 from $50.0 million in fiscal 1991, a compound annual growth rate
of 44.8%. During the same period, net income increased to $7.0 million
(excluding the impact of the Vanstar litigation settlement) from $1.3 million, a
compound annual growth rate of 43.4%. During the first nine months of 1996,
total net sales and revenues were $234.0 million, which represents an increase
of $62.6 million, or 36.5%, over total net sales and revenues from the same
period in 1995. During the first nine months of 1996, the Company had net income
of $3.1 million which represents an increase of $0.1 million from net income of
$3.0 million in the same period in 1995. Excluding the effect of the Vanstar
litigation settlement in 1996, net income would have been $5.7 million which
represents an increase of $2.7 million or 90.0% over the same period in 1995.
The Company has been able to increase its total net sales and revenues by
expanding its base of commercial, health care, governmental and educational
customers, acquiring and opening new branches and taking advantage of the
increased use of and demand for microcomputers.

The Company offers a wide range of microcomputer products and related
services. Typically, equipment and supplies sales carry relatively lower gross
profit margins while service revenues carry significantly higher gross profit
margins. For fiscal years 1994 and 1995, and the first nine months of fiscal
1996, the gross profit margin on equipment and supplies sales was 9.7%, 8.7% and
10.1%, respectively, while the gross profit margin on service revenues was
76.9%, 77.8% and 78.0%, respectively.

In fiscal 1995 and 1994, total net sales and revenue growth benefited from
roll-out projects with major customers (including hardware, software and
services), which are typically not recurring on an annual basis. Such projects,
as well as other high-volume equipment sales, typically have a lower than
average gross profit margin on the sale of hardware but are often accompanied by
service revenues which have a higher than average gross profit margin. However,
the overall gross profit margin contributed by such projects is lower than the
Company's average gross profit margin on total net sales and revenues. Because
of the magnitude of these projects, they can cause substantial short-term
variability in both sales and service revenues and gross profit margins.
Roll-out customers in fiscal 1995 and 1994 included GE, Long John Silvers',
Providian, and Western-Southern. In the first nine months of fiscal 1996, there
was only one small roll-out project. However, in December 1996, the Company was
awarded two contracts which the Company estimates will result in approximately
$45 million of sales and revenues over the immediately following 18-month
period. In January 1997, the Company was awarded two contracts which the Company
estimates will result in approximately $15 million of sales and revenues during
fiscal 1997.

The Company's customer base changes from year to year. The largest customers
are typically growing businesses and governmental entities that are purchasing
equipment and services for multiple locations. While only four of the Company's
top 10 customers were the same during fiscal 1994, 1995 and the first nine
months of 1996, many of the Company's largest customers in a given year may
remain customers of the Company at reduced levels. Customers who purchase a
large volume of equipment in one year may purchase services offered by the
Company in subsequent years. Although the Company has been successful in
retaining most of its larger customers, the microcomputer products and services
market is highly competitive. Most microcomputer products are sold pursuant to
purchase orders. For larger procurements, the Company will enter into written
contracts with customers. These contracts typically establish prices for certain
equipment and services and require short delivery dates for equipment and
services ordered by the customer. These contracts do not require the customer to
purchase microcomputer products or services exclusively from the Company and may
be terminated without cause upon 30 to 90 days' notice. Most contracts are for a
term of 12 to 24 months and, in order to be renewed, may require submission of a
new bid in response to the customer's request for proposal. As of February 5,
1997, the Company had been

18
<PAGE>
awarded contracts which it estimates will result in an aggregate of
approximately $85.6 million of net sales and revenues after February 5, 1997. Of
this amount, the Company estimates that $49.8 million of net sales and revenues
will be generated during fiscal year 1997 and the remainder will be generated
after the end of fiscal year 1997. An estimate of the value of contracts awarded
as of a comparable date in the preceding fiscal year is not available. See "Risk
Factors--Dependence on Key Customers" and "Business-- Customers."

Another major component of revenue growth has been the opening of new
branches by either internal expansion or acquisition. In fiscal 1994, the
Company opened two new branches, accounting for $5.5 million, $50.6 million and
$60.8 million of net sales and revenues in fiscal 1994 and 1995 and the first
nine months of 1996, respectively. In fiscal 1994 and 1995, the Company made two
acquisitions which contributed $0.3 million, $2.1 million and $2.8 million to
total net sales and revenues for the same periods since their dates of
acquisition. In the first nine months of 1996, the Company acquired two
companies, TCSS, a computer reseller based in Des Moines, Iowa (1995 total
revenue of $60.5 million) and AA Microsystems, Inc., a network systems
integrator in Birmingham, Alabama (1995 total revenue of $2.9 million).
Combined, these two acquisitions contributed since their dates of acquisition
(March 1996 and August 1996, respectively), $47.2 million to the Company's total
net sales and revenues for the first nine months of 1996. On October 11, 1996,
the Company acquired DILAN, a network integrator based in Hickory, North
Carolina (fiscal year ended March 31, 1996 total revenue of $19.3 million). See
"Business--Acquisitions."

Gross profit margins can vary significantly on a quarterly basis and are
affected by a number of factors including: the timing of large roll-out
projects; increased competition; changes in pricing policies by the Company, its
competitors or manufacturers; manufacturers' rebate programs; the timing of new
product introductions by manufacturers; changes in the mix of revenues derived
from the sale of products as compared to service revenues and general economic
conditions. Manufacturers' rebates (which, together with the market development
funds are collectively referred to on the Company's Consolidated Balance Sheets
and related Notes as Vendor Incentive Rebates) and other favorable pricing terms
from manufacturers are accounted for as a reduction in the cost of goods sold.
The Company's operating profit margins are favorably affected by the receipt of
market development funds from a number of its manufacturers since such funds are
accounted for as a reduction in selling, general and administrative expenses.

19
<PAGE>
RESULTS OF OPERATIONS

The following table presents, for the period indicated, the components of
the Company's statement of income as a percentage of total net sales and
revenues.

<TABLE>
<CAPTION>
NINE MONTHS ENDED
FISCAL YEARS OCTOBER 5,
------------------------ ------------------------
1994 1995 1995 1996
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
STATEMENT OF INCOME DATA:
Net sales and revenues:
Equipment and supplies............................................. 90.1% 91.5% 91.8% 91.5%
Services and other................................................. 9.9 8.5 8.2 8.5
----- ----- ----- -----
Total net sales and revenues..................................... 100.0 100.0 100.0 100.0

Cost of equipment and supplies....................................... 81.3 83.6 83.9 82.3
Cost of services and other........................................... 2.3 1.9 1.9 1.8
----- ----- ----- -----
Total cost of sales and revenues................................. 83.6 85.5 85.8 84.1
----- ----- ----- -----
Gross profit......................................................... 16.4 14.5 14.2 15.9

Operating expenses:
Selling, general and administrative................................ 11.9 10.1 10.0 10.4
Depreciation and amortization...................................... 0.6 0.4 0.4 0.7
----- ----- ----- -----
Total operating expenses......................................... 12.5 10.5 10.4 11.1
----- ----- ----- -----
Income from operations............................................... 3.9 4.0 3.8 4.8

Other expense:
Interest expense................................................... 0.7 0.8 0.8 0.7
Litigation settlement and related costs............................ -- -- -- 1.9
----- ----- ----- -----
Total other expense.............................................. 0.7 0.8 0.8 2.6
----- ----- ----- -----
Income before income taxes............................................. 3.2 3.2 3.0 2.2
Income tax expense..................................................... 1.3 1.3 1.2 0.9
----- ----- ----- -----
Net income............................................................. 1.9% 1.9% 1.8% 1.3%
----- ----- ----- -----
----- ----- ----- -----
</TABLE>

20
<PAGE>
NINE MONTHS ENDED OCTOBER 5, 1996 COMPARED TO NINE MONTHS ENDED OCTOBER 5, 1995

TOTAL NET SALES AND REVENUES. Total net sales and revenues increased $62.6
million, or 36.5%, to $234.0 million in the first nine months of 1996 from
$171.5 million in the first nine months of 1995. This increase was attributable
to the acquisition of TCSS and increased sales to existing and new customers.
After eliminating (i) fiscal 1995 revenues relating to the Kingsport, Tennessee
branch which was closed in September 1995, and P&G, which ceased to purchase
products and services from the Company in September 1995, and (ii) fiscal 1996
revenues from the acquisition of TCSS which was acquired in March 1996, total
net sales and revenues increased 25.2%. Sales of equipment and supplies
increased
$56.7, million or 36.0%, to $214.1 million in the first nine months of 1996 from
$157.4 million in the first nine months of 1995. After elimination of the
revenues described above, sales of equipment and supplies increased 22.9%.
Service revenues increased $5.9 million, or 42.1%, to $19.9 million in the first
nine months of 1996 from $14.0 million in the first nine months of 1995. After
elimination of the revenues described above, service revenues increased 50.2%.

GROSS PROFIT. Gross profit margin was 15.9% in the first nine months of
1996 compared to 14.2% in the first nine months of 1995. This increase was
primarily attributable to a lesser number of lower margin, high volume equipment
roll-outs, larger vendor rebates and the increase in the margin for service
revenues. Vendor rebates increased $2.4 million, or 75.0%, to $5.6 million in
the first nine months of 1996 from $3.2 million in the first nine months of
1995. Provided there are no changes in rebate programs, the level of vendor
rebates is expected to continue into the fourth quarter as volume purchases with
major manufacturers continue to increase.

OPERATING EXPENSES. Selling, general and administrative expenses (also
including rent expense and provision for doubtful accounts) expressed as a
percentage of total net sales and revenues increased to 10.4% in the first nine
months of 1996 from 10.0% in the first nine months of 1995. This increase is
primarily attributable to the addition of technical personnel as a result of the
growth of the Company's service business. As the personnel reach full
productivity, their costs as a percentage of services revenues should decrease.
In addition, market development funds, which reduce selling, general and
administrative expenses, have declined during the first nine months of 1996 to
$2.2 million from $2.3 million in the first nine months of 1995 primarily as a
result of vendors shifting funds to rebates. As a percentage of total net sales
and revenues, market development funds declined to 0.9% in the first nine months
of 1996, from 1.3% in the first nine months of 1995. Total operating expenses
expressed as a percentage of total net sales and revenues increased to 11.1% in
the first nine months of 1996 from 10.4% in the first nine months of 1995, due
to the reduction of market development funds and the increase in depreciation
related to the new headquarters and distribution facilities and amortization of
goodwill related to the acquisition of TCSS.

INCOME FROM OPERATIONS. Income from operations increased $4.5 million, or
68.3%, to $11.1 million in the first nine months of 1996 from $6.6 million in
the first nine months of 1995. The Company's operating margin increased to 4.8%
in the first nine months of 1996 from 3.9% in the first nine months of 1995
because the increase in gross margin more than offset the increase in operating
expenses as a percentage of net sales and revenues.

INTEREST EXPENSE. Interest expense was $1.6 million in the first nine
months of 1996 compared to $1.5 million in the first nine months of 1995.

INCOME TAXES. The Company's effective tax rate was 40.6% in the first nine
months of 1996 compared to 40.5% in the first nine months of 1995.

LITIGATION SETTLEMENT AND RELATED COSTS. On April 29, 1996, the Company
agreed to a settlement of the litigation with Vanstar. The settlement of $3.3
million consisted of a payment made by the Company to Vanstar of $1.65 million
in cash and a $1.65 million note which was paid on August 27, 1996. The

21
<PAGE>
settlement agreement also provided for mutual forgiveness of any and all claims
or obligations of the parties, resulting in a write-off of $0.5 million of
receivables from Vanstar and additional expenses of $0.5 million for costs
related to the litigation.

NET INCOME. Net income increased $0.1 million, or 2.3%, to $3.1 million in
the first nine months of 1996 from $3.0 million in the first nine months of 1995
due to the factors described above. Excluding the impact of the Vanstar
settlement, net income in the first nine months of 1996 would have been $5.7
million, an increase of 90.0% over the comparable period in 1995.

FISCAL YEAR 1995 COMPARED TO FISCAL YEAR 1994

TOTAL NET SALES AND REVENUES. Total net sales and revenues increased $86.1
million, or 59.6%, to $230.7 million in fiscal 1995 from $144.6 million in
fiscal 1994. Of the increase, approximately $82.3 million resulted from
increased sales to existing customers, including $35.6 million from one customer
and $18.4 million from two roll-out projects. The remainder of the increase,
approximately $3.8 million, was attributable to the opening of a new branch
office in Birmingham, Alabama in January 1995 and the acquisition of Xenas in
November 1994.

Sales of equipment and supplies increased $80.9 million, or 62.1%, to $211.2
million in fiscal 1995 from $130.3 million in fiscal 1994. Of the increase,
approximately $77.5 million resulted from internal growth and approximately $3.4
million was attributable to the opening of the Birmingham branch and Xenas
acquisition described above. Services revenues increased $4.5 million, or 33.8%,
to $17.9 million in fiscal 1995 from $13.4 million in fiscal 1994. Of this
increase, approximately $0.2 million resulted from the opening of the Birmingham
branch, with the remainder due to internal growth. As part of an overall
strategy to gain market share in 1995, the Company increased its hardware sales
by more aggressively bidding on large volume projects which resulted in an
increase in the proposition of equipment and supplies sales to total net sales
and revenues in 1995 as compared to 1994.

During the third quarter of 1995, the Company experienced a decline in its
sales of equipment to P&G. P&G discontinued using the Company as its primary
computer equipment supplier as part of P&G's program to select a single
world-wide supplier. See "Risk Factors--Dependence on Major Customers."
Additionally, the Company closed its Kingsport, Tennessee branch in an effort to
focus on more profitable business opportunities.

GROSS PROFIT. Gross profit margin was 14.5% in fiscal 1995 compared to
16.4% in fiscal 1994. This decrease was attributable to a combination of strong
price competition and large volume equipment roll-outs which increased the
proportion of total net sales and revenues derived from relatively lower gross
margin sales of products as compared to relatively higher gross margin revenues
derived from services.

OPERATING EXPENSES. Selling, general and administrative expenses (also
including rent expense and provision for doubtful accounts) expressed as a
percentage of total net sales and revenues declined to 10.1% in fiscal 1995 from
11.9% for fiscal 1994. This was attributable to the large volume increase in
sales in 1995 and continued emphasis on expense control. Another contributing
factor was the implementation of a new management information system which has
allowed the Company to reduce overhead costs as a percentage of sales. Total
operating expenses expressed as a percentage of total net sales and revenues
declined to 10.5% in fiscal 1995 from 12.5% in fiscal 1994 as the increase in
these costs slowed relative to the growth in total net sales and revenues.

INCOME FROM OPERATIONS. Income from operations increased $3.7 million, or
67.1%, to $9.3 million in fiscal 1995 from $5.6 million in fiscal 1994. The
Company's operating margin was essentially unchanged in 1995 as compared to 1994
as the decline in gross margin was offset by a decline in total operating
expenses as a percentage of total net sales and revenues.

22
<PAGE>
INTEREST EXPENSE. Total interest expense was $2.0 million in fiscal 1995
compared to $1.0 million in fiscal 1994. The increase was attributable to higher
average levels of debt outstanding on the bank line of credit and the floor plan
financing arrangements during fiscal 1995 as compared to fiscal 1994. At January
5, 1996, the amounts outstanding on the bank line of credit and floor plan lines
of credit were $16.9 million and $17.7 million, respectively. The additional
levels of financing were necessary primarily to support the increased levels of
accounts receivable and inventory needed to finance the higher total net sales
and revenues. In addition, the weighted average interest rate on bank borrowings
increased to 8.7% in fiscal 1995 compared with 7.1% in fiscal 1994, because of
higher interest rates in the first quarter of 1994. See "Management's Discussion
and Analysis of Financial Condition and Results of Operations-- Liquidity and
Capital Resources."

INCOME TAXES. The Company's effective tax rate was 40.6% in fiscal 1995
compared to 40.5% in fiscal 1994.

NET INCOME. Net income increased $1.6 million, or 60.1%, to $4.3 million in
fiscal 1995 from $2.7 million in fiscal 1994. The increase was a result of the
factors described above.

QUARTERLY RESULTS

The following table presents unaudited consolidated quarterly operating data
for each of the Company's last 11 fiscal quarters. This information has been
prepared by the Company on a basis consistent with the Company's audited
consolidated financial statements, including all adjustments, consisting of
normal recurring accruals, that the Company considers necessary for a fair
presentation of the data. Such quarterly results are not necessarily indicative
of future results of operations. This information should be read in conjunction
with the Company's Consolidated Financial Statements and Notes thereto included
elsewhere in this Prospectus or incorporated by reference herein.
<TABLE>
<CAPTION>
1994 1995
-------------------------------------------------- --------------------------------------------------
FIRST SECOND THIRD FOURTH FIRST SECOND THIRD FOURTH
QUARTER QUARTER QUARTER QUARTER QUARTER QUARTER QUARTER QUARTER
----------- ----------- ----------- ----------- ----------- ----------- ----------- -----------
(IN THOUSANDS, EXCEPT PER SHARE AND MARGIN DATA)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net sales and revenues..... $ 28,013 $ 30,566 $ 41,905 $ 44,101 $ 47,990 $ 58,487 $ 64,982 $ 59,252
Gross profit............... 4,587 5,492 6,033 7,562 7,753 7,882 8,765 9,137
Income from operations..... 897 1,281 1,403 1,976 1,988 2,277 2,332 2,688
Net income................. 422 634 716 955 906 1,055 1,088 1,319
Earnings per share
(fully diluted).......... $ 0.12 $ 0.18 $ 0.20 $ 0.26 $ 0.24 $ 0.27 $ 0.26 $ 0.32

Gross profit margin........ 16.4% 18.0% 14.4% 17.1% 16.2% 13.5% 13.5% 15.4%
Operating profit margin.... 3.2 4.2 3.3 4.5 4.1 3.9 3.6 4.5
Net income margin.......... 1.5 2.1 1.7 2.2 1.9 1.8 1.7 2.2

<CAPTION>
1996
-------------------------------------
FIRST SECOND THIRD
QUARTER QUARTER QUARTER
----------- ----------- -----------

<S> <C> <C> <C>
Net sales and revenues..... $ 63,224 $ 77,836 $ 92,975
Gross profit............... 9,600 12,846 14,667
Income from operations..... 2,457 3,749 4,891
Net income................. (1,355) 1,853 2,619
Earnings per share
(fully diluted).......... $ (0.33) $ 0.43 $ 0.40
Gross profit margin........ 15.2% 16.5% 15.8%
Operating profit margin.... 3.9 4.8 5.3
Net income margin.......... (2.1) 2.4 2.8
</TABLE>

The Company's quarterly results have varied in the past and are expected to
vary in the future primarily as a result of the timing of product roll-out
projects since the gross profit margins on the sales of products are
substantially lower than the gross profit margins on the sales of services. In
addition to the effect of roll-out projects, the gross profit margins for the
second and third quarters of fiscal 1995 were also adversely affected by strong
price competition in the marketplace and the Company's strategic decision to
aggressively bid for certain large volume equipment projects. Acquisitions may
also have a significant impact on quarterly results. The first quarter of 1996
includes the effect of the Vanstar litigation settlement and related costs of
$4.4 million. Without this charge, net income would have been $1.3 million, net
income per share would have been $0.30 and net income margin would have been
2.0%.

LIQUIDITY AND CAPITAL RESOURCES

Cash used in operating activities was $5.5 million in the first nine months
of 1996. Cash used in investing activities included $4.5 million for
acquisitions and $2.8 million for capital expenditures. Cash

23
<PAGE>
provided by financing activities included $17.9 million of net proceeds from the
issuance of 1.4 million shares of Common Stock in July 1996 and $1.3 million
from the exercise of stock options less $1.1 million of repayments on bank notes
payable, $2.3 million of repayments on various notes payable and $0.3 million
for the redemption of warrants.

Cash used in operating activities was $0.4 million in fiscal 1995. Cash used
in investing activities included $1.5 million for capital expenditures including
furniture, office equipment, leasehold improvements and acquisitions. Cash
provided by financing activities included $1.6 million from the exercise of
stock options and $1.4 million of net proceeds from bank notes payable less $0.3
million of repayments on various notes payable.

A significant part of the Company's inventories is financed by floor plan
arrangements with third parties. At January 5, 1997, these lines of credit
totaled $37.0 million, including $12.0 million with ICC and $25.0 million with
DFS. Borrowings under the ICC floor plan arrangement are made on sixty day
notes, with one-half of the note amount due in thirty days. Borrowings under the
DFS floor plan arrangement are made on thirty day notes. All such borrowings are
secured by the related inventory. Financing on many of the arrangements which
are subsidized by manufacturers is interest free. The average rate on the plans
overall is less than 2.1%. The Company classifies amounts outstanding under the
floor plan arrangements as accounts payable.

The Company's financing of receivables is provided through its Credit
Facility, which permits the Company to borrow up to the lesser of $25.0 million
or an amount based upon a formula of eligible trade receivables. The Credit
Facility carries a variable interest rate based on (i) Star Bank's prime rate
less the Incentive Pricing Spread or (ii) LIBOR plus the Incentive Pricing
Spread, at the Company's election. The Incentive Pricing Spread is adjusted
quarterly. At January 5, 1997, the amount outstanding was $21.9 million of which
$11.9 million was at an interest rate of 7.5%, and $10.0 million was at an
interest rate of 7.25% based on LIBOR rates. The Credit Facility expires in
April 1997 and is collateralized by substantially all of the assets of the
Company, except those assets that collateralize certain other financing
arrangements. Under the terms of the Credit Facility, the Company is prohibited
from paying any cash dividends and is subject to various restrictive covenants.

The Company believes that the net proceeds of this offering, together with
the anticipated cash flow from operations and current financing arrangements,
will be sufficient to satisfy the Company's capital requirements for the next 12
months.

24
<PAGE>
BUSINESS

GENERAL

Pomeroy Computer Resources is the tenth largest network value-added reseller
in the United States, as calculated by Network VAR Magazine based on 1995 local
area networking revenues. As such, the Company offers a broad range of
microcomputers and related products and provides a comprehensive selection of
integration and support services including network and system design, equipment
selection and procurement, complex network configuration, integration, Internet
and electronic commerce services, depot repair, on-site maintenance, staffing
and network management. The Company provides products and services to a wide
variety of commercial, health care, governmental, financial and educational
customers. The Company's operating strategy is to provide its customers with
cost-efficient comprehensive solutions that satisfy their information technology
requirements. To achieve this objective, the Company uses its (i) relationships
with leading computer hardware manufacturers, software developers and computer
product distributors and service providers to deliver and support quality
products at competitive prices, (ii) distribution skills to promptly and
efficiently manage inventory and deliver products, and (iii) technical expertise
to provide a broad range of complementary value-added services.

The Company offers microcomputer products from an array of manufacturers
including Compaq, Hewlett-Packard, IBM, Lexmark and Toshiba. The Company sells
these products together with a broad selection of networking, integration and
software products from manufacturers including 3Com, Bay Networks, Intel,
Microsoft, and Novell. Services provided by the Company allow customers to
outsource the selection, installation, integration and maintenance of their
microcomputer systems.

The Company is a Delaware corporation with its principal executive office
located at 1020 Petersburg Road, Hebron, KY 41048; its telephone number is (606)
586-0600. The Company maintains a web site which may be found at http:/
/www.pomeroy.com. The information contained in the Company's web site is not a
part of this Prospectus.

INDUSTRY TRENDS

In recent years, the ease of use and relatively low cost of PCs in
conjunction with the development of personal productivity software and the
emergence of increased usage of intranets, the Internet and the World Wide Web
has led to rapid growth in the number of PCs used by organizations. These
organizations, or individual departments within these organizations, have
increasingly sought to interconnect their PCs into LANs in order to share files,
data and printers. Separate LANs within a single facility or in geographically
dispersed locations may be interconnected through a WAN. Through LANs and WANs,
computing capability is distributed through interconnected PCs using a
client/server design. The typical client/server design installation consists of
a LAN with multiple centralized PCs operating as "servers" dedicated to
performing specific functions, such as file storage, communications routing and
print queuing for multiple "client" PCs on the LAN. These configurations are
powerful information management tools and are considered important and necessary
corporate assets.

Historically, large mainframe computer systems possessed greater speed and
capacity than PCs. Over time, PCs have evolved into more powerful tools while
decreasing in price. PCs are now able to perform, on a stand-alone basis, tasks
for which mainframes were historically required. Larger companies are augmenting
or replacing their mainframe computers with LANs and WANs, while medium and
smaller companies are becoming computerized with installations of LANs and WANs.
Furthermore, many companies that already have LANs and WANs are upgrading their
systems.

The advent of LANs, WANs and open systems has changed the manner in which
computer products are distributed in the market place by increasing the demand
for technical services offered together with

25
<PAGE>
hardware and software. The Company believes that the growing need for
increasingly complex microcomputer systems has increased outsourcing of
significant levels of sophisticated support services by commercial and
institutional customers. Outsourcing provides the customer with state-of-the-art
technical expertise on a cost-effective basis. Through outsourcing, a customer
contracts for services, including technical support, that traditionally had been
provided in-house by the customer.

The increased performance characteristics and networking capabilities of PCs
allow for customized solutions to a wide variety of customer needs. However,
networks frequently contain products from numerous manufacturers. As a result,
providers of microcomputer systems and services are increasingly being required
to offer products from many manufacturers and have the service expertise to help
companies plan for and implement new technologies, select and obtain PCs and
software at competitive prices, and coordinate the multiple PCs, peripheral
products and network communication devices into integrated systems.

OPERATING AND GROWTH STRATEGY

The Company's objective is to provide a single source, cost-effective
solution to its customers' information technology requirements. To achieve its
objective, the Company's strategy is to:

PROVIDE COMPREHENSIVE, COST-EFFICIENT PRODUCT SELECTION. Cost and breadth
of product offerings are significant considerations in a customer's selection of
a computer provider. The Company intends to meet or exceed customers'
expectations on a cost-effective basis by providing a wide range of advanced
microcomputer products from over 1,000 manufacturers. The Company uses its
sophisticated management information system to (i) facilitate timely delivery of
a wide range of products, (ii) allow sales people access to up-to-date product
availability and pricing information and (iii) tightly control inventory and
accounts receivable.

PROVIDE COMPLEMENTARY PROFESSIONAL SERVICES. In addition to cost and
selection, customers demand a full range of professional computer services from
a single source. The Company seeks to form broad-based relationships with its
customers by providing a comprehensive range of services that allows a customer
to outsource its microcomputer purchasing, installation and maintenance
functions to the Company. The Company provides a broad range of network and
integration services including on-site staffing, product configuration, design
and installation of voice and data cabling systems, service and support
contracts and network and technology consulting and related training. As of
January 5, 1997, the Company employed approximately 470 service and technical
personnel.

PURSUE ACQUISITION AND EXPANSION OPPORTUNITIES. Acquisitions have
contributed significantly to the Company's growth. The Company believes that
acquisitions are one method of increasing its presence in existing markets,
expanding into new geographic markets, adding experienced service personnel,
gaining new product offerings and services, obtaining more competitive pricing
as a result of increased purchasing volumes of particular products and improving
operating efficiencies through economies of scale. In recent years, there has
been consolidation among providers of microcomputer products and services and
the Company believes that this consolidation will continue, which, in turn, may
present additional opportunities for the Company to grow through acquisitions.

26
<PAGE>
ACQUISITIONS

The following table provides a summary of the acquisitions made by the
Company since its initial public offering in April 1992. A more detailed
description of the acquisitions follows the table.

<TABLE>
<CAPTION>
DATE STRATEGIC VALUE OF ACQUISITION TO THE
NAME OF ACQUIRED COMPANY ACQUIRED LOCATION(S) COMPANY
- ---------------------------------------- ----------- ------------------ ----------------------------------------
<S> <C> <C> <C>
C&N Corp. .............................. 12/92 Knoxville, TN * Expanded geographic markets
Jacksonville, FL *Expanded customer base
* Customer base allowed the Company to
provide incremental value-added
services

The Computer Store of Kentucky ......... 7/93 Louisville, KY * Increased market share in existing
d/b/a Connecting Point market
* Added experienced technical personnel
* Expanded customer base

Xenas Communications Corp. ............. 11/94 Cincinnati, OH * Added new products and services
d/b/a Envision (multi- media/video conferencing)

Cabling Unlimited, Inc. ................ 10/95 Indianapolis, IN * Enhanced services (cabling)
* Expanded geographic markets
* Added experienced technical and
operational personnel

The Computer Supply Store, Inc. ........ 3/96 Des Moines, IA * Expanded geographic markets
* Expanded customer base
* Customer base allowed the Company to
continue to provide incremental value-
added services

AA Microsystems, Inc. .................. 8/96 Birmingham, AL * Increased market share in existing
market
* Added experienced technical personnel
* Increased service offerings

Communications Technology, Inc. ........ 10/96 Hickory, NC * Added new services capabilities
d/b/a DILAN Charlotte, NC (Internet/ electronic commerce)
Raleigh, NC * Added experienced technical personnel,
Winston-Salem, NC in particular, WAN networking expertise
Greenville, SC * Expanded geographic markets
</TABLE>

C&N CORP. In December 1992, the Company acquired C&N Corp., a computer
reseller headquartered in Knoxville, Tennessee with a branch office in
Jacksonville, Florida. Through this acquisition, the Company expanded into the
Tennessee and Florida markets, expanded its customer base, and obtained the
opportunity to offer to C&N's customers value-added services to complement the
sale of products. Sales for these two branches have increased from $13.5 million
in fiscal 1993 to $29.3 million in fiscal 1995 and $43.2 million in fiscal 1996.
On January 3, 1997 C&N Corp. was merged with and into the Company.

CONNECTING POINT. In July 1993, the Company expanded its existing
Louisville branch office by acquiring certain assets of Connecting Point, a
major competitor of the Company in the Louisville market, and hiring 20
employees from Connecting Point. One of these employees currently serves as the
Company's Vice President of Operations.

XENAS. In November 1994, the Company acquired Xenas Communications Corp.,
based in Cincinnati, Ohio. Xenas is a provider of multimedia,
video-conferencing, audio visual, and presentation technologies, including
rental and staging services. Xenas is operated as the Envision division of the
Company and is currently located at the Company's headquarters facility in
Hebron, Kentucky. Sales for Xenas were $1.8 million in fiscal 1995 and $2.2
million in fiscal 1996; however, to date, the operations of Xenas have not been
profitable.

CABLING UNLIMITED. In October 1995, the Company acquired Cabling Unlimited,
a provider of communication cable installation services, located in
Indianapolis, Indiana. In addition to facilitating the

27
<PAGE>
Company's expansion into Indiana, this acquisition added technical personnel who
increased the Company's expertise in cabling installation services. Sales for
Cabling Unlimited were $0.3 million for fiscal 1995 and $1.2 million for fiscal
1996.

TCSS. In March 1996, the Company acquired certain assets of TCSS, a
computer reseller based in Des Moines, Iowa, whose primary geographic market
area is central Iowa. The operations acquired from TCSS now constitute the
Company's Des Moines branch office. The Des Moines branch provides a broad range
of microcomputer products and related professional services to a variety of
business and other organizations. The purchase price consisted of approximately
$4.5 million in cash, $2.7 million in a subordinated note, the assumption of
certain liabilities and 150,000 unregistered shares of Common Stock. In
addition, the Company entered into 5-year employment agreements with key
employees of TCSS.

For its fiscal year ended December 31, 1995 and for fiscal 1996, TCSS had
total revenues of $60.5 million and $78.3 million, respectively. TCSS' service
revenues have historically accounted for a smaller percentage of total revenues
(1.8% in 1995) than the percentage of service revenues of the Company, thus
affording the Company an opportunity to provide additional value-added services
to TCSS' customers. As of January 5, 1997, the Des Moines branch had
approximately 134 service contracts in effect. As of January 5, 1997, the Des
Moines branch had more than 4,800 customers, the largest of which included
Principal Insurance, Pioneer HiBred, Norwest Mortgage, Iowa Medical Center and
Blue Cross/ Blue Shield of Iowa. As part of its growth strategy, the Company
recently opened a branch office in Cedar Rapids, Iowa and intends to expand its
presence to the entire state of Iowa.

AA MICROSYSTEMS, INC. In August 1996, the Company acquired certain assets
of AA Microsystems, Inc., a network service provider located in Birmingham,
Alabama. This acquisition enabled the Company to expand the operations of its
existing branch office in Birmingham and increase the number, and enhance the
expertise, of its technical and service personnel. The purchase price consisted
of $67,464 in cash, a $200,000 note payable, and 19,974 unregistered shares of
Common Stock. In addition, the Company has entered into a three year employment
contract with the former president. For its fiscal year ended December 31, 1995,
AA Microsystems, Inc. had total revenues of $2.9 million.

DILAN. In October 1996, the Company acquired certain assets of DILAN, a
network integrator headquartered in Hickory, North Carolina. Through this
acquisition, the Company expanded into the North Carolina and South Carolina
markets, added Internet and electronic commerce services capabilities and
enhanced its technical expertise, in particular WAN services and complex network
integration. Historically, DILAN's business focused on network integration
products and services with limited sales of microcomputers. The Company believes
there exists an opportunity to expand sales of desktop and laptop PCs and
related products to DILAN's current customer base as well as other companies in
DILAN's markets. The purchase price consisted of approximately $2.6 million in
cash, a $1.1 million subordinated note and the assumption of $5.5 million of
liabilities. The purchase price is subject to adjustment based on DILAN's
operating income for the fiscal year ending March 31, 1997.

The Company has entered into a three year employment agreement with one
employee and a one year employment agreement with another employee, both of whom
were key employees of DILAN. For its fiscal year ended March 31, 1996 and the
first six months of fiscal 1997, DILAN had total revenues of $19.3 million and
$10.8 million, respectively. From the date of acquisition through January 5,
1997, DILAN contributed total revenues of $4.9 million.

28
<PAGE>
PRODUCTS

The Company has access to a wide variety of microcomputer product lines,
networking and interconnectivity application tools and software. The Company is
an authorized reseller for 35 manufacturers and offers the products of over
1,000 manufacturers, including:

Apple
AST
Bay Networks
Canon
Cheyenne
Compaq
Epson

Genicom
Hayes
Hewlett-Packard
IBM
Intel
Lexmark
Lotus

Microsoft
NEC
Novell
Sco-Unix
3Com
Toshiba

For the fiscal years 1994 and 1995, and the first nine months of fiscal
1996, sales by the Company of products manufactured by Compaq, Hewlett-Packard
and IBM, accounted for approximately 74%, 68%, and 58% respectively, of the
Company's total sales of equipment and supplies. The total dollar volume of
products purchased directly from these manufacturers was $69.6 million, $69.4
million and $53.5 million for fiscal years 1994 and 1995, and the first nine
months of fiscal 1996, respectively, and as a percentage of total purchases was
54%, 35% and 28%, respectively.

As new hardware and software products are introduced by manufacturers, the
utility of particular products may change substantially. Concern over these
changes in product utility may result in confusion by customers as to which
product is best suited to the customer's needs which, in turn, can result in
volatility of demand for products. The Company attempts to address this
confusion and volatility by being "platform neutral" in its marketing and
offering a variety of hardware solutions, software packages and support services
that address virtually all applicable industry standards.

For the fiscal years 1994 and 1995, and the first nine months of fiscal
1996, inventories as a percentage of total assets were 30.4%, 29.7%, and 22.6%,
respectively. In general, most of the inventory stocked by the Company (other
than parts/service inventory) is for specific customer orders and, consequently,
these inventories do not remain at the Company for an extended period of time. A
significant part of the Company's inventories are financed by floor plan
arrangements with third parties. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations."

SERVICES

The Company provides expertise in (i) selecting and evaluating new equipment
and technologies, (ii) technical and project management for implementation and
ongoing support, (iii) advanced network/ connectivity problem diagnosis and (iv)
training.

NETWORKING. The Company provides network design and consulting services
related to LANs and WANs. Technical expertise provided by the Company's system
engineers ("SEs") includes consultation regarding microcomputer communications
requirements, configuring proposed solutions, system integration, installation,
training and ongoing technical support of customers. Each of the markets served
by the Company has SEs available for technical support. Since 1993, the number
of the Company's SEs has increased from 19 to 115 to support the growth in this
aspect of the Company's business.

ON-SITE STAFFING AND OUTSOURCING. A growing part of the Company's business
is to provide on-site staffing services to commercial, health care, governmental
and educational customers. The Company's on-site staffing and outsourcing
capabilities include project management, hardware and facilities management,
network consulting, manufacturer negotiations and support and training. The
Company believes that the demand for on-site services is being driven, in part,
by the increasing complexity of microcomputer systems and networks. As of
January 5, 1997, approximately 11% of the Company's

29
<PAGE>
employees were engaged in on-site assignments. The Company currently provides
on-site services to a variety of customers including Barnett Bank, Belcan
Engineering, Blue Cross/Blue Shield of Kentucky, Champion, Jergens, and Ohio
National Life.

HARDWARE MAINTENANCE AND MANAGEMENT. The Company offers customers on-site
repair and warranty service as well as centralized off-site repair service from
the Company's depot repair center. Hardware service agreements sold by the
Company generally have terms of one or more years and have various coverage
options ranging from all encompassing on-site coverage to less expensive, less
comprehensive programs. The Company also offers time and material service
coverage for those customers who do not purchase a service agreement.

At its depot repair center, the Company provides repairs including component
level repairs, upgrades, refurbishment and redeployment services that can
minimize computer-related downtime for customers who have geographically
dispersed field personnel. Customers may deliver their hardware to the Company's
depot repair center or arrange scheduled or as-required pickups for their
hardware. The depot repair center currently has the capability to process more
than 75,000 desktop and laptop PCs, monitors and printers annually. The Company
intends to relocate its depot repair center, currently located in the former
distribution center, to an expansion of the current distribution center which is
owned by Pomeroy Investments, LLC ("Pomeroy Investments"), a company controlled
by David B. Pomeroy, II, the Chairman of the Board, President and Chief
Executive Officer of the Company. The expansion of the existing distribution
center is expected to be completed in mid 1997. Pomeroy Investments will
purchase the additional land and will finance and own the improvements thereon.
The estimated cost of the land and improvements is $260,000 and $1.5 million,
respectively. The addition is expected to expand the Company's depot repair
center capacity. See "Certain Transactions."

The Company also offers warehousing for customers' products not currently in
use and hardware management services, which include asset tagging, identifying
and tracking inventory. In addition, the Company provides software support
agreements that typically provide for "blocks of time" during which the
Company's SEs may be called upon by customers for installation of additional
equipment, training and problem resolution. As of January 5, 1997, the Company
had approximately 3,800 service contracts in effect (one customer can have
multiple contracts).

INTERNET SERVICES. The Company offers Internet services and electronic
commerce applications which enable its customers to effectively use the World
Wide Web in their businesses. These services include firewall security services
and audits, graphic conversions, HTML markups, home page development and
maintenance, web site hosting, remote connection administration and turnkey
installations. The Company believes that the demand for this type of expertise
will increase as usage of the World Wide Web by businesses becomes more
prevalent.

INTEGRATED MEDIA AND COMMUNICATION TECHNOLOGIES. The Company's Xenas
subsidiary provides services including integrated multimedia solutions,
videoconferencing, and satellite communication technology. Xenas also sells and
rents high-end presentation equipment. The Company's cabling division
specializes in the design and installation of cabling and wiring systems for
LANs and WANs. The Company offers customers assistance with data, voice, video,
security and multimedia cabling systems including service and maintenance
contracts and also has expertise in fiber optic and copper cabling.

MARKETING AND CUSTOMERS

The Company focuses its marketing efforts on large and medium sized
commercial, health care, governmental and educational customers. The Company's
sales are generated primarily by its 208 person direct sales force and sales
support personnel located in 15 regional offices in Kentucky, Iowa, Tennessee,
Florida, Alabama, Indiana, North Carolina and South Carolina. The Company
expects to open additional regional offices in Columbus, Ohio; Memphis,
Tennessee; and Montgomery, Alabama in the first quarter

30
<PAGE>
of fiscal 1997 and an additional regional office in Tampa, Florida later in
fiscal 1997. The Company's marketing representatives typically have college
degrees and three or more years of sales experience in the microcomputer and
related services industry. Territory assignments are based on skill, experience,
and demonstrated sales results. Compensation programs for marketing
representatives include salary, commission and other incentive compensation
awards. Commissions are based on volume, gross profit, service content and
strategic importance of the sale. The Company provides additional incentives in
the form of contests to encourage the representatives to sell various products.

The Company currently has more than 12,000 customers. In fiscal 1995, sales
to Columbia/HCA accounted for 19% of total net sales and revenues. In the first
nine months of 1996, the largest customers of Pomeroy Computer Resources
included:

Alliant
Bank of Mississippi
Barnett Bank
Champion
Columbia/HCA
Commonwealth of Kentucky
Iowa Medical Center
Kroger
Milacron

Norwest Mortgage
Physician Sales
Pioneer HiBred
Principal Insurance
Providian
Square D
Star Bank
State of Tennessee
Toyota

In recent years the Company has handled large roll-out projects with major
customers. Typically, roll-out projects involve large volumes of similar
equipment with standard configurations which are to be delivered on a specific
time table over a relatively short period of time. Roll-out projects may include
support capabilities such as project management, product scheduling, central
receiving, software loading and testing, coordination of shipments to multiple
sites and overall quality control. Roll-out projects, which frequently utilize
highly complex and sophisticated hardware and software configurations, are often
accompanied by other services offered by the Company.

The Company has a return policy for customers which generally allows
customers to return hardware and unopened software, without restocking charges,
within 30 days of the original invoice date subject to advance approval and
certain other conditions.

The Company grants credit to certain well-established customers that meet
specified criteria. The Company maintains a centralized credit department that
reviews credit applications. Accounts are regularly monitored for collectibility
and appropriate action is taken upon indication of risk. The Company also offers
leasing arrangements tailored to the customer's needs. See "Business--Leasing."

31
<PAGE>
OPERATIONS

The Company's business currently is operated through its headquarters
facility and distribution center located in Hebron, Kentucky and 15 regional
offices located in eight states. The Company expects to open three additional
regional offices in the first quarter of fiscal 1997 and one additional regional
office later in fiscal 1997, increasing the number of regional offices to 19 and
states to nine. Most of its inventory is maintained at the distribution center
although small amounts of inventory, including parts, are located at some branch
offices. The Company also coordinates purchasing on a centralized basis. Rebate,
payment, discount and volume purchase programs are negotiated directly by the
Company with its major vendors.

The Company believes that one of the key elements of its strategy is its
commitment to provide prompt response and service to its customers including
accurate and complete order fulfillment and reliable and consistent deliveries
of its products and services. The Company has implemented a national sales/order
desk to service customers who order large volumes of standardized products. Each
participating customer is given a unique toll-free telephone number and may
place orders directly through the order desk. The Company expects to expand the
availability of this system in the future.

The nature of the Company's business requires a management information
system that adjusts to the changing price, availability, and source of the
Company's products and provides timely data transmission to and from major
customers and suppliers in order for the Company to manage its inventory,
receivables and collections. Through ASTEA, a comprehensive management
information system, the Company is able to control and monitor inventory levels,
perform invoicing and order entry and establish delivery routes and schedules.
This integrated information system is a real-time, on-line repository which
enables instantaneous access and processing regardless of geographic location or
business function.

The Company began implementation of ASTEA in July 1994. As of December 5,
1996, ASTEA was fully implemented except for the management of inventory of one
customer of the Des Moines branch and the DILAN acquisition which are expected
to be complete by April 1997. This new system tracks all products shipped into
and out of the Company and allows all branches to obtain up-to-date information
about product pricing and availability. In particular, the system is intended to
allow the Company to increase sales volume without increasing the number of
employees needed to manage the inventory to support the increase in sales. Based
in part on the uniform implementation of ASTEA throughout the Company and its
branches, the Company intends to apply for ISO certification in the first
quarter of 1997.

The Company is in the process of integrating a warehouse management system
into its management information system. The purpose of this system is to better
manage inventory while it is located in the Company's facilities by optimizing
the positioning of inventory in the warehouse and the utilization of personnel
in the handling of the inventory. The Company anticipates that it will
continually need to refine and modify its management information system as the
Company grows and the needs of its business change.

The Company has also established EDI trading partnerships with a number of
its major suppliers and key customers. When fully utilized, EDI allows the
Company to electronically receive customer purchase orders, send purchase orders
to its suppliers, send invoices and asset management data to customers and
receive price and availability data from its suppliers.

LEASING

As part of its full service approach, the Company offers flexible equipment
leasing arrangements to customers. As leased equipment is returned at the end of
the lease term, the Company is ensured a dependable source of used equipment for
resale.

The Company has been using ILC as its principal leasing company. Pursuant to
a Remarketing and Agency Agreement (the "Agency Agreement") with ILC, the
Company obtains rights to 50% of the proceeds from the release or resale of used
equipment for services rendered in connection with

32
<PAGE>
remarketing the used equipment at the end of the original term of the lease. The
Company also invests in certain leases of equipment which do not involve the
sale of equipment and related support services by the Company to ILC. ILC has a
right of first refusal with respect to all proposed equipment lease financings
for the Company's customers. During fiscal years 1994 and 1995, and the first
nine months of fiscal 1996, the Company sold equipment and related support
services to ILC, for lease to ILC's customers, in the amounts of $4.2 million,
$23.7 million and $6.1 million, respectively. The term of the Agency Agreement
expires in May 1997. In addition, Provident Bancorp, a bank holding company
based in Cincinnati, Ohio, acquired ILC in December 1996. In the event the
Agency Agreement is not renewed, the Company believes that alternative leasing
options are available.

COMPETITION

The microcomputer products and services market is highly competitive.
Distribution has evolved from manufacturers selling through direct sales forces
to sales by manufacturers to aggregators (wholesalers), resellers and
value-added resellers. Competition, in particular the pressure on pricing, has
resulted in industry consolidation. In response to continuing competitive
pressures, including specific price pressure from the direct telemarketing and
mail order distribution channels, the microcomputer distribution channel is
currently undergoing segmentation into value-added resellers who emphasize
advanced systems together with service and support for business networks, as
compared to computer "superstores," who offer retail purchasers a relatively low
cost, low service alternative and direct-mail suppliers which offer low cost and
limited service. Certain superstores have expanded their marketing efforts to
target segments of the Company's customer base, which could have a material
adverse impact on the Company's operations and financial results.

While price is an important competitive factor in the Company's business,
the Company believes that its sales are principally dependent upon its service,
technical expertise, reputation and experience. The Company's principal
competitive strengths include: (i) quality assurance; (ii) service and technical
support; (iii) lower pricing of products through alternative distribution
sources; (iv) prompt delivery of products to customers; and (v) creative
financing alternatives.

The Company competes for product sales directly with local, national and
international distributors and resellers such as CompuCom, Dataflex, Entex,
InaCom, MicroAge, Sarcom and Vanstar. In addition, the Company competes with
microcomputer manufacturers that sell their product through their own direct
sales forces and to distributors. Although the Company believes its prices and
delivery terms are competitive, certain competitors offer more aggressive
hardware pricing to their customers. The Company's services and outsourcing
business competes with Andersen Consulting, EDS, ISSC, MicroAge, Vanstar and
XLConnect, among others. See "Risk Factors--Competition."

EMPLOYEES

As of January 5, 1997, the Company had 923 full-time employees consisting of
the following: 470 service and technical personnel including 115 systems
engineers; 110 direct sales representatives and 98 sales support personnel; 29
management personnel; and 216 administrative and distribution personnel. The
Company has no collective bargaining agreements and believes its relations with
its employees are good.

PATENTS AND TRADEMARKS

The Company owns no trademarks or patents. Although the Company's various
dealer agreements do not generally allow the Company to use the trademarks and
trade names of these various manufacturers, the agreements do permit the Company
to refer to itself as an "authorized dealer" of the products of those
manufacturers and to use their trademarks and trade names for marketing
purposes. The Company considers the use of these trademarks and trade names in
its marketing efforts to be important to its business.

33
<PAGE>
MANAGEMENT

DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY

The following table sets forth certain information with respect to each
person who is a director, a person to become a director or executive officer of
the Company.

<TABLE>
<CAPTION>
NAME AGE POSITION
- ------------------------------------------ --- ----------------------------------------------------------------
<S> <C> <C>
David B. Pomeroy, II (1)(2)............... 47 Chairman of the Board, President and Chief Executive Officer

Edwin S. Weinstein........................ 50 Director, Chief Financial Officer, Treasurer and Secretary

Richard C. Mills.......................... 41 Vice President of Operations

Carol Teufel Weinstein.................... 44 Vice President of Finance and Administration

James C. Eck.............................. 48 Vice President of Sales and Services

Stephen E. Pomeroy........................ 28 Vice President of Marketing and Corporate Development

James H. Smith, III (1)(2)(3)............. 46 Director

Dr. David W. Rosenthal (3)................ 44 Director

Michael E. Rohrkemper (1)(2)(3)........... 50 Director

Kenneth R. Waters (4)..................... 45 Proposed New Director
</TABLE>

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

(1) Member of Compensation Committee.

(2) Member of Audit Committee.

(3) Member of Stock Option Committee.

(4) Mr. Waters has agreed to become a director of the Company after the
completion of this offering.

Executive officers serve at the discretion of the Company's Board of
Directors and are appointed on an annual basis.

DAVID B. POMEROY, II was the founder of the first of the Pomeroy Companies
in 1981. Mr. Pomeroy controlled the Pomeroy Companies until their reorganization
into Pomeroy Computer Resources in 1992 and has served as Chairman of the Board,
President and Chief Executive Officer since 1992.

EDWIN S. WEINSTEIN has been with the Pomeroy Companies in substantially his
present capacity since January 1983. Mr. Weinstein became a Director and Chief
Financial Officer of the Company when it was organized in February 1992.

RICHARD C. MILLS joined the Company in January 1993 and has been Vice
President of Operations since July 1993. Prior to that time, Mr. Mills was the
founder and president of The Computer Store of Kentucky, Inc., a
Louisville-based retailer of computer products.

CAROL TEUFEL WEINSTEIN has been Vice President of Finance and Administration
since January 1993. Prior to that time, Mrs. Weinstein was Vice President of
Operations of the Company from October 1992 to July 1993 and Controller from
March 1987 to February 1992.

JAMES C. ECK joined the Company in September 1995 and was made Vice
President of Sales and Services effective February 1996. From 1983 until 1995,
Mr. Eck was employed by Canon USA Incorporated, a New York-based manufacturer of
digital and analog office equipment, and served as the director and general
manager of the National Division Office Equipment Group for Canon since 1991.

STEPHEN E. POMEROY has been the Vice President of Marketing and Corporate
Development since September 1996. Prior to that time, Mr. Pomeroy was the
Director of New Market Development of the

34
<PAGE>
Company from 1994 to September 1996 and Account Executive from 1991 to 1994.
From 1985 to 1991, Mr. Pomeroy was employed by the Company on a part-time basis.

JAMES H. SMITH, III has been a Director of the Company since April 1992. Mr.
Smith is a shareholder in the law firm of Lindhorst & Dreidame Co., LPA,
Cincinnati, Ohio, where he has practiced law since 1979. Lindhorst & Dreidame
acts as outside general counsel to the Company.

DR. DAVID W. ROSENTHAL has been a Director of the Company since April 1992.
Dr. Rosenthal is a Professor of Marketing at Miami University, Oxford, Ohio, a
position he has held for sixteen years. Dr. Rosenthal has also served as a
consultant with Stratvertise, a marketing research and strategic consulting firm
since 1975.

MICHAEL E. ROHRKEMPER has been a Director of the Company since July 1993.
Mr. Rohrkemper is a certified public accountant and has been a partner in the
accounting firm of Rohrkemper and Ossege Ltd. since January 1991.

KENNETH R. WATERS has agreed to become a director of the Company after the
completion of this offering. Mr. Waters has worked in the computer industry
since 1977. Most recently, he has been an industry consultant, serving as such
from February 1995 until present as well as from April 1993 to August 1993 and
January 1991 to August 1992. From September 1993 to January 1995, Mr. Waters was
the President of MicroAge Inc., a computer reseller. From September 1992 to
March 1993, Mr. Waters was the President and CEO of Power Up Software, a
software manufacturer. From July 1978 to September 1988, Mr. Waters was employed
by Vanstar (then known as ComputerLand), holding various management positions,
with his last position being CEO. Mr. Waters was also a director of Vanstar from
September 1987 to July 1989.

Stephen E. Pomeroy is the son of David B. Pomeroy, II and Edwin S. Weinstein
and Carol Teufel Weinstein are husband and wife. There are no other family
relationships among the Company's directors and executive officers.

CERTAIN TRANSACTIONS

The Company intends to expand its existing distribution center to include a
new depot repair facility that will replace the Company's existing depot repair
facility. The distribution center is owned by Pomeroy Investments LLC ("Pomeroy
Investments"), a limited liability company controlled by David B. Pomeroy, II,
the Chairman of the Board, President and Chief Executive Officer of the Company.
Pomeroy Investments intends to finance, purchase and own the land and
improvements necessary to accommodate the new depot repair facility. The
estimated cost of the additional land and improvements is expected to be $1.8
million. The Company will lease the additional space from Pomeroy Investments at
an annual base rent no less favorable to the Company than can be obtained from
unaffiliated third parties. The expansion of the existing distribution center to
accommodate the new depot repair facility is expected to be completed in mid
1997.

The Company from time to time has made advances to Pomeroy Investments to
satisfy Pomeroy Investments' working capital needs. In July 1996, the Company
made two advances to Pomeroy Investments in the amounts of $100,000 and
$150,000, respectively. In September and October 1996, the Company made two
additional advances in the amounts of $20,000 and $25,000, respectively. The
largest amount of advances outstanding at any time during fiscal 1996 was
$295,000. No interest was charged on the advanced funds, which were repaid in
full on December 20, 1996.

On April 29, 1996, the Company entered into a settlement agreement with
Vanstar (the "Settlement Agreement"). Pursuant to the Settlement Agreement, the
Company agreed to pay to Vanstar $3.3 million consisting of $1.65 million in
cash and a promissory note in the amount of $1.65 million (the "Vanstar Note").
The Vanstar Note was due on August 27, 1996 and bore interest at 8.0% per annum.

35
<PAGE>
The Vanstar Note was secured by a pledge of 100,000 shares of Common Stock
owned by Mr. Pomeroy (the "Pledge"). In consideration of the Pledge, the Company
agreed to indemnify Mr. Pomeroy against any loss, including attorneys' fees
suffered by Mr. Pomeroy in connection with the Pledge. Also in connection with
the Settlement Agreement the Company incurred approximately $0.4 million of
legal fees, which included the defense of the Company and the Pomeroys.

All agreements between the Company and Vanstar were terminated as of the
effective date of the Settlement Agreement. In partial consideration of the
Settlement Agreement, Vanstar agreed to release Mr. and Mrs. Pomeroy from their
personal guarantees of certain obligations of the Company to Vanstar. The
Company paid the Vanstar Note in full on August 27, 1996 and the Pledge was
terminated.

In September 1996, Stephen E. Pomeroy was appointed as the Vice President of
Marketing and Corporate Development of the Company and in November 1996, Mr.
Pomeroy entered into an employment agreement with the Company. The employment
agreement extends to December 31, 1999, and thereafter may be extended on a
daily basis unless either party gives 60 days written notice of termination (or
three days written notice if the Company terminates Mr. Pomeroy's employment for
cause). Mr. Pomeroy's compensation under the agreement consists of a base salary
at a rate of $100,000 for fiscal 1996 and an annual bonus, to be negotiated
annually. Mr. Pomeroy's base salary will increase to $115,000 for fiscal 1997
and is subject to increases in subsequent fiscal years at the discretion of the
Board of Directors. The amount of any annual bonus will be paid 50% in cash and
50% as incentive deferred compensation.

Kenneth R. Waters, who has agreed to become a director of the Company after
the completion of this offering, served as a consultant to the Company from June
1996 through November 1996. Mr. Waters was paid $1,500 per month for his
services for a total of $9,000 during the term of the consulting arrangement.
The Company has retained Mr. Waters to provide additional consulting services on
an on-going basis. Mr. Waters will be paid $1,500 per month pursuant to an oral
agreement with the Company.

Effective January 6, 1997, David B. Pomeroy, II, the Chairman of the Board
and Chief Executive Officer of the Company entered into a Sixth Amendment to
Employment Agreement with the Company (the "Sixth Amendment"). Mr. Pomeroy's
compensation under the Sixth Amendment will consist of a base salary of $395,000
for fiscal 1997 and each subsequent fiscal year unless modified by the
Compensation Committee. Under the Sixth Amendment Mr. Pomeroy is also entitled
to a bonus of up to a maximum of $720,000 in fiscal 1997 and each subsequent
fiscal year based upon the Company's operating income. Mr. Pomeroy may also be
paid a discretionary bonus under any compensation, benefit or management
incentive plan. Fifty percent of any discretionary bonus will be paid in cash
and fifty percent will be treated as incentive deferred compensation.

Under the Sixth Amendment the Company has agreed to pay all premiums for a
term life insurance policy with a death benefit equal to $3,000,000 insuring the
life of Mr. Pomeroy. The owner of this term life insurance policy will be a
trust established by Mr. Pomeroy, and the trustee of the trust will designate
the beneficiary of the trust. The Company and the trust will also enter into a
split dollar arrangement whereunder the Company will pay all premiums on a whole
life insurance policy with a death benefit equal to $1,000,000 insuring the life
of Mr. Pomeroy, less the reportable economic benefit to the trust.

Under the Sixth Amendment Mr. Pomeroy was also granted an option to acquire
25,000 shares of Common Stock at a per share price equal to the fair market
value of a share of Common Stock on January 3, 1997. In connection with the
Sixth Amendment, Mr. Pomeroy and the Company also entered into a registration
rights agreement which entitles Mr. Pomeroy to demand and piggy back
registration rights in the event of a change in control of the Company.

36
<PAGE>
PRINCIPAL AND SELLING STOCKHOLDERS

Based solely on information provided to the Company, the following table
sets forth certain information with respect to the beneficial ownership of the
Company's Common Stock as of January 6, 1997, and as adjusted to reflect the
sale of the Common Stock offered hereby, by, (i) each person or entity known to
the Company to be the beneficial owner of more than 5% of the Common Stock; (ii)
each of the Company's directors and the executive officers; and (iii) all
directors and executive officers as a group. Except as otherwise indicated in
the footnotes to the table, the individual named has sole voting and investment
power over the shares indicated.

<TABLE>
<CAPTION>
BENEFICIAL OWNERSHIP BENEFICIAL OWNERSHIP
PRIOR TO OFFERING NUMBER OF AFTER OFFERING(1)
-------------------- SHARES --------------------
NAME NUMBER PERCENT OFFERED NUMBER PERCENT
- ----------------------------------- --------- ------- ------------ --------- -------
<S> <C> <C> <C> <C> <C>
David B. Pomeroy, II............... 1,750,877(1) 26.7% 80,000 1,670,877 22.0%
Edwin S. Weinstein................. 68,436(2) 1.1 -- 68,436 *
Richard C. Mills................... 89,642(3) 1.4 -- 89,642 1.2
Carol Teufel Weinstein............. 6,293(4) * -- 6,293 *
James C. Eck....................... 1,500 * -- 1,500 *
Stephen E. Pomeroy................. 33,326(5) * -- 33,326 *
James H. Smith..................... 9,075(6) * -- 9,075 *
Dr. David W. Rosenthal............. 6,605(7) * -- 6,605 *
Michael E. Rohrkemper.............. 19,276(8) * -- 19,276 *
Pomeroy Computer Resources, ESOP... 57,129(9) * -- 57,129 *
All directors and executive
officers as a group (10
persons)......................... 1,927,901(10) 28.4% 80,000 1,847,901 23.6%
</TABLE>

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

* Less than one percent

(1) Includes 15,091 shares of Common Stock owned by his spouse as to which Mr.
Pomeroy disclaims beneficial ownership. Also includes 103,750 shares of
Common Stock issuable upon exercise of stock options and 57,129 shares owned
by ESOP. See Note (9) below. Of the 57,129 shares owned by ESOP, Mr. Pomeroy
disclaims beneficial ownership except as to the 23,983 shares allocated to
the account of Mr. Pomeroy which shares he has the right to vote under the
Plan with respect to certain matters. Beneficial ownership after the
offering excludes the 80,000 shares of Common Stock to be sold in this
offering. Mr. Pomeroy's address is 1020 Petersburg Road, Hebron, KY 41048.

(2) Includes 6,000 shares of Common Stock issuable upon exercise of stock
options, 57,129 shares owned by the ESOP, and excludes 6,293 shares owned by
his spouse as to which he disclaims beneficial ownership. See Note (9)
below. Of the 57,129 shares owned by the ESOP, Mr. Weinstein disclaims
beneficial ownership except as to the 3,174 shares allocated to Mr.
Weinstein which shares he has the right to vote under the Plan with respect
to certain matters.

(3) Includes 89,497 shares of Common Stock issuable upon exercise of stock
options and 145 shares held by the ESOP allocated to the account of Mr.
Mills which shares he has the right to vote under the Plan with respect to
certain matters.

(4) Excludes 68,436 shares owned by her spouse as to which she disclaims
beneficial ownership. Includes 3,000 shares of Common Stock issuable upon
exercise of stock options and 428 shares held by the ESOP allocated to the
account of Mrs. Weinstein which shares she has the right to vote under the
Plan with respect to certain matters.

(5) Includes 27,750 shares of Common Stock issuable upon exercise of stock
options and 131 shares held by the ESOP allocated to the account of Mr.
Pomeroy which shares he has the right to vote under the Plan with respect to
certain matters.

37
<PAGE>
(6) Includes 8,250 shares of Common Stock issuable upon exercise of stock
options.

(7) Includes 1,500 shares of Common Stock owned by his spouse, and 39 shares
held by the ESOP allocated to the account of his spouse (which shares she
has the right to vote under the Plan with respect to certain matters), as to
which Dr. Rosenthal disclaims beneficial ownership and 1,302 shares of
Common Stock issuable upon exercise of stock options.

(8) Includes 165 shares of Common Stock held by Rohrkemper & Ossege Ltd., a
partnership in which Mr. Rohrkemper has a 60% interest and 17,500 shares of
Common Stock issuable upon exercise of stock options.

(9) David Pomeroy, II and Edwin S. Weinstein, both officers of the Company, are
trustees of the ESOP and may have voting control over the 57,129 shares of
Common Stock held in the ESOP in certain situations.

(10) Includes all of the shares owned by Pomeroy Computer Resources ESOP.

38
<PAGE>
UNDERWRITING

Pursuant to the Underwriting Agreement, and subject to the terms and
conditions thereof, the Underwriters named below, acting through J.C. Bradford &
Co. and Tucker Anthony Incorporated, as representatives of the several
underwriters (the "Representatives"), have agreed severally, to purchase from
the Company and the Selling Stockholder the number of shares of Common Stock set
forth below opposite their respective names.

<TABLE>
<CAPTION>
NUMBER OF
NAME OF UNDERWRITERS SHARES
- --------------------------------------------------------------------------------- ----------
<S> <C>
J.C. Bradford & Co...............................................................
Tucker Anthony Incorporated......................................................

----------
Total........................................................................ 1,100,000
----------
----------
</TABLE>

In the Underwriting Agreement, the Underwriters have agreed, subject to the
terms and conditions contained therein, to purchase all of the shares of Common
Stock offered hereby if any of such shares are purchased.

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

The offering of the Common Stock is made for delivery when, as and if
accepted by the Underwriters and subject to prior sale and to withdrawal,
cancellation or modification of the offer without notice. The Underwriters
reserve the right to reject any order for the purchase of the shares.

The Company has granted the Underwriters an option, exercisable not later
than 30 days from the date of this Prospectus, to purchase up to 165,000
additional shares of Common Stock to cover over-allotments. To the extent the
Underwriters exercise this option, each of the Underwriters will have a firm
commitment to purchase approximately the same percentage thereof which the
number of shares of Common Stock to be purchased by it shown in the table above
bears to 1,100,000, and the Company will be obligated, pursuant to the option,
to sell such shares to the Underwriters. The Underwriters may exercise such
option only to cover over-allotments made in connection with the sale of shares
of Common Stock offered hereby. If purchased, the Underwriters will sell such
additional shares on the same terms as those on which the 1,100,000 shares are
being offered.

The Company, the Selling Stockholder and all executive officers and
directors of the Company have agreed not to offer, sell or otherwise dispose of
any shares of Common Stock owned by them prior to the expiration of 180 days
from the date of the prospectus without the prior written consent of the
Representatives.

The Underwriting Agreement provides that the Company and the Selling
Stockholder will indemnify the Underwriters and controlling persons, if any,
against certain liabilities, including liabilities under the Securities Act or
to contribute to payments which the Underwriters or any such controlling persons
may be required to make in respect thereof.

39
<PAGE>
In connection with this offering, certain Underwriters and selling group
members who in the past have acted as market makers in the Common Stock may
engage in passive market marking activities in the Common Stock on the Nasdaq
National Market in accordance with Rule 10b-6A under the Exchange Act.
Underwriters and other participants in the distribution of the Common Stock
generally are prohibited during a specified time (the "qualifying period")
determined in light of the timing of the distribution, from bidding for or
purchasing the Common Stock or a related security except to the extent permitted
under applicable rules, primarily Rules 10b-6 and 10b-6A. Rule 10b-6A allows,
among other things, an underwriter or member of the selling group for the Common
Stock to effect "passive market making" transactions on the Nasdaq National
Market in the Common Stock during the qualifying period at a price that does not
exceed the highest independent bid for that security at the time of the
transaction. Such a passive market maker must not display a bid for the subject
security at a price in excess of the highest independent bid, and generally must
lower its bid if all independent bids are lowered. Moreover, the passive market
maker's net purchases of such security on each day of the qualifying period
shall not exceed 30% of its average daily trading volume during a reference
period preceding the distribution.

LEGAL MATTERS

The legality of the shares of Common Stock offered hereby and certain other
legal matters will be passed upon for the Company and the Selling Stockholder by
Cors & Bassett, Cincinnati, Ohio. Lindhorst & Dreidame Co., L.P.A., Cincinnati,
Ohio, will pass upon certain other legal matters for the Company. James H.
Smith, III, a stockholder of Lindhorst & Dreidame, is a director of the Company.
As of January 5, 1997, Mr. Smith beneficially owned 9,075 shares of Common
Stock. Certain legal matters related to this offering will be passed upon for
the Underwriters by Alston & Bird, Atlanta, Georgia.

EXPERTS

The Consolidated Financial Statements of the Company as of January 5, 1996
and January 5, 1995 and October 5, 1996, and for the fiscal years and period
then ended have been audited by Grant Thornton LLP, independent certified public
accountants, as set forth in their report thereon included therein and
incorporated herein by reference, and are incorporated herein by reference in
reliance upon such report given upon the authority of such firm as experts in
accounting and auditing.

The Consolidated Financial Statements of the Company for the fiscal year
ended January 5, 1994, incorporated in this Prospectus by reference from the
Company's Annual Report on Form 10-K for the year ended January 5, 1996 have
been audited by Deloitte & Touche LLP, independent auditors, as stated in their
report which is incorporated herein by reference, and has been so incorporated
in reliance upon the report of such firm given upon their authority as experts
in accounting and auditing.

The financial statements of TCSS for the fiscal year ended December 31,
1995, appearing in the Company's Current Report on Form 8-K dated March 28,
1996, as amended by the Company's Current Report on Form 8-K/A dated May 13,
1996, incorporated by reference in this Prospectus and Registration Statement
have been audited by Deloitte & Touche LLP, independent certified public
accountants, as set forth in their report thereon incorporated by reference
herein, and are incorporated by reference herein in reliance upon such report
given upon the authority of such firm as experts in accounting and auditing.

The financial statements of TCSS for the fiscal year ended December 31,
1994, appearing in the Company's Current Report on Form 8-K dated March 28,
1996, as amended by the Company's Current Report on Form 8-K/A dated May 13,
1996, incorporated by reference in this Prospectus and Registration Statement
have been audited by Northup, Haines, Kaduce, Schmid, Macklin, P.C., independent
certified public accountants, as set forth in their report thereon incorporated
by reference herein, and are incorporated by reference herein in reliance upon
such report given upon the authority of such firm as experts in accounting and
auditing.

40
<PAGE>
AVAILABLE INFORMATION

The Company has filed with the Securities and Exchange Commission (the
"Commission") a Registration Statement on Form S-3 under the Securities Act of
1933, as amended, with respect to the Common Stock offered by this Prospectus.
This Prospectus does not contain all the information set forth in the
Registration Statement as permitted by the rules and regulations of the
Commission. For further information with respect to the Company and the
securities offered by this Prospectus, reference is made to the Registration
Statement, including the exhibits and schedules filed therewith. Copies of the
Registration Statement, together with its exhibits and schedules, may be
obtained from the Public Reference Section of the Commission at 450 Fifth
Street, N.W., Room 1027, Washington, D.C. 20549 and also at the following
regional offices of the Commission: Citicorp Center, 500 West Madison Street,
Suite 1400, Chicago, Illinois 60661-2511; and 7 World Trade Center, Suite 1300,
New York, New York 10048, upon payment of the charges prescribed therefor by the
Commission. In addition, the Common Stock is included in the Nasdaq National
Market and the aforementioned materials may also be inspected at the offices of
the Nasdaq National Market at 1735 K Street, N.W., Washington, D.C. 20006.

The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended, and in accordance therewith files reports,
proxy statements and other information with the Commission. Such reports, proxy
statements and other information can be inspected and copied at the public
reference facilities maintained by the Commission at the addresses set forth
above. The Commission maintains a web site that contains reports, proxy
statements and other information regarding registrants that file electronically
with the Commission. Such reports, proxy statements and other information may be
found at the Commission site address (http://www.sec.gov).

INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE

The following documents filed by the Company with the Commission (File No.
0-20022) are hereby incorporated by reference into this Prospectus:

(1) Annual Report on Form 10-K for the fiscal year ended January 5,
1996, as amended by Form 10-K/A dated May 3, 1996;

(2) Quarterly Reports on Form 10-Q for the quarters ended April 5, 1996;
July 5, 1996 and October 5, 1996, as amended by Form 10-Q/A dated January 6,
1997;

(3) Current Report on Form 8-K dated March 28, 1996 as amended by Form
8-K/A dated May 13, 1996;

(4) Current Report on Form 8-K dated May 13, 1996;

(5) Current Report on Form 8-K dated October 24, 1996;

(6) Current Report on Form 8-K dated January 6, 1997;

(7) Current Report on Form 8-K dated February 21, 1997; and

(8) the description of the Company's Common Stock contained in the
Company's Registration Statement on Form 8-A, effective as of April 3, 1992,
including any amendment filed for the purpose of updating such information.

All documents filed by the Company pursuant to Sections 13(a), 13(c), 14 or
15(d) of the Exchange Act subsequent to the date of this prospectus and prior to
the termination of the offering made hereby shall be deemed to be incorporated
by reference in this prospectus and to be a part hereof from the respective
dates of the filing of such documents. See "Available Information." Any
statement or information contained in a document incorporated or deemed to be
incorporated herein by reference shall be deemed modified or superseded for
purposes of this prospectus to the extent that a statement contained herein or
in any other subsequently filed document which also is or is deemed to be
incorporated by

41
<PAGE>
reference herein modifies or supersedes such statement. Any such statement so
modified or superseded shall not be deemed, except as so modified or superseded,
to constitute a part of this prospectus.

The Company will provide without charge to any person to whom this
Prospectus is delivered, upon written or oral request, a copy of any or all of
the documents incorporated herein by reference (other than exhibits to such
documents not specifically incorporated by reference). Requests should be
directed to Pomeroy Computer Resources, Inc., 1020 Petersburg Road, Hebron,
Kentucky, 41048, Attention: Edwin S. Weinstein, Chief Financial Officer and
Treasurer.

42
<PAGE>
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
PAGE
---------
<S> <C>
Consolidated Financial Statements of the Company:

Report of Independent Certified Public Accountants......................................................... F-3

Consolidated Balance Sheets as of January 5, 1995 and 1996 and October 5, 1996........................... F-4

Consolidated Statements of Income for the Years Ended January 5, 1995 and 1996 and for the Nine Months
Ended October 5, 1995 (Unaudited) and 1996............................................................. F-6

Consolidated Statements of Cash Flows for the Years Ended January 5, 1995 and 1996 and for the Nine
Months Ended October 5, 1995 (Unaudited) and 1996...................................................... F-7

Consolidated Statements of Equity for the Years Ended January 5, 1995 and 1996 and for the Nine Months
Ended October 5, 1996.................................................................................. F-8

Notes to Consolidated Financial Statements............................................................... F-9

Unaudited Pro Forma Consolidated Financial Statements of the Company:

Pro Forma Condensed Consolidated Statement of Income (Unaudited) for the Year Ended January 5, 1996 and
Nine Months Ended October 5, 1996...................................................................... F-21
</TABLE>

F-1
<PAGE>
(This page has been left blank intentionally.)

F-2
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS

To the Board of Directors and Stockholders
Pomeroy Computer Resources, Inc.

We have audited the accompanying consolidated balance sheets of Pomeroy
Computer Resources, Inc. as of January 5, 1995, 1996, and October 5, 1996 and
the related consolidated statements of income, equity, and cash flows for each
of the two years in the period ended January 5, 1996 and the nine months ended
October 5, 1996. These financial statements are the responsibility of the
Corporation's management. Our responsibility is to express an opinion on these
financial statements based on our audits.

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

In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position of
Pomeroy Computer Resources, Inc. at January 5, 1995, 1996 and October 5, 1996
and the consolidated results of its operations and its consolidated cash flows
for each of the two years in the period ended January 5, 1996 and the nine
months ended October 5, 1996 in conformity with generally accepted accounting
principles.

Grant Thornton LLP

Cincinnati, Ohio
December 19, 1996

F-3
<PAGE>
POMEROY COMPUTER RESOURCES, INC.

CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
JANUARY 5, JANUARY 5, OCTOBER 5,
1995 1996 1996
------------- ------------- --------------
<S> <C> <C> <C>
ASSETS

Current assets:
Cash............................................................. $ 73,620 $ 596,321 $ 3,168,257

Accounts receivable:
Trade, less allowance of $65,000, $200,737 and $406,688 at
January 5, 1995 and 1996 and October 5, 1996, respectively... 26,631,488 27,098,141 51,714,717
Vendor product returns, less allowance of $225,000, $210,000
and $80,423 at January 5, 1995 and 1996 and October 5, 1996,
respectively................................................. 3,542,761 3,484,709 4,330,187
Vendor incentive rebates....................................... 1,551,121 3,141,847 5,054,262
Amount due from stockholder.................................... 140,633 205,525 270,000
Other.......................................................... 129,360 389,336 182,300
------------- ------------- --------------
Total receivables............................................ 31,995,363 34,319,558 61,551,466
------------- ------------- --------------
Inventories...................................................... 17,326,486 18,986,807 24,452,710
Other............................................................ 624,344 487,515 735,915
------------- ------------- --------------
Total current assets......................................... 50,019,813 54,390,201 89,908,348
------------- ------------- --------------

Equipment and leasehold improvements:
Furniture, fixtures and equipment................................ 4,213,290 5,407,799 6,692,500
Leasehold improvements........................................... 1,073,079 1,151,606 4,041,152
------------- ------------- --------------
Total........................................................ 5,286,369 6,559,405 10,733,652
Less accumulated depreciation.................................... 1,079,677 1,968,271 3,229,358
------------- ------------- --------------
Net equipment and leasehold improvements..................... 4,206,692 4,591,134 7,504,294
------------- ------------- --------------
Investment in lease residuals.................................... 1,302,117 2,596,499 2,946,462
Goodwill and other intangible assets............................. 953,172 1,445,994 7,091,301
Other assets..................................................... 578,866 961,581 630,500
------------- ------------- --------------
Total assets................................................. $ 57,060,660 $ 63,985,409 $ 108,080,905
------------- ------------- --------------
------------- ------------- --------------
</TABLE>

See notes to consolidated financial statements.

F-4
<PAGE>
POMEROY COMPUTER RESOURCES, INC.

CONSOLIDATED BALANCE SHEETS (CONTINUED)

<TABLE>
<CAPTION>
JANUARY 5, JANUARY 5, OCTOBER 5,
1995 1996 1996
------------- ------------- --------------
<S> <C> <C> <C>
LIABILITIES AND EQUITY

Current liabilities:
Notes payable.................................................... $ 422,175 $ 408,864 $ 606,550
Accounts payable:
Floor plan financing........................................... 18,974,900 17,676,926 26,407,542
Trade.......................................................... 4,631,468 3,966,820 12,507,843
------------- ------------- --------------
Total accounts payable..................................... 23,606,368 21,643,746 38,915,385
Bank notes payable................................................. 15,441,901 16,877,040 16,580,965
Deferred revenue................................................... 1,700,412 2,286,390 2,215,974
Accrued liabilities:
Employee compensation and benefits............................... 785,276 800,629 1,732,077
Income taxes..................................................... 1,051,009 1,117,855 2,595,188
Interest......................................................... 56,137 41,995 70,716
Miscellaneous.................................................... 400,848 874,038 516,638
------------- ------------- --------------
Total current liabilities.................................. 43,464,126 44,050,557 63,233,493
------------- ------------- --------------
Notes payable...................................................... 166,800 100,000 1,523,800
Deferred income taxes.............................................. 300,000 635,000 627,000
Equity:
Preferred stock (no shares issued or outstanding)................ -- -- --
Common stock (2,228,908, 2,625,917 and 6,397,346 shares issued
and outstanding at January 5, 1995 and 1996, and October 5,
1996, respectively)............................................ 22,289 26,259 63,973
Paid-in capital.................................................. 8,158,080 13,279,697 33,621,933
Retained earnings................................................ 5,153,371 6,097,902 9,214,712
------------- ------------- --------------
13,333,740 19,403,858 42,900,618
Less treasury stock, at cost (20,900 shares at January 5, 1995
and 1996, and October 5, 1996, respectively)................... 204,006 204,006 204,006
------------- ------------- --------------
Total equity............................................... 13,129,734 19,199,852 42,696,612
------------- ------------- --------------
Total liabilities and equity............................... $ 57,060,660 $ 63,985,409 $ 108,080,905
------------- ------------- --------------
------------- ------------- --------------
</TABLE>

See notes to consolidated financial statements.

F-5
<PAGE>
POMEROY COMPUTER RESOURCES, INC.

CONSOLIDATED STATEMENTS OF INCOME

<TABLE>
<CAPTION>
FISCAL YEARS ENDED JANUARY 5, NINE MONTHS ENDED OCTOBER 5,
------------------------------ ------------------------------
1995 1996 1996
-------------- -------------- 1995 --------------
--------------
(UNAUDITED)
<S> <C> <C> <C> <C>
Net sales and revenues:
Sales--equipment and supplies................ $ 130,270,342 $ 211,149,458 $ 157,418,085 $ 214,091,570
Service...................................... 13,409,559 17,939,868 12,794,940 18,367,793
Other........................................ 895,085 1,620,516 1,245,304 1,575,640
-------------- -------------- -------------- --------------
Total net sales and revenues............. 144,574,986 230,709,842 171,458,329 234,035,003
-------------- -------------- -------------- --------------
Cost of sales and service:
Equipment and supplies....................... 117,594,334 192,838,684 143,735,839 192,540,997
Service...................................... 3,306,736 4,334,806 3,324,484 4,380,818
-------------- -------------- -------------- --------------
Total cost of sales and service.......... 120,901,070 197,173,490 147,060,323 196,921,815
-------------- -------------- -------------- --------------
Gross profit................................. 23,673,916 33,536,352 24,398,006 37,113,188
-------------- -------------- -------------- --------------
Operating expenses:
Selling, general and administrative.......... 16,268,236 21,862,576 16,179,864 23,052,149
Rent expense................................. 699,341 894,258 664,531 1,016,400
Depreciation................................. 330,628 770,540 509,089 1,277,586
Amortization................................. 555,259 233,916 164,135 425,516
Provision for doubtful accounts.............. 263,289 489,813 285,669 244,356
-------------- -------------- -------------- --------------
Total operating expenses................. 18,116,753 24,251,103 17,803,288 26,016,007
-------------- -------------- -------------- --------------
Income from operations......................... 5,557,163 9,285,249 6,594,718 11,097,181
-------------- -------------- -------------- --------------
Other expense (income):
Interest expense............................. 1,030,892 1,999,399 1,506,547 1,593,553
Litigation settlement and related costs...... -- -- -- 4,392,102
Miscellaneous................................ (56,718) (64,083) (34,151) (132,841)
-------------- -------------- -------------- --------------
Total other expense...................... 974,174 1,935,316 1,472,396 5,852,814
-------------- -------------- -------------- --------------
Income before income tax....................... 4,582,989 7,349,933 5,122,322 5,244,367
Income tax expense............................. 1,856,000 2,983,000 2,074,000 2,127,000
-------------- -------------- -------------- --------------
Net income..................................... $ 2,726,989 $ 4,366,933 $ 3,048,322 $ 3,117,367
-------------- -------------- -------------- --------------
-------------- -------------- -------------- --------------
Weighted average shares outstanding:
Primary...................................... 3,644,253 4,004,781 3,972,387 4,984,804
-------------- -------------- -------------- --------------
-------------- -------------- -------------- --------------
Fully diluted................................ 3,644,253 4,043,829 4,019,425 5,085,845
-------------- -------------- -------------- --------------
-------------- -------------- -------------- --------------
Net income per common share:
Primary...................................... $ 0.75 $ 1.09 $ 0.77 $ 0.63
-------------- -------------- -------------- --------------
-------------- -------------- -------------- --------------
Fully diluted................................ $ 0.75 $ 1.08 $ 0.76 $ 0.61
-------------- -------------- -------------- --------------
-------------- -------------- -------------- --------------
</TABLE>

See notes to consolidated financial statements.

F-6
<PAGE>
POMEROY COMPUTER RESOURCES, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
FISCAL YEARS ENDED JANUARY 5, NINE MONTHS ENDED OCTOBER 5,
----------------------------- -----------------------------
1995 1996 1996
-------------- ------------- 1995 --------------
-------------
(UNAUDITED)
<S> <C> <C> <C> <C>
Cash Flows from Operating Activities:
Net income.............................................. $ 2,726,989 $ 4,366,933 $ 3,048,322 $ 3,117,367
Adjustments to reconcile net income to net cash flows
from operating activities:
Depreciation.......................................... 330,628 770,540 509,089 1,277,586
Amortization.......................................... 555,259 233,916 164,135 425,516
Deferred income taxes................................. 112,000 258,000 189,000 (38,000)
Net acquisition of lease residuals.................... (252,518) (1,294,382) (1,040,823) (311,163)
Issuance of common shares for stock awards............ 40,000 40,000 40,000 40,000
Changes in working capital accounts, net of effects of
subsidiary companies purchased:
Accounts receivable................................. (12,611,901) (2,129,559) (7,786,244) (21,028,124)
Inventories......................................... (8,619,599) (1,814,197) (6,215,520) (4,024,561)
Floor plan financing................................ 11,398,614 (1,297,974) 5,512,054 8,730,616
Trade payables...................................... 457,791 (687,885) 3,755,043 4,657,964
Deferred revenue.................................... 503,311 585,978 711,255 (151,890)
Income tax payable.................................. 177,006 66,846 (11,042) 1,477,333
Other, net.......................................... 166,117 487,414 313,067 303,816
-------------- ------------- ------------- --------------
Net operating activities.............................. (5,016,303) (414,370) (811,664) (5,523,540)
-------------- ------------- ------------- --------------
Cash Flows from Investing Activities:
Capital expenditures.................................. (1,242,771) (1,070,424) (743,782) (2,763,762)
Payments for covenants not to compete................. (219,750) (238,250) (143,250) --
Acquisition of subsidiary companies, net of cash
acquired............................................ (113,803) (19,514) (19,514) --
Acquisition of reseller assets........................ -- (424,695) (75,000) (4,527,558)
-------------- ------------- ------------- --------------
Net investing activities.............................. (1,576,324) (1,752,883) (981,546) (7,291,320)
-------------- ------------- ------------- --------------
Cash Flows from Financing Activities:
Payments on notes payable............................. (57,600) (305,111) (214,200) (2,332,079)
Net proceeds of stock offering........................ -- -- -- 17,924,439
Net proceeds (payments) under bank notes payable...... 6,302,644 1,435,139 915,508 (1,146,075)
Proceeds from long term note payable.................. 500,000 -- -- --
Purchase of treasury stock............................ (204,006) -- -- --
Offering costs........................................ (168,573) -- -- --
Proceeds from exercise of stock options............... -- 1,559,926 1,332,428 1,270,511
Retirement of stock warrants.......................... -- -- -- (330,000)
-------------- ------------- ------------- --------------
Net financing activities.............................. 6,372,465 2,689,954 2,033,736 15,386,796
-------------- ------------- ------------- --------------
Increase (decrease) in cash............................... (220,162) 522,701 240,526 2,571,936
Cash:
Beginning of period................................... 293,782 73,620 73,620 596,321
-------------- ------------- ------------- --------------
End of period......................................... $ 73,620 $ 596,321 $ 314,146 $ 3,168,257
-------------- ------------- ------------- --------------
-------------- ------------- ------------- --------------
</TABLE>

See notes to consolidated financial statements.

F-7
<PAGE>
POMEROY COMPUTER RESOURCES, INC.

CONSOLIDATED STATEMENTS OF EQUITY

<TABLE>
<CAPTION>
COMMON PAID-IN RETAINED TREASURY
STOCK CAPITAL EARNINGS STOCK TOTAL EQUITY
--------- ------------- ------------ ----------- -------------
<S> <C> <C> <C> <C> <C>
Balances at January 5, 1994..................... 22,128 8,145,240 2,426,382 -- 10,593,750
Net income.................................... 2,726,989 2,726,989
3,168 common shares issued for stock awards... 32 39,968 40,000
12,976 common shares issued for acquisition of
subsidiary.................................. 129 136,445 136,574
Purchases of treasury stock................... (204,006) (204,006)
Costs associates with initial public
offering.................................... (168,573) (168,573)
Tax benefit of costs related to initial public
offering.................................... 5,000 5,000
--------- ------------- ------------ ----------- -------------
Balances at January 5, 1995..................... 22,289 8,158,080 5,153,371 (204,006) 13,129,734
Net income.................................... 4,366,933 4,366,933
4,000 common shares issued for stock awards... 40 39,960 40,000
5,755 common shares issued for acquisition.... 58 99,942 100,000
Stock options exercised and related tax
benefit..................................... 1,664 1,557,921 1,559,585
Stock dividend................................ 2,208 3,420,194 (3,422,402)
Tax benefit of costs related to initial public
offering.................................... 3,600 3,600
--------- ------------- ------------ ----------- -------------
Balances at January 5, 1996..................... 26,259 13,279,697 6,097,902 (204,006) 19,199,852
Net income.................................... 3,117,367 3,117,367
3,076 common shares issued for stock awards... 31 39,969 40,000
113,316 common shares issued for
acquisitions................................ 1,133 1,473,867 1,475,000
Stock options exercised and related tax
benefit..................................... 1,270 1,269,241 1,270,511
Retirement of stock warrants.................. (330,000) (330,000)
Effect of 3 for 2 stock split................. 21,255 (21,255) (557) (557)
1,402,500 common shares issued by public
offering.................................... 14,025 17,910,414 17,924,439
--------- ------------- ------------ ----------- -------------
Balances at October 5, 1996..................... $ 63,973 $ 33,621,933 $ 9,214,712 $ (204,006) $ 42,696,612
--------- ------------- ------------ ----------- -------------
--------- ------------- ------------ ----------- -------------
</TABLE>

See notes to consolidated financial statements.

F-8
<PAGE>
POMEROY COMPUTER RESOURCES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FISCAL YEARS ENDED JANUARY 5, 1995 AND JANUARY 5, 1996
AND
NINE MONTHS ENDED OCTOBER 5, 1996

1. COMPANY DESCRIPTION

On February 13, 1992, Pomeroy Computer Resources, Inc. was formed and on
April 2, 1992 was merged with eight related businesses ("predecessor
businesses") (collectively the "Company"), five of which owned and operated
franchises of ComputerLand Corporation ("ComputerLand") in Ohio and Kentucky.
The Company has 10 million shares of $.01 par value common stock authorized,
with 6.4 million shares outstanding. The Company is also authorized to issue 2
million shares of $.01 par value preferred stock. Since the owner of the Company
and the predecessor businesses were the same, this transaction constituted a
combination of the predecessor businesses under common control and was accounted
for at historical cost in a manner similar to that followed for a pooling of
interests. The Company purchased C&N Corp. ("C&N") in fiscal 1992 and Xenas
Communications Corp. ("Xenas") in fiscal 1994 (see Note 12). In fiscal 1995 the
Company formed a wholly-owned subsidiary, Pomeroy Computer Leasing Company,
Inc., ("PCL"), for the purpose of leasing computer equipment to the Company's
customers.

The Company sells, installs and services microcomputers and microcomputer
equipment primarily for business, professional, educational and government
customers. The Company also derives revenue from customer support services,
including network analysis and design, systems configuration, cabling, custom
installation, training, maintenance and repair. The Company has ten branch
offices in Kentucky, Iowa, Indiana, Tennessee, Florida and Alabama and grants
credit to substantially all customers in these areas.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

PRINCIPLES OF CONSOLIDATION--The accompanying consolidated financial
statements include the accounts of the Company and its wholly-owned subsidiaries
C&N, Xenas and PCL. All significant intercompany accounts and transactions have
been eliminated in consolidation. Certain reclassifications have been made to
the 1994 financial statements included herein to conform with the presentation
used in 1995.

FISCAL YEAR--The Company's fiscal year is a 12-month period ending January
5. References to fiscal 1994 and 1995 are for the fiscal years ended January 5,
1995 and January 5, 1996, respectively.

GOODWILL AND OTHER INTANGIBLE ASSETS--Goodwill is amortized using the
straight-line method over periods of fifteen to twenty-five years. In accordance
with SFAS No. 121 "Accounting for The Impairment of Long-Lived Assets," the
Company evaluates its goodwill on an ongoing basis to determine potential
impairment by comparing the carrying value to the undiscounted estimated
expected future cash flows of the related assets. Other intangible assets are
amortized using the straight-line method over periods up to ten years.

EQUIPMENT AND LEASEHOLD IMPROVEMENTS--Equipment and leasehold improvements
are stated at cost. Depreciation on equipment is computed using the
straight-line method over estimated useful lives. Depreciation on leasehold
improvements is computed using the straight-line method over estimated useful
lives or the term of the lease, whichever is less. Expenditures for repairs and
maintenance are charged to expense as incurred and additions and improvements
that significantly extend the lives of assets are capitalized. Upon sale or
retirement of depreciable property, the cost and accumulated depreciation are
removed from the related accounts and any gain or loss is reflected in the
results of operations.

INCOME TAXES--Deferred income tax liabilities and assets are provided for
temporary differences between the tax basis and reported amounts of assets and
liabilities that will result in taxable or deductible

F-9
<PAGE>
POMEROY COMPUTER RESOURCES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

FISCAL YEARS ENDED JANUARY 5, 1995 AND JANUARY 5, 1996
AND
NINE MONTHS ENDED OCTOBER 5, 1996

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
amounts in future years. The Company's temporary differences primarily result
from revenue from the acquisitions of lease residuals not taxable until
received, the use of accelerated depreciation for tax purposes and accrued
expenses not deductible for tax purposes until paid.

VENDOR INCENTIVE REBATES--Certain vendors provide incentive rebates to
perform product training, advertising and other sales and market development
activities. The Company recognizes these rebates when it has completed its
obligation to perform under the specific incentive arrangement. Incentive
rebates are recorded as reductions of selling, general and administrative
expense or, if volume based, cost of sales.

INVENTORIES--Inventories are stated at the lower of cost or market. Cost is
determined by the average cost method.

REVENUE RECOGNITION--The Company recognizes revenue on the sale of equipment
and supplies when the products are shipped. Service revenue is recognized when
the applicable services are provided.

DEFERRED REVENUE--Revenues received on maintenance contracts are recognized
ratably over the lives of the contracts. Costs related to maintenance contracts
are recognized when incurred.

STOCK-BASED COMPENSATION--The Financial Accounting Standards Board issued
SFAS No. 123-- Accounting for Stock-Based Compensation in the Fall of 1995. The
statement encourages, but does not require, companies to record compensation
cost for stock-based employee compensation plans at fair value beginning in
fiscal 1996. The Company elected to account for stock-based compensation using
the intrinsic value method prescribed in Accounting Principles Board Opinion No.
25--Accounting for Stock Issued to Employees--and related Interpretations.
Accordingly, compensation cost for stock options is measured as the excess, if
any, of the quoted market price of the Company's common stock at the date of
grant over the amount an employee must pay to acquire the stock. The Company has
adopted SFAS No. 123 for disclosure purposes and for non-employee stock options.
This has no material effect on the results of operations or financial position
of the Company.

NET INCOME PER SHARE--The computation of primary net income per common and
common equivalent share is based upon the weighted average number of common
shares outstanding during the period plus, in periods in which they have a
dilutive effect, the effect of common shares contingently issuable, primarily
from stock options and warrants. Fully diluted net income per common share also
reflects dilution due to the use of the market price at the end of the period,
when higher than the average price for the period.

USE OF ESTIMATES IN FINANCIAL STATEMENTS--In preparing financial statements
in conformity with generally accepted accounting principles, management makes
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosures of contingent assets and liabilities at the date of
the financial statements, as well as the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from those
estimates.

FAIR VALUE DISCLOSURES--The fair value of financial instruments approximates
carrying value.

F-10
<PAGE>
POMEROY COMPUTER RESOURCES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

FISCAL YEARS ENDED JANUARY 5, 1995 AND JANUARY 5, 1996
AND
NINE MONTHS ENDED OCTOBER 5, 1996

3. ACCOUNTS RECEIVABLE

The following table summarizes the activity in the allowance for doubtful
accounts for fiscal 1994 and 1995, and the first nine months of fiscal 1996.

<TABLE>
<CAPTION>
TRADE OTHER
---------- -----------
<S> <C> <C>
Balance January 5, 1994.............................................. $ 65,000 $ --
Provision 1994..................................................... 38,289 225,000
Accounts written-off............................................... (38,289) --
---------- -----------
Balance January 5, 1995.............................................. 65,000 225,000
Provision 1995..................................................... 93,491 416,474
Accounts written-off............................................... (89,125) (443,737)
Recoveries......................................................... 131,371 12,263
---------- -----------
Balance January 5, 1996.............................................. 200,737 210,000
Provision 1996..................................................... 250,000 30,675
Accounts written-off............................................... (97,045) (588,474)
Recoveries......................................................... 52,996 428,222
---------- -----------
Balance October 5, 1996.............................................. $ 406,688 $ 80,423
---------- -----------
---------- -----------
</TABLE>

4. INVENTORIES

Inventories consist of items held for resale and are comprised of the
following components as of the end of fiscal 1994 and 1995, and as of October 5,
1996:

<TABLE>
<CAPTION>
OCTOBER 5,
1994 1995 1996
------------- ------------- --------------
<S> <C> <C> <C>
Equipment and supplies......................... $ 16,738,759 $ 17,926,478 $ 23,288,825
Service parts.................................. 587,727 1,060,329 1,163,885
------------- ------------- --------------
Total...................................... $ 17,326,486 $ 18,986,807 $ 24,452,710
------------- ------------- --------------
------------- ------------- --------------
</TABLE>

5. GOODWILL AND OTHER INTANGIBLE ASSETS

Goodwill and other intangible assets consist of the following as of the end
of the fiscal year and the nine months ended October 5, 1996, net of accumulated
amortization of $442,232 (1994), $489,348 (1995) and $913,551 (October 5, 1996),
respectively:

<TABLE>
<CAPTION>
OCTOBER 5,
1994 1995 1996
---------- ------------ --------------
<S> <C> <C> <C>
Goodwill........................................... $ 458,886 $ 450,729 $ 6,299,750
Covenants not to compete........................... 311,782 394,029 249,940
Customer lists..................................... 182,504 601,236 541,611
---------- ------------ --------------
$ 953,172 $ 1,445,994 $ 7,091,301
---------- ------------ --------------
---------- ------------ --------------
</TABLE>

F-11
<PAGE>
POMEROY COMPUTER RESOURCES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

FISCAL YEARS ENDED JANUARY 5, 1995 AND JANUARY 5, 1996
AND
NINE MONTHS ENDED OCTOBER 5, 1996

5. GOODWILL AND OTHER INTANGIBLE ASSETS (CONTINUED)
As a result of its litigation with Vanstar Corporation, the Company in
fiscal 1994 wrote-off unamortized costs in the amount of $251,000 related to its
agreement with Vanstar which are included in amortization expense. On April 29,
1996 the Company and Vanstar entered into a settlement agreement (the
"Settlement Agreement") which in effect terminated all agreements between the
parties.

In 1993, the Company acquired certain assets, principally customer lists, of
a computer reseller in Louisville, Kentucky. Also, the Company entered into a
five year covenant not to compete with the reseller and its owners. Amounts paid
to the reseller for these intangibles were $194,150 for customer lists and
$241,000 for the covenant not to compete. The Company entered into an additional
covenant not to compete with a former owner of the reseller whereby the Company
paid a total of $277,000 in two installments during 1994 and 1995.

In the first nine months of 1996, the Company acquired The Computer Supply
Store, Inc. ("TCSS") a privately held computer reseller located in Des Moines,
Iowa and AA Microsystems, Inc. ("AA Micro"), a network service provider located
in Birmingham, Alabama (See Note 12). The Company recorded $5,690,000 and
$402,000 of goodwill in connection with those acquisitions, respectively.

6. BORROWING ARRANGEMENTS

The Company has an available line of credit up to the lesser of $25,000,000
(or an amount based upon a formula of eligible trade receivables) at an interest
rate that varies based on the prime rate of the bank or the LIBOR rate at the
Company's election. At January 5, 1995 and 1996 and October 5, 1996, bank notes
payable include $2,301,000, $624,000 and $880,965, respectively, of overdrafts
in accounts with the Company's primary lender. These amounts were subsequently
funded through the normal course of business. The interest rate charged was
8.75%, 8.25% and 7.5% at January 5, 1995 and 1996 and October 5, 1996,
respectively. The agreement, which expires in April 1997, calls for the payment
of a .25% commitment fee based on the unused portion of the line of credit. The
revolving credit agreement is collateralized by substantially all assets of the
Company, except those assets which collateralize certain other financing
arrangements. Under the revolving credit agreement, the Company may not make any
cash dividend payments.

The maximum amount outstanding and the average amount outstanding on bank
revolving credit agreements were as follows:

<TABLE>
<CAPTION>
MAXIMUM AVERAGE
AMOUNT AMOUNT
PERIOD ENDING OUSTANDING OUSTANDING
- --------------------------------------------------------------- ------------- -------------
<S> <C> <C>
January 5, 1995................................................ $ 15,442,000 $ 9,382,000
January 5, 1996................................................ $ 19,000,000 $ 14,741,000
October 5, 1996................................................ $ 26,687,000 $ 17,408,000
</TABLE>

The above average amounts outstanding are calculated by dividing the sum of
the average daily balances for each month by the number of months in the period.
The weighted average interest rate on the bank revolving credit agreements was
7.1%, 8.7% and 8.2% in fiscal 1994 and 1995 and the nine months ended October 5,
1996, respectively.

F-12
<PAGE>
POMEROY COMPUTER RESOURCES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

FISCAL YEARS ENDED JANUARY 5, 1995 AND JANUARY 5, 1996
AND
NINE MONTHS ENDED OCTOBER 5, 1996

6. BORROWING ARRANGEMENTS (CONTINUED)
In November 1994, the Company exercised an option in its revolving credit
agreement to borrow $500,000 on a term note with interest at a rate of 0.5%
above the bank's prime rate. The interest rate on this term note was revised to
the bank's prime rate in March, 1995. The term note matured July 31, 1996 and
was paid off. The interest rate charged was 8.5% at January 5, 1996. As of
October 5, 1996, the term note was paid in full.

The Company finances inventory through floor plan arrangements with two
finance companies. As of October 5, 1996 the floor plan lines of credit were
$12,000,000 with IBM Credit Corporation ("ICC") and $25,000,000 with Deutsche
Financial Services ("DFS"). Borrowings are made on sixty day notes, with one-
half of the note amount due in thirty days. Financing on many of the
arrangements which are subsidized by manufacturers is interest free. The average
rate on the plans overall is less than 2.1%.

The maximum amount outstanding and the average amount outstanding on each of
the floor plan arrangements were as follows:

<TABLE>
<CAPTION>
ICC DFS
-------------------------- ----------------------------
MAXIMUM AVERAGE MAXIMUM AVERAGE
AMOUNT AMOUNT AMOUNT AMOUNT
PERIOD ENDING OUSTANDING OUSTANDING OUSTANDING OUSTANDING
- ----------------------------------- ------------ ------------ ------------- -------------
<S> <C> <C> <C> <C>
January 5, 1995.................... $ 5,391,000 $ 3,579,000 $ 14,225,000 $ 7,703,000
January 5, 1996.................... $ 6,300,000 $ 4,190,970 $ 21,045,000 $ 15,979,000
October 5, 1996.................... $ 8,066,000 $ 5,371,000 $ 25,508,000 $ 16,979,000
</TABLE>

The average amount outstanding is calculated by dividing the sum of the
outstanding balances at the end of each month by the number of months in the
applicable period.

At October 5, 1996 subordinated debt in the amount of $1,700,000 was
outstanding related to the acquisition of TCSS as described in Note 12.

7. INCOME TAXES

The provision for income taxes consists of the following:

<TABLE>
<CAPTION>
NINE MONTHS ENDED
1994 1995 OCTOBER 5, 1996
------------ ------------ ------------------
<S> <C> <C> <C>
Current:
Federal.................................... $ 1,403,000 $ 2,071,000 $ 1,645,000
State...................................... 406,000 654,000 520,000
------------ ------------ ------------------
Total current............................ 1,809,000 2,725,000 2,165,000
------------ ------------ ------------------
Deferred:
Federal.................................... 35,000 206,000 (30,000)
State...................................... 12,000 52,000 (8,000)
------------ ------------ ------------------
Total deferred........................... 47,000 258,000 (38,000)
------------ ------------ ------------------
Total income tax provision................... $ 1,856,000 $ 2,983,000 $ 2,127,000
------------ ------------ ------------------
------------ ------------ ------------------
</TABLE>

F-13
<PAGE>
POMEROY COMPUTER RESOURCES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

FISCAL YEARS ENDED JANUARY 5, 1995 AND JANUARY 5, 1996
AND
NINE MONTHS ENDED OCTOBER 5, 1996

7. INCOME TAXES (CONTINUED)
The approximate tax effect of the temporary differences giving rise to the
Company's deferred income tax assets (liabilities) are:

<TABLE>
<CAPTION>
NINE MONTHS ENDED
1994 1995 OCTOBER 5, 1996
----------- ----------- ------------------
<S> <C> <C> <C>
Deferred Tax Asset:
Bad debt provision........................... $ 90,000 $ 167,000 $ 197,000
----------- ----------- ----------

Deferred Tax Liability:
Acquisition of lease residuals............... (314,000) (609,000) (702,000)
Other temporary differences.................. 14,000 (26,000) 75,000
----------- ----------- ----------
(300,000) (635,000) (627,000)
----------- ----------- ----------
Net deferred tax liability................... $ (210,000) $ (468,000) $ (430,000)
----------- ----------- ----------
----------- ----------- ----------
</TABLE>

The Company's effective income tax rate differs from the Federal statutory
rate as follows:

<TABLE>
<CAPTION>
NINE MONTHS ENDED
1994 1995 OCTOBER 5, 1996
--------- --------- ---------------------
<S> <C> <C> <C>
Tax at Federal statutory rate........................... 34.0% 34.0% 34.0%

State taxes........................................... 6.0 6.3 6.4
Other................................................. 0.5 0.3 0.2
--- --- ---
Effective tax rate.................................. 40.5% 40.6% 40.6%
--- --- ---
--- --- ---
</TABLE>

8. OPERATING LEASES

The Company leases office and warehouse space, vehicles and certain office
equipment from various lessors. Lease terms vary in duration and include various
option periods. The leases generally require the Company to pay taxes and
insurance. Future minimum lease payments under noncancelable operating leases
with initial or remaining terms in excess of one year as of October 5, 1996 are
as follows:

<TABLE>
<CAPTION>
12 MONTHS ENDED OCTOBER 5,
- --------------------------------------------------------------------------------
<S> <C>
1997.......................................................................... $ 1,977,000
1998.......................................................................... 1,480,000
1999.......................................................................... 1,194,000
2000.......................................................................... 1,045,000
2001.......................................................................... 857,000
Thereafter.................................................................... 2,576,000
------------
Total minimum lease payments.................................................... $ 9,129,000
------------
------------
</TABLE>

F-14
<PAGE>
POMEROY COMPUTER RESOURCES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

FISCAL YEARS ENDED JANUARY 5, 1995 AND JANUARY 5, 1996
AND
NINE MONTHS ENDED OCTOBER 5, 1996

9. EMPLOYEE BENEFIT PLANS

As of July 1, 1992 the Company converted its profit sharing plan, which
covers substantially all employees, to an Employee Stock Ownership Plan
("ESOP"). No less than a majority and no more than 75% of the assets of the ESOP
will be invested in common stock of the Company purchased on the open market. As
of October 5, 1996, the ESOP held 57,129 shares of Company stock. No
contributions were accrued in fiscal 1995 and the nine months ended October 5,
1996. A contribution of $100,000 was accrued in fiscal 1994.

The Company has a savings plan intended to qualify under sections 401(a) and
401(k) of the Internal Revenue Code. The plan covers substantially all employees
of the Company. The Company does not contribute to the plan.

10. INVESTMENT IN LEASE RESIDUALS

The Company participates in a Remarketing and Agency Agreement ("Agreement")
with Information Leasing Corporation ("ILC") whereby the Company obtains rights
to 50% of lease residual values for services rendered in connection with
locating the lessee, selling the equipment to ILC and agreeing to assist in
remarketing the used equipment.

During fiscal 1994, 1995 and the first nine months of 1996, the Company sold
equipment and related support services to ILC, for lease to ILC's customers, in
amounts of $4,188,000, $23,661,000 and $6,072,000, respectively. The Company
also obtained rights to lease residuals from ILC in the amount of $300,000,
$875,000 and $325,000 in 1994, 1995 and the first nine months of 1996,
respectively. Such amounts are recorded as a reduction of the related cost of
sales. Residuals acquired in this manner are recorded at the estimated present
value of interest retained.

The Company also purchases residuals associated with separate leasing
arrangements entered into by ILC. Such transactions do not involve the sale of
equipment and related support services by the Company to ILC. Residuals acquired
in this manner are accounted for at cost.

The carrying value of investments in lease residuals is evaluated on a
quarterly basis, and is subject only to downward market adjustments until
ultimately realized through a sale or re-lease of the equipment.

11. MAJOR CUSTOMERS

Sales to a major customer totaled approximately $16,030,000 for fiscal 1994.
Sales to a major customer were approximately $43,849,000 for fiscal 1995. During
the first nine months of 1996, sales to the largest customer totaled
approximately $29,452,000.

12. ACQUISITIONS

On November 14, 1994, the Company acquired all of the outstanding stock of
Xenas for approximately $546,000. The purchase price consisted of $273,000 in
cash, notes payable in the amount of $136,000 with interest at the rate of 0.5%
above the prime rate of the Company's primary lender, and 12,976 unregistered
shares of the Company's common stock with a value of $137,000. The acquisition
was accounted for as a purchase, and accordingly the purchase price was
allocated to assets and liabilities based

F-15
<PAGE>
POMEROY COMPUTER RESOURCES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

FISCAL YEARS ENDED JANUARY 5, 1995 AND JANUARY 5, 1996
AND
NINE MONTHS ENDED OCTOBER 5, 1996

12. ACQUISITIONS (CONTINUED)
on the estimated value as of the date of acquisition. The results of Xenas's
operations have been included in the consolidated statements of income from the
date of acquisition. The acquisition agreement provides for the payment of
contingent consideration if certain levels of net operating income, as defined
in the agreement, are achieved periodically from the date of acquisition through
fiscal 1997. Any future payments under this provision would adjust the recorded
cost in excess of fair market value of net assets acquired. Had Xenas been
acquired at the beginning of fiscal 1993, the pro-forma inclusion of its
operating results would not have had a significant effect on the reported
consolidated net income for that year.

On March 14, 1996, the Company acquired substantially all of the assets and
assumed substantially all of the liabilities of TCSS, a privately held computer
reseller located in Des Moines, Iowa. The purchase price consisted of $4,500,000
in cash, a $2,700,000 subordinated note and 100,000 unregistered shares of the
Company's common stock with an approximate value of $1,300,000. Interest on the
subordinated note, which is calculated at prime plus 0.5%, is payable quarterly
and principal is payable in four equal annual installments of $675,000. The
acquisition was accounted for as a purchase, accordingly the purchase price was
allocated to assets and liabilities based on their estimated value as of the
date of the acquisition. The results of TCSS's operations will be included in
the consolidated statement of income from the date of acquisition. The following
table summarizes, on an unaudited pro forma basis, adjusted to reflect a three-
for-two split of the Company's common stock in the form of a stock dividend paid
on October 4, 1996 and a 10% stock dividend paid on May 22, 1995, the estimated
combined results of the Company and TCSS assuming the acquisition had occurred
on January 6, 1995. These results include certain adjustments, primarily
goodwill amortization and interest expense, and are not necessarily indicative
of what results would have been had the Company owned TCSS during the period
presented:

<TABLE>
<CAPTION>
FISCAL YEAR
1995
---------------
<S> <C>
Net sales and revenues....................................................... $ 291,209,000
Net income................................................................... $ 4,794,000
Net income per common share:
Primary.................................................................... $ 1.15
Fully Diluted.............................................................. $ 1.14
</TABLE>

In August 1996, the Company acquired certain assets of AA Micro, a network
service provider located in Birmingham, Alabama. The purchase price consisted of
$67,464 in cash, a $200,000 note payable and 19,974 unregistered shares of the
Company's common stock with an approximate value of $200,000. Interest on the
note, which is calculated at 8.25%, is payable quarterly and principal is
payable in three equal annual installments of $66,667. In addition, the Company
has entered into a three-year employment contract with the former president. The
acquisition was accounted for as a purchase, accordingly the purchase price was
allocated to assets based on their estimated value as of the date of
acquisition. The results of AA Micro's operations will be included in the
consolidated statement of income from the date of acquisition.

F-16
<PAGE>
POMEROY COMPUTER RESOURCES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

FISCAL YEARS ENDED JANUARY 5, 1995 AND JANUARY 5, 1996
AND
NINE MONTHS ENDED OCTOBER 5, 1996

13. RELATED PARTIES

During fiscal 1995 the Company entered into a ten year triple-net lease
agreement commencing in 1996 for a new headquarters and distribution facility
with a company that is controlled by the Chief Executive Officer of the Company.
The base rental for 1996 on an annualized basis is $583,294. The annual rental
for these properties was determined on the basis of a fair market value rental
opinion provided by an independent real estate company.

During fiscal 1992 the Company loaned $100,000 to an officer of the Company.
This loan was evidenced by a promissory note with an annual interest rate of 1%
over the prime rate. In addition, a total of $106,000 was advanced to the
officer in fiscal years 1993 through 1995. The note plus accrued interest and
the advance were repaid during the nine months ended October 5, 1996.

During the nine months ended October 5, 1996, the Company made periodic
advances to a company that is controlled by the Chief Executive Officer of the
Company. At October 5, 1996, the amount advanced by the Company was $270,000. No
interest was charged on the advances which were repaid in December 1996.

14. SUPPLEMENTAL CASH FLOW DISCLOSURES

Supplemental disclosures with respect to cash flow information and non-cash
investing and financing activities are as follows:

<TABLE>
<CAPTION>
NINE MONTHS ENDED
1994 1995 OCTOBER 5, 1996
------------ ------------ ------------------
<S> <C> <C> <C>
Interest paid.................................................... $ 998,000 $ 2,037,000 $ 1,565,000
------------ ------------ ------------------
------------ ------------ ------------------
Income taxes paid................................................ $ 1,719,000 $ 2,658,000 $ 688,000
------------ ------------ ------------------
------------ ------------ ------------------
Business combination accounted for as purchase:
Assets acquired................................................ $ 680,000 $ 774,000 $ 15,298,000
Liabilities assumed............................................ (355,000) (24,000) (6,395,000)
Note payable................................................... (136,000) (225,000) (2,900,000)
Stock issued................................................... (137,000) (100,000) (1,475,000)
------------ ------------ ------------------
Net cash paid.................................................. $ 52,000 $ 425,000 $ 4,528,000
------------ ------------ ------------------
------------ ------------ ------------------
</TABLE>

15. STOCK OPTION PLANS

The Company's 1992 Non-Qualified and Incentive Stock Option Plan provides
certain employees of the Company with options to purchase common stock of the
Company through options at an exercise price equal to the market value on the
date of grant. 600,000 shares of the common stock of the Company are reserved
for issuance under the plan. The plan will terminate ten years from the date of
adoption. Stock options granted under the plan are exercisable in accordance
with various terms as authorized by the Compensation Committee. To the extent
not exercised, options will expire not more than ten years after the date of
grant.

F-17
<PAGE>
POMEROY COMPUTER RESOURCES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

FISCAL YEARS ENDED JANUARY 5, 1995 AND JANUARY 5, 1996
AND
NINE MONTHS ENDED OCTOBER 5, 1996

15. STOCK OPTION PLANS (CONTINUED)
The Company's 1992 Outside Directors' Stock Option Plan provides outside
directors of the Company with options to purchase common stock of the Company at
an exercise price equal to the market value of the shares at the date of grant.
75,000 shares of common stock of the Company are reserved for issuance under the
plan. The plan will terminate ten years from the date of adoption. Pursuant to
the plan, an option to purchase 10,000 shares of common stock automatically will
be granted on the first day of the initial term of a director. An additional
2,500 shares of common stock automatically will be granted to an eligible
director upon the first day of each consecutive year of service on the board.
Options may be exercised after one year from the date of grant for not more than
one-third of the shares subject to the option and an additional one-third of the
shares subject to the option may be exercised for each of the next two years
thereafter. To the extent not exercised, options will expire five years after
the date of grant.

The following summarizes the stock option transactions under the plans for
the fiscal years ended January 5, 1995 and 1996 and the nine months ended
October 5, 1996:

<TABLE>
<CAPTION>
WEIGHTED AVERAGE OPTION
SHARES EXERCISE PRICE PRICE RANGE
---------- ----------------- -----------------
<S> <C> <C> <C>
Options outstanding January 5, 1994.............................. 179,332 $6.62 to $10.75
Granted........................................................ 106,500 $8.00 to $10.75
Surrendered.................................................... (2,000) $7.81 to $9.50
----------
Options outstanding January 5, 1995.............................. 283,832 $6.62 to $10.75
Granted........................................................ 66,300 $ 10.95
Stock dividend................................................. 33,383 8.32
Exercised...................................................... (164,975) 8.27
----------
Options outstanding January 5, 1996.............................. 218,540 8.32
Granted........................................................ 149,600 13.83
Exercised...................................................... (126,075) 10.08
Stock split effect............................................. 121,082 7.21
----------
Options outstanding October 5, 1996.............................. 363,147 $ 7.21
----------
----------
</TABLE>

The following summarizes options outstanding and exercisable at October 5,
1996:

<TABLE>
<CAPTION>
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
----------------------------------------------------- ------------------------------
NUMBER WEIGHTED AVERAGE NUMBER
OUTSTANDING REMAINING CONTRACTUAL WEIGHTED AVERAGE EXERCISABLE WEIGHTED AVERAGE
RANGE OF EXERCISE PRICES AT 10/5/96 LIFE EXERCISE PRICE AT 10/5/96 EXERCISE PRICE
- -------------------------------- ----------- --------------------- ----------------- ----------- -----------------
<S> <C> <C> <C> <C> <C>
$4.01 to $5.99................. 166,747 1.7 $ 5.15 165,372 $ 5.14
$6.41 to $8.50................. 113,900 1.9 $ 7.47 105,599 $ 7.63
$9.50 to $11.92................. 82,500 3.5 $ 10.07 68,750 $ 9.98
----------- -----------
363,147 2.1 $ 7.21 339,721 $ 6.90
----------- -----------
----------- -----------
</TABLE>

F-18
<PAGE>
POMEROY COMPUTER RESOURCES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

FISCAL YEARS ENDED JANUARY 5, 1995 AND JANUARY 5, 1996
AND
NINE MONTHS ENDED OCTOBER 5, 1996

15. STOCK OPTION PLANS (CONTINUED)
The weighted average fair value at date of grant for options granted during
fiscal 1995 and the first nine months of fiscal 1996 was $2.42 and $2.75,
respectively. The fair value of options at the date of grant was estimated using
the Black-Scholes model with the following weighted average assumptions:

<TABLE>
<CAPTION>
NINE MONTHS ENDED
FISCAL 1995 OCTOBER 5, 1996
--------------- -----------------------
<S> <C> <C>
Expected life (years)........................................ 2.4 1.7
Interest rate................................................ 7.3% 5.8%
Volatility................................................... 50% 55%
Dividend yield............................................... 0% 0%
</TABLE>

Had compensation cost for the Company's stock option plans been determined
based on the fair value at the grant date for awards in fiscal 1995 and the
first nine months of fiscal 1996 consistent with the provisions of SFAS No. 123,
the Company's net income and earnings per share would have been reduced to the
pro forma amounts indicated below:

<TABLE>
<CAPTION>
NINE MONTHS ENDED
FISCAL 1995 OCTOBER 5, 1996
------------ ------------------
<S> <C> <C>
Net income--as reported..................................... $ 4,366,933 $ 3,117,367
Net income--pro forma....................................... $ 4,195,923 $ 2,647,572
Net income per common share--as reported
Primary................................................... $ 1.09 $ 0.63
Fully diluted............................................. $ 1.08 $ 0.61
Net income per common share--pro forma
Primary................................................... $ 1.05 $ 0.53
Fully diluted............................................. $ 1.04 $ 0.52
</TABLE>

The initial application of SFAS No. 123 for pro forma disclosure may not be
representative of the future effects of applying the statement.

In 1994 and 1995 and the first nine months of 1996, shares of common stock
were awarded to officers of the Company totalling 3,168, 4,000 and 3,076,
respectively. Compensation expense resulting from the awards was $40,000 in each
of fiscal years 1994 and 1995, and $30,000 for the first nine months of 1996.

16. LITIGATION

There are various legal actions arising in the normal course of business
that have been brought against the Company. Management believes these matters
will not have a material adverse effect on the Company's consolidated financial
position or results of operations.

17. RISK OF LOSS FROM CONCENTRATIONS

During fiscal 1995 and the first nine months of 1996, approximately 42% and
41%, respectively, of the Company's total net sales and revenues were derived
from its top ten customers, including one customer which accounted for 19% and
13%, respectively, of total net sales and revenues. A loss of one or more of the
Company's major customers could have a material adverse effect on the Company.

F-19
<PAGE>
POMEROY COMPUTER RESOURCES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

FISCAL YEARS ENDED JANUARY 5, 1995 AND JANUARY 5, 1996
AND
NINE MONTHS ENDED OCTOBER 5, 1996

17. RISK OF LOSS FROM CONCENTRATIONS (CONTINUED)
Due to the demand for the products sold by the Company, significant product
shortages occur from time to time because manufacturers are unable to produce
sufficient quantities of certain products to meet increased demand. Failure to
obtain adequate product shipments could have a material adverse effect on the
Company's operations and financial results.

The Company is required to have authorizations from manufacturers in order
to sell their products. The loss of a significant vendor's authorization could
have a material adverse effect on the Company's business.

18. SUBSEQUENT EVENT

On October 11, 1996 the Company acquired substantially all of the assets and
assumed substantially all of the liabilities of Communications Technology, Inc.,
d/b/a DILAN ("DILAN"), a privately held network integrator located in Hickory,
North Carolina. The purchase price consisted of $2.6 million in cash, a $1.1
million subordinated note and $5.5 million of assumed liabilities. Interest on
the subordinated note, which is calculated at 10% per annum, is payable
quarterly and principal is payable in three equal annual installments of
$365,000. The acquisition will be accounted for as a purchase, accordingly the
purchase price will be allocated to assets and liabilities based on their
estimated value as of the date of the acquisition. The results of DILAN'S
operations will be included in the consolidated statement of income from the
date of acquisition.

F-20
<PAGE>
POMEROY COMPUTER RESOURCES, INC.
PRO FORMA CONSOLIDATED CONDENSED STATEMENT OF INCOME
YEAR ENDED JANUARY 5, 1996 AND NINE MONTHS ENDED OCTOBER 5, 1996
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED JANUARY 5, 1996 OCTOBER 5, 1996
----------------------------------------------- ---------------------
HISTORICAL (1) HISTORICAL (2)
--------------------- PRO FORMA ---------------------
COMPANY TCSS ADJUSTMENTS PRO FORMA COMPANY TCSS
---------- --------- ----------- ----------- ---------- ---------
<S> <C> <C> <C> <C> <C> <C>
Net sales and revenues.............................. $ 230,710 $ 60,499 $ 291,209 $ 234,035 $ 11,817
Cost of sales and service........................... 197,174 52,504 (3) 249,678 196,922 10,342
---------- --------- ----------- ---------- ---------
Gross profit...................................... 33,536 7,995 41,531 37,113 1,475
Operating expenses.................................. 24,251 5,931 $ 614(4) 30,796 26,016 951
---------- --------- ----------- ----------- ---------- ---------
Income from operations............................ 9,285 2,064 (614) 10,735 11,097 524
Interest expense.................................... 1,999 107 618(5) 2,724 1,594 15
Litigation settlement and related costs............. -- -- -- -- 4,392 --
Miscellaneous income................................ (64) 5 (59) (133) 2
---------- --------- ----------- ----------- ---------- ---------
Income before income taxes........................ 7,350 1,952 (1,232) 8,070 5,244 507
Income tax expense.................................. 2,983 -- (293) (6) 3,276 2,127 203
---------- --------- ----------- ----------- ---------- ---------
Net income.......................................... $ 4,367 $ 1,952 $ (1,525) $ 4,794 $ 3,117 $ 304
---------- --------- ----------- ----------- ---------- ---------
---------- --------- ----------- ----------- ---------- ---------
Weighted average shares outstanding................. 4,005 4,155 4,985
---------- ----------- ----------
---------- ----------- ----------
Primary net income per common share................. $ 1.09 $ 1.15 $ 0.63
---------- ----------- ----------
---------- ----------- ----------

PRO FORMA
ADJUSTMENTS PRO FORMA
--------------- -----------
<S> <C> <C>
Net sales and revenues.............................. $ 245,852
Cost of sales and service........................... 207,264
-----------
Gross profit...................................... $ 38,588
Operating expenses.................................. $ 83 27,050
--- -----------
Income from operations............................ (83) 11,538
Interest expense.................................... 1,609
Litigation settlement and related costs............. -- 4,392
Miscellaneous income................................ (131)
--- -----------
Income before income taxes........................ (83) 5,668
Income tax expense.................................. (33) 2,297
--- -----------
Net income.......................................... $ (50) $ 3,371
--- -----------
--- -----------
Weighted average shares outstanding................. 5,023
-----------
-----------
Primary net income per common share................. $ 0.67
-----------
-----------
</TABLE>

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

(1) Based on the financial statements of the Company and TCSS for the year ended
January 5, 1996 and December 31, 1995, respectively.

(2) Based on the financial statements of the Company for the nine months ended
October 5, 1996 and the financial statements of TCSS for the two months
ended February 29, 1996.

(3) The pro forma information does not assume any reduction of TCSS's historical
costs or expenses due to synergies with the Company's operations.

(4) Reflects additional payroll for former owners of TCSS based on new
employment agreements, rent on building not purchased and amortization of
estimated goodwill over a 15 year period.

(5) Reflects additional interest expense resulting from financing the purchase
of TCSS.

(6) Reflects the income tax provision for TCSS for the period presented and the
income tax effect of pro forma adjustments.

F-21
<PAGE>
GLOSSARY

<TABLE>
<CAPTION>
COMPANY NAMES
- ---------------------------------------------
<S> <C>
3Com......................................... 3Com Corporation
AA Microsystems.............................. AA Microsystems, Inc.
AST.......................................... AST Research, Inc.
ASTEA........................................ ASTEA International Inc.
Alliant...................................... Alliant Health Systems, Inc.
Andersen Consulting.......................... Andersen Consulting Corp.
Apple........................................ Apple Computer, Inc.
Bank of Mississippi.......................... Bank of Mississippi
Barnett Bank................................. Barnett Bank, Inc.
Bay Networks................................. Bay Networks, Inc.
Belcan Engineering........................... Belcan Corp.
Blue Cross/ Blue Shield of Iowa.............. Blue Cross/Blue Shield of Iowa
Blue Cross/Blue Shield of Kentucky........... Blue Cross/Blue Shield of Kentucky
Canon........................................ Canon America, Inc.
Champion..................................... Champion International
Cheyenne..................................... Cheyenne Software, Inc., a division of Computer Associates
International, Inc.
Columbia/HCA................................. Columbia/Healthcare Corporation of America
Compaq....................................... Compaq Computer Corporation
CompuCom..................................... CompuCom Systems, Inc.
DataFlex..................................... DataFlex Corporation
DFS.......................................... Deutsche Financial Services
DILAN........................................ Communications Technology, Inc. d/b/a DILAN
EDS.......................................... Electronic Data Systems, Inc.
Entex........................................ Entex Information Services
Epson........................................ Epson America, Inc.
GE........................................... General Electric Corporation
Genicom...................................... Genicom Corporation
Hayes........................................ Hayes Microcomputer Products, Inc.
Hewlett-Packard.............................. Hewlett-Packard Company
IBM.......................................... International Business Machines Corporation
ICC.......................................... IBM Credit Corporation
ILC.......................................... Information Leasing Corporation
ISO.......................................... International Standards Organization
ISSC......................................... Integrated Services Solutions Corp.
InaCom....................................... InaCom Corp.
Intel........................................ Intel Corporation
Iowa Medical Center.......................... Iowa Medical Center
Jergens...................................... Andrew Jergens Co.
Kroger....................................... The Kroger Company
Lexmark...................................... Lexmark International, Inc.
</TABLE>

G-1
<PAGE>
<TABLE>
<CAPTION>
COMPANY NAMES
- ---------------------------------------------
<S> <C>
Long John Silvers............................ Long John Silver, Inc.
Lotus........................................ Lotus Development Corp., a division of International Business
Machines Corporation
MicroAge..................................... MicroAge Inc.
Microsoft.................................... Microsoft Corporation
Milacron..................................... Cincinnati Milacron, Inc.
NEC.......................................... NEC Technologies, Inc.
Norwest Mortgage............................. Norwest Mortgage, Inc.
Novell....................................... Novell, Inc.
P&G.......................................... The Procter & Gamble Company
Physician Sales.............................. Physician Sales & Service, Inc.
Pioneer HiBred............................... Pioneer HiBred International
Principal Insurance.......................... Principal Mutual Life Insurance Company
Provident Bancorp............................ Provident Bancorp, Inc.
Providian.................................... Providian Insurance Corp.
Ohio National Life........................... The Ohio National Life Insurance Co.
Sarcom....................................... Sarcom Technologies, Inc.
Sco-Unix..................................... Sco-Unix
Square D..................................... Square D Company
Star Bank.................................... Star Bank Corporation
TCSS......................................... The Computer Supply Store, Inc.
Toshiba...................................... Toshiba America Information Systems, Inc.
Toyota....................................... Toyota Motor Manufacturing North America Inc.
Vanstar...................................... Vanstar Corporation
Western-Southern............................. Western-Southern Life Insurance Company
XLConnect.................................... XLConnect Solutions, Inc.
</TABLE>

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

* The trademarks, service marks and trade names of other companies including
those listed above to which reference is made in this Prospectus are the
property of their respective owners. Such owners have all applicable rights
with respect to their respective trademarks, service marks and trade names.

G-2
<PAGE>

<TABLE>
<CAPTION>
TECHNICAL TERMS
- ---------------------------------------------
<S> <C>
Aggregator................................... Company that purchases directly from manufacturers in large
quantities, maintains inventory, breaks bulk and resells to
distributors, resellers and value-added resellers
Configuration................................ The customization of equipment to a customer's specifications. May
include the loading of software, adding of memory or combining of
different manufacturers' equipment in such a way that it will be
compatible as an integrated system
HTML......................................... HyperText Markup Language. The coding language used to create
Hypertext (text containing links to other documents) documents for
use on the World Wide Web
EDI (Electronic Data Interchange)............ The connecting of computer systems at different companies so that
information may be directly exchanged between them
Internet..................................... An open global network of interconnected commercial, educational
and governmental computer networks that utilize a common
communications protocol
LAN.......................................... Local area network
PC........................................... Personal computer
Roll-Out..................................... Single sale involving a large volume of similar products to be
delivered on a pre-specified timetable
VAR (Value-added reseller)................... A company that purchases equipment or software from a
manufacturer, aggregator or distributor, adds value and
subsequently resells the enhanced product
WAN.......................................... Wide area network
World Wide Web............................... A network of computer servers that uses a special communications
protocol to link different servers throughout the Internet and
permits communications of graphics, video and sound
</TABLE>

G-3
<PAGE>
1. Photo of a man working on the inside of an open computer.
-- Text above photo: "Electronic Testing & Redeploy Services"

2. Photo of Compaq computer box with bar code sticker affixed. A hand with an
infrared scanner is shown scanning the sticker.
-- Text below photo: "Product Procurement & Distribution Services"

3. Photo of product on conveyor belts with computers and monitors arranged on
repair desks in the background.
-- Text below photo: "Depot Repair"

4. Photo of disassembled computer with hand inside depicting maintenance or
repair.
-- Text below photo: "Maintenance Services"
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------

NO DEALER, SALESMAN OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS NOT CONTAINED IN THIS PROSPECTUS IN
CONNECTION WITH THE OFFER MADE BY THIS PROSPECTUS AND, IF GIVEN OR MADE, SUCH
INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED
BY THE COMPANY, THE SELLING STOCKHOLDER OR BY ANY OF THE UNDERWRITERS. NEITHER
THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY
CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE
AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF. THIS PROSPECTUS DOES NOT
CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY THE SHARES OF
COMMON STOCK OFFERED HEREBY BY ANYONE IN ANY JURISDICTION IN WHICH SUCH OFFER OR
SOLICITATION IS NOT AUTHORIZED OR IN WHICH THE PERSON MAKING SUCH OFFER OR
SOLICITATION IS NOT QUALIFIED TO DO SO, OR TO ANYONE TO WHOM IT IS UNLAWFUL TO
MAKE SUCH OFFER OR SOLICITATION.

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

TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary........................................................ 3
Risk Factors.............................................................. 6
Use of Proceeds........................................................... 11
Capitalization............................................................ 12
Price Range of Common Stock and Dividend Policy........................... 13
Selected Consolidated Financial and Operating Data........................ 14
Selected Pro Forma Consolidated Financial and Operating Data.............. 16
Management's Discussion and Analysis of Financial Condition and Results of
Operations............................................................... 17
Business.................................................................. 25
Management................................................................ 34
Certain Transactions...................................................... 35
Principal and Selling Stockholders........................................ 37
Underwriting.............................................................. 39
Legal Matters............................................................. 40
Experts................................................................... 40
Available Information..................................................... 41
Incorporation of Certain Documents by Reference........................... 41
Index to Consolidated Financial Statements................................ F-1
Glossary.................................................................. G-1
</TABLE>

1,100,000 SHARES

[LOGO]

COMMON STOCK

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

P R O S P E C T U S

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

[LOGO]

, 1997

ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.

The following table sets forth the expenses relative to the offering.
Expenses other than filing fees are estimated.

<TABLE>
<S> <C>
Securities and Exchange Commission registration fee............... $ 13,321
NASD filing fee................................................... 4,896
Nasdaq Stock Market's National Market listing fee................. 17,500
Accounting Fees and Expenses...................................... 65,000
Transfer Agent's Fees and Expenses................................ 5,000
Legal Fees and Expenses........................................... 60,000
Blue Sky Fees and Expenses........................................ 10,000
Printing and Engraving Expenses................................... 115,000
Miscellaneous..................................................... 309,283
---------
Total Expenses................................................ $ 600,000
---------
---------
</TABLE>

ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.

Section 145 of the Delaware General Corporation Law ("DGCL") empowers a
Delaware corporation to indemnify present and former directors, officers,
employees or agents of the corporation. The Company's Certificate of
Incorporation and Bylaws provide for indemnification of directors and officers
of the Company to the fullest extent permitted by the DGCL. The Company's
Certificate of Incorporation provides that the Company shall indemnify to the
fullest extent authorized under the DGCL each person who was or is made a party
to, or is threatened to be made a party to, or is involved in, any action, suit
or proceeding by reason of the fact such person is or was a director or officer
of the Company or is or was serving at the request of the Company as a director,
officer, employee or agent of another corporation or enterprise, including
service with respect to employee benefit plans, against all expense, liability
and loss (including attorney's fees, judgments, fines, ERISA excise taxes and
penalties, and amounts paid in settlement) reasonably incurred by such person in
connection therewith provided that the applicable standards of conduct under the
DGCL are satisfied. These standards are, with respect to civil proceedings, that
such person acted in good faith and in a manner such person reasonably believed
to be in or not opposed to the best interests of the Company or its stockholders
and, with respect to criminal proceedings, such person had no reasonable cause
to believe his or her conduct was unlawful. However, under the DGCL, with
respect to claims by or in the right of the Company, no indemnification may be
made in respect of any such claim, issue or matter as to which such person shall
have been adjudged to be liable for negligence or misconduct in the performance
of his or her duty to the Company except to the extent that the Court of
Chancery of Delaware or the court in which such action or suit was brought shall
determine that despite such adjudication and in view of all the circumstances of
the case, such person is fairly and reasonably entitled to such indemnity as
such court deems proper.

The Company has in effect an insurance policy that covers any negligent act,
error or omission of a director or officer, subject to certain exclusions. The
limit of liability under the policy is $5,000,000 in the aggregate annually for
coverage in excess of deductibles and covers only 30% of securities claims.

II-1
<PAGE>
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.

(a) Exhibits

<TABLE>
<CAPTION>
NUMBER EXHIBIT
- ------ --------------------------------------------------------------------------
<C> <S>
1.1* Form of Underwriting Agreement among the Company, the Selling Stockholder
and J.C. Bradford & Co. and Tucker Anthony Incorporated, as the
Representatives of the several Underwriters.

5* Opinion of Cors & Bassett regarding legality of Common Stock being
registered.

10.1* Amendment to Loan Agreement by Letter Agreement dated June 27, 1996 by and
among Star Bank, N.A., the Company, C&N Corp., Xenas Communications
Corp. and Pomeroy Computer Leasing Company, Inc.

10.2* Amendment to Loan Agreement by Letter Agreement dated December 20, 1996 by
and among Star Bank, N.A., the Company, C&N Corp., Xenas Communications
Corp. and Pomeroy Computer Leasing Company, Inc.

10.3* Employment Agreement between the Company and Stephen E. Pomeroy dated
November 13, 1996.

10.4* Incentive Deferred Compensation Agreement between the Company and Stephen
E. Pomeroy dated November 13, 1996

10.5* Asset Purchase Agreement among the Company, AA Microsystems, Inc. and
Stuart Raburn dated August 2, 1996.

10.6* Promissory Note dated August 2, 1996 of the Company in favor of AA
Microsystems, Inc.

10.7* Asset Purchase Agreement among the Company, Communications Technology,
Inc. d/b/a DILAN and Robert Martin dated October 11, 1996.

10.8* Subordinated Promissory Note dated October 11, 1996 of the Company in
favor Communications Technology, Inc.

10.9* Subordination Agreement among the Company, Communications Technology, Inc.
d/b/a DILAN and Star Bank, National Association dated October 11, 1996.

10.10* Sixth Amendment to Employment Agreement between the Company and David B.
Pomeroy, II effective January 6, 1997.

10.11* Award Agreement between the Company and David B. Pomeroy, II effective
January 6, 1997.

10.12* Registration Rights Agreement between the Company and David B. Pomeroy, II
effective January 6, 1997.

10.13* Services Agreement between the Company and Nationwide Mutual Insurance
Company dated December 11, 1996.

23.1* Consent of Grant Thornton LLP

23.2* Consent of Deloitte & Touche LLP--Cincinnati

23.3* Consent of Deloitte & Touche LLP--Des Moines

23.4* Consent of Northup, Haines, Kaduce, Schmid, Macklin, P.C.--West Des Moines
</TABLE>

II-2
<PAGE>
<TABLE>
<CAPTION>
NUMBER EXHIBIT
- ------ --------------------------------------------------------------------------
<C> <S>
23.5* Consent of Cors & Bassett (contained in the opinion of counsel to be filed
as Exhibit 5 hereto)

23.6* Consent of Kenneth R. Waters

24* Power Attorney (included in Part II of the Registration Statement)

27* Financial Data Schedule
</TABLE>

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

* previously filed

ITEM 17. UNDERTAKINGS.

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

The undersigned registrant hereby undertakes that:

(1) For purposes of determining any liability under the Act, each filing of
the registrant's annual report pursuant to section 13(a) or section 15(d) of the
Securities Exchange Act of 1934 that is incorporated by reference in the
registration statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.

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

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

II-3
<PAGE>
SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this Pre-Effective Amendment No. 5 to the Registration Statement
to be signed on its behalf by the undersigned, thereunto duly authorized in the
City of Hebron, Commonwealth of Kentucky, February 24, 1997.

POMEROY COMPUTER RESOURCES, INC.

By: /s/ DAVID B. POMEROY, II
-----------------------------------------
David B. Pomeroy, II
CHAIRMAN OF THE BOARD, PRESIDENT AND
CHIEF EXECUTIVE OFFICER

Pursuant to the requirements of the Securities Act of 1933, this
Pre-Effective Amendment No. 5 to the Registration Statement has been signed by
the following persons in the capacities and on the dates indicated.

SIGNATURE TITLE DATE
- ------------------------------ -------------------------- -------------------

Chairman of the Board of
/s/ DAVID B. POMEROY, II Directors, President and
- ------------------------------ Chief Executive Officer February 24, 1997
David B. Pomeroy, II (Principal Executive
Officer)

Director, Chief Financial
* Officer, Treasurer and
- ------------------------------ Secretary (Principal February 24, 1997
Edwin S. Weinstein Financial and Accounting
Officer)

*
- ------------------------------ Director February 24, 1997
James H. Smith, III

*
- ------------------------------ Director February 24, 1997
David W. Rosenthal

*
- ------------------------------ Director February 24, 1997
Michael E. Rohrkemper

*By: /s/ DAVID B. POMEROY, II
------------------------------
David B. Pomeroy, II
ATTORNEY-IN-FACT

II-4