----

----

| x | QUARTERLY      REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF      1934 |
|---|---------------------------------------------------------------------------------------------------|

| ¨ | TRANSITION      REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF      1934 |
|--------|----------------------------------------------------------------------------------------------------|

| Delaware                                                            | 95-4172359                                  |
|---------------------------------------------------------------------|---------------------------------------------|
| (State      or Other Jurisdiction of Incorporation or Organization) | (I.      R. S. Employer Identification No.) |
|                                                                |                                        |
| 127      West 30th      Street, 5th      FloorNew      York, NY     |  10001                                 |
| (Address      of Principal Executive Offices)                       | (Zip      Code)                             |
|                                                                |
| 1      (212) 594-4800                                               |
| (Registrant's      Telephone Number, Including Area Code)           |
|                                                                |

----

|                                                      |                                                                                                                                  | Reference |
|-----------------------------------------------------------|---------------------------------------------------------------------------------------------------------------------------------------|-----------|
| PART      I.    FINANCIAL INFORMATION |
| Item      1.                                              | Financial      Statements                                                                                                             |      |
|                                                      | Condensed      Consolidated Balance Sheets as of September 30, 2009 (Unaudited) and      December 31, 2008                            | 1         |
|                                                      | Condensed      Consolidated Statements of Operations for the Three and Nine Months Ended      September 30, 2009 and 2008 (Unaudited) | 3         |
|                                                      | Condensed      Consolidated Statements of Cash Flows for the Nine Months Ended September      30, 2009 and 2008 (Unaudited)           | 4         |
|                                                      | Notes      to Condensed Consolidated Financial Statements (Unaudited)                                                                 | 5         |
| Item      2.                                              | Management’s      Discussion and Analysis of Financial Condition and Results of      Operations                                 | 19        |
| Item      4.                                              | Controls      and Procedures                                                                                                          | 26        |
| PART      II.    OTHER INFORMATION    |                                                                                                                                  |
| Item      1.                                              | Legal      Proceedings                                                                                                                | 27        |
| Item      5                                               | Other      Information                                                                                                                | 28        |
| Item      6.                                              | Exhibits                                                                                                                              | 39        |
|                                                      | SIGNATURES                                                                                                                            | 36        |

----

----

|                                                                                            |   | September 30, 2009 |    |   | December 31, 2008 |   |
|-------------------------------------------------------------------------------------------------|--------|--------------------|---------|--------|-------------------|--------|
|                                                                                            |   | (Unaudited)        |    |   |              |   |
| Current      assets:                                                                            |   |               |    |   |              |   |
| Cash      and cash equivalents                                                                  |   | $                  | 8,422   |   |              | $      | 9,752 |   |
| Accounts      receivable, net of allowance of $359 and   $334,      respectively |   |               | 11,992  |   |              |   | 17,597 |   |
| Inventories                                                                                     |   |               | 2,080   |   |              |   | 3,268 |   |
| Prepaid      expenses and other current assets                                                  |   |               | 943     |   |              |   | 1,191 |   |
| Deferred      tax asset, net                                                                    |   |               | 1,447   |   |              |   | 2,616 |   |
|   Total      current assets                                                           |   |               | 24,884  |   |              |   | 34,424 |   |
|                                                                                            |   |               |    |   |              |   |   |   |
| Property      and equipment, net                                                                |   |               | 8,115   |   |              |   | 7,519 |   |
|                                                                                            |   |               |    |   |              |   |   |   |
| Restricted      cash                                                                            |   |               | 2,232   |   |              |   | 2,961 |   |
| Other      assets                                                                               |   |               | 132     |   |              |   | 121 |   |
| Intangible      assets, net                                                                     |   |               | 3,958   |   |              |   | 5,129 |   |
| Trademarks                                                                                      |   |               | 10,609  |   |              |   | 10,609 |   |
| Goodwill                                                                                        |   |               | 13,924  |   |              |   | 13,649 |   |
| Deferred      tax asset, net                                                                    |   |               | 41,932  |   |              |   | 37,320 |   |
|                                                                                            |   |               |    |   |              |   |   |   |
| Total      assets                                                                               |   | $                  | 105,786 |   |              | $      | 111,732 |   |
|                                                                                            |   |               |    |   |              |   |   |   |

----

|                                                                                                                                                                                                         |   | September 30, 2009 |     |   | December 31, 2008 |   |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------------------|----------|--------|-------------------|--------|
|                                                                                                                                                                                                         |   | (Unaudited)        |     |   |              |   |
| Current      liabilities:                                                                                                                                                                                    |   |               |     |   |              |   |
| Accounts      payable                                                                                                                                                                                        |   | $                  | 3,512    |   |              | $      | 4,785 |   |
| Accrued      liabilities                                                                                                                                                                                     |   |               | 5,666    |   |              |   | 4,748 |   |
| Capital      lease obligations, current maturities                                                                                                                                                           |   |               | 268      |   |              |   | 69 |   |
| Installment      notes, current maturities                                                                                                                                                                   |   |               | -        |   |              |   | 500 |   |
| Revolving      credit agreement                                                                                                                                                                              |   |               | -        |   |              |   | 8,630 |   |
|   Total      current liabilities                                                                                                                                                                   |   |               | 9,446    |   |              |   | 18,732 |   |
|                                                                                                                                                                                                         |   |               |     |   |              |   |   |   |
| Capital      lease obligations, less current maturities                                                                                                                                                      |   |               | 814      |   |              |   | 17 |   |
| Revolving      credit agreement                                                                                                                                                                              |   |               | 7,115    |   |              |   | - |   |
| Other      liabilities                                                                                                                                                                                       |   |               | 705      |   |              |   | 710 |   |
| Total      liabilities                                                                                                                                                                                       |   |               | 18,080   |   |              |   | 19,459 |   |
|                                                                                                                                                                                                         |   |               |     |   |              |   |   |   |
| Commitments      and contingencies                                                                                                                                                                           |   |               |     |   |              |   |   |   |
|                                                                                                                                                                                                         |   |               |     |   |              |   |   |   |
| Temporary      equity:                                                                                                                                                                                       |   |               |     |   |              |   |   |   |
| Convertible      preferred stock, $.01 par value, authorized   600,000      shares; 307,383 shares issued and   outstanding      at September 30, 2009                         |   |               | 31,353   |   |              |   | - |   |
|                                                                                                                                                                                                         |   |               |     |   |              |   |   |   |
| Stockholders’      equity:                                                                                                                                                                             |   |               |     |   |              |   |   |   |
| Convertible      preferred stock, $.01 par value, authorized   300,000      shares; 289,653 shares issued and   outstanding      at December 31, 2008                          |   |               | -        |   |              |   | 29,544 |   |
| Common      stock, $.01 par value, authorized 30,000,000   shares;      8,453,671 and 8,473,503  issued and 7,232,284   and      7,385,322 outstanding, respectively |   |               | 85       |   |              |   | 85 |   |
| Additional      paid-in capital                                                                                                                                                                              |   |               | 269,058  |   |              |   | 270,713 |   |
| Accumulated      deficit                                                                                                                                                                                     |   |               | (210,863 | )      |              |   | (206,261 | ) |
| Treasury      stock at cost, 1,221,387 and 1,088,181 shares   repurchased,      respectively                                                                                                  |   |               | (1,927   | )      |              |   | (1,808 | ) |
| Total      stockholders’ equity                                                                                                                                                                        |   |               | 87,706   |   |              |   | 92,273 |   |
|                                                                                                                                                                                                         |   |               |     |   |              |   |   |   |
| Total      liabilities and stockholders’ equity                                                                                                                                                        |   | $                  | 105,786  |   |              | $      | 111,732 |   |

----

|                                                         |   | Three      Months Ended September      30, |   |   | Nine      Months EndedSeptember      30, |   |
|--------------------------------------------------------------|--------|--------------------------------------------|--------|--------|------------------------------------------|--------|
|                                                         |   | 2009                                       |   |   | 2008                                     |   |   | 2009 |   |   | 2008 |   |
|                                                         |   |                                       |   |   |                                     |   |   |   |   |   |   |   |
| Net      sales                                               |   | $                                          | 14,921 |   |                                     | $      | 21,607 |   |   | $ | 44,400 |   |   | $ | 63,301 |   |
|                                                         |   |                                       |   |   |                                     |   |   |   |   |   |   |   |   |   |   |   |
| Cost      of sales                                           |   |                                       | 10,321 |   |                                     |   | 11,942 |   |   |   | 30,159 |   |   |   | 35,642 |   |
|                                                         |   |                                       |   |   |                                     |   |   |   |   |   |   |   |   |   |   |   |
| Gross      profit                                            |   |                                       | 4,600  |   |                                     |   | 9,665 |   |   |   | 14,241 |   |   |   | 27,659 |   |
|                                                         |   |                                       |   |   |                                     |   |   |   |   |   |   |   |   |   |   |   |
| Selling,      general & administrative expenses          |   |                                       | 7,918  |   |                                     |   | 9,359 |   |   |   | 22,092 |   |   |   | 30,246 |   |
|                                                         |   |                                       |   |   |                                     |   |   |   |   |   |   |   |   |   |   |   |
| Operating      (loss) income                                 |   |                                       | (3,318 | )      |                                     |   | 306 |   |   |   | (7,851 | ) |   |   | (2,587 | ) |
|                                                         |   |                                       |   |   |                                     |   |   |   |   |   |   |   |   |   |   |   |
| Interest      expense, net                                   |   |                                       | 105    |   |                                     |   | 53 |   |   |   | 194 |   |   |   | 78 |   |
|                                                         |   |                                       |   |   |                                     |   |   |   |   |   |   |   |   |   |   |   |
| (Loss)      income before (benefit) provision for income tax |   |                                       | (3,423 | )      |                                     |   | 253 |   |   |   | (8,045 | ) |   |   | (2,665 | ) |
|                                                         |   |                                       |   |   |                                     |   |   |   |   |   |   |   |   |   |   |   |
| Income      tax (benefit) provision                          |   |                                       | (1,465 | )      |                                     |   | 109 |   |   |   | (3,443 | ) |   |   | (1,140 | ) |
|                                                         |   |                                       |   |   |                                     |   |   |   |   |   |   |   |   |   |   |   |
| Net      (loss) income                                       |   |                                       | (1,958 | )      |                                     |   | 144 |   |   |   | (4,602 | ) |   |   | (1,525 | ) |
|                                                         |   |                                       |   |   |                                     |   |   |   |   |   |   |   |   |   |   |   |
| Preferred      stock dividends                               |   |                                       | 615    |   |                                     |   | 568 |   |   |   | 1,809 |   |   |   | 1,671 |   |
| Loss      available to common stockholders                   |   | $                                          | (2,573 | )      |                                     | $      | (424 | ) |   | $ | (6,411 | ) |   | $ | (3,196 | ) |
|                                                         |   |                                       |   |   |                                     |   |   |   |   |   |   |   |   |   |   |   |
| Loss      per share (basic and diluted):                     |   |                                       |   |   |                                     |   |   |   |   |   |   |   |   |   |   |   |
| Net      loss available to common stockholders               |   | $                                          | (0.36  | )      |                                     | $      | (0.05 | ) |   | $ | (0.89 | ) |   | $ | (0.41 | ) |
| Weighted      average number of shares                       |   |                                       |   |   |                                     |   |   |   |   |   |   |   |   |   |   |   |
|   Basic                                            |   |                                       | 7,186  |   |                                     |   | 7,838 |   |   |   | 7,205 |   |   |   | 7,865 |   |
|   Diluted                                          |   |                                       | 7,186  |   |                                     |   | 7,838 |   |   |   | 7,205 |   |   |   | 7,865 |   |

----

|                                                                                                |   | Nine      Months Ended September 30, |   |
|-----------------------------------------------------------------------------------------------------|--------|--------------------------------------|--------|
|                                                                                                |   | 2009                                 |   |   | 2008 |   |
|                                                                                                |   |                                 |   |   |   |   |
| CASH      FLOWS FROM OPERATING ACTIVITIES:                                                          |   |                                 |   |   |   |   |
| Net      loss                                                                                       |   | $                                    | (4,602 | ) |   | $ | (1,525 | ) |
| Adjustments      to reconcile net loss to net cash provided by (used in) operating      activities: |   |                                 |   |   |   |   |   |   |
|   Stock-based      compensation expense                                                   |   |                                 | 154    |   |   |   | 298 |   |
|   Deferred      occupancy costs                                                           |   |                                 | (5     | ) |   |   | 33 |   |
|   Bad      debt provision                                                                 |   |                                 | 356    |   |   |   | 34 |   |
|   Deferred      income taxes                                                              |   |                                 | (3,443 | ) |   |   | (1,082 | ) |
|   Gain      on sale of equipment                                                          |   |                                 | (26    | ) |   |   | - |   |
|   Depreciation      and amortization                                                      |   |                                 | 3,725  |   |   |   | 3,572 |   |
| Changes      in operating assets and liabilities:                                                   |   |                                 |   |   |   |   |   |   |
|   Accounts      receivable                                                                |   |                                 | 5,249  |   |   |   | (2,622 | ) |
|   Inventories                                                                             |   |                                 | 1,188  |   |   |   | (1,509 | ) |
|   Prepaid      expenses and other assets                                                  |   |                                 | 237    |   |   |   | (523 | ) |
|   Restricted      cash                                                                    |   |                                 | 729    |   |   |   | 222 |   |
|   Accounts      payable                                                                   |   |                                 | (1,273 | ) |   |   | 2,670 |   |
|   Accrued      liabilities                                                                |   |                                 | 268    |   |   |   | (2,617 | ) |
| Net      cash provided by (used in) operating activities                                            |   |                                 | 2,557  |   |   |   | (3,049 | ) |
|                                                                                                |   |                                 |   |   |   |   |   |   |
| CASH      FLOWS FROM INVESTING ACTIVITIES:                                                          |   |                                 |   |   |   |   |   |   |
|   Acquisition      earnout payments                                                       |   |                                 | (275   | ) |   |   | (750 | ) |
|   Capital      expenditures                                                               |   |                                 | (1,364 | ) |   |   | (2,030 | ) |
| Net      cash used in investing activities                                                          |   |                                 | (1,639 | ) |   |   | (2,780 | ) |
|                                                                                                |   |                                 |   |   |   |   |   |   |
| CASH      FLOWS FROM FINANCING ACTIVITIES:                                                          |   |                                 |   |   |   |   |   |   |
| Capital      lease payments                                                                         |   |                                 | (114   | ) |   |   | (237 | ) |
| Bank      debt repayments                                                                           |   |                                 | (2,015 | ) |   |   | (275 | ) |
| Purchase      of treasury stock                                                                     |   |                                 | (119   | ) |   |   | (319 | ) |
| Net      cash used in financing activities                                                          |   |                                 | (2,248 | ) |   |   | (831 | ) |
|                                                                                                |   |                                 |   |   |   |   |   |   |
| NET      DECREASE IN CASH AND CASH EQUIVALENTS                                                      |   |                                 | (1,330 | ) |   |   | (6,660 | ) |
|                                                                                                |   |                                 |   |   |   |   |   |   |
| CASH      AND CASH EQUIVALENTS, BEGINNING OF PERIOD                                                 |   |                                 | 9,752  |   |   |   | 15,254 |   |
| CASH      AND CASH EQUIVALENTS, END OF PERIOD                                                       |   | $                                    | 8,422  |   |   | $ | 8,594 |   |
|                                                                                                |   |                                 |   |   |   |   |   |   |
| Cash      paid during the period for:                                                               |   |                                 |   |   |   |   |   |   |
|   Income      taxes                                                                       |   | $                                    | -      |   |   | $ | 255 |   |
|   Interest      expense                                                                   |   |                                 | 294    |   |   |   | 455 |   |
| Non-cash      investing and financing activities:                                                   |   |                                 |   |   |   |   |   |   |
|   Preferred      dividends accumulated                                                    |   |                                 | 1,809  |   |   |   | 1,671 |   |
|   Reversal      of acquisition accruals                                                   |   |                                 | -      |   |   |   | 89 |   |
|   Increase      in accrued purchases of equipment and lease acquisitions                  |   |                                 | 2,085  |   |   |   | - |   |

----

----

| 3.   | New      and Recently Adopted AccountingStandards |
|----------------|---------------------------------------------------|

----

| 4.   | Inventories |
|----------------|-------------|

|                          |   |               |   |   |              |   |
|-------------------------------|--------|--------------------|--------|--------|-------------------|--------|
|                          |   | September 30, 2009 |   |   | December 31, 2008 |   |
| Raw      materials            |   | $                  | 1,207  |   |              | $      | 1,748 |   |
| Work      in process          |   |               | 876    |   |              |   | 1,525 |   |
| Reserve      for obsolescence |   |               | (3     | )      |              |   | (5 | ) |
| Total      inventory, net     |   | $                  | 2,080  |   |              | $      | 3,268 |   |

| 5.   | Intangibles |
|----------------|-------------|

|                        |   | September 30, 2009 |   |   | December 31, 2008 |   |
|-----------------------------|--------|--------------------|--------|--------|-------------------|--------|
| Customer      relationships |   | $                  | 2,742  |   |              | $      | 2,926 |   |
| Non-compete      agreements |   |               | 475    |   |              |   | 1,095 |   |
| Employee      agreements    |   |               | -      |   |              |   | 241 |   |
| Trade      know-how         |   |               | 741    |   |              |   | 867 |   |
| Total                       |   | $                  | 3,958  |   |              | $      | 5,129 |   |

----

| For      the Twelve-Month Period Ended September 30, |   |
|------------------------------------------------------|--------|
|                                                 |   | Amount |   |
| 2010                                                 |   | $ | 874 |   |
| 2011                                                 |   |   | 426 |   |
| 2012                                                 |   |   | 413 |   |
| 2013                                                 |   |   | 399 |   |
| 2014                                                 |   |   | 329 |   |
| Thereafter                                           |   |   | 1,517 |   |
| Total                                                |   | $ | 3,958 |   |

----

| ·   | The      Company’s stock is thinly traded; |
|--------------------|--------------------------------------------------|

| ·   |  The      decline in the Company’s stock price during 2009 is not correlated to a      change in the overall operating performance of the  Company; |
|--------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Previously      unseen pressures in the stock price are in place given the global      financial and economic crisis; and |
|--------------------|---------------------------------------------------------------------------------------------------------------------------|

| ·   | The      Company has a substantial amount of Convertible Preferred Stock      outstanding which is not traded in the public  market. |
|--------------------|--------------------------------------------------------------------------------------------------------------------------------------|

| 6.   | Fair      Value Measurements |
|----------------|------------------------------|

| ·   | Level      1- Unadjusted quoted prices in active markets for identical assets or      liabilities that are accessible at the measurement  date. |
|--------------------|-------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Level      2- Inputs other than quoted prices included within Level 1 that are      observable for the asset or liability, either directly or indirectly.      Level 2 inputs include quoted prices for similar assets or liabilities in      active markets; quoted prices for identical or similar assets or      liabilities in markets that are not active; inputs other than quoted      prices that are observable for the asset or liability; and inputs that are      derived principally from or corroborated by observable market data by      correlation or other means. |
|--------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   |  Level      3- Inputs that are unobservable for the asset or  liability. |
|--------------------|-------------------------------------------------------------------------------|

----

| 7.   | Accrued      Liabilities |
|----------------|--------------------------|

|                                             |   | September 30, 2009 |   |   | December 31, 2008 |   |
|--------------------------------------------------|--------|--------------------|--------|--------|-------------------|--------|
| Accrued      liabilities:                        |   |               |   |   |              |   |
| Compensation      and other benefit accruals     |   | $                  | 2,672  |   |              | $      | 3,161 |   |
| State      and local sales taxes and other taxes |   |               | 142    |   |              |   | 170 |   |
| Other      accruals                              |   |               | 2,852  |   |              |   | 1,417 |   |
|   Total      accrued liabilities       |   | $                  | 5,666  |   |              | $      | 4,748 |   |

| 8.   | Income      Taxes |
|----------------|-------------------|

----

|                                                                       |   | For      the Three Months EndedSeptember      30 |   |   | For      the Nine Months EndedSeptember      30, |   |
|----------------------------------------------------------------------------|--------|--------------------------------------------------|--------|--------|--------------------------------------------------|--------|
|                                                                       |   | 2009                                             |   |   | 2008                                             |   |   | 2009 |   |   | 2008 |   |
|                                                                       |   |                                             |   |   |                                             |   |   |   |   |   |   |   |
|       Current                                |   | $                                                | -      |   |                                             | $      | (76 | ) |   | $ | - |   |   | $ | (58 | ) |
|       Deferred                               |   |                                             | (1,465 | )      |                                             |   | 185 |   |   |   | (3,443 | ) |   |   | (1,082 | ) |
|       Net      Change in Valuation Allowance |   |                                             | -      |   |                                             |   | - |   |   |   | - |   |   |   | - |   |
|                                                                       |   |                                             | (1,465 | )      |                                             |   | 109 |   |   |   | (3,443 | ) |   |   | (1,140 | ) |
|                                                                       |   |                                             |   |   |                                             |   |   |   |   |   |   |   |   |   |   |   |
| The      above is further comprised of  the following:           |   |                                             |   |   |                                             |   |   |   |   |   |   |   |   |   |   |   |
|        Federal                          |   |                                             | (1,042 | )      |                                             |   | 146 |   |   |   | (2,519 | ) |   |   | (756 | ) |
|        State                            |   |                                             | (423   | )      |                                             |   | (37 | ) |   |   | (924 | ) |   |   | (384 | ) |
|                                                                       |   |                                             | (1,465 | )      |                                             |   | 109 |   |   |   | (3,443 | ) |   |   | (1,140 | ) |
|                                                                       |   |                                             |   |   |                                             |   |   |   |   |   |   |   |   |   |   |   |
| Deferred      tax expense, net of change in                                |   |                                             |   |   |                                             |   |   |   |   |   |   |   |   |   |   |   |
| valuation      allowance:                                                  |   |                                             |   |   |                                             |   |   |   |   |   |   |   |   |   |   |   |
|        Federal                          |   |                                             | (1,042 | )      |                                             |   | 148 |   |   |   | (2,519 | ) |   |   | (754 | ) |
|        State                            |   |                                             | (423   | )      |                                             |   | 37 |   |   |   | (924 | ) |   |   | (328 | ) |
|                                                                       |   |                                             | (1,465 | )      |                                             |   | 185 |   |   |   | (3,443 | ) |   |   | (1,082 | ) |

| 9.   | Debt |
|----------------|------|

----

| 10.   | Commitments      and Contingencies |
|-----------------|------------------------------------|

----

----

| 11.   | Stock-Based      Compensation |
|-----------------|-------------------------------|

----

|                                                                                                               |   |          |    |
|--------------------------------------------------------------------------------------------------------------------|--------|---------------|---------|
|                                                                                                               |   |  Options |    |   | WeightedAverageExercise      Price |   |
| Outstanding      at December      31, 2008                                                                    |   |          | 300,000 |   |   | $ | 8.33 |   |
| Granted                                                                                                            |   |          | -       |   |   |   | N/A |   |
| Exercised                                                                                                          |   |          | -       |   |   |   | N/A |   |
| Canceled                                                                                                           |   |          | -       |   |   |   | N/A |   |
| Outstanding      at September      30, 2009                                                                   |   |          | 300,000 |   |   | $ | 8.33 |   |
|  Options      exercisable at September 30, 2009                                                               |   |          | 300,000 |   |   | $ | 8.33 |   |
| Weighted      average fair value  at date of grant of      options  granted during the quarter |   |          | N/A     |   |   |   | N/A |   |

|                 | Options      Outstanding  | Options      Exercisable |
|----------------------|--------------------------------|--------------------------|
|                 |                           | Weighted                 |   |   |   |
|                 |                           | Average                  | Weighted |   | Weighted |
|                 | Number                         | Remaining                | Average | Number | Average |
| Range      of        | Outstanding                    | Life                     | Exercise | Exercisable | Exercise |
| Exercise      Prices | At      9/30/09 33/3/31/09     | In      Years            | Price | At      9/30/09 3/31/09 | Price |
|                 |                           |                     |   |   |   |
| $5.00                | 100,000                        | 5.1                      | $5.00 | 100,000 | $5.00 |
| $8.00                | 100,000                        | 5.1                      | $8.00 | 100,000 | $8.00 |
| $12.00               | 100,000                        | 5.1                      | $12.00 | 100,000 | $12.00 |
|                 |                           |                     |   |   |   |
| $5.00      to $12.00 | 300,000                        |                     | $8.33 | 300,000 | $8.33 |

----

|                                                    |   | Shares |    |   | Weighted      Average Grant-Date Fair Value |   |
|---------------------------------------------------------|--------|--------|---------|--------|---------------------------------------------|--------|
| Nonvested      shares at December 31, 2008              |   |   | 67,334  |   |                                        | $      | 3.83 |   |
| Granted                                                 |   |   | -       |   |                                        |   | N/A |   |
| Vested                                                  |   |   | (2,000  | )      |                                        | $      | 5.50 |   |
| Cancelled                                               |   |   | (19,832 | )      |                                        | $      | 3.46 |   |
|   Nonvested      shares at September 30, 2009 |   |   | 45,502  |   |                                        | $      | 3.91 |   |

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| 12.   | Temporary      Equity |
|-----------------|-----------------------|

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| 13.   | Earnings      Per Share and Stockholders Equity |
|-----------------|-------------------------------------------------|

| 14.   | Related      Party Transactions |
|-----------------|---------------------------------|

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| ·   | On      March 1, 2005, the Company acquired its New York-based graphics solutions,      premedia and retouching services businesses, Color Edge, Inc. (“Color      Edge”) and Color Edge Visual, Inc. (“Color Edge Visual”), and its New      York-based prototype services provider, Comp 24, LLC (“Comp      24”); |
|--------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | On      August 8, 2005, the Company acquired its California-based graphics      solutions business, Crush Creative, Inc.  (“Crush”); |
|--------------------|--------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | On      May 5, 2006, the Company acquired its California-based prototypes      business, Dennis Curtin Studios, Inc.(“DCS”); |
|--------------------|------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | On      May 10, 2006, the Company acquired its Georgia-based prototypes business,      Advertising Props, Inc. (“AdProps”);and |
|--------------------|--------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | On      October 1, 2006, the Company acquired its New York-based premedia and      retouching services business, Fuel Digital, Inc.  (“Fuel”). |
|--------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------|

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Item 6. Exhibits

| Exhibit | Description                                                                                                                                                                                                                                                                                                                                                                                                    |   | Method of Filing                                                                                                          |
|---------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|---------------------------------------------------------------------------------------------------------------------------|
| 2.1     | Asset      Purchase Agreement dated as of December 24, 2004, as amended, by and among      Merisel, Inc., MCEV, LLC, Color Edge Visual, Inc. (“CEV”), Photobition New      York, Inc. (“PBNY”) and the direct or indirect shareholders or members of      CEV and PBNY signatories thereto.                                                                                       |   | Filed      as Exhibit 2.2 to the Company’s Current Report on Form 8-K filed with the      SEC on March 7, 2005. **  |
| 2.2     | Asset      Purchase Agreement dated as of December 24, 2004, as amended, by and among      Merisel, Inc., MC24, LLC, Comp 24, LLC (“Comp 24”) and the direct and      indirect shareholders or members of Comp 24 signatories      thereto.                                                                                                                                                   |   | Filed      as Exhibit 2.3 to the Company’s Current Report on Form 8-K filed with the      SEC on March 7, 2005. **  |
| 2.3     | Amendment      and Waiver to Asset Purchase Agreement dated as of March 1, 2005 by and      among MCEI, LLC, Merisel, Inc. and Color Edge, Inc. and the direct and      indirect shareholders set forth on the signature pages      thereto.                                                                                                                                                              |   | Filed      as Exhibit 2.4 to the Company’s Current Report on Form 8-K filed with the      SEC on March 7, 2005. **  |
| 2.4     | Amendment      and Waiver to Asset Purchase Agreement dated as of March 1, 2005 by and      among MCEV, LLC, Merisel, Inc. and Color Edge Visual, Inc. and the direct      and indirect shareholders set forth on the signature pages      thereto.                                                                                                                                                       |   | Filed      as Exhibit 2.5 to the Company’s Current Report on Form 8-K filed with the      SEC on March 7, 2005. **  |
| 2.5     | Amendment      and Waiver to Asset Purchase Agreement dated as of March 1, 2005 by and      among MC24, LLC, Merisel, Inc. and Comp 24, LLC and the direct and      indirect shareholders set forth on the signature pages      thereto.                                                                                                                                                                  |   | Filed      as Exhibit 2.6 to the Company’s Current Report on Form 8-K filed with the      SEC on March 7, 2005. **  |
| 2.6     | Asset      Purchase Agreement dated as of July 6, 2005 by and among Merisel, Inc.,      MCRU, LLC, Crush Creative, Inc. (“Crush”) and the shareholders of Crush      signatories thereto, as amended by that certain Amendment and Waiver to      Asset Purchase Agreement, dated as of August 8, 2005 by and among Merisel,      MCRU, Crush and Guy Claudy as Shareholders Representative.  |   | Filed      as Exhibit 2.1 to the Company’s Current Report on Form 8-K filed with the      SEC on August 9, 2005. ** |

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| 2.7   | Amendment      and Waiver to Asset Purchase Agreement, dated as of August 8, 2005 by and      among Merisel, Inc., MCRU, LLC, Crush Creative, Inc. and Guy Claudy as      Shareholders Representative.  |   | Filed      as Exhibit 2.2 to the Company’s Current Report on Form 8-K filed with the      SEC on August 9, 2005. **        |
|-------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|----------------------------------------------------------------------------------------------------------------------------------|
| 2.8   | Asset      Purchase Agreement dated as of October 4, 2006 by and among Merisel, Inc.,      Merisel FD, LLC, Fuel Digital, Inc. and the shareholders of Fuel      signatories thereto.                   |   | Filed      as Exhibit 2.1 to the Company's Current Report on Form 8-K filed with the      SEC on October 6, 2006. **             |
| 3.1   | Restated      Certificate of Incorporation of Merisel, Inc., as amended.                                                                                                                                |   | Filed      as Exhibit 3.1 to the Company’s Annual Report on Form 10-K for the year      ended December 31, 2005. **   |
| 3.2   | Bylaws      of Merisel, Inc., as amended.                                                                                                                                                                    |   | Filed      as Exhibit 3.2 to the Company’s Annual Report on Form 10-K for the year      ended December 31, 2005. **   |
| 4.1   | Certificate      of Designation of Convertible Preferred Stock of Merisel,    Inc.                                                                                                                           |   | Filed      as Exhibit 99.2 to the Company’s Current Report on Form 8-K dated June 9,      2000. **                    |
| *10.1 | Merisel,      Inc. 1997 Stock Award and Incentive Plan.                                                                                                                                                      |   | Filed      as Annex II to the Company’s Schedule 14A dated October 6, 1997.      **                                   |
| *10.2 | Form      of Nonqualified Stock Option Agreement under the Merisel, Inc. 1997 Stock      Award and Incentive Plan.                                                                                           |   | Filed      as Exhibit 10.7 to the Company’s Annual Report on Form 10-K for the year      ended December 31, 1997. **  |
| 10.3  | Stock      Subscription Agreement by and between Merisel, Inc. and Phoenix      Acquisition Company II, L.L.C. dated as of June 2, 2000.                                                                |   | Filed      as Exhibit 99.1 to the Company’s Current Report on Form 8-K, dated June 9,      2000. **                        |

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| 10.4  | Amended      and Restated Registration Rights Agreement dated June 9, 2000 (executed      November 7, 2002) between Merisel, Inc. and Phoenix Acquisition Company      II, L.L.C.  |   | Filed      as Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q for the      quarter ended September 30, 2002. **  |
|-------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|-----------------------------------------------------------------------------------------------------------------------------------------|
| *10.5 | Employment      Agreement dated November 22, 2004 between Merisel, Inc. and Donald R.      Uzzi.                                                                                   |   | Filed      as Exhibit 99.1 to the Company’s Current Report on Form 8-K filed with the      SEC on November 24, 2004. **      |
| *10.6 | Employment      Agreement dated as of March 1, 2005 by and between Merisel Americas, Inc.      and Kenneth Wasserman.                                                              |   | Filed      as Exhibit 10.2 to the Company’s Current Report on Form 8-K filed with the      SEC on March 7, 2005. **               |
| *10.7 | Employment      Agreement dated as of March 1, 2005 by and between Merisel Americas, Inc.      and John Sheehan.                                                                   |   | Filed      as Exhibit 10.3 to the Company’s Current Report on Form 8-K filed with the      SEC on March 7, 2005. **               |
| 10.8  | Credit      Agreement dated as of March 1, 2005 by and among MCEI, LLC, MCEV, LLC,      Merisel, Inc., Merisel Americas, Inc., MC24, LLC and Amalgamated      Bank.                |   | Filed      as Exhibit 10.4 to the Company’s Current Report on Form 8-K filed with the      SEC on March 7, 2005. **               |
| 10.9  | Pledge      Agreement, dated as of March 1, 2005, made among MCEI, LLC, MCEV, LLC,      Merisel, Inc., Merisel Americas, Inc., and Amalgamated Bank.                               |   | Filed      as Exhibit 10.5 to the Company’s Current Report on Form 8-K filed with the      SEC on March 7, 2005. **               |
| 10.10 | Security      Agreement, dated as of March 1, 2005, made by MCEI, LLC, MCEV, LLC,      Merisel, Inc., Merisel Americas, Inc., and MC24, LLC, in favor of      Amalgamated Bank.    |   | Filed      as Exhibit 10.6 to the Company’s Current Report on Form 8-K filed with the      SEC on March 7, 2005. **               |
| 10.11 | Corporate      Guarantee, dated as of March 1, 2005, made among each signatory hereto, in      favor of Amalgamated Bank.                                                          |   | Filed      as Exhibit 10.7 to the Company’s Current Report on Form 8-K filed with the      SEC on March 7, 2005. **               |
| 10.12 | Credit      Agreement dated as of March 1, 2005 by and among MC24, LLC, Merisel, Inc.,      Merisel Americas, Inc., MCEI, LLC, MCEV, LLC and Amalgamated      Bank.                |   | Filed      as Exhibit 10.8 to the Company’s Current Report on Form 8-K filed with the      SEC on March 7, 2005. **               |

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| 10.13  | Pledge      Agreement, dated as of March 1, 2005, made among MC24, LLC, Merisel, Inc.,      Merisel Americas, Inc., and Amalgamated Bank.                                                                                                                                                                                                                                            |   | Filed      as Exhibit 10.9 to the Company’s Current Report on Form 8-K filed with the      SEC on March 7, 2005. **        |
|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|----------------------------------------------------------------------------------------------------------------------------------|
| 10.14  | Security      Agreement, dated as of March 1, 2005 made by MC24, LLC, Merisel, Inc.,      Merisel Americas Inc., MCEI, LLC, MCEV, LLC, and each of their      Subsidiaries from time to time parties thereto, in favor of Amalgamated      Bank.                                                                                                                                     |   | Filed      as Exhibit 10.10 to the Company’s Current Report on Form 8-K filed with      the SEC on March 7, 2005. **       |
| 10.15  | Corporate      Guarantee, dated as of March 1, 2005, made among each signatory hereto, in      favor of Amalgamated Bank.                                                                                                                                                                                                                                                            |   | Filed      as Exhibit 10.11 to the Company’s Current Report on Form 8-K filed with      the SEC on March 7, 2005. **  |
| 10.16  | Amendment      No. 1 to Credit Agreement dated as of August 8, 2005 by and among MCRU,      Color Edge LLC (formerly known as MCEI, LLC), Color Edge Visual, LLC      (formerly known as MCEV, LLC), Comp 24 LLC (formerly known as MC24, LLC),      Merisel Americas, Inc., the Company and Amalgamated Bank, entered into in      connection with the MCEI/MCEV Credit Agreement.  |   | Filed      as Exhibit 10.1 to the Company’s Current Report on Form 8-K filed with the      SEC on August 9, 2005. **       |
| *10.17 | Amendment      to Employment Agreement dated November 22, 2004 between Merisel, Inc. and      Donald R. Uzzi.                                                                                                                                                                                                                                                                             |   | Filed      as Exhibit 10.1 to the Company’s current report on Form 8-K filed with the      SEC on March 9, 2006.**    |
| *10.18 | Form      of Indemnity Agreement entered into between Merisel, Inc. and each of its      Directors and certain Officers.                                                                                                                                                                                                                                                             |   | Filed      as Exhibit 10.2 to the Company’s Current Report on Form 8-K filed with the      SEC on March 9, 2006.**    |
| 10.19  | Amendment      No. 2 to Asset Purchase Agreement and Amendment to Confidentiality and      Non-Competition Agreement (MCEI).                                                                                                                                                                                                                                                         |   | Filed      as Exhibit 10.1 to the Company’s Current Report on Form 8-K filed with the      SEC on May 1, 2006. **          |
| 10.20  | Amendment      No. 2 to Asset Purchase Agreement and Amendment to Confidentiality and      Non-Competition Agreement (MCEV).                                                                                                                                                                                                                                                         |   | Filed      as Exhibit 10.2 to the Company's Current Report on Form 8-K filed with the      SEC on May 1, 2006. **                |

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| *10.21 | 1997      Merisel Inc. Stock Award and Incentive Plan Form of Restricted Stock      Agreement for Executives and Key Employees.                                                                                                                                                                                                                                                          |   | Filed      as Exhibit 10.1 to the Company’s      Current Report on Form 8-K filed with the SEC on December 19, 2006.      ** |
|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|-----------------------------------------------------------------------------------------------------------------------------------------|
| 10.22  | Amendment      No. 2 to Credit Agreement, dated February 27, 2008, among Color Edge LLC,      Color Edge Visual LLC and Crush Creative LLC, as borrowers, the Company,      Merisel Americas, Inc., Comp 24 LLC, Fuel Digital, LLC, Dennis Curtin      Studios, LLC, MADP, LLC and Advertising Props, Inc., as guarantors, and      Amalgamated Bank, as lender.                         |   | Filed      as Exhibit 10.1 to the Company’s Current Report on Form 8-K filed with the      SEC on March 4, 2008.**           |
| 10.23  | Reaffirmation      and Confirmation Agreement (Security Documents), dated February 27, 2008,      among Color Edge LLC, Color Edge Visual LLC and Crush Creative LLC, as      borrowers, the Company, Merisel Americas, Inc., Comp 24 LLC, Fuel Digital,      LLC, Dennis Curtin Studios, LLC, MADP, LLC and Advertising Props, Inc., as      guarantors, in favor of Amalgamated Bank.  |   | Filed      as Exhibit 10.2 to the Company’s Current Report on Form 8-K filed with the      SEC on March 4, 2008.**           |
| *10.24 | Amendment      to 1997 Merisel Inc. Stock Award and Incentive Plan Form of Restricted      Stock Agreement for Directors.                                                                                                                                                                                                                                                           |   | Filed      as Exhibit 10.50 to the Company’s Annual Report on Form 10-K for the year      ended December 31, 2007. **             |
| *10.25 | Amendment      No. 2 to Employment Agreement, dated January 18, 2008, between Merisel,      Inc. and Donald R. Uzzi.                                                                                                                                                                                                                                                                     |   | Filed      as Exhibit 10.51 to the Company’s Annual Report on Form 10-K for the year      ended December 31, 2007. **        |
| *10.26 | Merisel,      Inc. 2008 Stock Award and Incentive Plan.                                                                                                                                                                                                                                                                                                                                       |   | Filed      as Annex A to the Company’s Schedule 14A dated November 7, 2008.      **                                          |
| 10.27  | Amendment      No. 3 to Credit Agreement, dated March 26, 2009, among Color Edge LLC,      Color Edge Visual LLC and Crush Creative LLC, as borrowers, the Company,      Merisel Americas, Inc., Comp 24 LLC, Fuel Digital, LLC, Dennis Curtin      Studios, LLC, MADP, LLC and Advertising Props, Inc., as guarantors, and      Amalgamated Bank, as lender.                            |   | Filed      as Exhibit 10.30 to the Company’s Annual Report on Form 10-K for the year      ended December 31, 2008. .              |

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| *10.28 | Employment      Agreement dated May 6, 2009 by and between Merisel, Inc. and Victor L.      Cisario.                                                                                                                                                                                                                                       |   | Filed      as Exhibit 10.1 to the Company’s Current Report on Form 8-K filed with the      SEC on June 12, 2009.**       |
|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|-------------------------------------------------------------------------------------------------------------------------------------|
| *10.29 | Amendment      #3 to Employment Agreement, dated June 29, 2009 by and between Merisel,      Inc. and Donald R. Uzzi.                                                                                                                                                                                                                       |   | Filed      as Exhibit 10.1 to the Company’s Current Report on Form 8-K filed with the      SEC on September 30, 2009.**  |
| 10.30  | Amended      and Restated Credit Agreement dated September 30, 2009, among Color Edge      LLC, Color Edge Visual LLC and Crush Creative LLC, as borrowers, the      Company, Merisel Americas, Inc. and certain other affiliates of borrowers,      as corporate guarantors, and Amalgamated Bank, as lender.                             |   | Filed      as Exhibit 10.1 to the Company’s Current Report on Form 8-K filed with the      SEC on October 5, 2009.**     |
| 10.31  | Second      Reaffirmation and Confirmation Agreement (Security Documents) dated      September 30, 2009, among Color Edge LLC, Color Edge Visual LLC and Crush      Creative LLC, as borrowers, the Company, Merisel Americas, Inc. and      certain other affiliates of borrowers, as corporate guarantors, in favor      of Amalgamated Bank. |   | Filed      as Exhibit 10.2 to the Company’s Current Report on Form 8-K filed with the      SEC on October 5, 2009.**     |
| 14.1   | Code      of Business Conduct.                                                                                                                                                                                                                                                                                                                  |   | Filed      as exhibit 99.2 to the Company’sAnnual      Report on Form 10-K for the year ended December 31, 2002.**       |
| 31.1   | Certification      of the Chief Executive Officer pursuant to Section 302 of the      Sarbanes-Oxley Act of 2002.                                                                                                                                                                                                                          |   | Filed      herewith.                                                                                                                |
| 31.2   | Certification      of the Chief Financial Officer pursuant to Section 302 of the      Sarbanes-Oxley Act of 2002.                                                                                                                                                                                                                     |   | Filed      herewith.                                                                                                                |
| 32     | Certification      of Chief Executive Officer and Chief Financial Officer pursuant to 18      U.S.C. Section 1350.                                                                                                                                                                                                                         |   | Filed      herewith.                                                                                                                |

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