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SECURITIES AND EXCHANGE COMMISSIONWASHINGTON, D.C. 20549

FORM 10-K

|(Mark One)
|----------

|[ X ] | ANNUAL REPORT PURSUANT TO SECTION 13 or 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934For the fiscal year ended December 31, 2003 | 
|----- | ------------------------------------------------------------------------------------------------------------------------------- | 

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:
1-13792

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Systemax Inc.(Exact name of registrant as specified in its charter)

|Delaware
(State or other jurisdiction of
incorporation or organization) | 11-3262067
(I.R.S. Employer
Identification No.)
|----------------------------------------------------------------------- | -----------------------------------------------

|11 Harbor Park Drive
Port Washington, New York
(Address of principal executive offices) | 11050
(Zip Code)
|--------------------------------------------------------------------------------------- | ----------------

Registrant's telephone number, including area
code: (516) 608-7000

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

|Title of each class
Common Stock, par value $ .01 per share | Name of each exchange onwhich registered
New York Stock Exchange
|----------------------------------------------------------- | ----------------------------------------------------------------

Securities registered pursuant to Section 12(g)
of the Act: NONE

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

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

Indicate by check mark whether the registrant is an accelerated filer (as
defined in Exchange Act Rule 12b-2). Yes [ ] No [X]

The
aggregate market value of the voting stock held by non-affiliates of the
registrant as of June 30, 2003, which is the last business day of the
registrants most recently completed second fiscal quarter, was
approximately $22,385,000. For purposes of this computation, all executive
officers and directors of the Registrant and all parties to the Stockholders
Agreement dated as of June 15, 1995 have been deemed to be affiliates. Such
determination should not be deemed to be an admission that such persons are, in
fact, affiliates of the Registrant.

The
number of shares outstanding of the registrant's common stock as of March 15,
2004 was 34,343,786 shares. Documents incorporated by reference: Portions of the
definitive Proxy Statement of Systemax Inc. relating to the 2004 annual meeting
of stockholders are incorporated by reference in Part III hereof.

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TABLE OF CONTENTS

`Part I
  Item 1. Business.........................................................................1
           General.........................................................................1
           Available Information ..........................................................1
           Recent Developments.............................................................2
           Products........................................................................3
           Sales and Marketing.............................................................3
           Customer Service and Support....................................................5
           Sales and Distribution Centers..................................................5
           Suppliers.......................................................................6
           Research and Development........................................................6
           Competition and Other Market Factors............................................6
           Employees.......................................................................7
           Environmental Matters...........................................................7
           Financial Information About Foreign and Domestic Operations.....................7

  Item 2.  Properties......................................................................9
  Item 3.  Legal Proceedings...............................................................9
  Item 4.  Submission of Matters to a Vote of Security Holders............................10

Part II
  Item 5.  Market for Registrant's Common Equity and Related Stockholder Matters..........10
  Item 6.  Selected Financial Data........................................................11
  Item 7.  Management's Discussion and Analysis of Financial Condition and Results of
           Operations.....................................................................12
  Item 7A. Quantitative and Qualitative Disclosures About Market Risk.....................25
  Item 8.  Financial Statements and Supplementary Data ...................................26
  Item 9.  Changes in and Disagreements With Accountants on Accounting and Financial
           Disclosure.....................................................................26
  Item 9A. Controls and Procedures........................................................26

Part III
  Item 10. Directors and Executive Officers of the Registrant.............................26
  Item 11. Executive Compensation.........................................................26
  Item 12. Security Ownership of Certain Beneficial Owners and Management and Related
           Stockholder Matters............................................................26
  Item 13. Certain Relationships and Related Transactions.................................26
  Item 14. Principal Accounting Fees and Services.........................................26

Part IV
  Item 15. Exhibits, Financial Statement Schedules and Reports on Form 8-K................27

           Signatures.....................................................................30`

PART I

Unless otherwise indicated, all references herein to Systemax Inc. (sometimes
referred to as "Systemax", the "Company" or we)
include its subsidiaries.

Forward Looking Statements

This report contains forward looking statements within the meaning of that
term in the Private Securities Litigation Reform Act of 1995 (Section 27A of the
Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934).
Additional written or oral forward looking statements may be made by the Company
from time to time, in filings with the Securities Exchange Commission or
otherwise. Statements contained in this report that are not historical facts are
forward looking statements made pursuant to the safe harbor provisions of the
Private Securities Litigation Reform Act of 1995. Forward looking statements may
include, but are not limited to, projections of revenue, income or loss and
capital expenditures, statements regarding future operations, financing needs,
compliance with financial covenants in loan agreements, plans for acquisition or
sale of assets or businesses and consolidation of operations of newly acquired
businesses, and plans relating to products or services of the Company,
assessments of materiality, predictions of future events and the effects of
pending and possible litigation, as well as assumptions relating to the
foregoing. In addition, when used in this discussion, the words
anticipates, believes, estimates,
expects, intends, plans and variations
thereof and similar expressions are intended to identify forward looking
statements.

Forward looking statements are inherently subject to risks and uncertainties,
some of which cannot be predicted or quantified based on current expectations.
Consequently, future events and results could differ materially from those set
forth in, contemplated by, or underlying the forward looking statements
contained in this report. Statements in this report, particularly in Item
1. Business, Item 3. Legal Proceedings, Item 7.
Managements Discussion and Analysis of Financial Condition and Results of
Operations, and the Notes to Consolidated Financial Statements describe
certain factors, among others, that could contribute to or cause such
differences.

Item 1. Business.

General

Systemax is a direct marketer of brand name and private label products,
including personal desktop computers (PCs), notebook computers,
computer related products and industrial products, in North America and Europe.
We assemble our own PCs and sell them under the trademarks
Systemax, Tiger® and Ultra. In addition,
we market and sell computers manufactured by other leading companies. We offer
our customers a broad selection of products, prompt order fulfillment and
extensive customer service. Computers and computer related products accounted
for 91% of our net sales in 2003.

The
Company was incorporated in Delaware in 1995. Certain predecessor businesses
which now constitute part of the Company have been in business since 1955. Our
headquarters office is located at 11 Harbor Park Drive, Port Washington, New
York.

Available Information

We
maintain an internet web site at www.systemax.com. We file reports with
the Securities and Exchange Commission (SEC) and make available free
of charge on or through this web site our annual reports on Form 10-K, quarterly
reports on Form 10-Q and current reports on Form 8-K, including all amendments
to those reports. These are available as soon as is reasonably practicable after
they are filed with the SEC. All reports mentioned above are also available from
the SECs web site (www.sec.gov). The information on our web site is
not part of this or any other report we file with, or furnish to, the SEC.

Our
Board of Directors has adopted the following corporate governance documents with
respect to the Company (the Corporate Governance Documents):

| |  | Corporate Ethics Policy for officers, directors and employees
| | - | -------------------------------------------------------------

| |  | Charter for the Audit Committee of the Board of Directors
| | - | ---------------------------------------------------------

| |  | Charter for the Compensation Committee of the Board of Directors
| | - | ----------------------------------------------------------------

| |  | Charter for the Nominating/Corporate Governance Committee of the
Board of Directors
| | - | -----------------------------------------------------------------------------------

In
accordance with the corporate governance rules of the New York Stock Exchange,
each of the Corporate Governance Documents is available on our Company web site
(www.systemax.com) or can be obtained by writing to Systemax Inc., Attention:
Board of Directors (Corporate Governance), 11 Harbor Park Drive, Port
Washington, NY 11050.

Recent Developments

Profit Center Software Inc.

In
September 2003 we formed a new subsidiary company, Profit Center Software Inc.,
to market for general commercial use a number of integrated computer software
products we had created initially as a customized software solution for our own
business. Offered as Profit Center Software , it is a suite of web-based
business software applications, including sales force automation, order
processing and product management applications, which assist companies in
automating their business in order to improve efficiencies and maximize
profitability. PCS Inc. is actively seeking customers, but is a new venture with
all the attendant business risks normally associated with any new business,
including uncertainty of future growth and profitability.

Amendments To Company's 1999 Long Term Stock Incentive Plan

On
May 20, 2003 our Board of Directors approved, subject to stockholder approval,
amendments to the Companys 1999 Long Term Stock Incentive Plan which,
among other things, (a) increased the number of Company shares with respect to
which awards may be granted under the plan to a total of 5 million shares, (b)
increased the limit on yearly award grants to individuals to 1,500,000 shares
per type of award and 3,000,000 shares in total, and (c) extended the expiration
date of the plan to December 31, 2009. We intend to seek stockholder approval of
the plan amendments at our annual stockholders meeting, currently scheduled to
be held on May 25, 2004. A copy of the amended plan is an Exhibit to this Annual
Report. It will also be annexed to the Companys proxy statement for the
2004 annual stockholders meeting.

2004 Streamlining Plan

In
February 2004 we announced a plan to streamline the back office and warehouse
operations of our computer businesses in the United States. We anticipate that
the streamlining will result in the elimination of approximately 200 jobs and,
in conjunction with a January 2004 consolidation of United Kingdom sales offices
which resulted in the elimination of 50 jobs, will result in approximately $3
million (pre-tax) of severance and other restructuring costs, which will be
reflected in our first quarter 2004 results. We expect that this plan will
result in annual savings of approximately $8 million, excluding the severance
and other restructuring costs to be recognized in fiscal 2004.

Products

We
offer more than 100,000 brand name and private label products. We endeavor to
expand and keep current the breadth of our product offerings in order to fulfill
the increasingly wide range of product needs of our customers.

Computer sales include Systemax PCs complemented by offerings of other brand
name PCs and notebook computers. Our computer related products include supplies
such as laser printer toner cartridges and ink jet printer cartridges; media
such as recordable disks and magnetic tape cartridges; peripherals such as hard
disks, CD-ROM and DVD drives, printers and scanners; memory upgrades; data
communication and networking equipment; ergonomic accessories such as adjustable
monitor support arms and anti-glare screens; and packaged software.

We
assemble our Systemax-brand PCs in our 297,000 square foot, ISO-9000-certified
facility in Fletcher, Ohio. We purchase components and subassemblies from
suppliers in the United States as well as overseas. Certain parts and components
for our PCs are obtained from a limited group of suppliers. Systemax PCs sold in
Europe are assembled by third parties. We also utilize licensed technology and
computer software in the assembly of our PCs. For a discussion of risks
associated with these licenses and suppliers, see Item 7,
Managements Discussion and Analysis of Financial Condition and
Results of Operations  Factors That May Affect Future Results and
Financial Condition.

Our
industrial products include storage equipment such as metal shelving, bins and
lockers; light material handling equipment such as hand carts and hand trucks;
furniture, small office machines and related supplies; and consumable industrial
products such as first aid items, safety items, protective clothing and OSHA
compliance items.

The
table below summarizes our mix of sales by product category:

`Product Type - Years Ended December 31 (Percentage of net sales)

                                                                      2003    2002     2001
                                                                      ----    ----     ----
     Computer and Computer Related Products  ....................      91%     90%      89%
     Industrial Products ........................................       9      10       11
                                                                        -      --       --
     Total  .....................................................     100%    100%     100%
                                                                      ===     ===      ===`

Sales and Marketing

We
market our products to both business customers and individual consumers. Our
business customers include large businesses (customers with more than 1,000
employees), small and mid-sized businesses (customers with 20 to 1,000
employees), educational organizations and government entities. We have invested
consistently and aggressively in developing a proprietary customer and prospect
database. This database includes more than 50 million names. We consider our
business customers to be the various individuals who work within an organization
rather than the business location itself. The business customer and prospect
database includes detailed information, including company size, number of
employees, industry, various demographic and geographic characteristics and
purchasing history.

We
have established an integrated three-pronged system of direct marketing to
business customers, consisting of relationship marketers, catalog mailings and
propriety internet web sites, designed to maximize sales. Our relationship
marketers focus their efforts on our business customers by establishing a
personal relationship between such customers and a Systemax account manager. The
goal of the relationship marketing sales force is to increase the purchasing
productivity of current customers and to actively solicit newly targeted
prospects to become customers. With access to the records we maintain of
historical purchasing patterns, our relationship marketers are prompted with
product suggestions to expand customer order values. In the United States, we
also have the ability to provide such customers with electronic data interchange
(EDI) ordering and customized billing services, customer savings
reports and stocking of specialty items specifically requested by these
customers. Our relationship marketers efforts are supported by frequent
catalog mailings and e-mail campaigns designed to generate inbound telephone
sales, and our interactive websites, which allow customers to purchase products
directly over the Internet. We believe that the integration of these three
marketing methods enables us to more thoroughly penetrate our business and
government customer base. Increased internet exposure can lead to more
internetrelated sales and can also generate more inbound telephone sales;
just as catalog mailings which feature our websites can result in greater
internet-related sales.

We
successfully increased our sales to individual consumers through our Tiger
Direct subsidiary, using a combination of e-commerce initiatives and catalog
mailings. To reach our consumer audience, we use methods such as website
campaigns, banner ads and e-mail campaigns. We are able to monitor and evaluate
the results of our various advertising campaigns to enable us to execute them in
a cost-effective manner. Our catalogs generate calls to inbound sales
representatives. These sales representatives use our information systems to
fulfill orders and explore additional customer product needs. Sales to consumers
are generally fulfilled from our own stock, requiring us to carry more inventory
than we would for our business customers. We also periodically take advantage of
attractive product pricing by making opportunistic bulk inventory purchases with
the objective of turning them quickly into sales.

We
have also successfully increased our sales to individual consumers with the
addition of a number of retail outlet stores. These stores are located in or
near one of our existing sales and distribution centers, thereby minimizing our
operating costs. We presently have four such retail locations in North America
and plan to add several more in 2004.

Catalogs

We
currently produce a total of 30 full-line and targeted specialty catalogs under
distinct titles. Our portfolio of catalogs includes such established brand names
as Global Computer Supplies, TigerDirect.com, Misco®, HCS
Misco, Global Industrial, ArrowStar, Dartek.com and
06. Full-line computer product catalogs offer products such as PCs,
notebooks, peripherals, computer components, magnetic media, data communication,
networking and power protection equipment, ergonomic accessories, furniture and
software. Full-line industrial product catalogs offer products such as material
handling products and industrial supplies. Specialty catalogs contain more
focused product offerings and are targeted to individuals most likely to
purchase from such catalogs. We mail catalogs to both businesses and consumers.
In the case of business mailings, we mail our catalogs to many individuals at a
single business location, providing us with multiple points-of-entry. Our
in-house staff designs all of our catalogs. In-house catalog production helps
reduce overall catalog expense and shortens catalog production time. This allows
us the flexibility to alter our product offerings and pricing and to refine our
catalog formats more quickly. Our catalogs are printed by third parties under
fixed pricing arrangements. The commonality of certain core pages of our
catalogs also allows for economies in catalog production.

During 2003, we distributed approximately 97 million catalogs, of which
approximately 62 million catalogs were mailed in North America and approximately
35 million catalogs were distributed in Europe. This total was approximately 9%
fewer than in the prior year as we were able to leverage our advertising
spending as a result of increased internet sales.

E-commerce

We
continually upgrade the capabilities and performance of our internet web sites.
We currently have twenty-two e-commerce sites, including
www.systemaxpc.com, www.globalcomputer.com,
www.tigerdirect.com, www.dartek.com, www.misco.co.uk, www.simply.co.uk,
www.hcsmisco.fr, www.misco.de and www.globalindustrial.com, offering a wide
variety of computer and industrial products and allowing customers
around-the-clock, on-line access to purchase products. Our internet sites
feature on-line catalogs of thousands of products. Many of these sites also
permit customers to purchase build to order PCs configured to their
own specifications. In 2003 we had over $384 million in internet-related sales,
representing 23.2% of total revenues, an increase of $126 million from 2002.

Customer Service and Support

We
generally provide toll-free telephone number access to our customers. Certain of
our domestic call centers are linked to provide telephone backup in the event of
a disruption in phone service. In addition to telephone orders, we also receive
orders by mail, fax, electronic data interchange and on the internet.

Orders are fulfilled on a timely basis and are generally shipped by United
Parcel Service in the United States and by similar national small package
delivery services in Europe, as well as by various freight lines and local
carriers. Most customers receive their orders (other than custom items, large
furniture and large industrial items shipped directly by the vendor) within one
or two business days of the order date as a result of the regional locations of
our distribution centers.

We
provide extensive technical telephone support to our Systemax brand PC
customers. We maintain a database of commonly asked questions for our technical
support representatives, enabling them to respond quickly to similar questions.
We conduct regular on-site training seminars for our sales representatives to
help ensure that they are well trained and informed regarding our latest product
offerings.

Sales and Distribution Centers

A
large number of our products are carried in stock, and orders for such products
are fulfilled directly from our distribution centers, typically on the day the
order is received. The strategic locations of our distribution centers allow
next day or second day delivery via low cost ground carriers throughout most of
the United States, Canada and Western Europe. We maintain relationships with a
number of large distributors in the United States and Europe that deliver
products directly to our customers.

North America

We
operate out of multiple sales and distribution facilities in North America.
Certain of these facilities are linked by a wide area network management
information system. In the event of adverse delivery conditions, such as bad
weather at a location, we can shift inbound calls and/or order fulfillment and
shipping to an alternate location. We believe this provides us with important
operating flexibility and protection from possible sales interruptions for our
North American businesses.

Europe

We
have sales and/or distribution facilities in eight European countries and a
central office in the United Kingdom to direct their activities. The central
office is responsible for marketing support, financial reporting, logistics and
computer website and programming support. The locations of our distribution
centers in Europe have enabled us to market into four additional countries with
limited incremental investment.

Suppliers

We purchase the majority of our products and components directly from
manufacturers and large wholesale distributors. For the year ended December 31,
2003, Tech Data Corporation accounted for 14.7% and Ingram Micro Inc. accounted
for 10.4% of our purchases. For the year ended December 31, 2002, Tech Data
Corporation accounted for 14.7% of our purchases. For the year ended December
31, 2001, Tech Data Corporation accounted for 15.1% and Hewlett Packard Company
accounted for 10.5% of our purchases. The loss of any of these vendors, or any
other key vendors, could have an adverse effect on us.

Certain private label products are manufactured by third parties to our
specifications. Many of these private label products have been designed or
developed by our in-house research and development teams. See "Research and
Development.

Research and Development

Our
research and development teams design and develop products for our private label
offerings. The individuals responsible for research and development have
backgrounds in engineering and industrial design.

This
in-house capability provides important support to the private label offerings.
Products designed include PCs, servers, furniture, ergonomic monitor support
arms, printer and monitor stands, wrist rests and other durable computer related
products, storage racks and shelving systems, various stock and storage carts,
work benches, plastic bins and shop furniture. We own the tooling for many of
these products, including plastic bins, computer accessories, furniture and
metal alloy monitor arms. See Research and Development Costs in
Footnote 1 to the Consolidated Financial Statements for further information.

Competition and Other Market Factors

Personal Computers

The
North American and European computer markets are highly competitive, with many
U.S., Asian and European companies vying for market share. There are few
barriers of entry to the PC market, with PCs being sold through the direct
market channel, mass merchants, over the internet and by computer and office
supply superstores.

Timely introduction of new products or product features are critical elements to
remaining competitive. Other competitive factors include product performance,
quality and reliability, technical support and customer service, marketing and
distribution and price. Some of our competitors have stronger brand-recognition,
broader product lines and greater financial, marketing, manufacturing and
technological resources than us. Additionally, our results could also be
adversely affected should we be unable to maintain our technological and
marketing arrangements with other companies, such as Microsoft®,
Intel® and Advanced Micro Devices®.

While economic conditions in the United States have recently begun to improve
after several years of adverse conditions, economic conditions in Europe
continue to be unsettled, and, on balance, PC sales continue to be slow. This
continued slowness has resulted in lower selling prices among our competitors,
creating an extremely competitive environment that has affected, and may
continue to affect, profitability over the short-term. Our long-term view of the
PC market, however, remains optimistic, assuming that the strengthening of U.S.
economic conditions continues and conditions in Europe improve.

Computer Related Products

The
North American computer related products market is highly fragmented and
characterized by multiple channels of distribution including direct marketers,
local and national retail computer stores that carry computer supplies, computer
resellers, mass merchants, computer and office supply "superstores"
and internet-based resellers. In Europe, our major competitors are regional or
country-specific retail and direct-mail distribution companies and
internet-based resellers.

As
with PCs, the continued slowness of the global economy means the environment
remains highly competitive, resulting in the continued reduction in retail
prices for computer related products, which may continue to adversely affect our
revenues and profits. Additionally, we rely in part upon the introduction of new
technologies and products by other manufacturers in order to sustain long-term
sales growth and profitability. There is no assurance that the rapid rate of
such technological advances and product development will continue.

Industrial Products

The
market for the sale of industrial products in North America is highly fragmented
and is characterized by multiple distribution channels such as retail outlets,
small dealerships, direct mail distribution, internet-based resellers and large
warehouse stores. We also face competition from manufacturers' own sales
representatives, who sell industrial equipment directly to customers, and from
regional or local distributors. Many high volume purchasers, however, utilize
catalog distributors as their first source of product. In the
industrial products market, customer purchasing decisions are primarily based on
price, product selection, product availability, level of service and
convenience. We believe that direct marketing via catalog, the internet and
sales representatives is an effective and convenient distribution method to
reach mid-sized facilities that place many small orders and require a wide
selection of products. In addition, because the industrial products market is
highly fragmented and generally less brand oriented, it is well suited to
private label products. We sell a minor amount of industrial products in Europe.

Employees

As
of December 31, 2003, we employed a total of 3,130 employees, including 3,040
full-time and 90 part-time employees, of whom 1,826 were in North America and
1,304 were in Europe.

Environmental Matters

Under various national, state and local environmental laws and regulations in
North America and Europe, a current or previous owner or operator (including the
lessee) of real property may become liable for the costs of removal or
remediation of hazardous substances at such real property. Such laws and
regulations often impose liability without regard to fault. We lease most of our
facilities. In connection with such leases, we could be held liable for the
costs of removal or remedial actions with respect to hazardous substances.
Although we have not been notified of, and are not otherwise aware of, any
material environmental liability, claim or non-compliance, there can be no
assurance that we will not be required to incur remediation or other costs in
connection with environmental matters in the future.

Financial Information About Foreign and Domestic
Operations

We conduct our business in North America (the United States and
Canada) and Europe. The following sets forth our operations in those two
geographic markets (in thousands):

`2003                                               Europe       North America         TOTAL
----                                               ------       -------------         -----
Net sales..................................       $631,545        $1,026,233      $1,657,778
Income (loss) from operations..............        $(2,007)          $14,530         $12,523
Identifiable assets........................       $139,059          $306,593        $445,652


2002                                               Europe       North America         TOTAL
----                                               ------       -------------         -----
Net sales..................................       $587,712          $963,805      $1,551,517
Income (loss) from operations..............         $7,823          $(15,604)        $(7,781)
Identifiable assets........................       $130,651          $307,253        $437,904


2001                                               Europe       North America         TOTAL
----                                               ------       -------------         -----
Net sales..................................       $564,360          $982,615      $1,546,975
Income (loss) from operations..............        $18,229          $(15,699)         $2,530
Identifiable assets........................       $121,717          $332,730        $454,447`

Item 2. Properties.

Our primary facilities, which are leased except where otherwise indicated, are
as follows:

`Approximate    Expiration
Facility                                          Location                      Square Feet     of Lease
--------                                          --------                      -----------     --------

Headquarters, Sales and Distribution Center (1)   Port Washington, NY                86,000        2007
Sales and Distribution Center (2)                 Suwanee, GA                       361,000       Owned
Sales and Distribution Center                     Compton, CA                       140,000        2007
Sales and Distribution Center                     Naperville, IL                    241,000        2010
PC Assembly, Sales and Distribution Center        Fletcher, OH                      297,000       Owned
Sales Center                                      Miami, FL                          71,000        2010
Sales and Distribution Center                     Markham, Ontario                   45,000        2005
Sales and Distribution Center                     Verrieres le Buisson, France       48,000        2007
Sales and Distribution Center                     Frankfurt, Germany                 92,000        2013
Sales and Distribution Center                     Madrid, Spain                      38,000        (3)
Sales and Distribution Center                     Milan, Italy                      102,000        2009
Sales and Distribution Center                     Greenock, Scotland                 78,000       Owned
European Headquarters and Sales Center            Wellingborough, England            75,000       Owned
Sales Center                                      Amstelveen, Netherlands            21,000        2007
Sales and Distribution Center                     Lidkoping, Sweden                  20,000        2005`

|(1) | For information about this facility, leased from related parties,
see "Item 13--Certain Relationships and Related Transactions"
|--- | -------------------------------------------------------------------------------------------------------------------------------

|(2) | Approximately 120,000 square feet is leased to a third party
through March 2004.
|--- | --------------------------------------------------------------------------------

|(3) | Terminable upon two months prior written notice.
|--- | ------------------------------------------------

We also lease space for other, smaller offices and retail stores in the United
States, Canada and Europe. We have three vacated facilities totaling
approximately 100,000 square feet in England, which we are actively trying to
sublease. For further information regarding our lease obligations, see Note 10
to the Consolidated Financial Statements.

Item 3. Legal Proceedings.

Systemax is a party to various pending legal proceedings and disputes arising in
the normal course of business, including those involving commercial, employment,
tax and intellectual property related claims, none of which, in
managements opinion, is anticipated to have a material adverse effect on
our consolidated financial statements.

Item 4. Submission of Matters to a Vote of Security
Holders.

During the quarter ended December 31, 2003, there were no matters submitted to a
vote of the Company's security holders.

PART II

Item 5. Market for Registrant's Common Equity and Related
Stockholder Matters.

Systemax common stock is traded on the New York Stock Exchange under the symbol
"SYX". The following table sets forth the high and low closing sales
price of our common stock as reported on the New York Stock Exchange for the
periods indicated.

`2003                                                         High       Low
     ----                                                         ----       ---

     First quarter.............................................  $1.99     $1.29
     Second quarter............................................   4.28      1.95
     Third quarter.............................................   8.45      3.47
     Fourth quarter............................................   7.78      6.49

     2002                                                         High       Low
     ----                                                         ----       ---

     First quarter.............................................  $2.85     $2.25
     Second quarter............................................   3.70      2.40
     Third quarter.............................................   2.41      1.59
     Fourth quarter............................................   1.70      1.23`

On March 15, 2004, the last reported sale price of our common stock on the New
York Stock Exchange was $5.38 per share. As of March 15, 2004, we had 255
stockholders of record.

We have not paid any dividends since our initial public offering and anticipate
that all of our cash provided by operations in the foreseeable future will be
retained for the development and expansion of our business, and therefore do not
anticipate paying dividends on our common stock in the foreseeable future.

Item 6. Selected Financial Data.

The following selected financial information is 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 in
this report. The selected income statement data for the years ended December 31,
2003, 2002 and 2001 and the selected balance sheet data as of December 31, 2003
and 2002 is derived from the audited consolidated financial statements which are
included elsewhere in this report. The selected balance sheet data as of
December 31, 2001, 2000 and 1999 and the selected statement of operations data
for the years ended December 31, 2000 and 1999 is derived from the audited
financial statements of the Company which are not included in this report.

`Years Ended December 31
                                                -----------------------
                             (In  millions, except per common share data and number of catalog titles)

                                                             --------------------------------------------------------------
                                                                2003         2002         2001         2000        1999
                                                             --------------------------------------------------------------
Statement of Operations Data:
----------------------------
Net sales                                                     $1,657.8     $1,551.5     $1,547.0     $1,686.1    $1,754.5
Gross profit                                                    $268.3       $265.6       $276.9       $209.9      $314.5
Selling, general & administrative expenses                      $251.5       $256.1       $271.6       $270.9      $254.7
Restructuring and other charges                                   $1.7        $17.3         $2.8
Income (loss) from operations                                    $12.5        $(7.8)        $2.5       $(61.0)      $59.8
Provision (benefit) for income taxes                              $5.3        $(1.0)         $.4       $(24.5)      $24.5
Income (loss) before cumulative effect of change in
   accounting principle, net of tax                               $5.6        $(8.0)         $.7       $(40.8)      $36.0
Cumulative effect of change in accounting principle, net
   of tax                                                                    $(51.0)
Net income (loss)                                                 $5.6       $(58.9)         $.7       $(40.8)      $36.0
Net income (loss) per common share, basic and diluted:
Income (loss) before cumulative effect of change in
   accounting principle, net of tax                               $.16        $(.23)        $.02       $(1.19)      $1.01
Cumulative effect of change in accounting principle, net
   of tax                                                                    $(1.50)
Net income (loss) per common share, basic and diluted             $.16       $(1.73)        $.02       $(1.19)      $1.01
Weighted average common shares outstanding:
Basic                                                             34.2         34.1         34.1         34.3        35.8
Diluted                                                           34.9         34.1         34.1         34.3        35.8

Selected Operating Data:
-----------------------
Orders entered                                                     4.4          4.0          4.0          3.9         4.4
Number of catalogs distributed                                      97          106          126          157         171
Number of catalog titles                                            30           37           38           37          37

Balance Sheet Data:
------------------
Working capital                                                 $149.1       $133.3       $103.3       $106.7      $186.9
Total assets                                                    $445.7       $437.9       $454.4       $538.0      $551.8
Short-term debt                                                  $20.8        $21.2         $2.8        $48.6        $9.0
Long-term debt, excluding current portion                        $18.4        $17.5                                  $1.7
Shareholders' equity                                            $212.6       $201.9       $254.9       $255.7      $310.2`

Item 7. Management's Discussion and Analysis of
Financial Condition and Results of Operations.

Overview

We are a direct marketer of brand name and private label products, including
personal desktop computers, notebook computers, computer related products and
industrial products in North America and Europe. We assemble our own PCs and
sell them under our own trademarks, which we believe gives us a competitive
advantage. We also sell computers manufactured by other leading companies, such
as IBM and Hewlett Packard. We offer more than 100,000 products and continuously
update our product offerings to address the needs of our customers, which
include large, mid-sized and small businesses, educational and government
entities as well as individual consumers. Computers and computer related
products account for more than 90% of our net sales, and, as a result, we are
dependent on the general demand for information technology products.

The market for computer products is subject to intense price competition and is
characterized by narrow gross profit margins. Distribution of information
technology products is working capital intensive, requiring us to incur
significant costs associated with the warehousing of many products, including
the costs of leasing warehouse space, maintaining inventory and tracking
systems, and employing personnel to perform the associated tasks. We supplement
our product availability by maintaining relationships with major distributors,
utilizing a combination of stocking and drop-ship fulfillment.

During fiscal 2002 and 2003, our performance and that of the industry as a whole
was impacted negatively by the global economic downturn and cautious information
technology spending. As it became evident that the industry was experiencing a
prolonged economic downturn, we took measures to align our cost structure with
lower revenues and decreasing gross margins. The primary component of our
operating expenses historically has been employee related costs, which includes
items such as wages, commissions, bonuses, and benefits.We have recently
made substantial reductions in our workforce and closed or consolidated several
facilities. We have reduced selling, general and administrative expenses from
17.6% of net sales in 2001 to 14.3% (on a comparable basis) of net sales in
2003. In the first quarter of 2004 we announced and began the implementation of
a plan to streamline our United States computer business. This plan will
consolidate duplicative back office and warehouse operations, which we expect to
result in annual savings of approximately $8 million excluding severance and
other restructuring costs of approximately $3 million to be recognized in fiscal
2004.

The discussion of our results of operations and financial condition that follows
will provide information that will assist in understanding our financial
statements, the factors that we believe may affect our future results and
financial condition as well as information about how certain accounting
principles and estimates affect the financial statements.

Results of Operations

We had net income for the year ended December 31, 2003 of $5.6 million. For the
year ended December 31, 2002, we had a net loss of $58.9 million, after
recording a cumulative effect of a change in accounting principle of $51
million, net of tax, to reflect the impairment of the entire carrying amount of
goodwill. We had net income for the year ended December 31, 2001 of $653,000.

The following table represents our consolidated statement of operations data
expressed as a percentage of net sales for the three most recent fiscal years:

`2003       2002       2001
                                                             ----       ----       ----
     Net sales                                              100.0%     100.0%     100.0%
     Gross profit                                            16.2%      17.1%      17.9%
     Selling, general and administrative expenses            15.2%      16.5%      17.6%
     Restructuring and other charges                          0.1%       1.1%       0.2%
     Goodwill impairment                                      0.2%
     Income (loss) from operations                            0.8%      (0.5)%      0.2%
     Interest expense                                         0.1%       0.1%       0.1%
     Income taxes                                             0.3%      (0.1)%
     Income (loss) before cumulative effect of change         0.3%      (0.5)%      0.1%
       in accounting principle, net of tax
     Cumulative effect of change in accounting principle,               (3.3)%
       net of tax
     Net income (loss)                                        0.3%      (3.8)%      0.1%`

NET SALES

Net sales for the year ended December 31, 2003 were $1.658 billion, an increase
of 6.8% from $1.552 billion for the year ended December 31, 2002. North American
sales were $1.026 billion, a 6.5% increase from last years $963.8 million.
The increase in North American sales was a result of growth in our consumer
business. Continued weakness in demand for information technology products from
corporate customers resulted in lower sales to those customers. European sales,
in US dollars, increased 7.5% to $631.5 million for 2003 (representing 38.1% of
worldwide sales) compared to $587.7 million (representing 37.9% of worldwide
sales) in the year-ago period. Movements in foreign exchange rates positively
impacted European sales for 2003 by approximately $81.0 million. If currency
exchange rates for 2002 had prevailed in 2003, European sales would have
decreased 6.4% from the prior year. Lower demand and the effect of exchange rate
movements on product pricing in certain European markets resulted in decreased
local currency denominated sales.

Net sales of $1.552 billion in 2002 were $4.5 million or 0.3% higher than the
$1.547 billion reported in 2001. The weak worldwide economic environment
resulted in reduced demand, particularly in the technology sector. While sales
to individual consumers showed growth, sales to business customers remained
weak, as the anticipated replacement cycle for PCs continued to be deferred due
to our business customers desire to reduce capital expenditures. PC sales
were $350 million in 2002, representing 22.6% of the Companys net sales,
which was largely unchanged from 2001. Sales in North America decreased 1.9% to
$964 million in 2002 from $983 million in 2001 primarily as a result of the
continuing economic slowdown in the United States. European sales increased 4.1%
to $588 million in 2002 from $564 million in 2001. Movements in foreign exchange
rates positively impacted the European sales comparison by approximately $24.8
million in 2002 compared to 2001. Excluding the movements in foreign exchange
rates, European sales would have been substantially unchanged from the prior
year.

European economies continued to weaken during 2003, which is reflected in our
results. We suffered declines in local currencies in 2003 after a relatively
flat year in 2002 and slowing growth in 2001. The table below reflects European
sales for the three reported years at constant (2001) exchange rates (in
millions):

`2003         2002          2001
                                                  ----         ----          ----
     European sales as reported                  $631.5       $587.7       $564.4
     European sales at 2001 exchange rates       $528.3       $563.2       $564.4`

GROSS PROFIT

Gross profit, which consists of net sales less product cost, shipping, assembly
and certain distribution center costs, was $268.3 million, or 16.2% of net
sales, compared to $265.6 million, or 17.1% of net sales, in the year-ago
period, an increase of $2.7 million.  As a result of adopting Emerging
Issues Task Force (EITF) Issue No. 02-16, Accounting by a
Customer (including a Reseller) for Certain Consideration Received from a
Vendor, $14.5 million of vendor consideration was recorded as a reduction
of cost of sales in 2003. Excluding the impact of EITF 02-16, and therefore on a
non-GAAP basis, the gross profit margin would have been 15.3% in 2003 compared
to 17.1% in 2002. (The non-GAAP gross profit margin has been included here to
provide comparability to the prior year.) The decline in the gross profit margin
was due to continued pricing pressure resulting from weak market demand and
response to competition and changes in the mix of products sold, as customers
continue to shift to lower-priced solutions.

Gross profit was $265.6 million in 2002, down 4.1%, or $11.3 million, from
$276.9 million in 2001. As a percentage of sales, gross profit fell to 17.1% in
2002, from 17.9% in 2001. This decline resulted from a decline in the gross
profit ratio in the Companys European operations, which was affected by
intense pricing pressure in certain of its markets. The gross profit ratio in
the Companys North American business decreased only slightly from 2001 as
pricing pressures were partially offset by cost reductions resulting from
initiatives undertaken in recent years and production efficiencies achieved in
the Companys PC assembly business.

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES

Selling, general and administrative expenses for 2003 were $251.5 million
compared to $256.1 million in 2002, a net decrease of $4.6 million or 1.8%. The
decrease was realized in our North American operations and included decreased
television advertising spending related to sales of the Companys PCs. In
addition, as a result of increased internet sales, we were able to leverage our
total advertising spending and reduce our other advertising expenses by reducing
the number of catalogs we mailed. These decreases were partially offset by
approximately $13 million of increased costs in Europe resulting from the
effects of changes in foreign exchange rates and the effects of the adoption of
EITF 02-16. The adoption of EITF 02-16 resulted in the reclassification of
$14.5 million of vendor consideration as a reduction of cost of sales,
which would previously have been recorded as a reduction of advertising expense.
As a percentage of sales, selling, general and administrative expenses were
15.2% (14.3% on a non-GAAP basis before the adoption of EITF 02-16) compared to
16.5% in the year-ago period.

Selling, general and administrative expenses totaled $256.1 million, or 16.5% of
net sales, in 2002, a decrease of $15.6 million, or 5.7%, compared to $271.6
million, or 17.6% of net sales, in 2001. Reductions in catalog costs comprised
the largest portion of the decrease. The Company also reduced its employee count
in the United States, lowering its salary expense and related benefit costs in
2002. Selling, general and administrative expenses also declined as a result of
actions taken to reduce costs and tighten discretionary spending. These
reductions were partially offset by increased salary and other operating
expenses in the Companys European operations.

RESTRUCTURING AND OTHER CHARGES

In the fourth quarter of 2003 we implemented a plan to consolidate the
warehousing facilities in our United States computer supplies business. We
recorded $713,000 of costs related to this plan in the fourth quarter, including
$233,000 of non-cash costs for impairment of the carrying value of fixed assets
and $480,000 of charges for other exit costs.

During 2002 we implemented a plan to consolidate the activities of our three
United Kingdom locations into a new facility we had constructed. We incurred
$4.1 million of costs associated with the plan, including $1.9 million for
recruitment, staff relocation and severance and benefits for approximately 150
terminated employees, $1.7 million of charges for other exit costs, primarily
facilities closing and lease terminations, and $0.5 million of non-cash costs
for impairment of the carrying value of fixed assets. During the fourth quarter
of fiscal 2003 we recorded $2.2 million of additional costs, net of reductions,
related to this plan as a charge to operations. These charges consisted of $1.6
million of other restructuring activities as we adjusted the original estimates
of lease and contract termination costs and $600,000 of additional non-cash
asset impairments, related to buildings vacated.

In 2001 approximately $2 million of previously capitalized costs associated with
software projects abandoned were written off. We also incurred approximately
$750,000 of costs in 2001 related to the consolidation of one of our domestic
warehouse locations.

In August 2003 we settled our litigation with a software developer and reversed
a previously recorded liability of $1.3 million, which was no longer required.

During the second quarter of 2003, we purchased the minority ownership of our
Netherlands subsidiary for approximately $2.6 million, pursuant to the terms of
the original purchase agreement. All of the purchase price was attributable to
goodwill and, as a result of an impairment analysis, was written off in
accordance with Statement of Financial Accounting Standards 142, Goodwill
and Other Intangible Assets."

During the second quarter of 2002 we recorded a non-recurring write-off of $13.2
million resulting from our decision to discontinue development of internal-use
computer software.

INCOME (LOSS) FROM OPERATIONS

We had income from operations of $12.5 million in 2003, a loss from operations
of $7.8 million in 2002 and income from operations for the year ended December
31, 2001 of $2.5 million. Results in 2003 include restructuring and other
charges of $1.7 million and a goodwill impairment charge of $2.6 million. The
loss from operations in 2002 includes $17.3 million of restructuring and other
charges. Income from operations in 2001 includes the elimination of a liability
of $3 million recorded in a prior year which we determined was no longer
required and expense of $2.8 million for restructuring and other charges. We had
a loss from operations in Europe in 2003 of $2.0 million, compared to income
from operations of $7.8 million in 2002 and $18.2 million in 2001. European
results declined as a result of decreased gross profit, increased selling,
general and administrative expenses and $4.8 million of restructuring and other
charges.

INTEREST AND OTHER INCOME AND INTEREST EXPENSE

Interest expense was $2.3 million in 2003, $1.7 million in 2002 and $1.8 million
in 2001. The increased expense in 2003 resulted from increased short-term
borrowings under our United Kingdom facility and a full year of interest expense
on long-term obligations incurred in 2002. We had decreased borrowings under our
United States and United Kingdom short-term credit facilities in 2002, the
effect of which was partially offset by interest expense on new long-term
borrowings entered into during the year. Interest and other income was $0.8
million in 2003, $0.4 million in 2002 and $0.3 million in 2001.

INCOME TAXES

We recorded an income tax provision of $5.3 million in 2003, an income tax
benefit of $1.0 million in 2002 and an income tax provision of $389,000 in 2001.
The effective rates were 48.7% in 2003, 11.5% in 2002 and 37.3% in 2001. The
effective tax rate in 2003 was adversely affected by the goodwill impairment
write-off, which is not tax deducible. The mix in taxable income and losses
between our U. S. and foreign operations and the expected utilization of our
deferred tax assets significantly impacted the recording of the 2002 tax
benefit. In 2002, we also incurred additional tax expense in connection with
audit assessments in two of our foreign subsidiaries. For the years ended
December 31, 2003 and 2002, we have not recognized certain foreign tax credits,
certain state tax benefits on losses in the United States and certain benefits
on losses in foreign tax jurisdictions due to our inability to carry such
credits and losses back to prior years. Accordingly, valuation allowances were
recorded against the deferred tax assets associated with those tax credits and
net operating loss carryforwards.

CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING PRINCIPLE

During the first half of 2002, we completed the transitional review for goodwill
impairment required by SFAS 142. The review indicated that the entire carrying
value of the goodwill recorded on our balance sheet was impaired as of January
1, 2002. Accordingly, we recorded a transitional impairment loss of $68 million
($51 million net of tax or a net loss per share of $1.50) as a cumulative effect
of change in accounting principle in our statements of operations for the year
ended December 31, 2002.

NET INCOME (LOSS)

As a result of the above, net income for 2003 was $5.6 million, or $.16 per
basic and diluted share, the net loss for 2002 was $58.9 million, or $1.73 per
basic and diluted share, and net income for 2001 was $653,000, or $.02 per basic
and diluted share.

Seasonality

Net sales have historically been modestly weaker during the second and third
quarter as a result of lower business activity during those months. The
following table sets forth the net sales, gross profit and income (loss) from
operations for each of the quarters since January 1, 2002 (amounts in
millions).

`2003                                                 March 31      June 30      September 30      December 31
     ----                                                 --------      -------      ------------      -----------
     Net sales........................................      $426         $389           $405              $438
     Percentage of year's net sales ..................      25.7%        23.5%          24.4%             26.4%
     Gross profit.....................................       $72          $64            $67               $65
     Income (loss) from operations....................        $9          $(1)            $4                $1

     2002                                                 March 31      June 30      September 30      December 31
     ----                                                 --------      -------      ------------      -----------
     Net sales........................................      $412         $364           $372              $403
     Percentage of year's net sales ..................      26.6%        23.4%          24.0%             26.0%
     Gross profit.....................................       $74          $62            $63               $67
     Income (loss) from operations....................        $1         $(14)            $2                $4`

Financial Condition, Liquidity and Capital Resources

Liquidity is the ability to generate sufficient cash flows to meet obligations
and commitments from operating activities and the ability to obtain appropriate
financing and to convert into cash those assets that are no longer required to
meet existing strategic and financing objectives. Therefore, liquidity cannot be
considered separately from capital resources that consist of current and
potentially available funds for use in achieving long-range business objectives
and meeting debt service commitments. Currently, our liquidity needs arise
primarily from working capital requirements and capital expenditures.

Our working capital was $149 million at December 31, 2003, an increase of $16
million from $133 million at the end of 2002. This was due principally to a $36
million increase in inventories, a $4 million increase in accounts receivable
and a $13 million decrease in accrued expense and other current liabilities
offset by a $24 million decrease in cash, a $3 million decrease in prepaid
expenses and other current assets and a $10 million increase in accounts
payable. Our inventories increased to meet the needs of our growing consumer
base, as increased stock levels facilitate such sales, while sales to business
customers include a large portion of merchandise shipped directly by our
vendors. The increase in accounts receivable was less pronounced, as sales to
consumers are generally paid by credit card, which have a 2-3 day
shipment-to-cash cycle compared to the normal 30-day payment terms offered to
our business customers. We expect that future accounts receivable and inventory
balances will fluctuate with the mix of our net sales between consumer and
business customers.

We maintain our cash and cash equivalents primarily in money market funds or
their equivalent. As of December 31, 2003, all of our investments mature in less
than three months. Accordingly, we do not believe that our investments have
significant exposure to interest rate risk.

Our cash balance decreased $24.3 million to $38.7 million during the year ended
December 31, 2003. Net cash used in operating activities was $6.9 million in
2003, compared with net cash provided by operating activities of $4.9 million in
2002 and $95.6 million in 2001. The decrease in cash provided by operations in
2003 resulted from changes in our working capital accounts, which used $31.7
million in cash compared to $16.8 million in 2002, and resulted primarily from
the increase in our inventories and a decrease in accounts payable and accrued
expenses. This was partially offset by an increase in cash generated from net
income adjusted by other non-cash items, which provided $24.8 million in 2003,
compared to $21.6 million provided by these items in 2002. The decrease of $90.7
million in cash provided by operations in 2002 was primarily a result of changes
in working capital, which used $16.8 million in cash compared to $66.2 million
provided in 2001, and resulted primarily from increases in our inventories,
accounts receivable and prepaid expenses. Cash was provided by operations in
2001 by inventory reductions, decreases in accounts receivable and receipt of a
tax refund resulting from the loss recorded in the United States in 2000, offset
by a decrease in accounts payable.

In 2003, $11.2 million of cash was used in investing activities, principally
$8.7 million for the purchase of property, plant and equipment, and $2.6 million
for the acquisition of the minority interest in our Netherlands subsidiary. The
capital expenditures in 2003 included upgrades and enhancements to our
information and communications systems hardware and facilities costs for the
opening of several retail stores. Cash of $14.7 million was used in investing
activities in 2002. This included $15.4 million of additions to property, plant
and equipment, primarily for the completion of a new facility for our United
Kingdom operations. In 2001 we used cash in investing activities of $23.8
million, primarily for property, plant and equipment additions. These
expenditures included $9.5 million for software and systems development and $5.5
million toward the construction of our United Kingdom facility. We anticipate no
major capital expenditures in 2004 and will fund any capital expenditures out of
cash from operations and borrowings under our credit lines.

Net cash of $1.9 million was used in financing activities in 2003. Cash of $4.2
million was used to repay short and long-term obligations, which was partially
offset by $1.5 million of cash provided by the issuance of capital leases and
$759,000 provided by the exercise of stock options. Cash of $33.8 million was
provided by financing activities in 2002 from bank borrowings and the mortgaging
of our Georgia distribution facility and new United Kingdom facility. In 2001,
$45.8 million of cash was used in financing activities, all of which paid down
short-term borrowings.

Under our $70 million United States secured revolving credit agreement, which
expires in June 2004, availability as of December 31, 2003 was $49.0 million.
The revolving credit agreement contains certain financial and other covenants,
including restrictions on capital expenditures and payments of dividends. We
were in compliance with all of the covenants as of December 31, 2003. There were
outstanding letters of credit of $8.0 million and there were no outstanding
advances as of December 31, 2003. We are in the process of extending this
facility through the end of the first quarter of 2005 while we negotiate a new
agreement.

We also maintain a £15 million ($26.9 million at the December 31, 2003
exchange rate) multi-currency credit facility with a financial institution in
the United Kingdom, which is available to our United Kingdom subsidiaries. The
facility does not have a termination date, but may be canceled by either party
on six months notice. Borrowings under the facility are secured by certain
assets of our United Kingdom subsidiaries. At December 31, 2003 there were
£7.5 million ($13.3 million) of borrowings outstanding under this line with
interest payable at a rate of 5.85%.

In October 2003 our Netherlands subsidiary entered into a 5 million ($6.3
million at the December 31, 2003 exchange rate) credit facility. Borrowings
under the facility are secured by the subsidiarys accounts receivable and
are subject to a borrowing base limitation of 85% of the eligible accounts. At
December 31, 2003 there were 4.5 million ($5.7 million) of borrowings
outstanding under this line with interest payable at a rate of 5.0%. The
facility expires in November 2005.

In 2002 we entered into a £6.6 million ($10.6 million at the December 31,
2003 exchange rate), 111⁄2 year term loan agreement with a United Kingdom
bank, to finance the construction of a new United Kingdom facility. The
borrowings are secured by the land and building and are repayable in 40
quarterly installments of £165,000 ($295,000) through August 2012. The
outstanding borrowings bear interest at LIBOR plus 160 basis points (5.25% at
December 31, 2003). In connection with this term loan, we also entered into an
interest rate collar agreement to reduce our exposure to market rate
fluctuations. At December 31, 2003, the notional amount of the interest rate
collar was £5,775,000 ($10,338,000) with an interest rate cap of 6.0% and a
floor of 4.5%. The interest rate collar expires on April 30, 2005. As of
December 31, 2003, the collar was in a loss position of approximately $39,000
and, accordingly, the aggregate fair value of the collar was recorded as a
liability. The change in the fair value of this derivative for the year ended
December 31, 2003 has been recognized in the Consolidated Statement of
Operations as this hedge was determined to be ineffective. The term loan
agreement contains certain financial and other covenants related to our United
Kingdom subsidiaries.

In April 2002 we entered into a ten year, $8.4 million mortgage loan on our
Suwanee, Georgia distribution facility. The mortgage has monthly principal and
interest payments of $62,000 through May 2012, with a final additional principal
payment of $6.4 million at maturity in May 2012. The mortgage loan bears
interest at 7.04% and is collateralized by the underlying land and building.

We are obligated under operating leases for the rental of certain facilities and
equipment which expire at various dates through 2013. We currently lease our New
York facility from an entity owned by Richard Leeds, Robert Leeds and Bruce
Leeds, the Companys three principal shareholders and senior executive
officers. The annual rental totals $612,000 and the lease expires in 2007.

Following is a summary of our contractual obligations for future principal
payments on our debt, minimum rental payments on our non-cancelable operating
leases and minimum payments on our other commitments at December 31, 2003 (in
thousands):

`After
                                         2004     2005     2006     2007     2008     2008
                                         ----     ----     ----     ----     ----     ----
Contractual Obligations:
Maturities of long-term debt           $1,746   $1,740   $1,745   $1,675   $1,516  $11,677
Payments on non-cancelable              7,277    7,128    6,511    5,614    3,984   11,063
  operating leases
Purchase commitments                    1,883        -        -        -        -        -
                                        -----    -----    -----    -----    -----    -----
Total contractual obligations         $10,906   $8,868   $8,256   $7,289   $5,500  $22,740
                                      =======   ======   ======   ======   ======  =======

Other Commitments:
Letters of credit                      $8,000      N/A      N/A      N/A      N/A      N/A
                                       ======`

Our operating results have generated cash flow which, together with borrowings
under our debt agreements, have provided sufficient capital resources to finance
working capital and cash operating requirements, fund capital expenditures, and
fund the payment of interest on outstanding debt. Our primary ongoing cash
requirements will be to finance working capital, fund the payment of principal
and interest on indebtedness and fund capital expenditures. We believe future
cash flows from operations and availability of borrowings under our lines of
credit (as they are expected to be extended) will be sufficient to fund ongoing
cash requirements.

We are party to certain litigation, as disclosed in Commitments and
Contingencies in the Notes to Consolidated Financial Statements, the
outcome of which we believe, based on discussions with legal counsel, will not
have a material adverse effect on our consolidated financial statements.

Off-balance Sheet Arrangements

We have not created, and are not party to, any special-purpose or off-balance
sheet entities for the purpose of raising capital, incurring debt or operating
our business. We do not have any arrangements or relationships with entities
that are not consolidated into the financial statements that are reasonably
likely to materially affect our liquidity or the availability of capital
resources.

Factors That May Affect Future Results and Financial
Condition

There are a number of factors and variables that affect our results of
operations and financial condition. Following is a description of some of the
important factors that may affect future results.

| |  | Economic conditions have affected and could continue to adversely affect our
revenues and profits.
Both we and our business customers are subject to global political, economic and
market conditions, including military action and the threat of terrorism.
Economic conditions in the United States have recently begun to improve after
several years of adverse conditions. Economic conditions in Europe continue to
be unsettled. If the strengthening of general economic conditions does not
continue and if conditions in Europe remain weak, our results could continue to
be adversely affected. We may experience a decline in sales as a result of poor
economic conditions and the lack of visibility relating to future orders. Our
consolidated results of operations depend upon, among other things, our ability
to maintain and increase sales volumes with existing customers, our ability to
attract new customers and the financial condition of our customers. A decline in
the economy that adversely affects our customers, causing them to limit or defer
their spending, would likely adversely affect us as well. We cannot predict with
any certainty whether we will be able to maintain or improve upon historical
sales volumes with existing customers, or whether we will be able to attract new
customers.
In response to economic and market conditions, from time to time we have
undertaken initiatives to reduce our cost structure where appropriate. The
initiatives already implemented as well as any future workforce and facilities
reductions undertaken may not be sufficient to meet the changes in economic and
market conditions and to achieve future profitability. In addition, costs
actually incurred in connection with our restructuring actions may be higher
than our estimates of such costs and/or may not lead to the anticipated cost
savings.
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | Competitive pressures could harm our revenue and gross margin.
We may not be able to compete effectively with current or future competitors.
The market for our products and services is intensely competitive and subject to
constant technological change. We expect this competition to further intensify
in the future. Competitive factors include price, availability, service and
support. We compete with a wide variety of other resellers and retailers, as
well as manufacturers. Some of our competitors are larger companies with greater
financial, marketing and product development resources than ours. In addition,
new competitors may enter our markets. This may place us at a disadvantage in
responding to competitors' pricing strategies, technological advances and other
initiatives, resulting in our inability to increase our revenues or maintain our
gross margins in the future.
In many cases our products compete directly with those offered by other
manufacturers and distributors. If any of our competitors were to develop
products or services that are more cost-effective or technically superior,
demand for our product offerings could decrease.
Our margins are also dependent on the mix of products we sell and could be
adversely affected by a continuation of our customers shift to
lower-priced products.
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | We are dependent on third-party suppliers.
We purchase a significant portion of our computer related products from major
distributors such as Tech Data Corporation and Ingram Micro Inc. and
directly from large manufacturers such as IBM and Hewlett Packard, who deliver
those products directly to our customers. These relationships enable us to make
available to our customers a wide selection of products without having to
maintaining large amounts of inventory. The termination or interruption of our
relationships with any of these suppliers could materially adversely affect our
business.
Our PC products contain electronic components, subassemblies and software that
in some cases are supplied through sole or limited source third-party suppliers,
some of which are located outside of the U.S. Although we do not anticipate any
problems procuring supplies in the near-term, there can never be any assurance
that parts and supplies will be available in a timely manner and at reasonable
prices. Any loss of, or interruption of supply from key suppliers may require us
to find new suppliers. This could result in production or development delays
while new suppliers are located, which could substantially impair operating
results. If the availability of these or other components used in the
manufacture of our products was to decrease, or if the prices for these
components were to increase significantly, operating costs and expenses could be
adversely affected.
A portion of our revenues is derived from the sale of products manufactured
using licensed patents, software and/or technology. Failure to renew these
licenses on favorable terms or at all could force us to stop manufacturing and
distributing these products and our financial condition could be adversely
affected.
Many product suppliers provide us with co-op advertising support in exchange for
featuring their products in our catalogs and on our internet sites. Certain
suppliers provide us with other incentives such as rebates, reimbursements,
payment discounts, price protection and other similar arrangements. These
incentives are offset against cost of goods sold or selling, general and
administrative expenses, as applicable. The level of co-op advertising support
and other incentives received from suppliers may decline in the future, which
could increase our cost of goods sold or selling, general and administrative
expenses and have an adverse effect on results of operations and cash flows.
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | We are exposed to inventory risks.
Our inventory is subject to risk due to technological change and changes in
market demand for particular products. Certain of our suppliers offer limited
price protection from the loss in value of inventory and we have limited right
to return purchases to suppliers. The decrease or elimination of price
protections or purchase returns could lower our gross margin or result in
inventory write-downs. We also periodically take advantage of attractive product
pricing by making opportunistic bulk inventory purchases; any resulting excess
and/or obsolete inventory that we are not able to re-sell could have an adverse
impact on our results of operations. Any inability to enter into such
arrangements may significantly impact our sales and profitability.
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | State and local sales tax collection may affect demand for our products.
Our United States subsidiaries collect and remit sales tax in states in which
the subsidiaries have physical presence or in which we believe other appropriate
nexus to obligate such collection exists. Other states may, from time to time,
claim that we have state-related activities constituting a sufficient nexus to
trigger such collection. Additionally, many other states seek to impose sales
tax collection obligations on companies that sell goods to customers in their
state even without a physical presence. Such efforts by states have increased
recently, as states seek to raise revenues without increasing the tax burden on
residents. We rely, as do other direct mail retailers, on United States Supreme
Court decisions which hold that, without Congressional authority, a state may
not enforce a sales tax collection obligation on a company that has no physical
presence in the state and whose only contacts with the state are through the use
of interstate commerce such as the mailing of catalogs into the state and the
delivery of goods by mail or common carrier. We cannot predict whether the
nature or level of contacts we have with a particular state will be deemed
enough to require us to collect sales tax in that state nor can we be assured
that Congress or individual states will not approve legislation authorizing
states to impose tax collection obligations on all direct mail and/or e-commerce
transactions. A successful assertion by one or more states that we should
collect sales tax on the sale of merchandise could result in substantial tax
liabilities for past sales and would result in considerable administrative
burdens and costs for us and may reduce demand for our products from customers
in such states when we charge customers for such taxes.
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | We have substantial international operations and we are exposed to
fluctuations in currency exchange rates and political uncertainties.
We currently have operations located in nine countries outside the United
States, and non-U.S. sales accounted for 39.7% of our revenue during 2003. Our
future results could be materially adversely affected by a variety of factors,
including changes in foreign currency exchange rates, changes in a
countrys economic or political conditions, unexpected changes in
regulatory requirements and natural disasters.
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | Our income tax rate and the value of our deferred tax assets are subject to
change.
Changes in taxes due to changes in the mix of U.S. and non-U.S. revenues and
profitability, changes in tax rates or exposure to additional income tax
liabilities could affect our profitability. We are subject to income taxes in
the United States and various foreign jurisdictions. Our effective tax rate
could be adversely affected by changes in the mix of earnings in countries with
differing statutory tax rates, changes in the valuation of deferred tax assets
and liabilities, changes in tax laws or by material audit assessments. The
carrying value of our deferred tax assets, which are primarily in the United
States, is dependent on our ability to generate future taxable income in the
United States. In addition, the amount of income taxes we pay is subject to
ongoing audits in various jurisdictions and a material assessment by a tax
authority could affect our profitability.
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | Business disruptions could adversely impact our revenue and financial
condition.
It is our policy to insure for certain property and casualty risks consisting
primarily of physical loss to property, business interruptions resulting from
property losses, workers' compensation, comprehensive general liability, and
auto liability. Insurance coverage is obtained for catastrophic property and
casualty exposures as well as those risks required to be insured by law or
contract. Although we believe that our insurance coverage is reasonable,
significant events such as acts of war and terrorism, economic conditions,
judicial decisions, legislation and large losses could materially affect our
insurance obligations and future expense.
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | Reliance on technology
We rely on a variety of information and telecommunications systems in our
operations. Our success is dependent in large part on the accuracy and proper
use of our information systems, including our telecommunications systems. To
manage our growth, we continually evaluate the adequacy of our existing systems
and procedures. We anticipate that we will regularly need to make capital
expenditures to upgrade and modify our management information systems, including
software and hardware, as we grow and the needs of our business change. The
occurrence of a significant system failure or our failure to expand or
successfully implement our systems could have a material adverse effect on our
results of operations.
Our information systems networks, including our web sites, and applications
could be adversely affected by viruses or worms and may be vulnerable to
malicious acts such as hacking. Although we take preventive measures, these
procedures may not be sufficient to avoid harm to our operations, which could
have an adverse effect on our results of operations.
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | Availability of credit and financing.
We require significant levels of capital in our business to finance accounts
receivable and inventory. We maintain credit facilities in the United States and
in Europe to finance increases in our working capital if cash available is
insufficient. The amount of credit available to us at any point in time may be
adversely affected by the quality or value of the assets collateralizing these
credit lines. In addition, if we are unable to renew or replace these facilities
at maturity, our liquidity and capital resources may be adversely affected.
However, we have no reason to believe that we will not be able to renew our
facilities.
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | Sales to individual consumers exposes us to credit card fraud, which could
adversely affect our business.
Failure to adequately control fraudulent credit card transactions could increase
our expenses. Increased sales to individual consumers, which are more likely to
be paid for using a credit card, increases our exposure to fraud. We employ
technology solutions to help us detect the fraudulent use of credit card
information. However, if we are unable to detect or control credit card fraud,
we may in the future suffer losses as a result of orders placed with fraudulent
credit card data, which could adversely affect our business.
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | Increased costs associated with corporate governance compliance may impact
our results of operations.
As a public company, we incur significant legal, accounting and other expenses
that we would not incur as a private company. In addition, the Sarbanes-Oxley
Act of 2002, as well as new rules subsequently implemented by the Securities and
Exchange Commission and new listing requirements subsequently adopted by the New
York Stock Exchange in response to Sarbanes-Oxley, have required changes in
corporate governance practices of public companies. We expect these developments
to increase our legal compliance and financial reporting costs and make some
activities more costly and time consuming. These developments may make it more
difficult and more expensive for us to obtain directors and officers
liability insurance and we may be required to accept reduced coverage or incur
substantially higher costs to obtain coverage, possibly making it more difficult
for us to attract and retain qualified members of our board of directors,
particularly to serve on our audit committee. We presently cannot estimate the
timing or magnitude of additional costs we may incur as a result; however, to
the extent these costs are significant, our general and administrative expenses
are likely to increase as a percentage of revenue and our results of operations
will be negatively impacted.
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Other factors that could contribute to or cause such differences include, but
are not limited to, unanticipated developments in any one or more of the
following areas: (i) the effect on us of volatility in the price of paper and
periodic increases in postage rates, (ii) the operation of our management
information systems, (iii) significant changes in the computer products retail
industry, especially relating to the distribution and sale of such products,
(iv) timely availability of existing and new products, (v) risks involved with
e-commerce, including possible loss of business and customer dissatisfaction if
outages or other computer-related problems should preclude customer access to
us, (vi) risks associated with delivery of merchandise to customers by utilizing
common delivery services such as the United States Postal Service and United
Parcel Service, including possible strikes and contamination, (vii) borrowing
costs or availability, (viii) pending or threatened litigation and
investigations and (ix) the availability of key personnel, as well as other risk
factors which may be detailed from time to time in our Securities and Exchange
Commission filings.

Readers are cautioned not to place undue reliance on any forward looking
statements contained in this report, which speak only as of the date of this
report. We undertake no obligation to publicly release the result of any
revisions to these forward looking statements that may be made to reflect events
or circumstances after the date hereof or to reflect the occurrence of
unexpected events.

Critical Accounting Policies and Estimates

Our significant accounting policies are described in Note 1 to the consolidated
financial statements. The policies below have been identified as critical to our
business operations and understanding the results of operations. Certain
accounting policies require the application of significant judgment by
management in selecting the appropriate assumptions for calculating financial
estimates. By their nature, these judgments are subject to an inherent degree of
uncertainty, and as a result, actual results could differ from those estimates.
These judgments are based on historical experience,observation of trends
in the industry, information provided by customers and information available
from other outside sources, as appropriate. Management believes that full
consideration has been given to all relevant circumstances that we may be
subject to, and the consolidated financial statements of the Company accurately
reflect management's best estimate of the consolidated results of operations,
financial position and cash flows of the Company for the years presented. Actual
results may differ from these estimates under different conditions or
assumptions.

Revenue Recognition. We recognize sales based on the
terms of the customer purchase order, which indicates title to the product and
risk of ownership passes to the customer upon shipment. Sales are shown net of
returns and allowances. Reserves for estimated returns and allowances are
provided when sales are recorded based on historical experience and current
trends.

Accounts Receivable and Allowance for Doubtful Accounts.
We record an allowance for doubtful accounts to reflect our estimate of the
collectibility of our trade accounts receivable. We evaluate the collectibility
of accounts receivable based on a combination of factors, including an analysis
of the age of customer accounts and our historical experience with accounts
receivable write-offs. The analysis also includes the financial condition of a
specific customer or industry, and general economic conditions. In circumstances
where we are aware of customer charge-backs or a specific customer's inability
to meet its financial obligations, a specific reserve for bad debts applicable
to amounts due to reduce the net recognized receivable to the amount management
reasonably believes will be collected is recorded. In those situations with
ongoing discussions, the amount of bad debt recognized is based on the status of
the discussions. While bad debt allowances have been within expectations and the
provisions established, there can be no guarantee that we will continue to
experience the same allowance rate we have in the past.

Inventories. We value our inventories at the lower of
cost or market, cost being determined on the first-in, first-out method.
Reserves for excess and obsolete or unmarketable merchandise are provided based
on historical experience, assumptions about future product demand and market
conditions. The adequacy of these reserves are evaluated quarterly. If market
conditions are less favorable than projected or if technological developments
result in accelerated obsolescence, additional write-downs may be required.
While markdowns and obsolescence have been within expectations and the
provisions established, there can be no guarantee that we will continue to
experience the same level of markdowns we have in the past.

Long-lived Assets. Management exercises judgment in
evaluating our long-lived assets for impairment. We believe we will generate
sufficient undiscounted cash flow to more than recover the investments made in
property, plant and equipment. While we believe that our estimates of future
cash flows are reasonable, different assumptions regarding such cash flows could
materially affect our evaluations

Income Taxes. We are subject to taxation from federal,
state and foreign jurisdictions and the determination of our tax provision is
complex and requires significant management judgment. Management judgment is
also applied in the determination of deferred tax assets and liabilities and any
valuation allowances that might be required in connection with our ability to
realize deferred tax assets.

Since we conduct operations internationally, our effective tax
rate has and will continue to depend upon the geographic distribution of our
pre-tax income or losses among locations with varying tax rates and rules. As
the geographic mix of our pre-tax results among various tax jurisdictions
changes, the effective tax rate may vary from period to period. We are also
subject to periodic examination from domestic and foreign tax authorities
regarding the amount of taxes due. These examinations include questions
regarding the timing and amount of deductions and the allocation of income among
various tax jurisdictions. We have established, and periodically reevaluate, an
estimated income tax reserve on our consolidated balance sheet to provide for
the possibility of adverse outcomes in income tax proceedings. While management
believes that we have identified all reasonably identifiable exposures and that
the reserve we have established for identifiable exposures is appropriate under
the circumstances, it is possible that additional exposures exist and that
exposures may be settled at amounts different than the amounts reserved.

We account for income taxes in accordance with Statement of
Financial Accounting Standards 109, Accounting for Income Taxes,
which requires that deferred tax assets and liabilities be recognized for the
effect of temporary differences between the book and tax bases of recorded
assets and liabilities. The realization of net deferred tax assets is dependent
upon our ability to generate sufficient future taxable income. Where it is more
likely than not that some portion or all of the deferred tax asset will not be
realized, we have provided a valuation allowance. If the realization of those
deferred tax assets in the future is considered more likely than not, an
adjustment to the deferred tax assets would increase net income in the period
such determination is made. In the event that actual results differ from these
estimates or we adjust these estimates in future periods, an adjustment to the
valuation allowance may be required, which could materially affect our
consolidated financial position and results of operations.

Restructuring charges. We have taken restructuring
actions, and may commence further restructuring activities which requires
management to utilize significant estimates related to expenses for severance
and other employee separation costs, lease cancellations, asset impairments and
other exit costs. Should the actual amounts differ from our estimates, the
amount of the restructuring charges could be impacted, which could materially
affect our consolidated financial position and results of operations.

Recent Accounting Developments

In November 2002, the Financial Accounting Standards Board issued Interpretation
45, Guarantors Accounting and Disclosure Requirements for
Guarantees, Including Indirect Guarantees of Indebtedness of Others, which
requires that a guarantor recognize, at the inception of a guarantee, a
liability for the fair value of the obligation undertaken in issuing the
guarantee. However, the provisions related to recognizing a liability at
inception of the guarantee for the fair value of the guarantors
obligations does not apply to product warranties or to guarantees accounted for
as derivatives. Interpretation 45 also elaborates on the disclosures to be made
by a guarantor in its interim and annual financial statements about its
obligations under certain guarantees it has issued. The initial recognition and
initial measurement provisions of this Interpretation are applicable on a
prospective basis to guarantees issued or modified after December 31, 2002
and the disclosure requirements in this Interpretation are effective for
financial statements of interim or annual periods ending after December 15,
2002. The adoption of the recognition and measurement provisions of
Interpretation 45 did not have a material effect on our consolidated financial
statements.

In December 2003, the Financial Accounting Standards Board issued
Interpretation 46 (Revised) to address certain Interpretation 46
implementation issues. This interpretation clarifies the application of
Accounting Research Bulletin 51, Consolidated Financial
Statements, for companies that have interests in entities that are
Variable Interest Entities as defined under Interpretation 46. According to
this interpretation, if a company has an interest in a Variable Interest Entity
and is at risk for a majority of the Variable Interest Entitys expected
losses or receives a majority of the Variable Interest Entitys expected
gains it shall consolidate the Variable Interest Entity.
Interpretation 46-R also requires additional disclosures by primary
beneficiaries and other significant variable interest holders. For entities
acquired or created before February 1, 2003, this interpretation is
effective no later than the end of the first interim or reporting period ending
after March 15, 2004, except for those Variable Interest Entity's that are
considered to be special purpose entities, for which the effective date is no
later than the end of the first interim or annual reporting period ending after
December 15, 2003. For all entities that were acquired subsequent to
January 31, 2003, this interpretation is effective as of the first interim
or annual period ending after December 31, 2003. We have adopted
Interpretation 46-R and are evaluating the impact of this interpretation on our
consolidated financial statements.

In April 2003, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards 149, Amendment of Statement 133 on
Derivative Instruments and Hedging Activities. Statement of Financial
Accounting Standards 149 amends and clarifies Statement of Financial Accounting
Standards 133 for the financial accounting and reporting of derivative
instruments and hedging activities and requires that contracts with similar
characteristics be accounted for on a comparable basis. The provisions of
Statement of Financial Accounting Standards 149 are effective for contracts
entered into or modified after June 30, 2003, and for hedging relationships
designated after June 30, 2003. The adoption of Statement of Financial
Accounting Standards 149 did not have a material impact on our consolidated
financial statements.

In May 2003, the Financial Accounting Standards Board issued SFAS 150,
Accounting for Certain Financial Instruments with Characteristics of both
Liabilities and Equity. Statement of Financial Accounting Standards 150
establishes standards on the classification and measurement of certain financial
instruments with characteristics of both liabilities and equity. The provisions
of Statement of Financial Accounting Standards 150 are effective for financial
instruments entered into or modified after May 31, 2003 and to all other
instruments that exist as of the beginning of the first interim financial
reporting period beginning after June 15, 2003. The adoption of Statement of
Financial Accounting Standards 150 did not have a material impact on our
consolidated financial statements.

Item 7A. Quantitative and Qualitative Disclosure About Market
Risk.

We are exposed to market risks, which include changes in U.S. and international
interest rates as well as changes in currency exchange rates as measured against
the U.S. dollar and each other.

We have limited involvement with derivative financial instruments and do not use
them for trading purposes. Changes in currency exchange rates as measured
against the U.S. dollar may positively or negatively affect sales, gross
margins, operating expenses and retained earnings as expressed in U.S. dollars.
We may enter into foreign currency options or forward exchange contracts aimed
at limiting in part the impact of certain currency fluctuations, but as of
December 31, 2003 we had no outstanding forward exchange contracts.

Our exposure to market risk for changes in interest rates relates primarily to
our variable rate debt. In connection with our United Kingdom term loan
agreement, effective April 30, 2002 we entered into an interest rate collar
agreement to reduce our exposure to market rate fluctuations. At December 31,
2003 the notional amount of the interest rate collar was £5.8 million
($10.3 million at the December 31, 2003 exchange rate) with an interest rate cap
of 6.0% and a floor of 4.5%. The interest rate collar expires on April 30, 2005.

Item 8. Financial Statements and Supplementary
Data.

The information required by Item 8 of Part II is incorporated herein by
reference to the Consolidated Financial Statements filed with this report; see
Item 15 of Part IV.

Item 9. Changes In and Disagreements with Accountants on Accounting and
Financial Disclosure.

None.

Item 9A. Controls and Procedures.

The Company has carried out an evaluation under the supervision of management,
including the Chairman and Chief Executive Officer and Chief Financial Officer,
of the effectiveness of the design and operation of the Companys
disclosure controls and procedures. Based on that evaluation, the Companys
Chief Executive Officer and Chief Financial Officer have concluded that, as of
December 31, 2003, the Companys disclosure controls and procedures were
effective to ensure that information required to be disclosed by the Company in
the reports filed or submitted by it under the Securities Exchange Act of 1934,
as amended, is recorded, processed, summarized and reported within the time
periods specified in the rules and forms of the SEC, and include controls and
procedures designed to ensure that information required to be disclosed by the
Company in such reports is assembled and reported to the Companys
management, including the Chairman and Chief Executive Officer and Chief
Financial Officer, as appropriate to allow timely decisions regarding required
disclosures.

PART III

Item 10. Directors and Executive Officers of the
Registrant.

The information required by Item 10 of Part III is hereby incorporated by
reference from the Company's Proxy Statement for the 2004 Annual Meeting of
Stockholders (the "Proxy Statement").

Item 11. Executive Compensation.

The information required by Item 11 of Part III is hereby incorporated by
reference from the Proxy Statement.

Item 12. Security Ownership of Certain Beneficial Owners and
Management and Related Stockholder Matters.

The information required by Item 12 of Part III is hereby incorporated by
reference from the Proxy Statement.

Item 13. Certain Relationships and Related
Transactions.

The information required by Item 13 of Part III is hereby incorporated by
reference from the Proxy Statement.

Item 14. Principal Accounting Fees and
Services.

The information required by Item 14 of Part III is hereby incorporated by
reference from the Proxy Statement.

PART IV

Item 15. Exhibits, Financial Statements, Schedules and
Reports on Form 8-K.

| | (a) | 1. | The Consolidated Financial Statements of Systemax Inc. | Reference
| | --- | -- | ------------------------------------------------------ | ---------

| | Independent Auditors' Report | 30
| | ---------------------------- | --

| | Consolidated Balance Sheets | 31
| | --------------------------- | --

| | Consolidated Statements of Operations | 32
| | ------------------------------------- | --

| | Consolidated Statements of Shareholders' Equity | 33
| | ----------------------------------------------- | --

| | Consolidated Statements of Cash Flows | 34
| | ------------------------------------- | --

| | Notes to Consolidated Financial Statements | 35 - 44
| | ------------------------------------------ | -------

| | 2. | Financial Statement Schedules:
Schedules not included with this additional financial data have been omitted
because they are not applicable or the required information is shown in the
Consolidated Financial Statements or Notes thereto.
| | -- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 3. | Exhibits.
| | -- | ---------

`Exhibit
               No.            Description
               -------        -----------
               3.1            Composite Certificate of Incorporation of Registrant, as amended9
               3.2            By-laws of Registrant1
               4.1            Stockholders Agreement2
               10.1           Form of 1995 Long-Term Stock Incentive Plan3*
               10.2           Form of 1999 Long-Term Stock Incentive Plan as amended13*
               10.3           Lease Agreement dated September 20, 1988 between the Company
                              and Addwin Realty Associates (Port Washington facility)1
               10.4           Amendment to Lease Agreement dated September 29, 1998 between the
                              Company and Addwin Realty Associates (Port Washington facility)6
               10.5           Lease Agreement dated as of July 17, 1997 between the Company and
                              South Bay Industrials Company (Compton facility)4
               10.6           Build-to-Suit Lease Agreement dated April, 1995 among the Company,
                              American National Bank and Trust Company of Chicago and Walsh,
                              Higgins & Company (Naperville facility)1
               10.7           Lease Agreement dated September 17, 1998 between Tiger Direct,
                              Inc. and Keystone Miami Property Holding Corp. (Miami facility)5
               10.8           Royalty Agreement dated June 30, 1986 between the Company and
                              Richard Leeds, Bruce Leeds and Robert Leeds, and Addendum thereto1
               10.9           Form of 1995 Stock Plan for Non-Employee Directors3*
               10.10          Consulting Agreement dated as of January 1, 1996 between the
                              Company and Gilbert Rothenberg3*
               10.11          Separation Agreement and General Release between the Company and
                              Robert Dooley, dated March 5, 2004*
               10.12          Employment Agreement dated as of December 12, 1997 between the
                              Company and Steven M. Goldschein4*
               10.13          Loan and Security Agreement, dated June 13, 2001, between The
                              Chase Manhattan Bank (as Lender and Agent) and TransAmerica
                              Business Capital Corporation (as Lender and Co-Agent) with the
                              Company and certain subsidiaries of the Company (as Borrowers),
                              as amended, the "Chase Loan Agreement")7
               10.14          Amendment No. 1, dated as of September 1, 2001, to the Chase
                              Loan Agreement8
               10.15          Amendment No. 2, dated as of December 13, 2001, to the Chase
                              Loan Agreement9
               10.16          Amendment No. 3, dated as of December 20, 2001, to the Chase
                              Loan Agreement9
               10.17          Amendment No. 4, dated as of April 18, 2002, to the Chase Loan
                              Agreement10
               10.18          Amendment No. 5, dated as of June 30, 2002, to the Chase Loan
                              Agreement11
               10.19          Amendment No. 6, dated as of September 22, 2003, to the Chase
                              Loan Agreement
               10.20          Promissory Note of Systemax Suwanee LLC, dated as of April 18,
                              2002 payable to the order of New York Life Insurance Company in
                              the original principal sum of $8,400,00010
               10.21          Deed to Secure Debt, Assignment of Leases and Rents and Security
                              Agreement, dated as of April 18, 2002 from Systemax Suwanee LLC
                              to New York Life Insurance Company10
               14             Corporate Ethics Policy for Officers, Directors and Employees
               19             Specimen stock certificate of Registrant9
               21             Subsidiaries of the Registrant
               23             Consent of experts and counsel: Consent of Independent Public
                              Accountants
               31.1           Certification of the Chief Executive Officer pursuant to Section
                              302 of the Sarbanes-Oxley Act of 2002
               31.2           Certification of the Chief Financial Officer pursuant to Section
                              302 of the Sarbanes-Oxley Act of 2002
               32.1           Certification of the Chief Executive Officer pursuant to Section
                              906 of the Sarbanes-Oxley Act of 2002
               32.2           Certification of the Chief Financial Officer pursuant to Section
                              906 of the Sarbanes-Oxley Act of 2002
               99.1           Charter of the Audit Committee of the Company's Board of
                              Directors, as revised February 28, 200312
               99.2           Charter of the Compensation Committee of the Company's Board of
                              Directors, as approved February 28, 200312
               99.3           Charter of the Nominating/Corporate Governance Committee of the
                              Company's Board of Directors, as approved February 28, 200312
               99.4           Annual CEO Certification to the New York Stock Exchange, dated
                              March 26, 2004`

| | (b) | Reports on Form 8-K.
A report on Form 8-K was filed by the Company on November 12, 2003 regarding the
Companys financial results for the quarterly period ended September 30,
2003.
| | --- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|* | Management contract or compensatory plan or arrangement
|- | -------------------------------------------------------

|1 | Incorporated herein by reference to the Company's registration
statement on Form S-1 (Registration No. 33-92052).
|- | -----------------------------------------------------------------------------------------------------------------

|2 | Incorporated herein by reference to the Company's quarterly report
on Form 10-Q for the quarterly period ended September 30, 1995.
|- | ----------------------------------------------------------------------------------------------------------------------------------

|3 | Incorporated herein by reference to the Company's registration
statement on Form S-1 (Registration No. 333-1852).
|- | -----------------------------------------------------------------------------------------------------------------

|4 | Incorporated herein by reference to the Company's annual report on
Form 10-K for the year ended December 31, 1997.
|- | ------------------------------------------------------------------------------------------------------------------

|5 | Incorporated herein by reference to the Companys quarterly
report on Form 10-Q for the quarterly period ended September 30, 1998.
|- | ----------------------------------------------------------------------------------------------------------------------------------

|6 | Incorporated herein by reference to the Companys annual
report on Form 10-K for the year ended December 31, 1998.
|- | ------------------------------------------------------------------------------------------------------------------

|7 | Incorporated herein by reference to the Company's report on Form
8-K dated June 13, 2001
|- | ----------------------------------------------------------------------------------------

|8 | Incorporated herein by reference to the Companys quarterly
report on Form 10-Q for the quarterly period ended September 30, 2001.
|- | ----------------------------------------------------------------------------------------------------------------------------------

|9 | Incorporated herein by reference to the Companys annual
report on Form 10-K for the year ended December 31, 2001.
|- | ------------------------------------------------------------------------------------------------------------------

|10 | Incorporated herein by reference to the Companys quarterly
report on Form 10-Q for the quarterly period ended March 31, 2002.
|-- | ------------------------------------------------------------------------------------------------------------------------------

|11 | Incorporated herein by reference to the Companys quarterly
report on Form 10-Q for the quarterly period ended June 30, 2002.
|-- | -----------------------------------------------------------------------------------------------------------------------------

|12 | Incorporated herein by reference to the Companys annual
report on Form 10-K for the year ended December 31, 2002.
|-- | ------------------------------------------------------------------------------------------------------------------

|13 | Incorporated herein by reference to the Company's report on Form
8-K dated May 20, 2003.
|-- | ----------------------------------------------------------------------------------------

SIGNATURES

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

| | SYSTEMAX INC.
By: /s/ RICHARD LEEDS
       Richard Leeds
       Chairman and Chief Executive Officer
Date: March 26, 2004
| | -------------------------------------------------------------------------------------------------------------------------

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 and
in the capacities and on the dates indicated.

`Signature                                      Title                               Date
       ---------                                      -----                               ----

/s/ RICHARD LEEDS                       Chairman and Chief Executive Officer         March 26, 2004
------------------------------             (Principal Executive Officer)
        Richard Leeds

/s/ BRUCE LEEDS                     Vice Chairman and President of International     March 26, 2004
------------------------------                    Operations
        Bruce Leeds

/s/ ROBERT LEEDS                      Vice Chairman and President of Domestic        March 26, 2004
------------------------------
       Robert Leeds

/s/ STEVEN GOLDSCHEIN            Senior Vice President and Chief Financial Officer   March 26, 2004
------------------------------             (Principal Financial Officer)
    Steven Goldschein

/s/ MICHAEL J. SPEILLER                    Vice President and Controller             March 26, 2004
------------------------------             (Principal Accounting Officer)
    Michael J. Speiller

/s/ ROBERT D. ROSENTHAL                               Director                       March 26, 2004
------------------------------
    Robert D. Rosenthal

/s/ STACY DICK                                        Director                       March 26, 2004
------------------------------
       Stacy Dick

/s/ ANN R. LEVEN                                      Director                       March 26, 2004
------------------------------
      Ann R. Leven`

EXHIBIT INDEX

`Exhibit
     No.            Description
     -------        -----------

     10.11          Separation Agreement and General Release between the Company and Robert
                    Dooley, dated March 5, 2004
     10.19          Amendment No. 6, dated as of September 22, 2003, to the Chase Loan
                    Agreement
     14             Corporate Ethics Policy for Officers, Directors and Employees
     21             Subsidiaries of the Registrant
     23             Consent of experts and counsel: Consent of Independent Public Accountants
     31.1           Certification of the Chief Executive Officer pursuant to Section 302 of the
                    Sarbanes-Oxley Act of 2002
     31.2           Certification of the Chief Financial Officer pursuant to Section 302 of the
                    Sarbanes-Oxley Act of 2002
     32.1           Certification of the Chief Executive Officer pursuant to Section 906 of the
                    Sarbanes-Oxley Act of 2002
     32.2           Certification of the Chief Financial Officer pursuant to Section 906 of the
                    Sarbanes-Oxley Act of 2002
     99.4           Annual CEO Certification to the New York Stock Exchange`