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FORM 10-K

SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

(Mark One)

 FOR ANNUAL AND TRANSITION REPORTS PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934.

For the fiscal year ended December 31, 2001

 [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

OR

[  ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from __________ to __________

Commission File Number: 0-25790

PC MALL, INC.
(Exact name of registrant as specified in its charter)

2555 West 190th Street
Torrance, CA 90504
(address of principal executive offices)
(310) 354-5600
(Registrant's telephone number, including area code)

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

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

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

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

As of March 28, 2002 the aggregate market value of the Common Stock held by non-affiliates of the Registrant was approximately $30,993,692.  The number of shares outstanding of the Registrant's Common Stock as of March 28, 2002 was 10,443,616.

Documents incorporated by reference into Part III:  Portions of the Proxy Statement for the Registrant's 2002 Annual Meeting of Stockholders are incorporated by reference into Part III hereof.

PC MALL, INC.

TABLE OF CONTENTS

PART I
ITEM 1 - Business
ITEM 2 - Properties
ITEM 3 - Legal Proceedings
ITEM 4 - Submission of Matters to a Vote of Security Holders
PART II
ITEM 5 - Market for Registrant's Common Stock and Related Stockholder Matters
ITEM 6 - Selected Financial Data
ITEM 7 - Management's Discussion and Analysis of Financial Condition and Results of Operations
ITEM 7A - Quantitative and Qualitative Disclosures about Market Risk
ITEM 8 - Financial Statements and Supplementary Data
ITEM 9 - Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
PART III
ITEM 10 - Directors and Executive Officers of the Registrant
ITEM 11 - Executive Compensation
ITEM 12 - Security Ownership of Certain Beneficial Owners and Management
ITEM 13 - Certain Relationships and Related Transactions
PART IV
ITEM 14 - Exhibits, Financial Statement Schedules and Reports on Form 8-K
SIGNATURES

PART I

ITEM 1. BUSINESS

General

PC Mall, Inc. (the "Company"), formerly IdeaMall, Inc. and Creative Computers, Inc., founded in 1987, is a rapid response supplier of computer hardware, software, peripheral and electronics products. The Company offers products to business, government and educational institutions as well as individual consumers through relationship-based direct marketing techniques, direct response catalogs, dedicated inbound telemarketing sales executives, the Internet, a direct sales force, and a retail showroom.  The Company offers a broad selection of products through its distinctive full-color catalogs under the PC Mall, MacMall, and eCOST.com brands, its five worldwide web sites on the Internet: pcmall.com, macmall.com, ccit-inc.com, ecost.com, and elinux.com, and other promotional materials. The Company's staff of knowledgeable sales executives, customer service and technical support personnel work together to serve customers by assisting in product selection and offering technical assistance.  The Company believes that its high level of customer service results in customer loyalty and repeat customer orders.

 In September 1997, the Company formed a wholly-owned subsidiary, uBid, Inc. ("uBid"), to sell computer-related products and consumer electronics through an auction format on the Internet. On December 9, 1998, uBid completed an initial public offering of 1,817,000 shares of its Common Stock.  Upon completion of this offering, the Company owned 80.1% of the outstanding Common Stock of uBid.  On June 7, 1999, the Company divested its ownership in uBid by means of a tax-free distribution of all of its remaining 7.3 million shares of uBid Common Stock to the Company's stockholders of record as of May 24, 1999.  In April 2000, uBid was acquired by CMGI.

In February 1999, the Company formed eCOST.com as a wholly-owned subsidiary.  eCOST.com is a multi-category Internet retailer of computer products and electronics, and offers a broad selection of name-brand products, most of which are sold at competitive prices plus itemized fees for processing and shipping the order.  In December 1999, the Company formed eLinux as a wholly-owned subsidiary to focus on products and services directed to the Linux community.

During 2000, the Company shifted its strategy to focus primarily on its outbound direct marketing operations.  Accordingly, the Company changed its operating strategy for its start-up businesses, eCOST.com and eLinux, emphasizing profitability over growth.

 The Company currently operates in three reportable business segments: 1) a rapid response supplier of computers, hardware, software, peripheral and electronics products under the PCMall, MacMall, and CCIT brands, collectively referred to as the "Core Business"; 2) a multi-category Internet retailer of computer and consumer electronics products under the eCOST.com brand, and 3) a rapid response supplier of Linux-based products and services provided under the eLinux brand.  For segment information relating to net sales, gross profit and operating income, see Note 9 to the Company's financial statements included herein.

Strategy

The Company's strategy is to be a leading rapid response direct marketer and supplier of a broad range of computers, software and related technology products and solutions to businesses, governmental and educational institutions, and individual customers.  Specific elements of the Company's operating strategy include:

Continued Development of Outbound Direct Marketing.  During 2001, the Company continued to intensify its outbound direct marketing efforts to focus on the under-served small and medium business (SMB) market as well as large businesses (enterprise), government and education markets.  The Company believes that its inherent cost efficiencies and its purchasing power with key vendors provides it with competitive advantages and growth opportunities to acquire market-share from small Value-Added Resellers ("VARS") that traditionally serve the SMB market.   Outbound business sales can also be more profitable than inbound sales due to reduced advertising expense and lower transaction cost from higher average order size.  The Company's strategy is to expand its outbound sales executive workforce and use its expertise in database marketing to mine its customer database and purchased name lists for prospects.  During 2001, the Company continued to hire experienced outbound direct marketing executives to manage this initiative and expand the outbound sales executive workforce.  In September 2001, the Company opened a new outbound call center located in Orange County, California.  The Company also focused on the development of its direct marketing executives through its comprehensive training program.  The Company expects to continue to invest in new tools and training to develop its outbound direct marketing sales operation. 

 Focus on the Windows/Intel (PC platform) Market.  The Company launched its first PC catalog, PC Mall, primarily for PC platform customers, in May 1995.  The Company published seven editions of PC Mall with a total circulation of 11.1 million copies in 1995.  During 2001, there were 13 editions of the PC Mall catalog distributed, with total circulation of 13.7 million.  Total PC platform revenues were $437.8 million, a  decrease of $60.6 million, or 12.2% over 2000 PC platform revenue of $498.4 million.

 The Company is authorized or otherwise has the ability to sell IBM, Compaq, Hewlett-Packard, Sony, Toshiba and other name brand computers.  The Company has become one of the leading catalog resellers of PC platform products since the start of its PC platform initiative in 1995.

 Continued Macintosh Marketshare Expansion.  Throughout 2001, the Company continued to be a leading rapid response supplier of Macintosh products, offering the full line of Apple and related products.  The Company's sales of Mac-related products in 2001 was $280.4 million, a decrease of $39.8 million, or 12.4% compared to $320.2 million in 2000.  During 2001, the Company published 14 editions of its MacMall catalog with a circulation of 29.7 million copies, a 1% increase from the prior year's 29.5 million circulation and a 6% decrease from the 31.5 million copies circulated in 1999.  

 Penetration of the Linux Market.  In February 2000, the Company launched its newest venture, eLinux, focusing on providing technology solutions to Linux users.  Linux is an open source operating software gaining rapid acceptance within the IT community and is used extensively to run network servers.  eLinux  offers complete multi-vendor Linux solutions, including Linux compatible products, consulting and support services, and community.  The Company's eLinux subsidiary serves the rapidly growing Linux community by providing multi-vendor Linux solutions and custom configurations of Linux-based systems and compatible products through its secure web site and its outbound sales executive work force.

Marketing Database Growth.  The Company has compiled a proprietary mailing list of approximately 7.7 million names of previous and potential customers.  The database is continually analyzed to target customer types and increase response and purchase rates.  The Company's response rate (calculated by dividing the number of orders generated by the number of catalogs distributed) for its proprietary mailing list during 2001 was higher than its response rate for prospects from purchased name lists.

 Increased Relationship-Based Selling.  The Company's sales executives are highly trained in relationship building with their customers and are continuously coached to offer higher levels of service.  The Company is committed to relationship-based selling.  Each sales executive is trained and empowered to handle all customer needs, including ongoing customer service and returns-related issues.  Additionally, sales executives bring other expertise to bear as needed from within the Company, including Novell-trained Certified Network Engineers (CNE), Microsoft Windows NT specialists (MCSE) and Apple and Cisco-certified technicians.

 Leverage of Internet Leadership Position.  The Company considers itself a leader in Internet e-commerce innovation and intends to continue enhancing its leadership position on the Internet. The Company was among the first to enter the Internet auction space with its ubid.com web site.  uBid completed a successful initial public offering ("IPO") in December 1998, and the Company subsequently distributed to its stockholders all of its remaining shares of uBid in June 1999.

 In March 1999, the Company launched the eCOST.com web site, which offers a broad selection of name-brand products, most of which are sold at discount prices. Customers are provided an itemized description of the fees associated with processing their orders, including a handling fee to cover warehousing, order processing, systems and overhead costs, and a shipping fee. With the introduction of eCOST.com, the Company believes that it was among the first full-spectrum Internet resellers in the personal computing marketplace, offering customers many different ways to purchase computer hardware, software, peripherals and consumer electronics.

 Marketing and Sales

The Company designs its various marketing programs to attract new customers and to stimulate additional purchases by previous customers.  The Company continuously attracts new customers by producing leads from existing and purchased databases, employing outbound direct marketing sales techniques to establish relationships with businesses, selectively mailing catalogs to prospective customers and through advertising on the Internet and in major computer user magazines, such as Computer Shopper, MacWorld, Mac Home, Mac Today, Mac Addict and others.  In addition, the Company obtains the names of prospective customers through selected mailing lists acquired from various sources, including manufacturers, suppliers and computer magazine publishers.   The Company sells its products to businesses, government and educational institutions, as well as individual consumers. 

During 2001, the Company acquired a software package designed to manage marketing campaigns using different media channels and to optimize campaigns through advanced data mining techniques.  The software combines these optimization techniques with multiple predictive statistical models to more effectively match offers to individuals and businesses to provide the most profitable results.  The Company expects to begin using the software in 2002.

Outbound Direct Marketing and Inbound Telemarketing.  The Company believes that much of its success has come from the quality and training of its sales executives.  Sales executives are responsible for assisting customers in purchasing decisions, answering product pricing and availability questions and processing product orders.  Sales executives also have the authority to vary prices within specified parameters in order to meet prices of competitors.  In addition, sales executives undergo an initial three-month training program focusing on use of the Company's systems, product offerings and networking solutions, sales techniques, phone etiquette and customer service.  Sales executives also attend frequent training sessions to stay up-to-date on new products.  Sales executives staff the Company's toll-free order lines 24 hours a day, seven days a week.  Customer service and technical support personnel assist inbound and outbound sales executives.

The Company's phone and computer systems are used for order entry, customer tracking and inventory management.  The computer system maintains a database listing previous customer purchases, which allows sales executives to make product suggestions that fit each customer's specific buying preferences and to offer the latest upgrades for products previously purchased from the Company.  During 2001, the Company shipped approximately 640,000 inbound and outbound orders with an average order size of $739.

Catalogs.  The Company published 13 editions of its PC Mall catalog during 2001 and distributed approximately 13.7 million catalogs.  PC Mall customers receive a catalog several times a year depending on purchasing history.  In addition, the Company includes a catalog with most orders shipped, as well as special promotional flyers and manufacturers' product brochures.

The Company published 14 editions of its MacMall catalog in 2001 and distributed approximately 29.7 million catalogs.  Active MacMall customers receive a catalog several times a year depending upon purchasing history, and the Company includes a catalog with most orders shipped, as well as special promotional flyers and manufacturers' product brochures.

The Company creates all of its catalogs in-house with its own design team and production artists using a computer-based desktop publishing system.  The in-house preparation of the catalogs streamlines the production process, provides greater flexibility and creativity in catalog production, and results in significant cost savings over outside production.

The Internet.  The Company operates five worldwide web sites on the Internet, including pcmall.com, macmall.com, ccit-inc.com, ecost.com and elinux.com.  The Company offers many advanced Internet features such as on-line ordering, access to inventory availability and a large product selection with detailed product information.  The Company also maintains and operates an extranet for its Corporate customers, called "Corporate Access Pages" or CAP sites.  The CAP sites provide custom catalogs and online purchasing channels for corporate customers and their employees.  Sales generated through the Internet have grown rapidly for the Company as it offers its customers a convenient means of shopping and ordering its products.  In addition, the Company's web sites also serve as another source of new customers.  In 2001, the Company shipped approximately 355,000 Internet orders, with an average order size of $608.

Vendor Supported Marketing.  The Company currently has a marketing team that sells advertising space in the Company's catalogs, advertising on the Company's Internet sites and vendor supported outbound marketing campaigns.  These advertising sales generate revenues that offset a substantial portion of the expense of publishing and distributing the catalogs.  The same marketing team also develops marketing campaigns to maximize product sales.

National Off-Page Advertising.  The Company continuously attracts new catalog customers and generates orders through large multi-page color advertisements in major publications such as  Computer Shopper, MacWorld, Mac Home, Mac Today, and Mac Addict.  During 2001, the Company purchased 184 pages of magazine advertising.

Corporate Sales.  The specific needs of corporate buyers are fulfilled through a combination of inbound and outbound full-time sales personnel as well as a direct sales force through its CCIT subsidiary.  The Company's sales staff builds long-term relationships with corporate customers through regular phone contact and personalized service.  Corporate customers may choose from several purchase or lease options for financing product purchases, and the Company extends credit terms to certain corporate customers.

Customer Return Policy.  The Company offers a 30-day return policy on a number of its products, subject to vendor terms and conditions.  Returns are monitored to identify trends in product acceptance and defects, to enhance customer satisfaction and to reduce overall returns.

Products and Merchandising

The Company offers hardware, software, peripherals, components and accessories for users of computer products, as well as electronics equipment.  The Company screens new products and selects products for inclusion in its catalogs and web sites based on features, quality, sales trends, price, margins, cooperative/market development funds and warranties.  The Company offers its customers other value-added services, such as the ability to purchase systems that have been specifically configured to meet the customer's requirements.  Through frequent mailings of its catalogs and e-mails to its customers, the Company is able to quickly introduce new products and replace slower selling products with new products.

The following table sets forth the Company's net sales by major product category as a percentage of total net sales for the periods presented.

(1)    Other consists primarily of other electronic products, income from labor charges and sales of extended warranties.

Computer Systems.  The Company offers a large selection of desktop, laptop, and server systems from leading manufacturers including Apple, IBM, Compaq, Hewlett-Packard, Sony, Toshiba and others.

Peripherals, Components and Accessories.  The Company offers a large selection of peripheral and component products from manufacturers such as Apple, Hewlett-Packard, Sony, Epson, 3Com, US Robotics, IBM, Iomega and Compaq.  Peripherals and components include printers, modems, monitors, data storage devices, add-on circuit boards, connectivity products and communications products.  The accessories offered by the Company include a broad range of computer-related items and supplies such as diskettes, cables and connectors.

Software.   The Company sells a wide variety of software packages in the business and personal productivity, utility, language, educational and entertainment categories, including word processing, spreadsheet and database software.  The Company offers a large number of software programs and licenses from established vendors, such as Microsoft, Corel, Adobe, Symantec, Quark, Lotus, Macromedia and Intuit, as well as numerous specialty products from new and emerging vendors.  The Company also markets upgrades from certain vendors, such as Symantec, Corel, Lotus and Microsoft, which the Company believes offer incremental revenue opportunities.

Purchasing and Inventory

The Company believes that effective purchasing is a key element of its business strategy to provide name brand computer products and related software and peripherals at competitive prices.  The Company believes that its high volume of sales results in increased purchasing power with its primary suppliers, resulting in volume discounts, favorable product return policies and vendor promotional allowances.  During 2001, the Company purchased products from over 548 vendors.  During 2001, 2000 and 1999, products manufactured by Apple represented approximately 27.0%, 24.9% and 25.4% of net sales, respectively.  The Company is also linked electronically with twelve distributors, which allows account executives to view distributor product availability on line and drop-ship product directly to their customers.  The benefits of this program, known as virtual warehouse, include reduced inventory carrying costs and improved inventory turns.

Most key vendors have agreements to provide market development funds to the Company, whereby such vendors fund portions of the cost of catalog publication and distribution based upon the amount of coverage given in the catalogs for their products.  Termination or interruption of the Company's relationships with its vendors, or modification of the terms of or discontinuance of the Company's agreements with its vendors, could adversely affect the Company's operating results.  The Company's success is dependent in part upon the ability of its vendors to develop and market products that meet the changing requirements of the marketplace.  As is customary in the industry, the Company has no long-term supply contracts with any of its vendors.  Substantially all of the Company's contracts with its vendors are terminable upon 30 days' notice or less.

The Company attempts to manage its inventory position to generate the highest levels of customer satisfaction possible while limiting inventory risk.  The Company believes that it has increased its ability to provide constrained products, which it believes is an important competitive advantage; and the Company invested in this strategy heavily during 2001.  The Company's average annual inventory turns were 15.7 times in 2001, 18.5 times in 2000, and 15.1 times in 1999.  Inventory levels may vary from period to period, due in part to increases or decreases in sales levels, the Company's practice of making large-volume purchases when it deems the terms of such purchases to be attractive and the addition of new manufacturers and products.  The Company has negotiated agreements with many of its vendors that contain price protection provisions intended to reduce the Company's risk of loss due to manufacturer price reductions.  The Company currently has such rights with respect to products that it purchases from Apple, IBM, Compaq, Hewlett-Packard and certain other vendors; however, such rights vary by product line, have other conditions and limitations and can be terminated or changed at any time.

 The market for computers, computer products, peripherals, software and electronics is characterized by rapid technological change and a growing diversity of products.  The Company believes that its success depends in large part on its ability to identify and obtain the right to market products that will meet the changing requirements of the marketplace and to obtain sufficient quantities of product to meet changing demands.  There can be no assurance that the Company will be able to identify and offer products necessary to remain competitive or avoid losses related to excess or obsolete inventory.

Distribution

The Company operates a full-service 325,000 square foot distribution center in Memphis, Tennessee.  The centralized distribution operations, strategically located near the Federal Express hub in Memphis, allow most orders of in-stock products accepted by 10:00 p.m. Eastern Standard Time to be shipped for delivery by 10:30 a.m. the following day via Federal Express.  Upon request, orders may also be shipped at a lower cost by United Parcel Ground Service.  The Company subleases 105,600 square feet of the Company's 325,000 square foot facility to uBid, and the sublease is coterminus with the building lease.  

When an order is entered into the system, an automated credit check or credit card verification is performed and, if approved, the order is electronically transmitted to the warehouse, where a packing slip is printed for order fulfillment.  Orders fulfilled by certain distributors linked electronically with the Company are transmitted directly to their warehouses via electronic data interchange (EDI).  All inventory items are bar coded and located in computer-designated areas which are easily identified on the packing slip.  All orders are checked with bar code scanners prior to final packing to ensure that each order is packed correctly.

The Company believes that its existing distribution facilities are currently adequate for its needs.

Management Information Systems

The Company has committed significant resources to the development of a sophisticated computer system that is used to manage all aspects of its business.  The Company's computer system supports telemarketing, marketing, purchasing, accounting, customer service, warehousing and distribution, and facilitates the preparation of daily operating control reports which provide concise and timely information regarding key aspects of its business.  The system allows the Company to, among other things, monitor sales trends, make informed purchasing decisions and provide product availability and order status information.  In addition to the main computer system, the Company has a system of networked personal computers, which facilitates data sharing.  The Company also applies its management information systems to the task of managing its inventory.  The Company currently operates its management information system using a Hewlett Packard HP3000 Enterprise System and has a back-up system available in the event of a system failure.  The Company believes that in order to remain competitive it will be necessary to upgrade its management information systems on a continuing basis.

The Company's success is in part dependent on the accuracy and proper utilization of its management information systems and its telephone system.  In addition to the costs associated with system upgrades, the transition to and implementation of new or upgraded hardware or software systems can result in system delays or failures.  Any interruption, corruption, degradation or failure of the Company's management information systems or telephone system could impact its ability to receive and process customer orders on a timely basis. 

Retail Computer Showroom

The Company currently operates one retail computer showroom, located in Santa Monica, California that is targeted at high-end consumers and small businesses located in the Southern California area.

Competition

The retail business for personal computers and related products is highly competitive.  The Company competes with other direct marketers, including CDW, Insight Enterprises, PC Connection and Zones.  In addition, the Company competes with computer retail stores and resellers, including superstores such as CompUSA and Best Buy, certain hardware and software vendors such as Gateway and Dell Computer that sell directly to end users, and other direct marketers of hardware, software and computer-related products.  Barriers to entry are relatively low in the direct marketing industry and the risk of new competitors entering the market is high.  The market in which the Company's retail showroom operates is also highly competitive.

The manner in which personal computers, software and related products are distributed and sold is changing, and new methods of sales and distribution have emerged.  Technology now allows software vendors the ability to sell and download programs directly to consumers, if so desired.  In addition, in recent years the industry has generated a number of new, cost-effective channels of distribution such as computer superstores, consumer electronic and office supply superstores, national direct marketers and mass merchants.  Computer resellers are consolidating operations and acquiring or merging with other resellers to achieve economies of scale and increased efficiency.  In addition, traditional retailers have entered and may increase their penetration into the direct mail channel.  The current industry reconfiguration and the trend toward consolidation could cause the industry to become even more competitive, further increase pricing pressures and make it more difficult for the Company to maintain its operating margins or to increase or maintain the same level of net sales or gross profit.

Although many of the Company's competitors have greater financial resources than the Company, the Company believes that its ability to offer the consumer a wide selection of products, at competitive prices, with prompt delivery and a high level of customer service, and its good relationships with its vendors and suppliers, allow it to compete effectively.  There can be no assurance that the Company can continue to compete effectively against existing or new competitors that may enter the market.  The Company believes that competition may increase in the future, which could require the Company to reduce prices, increase advertising expenditures or take other actions that may have an adverse effect on the Company's operating results.

Employees

As of December 31, 2001, the Company had 907 full-time employees, including 100 people at the Company's distribution center.  The Company emphasizes the recruiting and training of high-quality personnel and, to the extent practical, promotes people to positions of increased responsibility from within the Company.  Each employee initially receives training appropriate for his or her position, followed by varying levels of training in computer technology, communication and leadership.  New account executives participate in an intensive three-month training program, during which time they are introduced to the Company's philosophy, available resources, products and services, as well as basic and advanced sales skills.  Training for specific product lines and continuing education programs for all employees are conducted on an ongoing basis, supplemented by vendor-sponsored training programs for all sales executives and technical support personnel.

The Company's employees are generally compensated on a basis that rewards performance and the achievement of identified goals.  For example, sales executives receive compensation pursuant to a commission schedule that is based primarily upon aggregate sales, gross profit dollars and gross profit percentage generated from their sales efforts.  The Company believes that these incentives positively impact its performance and operating results.

The Company considers its employee relations to be good.  None of the Company's employees is represented by a labor union, and the Company has experienced no work stoppages.

Since its formation, the Company has experienced rapid growth.  As a result of this growth, the Company has added a significant number of employees and has been required to expend considerable effort in training these new employees.

Properties

The Company's facilities at December 31, 2001 were as follows:

 The Company leases all of its facilities, except for the Santa Monica retail showroom and the Lenexa property, both of which are owned by the Company.  The Company's distribution center serves the Company's Core Business, eCOST.com and eLinux operations, and includes shipping, receiving, warehousing and administrative space.  The Company subleases 105,600 square feet of its distribution center to uBid, and is coterminus with the original building lease.  The PC Mall Corporate Headquarters and Wisconsin Sales Office have leases remaining greater than two years.  All of the other leases have remaining terms less than two years.  The Company intends to sell its Lenexa, Kansas building.  The Distribution Center lease expires April 30, 2002, and the Company is negotiating a three-year extension covering 155,000 square feet.

Regulatory and Legal Matters

The direct response business as conducted by the Company is subject to the Merchandise Mail Order Rule and related regulations promulgated by the Federal Trade Commission and laws or regulations directly applicable to access to or commerce on the Internet.  While the Company believes it is currently in compliance with such laws and regulations and has implemented programs and systems to address its on-going compliance with such regulations, no assurances can be given that new laws or regulations will not be enacted or adopted which might adversely affect the Company's operations.  Due to the increasing popularity and use of the Internet, it is possible that a number of laws and regulations may be adopted with respect to the Internet.  The growth and development of the market for Internet commerce may prompt calls for more stringent consumer protection laws that may impose additional burdens on those companies conducting business over the Internet.  The adoption of any additional laws or regulations may decrease the growth of the Internet, which, in turn, could decrease the demand for and growth of the Company's Internet-based sales. 

Based upon current law, the Company, or various subsidiaries, currently collects and remits sales tax only on sales of its products to residents of the states in which the Company or its respective subsidiaries has a physical presence.  Various state taxing authorities have sought to impose on direct marketers with no physical presence in the taxing state the burden of collecting state sales and use taxes on the sale of products shipped to those states' residents, and it is possible that such a requirement could be imposed in the future.  In addition, a number of bills are pending before federal and state legislatures that would potentially expand the tax collection responsibility of Internet-related companies.  Until these legislative efforts have run their course and the courts have considered and resolved some cases involving these tax collection issues, there can be no assurance that future laws imposing taxes or other regulations on commerce over the Internet would not substantially impair the growth of e-commerce and as a result have a material adverse effect on the Company's business, results of operations and financial condition.

Executive Officers

The executive officers of the Company as of March 29, 2002 and their respective ages and positions are as follows:

 The following is a biographical summary of the experience of the executive officers:

Frank F. Khulusi is a co-founder of the Company and has served as Chairman of the Board and Chief Executive Officer of the Company since the Company's inception in 1987, served as President until July 1999, and resumed the office of President in March 2001.  Mr. Khulusi attended the University of Southern California.

 Theodore R. Sanders has served as Chief Financial Officer since September 1998 and was Vice President - Controller of the Company from May 1997 to September 1998.  Prior to joining the Company, Mr. Sanders spent ten years with the Pittston Company in various senior finance roles including Controller of its Burlington Air Express Global division and Director of Internal Audit.  Mr. Sanders started his career with Deloitte & Touche and rose to the position of Manager.  Mr. Sanders is a C.P.A. and received a B.S.B.A. degree from Nichols College.

Daniel J. DeVries has served as Executive Vice President - Marketing since February 1996 and was Senior Vice President from October 1994 to that time.  Mr. DeVries is responsible for all marketing, consumer sales, purchasing and the retail showroom.  Mr. DeVries' marketing responsibilities include vendor co-op marketing, merchandising, database marketing and Internet marketing.  From April 1993 to October 1994, he held various sales and marketing positions with the Company.  From July 1988 to April 1993, Mr. DeVries was a Regional Manager for Sun Computers, a computer retailer.

Kristin M. Rogers joined the Company in February 2000 and was appointed as Executive Vice President  - Enterprise Sales in June 2001.  Ms. Rogers is responsible for all enterprise sales, which includes all sales divisions selling to businesses, as well as the sales support functions including training, sales operations and recruiting.  Prior to joining PC Mall, Ms. Rogers held a variety of positions with Merisel, a computer wholesale distributor from 1980 through 1999, the most recent position being Senior Vice President and General Manager of the US region.  In addition, Ms. Rogers spent one year (1997) as Executive Vice President and General Manager of the US region for Micro Warehouse, a direct marketer based in Norwalk, Connecticut.  Ms. Rogers received a B.A. degree in Political Science at Bates College (Lewiston, Maine).

CERTAIN FACTORS AFFECTING FUTURE RESULTS

This Annual Report on Form 10-K, including the sections entitled "Business," "Management's Discussion and Analysis of Financial Condition and Results of Operations" and other sections of this Report, contain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, and Section 21E of the Securities Exchange Act of 1934.  Words such as "expect," "anticipate," "intend," "plan," "believe," "estimate," "may," "will," "should," "seeks" and variations of such words and similar expressions are intended to identify such forward-looking statements.  The Company intends such forward-looking statements to be covered by the safe harbor provisions for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995, and the Company is including this statement for purposes of complying with these safe harbor provisions.  The Company has based these forward-looking statements on its current expectations and projections about future events.  These forward-looking statements are not guarantees of future performance and are subject to risks, uncertainties and assumptions, and actual results could differ materially as a result of several factors, including those set forth under this section entitled "Certain Factors Affecting Future Results" and elsewhere herein.  The Company undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

          It is not reasonably possible to itemize all of the many factors and specific events that could affect the Company and/or the computer products and electronics industry as a whole.  However, the discussion below discusses in more detail some of the foregoing factors, as well as additional factors which may affect the Company's actual results and cause such results to differ materially from those projected, forecasted, estimated, budgeted or otherwise expressed in any "forward-looking statements."

The addition of a new business focus could subject the Company to risks commonly associated with a new company.

The Company has historically operated as a direct marketer of computer products, and has only subsequently expanded its business model to include a focus on the business-to-business and Internet markets by developing its portfolio of web site properties.  The Company has only been active in this new line of business since 1995 when the pcmall.com web site was launched.  The Company established uBid.com, an on-line auction web site in 1997, the ecost.com web site in March 1999 and the eLinux.com web site in February 2000, and plans to continue its focus on the business-to-business and Internet market in the future.   The Company does not have a significant operating history to evaluate the new business focus, and past performance should be not relied upon to predict future performance.  In adding a new business focus, the Company expects that it will have to make changes to its business operations, sales and implementation practices, customer service and support operations and management focus.  The Company also faces new risks and challenges, including a lack of meaningful historical financial data upon which to plan future budgets, reliance on the growth and use of the Internet to generate commercial opportunities, competition from a wider range of sources, the need to develop strategic relationships and other risks.  The Company cannot guarantee that it will be able to successfully transition to this new business focus.

Dependence on Apple

 The Company is dependent on sales of Apple computers and software and peripheral products used with Apple computers.  Products manufactured by Apple represented 27.0%, 24.9% and 25.4% of the Company's net sales in 2001, 2000 and 1999, respectively.  A decline in sales of Apple computers or a decrease in supply of or demand for software and peripheral products for such computers could have a material adverse impact on the Company's business.  During parts of 2001, 2000 and 1999, certain Apple computers were in short supply.  A continuation of such shortages or future shortages could adversely affect the Company's operating results.  The Company is an authorized dealer for the full retail line of Apple products; however, the Company's dealer agreement with Apple is terminable upon 30 days' notice.  The Company's business would be adversely affected if all or a portion of the line of Apple products was no longer available to the Company.  The Company's success is, in part, dependent upon the ability of Apple to develop and market products that meet the changing requirements of the marketplace.  To the extent that these products are not available to the Company, the Company could encounter increased price and other competition, which would adversely affect the Company's business, financial condition and results of operations.

 Rapid Growth

 Since its formation, the Company has experienced rapid growth.  Net sales have grown from $8.7 million in 1990 to $718.1 million in 2001.  The Company's direct marketing sales grew from $117.9 million in 1994 to $472.9 million in 2001.  Internet sales on its pcmall.com, macmall.com, ccit-inc.com, ecost.com and elinux.com web sites grew from $15.6 million in 1997 to $215.8 million in 2001.  As a result of the Company's shift from the retail showroom to the Internet sales and catalog distribution channels, retail showroom sales have decreased from 28.0% of net sales in 1994 to 4.1% in 2001.  In response to the growth in catalog and business-to-business sales, the Company has added a significant number of employees and has been required to expend considerable efforts in training these new employees.  This growth has placed strains on the Company's management, resources and facilities.  As part of its growth strategy, the Company may in the future acquire companies in the same or complementary lines of business.  These acquisitions and any such acquisition and the ensuing integration of the operations of the acquired company with those of the Company place additional demands on the Company's management, operating and financial resources.  The Company's success will, in part, be dependent upon the ability of the Company to manage growth effectively.  In addition, the Company's business and growth could be affected by the spending patterns of existing or prospective customers, the cyclical nature of capital expenditures of businesses, continued competition and pricing pressures, changes in the rate of development of new technologies and new products by manufacturers, acceptance by end users and other trends in the general economy.  There can be no assurance that the Company's historical growth will continue in the future.

 Competition

 The retail business for personal computers, electronics and related products is highly competitive, based primarily on price, product availability, speed and accuracy of delivery, effectiveness of sales and marketing programs, credit availability, ability to tailor specific solutions to customer needs, quality and breadth of product lines and services, and availability of technical or product information.  The Company competes with other direct marketers, including CDW, Insight Enterprises, PC Connection and Zones.  In addition, the Company competes with computer retail stores and resellers including superstores such as CompUSA and Best Buy, certain hardware and software vendors such as Gateway and Dell Computer that sell directly to end users, and other direct marketers of hardware, software and computer-related products.  In the direct marketing and Internet retail industries, barriers to entry are relatively low and the risk of new competitors entering the market is high.  Certain existing competitors of the Company have substantially greater financial resources than the Company.  There can be no assurance that the Company can continue to compete effectively against existing competitors, consolidations of competitors or new competitors that may enter the market.  In addition, price is an important competitive factor in the personal computer hardware, software and peripherals market and the market for electronics products, and there can be no assurance that the Company will not be subject to increased price competition, which may have an adverse effect on the Company's business, financial condition and results of operations.  There can be no assurance that the Company will not lose market share or that it will not be forced in the future to reduce its prices in response to the actions of its competitors and thereby experience a further reduction in its gross margins. 

Narrow Gross Operating Margins

 As a result of intense price competition in the computer products and electronics industry, the Company's margins have historically been narrow and are expected to continue to be narrow.  These narrow gross margins magnify the impact on operating results of variations in operating costs and of adverse or unforeseen events.

Potential Quarterly Fluctuations 

The Company experiences variability in its net sales and net income on a quarterly basis as a result of many factors.  These factors include the frequency of catalog mailings, introduction or discontinuation of new catalogs, the introduction of new products or services by the Company and its competitors, changes in prices from suppliers, the loss or consolidation of a significant supplier or customer, general competitive conditions including pricing, the Company's ability to control costs, the timing of capital expenditures, the condition of the personal computer industry and electronics in general, seasonal shifts in demand for computer and electronics products, industry announcements and market acceptance of new products or upgrades, deferral of customer orders in anticipation of new product applications, product enhancements or operating systems, the relative mix of products sold during the period, inability of the Company to obtain adequate quantities of products carried in its catalogs, delays in the release by suppliers of new products and inventory adjustments and expenditures by the Company on new business ventures.  The Company's planned operating expenditures each quarter are based on sales forecasts for the quarter. If sales do not meet expectations in any given quarter, operating results for the quarter may be materially adversely affected. The Company's narrow margins may magnify the impact of these factors on the Company's operating results. The Company believes that period-to-period comparisons of its operating results should not be relied upon as an indication of future performance. In addition, the results of any quarterly period are not necessarily indicative of results to be expected for a full fiscal year.  In certain future quarters, the Company's operating results may be below the expectations of public market analysts or investors.  In such event, the market price of the Company's Common Stock could be materially adversely affected.

 Dependence on Vendors

 The Company purchases all of its products from vendors.  Certain key vendors, including IBM, Hewlett-Packard, Compaq and Apple, provide the Company with trade credit as well as substantial incentives in the form of discounts, credits and cooperative advertising.  Most key vendors have agreements to provide, or otherwise have consistently provided, market development funds to the Company, whereby such vendors finance portions of the cost of catalog publication and distribution based upon the amount of coverage given in the catalogs to their respective products.  Termination or interruption of the Company's relationships with one or more of these vendors, including Apple, or modification of the terms or discontinuance of the agreements and market-development fund programs with these vendors, could adversely affect the Company's operating income and cash flow.  The Company's success is dependent in part upon the ability of its vendors to develop and market products that meet the changing requirements of the marketplace.  Substantially all of the Company's contracts with its vendors are terminable upon 30 days' notice or less.  In most cases, the Company has no guaranteed price or delivery arrangements with its suppliers.  As a result, the Company has experienced and may in the future experience short-term inventory shortages on certain products.  In addition, manufacturers who currently sell their products through the Company may decide to sell their products directly or through resellers or channels other than the Company.  Further, the personal computer industry experiences significant product supply shortages and customer order backlogs from time to time due to the inability of certain manufacturers to supply certain products as needed.  There can be no assurance that suppliers will be able to maintain an adequate supply of products to fulfill the Company's customers' orders on a timely basis or that the Company will be able to obtain particular products or that a product line currently offered by suppliers will continue to be available.  Similarly, there can be no assurance that the Company will be able to obtain authorizations from new vendors which may introduce new products that create market demand.

 Business Interruption; Facilities

The Company believes that its success to date has been, and future results of operations will be, dependent in large part upon its ability to provide prompt and efficient service to its customers.  The Company has taken several precautionary steps to help minimize the impact of disasters that might cause business interruptions.  There can be no assurance that a disruption will not occur; however, any disruption of the Company's day-to-day operations including those caused by natural disasters, acts or threats of war, terrorism or other conflict could have a material adverse effect upon the Company, and any interruption, corruption, degradation or failure of the Company's management information systems, distribution center, web site or telephone system could impair its ability to receive and process customer orders and ship products on a timely basis.  The Company does not have a redundant telephone system and does not have a backup or redundant call center.

 Changing Methods of Distribution

 The manner in which computer and electronics products are distributed and sold is changing, and new methods of sale and distribution, such as the Internet, have emerged.  Computer hardware and software vendors have sold, and may intensify their efforts to sell, their products directly to end users.  From time to time, certain vendors have instituted programs for the direct sale of large quantities of hardware and software to certain major corporate accounts.   These types of programs may continue to be developed and used by various vendors.  Vendors also may attempt to increase the volume of software products distributed electronically to end users' personal computers.  Any of these competitive programs, if successful, could have a material adverse effect on the Company's business, financial condition and results of operations.

 Dependence on Independent Shipping Companies

The Company relies almost entirely on arrangements with independent shipping companies, especially Federal Express and UPS, for the delivery of its products.  The disruption or termination of the Company's arrangements with Federal Express, UPS or other shipping companies, or the failure or inability of one or more shipping companies to deliver products from the Company to its customers, or from suppliers to the Company, could have a material adverse effect on the Company's business, financial condition and results of operations.

 Postage, Shipping and Paper Costs

 Postage and shipping are significant expenses in the operation of the Company's business.  The Company ships its products to customers by overnight delivery and ground delivery services and generally mails its catalogs through the U.S. Postal Service.  Any increases in postal or shipping rates in the future could have a material adverse effect on the business, financial condition and results of operations.  The cost of paper is also a significant expense of the Company in printing its catalogs.  The cost of paper has fluctuated significantly over the last several years.  While the Company believes that it may be able to recoup a portion of any increased postage and paper costs through increases in vendor advertising rates, no assurance can be given that such advertising rate increases can be sustained or that they will offset all of the increased costs.

 Risk of Technological Changes and Inventory Obsolescence

 The market for personal computers, peripherals, software and electronics products is characterized by rapid technological change and a growing diversity of products.  The Company's success depends in large part on its ability to identify and obtain the right to market products that will meet the changing requirements of the marketplace.  There can be no assurance that the Company will be able to identify and offer products necessary to remain competitive or avoid losses related to excess and obsolete inventory.  The Company currently has limited return rights with respect to products which it purchases from Apple, IBM, Compaq, Hewlett-Packard and certain other vendors; however, such rights vary by product line, have other conditions and limitations and can be terminated or changed at any time.

 State Sales Tax Collection

 Based upon current law, the Company, or various subsidiaries, currently collects and remits sales tax only on sales of its products to residents of the states in which the Company or its respective subsidiaries has a physical presence.  The U.S. Supreme Court has ruled that the various states, absent Congressional legislation, may not impose tax collection obligations on an out-of-state mail order company whose only contacts with the taxing state are distribution of catalogs and other advertisement materials through the mail, and whose subsequent delivery of purchased goods is by mail or interstate common carriers.   Certain court cases have upheld tax collection obligations on  companies, including mail order companies, whose contacts with  the taxing state was quite limited (e.g., visiting the state several times a year to aid customers or  to inspect showrooms stocking their goods).  The Company believes its operations are different from the operations of the companies in  these cases and thus do not give rise to tax collection obligations.

However, the Company cannot predict the level of contact with any state which would give rise to future or past tax collection obligations.   The tax treatment of the Internet and e-commerce is currently  in a state of flux.   Various state taxing authorities have sought to impose on direct marketers with no physical presence in the taxing state the burden of collecting state sales and use taxes on the sale of products shipped to those states' residents, and it is possible that such a requirement could be imposed in the future.  In addition, a number of bills are pending before federal and state legislatures that would potentially expand the tax collection responsibility of Internet-related companies.  It is possible that federal legislation could be enacted that would permit states to impose sales tax collection obligations on out-of-state mail order companies and if enacted, the imposition of a tax collection obligation on the Company may result in additional administrative expenses to the Company and price increases to its customers that could adversely affect the Company's business, financial condition and results of operations.  States also potentially may expand tax collection responsibilities of out-of-state companies through legislation.  Until these legislative efforts have run their course and the courts have considered and resolved some cases involving tax  collection issues, there can be no assurance that future laws imposing taxes or other regulations on commerce over the Internet would not substantially impair the growth of e-commerce and as a result have a material adverse effect on the Company's business, results of operations and financial condition.

Industry Evolution and Price Reductions

 The personal computer industry is undergoing significant change.  In addition, in recent years a number of new, cost-effective channels of distribution have developed in the industry, such as the Internet, computer superstores, consumer electronic and office supply superstores, national direct marketers and mass merchants.  Computer resellers are consolidating operations and acquiring or merging with other resellers and/or direct marketers to achieve economies of scale and increased efficiency.  The current industry reconfiguration and the trend towards consolidation could cause the industry to become even more competitive, further increase pricing pressures and make it more difficult for the Company to maintain its operating margins or to increase or maintain the same level of net sales or gross profit.  Declining prices, resulting in part from technological changes, may require the Company to sell a greater number of products to achieve the same level of net sales and gross profit.  Such a trend could make it more difficult for the Company to continue to increase its net sales and earnings growth.  In addition, the personal computer market has experienced rapid growth.  If the growth rate of the personal computer market were to decrease, the Company's business, financial condition and operating results could be adversely affected.

 Management Information Systems

The Company's success is in part dependent on the accuracy and proper utilization of its management information systems, including its telephone system.  The Company's ability to analyze data derived from its management information systems to increase product promotions, manage inventory and accounts receivable collections, to purchase, sell and ship products efficiently and on a timely basis and to maintain cost-efficient operations, are each dependent upon the quality and utilization of the information generated by its management information systems.  During 1995, the Company significantly upgraded its management information system hardware and software.  The Company believes that to remain competitive it will be necessary to upgrade its management information systems on a continuing basis.  In addition to the costs associated with such upgrades, the transition to and implementation of new or upgraded hardware or software systems can result in system delays or failures which could impair the Company's ability to receive and process orders and ship products in a timely manner.  The Company does not currently have a redundant or back-up telephone system, and any interruption in telephone service including those caused by natural disasters could have a material adverse effect on the Company's business, financial condition and results of operations.

 Dependence on Senior Management

The Company's future performance will depend to a significant extent upon the efforts and abilities of certain key management personnel, including Frank Khulusi, Chairman of the Board, President and Chief Executive Officer.  The Company has a $3 million key man life insurance policy on Mr. Khulusi.  The loss of service of one or more of the Company's key management personnel could have an adverse effect on the Company's business.  The Company's success and plans for future growth will also depend in part on management's continuing ability to hire, train and retain skilled personnel in all areas of its business.

 Management of Growth

The rapid growth of the Company's business has required the Company to make significant additions in personnel and has significantly increased the Company's working capital requirements.  Although the Company has experienced significant sales growth, such growth should not be considered indicative of future sales growth.  Such growth has resulted in new and increased responsibilities for management personnel and has placed and continues to place significant strain upon the Company's management, operating and financial systems, and other resources.  There can be no assurance that this strain will not have a material adverse effect on the Company's business, financial condition, and results of operations, nor can there be any assurance that the Company will be able to attract or retain sufficient personnel to continue the expansion of its operations.  Also crucial to the Company's success in managing its growth will be its ability to achieve additional economies of scale.  There can be no assurance that the Company will be able to achieve such economies of scale, and the failure to do so could have a material adverse effect upon the Company's business, financial condition and results of operations.

Acquisitions

As part of its growth strategy, the Company acquired two marketers of computers and computer-related products in 1997 and may continue to pursue acquisitions of companies that would either complement or expand its existing business.  No assurance can be given that the benefits expected from the integration of acquired companies will be realized.  In addition, acquisitions involve a number of risks and difficulties, including expansion into new geographic markets and business areas, the diversion of management's attention to the assimilation of the operations and personnel of the acquired company, the integration of the acquired Company's management information systems with those of the Company, potential short-term adverse effects on the Company's operating results and the amortization of acquired intangible assets.  Any delays or unexpected costs incurred in connection with the integration of acquired operations could have a material adverse effect on the Company's business, financial condition and results of operations.  There can be no assurance that the Company will be able to implement or sustain its acquisition strategy or that its strategy will ultimately prove profitable for the Company.

Possible Volatility of Stock Price

The Company believes certain factors, such as sales of the Company's Common Stock into the market by existing stockholders, fluctuations in quarterly operating results and market conditions generally, including market conditions affecting stocks of computer hardware and software manufacturers and resellers and companies in the Internet and electronic commerce industries in particular, and other technology or related stocks, could cause the market price of the Company's Common Stock to fluctuate substantially.  The stock market in general, and the stocks of computer and software resellers, and companies in the Internet and electronic commerce industries in particular, and other technology or related stocks, have in the past experienced extreme price and volume fluctuations which have been unrelated to corporate operating performance.  Such market volatility may adversely affect the market price of the Company's Common Stock. 

 The Company's Common Stock is presently authorized for quotation on the Nasdaq National Market. Accordingly, the Company is subject to all requirements of its listing agreement with Nasdaq.  Among the events that could cause the Company's Common Stock to have its status as a National Market security terminated include the failure to maintain a minimum closing bid price for the Common Stock of $1.00 per share, failure to timely hold annual meetings of stockholders and failure to comply with other corporate governance requirements.  Any delisting of the Company's Common Stock from the Nasdaq National Market could have a material adverse effect on the liquidity and market price of the Company's Common Stock.

Privacy Concerns

 The Company mails catalogs and sends electronic messages to names in its proprietary customer database and to potential customers whose names the Company obtains from rented or exchanged mailing lists.  Worldwide public concern regarding personal privacy has subjected the rental and use of customer mailing lists and other customer information to increased scrutiny.  Any domestic or foreign legislation enacted limiting or prohibiting these practices could negatively affect the Company's business, financial condition and results of operations.

Dependence on Continued Use of Internet

The Company's level of sales generated from its worldwide web sites has increased in part because of the growing use and acceptance of the Internet by end-users.  The growth in Internet usage is a relatively recent development, and no assurance can be made that the Internet will continue to develop or that a sufficiently broad base of consumers will adopt and continue to use the Internet and other online services as a medium of commerce.  Sales of computer products over the Internet have increased as a percentage of the Company's net sales in recent years.  Continued growth of the Company's Internet sales is dependent on potential customers using the Internet in addition to traditional means of commerce to purchase products.  The Company cannot accurately predict the rate at which they will do so.  If the use by consumers of the Internet to purchase products does not continue, the Company's business, financial condition and results of operations could be adversely affected.

The Company's success in maintaining and growing its Internet business will depend in large part upon the development of an infrastructure for providing Internet access and services.  If the number of Internet users or their use of Internet resources continues to grow rapidly, such growth may overwhelm the existing Internet infrastructure.  The Company's ability to increase the speed with which it provides services to customers and to increase the scope of such services ultimately is limited by and reliant upon the speed and reliability of the networks operated by third parties.  The Company cannot assure that networks and infrastructure providing sufficient capacity and reliability will continue to be developed.

ITEM 2.  PROPERTIES

See "Properties" in Item 1 above.

 ITEM 3. LEGAL PROCEEDINGS

The Company is subject to various legal proceedings or claims which arise in the ordinary course of business.  In the opinion of management, the amount of ultimate liability with respect to those actions will not materially affect the Company's business, financial condition or results of operations.

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

 No matter was submitted to a vote of security holders during the fourth quarter of 2001.

PART I

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

 The Common Stock of the Company has been traded on the Nasdaq National Market since the Company's initial public offering on April 4, 1995 (the "IPO").  Prior to the IPO, there was no public market for the Company's Common Stock.  The following table sets forth the range of high and low closing sales prices for the Company's Common Stock for the periods indicated, as reported by the Nasdaq National Market.

		Price Range of Common Stock
		High	Low
Year Ended December 31, 1999
	First Quarter	$43.25	$25.13
	Second Quarter	39.13	6.06
	Third Quarter	7.88	5.25
	Fourth Quarter	11.00	5.75
Year Ended December 31, 2000
	First Quarter	14.06	7.13
	Second Quarter	10.06	3.66
	Third Quarter	4.56	2.59
	Fourth Quarter	3.13	0.53
Year Ended December 31, 2001
	First Quarter	2.50	0.81
	Second Quarter	2.01	1.00
	Third Quarter	3.50	1.43
	Fourth Quarter	4.06	1.73

On March 28, 2002, the closing price of the Company's Common Stock as reported on the Nasdaq National Market was $4.40 per share.  As of March 28, 2002, there were approximately 52 holders of record of the Common Stock.

On June 7, 1999, the Company distributed to its stockholders all of the 7.3 million shares of common stock of uBid, Inc. owned by the Company, representing approximately 80.1% of the outstanding stock of uBid.  Each of the holders of the Company's Common Stock entitled to the distribution received approximately .70488 shares of uBid common stock for each share of the Company's Common Stock held by such stockholders on May 24, 1999.  On June 8, 1999, the Company's Common Stock traded ex-dividend to reflect the spin-off of uBid, and its closing price on the Nasdaq National Market on that date was $8.6875.

The Company has never paid and has no present plans to pay any cash dividends on its capital stock.  The Company intends to retain its earnings to finance the growth and development of its business.

 ITEM 6.  SELECTED FINANCIAL DATA

The following selected consolidated financial data are qualified by reference to, and should be read in conjunction with, the Company's Consolidated Financial Statements and the notes thereto, and "Management's Discussion and Analysis of Financial Condition and Results of Operations" contained elsewhere herein.  The selected income statement data for the years ended December 31, 1999, 2000 and 2001 and the selected balance sheet data as of December 31, 2000 and 2001 are derived from the Company's audited consolidated financial statements, which are included elsewhere herein.  The selected income statement data for the years ended December 31, 1997 and 1998 along with the balance sheet data as of December 31, 1997, 1998 and 1999 are derived from the audited consolidated financial statements of the Company which are not included herein.  The selected operating data are derived from the operating records of the Company and have not been audited.

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis of the Company's financial condition and results of operations should be read in conjunction with the Company's consolidated financial statements and notes thereto included elsewhere herein.

Overview

The Company began operations in May 1987 as a mail order company and opened its first retail computer showroom in August 1987.  After opening its first retail showroom, the Company conducted mail order operations from one of its retail showroom locations.  The Company became an authorized Apple dealer in 1991. During 1997, the Company operated four retail showrooms in Southern California under the name Creative Computers and three retail showrooms in Illinois and one retail showroom in Indiana under the name of Elek-Tek.  During the first quarter of 1998, the Company closed all but one of its retail showrooms.

In 1993, the Company shifted its principal distribution and marketing focus from retail showrooms to direct mail marketing distribution and relocated its mail order/catalog operations to a central location.  In 1994, the Company received authorization from Apple to offer the full retail line of Apple products via direct mail and the Company distributed the first edition of its MacMall catalog in April 1994.

In 1998, the Company modified its strategic focus to acquiring small-to-medium size business customers and established an outbound relationship-based direct marketing model.  The outbound direct marketing model involves hiring and training technical sales executives, developing qualified business leads and establishing business relationships with IT professionals.

During 1999, the Company successfully completed a spin-off of its former subsidiary, uBid, Inc., to the Company's stockholders.  Consistent with its strategic focus on the business-to-business and Internet markets, the Company formed a new subsidiary, eCOST.com, a multi-category Internet retail web site, in February 1999.  In December 1999, the Company formed its eLinux subsidiary to provide products, news, discussion groups, services and support to the Linux community.

During 2000, the Company shifted its strategy to focus primarily on its outbound direct marketing operations.  Accordingly, the Company changed its operating strategy for its start-up businesses, eCOST.com and eLinux, emphasizing profitability over growth.

Net sales from direct marketing operations, as a percentage of net sales, were  65.9%, 70.2% and 76.2% in 2001, 2000 and 1999 respectively, with an average order size of $739, $837, and $637 for those respective years.  Net sales from the Internet, as a percentage of net sales, were 30.0%, 25.4% and  19.0% in 2001, 2000 and 1999 respectively, with an average order size of $608,  $533 and $414 for those respective years.

Net sales of the Company are derived primarily from the sale of computer hardware, software, peripherals, and electronic products to businesses, government and educational institutions as well as individual consumers through relationship-based direct marketing techniques, direct response catalogs, dedicated inbound telemarketing sales executives, the Internet, a direct sales force, and a retail showroom. Gross profit consists of net sales less product and shipping costs. The Company receives marketing development funds ("MDF") from manufacturers of products included in the Company's catalogs and web sites, as well as co-operative advertising funds ("Co-Op") on products purchased from manufacturers and vendors.

A substantial portion of the Company's business is dependent on sales of Apple computers and software and peripheral products used with Apple computers. Products manufactured by Apple represented approximately 27.0%, 24.9% and  25.4% of the Company's net sales in 2001, 2000 and 1999, respectively.

Results of Operations

The following table sets forth for the years indicated information derived from the Company's consolidated statement of operations expressed as a percentage of net sales.  Results for the year ended December 31, 1999 have been restated to reflect the results of uBid as discontinued operations. There can be no assurance that trends in sales gross profit or operating results will continue in the future.

Year Ended December 31, 2001 Compared to the Year Ended December 31, 2000

Net sales in  2001 were $718.1 million, a decrease of $100.5 million or 12.3% from net sales of $818.6 million in 2000.  The Company's Core Business net sales declined 11.0% to $625.0 million in 2001.  The Core Business sales decline in 2001 resulted from reduced demand and lower selling prices of technology products due to the economic recession and the effect of the September 11th attacks.  Further, net catalog circulation in 2001 decreased 12.0%, or 5.9 million catalogs to 43.4 million,  comprised of 29.7 million and 13.7 million MacMall and PC Mall catalogs, respectively.  Retail net sales included in the Core Business declined $6.5 million or 18.0% in 2001 to $29.4 million.  The decline was partially offset by an increase in Core Business Internet sales of $33.7 million, a 35.0% increase over 2000.  Net sales for the Company's eCOST.com segment in 2001 declined $25.3 million or 23.0% over 2000  because of a significant reduction of advertising expenditures and increases in product margins to sustainable levels.  The Company's eLinux segment reported net sales growth in 2001 of 34.5% to $8.4 million from $6.2 million in 2000.  Total PC platform revenues were $437.7 million, a  decrease of $60.7 million, or 12.2% over 2000 PC platform revenue of $498.4 million.    Total sales of  Mac platform products in 2001 was $280.4 million, a decrease of $39.8 million, or 12.4% compared to $320.2 million in 2000.  

Gross profit increased as a percentage of net sales to 11.0% in 2001, versus 10.7% in 2000.  The gross profit percentage in 2001 was positively affected by eCOST.com, which nearly doubled its margin percentage from 2000,  partially offset by a decline in the Core Business margin to 11.3% from 11.7% of sales in 2000, due to market conditions.  eCOST.com gross profit increased 49.5% to $7.7 million in 2001, from $5.2 million in 2000 as a result of its focus on profitability.  Core Business gross profit declined 14.1% to $70.5 million in 2001 primarily as a result of decreased net sales.  eLinux gross profit increased in 2001 by $0.1 million or 21.0% over 2000.  Gross profit margin may vary depending on various factors, including outbound sales initiatives, fluctuations in key vendor support programs and price protections, product mix, market conditions and other factors.

Selling, general and administrative expenses (SG&A) declined $21.8 million in 2001, or 22.8% from 2000 due to companywide cost containment efforts, combined with increased productivity in net advertising expense.  The decline in SG&A expenditures resulted in a decrease in SG&A as a percentage of net sales, decreasing to 10.3% in 2001 from 11.7% in 2000.  Core Business SG&A declined $12.3 million in 2001, or 15.9% primarily due to cost containment efforts and optimization of advertising expenditures.  Core Business SG&A as a percentage of net sales declined to 10.4% from 11.0% in 2000.  eCOST.com SG&A decreased 50.1% in 2001, to $7.3 million, from $14.6 million in 2000, resulting primarily from reduced adverting expenditures.  eCOST.com SG&A as a percentage of net sales declined to 8.6% in 2001, versus 13.3% in 2000.  SG&A expenses for eLinux were $1.3 million in 2001, a decrease of $2.1 million, or 61.6% from $3.5 million in the prior year due primarily to reduced advertising expenditures.  As a percentage of net sales, eLinux SG&A declined to 15.9% in 2001, versus 55.6% in 2000.

Net interest expense was $0.7 million for the year ended December 31, 2001 compared to $0.9 million net interest expense for the year ended December 31, 2000.  The decrease was due to reduced borrowings and outstanding debt throughout the year of 2001 versus 2000, as well as reduced borrowing rates.

No income tax provision was recorded for the year ended December 31, 2001 or for the year ended December 31, 2000;  as such, the effective tax rate was 0% for both years.

Year Ended December 31, 2000 Compared to the Year Ended December 31, 1999

Net sales for the year ended December 31, 2000 were $818.6 million, an increase of $88.4 million or 12.1% over net sales for the year ended December 31, 1999 of $730.2 million. Telemarketing/catalog sales for 2000 were $575.0 million, an increase of $18.5 million or 3.3% compared to 1999 telemarketing/catalog sales of $556.5 million. The increase in telemarketing/catalog sales is primarily due to higher revenue per book and average order value. Net catalog circulation in 2000 decreased 16.4%, or 9.7 million catalogs to 49.3 million, of which MacMall comprised 29.5 million, PC Mall 18.0 million and ComputAbility 1.8 million. The ComputAbility catalog was merged with PC Mall during 2000. Internet sales in 2000 were $207.8 million, an increase of 49.5%, or $68.8 million over 1999. Retail net sales in 2000 were $35.8 million, an increase of 3.2%, or $1.1 million from 1999. PC platform net sales increased 21.5% to $498.4 million in 2000, versus $410.2 million in 1999. Sales for eCOST.com were $110.0 million, an increase of $73.2 million, or 199% over 1999 sales of $36.8 million. Sales for eLinux were $6.2 million in its first year of operations.

Gross profit for the year ended December 31, 2000 was $87.8 million, an increase of $8.3 million or 10.4% from gross profit of $79.6 million for the year ended December 31, 1999. The increase in gross profit was primarily due to the sales increase in 2000 over 1999, partially offset by a slight decrease in overall margin as a percentage of sales. Gross profit as a percentage of sales was 10.7% in 2000, versus 10.9% in 1999. The gross profit percentage was negatively affected by lower margins experienced by eCOST.com, primarily in the first half of the year, and other factors, including outbound sales initiatives and fluctuations in key vendor support programs, offset by an improvement in the core business margin to 11.6% from 11.4% of sales in 1999. Completing its second year of operations, gross profit for eCOST.com was $5.2 million for the year ended December 31, 2000, an increase of 1,877% or $4.9 million over 1999 gross profit of $0.3 million. Gross profit for eLinux was $0.7 million for the year ended December 31, 2000, its first year of operations.

Selling, general and administrative expenses (SG&A) were $95.5 million for the year ended December 31, 2000, an increase of $11.8 million or 14.2% over SG&A expenses of $83.7 million for the year ended December 31, 1999. As a percentage of net sales, SG&A expenses were 11.7% in 2000, versus 11.5% in 1999, the increase due to higher advertising expenditures in the first half of the year. For its second year of operations, SG&A expenses for eCOST.com were $14.6 million for the year ended December 31, 2000, versus $6.4 million in the prior year, primarily due to advertising increases. For its first year of operations SG&A expenses for eLinux were $3.5 million for the year ended December 31, 2000.

Net interest expense was $0.9 million for the year ended December 31, 2000 compared to $0.2 million net interest income for the year ended December 31, 1999. The increase was due to increased debt outstanding in 2000 versus 1999.

No income tax provision was recorded for the year ended December 31, 2000 versus a provision of $0.8 million for the year ended December 31, 1999. As such, the effective tax rate for 2000 was 0%, compared with 20.8% in 1999. The change in effective tax rate is primarily due to the provision of valuation allowance against deferred tax assets.

Liquidity and Capital Resources

The Company's primary capital need has been funding the working capital requirements created by its growth in sales.  Historically, the Company's primary sources of financing have come from cash flow from operations, public offerings and borrowings from its stockholders, private investors and financial institutions. In April and August 1995, the Company completed an initial public offering and a follow on offering of its Common Stock which resulted in aggregate net proceeds to the Company of approximately $46.6 million. Cash flows from operations were $14.9 million, $(28.0) million, and $21.5 million for 2001, 2000 and 1999, respectively.

Inventory increased $10.2 million in 2001 and inventory turns declined to 15.7  from 18.5 in 2000.  Inventory increased at the end of 2001 versus 2000 as a result of strategic purchases made at the end of 2001.  Accounts receivable decreased $16.3 million to $38.7 million during 2001, primarily due to strong cash collections and improved days sales outstanding.

For the year ended December 31, 2001, the Company's capital expenditures were $1.3 million compared to $4.4 million in 2000 and $4.2 million in 1999. The Company's primary capital needs will continue to fund its working capital requirements for anticipated sales growth, possible acquisitions and new business ventures.

In March 2001, the Company replaced its existing $40 million credit facility with a new $75 million, three-year asset-based revolving credit facility from a lending unit of a large commercial bank (the "New Line of Credit").  The New Line of Credit functions as a working capital line of credit with a borrowing base of inventory and accounts receivable, and bears interest at prime with a LIBOR option.  At December 31, 2001, the Prime Rate was 4.75%.  The New Line of Credit is secured by substantially all of the Company's assets.  The New Line of Credit has as its single financial covenant a minimum tangible net worth requirement and also includes a commitment fee of 0.25% annually on the unused portion of the line up to $60 million.  In addition, in March 2001, the Company entered into a new $40 million flooring credit facility, which functions in lieu of a vendor trade payable for inventory purchases and does not bear interest if paid within terms specific to each vendor (the "New Flooring Facility").  The New Flooring Facility is secured by substantially all of the Company's assets and is also supported by a letter of credit issued under the New Line of Credit in the amount outstanding under the New Flooring Facility from time to time.  The amount of the Letter of Credit is applied against the credit limit under the New Line of Credit.  The Company had $4.6 million of borrowings under the credit facility included in accounts payable and $1.6 million of net working capital advances outstanding at December 31, 2001.

At December 31, 2001 and 2000, the Company had cash and short-term investments of $10.0 million and $12.2 million, respectively, and working capital of $17.3 million and $10.2 million, respectively.  The Company has historically funded its operations through a combination of operating cash flow, current working capital and available lines of credit.  The Company believes that current working capital, together with cash flows from operations and available lines of credit, will be adequate to support the Company's current operating plans through 2002.  However, if the Company needs extra funds, such as for acquisitions or expansion or to fund a significant downturn in sales that causes losses, there are no assurances that adequate financing will be available at acceptable terms, if at all.

In July 1996, the Company announced its plan to repurchase up to 1,000,000 shares of its Common Stock. The shares will be repurchased from time to time at prevailing market prices, through open market or negotiated transactions, depending upon market conditions. No limit was placed on the duration of the repurchase program. There is no guarantee as to the exact number of shares that the Company will repurchase. Subject to applicable securities laws, repurchases may be made at such times and in such amounts as the Company's management deems appropriate. The program can also be discontinued at any time management feels additional purchases are not warranted. As of December 31, 2001, the Company has repurchased 15,000 shares.

As part of its growth strategy, the Company may, in the future, acquire other companies in the same or complementary lines of business, and pursue other business ventures. Any launch of a new business venture or any acquisition and the ensuing integration of the operations of the acquired company with those of the Company would place additional demands on the Company's management, operating and financial resources.  

Inflation

Inflation has not had a material impact upon operating results, and the Company does not expect it to have such an impact in the near future. There can be no assurances, however, that the Company's business will not be so affected by inflation.

Impact of Recently Issued Accounting Standards

In July 2001, the FASB issued SFAS No. 142, "Goodwill and Other Intangible Assets."  SFAS 142, which changes the accounting for goodwill and indefinite-lived intangible assets from an amortization method to an impairment-only approach, will be effective for fiscal years beginning after December 15, 2001.  The Company has not determined the full impact that adoption of this Standard will have on its consolidated financial statements.  However, the Company does anticipate that selling, general and administrative expenses will be reduced by approximately $0.5 million per year due to the discontinuance of goodwill amortization as required by the Standard. 

In August 2001, the FASB issued SFAS No. 144, "Accounting for the Impairment of Long-Lived Assets."  SFAS No.144 supercedes FAS No. 121," Accounting for the Impairment of Long-Lived Assets and Long-Lived Assets to be Disposed Of" and APB Opinion No. 30, "Reporting Extraordinary, Unusual and Infrequently Occurring Events and Transactions" and amends APB No. 51, "Consolidated Financial Statements."  This Statement was issued to address the accounting for a segment of a business accounted for as a discontinued operation under APB No. 30 and to establish a single accounting model based on the framework established in FAS No. 121, for long-lived assets to be disposed of by sale.  The Statement is effective for financial statements issued for fiscal years beginning after December 15, 2001.  The adoption of this statement will not have a material impact on the Company's consolidated financial statements.

Critical Accounting Policies

The Company has identified the following as its critical accounting policies:

Revenue Recognition.  Net sales include product sales, net of returns and allowances, and gross outbound shipping and handling charges.  The Company recognizes revenue from product sales, net of discounts, coupon redemption and estimated sales returns, when title to products sold has transferred to the customer, generally upon the receipt of products by the customer.  The Company offers a 30-day return policy on selected items based on manufacturer return policies, and provides an allowance for sales returns based on historical experience.  For all product sales shipped directly from suppliers to customers, the Company takes title to the products sold upon shipment, bears credit risk, and bears inventory risk for returned products that are not successfully returned to suppliers; therefore, these revenues are recognized at gross sales amounts.  

Allowance for Doubtful Accounts Receivable.  The Company maintains an allowance for doubtful accounts receivable based upon estimates of future collection.  The Company extends credit to its customers based upon an evaluation of each customer's financial condition and credit history, and generally does not require collateral.  The Company continually evaluates its customers' financial condition and credit history in determining the adequacy of  its allowance for doubtful accounts.  The Company also maintains an allowance for uncollectible vendor receivables which arise from vendor rebate programs, price protections and other promotions.  The Company determines the sufficiency of the vendor receivable allowance based various factors, including payment history.  Amounts received from vendors may vary from amounts recorded because of potential non-compliance with certain elements of vendor programs.

Reserve for Inventory Obsolescence.  The Company maintains allowances for the valuation of its inventory by estimating the obsolete or unmarketable inventory based on the difference between inventory cost and market value determined by general market conditions,  nature, age and type of of each product.  The Company continually evaluates the adequacy of its inventory reserve.

Deferred Advertising Revenue and Costs.  The Company produces and circulates catalogs at various dates throughout the year and  receives market development funds and cooperative (co-op) advertising funds from vendors included in each catalog.  These funds are recognized based on sales generated over the life of the catalog, approximately eight weeks.  The costs of developing, producing and circulating each catalog are deferred and charged to advertising expense at the same rate as the co-op revenue based on the life of the catalog.  Deferred advertising revenue is included in accrued expenses and other current liabilities, offset by deferred advertising costs, which are included in prepaid expenses and other current assets.

Contractual Obligations

The following tables set forth the Company's future contractual obligations and other commercial commitments as of December 31, 2001 (in thousands):

Contractual obligations	Total	Less than 1 year	1-3 years	4-5 years	After 5 years
Long-term debt	$     1,250	$     1,000	$       250	$         -	$         -
Operating leases	10,548	2,450	4,111	2,941	1,046
Capital lease obligations	655	507	148	-	-
Total contractual cash obligations	$   12,453	$     3,957	$    4,509	$  2,941	$  1,046

Other commercial commitments	Total	Less than 1 year	1-3 years	4-5 years	After 5 years
Lines of credit	$   6,161	$     6,161	-	-	-

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The Company's financial instruments include cash and long-term debt. At March 29, 2002, the carrying values of the Company's financial instruments approximated their fair values based on current market prices and rates.

It is the Company's policy not to enter into derivative financial instruments. The Company does not have any significant foreign currency exposure since it does not transact business in foreign currencies. Therefore, the Company does not have significant overall currency exposure at March 29, 2002.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

The information required by this item is contained in the financial statements listed in Item 14(a) under the caption "Consolidated Financial Statements" and commencing on page F-1 of this Report.

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

None.

PART III 

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

 Information regarding directors of the Company is set forth under the caption "Election of Directors," in the Company's definitive Proxy Statement to be filed in connection with its 2002 Annual Meeting of Stockholders and such information is incorporated herein by reference. A list of executive officers of the Company is included in Part I of this report.

ITEM 11. EXECUTIVE COMPENSATION 

The information required by this item is set forth under the caption "Executive Compensation and Other Information" and "Election of Directors - Compensation of Directors" in the Company's definitive Proxy Statement to be filed in connection with its 2002 Annual Meeting of Stockholders and such information is incorporated herein by reference.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The information required by this item is set forth under the caption "Security Ownership of Certain Beneficial Owners and Management" in the Company's definitive Proxy Statement to be filed in connection with its 2002 Annual Meeting of Stockholders and such information is incorporated herein by reference.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

The information required by this item is set forth under the captions "Certain Relationships and Related Transactions" and "Compensation Committee Interlocks and Insider Participation" in the Company's definitive Proxy Statement to be filed in connection with its 2002 Annual Meeting of Stockholders and such information is incorporated herein by reference.

PART IV

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

 The following consolidated financial statements of the Company are filed as part of this report:

(a) (1) Consolidated Financial Statements.  See Consolidated Financial Statements beginning on page F-2.

      (2) Financial Statement Schedules.  See Schedule II, Valuation and Qualifying Accounts in the Consolidated Financial Statements.

      (3) Exhibits.

      The following exhibits are filed or incorporated by reference as part of this report:

Exhibit Number	Description
3.1	Certificate of Incorporation of the Company (1)
3.1(A)	Certificate of Amendment of Certificate of Incorporation, dated June 1, 2000 (13)
3.1(B)	Certificate of Amendment of Certificate of Incorporation, dated June 19, 2001 (14)
3.2	Amended and Restated Bylaws of the Company (13)
10.1*	Amended and Restated 1994 Stock Incentive Plan (10)
10.2*	Employment Agreement dated January 1, 1995, between Creative Computers, Inc. and Frank F. Khulusi (1)
10.4*	Employment Agreement dated January 1, 1994, between Creative Computers, Inc. and Dan DeVries (1)
10.18*	Directors' Non-Qualified Stock Option Plan, amended and restated as of May 18, 1999 (7)
10.25	Industrial Lease Agreement between Corporate Estates, Inc. and Creative Computers, Inc. dated September 15, 1995 for the premises located at 4515 E. Shelby Drive, Memphis, Tennessee, filed in connection with the Company's 10-Q for the quarter ended September 30, 1995 (4)
10.28	Authorized Apple Dealer U.S. Sales Agreement dated August 29, 1996; Authorized Apple Catalog Reseller Sales Agreement dated August 29, 1996; Dealer Apple Authorized Service Provider Agreement dated August 29, 1996; Apple Corporate Alliance Program Addendum to the Authorized Apple Dealer Sales Agreement dated August 29, 1996 (4)
10.35	Separation and Distribution Agreement by and between Creative Computers, Inc. and uBid, Inc., dated as of December 7, 1998, as amended (7)
10.37(A)	Tax Indemnification and Allocation Agreement by and between Creative Computers, Inc. and uBid, Inc., dated as of December 7, 1998, as amended (8)
10.37(B)	Amendment No. 1 to the Tax Indemnification and Allocation Agreement by and among uBid, Creative Computers and CMGI, Inc., dated as of February 9, 2000 (9)
10.38	Sublease Agreement between Creative Computers, Inc. and uBid, Inc., dated as of July 1, 1998 (6)
10.41(A)	Sublease Agreement between Creative Computers, Inc. and uBid, Inc., dated as of December 1, 1999  (12)
10.41(B)	Amendment No. 1 to the Sublease Agreement between the Company and uBid, Inc., dated as of February 1, 2001
10.43	Loan and Security Agreement, dated March 7, 2001, between Congress Financial Corporation and IdeaMall, Inc. and Subsidiaries (13)
10.44	Agreement for Wholesale Financing dated March 15, 2001, between Deutsche Financial Services and IdeaMall, Inc. and Subsidiaries (13)
10.45*	Employment Agreement dated January 20, 2000 between the Company and Kristin M. Rogers.
21.1	Subsidiaries
23.1	Consent of PricewaterhouseCoopers LLP
(1)	Incorporated by reference to the Company's Registration Statement on Form S-1 (33-89572) declared effective on April 4, 1995.
(2)	Incorporated by reference to the Company's Registration Statement on Form S-1 (33-95416) declared effective on August 23, 1995.
(3)	Intentionally omitted.
(4)	Incorporated by reference to the Company's 1996 Form 10-K, filed with the Commission on March 31, 1997.
(5)	Intentionally omitted.
(6)	Incorporated by reference to the Registration Statement on Form S-1 of uBid, Inc. (File No. 333-58477), on file with the Commission.
(7)	Incorporated by reference to the Company's Report on Form 10-Q for the quarter ended June 30, 1999, filed with the Commission on August 16, 1999.
(8)	Incorporated by reference to the Company's Report on Form 10-Q for the quarter ended March 31, 1999, filed with the Commission on May 17, 1999.
(9)	Incorporated by reference to the Annual Report on 10-K of uBid, Inc. (Commission File No. 000-25119) for the year ended December 31, 1999.
(10)	Incorporated by reference to Annex A of the registrant's Definitive Proxy Statement filed with the Commission on April 24, 2000.
(11)	Intentionally omitted.
(12)	Incorporated by reference to the Company's Annual Report of Form 10-K, File Number 0-25790, for the year ended December 31, 1999, filed with the Commission on March 30, 2000.
(13)	Incorporated by reference to the Company's Annual Report of Form 10-K, File Number 0-25790, for the year ended December 31, 2000, filed with the Commission on March 30, 2001.
(14)	Incorporated by reference to the Company's Annual Report of Form 10-Q for the quarter ended June 30, 2001, filed with the Commission on August 14, 2001.

        * The referenced exhibit is a compensatory contract, plan or arrangement.

 (b)    Reports on Form 8-K:

1.  A Current Report on Form 8-K was filed on October 25, 2001 regarding a press release issued to announce unaudited consolidated financial results for the third quarter of 2001.

PC MALL, INC.

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

F-1

REPORT OF INDEPENDENT ACCOUNTANTS

To the Board of Directors and Stockholders of PC Mall, Inc.

In our opinion, the consolidated financial statements listed in the accompanying index present fairly, in all material respects, the financial position of PC Mall, Inc. and its subsidiaries at December 31, 2001 and 2000, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2001 in conformity with accounting principles generally accepted in the United States of America.  In addition, in our opinion, the financial statement schedule listed in the accompanying index presents fairly, in all material respects, the information set forth therein when read in conjunction with the related consolidated financial statements. These financial statements and financial statement schedule are the responsibility of the Company's management; our responsibility is to express an opinion on these financial statements and financial statement schedule based on our audits.  We conducted our audits of these statements in accordance with auditing standards generally accepted in the United States of America, which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

As discussed in Note 1 to the consolidated financial statements, the Company changed its method of revenue recognition in 2000.

/s/ PRICEWATERHOUSECOOPERS LLP

 Los Angeles, California

January 18, 2002

F-2

PC MALL, INC.
CONSOLIDATED BALANCE SHEET
(in thousands, except share data)

See notes to consolidated financial statements.

F-3

PC MALL, INC.
 CONSOLIDATED STATEMENT OF OPERATIONS
(in thousands, except per share data)

See notes to consolidated financial statements.

F-4

PC MALL, INC.
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
(in thousands)

See notes to consolidated financial statements.

F-5

PC MALL, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
(in thousands)

See notes to consolidated financial statements.

F-6

PC MALL, INC.
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share and per share data)

1.            Summary of Significant Accounting Policies

 Description of Company

PC Mall, Inc., formerly IdeaMall, Inc. and Creative Computers, Inc. (the "Company"), founded in 1987, is a rapid response supplier of personal computer hardware, software and peripheral products, as well as consumer electronics.  The Company offers products to individual consumers, home offices, small businesses and large corporations through direct response catalogs, dedicated inbound and outbound sales executives, a direct sales force, a retail showroom and multiple Internet web sites.  The Company offers a broad selection of products through its distinctive, full-color catalogs, MacMall, PC Mall Business Solutions, MacMall Software Buyers Guide and eCOST.com, the Company's worldwide web sites on the Internet, and other promotional materials.  

In September 1997, the Company formed a wholly owned subsidiary, uBid, Inc. ("uBid") to sell computer-related products and consumer electronics through an auction format on the Internet.  In December 1998, uBid completed an initial public offering of 1,817,000 shares of its common stock.  On June 7, 1999, the Company divested its ownership in uBid by means of a tax-free distribution of all of its remaining 7.3 million shares of uBid common stock to the Company's shareholders of record as of May 24, 1999.  In accordance with Accounting Principles Board Opinion No. 30, "Reporting the Results of Operations," uBid's revenues and expenses have been excluded from the Company's consolidated revenues and expenses from continuing operations.  The Company's share of uBid's operating results, net of taxes, in 1999 is reported as a separate line item on the Company's consolidated statement of operations under the caption "Loss from discontinued operations."   uBid's revenues were $64,784 for the period ended June 7, 1999.

Use of Estimates in the Preparation of Financial Statement

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 respective reporting periods.  Actual results could differ from those estimates.

 Principles of Consolidation

 The consolidated financial statements include the accounts of the Company and its subsidiaries.  All significant intercompany accounts and transactions have been eliminated.

Revenue Recognition

Net sales include product sales, net of returns and allowances, and gross outbound shipping and handling charges. The Company recognizes revenue from product sales, net of discounts, coupon redemption and estimated sales returns, when title to products sold has transferred to the customer.  The Company considers this to occur upon receipt of products by the customer.  The Company provides an allowance for sales returns, which is based on historical experience.  For all product sales shipped directly from suppliers to customers, the Company takes title to the products sold upon shipment, bears credit risk, and bears inventory risk for returned products that are not successfully returned to suppliers, although some of these risks are mitigated through arrangements with the Company's shippers and suppliers.

In the fourth quarter of 2000, the Company adopted Securities and Exchange Commission Staff Accounting Bulletin No. 101 ("SAB 101"), "Revenue Recognition in Financial Statements."  SAB 101 requires the Company to defer, in certain situations, sales revenue until goods have been received by the customer and risk of loss has been passed.  The adjustment resulted from the change in timing of revenue recognition from the point of shipment to the point of delivery of product to the customer.  The adoption of SAB 101 resulted in a cumulative effect of a change in accounting principle of $536, retroactively applied to January 1, 2000.  The financial effect of adoption on revenue for the year ended December 31, 2000 is immaterial.  The pro forma amounts shown in the consolidated statement of operations present the effect of retroactive application of SAB 101.

Outbound Shipping Costs

        Outbound shipping costs incurred to deliver products to customers are included in cost of goods sold.

Cash Equivalents

        All highly liquid investments with initial maturities of three months or less are considered cash equivalents.

Concentration of Credit Risk

Accounts receivable potentially subject the Company to credit risk.  The Company extends credit to its customers based upon an evaluation of each customer's financial condition and credit history and generally does not require collateral.  The Company has historically incurred minimal credit losses.   No customers accounted for more than 10% of trade accounts receivable at December 31, 2001 and 2000.

Inventories

Inventories consist primarily of finished goods, and are stated at cost (determined under the first-in, first-out cost method) or market, whichever is lower.  At December 31, 2001 and 2000, the Company had reserves of $972 and $1,107, respectively, for demonstration inventory, lower of cost or market pricing and potential excess and obsolete inventory.

Deferred Advertising Revenue and Costs

The Company produces and circulates catalogs at various dates throughout the year.  The Company receives market development funds and cooperative (co-op) advertising funds from vendors included in each catalog.  These funds are recognized based on sales generated over the life of the catalog, which approximates eight weeks.  The costs of developing and circulating each catalog are deferred and charged to advertising expense in the same time period as the co-op funds based on sales over the life of the catalog.  Deferred advertising revenue is included in accrued expenses and other current liabilities.  Advertising expense, net of advertising revenue earned, included in selling, general and administrative expenses, was $556, $13,355 and $7,325  in 2001, 2000 and 1999, respectively.  Deferred advertising costs were $1,422 and $1,784 at December 31, 2001 and 2000, respectively, and are included in prepaid expenses and other current assets in the consolidated balance sheet.

Property and Equipment

Property and equipment (including equipment acquired under capital leases) are stated at cost and are depreciated using straight-line methods over the estimated useful lives of the assets, as follows:

Disclosures About Fair Value of Financial Instruments

The carrying amount of cash, cash equivalents, accounts receivable, accounts payable and accrued expenses and other current liabilities approximates fair value because of the short-term maturity of these instruments.  The carrying amount of the Company's notes payable approximates fair value based upon the current rates offered to the Company for obligations of similar terms and remaining maturities. 

Goodwill

Goodwill, resulting from acquisitions, was amortized using the straight-line method over periods not exceeding twenty-five years and was subject to periodic review for impairment.  Accumulated amortization at December 31, 2001 and 2000 was $2,126 and $1,606, respectively.  Amortization expense totaled $520, $520 and $482  in 2001, 2000 and 1999, respectively.  Beginning in 2002, the Company will no longer amortize goodwill pursuant to its adoption of  SFAS No. 142, "Goodwill and Other Intangible Assets."  See Recent Accounting Pronouncements for additional information.

Accounting for the Impairment of Long-Lived Assets

The Company reviews long-lived assets and certain intangible assets for impairment when events or changes in circumstances indicate the carrying amount of an asset may not be recoverable.  In the event the sum of the expected undiscounted future cash flows resulting from the use of the asset is less than the carrying amount of the asset, an impairment loss equal to the excess of the asset's carrying value over its fair value is recorded.

Income Taxes

The Company accounts for income taxes under the liability method.  Under this method, deferred income taxes are recognized by applying enacted statutory tax rates applicable to future years to differences between the tax bases and financial reporting amounts of existing assets and liabilities.  A valuation allowance is provided when it is more likely than not that all or some portion of deferred tax assets will not be realized.

Earnings (Loss) per Share

Basic EPS excludes dilution and is computed by dividing net income (loss) by the weighted average number of common shares outstanding during the reported periods.  Diluted EPS reflects the potential dilution that could occur if stock options and other commitments to issue common stock were exercised using the treasury stock method.

The computation of Basic and Diluted EPS is as follows:

(a)  Potential common shares of 168,133 and 339,609 for 2000 and 1999, respectively, have been excluded from the earnings (loss) of per share computations because the effect of their inclusion would be anti-dilutive.

Accounting for Stock-Based Compensation

        The Company accounts for employee stock-based compensation in accordance with Accounting Principles Board Opinion No. 25 and related interpretations.  The disclosures required by Statement of Financial Accounting Standards No. 123, "Accounting for Stock-Based Compensation" (SFAS 123), have been included in Note 7.

Reclasifications

        Certain reclassifications have been made to the 1999 and 2000 financial statement amounts to conform to the 2001 presentation.

Recent Accounting Pronouncements

In July 2001, the FASB issued SFAS No. 142, "Goodwill and Other Intangible Assets."  SFAS 142, which changes the accounting for goodwill and indefinite-lived intangible assets from an amortization method to an impairment-only approach, will be effective for fiscal years beginning after December 15, 2001.  The Company has not determined the full impact that adoption of this Standard will have on its consolidated financial statements.  However, the Company does anticipate that selling, general and administrative expenses will be reduced by approximately $520 per year due to the discontinuance of goodwill amortization as required by the Standard.

In August 2001, the FASB issued SFAS No. 144, "Accounting for the Impairment of Long-Lived Assets."  SFAS No.144 supercedes FAS No. 121," Accounting for the Impairment of Long-Lived Assets and Long-Lived Assets to be Disposed Of" and APB Opinion No. 30, "Reporting Extraordinary, Unusual and Infrequently Occurring Events and Transactions" and amends APB No. 51, "Consolidated Financial Statements."  This Statement was issued to address the accounting for a segment of a business accounted for as a discontinued operation under APB No. 30 and to establish a single accounting model based on the framework established in FAS No. 121, for long-lived assets to be disposed of by sale.  The Statement is effective for financial statements issued for fiscal years beginning after December 15, 2001.  The adoption of this statement will not have a material impact on the Company's consolidated financial statements.

2.     Property and Equipment

Property and equipment consist of the following as of December 31:

Depreciation expense in 2001, 2000 and 1999 totaled $4,847, $5,378 and $4,415, respectively.

3.     Line of Credit

In March 2001, the Company replaced its existing $40 million credit facility with a new $75 million, three-year asset-based revolving credit facility from a lending unit of a large commercial bank (the "New Line of Credit").  The New Line of Credit functions as a working capital line of credit with a borrowing base of inventory and accounts receivable, and bears interest at prime with a LIBOR option.  At December 31, 2001, the Prime Rate was 4.75%.  The New Line of Credit is secured by substantially all of the Company's assets.  The New Line of Credit has as its single financial covenant a minimum tangible net worth requirement and also includes a commitment fee of 0.25% annually on the unused portion of the line up to $60 million.  In addition, in March 2001, the Company entered into a new $40 million flooring credit facility, which functions in lieu of a vendor trade payable for inventory purchases and does not bear interest if paid within terms specific to each vendor (the "New Flooring Facility").  The New Flooring Facility is secured by substantially all of the Company's assets and is also supported by a letter of credit issued under the New Line of Credit in the amount outstanding under the New Flooring Facility from time to time.  The amount of the Letter of Credit is applied against the credit limit under the New Line of Credit.  The Company had $4.6 million of borrowings under the credit facility included in accounts payable and $1.6 million of net working capital advances outstanding at December 31, 2001.

At December 31, 2001 and 2000, the Company had cash and short-term investments of $10.0 million and $12.2 million, respectively, and working capital of $17.3 million and $10.2 million, respectively.  The Company believes that current working capital, together with cash flows from operations and available lines of credit, will be adequate to support the Company's current operating plans through 2002.  However, if the Company needs extra funds, such as for acquisitions or expansion or to fund a significant downturn in sales that causes losses, there are no assurances that adequate financing will be available at acceptable terms, if at all.

4.       Income Taxes

The provision (benefit) for income taxes consists of the following for the years ended December 31:

		2001		2000		1999
Current
Federal	$	106	$	-	$	106
State		14		-		13
		118		-		119
Deferred
Federal		(104)		-		620
State		(14)		-		73
		(118)		-		693
	$	-	$	-	$	812

The provision (benefit) for income taxes differed from the amount computed by applying the U.S. federal statutory rate to income (loss) before income taxes due to the effects of the following:

	2001		2000		1999
Expected taxes at federal statutory tax rate	34.0	%	(34.0)	%	(34.0)	%
State income taxes, net of federal income tax benefit	0.2		-		(2.9)
Change in valuation allowance	(36.8)		34.0		53.7
Other	2.6		-		4.0
	-	%	-	%	20.8	%

The significant components of deferred tax assets and liabilities are as follows at December 31:

At December 31, 2001, the Company had federal net operating loss carryforwards of $23,934, which begin to expire at the end of 2018.  At December 31, 2001, the Company had various state net operating loss carryforwards ranging in amounts from $130 to $4,844, which begin to expire at the end of 2003.  At December 31, 2001, the Company had Federal and State minimum tax credit carryforwards of $118 and $12, respectively, which do not expire.

5.       Commitments and Contingencies

Leases 

The Company leases office and warehouse space and equipment under various operating and capital leases which provide for minimum annual rentals and escalations based on increases in real estate taxes and other operating expenses.

Minimum annual rentals under non-cancelable leases at December 31, 2001 were as follows:

In 2001, 2000 and 1999 rent expense included in selling, general and administrative costs was $3,744, $3,969 and $3,206, respectively.  Some of the leases contain renewal options and escalation clauses and require the Company to pay taxes, insurance and maintenance costs.

Legal Proceedings

Various claims and actions, considered normal to the Company's business, have been asserted and are pending against the Company.  The Company believes that such claims and actions will not have any material adverse effect upon the Company's consolidated financial position or results of operations.

6.       Stockholders' Equity

Initial Public Offering and Spin-off of uBid, Inc.

On December 9, 1998, uBid, Inc., a subsidiary of the Company at that time, completed an initial public offering (the "Offering") of 1,817,000 shares of common stock at an offering price of $15.00 per share.  Net proceeds to uBid were $23,847.  The shares sold to the public in the offering represented approximately 19.9% of uBid's outstanding common stock.  As discussed in Note 1, the Company's remaining interest in uBid was subsequently spun off to the Company's shareholders in June 1999, resulting in a charge of $8,877 to additional paid-in capital in 1999.

Treasury Stock

In July 1996, the Company announced its plan to repurchase up to 1,000,000 shares of its Common Stock.  The shares will be repurchased from time to time at prevailing market prices, through open market or negotiated transactions, depending upon market conditions.  No limit was placed on the duration of the repurchase program. There is no guarantee as to the exact number of shares that the Company will repurchase.  Subject to applicable securities laws, repurchases may be made at such times and in such amounts as the Company's management deems appropriate.  The program can also be discontinued at any time management feels additional purchases are not warranted.  As of December 31, 2001, the Company has repurchased 15,000 shares.

7.       Employee Benefits

401(k) Savings Plan

Effective January 1, 1994, the Company adopted a 401(k) Savings Plan which covers substantially all full-time employees who meet the plan's eligibility requirements.  Participants may make tax-deferred contributions of up to 15% of annual compensation (subject to other limitations specified by the Internal Revenue Code).  In December 1995, the Company amended the Plan to make a 25% matching contribution for amounts that do not exceed 4% of the participants' annual compensation.  During 2001, 2000 and 1999, the Company incurred $135, $154, and $142, respectively, of expenses related to the 401(k) matching component of this plan.

1994 Employee Stock Option Plan

In November 1994, the Board of Directors and stockholders of the Company approved the 1994 Stock Option Plan (the "1994 Plan"), which provides for the grant of stock options to employees and consultants of the Company.  Under the 1994 Plan, the Company may grant options ("Incentive Stock Options") within the meaning of Section 422A of the Internal Revenue Code, or options not intended to qualify as Incentive Stock Options ("Nonstatutory Stock Options"). 

In May 2000, the Board of Directors and stockholders of the Company approved amendments to the 1994 Plan which (i) increased the number of shares authorized to be issued under the Plan from 1,950,000 shares to 2,950,000 shares, (ii) added an "evergreen provision" the effect of which automatically increases the number of shares of the Company's Common Stock available for issuance under the Plan as of January 1 of each year by three percent (3%) of the Company's outstanding Common Stock as of December 31 of the immediately preceding fiscal year, (iii) added non-employee directors as persons eligible to receive options and other stock-based awards under the Plan, and (iv) added certain provisions to the Plan to ensure that options may qualify as performance-based compensation under Section 162(m) of the Code.

As of December 31, 2001, a total of 876,702 shares of authorized but unissued shares are available for future grants.  All options granted through December 31, 2001 have been Nonstatutory Stock Options.

The 1994 Plan is administered by the Compensation and Stock Option Committee of the Board of Directors.  Subject to the provisions of the 1994 Plan, the Committee has the authority to select the employees and consultants to whom options are granted and determine the terms of each option, including (i) the number of shares of common stock covered by the option, (ii) when the option becomes exercisable, (iii) the option exercise price, which must be at least 100%, with respect to Incentive Stock Options, and at least 85%, with respect to Nonstatutory Stock Options, of the fair market value of the common stock as of the date of grant, and (iv) the duration of the option (which may not exceed ten years).  All options generally vest annually over four to five years, and are nontransferable other than by will or by the laws of descent and distribution.

1995 Director Stock Option Plan 

The Company adopted the Directors' Non-Qualified Stock Option Plan (the "Director Plan") in 1995 under which each non-employee director of the Company ("Non-Employee Director") receives a non-qualified option to purchase 5,000 shares of Common Stock upon his or her first election or appointment to the Board of Directors, as well as subsequent grants each year after the annual meeting of the Company's stockholders.  In 1999, the Company increased the total number of shares reserved for issuance under the Director Plan to 100,000 from 50,000.  However, in May 2000, the Company's Board of Directors and shareholders voted to terminate the Director Plan such that no further grants would be made thereunder, and further provided that Non-Employee Directors are persons eligible to receive future options and other stock-based awards under the 1994 Employee Stock Option Plan.

The following table summarizes stock option activity:

		Number			Weighted Average Exercise Price
Outstanding at December 31, 1998		904,353		$	7.34
	Granted	1,758,048			5.04
	Canceled	(1,014,907)			7.72
	Exercised	(139,029)			6.15
Outstanding at December 31, 1999		1,508,465			4.54
	Granted	511,150			5.52
	Canceled	(369,223)			5.58
	Exercised	(29,797)			2.22
Outstanding at December 31, 2000		1,620,595			4.67
	Granted	936,275			1.69
	Canceled	(504,182)			5.47
	Exercised	(9,750)			1.48
Outstanding at December 31, 2001		2,042,938		$	3.10

Of the options outstanding at December 31, 2001, 2000 and 1999, options to purchase 865,856, 599,000 and 361,632 shares were exercisable at weighted average prices of $3.09, $3.24 and $1.88 per share, respectively.  The following table summarizes information concerning currently outstanding and exercisable stock options:

		Options Outstanding at December 31, 2001				Options Exercisable at December 31, 2001
Range of Exercise Prices		Number Outstanding	Weighted Average Remaining Contractual Life	Weighted Average Exercise Price		Number Exercisable	Weighted Average Exercise Price
$0.88 - $1.49		534,975	8.58	$1.47		201,150	$1.47
$1.49 - $1.89		604,772	7.25	$1.73		306,212	$1.73
$1.91 - $5.00		511,266	8.34	$3.27		175,740	$2.98
$5.03 - $12.31		391,925	7.68	$7.22		182,754	$7.23
		2,042,938				865,856

FAS 123 Pro Forma Information

The Company accounts for its stock option plans under APB Opinion No. 25.  Had compensation expense for these plans been determined consistent with SFAS 123, the Company's net income (loss) and net income (loss) per share would have been adjusted to the pro forma amounts in the following table.

			2001			2000			1999
Net income (loss)		As Reported	$	4,488		$	(9,156)		$	(10,943)
		Pro Forma	$	3,553		$	(10,818)		$	(12,943)
Basic and diluted net income (loss) per share		As Reported	$	0.43		$	(0.88)		$	(1.05)
		Pro Forma	$	0.34		$	(1.04)		$	(1.25)

The fair value of each stock option grant has been estimated pursuant to SFAS 123 on the date of grant using the Black-Scholes option pricing model with the following weighted average assumptions:

The weighted average grant date fair values of options granted under the Plans during 2001, 2000 and 1999 were $1.59, $4.91 and $7.41 respectively.

1999 eCOST.com Employee Stock Option Plan

The Company adopted the eCOST.com Employee Stock Option Plan in 1999.  During 2000 and 1999, options to purchase 598,000 and 537,000 shares, respectively, of eCOST.com common stock were granted at a weighted average exercise price of $2.59 and $0.20.  No options were granted in 2001.  Options generally vest annually over four to five years, and are nontransferable other than by will or by the laws of descent and distribution.  As of December 31, 2001, options to purchase 362,200 eCOST.com shares were outstanding at a weighted average exercise price of $0.40.

8.       Supplemental Disclosures of Cash Flow Information

9.   Segment Information

The Company operates in three reportable business segments: 1) a rapid response supplier of computers, hardware, software, peripheral and electronics products under the PC Mall, MacMall, and CCIT brands, collectively referred to as the "Core Business"; 2) a multi-category Internet retailer of computer and consumer electronics products under the eCOST.com brand, and 3) a rapid response supplier for Linux-based products and services provided under the eLinux brand. 

Summarized segment information for continuing operations for the years ended December 31, 2001, 2000 and 1999 is as follows:

     Segment information for eLinux is not presented for the year ended December 31, 1999, as the Company did not operate that segment until January 2000.

F-7

PC MALL, INC.

QUARTERLY FINANCIAL INFORMATION

(unaudited, in thousands, except per share data)

(1)  During the fourth quarter of 2000, the Company implemented Staff Accounting Bulletin  (SAB) 101, Revenue Recognition in Financial Statements.  Effective January 1, 2000, the Company recorded  the cumulative effect of the accounting change and, accordingly, the quarterly information for the first three quarters of 2000, which had been previously reported, has been restated.

 F-8

SCHEDULE II

PC MALL, INC.

Valuation and Qualifying Accounts

For the years ended December 31, 2001, 2000, and 1999

(in thousands)

F-9

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized in the City of Torrance, State of California, on March 29, 2002.

POWER OF ATTORNEY

KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Frank F. Khulusi and Theodore R. Sanders, and each of them, as his true and lawful attorneys-in-fact and agents, with full power of substitution and resubstitution, for him and in his name, place and stead, in any and all capacities, to sign any and all amendments to this Report on Form 10-K, and to file the same, with exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done in connection therewith, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents, or any of them, or their or his substitute or substitutes, may lawfully do or cause to be done by virtue hereof.

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

Signature		Title		Date
/s/ FRANK F. KHULUSI               Frank F. Khulusi		Chairman of the Board of Directors, Chief Executive Officer and President (Principal Executive Officer)		March 29, 2002
/s/ THEODORE R. SANDERS      Theodore R. Sanders		Chief Financial Officer (Principal Financial and Accounting Officer)		March 29, 2002
/s/ SAM U. KHULUSI                   Sam U. Khulusi		Director		March 29, 2002
/s/ THOMAS MALOOF               Thomas Maloof		Director		March 29, 2002
/s/ RONALD B. RECK                  Ronald B. Reck		Director		March 29, 2002
/s/ MARK C. LAYTON               Mark C. Layton		Director		March 29, 2002