Eplus Inc – ‘424B3’ on 2/11/98

As of:  Wednesday, 2/11/98   ·   Accession #:  950133-98-348   ·   File #:  333-44335

in

this entire Filing. an “Entity” Search.

Show

Documents searched

and

each “hit”. the 1st “hit”.

↓↑Hints

Prospectus   —   Rule 424(b)(3)
Filing Table of Contents

Document/Exhibit                   Description                      Pages   Size 

 1: 424B3       Filed Pursuant to Rule 424(B)(3)                     101    646K 

Document Table of Contents

424B3
1st Page of 101
TOC
↑Top
Previous
Next
↓Bottom
Just 1st
 

PROSPECTUS                                                                      

2,964,305 SHARES

MLC HOLDINGS, INC.

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

   This Prospectus relates to 2,000,000 shares (the "Acquisition
Shares") of common stock, $.01 par value (the "Common Stock"), which may be     
offered and issued by MLC Holdings, Inc., a Delaware corporation (the           
"Company") from time to time in connection with the merger with or acquisition  
by the Company of other businesses or assets. The Company, however, has no      
present understandings, commitments or agreements with respect to any material  
acquisition. It is expected that the terms of acquisitions involving the        
issuance of securities covered by this Prospectus will be determined by direct  
negotiations with the owners or controlling persons of the businesses or assets 
to be merged with or acquired by the Company, and that the shares of Common     
Stock issued will be valued at prices reasonably related to market prices       
current either at the time of a merger or acquisition are agreed upon or at or  
about the time of delivery of shares. No underwriting discounts or commissions  
will be paid, although finder's fees may be paid from time to time with respect 
to specific mergers or acquisitions. Any person receiving any such fees may be  
deemed to be an underwriter within the meaning of the Securities Act of 1933,   
as amended (the "Securities Act").                                              

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

           On February 9, 1998 the closing sale price of the Common Stock on the
NASDAQ National Market was $11.75 per share.                                    

                                                    (cover continued overleaf)

         SEE "RISK FACTORS" BEGINNING ON PAGE 8, FOR A DISCUSSION OF CERTAIN
FACTORS THAT SHOULD BE CONSIDERED BY PROSPECTIVE INVESTORS IN THE SECURITIES.   

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

THE DATE OF THIS PROSPECTUS IS FEBRUARY 11, 1998.       

424B3
2nd Page of 101
TOC
1st
Previous
Next
↓Bottom
Just 2nd

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

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

AVAILABLE INFORMATION 

     The Company is subject to the informational requirements of the
Securities Exchange Act of 1934 as amended (the "Exchange Act") and in          
accordance therewith files reports, proxy statements, and other information     
(the "1934 Act Filings") with the Securities and Exchange Commission (the "SEC" 
or the "Commission"). In addition, the Company has filed with the SEC (the      
"SEC" or "Commission") a Registration Statement on Form S-1 (together with all  
exhibits and schedules thereto, the "Registration Statement") under the         
Securities Act, with respect to the Securities offered hereby. This Prospectus  
does not contain all of the information set forth in the Registration           
Statement. For further information with respect to the Company and the          
Securities, reference is hereby made to such Registration Statement. Although   
statements contained in this Prospectus as to the contents of any contract or   
other document are believed by the Company to set forth all material elements   
of the contract or document as to which such statements relate, in each         
instance, reference is made to the copy of such contract or document filed as   
an exhibit to the Registration Statement, each such statement being qualified   
in all respects by such reference. Copies of the Registration Statement,        
including the exhibits thereto and the 1934 Act Filings, can be inspected and   
copied at the public reference facilities maintained by the Commission at 450   
Fifth Street, N.W., Washington, D.C. 20549, and at the regional offices of the  
Commission located at 500 West Madison Street, Room 1400, Chicago, Illinois     
60606, and at 7 World Trade Center, Suite 1300, New York, New York 10048.       
Copies of such material can be obtained from the Public Reference Section of    
the Commission at 450 Fifth Street, Washington, D.C. 20549, at prescribed       
rates. The Commission also maintains a web site on the World Wide Web that      
contains reports, proxy and information statements and other information        
regarding registrants that file electronically with the Commission, including   
the Company, and the address is http://www.sec.gov.                             

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

2 

424B3
3rd Page of 101
TOC
1st
Previous
Next
↓Bottom
Just 3rd

PROSPECTUS SUMMARY

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

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

THE COMPANY 

        MLC Holdings, Inc. ("MLC Holdings" or the "Company") was formed in
1996 and is a Delaware corporation which, pursuant to a reorganization effected 
September 1, 1996, serves as the holding company for MLC Group, Inc. ("MLC      
Group") and other subsidiaries. All references to the "Company" shall be deemed 
to include and refer to MLC Holdings and its subsidiaries, including MLC Group. 
The Company engages in no other business other than serving as the parent       
holding company for MLC Group, MLC Network Solutions, Inc., ("MLC Network       
Solutions"), MLC Federal, Inc., MLC Capital, Inc., Educational Computer         
Concepts, Inc. ("ECCI") and MLC Leasing, S.A. de C.V., (a wholly owned          
subsidiary of MLC Group and MLC Network Solutions, based in Mexico City,        
Mexico). MLC/GATX Leasing Corporation is a 50% owned investment of MLC Group.   
See "The Company."                                                              

  The Company specializes in leasing and financing information
technology assets, providing network services, software and PCs, providing      
system design and upgrades, hardware maintenance, on-site technical support,    
relocation services and providing asset management services to commercial       
customers with annual sales revenue of between $10 million and $500 million     
("middle market customers"), select Fortune 1000 firms, federal, state and      
local governments and vendors. The assets leased or sold by the Company include 
personal computers and peripherals, client server systems, networks, mid-range  
and mainframe computer equipment, telecommunications equipment and software.    
MLC Network Solutions and ECCI were acquired to provide a wide range of         
information technology ("IT") services and solutions to middle market           
organizations. The Company offers its clients a single source for a             
comprehensive range of services, including procurement of software and PC and   
communication equipment, desktop systems maintenance and support, strategic     
planning and management consulting, integration and installation of IT systems, 
training and continuing education. The Company will focus on marketing its      
comprehensive IT offerings to middle market organizations, which typically      
spend from $250 thousand to $25 million annually on their IT needs. The IT      
service industry has evolved into a highly fragmented environment with a small  
number of large, national service providers and a large number of small- and    
medium-sized service providers, usually with a regional focus. Large IT service 
providers typically address the IT needs of large organizations with            
substantial IT requirements for a wide range of services, whereas smaller IT    
service firms provide specialized services of limited scope. Consequently,      
middle market organizations rely on multiple, often specialized, smaller IT     
service providers to help implement and manage their systems. The Company       

3 

424B3
4th Page of 101
TOC
1st
Previous
Next
↓Bottom
Just 4th
believes that a single-source IT service provider will help middle market       
organizations reduce cost and management complexity and increase the quality    
and compatibility of IT solutions. As part of its strategy, the Company intends 
to leverage its high-level services to foster long-term relationships with      
clients and to implement technology strategies in order to achieve the clients' 
desired IT solutions. The Company also believes it can increase its revenues    
from existing clients by cross-selling its services. Another key element of the 
Company's strategy is the expansion of service offerings and the addition of    
new businesses in order to offer new and existing clients access to a more      
complete range of services. The Company also will operate with a decentralized  
management structure to provide focus on superior client service and foster a   
motivating environment for its various subsidiaries, and will seek to acquire   
additional companies to strengthen its core competencies, to offer              
complementary services and to facilitate its expansion into new regions.        

  The Company also leases and finances equipment, software and
services through relationships with vendors, equipment manufacturers and        
systems integrators. These vendor clients represent a variety of high           
technology industries and include, among others, in alphabetical order: Cisco   
Systems, Inc. (including its financing company, Cisco Systems Capital); EMC     
Corporation; Systems & Computer Technology Corporation; and Sterling Software,  
Inc.                                                                            

    The Company's asset trading activity involves the purchase and
resale of previously owned information technology equipment. By offering asset  
trading capabilities, the Company is able to develop and maintain knowledge of  
current market trends and values which enables the Company to predict more      
accurately residual values when pricing leasing transactions, dispose           
efficiently of off-lease equipment and offer customers a way to dispose of or   
acquire previously owned information technology equipment. Asset management     
services, which are offered primarily to enhance customer service, is a general 
term used to describe the provision of asset inventory and tracking services,   
software and record keeping programs to customers. The asset management         
services provided by the Company allow the customers to better track their      
information technology assets. The asset management services include a third    
party software system utilized onsite by the Company which generates reports    
and allows customers to dial up and receive information on a real time basis.   
The Company's network services, software and PC reselling activity involves     
closely working with customers to solve their integration solutions and provide 
training facilities to educate clients on commercial off the shelf software     
items.                                                                          

         The Company's principal executive office is located at 11150 Sunset
Hills Road, Suite 110, Reston, Virginia 20190-5321 and its telephone number at  
such address is (703) 834-5710. The Company's 186 employees operate through     
twelve offices, including its principal executive offices and regional sales    
offices which are located in the following metropolitan and suburban areas:     
Pottstown and West Chester, Pennsylvania (both are Philadelphia suburban        
locations); Dallas and Austin, Texas; Sacramento and San Diego California;      
Greenville, Wilmington and Raleigh (2 offices), North Carolina and Atlanta,     
Georgia. The Company also has an arrangement with an independent contractor who 
works primarily for the Company from Columbus, Ohio.                            

THE OFFERING                                                                    

Common Stock offered by:                                                        
 The Company                                            2,000,000 shares (1)
 Selling Stockholders                                     964,305 shares (2)
Common Stock outstanding after this Offering              8,071,305 shares (3)  

Nasdaq National Market Symbol                             MLCH                  

4 

424B3
5th Page of 101
TOC
1st
Previous
Next
↓Bottom
Just 5th

(1)  Such shares may be offered and issued from time to time in connection with 
future acquisitions by the Company. The Company intends to seek the   
agreement of recipients of shares of Common Stock in acquisitions to  
 restrictions on the transfer of such shares for periods ranging from an
estimated six to eighteen months or to structure such transactions to 
   provide for issuance of shares on a deferred basis over periods of six to
eighteen months.                                                      

(2)  Such shares are issued and outstanding and may be offered and sold from    
time to time by the Selling Stockholders. See "Selling Stockholders." 

(3)  Up to an additional 20% of the outstanding shares of Common Stock have     
been reserved for future issuance under the Company's employee stock  
   option plans. See "Management -- Compensation Arrangements and Employment
Agreements."                                                          

RISK FACTORS

The Company and its business are subject to varying risks which are:  
(i) a dependence on the ability to obtain creditworthy customers; (ii) a        
dependence on major relationships; (iii) asset ownership resulting from the     
majority of the Company's lease transactions and the future realization of the  
estimated residual values; (iv) a dependence upon the Company's ability to      
obtain financing; (v) substantial competition including numerous national and   
regional companies selling, leasing and financing similar or same or equivalent 
products; (vi) risk associated with the pursuit and integration of              
acquisitions; (vii) a dependence upon the efforts, abilities and relationships  
of a few key management personnel; (viii) control of 46.6% of the Company's     
Common Stock by a single individual, Phillip G. Norton; (ix) risk associated    
with contractual "termination rights" in leases to government customers; (x)    
the inability to timely and at a competitive price obtain equipment for lease;  
(xi) management's ability to manage the Company's rapid growth; (xii) potential 
changes in tax laws which may make leasing less desirable for potential         
customers; (xiii) potential changes in accounting practices which may make      
leasing less attractive to potential customers; (xiv) interest rate             
fluctuations; (xv) provisions of the Company's governing documents and Delaware 
law, coupled with control by insiders and a staggered board which may make it   
more difficult for a third party to acquire control of the Company without      
approval of the Company's Board of Directors; (xvi) volatility of the           
public market for the Common Stock; (xvii) absence of dividend history or       
intention to pay dividends in the foreseeable future; (xviii) fluctuations in   
quarterly operating results; (xix) potential for a larger number of additional  
shares held by current stockholders to become eligible for sale and thereby     
adversely impact the market price of the Common Stock and (xx) the dependence   
on the continued authorization to resell and provide manufacturer authorized    
equipment and services.                                                         

SUMMARY CONSOLIDATED FINANCIAL DATA 

   The summary consolidated financial data set forth below should be read in
conjunction with the Consolidated Financial Statements of the Company, and      
related Notes thereto, and the information included under "Selected Consolidated
Financial Data" and "Management's Discussion and Analysis of Results of         
Operations and Financial Condition," included elsewhere herein.                 

The summary consolidated financial data, as of and for, the six months
ended September 30, 1996, and September 30, 1997, has been derived from         
unaudited financial information, which, in the opinion of management of the     
Company, include all adjustments (consisting only of normal recurring accruals) 
necessary for a fair presentation. The results of operations for the six months 
ended September 30, 1997, are not necessarily indicative of the results of      
operations that may be expected for the entire year. See "Selected Consolidated 
Financial Data," "Management's Discussion and Analysis of Results of Operations 
and Financial Condition" and "Business."                                        

5 

424B3
6th Page of 101
TOC
1st
Previous
Next
↓Bottom
Just 6th
        The following consolidated balance sheet and statement of earnings
data have been restated to include the accounts and results of operations of    
the Company's two newly acquired subsidiaries which were accounted for under    
the pooling-of-interests method.                                                

6 

424B3
7th Page of 101
TOC
1st
Previous
Next
↓Bottom
Just 7th

MLC HOLDINGS, INC. AND SUBSIDIARIES                                             
SUMMARY CONSOLIDATED FINANCIAL DATA                                             
(Dollar amounts in thousands, except per share data)                          

                                                        [Enlarge/Download Table]

                                                                                                        SIX MONTHS ENDED       
                                                                    YEAR ENDED MARCH 31,                  SEPTEMBER 30,        
                                                      -------------------------------------------  ----------------------------
                                                           1995            1996           1997        1996               1997  
                                                      -------------------------------------------  ----------------------------

                                                                                                                               
EARNINGS STATEMENT DATA:                                                                                                       
Total revenues                                          $   64,364     $   71,880    $   86,649    $   38,225       $   67,717 
Total costs and expenses                                    63,581         68,300        81,798        36,141           63,536 
                                                      -------------------------------------------  ----------------------------
Earnings before provision for income taxes                     783          3,580         4,851         2,084            4,181 
Provision for income taxes                                     198            881         1,360           606              872 
                                                      -------------------------------------------  ----------------------------
Earnings before extrordinary item                              585          2,699         3,491         1,478            3,309 
Extrordinary gain, net (1)                                       -            117             -             -                - 
                                                      -------------------------------------------  ----------------------------
Net earnings                                            $      585     $    2,816    $    3,491    $    1,478       $    3,309 
                                                      ===========================================  ============================
Earnings per common share, before extraordinary item          0.13           0.59          0.67          0.31             0.55 
Extraordinary gain per common share                              -           0.03             -             -                - 
                                                      -------------------------------------------  ----------------------------
Net earnings per common share                           $     0.13     $     0.62    $     0.67    $     0.31       $     0.55 
                                                      ===========================================  ============================
Pro forma net earnings (2)                              $      529     $    2,389    $    3,133    $    1,342       $    2,696 
                                                      ===========================================  ============================
Pro forma net earnings per common share                 $     0.12     $     0.52    $     0.60    $     0.28       $     0.45 
                                                      ===========================================  ============================
Weighted average common shares outstanding               4,383,490      4,572,635     5,184,261     4,754,390        5,990,200 

                                                                   AS OF MARCH 31,                        AS OF SEPTEMBER 30,  
                                                      -------------------------------------------  ----------------------------
                                                              1995           1996          1997          1996             1997 
                                                      -------------------------------------------  ----------------------------
BALANCE SHEET DATA:                                                                                                            
Investment in leases                                    $   13,998     $   26,493    $   28,538    $   27,825       $   27,390 
Total assets                                                21,716         35,184        49,024        43,481           57,317 
Recourse notes payable                                       2,597          2,106           439           206            4,764 
Nonrecourse notes payable                                   10,162         18,352        19,705        19,827           16,134 
Retained earnings                                            2,014          4,467         7,071         5,636            9,294 
Stockholders' equity                                         2,801          5,232        16,477         6,400           20,711 

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

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

7 

424B3
8th Page of 101
TOC
1st
Previous
Next
↓Bottom
Just 8th

RISK FACTORS

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

DEPENDENCE ON CREDITWORTHY CUSTOMERS                                            

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

DEPENDENCE ON MAJOR RELATIONSHIPS                                               

       As of March 31, 1997, the Company's portfolio consisted of leases
with 135 customers. During fiscal year 1997, the Company originated commercial  
leasing transactions with 72 customers, ten of which accounted for              
approximately 61% of the aggregate purchase price of equipment leased by the    
Company to those 72 customers. During the first six months of fiscal year 1998, 
through September 30, 1997, the Company originated leasing transactions with 57 
customers, ten of which accounted for 72.5% of the aggregate purchase price of  
equipment leased. In the event any of the Company's major customers ceases to   
lease additional equipment or materially reduces the amount of equipment it     
leases from the Company, this cessation or reduction could have a material      
adverse effect upon the Company's business, financial condition, results of     
operations, and cash flows. See "Business -- Leasing, Financing and Sales       
Activities." In addition to its dependence on a limited number of substantial   
customers, the Company also obtains a significant source of its equity          
financing for transactions and its revenue through two joint venture            
arrangements: (i) MLC/GATX Limited Partnership I, a Colorado limited            
partnership, which is used for financing mainframe and peripheral computer      
equipment; and (ii) MLC/CLC LLC, a Virginia limited liability company, which is 
used for financing personal computers and client server equipment.              

      The partners in MLC/GATX Limited Partnership I are: the Company,
with a 9.5% limited partnership interest; GATX Capital Corporation ("GATX")     
with an 89.5% limited partnership interest; and MLC/GATX Leasing Corporation, a 
Colorado corporation, which is equally owned by the Company and GATX and which  
is a general partner with a 1% general partnership interest. During fiscal year 
1997, revenue recognized from sales to MLC/GATX Limited Partnership I was $3.5  
million of the Company's total revenues. The Company's investment in MLC/GATX   
Limited Partnership I accounted for by the use of the cost method was $226,835  
and $173,733 as of March 31, 1997 and September 30, 1997, respectively.         
MLC/GATX Limited Partnership I does not purchase any lease transactions from    
anyone other than the Company. GATX, which is based in San Francisco,           
California and which is not affiliated with the Company, has been in the        
equipment leasing and financing market for over 25 years,                       

8 

424B3
9th Page of 101
TOC
1st
Previous
Next
↓Bottom
Just 9th
and has assets of approximately $1.85 billion. GATX is a publicly held          
corporation which files periodic reports with the Commission pursuant to the    
Exchange Act.                                                                   

      The members of MLC/CLC LLC are the Company, with a 5% membership
interest, and Cargill Leasing Corporation, a Delaware corporation, with a 95%   
membership interest. MLC Group serves as the manager for MLC/CLC LLC. For       
fiscal year 1997 and the six months ended September 30, 1997, revenue           
recognized from the sales to MLC/CLC LLC was $16.9 million and $27.7 million of 
the Company's total revenues, respectively. The Company's investment in MLC/CLC 
LLC accounted for by the use of the cost method was $168,259 and $417,307 as of 
March 31, 1997 and September 30, 1997, respectively. MLC/CLC LLC does not       
purchase any lease transactions from anyone other than the Company.             

         Cargill Leasing Corporation, located in Minnetonka, Minnesota, is a
subsidiary of Cargill, Inc., and is not affiliated with the Company. Cargill,   
Inc. has been reported by Forbes Magazine to be one of the largest privately    
owned companies in the United States. Cargill Leasing Corporation has been in   
the equipment leasing and financing business for over ten years. As privately   
held companies, neither Cargill, Inc. or Cargill Leasing Corporation makes      
financial information available to the public and neither company issues an     
annual report to the general public. Cargill, Inc. has released the following   
financial data for its fiscal year ended May, 1997 as reported in Forbes        
Magazine issue of December, 1997: sales were $56 billion, operating income was  
$3.2 billion and net income was $814 million.                                   

     For fiscal year 1997 and fiscal year 1998 through September 30,
1997, the Company did not have any revenue sources which alone accounted for    
more than 10% of the Company's revenues except for the Company's relationship   
with GATX and Cargill Leasing Corporation. For the year ended March 31, 1997,   
out of leased equipment sales of $21.6 million, MLC/GATX Limited Partnership I  
represented $3.5 million or 16.2% and MLC/CLC LLC represented $16.9 million or  
78.2%. For the six months ended September 30, 1997, out of leased equipment     
sales of $32.2 million, MLC/GATX Limited Partnership represented $0.4 million   
or 1.2% and MLC/CLC LLC represented $27.7 million or 86.0%. MLC/GATX Limited    
Partnership I and MLC/CLC LLC only purchase transactions from the Company. For  
the fiscal year ended 1997 and six months ended September 30, 1997, the         
Company's network service, software and PC sales subsidiaries had two accounts  
that were in excess of 10% of each subsidiaries revenues. ECCI had one account, 
AHERF, that represented $5.3 million or 41.2% of its total sales for the 12     
month period ended December 31, 1996. AHERF is a Pittsburgh based               
not-for-profit entity that owns multiple hospitals, the largest of which        
include Hahnemann University Hospital, St. Christopher's Hospital for Children, 
Medical College of Pennsylvania and Graduate Hospital, all of which are located 
in Philadelphia, Pennsylvania. Compuventures has one account, Corning, Inc.,    
that represented $3.2 million or 22% of its year ended December 31, 1996        
revenues. The loss of either AHERF or Corning as a customer would have a        
material adverse effect upon the Company's success in the network services and  
software and PC reselling business, financial condition, results of operations, 
and cash flows, and would create a significant adverse financial effect on the  
respective subsidiary.                                                          

          For fiscal year 1997 and six months ended September 30, 1997, of the
Company's total revenue, approximately 4.0% and 0.6%, respectively, was         
attributable to sales of lease transactions to MLC/GATX Limited Partnership I,  
and approximately 19.5% and 40.9%, respectively, was attributable to sales of   
lease transactions to MLC/CLC LLC. Transactions involving the use or placement  
of equity from these joint ventures require the consent of the relevant joint   
venture partner, and if financing from those sources were to be withheld or     
were to become unavailable, it would limit the amount of equity available to    
the Company and may have a material adverse effect upon the Company's business, 
financial condition, results of operations, and cash flows. The Company does    
finance leases and related equipment internally, rather than with financing     
provided by lenders. These internal lease financing typically occur in cases    
where the financed amounts, terms, collateral, or structures are not attractive 
to lenders, or                                                                  

9 

424B3
10th Page of 101
TOC
1st
Previous
Next
↓Bottom
Just 10th
where the credit rating of the lessee is not acceptable to lenders. The Company 
also temporarily finances selected leases internally, generally for less than   
90 days, until permanent outside nonrecourse financing is obtained.             

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

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

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

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

   Numerous factors, many of which are beyond the control of the
Company, may have an impact on the Company's ability to re-lease or re-sell     
equipment on a timely basis. Among the factors are general market conditions,   
regulatory changes, variations in the supply or cost of comparable equipment    
and technological improvements that lead to the risk of technological           
obsolescence. The computer and telecommunications industries have been          
characterized by significant and rapid technological advances.                  

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

   If the Company's estimated residual values are reduced or not
achieved in the future, its business, financial condition, results of           
operations, and cash flows could be materially adversely affected. As of March  
31, 1997, the total net unrealized residual value at the end of the initial     
lease term of the Company's owned lease portfolio was approximately $4.19       
million consisting of $2.92 million of operating lease portfolio and $1.27      
million of residual values of direct financing lease portfolio. As of September 
30, 1997, the total net unrealized residual value at the end of the initial     
lease term of the Company's owned lease portfolio was approximately $6.15       
million consisting of $2.67 million of operating lease portfolio and $3.48      
million of residual values of direct financing lease portfolio. Similarly, if   
the Company is unable to re-lease or re-sell equipment on favorable terms, its  
business,                                                                       

10  

424B3
11th Page of 101
TOC
1st
Previous
Next
↓Bottom
Just 11th
financial condition, results of operations, and cash flows could be materially  
adversely affected. See "Management's Discussion and Analysis of Results of     
Operations and Financial Condition -- Revenue Recognition and Lease Accounting" 
and "Business -- Leasing, Financing and Sales Activities."                      

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

DEPENDENCE ON AVAILABILITY OF FINANCING                                         

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

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

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

 Nonrecourse Financing. The credit standing of the Company's
customers must be of such a quality as to allow the Company to finance most of  
its leasing or financing transactions on a nonrecourse basis. Under a           
nonrecourse loan, the Company borrows an amount equal to the committed lease    
payments under the financed lease, discounted at a fixed interest rate. The     
lender is entitled to receive the payments under the financed lease in          
repayment of the loan, and takes a security interest in the related equipment   
but has no recourse against the Company. The Company retains ownership of such  
equipment, subject to the lender's security interest. Interest rates under this 
type of financing are negotiated on a transaction-by-transaction basis and      
reflect the financial condition of the lessee, the term of the lease and the    
amount of the loan. As of March 31, 1997, and September 30, 1997, the Company   
had aggregate outstanding nonrecourse borrowings of approximately $19.7 million 
and $16.1 million, respectively.                                                

         The Company adopted Statement of Financial Accounting Standards No.
125 ("SFAS No. 125"), Accounting for Transfers and Servicing of Financial       
Assets and Extinguishments of Liabilities as of January 1, 1997. SFAS No. 125   
has changed the manner in which the Company determines and                      

11  

424B3
12th Page of 101
TOC
1st
Previous
Next
↓Bottom
Just 12th
recognizes the gain recorded upon the transfer of its interest in finance       
contracts subsequent to December 31, 1996. Additionally, SFAS No. 125 requires  
the Company to record gains or losses with respect to transfers of its interest 
in leases previously accounted for as direct finance leases. SFAS No. 125 has   
also altered the presentation in the Company's consolidated financial           
statements of revenues, expenses and certain assets and liabilities associated  
with finance contracts sold. Prior to this accounting pronouncement, proceeds   
received from assigning receivables from direct financing leases prior to       
December 31, 1996 would have been recorded as nonrecourse debt rather than the  
required new sale treatment as required under SFAS 125. As a result, certain    
aspects of the Company's financial statements as of September 30, 1997 may not  
be directly comparable to the prior period financial statements based on the    
requirement that no retroactive accounting was allowable.                       

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

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

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

       Equity Joint Ventures. Through MLC/GATX Limited Partnership I and
MLC/CLC LLC, the Company has formal joint venture arrangements with two         
institutional investors which provide the equity investment financing for       
certain of the Company's transactions. GATX, an unaffiliated company which      
beneficially owns 90% of MLC/GATX Limited Partnership I, is a publicly listed   
company with stockholders' equity in excess of $806 million as of June 30,      
1997. Cargill Leasing Corporation, an unaffiliated investor which owns 95% of   
MLC/CLC LLC, is affiliated with Cargill, Inc., a privately held company that    
was reported by Forbes Magazine in December, 1997 to have sales of $56 billion, 

12  

424B3
13th Page of 101
TOC
1st
Previous
Next
↓Bottom
Just 13th
operating income of $3.2 billion and net income of $814 million for the fiscal  
year ended May, 1997. See "Risk Factors -- Dependence on Major Relationships."  

       For fiscal year 1997 and the six months ended September 30, 1997,
approximately $20.4 million or 23.5% and approximately $28.1 million or 41.5%,  
respectively, of the Company's total revenue was attributable to sales of lease 
transactions to MLC/GATX Limited Partnership I and the MLC/CLC LLC entity.      
Transactions involving the use or placement of equity from these joint ventures 
require the consent of the relevant joint venture partner, and if financing     
from those sources were to be withheld or were to become unavailable, it would  
limit the amount of equity available to the Company and have a material adverse 
effect upon the Company's business, financial condition, results of operations, 
and cash flows. See "Business -- Financing."                                    

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

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

     Recourse Financing. Bank Lines of Credit. The Company relies on
recourse borrowing in the form of revolving lines of credit for working capital 
to acquire equipment to be resold in its trading operation and to acquire       
equipment for leases and, to a lesser extent, the Company uses recourse         
financing for long term financing of leases. As of March 31, 1997, the          
Company's available credit under its short-term, recourse facility with First   
Union National Bank of Virginia, N.A. (the "First Union Facility") totaled      
$5,000,000, and no amounts were outstanding as of March 31, 1997. Borrowing     
under the First Union Facility was available through July 30, 1997, with        
repayments due 90 days after borrowing; however, on June 10, 1997, the Company  
terminated the First Union Facility. Borrowings under the First Union Facility  
bore interest at LIBOR plus 275 basis points. The Company previously had a      
$2,000,000 facility with NationsBank, N.A. which it allowed to expire on        
December 1, 1996.                                                               

  As of March 31, 1997 and September 30, 1997, the Company had
aggregate outstanding recourse borrowings of $439,004 and $4,763,664,           
respectively, from various lenders, primarily for the long term financing of    
leases.                                                                         

       On June 5, 1997, the Company entered into a $15,000,000 committed
recourse line of credit with CoreStates Bank, N.A. (the "CoreStates Facility"). 
Borrowings under the CoreStates Facility, which is available through June 5,    
1998, bear interest at LIBOR + 110 basis points, or, at the Company's option,   
prime minus one percent. On September 5, 1997, the Company entered into         
Amendment No. 1 (the "Amendment") dated September 5, 1997 between it and        
CoreStates Bank, N.A. The Amendment increases the Loan Commitment from          
$15,000,000 to $25,000,000 and increases the amount of Investment Grade Paper   
which may qualify as Eligible Leases from $10,000,000 to $15,000,000. In        
connection with the Amendment, the Company made and delivered to CoreStates a   
$25,000,000 note                                                                

13  

424B3
14th Page of 101
TOC
1st
Previous
Next
↓Bottom
Just 14th
(the "Note") dated September 5, 1997 to replace the $15,000,000 note existing   
under the Credit Agreement. On June 10, 1997, the Company terminated its First  
Union Facility, repaid all amounts outstanding, and made its first borrowing    
under the CoreStates Facility in the amount of $7,500,000. The CoreStates       
Facility is made to MLC Group and guaranteed by MLC Holdings. The CoreStates    
Facility is secured by certain of the Company's assets such as chattel paper    
(including leases), receivables, inventory, and equipment. The availability of  
the line is subject to a borrowing base which consists of inventory,            
receivables, purchased assets, and leases. Availability under the revolving     
lines of credit may be limited by the asset value of equipment purchased by the 
Company and may be further limited by certain covenants and terms and           
conditions of the facilities. In the event that the Company is unable to sell   
the equipment or unable to finance the equipment on a permanent basis within a  
certain period of time, the availability of credit under the lines could be     
diminished or eliminated. Furthermore, in the event that receivables            
collateralizing the line are uncollectible, the Company would be responsible    
for repayment of the lines of credit. Accordingly, such a default could have a  
material adverse effect on the business, financial condition and results of     
operations of the Company, particularly if the then fair market value of the    
equipment is insufficient to satisfy the obligations due to the bank. There can 
be no assurance that the Company will be able to renew, extend or replace this  
credit facility and a failure to renew, extend or replace any of this facility  
would have a material adverse effect upon the Company's business, financial     
condition, results of operations, and cash flows.                               

      The Company's newly acquired subsidiaries, MLC Network Solutions
(acquired July 24, 1997) and ECCI (acquired September 29, 1997), both have      
separate credit sources to finance their working capital requirements for       
inventories and accounts receivable, which the Company has guaranteed. Their    
traditional business as value-added resellers of PC's and related network       
equipment and software products is financed through agreements known as "floor  
planning" financing where interest expense for the first thirty days is charged 
to the supplier/distributor but not the reseller. These floor plan liabilities  
are recorded under accounts payable as they are normally repaid within the 30   
day time frame as they represent an assigned accounts payable originally        
generated with the supplier/distributor. If the 30 day obligation is not timely 
liquidated, interest is then assessed at stated contractual rates. As of        
September 30, 1997 MLC Network Solutions has floor planning availability of     
$1,400,000 through Deutsche Financial, Inc. and $300,000 from IBM Credit        
Corporation. The outstanding balances to these respective suppliers were        
$595,033 and $25,786 as of September 30, 1997. ECCI has floor planning          
availability of $1,500,000 from AT&T Credit Corporation, $1,000,000 through IBM 
Credit Corporation, and $100,000 through Deutsche Financial, Inc. The           
outstanding balances to these respective suppliers were $522,713, $470,454 and  
$6,048 as of September 30, 1997. ECCI additionally has a line of credit in      
place, expiring on April 30, 1998, with PNC Bank, N.A. to provide an asset      
based credit facility. The line has a maximum credit limit of $2,500,000 and    
interest is based on the bank's prime rate. The outstanding balance was         
$931,000 as of September 30, 1997. There can be no assurance that the Company   
will be able to renew, extend or replace these credit facilities and a failure  
to renew, extend or replace any of these facilities would have a material       
adverse effect upon the Company's business, financial condition, results of     
operations, and cash flows.                                                     

   Partial Recourse Borrowing Facilities. On March 12, 1997, the
Company finalized and executed documents establishing a $10,000,000 credit      
facility agreement (the "Heller Facility"), with Heller Financial, Inc.         
("Heller"), a Delaware corporation. Under the terms of the Heller Facility, a   
maximum amount of $10,000,000 is available to the Company, provided that each   
draw is subject to the approval of Heller. The Heller Facility is evidenced by  
a Loan and Security Agreement dated as of January 31, 1997 (the "Loan           
Agreement") and a First Amendment to Loan and Security Agreement (the           
"Amendment") dated as of March 12, 1997 (although the Loan Agreement is dated   
effective January 31, 1997, all documents were executed concurrently in March,  
1997). The primary purpose of the Heller Facility is for the permanent          
fixed-rate discounting of rents for commercial leases of information technology 
assets with the Company's middle-market customers. As of March 31, 1997, no     
advances                                                                        

14  

424B3
15th Page of 101
TOC
1st
Previous
Next
↓Bottom
Just 15th
under the Heller Facility had been made. As of September 30, 1997, the          
principal balance due under the Heller Facility was $941,187. Each advance      
under the facility will bear interest at an annual rate equal to the sum of the 
weekly average U.S. Treasury Constant Maturities for a Treasury Note having     
approximately an equal term as the weighted average term of the contracts       
subject to the advance, plus an index ranging from 1.75% to 3.00%, depending on 
the amount of the advance and the credit rating (if any) of the lessee. The     
Heller Facility contains a number of covenants binding on the Company and is a  
limited recourse facility, secured by a first-priority lien in the contracts    
and chattel paper relating to each advance, the equipment subject to such       
contracts, a 10% cross-collateralized first loss guarantee, and all books,      
records and proceeds pertaining thereto. The Heller Facility is made to MLC     
Group and guaranteed by MLC Holdings. As compared to a committed line of        
credit, lending under the Heller Facility is in Heller's sole discretion, and   
is further subject to MLC Group's compliance with certain conditions and        
procedures. Under the Heller Facility, upon not less than sixty (60) days'      
prior notice, either Heller or the Company may notify the other of its          
intention not to seek/provide any further financing thereunder. There can be no 
assurance that the Company will be able to renew, extend or replace this credit 
facility and a failure to renew, extend or replace any of this facility would   
have a material adverse effect upon the Company's business, financial           
condition, results of operations, and cash flows.                               

     With respect to the long-term recourse notes to finance certain
leases, the availability of such recourse borrowing is dependent on both the    
creditworthiness of the customer, as described above under "-- Dependence on    
Availability of Financing -- Nonrecourse Financing," and the creditworthiness   
of the Company, including the Company's ability to meet certain debt-to-equity  
ratios often required by recourse lenders. The Company's ability to increase    
the amount of its recourse debt has been limited by its capital position and,   
prior to the Company's initial public offering on November 20, 1996 (the        
"Initial Public Offering"), the personal guarantees and collateral provided by  
its stockholders. No assurances can be given that the Company will not          
experience difficulty in obtaining recourse debt in the future, whether because 
lenders change their credit standards for providing such financing, the         
stockholders cease to provide personal guarantees or collateral, or because the 
Company increases its recourse borrowing to a level where it cannot meet such   
debt-to-equity ratio requirements or other financial covenants. The             
unavailability of such recourse financing would have a material adverse effect  
on the ability of the Company to finance lease transactions and, thus, have a   
material adverse effect upon the Company's business, financial condition,       
results of operations, and cash flows. See "Business -- Financing."             

COMPETITION                                                                     

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

15  

424B3
16th Page of 101
TOC
1st
Previous
Next
↓Bottom
Just 16th
RISKS RELATED TO THE COMPANY'S ACQUISITION STRATEGY                             

        As part of its long-term business strategy, the Company intends to
pursue acquisitions of other companies. Future acquisitions may result in       
potentially dilutive issuances of equity securities, the incurrence of          
additional debt and the amortization of expenses related to goodwill and other  
intangible assets, all of which could have a material adverse effect on the     
Company's business, financial condition, results of operations and cash flows.  
There can be no assurance that the Company will be able to identify, acquire or 
profitably manage additional businesses or successfully integrate acquired      
businesses, if any, into the Company without substantial costs, delays or other 
operational or financial problems. Further, acquisitions may involve a number   
of special risks, including adverse effects on the Company's financial          
condition, operating results, cash flows, diversion of management's attention,  
failure to retain key acquired personnel, risks associated with unanticipated   
events or circumstances or legal liabilities and amortization of acquired       
intangible assets, some or all of which could have a material adverse effect on 
the Company's business, financial condition, results of operations, and cash    
flows. Client satisfaction or performance problems at a single acquired firm    
could have a material adverse impact on the reputation of the Company as a      
whole. In addition, there can be no assurance that acquired businesses, if any, 
will achieve anticipated revenues and earnings. The inability of the Company to 
implement and manage its acquisition strategy successfully may have an adverse  
effect on the future prospects of the Company. See "Business -- Strategy" and   
"--Acquisition of Related Companies."                                           

    Risks Related to Acquisition Financing.  The Company currently
intends to finance future acquisitions by primarily using shares of its Common  
Stock, including the Acquisition Shares offered by this Prospectus, for all or  
a portion of the consideration to be paid. If the Common Stock does not         
maintain a sufficient value, or potential acquisition candidates are unwilling  
to accept Common Stock as part or all of the consideration for the sale of      
their businesses, the Company may be required to use more of its cash           
resources, if available, to initiate and maintain its acquisition program. If   
the Company does not have sufficient cash resources, its growth could be        
limited unless it is able to obtain additional capital through additional debt  
or equity financing. There can be no assurance that the Company will be able to 
obtain such financing if and when it is needed or that, if available, it will   
be available on terms the Company deems acceptable. As a result, the Company    
might be unable to successfully implement its acquisition strategy. The         
inability of the Company to implement and manage its acquisition strategy       
successfully may have an adverse effect on the future prospects of the Company. 

        The Company has financed its last two acquisitions by using shares
of its Common Stock for the total consideration. On July 24, 1997, the Company, 
through a new wholly owned subsidiary, MLC Network Solutions, which was         
incorporated on July 14, 1997, entered into an Agreement and Plan of Merger     
with Compuventures of Pitt County, Inc. ("Compuventures"). Compuventures was    
merged into MLC Network Solutions effective July 24, 1997. The outstanding      
shares of Compuventures common stock were converted into 260,978 shares, valued 
at $3,384,564, of MLC Holdings Common Stock. Educational Computer Concepts,     
Inc. (previously defined as "ECCI" and dba "ECC Integrated, Inc."), was         
acquired on September 29, 1997 by means of merging MLC Acquisitions             
Corporation, a newly formed corporation wholly owned by MLC Holdings, into ECCI 
with ECCI being the surviving entity. MLC Holdings effectively exchanged        
498,998 shares of its stock, valued at $7,092,000, for the total stock of ECCI. 
Each of the mergers was accounted for as a pooling of interests.                

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

16  

424B3
17th Page of 101
TOC
1st
Previous
Next
↓Bottom
Just 17th
"Business --Strategy" and "--Acquisition of Related Companies." The Company     
currently has no binding agreements or understandings with regard to any        
acquisitions.                                                                   

DEPENDENCE ON CURRENT MANAGEMENT                                                

         The operations and future success of the Company are dependent upon
the efforts, abilities and relationships of the Company's Chairman, Chief       
Executive Officer and President, Phillip G. Norton, and its founder and         
Executive Vice President, Bruce M. Bowen, who also serves as a director of the  
Company, Thomas B. Howard Jr., Executive Vice President and Chief Operating     
Officer, Steven J. Mencarini, Senior Vice President and Chief Financial         
Officer, Kleyton L. Parkhurst, Secretary and Treasurer, Vincent Marino,         
President of ECCI and William G. Garner, President of MLC Network Solutions.    
The loss of any of these key management officers and personnel would materially 
adversely affect the business, financial condition, results of operations, and  
cash flows of the Company. Each of these officers has entered into an           
employment agreement with the Company. The Company maintains key-man life       
insurance on Mr. Norton in the form of two separate policies, one with First    
Colony Forge Life Insurance Company and the second with CNA/Valley Forge Life   
Insurance Company Life Co., each in the amount of $5 million, and on Mr. Bowen  
with CNA/Valley Forge Life Insurance Company in the amount of $1 million. See   
"Management -- Executive Compensation and Other Information -- Compensation     
Arrangements and Employment Agreements."                                        

CONTROL BY PRINCIPAL STOCKHOLDERS                                               

     One of the Company's current principal stockholders, Phillip G.
Norton, Chairman, Chief Executive Officer and President of the Company,         
directly and indirectly controls approximately 46% of the Company's outstanding 
Common Stock. In the event of the death of Phillip G. Norton, Patricia A.       
Norton, if then living, would succeed to his rights under the Irrevocable Proxy 
and Stock Rights Agreement. See "Management -- Executive Compensation and Other 
Information" and "Principal Stockholders -- Irrevocable Proxy and Stock Rights  
Agreement."                                                                     

         Similarly, another of the Company's current principal stockholders,
Bruce M. Bowen, a director and Executive Vice President of the Company,         
directly and indirectly controls approximately 12.7% of the Company's           
outstanding Common Stock. See "Management -- Executive Compensation and Other   
Information" and "Principal Stockholders."                                      

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

GOVERNMENT TERMINATION RISK                                                     

 Virtually all of the Company's lease volume with government
customers is pursuant to leases which are "subject to appropriation," or, with  
respect to federal government leases, "also subject to                          

17  

424B3
18th Page of 101
TOC
1st
Previous
Next
↓Bottom
Just 18th
termination for convenience or the risk of non-renewal at the end of each       
fiscal year." A lease which is subject to termination for convenience may also  
be terminated by the government at any time prior to expiration of the fiscal   
year on various grounds in which event, while the Company or its assignee       
through the contractor may submit a claim for losses, if any, associated        
therewith, the timing and amount of a settlement upon such a claim can be       
uncertain. In addition, most federal government leases are written over several 
fiscal years and give the government the option not to renew at the end of each 
fiscal year for any reason, even if funds have been appropriated. In the case   
of a lease which is "subject to appropriation," the obligation of the lessor is 
subject to and contingent upon appropriation of funding for that lease in       
future fiscal years and if such funding is not appropriated, then the           
governmental lessee has no obligation to continue the lease. The Company has    
historically sought and been able to pass these appropriation, non-renewal and  
termination for convenience risks to financial institutions by financing such   
leases on a "nonrecourse" basis; however, there can be no assurance that the    
Company will be able to obtain such financing in the future. A material         
increase in either industry-wide termination experience or in the Company's     
termination due to non-appropriation, non-renewal or termination for            
convenience experience would make it more difficult for the Company to obtain   
nonrecourse financing for similar "subject to appropriation" governmental       
leases in the future and would have a material adverse effect on the Company's  
business, financial condition, results of operations, and cash flows.           

         As of the end of fiscal year 1997 and as of September 30, 1997, the
Company had $244,115 and $522,576, respectively, of assets leased to            
governmental units. All of these leases are subject to termination rights by    
the governmental units as described above.                                      

DEPENDENCE UPON AVAILABILITY OF EQUIPMENT                                       

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

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

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

18  

424B3
19th Page of 101
TOC
1st
Previous
Next
↓Bottom
Just 19th
  The occurrence of these shortages in the future would have a
material adverse effect on the Company's business, financial condition, results 
of operations, and cash flows. As of March 31, 1997, the Company's inventory of 
information technology equipment was $1,278,144 which also was the highest      
inventory level at the end of any quarter during the fiscal year. As of         
September 30, 1997, the Company's inventory of information technology equipment 
was $1,625,496. See "Business -- Competition."                                  

MANAGEMENT OF GROWTH                                                            

     In order to support the anticipated growth of its business, the
Company has added new personnel in 1995, 1996, and 1997 and expects to add      
additional personnel in 1998. The Company is absorbing, and will continue to    
absorb in the future, the effects of additional personnel costs and the         
implementation of new systems necessary to manage such growth. The Company's    
future operating results will depend on its ability to attract, hire and retain 
skilled employees and on the ability of its officers and key employees to       
continue to implement and improve its operational and financial control systems 
and to train and manage its employees. If the Company is unable to manage       
growth effectively, or attract and retain the personnel it requires, the        
Company's business, financial condition, results of operations, and cash flows  
would be materially adversely affected.                                         

RISK OF CHANGES IN TAX LAWS                                                     

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

RISK OF CHANGES IN ACCOUNTING PRACTICES                                         

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

INTEREST RATE RISK                                                              

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

        In addition, prior to obtaining long-term financing for its leases
and the related equipment, the Company sometimes finances the purchase of those 
assets through lines of credit which bear interest at variable rates. See "Risk 
Factors -- Dependence on Availability of Financing -- Recourse Financing" and   
"Business -- Financing." The Company is exposed to interest rate risk on leases 
financed through the                                                            

19  

424B3
20th Page of 101
TOC
1st
Previous
Next
↓Bottom
Just 20th
CoreStates Bank, N.A. Facility to the extent interest rates increase between    
the time the leases are initially financed and the time they are permanently    
financed.                                                                       

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

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

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

   The Company's Certificate of Incorporation and Bylaws further
provide for the Company's Board of Directors to be divided into three classes,  
with directors in each class elected for three-year staggered terms, except for 
the initial directors. This classification of the Board of Directors could make 
it more difficult for a third party to acquire control of the Company, because  
it would require more than one annual meeting of the stockholders to elect a    
majority of the Board of Directors. One of the Company's current principal      
stockholders, Phillip G. Norton, Chairman, Chief Executive Officer and          
President of the Company, controls approximately 46% of the Common Stock, and   
thus will likely be able to prevent a third party from acquiring control of the 
Company. See "-- Control by Principal Stockholders."                            

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

20  

424B3
21st Page of 101
TOC
1st
Previous
Next
↓Bottom
Just 21st
PUBLIC MARKET FOR STOCK                                                         

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

ABSENCE OF DIVIDENDS                                                            

         The Company has never paid a cash dividend to stockholders and does
not anticipate paying dividends on the Common Stock in the foreseeable future,  
as the Company's Board of Directors intends to retain the Company's earnings    
for use in the business. See "Dividend Policy."                                 

POTENTIAL FLUCTUATIONS IN QUARTERLY OPERATING RESULTS                           

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

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

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

21  

424B3
22nd Page of 101
TOC
1st
Previous
Next
↓Bottom
Just 22nd
SHARES ELIGIBLE FOR FUTURE SALE MAY ADVERSELY AFFECT THE MARKET PRICE OF COMMON 
STOCK                                                                           

        The Company has 6,071,305 shares of Common Stock outstanding as of
the date of this Prospectus. Of this amount, 1,150,000 shares of Common Stock   
are freely tradable without restriction. The remaining 4,921,305 shares, unless 
registered, will be required to be sold pursuant to provisions of Rule 144 under
the Securities Act. Sales of any such shares could adversely affect the market  
price of the Common Stock. See "Description of Capital Stock -- Shares Eligible 
for Future Sale." The 921,305 shares issued in the acquisitions of Compuventures
and ECCI of 260,978 and 498,998 on July 24, 1997 and September 29, 1997,        
respectively, and 161,329 shares issued by the Company in a private placement on
June 18, 1997 are included in the Registration Statement of which this          
Prospectus forms a part. See "Selling Stockholders."                            

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

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

THE COMPANY 

The Company is a Delaware corporation which, pursuant to a
reorganization effected September 1, 1996, serves as the holding company for    
MLC Group and other subsidiaries. The Company engages in no other business      
other than serving as the parent holding company for MLC Group, MLC Capital,    
Inc., MLC Federal, Inc., MLC Network Solutions, ECCI and MLC Leasing, S.A. de   
C.V. based in Mexico City, Mexico, (a wholly owned subsidiary of MLC Group and  
MLC Network Solutions which to date has conducted no business). MLC/GATX        
Leasing Corporation is a 50% owned investment of MLC Group.                     

       MLC Group, a Virginia corporation, founded in 1990 and originally
named Municipal Leasing Corporation, currently conducts the majority of all     
business activity of the Company. MLC Group has obtained a significant source   
of its equity financing for transactions through two joint venture              
arrangements: (i) MLC/GATX Limited Partnership I; and (ii) MLC/CLC LLC. MLC     
Group has a 9.5% limited partnership ownership interest in MLC/GATX Limited     
Partnership I and owns 50% of the stock of MLC/GATX Leasing Corporation, which  
serves as general partner of MLC/GATX Limited Partnership I with a 1% general   
partnership interest. MLC Group has a 5% membership interest in                 

22  

424B3
23rd Page of 101
TOC
1st
Previous
Next
↓Bottom
Just 23rd
MLC/CLC LLC and serves as its manager. See "Risk Factors -- Dependence on Major 
Relationships" and "Business -- Financing."                                     

On July 24, 1997, the Company, through a new wholly owned 
subsidiary, MLC Network Solutions which was incorporated on July 14, 1997,      
entered into an Agreement and Plan of Merger with Compuventures. Compuventures  
was merged into MLC Network Solutions effective July 24, 1997. The outstanding  
shares of Compuventures Common Stock were converted into 260,978 shares, valued 
at $3,384,564, of MLC Holdings Common Stock. Compuventures is a value-added     
reseller of PC's and related network equipment and software products and        
provides various support services to its customers from facilities located in   
Greenville, Raleigh and Wilmington, North Carolina. The merger was accounted    
for as a pooling of interests.                                                  

        Educational Computer Concepts, Inc. (referred to as "ECCI" and dba
"ECC Integrated, Inc."), was acquired on September 29, 1997 through the merger  
of MLC Acquisitions Corporation, a newly formed corporation wholly owned by MLC 
Holdings, which was incorporated on September 2, 1997, into ECCI with ECCI      
being the surviving entity. ECCI currently conducts a network services and      
software and PC reselling business from its sole location in Pottstown,         
Pennsylvania. MLC Holdings effectively exchanged 498,998 shares of its Common   
Stock, valued at $7,092,000, for the total stock of ECCI. This transaction was  
also accounted for as a pooling of interests.                                   

          MLC Capital, Inc. is an NASD-registered broker-dealer and, as of the
date of this report, has conducted no business transactions. The Company does   
not have any plans, at present, to engage in business through MLC Capital, Inc. 

        MLC Federal, Inc. was incorporated on September 17, 1997 to handle
future business servicing the Federal government marketplace.                   

        On October 22, 1997, the Company formed MLC Leasing, S.A. de C.V.,
a wholly owned subsidiary of MLC Group and MLC Network Solutions based in       
Mexico City, Mexico. To date, no business has been conducted through the new    
subsidiary.                                                                     

   On November 20, 1996, the Company closed a public offering of
1,000,000 shares of its Common Stock (the "Initial Public Offering"), and on    
December 13, 1996, the underwriter exercised its over-allotment option of       
150,000 additional shares. The initial offering price was $8.75 per share. The  
Company received net proceeds of $8,603,762. Expenses and underwriter's         
discount relating to the Initial Public Offering were $1,458,738.               

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

    The Company's principal executive offices are located at 11150
Sunset Hills Road, Suite 110, Reston, Virginia 20190-5321 and its telephone     
number at such address is (703) 834-5710. The Company's 186 employees operate   
through twelve offices, including its principal executive office and eleven     
regional sales offices which are located in the following metropolitan and      
suburban areas: Pottstown and West Chester, Pennsylvania (both are Philadelphia 
suburban locations); Dallas and Austin, Texas; Sacramento and San Diego         
California; Greenville, Wilmington and Raleigh (2 offices),                     

23  

424B3
24th Page of 101
TOC
1st
Previous
Next
↓Bottom
Just 24th
North Carolina and Atlanta, Georgia. The Company also has an arrangement with   
an independent contractor who works primarily for the Company in Columbus,      
Ohio.                                                                           

USE OF PROCEEDS 

      The 2,000,000 Acquisition Shares to be offered and issued by the
Company will be issued from time to time in full or part consideration in       
connection with future acquisitions by the Company.                             

      An additional 964,305 Selling Stockholder Shares subject of this
Prospectus have been previously issued to the Selling Stockholders and are      
being offered for sale by the Selling Stockholders. Consequently, the Company   
will not receive any of the proceeds from the sales of such shares.             

DIVIDEND POLICY 

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

CAPITALIZATION

         The following table sets forth the capitalization of the Company as
of September 30, 1997.                                                          

                                                        [Enlarge/Download Table]

                                                                             As of September 30, 1997
                                                                             ------------------------
                                                                               (Dollars in thousands)

                                                                                                     
Nonrecourse notes payable..........................................................       $4,764     
Recourse notes payable.............................................................       16,134     
                                                                                          ------     
Total..............................................................................       20,898     
Stockholders' equity:                                                                                
     Preferred stock, $0.01 par value -- 2,000,000                                                   
       shares authorized; none issued or outstanding...............................          --      
     Common stock, $0.01 par value - 25,000,000 shares                                               
       authorized; 6,071,305 shares issued and                                                       
       outstanding (actual)........................................................           61     
Additional paid-in capital.........................................................       11,356     
Retained earnings..................................................................        9,294     
                                                                                          ------     
     Total stockholders' equity....................................................       20,711     
                                                                                          ------     
     Total capitalization..........................................................      $41,609     
                                                                                          ======     

24  

424B3
25th Page of 101
TOC
1st
Previous
Next
↓Bottom
Just 25th
SELECTED CONSOLIDATED FINANCIAL DATA

        The selected consolidated financial data set forth below should be
read in conjunction with the Consolidated Financial Statements of the Company   
and related Notes thereto and the information included under "Management's      
Discussion and Analysis of Results of Operations and Financial Condition,"      
included elsewhere herein. See "Management's Discussion and Analysis of Results 
of Operations and Financial Condition" and "Business."                          

        The following condensed consolidated balance sheets and statements
of earnings have been restated to include the accounts and results of           
operations of the Company's two newly acquired subsidiaries which were          
accounted for under the pooling-of-interests method. Although the balance       
sheets of the Company as of March 31, 1993, 1994 and 1995, prior to             
restatement, as well as the balance sheets of Compuventures and ECCI as of      
March 31, 1995 have been audited, the restated balance sheets of the Company as 
of March 31, 1993, 1994 and 1995 have been prepared by the Company, without     
audit. Additionally, although the Company's statements of earnings for the years
ended March 31, 1993 and 1994 have been audited, the restated statements of     
earnings for the years ended March 31, 1993 and 1994 have been prepared by the  
Company without audit. The Company elected to consolidate the data presented    
for its years ended March 31, 1993 and 1994 to reflect the results of           
operations of the two newly acquired subsidiary companies as of and for their   
years ended December 31, 1992 and 1993.                                         

         The consolidated financial data, as of and for the six months ended
September 30, 1996, and September 30, 1997, has been derived from unaudited     
financial information, which in the opinion of management of the Company        
includes all adjustments (consisting only of normal recurring accruals)         
necessary for a fair presentation. The results of operations for the six months 
ended September 30, 1997, are not necessarily indicative of the results of      
operations that may be expected for the entire year. See "Management's          
Discussion and Analysis of Results of Operations and Financial Condition" and   
"Business." Dollars are in thousands, except per share data.                    

25  

424B3
26th Page of 101
TOC
1st
Previous
Next
↓Bottom
Just 26th

MLC HOLDINGS, INC. AND SUBSIDIARIES                                             
SELECTED CONSOLIDATED FINANCIAL DATA                                            

                                                        [Enlarge/Download Table]

                                                                                 YEAR ENDED MARCH 31,                        
                                                      -----------------------------------------------------------------------
                                                           1993            1994          1995           1996         1997    
                                                      -----------------------------------------------------------------------
                                                                                                                             
STATEMENTS OF EARNINGS                                                                                                       
Revenue:                                                                                                                     
   Sales of equipment                                   $   44,179      $   43,262     $  50,471     $   47,591   $   52,167 
   Sales of leased equipment                                     -           5,940         9,958         16,318       21,634 
   Lease revenues                                            1,219           1,577         2,968          6,009       10,345 
   Net margin on sales type leases                             193             380           277             86            - 
   Fee and other income                                        787           1,046           690          1,876        2,503 
                                                      -----------------------------------------------------------------------
      Total revenues                                        46,378          52,205        64,364         71,880       86,649 
                                                      -----------------------------------------------------------------------
Costs and Expenses:                                                                                                          
   Cost of sales of equipment                               38,760          37,924        44,157         38,782       42,180 
   Cost of sales of leased equipment                             -           5,698         9,463         15,522       21,667 
   Direct lease costs                                          140             344           841          2,863        5,198 
   Professional and other costs                                792             628           657            709          577 
   Salaries and benefits                                     3,907           4,590         5,679          6,682        8,241 
   General and administrative expenses                       1,331           1,781         1,673          2,040        2,286 
   Interest and financing costs                                333             512         1,111          1,702        1,649 
   Nonrecurring acquisition costs                                -               -             -              -            - 
                                                      -----------------------------------------------------------------------
      Total costs and expenses                              45,263          51,477        63,581         68,300       81,798 
                                                      -----------------------------------------------------------------------

Earnings before provision for income taxes                   1,115             728           783          3,580        4,851 
Provision for income taxes                                     185              59           198            881        1,360 
                                                      -----------------------------------------------------------------------
Net earnings before extrordinary item                          930             669           585          2,699        3,491 
Extraordinary gain, net (1)                                      -               -             -            117            - 
                                                      -----------------------------------------------------------------------
Net earnings                                            $      930      $      669     $     585     $    2,816   $     3,491
                                                      =======================================================================
Earnings per common share, before extraordinary item          0.21            0.15          0.13           0.59         0.67 
Extraordinary gain per common share                              -               -             -           0.03            - 
                                                      -----------------------------------------------------------------------
Net earnings per common share                           $     0.21      $     0.15     $    0.13     $     0.62   $     0.67 
                                                      =======================================================================
Pro forma net earnings (2)                              $      756      $      545     $     529     $    2,389   $    3,133 
                                                      =======================================================================
Pro forma net earnings per common share                 $     0.17      $     0.12     $    0.12     $     0.52   $     0.60 
                                                      =======================================================================
Weighted average common shares outstanding               4,380,270       4,380,270     4,383,490      4,572,635    5,184,261 

                                                                                    AS OF MARCH 31,                          
                                                      ---------------------------------------------------------------------- 
                                                            1993           1994           1995          1996          1997   
                                                      ---------------------------------------------------------------------- 
BALANCE SHEETS                                                                                                               
Assets:                                                                                                                      
   Cash and cash equivalents                              $    669        $  1,632     $     276     $      651    $   6,654 
   Accounts receivable                                       2,513           3,384         4,852          4,526        8,846 
   Notes receivable                                             34              87            37             92        2,154 
   Inventories                                               1,844           1,692         1,294            965        1,278 
   Net investment in direct financing and sales                                                                              
      type leases, net                                       2,577          10,146        12,124         16,273       17,473 
   Investment in operating lease equipment, net              2,104             164         1,874         10,220       11,065 
   Other assets                                                 82             374           587          1,935          741 
   All other assets                                            224             553           672            522          813 
                                                      -----------------------------------------------------------------------
      Total assets                                        $ 10,047        $ 18,032     $  21,716     $   35,184    $  49,024 
                                                      =======================================================================

Liabilities:                                                                                                                 
   Accounts payable - equipment                           $  2,107        $  1,092     $   3,014     $    4,973    $   4,946 
   Accounts payable - trade                                  1,627           1,970         1,890          2,215        3,007 
   Salaries and commissions payable                            313             280           316            153          672 
   Recourse notes payable                                    1,419           3,113         2,597          2,106          439 
   Nonrecourse notes payable                                 1,917           8,116        10,162         18,352       19,705 
   All other liabilities                                       679           1,113           936          2,154        3,778 
                                                      -----------------------------------------------------------------------
      Total liabilities                                      8,062          15,684        18,915         29,953       32,547 
Total stockholders' equity                                   1,985           2,348         2,801          5,232       16,477 
                                                      -----------------------------------------------------------------------
Total liabilities and stockholders' equity                $ 10,047        $ 18,032     $  21,716     $   35,184    $  49,024 
                                                      =======================================================================

                                                        [Enlarge/Download Table]

                                                                 SIX MONTHS ENDED          
                                                                   SEPTEMBER 30,           
                                                        -----------------------------------
                                                                 1996             1997     
                                                        -----------------------------------
                                                                                           
STATEMENTS OF EARNINGS                                                                     
Revenue:                                                                                   
   Sales of equipment                                          $   22,344       $   25,493 
   Sales of leased equipment                                        9,707           32,187 
   Lease revenues                                                   3,911            7,218 
   Net margin on sales type leases                                      -                - 
   Fee and other income                                             2,263            2,819 
                                                        -----------------------------------
      Total revenues                                               38,225           67,717 
                                                        -----------------------------------
Costs and Expenses:                                                                        
   Cost of sales of equipment                                      18,765           20,085 
   Cost of sales of leased equipment                                9,591           31,580 
   Direct lease costs                                               1,697            3,331 
   Professional and other costs                                       232              441 
   Salaries and benefits                                            3,648            4,785 
   General and administrative expenses                              1,415            2,155 
   Interest and financing costs                                       794              975 
   Nonrecurring acquisition costs                                       -              183 
                                                        -----------------------------------
      Total costs and expenses                                     36,141           63,536 
                                                        -----------------------------------

Earnings before provision for income taxes                          2,084            4,181 
Provision for income taxes                                            606              872 
                                                        -----------------------------------
Net earnings before extrordinary item                               1,478            3,309 
Extraordinary gain, net (1)                                             -                - 
                                                        -----------------------------------
Net earnings                                                   $    1,478       $    3,309 
                                                        ===================================
Earnings per common share, before extraordinary item                 0.31             0.55 
Extraordinary gain per common share                                     -                - 
                                                        -----------------------------------
Net earnings per common share                                  $     0.31       $     0.55 
                                                        ===================================
Pro forma net earnings (2)                                     $    1,342       $    2,696 
                                                        ===================================
Pro forma net earnings per common share                        $     0.28       $     0.45 
                                                        ===================================
Weighted average common shares outstanding                      4,754,390        5,990,200 

                                                                  AS OF SEPTEMBER 30,      
                                                      -------------------------------------
                                                              1996              1997       
                                                      -------------------------------------
BALANCE SHEETS                                                                             
Assets:                                                                                    
   Cash and cash equivalents                                     $  3,328         $  7,839 
   Accounts receivable                                              7,680           13,032 
   Notes receivable                                                 1,120            4,447 
   Inventories                                                      1,619            1,625 
   Net investment in direct financing and sales                                            
      type leases, net                                             16,933           18,590 
   Investment in operating lease equipment, net                    10,892            8,799 
   Other assets                                                       998            1,858 
   All other assets                                                   911            1,127 
                                                        -----------------------------------
      Total assets                                               $ 43,481         $ 57,317 
                                                        ===================================

Liabilities:                                                                               
   Accounts payable - equipment                                  $ 11,959         $  6,766 
   Accounts payable - trade                                         2,014            4,237 
   Salaries and commissions payable                                   214              335 
   Recourse notes payable                                             206            4,764 
   Nonrecourse notes payable                                       19,827           16,134 
   All other liabilities                                            2,861            4,370 
                                                        -----------------------------------
      Total liabilities                                            37,081           36,606 
Total stockholders' equity                                          6,400           20,711 
                                                        -----------------------------------
Total liabilities and stockholders' equity                       $ 43,481         $ 57,317 
                                                        ===================================

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

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

26  

424B3
27th Page of 101
TOC
1st
Previous
Next
↓Bottom
Just 27th

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

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

          The discussion and analysis of the Company's financial condition and
results of operations relates to the accompanying condensed consolidated        
balance sheets, statements of earnings, and statements of cash flow as restated 
to include the accounts and results of operations of the Company's two newly    
acquired subsidiaries which were accounted for under the pooling-of-interests   
method. The balance sheets and statements of earning as of and for the six      
months ended September 30, 1996 and 1997 have been prepared by the Company,     
without audit.                                                                  

REVENUE RECOGNITION AND LEASE ACCOUNTING                                        

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

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

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

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

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

  Sales-type leases include a dealer profit (or loss) which is
recorded by the lessor at the inception of the lease. The dealer's profit (or   
loss) represents the difference, at the inception of the lease, between the     
fair value of the leased property and its cost or carrying amount. The          
equipment subject to such                                                       

27  

424B3
28th Page of 101
TOC
1st
Previous
Next
↓Bottom
Just 28th
leases may be obtained in the secondary marketplace, but most frequently is the 
result of releasing the Company's own portfolio. This profit (or loss) which is 
recognized at lease inception, is included in net margin on sales-type leases.  
Interest earned on the present value of the lease payments and residual value   
is recognized over the lease term using the interest method and is included as  
part of the Company's lease revenue.                                            

         The Company adopted Statement of Financial Accounting Standards No.
125 ("SFAS No. 125"), Accounting for Transfers and Servicing of Financial       
Assets and Extinguishments of Liabilities as of January 1, 1997. SFAS No. 125   
has changed the manner in which the Company determines and recognizes the gain  
recorded upon the transfer of its interest in finance contracts subsequent to   
December 31, 1996. Additionally, SFAS No. 125 requires the Company to record    
gains or losses with respect to transfers of its interest in leases previously  
accounted for as direct finance leases. SFAS No. 125 has also altered the       
presentation in the Company's consolidated financial statements of revenues,    
expenses and certain assets and liabilities associated with finance contracts   
sold. Prior to this accounting pronouncement, proceeds received from assigning  
receivables from direct financing leases prior to December 31, 1996 would have  
been recorded as nonrecourse debt rather than the required new sale treatment.  
As a result, certain aspects of the Company's financial statements as of        
September 30, 1997 may not be directly comparable to the prior period financial 
statements based on the requirement that no retroactive accounting was          
allowable.                                                                      

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

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

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

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

        The Company seeks to realize the estimated residual value at lease
termination through: (i) renewal or extension of the original lease; (ii) sale  
of the equipment either to the lessee or the secondary market; or (iii) lease   
of the equipment to a new user. The difference between the proceeds of a sale   
and the remaining estimated residual value is recorded as a gain or loss in     
lease revenues when title is                                                    

28  

424B3
29th Page of 101
TOC
1st
Previous
Next
↓Bottom
Just 29th
transferred to the lessee, or, if the equipment is sold on the secondary        
market, in sales revenues and cost of sales when title is transferred to the    
buyer. The proceeds from any subsequent lease are accounted for as lease        
revenues at the time such transaction is entered into.                          

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

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

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

RESULTS OF OPERATIONS FOR THE SIX MONTHS ENDED SEPTEMBER 30, 1997 AND 1996      
(UNAUDITED)                                                                     

REVENUES                                                                        

         During the six month period ended September 30, total revenues were
$67,717,056 and $38,224,790 in 1997 and 1996, respectively, an increase of      
77.2% and sales increased 80.0% to $57,679,539 over the corresponding period in 
the prior year. These increases are largely attributable to the 231.6% increase 
in sales of leased equipment. Historically, the majority of sales of leased     
equipment have been to one of the Company's two institutional equity partners.  
During the six month periods ended September 30, sales to MLC/CLC, LLC          
accounted for 86.1% and 66.9% of 1997 and 1996 sales of leased equipment,       
respectively. Sales to these entities require the consent of the relevant joint 
venture partner. While management expects the continued availability of equity  
financing through these joint ventures, if such consent is withheld, or         
financing from these entities otherwise becomes unavailable, it could have a    
material adverse effect upon the Company's business, financial condition and    
results of operations until other equity financing arrangements are secured.    

      Sales of equipment, both new and used, are generated through the
Company's equipment brokerage and re-marketing activities, and through its      
newly acquired valued added-reseller ("VAR") subsidiaries. For the fiscal year  
to date through September 30, 1997, equipment sales increased 14.1% to          
$25,493,028. During the six month periods ended September 30, 1997 and 1996,    
brokerage and re-marketing activities generated 15.8% and 41.8% of equipment    
sales revenue, respectively. Brokerage and re-marketing revenue can vary        
significantly from period to period, depending on the volume and timing of      
transactions, and the availability of equipment for sale. VAR sales accounted   
for the remaining portion of equipment sales.                                   

 For the fiscal year to date through September 30, 1997, the
Company's lease revenues increased 84.6% to $7,218,351 for the 1997 period      
compared to the same period in 1996. These increases reflect increased rental   
revenues due to a higher average investment in operating lease equipment. In    
addition, lease revenue includes the gain or loss on the sale of certain        
financial assets, as required under the provisions of Financial Accounting      
Standard No. 125 "Accounting for Transfers and Servicing of                     

29  

424B3
30th Page of 101
TOC
1st
Previous
Next
↓Bottom
Just 30th
Financial Assets and Extinguishments of Liabilities," which was required to be  
in effect as of January 1, 1997.                                                

       For the six months ended September 30, 1997, fee and other income
increased 24.6% over the comparable periods in the prior year. These increases  
are attributable to increases in revenues from adjunct services and fees,       
including support fees, warranty reimbursements, and learning center revenues,  
generated by the Company's VAR subsidiaries.                                    

EXPENSES                                                                        

Cost of Sales. The Company's cost of sales have increased 
approximately in proportion with the increase in total revenues. In comparing   
the six month periods ended September 30, cost of sales increased 82.2%, while  
total revenues increased 77.2% during the same period.                          

     The Company's direct lease costs increased 96.3% during the six
month period ended September 30, 1997, as compared to the same period in the    
prior year. The largest component of direct lease costs is depreciation on      
operating lease equipment. The increase in direct lease costs is consistent     
with the Company's higher average investment in operating lease equipment for   
the six month periods in 1997 as compared to the same period in the prior year. 

          Professional and Other Costs, Salaries and Benefits, and General and
Administrative Expenses. Professional and other fees incurred by the Company    
during the six month period ended September 30, 1997 were $440,874, reflecting  
increases of 90.2% over the comparable periods in 1996. These increases are     
attributable to increases in the volume of broker fees which the Company pays   
on certain transactions, and the increased legal and professional fees          
associated with the Company's securities being publicly traded.                 

          For the fiscal year to date through September 30, 1997, salaries and
benefits and general and administrative costs had increased 31.2% and 52.2%     
over the prior  year, respectively. These increases are the result of           
additional personnel and administrative costs associated with the increased     
volume of leasing transactions the Company has generated in comparison to the   
corresponding periods in the prior year.                                        

    Interest Expense. Interest and financing costs incurred by the
Company for the six months ended September 30, 1997 and 1996 amounted to        
$975,264 and $793,867, respectively, and related to interest costs on the       
Company's lines of credit and notes payable. Interest costs on the majority of  
the non-recourse and certain recourse notes are typically remitted directly to  
the lender by the lessee.                                                       

Non-Recurring Acquisition Expense. The Company recognized 
non-recurring acquisition costs of $183,453 during the six months ended         
September 30, 1997 in conjunction with business combinations accounted for      
under the pooling-of-interests method. These non-recurring acquisition costs    
included accounting and legal fees, and various other acquisition related       
costs. Generally accepted accounting principles require the Company to expense  
all acquisition costs (both those paid by the Company and those paid by the     
sellers of the acquired companies) related to business combinations accounted   
for under the pooling-of-interests method. The Company expects to incur similar 
non-recurring costs in the future, as the Company anticipates completing        
additional acquisitions accounted for under the pooling-of-interests method.    

    Income Taxes. For the six months ended September 30, 1997, the
Company's provision for income tax was $872,133, as compared to $606,000 during 
the comparable period in the prior year, reflecting effective income tax rates  
of 20.9% and 29.1%, respectively. The low effective income tax rates, compared  
to the federal statutory rate of 35.0%, was primarily due to the inclusion of   
the net earnings of businesses acquired by the Company, which prior to their    
combination with the Company                                                    

30  

424B3
31st Page of 101
TOC
1st
Previous
Next
↓Bottom
Just 31st
had elected subchapter S corporation status, and as such were not previously    
subject to federal income tax.                                                  

         The foregoing resulted in a 124.0% increase in net earnings for the
six month period ended September 30, 1997, as compared to the same period in    
the prior year. For the fiscal year to date through September 30, the Company's 
earnings per share were $.55 in 1997, as compared to $.31 in 1996, based on     
weighted average common shares outstanding of 5,990,200 and 4,754,390,          
respectively, and pro forma net earnings per share were $0.45 and $0.28,        
respectively.                                                                   

LIQUIDITY AND CAPITAL RESOURCES                                                 

  Cash Flow from Operations. During the six month period ended
September 30, 1997, the Company generated cash flows from operations of         
$143,497, and cash flows from financing activities of $5,342,702. Cash used in  
investing activities amounted to $4,301,098 during the same period. The net     
effect of these cash flows was to increase cash and cash equivalents by         
$1,185,101 during the six month period. During the same period, the Company's   
total assets increased $8,293,663, or 16.9%, primarily the result of increases  
in accounts receivable arising from equipment purchased on behalf of lessees    
but not yet placed under an equipment schedule, and notes receivable arising    
from the equity sale of unfunded leases to MLC/CLC, LLC.                        

          Cash Flow from Borrowings. On June 5, 1997, the Company entered into
the CoreStates Facility, which is available through June 5, 1998, bears         
interest at LIBOR+110 basis points, or, at the Company's option, Prime minus    
one percent. On September 5, 1997, the Company's CoreStates Facility was        
increased to a maximum limit of $25 million. Availability under the revolving   
lines of credit may be limited by the asset value of equipment purchased by the 
Company and may be further limited by certain covenants and terms and           
conditions of the facilities. As of September 30, 1997, the Company had an      
outstanding balance on the CoreStates Facility of $3.5 million. The CoreStates  
facility is made to MLC Group, and guaranteed by MLC Holdings. The Company's    
newly acquired subsidiaries, MLC Network Solutions and ECCI, both have separate 
credit sources to finance their working capital requirements for inventories    
and accounts receivable, which the Company has guaranteed. Their traditional    
business as value-added resellers of PC's and related network equipment and     
software products is financed through agreements known as "floor planning"      
financing where interest expense for the first thirty days is charged to the    
supplier/distributor but not the reseller. These floor plan liabilities are     
recorded under accounts payable as they are normally repaid within the 30 day   
time frame as they represent an assigned accounts payable originally generated  
with the supplier/distributor. If the 30 day obligation is not timely           
liquidated, interest is then assessed at stated contractual rates. As of        
September 30, 1997 MLC Network Solutions, has floor planning availability of    
$1,400,000 through Deutsche Financial, Inc. and $300,000 from IBM Credit        
Corporation. The outstanding balances to these respective suppliers were        
$595,033 and $25,786 as of September 30, 1997. ECCI has floor planning          
availability of $1,500,000 from AT&T Credit Corporation, $1,000,000 through IBM 
Credit Corporation, and $100,000 through Deutsche Financial, Inc. The           
outstanding balances to these respective suppliers were $522,713, $470,454 and  
$6,048 as of September 30, 1997. ECCI additionally has a line of credit in      
place, expiring on April 30, 1998, with PNC Bank, N.A. to provide an asset      
based credit facility. The line has a maximum credit limit of $2,500,000 and    
interest is based on the bank's prime rate. The outstanding balance was         
$931,000 as of September 30, 1997.                                              

   In March 1997, the Company established the Heller Facility, a
$10,000,000 partial recourse credit facility agreement, with Heller Financial,  
Inc., Vendor Finance Division. Under the terms of the Heller Facility, a        
maximum amount of $10 million is available to the Company, provided, that each  
draw is subject to the approval of Heller. As of September 30, 1997, the        
principal balance due under the Heller Facility was $941,187.                   

31  

424B3
32nd Page of 101
TOC
1st
Previous
Next
↓Bottom
Just 32nd
          Through MLC/GATX Limited Partnership I and MLC/CLC, LLC, the Company
has formal joint venture agreements with two institutional investors which      
provide the equity investment financing for certain of the Company's            
transactions. GATX, an unaffiliated company which beneficially owns 90% of      
MLC/GATX Limited Partnership I, is a publicly held company with stockholders'   
equity in excess of $804 million, as of June 30, 1997. Cargill Leasing          
Corporation, an unaffiliated investor which owns 95% of MLC/CLC, LLC, is        
affiliated with Cargill, Inc., a privately held business that was reported by   
Forbes Magazine to have 1997 earnings in excess of $800 Million. These joint    
ventures arrangements enable the Company to invest in a significantly greater   
portfolio of business than its limited capital base would otherwise allow. A    
significant portion of the Company's revenue generated by the sale of leased    
equipment is attributable to sales to either MLC/CLC, LLC or MLC/GATX Limited   
Partnership I.                                                                  

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

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

RESULTS OF OPERATIONS FOR THE THREE YEARS ENDED MARCH 31, 1997                  

REVENUES                                                                        

         Total revenues increased $14.8 million or 20.6%, from $71.9 million
in fiscal year 1996 to $86.6 million in fiscal year 1997. In fiscal year 1996,  
total revenues increased $7.5 million, or 11.7% from fiscal year 1995, to $71.9 
million. Lease revenue increased $2.8 million, or 87.8%, from $3.2 million in   
fiscal year 1995 to $6.1 million in fiscal year 1996, and $4.2 million, or      
69.8%, to $10.3 million in fiscal year 1997, as a result of the increase of     
operating leases and direct financing leases originated or acquired and         
retained by the Company during the periods. This trend is expected to continue  
as the Company increases its sales activity in the area of acquiring leased     
equipment. Sales revenue increased 5.8% from $60.4 million in fiscal year 1995  
to $63.9 million in fiscal year 1996 as a result of a 63.9% increase in sales   
of leased equipment from $10.0 million to $16.3 million combined with a 5.9%    
decrease in sales of equipment from $50.5 million to $47.6 million. The major   
component of the decrease was a reduction in sales revenue in the buy/sell area 
from $26.9 million in fiscal year 1995 to $18.5 million in fiscal 1996. Sales   
revenue increased 15.5% from $63.9 million in fiscal year 1996 to $73.8 million 
in fiscal year 1997. The increase reflected the 32.6% increase in sales of      
leased equipment and 9.6% increase in sales of equipment. Sales of leased       
equipment has become a major revenue source for the Company and represents      
15.5%, 22.7% and 24.9% of the Company's revenues for the fiscal years ended     
1995, 1996 and 1997.                                                            

32  

424B3
33rd Page of 101
TOC
1st
Previous
Next
↓Bottom
Just 33rd
         Net margin on sales-type leases revenue was $276,688 in fiscal year
1995 and decreased to $85,590 in fiscal year 1996 as a result of a decrease in  
the origination of leases qualifying as sales-type leases. This downward trend  
is expected to continue as the Company decreases its emphasis in this area. In  
fiscal year 1997, there were no sales-type lease revenues.                      

    Fee and Other Income. Fee and other income totaled $690,466 in
fiscal year 1995 and increased $1,185,944, or 171.8% to $1,876,410 in fiscal    
year 1996. Fiscal year 1997 fee income was $2,503,381, a 33.4% increase over    
the prior year. Fees earned in fiscal year 1996 included $440,570 from the      
financing of federal lease transactions and $327,627 from the brokerage of      
various municipal leases of lottery equipment. Fees earned in fiscal 1997       
included a one time fee of $250,000 for providing advisory services to a        
company which is in part owned by one of the Company's outside directors. The   
increase in fee and other income is attributable to higher levels of interest   
income, remarketing fees, earnings from a prepay escrow fee, and higher levels  
of management fee income earned from the equity joint ventures with Cargill and 
GATX, as compared to the same periods of 1996. The Company expects that fee and 
other income will vary considerably due to the uncertainty of completion and    
the timing of specific transactions. See "Management's Discussion and Analysis  
of Results of Operations and Financial Condition -- Fluctuations in Quarterly   
Operating Results."                                                             

EXPENSES                                                                        

         Cost of Sales. Cost of sales increased from $53.6 million in fiscal
year 1995 to $54.3 million in fiscal year 1996, and increased $9.5 million or   
17.6% to $63.8 million in fiscal year 1997. The increase in fiscal years 1996   
and 1997 relate directly to the volume of sales in each of those years.         

    Depreciation and Operating Leases. Depreciation increased from
$597,309 in fiscal year 1995 to $2,117,760, or 254.5% in fiscal year 1996, and  
$1,405,099, or 66.4%, to $3,522,859 in fiscal year 1997. The increase           
in depreciation for both years is due to the increased level of operating       
leases originated and acquired by the Company and increases in the Company's    
operating lease assets and internal equipment over the three-year period.       

       General and Administrative Expenses. General and administrative
expenses increased $.37 million or 22% to $2.04 million in fiscal year 1996 and 
$.25 million, or 12% to $2.3 million in fiscal year 1997. The increases during  
the two year period is due primarily to increased level of business and selling 
activity.                                                                       

       Interest Expense. Interest and other financing expenses increased
$590,510, or 53.1%, from $1,111,128 in fiscal year 1995 to $1,701,638 in fiscal 
year 1996, and decreased $52,695 or 3.1%, to $1,648,943 in fiscal year 1997.    
The increase in interest expense during the periods resulted from the Company's 
increased level of leasing and business activity, including an increase in      
recourse and nonrecourse debt from $12.8 million in fiscal year 1995 to $20.5   
million in fiscal year 1996 to $20.1 million in fiscal year 1997. The weighted  
average interest rate for the Company's nonrecourse debt outstanding as of      
March 31, 1997 was 7.8%.                                                        

         Income Taxes. The provision for taxes was 25.3%, 24.6% and 28.0% of
earnings before income taxes for the fiscal years 1995, 1996 and 1997,          
respectively. The low rates are reflective of the effects of the pooling of     
interests method of accounting for the two companies acquired, Educational      
Computer Concepts, Inc. and Compuventures, Inc. as both were subchapter S       
corporations prior to the business combination and were not subject to income   
taxes at the corporate level. See Note 9) in the accompanying consolidated      
financial statements.                                                           

33  

424B3
34th Page of 101
TOC
1st
Previous
Next
↓Bottom
Just 34th
   Net Earnings. On a consolidated basis, net earnings and net
earnings per share increased in each of the fiscal years 1995, 1996 and 1997.   
Net earnings increased in fiscal year 1996 $2.23 million to $2.816 million, or  
382%, from $.585 million in fiscal year 1995. In fiscal 1997 net income         
increased 24% to $3.491 million over the prior year. The increases result from  
the fluctuation in revenues and expenses discussed in the above paragraphs. Pro 
forma net earnings for the fiscal years 1995, 1996 and 1997 were $.53 million,  
$2.39 million, and $3.13 million, respectively.                                 

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

FLUCTUATIONS IN QUARTERLY OPERATING RESULTS                                     

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

FINANCIAL CONDITION                                                             

        At the start of fiscal year 1995 the Company's financial resources
consisted of its stockholders' equity of $2,488,265 and various lines of credit 
and recourse loans totaling $3,112,830. During fiscal year 1995, the Company    
entered into its partnership with GATX which gave it access to additional       
financial resources to finance the equity investment in its lease transactions. 
See "Risk Factors -- Dependence on Major Relationships," "-- Dependence on      
Availability of Financing," "The Company" and "Business -- Financing". Through  
this partnership, the Company was able to compete on a larger volume of lease   
transactions than it could have without this facility. In fiscal year 1996, the 
Company also entered into an equity joint venture with Cargill Leasing          
Corporation, a transaction which positioned the Company to compete more         
effectively in the growing area of personal computer and network leasing. See   
"Risk Factors -- Dependence on Major Relationships," " -- Dependence on         
Availability of Financing," "The Company," and "Business -- Financing." As a    
result of fiscal year 1995, 1996 and 1997 net earnings of $.6 million, $2.8     
million and $3.5 million respectively, stockholders' equity increased to $16.5  
million at March 31, 1997, including net proceeds from the Initial Public       
Offering of $8.6 million.                                                       

    During the three year period ended March 31, 1997, the Company
improved its financial condition and increased available financial resources in 
the following ways: (i) available lines of credit increased from $2.4 million   
to $16.2 million; (ii) stockholders' equity increased from $2.5 million to      
$16.5 million from net earnings, proceeds from the Initial Public Offering in   
November, 1996 and subsequent over subscription in December, 1996; and (iii)    
the Company entered into two equity joint ventures which substantially          
increased its ability to finance its lease transactions. All of the above       
factors have allowed the Company to be able to support the higher levels of     
sales and leasing activity reflected in its financial statements.               

         As part of its ongoing business activity, the Company generates new
equipment leases and also engages in leased equipment sales. From fiscal year   
1995 to fiscal year 1996 the minimum lease payments for direct financing and    
sales type leases balance increased from $13.7 million to $18.2 million         

34  

424B3
35th Page of 101
TOC
1st
Previous
Next
↓Bottom
Just 35th
or 32.9% and increased another 3% in the fiscal year 1997 to $18.8 million. For 
the quarter ended September 30, 1997, the minimum lease payments for direct     
financing and sales type leases decreased from the end of the fiscal year 1997  
from $18.8 million to $17.5 million, or 6.7%. This decrease is a result of the  
Company's leased equipment sales activity which were in excess of its new lease 
activity. The future minimum lease payments fluctuate, depending on sales and   
new lease activity from year to year and quarter to quarter, making it          
impractical to accurately trend the minimum lease payments. See "Management's   
Discussion and Analysis of Results of Operations and Financial Condition --     
Fluctuations in Quarterly Operating Results."                                   

LIQUIDITY AND CAPITAL RESOURCES                                                 

     Cash Flow from Operations. The Company generated cash flow from
operating activities of $2.7 million for fiscal year 1997. Cash flow from       
operations in fiscal year 1997 was lower than net earnings of $3.5 million,     
primarily due to increases in accounts receivable of $4,343,319, notes          
receivable of $2,062,393 and payments from leases directly to lenders of        
$1,590,061, and increases in inventories of $400,046 and offset by increases in 
accounts payable-trade of $796,740, increases in accrued expenses, salaries and 
commissions payable of $2,286,921. In addition, cash flow used for investing    
activities primarily related to leases was $31.6 million. Financing activities  
from both recourse and nonrecourse borrowing produced $27 million for fiscal    
year 1997. The net result of all of the above activities was an increase in     
cash of $6 million for fiscal year 1997.                                        

    Cash Flow from Borrowings. To date, the financing necessary to
support the Company's leasing and financing activities has been provided        
principally from nonrecourse borrowings, and to a lesser extent, recourse       
borrowings. The buy/sell and new equipment and software sales are financed, in  
part, with recourse lines of credit that require a borrowing base of            
unencumbered receivables and inventory. The Company anticipates that future     
leasing and financing activities will be financed in a similar manner, as well  
as from cash flow from operations and proceeds from the previous stock          
placements.                                                                     

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

          In order to take advantage of the most favorable long-term financing
arrangements available to it, the Company often finances equipment purchases    
and the related leases on an interim basis with short-term, recourse debt, and  
accumulates such leases until it has a portfolio large enough (generally at     
least $1.0 million, based on the aggregate balance of periodic lease payments   
under such leases) to warrant obtaining long-term financing for such leases     
either through nonrecourse borrowings or sales transactions. Such interim       
financing is usually obtained through secured, "warehouse" lines of credit,     
which generally have a term of one year. The Company's maximum available credit 
under such lines of credit totaled $27.5 million as of September 30, 1997. A    
brief description of each line of credit presently in place as of September 30, 
1997 follows: (i) the Corestates Bank Facility is an asset backed facility      
secured by specific leases with a maximum loan of $25 million and bears         
interest at LIBOR +110 basis points, or, at the Company's option, prime minus   
one percent, and the PNC Bank, N.A. an asset based credit facility with a       
maximum credit limit of $2.5 million and carries interest at the bank's prime   
rate. The business segment of reselling PC's and related network equipment is   
financed through agreements known as "floor planning" facilities from IBM       
Credit Corporation, AT&T Credit Corporation and Deutsche Financial, Inc. These  
facilities, totaling a maximum limit of $4.3 million, are classified as trade   
payables as the interest for the liabilities for the first 30 days is the       
responsibility of the supplier or distributor. The Company feels that these     
agreements could be substituted with the line of credit facilities noted above  
but will continue their use as long as they carry beneficial short term rates.  

35  

424B3
36th Page of 101
TOC
1st
Previous
Next
↓Bottom
Just 36th
 The Company had borrowed $275,000 on March 1, 1995 from two
stockholders at a rate of 10% per annum. The loans were repayable at any time   
without premium or penalty and were originally due in full on or before March   
1, 1998. Both the loans were liquidated in November, 1996 utilizing proceeds    
from the Initial Public Offering.                                               

         The Company obtains long-term, nonrecourse financing for individual
significant lease transactions near or at the time it purchases the related     
equipment. The Company entered into various nonrecourse financings during the   
six months ended September 30, 1997 most of which were accounted for under SFAS 
125 (which was effective subsequent to December 31, 1996) and received sales    
treatment. As such, these transactions were not recorded as nonrecourse debt    
but were part of a period gain or loss. The transactions recorded as            
nonrecourse loan additions for the six months ended September 30, 1997 totaled  
$2,356,775 compared to the six months ended September 30, 1996 of $12,998,838   
(prior to SFAS 125 effective date).                                             

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

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

ADEQUACY OF CAPITAL RESOURCES                                                   

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

NEW ACCOUNTING PRONOUNCEMENTS                                                   

   The Financial Accounting Standards Board issued SFAS No. 125,
"Accounting for Transfers and Servicing of Financial Assets and Extinguishments 
of Liabilities," in June 1996. SFAS No. 125 requires sales treatment for a      
material number of direct financing leases that are financed using nonrecourse  
debt subsequent to December 31, 1996 and was, specifically, not retroactive to  
prior periods. As such, many areas of financial reporting of direct financing   
leases and nonrecourse debt for periods subsequent to December 31, 1996 will    
not be stated on the same basis as periods prior to January 1, 1997.            

       In February 1997, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 128, "Earnings per Share" (SFAS 
128). The Company is required to adopt SFAS 128 in the fourth calendar quarter  
of 1997 and will restate at that time earnings per share ("EPS") data for prior 
periods to conform with SFAS 128. Earlier application is not permitted.         

36  

424B3
37th Page of 101
TOC
1st
Previous
Next
↓Bottom
Just 37th
         SFAS 128 replaces current EPS reporting requirements and requires a
dual presentation of basic and diluted EPS. Basic EPS excludes dilution and is  
computed by dividing net income available to common shareholders by the         
weighted average number of shares of Common Stock outstanding for the period.   
Diluted EPS reflects the potential dilution that could occur if securities or   
other contracts to issue Common Stock were exercised or converted into common   
stock.                                                                          

       Earnings per share amounts are calculated based on the net income
(loss) divided by the weighted average number of shares of common stock and     
common stock equivalents outstanding during the period. Common stock            
equivalents consist of options, warrants and convertible redeemable preferred   
stock.                                                                          

      The weighted average number of shares of Common Stock and Common
Stock equivalents outstanding used for computing earnings or loss per share for 
the years ended March 31, 1995, 1996, 1997, and the six months ended September  
30, 1996 and 1997 were 4,383,490, 4,572,635, 5,184,261, 4,754,390, and          
5,990,200, respectively. Had SFAS 128 been in effect during the current and     
prior periods, basic and diluted EPS would have been the same as previously     
presented.                                                                      

      If SFAS 128 had been in effect during the current and prior year
periods basic EPS for the years ended March 31, 1995, 1996, 1997, and the six   
months ended September 30, 1996 and 1997 would have been $0.13, $0.62, $0.67,   
$0.31, and $0.55, respectively.                                                 

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

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

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

BUSINESS

GENERAL                                                                         

  The Company specializes in leasing and financing information
technology assets and providing asset management services to middle market      
commercial customers, select Fortune 1000 firms, federal, state and local       
governments and vendors. The assets leased by the Company include personal      
computers, client server systems, networks, mid-range and mainframe computer    
equipment, telecommunications equipment and software. The Company is also a     
value-added reseller of PC's and related network equipment and software         
products and provides various support services to its customers from facilities 
located in Greenville, Raleigh and Wilmington, North Carolina and Pottstown,    
Pennsylvania, located in the suburbs of Philadelphia. The Company's value-added 
reseller business is basically a desktop and                                    

37  

424B3
38th Page of 101
TOC
1st
Previous
Next
↓Bottom
Just 38th
network equipment distribution business and service provider that requires      
minimal inventories and costs are variable to the level of business.            

     The ten largest commercial customers of the Company by purchase
price of the equipment leased by the Company, for fiscal year 1997 are, (in     
alphabetical order): BTG, Inc.; Cable & Wireless, Inc.; Checkfree Corporation;  
Corning Incorporated; Interealty Corp.; Progressive Casualty Insurance Company; 
Sandia Corporation; SCT Software and Resources Management Corporation; Sprint   
Communications Company, L.P. and affiliates (collectively, "Sprint"); and Walt  
Disney Attractions, Inc. The three largest customers of the network services,   
software and PC reselling business for fiscal year 1997 are AHERF, Corning,     
Inc. and PPD Inc. The three largest government customers, based upon purchase   
price of the equipment leased by the Company for fiscal year 1997, are, in      
alphabetical order: the California Department of Justice; McHenry County,       
Illinois; and the State of Missouri. The three largest customers constituted    
more than 10% of the Company's revenues for fiscal year 1997.                   

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

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

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

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

    The Company's asset trading activity involves the purchase and
resale of previously owned information technology equipment. By offering asset  
trading capabilities, the Company is able to develop and maintain knowledge of  
current market trends and values which enables the Company to                   

38  

424B3
39th Page of 101
TOC
1st
Previous
Next
↓Bottom
Just 39th
predict more accurately residual values when pricing leasing transactions,      
dispose efficiently of off-lease equipment and offer customers a way to dispose 
of or acquire previously owned information technology equipment. Asset          
management services, which are offered primarily to enhance customer service,   
is a general term used to describe the provision of asset inventory and         
tracking services, software and record keeping programs to customers. The asset 
management services provided by the Company allow the customers to better track 
their information technology assets. The asset management services include a    
software system maintained by the Company which generates reports and allows    
customers to dial up and receive information on a real time basis, thus better  
utilizing their assets.                                                         

         The extensive experience of the Company's management in leasing and
financing information technology equipment has enabled the Company to manage    
its residual portfolio to achieve superior returns. Since the Company's         
organization in November, 1990 through March 31, 1997, on matured leases, the   
Company has realized a return of 142% of the amount originally recorded as      
residual values for its equipment. As part of its underwriting and risk         
management efforts, the Company's management seeks to structure lease           
transactions so that they can be financed or sold to third parties on a         
nonrecourse basis, even if the Company ultimately retains an equity interest in 
the lease. The Company's underwriting approach has resulted in no credit losses 
in its leasing operations since its organization. The Company believes that its 
historical approach to estimating residuals, pricing and underwriting leases    
and managing relationships among vendors, customers and financial partners      
provides a foundation for the Company to grow and profitably deploy new         
capital. See "Management."                                                      

INDUSTRY OVERVIEW                                                               

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

        Customer End-Users - Commercial. The equipment leasing industry in
the United States is a significant factor in financing capital expenditures of  
businesses. According to research by the Equipment Leasing Association of       
America ("ELA"), using United States Department of Commerce data, approximately 
$169.9 billion of the $566.2 billion spent on productive assets in 1996 was     
financed by means of leasing. The ELA estimates that 80% of all U.S. businesses 
are leasing or financing to acquire some of their capital assets.               

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

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

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

39  

424B3
40th Page of 101
TOC
1st
Previous
Next
↓Bottom
Just 40th
Research, Inc. further estimated that this market segment will maintain a 10%   
growth rate through the year 2000 as governments convert to client server       
systems.                                                                        

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

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

      The transition from the mainframe to the more complicated client
server applications has also placed a premium on the efficient planning,        
tracking, procurement and disposal of each unit. The Gartner Group estimates in 
their May 9, 1996 statement on PC total cost of ownership under the "Windows 95 
Model" that the average cost of a corporate customer acquiring, maintaining,    
supporting and disposing of the desktop asset is approximately $41,000 over a   
five-year period as compared to the average capital cost of each unit of        
$5,500. The above changes have increased the need for the specialized asset     
management services such as those provided by the Company because the           
procurement and management functions of many end-users are oriented to the      
acquisition of a high-priced, centralized unit and not to the management of     
numerous small-ticket items in multiple locations.                              

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

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

40  

424B3
41st Page of 101
TOC
1st
Previous
Next
↓Bottom
Just 41st
STRATEGY                                                                      

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

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

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

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

On July 24, 1997, the Company, through a new wholly owned 
subsidiary, MLC Network Solutions which was incorporated on July 14, 1997,      
entered into an Agreement and Plan of Merger with Compuventures. Compuventures  
was merged into MLC Network Solutions effective July 24, 1997. The outstanding  
shares of Compuventures Common Stock were converted into 260,978 common shares, 
valued at $3,384,564, of MLC Holdings Common Stock. Compuventures is a          
value-added reseller of PC's and related network equipment and software         
products and provides various support services to its                           

41  

424B3
42nd Page of 101
TOC
1st
Previous
Next
↓Bottom
Just 42nd
customers from facilities located in Greenville, Raleigh and Wilmington, North  
Carolina. The merger was accounted for as a pooling of interests.               

      ECCI (dba "ECC Integrated, Inc."), was acquired on September 29,
1997 through the merger of MLC Acquisitions Corporation, a newly formed         
corporation wholly owned by MLC Holdings which was incorporated on September 2, 
1997, into ECCI with ECCI being the surviving entity. ECCI currently conducts a 
network services and software and PC reselling business from its sole location  
in Pottstown, Pa. MLC Holdings effectively exchanged 498,998 shares of its      
stock, valued at $7,092,000, for the total stock of ECCI.                       

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

LEASING, FINANCING AND SALES ACTIVITIES                                         

       The Company is in the business of leasing and financing equipment
and assets, and is also a value-added reseller of PC's and related network      
equipment and software products, and provides various support service to its    
customers. Although the majority of the transactions are leases, the use of the 
phrase "lease," "leases," "leasing" or "financing" may refer to transactions    
involving: equipment leases; conditional sales contracts; installment purchase  
contracts; software and services contracts; municipal and federal government    
contracts; notes; operating leases; customer agreements; direct financial       
leases; receivables; factoring; tax exempt leases; true leases; leases with     
option to purchase; leases to purchase; vendor agreements; sales-type leases;   
leveraged leases; computer leases; capital leases; private label agreements;    
financing agreements; or energy management contracts.                           

         Business Development. The Company conducts its business development
efforts through its marketing staff of both employees and independent           
representatives which includes 55 individuals located in twelve regional        
offices and the Company's principal executive offices. The Company believes     
that one of its major strengths is its professional and dedicated sales         
organization and back office organization which gives it the ability to         
customize its programs to meet its customers' specific objectives.              

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

42  

424B3
43rd Page of 101
TOC
1st
Previous
Next
↓Bottom
Just 43rd
        The manufacturers and vendors of the above assets include IBM, EMC
Corporation, Hewlett-Packard Company, Toshiba, Cisco Systems, Inc., Digital     
Equipment Corporation, Gateway 2000, Inc., Compaq Computer Corporation,         
Microsoft Corporation, Amdahl Corporation, Dell Computer Corporation,           
HitachiData Systems Corporation, Sterling Software, Inc. and Systems & Computer 
Technology Corporation.                                                         

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

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

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

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

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

      At the inception of each FMV lease, the Company has historically
estimated a residual value for the leased equipment based on the terms of the   
related lease and which will permit the transaction to be financed or sold by   
means of external, generally nonrecourse, sources. This estimate is approved by 
the                                                                             

43  

424B3
44th Page of 101
TOC
1st
Previous
Next
↓Bottom
Just 44th
Company's investment committee, which acts by a signature process instead       
of conducting formal meetings. A decrease in the market value of such equipment 
at a rate greater than the rate expected by the Company, whether due to rapid   
technological obsolescence or other factors, would adversely affect the         
residual values of such equipment. Consequently, there can be no assurance that 
the Company's estimated residual value for equipment will be realized.          

PROCESS CONTROL AND ADMINISTRATIVE SYSTEMS                                      

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

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

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

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

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

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

FINANCING                                                                       

         The business in which the Company is engaged is a capital intensive
business. The Company's business involves both the leasing and the financing of 
assets. The leasing business is characterized                                   

44  

424B3
45th Page of 101
TOC
1st
Previous
Next
↓Bottom
Just 45th
by ownership of the assets residing with the Company or its assigns. The        
financing business is characterized by the beneficial ownership of assets       
residing with the asset user or customer. Several different types of financing, 
each of which is described below, are important to the conduct of the Company's 
leasing and financing business.                                                 

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

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

 Nonrecourse Financing. The credit standing of the Company's
customers must be of such a quality as to allow the Company to finance most of  
its leasing or financing transactions on a nonrecourse basis. Under a           
nonrecourse loan, the Company borrows an amount equal to the committed lease    
payments under the financed lease, discounted at a fixed interest rate. The     
lender is entitled to receive the payments under the financed lease in          
repayment of the loan, and takes a security interest in the related equipment   
but has no recourse against the Company. The Company retains ownership of such  
equipment, subject to the lender's security interest. Interest rates under this 
type of financing are negotiated on a transaction-by-transaction basis and      
reflect the financial condition of the lessee, the term of the lease and the    
amount of the loan. As of March 31, 1997, the Company had aggregate outstanding 
nonrecourse borrowings of $19,705,060 and $16,134,240 at September 30, 1997.    

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

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

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

45  

424B3
46th Page of 101
TOC
1st
Previous
Next
↓Bottom
Just 46th
        Government Financing. The Company also originates tax-exempt state
and local lease transactions in which the interest income is exempted from      
federal income taxes, and to some degree, certain state income taxes. The       
Company assigns its tax-exempt leases to institutional investors, banks and     
investment banks which can utilize tax-free income, and has a number of such    
entities which regularly purchase the transactions.                             

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

       The Company plans to utilize the public debt securities market in
the future to provide a portion of the nonrecourse debt it requires. The        
Company believes that its utilization of the public debt securities markets is  
likely to reduce the Company's effective interest cost for its nonrecourse debt 
and to provide for a more efficient financing arrangement, than is presently    
provided by its existing financing arrangements, to fund its nonrecourse        
borrowing requirements. See "Management's Discussion and Analysis of Results of 
Operations and Financial Condition -- Liquidity and Capital Resources."         

       Equity Joint Ventures. Through MLC/GATX Limited Partnership I and
MLC/CLCLLC, the Company has formal joint venture arrangements with two          
institutional investors which provide the equity investment financing for       
certain of the Company's transactions. GATX, an unaffiliated company which      
beneficially owns 90% of MLC/GATX Limited Partnership I, is a publicly listed   
company with stockholders' equity in excess of $806 million, as of June 30,     
1997. Cargill Leasing Corporation, an unaffiliated investor which owns 95% of   
MLC/CLC LLC, is affiliated with Cargill, Inc., a privately held business that   
was reported by Forbes Magazine in December, 1997 to have sales of $56 billion, 
operating income of $3.2 billion and net income of $814 million for the fiscal  
year ended May, 1997. These joint venture arrangements enable the Company to    
invest in a significantly greater portfolio of business than the Company's      
limited capital base would otherwise allow. See "Risk Factors -- Dependence on  
Major Relationships."                                                           

         MLC/GATX Limited Partnership I and MLC/CLC LLC provide the majority
of the Company's equity investment from third parties as referenced above.      
During fiscal year 1995, the Company's investment in MLC/GATX Limited           
Partnership I increased due to the Company's capital contributions for its      
share of the partnership's equity investment in leased equipment and            
partnership expenses. During fiscal year 1997, revenue recognized from sales to 
MLC/GATX Limited Partnership I was $3.5 million of the Company's total          
revenues. For the six months ending September 30, 1997, revenue recognized from 
sales to MLC/GATX Limited Partnership I was $0.4 million. MLC/GATX Limited      
Partnership I does not purchase any lease transactions from anyone other than   
the Company. MLC/CLC LLC does not purchase any lease transactions from anyone   
other than the Company.                                                         

      For fiscal year 1997, approximately 23.5% of the Company's total
revenue was attributable to sales of lease transactions to MLC/GATX Limited     
Partnership I and to MLC/CLC LLC. Transactions involving the use or placement   
of equity from these joint ventures require the consent of the relevant joint   
venture partner, and if financing from those sources were to be withheld or     
were to become unavailable, it would limit the amount of equity available to    
the Company and have a material adverse effect upon the Company's business,     
financial condition and results of operations.                                  

     Equity Capital and Internal Financing. Occasionally the Company
finances leases and related equipment internally, rather than with financing    
provided by lenders. These internal lease financing typically occur in cases    
where the financed amounts are not sufficiently large to be attractive to       
lenders                                                                         

46  

424B3
47th Page of 101
TOC
1st
Previous
Next
↓Bottom
Just 47th
or where the credit rating of the lessee is not acceptable to lenders. The      
Company also temporarily finances selected leases internally, generally for     
less than 90 days, until permanent outside nonrecourse financing is obtained.   

     Recourse Financing. Bank Lines of Credit. The Company relies on
recourse borrowing in the form of revolving lines of credit for working capital 
to acquire equipment to be resold in its trading operation and to acquire       
equipment for leases and, to a lesser extent, the Company uses recourse         
financing for long term financing of leases. As of March 31, 1997, the          
Company's available credit under its short-term, recourse facility with First   
Union National Bank of Virginia, N.A. (the "First Union Facility") totaled      
$5,000,000, and no amounts were outstanding as of March 31, 1997. Borrowing     
under the First Union Facility was available through July 30, 1997, with        
repayments due 90 days after borrowing; however, on June 10, 1997, the Company  
terminated the First Union Facility. Borrowings under the First Union Facility  
bore interest at LIBOR plus 275 basis points. The Company previously had a      
$2,000,000 facility with NationsBank, N.A. which it allowed to expire on        
December 1, 1996.                                                               

  As of March 31, 1997 and September 30, 1997, the Company had
aggregate outstanding long-term recourse borrowings of $439,004 and $4,763,664, 
respectively, from various lenders, primarily for the long term financing of    
leases.                                                                         

       On June 5, 1997, the Company entered into a $15,000,000 committed
recourse line of credit with CoreStates Bank, N.A. (the "CoreStates Facility"). 
Borrowings under the CoreStates Facility, which is available through June 5,    
1998, bear interest at LIBOR + 110 basis points, or, at the Company's option,   
prime minus one percent. On September 5, 1997, the Company entered into         
Amendment No. 1 (the "Amendment") dated September 5, 1997 between it and        
CoreStates Bank, N.A. The Amendment increases the Loan Commitment from          
$15,000,000 to $25,000,000 and increases the amount of Investment Grade Paper   
which may qualify as Eligible Leases from $10,000,000 to $15,000,000. In        
connection with the Amendment, the Company made and delivered to CoreStates a   
$25,000,000 note (the "Note") dated September 5, 1997 to replace the            
$15,000,000 note existing under the Credit Agreement. On June 10, 1997, the     
Company terminated its First Union Facility, repaid all amounts outstanding,    
and made its first borrowing under the CoreStates Facility in the amount of     
$7,500,000. The CoreStates Facility is made to MLC Group and guaranteed by MLC  
Holdings. The CoreStates Facility is secured by certain of the Company's assets 
such as chattel paper (including leases), receivables, inventory, and           
equipment. The availability of the line is subject to a borrowing base which    
consists of inventory, receivables, purchased assets, and leases. Availability  
under the revolving lines of credit may be limited by the asset value of        
equipment purchased by the Company and may be further limited by certain        
covenants and terms and conditions of the facilities. In the event that the     
Company is unable to sell the equipment or unable to finance the equipment on a 
permanent basis within a certain period of time, the availability of credit     
under the lines could be diminished or eliminated. Furthermore, in the event    
that receivables collateralizing the line are uncollectible, the Company would  
be responsible for repayment of the lines of credit. Accordingly, such a        
default could have a material adverse effect on the business, financial         
condition and results of operations of the Company, particularly if the then    
fair market value of the equipment is insufficient to satisfy the obligations   
due to the bank. There can be no assurance that the Company will be able to     
renew, extend or replace this credit facility and a failure to renew, extend or 
replace any of this facility would have a material adverse effect upon the      
Company's business, financial condition and results of operations.              

 The CoreStates Facility contains covenants and restrictions
including prohibitions against certain mergers or consolidations in which the   
Company is not the surviving entity, creation of liens against the Company's    
property, guarantees of obligations in excess of $10 million, use of proceeds   
to acquire margin stock, certain purchases of stock or assets in the event a    
default exists or is likely, sales, pledge or assignment of assets other than   
in the ordinary course of business and certain redemptions, repurchases,        

47  

424B3
48th Page of 101
TOC
1st
Previous
Next
↓Bottom
Just 48th
dividends or distributions of stock. As of the date of this Prospectus, the     
Company is in compliance with all applicable financial ratios and covenants     
under the CoreStates Facility.                                                  

      The Company's newly acquired subsidiaries, MLC Network Solutions
(acquired July 24, 1997) and ECCI (acquired September 29, 1997), both have      
separate credit sources to finance their working capital requirements for       
inventories and accounts receivable, which the Company has guaranteed. Their    
traditional business as value-added resellers of PC's and related network       
equipment and software products is financed through agreements known as "floor  
planning" financing where interest expense for the first thirty days is charged 
to the supplier/distributor but not the reseller. These floor plan liabilities  
are recorded under accounts payable as they are normally repaid within the 30   
day time frame as they represent an assigned accounts payable originally        
generated with the supplier/distributor. If the 30 day obligation is not timely 
liquidated, interest is then assessed at stated contractual rates. As of        
September 30, 1997 MLC Network Solutions has floor planning availability of     
$1,400,000 through Deutsche Financial, Inc. and $300,000 from IBM Credit        
Corporation. The outstanding balances to these respective suppliers were        
$595,033 and $25,786 as of September 30, 1997. ECCI has floor planning          
availability of $1,500,000 from AT&T Credit Corporation, $1,000,000 through IBM 
Credit Corporation, and $100,000 through Deutsche Financial, Inc. The           
outstanding balances to these respective suppliers were $522,713, $470,454 and  
$6,048 as of September 30, 1997. ECCI additionally has a line of credit in      
place, expiring on April 30, 1998, with PNC Bank, N.A. to provide an asset      
based credit facility. The line has a maximum credit limit of $2,500,000 and    
interest is based on the bank's prime rate. The outstanding balance was         
$931,000 as of September 30, 1997. There can be no assurance that the Company   
will be able to renew, extend or replace these credit facilities and a failure  
to renew, extend or replace any of these facilities would have a material       
adverse effect upon the Company's business, financial condition and results of  
operations.                                                                     

   Partial Recourse Borrowing Facilities. On March 12, 1997, the
Company finalized and executed documents establishing a $10,000,000 credit      
facility agreement (the "Heller Facility"), with Heller Financial, Inc.         
("Heller"), a Delaware corporation. Under the terms of the Heller Facility, a   
maximum amount of $10,000,000 is available to the Company, provided, that each  
draw is subject to the approval of Heller. The Heller Facility is evidenced by  
a Loan and Security Agreement dated as of January 31, 1997 (the "Loan           
Agreement") and a First Amendment to Loan and Security Agreement (the           
"Amendment") dated as of March 12, 1997 (although the Loan Agreement is dated   
effective January 31, 1997, all documents were executed concurrently in March,  
1997). The primary purpose of the Heller Facility is for the permanent          
fixed-rate discounting of rents for commercial leases of information technology 
assets with the Company's middle-market customers. As of March 31, 1997, no     
advances under the Heller Facility had been made. As of September 30, 1997, the 
principal balance due under the Heller Facility was $941,187. Each advance      
under the facility will bear interest at an annual rate equal to the sum of the 
weekly average U.S. Treasury Constant Maturities for a Treasury Note having     
approximately an equal term as the weighted average term of the contracts       
subject to the advance, plus an index ranging from 1.75% to 3.00%, depending on 
the amount of the advance and the credit rating (if any) of the lessee. The     
Heller Facility contains a number of covenants binding on the Company and is a  
limited recourse facility, secured by a first-priority lien in the contracts    
and chattel paper relating to each advance, the equipment subject to such       
contracts, a 10% cross-collateralized first loss guarantee, and all books,      
records and proceeds pertaining thereto. The Heller Facility is made to MLC     
Group and guaranteed by MLC Holdings. As compared to a committed line of        
credit, lending under the Heller Facility is in Heller's sole discretion, and   
is further subject to MLC Group's compliance with certain conditions and        
procedures. Under the Heller Facility, upon not less than sixty (60) days'      
prior notice, either Heller or the Company may notify the other of its          
intention not to seek/provide any further financing thereunder. There can be no 
assurance that the Company will be able to renew, extend or replace this credit 
facility and a failure to renew, extend or replace any of this facility would   
have a material adverse effect upon the Company's business, financial condition 
and results of operations.                                                      

48  

424B3
49th Page of 101
TOC
1st
Previous
Next
↓Bottom
Just 49th
     With respect to the long-term recourse notes to finance certain
leases, the availability of such recourse borrowing is dependent on both the    
creditworthiness of the customer, as described above under "-- Dependence on    
Availability of Financing -- Nonrecourse Financing," and the creditworthiness   
of the Company, including the Company's ability to meet certain debt-to-equity  
ratios often required by recourse lenders. The Company's ability to increase    
the amount of its recourse debt has been limited by its capital position and,   
prior to the Initial Public Offering, the personal guarantees and collateral    
provided by its stockholders. No assurances can be given that the Company will  
not experience difficulty in obtaining recourse debt in the future, whether     
because lenders change their credit standards for providing such financing, the 
stockholders cease to provide personal guarantees or collateral, or because the 
Company increases its recourse borrowing to a level where it cannot meet such   
debt-to-equity ratio requirements or other financial covenants. The             
unavailability of such recourse financing would have a material adverse effect  
on the ability of the Company to finance lease transactions and, thus, have a   
material adverse effect upon the Company's business, financial condition,       
results of operations, and cash flows. See "Business -- Financing."             

DEFAULT AND LOSS EXPERIENCE                                                     

        From the organization of the Company in 1990 through September 30,
1997 the Company has not taken any write-offs due to credit losses with respect 
to lease transactions financed by the Company though no assurance can be given  
about what the Company's future credit loss experience will be. The Company is  
aware of one customer that had filed for Chapter 11 protection in December,     
1997. The net book value of the leased assets involving such customer, as of    
September 30, 1997, was $35,573.                                                

       The VAR line of business had write-offs of approximately $14,000,
$58,000 and $57,900 for the twelve months ended December 31, 1995, 1996 and     
nine months ended September 30, 1997, respectively.                             

PROPERTIES                                                                      

          The Company has twelve leased office facilities with an aggregate of
approximately 39,455 square feet of office space under lease with an average    
remaining lease term of 40 months. The Company's four largest offices are its   
principal executive office which is approximately 6,625 square feet at 11150    
Sunset Hills Road, Suite 110, Reston, Virginia 20190, ECCI's sole location, a   
16,200 square foot facility, located in Pottstown, PA, and Compuventures' two   
main locations in Greenville and Wilmington, NC which are 5,719 and 4,460       
square feet respectively. The other regional offices in Austin, TX, San Diego,  
CA, Dallas, TX, Sacramento, CA, West Chester, PA, Atlanta, GE and Raleigh, NC   
comprise a total of 6,451 square feet. As of September 30, 1997, the aggregate  
monthly rent under all of the Company's office leases was approximately         
$42,000. For the fiscal year ended March 31, 1997 rental expense for facilities 
totaled $335,997.                                                               

49  

424B3
50th Page of 101
TOC
1st
Previous
Next
↓Bottom
Just 50th
COMPETITION                                                                     

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

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

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

EMPLOYEES                                                                       

          As of September 30, 1997 the Company had 186 employees. Of these, 44
work in the Company's principal executive office in Reston, Virginia, 57 work   
at ECCI from a single location in Pottstown, Pennsylvania, 64 of Compuventures' 
personnel work out of three locations in North Carolina and the remaining 21    
work in the various regional offices of the Company. Regional offices are       
generally staffed with one or more account representatives who have daily       
contact with customers, lessees and vendors.                                    

        The Company has assigned its employees to the following functional
areas, with the number of employees in each area indicated in parenthesis:      
sales (55), technical (57), officers and managers (14), contracts and           
accounting (28), clerical (29), and warehouse/distribution (3).                 

50  

424B3
51st Page of 101
TOC
1st
Previous
Next
↓Bottom
Just 51st
LITIGATION                                                                      

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

MANAGEMENT  

DIRECTORS, EXECUTIVE OFFICERS AND KEY EMPLOYEES                                 

          The Board of Directors of the Company is divided into three classes:
(i) Class I (initial term ending after 2000 annual stockholders meeting); (ii)  
Class II (initial term ending after 1998 annual stockholders meeting); and      
(iii) Class III (initial term ending after 1999 annual stockholders meeting).   
After his or her initial term, each director serves for a term ending after the 
third annual meeting following the annual meeting at which such director is     
elected and until his or her successor is elected. Each officer of the Company  
is chosen by the Board of Directors and holds his or her office until his or    
her successor shall have been duly chosen and qualified or until his or her     
death or until he or she shall resign or be removed as provided by the By-Laws. 

        The following table sets forth the name, age and position with the
Company of each person who served as an executive officer, director or          
significant employee as of February 1, 1998.                                    

                                                        [Enlarge/Download Table]

NAME                                         AGE         POSITION                     CLASS 
----                                         ---         --------                     ----- 

                                                                                            
Phillip G. Norton**.............................53  Chairman of the Board,                  
                                                    President, and Chief                    
                                                    Executive Officer                    III

Thomas B. Howard, Jr............................50  Vice President; Executive               
                                                    Vice President, and Chief               
                                                    Operating Officer of MLC Group          

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

Steven J. Mencarini.............................42  Senior Vice President and               
                                                    Chief Financial Officer                 

Jonathan J. Ledecky.............................40  Director                               I

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

Carl J. Rickertsen..............................37  Director                              II

Kleyton L. Parkhurst............................34  Secretary and Treasurer                 

William G. Garner...............................40  President, MLC Network Solutions        

Vincent M. Marino...............................40  President, ECCI                         

51  

424B3
52nd Page of 101
TOC
1st
Previous
Next
↓Bottom
Just 52nd

                                                                [Download Table]
                                                                               
Kevin M. Norton**...............................41  Vice President of Brokerage
                                                    Operations                 

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

Thomas K. McNamara..............................52  Vice President             

**Phillip G. Norton, Kevin M. Norton and Patrick J. Norton, Jr. are brothers.   
All references to a Mr. Norton contained herein refer to Mr. Phillip G. Norton  
unless otherwise indicated.                                                     

         The name and business experience during the past five years of each
director, executive officer and key employee of the Company as of February 1,   
1998 are described below.                                                       

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

  Bruce M. Bowen founded the Company in 1990 and served as its
President until September 1, 1996. Since September 1, 1996, Mr. Bowen has       
served as a Director and Executive Vice President of the Company, and from      
September 1, 1996 to June 18, 1997, he served as Chief Financial Officer. Mr.   
Bowen has been a director of the Company since it was formed. Prior to founding 
the Company, from 1986 through 1990, Mr. Bowen was Senior Vice President of     
PacifiCorp Capital, Inc. Prior to his tenure at PacifiCorp Capital Inc., Mr.    
Bowen was with Systems Leasing Corporation and Federal Leasing, Inc., where his 
leasing career started in 1975. Mr. Bowen is a past President of the            
Association of Government Leasing and Finance and currently serves as Vice-     
Chairman for the State and Local Public Enterprise Committee of the Information 
Technology Association of America. Mr. Bowen is a 1973 graduate of the          
University of Maryland and in 1978 received a Masters of Business               
Administration from the University of Maryland.                                 

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

52  

424B3
53rd Page of 101
TOC
1st
Previous
Next
↓Bottom
Just 53rd
      Steven J. Mencarini joined the Company in June of 1997 as Senior
Vice President and Chief Financial Officer. Prior to joining the Company, Mr.   
Mencarini was Controller of the Technology Management Group of Computer         
Sciences Corporation ("CSC"), a New York Stock Exchange company and one of the  
nation's three largest information technology outsourcing organizations. At     
CSC, Mr. Mencarini supervised 72 people and was responsible for all financial   
and tax reporting, financial review of MIS systems, financial planning and      
approval for a $150 million capital annual budget, tax research, sales and      
personal property tax, asset management of owned and leased equipment, and the  
review and analysis of proposed work for outsourcing contracts which included   
costing, pricing, residual analysis, lease financing, and equipment             
liquidation. Mr. Mencarini joined CSC in 1991 as Director of Finance and was    
promoted to Controller in 1996. Prior to working at CSC, Mr. Mencarini was the  
Vice President-Finance of PacifiCorp Capital from 1981 to 1991, and was Senior  
Auditor of Deloitte, Haskins & Sells from 1979 to 1981. Mr. Mencarini is a 1976 
graduate of the University of Maryland and has a Masters of Taxation from       
American University.                                                            

    Jonathan J. Ledecky joined the Company's Board of Directors in
November, 1996 upon the completion of the Company's Initial Public Offering.    
Mr. Ledecky founded Consolidation Capital Corporation in February, 1997 to      
build consolidated enterprises through the acquisition and integration of       
multiple businesses in one or more fragmented industries. Mr. Ledecky founded   
U.S. Office Products Company in October, 1994, a Nasdaq National Market         
Company, and has served as its Chairman and until November 5, 1997, its Chief   
Executive Officer. Mr. Ledecky has also served as the Non-Executive Chairman of 
the Board of U.S. Floral since April, 1997 and as the Non-Executive Chairman of 
the Board of US Leasing since October, 1997. Prior to founding U.S. Office      
Products Company, Mr. Ledecky served as the President of The Legacy Fund, Inc., 
an investment management firm, from 1989 through 1991 and as President and      
Chief Executive Officer of Legacy Dealer Capital, Inc., a wholly owned          
subsidiary of Steelcase Inc., and the nation's largest manufacturer of office   
furniture products, from 1991 to September, 1994 . Prior to his tenure at The   
Legacy Fund, Inc., Mr. Ledecky was a partner at Adler and Company, an           
investment management firm, and a Senior Vice President at Allied Capital       
Corporation, a publicly traded investment management company. Mr. Ledecky is a  
1979 graduate of Harvard College, and in 1983, received a Masters of Business   
Administration from Harvard Business School.                                    

   Terrence O'Donnell joined the Company's Board of Directors in
November, 1996 upon the completion of the Company's Initial Public Offering.    
Mr. O'Donnell is a partner with the law firm of Williams & Connolly in          
Washington, D.C. Mr. O'Donnell has practiced law with Williams & Connolly since 
1977, with the exception of the period from 1989 through 1992 when he served as 
general counsel to the U.S. Department of Defense. Prior to commencing his law  
practice, Mr. O'Donnell served as Special Assistant to President Ford from 1974 
through 1976 and as Deputy Special Assistant to President Nixon from 1972       
through 1974. Mr. O'Donnell presently also serves as a director of IGI, Inc., a 
Nasdaq National Market Company which manufactures and markets a broad range of  
animal health products used in poultry production and pet care. IGI also        
markets cosmetics, consumer products and human pharmaceuticals. Mr. O'Donnell   
is a 1966 graduate of the U.S. Air Force Academy, and in 1971, received a Juris 
Doctor from Georgetown University Law Center.                                   

   Carl J. Rickertsen joined the Company's Board of Directors in
November, 1996 upon the completion of the Company's Initial Public Offering.    
Mr. Rickertsen is a partner in Thayer Capital Partners, a $364 million          
institutional private equity fund based in Washington, D.C. Mr. Rickertsen has  
been with Thayer Capital Partners since September, 1994. Prior to his tenure at 
Thayer Capital Partners, Mr. Rickertsen acted as a private financial consultant 
from 1993 through 1994 and was a partner of Hancock Park Associates, a private  
equity investment firm, from 1989 through 1993. Prior to that, Mr. Rickertsen   
was associated with Brentwood Associates from 1987 through 1989 and was a       
Financial                                                                       

53  

424B3
54th Page of 101
TOC
1st
Previous
Next
↓Bottom
Just 54th
Analyst with Morgan Stanley & Co., Incorporated from 1983 through 1985. Mr.     
Rickertsen is a 1983 graduate of Stanford University and, in 1987, received a   
Masters of Business Administration from Harvard Business School.                

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

 Vincent M. Marino, President of ECCI, joined the Company on
September 29, 1997, upon the Company's acquisition of ECCI and has played the   
key leadership role in the founding and developing the business since ECCI's    
origin in January 1986. He currently manages the operational, administrative    
and sales staff of 56 people located at ECCI's location in Pottstown,           
Pennsylvania. He has a MBA from Drexel University and an undergraduate degree   
from Ursinus College in Biology.                                                

       William G. Garner, President of MLC Network Solutions, joined the
Company on July 24, 1997, upon the Company's acquisition of Compuventures.      
William G. Garner manages the three office Compuventures subsidiary in North    
Carolina which has 64 employees. Mr. Garner was a co-founder of Compuventures   
and has over 10 years of experience in the network services and PC reselling    
business. He received his MBA from Harvard Business School and undergraduate    
degree from East Carolina University.                                           

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

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

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

54  

424B3
55th Page of 101
TOC
1st
Previous
Next
↓Bottom
Just 55th
         There are no material proceedings to which any director, officer of
affiliate of the Company, any owner of record or beneficially of more than five 
percent of any class of voting securities of the Company, or any associate of   
any such director, officer, affiliate of the Company or security holder is a    
party adverse to the Company or any of its subsidiaries or has a material       
interest adverse to the Company or any of its subsidiaries.                     

COMMITTEES AND MEETINGS                                                         

         Audit Committee. The audit committee of the Board of Directors (the
"Audit Committee") is responsible for making recommendations to the Board       
concerning the engagement of independent public accountants, monitoring and     
reviewing the quality and activities of the Company's external audit functions  
and monitoring the adequacy of the Company's operating and internal controls as 
reported by management and the external auditors. The members of the Audit      
Committee are Terrence O'Donnell and Carl J. Rickertsen.                        

        Compensation Committee. The compensation committee of the Board of
Directors (the "Compensation Committee") is responsible for reviewing the       
salaries, benefits and other compensation, excluding stock based compensation,  
of Mr. Norton and Mr. Bowen and will make recommendations to the Board based on 
its review. The members of the Compensation Committee are Terrence O'Donnell,   
Jonathan J. Ledecky and Carl J. Rickertsen. Mr. Norton and Mr. Bowen, as        
directors, will not vote on any matters affecting their personal compensation.  
Mr. Bowen and Mr. Norton will be responsible for reviewing and establishing     
salaries, benefits and other compensation for other directors and all other     
employees. Since compensation for Mr. Norton and Mr. Bowen was established      
prior to the Company's Initial Public Offering in November, 1996, the           
Compensation Committee did not meet during the fiscal year ended March 31,      
1997.                                                                           

          The current members of the Compensation Committee were not appointed
until January, 1997, and the Compensation Committee has neither reviewed nor    
approved any compensation actions relating to the Company's fiscal year ended   
March 31, 1997. The Compensation Committee recognizes that as a company which   
recently became a public company, the Company needs a transition period during  
which to establish its long-range compensation philosophy and objectives. The   
Compensation Committee is developing its compensation policies and will         
describe them in the proxy materials to be furnished in connection with the     
Company's 1998 annual meeting of shareholders.                                  

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

55  

424B3
56th Page of 101
TOC
1st
Previous
Next
↓Bottom
Just 56th
disinterested members of the Board of Directors, no member of the Stock         
Incentive Committee is eligible to receive grants under the Stock Incentive     
Plan.                                                                           

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

DIRECTOR COMPENSATION                                                           

      Directors who are also employees of the Company do not currently
receive any compensation or other services as members of the Board of           
Directors. Prior to May 14, 1997, the outside directors were paid $500 per      
meeting. On May 14, 1997, the Board of Directors adopted a revised outside      
director compensation program which provides for each outside director to       
receive a $10,000 annual retainer, and $500 for each special committee meeting. 
The $500 fee for regular Board meetings was terminated. All directors will be   
reimbursed for their out-of-pocket expenses incurred to attend board or         
committee meetings. The Company has adopted the Amended and Restated Outside    
Director Stock Option Plan (formerly the 1996 Outside Director Stock Option     
Plan prior to an amendment and restatement effective May 14, 1997), which       
provides for the award and exercise of certain options to nonemployee directors 
on a formula basis based upon length of service. In November, 1996, under the   
1996 Outside Director Stock Option Plan, the Company granted options to its     
nonemployee directors to purchase an aggregate of 30,000 shares of Common Stock 
at an exercise price equal to $8.75 per share, 50% of which may be exercised    
after the first year of service and the remaining 50% of which may be exercised 
after the second year of service, provided they continue to serve as directors. 
The Amended and Restated Outside Director Stock Option Plan made the options    
granted in November, 1996 immediately exercisable and also provides for the     
grant of options for 10,000 shares of Common Stock to each nonemployee director 
on the anniversary of each year of service as a director at an exercise price   
equal to the market price as of the date of grant, with each option being       
subject to a one-year vesting requirement. See "-- Executive Compensation and   
Other Information -- Master Stock Incentive Plan" for a description of option   
grants to nonemployee directors.                                                

EXECUTIVE COMPENSATION AND OTHER INFORMATION                                    

      Summary Compensation Table. The following table provides certain
summary information concerning the compensation earned, for services rendered   
in all capacities to the Company, by the Company's Chief Executive Officer and  
certain other executive officers (together with the Chief Executive Officer,    
the "Named Executive Officers") of the Company for the fiscal year ended March  
31, 1997. Certain columns have been omitted from this summary compensation      
table as they are not applicable.                                               

                                                        [Enlarge/Download Table]

                                                                        ANNUAL COMPENSATION                            
                                       --------------------------------------------------------------------------------
                                                                                            Other                      
                                                                         Bonus/            Annual        All Other     
Name and Principal Position            Year          Salary            Commission       Compensation     Compensation  
---------------------------            ----          ------            ----------       ------------     ------------  

                                                                                                                       
        Phillip G. Norton              1997         $67,265                  $--               $348         $90,000(1) 
            Chairman, Chief Executive  1996             984                   --                 --         120,000(1) 
            Officer and President      1995             376                   --                 --                 -- 

        Bruce M. Bowen                 1997         130,000               10,000       12,729(2)(3)                 -- 
            Director, Chief Financial  1996         120,000               40,000       13,206(2)(3)           1,000(4) 
            Officer, Executive Vice    1995         120,000               16,000       11,500(2)(3)           1,000(4) 
            President                                                                                                  

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


56  

424B3
57th Page of 101
TOC
1st
Previous
Next
↓Bottom
Just 57th

                                                                [Download Table]
                                                                   
    Brokerage Operations     1995         --  348,944  1,068(2)  --

Kleyton L. Parkhurst         1997  40,000(5)  117,567  1,500(2)  --
    Secretary and Treasurer  1996         --  169,352  1,356(2)  --
                             1995         --  237,153  1,500(2)  --

Thomas K. McNamara           1997     42,000  351,781     1,109    
    Vice President           1996     42,000   98,257  3,234(2)  --
                             1995     42,000  335,699     1,500  --

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

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

(2)  Employer 401(k) plan match.                                                

(3)  Includes $11,229 in fiscal year 1997 and $10,000 in fiscal years 1996 and  
    1995, respectively, of interest paid on loans by Mr. Bowen to the Company;
the balance represents employer 401(k) plan match amounts.            

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

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

OPTION GRANTS IN LAST FISCAL YEAR                                               

        The following table sets forth certain information with respect to
options granted during the last fiscal year ended March 31, 1997 to the Named   
Executive Officers in the above Summary Compensation Table.                     

                                                        [Enlarge/Download Table]

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

                                                                                                          
Phillip G. Norton        130,000(1)         36.7%    $ 8.75        11/19/2006    715,390        1,812,850 
Bruce M. Bowen            15,000(1)          4.2%    $ 8.75        11/19/2006     82,545          209,175 
Kevin M. Norton           ----                ---      ---            ---         ---             ---     
Kleyton L. Parkhurst     100,000(2)         28.3%    $ 6.40        11/19/2006    785,300        1,629,500 
Thomas K. McNamara         5,000(3)          1.4%    $ 8.75        11/19/2006     27,515           69,725 
                           5,000(4)          1.4%    $10.75        01/07/2007     17,515           59,725 

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

(1)  The options were granted to Mr. Norton and Mr. Bowen on September 1, 1996, 
  under employment agreements, with an exercise price equal to the Initial
    Public Offering price. These options are nonqualified options and were not
issued as part of the Company's Stock Incentive                       

57  

424B3
58th Page of 101
TOC
1st
Previous
Next
↓Bottom
Just 58th
  Plan. They become exercisable in four annual increments beginning on the
date of the Initial Public Offering.                                  

(2)  The options were granted to Mr. Parkhurst on September 1, 1996 under an    
   employment agreement. These options are nonqualified options and were not
issued as part of the Company's Stock Incentive Plan. They become     
    exercisable in four annual increments beginning on the date of the Initial
Public Offering.                                                      

(3)  The options were granted to Mr. McNamara on November 20, 1996 under the    
   1996 Incentive Stock Option Plan, a component plan of the Company's Stock
Incentive Program. These options become exercisable in four increments
   beginning one year after grant. See Note 11 of the Company's consolidated
   financial statements appearing elsewhere herein for further discussion of
  the Company's Stock Incentive Plan and "-- Master Stock Incentive Plan."

(4)  The options were granted to Mr. McNamara on January 7, 1997 under the 1996 
Incentive Stock Option Plan, a component plan of the Company's Stock  
  Incentive Program. These options become exercisable in four installments
   beginning one year after grant. See Note 11 of the Company's consolidated
   financial statements appearing elsewhere herein for further discussion of
  the Company's Stock Incentive Plan and "-- Master Stock Incentive Plan."

(5)  Based on options to purchase an aggregate of 353,800 shares granted during 
fiscal 1997 to certain employees of the Company.                      

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

AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR (3/31/97) AND FISCAL        
YEAR-END (3/31/97) OPTION/SAR VALUES                                            

    The following table sets forth certain information with respect to options
exercised during the Company's fiscal year ended March 31, 1997 by the Named    
Executive Officers in the Summary Compensation Table, and with respect to       
unexercised options held by such persons at the end of fiscal year 1997.        

                                                        [Enlarge/Download Table]

                          Shares                       Number of Securities       Value of Unexercised in the      
                       Acquired On    Value          Underlying Unexercised          Money Options/SARs at         
Name                  Exercise (#)  Realized ($)   Options/SARS at FY- End (#)          FY-End ($)(1)              
----                  ------------  ------------   ---------------------------          -------------              

                                                  Exercisable      Unexercisable  Exercisable         Unexercisable
                                                  -----------      -------------  -----------         -------------
                                                                                                                   
Philip G. Norton           ---        ---             32,500            97,500       105,625             316,875   
Bruce M. Bowen             ---        ---              3,750            11,250        12,188              36,562   
Kevin M. Norton            ---        ---             ---               ---           ---                 ---      
Kleyton L. Parkhurst       ---        ---             25,000            75,000       140,000             420,000   
Thomas K. McNamara         ---        ---             ---               10,000        ---                 22,500   

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

(1)  Based on a closing bid price of $12.00 per share as of the close of        
business on March 31, 1997.                                           

58  

424B3
59th Page of 101
TOC
1st
Previous
Next
↓Bottom
Just 59th

          Compensation Arrangements and Employment Agreements. The Company has
entered into employment agreements with Phillip G. Norton, Bruce M. Bowen,      
Kleyton L. Parkhurst and William J. Slaton, each effective as of September 1,   
1996, with Thomas B. Howard, Jr. effective as of April 1, 1997, with Steven J.  
Mencarini effective as of June 18, 1997, with William G. Garner, effective July 
24, 1997, and with Vincent W. Marino effective September 29, 1997. Each         
employment agreement, except for William G. Garner's who has a one year term,   
provides for an initial term of three years, and is subject to an automatic     
one-year renewal at the expiration thereof unless the Company or the employee   
provides notice of an intention not to renew at least three months prior to     
expiration. Under each employment agreement, the employee is entitled to        
receive an annual base salary ($200,000 in the case of Phillip G. Norton;       
$150,000 in the case of Bruce M. Bowen; $150,000 in the case of Vincent W.      
Marino; $120,000 in the case of Kleyton L. Parkhurst and William J. Slaton;     
$125,000 in the case of Thomas B. Howard, Jr. and Steven J. Mencarini; and      
$36,000 for William G. Garner who is under a part time requirement) and are     
eligible for commissions or performance bonuses. The performance bonus for      
Phillip G. Norton for each fiscal year is equal to 5% of the increase in the    
Company's net income before taxes over net income before taxes for the          
preceding fiscal year, not to exceed $150,000 for any fiscal year. The          
performance bonus for Bruce M. Bowen for each fiscal year is equal to 5% of the 
increase in the Company's net income before taxes over net income before taxes  
for the preceding fiscal year, not to exceed $100,000 for any fiscal year. The  
performance bonus for Kleyton L. Parkhurst, William J. Slaton, Thomas B.        
Howard, Jr. and Steven J. Mencarini are paid based upon performance criteria    
established by Phillip G. Norton and Bruce M. Bowen, not to exceed $80,000 each 
per fiscal year as to Kleyton L. Parkhurst and William Slaton, not to exceed    
$100,000 for Thomas B. Howard, Jr. and not to exceed $25,000 for Steven J.      
Mencarini. Thomas K. McNamara is compensated pursuant to the Company's          
commission program which is generally based on the profitability of business    
produced. Vincent W. Marino and William G. Garner are eligible for annual       
discretionary bonuses determined by the Chief Executive Officer or the Board of 
Directors.                                                                      

  Under the employment agreements, each receives certain other
benefits including medical, insurance, death and long term disability benefits, 
401(k), and reimbursement of employment related expenses. Mr. Bowen's country   
club dues are paid by the Company. The employment agreements of Messrs. Norton, 
Bowen, Slaton, Howard and Mencarini contain a covenant not to compete on the    
part of each, whereby in the event of a voluntary termination of employment,    
upon expiration of the term of the agreement or upon the termination of         
employment by the Company for cause, each are subject to restrictions upon      
acquiring, consulting with or otherwise engaging in or assisting in the         
providing of capital needs for competing business activities or entities within 
the United States for a period of one year after the date of such termination   
or expiration of the term of the employment agreement. Both Mr. Marino and Mr.  
Garner have 24 month non-competition and non-solicitation clauses in their      
employment agreements following termination of employment for any reason.       

   Under his employment agreement, Phillip G. Norton was granted
options to acquire 130,000 shares of Common Stock at a price per share equal to 
$8.75 per share. These options have a ten year term, and became exercisable and 
vested 25% on November 20, 1996, and the balance will be exercisable and vest   
in 25% increments over three years on November 20, 1997, November 20, 1998, and 
November 20, 1999, respectively, subject to acceleration upon certain           
conditions. The Company had paid a $120,000 annual guarantee fee payable in     
$10,000 monthly payments to Patricia A. Norton, wife of Phillip G. Norton, in   
consideration of providing certain guarantees and collateral for the            
NationsBank and First Union Facilities. This fee was terminated when these      
credit facilities were terminated in November, 1996 and the guarantee released. 
See "Certain Transactions."                                                     

        Under his employment agreement, Bruce M. Bowen was granted options
to acquire 15,000 shares of Common Stock at a price equal to $8.75 per share.   
These options have a ten year term, and became exercisable and vested 25% on    
November 20, 1996, and the balance will be exercisable and vest                 

424B3
60th Page of 101
TOC
1st
Previous
Next
↓Bottom
Just 60th
in 25% increments over three years on November 20, 1997, November 20, 1998, and 
November 20, 1999, respectively, subject to acceleration upon certain           
conditions.                                                                     

      Under his employment agreement, Kleyton L. Parkhurst was granted
options to acquire 100,000 shares of Common Stock at a price per share equal to 
$6.40 per share. These options have a ten year term, and became exercisable and 
vested 25% on November 20, 1996, and the balance will become exercisable and    
vest in 25% increments over three years on November 20, 1997, November 20,      
1998, and November 20, 1999, respectively, subject to acceleration upon certain 
conditions.                                                                     

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

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

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

      Master Stock Incentive Plan. The Company has established a stock
incentive program (the "Master Stock Incentive Plan") (formerly the 1996 Stock  
Incentive Plan prior to amendment and restatement effective May 14, 1997 which  
has been adopted by the Board of Directors and was ratified by stockholders at  
the annual stockholder meeting on September 30, 1997) to provide an opportunity 
for directors, executive officers, independent contractors, key employees, and  
other employees of the Company to participate in the ownership of the Company.  
The Master Stock Incentive Plan provides for the award to eligible directors,   
employees, and independent contractors of the Company, of a broad variety of    
stock-based compensation alternatives under a series of component plans. These  
component plans include tax advantaged incentive stock options for employees    
under the Incentive Stock Option Plan (formerly the 1996 Incentive Stock Option 
Plan prior to amendment and restatement effective May 14, 1997), formula length 
of service based nonqualified options to nonemployee directors under the        
Outside Director Stock Plan (formerly the 1996 Outside Director Stock Option    
Plan prior to amendment and restatement effective May 14, 1997), nonqualified   
stock options under the Nonqualified Stock Option Plan (formerly the 1996       
Nonqualified Stock Option Plan prior to amendment and restatement effective May 
14, 1997), a program for employee purchase of Common Stock of the Company at    
85% of fair market value under a tax advantaged Employee Stock Purchase Plan    
(approved by the Board of Directors and ratified at the annual stockholder      
meeting on September 30, 1997), as well as other restrictive stock and          
performance based stock awards and programs which may be established by the     
Board of Directors. (The above-described amendments effective May 14, 1997 are  
hereinafter collectively referred to as the "May 14, 1997 Amendments.") Prior   
to the May 14, 1997 Amendments which were ratified by stockholders in           
September, 1997, the Company had reserved a total of 155,000 shares of Common   
Stock (subsequently increased as described below) for issuance upon exercise of 
options under: (i) the 1996 Incentive Stock Option Plan (under which options    
for an aggregate of 202,150 shares were granted through December 31, 1997; (ii) 
the 1996 Outside Director Stock Plan (under which options for an aggregate of   
75,000                                                                          

60  

424B3
61st Page of 101
TOC
1st
Previous
Next
↓Bottom
Just 61st
shares of Common Stock were reserved for grant under a formula plan based upon  
length of service, which reserved number was reduced to 30,000 shares which were
transferred to the Incentive Stock Option Plan by the Board of Directors on May 
14, 1997, and under which options for 30,000 shares of Common Stock were granted
on November 20, 1996 and November 20, 1997, respectively); and (iii) the 1996   
Nonqualified Stock Option Plan (under which options for an aggregate of 5,000   
shares of Common Stock were granted on January 8, 1997). The May 14, 1997       
Amendments increase the aggregate number of shares reserved for grant under all 
plans which are a part of the Master Stock Incentive Plan to a floating number  
equal to 20% of the issued and outstanding stock of the Company (after giving   
effect to pro forma assumed exercise of all outstanding options and purchase    
rights). The number that may be subject to options granted under the Incentive  
Stock Option Plan is also further capped at a maximum of 4,000,000 shares to    
comply with IRS requirements for a specified maximum. As of December 31, 1997,  
based on 6,071,305 shares outstanding and 482,150 shares of Common Stock for    
which options have been granted, this 20% number would be 1,310,691 shares.     

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

          Incentive stock options issued under the 1996 Incentive Stock Option
Plan are designed to comply with the provisions of the Internal Revenue Code of 
1986, as amended (the "Code"), and are subject to restrictions contained in the 
Code, including a requirement that exercise prices be equal to at least 100% of 
fair market value of the shares of Common Stock on the grant date and a         
ten-year restriction on the option term. The incentive stock options may be     
subsequently modified to disqualify them from treatment as incentive stock      
options. Under the Stock Incentive Plan and the Code, non-employee directors    
are not permitted to receive incentive stock options.                           

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

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

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

61  

424B3
62nd Page of 101
TOC
1st
Previous
Next
↓Bottom
Just 62nd
period (or such other offering period as the Board may adopt). As a part of the 
Employee Stock Purchase Plan employees will participate via payroll             
withholding.                                                                    

          Compensation Committee Interlocks and Insider Participation. For the
year ended March 31, 1997, all decisions regarding executive compensation were  
made by the Compensation Committee when applicable or by Mr. Norton as          
President. None of the executive officers of the Company currently serves on    
the Compensation Committee of another entity or any other committee of the      
board of directors of another entity performing similar functions. For a        
description of transactions between the Company and Mr. Bowen, see "Certain     
Transactions."                                                                  

LIMITATION OF LIABILITY AND INDEMNIFICATION                                     

       Indemnification Agreements. The Company has entered into separate
but identical indemnification agreements (the "Indemnification Agreements")     
with each director and executive officer of the Company and expects to enter    
into Indemnification Agreements with persons who become directors or executive  
officers in the future. The Indemnification Agreements provide that the Company 
will indemnify the director or officer (the "Indemnitee") against any expenses  
or liabilities in connection with any proceeding in which such Indemnitee may   
be involved as a party or otherwise, by reason of the fact that such Indemnitee 
is or was a director or officer of the Company or by reason of any action taken 
by or omitted to be taken by such Indemnitee while acting as an officer or      
director of the Company, provided that such indemnity shall only apply if (i)   
the Indemnitee was acting in good faith and in a manner the Indemnitee          
reasonably believed to be in the best interests of the Company, and, with       
respect to any criminal action, had no reasonable cause to believe the          
Indemnitee's conduct was unlawful, (ii) the claim was not made to recover       
profits made by such indemnitee in violation of Section 16(b) of the Exchange   
Act, or any successor statute, (iii) the claim was not initiated by the         
Indemnitee, or (iv) the claim was not covered by applicable insurance, or (v)   
the claim was not for an act or omission of a director of the Company from      
which a director may not be relieved of liability under Section 103(b)(7) of    
the DGCL. Each Indemnitee has undertaken to repay the Company for any costs or  
expenses paid by the Company if it shall ultimately be determined that such     
Indemnitee is not entitled to indemnification under the Indemnification         
Agreements.                                                                     

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

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

       Directors and Officers Insurance. The Company has bound directors
and officers liability and company reimbursement insurance pursuant to a policy 
in effect (the "D&O Policy") with the Genesis Insurance Company ("Genesis"), a  
wholly owned subsidiary of the American International Group. Pursuant to the    
D&O Policy, Genesis will pay, on behalf of directors and officers of the        
Company, certain losses ("Losses") incurred as a result of a wrongful act (a    
"Wrongful Act") by such persons, for which they are not indemnified by the      
Company. In addition, Genesis will reimburse the Company for Losses over        
$100,000 incurred as a result of the Company's indemnification of an officer or 
director in                                                                     

62  

424B3
63rd Page of 101
TOC
1st
Previous
Next
↓Bottom
Just 63rd
connection with a Wrongful Act. The D&O Policy provides that Genesis' aggregate 
liability to the Company with respect to a single policy year shall not exceed  
$3 million and is subject to customary exclusions.                              

CERTAIN TRANSACTIONS

GUARANTEES OF NATIONSBANK FACILITY                                              

        Through December, 1996, the NationsBank Facility was guaranteed by
Phillip G. Norton, Patricia A. Norton, Bruce M. Bowen, Elizabeth D. Bowen,      
William J. Slaton, Margaret Newton, Kevin M. Norton, Brianna Norton and Patrick 
J. Norton. In addition, this line was secured by a pledge of approximately $1.5 
million of cash collateral pledged by Phillip G. Norton and his spouse,         
Patricia A. Norton. The Company terminated the NationsBank Facility on December 
31, 1996, at which time all stockholders' personal guarantees were removed and  
collateral pledges released. See "Business -- Financing."                       

GUARANTEES OF FIRST UNION FACILITY                                              

       Through June 10, 1997, the First Union Facility was guaranteed by
Phillip G. Norton, Patricia A. Norton, Bruce M. Bowen, Elizabeth D. Bowen,      
William J. Slaton, Kevin M. Norton and Patrick J. Norton, each of whom is a     
beneficial owner of Common Stock. In addition, the facility was secured by cash 
and securities having a value of approximately $1.2 million, pledged as         
collateral by Patricia A. Norton, as trustee for the Phillip G. Norton Jr.      
Trust, the Andrew L. Norton Trust and the Jeremiah O. Norton Trust. Upon        
termination of the facility on June 10, 1997, all stockholders' personal        
guarantees were removed and collateral pledges released. See "Business --       
Financing."                                                                     

GUARANTEES OF NATIONSBANK LEASING FACILITY                                      

          Through January 31, 1997, the NationsBank Facility was guaranteed by
Philip G. Norton and Bruce M. Bowen. The Company terminated the Facility, at    
which time all personal guarantees were removed. See "Business -- Financing."   

LOANS FROM STOCKHOLDERS                                                         

      During November, 1996, the Company repaid a total of $275,000 in
outstanding borrowings from stockholders ($175,000 from Bruce M. Bowen and      
$100,000 from William J. Slaton) with a portion of proceeds received from the   
Initial Public Offering. Each of these loans was evidenced by a promissory note 
dated March 1, 1995, bearing interest at a rate of 10% per annum, and due March 
1, 1998. The Company paid $17,500 and $10,000 in interest for fiscal year 1996, 
and $11,229 and $6,417 in interest for fiscal year 1997 to Messrs. Bowen and    
Slaton, respectively. Additionally, the Company had various unsecured notes     
payable to stockholders of ECC Integrated, Inc. with no formal amortization of  
principal, with interest rates ranging from 7% to 10%. All obligations were     
fully paid during the year ended March 31, 1997 and the balance as of March 31, 
1996 and March 31, 1995 were $162,824 and $162,900, respectively.               

NEW ENERGY LEASING CORPORATION OBLIGATIONS                                      

          The Company is a party to an agreement entered into in 1994 with New
Energy Leasing Corporation ("New Energy"), of which Bruce M. Bowen is a 45%     
stockholder. Under that arrangement, the Company has sold leases to New Energy  
under which the Company remains obligated to manage the lease and to provide    
remarketing or asset disposition services upon expiration or other termination  
of the                                                                          

63  

424B3
64th Page of 101
TOC
1st
Previous
Next
↓Bottom
Just 64th
lease. The Company recognized revenue for such transactions of approximately    
$1.3 million for the year ended March 31, 1996, and the basis of the equipment  
sold was approximately $1.6 million. During the year ended March 31, 1997, the  
Company received remarketing fees from New Energy in the amount of $224,126.    
New Energy is entitled to the first $75,000 of proceeds from any remarketing or 
sale of the assets, with the Company being entitled to 90% of any proceeds      
above that amount. This agreement and the lease transactions to which it        
relates are slated to expire in 1999. The Company does not intend to enter into 
any further lease sale transactions with New Energy.                            

UNITED FEDERAL OBLIGATIONS                                                      

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

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

GUARANTEE FEES                                                                  

        From April 1, 1995 through June 30, 1996, the Company paid a total
of $150,000 of guarantee fees, $10,000 per month, to Patricia A. Norton, the    
spouse of Phillip G. Norton, as consideration for her providing personal        
guarantees and pledging personal assets for the NationsBank Facility. The       
guarantee requirement was liquidated upon the termination of the facility on    
December 1, 1996.                                                               

ADVANCES AND LOANS TO EMPLOYEES AND STOCKHOLDERS                                

          The Company has in the past provided loans and advances to employees
and certain stockholders. Such balances are to be repaid from personal funds or 
commissions earned by the employees/stockholders on successful sales or         
financing arrangements obtained on behalf of the Company. Loans and advances    
totalled $77,664, $70,612 and $95,918 for March 31, 1996, March 31, 1997, and   
September 30, 1997, respectively.                                               

LOANS TO STOCKHOLDERS                                                           

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

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

64  

424B3
65th Page of 101
TOC
1st
Previous
Next
↓Bottom
Just 65th
 In 1995, the Company loaned $54,000 to Patrick J. Norton, a
stockholder of the Company, pursuant to a promissory note dated November 17,    
1995, bearing interest at 8% per annum. Patrick J. Norton paid interest of      
$1,608 and made principal repayments of $8,392 during fiscal year 1996 and      
interest of $3,193 and principal payments of $14,507 during fiscal year 1997.   
The Company's loan to Patrick J. Norton had balances of $31,101 and $45,608 as  
of March 31, 1997 and 1996, respectively. As of September 30, 1997, Patrick J.  
Norton had a balance of $32,481 owed to the Company.                            

BROKERAGE FEE                                                                   

   During the year ended March 31, 1997 and the six months ended
September 30, 1997, the Company recognized $250,000 and $0, respectively, in    
income from broker fees for providing advisory services to a company which is   
owned, in part, by Carl J. Rickertsen, one of the Company's outside directors.  

REIMBURSEMENT OF CERTAIN EXPENSES                                               

      The Company is reimbursed for certain general and administrative
expenses by a company owned, in part, by an executive of a subsidiary of the    
Company. The reimbursements totaled $282,200, $128,310 and $176,075 for the     
years ended March 31, 1995, 1996 and 1997 and $69,396 for the six months ended  
September 30, 1997.                                                             

INDEMNIFICATION AGREEMENTS                                                      

         Prior to the completion of the Initial Public Offering, the Company
entered into separate but identical indemnification agreements (the             
"Indemnification Agreements") with each director and executive officer of the   
Company and expects to enter into Indemnification Agreements with persons who   
become directors or executive officers in the future. The Indemnification       
Agreements provide that the Company will indemnify the director or officer (the 
"Indemnitee") against any expenses or liabilities in connection with any        
proceeding in which such Indemnitee may be involved as a party or otherwise, by 
reason of the fact that such Indemnitee is or was a director or officer of the  
Corporation or by reason of any action taken by or omitted to be taken by such  
Indemnitee while acting as an officer or director of the Corporation, provided  
that such indemnity shall only apply if (i) the Indemnitee was acting in good   
faith and in a manner the Indemnitee reasonably believed to be in the best      
interests of the Corporation, and, with respect to any criminal action, had no  
reasonable cause to believe the Indemnitee's conduct was unlawful, (ii) the     
claim was not made to recover profits made by such indemnitee in violation of   
Section 16(b) of the Exchange Act, or any successor statute, (iii) the claim    
was not initiated by the Indemnitee, or (iv) the claim was not covered by       
applicable insurance, or (v) the claim was not for an act or omission of a      
director of the Company from which a director may not be relieved of liability  
under Section 103(b)(7) of the DGCL. Each Indemnitee has undertaken to repay    
the Company for any costs or expenses paid by the Company if it shall           
ultimately be determined that such Indemnitee is not entitled to                
indemnification under the Indemnification Agreements. For more information on   
director and officer liability, see "Management -- Limitation of Liability and  
Indemnification."                                                               

FUTURE TRANSACTIONS                                                             

      Certain of the transactions described above may be on terms more
favorable to officers, directors and principal stockholders than they could     
obtain in transaction with an unaffiliated party. The Company intends to adopt  
a policy requiring that all material transactions between the Company and its   
officers, directors or other affiliates must (i) be approved by a majority of   
the disinterested members of the Board                                          

65  

424B3
66th Page of 101
TOC
1st
Previous
Next
↓Bottom
Just 66th
of Directors of the Company, and (ii) be on terms no less favorable to the      
Company than could be obtained from unaffiliated third parties.                 

PRINCIPAL STOCKHOLDERS

GENERAL                                                                         

        The following table sets forth certain information, as of November
30, 1997, regarding the beneficial ownership of the Common Stock, with respect  
to (i) each director of the Company, (ii) each person who is known by the       
Company to own beneficially 5% or more of the Common Stock, (iii) each of the   
Named Executive Officers and (iv) all directors and executive officers of the   
Company as a group.                                                             

                                                        [Enlarge/Download Table]

                                         Shares Beneficially       Shares Beneficially   
Name and Address of                    Owned  Prior to Offering  Owned After Offering (2)
   Beneficial Owner(1)                  Number       Percent       Number      Percent   

                                                                                         
Phillip G. Norton(3)                 2,878,000           46.9%    2,878,000       35.4%  
1019 Basil Road                                                                          
McLean, Virginia 22101                                                                   

Bruce M. and Elizabeth D. Bowen (4)    767,500           12.6%      767,500        9.5%  
10895 Lake Windermere Drive                                                              
Great Falls, Virginia  22066                                                             

William J. Slaton                      400,000            6.6%      400,000        5.0%  
1850 Maple Glen                                                                          
Sacramento, California  95864                                                            

Vincent W. Marino(5)                   372,386            6.1%            0          0%  
89 Heffner Road                                                                          
Limerick, Pennsylvania  19468                                                            

Kevin M. Norton (6)                    376,500           6.28%      376,500        4.7%  
5920 Royal Palm                                                                          
Plano, Texas  75093                                                                      

Patrick J. Norton (6)                  376,500            6.2%      376,500        4.7%  
705 Brookfield Road                                                                      
Raleigh, North Carolina  27615                                                           

Kleyton L. Parkhurst (7)                93,000            1.5%       50,000        1.0%  
605 Abbott Lane                                                                          
Falls Church, Virginia 22046                                                             

Thomas B. Howard, Jr.                        0              0%            0          0%  
11565 Embers Court                                                                       
Reston, Virginia 20191                                                                   

Steven J. Mencarini                          0              0%            0          0%  
1921 Batten Hollow Road                                                                  
Vienna, Virginia 22182                                                                   

Terrence O'Donnell (8)                  10,000               *       10,000           *  
5133 Yuma Street, N.W.                                                                   
Washington, D.C. 20016                                                                   

Carl J. Rickertsen (8)                  10,000               *       10,000           *  
4016 Linnean Avenue, N.W.                                                                
Washington, D.C. 20008                                                                   

Laifer Capital Management (9)          474,000            7.8%      474,000        5.9%  
114 West 47th Street                                                                     
New York, New York 10036                                                                 

66  

424B3
67th Page of 101
TOC
1st
Previous
Next
↓Bottom
Just 67th

                                                        [Enlarge/Download Table]

                                         Shares Beneficially       Shares Beneficially   
Name and Address of                    Owned  Prior to Offering  Owned After Offering (2)
   Beneficial Owner(1)                  Number       Percent       Number      Percent   

                                                                                         
Jonathan Ledecky (8)                     10,000          *           10,000          *   
c/o Consolidation Capital Corp.                                                          
1747 Pennsylvania Avenue, N.W.                                                           
Washington, D.C. 20008                                                                   

All executive officers and directors                                                     
as a group (10 persons)               4,159,500      66.9%        4,116,500       50.6%  

-----------------                                                               
*Less than 1%                                                                   

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

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

(3)  Includes 2,040,000 shares held by J.A.P. Investment Group, L.P., a         
Virginia limited partnership, of which J.A.P., Inc., a Virginia       
   corporation, is the sole general partner, and Patricia A. Norton, trustee
   for the benefit of Phillip G. Norton, Jr., u/a dated as of July 20, 1983,
   Patricia A. Norton, trustee for the benefit of Andrew L. Norton u/a dated
as of July 20, 1983, Patricia A. Norton, trustee for the benefit of   
  Jeremiah O. Norton u/a dated as of July 20, 1983, and Patricia A. Norton
    are the limited partners. Patricia A. Norton, spouse of Phillip G. Norton,
   is the sole stockholder of J.A.P., Inc. and Phillip G. Norton is the sole
  director and President of J.A.P., Inc. Includes the 753,000 shares as to
   which Phillip G. Norton holds sole voting rights together with all shares
 of voting stock acquired in the future held by J.A.P. Investment Group,
L.P., Kevin M. Norton and Patrick J. Norton, Jr. under the Irrevocable
Proxy and Stock Rights Agreement. See "Principal Stockholders --      
Irrevocable Proxy and Stock Rights Agreement" and footnote (5). Also  
  includes 65,000 shares of Common Stock that Phillip G. Norton has rights
    to acquire pursuant to options, which are vested and which are immediately
   exercisable and excludes 65,000 options to acquire shares of Common Stock
which are not vested and not exercisable. See "Management -- Executive
Compensation and Other Information -- Compensation Arrangements and   
Employment Agreements," and "Irrevocable Proxy and Stock Rights       
Agreement,"                                                           

(4)  Includes 600,000 shares held by Bruce M. And Elizabeth D. Bowen, as        
tenants by the entirety, and includes 160,000 shares held by Bowen    
  Holdings L.C., a Virginia limited liability company composed of Bruce M.
Bowen and three minor children, Daniel Bowen, Sarah Bowen and Margaret
Bowen, of whom Bruce M. Bowen is legal guardian and for which Bruce M.
  Bowen serves as manager. Also includes 7,500 shares of Common Stock that
Bruce M. Bowen has rights to acquire pursuant to options and excludes 
7,500 options to acquire Common Stock which                           

(5)  Does not include options to purchase 5,000 shares issuable pursuant to an  
   employment agreement dated September 25, 1997 and which are not vested or
exercisable.                                                          

67  

424B3
68th Page of 101
TOC
1st
Previous
Next
↓Bottom
Just 68th
are not vested and not immediately exercisable. See "Management --    
   Executive Compensation and Other Information -- Compensation Arrangements
and Employment Agreements."                                           

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

(7)  Includes 13,000 shares held by Kleyton L. Parkhurst, 30,000 shares held by 
three minor children of Kleyton L. Parkhurst, Charlotte A. Parkhurst, 
Madeline M. Parkhurst, and Kleyton L. Parkhurst, Jr., all of which are
   voted by Kleyton L. Parkhurst, Custodian, under the Virginia Uniform Gift
   to Minors Act and 50,000 shares of Common Stock that Kleyton L. Parkhurst
    has rights to acquire pursuant to options which are vested and immediately
    exercisable, and excludes 50,000 options to acquire Common Stock which are
  not vested and not immediately exercisable. See "Management -- Executive
Compensation and Other Information -- Compensation Arrangements and   
Employment Agreements."                                               

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

(9)  On May 28, 1997, a Schedule 13D was filed by Laifer Capital Management,    
Inc. According to the filing, Laifer Capital Management, Inc. is the  
   beneficial owner of 474,000 shares, or 9.2%. The 474,000 shares of Common
   Stock beneficially owned by Laifer Capital Management, Inc. includes: (i)
267,500 shares of Common Stock beneficially owned by Laifer Capital   
    Management, Inc. in its capacity as General Partner and investment advisor
to Hilltop Partners, L.P.; and (ii) 206,500 shares of Common Stock    
  beneficially owned by Laifer Capital Management, Inc. in its capacity as
 investment advisor to various other clients. These clients include: (a)
   various Wolfson family entities ("Wolfson"), with an address at One State
Street Plaza, New York, New York 10004-1505, and (b) Hilltop Offshore 
  Limited, a Cayman Islands company, with an address c/o Consolidated Fund
   Management Limited, P.O. Box HM 2257, Par La Ville Place, 14 Par La Ville
 Road, Hamilton HMJX, Bermuda. Lance Laifer, as president, sole director
    and principal stockholder of Laifer Capital Management, Inc., is deemed to
have the same beneficial ownership as Laifer Capital Management, Inc. 

IRREVOCABLE PROXY AND STOCK RIGHTS AGREEMENT                                    

   Phillip G. Norton and J.A.P. Investments Group, L.P., Kevin M. Norton and
Patrick J. Norton have entered into an agreement entitled "Irrevocable Proxy    
and Stock Rights Agreement" pursuant to the terms of which (i) each of J.A.P.   
Investments, L.P., Kevin M. Norton and Patrick J. Norton have granted Phillip   
G. Norton an irrevocable proxy to vote their shares of Common Stock, which      
proxy terminates only upon the death or mental incapacity of Phillip G. Norton  
or in the event of his death or mental incapacity, then to Patricia A. Norton,  
if then living, or upon the sale or transfer to a third party of the shares of  
Common Stock subject thereto and (ii) Kevin M. Norton or Patrick J. Norton have 
granted Phillip G. Norton a first right to buy their shares of Common Stock in  
the event they desire to sell or transfer any shares of Common Stock to a third 
party. The foregoing first right to buy is at 85% of the market value, or if    
sold for less, for a period of three years from November 20, 1996 and at 95% of 
the market value thereafter. Phillip G. Norton may assign his first right to    
buy to a third party, and if exercised, the terms of the Irrevocable Proxy and  
Stock Rights Agreement provide for a deferred purchase money note to finance    
the purchase. Any shares of Common Stock which Kevin M. Norton or Patrick J.    
Norton offers to Phillip G. Norton and which are subsequently sold or           
transferred to a third party after Phillip G. Norton's nonexercise of his first 
right to buy, will no longer be subject to the Irrevocable Proxy and Stock      
Rights Agreement.                                                               

68  

424B3
69th Page of 101
TOC
1st
Previous
Next
↓Bottom
Just 69th

SELLING STOCKHOLDERS

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

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

                                                        [Enlarge/Download Table]
                                                                      Percentage of Common Stock Owned     
 Name and Address                            Shares of Common         --------------------------------     
of Beneficial Owner                       Stock Being Offered (1)  Before Offering (1)    After Offering(2)
-------------------                       -----------------------  -------------------    -----------------

                                                                                                           
Vincent W. Marino (3)                           372,386                   6.13%                   0%       
89 Heffner Road                                                                                            
Limerick, Pennsylvania  19468                                                                              

WIHL-IV, a Cayman Islands Corp.(4)              161,329                   2.66%                   0%       
C/o Hitachi Leasing America, Ltd.                                                                          
400 Madison Avenue, Ste 301                                                                                
New York, New York 10017                                                                                   

Elaine G. Denton (5)                            119,927                   1.98%                   0%       
Rt. 8 Box 767                                                                                              
Greenville, North Carolina 27834                                                                           

William G. Garner (5)                            99,400                   1.64%                   0%       
4104 Hardwick Court                                                                                        
Greenville, North Carolina 27834                                                                           

Kleyton L. Parkhurst (6)                         43,000                       *                   0%       
605 Abbott Lane                                                                                            
Falls Church, Virginia 22046                                                                               

Ralph E. Marcellus (3)                           65,168                   1.07%                   0%       
3 Legend lane                                                                                              
Chadds Ford, Pennsylvania                                                                                  

Rodney Gamet (3)                                 55,858                       *                   0%       
111 Goshen Road                                                                                            
Schwenksville, Pennsylvania  19473                                                                         

Leslie H. Garner Jr (5)                          21,635                       *                   0%       
800 1st Street                                                                                             
Mount Vernon, Iowa 52314                                                                                   

Nan F. Spainhour (5)                              6,814                       *                   0%       
118 Lees Cut                                                                                               
Wrightsville Beach, North Carolina 28480                                                                   

David J. Rose III (5)                             6,814                       *                   0%       
3220 Graylyn Terrace                                                                                       
Wilmington, North Carolina 28405                                                                           

69  

424B3
70th Page of 101
TOC
1st
Previous
Next
↓Bottom
Just 70th

                                                        [Enlarge/Download Table]
                                                                Percentage of Common Stock Owned  
Name and Address                    Shares of Common            --------------------------------  
of Beneficial Owner              Stock Being Offered (1)  Before Offering (1)    After Offering(2)
-------------------              -----------------------  -------------------    -----------------

                                                                                                  
Susan P. Chatham (5)                               6,388                *                   0%    
1601 Canterbury Road                                                                              
Greenville, North Carolina  27858                                                                 

Lucille Defrancesco (3)                            1,862                *                   0%    
696 Springdell Roan                                                                               
King of Prussia, Pennsylvania 19406                                                               

Mathew A. McBride (3)                              1,862                *                   0%    
1746 Nathan's Drive                                                                               
Tampa, Florida 33647                                                                              

David M. Winans (3)                                1,862                *                   0%    
1600 Briarwood Lane                                                                               
Pottstown, Pennsylvania  19464                                                                    

--------------------                                                            
*Less than 1%                                                                   

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

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

(3)  Represents a portion of a total of 498,998 shares issued by the Company in 
the acquisition of ECCI on September 29, 1997. See "The Company."  An 
   aggregate of 49,900 of such shares have been deposited in escrow pursuant
    to the Agreement and Plan of Merger with ECCI until the second anniversary
of the merger to fund any indemnity claim made by the Company. After  
     registration of the shares is completed and after the Company publishes the
results for the quarter ended December 31, 1997 in its Form 10-Q on   
February 14, 1998, the shares, though registered, will be subject to  
  certain restrictions on transfer, including (without limitation) that no
   more than 49.9% of such shares may be transferred before October 1, 1998,
     and, in the case of Vincent M. Marino, the further restriction that no more
than 75% of his shares may be transferred before October 1, 1999.     

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

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

70  

424B3
71st Page of 101
TOC
1st
Previous
Next
↓Bottom
Just 71st
(6)  Includes 13,000 shares held by Kleyton L. Parkhurst, 30,000 shares held by 
three minor children of Kleyton L. Parkhurst, Charlotte A. Parkhurst, 
Madeline M. Parkhurst, and Kleyton L. Parkhurst, Jr., all of which are
   voted by Kleyton L. Parkhurst, Custodian, under the Virginia Uniform Gift
    to Minors Act. Under the employment agreement between Kleyton L. Parkhurst
  and the Company, Mr. Parkhurst has the right to request, at any time the
Company proposes to file an applicable SEC registration form that may 
include restricted stock, to have his stock registered.               

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

PRICE RANGE OF COMMON STOCK 

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

                                                                [Download Table]

Quarter Ended                            High                           Low   
-------------                            ----                           ---   
                                                                              
December 31, 1996*                       $10.25                         $ 8.75
March 31, 1997                           $14.50                         $ 9.37
June 30, 1997                            $14.00                         $10.75
September 30, 1997                       $14.75                         $12.75
December 31, 1997                        $14.75                         $11.75

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

 On February 9, 1997, the last sale price of the Common Stock was $11.75
per share. As of January 6, 1998, there were approximately 38 stockholders of   
record of the Company's Common Stock. In addition, as of December 23, 1997,     
there were approximately 44 individual participants holding 18.9% of the        
outstanding Common Stock in security position listings furnished by Cede & Co., 
New York, New York, registered clearing agency and depository.                  

DESCRIPTION OF CAPITAL STOCK

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

71

424B3
72nd Page of 101
TOC
1st
Previous
Next
↓Bottom
Just 72nd
COMMON STOCK                                                                    

        The Company's Certificate of Incorporation, as amended, authorizes
the issuance of up to 25,000,000 shares of Common Stock. Each holder of Common  
Stock on the applicable record date is entitled to receive such dividends as    
may be declared by the Board of Directors out of funds legally available        
therefor and in the event of dissolution, to share pro rata in any distribution 
of the Company's assets after payment or providing for the payments of the      
Company's liabilities. Each holder of Common Stock is entitled to one vote for  
each share held of record on the applicable record date on all matters          
presented to a vote of the stockholders. Holders of Common Stock have no        
preemptive rights to purchase or subscribe for any stock or other securities,   
and there are no conversion rights or redemption or sinking fund provisions     
with respect to the Common Stock. All outstanding shares of Common Stock and    
the shares of Common Stock issued pursuant to this Prospectus will be, when     
issued, fully paid and non-assessable.                                          

PREFERRED STOCK                                                                 

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

CERTAIN ANTI-TAKEOVER PROVISIONS                                                

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

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

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

72  

424B3
73rd Page of 101
TOC
1st
Previous
Next
↓Bottom
Just 73rd
   The provisions of the Certificate of Incorporation and Bylaws
described herein would make more difficult or discourage a proxy contest or the 
assumption of control by a holder of a substantial block of the Company's       
Common Stock or the removal of the incumbent Board, and thus could have the     
effect of perpetuating the incumbent management. At the same time, the          
provisions would help ensure that the Board, if confronted by a surprise        
proposal from a third party who has recently acquired a block of the Company's  
voting stock, will have sufficient time to review the proposal and appropriate  
alternatives to the proposal and to seek a premium price for the stockholders.  
These provisions are thus intended to encourage persons seeking to acquire      
control of the Company to initiate such an acquisition through arms-length      
negotiations with the Company's management and Board of Directors. The          
provisions are permitted under Delaware law and are consistent with the rules   
of the Nasdaq National Market.                                                  

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

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

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

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

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

        Authorization of Preferred Stock. The Certificate of Incorporation
authorizes 2,000,000 shares of Preferred Stock. The Company is authorized to    
issue Preferred Stock from time to time in one or more series subject to        
applicable provisions of law, and the Board of Directors is authorized to fix   
the designations, powers, preferences and rights of such share, including       
voting rights and conversion rights. In the event of a proposed merger, tender  
offer or other attempt to gain control of the Company that the Board of         
Directors does not approve, it might be possible for the Board of Directors to  
authorize the                                                                   

73  

424B3
74th Page of 101
TOC
1st
Previous
Next
↓Bottom
Just 74th
issuance of a series of Preferred Stock with rights and preferences that would  
impede the completion of such a transaction. An effect of the possible issuance 
of Preferred Stock, therefore, may be to deter a future takeover attempt. The   
Board of Directors has no present plans or understandings for the issuance of   
any Preferred Stock, and does not intend to issue any Preferred Stock except on 
terms which the Board deems to be in the best interests of the Company and its  
stockholders.                                                                   

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

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

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

SHARES ELIGIBLE FOR FUTURE SALE                                                 

       The Company has issued and outstanding 6,071,305 shares of Common
Stock. Of these shares, the 1,150,000 shares sold in the Initial Public         
Offering are freely tradable without restriction under the Securities Act,      
unless such shares are held by "affiliates" of the Company, as that term is     
defined in Rule 144 under the Securities Act. The remaining 4,921,305 shares of 
Common Stock outstanding are "restricted securities" as that term is defined in 
Rule 144 ("Restricted Shares"). Restricted Shares may be sold in the public     
market only if registered or if the sale transaction qualifies for an exemption 
from registration, such as that provided by Rule 144 under the Securities Act,  
which is summarized below. Sales of Restricted Shares in the public market, or  
the availability of such shares for sale, could adversely affect the market     
price of the Common Stock.                                                      

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

74  

424B3
75th Page of 101
TOC
1st
Previous
Next
↓Bottom
Just 75th
Sales under Rule 144 are also subject to certain manner of sale provisions and  
notice requirements and to the availability of current public information about 
the Company.                                                                    

          The 2,964,305 shares being offered by this Prospectus will generally
be freely tradable after their issuance, unless the sale thereof is             
contractually restricted.  Sales of significant numbers of shares of the Common 
Stock in the public market could adversely affect the market price of the       
Common Stock and could impair the Company's future ability to raise capital     
through an offering of its equity securities. The 964,305 Selling Stockholder   
Shares are subject to contractual restrictions on resale. See "Selling          
Stockholders."                                                                  

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

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

PLAN OF DISTRIBUTION

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

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

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

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

75  

424B3
76th Page of 101
TOC
1st
Previous
Next
↓Bottom
Just 76th
  Under applicable rules and regulations promulgated under the
Exchange Act, any person engaged in a distribution of securities may not        
simultaneously bid for or purchase securities of the same class for a period of 
two business days prior to the commencement of such distribution. In addition   
and without limiting the foregoing, the Selling Stockholders will be subject to 
applicable provisions of the Exchange Act and the rules and regulations         
thereunder, including without limitation Rules 10b-5 and Regulation M, in       
connection with transactions in the Selling Stockholder Shares during           
effectiveness of the registration statement of which this Prospectus is a part. 
All of the foregoing may affect the marketability of such securities.           

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

LEGAL MATTERS 

         The legality of the Securities being offered hereby has been passed
upon for the Company by Hazel & Thomas, P.C., Falls Church, Virginia, counsel   
to the Company.                                                                 

EXPERTS 

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

76  

424B3
77th Page of 101
TOC
1st
Previous
Next
↓Bottom
Just 77th

 MLC HOLDINGS, INC. AND SUBSIDIARIES
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

Independent Auditors' Report................................................F-2 
Consolidated Balance Sheets as of March 31, 1996 and 1997, and                  
September 30, 1997 (unaudited)..............................................F-3 
Consolidated Statements of Earnings for the Years Ended                         
March 31, 1995, 1996 and 1997 and for the six months                          
ended September 30, 1997  and 1996 (unaudited).............................F-4
Consolidated Statements of Stockholders' Equity for the Years                   
Ended March 31,  1995, 1996 and 1997 and for the                              
six months ended September 30, 1997 (unaudited)............................F-5
Consolidated Statements of Cash Flows for the Years Ended                       
March 31, 1995, 1996 and 1997 and for the six months ended                    
September 30, 1996 and 1997(unaudited).....................................F-6
Notes to Consolidated Financial Statements..................................F-8 

 F-1

424B3
78th Page of 101
TOC
1st
Previous
Next
↓Bottom
Just 78th

INDEPENDENT AUDITORS' REPORT

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

We have audited the accompanying consolidated balance sheets of MLC Holdings,   
Inc. and subsidiaries as of March 31, 1997 and 1996, and the related            
consolidated statements of earnings, stockholders' equity, and cash flows for   
each of the three years in the period ended March 31, 1997. These financial     
statements are the responsibility of the Company's management. Our              
responsibility is to express an opinion on these financial statements based on  
our audits. The consolidated financial statements give retroactive effect to the
merger of MLC Holdings, Inc., ECC Integrated, Inc. and Compuventures of Pitt    
County, Inc. which have been accounted for as a pooling of interests as         
described in Note 1 to the consolidated financial statements. We did not audit  
the balance sheet of ECC Integrated, Inc. as of March 31, 1996, or the related  
statements of earnings, stockholders' equity, and cash flows of ECC Integrated, 
Inc. for the years ended March 31, 1996 and 1995, which statements reflect total
assets of $2,613,757 as of March 31, 1996, and total revenues of $15,291,164 and
$11,350,568 for the years ended March 31, 1996 and 1995, respectively. Those    
statements were audited by other auditors whose report has been furnished to us,
and our opinion, insofar as it relates to the amounts included for ECC          
Integrated, Inc. for 1996 and 1995, is based solely on the report of such other 
auditors.                                                                       

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

In our opinion, based on our audits and the reports of other auditors, the      
consolidated financial statements referred to above present fairly, in all      
material respects, the financial position of MLC Holdings, Inc. and subsidiaries
as of March 31, 1997 and 1996, and the results of their operations and their    
cash flows for each of the three years in the period ended March 31, 1997, in   
conformity with generally accepted accounting principles.                       

/s/ Deloitte & Touche LLP                                                       
McLean, Virginia                                                                
June 5, 1997, except for the                                                    
second and third paragraphs                                                     
of Note 1, and Notes 13 and 14, as to                                           
which the date is October 22, 1997.                                             

F-2   

424B3
79th Page of 101
TOC
1st
Previous
Next
↓Bottom
Just 79th
MLC HOLDINGS, INC. AND SUBSIDIARIES                                             
CONSOLIDATED BALANCE SHEETS                                                     

                                                        [Enlarge/Download Table]

                                                                          As of March 31,              As of       
                                                                      1996             1997      September 30, 1997
                                                               --------------------------------  ------------------
                                                                                                     (Unaudited)   
                                                                                                                   
ASSETS                                                                                                             

Cash and cash equivalents                                        $    651,150   $     6,654,209     $  7,839,310   
Investment in direct financing and sales type leases - net         16,273,218        17,473,069       18,590,416   
Accounts receivable                                                 4,525,907         8,846,426       13,031,809   
Notes receivable(1)                                                    91,857         2,154,250        4,446,931   
Employee advances                                                      77,664            70,612           95,918   
Inventories                                                           964,637         1,278,144        1,625,496   
Investment in operating lease equipment - net                      10,219,826        11,065,159        8,799,124   
Property and equipment - net                                          444,584           740,744        1,029,857   
Other assets(2)                                                     1,935,350           740,925        1,858,340   
                                                                 ------------------------------     ------------   
Total Assets                                                     $ 35,184,193   $    49,023,538     $ 57,317,201   
                                                                 ==============================     ============   

LIABILITIES AND STOCKHOLDERS' EQUITY                                                                               

LIABILITIES                                                                                                        
Accounts payable - trade                                         $  2,215,116   $     3,006,937     $  4,237,264   
Accounts payable - equipment                                        4,972,979         4,946,422        6,766,488   
Salaries and commissions payable                                      153,326           671,899          335,361   
Accrued expenses and other liabilities                              1,402,873         2,256,884        3,779,240   
Recourse notes payable                                              2,106,473           439,004        4,763,664   
Nonrecourse notes payable                                          18,351,579        19,705,060       16,134,240   
Loans from stockholders                                               275,000                 -                -   
Deferred taxes                                                        469,000           590,000          590,000   
Income tax payable                                                      6,332           930,587                -   
                                                                 ------------------------------     ------------   
Total Liabilities                                                  29,952,678        32,546,793       36,606,257   

Commitments and contingencies                                             -                 -                -     

STOCKHOLDERS' EQUITY                                                                                               

Preferred stock, $.01 par value; 2,000,000 shares authorized;                                                      
   none issued or outstanding                                             -                 -                -     
Common stock, $.01 par value; 10,000,000 authorized at                                                             
   March 31, 1996 and 1997, 25,000,000 authorized at                                                               
   September 30, 1997; 4,754,390, 5,909,976, and                                                                   
   6,071,305 issued and outstanding at March 31, 1996,                                                             
   1997 and September 30, 1997 (unaudited)                             48,661            59,100           60,713   
Additional paid-in capital                                            744,485         9,346,214       11,356,710   
Retained earnings                                                   4,467,223         7,071,431        9,293,521   
Less: Cost of 111,716 treasury shares at March 31, 1996               (28,854)              -                -     
                                                                 ------------------------------     ------------   
Total Stockholders' Equity                                          5,231,515        16,476,745       20,710,944   

                                                                 ------------------------------     ------------   
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY                       $ 35,184,193   $    49,023,538     $ 57,317,201   
                                                                 ==============================     ============   

SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.                                 

(1) Includes amounts with related parties of $11,250 and $1,835,214 as of March 
31, 1996 and 1997 and $3,325,137 as of September 30, 1997 (unaudited).          

(2) Includes amounts with related parties of $678,383 and $338,226 as of March  
31, 1996 and 1997 and $670,921 as of September 30, 1997 (unaudited).            

F-3 

424B3
80th Page of 101
TOC
1st
Previous
Next
↓Bottom
Just 80th
MLC HOLDINGS, INC. AND SUBSIDIARIES                                             
CONSOLIDATED STATEMENTS OF EARNINGS                                             

                                                        [Enlarge/Download Table]

                                                      Year Ended March 31,                  Six Months Ended September 30,
                                            ------------------------------------------------------------------------------
                                                  1995              1996             1997            1996            1997 
                                            ------------------------------------------------------------------------------
                                                                                                        (Unaudited)       
                                                                                                                          
REVENUES                                                                                                                  

Sales of equipment                            $50,471,192     $47,591,068     $52,166,828     $22,343,509     $25,493,028 
Sales of leased equipment                       9,958,125      16,318,049      21,633,996       9,707,396      32,186,511 
                                              -------------------------------------------     --------------------------- 
                                               60,429,317      63,909,117      73,800,824      32,050,905      57,679,539 

Lease revenues                                  3,244,138       6,094,416      10,345,110       3,910,603       7,218,351 
Fee and other income                              690,466       1,876,410       2,503,381       2,263,282       2,819,166 
                                              -------------------------------------------     --------------------------- 
                                                3,934,604       7,970,826      12,848,491       6,173,885      10,037,517 

                                              -------------------------------------------     --------------------------- 
TOTAL REVENUES (1)                             64,363,921      71,879,943      86,649,315      38,224,790      67,717,056 
                                              -------------------------------------------     --------------------------- 
COSTS AND EXPENSES                                                                                                        

Cost of sales, equipment                       44,157,058      38,782,181      42,179,823      18,764,709      20,085,389 
Cost of sales, leased equipment                 9,463,075      15,522,469      21,667,197       9,590,999      31,579,951 
                                              -------------------------------------------     --------------------------- 
                                               53,620,133      54,304,650      63,847,020      28,355,708      51,665,340 

Direct lease costs                                841,345       2,862,815       5,197,868       1,696,743       3,330,971 
Professional and other costs                      657,109         709,350         576,855         231,789         440,874 
Salaries and benefits                           5,678,926       6,682,005       8,241,405       3,647,597       4,784,885 
General and administrative expenses             1,672,663       2,039,970       2,285,878       1,415,412       2,154,786 
Nonrecurring acquisition costs                          -               -               -               -         183,453 
Interest and financing costs                    1,111,128       1,701,638       1,648,943         793,867         975,264 
                                              -------------------------------------------     --------------------------- 
                                                9,961,171      13,995,778      17,950,949       7,785,408      11,870,233 

                                              -------------------------------------------     --------------------------- 
TOTAL COSTS AND EXPENSES (2)                   63,581,304      68,300,428      81,797,969      36,141,116      63,535,573 
                                              -------------------------------------------     --------------------------- 

EARNINGS BEFORE PROVISION FOR INCOME TAXES        782,617       3,579,515       4,851,346       2,083,674       4,181,483 
AND EXTRAORDINARY ITEM                        -------------------------------------------     --------------------------- 

PROVISION FOR INCOME TAXES                        198,000         881,000       1,360,000         606,000         872,133 
                                              -------------------------------------------     --------------------------- 
EARNINGS BEFORE EXTRAORDINARY ITEM                584,617       2,698,515       3,491,346       1,477,674       3,309,350 

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

NET EARNINGS                                  $   584,617     $ 2,815,559     $ 3,491,346     $ 1,477,674     $ 3,309,350 
                                              ===========================================     =========================== 
EARNINGS PER COMMON SHARE, BEFORE                                                                                         
EXTRAORDINARY ITEM                                   0.13            0.59           0.67             0.31            0.55 

EXTRAORDINARY GAIN PER COMMON SHARE                  -               0.03           -                -               -    
                                              -------------------------------------------     --------------------------- 

NET EARNINGS PER COMMON SHARE                 $      0.13      $     0.62     $     0.67       $     0.31     $      0.55 
                                              ===========================================     =========================== 
PRO FORMA NET EARNINGS                        $   529,228      $2,389,418     $3,133,436       $1,341,841     $ 2,696,089 
                                             ===========================================      =========================== 
PRO FORMA NET EARNINGS PER COMMON                                                                                         
SHARE                                         $      0.12      $     0.52     $     0.60       $     0.28     $      0.45 
                                             ===========================================      =========================== 
WEIGHTED AVERAGE COMMON SHARES                                                                                            
OUTSTANDING                                     4,383,490       4,572,635      5,184,261        4,754,390       5,990,200 


SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.                                 

(1) Includes amounts from related parties of $1,901,192, $15,758,610 and        
$21,051,453 for the fiscal years ended March 31, 1995, 1996 and 1997 and        
$8,854,546 and $30,543,774 for the six months ended September 30, 1996 and 1997 
(unaudited).                                                                    

(2) Includes amounts to related parties of $1,673,830, $15,055,141 and          
$20,566,924 for the fiscal years ended March 31, 1995, 1996 and 1997 and        
$8,670,226 and $29,884,057 for the six months ended September 30, 1996 and 1997 
(unaudited).                                                                    

F-4 

424B3
81st Page of 101
TOC
1st
Previous
Next
↓Bottom
Just 81st

MLC HOLDINGS, INC. AND SUBSIDIARIES                                             
STATEMENT OF STOCKHOLDERS' EQUITY                                               

                                                        [Enlarge/Download Table]

                                                    Common Stock                  Treasury Stock      
                                          -----------------------------------    ---------------------
                                                 Shares       Par Value          Shares     Cost      
                                          -----------------------------------    ---------------------
                                                                                                      
Balance, April 1, 1994                            4,380,270  $     45,022       121,995  $     47,156 

 Distributions to owners                                -             -             -             -   
 Sale of common shares                                6,388            64           -             -   
 Retirement of treasury shares                          -            (126)      (12,606)      (41,302)
 Net earnings                                           -             -             -             -   
                                          -----------------------------------   --------------------- 
Balance, March 31, 1995                           4,386,658        44,960       109,389         5,854 

 Issuance of shares to owners                       370,059         3,701           -             -   
 Purchase of treasury shares                         (2,327)          -           2,327        23,000 
 Distributions to owners                                -             -             -             -   
 Net earnings                                           -             -             -             -   

                                          -----------------------------------   ----------------------
Balance, March 31, 1996                           4,754,390        48,661       111,716        28,854 

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

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

 Sale of common shares (unaudited)                  161,329         1,613           -             -   
 Compensation to outside directors (unaudited)          -             -             -             -   
 Distributions to owners (unaudited)                    -             -             -             -   
 Net earnings (unaudited)                               -             -             -             -   

                                          -----------------------------------  ---------------------- 
Balance, September 30, 1997 (unaudited)           6,071,305  $     60,713          -     $        -   
                                          ===================================  ====================== 

                                                        [Enlarge/Download Table]

                                                 Additional                                
                                                   Paid-in       Retained                  
                                                   Capital       Earnings         TOTAL    
                                                -------------  -------------  ------------ 
                                                                                           
Balance, April 1, 1994                          $    764,301   $  1,726,098   $  2,488,265 

 Distributions to owners                                 -         (296,721)      (296,721)
 Sale of common shares                                25,061            -           25,125 
 Retirement of treasury shares                       (41,176)           -              -   
 Net earnings                                            -          584,617        584,617 

                                                ------------   ------------   ------------ 
Balance, March 31, 1995                              748,186      2,013,994      2,801,286 

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

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

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

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

 Sale of common shares (unaudited)                 1,998,387            -        2,000,000 
 Compensation to outside directors (unaudited)        12,109            -           12,109 
 Distributions to owners (unaudited)                     -       (1,087,260)    (1,087,260)
 Net earnings (unaudited)                                -        3,309,350      3,309,350 

                                                ------------   ------------   -------------
Balance, September 30, 1997 (unaudited)         $ 11,356,710   $  9,293,521   $ 20,710,944 
                                                ============   ============   =============

SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS                                  

F-5 

424B3
82nd Page of 101
TOC
1st
Previous
Next
↓Bottom
Just 82nd

MLC HOLDINGS INC. AND SUBSIDIARIES                                              
CONSOLIDATED STATEMENTS OF CASH FLOW                                            

                                                        [Enlarge/Download Table]

                                                                                        Year Ended March 31,           
                                                                        -----------------------------------------------
                                                                            1995              1996             1997    
                                                                        -----------------------------------------------

                                                                                                                       
CASH FLOWS FROM OPERATING ACTIVITIES:                                                                                  
     Net earnings                                                       $584,617        $2,815,559        $3,491,346   
     Adjustments to reconcile net earnings to net cash provided by                                                     
        operating activities:                                                                                          
        Depreciation and amortization                                    648,512         2,199,722         3,650,248   
        Abandonment of assets                                                               17,984            10,049   
        Provision for credit losses                                                                           66,000   
        Extraordinary gain                                                                (117,044)                    
        Gain (Loss) on sale of operating lease equipment(1)              (48,235)         (323,422)           83,754   
        Adjustment of basis to fair market value of early                                                              
           returned operating lease equipment                                                                          
        Impairment of operating lease residual values                                                        153,434   
        Payments from lessees directly to lenders                       (217,375)         (884,389)       (1,590,061)  
        Loss on disposal of property and equipment                           974             4,489            (9,124)  
        Deferred taxes                                                    26,000           623,000           121,000   
        Compensation to outside directors - stock options                                                      9,500   
        Changes in:                                                                                                    
           Accounts receivable                                          (928,727)          323,782        (4,343,319)  
           Notes receivable(2)                                            50,150           (55,088)       (2,062,393)  
           Employee advances                                              18,922           (61,996)           28,537   
           Inventories                                                   633,567          (813,491)         (400,046)  
           Other assets(3)                                              (192,088)         (342,209)          457,169   
           Accounts payable - equipment                                1,922,938         1,958,532           (26,557)  
           Accounts payable - trade                                     (827,485)          329,149           796,740   
           Salaries and commissions payable, accrued                                                                   
              expenses and other liabilities                             299,223           638,690         2,286,921   
                                                                    -------------------------------------------------  
                 Net cash provided by operating activities             1,970,993         6,313,268         2,723,198   
                                                                    -------------------------------------------------  
CASH FLOWS FROM INVESTING ACTIVITIES:                                                                                  
     Proceeds from sale of operating equipment                            73,072         1,383,677         4,992,050   
     Purchase of operating lease equipment(4)                         (2,268,792)      (13,919,193)      (24,800,360)  
     Increase in net investment in direct financing                                                                    
       and sales-type leases(5)                                       (9,766,564)      (17,169,201)       (6,825,873)  
     Proceeds from sale of property and equipment                         23,638             9,049             9,124   
     Insurance proceeds received                                                           750,000           512,044   
     Purchase of property and equipment                                  (46,150)         (301,039)         (266,061)  
     Decrease (Increase) in other assets(6)                             (158,841)         (306,228)          226,530   
                                                                     ------------------------------------------------  
                 Net cash used in investing activities               (12,143,637)      (29,552,935)      (26,152,546)  
                                                                     ------------------------------------------------  
CASH FLOWS FROM FINANCING ACTIVITIES:                                                                                  
     Borrowings:                                                                                                       
        Nonrecourse                                                   10,217,530        25,678,168        26,825,118   
        Recourse                                                         165,089            67,103           220,768   
     Repayments:                                                                                                       
        Nonrecourse                                                     (348,373)       (1,144,023)       (3,199,626)  
        Recourse                                                        (102,886)         (231,273)         (434,867)  
     Proceeds of loans from stockholders                                  75,000               -                 -     
     Repayments of loans from stockholders                                                 (50,000)         (275,000)  
     Distributions to shareholders of combined companies                                                               
        prior to business combination                                   (296,721)         (362,330)         (859,378)  
     Proceeds from sale of capital stock, net of expenses                 25,125                           8,603,762   
     Purchase of treasury stock                                                            (23,000)                    
     Proceeds (Repayments) from lines of credit                         (450,532)         (252,098)       (1,448,370)  
                                                                     ------------------------------------------------  
                 Net cash provided by financing activities             9,284,232        23,682,547        29,432,407   
                                                                     ------------------------------------------------  

NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS                    (888,412)          442,880         6,003,059   

CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD                         1,163,913           208,270           651,150   
                                                                     ------------------------------------------------  

CASH AND CASH EQUIVALENTS, END OF PERIOD                                $275,501          $651,150        $6,654,209   
                                                                     ================================================  
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:                                                                     
        Cash paid for interest                                          $264,929          $302,214          $140,081   
                                                                     ================================================  
        Cash paid for income taxes                                      $219,573          $202,864          $315,137   
                                                                     ================================================  
                                                        [Enlarge/Download Table]

                                                                       Six Months Ended September 30, 
                                                                       -------------------------------
                                                                            1996              1997    
                                                                       ------------------------------ 
                                                                               ( Unaudited)           
                                                                                                      
CASH FLOWS FROM OPERATING ACTIVITIES:                                                                 
     Net earnings                                                        $1,477,674        $3,309,350 
     Adjustments to reconcile net earnings to net cash provided by                                    
        operating activities:                                                                         
        Depreciation and amortization                                     1,111,827         2,328,955 
        Abandonment of assets                                                                         
        Provision for credit losses                                                           (30,000)
        Extraordinary gain                                                                            
        Gain (Loss) on sale of operating lease equipment(1)                 (44,172)         (313,295)
        Adjustment of basis to fair market value of early                                             
           returned operating lease equipment                               299,403           231,000 
        Impairment of operating lease residual values                                                 
        Payments from lessees directly to lenders                          (794,668)         (992,838)
        Loss on disposal of property and equipment                           (8,740)                  
        Deferred taxes                                                       21,000                   
        Compensation to outside directors - stock options                                      12,109 
        Changes in:                                                                                   
           Accounts receivable                                           (3,167,299)       (4,613,259)
           Notes receivable(2)                                           (1,036,993)       (2,292,681)
           Employee advances                                                (16,507)          (25,806)
           Inventories                                                     (757,017)         (351,452)
           Other assets(3)                                                  612,823          (429,216)
           Accounts payable - equipment                                   6,985,881         1,820,066 
           Accounts payable - trade                                        (200,927)        1,435,326 
           Salaries and commissions payable, accrued                                                  
              expenses and other liabilities                                745,996            55,238 
                                                                    --------------------------------- 
                 Net cash provided by operating activities                5,228,281           143,497 
                                                                    --------------------------------- 
CASH FLOWS FROM INVESTING ACTIVITIES:                                                                 
     Proceeds from sale of operating equipment                           1,290,311           579,813  
     Purchase of operating lease equipment(4)                          (10,653,298)       (1,163,208) 
     Increase in net investment in direct financing                                                   
       and sales-type leases(5)                                         (3,515,521)       (3,166,666) 
     Proceeds from sale of property and equipment                            8,740                    
     Insurance proceeds received                                                                      
     Purchase of property and equipment                                    (20,968)         (327,366) 
     Decrease (Increase) in other assets(6)                                147,270          (223,671) 
                                                                      ------------------------------  
                 Net cash used in investing activities                 (12,743,466)       (4,301,098) 
                                                                      ------------------------------  
CASH FLOWS FROM FINANCING ACTIVITIES:                                                                 
     Borrowings:                                                                                      
        Nonrecourse                                                     12,998,838         2,356,775  
        Recourse                                                                             109,972  
     Repayments:                                                                                      
        Nonrecourse                                                       (597,629)       (2,246,963) 
        Recourse                                                          (761,046)         (110,812) 
     Proceeds of loans from stockholders                                                              
     Repayments of loans from stockholders                                                            
     Distributions to shareholders of combined companies                                              
        prior to business combination                                     (308,938)       (1,087,270) 
     Proceeds from sale of capital stock, net of expenses                                             
     Purchase of treasury stock                                                            2,000,000  
     Proceeds (Repayments) from lines of credit                         (1,139,195)        4,321,000  
                                                                      ------------------------------  
                 Net cash provided by financing activities              10,192,030         5,342,702  
                                                                      ------------------------------  

NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS                     2,676,845         1,185,101  

CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD                             651,149         6,654,209  
                                                                      ------------------------------  

CASH AND CASH EQUIVALENTS, END OF PERIOD                                $3,327,994        $7,839,310  
                                                                      =============================   
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:                                                    
        Cash paid for interest                                             $15,439          $206,266  
                                                                      ==============================  
        Cash paid for income taxes                                        $108,176        $1,812,233  
                                                                      ==============================  

SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS                                  

F-6 

424B3
83rd Page of 101
TOC
1st
Previous
Next
↓Bottom
Just 83rd

(1) Includes amounts provided (used) by related parties of $(172,956), $3,930,  
$40,549 and $(36,963) for the fiscal years ended March 31, 1996 and 1997 and the
six months ended September 30, 1996 and 1997 (unaudited).                       

(2) Includes amounts used by related parties of $1,812,414, and $1,762,763 for  
the fiscal year ended March 31, 1997 and for the six months ended September 30, 
1997 (unaudited).                                                               

(3) Includes amounts provided (used) by related parties of $234,090,            
$(398,034), and $285,943 for the fiscal years ended March 31, 1995, 1996 and    
1997 and $186,646 and $(108,641) for the six months ended September 30, 1996    
and 1997 (unaudited).                                                           

(4) Includes amounts provided by related parties of $1,073,427, $2,707,213,     
$1,208,321 and $883,610 for the fiscal years ended March 31, 1996 and 1997 and  
the six months ended September 30, 1996 and 1997 (unaudited).                   

(5) Includes amounts provided (used) by related parties of $(235,180), $259,857,
and $(23,417) for the fiscal years ended March 31, 1995, 1996 and 1997 and      
$(41,327) and $9,568,554 for the six months ended September 30, 1996 and 1997   
(unaudited).                                                                    

(6) Includes amounts provided (used) by related parties of $(153,826),          
$(270,860) and $73,338 for the fiscal years ended March 31, 1995, 1996 and 1997 
and $(10,718) and $(195,946) for the six months ended September 30, 1996 and    
1997 (unaudited).                                                               

F-7 

424B3
84th Page of 101
TOC
1st
Previous
Next
↓Bottom
Just 84th

MLC HOLDINGS, INC. AND SUBSIDIARIES 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS                                      

YEARS ENDED MARCH 31, 1995, 1996, AND 1997 AND FOR THE SIX MONTHS ENDED 
SEPTEMBER 30, 1996 AND 1997 (UNAUDITED) 
(ALL FIGURES ARE IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)

1.        ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES           

Basis of Presentation - Effective September 1, 1996, MLC Holdings, Inc.,
(incorporated August 27, 1996) became the holding company for MLC Group, Inc.,  
and MLC Capital, Inc. (MLC Holdings, Inc., together with its subsidiaries       
collectively, "MLC" or "the Company"). The accompanying consolidated financial  
statements include the accounts of the wholly owned subsidiary companies at     
historical amounts as if the combination had occurred on March 31, 1994 in a    
manner similar to a pooling of interest.                                        

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

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

All significant intercompany balances and transactions have been eliminated.    

   Revenue Recognition - The Company sells information technology equipment to
its customers and recognizes revenue from equipment sales at the time equipment 
is accepted by the customer. The Company is the lessor in a number of its       
transactions and these are accounted for in accordance with Financial Accounting
Standards ("SFAS") No. 13, "Accounting for Leases." Each lease is classified as 
either a direct financing lease, sales-type lease, or operating lease, as       
appropriate. Under the direct financing and sales-type lease methods, the       
Company records the net investment in leases, which consists of the sum of the  
minimum lease term payments, initial direct costs, and unguaranteed residual    
value (gross investment) less the unearned income. The difference between the   
gross investment and the cost of the leased equipment for direct finance leases 
is recorded as unearned income at the inception of the lease. The unearned      
income is amortized over the life of the lease using the interest method. Under 
sales-type leases, the difference between the fair value and cost of the leased 
property (net margins) is recorded as revenue at the inception of the lease.    
Accounting for Transfers and Servicing of Financial Assets and Extinguishment of
Liabilities - Effective January 1, 1997, the Company adopted SFAS No.           

F-8 

424B3
85th Page of 101
TOC
1st
Previous
Next
↓Bottom
Just 85th

125, "Accounting for Transfers and Servicing of Financial Assets and            
Extinguishments of Liabilities." This Standard is effective for transactions    
occurring after December 31, 1996, and establishes new criteria for determining 
whether a transfer of financial assets in exchange for cash or other            
consideration should be accounted for as a sale or as a pledge of collateral in 
a secured borrowing. Certain assignments of direct finance leases made on a     
nonrecourse basis by the Company after December 31, 1996 meet the criteria for  
surrender of control set forth by SFAS 125 and have therefore been treated as   
sales for financial statement purposes.                                         

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

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

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

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

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

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

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

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

Income Taxes - Deferred income taxes are provided for in accordance with
SFAS No. 109, "Accounting for Income Taxes." Under this method, deferred income 
tax liabilities and assets are based on the difference between financial        
statement and tax bases of assets and liabilities, using tax rates currently in 
effect. The Company acquired two companies that were accounted under the pooling
of interests method. The two companies had elected to be taxed under the        
provisions of Subchapter "S" of the Internal Revenue Code. Under this election, 
each company's income or loss was included in the                               

F-9 

424B3
86th Page of 101
TOC
1st
Previous
Next
↓Bottom
Just 86th

taxable income of the stockholders and thus, there is no provision for federal  
or state income taxes in these financial statements for these companies.        

Estimates - The preparation of financial statements in conformity with  
generally accepted accounting principles requires management to make estimates  
and assumptions that affect the reported amounts of assets and liabilities and  
disclosure of contingent assets and liabilities at the date of the financial    
statements and the reported amounts of revenues and expenses during the         
reporting period. Actual results could differ from those estimates.             

 Reclassifications - Certain items have been reclassified in the March 31,
1995 and 1996 financial statements to conform to the March 31, 1997             
presentation.                                                                   

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

Earnings Per Share - Earnings per share are based on a weighted average 
number of shares outstanding of 4,383,490 in 1995, 4,572,635 in 1996 and        
5,184,261 in 1997. The dilutive effect of stock options is not material for any 
of the three years.                                                             

New Accounting Pronouncement - The Financial Accounting Standards Board 
issued SFAS No. 128, "Earnings per Share" in February 1997. This Standard will  
be effective for the Company beginning in fiscal year 1998. The pro forma effect
of adopting this Standard has no impact on the earnings per share calculation   
for the years ended March 31, 1995, 1996 and 1997.                              

    Interim Financial Statements (Unaudited) - In the opinion of management, the
accompanying unaudited financial statements contain all adjustments (consisting 
on of various normal accruals) necessary to present fairly the Company's        
financial position, results of earnings and cash flows. The results of earnings 
for the six months ended September 30, 1997, are not necessarily indicative of  
the results of operations to be expected for the full year.                     

2.         INVESTMENT IN DIRECT FINANCING AND SALES-TYPE LEASES                 

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

                                                        [Enlarge/Download Table]

                                                    As of March 31,     As of September 30
                                               1996             1997         1997         
                                               ----             ----         ----         
                                                                      (Unaudited)         

                                                                                          
Minimum Lease Payments                      $18,212          $18,752      $17,493         
Estimated unguaranteed residual value           347            1,271        3,482         
Initial direct costs - net of amortization    1,539            1,237          846         

Less: Unearned lease income                 (3,825)          (3,721)      (3,195)         
Reserve for credit losses                        -              (66)         (36)         

                                            -------          -------      -------         
Investment in direct financing lease and                                                  
sales-type lease - net                      $16,273         $17,473       $18,590         
                                            =======          ======        ======         

F-10

424B3
87th Page of 101
TOC
1st
Previous
Next
↓Bottom
Just 87th

Initial direct costs, are shown net of amortization of $590, $1,299 and $846 at 
March 31, 1996 and 1997 and September 30, 1997, respectively.                   

Future scheduled minimum lease rental payments as of March 31, 1997, are as     
follows:                                                                        

                                                                [Download Table]

Year ending March 31,            

                                 
                  1998     $7,799
                  1999      6,195
                  2000      3,658
                  2001        890
 2002 and thereafter          210
                          -------

                 Total    $18,752
                          =======

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

3.         SALES-TYPE LEASES                                                    

The detail for the sales-type leases consists of the following:                 

                                                                [Download Table]

                                                            For the Six Months Ended
                              For the year ended March 31,       September 30,      
                                 1995      1996      1997        1996      1997     
                                 ----      ----      ----        ----      ----     
                                                                  (Unaudited)       
                                                                                    
Gross minimum lease payments   $3,452      $559        $-           $-         $-   

Estimated unguaranteed                                                              
residual value                      3         -         -            -         -    

Gross cost of sales           (2,629)     (375)         -            -         -    
Unearned lease income           (549)      (98)         -            -         -    
                               ------      ---        ---          ---       --     

Net margin                    $  277      $ 86         $-           $-        $-    
                              ======      ====       ====          ===       ===    

4.         INVESTMENT IN OPERATING LEASE EQUIPMENT                              

    Investment in operating leases represents primarily equipment leased for two
to three years. The components of the net investment in operating lease         
equipment are as follows:                                                       

                                                        [Enlarge/Download Table]

                                                      As of March 31,  As of September 30,
                                                  1996           1997       1997          
                                                  ----           ----       ----          
                                                                         (Unaudited)      

                                                                                          
Cost of equipment under operating lease        $11,411        $14,519     $13,771         
Initial direct costs                                54             42          42         

Accumulated depreciation and amortization      (1,245)        (3,496)     (5,014)         
                                               -------        -------     -------         
Investment in operating lease equipment - net  $10,220        $11,065      $8,799         
                                               =======        =======     =======         

F-11  

424B3
88th Page of 101
TOC
1st
Previous
Next
↓Bottom
Just 88th

As of March 31, 1997, future scheduled minimum lease rental payments are as     
follows:                                                                        

Year ending March 31,                                                           
1998      $5,279                        
1999       3,429                        
2000       1,469                        
2001          31                        
2002 and thereafter         5                                     
-------               
$10,213               
=======               

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

5.      PROPERTY AND EQUIPMENT                                                  

Property and equipment consists of:                                             

                                                                [Download Table]


                                         As of             As of    
                                        March 31,      September 30,
                                    1996         1997         1997  
                                    ----         ----         ----  
                                                         (Unaudited)

                                                                    
Furniture and equipment          $   478      $   852      $ 1,061  
Capitalized software                 168          186          378  
Leasehold improvements                23           23           24  
Vehicles                             100          142          142  

Accumulated depreciation            (324)        (462)        (575) 
                                 -------      -------      -------  
Property and equipment - net     $   445      $   741      $ 1,030  
                                 =======      =======      =======  

F-12

424B3
89th Page of 101
TOC
1st
Previous
Next
↓Bottom
Just 89th

6.         RECOURSE AND NONRECOURSE NOTES PAYABLE                               

                                                        [Enlarge/Download Table]

                                                            As of              As of    
                                                           March  31,      September 30,

                                                       1996        1997         1997    
                                                       ----        ----         ----    
                                                                            (Unaudited) 
                                                                                        
Recourse equipment notes with varying interest rates                                    
ranging from 8.17% to 8.53%, 8.53% to 8.75% and 8.53%                                   
to 8.75%, respectively, secured by                                                      
related investments in leases                           $  141     $  269   $  295      

Noncollateralized recourse note bearing                                                 
interest at 8.05%                                           16          -        -      

Revolving line of credit with a maximum                                                 
balance of $250, bearing interest at the                                                
prime rate plus 1.5% payable on demand,                                                 
secured by equipment purchases                             175          -        -      

Revolving line of credit with a maximum                                                 
balance of $2,000, bearing interest at                                                  
the prime rate plus 1%, and personally                                                  
guaranteed by an employee/stockholder                      592          -        -      

Revolving line of credit with a maximum                                                 
balance of $5,000 bearing interest at                                                   
the LIBOR rate plus 2.75%, secured by                                                   
the Company's assets and personal                                                       
guarantees from employees/stockholders                     361          -        -      

Recourse line of credit with a maximum                                                  
balance of $15,000, bearing an interest                                                 
of LIBOR plus 110 basis points or, at                                                   
the Company's option, prime minus 100                                                   
basis points                                                 -          -    3,500      

Recourse line of credit with a maximum                                                  
balance of $2,500  with  interest based                                                 
on the prime rate                                          215        110      931      

Demand note payable  with an interest  rate of prime                                    
plus .75%                                                  200          -        -      

Term banks obligations with interest rates from 8.25%                                   

to bank prime plus .75%                                     68         31       22      

Notes to various unsecured individuals at                                               
interest rates of 7% to 10%                                 82          -        -      

Capitalized equipment lease debt imputed at 9%               9          4        -      

Various unsecured notes from Stockholders                                               
with interest rates ranging from 7% to 10%                 163          -        -      


F-13

424B3
90th Page of 101
TOC
1st
Previous
Next
↓Bottom
Just 90th

                                                                [Download Table]

                                                                               
Loans from Related Party at 8% to 10%                      61       25       16

Recourse line of credit  at prime plus                                         
one half point                                             23      -        -  
                                                       ------   ------   ------

                                                       $2,106   $  439   $4,764
                                                       ======   ======   ======

Nonrecourse equipment notes with varying interest                              
rates ranging from 5.85% to 14.39%, 6.30% to 9.90%                             
and 6.30% to 9.99%, respectively, secured by related                           
investments in leases                                 $18,352  $19,705  $16,134
                                                       ======   ======   ======

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

Borrowings under the $2,000 line of credit (which expired on December 1,  
1996) and the $5,000 line of credit above contain covenants regarding maximum   
recourse debt to worth ratio, minimum consolidated tangible net worth, fixed    
charge coverage ratio, and prohibit the payment of dividends.                   

Recourse and nonrecourse notes payable as of March 31, 1997, mature a     
follows:                                                                        

                                                                [Download Table]

                                Nonrecourse     Recourse    
                                Notes Payable  Notes Payable
                                -------------  -------------

Year Ending March 31,                                       

                                                            
           1998                     $12,725          $292   
           1999                       4,517           124   
           2000                       1,921            16   
           2001                         459             7   
           2002 and thereafter           83             -   
                                    -------          ----   
                                    $19,705          $439   
                                    =======          ====   

7.         RELATED PARTY TRANSACTIONS                                           

Loans from stockholders/officers consist of the following:                      

                                                                [Download Table]

                                                             As of March 31,

                                                              1996      1997
                                                              ----      ----
                                                                            
Note payable to stockholder bearing interest at 10%,                        
           maturing March 1, 1998                             $175      $-- 
Note payable to stockholder bearing interest at 10%,                        
           maturing March 1, 1998                              100       -- 
                                                               ---       -- 

                                                              $275      $-  
                                                              ====      === 

F-14  

424B3
91st Page of 101
TOC
1st
Previous
Next
↓Bottom
Just 91st
Other                                                                           

- The Company provided loans and advances to employees/stockholders 
    aggregating a total of $62, $139, and $12, for the years ended March 31,
   1995, 1996, and 1997, respectively. Such balances are to be repaid from
   commissions earned by the employees/stockholders on successful sales or
   financing arrangements obtained on behalf of the Company. Repayments on
these loans and advances have been made as follows:                 

     - Loans and advances of $80, $83, and $54 were repaid for the years ended
    March 31, 1995, 1996, and 1997, respectively. No interest was charged on
advances.                                                           

      - During the year ended March 31, 1996, an employee/stockholder repaid the
entire amount due the Company under a promissory note with a maximum
amount of $40 (loaned in 1994) bearing interest at a rate of 8%. In 
   addition, the Company loaned a stockholder $54 pursuant to a promissory
note bearing interest at a rate of 8%. Under the terms of the note, 
      interest of $2 and $3 and principal of $8 and $15, respectively, were paid
to the Company during the years ended March 31, 1996 and 1997.      

The Company sold leased equipment to a company in which an          
employee/stockholder has a 45% ownership interest. During the years ended March 
31, 1995 and 1996 revenue recognized from the sale was $1,855 and $1,300 and the
basis of the equipment sold was $1,620 and $1,272 respectively. At March 31,    
1996, accrued expenses and other liabilities include $27 due to the related     
company, notes receivable include $17 due from the company, and other assets    
include $73, which represents the Company's investment in lease deals with the  
company. During the year ended March 31, 1997, the Company received remarketing 
fees from the company amounting to $224.                                        

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

   During the years ended March 31, 1996 and 1997, the Company sold leased
equipment to MLC/GATX Limited Partnership I (the Partnership), that amounted to 
31% and 6% of the Company's revenues, respectively. The Company has a 9.5%      
limited partnership interest in the Partnership and owns a 50% interest in the  
corporation that owns a 1% general partnership interest in the Partnership.     
Revenue recognized from the sales was $13,079 and $3,453, and the basis of the  
equipment sold was $12,274 and $3,309, respectively, during the years ended     
March 31, 1996 and 1997. Other assets include $210 due from, and $76 due to the 
Partnership as of March 31, 1996 and 1997, respectively. The Company's          
investment balance in the Partnership, accounted for using the cost method,     
included in other assets, is $381 and $227 as of March 31, 1996 and 1997,       
respectively. In addition, the Company received $46, $122, and $149 for the     
years ended March 31, 1995, 1996, and 1997, respectively, for accounting and    
administrative services provided to the Partnership.                            

During the year ended March 31, 1997, the recoverability of certain 
capital contributions made by the Company to the Partnership was determined to  
be impaired. As a result, the Company recognized a write-down of its recorded   
investment balance of $196 to reflect the revised net realizable value. The     
write-down is included in cost of sales in the accompanying consolidated        
statements of earnings.                                                         

  During the years ended March 31, 1996 and 1997, and for the six months
ended September 30, 1996 and 1997 (unaudited) the Company sold leased equipment 
to MLC/CLC LLC, in which the Company has a 5% ownership interest, that amounted 
to 1.8%, 19.5%, 17.0% and 40.9% of the Company's revenues, respectively. Revenue
recognized from the sales was $1,257, $16,923, $6,489 and $27,717 and the       
respective basis for the equipment sold was $1,335, $16,918, $6,521, and        
$27,407. Notes receivable includes $1,812 due from the partnership as of March  
31, 1997. Other assets includes an investment of $14 and $168, as of March 31,  
1996 and 1997, respectively, accounted for using the                            

F-15

424B3
92nd Page of 101
TOC
1st
Previous
Next
↓Bottom
Just 92nd

cost method. In addition, the Company received $53 for the year ended March 31, 
1997 for accounting and administrative services provided to MLC/CLC LLC.        

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

As of March 31, 1996 and 1997, $153 and $72 was receivable from MLC 
Federal, which is owned in part by an individual related to a Company executive.
As of March 31, 1997, the Company fully reserved for the receivable from MLC    
Federal.                                                                        

     The Company is reimbursed for certain general and administrative expenses
by a company owned, in part, by an executive of a subsidiary of the Company. The
reimbursements totaled $282,200, $128,310 and $176,075 for the years ended March
31, 1995, 1996 and 1997 and $69,396 for the six months ended September 30, 1997 
(unaudited).                                                                    

8.    COMMITMENTS AND CONTINGENCIES                                             

     The Company leases office space and some office equipment for the conduct
of its business. Rent expense relating to operating leases was $376, $397 and   
$348 for the years ended March 31, 1995, 1996, and 1997, respectively and $173  
and $200 for the six month periods ending September 30, 1996 and 1997. As of    
March 31, 1997, the future minimum lease payments are due as follows:           

                                                                [Download Table]

Year Ending March 31,              
                                   
        1998                   $360
        1999                    285
        2000                    236
        2001                    209
        2002                    196
  Thereafter                    424
                                ---

                             $1,710
                             ======

As of March 31, 1997, the Company has guaranteed $173 of the residual value for 
equipment owned by the MLC/GATX Limited Partnership I.                          

9.    INCOME TAXES                                                              

A reconciliation of income tax computed at the statutory Federal rate to the    
provision for income tax included in the consolidated statements of earnings is 
as follows:                                                                     

                                                        [Enlarge/Download Table]

                                               For the                For the Six Months Ended
                                          Year Ended March 31,          September 30,         
                                                                         (Unaudited)          

                                    1995           1996          1997          1997           
                                    ----           ----          ----          ----           

                                                                                              
Statutory Federal income tax rate     34%           34%           34%           34%           

Income tax expense computed at the                                                            
statutory Federal rate               $263        $1,272        $1,664        $1,345           

F-16

424B3
93rd Page of 101
TOC
1st
Previous
Next
↓Bottom
Just 93rd

                                                                [Download Table]
                                                                     
Income tax expense of Sub                                            
S not subject to tax                       (55)  (426)   (358)  (613)
State income tax expense, net of Federal                             
tax expense                                   6     25      49    117
Nontaxable interest income                 (95)   (79)    (34)    (7)
Nondeductible expenses                       79     89      39     31
                                             --     --      --     --

Provision for income taxes                 $198   $881  $1,360   $873
                                           ====   ====  ======   ====

Effective tax rate                        25.3%  31.3%   28.0%  20.9%
                                          =====  =====   =====  =====

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

                                                                [Download Table]

                    For the Year          
                    Ended March 31,       

                1995       1996       1997
                ----       ----       ----
                                          
Current:                                  
Federal         $154       $231     $1,152
State             18         27         87
                  --         --         --

                 172        258      1,239
                 ---        ---      -----

Deferred:                                 

Federal           17        557        113
State              9         66          8
                   -         --          -

                  26        623        121
                  --        ---        ---

                $198       $881     $1,360
                ====       ====     ======

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

                                                                [Download Table]

                                     For the Year        
                                     Ended March 31,     

                               1995       1996       1997
                               ----       ----       ----
                                                         
Alternative minimum tax      $(158)     $(200)       $369
Lease revenue recognition       184        823      (248)
                              -----      -----      -----

Total                           $26       $623       $121
                              =====      =====      =====

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

F-17

424B3
94th Page of 101
TOC
1st
Previous
Next
↓Bottom
Just 94th

                                                                [Download Table]

                                   As of March 31, 

                                  1996        1997 

                                                   
Alternative minimum tax          $619         $250 
Lease revenue recognition      (1,088)       (840) 
                               ------        ----  

Net deferred liability          $(469)       $(590)
                                =====        ===== 

UNAUDITED PRO FORMA INCOME TAX INFORMATION                                      

The following unaudited pro forma income tax information is presented in        
accordance with Statement of Financial Accounting Standard No. 109, "Accounting 
for Income Taxes," as if the pooled companies, which were subchapter S          
corporations prior to their business combinations with the Company, had been    
subject to federal income taxes throughout the periods presented. The managed   
companies acquired had elected S Corporation status for income tax purposes for 
various periods until acquisition date at the time the S Corporation tax        
elections were elected. As S Corporations, the income or loss from these        
entities was includable by their shareholders in their individual income tax    
returms. Therefore for the companies acquired accounted for using the           
pooling-of-interests method of accounting, no provision for income taxes has    
been made in the consolidated financial statements for the respective periods   
the entities were S Corporations.                                               

                                                                [Download Table]

                                     For the           For the Six Months Ended
                                Year Ended March 31,       September 30,       

                             1995       1996       1997       1997             
                             ----       ----       ----       ----             

                                                                               
Net income before pro forma                                                    
adjustment, per the                                                            
consolidated income                                                            
statement                    $585     $2,816     $3,491     $3,309             

Additional provision for                                                       
income taxes                   56        427        358        613             
                               --        ---        ---        ---             

Pro forma net income         $529     $2,389     $3,133     $2,696             
                             ====     ======     ======     ======             

10.   NONCASH INVESTING AND FINANCING ACTIVITIES                                

The Company recognized a reduction in recourse and nonrecourse notes
payable (Note 6) associated with its direct finance and operating lease         
activities from payments made directly by customers to the third-party lenders  
amounting to $6,151, $4,796, and $4,214 for the years ended March 31, 1995,     
1996, and 1997, respectively. In addition, the Company realized a reduction in  
recourse and nonrecourse notes payable from the sale of the associated assets   
and liabilities amounting to $1,855, $11,550, and $18,058, for the years ended  
March 31, 1995, 1996, and 1997, respectively.                                   

F-18

424B3
95th Page of 101
TOC
1st
Previous
Next
↓Bottom
Just 95th

11.   BENEFIT AND STOCK OPTION PLANS                                            

      The Company provides its employees with contributory 401(k) profit sharing
plans. General eligibility for employees requires a minimum age of 21,          
completion of a minimum amount of hours and a short time period before entrance 
into the plan. Full vesting in the plans vary from after the fourth to the sixth
consecutive year of plan participation. Employer contributions are discretionary
for each year. The Company's expense for the plans was $30, $76 and $55 for the 
years ended March 31, 1995, 1996 and 1997, respectively.                        

     Effective September 1, 1996 (and modified on May 24, 1997 and ratified by
the stockholders on September 30, 1997 as noted below), the Company established 
a stock incentive program ("the Plan") to provide an opportunity for directors, 
executive officers, independent contractors, key employees, and other employees 
to participate in the ownership of the Company. A total of 400,000 shares of    
common stock has been reserved for issuance upon exercise of options granted    
under the Plan, which encompasses the following agreements:                     

-          compensation agreements and employment arrangements with certain     
           executives ("Executive Compensation Agreements"), under which 245,000
options have been granted;                                

-          the 1996 Incentive Stock Option Plan ("Employee Plan"), under which  
          75,000 options have been reserved, and of this amount 73,800 options
granted, to Company employees;                            

-          the 1996 Outside Director Stock Plan ("Outside Director Plan"), under
        which 75,000 options have been reserved, and of this amount 30,000
granted; and                                              

-          the 1996 Nonqualified Stock Option Plan ("Nonqualified Plan"), under 
which 5,000 options have been granted.                    

     All stock option grants to date were made effective with or subsequent to
the completion of the Company's initial public offering ("IPO") on November 19, 
1996. As of March 31, 1997, no options have been exercised.                     

  The exercise price of options granted under the Executive Compensation
Agreements is equivalent to the fair market value of the Company's common stock 
on the date of grant. These options have a ten year term, and vest in equal     
increments over three years with 25% being exercisable and vested upon          
completion of the IPO which was completed in November, 1996 and subject to      
acceleration upon certain conditions.                                           

The exercise price of options granted under the Employee Plan is    
equivalent to the fair market value of the Company's common stock on the date of
grant. These options have a ten year term, and vest in equal increments over    
five years beginning on the first anniversary of the completion of the IPO,     
subject to continued employment and acceleration upon certain conditions.       

    The exercise price of options granted under the Outside Director Plan is
equivalent to the fair market value of the Company's common stock on the date of
grant. These options have a ten year term, and vest in equal increments over two
years beginning on the first anniversary of the completion of the IPO, subject  
to continued service. The Outside Director Plan also provides for additional    
option grants on the second, third and fourth anniversary of service at a price 
equivalent to the fair market value of the Company's common stock on the date of
grant. Such additional options vest in equal increments over two years beginning
on the first anniversary of the date of grant.                                  

F-19

424B3
96th Page of 101
TOC
1st
Previous
Next
↓Bottom
Just 96th

   Any Options issued under the Nonqualified Plan have exercise prices not
less than 80% of the market value of the common stock on the date of grant and  
are exercisable over a period not to exceed ten years.                          

A summary of stock option activity during the year ended March 31, 1997 is as   
follows:                                                                        

                                                                [Download Table]

                                        Exercise   
                         Number of        Price    
                          Shares          Range    
                          ------          -----    

                                                   
Outstanding, April 1            -                 -
Granted                   353,800     $6.40 - $8.75
Exercised                       -                 -
Forfeited                       -                 -
                           ------             -----

Outstanding, March 31     353,800     $6.40 - $8.75
                          =======     =============

Exercisable options        66,250     $6.40 - $8.75
                          =======     =============

Additional information regarding options outstanding as of March 31, 1997 is as 
follows:                                                                        

                                                                [Download Table]


    Options Outstanding                            Options Exercisable       
    -------------------                            -------------------       

                     Weighted                                                
                      Average             Weighted-                          
                     Remaining            Average                            
Number               Contractual          Exercise     Number                
Outstanding           Life                Price        Exercisable      Price
-----------           ----                -----        -----------      -----

                                                                             
353,800              9.6 yrs              $8.05           66,250        $7.79

      Effective April 1, 1996, the Company adopted SFAS No. 123, "Accounting for
Stock-Based Compensation." This Statement gave the Company the option of either 
(1) continuing to account for stock-based employee compensation plans in        
accordance with the guidelines established by Accounting Principles Board       
("APB") No. 25, "Accounting for Stock Issued to Employees" while providing the  
disclosures required under SFAS No. 123, or (2) adopting SFAS No. 123 accounting
for all employee and non-employee stock compensation arrangements. The Company  
opted to continue to account for its stock-based awards using the intrinsic     
value method in accordance with APB No. 25. Accordingly, no compensation expense
has been recognized in the financial statements for employee stock arrangements.
Option grants made to non-employees, including outside directors, have been     
accounted for using the fair value method, which resulted in $9 in compensation 
expense during the year ended March 31, 1997. The following table summarizes the
pro forma disclosures required by SFAS No. 123 assuming the Company had adopted 
the fair value method for stock-based awards to employees as of the beginning of
fiscal year 1997:                                                               

F-20

424B3
97th Page of 101
TOC
1st
Previous
Next
↓Bottom
Just 97th

Net Income                                                          

As reported                    $3,491               
Pro forma                      $3,410               

Earnings per common share                                           
As reported                    $0.67                
Pro forma                      $0.65                

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

                                                                [Download Table]
                                                                          
Expected dividend yield:               0%                                 
Expected stock price volatility:       44%                                
Expected option term:                   8 years (options granted under    
                                        Executive Compensation Agreements)
                                        and                               
                                        5 years (all other option grants) 
Risk-free interest rate:               6.05% (options granted under       
                                        Executive Compensation Agreements)
                                        and                               
                                       5.81%   (all other option grants)  

Master Stock Incentive Plan Amendment                                           

    The Company has established a stock incentive program (the "Master Stock
Incentive Plan")(formerly the 1996 Stock Incentive Plan prior to amendment and  
restatement effective May 14, 1997 which has been adopted by the Board of       
Directors and received on September 30, 1997 stockholder ratification) to       
provide an opportunity for directors, executive officers, independent           
contractors, key employees, and other employees of the Company to participate in
the ownership of the Company. The Master Stock Incentive Plan provides for the  
award to eligible directors, employees, and independent contractors of the      
Company, of a broad variety of stock-based compensation alternatives under a    
series of component plans. These component plans include tax advantaged         
incentive stock options for employees under the Incentive Stock Option Plan     
(formerly the 1996 Incentive Stock Option Plan prior to amendment and           
restatement effective May 14, 1997), formula length of service based            
nonqualified options to nonemployee directors under the Outside Director Stock  
Plan (formerly the 1996 Outside Director Stock Option Plan prior to amendment   
and restatement effective May 14, 1997), nonqualified stock options under the   
Nonqualified Stock Option Plan (formerly the 1996 Nonqualified Stock Option Plan
prior to amendment and restatement effective May 14, 1997), a program for       
employee purchase of Common Stock of the Company at 85% of fair market value    
under a tax advantaged Employee Stock Purchase Plan (approved by the Board of   
Directors but which is not effective until stockholder ratification), as well as
other restrictive stock and performance based stock awards and programs which   
may be established by the Board of Directors. The May 14, 1997 Amendments       
increase the aggregate number of shares reserved for grant under all plans which
are a part of the Master Stock Incentive Plan to a floating number equal to 20% 
of the issued and outstanding stock of the Company (after giving effect to pro  
forma assumed exercise of all outstanding options and purchase rights). The     
number that may be subject to options granted under the Incentive Stock Option  
Plan is also further capped at a maximum of 4,000,000 shares to comply with IRS 
requirements for a specified maximum.                                           

12.   FAIR VALUE OF FINANCIAL INSTRUMENTS                                       

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

F-21

424B3
98th Page of 101
TOC
1st
Previous
Next
↓Bottom
Just 98th

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

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

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

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

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

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

                                                                [Download Table]

                                 As of March 31, 1997
                                 --------------------

                                  Carrying    Fair   
                                  Amount      Value  

                                                     
Assets:                                              
    Cash and cash equivalents      $6,654      $6,654
Liabilities:                                         
    Nonrecourse notes payable     $19,705     $19,752
    Recourse notes payable           $439        $465

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

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

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

13.    BUSINESS COMBINATIONS                                                    

     On July 24, 1997, the Company, through a new wholly owned subsidiary, MLC
Network Solutions, Inc., issued 260,978 common shares, valued at $3,385, in     
exchange for all outstanding common shares of Compuventures of Pitt County,     
Inc. ("Compuventures"), a value-added reseller of PC's and related network      
equipment and software products and provides various support services to its    
customers from facilities located in Greenville, Raleigh and Wilmington, North  
Carolina.                                                                       

F-22  

424B3
99th Page of 101
TOC
1st
Previous
Next
↓Bottom
Just 99th

   On September 29, 1997, the Company issued 498,998 common shares, valued
at $7,092 in exchange for all outstanding common shares of Educational Computer 
Concepts, Inc. (dba "ECC Integrated")("ECCI"), a network systems integrator and 
computer reseller serving customers in eastern Pennsylvania, New Jersey and     
Delaware.                                                                       

These business combinations have been accounted for as              
pooling-of-interests, and accordingly, the consolidated financial statements    
for periods prior to the combinations have been restated to include the         
accounts and results of operations of the pooled companies. The results of      
operations previously reported by the Company and the pooled companies and the  
combined amounts presented in the accompanying unaudited consolidated financial 
statements are presented below.                                                 

                                                                [Download Table]

                            For the Year                  For the Six         
                            Ended March 31,         Months Ended September 30,

                      1995        1996        1997       1996        1997     
                      ----        ----        ----       ----        ----     
                                                          (Unaudited)         
                                                                              
Revenues:                                                                     
MLC Holdings, Inc. $40,819     $42,800     $56,147    $24,601     $44,975     
Pooled companies    23,545      29,080      30,502     13,624      22,742     
                   -------     -------     -------    -------     -------     

Combined           $64,364     $71,880     $86,649    $38,225     $67,717     
                   =======     =======     =======    =======     =======     

Net Income:                                                                   
MLC Holdings, Inc.    $414      $1,610      $2,481     $1,095      $1,582     
Pooled companies       171       1,205       1,010        383       1,727     
                       ---       -----       -----        ---       -----     

Combined              $585      $2,815      $3,491     $1,478      $3,309     
                      ====      ======      ======     ======      ======     

14.   SUBSEQUENT EVENTS                                                         

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

Credit Agreement - During June 1997, MLC Group entered into a Credit
Agreement (the "Agreement") with CoreStates Bank, N.A. (the "CoreStates         
Facility"). Under terms of the Agreement, MLC Group may borrow up to $15,000    
through June 5, 1998. On September 5, the facility was increased to $25,000.    
All borrowings under the CoreStates Facility bear interest at the LIBOR rate    
plus 1.10% or, at MLC Group's option, the prime rate less 1.00%. Such amounts   
are secured by MLC Group's business assets, including accounts receivable,      
inventory and fixed assets, as well as the related investments in leases, and   
are guaranteed by the Company.                                                  

15.   QUARTERLY DATA (UNAUDITED)                                                

Summarized quarterly financial information is as follows (amounts in thousands  
except per share information). Adjustments reflect the results of operations of 
business combinations accounted for under the pooling of interests method.      

F-23  

424B3
100th Page of 101
TOC
1st
Previous
Next
↓Bottom
Just 100th

MLC HOLDINGS, INC. AND SUBSIDIARIES                                             
CONDENSED QUARTERLY INFORMATION                                                 

                                                        [Enlarge/Download Table]

                                                               FIRST QUARTER               
                                              Previously                       Adjusted    
                                               Reported       Adjustments       Amount     
                                            -----------------------------------------------
                                                                                           
Year Ended March 31, 1996                                                                  
Sales                                           $     2,091        $   6,770     $   8,861 
Total revenues                                        3,775            6,773        10,548 
Cost of sales                                         1,454            5,719         7,173 
Total costs and expenses                              3,134            6,908        10,042 
Earnings before provision for income taxes              641             (135)          506 
Provision for income taxes                              227                -           227 
Earnings before extraordinary item                      414             (135)          279 
Extraordinary gain                                        -                -             - 
Net earnings                                            414             (135)          279 
                                            -----------------------------------------------
Net earnings per common share                   $      0.10                      $    0.06 
                                            ================                 ==============

Year Ended March 31, 1997                                                                  
Sales                                           $    10,412        $   6,978     $  17,390 
Total revenues                                       12,896            7,304        20,200 
Cost of sales                                         9,894            5,649        15,543 
Total costs and expenses                             12,097            7,226        19,323 
Earnings before provision for income taxes              799               79           878 
Provision for income taxes                              284                -           284 
Earnings before extraordinary item                      515               79           594 
Extraordinary gain                                        -                -             - 
Net earnings                                            515               79           594 
                                            -----------------------------------------------
Net earnings per common share                   $      0.13                      $    0.12 
                                            ================                 ==============

Year Ended March 31, 1998                                                                  
Sales                                           $    22,309        $  12,964     $  35,273 
Total revenues                                       26,763           13,701        40,464 
Cost of sales                                        21,859           10,033        31,892 
Total costs and expenses                             25,379           12,438        37,817 
Earnings before provision for income taxes            1,384            1,263         2,647 
Provision for income taxes                              460                -           460 
Earnings before extraordinary item                      923            1,264         2,187 
Extraordinary gain                                        -                -             - 
Net earnings                                            923            1,264         2,187 
                                            -----------------------------------------------
Net earnings per common share                   $      0.18                      $    0.37 
                                            ================                 ==============

                                                        [Enlarge/Download Table]

                                                            SECOND QUARTER               
                                            Previously                       Adjusted    
                                             Reported      Adjustments        Amount     
                                           ----------------------------------------------
                                                                                         
Year Ended March 31, 1996                                                                
Sales                                           $ 13,031          $ 8,911      $  21,942 
Total revenues                                    14,785            8,914         23,699 
Cost of sales                                     12,115            7,001         19,116 
Total costs and expenses                          14,067            8,343         22,410 
Earnings before provision for income taxes           718              571          1,289 
Provision for income taxes                           253                -            253 
Earnings before extraordinary item                   465              571          1,036 
Extraordinary gain                                     -                -              - 
Net earnings                                         465              571          1,036 
                                           ----------------------------------------------
Net earnings per common share                   $   0.12                       $    0.24 
                                           ==============                 ===============

Year Ended March 31, 1997                                                                
Sales                                           $  8,635          $ 6,026      $  14,661 
Total revenues                                    11,705            6,320         18,025 
Cost of sales                                      8,250            4,563         12,813 
Total costs and expenses                          10,803            6,015         16,818 
Earnings before provision for income taxes           902              304          1,206 
Provision for income taxes                           322                -            322 
Earnings before extraordinary item                   580              304            884 
Extraordinary gain                                     -                -              - 
Net earnings                                         580              304            884 
                                           ----------------------------------------------
Net earnings per common share                   $   0.15                       $    0.19 
                                           ==============                 ===============

Year Ended March 31, 1998                                                                
Sales                                           $ 22,407                -      $  22,407 
Total revenues                                    27,253                -         27,253 
Cost of sales                                     19,773                -         19,773 
Total costs and expenses                          25,719                -         25,719 
Earnings before provision for income taxes         1,535                -          1,535 
Provision for income taxes                           412                -            412 
Earnings before extraordinary item                 1,123                -          1,123 
Extraordinary gain                                     -                -              - 
Net earnings                                       1,123                -          1,123 
                                           ----------------------------------------------
Net earnings per common share                   $   0.19                       $    0.19 
                                           ==============                 ===============

                                                        [Enlarge/Download Table]

                                                              THIRD QUARTER               
                                              Previously                      Adjusted    
                                               Reported      Adjustments       Amount     
                                            ----------------------------------------------
                                                                                          
Year Ended March 31, 1996                                                                 
Sales                                         $      8,083        $   7,598    $   15,681 
Total revenues                                      10,483            7,601        18,084 
Cost of sales                                        7,479            6,012        13,491 
Total costs and expenses                            10,057            7,058        17,115 
Earnings before provision for income taxes             426              543           969 
Provision for income taxes                             153                -           153 
Earnings before extraordinary item                     273              543           816 
Extraordinary gain                                       -              117           117 
Net earnings                                           273              660           933 
                                            ----------------------------------------------
Net earnings per common share                 $       0.06                     $     0.21 
                                            ===============                 ==============

Year Ended March 31, 1997                                                                 
Sales                                         $      8,435        $   8,745    $   17,180 
Total revenues                                      11,800            8,445        20,245 
Cost of sales                                        7,676            7,112        14,788 
Total costs and expenses                            10,810            8,437        19,247 
Earnings before provision for income taxes             990                8           998 
Provision for income taxes                             349                -           349 
Earnings before extraordinary item                     641                8           649 
Extraordinary gain                                       -                -             - 
Net earnings                                           641                8           649 
                                            ----------------------------------------------
Net earnings per common share                 $       0.14                     $     0.12 
                                            ===============                 ==============

Year Ended March 31, 1998                                                                 
Sales                                                                                     
Total revenues                                                                            
Cost of sales                                                                             
Total costs and expenses                                                                  
Earnings before provision for income taxes                                                
Provision for income taxes                                                                
Earnings before extraordinary item                                                        
Extraordinary gain                                                                        
Net earnings                                                                              

Net earnings per common share                                                             


                                                        [Enlarge/Download Table]

                                                            FOURTH QUARTER                     
                                              Previously                       Adjusted        
                                               Reported      Adjustments        Amount         
                                            -----------------------------------------------    
                                                                                               
Year Ended March 31, 1996                                                                      
Sales                                         $     11,637       $    5,788    $    17,425     
Total revenues                                      13,757            5,791         19,548     
Cost of sales                                       10,154            4,371         14,525     
Total costs and expenses                            13,051            5,682         18,733     
Earnings before provision for income taxes             706              109            815     
Provision for income taxes                             248                -            248     
Earnings before extraordinary item                     458              109            567     
Extraordinary gain                                       -                -              -     
Net earnings                                           458              109            567     
                                            -----------------------------------------------    
Net earnings per common share                 $       0.12                     $      0.12     
                                            ===============                 ===============    

Year Ended March 31, 1997                                                                      
Sales                                         $     15,836       $    8,733    $    24,569     
Total revenues                                      19,746            8,433         28,179     
Cost of sales                                       14,284            6,419         20,703     
Total costs and expenses                            18,597            7,813         26,410     
Earnings before provision for income taxes           1,149              620          1,769     
Provision for income taxes                             405                -            405     
Earnings before extraordinary item                     744              620          1,364     
Extraordinary gain                                       -                -              -     
Net earnings                                           744              620          1,364     
                                            ---------------------------------------------------
Net earnings per common share                 $       0.14                      $     0.23     
                                            ===============                 ===============    

Year Ended March 31, 1998                                                                      
Sales                                                                                          
Total revenues                                                                                 
Cost of sales                                                                                  
Total costs and expenses                                                                       
Earnings before provision for income taxes                                                     
Provision for income taxes                                                                     
Earnings before extraordinary item                                                             
Extraordinary gain                                                                             
Net earnings                                                                                   

Net earnings per common share                                                                  


F-24

424B3
Last Page of 101
TOC
1st
Previous
Next
↓Bottom
Just 101st

                                                        [Enlarge/Download Table]
                                                                                                                       
================================================================================  =====================================

No person has been authorized in connection with the Offering made hereby to                  2,964,305  SHARES        
give any information or to make any representation not contained in this                                               
Prospectus and, if given or made, such information or representation must not be             MLC HOLDINGS, INC.        
relied upon as having been authorized by the Company or any Underwriter. This                                          
Prospectus does not constitute an offer to sell or a solicitation to buy any of                 COMMON STOCK           
the securities offered hereby to any person or by anyone in any jurisdiction in                                        
which it is unlawful to make such offer or solicitation. Neither the delivery of                                       
this Prospectus nor any sale made hereunder shall, under any circumstances,                                            
create any implication that the information contained herein is correct as of                                          
any date subsequent to the date hereof.                                                                                
                                                                                              ----------------         
                        ------------------------                                                                       
                                                                                                 PROSPECTUS            
                            TABLE OF CONTENTS                                                                          
                                                                                               ---------------         
                        ------------------------                                                                       

                                                                    Page                                               
                                                                    ----                                               
Available Information................................................  2                                               
Prospectus Summary.................................................... 3                                               
Risk Factors.......................................................... 8                                               
The Company...........................................................22                                               
Use of Proceeds...................................................... 24                                               
Dividend Policy...................................................... 24                                               
Capitalization........................................................24                                               
Selected Consolidated Financial Data..................................25                                               
Management's Discussion and Analysis of                                                                                
  Results of Operations and Financial                                                         February 11, 1998        
  Condition.......................................................... 27                                               
Business .............................................................37                                               
Management............................................................51                                               
Certain Transactions..................................................63                                               
Principal Stockholders................................................66                                               
Selling Stockholders..................................................69                                               
Price Range of  Common Stock .........................................71                                               
Description of Capital Stock..........................................71                                               
Plan of Distribution..................................................75                                               
Legal Matters.........................................................76                                               
Experts...............................................................76                                               
Index to Consolidated Financial                                                                                        
  Statements.........................................................F-1                                               

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

Dates Referenced Herein   and   Documents Incorporated by Reference

				Referenced-On Page
This ‘424B3’ Filing		Date		First		Last			Other Filings
		11/20/99		59		60
		10/1/99		70		71			8-K
		11/20/98		59		60
		10/1/98		70		71
		6/5/98		13		99
		4/30/98		14		48
		3/31/98		88		100			10-K405
		3/1/98		36		90
		2/16/98		71
		2/14/98		70
Filed on:		2/11/98		1		101
		2/9/98		1
		2/1/98		51		52
		1/6/98		71
		12/31/97		60		71			10-Q
		12/23/97		71
		11/30/97		66
		11/20/97		59		61
		11/5/97		53
		10/22/97		23		84
		9/30/97		5		97			10-Q,  DEF 14A,  PRE 14A
		9/29/97		14		99
		9/25/97		67
		9/17/97		23		84
		9/5/97		13		47
		9/2/97		23		42
		7/30/97		13		47
		7/24/97		14		98			8-K,  8-K/A
		7/14/97		16		41
		7/1/97		23		99
		6/30/97		12		71			10-K,  10-Q
		6/18/97		22		99
		6/10/97		13		63
		6/5/97		13		78			SC 13D
		5/28/97		68
		5/24/97		95
		5/14/97		55		97
		4/1/97		59
		3/31/97		8		100			10-K,  10-K/A
		3/12/97		14		48			8-K
		2/9/97		71
		1/31/97		14		63
		1/8/97		61
		1/7/97		58
		1/1/97		11		84
		12/31/96		9		85			10-Q
		12/13/96		23
		12/1/96		13		90
		11/20/96		15		71
		11/19/96		95
		9/30/96		5		92			10-Q
		9/1/96		3		95
		8/27/96		84
		6/30/96		64
		5/9/96		40
		4/1/96		96
		3/31/96		37		100
		12/31/95		49
		11/17/95		65
		7/31/95		64
		4/1/95		64
		3/31/95		25		95
		3/1/95		36		63
		1/5/95		64
		4/1/94		81
		3/31/94		25		84
		2/15/94		64
		12/31/93		25
		3/31/93		25
		12/31/92		25
									List all Filings