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                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                    FORM 10-K

         [X]      ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D)
                     OF THE SECURITIES EXCHANGE ACT OF 1934
                   For the fiscal year ended December 31, 2002

                                       OR

         [ ]     TRANSITION REPORT PURSUANT TO SECTION 13 OF 15(D)
                     OF THE SECURITIES EXCHANGE ACT OF 1934
                 For the transition period from ____________ to ____________.

                         COMMISSION FILE NUMBER: 0-21528

                             BELL MICROPRODUCTS INC.
             (Exact name of registrant as specified in its charter)

            CALIFORNIA                                      94-3057566
   (State or other jurisdiction                          (I.R.S. Employer
 of incorporation or organization)                    Identification Number)

              1941 RINGWOOD AVENUE, SAN JOSE, CALIFORNIA 95131-1721
           (Address of principal executive office, including zip code)

       Registrant's telephone number, including area code: (408) 451-9400

        SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT: None.

           SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
                          Common Stock, $.01 par value

         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 of the registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [ ]

         Indicate by check mark whether the registrant is an accelerated filer
(as defined in Exchange Act Rule 12b-2).

                                  Yes [X]  No [ ]

The aggregate market value of the voting stock held by non-affiliates of the
registrant, as June 28, 2002, was approximately $130,269,326 based upon the last
sale price reported for such date on the Nasdaq National Market

         The number of shares of Registrant's Common Stock outstanding as of
March 18, 2003 was 20,132,175.

                      DOCUMENTS INCORPORATED BY REFERENCE:

Portions of the definitive Proxy Statement for the Company's Annual Meeting of
Shareholders to be held on May 22, 2003 are incorporated by reference into Part
III of this Form 10-K.

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                                     PART I

ITEM 1. BUSINESS

FORWARD LOOKING DISCLOSURE

This Annual Report on Form 10-K ("Report") contains " forward-looking
statements" within the meaning of the Private Litigation Reform Act of 1995
regarding future events and the future results of Bell Microproducts Inc that
are based on current expectations, estimates, forecasts, and projects as well as
the beliefs and assumptions of Bell Microproducts Inc management. Words such as
"outlook", "believes", "expects", "appears", "may", "will", "should",
"anticipates" or the negative thereof or comparable terminology, are intended to
identify such forward looking statements. These forward-looking statements are
only predictions and are subject to risks, uncertainties and assumptions that
are difficult to predict. Therefore actual results may differ materially and
adversely from those expressed in any forward-looking statements. Factors that
might cause or contribute to such differences include, but are not limited to,
those discussed in this Report under the section entitled "Risk Factors" and
elsewhere, and in other reports Bell Microproducts Inc. files with the
Securities and Exchange Commission, specifically the most recent reports on Form
8-K and Form 10-Q. You should not place undue reliance on these forward-looking
statements, which speak only as of the date of this Annual Report on Form 10-K.
Bell Microproducts Inc. undertakes no obligation to revise or update publicly
any forward-looking statements for any reason.

GENERAL

         Founded in 1987, Bell Microproducts Inc. together with its
subsidiaries, is a leading value-added distributor of storage products and
systems, semiconductors and computer products and peripherals. We market and
distribute our products at various levels of integration, from raw components to
fully integrated, tested and certified systems. We carry over 150 brand name
product lines as well as our own proprietary Rorke Data storage products,
Markvision memory modules and TradeMark computer products. Across our product
lines, we emphasize our ability to combine our extensive product portfolio with
comprehensive value-added services.

         We offer components that include disk drives, semiconductors, flat
panel displays and related products, and other storage products and
custom-configured computer products. Our products also include value-added
services such as system design, integration, installation, maintenance and other
consulting services combined with a variety of storage and computer hardware and
software products. In addition, we offer network attached storage (NAS), storage
area network (SAN) and other storage systems, computer platforms, tape drives
and libraries and related software. Our selection of products and technologies,
together with our independence, allows us to offer the best available hardware,
software and service solutions for each customer. Customers can purchase our
components as stand-alone products or in combination with certain value-added
services.

AVAILABLE INFORMATION

         All reports filed electronically by Bell with the Securities and
Exchange Commission ("SEC"), including its annual reports on Form 10-K,
quarterly reports on Form 10-Q, current reports on Form 8-K and proxy
statements, and other information and amendments to those reports filed (if
applicable), are accessible at no cost on the Company's web site at
www.bellcom.com, and they are available by contacting our Investor Relations at
ir@bellmicro.com or 408-451-9400. These filings are also accessible on the SEC's
web site at www.sec.gov. The public may read and copy any materials filed by the
Company with the SEC at the SEC's Public Reference Room at 450 Fifth Street, NW,
Washington, DC 20549. The public may obtain information for the Public

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Reference Room by calling the SEC at 1-800-SEC-0330.

INDUSTRY

         The storage, semiconductor and computer industries have experienced
significant growth over the past decade, due to rapid growth in Internet usage
and e-commerce; enterprise applications such as enterprise resource planning and
data mining; server, desktop and laptop computers; and wireless communications
as well as a variety of emerging consumer products and applications.

         Traditionally, storage, semiconductor and computer products have been
sold through both direct and indirect distribution channels. The use of indirect
distribution channels is growing rapidly as manufacturers focus on core
activities such as product design, development and marketing and begin to divest
or outsource non-core functions. The growth of the indirect market reflects the
need for manufacturers to increasingly use distributors, particularly for
servicing OEMs, VARs, CEMs and system integrators. Customers are also driving
the trend toward indirect distribution due to the value-added services that
distributors often provide, particularly in the storage market. The rapid growth
of storage requirements and the need for sophisticated networked storage systems
such as NAS and SAN have increased the importance of independent storage
solutions providers.

         Since the onset of the market downturn more than two years ago,
distributors and vendors have experienced a slowdown of demand and increased
competitive market conditions, resulting from industry maturation, technology
overspending and other cyclical factors. Historically, a return of economic
growth has laid the groundwork for a return of growth.

         Network Attached Storage. NAS appliances are advanced storage systems
that attach directly to a local area network. A NAS appliance can be thought of
as a thin file server with built-in storage. Similar to general-purpose servers,
NAS appliances include a central processing unit, an operating system and
internal hard disk drive storage.

         Storage Area Networks. A SAN is an architecture that directly connects
multiple independent servers and storage subsystems through a network dedicated
to storage. A SAN consists of a variety of heterogeneous networking equipment
such as switches, hubs and routers; storage products such as disk subsystems,
tape libraries and optical drives; and storage management software. A SAN is
often connected using a protocol known as Fibre Channel.

         Both the NAS and SAN markets are projected to grow rapidly over the
next few years. The complexity of sophisticated data storage solutions such as
NAS and SAN combined with a shortage of qualified information technology
personnel often requires companies to outsource the research, design,
implementation and support of their networked storage solutions. Accordingly,
significant growth in SAN and NAS is expected to be through indirect
distribution channels.

         In recent years, a growing number of manufacturers began to reduce the
number of distributors they use. Distributors themselves are also choosing to
consolidate because of the competitive advantages that arise from expanded
product offerings and economies of scale. The rapidly changing nature of the
storage, semiconductor and computer industries has required distributors to
significantly expand both their customer base and product and service offerings,
to compete effectively. To be successful within these areas, we believe
distributors must emphasize time-to-market and total cost reductions and focus
on markets in which they have advantages in service, flexibility and component
content. Distributors also need to distinguish themselves through a combination
of value-added services such as consulting, design, implementation and
maintenance as well as more knowledgeable service and technical support.

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OUR STRATEGY

         Our goal is to expand our leadership position as a distributor of
storage solutions products and systems and to become one of the leading
distributors of semiconductor components and computer products and peripherals.
We intend to achieve this goal by leveraging our strengths and implementing the
following strategies:

         Continue Our Focus on Storage Solutions. We plan to continue to take
advantage of the market opportunities in the storage industry by maintaining our
strategic focus on our storage solutions. For example, we have devoted
significant resources to expanding our marketing efforts, deepening the
expertise of our sales force and offering an extensive range of
technologically-advanced products. We believe that our ability to offer
value-added services will be critical for implementing storage solutions and
leveraging the opportunity in the data storage market given the increasing
complexity of storage solutions and the shift toward indirect distribution.

         Expand our Storage and Semiconductor Product Lines. We believe that our
ability to offer customers an extensive line of leading storage products across
technologies and manufacturers will continue to be a strong competitive
advantage for us, particularly as it relates to SAN and NAS solutions. Our
selection of products and technologies, together with our independence, allows
us to reliably deliver the optimal package of appropriate hardware, software and
services for each project. We also believe it is important to expand our
semiconductor offerings to markets with growing customer demands. We will
continue to expand our product lines through strategic acquisitions and internal
growth.

         Expand Geographically. We intend to deepen our presence in the United
States, and expand our coverage in the major markets of Canada, Latin America
and Europe through targeted internal growth and strategic acquisitions.
Increasingly, multinational companies, including our manufacturers and
customers, are requiring products and solutions that are able to address local
operational and reporting requirements, but which are also heterogeneous and
interoperable among countries, regions and offices. As we expand our global
presence, we believe that we will be better able to address the demands of
multinational customers, gain more access to multinational manufacturers and
leverage our expertise.

         Align with Industry Leaders. We intend to leverage our position as a
leading storage solutions provider to create new strategic relationships with
manufacturers. We believe that distribution channels will continue to
consolidate and leading manufacturers will align with those distributors that
are best able to offer value-added services and access new customers. We believe
being aligned with leading manufacturers will allow us to identify innovative
products, exchange critical information, and gain access to new technologies and
create cross-marketing opportunities. Recently, we have entered into strategic
relationships with a number of manufacturers, including IBM, HP and EMC, Intel,
Western Digital and Samsung.

         Expand Electronic Commerce Initiatives. We intend to expand the scope
of our electronic commerce, supply chain management and customer relationship
management programs. We believe that our electronic commerce initiatives will
expand our customer base, establish greater penetration with existing customers
and strengthen our position as a preferred distributor of storage, semiconductor
and computer products.

PRODUCTS AND SERVICES

         We market and distribute more than 150 brand name product lines, as
well as our own Rorke Data storage products, Markvision memory modules and
TradeMark computers and servers. We offer the following products as discrete
components or as part of our solutions offering.

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Storage Products and Related Software

         Our storage products include network attached storage, storage area
network products, Fibre Channel networking products and systems, tape libraries
and disk drives, as well as storage-related software products. We partner with
the best in class storage providers in the industry; to provide the most
comprehensive cost effective solutions to enterprise customers worldwide. We
offer a comprehensive set of products and services, supported through a network
of worldwide integration and solution centers with more than 500 dedicated
storage professionals available to serve our customer's enterprise needs. Our
customer base includes leading Var2000 and vertical solution providers
worldwide.

Semiconductor and Other Components

         We distribute a variety of semiconductor components, including memory
components and modules, logic devices, microprocessors, microcontrollers, power
management components, analog and mixed signal circuits, application-specific
integrated circuits (ASICs), graphics and video devices, communications and
specialty components.

Computer Products and Software

         Our computer products include a variety of standard and
custom-configured motherboards, flat panel displays and related components,
monitors, keyboards, chassis, scanners, personal computers and servers, board
level products and network interface controller (NIC) cards, as well as related
software. Among the computer products we offer are our own proprietary
Markvision memory modules and TradeMark computer products that complement the
other products and technologies we provide.

Value-Added Services

         We offer our customers a variety of value-added services as described
below. Many of our value-added services are product focused, while others
provide our customers assistance with a variety of product management
activities.

         Storage System Consulting Services. We work with customers to determine
data storage needs to make decisions regarding their storage strategies and to
design storage systems to address these needs. Our consulting services draw from
our core competencies in enterprise storage integration solutions. We perform
tasks such as storage audit or feasibility studies, supplement specialist
elements of a pre-defined project or provide full project management and
implementation.

         NAS and SAN Solutions. We offer a complete range of professional
services including design and consultation, installation, training and on-site
service programs relating to NAS and SAN solutions. We have established a
dedicated enterprise storage systems team that can address the challenges
associated with enterprise storage systems. Our service programs also offer
customers Fibre Channel interoperability and fully integrated turnkey storage
solutions. For example, we integrate SANs with Fibre Channel-based technology
including switches, bridges, archive libraries and network software.

         Storage Subsystems. We provide standard and custom subsystem products
to our customers. We integrate standard products for our Rorke Data brand
storage products. We also configure custom products to meet the needs of
customers that cannot be served by industry-standard product offerings.

         Other Product Services. We provide value-added services to a full range
of semiconductor, storage and computer products, including semiconductor device
programming, tape and reeling, special labeling, disk drive image duplication,
firmware modification, software downloading and hardware modification.

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         Flat Panel Integration. We offer a comprehensive portfolio of Flat
Panel Displays, technologies and integration services that include off-the-shelf
solutions for Kiosk, point-of-sale and other OEM applications. We also offer
fully customed designs to support applications such as full sunlight readability
and harsh environmental deployment.

         Board and Blade Level Building Blocks. We provide complete Board and
Blade offerings geared for applications to include computers, servers, medical
equipment, video/graphics, security, test and measurement and networking
products offered in a variety of industry standard form factors including ATX,
Micro-ATX, PCI and Compact PCI. We also provide complete integration services,
manufacturing assembly, interoperability testing and application support.

         Application Support Services. Our application support services provide
design support and product recommendations, training programs, maintenance
options and testing, technical advice and prompt incident detection and
resolution.

         Supply Chain Management. We provide a variety of materials-management
solutions, including e-procurement services, Internet-enabled, real-time pricing
and delivery quotations, electronic data interface programs, just-in-time
inventory programs, bonded inventories, on-site consignment inventory and
kitting. We are implementing an end-to-end supply chain management program for
manufacturers and customers, designed to help us improve inventory turns,
service levels and sales productivity. We are also working with several
companies in order to provide software applications and other resources to OEMs
and contract electronic manufacturers for materials-management logistic
activities.

SALES AND MARKETING

         Our customer base primarily consists of OEMs, VARs, system integrators,
contract electronic manufacturers, storage solution customers and retailers. For
customers primarily seeking our solution offerings, our sales and marketing
efforts often involve proactive efforts of our sales people and field
application engineers. Sales and technical personnel focusing on these customers
tend to spend time at customers' facilities assessing the customers' needs,
developing and providing solutions as well as providing proof of concept
supported by our technical capabilities and experience. Our component offering
marketing efforts involve supply chain management programs, consignment and
bonded inventory programs and end-of-life programs. Sales of our component
offerings are principally driven by product breadth and depth, pricing and
on-time availability.

         We also believe that our relationships with manufacturers provide us
with significant opportunities to increase our sales and customer base. We work
closely with many manufacturers to develop strategies to penetrate both targeted
markets and customers. In many cases, our sales presentations to customers are a
joint effort with manufacturers' sales representatives.

         We believe our e-commerce program will enhance our sales and marketing
efforts by:

    -    providing our customers with detailed product information, including
         availability and pricing;

    -    providing customers additional channels to purchase our products;

    -    reducing time and expenditures involved in customers' product
         procurement activities; and

    -    providing our customers with resource planning tools to more accurately
         manage their product requirements.

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COMPETITION

         In the distribution of storage, semiconductor components and computer
products, we generally compete for customer relationships with numerous local,
regional and national and international authorized and unauthorized
distributors. We also compete for customer relationships with manufacturers,
including some of our manufacturers and customers. Consistent with our sales and
marketing efforts, we tend to view our competition, whether arising from the
direct or indirect distribution channel, on a customer-category basis. We
believe that our most significant competition for customers seeking both
products and value-added services arises from Arrow Electronics, Avnet, Future
Electronics, Memec PLC and Pioneer-Standard Electronics. We believe that our
most significant competition for customers seeking products apart from
value-added services arises from Ingram Micro, Tech Data and Synnex.

         We believe that competition for customers is based on product line
breadth, depth and availability, competitive pricing, customer service,
technical expertise, value-added services and e-commerce capabilities. We
believe that we compete favorably with respect to each of these factors. We
directly compete with numerous distributors, many of which possess superior
brand recognition and financial resources. In the area of storage products and
solutions, however, we believe that none of our competitors offers the full
range of storage products and solutions that we offer.

         We compete with other distributors for relationships with
manufacturers. In recent years, a growing number of manufacturers began to
reduce the number of distributors they use. We believe this consolidation is the
result of a manufacturer's need to streamline its supply chain and establish
stronger and more expansive relationships with a smaller number of distributors.
Since we believe that competition for customers is often based upon product line
breadth, depth and availability, the loss of any significant manufacturer could
harm our competitive position.

         Although we believe that we are currently well positioned within our
target markets, the storage and computer product markets are rapidly evolving
and highly competitive. As technologies continue to change, we expect that
competition will increase in the future. We believe direct competition from
manufacturers is likely to increase if, as expected, the data storage industry
continues to consolidate. This consolidation would probably result in fewer
manufacturers with greater resources to devote to internal sales and marketing
efforts. In addition, manufacturers have established and will probably continue
to establish cooperative relationships with other manufacturers and data storage
solution providers. These cooperative relationships may enable manufacturers to
offer comprehensive storage solutions that compete with those we offer.

RECENT ACQUISITIONS

         In connection with our solution offerings, we have completed a number
of strategic acquisitions. Through these acquisitions in 2001, we gained
expertise in storage solutions and greater access to international markets.

         Our acquisition of Total Tec, a company headquartered in Edison, NJ,
and with sales offices in the eastern and southern United States, has
significantly expanded our ability to address challenging SAN initiatives. Total
Tec is one of Hewlett-Packard's ("HP") four enterprise distributors and one of
the nation's premier enterprise (computing and storage) solutions providers
focused on implementing comprehensive IT solutions to Fortune 1000 firms. Their
methodology addresses key business data concerns including availability,
reliability, performance, scalability and manageability. During the fourth
quarter of 2001, we expanded our U.K. HP/Compaq relationship to include the U.S.
market for Proliant servers and StorageWorks enterprise storage systems. Through
this distribution agreement, Bell Microproducts will offer leading HP/Compaq
enterprise products, services and solutions to its large customer base of VARs,
resellers, OEMs and system integrators in the U.S.

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         Our acquisition of Touch The Progress Group BV, a company based in the
Netherlands and with offices in Germany, Belgium and Austria, has added
enterprise storage solutions including storage management software products,
integrated storage technology, infrastructure, and support services to our
strategic effort. The company offers an extensive portfolio of storage solutions
from some of the world's leading manufacturers. This portfolio allows the
company and its business partners to provide a total storage management solution
for multiple heterogeneous computing platforms, including IBM, HPQ, Veritas and
other leading manufacturers.

         Our acquisition of Forefront Graphics, a company headquartered in
Toronto, Canada, and with offices in Ottawa, Montreal, Calgary and Vancouver,
has added high performance computer graphics, digital audio and video, storage
and multimedia products targeted at both the computer reseller marketplace and
the video production reseller marketplace.

EMPLOYEES

         At December 31, 2002, we had a total of 1,344 employees, including 689
in sales and marketing functions, 481 in general administrative functions and
174 in technical and value add integration functions. Of our total employees,
608 are located at our facilities outside of the United States, including 411 in
the United Kingdom. None of our employees are represented by a labor union. We
have not experienced any work stoppages and consider our relations with our
employees to be good. Many of our current key personnel have substantial
experience in our industry and would be difficult to replace. The labor market
in which we operate is highly competitive and, as a result, we may not be able
to retain and recruit key personnel. If we fail to recruit, retain or adequately
train key personnel, we will experience difficulty in implementing our strategy,
which could negatively affect our business, financial condition and stock price.

RISK FACTORS

         You should consider carefully the risks described below together with
all of the other information included in this Form 10-K. The risks and
uncertainties described below and elsewhere in this Form 10-K are not the only
ones facing us. If any of the following risks actually occur, our business,
financial condition or results of operations would likely suffer. In that case,
the trading price of our common stock could fall, and you may lose all or part
of your investment.

THE CYCLICAL NATURE OF THE STORAGE, SEMICONDUCTOR AND COMPUTER INDUSTRIES COULD
HURT OUR OPERATING RESULTS.

         The storage, semiconductor and computer industries have historically
been characterized by fluctuations in product demand and supply, and,
consequently, severe fluctuations in price. Over the past year, the industries
in which we operate have experienced a significant downturn in demand and excess
production levels. Although our distribution agreements with manufacturers
provide us with limited price protection and certain rights of return, the
shortfalls in demand and excess production hurt our sales and gross margins.
Such shortfalls in demand and excess production capacity may adversely affect
our operations and our revenue, margins and overall financial results. In
addition, many of our customers in the storage and computer products industries
are subject to the risks of significant shifts in demand and severe price
pressures by their customers, which may increase the risk that we may not be
able to collect accounts receivable owed by some of our customers. If we are
unable to collect our accounts receivable, our results of operations and
financial condition may suffer.

         If the data storage and computer products industries experience
significant unit volume growth that, in turn, results in increased demand for
many of the products we distribute, we may experience a shortage of our
products. In such event, our operating results may depend on the amount of
product allocated to us by manufacturers and the timely receipt of such product.

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WE ARE DEPENDENT ON MANUFACTURERS AND WOULD SUFFER IF WE LOST ANY SIGNIFICANT
MANUFACTURER OR FACED A PRODUCT SHORTAGE.

         We are highly dependent on manufacturers for substantially all of the
products that we sell. Four manufacturers provided products that represented 37%
and 41% of our sales in 2002 and 2001, respectively. The loss of any significant
manufacturer could harm our financial condition and results of operations. In
the past, significant manufacturers have terminated distribution arrangements
with us, and significant distribution relationships could be terminated in the
future. Our distribution agreements are cancelable on short notice. Our reliance
on manufacturers leaves us vulnerable to having an inadequate supply of required
products, price increases, late deliveries and poor product quality. From time
to time we, like other distributors in our industry, experience supply shortages
and are unable to purchase our desired volume of products. If we are unable to
enter into and maintain satisfactory distribution arrangements with leading
manufacturers and an adequate supply of products, our sales could suffer
considerably.

IF WE CANNOT EFFECTIVELY MANAGE OUR GROWTH, OUR BUSINESS MAY SUFFER.

         Our growth in recent years has placed, and continues to place, a
significant strain on our management, financial and operational resources. This
growth also increases demand on our professional and technical services, sales,
information systems, marketing and customer service and support functions. We
intend to continue to pursue our growth strategy through increasing our sales
efforts for existing and new solution and component offerings, increasing
geographical sales coverage and strategic acquisitions. Continued growth will
require increased personnel, expanded information systems and additional
financial and administrative control procedures. We may not be successful in our
efforts to manage growth. If we do not properly manage our planned growth, our
financial condition and common stock price may suffer.

THERE COULD BE FLUCTUATIONS IN OUR QUARTERLY OPERATING RESULTS.

         Our quarterly operating results have in the past and could in the
future fluctuate substantially. Our operating expense levels are based in part
on expectations of future sales. If sales or gross margins in a particular
quarter do not meet expectations, operating results could suffer. Factors
affecting our quarterly operating results include:

         -   the loss of key manufacturers or customers;

         -   price competition;

         -   problems incurred in managing inventories;

         -   a change in the product mix sold by us;

         -   customer demand, including the timing of purchase orders from
             significant customers;

         -   changing economic conditions in North and South America and Europe;

         -   our ability to manage credit risk and collect accounts receivable;

         -   our management of foreign currency exposure;

         -   availability of product from manufacturers; and

         -   the timing of expenditures in anticipation of increased sales.

         Due in part to manufacturer rebate programs, a larger portion of our
gross profit has historically been reflected in the third month of each quarter
than in each of the first two months of each quarter. In addition, we often
experience increased sales volume near the end of each quarter, which also
causes us to report higher gross profit levels in the third month of each
quarter than in each of the first two months of each quarter. If we do not
receive products from manufacturers or complete sales in a timely manner at the
end of a quarter, or if rebate programs and marketing development funds are
discontinued, our operating results in a particular quarter could suffer. In
various periods in the past, our operating results have been affected by all of
these factors. In particular,

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price fluctuations in the disk drive and semiconductor industries have affected
our gross margins in recent periods.

OUR FINANCIAL OBLIGATIONS MAY LIMIT OUR ABILITY TO OPERATE OUR BUSINESS.

         We have raised significant funding through debt, some of which bears
interest at fixed rates and some at variable rates. We are required to meet
financial tests on a quarterly basis and comply with other covenants customary
in secured financings. If we do not meet debt covenant requirements, our lenders
may demand immediate repayment of amounts outstanding. Changes in interest rates
may have a significant effect on our operating results. Furthermore, we are
dependent on credit from our manufacturers to fund our inventory purchases. If
our debt burden increases to high levels, our manufacturers may restrict our
credit. Our cash requirements will depend on numerous factors, including the
rate of growth of our sales, the timing and levels of products purchased,
payment terms and credit limits from manufacturers, the timing and level of our
accounts receivable collections and our ability to manage our business
profitably.

         Our ability to satisfy our existing obligations will depend upon our
future operating performance, which may be affected by prevailing economic
conditions and financial, business and other factors described in this Form
10-K, many of which are beyond our control. If we are unable to service our debt
obligations, we may be forced to adopt one or more strategies that may include
actions such as reducing or delaying capital expenditures or otherwise slowing
our growth strategies, selling assets, restructuring or refinancing our
indebtedness or seeking additional equity capital. We do not know whether any of
these actions could be effected on satisfactory terms, if at all. Any equity
financing may be on terms that are dilutive or potentially dilutive. If we are
unable to successfully manage our debt burden, our financial condition would
suffer considerably.

WE ARE SUBJECT TO THE RISKS OF INTERNATIONAL OPERATIONS, WHICH MAY HURT OUR
PROFITABILITY.

         We believe that international sales will represent a substantial and
increasing portion of our net sales for the foreseeable future. Our
international operations are subject to a number of risks, including:

         -    fluctuations in currency exchange rates;

         -    difficulty in collecting accounts receivable due to longer payment
              cycles common in foreign markets;

         -    political and economic instability;

         -    difficulty in staffing and managing foreign operations;

         -    import and export license requirements, tariffs, taxes and other
              trade barriers; and

         -    the burden of complying with a wide variety of foreign laws,
              treaties and technical standards and changes in those regulations.

         The majority of our revenues and expenditures in our foreign
subsidiaries are transacted in the local currency of the country where the
subsidiary operates. For each of our foreign subsidiaries, the local currency is
also the functional currency. Fluctuations in currency exchange rates could
cause our products to become relatively more expensive to customers in a
particular country, leading to a reduction in sales or profitability in that
country. To the extent our revenues and expenses are denominated in currencies
other than U.S. dollars, gains and losses on the conversion to U.S. dollars may
contribute to fluctuations in our operating results. In addition, we have
experienced foreign currency remeasurement gains and losses because a
significant amount of our foreign subsidiaries' remeasurable net assets and
liabilities are denominated in currencies other than the subsidiaries'
functional currency. As we continue to expand globally and the amount of our
foreign subsidiaries' U.S. dollar or non-functional currency denominated
remeasurable net asset or liability position increases, our potential for
fluctuations in foreign currency remeasurement gains and losses will increase.
We have in the past, and expect in the future, to enter into forward exchange
contracts and enter into local currency borrowing facilities to reduce this
exposure, but these arrangements may not be adequate. Furthermore, payment
cycles for international customers are typically longer than those for customers
in the United States. Unpredictable sales cycles could cause us to fail

                                       10

<PAGE>

to meet or exceed the expectations of security analysts and investors for any
given period. Further, foreign markets may not continue to develop. If we are
unable to manage these risks effectively, our operating results and financial
position could be harmed.

OUR GROWTH PLANS DEPEND IN PART ON OUR ABILITY TO SUCCESSFULLY COMPLETE AND
INTEGRATE ACQUISITIONS.

         An important part of our growth has been the acquisition of
complementary businesses. We may choose to continue this strategy in the future.
Our identification of suitable acquisition candidates involves risks inherent in
assessing the value, strengths, weaknesses, overall risks and profitability of
acquisition candidates. We may be unable to identify suitable acquisition
candidates. If we do not make suitable acquisitions, we may find it more
difficult to realize our growth objectives.

         The process of integrating new businesses into our operations,
including our recently completed acquisitions, poses numerous risks, including
an inability to assimilate acquired operations, information systems, internal
control systems and products; diversion of management's attention; difficulties
and uncertainties in transitioning the business relationships from the acquired
entity to us; and the loss of key employees of acquired companies. In addition,
future acquisitions by us may be dilutive to our shareholders, cause us to incur
additional indebtedness and large one-time expenses or create intangible assets
that could result in significant amortization expense. If we spend significant
funds or incur additional debt, our ability to obtain necessary financing may
decline and we may be more vulnerable to economic downturns and competitive
pressures. We cannot guarantee that we will be able to successfully complete any
acquisitions, that we will be able to finance acquisitions or that we will
realize any anticipated benefits from acquisitions that we complete.

WE COULD SUFFER A SURPLUS OF OBSOLETE OR UNMARKETABLE INVENTORY.

         Franchise distribution agreements often provide us with limited
inventory management protection, including price protection and inventory return
rights. While we purchase a substantial amount of inventory under franchise
distribution agreements, we also purchase significant amounts of inventory
without the limited protection that franchise distribution agreements often
provide. Without the benefit of effective price protection or inventory return
rights for our inventory purchases, we bear the sole risk of obsolescence and
price fluctuations, which could harm our operating results. Even when our
franchise distribution agreements provide us with price protection and inventory
return rights, they may be ineffective when the products in our inventory become
obsolete or unmarketable, or when the manufacturers of those products have
financial difficulty. In those events, we may be unable to return the products
to the manufacturer or to collect refunds for those products in a timely manner,
or at all.

WE MUST BE ABLE TO MANAGE RAPID TECHNOLOGICAL CHANGE.

         Many of the products we sell are used in the manufacture or
configuration of a wide variety of electronic products. These products are
characterized by rapid technological change, short product life cycles and
intense competition and pricing pressures. Our continued success depends upon
our ability to continue to identify new, emerging technologies, develop
technological expertise in these technologies and continually develop and
maintain relationships with industry leaders. If we are unsuccessful in our
efforts, our results of operations and financial condition may suffer.

ITEM 2. PROPERTIES

         In the Americas, we maintain 49 sales offices in a variety of
locations, including the U.S., Canada, Argentina, Brazil, Chile and Mexico. In
Europe, we maintain sales offices in Austria, Belgium, England, France, Germany,
Italy, the Netherlands and Sweden. In addition to our sales offices, we operate
six integration and service facilities and 11 warehouses. We currently operate
four significant management and distribution centers. Our corporate

                                       11

<PAGE>

headquarters is located in San Jose, California, where we currently lease office
space and distribution facilities with approximately 160,000 square feet of
space. The leases expire in 2007. In Chessington, England, we acquired a
facility with approximately 102,000 square feet that serves as our center for
directing and managing our operations in the United Kingdom and Europe. Our
European distribution center is located in Birmingham, England where we lease a
warehouse facility with approximately 130,000 square feet of space. This lease
expires in 2019. In Miami, Florida, we currently lease a facility with
approximately 65,000 square feet that serves as our center for directing and
managing our business in Latin America. The lease expires in 2005, with two
5-year options to extend. In Montgomery, Alabama, we currently lease a facility
with approximately 53,000 square feet that serves as our corporate technology
and data center and our primary customer call center. The lease on this facility
expires in October 2007. We believe that our existing facilities are adequate
for our current operational needs.

ITEM 3. LEGAL PROCEEDINGS

         We are subject to legal proceedings and claims that arise in the normal
course of business. We believe that the ultimate resolution of such matters will
not have a material adverse affect on our financial position or results of
operations; however, such litigation could in the future result in substantial
costs and diversion of management resources. Such litigation could also result
in payment of monetary damages or prohibitions against use of technologies, and
could harm our business, financial condition and results of operations.

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

         None.

                                       12

<PAGE>

                                     PART II

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

       The Company's Common Stock is traded on the Nasdaq National Market
under the symbol "BELM." The following table sets forth for the periods
indicated the high and low sale prices of the Common Stock as reported by
Nasdaq.

<TABLE>
<CAPTION>
                                                          HIGH          LOW
                                                        -------       -------
<S>                                                     <C>           <C>
2001

    First quarter................................       $ 24.25       $ 10.69

    Second quarter ..............................         14.24          6.80

    Third quarter ...............................         11.13          6.68

    Fourth quarter ..............................         14.34          7.40

2002

    First quarter................................       $ 15.79       $  9.79

    Second quarter...............................         12.90          6.70

    Third quarter................................          7.80          3.25

    Fourth quarter ..............................          8.70          3.61

2003

    First quarter (through March 18, 2003).......       $  6.51       $  6.09
</TABLE>

         On March 18, 2003, the last sale price of the Common Stock as reported
by Nasdaq was $6.26 per share.

         As of March 18, 2003, there were approximately 456 holders of record of
the Common Stock (not including shares held in street name).

         To date, the Company has paid no cash dividends to its shareholders.
The Company has no plans to pay cash dividends in the near future. The Company's
line of credit agreement prohibits the Company's payment of dividends or other
distributions on any of its shares except dividends payable in the Company's
capital stock.

                                       13

<PAGE>

ITEM 6. SELECTED FINANCIAL DATA

         The selected financial data of the Company set forth below should be
read in conjunction with the consolidated financial statements of the Company,
including the notes thereto, and Management's Discussion and Analysis included
elsewhere herein.

<TABLE>
<CAPTION>
                                                                  (IN THOUSANDS, EXCEPT EARNINGS PER SHARE DATA)
                                                                  ----------------------------------------------
STATEMENT OF INCOME DATA:                               2002          2001(1)        2000(2)       1999(3)        1998(4)
                                                     -----------    -----------    -----------   -----------    -----------
<S>                                                  <C>            <C>            <C>           <C>            <C>
Net sales                                            $ 2,104,922    $ 2,007,102    $ 1,804,102   $ 1,058,275    $   575,330
Cost of sales                                          1,926,366      1,854,294      1,638,802       967,491        511,476
                                                     -----------    -----------    -----------   -----------    -----------
Gross profit                                             178,556        152,808        165,300        90,784         63,854
Selling, general and administrative expenses             165,624        157,910        121,088        69,507         46,070
Restructuring and special charges                          5,688          8,894              -             -              -
                                                     -----------    -----------    -----------   -----------    -----------
Total operating expenses                                 171,312        166,804        121,088        69,507         46,070
Income (loss) from operations                              7,244        (13,996)        44,212        21,277         17,784
Interest expense and other income                         16,910         20,362         14,495         5,766          3,168
                                                     -----------    -----------    -----------   -----------    -----------
Income (loss) from operations before taxes                (9,666)       (34,358)        29,717        15,511         14,616
Provision for (benefit from) income taxes                 (2,612)       (12,251)        12,480         6,581          6,139
                                                     -----------    -----------    -----------   -----------    -----------
Income (loss) from operations                             (7,054)       (22,107)        17,237         8,930          8,477
Income (loss) from discontinued operations, net of
     of income taxes                                           -              -              -        (2,946)        (2,402)
Gain on sale of contract manufacturing segment                 -              -              -         1,054              -
                                                     -----------    -----------    -----------   -----------    -----------
Net income (loss)                                    $    (7,054)   $   (22,107)   $    17,237   $     7,038    $     6,075
                                                     ===========    ===========    ===========   ===========    ===========
Basic earnings (loss) per shares (5)
    Continuing operations                            $     (0.37)   $     (1.34)   $      1.17   $      0.66    $      0.64
    Discontinued operations                                    -              -              -         (0.14)         (0.18)
                                                     -----------    -----------    -----------   -----------    -----------
Total                                                $     (0.37)   $     (1.34)   $      1.17   $      0.52    $      0.46
                                                     ===========    ===========    ===========   ===========    ===========
Diluted earnings (loss) per share (5)
    Continuing operations                            $     (0.37)   $     (1.34)   $      1.05   $      0.65    $      0.64
    Discontinued operations                                    -              -              -         (0.14)         (0.18)
                                                     -----------    -----------    -----------   -----------    -----------
Total                                                $     (0.37)   $     (1.34)   $      1.05   $      0.51    $      0.46
                                                     ===========    ===========    ===========   ===========    ===========
Shares used in per share calculation
    Basic                                                 19,201         16,495         14,673        13,563         13,188
                                                     ===========    ===========    ===========   ===========    ===========
    Diluted                                               19,201         16,495         16,415        13,685         13,322
                                                     ===========    ===========    ===========   ===========    ===========
</TABLE>

<TABLE>
<CAPTION>
                                                                               AS OF DECEMBER 31,
                                                     ----------------------------------------------------------------------
BALANCE SHEET DATA:                                      2002         2001(1)        2000(2)       1999(3)        1998(4)
                                                     -----------    -----------    -----------   -----------    -----------
<S>                                                  <C>            <C>            <C>           <C>            <C>
Working capital                                      $   206,786    $   183,964    $   136,810   $   182,626    $   167,109
Total assets                                             614,191        643,687        661,207       360,351        285,580
Total long-term debt                                     179,237        176,441        106,871       110,638        106,963
Total shareholders' equity                               145,849        125,769        129,532        96,273         86,476
</TABLE>

(1)  2001 Statement of Income Data and Balance Sheet Data include the results of
     operations of Touch The Progress Group BV since acquisition on May 22,
     2001, Forefront Graphics on May 24, 2001 and Total Tec Systems, Inc. on
     November 13, 2001. See Note 4 of Notes to Consolidated Financial
     Statements.

(2)  2000 Statement of Income Data and Balance Sheet Data include the results of
     operations of Rorke Data, Inc. since acquisition on May 15, 2000 and Ideal
     Hardware Limited on August 3, 2000. See Note 4 of Notes to Consolidated

                                       14

<PAGE>

     Financial Statements.

(3)  1999 Statement of Income Data and Balance Sheet Data include the results of
     operations of Future Tech, Inc. from the date of acquisition on July 21,
     1999.

(4)  1998 Statement of Income Data and Balance Sheet Data include the results of
     operations of the Computer Products Division of Almo Corporation since
     acquisition on November 13, 1998 and Tenex Data Division of Axidata Inc. on
     November 19, 1998.

(5)  All per share amounts have been restated in accordance with Statement of
     Financial Accounting Standards No. 128 "Earnings Per Share". Earnings per
     share and shares used in per share calculations have been retroactively
     restated to reflect the 3-for-2 stock split the Company declared on July
     31, 2000.

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

         For an understanding of the significant factors that influenced the
Company's performance during the past three years, the following discussion
should be read in conjunction with the consolidated financial statements and the
other information appearing elsewhere in this report.

         When used in this report, the words "expects," "anticipates,"
"estimates," "intends" and similar expressions are intended to identify
forward-looking statements within the meaning of Section 27A under the
Securities Act of 1933 and Section 21E under the Securities Exchange Act of
1934. Such statements include but are not limited to statements regarding the
ability to obtain favorable product allocations and the ability to increase
gross profit while controlling expenses. These statements are subject to risks
and uncertainties that could cause actual results to differ materially,
including those risks described under "Risk Factors" in Item 1 hereof.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

         The preparation of financial statements in conformity with accounting
principles generally accepted in the U.S. requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Our estimates, judgments and assumptions are continually
evaluated based on available information and experience; however actual amounts
could differ from those estimates. The Company's significant accounting policies
are described in Note 2 of the Notes to Consolidated Financial Statements.

Revenue recognition

         Bell's policy is to recognize revenue from sales to customers when the
rights and risks of ownership have passed to the customer, when persuasive
evidence of an arrangement exists, the price is fixed and determinable and
collection of the resulting receivable is reasonably assured. Under specific
conditions, we permit our customers to return or exchange products. The
provision for estimated returns is recorded concurrently with the recognition of
revenue based on historical sales returns and analysis of credit memorandum
data.

         We maintain an allowance for doubtful accounts for losses that we
estimate will arise from our customers' inability to make required payments. We
make our estimates of the uncollectibility of our accounts receivable by
analyzing historical bad debts, specific customer creditworthiness and current
economic trends. At December 31, 2002 the allowance for doubtful accounts was
$19.3 million and at December 31, 2001 it was $16.2 million. If the financial
condition of our customers were to deteriorate, resulting in an impairment of
their

                                       15

<PAGE>

ability to make payments, additional allowances may be required. In 2002, our
bad debt expense was $11.4 million compared to $11.6 million in 2001. In
addition, included in 2002 restructuring and special charges were $1.7 million
of charges recorded in the second quarter that related to a rapid deterioration
in the financial condition of certain customers in Latin America resulting in
their inability to make payments. In the third quarter of 2001, the Company also
recorded other special charges of $4.1 million for additional accounts
receivable provisions. Events giving rise to this provision related to the
economic crisis in Argentina and the devaluation of the Argentinean peso, and a
default on guaranteed debt of one of the Company's large customers who filed for
bankruptcy.

Valuation of Inventory

         Inventories are recorded at the lower of cost (first in -- first out)
or estimated market value. The Company's inventories include high-technology
components, embedded systems and computing technologies sold into rapidly
changing, cyclical and competitive markets whereby such inventories may be
subject to early technological obsolescence. We write down our inventory for
estimated obsolescence or unmarketable inventory equal to the difference between
the cost of inventory and the estimated market value based upon assumptions
about future demand, selling prices and market conditions. During the second and
third quarters of 2001 we recorded $17.8 million of charges against inventory
related to excess inventory on hand. The additional write-down resulted from
market conditions and the decision to discontinue certain product lines. These
charges were included in the Statement of Income within the caption "Cost of
Sales." We evaluate inventories for excess, obsolescence or other factors that
may render inventories unmarketable at normal margins. Write-downs are recorded
so that inventories reflect the approximate net realizable value and take into
account the Company's contractual provisions with its suppliers governing price
protection, stock rotation and return privileges relating to obsolescence.
Because of the large number of transactions and the complexity of managing the
process around price protections and stock rotations, estimates are made
regarding adjustments to the carrying amount of inventories. Additionally,
assumptions about future demand, market conditions and decisions to discontinue
certain product lines can impact the decision to write down inventories. If
assumptions about future demand change or actual market conditions are less
favorable than those projected by management, additional write-downs of
inventories may be required. In any case, actual amounts could be different from
those estimated.

Special and Acquisition-Related Charges

         The Company has been subject to the financial impact of integrating
acquired businesses and charges related to business reorganizations. In
connection with such events, management is required to make estimates about the
financial impact of such matters that are inherently uncertain. Accrued
liabilities and reserves are established to cover the cost of severance,
facility consolidation and closure, lease termination fees, inventory
adjustments based upon acquisition-related termination of supplier agreements
and/or the re-evaluation of the acquired working capital assets (inventory and
accounts receivable), change-in-control expenses, and write-down of other
acquired assets including goodwill. Actual amounts incurred could be different
from those estimated.

Valuation of Accounts Payable

         Our accounts payable has been reduced by amounts claimed to vendors for
returns, price protection and other amounts related to incentive programs.
Amounts related to price protection and other incentive programs are recorded as
adjustments to product costs or selling, general and administrative expenses,
depending on the nature of the program. There is a time delay between the
submission of a claim by us and confirmation of agreement by our vendors.
Historically, our estimated claims have approximated amounts agreed to by our
vendors.

                                       16

<PAGE>

Accounting for Income Taxes

         Management judgment is required in determining the provision for income
taxes, deferred tax assets and liabilities and the valuation allowance recorded
against net deferred tax assets. The carrying value of the Company's net foreign
operating loss carry-forwards is dependent upon its ability to generate
sufficient future taxable income in certain tax jurisdictions. In addition, the
Company considers historic levels of income, expectations and risk associated
with estimates of future taxable income and ongoing prudent and feasible tax
planning strategies in assessing a tax valuation allowance. Should the Company
determine that it is not able to realize all or part of its deferred tax assets
in the future, a valuation allowance is recorded against the deferred tax assets
with a corresponding charge to income in the period such determination is made.

Valuation of Goodwill and Intangible Assets

         At December 31, 2002, goodwill amounted to $53.8 million and
identifiable intangible assets amounted to $6.0 million.

         We regularly evaluate whether events and circumstances have occurred
that indicate a possible impairment of goodwill. In determining whether there is
an impairment of goodwill, we calculate the estimated fair value of our company
based on the closing sales price of our common stock and projected discounted
cash flows as of the date we perform the impairment tests. We then compare the
resulting fair value to our respective net book value, including goodwill. If
the net book value of our Company exceeds its fair value, we measure the amount
of the impairment loss by comparing the implied fair value our goodwill with the
carrying amount of that goodwill. To the extent that the carrying amount of our
goodwill exceeds its implied fair value, we recognize a goodwill impairment
loss. We perform this impairment test annually and whenever facts and
circumstances indicate that there is a possible impairment of goodwill. We
completed the required annual impairment test, which resulted in no impairment
for fiscal year 2002. We believe the methodology we use in testing impairment of
goodwill provides us with a reasonable basis in determining whether an
impairment charge should be taken.

RESULTS OF OPERATIONS

Year Ended December 31, 2002 Compared to Year Ended December 31, 2001

         Net sales were $2,104.9 million for the year ended December 31, 2002,
which represented an increase of $97.8 million, or 5% over 2001. Computer
products sales increased by $103.5 million primarily due to growth in the
European market and expansion of the customer base related to the acquisitions
of Total Tec Systems, Inc. ("Total Tec") in November 2001 and Touch The Progress
Group BV ("TTPG") in May 2001. Semiconductor sales decreased by $5.7 million
primarily due to the economic downturn in the Americas and overall decrease in
demand.

         The Company's gross profit for 2002 was $178.6 million, an increase of
$25.7 million, or 17% from 2001. Gross profit in 2001 was negatively impacted by
inventory charges of $17.8 million taken in the second and third quarters of
2001 related to the impact of unfavorable market conditions and the Company's
decision to reposition its product offerings and discontinue certain
non-strategic product lines, as discussed below. Excluding the inventory charge,
gross profit increased to $178.6 million in 2002, compared to $170.6 million in
2001, an increase of $8.0 million, or 5%. The increase in gross profit was
primarily related to the acquisitions of Total Tec and TTPG, partially offset by
a decrease in the Americas. Excluding the inventory charge, the overall gross
margin remained flat at 8.5% compared to last year.

         Selling, general and administrative expenses increased to $165.6
million in 2002 from $157.9 million in 2001, an increase of $7.7 million, or 5%.
As a percentage of sales, selling, general and administrative expenses remained
flat at 7.9% compared to last year. The increase in expenses was attributable to
the acquisitions of Total Tec and TTPG and the overall European expansion.

                                       17

<PAGE>

         Interest expense and other income decreased in 2002 to $16.9 million
from $20.4 million in 2001, a decrease of $3.5 million, or 17%. The decrease in
interest expense and other income was primarily due to overall reduced interest
rates and decreased bank borrowings during 2002 for worldwide working capital
purposes. The average interest rate in 2002 was 7.0% versus 8.0% in 2001.

         In 2002 the Company recorded a tax benefit at a rate of 27.0% on the
loss before taxes compared to the 2001 tax benefit rate of 35.6% on losses
before taxes. The lower tax benefit rate for 2002 was primarily related to
income tax allowances established related to losses incurred in certain foreign
jurisdictions.

Restructuring Plan

         In the second quarter of 2002, as part of the Company's plan to reduce
costs and improve operating efficiencies, the Company recorded special charges
of $2.3 million in response to economic conditions. These costs consisted
primarily of provisions for certain Latin American receivables of $1.7 million,
and costs related to the closure of the Rorke Data Europe facilities, whose
operations were consolidated into the Company's TTP division in Almere,
Netherlands. The special charges related to Rorke Data Europe included accrued
costs for future lease obligations for non-cancelable lease payments of
$249,000, other facility closure costs of $306,000 and severance and benefits of
$28,000 for involuntary employee terminations. The Company expects annual cost
savings from the special charges related to employee expenses and facilities
costs will be immaterial.

         In the third quarter of 2002, the Company extended its cost reduction
plan in response to the continued economic downturn and recorded restructuring
costs of $3.4 million. These charges consisted of estimated lease costs of $2.3
million pertaining to future lease obligations for non-cancelable lease payments
for excess facilities in the U.S. and severance and benefits of $1.1 million
related to worldwide involuntary terminations. The Company terminated 78
employees, predominantly in sales and marketing functions and eliminated two
executive management positions in the U.S. The Company expects annual savings of
approximately $700,000 related to these vacated facilities and $5.4 million
related to employee terminations. Future expected cost reductions will be
reflected in the income statement line item `Selling, general and administrative
expenses.'

         In the second and third quarters of 2001, the Company accrued
restructuring costs of $4.8 million. These costs consisted primarily of the
abandonment of certain inventory related computer software that had a carrying
value of $2.4 million, severance and benefits of $2.2 million related to
involuntary employee terminations and estimated lease costs of $238,000
pertaining to future lease obligations for non-cancelable lease payments for
excess facilities. The Company terminated 267 employees worldwide, predominantly
in overhead support functions. The Company expected annual employee expense
reductions of approximately $10 million, depreciation expense reduction of
$550,000, and cost reductions related to excess facilities of approximately
$800,000. Cost reductions have been realized as expected and have been reflected
in the income statement line item `Selling, general and administrative
expenses.' Overall, these cost reductions have been offset by increases in
selling, general and administrative costs related to the acquisitions of Total
Tec and TTPG and other costs related to expansion of geographic sales coverage
in Europe, expansion of the Company's storage systems infrastructure and
expansion of the Company's Corporate Technology Center.

         Additionally in the third quarter of 2001, the Company recorded other
special charges of $4.1 million for additional accounts receivable provisions.
Events giving rise to this provision related to the economic crisis in Argentina
and the devaluation of the Argentinean peso, and a default on guaranteed debt of
one of the Company's large customers who filed for bankruptcy.

         In the second and third quarters of 2001, the Company also recorded a
provision for inventory of $17.8 million related to additional excess inventory.
The additional provision largely resulted from the decision to discontinue
certain product lines and the impact of current market conditions. The excess
inventory

                                       18

<PAGE>

charge is included within the Statement of Income under the caption 'Cost of
Sales.'

         At December 31, 2002, outstanding liabilities related to these charges
are summarized as follows (in thousands):

<TABLE>
<CAPTION>
                                                                                                           Restructuring
                                        2002            2001            Total            Cash             Liabilities at
                                       Charges         Charges         Charges          Payments         December 31, 2002
                                       -------         -------         -------          --------         -----------------
<S>                                    <C>             <C>             <C>              <C>              <C>
Severance costs                        $ 1,167         $ 2,199         $ 3,366          $  2,821              $    545
Lease costs                              2,515             238           2,753               674                 2,079
Other facility closure costs               306               -             306               306                     -
                                       -------         -------         -------          --------              --------
Total                                  $ 3,988         $ 2,437         $ 6,425          $  3,801              $  2,624
                                       =======         =======         =======          ========              ========
</TABLE>

Change in Accounting Principle -- Goodwill

         In June 2001, the FASB issued Statement of Financial Accounting
Standards No. 142 ("SFAS 142"), "Goodwill and Other Intangible Assets," which
establishes financial accounting and reporting for acquired goodwill and other
intangible assets. SFAS 142 requires that ratable amortization of goodwill be
replaced with periodic tests for goodwill impairment and that intangible assets
with finite lives be amortized over their useful lives. The Company adopted the
provisions of SFAS 142 effective January 1, 2002, the first day of the Company's
fiscal year 2002.

         Therefore, the amortization of goodwill was suspended effective on that
date. Under the required transitional provisions of SFAS 142, the Company
identified and evaluated its reporting units for impairment as of December 31,
2001 using a two-step process. The first step was to ascertain whether there was
an indication that any of the Company's goodwill was impaired. This was
accomplished by identifying the Company's reporting units pursuant to the
guidelines set out in SFAS 142 and then determining the carrying value of each
of those reporting units by assigning the Company's assets and liabilities,
including existing goodwill, to each of those reporting units as of December 31,
2001. The Company determined that it has one reporting unit. We calculated the
estimated fair value of our Company based on the closing sales price of our
common stock and projected discounted cash flows. Such fair value was then
compared to the carrying value of the Company. The Company identified no
impairment of goodwill.

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

         Net sales were $2,007.1 million for the year ended December 31, 2001,
which represented an increase of $203.0 million, or 11% over 2000. Computer
products sales increased by $300.1 million primarily due to the expansion of the
customer base related to the acquisitions of Ideal Hardware Limited ("Ideal") in
August 2000, Touch The Progress Group BV ("TTPG") in May 2001, Total Tec
Systems, Inc. ("Total Tec") in November 2001 and Rorke Data, Inc. ("RDI"),
acquired in May 2000. Semiconductor sales decreased by $97.1 million primarily
due to the economic downturn in the Americas and overall decrease in demand.

         The Company's gross profit for 2001 was $152.8 million, a decrease of
$12.5 million, or 8% from 2000. The decrease in gross profit was primarily the
result of inventory charges of $17.8 million taken in the second and third
quarters of 2001 related to the impact of current market conditions and the
Company's decision to reposition its product offerings and discontinue certain
non-strategic product lines, as discussed below. Excluding the inventory charge,
gross profit increased to $170.6 million in 2001, compared to $165.3 million in
2000, an increase of $5.3 million, or 3%. The increase in gross profit was
primarily related to the acquisition of Ideal, partially offset by a decrease in
the Americas. Excluding the inventory charge, the overall gross margin decreased
to 8.5% compared to 9.2% in the same period last year. The decrease in gross
margin percentage was primarily due to the impact of competitive market
conditions in North America and the inclusion of Ideal's lower

                                       19

<PAGE>

gross margin percentages for all of 2001.

         Selling, general and administrative expenses increased to $157.9
million in 2001 from $121.1 million in 2000, an increase of $36.8 million, or
30%. As a percentage of sales, selling, general and administrative expenses
increased to 7.9% from 6.7% in 2000. The increase in expenses was attributable
to the acquisitions of Ideal, RDI, TTPG and Total Tec, expansion of geographic
sales coverage in Europe and expansion of the storage systems infrastructure in
the U.S. and Europe.

         Interest expense and other income increased in 2001 to $20.4 million
from $14.5 million in 2000, an increase of $5.9 million, or 41%. The increase in
interest expense and other income was primarily due to increased overall bank
borrowings during 2001 for worldwide working capital purposes, and the
acquisitions of Ideal, RDI, TTPG, Forefront Graphics ("FFG"). The average
interest rate in 2001 was 8.0%, versus 8.7% in 2000.

         In 2001 the Company recorded a tax benefit at a rate of 35.6% on the
loss before taxes. In 2000 the Company recorded income taxes at an effective
rate of 42% on income before taxes. The lower tax benefit rate for 2001 was
primarily caused by the impact of items related to acquisitions, which are not
deductible for tax purposes.

Restructuring Plan

         The Company implemented a plan in the second quarter of 2001 to reduce
costs and improve operating efficiencies by discontinuing certain non-strategic
product lines. In the third quarter of 2001, the Company took additional actions
and extended its cost reduction efforts in response to the continuing economic
slowdown.

         In the second and third quarters of 2001, the Company accrued total
restructuring charges of $4.8 million consisting primarily of the discontinuance
and non-cash, write-off of certain fixed assets valued at $2.4 million,
severance and benefits of $2.2 million related to involuntary employee
terminations and lease costs of $238,000 pertaining to estimated future
obligations for non-cancelable lease payments for excess facilities in Minnesota
that were vacated due to the reductions in workforce. The Company also accrued
other special charges of $4.1 million for additional accounts receivable
provisions.

         In the second and third quarters of 2001, the Company also recorded a
provision for inventory of $17.8 million related to additional excess inventory
and a $300,000 provision included in selling, general and administrative
expenses. The additional provisions resulted from the impact of market
conditions and the decision to discontinue certain product lines. The excess
inventory charge is included within the Statement of Income under the caption
Cost of Sales.

LIQUIDITY AND CAPITAL RESOURCES

         In recent years, the Company has funded its working capital
requirements principally through borrowings under subordinated term loans and
bank lines of credit, as well as proceeds from warrant and stock option
exercises. Working capital requirements have included the financing of increases
in inventory and accounts receivable resulting from sales growth, and the
financing of certain acquisitions. In addition, in March 2002, the Company
received $16.5 million from a private equity financing.

         The net amount of cash provided by continuing operating activities was
$26.4 million in 2002. The net amount of cash used in investing activities in
2002 was $9.3 million, which was primarily related to the acquisition of
property and equipment. Net cash used in financing activities in 2002 totaled
$7.5 million, which was primarily related to net repayments under the Company's
long and short term borrowing facilities.

         The Company's accounts receivable decreased to $277.3 million at
December 31, 2002, from $299.1

                                       20

<PAGE>

million at December 31, 2001. Increases to accounts receivable resulting from
increased sales were largely offset by the Company's reduction in its days sales
outstanding to 47 at December 31, 2002, from 51 days at December 2001. The
Company's inventories decreased to $182.8 million at December 31, 2002, from
$195.8 million at December 31, 2001. This decrease was primarily due to the
Company's efforts to manage its inventory through a period of economic downturn.
The Company's accounts payable decreased to $211.9 million in 2002 from $231.7
million in 2001. This decrease was primarily due to decreased inventory
purchases.

         Net cash provided by continuing operating activities was $40.6 million
in 2001. The net amount of cash used in investing activities in 2001 was $30.2
million, which was primarily related to the acquisition of property and
equipment and the acquisitions of FFG, TTPG and Total Tec. Net cash used in
financing activities in 2001 totaled $19.6 million, which was primarily related
to net repayments under the Company's long and short term borrowing facilities.

         The Company's accounts receivable balance at December 31, 2001 of
$299.1 million was consistent with the $295.6 million balance at December 31,
2000. Increases to accounts receivable resulting from increased sales volume
through the Company's acquisitions during the year were largely offset by an
overall decline in sales in North America. The Company's inventories decreased
to $195.8 million at December 31, 2001, from $246.7 million at December 31,
2000. This decrease was primarily due to the Company's efforts to manage its
inventory through a period of economic downturn in the U.S., and the
discontinuance of certain product lines, partially offset by acquired
inventories and increased inventory purchases resulting from the Company's
acquisitions during the year. The Company's accounts payable increased to $231.7
million in 2001 from $231.1 million in 2000. This slight increase was primarily
due to accounts payable assumed in connection with the acquisitions of FFG, TTPG
and Total Tec in 2001, offset by a decrease in the U.S. resulting from decreased
inventory purchases.

         On December 31, 2002, the Company entered into an amendment to its
syndicated Loan and Security Agreement with First Union National Bank ("First
Union Facility"), a subsidiary of Wachovia. The amendment reduces the credit
facility to $160 million from $175 million and extends the maturity date to May
31, 2005. The First Union Facility refinanced the Company's $50 million credit
facility with California Bank & Trust that matured May 31, 2001, and the $80
million short-term loan with the RSA that matured June 30, 2001. The syndicate
includes Congress Financial Corporation (Western) and Bank of America N.A. as
co-agents and other financial institutions, as lenders. Borrowings under the
line of credit bear interest at First Union's prime rate plus a margin of 0.0%
to 0.5%, based on borrowing levels. At the Company's option, all or any portion
of the outstanding borrowings may be converted to a Eurodollar rate loan, which
bears interest at the adjusted Eurodollar rate plus a margin of 2.25% to 2.75%,
based on borrowing levels. The average interest rate on outstanding borrowings
under the revolving line of credit during the year ended December 31, 2002, was
4.4%, and the balance outstanding at December 31, 2002 was $52.1 million.
Obligations of the Company under the revolving line of credit are secured by
certain assets of the Company and its North and South American subsidiaries. The
revolving line of credit requires the Company to meet certain financial tests
and to comply with certain other covenants, including restrictions on incurrence
of debt and liens, restrictions on mergers, acquisitions, asset dispositions,
capital contributions, payment of dividends, repurchases of stock and
investments. The Company was in compliance with its bank covenants at December
31, 2002; however, there can be no assurance that the Company will be in
compliance with such covenants in the future. If the Company does not remain in
compliance with the covenants, and is unable to obtain a waiver of noncompliance
from its bank, the Company's financial condition and results of operations would
be materially adversely affected.

         On December 2, 2002, the Company entered into a Syndicated Credit
Agreement arranged by Bank of America, National Association ("B of A facility"),
as principal agent, to provide a L 75 million revolving line of credit
facility, or the equivalent of $115 million USD. The B of A facility refinanced
the Company's $60 million credit facility with Royal Bank of Scotland. The
syndicate includes Bank of America as agent and security trustee and other banks
and financial institutions, as lenders. Borrowings under the line of credit bear
interest at B of A's base rate plus a margin of 2.125% to 2.25%, based on
certain financial measurements. At the Company's

                                       21

<PAGE>

option, all or any portion of the outstanding borrowings may be converted to a
LIBOR Revolving Loan, which bears interest at the adjusted LIBOR rate plus a
margin of 2.125% to 2.25%, based on certain financial measurements. The average
interest rate on the outstanding borrowings under the revolving line of credit
for the period beginning December 2, 2002, to December 31, 2002 was 6.4%, and
the balance outstanding at December 31, 2002 was $48.4 million. Obligations of
the Company under the revolving line of credit are secured by certain assets of
the Company's European subsidiaries. The revolving line of credit requires the
Company to meet certain financial tests and to comply with certain other
covenants, including restrictions on incurrence of debt and liens, restrictions
on mergers, acquisitions, asset dispositions, capital contributions, payment of
dividends, repurchases of stock, repatriation of cash and investments. The
Company was in compliance with its bank covenants at December 31, 2002; however,
there can be no assurance that the Company will be in compliance with such
covenants in the future. If the Company does not remain in compliance with the
covenants, and is unable to obtain a waiver of noncompliance from its bank, the
Company's financial condition and results of operations would be materially
adversely affected.

         On July 6, 2000, the Company entered into a Securities Purchase
Agreement with The Retirement Systems of Alabama and certain of its affiliated
funds (the "RSA facility"), under which the Company borrowed $180 million of
subordinated debt financing. This subordinated debt financing was comprised of
$80 million bearing interest at 9.125%, repaid in May 2001; and $100 million
bearing interest at 9.0%, payable in semi-annual principal installments of $3.5
million plus interest installments commencing December 31, 2000 and in
semi-annual principal installments of $8.5 million commencing December 31, 2007,
with a final maturity date of June 30, 2010. The RSA facility is secured by a
second lien on the Company's and its subsidiaries' North American and South
American assets. The Company must meet certain financial tests on a quarterly
basis, and comply with certain other covenants, including restrictions of
incurrence of debt and liens, restrictions on asset dispositions, payment of
dividends, and repurchase of stock. The Company is also required to be in
compliance with the covenants of certain other borrowing agreements. The Company
is in compliance with its subordinated debt financing covenants; however, there
can be no assurance that the Company will be in compliance with such covenants
in the future. If the Company does not remain in compliance with the covenants
in the Securities Purchase Agreement and is unable to obtain a waiver of
noncompliance from its subordinated lenders, the Company's financial condition
and results of operations would be materially adversely affected. The balance
outstanding at December 31, 2002 on this long-term debt was $86.0 million, $10.5
million is payable in 2003, $7.0 million for each of the years 2004 through
2007, and $47.5 million thereafter.

         On November 13, 2001, the Company acquired Total Tec Systems, Inc.
("Total Tec") for a combination of cash and shares of the Company's common stock
totaling approximately $14.2 million, including acquisition costs. Liabilities
assumed included a $17.5 million borrowing facility with Summit Business Capital
Corporation ("SBCC") which is secured by substantially all of Total Tec's
assets, bears interest at SBCC's base rate or LIBOR plus 2.25% and matures April
30, 2003. The balance outstanding at December 31, 2002 was $5.4 million. At
December 31, 2002, the SBCC borrowing agreement was terminated and subsequent to
December 31, 2002, financial accommodations were extended to Total Tec under the
amended First Union Facility. The acquisition of Total Tec was funded through
borrowings under the Company's revolving line of credit.

         The Company has an agreement with IFN Finance BV to provide up to $7.3
million in short-term financing to the Company. The loan is secured by certain
European accounts receivable and inventories, bears interest at 5.5%, and
continues indefinitely until terminated by either party within 90 days notice.
Loan balances outstanding were $7.0 million and $1.5 million, at December 31,
2002 and 2001, respectively.

         On May 24, 2001, the Company acquired Forefront Graphics ("FFG") for
approximately $1.1 million in cash and 60,324 shares of the Company's common
stock. The acquisition was funded through borrowings under the Company's
revolving line of credit and newly issued shares of common stock.

         On May 22, 2001, the Company acquired Touch The Progress Group BV
("TTPG") for approximately

                                       22

<PAGE>

$2.5 million in cash and 560,000 shares of the Company's common stock. The
acquisition was funded through borrowings under the Company's revolving line of
credit and newly issued shares of common stock.

         On October 16, 2000, the Company entered into a $13.3 million mortgage
agreement with Lombard NatWest Limited, ("NatWest facility") related to the
acquisition of a building for Ideal. The mortgage has a term of five years,
bears interest at LIBOR plus 1.5% and is payable in quarterly installments of
approximately $290,000, plus interest, with a balloon payment of approximately
$7.5 million due November 2005. The principal amount due in 2003 is $1,288,000
and amounts due in 2004 and 2005 are $1,288,000 and $7,240,000, respectively.
The Company has an interest rate swap agreement that effectively converts the
variable interest payable on the mortgage to a fixed rate of 7.42% until January
2003. In the first quarter of 2002, the Company sold a portion of the property
for $1.7 million, and recorded a net gain on the sale of approximately $270,000.
Proceeds were used to reduce the balance on the mortgage. The balance of the
mortgage at December 31, 2002 was $9.8 million. The Company was in compliance
with a financial ratio covenant related to this facility at December 31, 2002,
however the Company does not expect to be in compliance with the same covenant
at March 31, 2003. The Company expects to receive a waiver from its lender. On
October 17, 2002, the Company signed a commitment letter with a U.K. financing
institution to re-mortgage the property under a new 15-year term loan facility
of approximately $10 million. The Company expects to finalize the new facility
and repay borrowings outstanding under the NatWest facility in the second
quarter of 2003. As a result, the balance of the mortgage is classified as a
current liability.

         The following table describes the Company's commitments to settle
contractual obligations in cash as of December 31, 2002 (in thousands):

<TABLE>
<CAPTION>
                                                   Payments Due By Period
                                     ----------------------------------------------------
                                     Up to 1      2-3        4-5      After 5
Contractual Obligations                Year      Years      Years      Years      Total
----------------------------------   --------   --------   --------   --------   --------
<S>                                  <C>        <C>        <C>        <C>        <C>
Notes Payable (1)                    $ 11,788   $ 22,528   $ 14,000   $ 47,500   $ 95,816
Capital leases                            987        298         93          -      1,378
                                     --------   --------   --------   --------   --------
Subtotal debt obligations              12,775     22,826     14,093     47,500     97,194

Operating leases                        7,081     10,860      7,948     14,300     40,189
                                     --------   --------   --------   --------   --------
Total contractual cash obligations   $ 19,856   $ 33,686   $ 22,041   $ 61,800   $137,383
                                     ========   ========   ========   ========   ========
</TABLE>

(1) Notes payable primarily consist of the RSA facility and the mortgage with
NatWest.

         Other contractual obligations of the Company include a $160 million
revolving line of credit with First Union National Bank, scheduled to mature May
31, 2005, a $115 million borrowing facility with Bank of America, scheduled to
mature December 2, 2005 and a $7.3 million borrowing facility with IFN Finance
BV, which continues until terminated by either party. Amounts outstanding at
December 31, 2002 under these facilities were $52.1 million, $48.4 million and
$7.0 million, respectively.

         The Company incurred net losses in 2002 and 2001. The 2002 loss is
related to certain restructuring initiatives including the reduction of
headcount and the abandonment of facilities and the increase in "Selling,
General, and Administrative Expenses." The 2001 loss is related to declining
product gross margins, discontinuation of certain product lines, abandonment of
certain computer software, and additional bad debt provision offset by revenue
increases. These increases were primarily the result of the Company's
acquisition strategy in 2000 and 2001.

         The Company anticipates that its existing cash and its ability to
borrow under its line of credits will be sufficient to meet the Company's
anticipated cash needs for operation and capital requirements through

                                       23

<PAGE>

December 31, 2003.

         The Company's expectations as to its cash flows, and as to future cash
balances, are subject to a number of assumptions, including assumptions
regarding anticipated revenues, customer purchasing and payment patterns, and
improvements in general economic conditions, many of which are beyond the
Company's control. If revenues do not match projections and if losses exceed the
Company's expectations, the Company will implement cost saving initiatives. If
the Company is unable to return to profitability, in order to continue
operations, it may need to obtain additional debt financing or sell additional
shares of its equity securities. There can be no assurance that the Company will
be able to obtain additional debt or equity financing on terms acceptable to the
Company or at all. The failure of the Company to obtain sufficient funds on
acceptable terms when needed could have a material adverse effect on the
Company's ability to achieve its intended business objectives.

RECENT ACCOUNTING PRONOUNCEMENTS

         In July 2001, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards No. 141, ("SFAS 141"), "Business
Combinations", and Statement of Financial Accounting Standards No. 142, ("SFAS
142"), "Goodwill and Other Intangible Assets." These statements made significant
changes to the accounting for business combinations, goodwill, and intangible
assets. SFAS 141 established new standards for accounting and reporting
requirements for business combinations and requires that the purchase method of
accounting be used for all business combinations initiated after June 30, 2001.
SFAS 142 established new standards for goodwill acquired in a business
combination, eliminates amortization of goodwill and instead sets forth methods
to periodically evaluate goodwill for impairment. Intangible assets with a
determinable useful life will continue to be amortized over that period. The
Company adopted the provisions of SFAS 142 on January 1, 2002. As a result, the
Company has ceased amortization of $53.3 million in goodwill.

         In August 2001, the FASB issued SFAS No. 144, "Accounting for the
Impairment or Disposal of Long-Lived Assets." This standard supercedes SFAS No.
121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to Be Disposed Of." The standard retains the previously existing
accounting requirements related to the recognition and measurement of the
impairment of long-lived assets to be held and used while expanding the
measurement requirements of long-lived assets to be disposed of by sale to
include discontinued operations. It also expands on the previously existing
reporting requirements for discontinued operations to include a component of an
entity that either has been disposed of or is classified as held for sale. Bell
adopted SFAS No. 144 on January 1, 2002. The adoption of SFAS No. 144 did not
have a material impact on its consolidated financial position or results of
operations.

         In April 2002, the FASB issued SFAS No. 145, which rescinds SFAS No. 4,
"Reporting Gains and Losses from Extinguishment of Debt," SFAS No. 44,
"Accounting for intangible Assets of Motor Carriers' and SFAS No. 64,
"Extinguishments of Debt Made to Satisfy Sinking-Fund Requirements and amends
SFAS No. 13, "Accounting for Leases." This statement updates, clarifies and
simplifies existing accounting pronouncements. As a result of rescinding SFAS
No. 4 and SFAS No. 64, the criteria in APB No. 30 will be used to classify gains
and losses from extinguishment of debt. The provisions of SFAS 145 will be
adopted during fiscal year 2003. The Company believes that the adoption of this
standard will have no material impact on its financial statements.

         In June 2002, the FASB issued Statement of Financial Accounting
Standards No. 146, ("SFAS No. 146"), "Accounting for Exit or Disposal
Activities". SFAS 146 addresses significant issues regarding the recognition,
measurement and reporting of costs that are associated with exit and disposal
activities, including restructuring activities that are currently accounted for
pursuant to the guidance that the EITF has set forth in Issue No. 94-3,
"Liability Recognition for Certain Employee Termination Benefits and Other Costs
to Exit an Activity (including Certain Costs Incurred in a Restructuring)". The
scope of SFAS 146 also includes

                                       24

<PAGE>

(1) costs related to terminating a contract that is not a capital lease and (2)
termination benefits that employees who are involuntarily terminated receive
under the terms of a one-time benefit arrangement that is not an ongoing benefit
arrangement or an individual deferred compensation contract. SFAS 146 will be
effective for exit or disposal activities that are initiated after December 31,
2002. The Company believes that the adoption of this standard will have no
material impact on its financial statements.

         In November 2002, the Financial Accounting Standards Board ("FASB")
issued FASB Interpretation No. 45 ("FIN45"), "Guarantor's Accounting and
Disclosure Requirements for Guarantees, Including Indirect Guarantees of
Indebtedness of Others." FIN 45 requires that a liability be recorded in the
guarantor's balance sheet upon issuance of a guarantee. In addition, FIN 45
requires disclosures about the guarantees that an entity has issued, including a
reconciliation of changes in the entity's product warranty liabilities. The
initial recognition and initial measurement provisions of FIN 45 are applicable
on a prospective basis to guarantees issued or modified after December 31, 2002,
irrespective of the guarantor's fiscal year-end. The disclosure requirements of
FIN 45 are effective for financial statements of interim or annual periods
ending after December 15, 2002. The Company believes that the adoption of this
standard will have no material impact on its financial statements.

         In December 2002, the FASB issued Statement of Financial Accounting
Standards ("SFAS") No. 148, "Accounting for Stock-Based Compensation, Transition
and Disclosure." SFAS No. 148 provides alternative methods of transition for a
voluntary change to the fair value based method of accounting for stock-based
employee compensation. SFAS No. 148 also requires that disclosures of the pro
forma effect of using the fair value method of accounting for stock-based
employee compensation be displayed more prominently and in a tabular format.
Additionally, SFAS No. 148 requires disclosure of the pro forma effect in
interim financial statements. The transition and annual disclosure requirements
of SFAS No. 148 are effective for fiscal years ended after December 15, 2002.
The interim disclosure requirements are effective for interim periods beginning
after December 15, 2002. The Company believes that the adoption of this standard
will have no material impact on its financial statements and has adopted the
disclosure-only provisions of SFAS No. 148 at December 31, 2002.

         In January 2003, the FASB issued FASB Interpretation No. 46 ("FIN 46"),
"Consolidation of Variable Interest Entities, an Interpretation of ARB No. 51."
FIN 46 requires certain variable interest entities to be consolidated by the
primary beneficiary of the entity if the equity investors in the entity do not
have the characteristics of a controlling financial interest or do not have
sufficient equity at risk for the entity to finance its activities without
additional subordinated financial support from other parties. FIN 46 is
effective immediately for all new variable interest entities created or acquired
after January 31, 2003. For variable interest entities created or acquired prior
to February 1, 2003, the provisions of FIN 46 must be applied for the first
interim or annual period beginning after June 15, 2003. The Company believes
that the adoption of this standard will have no material impact on its financial
statements.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

         The Company is subject to interest rate risk on its variable rate
credit facilities and could be subjected to increased interest payments if
market interest rates fluctuate. For the year ended December 31, 2002, average
borrowings outstanding on the variable rate credit facility with First Union
National Bank were $73 million and average borrowings between Ideal's borrowing
facility with Royal Bank of Scotland and its new European borrowing facility
with Bank of America, N.A. was $60 million. First Union, Royal Bank of Scotland
and Bank of America have interest rates that are based on associated rates such
as Eurodollar and base or prime rates that may fluctuate over time based on
changes in the economic environment. Based on actual borrowings throughout the
year under these borrowing facilities, an increase of 1% in such interest rate
percentages would increase the annual interest expense by approximately $1.3
million.

                                       25

<PAGE>

         A substantial part of the Company's revenue and capital expenditures
are transacted in U.S. Dollars, but the functional currency for foreign
subsidiaries is not the U.S. dollar. As a result of the Company or its
subsidiaries entering into transactions denominated in currencies other than
their functional currency, the Company recognized a foreign currency loss of
$826,000 during the year ended December 31, 2002. The Company enters into
foreign forward exchange contracts to hedge certain balance sheet exposures
against future movements in foreign exchange rates. The gains and losses on the
forward exchange contracts are largely offset by gains or losses on the
underlying transactions and, consequently, a sudden or significant change in
foreign exchange rates should not have a material impact on future net income or
cash flows. To the extent the Company is unable to manage these risks, the
Company's results and financial position could be materially adversely affected.

                                       26

<PAGE>

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

<TABLE>
<CAPTION>
                                                                         Form 10-K
Index to Consolidated Financial Statements                              Page Number
                                                                        -----------
<S>                                                                     <C>
Report of Independent Accountants                                           28

Consolidated Balance Sheets at December 31, 2002
  and 2001                                                                  29

Consolidated Statements of Income for the years
  ended December 31, 2002, 2001 and 2000                                    30

Consolidated Statements of Shareholders' Equity for the years
  ended December 31, 2002, 2001 and 2000                                    31

Consolidated Statements of Cash Flows for the years ended
  December 31, 2002, 2001 and 2000                                          32

Notes to Consolidated Financial Statements                                  33

Financial Statement Schedules:

Consolidated Financial Statement Schedule II

  -  Valuation and Qualifying Accounts and Reserves                         60

All other schedules are omitted because they are not
applicable or the required information is shown in the
financial statements or notes thereto.
</TABLE>

                                       27

<PAGE>

                        REPORT OF INDEPENDENT ACCOUNTANTS

To the Board of Directors and Stockholders
of Bell Microproducts Inc. and Subsidiaries

In our opinion, the consolidated financial statements listed in the accompanying
index present fairly, in all material respects, the financial position of Bell
Microproducts Inc. and its subsidiaries at December 31, 2002 and 2001, and the
results of their operations and their cash flows for each of the three years in
the period ended December 31, 2002, in conformity with accounting principles
generally accepted in the United States of America. In addition, in our opinion,
the financial statement schedule listed in the accompanying index presents
fairly, in all material respects, the information set forth therein when read in
conjunction with the related consolidated financial statements. These financial
statements and financial statement schedule are the responsibility of the
Company's management; our responsibility is to express an opinion on these
financial statements and financial statement schedule based on our audits. We
conducted our audits of these statements in accordance with auditing standards
generally accepted in the United States of America, which require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

As discussed in Note 2 and Note 3 to the consolidated financial statements as of
January 1, 2002, the Company ceased amortization of goodwill to conform with the
provisions of Statement of Financial Accounting Standards No. 142 "Goodwill and
Other Intangible Assets".

PricewaterhouseCoopers LLP
San Jose, California
February 17, 2003, except for Note 15, which is as of March 28, 2003

                                       28

<PAGE>

                             BELL MICROPRODUCTS INC.
                           CONSOLIDATED BALANCE SHEETS
                      (IN THOUSANDS, EXCEPT PER SHARE DATA)

<TABLE>
<CAPTION>
                                                                           December 31,
                                                                       ---------------------
                                                                         2002        2001
                                                                       ---------   ---------
<S>                                                                    <C>         <C>
ASSETS
Current assets:
     Cash                                                              $  12,025   $   1,308
     Accounts receivable, net                                            277,305     299,108
     Inventories                                                         182,775     195,791
     Prepaid expenses and other current assets                            23,786      29,234
                                                                       ---------   ---------
              Total current assets                                       495,891     525,441

Property and equipment, net                                               50,761      50,706
Goodwill                                                                  53,803      53,307
Intangibles                                                                6,006       6,602
Deferred debt issuance costs and other assets                              7,730       7,631
                                                                       ---------   ---------
     Total assets                                                      $ 614,191   $ 643,687
                                                                       =========   =========

LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
     Accounts payable                                                  $ 211,881   $ 231,715
     Borrowings under lines of credit                                      7,919      37,266
     Short-term note payable and current portion of long-term notes
     payable                                                              23,458      23,431
     Other accrued liabilities                                            45,847      49,065
                                                                       ---------   ---------
              Total current liabilities                                  289,105     341,477

Borrowings under lines of credit                                         100,555      86,650
Long-term notes payable                                                   75,500      85,052
Other long-term liabilities                                                3,182       4,739
                                                                       ---------   ---------
     Total liabilities                                                   468,342     517,918
                                                                       ---------   ---------

Commitments and contingencies (Note 11)

Shareholders' equity:
     Preferred Stock, $0.01 par value, 10,000 shares authorized;
        none issued and outstanding                                            -           -
     Common Stock, $0.01 par value, 40,000 shares authorized; 20,127
     and 17,578 shares issued and outstanding                            115,888      94,553
     Retained earnings                                                    25,311      32,365
     Accumulated other comprehensive income                                4,650      (1,149)
                                                                       ---------   ---------
              Total shareholders' equity                                 145,849     125,769
                                                                       ---------   ---------
     Total liabilities and shareholders' equity                        $ 614,191   $ 643,687
                                                                       =========   =========
</TABLE>

         The accompanying notes are an integral part of these consolidated
                             financial statements.

                                       29

<PAGE>

                             BELL MICROPRODUCTS INC.
                        CONSOLIDATED STATEMENTS OF INCOME
                      (IN THOUSANDS, EXCEPT PER SHARE DATA)

<TABLE>
<CAPTION>
                                                             Year Ended December 31,
                                                    -----------------------------------------

                                                       2002           2001           2000
                                                    -----------    -----------    -----------
<S>                                                 <C>            <C>            <C>
Net sales                                           $ 2,104,922    $ 2,007,102    $ 1,804,102
Cost of sales                                         1,926,366      1,854,294      1,638,802
                                                    -----------    -----------    -----------

Gross profit                                            178,556        152,808        165,300

Selling, general and administrative expenses            165,624        157,910        121,088
Restructuring and special charges                         5,688          8,894             --
                                                    -----------    -----------    -----------
Total operating expenses                                171,312        166,804        121,088

Operating income (loss)                                   7,244        (13,996)        44,212
Interest expense and other income                        16,910         20,362         14,495
                                                    -----------    -----------    -----------

Income (loss) from operations before income taxes        (9,666)       (34,358)        29,717
Provision for (benefit from) income taxes                (2,612)       (12,251)        12,480
                                                    -----------    -----------    -----------
Net income (loss)                                   $    (7,054)   $   (22,107)   $    17,237
                                                    ===========    ===========    ===========

Earnings (loss) per share (Note 2)

       Basic                                        $     (0.37)   $     (1.34)   $      1.17
                                                    ===========    ===========    ===========
       Diluted                                      $     (0.37)   $     (1.34)   $      1.05
                                                    ===========    ===========    ===========

Shares used in per share calculation (Note 2)
       Basic                                             19,201         16,495         14,673
                                                    ===========    ===========    ===========
       Diluted                                           19,201         16,495         16,415
                                                    ===========    ===========    ===========
</TABLE>

         The accompanying notes are an integral part of these consolidated
                             financial statements.

                                       30

<PAGE>

                             BELL MICROPRODUCTS INC.
                 CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
                                 (IN THOUSANDS)

<TABLE>
<CAPTION>
                                             Common Stock                                       Other
                                        ----------------------      Deferred      Retained   Comprehensive
                                         Shares        Amount     Compensation    Earnings      Income        Total
                                        ---------    ---------    ------------    ---------  -------------  ---------
<S>                                     <C>          <C>          <C>             <C>        <C>            <C>
Balance at December 31, 1999               13,877    $  58,527     $       -      $  37,285    $     461    $  96,273

Foreign currency translation                    -            -             -              -         (555)        (555)
Net income                                      -            -             -         17,237            -       17,237
                                                                                                            ---------
Total comprehensive income                                                                                     16,682

Exercise of stock options, including
   related tax benefit of $1,933              622        5,242             -              -            -        5,242
Issuance of Common Stock under
   Stock Purchase Plan                        278        1,421             -              -            -        1,421
Stock split                                     -           50             -            (50)           -            -
Issuance of Common Stock for
   acquisition of Rorke Data (Note 4)         269        2,508             -              -            -        2,508
Issuance of warrant to RSA                    747        7,406             -              -            -        7,406
                                        ---------    ---------     ---------      ---------    ---------    ---------
Balance at December 31, 2000               15,793       75,154             -         54,472          (94)     129,532

Foreign currency translation                    -            -             -              -       (1,055)      (1,055)
Net loss                                        -            -             -        (22,107)           -      (22,107)
                                                                                                            ---------
Total comprehensive loss                                                                                      (23,162)

Exercise of stock options, including
   related tax benefit of $1,270              446        3,947             -              -            -        3,947
Issuance of Common Stock under
   Stock Purchase Plan                        319        2,175             -              -            -        2,175
Issuance of Common Stock for
   business acquisitions (Note 4)           1,020       13,277             -              -            -       13,277
                                        ---------    ---------     ---------      ---------    ---------    ---------
Balance at December 31, 2001               17,578       94,553             -         32,365       (1,149)     125,769

Foreign currency translation                    -            -             -              -        5,799        5,799
Net loss                                        -            -             -         (7,054)           -       (7,054)
                                                                                                            ---------
Total comprehensive loss                                                                                       (1,255)

Issuance of Common Stock in private
   placement                                1,500       12,642             -              -            -       12,642
Issuance of stock warrants in private
   placement                                    -        3,858             -              -            -        3,858
Exercise of stock options, including
   related tax benefit of $ 581               301        2,421             -              -            -        2,421
Issuance of Common Stock under
   Stock Purchase Plan                        399        2,318             -              -            -        2,318
Issuance of Common Stock for
   business acquisitions (Note 4)             349            -             -              -            -            -
Issuance of restricted stock                    -            -         1,330              -            -        1,330
Deferred compensation                           -            -        (1,234)             -            -       (1,234)
                                        ---------    ---------     ---------      ---------    ---------    ---------
Balance at December 31, 2002               20,127    $ 115,792     $      96      $  25,311    $   4,650    $ 145,849
                                        =========    =========     =========      =========    =========    =========
</TABLE>

  The accompanying notes are an integral part of these consolidated financial
                                   statements

                                       31


<PAGE>
                             BELL MICROPRODUCTS INC.
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                   (INCREASE (DECREASE) IN CASH, IN THOUSANDS)

<TABLE>
<CAPTION>
                                                                    -----------------------------------
                                                                          Year Ended December 31,
                                                                    -----------------------------------
                                                                      2002         2001         2000
                                                                    ---------    ---------    ---------
<S>                                                                 <C>          <C>          <C>
Cash flows from operating activities:
      Net income (loss)                                             $  (7,054)   $ (22,107)   $  17,237
      Adjustments to reconcile net income (loss) to net cash
        provided by (used in) operating activities:
      Depreciation and amortization                                    10,803       11,658        5,510
      Provision for doubtful accounts                                  11,357       11,569        9,958
      Loss on disposal of property, equipment and other                 1,337        2,503           87
      Deferred income taxes                                              (235)      (3,976)      (2,836)
      Tax benefit from stock options                                      581        1,270        1,933
      Changes in assets and liabilities:
             Accounts receivable                                       32,391        8,375      (16,550)
             Inventories                                               21,210       66,324      (38,451)
             Prepaid expenses                                             117      (11,298)      (3,091)
             Other assets                                                 (99)       1,133           (1)
             Accounts payable                                         (34,617)     (17,234)     (16,085)
             Other accrued liabilities                                 (9,418)      (7,614)       7,366
                                                                    ---------    ---------    ---------
      Net cash provided by (used in) operating activities              26,373       40,603      (34,923)

Cash flows from investing activities:
      Acquisition of property, equipment and other                    (11,143)     (16,380)     (33,989)
      Proceeds from sale of property, equipment and other               1,794            -           76
      Acquisitions of businesses (Note 4)                                   -      (13,807)     (30,893)
                                                                    ---------    ---------    ---------
Net cash used in investing activities                                  (9,349)     (30,187)     (64,806)

Cash flows from financing activities:
      Net borrowings (repayments) under line of credit agreements     (22,592)      61,404      (95,652)
      (Repayments) proceeds from long-term notes payable to RSA        (7,000)      (7,000)     100,000
      (Repayments) proceeds from short-term notes payable to RSA            -      (80,000)      80,000
      Borrowings of notes and leases payable                            9,545        3,358       18,033
      Repayment of notes and leases payable                            (8,081)      (2,214)      (5,144)
      Proceeds from issuance of Common Stock and warrants              20,658        4,852        4,730
                                                                    ---------    ---------    ---------
Net cash (used in) provided by financing activities                    (7,470)     (19,600)     101,967
Cash acquired upon acquisitions of businesses                               -        3,014          546
Effect of exchange rate changes on cash                                 1,163           13         (422)
                                                                    ---------    ---------    ---------
Net increase (decrease) in cash                                        10,717       (6,157)       2,362
Cash at beginning of year                                               1,308        7,465        5,103
                                                                    ---------    ---------    ---------
Cash at end of year                                                 $  12,025    $   1,308    $   7,465
                                                                    =========    =========    =========
Supplemental disclosures of cash flow information:
      Cash paid during the year for:
             Interest                                               $  17,664    $  24,346    $  10,817
             Income taxes                                           $     499    $   2,447    $  12,106
Supplemental non-cash financing activities:
      Issuance of Restricted stock                                  $   1,330    $       -    $       -
      Common Stock issued for acquisition (Note 4)                  $       -    $  13,277    $   2,508
      Stock warrant issued for subordinated debt                    $       -    $       -    $   7,406
      Liabilities assumed on acquisition of business (Note 4)       $       -    $       -    $   3,000
      Effect of stock split (Note 2)                                $       -    $       -    $      50
</TABLE>

  The accompanying notes are an integral part of these consolidated financial
                                  statements.

                                       32

<PAGE>

                             BELL MICROPRODUCTS INC.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 - THE COMPANY:

         The Company operates in one business segment, as a value-added
distributor of storage products and systems, computer products and
semiconductors and peripherals to original equipment manufacturers (OEMs),
value-added resellers (VARs) and dealers in the United States, Europe, Canada
and Latin America. Semiconductor products include memory, logic, microprocessor,
peripheral and specialty components. Computer products include disk, tape and
optical drives and subsystems, drive controllers, computers and board-level
products. The Company also provides a variety of value-added services to its
customers, including subsystem testing, software loading, mass storage and
computer systems integration, disk drive formatting and testing, and the
packaging of electronic component kits to customer specifications.

         The Company incurred net losses in 2002 and 2001. The 2002 loss is
related to certain restructuring initiatives including the reduction of
headcount and the abandonment of facilities and the increase in "Selling,
General, and Administrative Expenses." The 2001 loss is related to declining
product gross margins, discontinuation of certain product lines, abandonment of
certain computer software, and additional bad debt provision offset by revenue
increases. These increases were primarily the result of the Company's
acquisition strategy in 2000 and 2001.

         As is more fully discussed in Note 6, the Company has a $160 million
line of credit facility with a group of lenders for operations in North and
South America. The Company had approximately $66 million in unused borrowing
capacity at December 31, 2002 related to this facility. This facility is limited
to use for operations within the U.S. and the funds can be used outside the U.S
if permission is received by the Company from the lenders. The Company also has
a $115 million line of credit facility with a group of lenders in Europe. At
December 31, 2002, the Company had approximately $24 million in unused borrowing
capacity. This facility is limited to use for operations within Europe and the
United Kingdom.

         The Company anticipates that its existing cash and its ability to
borrow under its line of credits will be sufficient to meet the Company's
anticipated cash needs for operation and capital requirements through December
31, 2003.

         The Company's expectations as to its cash flows, and as to future cash
balances, are subject to a number of assumptions, including assumptions
regarding anticipated revenues, customer purchasing and payment patterns, and
improvements in general economic conditions, many of which are beyond the
Company's control. If revenues do not match projections and if losses exceed the
Company's expectations, the Company will implement cost saving initiatives. If
the Company is unable to return to profitability, in order to continue
operations, it may need to obtain additional debt financing or sell additional
shares of its equity securities. There can be no assurance that the Company will
be able to obtain additional debt or equity financing on terms acceptable to the
Company or at all. The failure of the Company to obtain sufficient funds on
acceptable terms when needed could have a material adverse effect on the
Company's ability to achieve its intended business objectives.

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:

PRINCIPLES OF CONSOLIDATION AND BASIS OF PREPARATION

         The consolidated financial statements include the accounts of the
parent company and its wholly owned subsidiaries. All material intercompany
transactions and balances have been eliminated on consolidation.

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


                                       33


<PAGE>

REVENUE RECOGNITION

         Revenue is recognized when title transfers to the customer and when the
rights and risks of ownership have passed to the customer, when persuasive
evidence of an arrangement exists, the price is fixed and determinable and
collection of the resulting receivable is reasonably assured. Transactions with
sale terms of FOB shipping point are recognized when the products are shipped
and transactions with sale terms of FOB destination are recognized upon arrival.
Provisions for estimated returns and expected warranty costs are recorded at the
time of sale and are adjusted periodically to reflect changes in experience and
expected obligations. The Company's warranty reserve relates primarily to its
storage solutions and value added businesses. Reserves for warranty items are
included in other current liabilities. A reconciliation of the changes in the
product warranty liability during 2002 is as follows (in thousands):

<TABLE>
<S>                                                   <C>
Balance at December 31, 2001                          $        799
Provision based on 2002 sales                                  632
Foreign currency translation                                     7
Warranty expenses incurred during 2002                        (756)
                                                      ------------
Balance at December 31, 2002                          $        682
                                                      ============
</TABLE>

CONCENTRATION OF CREDIT AND OTHER RISKS

         Financial instruments that potentially subject the Company to
concentrations of credit risk consist principally of accounts receivable. The
Company performs ongoing credit evaluations of its customers and generally does
not require collateral. The Company maintains reserves for estimated collection
losses. No customer accounts for more than 10% of sales in any of the three
years ended December 31, 2002, 2001 and 2000, or accounts receivable at December
31, 2002 and 2001.

         Four vendors accounted for 43%, 51% and 39% of the Company's inventory
purchases during 2002, 2001 and 2000, respectively.

INVENTORIES

         Inventories are stated at the lower of cost or market, cost being
determined by the first-in, first-out (FIFO) method. Market is based on
estimated net realizable value.

PROPERTY AND EQUIPMENT

         Property and equipment are recorded at cost. Depreciation is computed
using the straight-line method based upon the estimated useful lives of computer
and other equipment, furniture and fixtures and warehouse equipment that range
from three to five years. Depreciation of buildings is based upon the estimated
useful lives of 50 years. Amortization of leasehold improvements is computed
using the straight-line method over the shorter of the estimated life of the
asset or the lease term.

GOODWILL

         In accordance with SFAS No. 142, "Goodwill and Other Intangible
Assets," Bell is required to perform an annual impairment test for goodwill.
SFAS No. 142 requires Bell to compare the fair value of the Company to its
carrying amount on an annual basis to determine if there is potential
impairment. If the fair value of the Company is less than its carrying value, an
impairment loss is recorded to the extent that the fair value of the goodwill is
less than the carrying value. The fair value for goodwill is determined based on
discounted cash flows.

LONG-LIVED ASSETS

         Long-lived assets and certain identifiable intangible assets to be held
and used are reviewed for impairment whenever events or changes in circumstances
indicate that the carrying amount of such assets may not be recoverable.
Determination of recoverability is based on an estimate of undiscounted future
cash flows resulting from the use of the asset and its eventual disposition.
Measurement of any impairment loss for long-lived assets and certain
identifiable intangible assets that management expects to hold and use is based
on the fair value of the asset. Other intangible assets are recorded at cost and
amortized over periods ranging from 3 to 40 years.


                                       34


<PAGE>

INCOME TAXES

         The Company accounts for income taxes in accordance with the liability
method of accounting for income taxes. Under the liability method, deferred
assets and liabilities are recognized based upon anticipated future tax
consequences attributable to differences between financial statement carrying
amounts of assets and liabilities and their respective tax bases. The provision
for income taxes is comprised of the current tax liability and the change in
deferred tax assets and liabilities. The Company establishes a valuation
allowance to the extent that it is more likely than not that deferred tax assets
will not be recoverable against future taxable income.

EARNINGS PER SHARE

         Basic EPS is computed by dividing net income available to common
shareholders (numerator) by the weighted average number of common shares
outstanding (denominator) during the period. Diluted EPS gives effect to all
dilutive potential common shares outstanding during the period including stock
options, using the treasury stock method. In computing diluted EPS, the average
stock price for the period is used in determining the number of shares assumed
to be purchased from the exercise of stock options.

         Following is a reconciliation of the numerators and denominators of the
Basic and Diluted EPS computations for the periods presented below (in
thousands, except per share data):

<TABLE>
<CAPTION>
                                                                               Year Ended December 31,
                                                             ----------------------------------------------------------
                                                                2002                  2001                  2000
                                                             ------------          -----------           -----------
<S>                                                          <C>                   <C>                   <C>
Net income (loss)                                            $     (7,054)         $   (22,107)          $    17,237
                                                             ============          ===========           ===========
Weighted average common shares outstanding (basic)                 19,201               16,495                14,673

Effect of dilutive warrant and options                                  -                    -                 1,742
                                                             ------------          -----------           -----------
Weighted average common shares outstanding (diluted)               19,201               16,495                16,415
                                                             ============          ===========           ===========
Earnings (loss) per share:
Basic                                                        $      (0.37)         $     (1.34)          $      1.17
                                                             ============          ===========           ===========
Diluted                                                      $      (0.37)         $     (1.34)          $      1.05
                                                             ============          ===========           ===========
</TABLE>

         On July 31, 2000 the Company declared a 3-for-2 split of its Common
Stock. The stock split was in the form of a 50% Common Stock dividend payable at
the close of business on August 31, 2000 to shareholders of record on August 11,
2000. All references in the accompanying financial statements to earnings per
share, the number of common shares, warrants and options have been retroactively
restated to reflect the common stock split.

         At December 31, 2002 and 2001, all outstanding options, restricted
stock grants and warrants to purchase 6,117,246 and 4,489,553 shares of common
stock respectively were excluded from the computation of diluted net loss per
share because they were anti-dilutive. At December 31, 2000, 0.3 million options
to purchase common stock were excluded from the calculation of diluted EPS
because they were anti-dilutive.

FOREIGN CURRENCY TRANSLATION AND TRANSACTIONS

         The financial statements of the Company's foreign subsidiaries are
measured using the local currency as the functional currency. Assets and
liabilities of these subsidiaries are translated at the rates of exchange at the
balance sheet date. Income and expense items are translated at average quarterly
rates of exchange prevailing during the year. The resulting translation
adjustments are included in accumulated other comprehensive income as a separate
component of stockholders' equity. Gains and losses from foreign currency
transactions are included in the statement of income.

COMPREHENSIVE INCOME

         Comprehensive income is defined as the change in equity of a business
enterprise during a period from transactions and other events and circumstances
from non-owner sources. For the Company, comprehensive income consists of its
reported net income or loss and the change in the foreign currency translation
adjustment during a period.


                                       35


<PAGE>

STOCK-BASED COMPENSATION

         The Company accounts for stock-based compensation using the intrinsic
value method prescribed in Accounting Principles Board Opinion (APB) No. 25,
"Accounting for Stock Issued to Employees." The Company's policy is to grant
options with an exercise price equal to the quoted market price of the Company's
stock on the date of the grant. Accordingly, no compensation cost has been
recognized in the Company's Statements of Income. The Company provides
additional pro forma disclosures as required under Statement of Financial
Accounting Standards No. 123 ("SFAS 123"), "Accounting for Stock-Based
Compensation."

         The following table illustrates the effect on income from continuing
operations and earnings per share if Bell had applied the fair value recognition
provisions of SFAS No. 123 to stock-based compensation. The estimated fair value
of each Bell option is calculated using the Black-Scholes option-pricing model.

<TABLE>
<CAPTION>
                                                                     (In millions, except per share amounts):
                                                                   2002                2001               2000
                                                                 ---------          --------             -------
<S>                                                              <C>                <C>                  <C>
Net income (loss) as reported:                                   $  (7,054)         $(22,107)            $17,237
Stock-based employee compensation expense
     determined under fair value based method, net of tax           (5,982)           (5,727)             (2,634)
                                                                 ---------          --------             -------
Pro forma net income (loss)                                      $ (13,036)         $(27,834)            $14,603
                                                                 =========          ========             =======
Earnings (loss) per share:
     As reported
       Basic                                                     $   (0.37)         $  (1.34)            $  1.17
       Diluted                                                   $   (0.37)         $  (1.34)            $  1.05
     Pro forma
       Basic                                                     $   (0.68)         $  (1.69)            $  1.00
       Diluted                                                   $   (0.68)         $  (1.69)            $  0.89
</TABLE>

SEGMENT REPORTING

         Financial Accounting Standards Board Statement No.131, "Disclosure
about Segments of an Enterprise and Related Information" ("SFAS 131") requires
that companies report separately in the financial statements certain financial
and descriptive information about operating segments' profit or loss, certain
specific revenue and expense items and segment assets. Additionally, companies
are required to report information about the revenues derived from their
products and service groups, about geographic areas in which the Company earns
revenues and holds assets, and about major customers (see Note 14).

DERIVATIVE FINANCIAL INSTRUMENTS

         Effective January 1, 2001, the Company adopted Statement of Financial
Accounting Standards No. 133 (SFAS 133), "Accounting for Derivative Instruments
and Hedging Activities," as amended by SFAS 137 and SFAS 138. SFAS 133
establishes new standards of accounting and reporting for derivative instruments
and hedging activities, and requires that all derivatives, including foreign
currency exchange contracts, be recognized on the balance sheet at fair value.
Changes in the fair value of derivatives that do not qualify for hedge
treatment, as well as the ineffective portion of any hedges, must be recognized
currently in earnings. All of the Company's derivative financial instruments are
recorded at their fair value in other current assets or accounts payable and
accrued expenses. The transition adjustment upon adoption of SFAS 133 was not
material.

         The Company generates a substantial portion of its revenues in
international markets, which subjects its operations and cash flows to the
exposure of currency exchange fluctuations. The Company seeks to minimize the
risk associated with currency exchange fluctuations by entering into forward
exchange contracts to hedge certain foreign currency denominated assets or
liabilities. These derivatives do not qualify for SFAS 133 hedge accounting
treatment. Accordingly, changes in the fair value of these hedges are recorded
immediately in earnings to offset the changes in the fair value of the assets or
liabilities being hedged.


                                       36


<PAGE>

RECENTLY ISSUED ACCOUNTING STANDARDS

         In July 2001, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards No. 141, ("SFAS 141"), "Business
Combinations", and Statement of Financial Accounting Standards No. 142, ("SFAS
142"), "Goodwill and Other Intangible Assets." These statements made significant
changes to the accounting for business combinations, goodwill, and intangible
assets. SFAS 141 established new standards for accounting and reporting
requirements for business combinations and requires that the purchase method of
accounting be used for all business combinations initiated after June 30, 2001.
SFAS 142 established new standards for goodwill acquired in a business
combination, eliminates amortization of goodwill and instead sets forth methods
to periodically evaluate goodwill for impairment. Intangible assets with a
determinable useful life will continue to be amortized over that period. The
Company adopted the provisions of SFAS 142 on January 1, 2002. As a result, the
Company has ceased amortization of $53.3 million in goodwill.

         In August 2001, the FASB issued SFAS No. 144, "Accounting for the
Impairment or Disposal of Long-Lived Assets." This standard supercedes SFAS No.
121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to Be Disposed Of." The standard retains the previously existing
accounting requirements related to the recognition and measurement of the
impairment of long-lived assets to be held and used while expanding the
measurement requirements of long-lived assets to be disposed of by sale to
include discontinued operations. It also expands on the previously existing
reporting requirements for discontinued operations to include a component of an
entity that either has been disposed of or is classified as held for sale. Bell
adopted SFAS No. 144 on January 1, 2002. The adoption of SFAS No. 144 did not
have a material impact on its consolidated financial position or results of
operations.

         In April 2002, the FASB issued SFAS No. 145, which rescinds SFAS No. 4,
"Reporting Gains and Losses from Extinguishment of Debt," SFAS No. 44,
"Accounting for intangible Assets of Motor Carriers" and SFAS No. 64,
"Extinguishments of Debt Made to Satisfy Sinking-Fund Requirements and amends
SFAS No. 13, "Accounting for Leases." This statement updates, clarifies and
simplifies existing accounting pronouncements. As a result of rescinding SFAS
No. 4 and SFAS No. 64, the criteria in APB No. 30 will be used to classify gains
and losses from extinguishment of debt. The provisions of SFAS 145 will be
adopted during fiscal year 2003. The Company believes that the adoption of this
standard will have no material impact on its financial statements.

         In June 2002, the FASB issued Statement of Financial Accounting
Standards No. 146, ("SFAS No. 146"), "Accounting for Exit or Disposal
Activities". SFAS 146 addresses significant issues regarding the recognition,
measurement and reporting of costs that are associated with exit and disposal
activities, including restructuring activities that are currently accounted for
pursuant to the guidance that the EITF has set forth in Issue No. 94-3,
"Liability Recognition for Certain Employee Termination Benefits and Other Costs
to Exit an Activity (including Certain Costs Incurred in a Restructuring)". The
scope of SFAS 146 also includes (1) costs related to terminating a contract that
is not a capital lease and (2) termination benefits that employees who are
involuntarily terminated receive under the terms of a one-time benefit
arrangement that is not an ongoing benefit arrangement or an individual deferred
compensation contract. SFAS 146 will be effective for exit or disposal
activities that are initiated after December 31, 2002. The Company believes that
the adoption of this standard will have no material impact on its financial
statements.

         In November 2002, the Financial Accounting Standards Board ("FASB")
issued FASB Interpretation No. 45 ("FIN45"), "Guarantor's Accounting and
Disclosure Requirements for Guarantees, Including Indirect Guarantees of
Indebtedness of Others." FIN 45 requires that a liability be recorded in the
guarantor's balance sheet upon issuance of a guarantee. In addition, FIN 45
requires disclosures about the guarantees that an entity has issued, including a
reconciliation of changes in the entity's product warranty liabilities. The
initial recognition and initial measurement provisions of FIN 45 are applicable
on a prospective basis to guarantees issued or modified after December 31, 2002,
irrespective of the guarantor's fiscal year-end. The disclosure requirements of
FIN 45 are effective for financial statements of interim or annual periods
ending after December 15, 2002. The Company believes that the adoption of this
standard will have no material impact on its financial statements.

         In December 2002, the FASB issued Statement of Financial Accounting
Standards ("SFAS") No. 148, "Accounting for Stock-Based Compensation, Transition
and Disclosure." SFAS No. 148 provides alternative methods of transition for a
voluntary change to the fair value based method of accounting for stock-based
employee compensation. SFAS No. 148 also requires that disclosures of the pro
forma effect of using the fair value method of accounting for stock-based
employee compensation be displayed more prominently and in a tabular format.
Additionally, SFAS No. 148 requires disclosure of the pro forma effect in
interim financial statements. The transition and annual disclosure requirements
of SFAS No. 148 are

                                       37

<PAGE>

effective for fiscal years ended after December 15, 2002. The interim disclosure
requirements are effective for interim periods beginning after December 15,
2002. The Company believes that the adoption of this standard will have no
material impact on its financial statements and has adopted the disclosure-only
provisions of SFAS No. 148 at December 31, 2002.

         In January 2003, the FASB issued FASB Interpretation No. 46 ("FIN 46"),
"Consolidation of Variable Interest Entities, an Interpretation of ARB No. 51."
FIN 46 requires certain variable interest entities to be consolidated by the
primary beneficiary of the entity if the equity investors in the entity do not
have the characteristics of a controlling financial interest or do not have
sufficient equity at risk for the entity to finance its activities without
additional subordinated financial support from other parties. FIN 46 is
effective immediately for all new variable interest entities created or acquired
after January 31, 2003. For variable interest entities created or acquired prior
to February 1, 2003, the provisions of FIN 46 must be applied for the first
interim or annual period beginning after June 15, 2003. The Company believes
that the adoption of this standard will have no material impact on its financial
statements.

NOTE 3 - CHANGE IN ACCOUNTING FOR GOODWILL AND CERTAIN OTHER INTANGIBLES:

         In accordance with SFAS No. 142, goodwill amortization was discontinued
as of January 1, 2002. SFAS No. 142 prescribes a two-phase process for
impairment testing of goodwill. The first phase screens for impairment; while
the second phase (if necessary), measures the impairment. The Company completed
its first phase impairment analysis during the first quarter of 2002 and found
no instances of impairment of its recorded goodwill; accordingly, the second
testing phase, absent future indicators of impairment, is not necessary during
2002. The Company performed an impairment analysis of our intangible assets
during the first quarter and found no instances of impairment.

         In accordance with SFAS No. 142, the effect of this accounting change
is reflected prospectively. The Company has one reporting unit and supplemental
comparative disclosure as if goodwill had not been amortized in the prior year
period is as follows (in thousands, except per share amounts):

<TABLE>
<CAPTION>
                                               2002                  2001                  2000
                                           ------------          ------------          ------------
<S>                                        <C>                   <C>                   <C>
Reported net income (loss)                 $     (7,054)         $    (22,107)         $     17,237
Add back:  Goodwill amortization                      -                 1,741                   947
                                           ------------          ------------          ------------
Adjusted net loss                          $     (7,054)         $    (20,366)         $     18,184
                                           ============          ============          ============

Basic loss per share:
    Reported loss per share                $      (0.37)         $      (1.34)         $       1.17
    Goodwill amortization                             -                  0.11                  0.06
                                           ------------          ------------          ------------
    Adjusted net loss per share            $      (0.37)         $      (1.23)         $       1.23
                                           ============          ============          ============

Diluted loss per share:
    Reported net loss per share            $      (0.37)         $      (1.34)         $       1.05
    Goodwill amortization                             -                  0.11                  0.06
                                           ------------          ------------          ------------
    Adjusted net loss per share            $      (0.37)         $      (1.23)         $       1.11
                                           ============          ============          ============
</TABLE>

         The Company has acquired certain intangible assets through acquisitions
which include non-compete agreements, a trademark, a trade name and supplier
relationships, with estimated useful lives for amortization of three years, 40
years, 20 years and ten years, respectively. The carrying values and accumulated
amortization of these assets at December 31, 2002 are as follows (in thousands):

                                       38

<PAGE>

<TABLE>
<CAPTION>
                                                      As of December 31, 2002
                                         ---------------------------------------------
                                         Gross Carrying                   Accumulated
Amortized Intangible Assets                  Amount                       Amortization
---------------------------              --------------                   ------------
<S>                                      <C>                              <C>
Non-compete agreements                     $    2,137                       $  (1,233)
Trademark                                       3,965                            (228)
Trade name                                        300                             (15)
Supplier relationships                          1,200                            (120)
                                           ----------                       ---------
Total                                      $    7,602                       $  (1,596)
                                           ==========                       =========
</TABLE>

         The expected amortization of these balances over the next five fiscal
years are as follows (in thousands):

Aggregate Amortization Expense
For year ended 12/31/02                        $    794
Estimated Amortization Expense
For year ending 12/31/03                       $    790
For year ending 12/31/04                       $    749
For year ending 12/31/05                       $    248
For year ending 12/31/06                       $    238
For year ending 12/31/07                       $    229

NOTE 4 - ACQUISITIONS:

         All acquisitions below have been accounted for using the purchase
method. Accordingly, the results of operations of the acquired businesses are
included in the consolidated financial statements from the dates of acquisition.

Total Tec Systems, Inc. Acquisition

         On November 13, 2001, the Company acquired all the capital stock of
Total Tec Systems Inc. ("Total Tec"), a privately held company headquartered in
Edison, New Jersey, with offices in the eastern and southern United States.
Total Tec is an enterprise computing and storage solutions provider focused on
providing comprehensive IT solutions to address key business data concerns
including availability, reliability, performance, scalability and manageability.

         Total Tec was acquired for a total purchase price of approximately
$14.2 million which included cash of approximately $9 million, the issuance of
400,000 shares of the Company's Common Stock that include a certain share price
guarantee and acquisition costs. The share price guarantee provides for the
issuance of additional consideration if the market value of the Company's Common
Stock is less than $12.50 per share on the first anniversary of the closing date
of the acquisition. As a result of this guarantee, the Common Stock issued as
part of the acquisition has been valued at the $12.50 guaranteed amount. In
November 2002, the Company issued 272,947 shares of the Company's Common Stock
resulting from the share price guarantee. The purchase price was allocated to
the acquired assets and liabilities assumed, based upon management's estimate of
their fair market values as of the acquisition date, as follows (in thousands):

<TABLE>
<S>                                 <C>
Cash                                $     3,014
Accounts receivable                      16,229
Inventories                               7,006
Equipment and other assets                2,841
Goodwill                                  3,124
Other intangibles                         2,500
Accounts payable                         (7,100)
Other accrued liabilities                (3,792)
Notes payable                            (9,630)
                                    -----------
Total consideration                 $    14,192
                                    ===========
</TABLE>

         Other intangibles include trade name, supplier relationships and a
non-compete agreement, with estimated useful

                                       39

<PAGE>

lives for amortization of 20 years, ten years and three years, respectively.

Touch The Progress Group BV Acquisition

         On May 22, 2001, the Company acquired all the capital stock of Touch
The Progress Group BV ("TTPG"), a privately held company headquartered in the
Netherlands, with offices in Belgium, Germany and Austria. TTPG designs,
manufactures, markets and supports high performance and tailor made storage
solutions critical to success in high availability, mid-range and high-end
enterprise computing environments.

         TTPG was acquired for a total purchase price of approximately $10.7
million which included cash of $2.5 million, the issuance of 560,000 shares of
the Company's Common Stock valued at $7.5 million that include a one-year share
price guarantee and acquisition costs. The Common Stock issued was valued in
accordance with EITF Issue No. 99-12, "Determination of the Measurement Date for
the Market Price of Acquirer Securities Issued in a Purchase Business
Combination," using the average of the closing prices of the Company's Common
Stock for the two days prior to the acquisition date and the closing price of
the Company's Common Stock on the date of acquisition. The share price guarantee
provides for the issuance of additional consideration if the market value of the
Company's Common Stock is less than $12.50 per share on the first anniversary of
the closing date of the acquisition. This was a below-market share price
guarantee and was accounted for in accordance with EITF Issue No 97-15,
"Accounting for Contingency Arrangements Based on Security Prices in a Purchase
Business Combination." In June 2002, the Company issued an additional 74,714
shares of the Company's Common Stock as a result of the share price guarantee.
The purchase price was allocated to the acquired assets and assumed liabilities
bases upon management's estimate of their fair market values as of the
acquisition date, as follows (in thousands):

<TABLE>
<S>                                 <C>
Accounts receivable                 $      6,182
Inventories                                7,397
Equipment and other assets                   661
Goodwill                                   9,293
Accounts payable                          (9,915)
Other accrued liabilities                 (1,928)
Notes payable                               (998)
                                    ------------
Total consideration                 $     10,692
                                    ============
</TABLE>

Forefront Graphics Corporation Acquisition

         On May 24, 2001, the Company acquired all the capital stock of
Forefront Graphics ("FFG"), a privately held company headquartered in Toronto,
Canada with offices in Ottawa, Montreal, Calgary and Vancouver. FFG is a
distributor of high performance computer graphics, digital audio and video,
storage and multimedia products to both the computer reseller and the video
production reseller marketplaces.

         FFG was acquired for a total purchase price of approximately $2.2
million which included cash of $1.1 million, the issuance of 60,324 shares of
the Company's Common Stock valued at $800,000 and acquisition costs. The Common
Stock issued was valued in accordance with EITF Issue No. 99-12, "Determination
of the Measurement Date for the Market Price of Acquirer Securities Issued in a
Purchase Business Combination," using the average of the closing prices of the
Company's Common Stock for the two days prior to the acquisition date and the
closing price of the Company's Common Stock on the date of acquisition. The
Company is obligated to pay up to an additional $325,000 in cash within three
years of the closing date as a contingent incentive payment to be based upon
earnings achieved during certain periods, up to March 31, 2003. The purchase
price was allocated to the acquired assets and liabilities assumed, based upon
management's estimate of their fair market values as of the acquisition date, as
follows (in thousands):

                                       40

<PAGE>

<TABLE>
<S>                                         <C>
Accounts receivable                         $      1,069
Inventories                                        1,033
Equipment and other assets                            42
Goodwill                                           1,526
Accounts payable                                    (775)
Other accrued liabilities                           (401)
Notes payable                                       (294)
                                            ------------
Total consideration                         $      2,200
                                            ============
</TABLE>

Ideal Hardware Limited Acquisition

         On August 3, 2000, the Company acquired all the capital stock of Ideal
Hardware Limited ("Ideal"), a wholly owned subsidiary of InterX plc. Ideal is a
United Kingdom-based, storage-centric distributor offering value-added programs
and services.

         Ideal was acquired for a total purchase price of approximately $24.4
million which included cash paid of $19.9 million, deferred purchase price
payable of $3.0 million and acquisition costs of $1.5 million. The deferred
purchase price was paid on March 31, 2001. The purchase price was allocated to
the acquired assets and liabilities assumed, based upon management's estimate of
their fair market values as of the acquisition date, as follows (in thousands):

<TABLE>
<S>                                    <C>
Accounts receivable                    $  113,334
Inventories                                42,882
Equipment and other assets                  5,476
Goodwill and other intangibles             20,144
Accounts payable                          (96,084)
Bank borrowings                           (30,102)
Other accrued liabilities                 (27,890)
Deferred taxes                             (3,360)
                                       ----------
Total consideration                    $   24,400
                                       ==========
</TABLE>

Rorke Data, Inc. Acquisition

         On May 15, 2000, the Company acquired all of the outstanding capital
stock of Rorke Data, Inc. ("RDI"), a privately held company headquartered in
Minnesota, with subsidiaries in the Netherlands and Italy. RDI provides
leading-edge Fibre Channel and SAN storage solutions to vertical markets such as
digital audio/video, publishing, and medical imaging throughout the U.S. and
Europe.

         RDI was acquired for a total purchase price of approximately $7.0
million, which included cash of $4.1 million, the issuance of 269,418 shares of
the Company's Common Stock and acquisition costs. The 269,418 shares issued as
part of the consideration were valued at approximately $2.9 million. The Common
Stock issued was valued in accordance with EITF Issue No. 99-12, "Determination
of the Measurement Date for the Market Price of Acquirer Securities Issued in a
Purchase Business Combination," using the average of the closing prices of the
Company's Common Stock for the two days prior to the acquisition date and the
closing price of the Company's Common Stock on the date of acquisition. The
final allocation of the purchase price to acquired assets and liabilities
assumed, based upon management's estimate of their fair market values as of the
acquisition date, is as follows (in thousands):

                                       41

<PAGE>

<TABLE>
<S>                                    <C>
Cash                                   $      546
Accounts receivable                         6,644
Inventories                                 8,390
Equipment and other assets                  2,372
Goodwill                                    7,480
Accounts payable                           (7,253)
Other accrued liabilities                  (1,809)
Bank borrowings                            (7,832)
Notes payable                              (1,501)
                                       ----------
Total consideration                    $    7,037
                                       ==========
</TABLE>

NOTE 5 - BALANCE SHEET COMPONENTS:

<TABLE>
<CAPTION>
                                                                         December 31,
                                                                ---------------------------
                                                                   2002             2001
                                                                ----------       ----------
                                                                      (in thousands)
<S>                                                             <C>              <C>
Accounts receivable, net:
   Accounts receivable                                          $  300,645       $  319,314
   Less: allowance for doubtful accounts and returns               (23,340)         (20,206)
                                                                ----------       ----------
                                                                $  277,305       $  299,108
                                                                ==========       ==========
Property and equipment:
   Computer and other equipment                                 $   32,716       $   23,563
   Land and buildings                                               23,112           21,055
   Furniture and fixtures                                            9,901            9,505
   Warehouse equipment                                               8,307            7,912
   Leasehold improvements                                            2,623            2,351
                                                                ----------       ----------
                                                                    76,659           64,386
   Less: accumulated depreciation                                  (25,898)         (13,680)
                                                                ----------       ----------
                                                                $   50,761       $   50,706
                                                                ==========       ==========

Goodwill and other intangibles, net:
   Goodwill                                                     $   60,423       $   59,923
   Other intangibles                                                 7,602            7,408
   Less: accumulated amortization                                   (8,216)          (7,422)
                                                                ----------       ----------
                                                                $   59,809       $   59,909
                                                                ==========       ==========
</TABLE>

NOTE 6 - LINES OF CREDIT AND TERM LOAN:

LINES OF CREDIT

<TABLE>
<CAPTION>
                                                                        December 31,
                                                                ---------------------------
                                                                   2002             2001
                                                                ----------       ----------
<S>                                                             <C>              <C>
First Union Facility                                            $   52,127       $   86,535
Bank of America Facility                                            48,428                -
Lombard NatWest Limited Facility                                         -           31,200
IFN Financing BV                                                     6,992            1,484
Other lines                                                            927            4,831
                                                                ----------       ----------
                                                                   108,474          124,050
Less: amounts included in current liabilities                        7,919           37,400
                                                                ----------       ----------
Amounts included in non-current liabilities                     $  100,555       $   86,650
                                                                ==========       ==========
</TABLE>

         On December 31, 2002, the Company entered into an amendment to its
syndicated Loan and Security Agreement with

                                       42

<PAGE>

First Union National Bank ("First Union Facility"), a subsidiary of Wachovia.
The amendment reduces the credit facility to $160 million from $175 million and
extends the maturity date to May 31, 2005. The First Union Facility refinanced
the Company's $50 million credit facility with California Bank & Trust that
matured May 31, 2001, and the $80 million short-term loan with the RSA that
matured June 30, 2001. The syndicate includes Congress Financial Corporation
(Western) and Bank of America N.A. as co-agents and other financial
institutions, as lenders. Borrowings under the line of credit bear interest at
First Union's prime rate plus a margin of 0.0% to 0.5%, based on borrowing
levels. At the Company's option, all or any portion of the outstanding
borrowings may be converted to a Eurodollar rate loan, which bears interest at
the adjusted Eurodollar rate plus a margin of 2.25% to 2.75%, based on borrowing
levels. The average interest rate on outstanding borrowings under the revolving
line of credit during the year ended December 31, 2002, was 4.4%, and the
balance outstanding at December 31, 2002 was $52.1 million. Obligations of the
Company under the revolving line of credit are secured by certain assets of the
Company and its North and South American subsidiaries. The revolving line of
credit requires the Company to meet certain financial tests and to comply with
certain other covenants, including restrictions on incurrence of debt and liens,
restrictions on mergers, acquisitions, asset dispositions, capital
contributions, payment of dividends, repurchases of stock and investments. The
Company was in compliance with its bank covenants at December 31, 2002; however,
there can be no assurance that the Company will be in compliance with such
covenants in the future. If the Company does not remain in compliance with the
covenants, and is unable to obtain a waiver of noncompliance from its bank, the
Company's financial condition and results of operations would be materially
adversely affected.

         On December 2, 2002, the Company entered into a Syndicated Credit
Agreement arranged by Bank of America, National Association ("B of A facility"),
as principal agent, to provide a L 75 million revolving line of credit
facility, or the equivalent of $115 million USD. The B of A facility refinanced
the Company's $60 million credit facility with Royal Bank of Scotland. The
syndicate includes Bank of America as agent and security trustee and other banks
and financial institutions, as lenders. Borrowings under the line of credit bear
interest at B of A's base rate plus a margin of 2.125% to 2.25%, based on
certain financial measurements. At the Company's option, all or any portion of
the outstanding borrowings may be converted to a LIBOR Revolving Loan, which
bears interest at the adjusted LIBOR rate plus a margin of 2.125% to 2.25%,
based on certain financial measurements. The average interest rate on the
outstanding borrowings under the revolving line of credit for the period
beginning December 2, 2002, to December 31, 2002 was 6.4%, and the balance
outstanding at December 31, 2002 was $48.4 million. Obligations of the Company
under the revolving line of credit are secured by certain assets of the
Company's European subsidiaries. The revolving line of credit requires the
Company to meet certain financial tests and to comply with certain other
covenants, including restrictions on incurrence of debt and liens, restrictions
on mergers, acquisitions, asset dispositions, capital contributions, payment of
dividends, repurchases of stock, repatriation of cash and investments. The
Company was in compliance with its bank covenants at December 31, 2002; however,
there can be no assurance that the Company will be in compliance with such
covenants in the future. If the Company does not remain in compliance with the
covenants, and is unable to obtain a waiver of noncompliance from its bank, the
Company's financial condition and results of operations would be materially
adversely affected.

         On November 13, 2001, the Company acquired Total Tec Systems, Inc.
("Total Tec") for a combination of cash and shares of the Company's common stock
totaling approximately $14.2 million, including acquisition costs. Liabilities
assumed included a $17.5 million borrowing facility with Summit Business Capital
Corporation ("SBCC") which is secured by substantially all of Total Tec's
assets, bears interest at SBCC's base rate or LIBOR plus 2.25% and matures April
30, 2003. The balance outstanding at December 31, 2001 was $5.4 million. At
December 31, 2002, the SBCC borrowing agreement was terminated and subsequent to
December 31, 2003, financial accommodations were extended to Total Tec under the
amended First Union Facility. The acquisition of Total Tec was funded through
borrowings under the Company's revolving line of credit.

         The Company has an agreement with IFN Finance BV to provide up to $7.3
million in short-term financing to the Company. The loan is secured by certain
European accounts receivable and inventories, bears interest at 5.5%, and
continues indefinitely until terminated by either party within 90 days notice.
Loan balances outstanding were $7.0 million and $1.5 million, at December 31,
2002 and 2001, respectively.

                                       43

<PAGE>

TERM LOANS

<TABLE>
<CAPTION>
                                                                        December 31,
                                                                ---------------------------
                                                                   2002             2001
                                                                ----------       ----------
<S>                                                             <C>              <C>
Note payable to RSA                                             $   86,000       $   93,000
Lombard NatWest Limited Mortgage                                     9,816           11,839
Other                                                                    -            2,552
                                                                ----------       ----------
                                                                    95,816          107,391
Less: amounts due in current year                                   20,316           22,339
                                                                ----------       ----------
Long-term debt due after one year                               $   75,500       $   85,052
                                                                ==========       ==========
</TABLE>

         On July 6, 2000, the Company entered into a Securities Purchase
Agreement with The Retirement Systems of Alabama and certain of its affiliated
funds (the "RSA facility"), under which the Company borrowed $180 million of
subordinated debt financing. This subordinated debt financing was comprised of
$80 million bearing interest at 9.125%, repaid in May 2001; and $100 million
bearing interest at 9.0%, payable in semi-annual principal installments of $3.5
million plus interest installments commencing December 31, 2000 and in
semi-annual principal installments of $8.5 million commencing December 31, 2007,
with a final maturity date of June 30, 2010. The RSA facility is secured by a
second lien on the Company's and its subsidiaries' North American and South
American assets. The Company must meet certain financial tests on a quarterly
basis, and comply with certain other covenants, including restrictions of
incurrence of debt and liens, restrictions on asset dispositions, payment of
dividends, and repurchase of stock. The Company is also required to be in
compliance with the covenants of certain other borrowing agreements. The Company
is in compliance with its subordinated debt financing covenants; however, there
can be no assurance that the Company will be in compliance with such covenants
in the future. If the Company does not remain in compliance with the covenants
in the Securities Purchase Agreement and is unable to obtain a waiver of
noncompliance from its subordinated lenders, the Company's financial condition
and results of operations would be materially adversely affected. The balance
outstanding at December 31, 2002 on this long-term debt was $86.0 million, $10.5
million is payable in 2003, $7.0 million for each of the years 2004 through
2007, and $47.5 million thereafter.

         On October 16, 2000, the Company entered into a $13.3 million mortgage
agreement with Lombard NatWest Limited, ("NatWest facility") related to the
acquisition of a building for Ideal. The mortgage has a term of five years,
bears interest at LIBOR plus 1.5% and is payable in quarterly installments of
approximately $290,000, plus interest, with a balloon payment of approximately
$7.5 million due November 2005. The principal amount due in 2003 is $1,288,000
and amounts due in 2004 and 2005 are $1,288,000 and $7,240,000, respectively.
The Company has an interest rate swap agreement that effectively converts the
variable interest payable on the mortgage to a fixed rate of 7.42% until January
2003. In the first quarter of 2002, the Company sold a portion of the property
for $1.7 million, and recorded a net gain on the sale of approximately $270,000.
Proceeds were used to reduce the balance on the mortgage. The balance of the
mortgage at December 31, 2002 was $9.8 million. The Company was in compliance
with a financial ratio covenant related to this facility at December 31, 2002,
however the Company does not expect to be in compliance with the same covenant
at March 31, 2003. The Company expects to receive a waiver from its lender. On
October 17, 2002, the Company signed a commitment letter with a U.K. financing
institution to re-mortgage the property under a new 15-year term loan facility
of approximately $10 million. The Company expects to finalize the new facility
and repay borrowings outstanding under the NatWest facility in the second
quarter of 2003. As a result, the balance of the mortgage is classified as a
current liability.

NOTE 7 - COMMON STOCK:

         In March 2002, the Company received proceeds of approximately $16.5
million from a private placement of 1,500,000 shares of Common Stock. The
Company also issued to the purchasers warrants to purchase an additional 750,000
shares of Common Stock at an exercise price of $11.00 per share. The Company
valued the warrants at $3,858,000 using the Black-Scholes option pricing model
applying an expected life of 18 months, a risk free interest rate of 6.59% and a
volatility of 69%. The warrants were recorded as a component of equity.

NOTE 8 - RESTRUCTURING COSTS, SPECIAL CHARGES AND OTHER PROVISIONS:

         In the second quarter of 2002, as part of the Company's plan to reduce
costs and improve operating efficiencies, the Company recorded special charges
of $2.3 million in response to economic conditions. These costs consisted
primarily of

                                       44

<PAGE>

provisions for certain Latin American receivables of $1.7 million, and costs
related to the closure of the Rorke Data Europe facilities, whose operations
were consolidated into the Company's TTP division in Almere, Netherlands. The
special charges related to Rorke Data Europe included accrued costs for future
lease obligations for non-cancelable lease payments of $249,000, other facility
closure costs of $306,000 and severance and benefits of $28,000 for involuntary
employee terminations.

         In the third quarter of 2002, the Company extended its cost reduction
plan in response to the continued economic downturn and recorded restructuring
costs of $3.4 million. These charges consisted of estimated lease costs of $2.3
million pertaining to future lease obligations for non-cancelable lease payments
for excess facilities in the U.S. and severance and benefits of $1.1 million
related to worldwide involuntary terminations. The Company terminated 78
employees, predominantly in sales and marketing functions and eliminated two
executive management positions in the U.S.

         In the second and third quarters of 2001, the Company accrued
restructuring costs of $4.8 million. These costs consisted primarily of the
abandonment of certain inventory related computer software that had a carrying
value of $2.4 million, severance and benefits of $2.2 million related to
involuntary employee terminations and estimated lease costs of $238,000
pertaining to future lease obligations for non-cancelable lease payments for
excess facilities. The Company terminated 267 employees worldwide, predominantly
in overhead support functions

         Additionally in the third quarter of 2001, the Company recorded other
special charges of $4.1 million for additional accounts receivable provisions.
Events giving rise to this provision related to the economic crisis in Argentina
and the devaluation of the Argentinean peso, and a default on guaranteed debt of
one of the Company's large customers who filed for bankruptcy.

         In the second and third quarters of 2001, the Company also recorded a
provision for inventory of $17.8 million related to additional excess inventory.
The additional provision largely resulted from the decision to discontinue
certain product lines and the impact of current market conditions. The excess
inventory charge is included within the Statement of Income under the caption
'Cost of Sales.'

         At December 31, 2002, outstanding liabilities related to these charges
are summarized as follows (in thousands):

<TABLE>
<CAPTION>
                                                                                                        Restructuring
                                         2002            2001           Total             Cash          Liabilities at
                                        Charges        Charges         Charges          Payments       December 31, 2002
                                      ----------     ----------      -----------      -----------      -----------------
<S>                                   <C>            <C>             <C>              <C>              <C>
Severance costs                       $    1,167     $    2,199      $     3,366      $     2,821          $     545
Lease costs                                2,515            238            2,753              674              2,079
Other facility closure costs                 306              -              306              306                  -
                                      ----------     ----------      -----------      -----------          ---------
Total                                 $    3,988     $    2,437      $     6,425      $     3,801          $   2,624
                                      ==========     ==========      ===========      ===========          =========
</TABLE>

NOTE 9 - STOCK-BASED COMPENSATION PLANS:

STOCK OPTION PLANS

         In May of 1998, the Company adopted the 1998 Stock Plan (the "Plan")
which replaced the 1988 Amended and Restated Incentive Stock Plan (the "1988
Plan") and the 1993 Director Stock Option Plan (the "Director Plan").

         The Plan provides for the grant of stock options and stock purchase
rights to employees, directors and consultants of the Company at prices not less
than the fair value of the Company's Common Stock at the date of grant for
incentive stock options and prices not less than 85% of the fair value of the
Company's Common Stock for nonstatutory stock options and stock purchase rights.
Under the Plan, the Company has reserved for issuance a total of 4,239,327
shares of Common Stock plus 272,508 shares of Common Stock which were reserved
but unissued under the 1988 Plan and 52,500 shares of Common Stock which were
reserved but unissued under the Director Plan. The maximum aggregate number of
shares of Common Stock which may be optioned and sold under the Plan is
3,154,496 shares, plus an annual increase to be added on January 1 of each year,
equal to the lesser of (i) 600,000 shares, (ii) 4% of the outstanding shares on
such date, or (iii) a lesser amount determined by the Board of Directors,
subject to adjustment upon changes in capitalization of the Company. Since
inception, the Company has reserved 7,917,975 shares of Common Stock for
issuance under the aggregate of all stock option plans.

                                       45

<PAGE>

         All stock options become exercisable over a vesting period as
determined by the Board of Directors and expire over terms not exceeding ten
years from the date of grant. If an optionee ceases to be employed by the
Company, the optionee may, within one month (or such other period of time, as
determined by the Board of Directors, but not exceeding three months) exercise
options to the extent vested.

         As part of the Plan, the Board of Directors adopted a Management
Incentive Program (the "Program") for key employees. Under this Program, options
for 193,500 shares of Common Stock were granted in 2000 and no options were
granted in years 2001 and 2002. The Program provides for ten-year option terms
with vesting at the rate of one tenth per year, with potential for accelerated
vesting based upon attainment of certain performance objectives. The options
lapse ten years after the date of grant or such shorter period as may be
provided for in the stock option agreement.

         Options granted under the Director Plan prior to May 1998 and
outstanding at December 31, 2002 total 100,800. Under the Director Plan, 112,500
options were granted in 1993 at an exercise price of $5.33 per share, and 30,000
options were granted in 1996 at an exercise price of $4.67 per share. In 1997,
30,000 options were granted at an exercise price of $8.42 per share. In 1998,
22,500 options were granted at an exercise price of $5.00 per share. On August
5, 1999, the Board of Directors approved the vesting in full of all options
currently held by the Directors and modified the Plan to immediately vest all
future Board of Directors options at the time they are granted.

         In 2002, 2001 and 2000, the number of shares of Common Stock reserved
under the Plan were not sufficient to accommodate the Company's growth through
acquisitions and key employee retention efforts. To induce certain key employees
to accept employment with the Company, the Company issued a total of 897,999,
520,000 and 763,536 nonqualified stock options outside the provisions of the
Plan in 2002, 2001 and 2000 respectively, and 1,612,750 of these options were
outstanding at December 31, 2002, net of cancellations, and are included in the
table below.

         The following table presents all stock option activity:

<TABLE>
<CAPTION>
                                                                                Options Outstanding
                                                                      -------------------------------------
                                                    Options                                    Weighted
                                                 Available for                                  Average
                                                     Grant                   Shares          Exercise Price
                                                 -------------             ----------        --------------
<S>                                              <C>                       <C>               <C>
Balance at December 31, 1999                           114,062              2,595,207          $    5.50

Increase in options available for grant              1,754,474                      -                  -
Options canceled                                       261,732               (482,250)         $    6.83
Canceled options not available for grant               (67,500)                     -          $    5.67
Options granted                                     (2,182,464)             2,946,000          $   12.87
Options exercised                                            -               (621,840)         $    5.29
                                                    ----------             ----------          ---------
Balance at December 31, 2000                          (119,696)             4,437,117          $   10.11
                                                    ==========             ==========          =========

Increase in options available for grant                600,000                      -                  -
Options canceled                                       478,547               (652,535)         $    9.92
Canceled options not available for grant               (10,875)                     -          $    4.59
Options granted                                       (631,000)             1,151,000          $   11.71
Options exercised                                            -               (446,029)         $    5.98
                                                    ----------             ----------          ---------
Balance at December 31, 2001                           316,976              4,489,553          $   10.96
                                                    ==========             ==========          =========

Increase in options available for grant                600,000                      -                  -
Options canceled                                       178,684               (317,311)         $   13.36
Canceled options not available for grant                (3,000)                     -          $    7.42
Options granted                                       (598,250)             1,496,249          $    8.16
Options exercised                                            -               (301,245)         $    6.12
                                                    ----------             ----------          ---------
Balance at December 31, 2002                           494,410              5,367,246          $   10.31
                                                    ==========             ==========          =========
</TABLE>

                                       46

<PAGE>

         At December 31, 2002, 2,167,418 options were exercisable under these
Plans. Upon the adoption of the 1998 Stock Plan, canceled options under the 1988
Plan are not available for future grants.

         The following table summarizes information about stock options and
restricted stock outstanding for all plans at December 31, 2002:

<TABLE>
<CAPTION>
                                              OPTIONS OUTSTANDING                                 OPTIONS EXERCISABLE
                            -------------------------------------------------------      -------------------------------------
                             Number of
                              Options              Weighted                                Number of
                            Outstanding            Average                                   Shares
                               As of              Remaining             Weighted          Exercisable As         Weighted
  Range of Exercise         December 31,       Contractual Life          Average         of December 31,          Average
        Prices                  2002               In Years          Exercise Price           2002             Exercise Price
-----------------------     ------------       ----------------      --------------      -----------------     ---------------
<S>                         <C>                <C>                   <C>                 <C>                   <C>
$  0.00  - $  4.40              811,250             5.25                 $ 3.24                180,600              $ 4.32
$  4.42  - $  5.88              780,872             2.48                   5.04                543,711                5.18
$  6.13  - $  9.06              861,574             4.20                   7.61                458,757                7.50
$  9.37  - $ 11.80            1,021,550             5.47                  10.50                289,834                9.92
$ 11.82  - $ 13.95              865,500             4.68                  13.34                223,375               13.74
$ 15.00  - $ 24.13            1,023,500             2.75                  19.42                469,641               19.28
$ 24.38  - $ 24.38                3,000             2.83                  24.38                  1,500               24.38
                              ---------                                                      ---------
                              5,367,246             4.15                  10.31              2,167,418               10.18
                              =========                                                      =========
</TABLE>

EMPLOYEE STOCK PURCHASE PLAN

         The Employee Stock Purchase Plan ("ESPP") provides for automatic annual
increases in the number of shares reserved for issuance on January 1 of each
year by a number of shares equal to the lesser of (i) 225,000 shares, (ii) 1.5%
of the outstanding shares on such date, or (iii) a lesser amount determined by
the Board of Directors, subject to adjustment upon changes in capitalization of
the Company.

         The Company has reserved 1,803,498 shares of Common Stock for issuance
to all eligible employees under its ESPP. Sales made through this plan will be
at the lower of 85% of market price at the date of purchase or on the first day
of each six-month offering period in the prior two years. A total of 1,801,876
shares have been issued under this plan as of December 31, 2002.

FAIR VALUE DISCLOSURES

         The Company applies APB Opinion 25 and related interpretations in
accounting for its plans. Accordingly, no compensation cost has been recognized
for its plans, all of which are fixed plans. To determine the additional pro
forma disclosures required by SFAS 123 for the stock option plans, the fair
value of each option grant used for calculating pro forma net income is
estimated on the date of grant using the Black-Scholes multiple option-pricing
model. The following weighted average assumptions were used for grants in 2002,
2001 and 2000, respectively, expected volatility of 76%, 73% and 68%; risk free
interest rate of 3.4%, 4.9% and 5.8% and expected lives of 3.55, 3.50 and 3.69
years. The Company has not paid dividends and assumed no dividend yield. The
weighted average fair value of those stock options granted in 2002, 2001 and
2000 was $4.81, $5.47 and $6.68 per option, respectively. The fair value of each
ESPP purchase right is estimated on the beginning of the offering period using
the Black-Scholes option-pricing model with substantially the same assumptions
as the option plans but expected lives of 0.5 years. The weighted average fair
value of those purchase rights granted in 2002, 2001 and 2000 was $3.69, $4.22
and $3.56 per right, respectively. Had compensation cost for the Company's two
stock-based compensation plans been determined based on the fair value at the
grant dates for awards in 2002, 2001 and 2000 under those plans consistent with
the provisions of SFAS 123, the Company's net income and earnings per share
would have been reduced as presented below (in thousands, except per share
data):

                                       47

<PAGE>

<TABLE>
<CAPTION>
                                         2002                  2001                  2000
                                      ------------          -----------           -----------
<S>                                   <C>                   <C>                   <C>
Net income (loss):
     As reported                      $    ( 7,054)         $   (22,107)          $    17,237
     Pro forma                        $    (13,036)         $   (27,834)          $    14,603

Earnings (loss) per share:
     As reported
       Basic                          $      (0.37)         $     (1.34)          $      1.17
       Diluted                        $      (0.37)         $     (1.34)          $      1.05
     Pro forma
       Basic                          $      (0.68)         $     (1.69)          $      1.00
       Diluted                        $      (0.68)         $     (1.69)          $      0.89
</TABLE>

         Because additional stock options and stock purchase rights are expected
to be granted each year, the above pro forma disclosures are not considered by
management to be representative of pro forma effects on reported financial
results for future years.

OPTION EXCHANGE

         On November 25, 2002, the Company made an exchange offer (the Exchange)
to current officers and employees of the Company to exchange stock options held
by these employees for restricted shares of the Company's common stock. The
offer period ended December 31, 2002 and the restricted shares were issued on
January 3, 2003, (the Exchange Date). Employee stock options eligible for the
Exchange had a per share exercise price of $11.75 or greater, whether or not
vested (Eligible Options). The offer provided for an exchange ratio of three
option shares surrendered for each share of restricted stock received.

         In order to be eligible to participate in the Exchange (Eligible
Participant), the employee may not receive stock options or other equity awards
in the six months following the Exchange Date. In order to participate in the
Exchange, an Eligible Participant could tender all Eligible options held, or any
selected eligible options granted by different stock option agreements. If an
Eligible Participant chose to participate, all options granted on or after May
26, 2002 were tendered regardless of the exercise price of such options. The
shares of restricted stock will vest in one-fourth increments on each of the
first, second, third and fourth annual anniversary dates of the Exchange Date.
If the employment of an employee who participated in the Exchange terminates
prior to the vesting of the restricted stock received in the Exchange, the
employee will forfeit the unvested shares of restricted stock. As a result of
the Exchange, the Company issued 744,802 shares of restricted stock in return
for 2,234,250 stock options.

         Approximately $1,009,207 of non-cash deferred compensation expense
associated with the restricted stock will be charged to income during each of
the four years during which the restricted stock vests. The deferred
compensation charge is unaffected by future changes in the price of the common
stock.

NOTE 10 - INCOME TAXES:

         The provision for (benefit from) income taxes consists of the following
(in thousands):

<TABLE>
<CAPTION>
                                     2002                  2001                  2000
                                  ------------          -----------           -----------
<S>                               <C>                   <C>                   <C>
Current:
         Federal                  $     (2,335)         $    (7,214)          $    10,904
         State                               -                   34                 2,422
         Foreign                        (1,130)              (1,095)                1,990
                                  ------------          -----------           -----------
                                        (3,485)              (8,275)               15,316
Deferred:
         Federal                         1,461               (2,046)               (2,268)
         State                            (167)              (1,971)                 (510)
         Foreign                          (421)                  41                   (58)
                                  ------------          -----------           -----------
                                           873               (3,976)               (2,836)
                                  ------------          -----------           -----------
                                  $     (2,612)         $   (12,251)          $    12,480
                                  ============          ===========           ===========
</TABLE>

         Deferred tax assets (liabilities) comprise the following (in
thousands):

                                       48

<PAGE>

<TABLE>
<CAPTION>
                                                     2002                 2001
                                                   --------             --------
<S>                                                <C>                  <C>
Bad debt, sales and warranty reserves              $  4,286             $  4,689
Accruals, inventory and other reserves                6,069                6,397
Net operating losses                                  2,214                  982
Other                                                   324                  260
                                                   --------             --------
     Gross deferred tax assets                       12,893               12,328
                                                   --------             --------

Unrealized foreign exchange gain                       (316)                (288)
Depreciation and amortization                        (3,105)              (3,736)
                                                   --------             --------
     Gross deferred tax liabilities                  (3,421)              (4,024)
                                                   --------             --------

Valuation allowance                                    (933)                   -

                                                   --------             --------
     Net deferred tax assets                       $  8,539             $  8,304
                                                   ========             ========
</TABLE>

         Valuation allowances reduce the deferred tax assets to the amount that,
based upon all available evidence, is more likely than not to be realized. The
deferred tax assets valuation allowance at December 31, 2002 is attributed to
certain foreign net operating loss carryovers that do not meet the more likely
than not standard of realizability.

         As of December 31, 2002, the Company had state net operating loss
carryforwards of approximately $25,613,000 available to offset future state
taxable income. The state net operating loss carryforwards will expire in
varying amounts beginning 2006 through 2022.

         The tax benefit associated with dispositions from employee stock plans
for 2002 is approximately $581,000, which was recorded as an addition to paid-in
capital and a reduction to taxes payable.

         A reconciliation of the Federal statutory tax rate to the effective tax
(benefit) follows:

<TABLE>
<CAPTION>
                                                       2002                 2001              2000
                                                     --------             --------          --------
<S>                                                  <C>                  <C>               <C>
Federal statutory rate                                (35.0)%              (35.0)%            35.0%
State income taxes, net of Federal tax
    benefit and credits                                (1.7)%               (3.8)%             4.2%
Foreign taxes, net of foreign tax credits               6.0 %               (0.1)%             0.2%
Other                                                   3.7 %                3.2 %             2.6%
                                                     ------               ------            ------
Total                                                 (27.0)%              (35.7)%            42.0%
                                                     ======               ======            ======
</TABLE>

NOTE  11 - COMMITMENTS AND CONTINGENCIES:

         The Company leases its facilities under cancelable and non-cancelable
operating lease agreements. The leases expire at various times through 2019 and
contain renewal options. Certain of the leases require the Company to pay
property taxes, insurance, and maintenance costs.

         The Company leases certain equipment under capitalized leases with such
equipment amounting to $3,565,000 less accumulated depreciation of $1,641,000 at
December 31, 2002. Amortization expense on assets subject to capitalized leases
was $843,000 for the year ended December 31, 2002. The capitalized lease terms
range from 33 months to 60 months.

     The following is a summary of commitments under non-cancelable leases:

                                       49

<PAGE>

<TABLE>
<CAPTION>
                                                  CAPITALIZED          OPERATING
         YEAR ENDING DECEMBER 31,                   LEASES               LEASES
---------------------------------------           -----------          ---------
                                                           (in thousands)
                                                  -----------------------------
<S>                                               <C>                  <C>
2003                                                $   987            $   7,081
2004                                                    200                5,981
2005                                                     98                4,879
2006                                                     86                4,277
2007                                                      7                3,671
2008 and beyond                                           -               14,300

                                                   --------            ---------
Total minimum lease payments                          1,378            $  40,189
                                                                       =========
Less: imputed interest                                 (127)
                                                   --------

Present value of minimum lease payments             $ 1,251
                                                   ========
</TABLE>

         Total operating lease expense was $8,671,000, $7,370,000 and $4,718,000
for the years ended December 31, 2002, 2001 and 2000, respectively.

         The Company is subject to legal proceedings and claims that arise in
the normal course of business. Management believes that the ultimate resolution
of such matters will not have a material adverse effect on the Company's
financial position or results of operations.

NOTE 12 - TRANSACTIONS WITH RELATED PARTIES:

         A director of the Company, is a director of one of the Company's
customers/vendors, Company A. Another director of the Company, is a director of
one of the Company's vendors, Company B. A third director of the Company, is a
director one of the Company's customers, Company C. A fourth director of the
Company, is the President of one of the Company's consulting providers, Company
D. A fifth Director of the Company, is the President of one of the Company's
customers/vendors, Company E. The President of one of the Company's
subsidiaries, is a co-owner of one of the Company's customers, Company F. The
Company also leased a facility from Company F. Sales to these parties and
purchases of inventory and other services from these parties for the three years
ended December 31, 2001 and accounts receivable at December 31, 2001 and 2000
are summarized below:

<TABLE>
<CAPTION>
                                                          (In thousands)
                                       ---------------------------------------------------
                                            2002              2001             2000
                                       ---------------   ----------------  ---------------
<S>                                    <C>               <C>               <C>
SALES:
                         Company A        $  1,049          $  1,718         $  3,345
                         Company C              25               431                -
                         Company E              26                 -                -
                         Company F           3,431                 -                -
ACCOUNTS RECEIVABLE:
                         Company A              32               127              355
                         Company C               -                21                -
                         Company E               1                 -                -
                         Company F             524                 -                -
INVENTORY PURCHASED:
                         Company A               -                 -              199
                         Company B               -               111              364
                         Company E              19                 -                -
CONSULTING               Company D              53                 -                -
RENT                     Company F              92                 -                -
</TABLE>

         The Company believes that terms of these transactions were no less
favorable than reasonably could be expected to be obtained from unaffiliated
parties.

                                       50

<PAGE>

NOTE 13 - SALARY SAVINGS PLAN:

         The Company has a Section 401(k) Plan (the "Plan") which provides
participating employees an opportunity to accumulate funds for retirement and
hardship. Participants may contribute up to 15% of their eligible earnings to
the Plan. The Company may elect to make matching contributions equal to a
discretionary percentage of participants' contributions up to the statutory
maximum of participants' eligible earnings. The Company has not made any
contributions to the Plan.

NOTE 14 - GEOGRAPHIC INFORMATION:

         The Company operates in one industry segment and markets its products
worldwide through its own direct sales force. The Company attributes revenues
from customers in different geographic areas based on the location of the
customer. Sales in the U.S. were 44%, 45% and 57% of total sales for the years
ended December 31, 2002, 2001 and 2000, respectively.

         Geographic information consists of the following:

<TABLE>
<CAPTION>
                                                    (in thousands)
                                    2002                  2001                2000
                               ----------------     ----------------    ----------------
<S>                            <C>                  <C>                 <C>
Net sales:
    North America              $      1,023,308     $        998,347    $      1,281,967
    Latin America                       189,586              239,537             231,915
    Europe                              892,028              769,218             290,220
                               ----------------     ----------------    ----------------
        Total                  $      2,104,922     $      2,007,102    $      1,804,102
                               ================     ================    ================
</TABLE>

         The following table presents long-lived assets located in the Company's
country of domicile and located in all foreign countries.

<TABLE>
<CAPTION>
                                                                      December 31,
                                                        ------------------------------------------
                                                              2002                      2001
                                                        ----------------         -----------------
<S>                                                     <C>                      <C>
Long -lived assets:
    United States                                       $         49,934         $          51,982
    United Kingdom                                                53,189                    53,231
    Other foreign countries                                       15,177                    13,033
                                                        ----------------         -----------------
        Total                                           $        118,300         $         118,246
                                                        ================         =================
</TABLE>

NOTE 15 - SUBSEQUENT EVENTS:

         In March 2003, the Company took actions to reduce costs and improve
operating efficiencies. These actions primarily included a multifunctional
reduction in the Company's global workforce of approximately 120 positions, or
9% of the Company's total workforce, as well as the discontinuance and write-off
of certain fixed assets and additional inventory charges related to the
discontinuance of certain product lines.

                                       51

<PAGE>

SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED):

                    (in thousands, except per share amounts)

<TABLE>
<CAPTION>
                                                                         Quarter Ended
                                    ---------------------------------------------------------------------------------------------
                                     Mar. 31,     June 30,    Sept. 30,   Dec. 31,    Mar. 31,   June 30,   Sept. 30,    Dec. 31,
                                      2001         2001         2001        2001       2002        2002        2002       2002
                                    ---------    ---------   ----------  ----------  ---------  ---------   ---------   ---------
<S>                                 <C>          <C>         <C>         <C>         <C>        <C>         <C>         <C>
Net sales.......................    $ 535,523    $ 455,686    $ 489,089  $  526,804  $ 522,928  $ 497,713   $ 551,895   $ 532,386
Cost of sales...................      490,101      422,826      459,808     481,559    475,507    457,715     506,563     486,581
                                    ---------    ---------   ----------  ----------  ---------  ---------   ---------   ---------
Gross profit....................       45,422       32,860       29,281      45,245     47,421     39,998      45,332      45,805
Operating expenses:.............
Selling, general and
  administrative expenses.......       39,626       39,018       39,077      40,189     42,696     42,096      40,348      40,484
Restructuring costs and
  special charges...............            -        1,540        7,354           -          -      2,283       3,405           -
                                    ---------    ---------   ----------  ----------  ---------  ---------   ---------   ---------
Total operating expenses........       39,626       40,558       46,431      40,189     42,696     44,379      43,753      40,484

Operating income (loss).........        5,796       (7,698)     (17,150)      5,056      4,725     (4,381)      1,579       5,321
Interest expense and other
  income........................        5,579        5,098        4,874       4,811      4,063      4,408       4,473       3,966
                                    ---------    ---------   ----------  ----------  ---------  ---------   ---------   ---------
Income (loss) from operations
  before income taxes...........          217      (12,796)     (22,024)        245        662     (8,789)     (2,894)      1,355
Provision for (benefit from)
  income taxes..................           91       (5,123)      (7,307)         88        278     (2,716)       (538)        364
                                    ---------    ---------   ----------  ----------  ---------  ---------   ---------   ---------
Net income (loss)...............    $     126    $  (7,673)  $  (14,717) $      157  $     384  $  (6,073)  $  (2,356)  $     991
                                    =========    =========   ==========  ==========  =========  =========   =========   =========
Earnings (loss) per share
  Basic.........................    $    0.01    $   (0.47)  $    (0.88) $     0.01  $    0.02  $   (0.31)  $   (0.12)  $    0.05
  Diluted.......................    $    0.01    $   (0.47)  $    (0.88) $     0.01  $    0.02  $   (0.31)  $   (0.12)  $    0.05
                                    =========    =========   ==========  ==========  =========  =========   =========   =========
Shares used in per share
  calculation
  Basic.........................       15,842       16,173       16,804      17,160     18,099     19,327      19,610      19,770
                                    =========    =========   ==========  ==========  =========  =========   =========   =========
  Diluted.......................       17,417       16,173       16,804      18,041     19,160     19,327      19,610      20,048
                                    =========    =========   ==========  ==========  =========  =========   =========   =========
</TABLE>

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

         None.

                                       52

<PAGE>

                                    PART III

         Pursuant to Paragraph G(3) of the General Instructions to Form 10-K,
portions of the information required by Part III of Form 10-K are incorporated
by reference from the Company's Proxy Statement to be filed with the Commission
in connection with the 2003 Annual Meeting of Shareholders (the "Proxy
Statement").

ITEM 10.  DIRECTORS AND EXECTUTIVE OFFICERS OF THE REGISTRANT

    (a)       Information concerning directors of the Company appears in the
              Company's Proxy Statement, under Item 1 "Election of Directors."
              This portion of the Proxy Statement is incorporated herein by
              reference.

    (b)       EXECUTIVE OFFICERS OF THE REGISTRANT

              The following table and descriptions identify and set forth
              information regarding the Company's seven executive officers:

<TABLE>
<CAPTION>
          Name                      Age                Position
          ----                      ---                --------
<S>                                 <C>   <C>
W. Donald Bell................      65    President, Chief Executive Officer and
                                          Chairman of the Board

Ian French....................      49    President, Bell Microproducts Europe

James E. Illson...............      49    Chief Financial Officer and Executive
                                          Vice President of Finance and
                                          Operations

Richard J. Jacquet............      63    Vice President of Human Resources

Philip M. Roussey.............      60    Executive Vice President, Enterprise
                                          Marketing

Robert J. Sturgeon............      49    Vice President of Information
                                          Technology
</TABLE>

                   W. Donald Bell has been President, Chief Executive Officer
              and Chairman of the Board of the Company since its inception in
              1987. Mr. Bell has over forty years of experience in the
              electronics industry. Mr. Bell was formerly the President of
              Ducommun Inc. and its subsidiary, Kierulff Electronics Inc., as
              well as Electronic Arrays Inc. He has also held senior management
              positions at Texas Instruments Incorporated, American Microsystems
              and other electronics companies.

                   Ian French has been President of Bell Microproducts Europe
              since August 2000. From June 1999 to July 2000, Mr. French was
              Chief Executive Officer of Ideal Hardware, a United Kingdom
              distribution company subsequently acquired by the Company. Mr.
              French also held various management positions at IBM, Olivetti and
              Seiko.

                                       53

<PAGE>

                   James E. Illson has been our Chief Financial Officer and
              Executive Vice President of Finance and Operations since September
              2002. From March 2000 to April 2002, Mr. Illson was Chief
              Executive officer and President of Wareforce Inc. a value added
              reseller. Mr. Illson was with Merisel Inc. from August 1996 to
              January 2000, serving in the position of Chief Financial Officer
              until March 1998, when he became President/Chief Operating
              Officer. Mr. Illson holds a Bachelors degree in Business
              Administration and a Masters degree in Industrial Administration.
              Mr. Illson has over 20 years experience in financial and
              operational fields.

                   Richard J. Jaquet has been our Vice President of Human
              Resources since May 2000. From 1988 to May 2000, Mr. Jacquet
              served as Vice President of Administration of Ampex Corporation,
              an electronics manufacturing company. Prior to 1988, Mr. Jacquet
              served in various senior human resource positions with Harris
              Corporation and FMC Corporation.

                   Philip M. Roussey has been our Executive Vice President of
              our Enterprise Marketing since February 2002, prior to which he
              serve as our Executive Vice President of Computer Products
              Marketing from April 2000 until February 2002 and as our Senior
              Vice President of Marketing for Computer Products and Vice
              President of Marketing from the inception of our Company in 1987
              until April 2000. Prior to joining Bell Microproducts in 1987, Mr.
              Roussey served in management positions with Kierulff Electronics,
              most recently as Corporate Vice President of Marketing.

                   Robert J. Sturgeon has been our Vice President of Information
              Technology since July 2000, prior to which, he served as our Vice
              President of Operations since joining the Company in 1992. From
              January 1991 to February 1992, Mr. Sturgeon was Director of
              Information Services for Disney Home Video. Prior to that time,
              Mr. Sturgeon served as Management Information Services ("MIS")
              Director for Paramount Pictures' Home Video Division from June
              1989 to January 1991 and as a Marketing Manager for MTI Systems, a
              division of Arrow Electronics Inc., from January 1988 to June
              1989. Other positions Mr. Sturgeon has held include Executive
              Director of MIS for Ducommun where he was responsible for ten
              divisions, including Kierulff Electronics.

    (c)       Information concerning Compliance with Section 16(a) of the
              Securities Exchange Act of 1934 appears in the Company's Proxy
              Statement, under the heading "Compliance with Section 16(a) of the
              Securities Exchange Act of 1934," and is incorporated herein by
              reference.

ITEM 11.  EXECUTIVE COMPENSATION

         Information concerning executive compensation appears in the Company's
Proxy Statement, under the caption "Executive Compensation," and is incorporated
herein by reference.

ITEM 12.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

         Information concerning the security ownership of certain beneficial
owners and management appears in the Company's Proxy Statement, under Item 1
"Election of Directors," and is incorporated herein by reference.

         The following table provides information concerning the Company's
equity compensation plans as of December 31, 2002:

                                       54

<PAGE>

<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------
                                            Equity Compensation Plan Information
------------------------------------------------------------------------------------------------------------------------------
                                    Column (a)                     Column (b)                          Column (c)
------------------------------------------------------------------------------------------------------------------------------
                                                                                             Number of securities remaining
                              Number of securities to                                        available for future issuance
                              be issued upon exercise        Weighted-average exercise      under equity compensation plans
                              of outstanding options,         price of outstanding          (excluding securities reflected
  Plan Category                warrants and rights         options warrants and rights               in column (a))
------------------------------------------------------------------------------------------------------------------------------
<S>                           <C>                          <C>                              <C>
Equity compensation
plans approved by                    3,754,496                    $   10.01 (1)                        496,031 (2)
security holders
------------------------------------------------------------------------------------------------------------------------------
Equity compensation
plans not approved by                1,612,750                    $   10.88                                  -
security holders(3)
------------------------------------------------------------------------------------------------------------------------------
Total                                5,367,246                    $   10.18                            496,031
------------------------------------------------------------------------------------------------------------------------------
</TABLE>

    (1)       Weighted-average exercise price excludes 180,000 shares for
              restricted stock units with zero exercise price.

    (2)       Includes (a) shares under the Company's (2) 1998 Stock Option
              Plan, which plan provides for the automatic increase of shares on
              January 1 of each year of a number of shares equal to the lesser
              of (i) 600,000 shares, (ii) 4% of the outstanding shares on such
              date, or (iii) a lesser amount determined by the Board, subject to
              adjustment upon changes in capitalization of the Company and (b)
              1,621 shares remaining available under the Company's Employee
              Stock Purchase Plan, which plan provides for the automatic
              increase on January 1 of each year of a number of shares equal to
              the lesser of (i) 225,000 shares, (ii) 1.5% of the outstanding
              shares on such date, or (iii) a lesser amount determined by the
              Board, subject to adjustment upon changes in capitalization of the
              Company.

    (3)       Represents stock options that have been granted to employees
              outside of the Company's 1998 Stock Option Plan, which options are
              represented by agreements substantially the same as agreements
              with respect to options under the 1998 Stock Option Plan and
              generally provide for a vesting period as determined by the Board
              of Directors and expire over terms not exceeding ten years from
              the date of grant.

ITEM 13.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

         Information concerning certain relationships and related transactions
appears in the Company's Proxy Statement, under Item 1 "Election of Directors,"
and is incorporated herein by reference.

                                     PART IV

ITEM 14.  CONTROLS AND PROCEDURES

         Within the 90-day period prior to the filing of this report, an
evaluation was carried out under the supervision and with the participation of
the Company's management, including the Chief Executive Officer ("CEO") and
Chief Financial Officer ("CFO"), of the effectiveness of our disclosure controls
and procedures. Based on that evaluation, the CEO and CFO have concluded that
the Company's disclosure controls and procedures are effective to ensure that
information required to be disclosed by the Company in reports that it files or
submits under the Securities Exchange Act of 1934 is recorded, processed,
summarized and reported within the time periods specified in Securities and
Exchange Commission rules and forms. Subsequent to the date of their evaluation,
there were no significant changes in the Company's internal controls or in other
factors that could significantly affect the

                                       55

<PAGE>

disclosure controls, including any corrective actions with regard to significant
deficiencies and material weaknesses.

ITEM 15.  EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS OF FORM 8-K

(a)      The following documents are filed as part of this Form 10-K:

         (1)  Consolidated Financial Statements

         The financial statements (including the notes thereto) listed in the
Index to Consolidated Financial Statement Schedule (set forth in Item 8 of Part
II of this Form 10-K) are filed as part of this Annual Report on Form 10-K.

         (2)  Consolidated Financial Statement Schedule II - Valuation and
              Qualifying Accounts and Reserves              page 60

         Schedules not listed above have been omitted because they are not
required or the information required to be set forth therein is included in the
Consolidated Financial Statements or Notes to Consolidated Financial Statements.

         (3)  Exhibits - See Exhibit Index following signature page

(b)      Reports on Form 8-K.

         No reports on Form 8-K were filed by the Company in the fourth quarter
         of 2002.

(c)      Exhibits. See Item 14(a) above.

(d)      Financial Statements Schedules. See Item 14(a) above.

                                       56

<PAGE>

                                   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 on March 31, 2003.

                                         BELL MICROPRODUCTS INC.

                                            By: /s/ James E. Illson
                                                --------------------------------
                                                James E. Illson
                                                Chief Financial Officer and
                                                Executive Vice President of
                                                Finance and Operations

                                POWER OF ATTORNEY

         KNOW ALL MEN BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints W. Donald Bell and James E. Illson and
each of them, jointly and severally, his attorneys-in-fact, each with full power
of substitution, for him in any and all capacities, to sign any and all
amendments to this Report on Form 10-K, and to file the same, with exhibits
thereto and other documents in connection therewith, with the Securities and
Exchange Commission, hereby ratifying and confirming all that each of said
attorneys-in-fact, or his substitute or substitutes, may do or cause to be done
by virtue hereof.

         Pursuant to the requirements of the Securities Exchange Act of 1934,
this Report on Form 10-K has been signed below by the following persons on
behalf of the Registrant and in the capacities and on the dates indicated:

<TABLE>
<CAPTION>
            SIGNATURE                                   TITLE                                        DATE
------------------------------    ----------------------------------------------------------    --------------
<S>                               <C>                                                           <C>
 /s/ W. Donald Bell               Chairman of the Board, President and Chief Executive          March 31, 2003
------------------------------
(W. Donald Bell)                  Officer (Principal Executive Officer)

 /s/ James E. Illson              Chief Financial Officer and Executive Vice President of       March 31, 2003
------------------------------
(James E Illson)                  Finance and Operations (Principal Financial and Accounting
                                  Officer)

 /s/ Gordon A. Campbell           Director                                                      March 31, 2003
------------------------------
(Gordon A. Campbell)

 /s/ Eugene Chaiken               Director                                                      March 31, 2003
------------------------------
(Eugene Chaiken)

 /s/ David M. Ernsberger          Director                                                      March 31, 2003
------------------------------
(David M. Ernsberger)

 /s/ Edward L. Gelbach            Director                                                      March 31, 2003
------------------------------
(Edward L. Gelbach)

 /s/ James E. Ousley              Director                                                      March 31, 2003
------------------------------
(James E. Ousley)

 /s/ Glenn E. Penisten            Director                                                      March 31, 2003
------------------------------
(Glenn E. Penisten)
</TABLE>

                                       57

<PAGE>

                    SARBANES-OXLEY SECTION 302 CERTIFICATION

         I, W. Donald Bell, certify that:

         1.       I have reviewed this annual report on Form 10-K of Bell
Microproducts, Inc.;

         2.       Based on my knowledge, this annual report does not contain any
untrue statement of a material fact or omit to state a material fact necessary
to make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by this
annual report;

         3.       Based on my knowledge, the financial statements, and other
financial information included in this annual report, fairly present in all
material respects the financial condition, results of operations and cash flows
of the registrant as of, and for, the periods presented in this annual report;

         4.       The registrant's other certifying officers and I are
responsible for establishing and maintaining disclosure controls and procedures
(as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and
have:

         a)       Designed such disclosure controls and procedures to ensure
that material information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities, particularly
during the period in which this annual report is being prepared;

         b)       Evaluated the effectiveness of the registrant's disclosure
controls and procedures as of a date within 90 days prior to the filing date of
this annual report (the "Evaluation Date"); and

         c)       Presented in this annual report our conclusions about the
effectiveness of the disclosure controls and procedures based on our evaluation
as of the Evaluation Date;

         5.       The registrant's other certifying officers and I have
disclosed, based on our most recent evaluation, to the registrant's auditors and
the audit committee of registrant's board of directors (or persons performing
the equivalent functions):

         a)       All significant deficiencies in the design or operation of
internal controls which could adversely affect the registrant's ability to
record, process, summarize and report financial data and have identified for the
registrant's auditors any material weaknesses in internal controls; and

         b)       Any fraud, whether or not material, that involves management
or other employees who have a significant role in the registrant's internal
controls; and

         6.       The registrant's other certifying officers and I have
indicated in this annual report whether or not there were significant changes in
internal controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation, including any
corrective actions with regard to significant deficiencies and material
weaknesses.

Date: March 31, 2003
                                                 /s/ W. Donald Bell
                                                 -------------------------------
                                                 W. Donald Bell
                                                 Chief Executive Officer

                                       58

<PAGE>

                    SARBANES-OXLEY SECTION 302 CERTIFICATION

         I, James E. Illson, certify that:

         1.       I have reviewed this annual report on Form 10-K of Bell
Microproducts, Inc.;

         2.       Based on my knowledge, this annual report does not contain any
untrue statement of a material fact or omit to state a material fact necessary
to make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by this
annual report;

         3.       Based on my knowledge, the financial statements, and other
financial information included in this annual report, fairly present in all
material respects the financial condition, results of operations and cash flows
of the registrant as of, and for, the periods presented in this annual report;

         4.       The registrant's other certifying officers and I are
responsible for establishing and maintaining disclosure controls and procedures
(as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and
have:

         a)       Designed such disclosure controls and procedures to ensure
that material information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities, particularly
during the period in which this annual report is being prepared;

         b)       Evaluated the effectiveness of the registrant's disclosure
controls and procedures as of a date within 90 days prior to the filing date of
this annual report (the "Evaluation Date"); and

         c)       Presented in this annual report our conclusions about the
effectiveness of the disclosure controls and procedures based on our evaluation
as of the Evaluation Date;

         5.       The registrant's other certifying officers and I have
disclosed, based on our most recent evaluation, to the registrant's auditors and
the audit committee of registrant's board of directors (or persons performing
the equivalent functions):

         a)       All significant deficiencies in the design or operation of
internal controls which could adversely affect the registrant's ability to
record, process, summarize and report financial data and have identified for the
registrant's auditors any material weaknesses in internal controls; and

         b)       Any fraud, whether or not material, that involves management
or other employees who have a significant role in the registrant's internal
controls; and

         6.       The registrant's other certifying officers and I have
indicated in this annual report whether or not there were significant changes in
internal controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation, including any
corrective actions with regard to significant deficiencies and material
weaknesses.

Date: March 31, 2003

                                                     /s/ James E. Illson
                                                     ---------------------------
                                                     James E. Illson
                                                     Chief Financial Officer

                                       59

<PAGE>

                                                                     SCHEDULE II

                             BELL MICROPRODUCTS INC.

                 VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
                         ALLOWANCE FOR DOUBTFUL ACCOUNTS
                                 (IN THOUSANDS)

<TABLE>
<CAPTION>
                                                                   Restructuring                                         Additions
                                 Balance at                             and             Charged to                       Balance at
                                  Beginning                           Special           Costs and        Deductions-       End of
Year Ended December 31,           of Period         Other(1)          Charges            Expenses         Write-off        Period
-----------------------          ----------         --------       ---------------      ----------       -----------     -----------
<S>                              <C>                <C>            <C>                  <C>              <C>             <C>
2002                             $   16,206         $      -         $    1,700          $ 11,357         $ (9,923)       $  19,340

2001                                 12,831            1,630              4,038            11,569          (13,862)          16,206

2000                                  4,986            1,991                  -             9,958           (4,104)          12,831

</TABLE>

         (1)      Balance consists of allowance for doubtful accounts related to
                  the acquisitions of subsidiaries

                                       60

<PAGE>

                                INDEX TO EXHIBITS

         NUMBER DESCRIPTION OF DOCUMENT

         3.1      Amended and Restated Articles of Incorporation of Registrant -
                  incorporated by reference to exhibit filed with the
                  Registrant's Report on Form 10-Q for the quarter ended
                  September 30, 2000.

         3.2      Amended and Restated Bylaws of Registrant - incorporated by
                  reference to exhibit filed with the Registrant's Registration
                  Statement on Form S-1 (File No. 33-60954) filed on April 14,
                  1993 and which became effective on June 14, 1993.

         4.1      Specimen Common Stock Certificate of the Registrant -
                  incorporated by reference to exhibit filed with the
                  Registrant's Registration Statement on Form S-1 (File No.
                  33-60954) filed on April 14, 1993 and which became effective
                  on June 14, 1993.

         4.2      Amended and Restated Registration Rights Agreement dated June
                  11, 1992 between Registrant and certain investors named
                  therein, as amended - incorporated by reference to exhibit
                  filed with the Registrant's Report on Form 10-K for the fiscal
                  year ended December 31, 1993.

         10.1*    1998 Stock Plan - incorporated by reference to exhibit filed
                  with the Registrant's Report on Form S-8 (File No. 333-58053).

         10.2*    The form of Option Agreement used under the 1998 Stock Plan -
                  incorporated by reference to exhibit filed with the
                  Registrant's Report on Form S-8 (File No. 333-58053).

         10.3     Employee Stock Purchase Plan, as amended through May 21, 1998
                  - incorporated by reference to exhibit filed with the
                  Registrant's Report on Form S-8 (File No. 333-58053).

         10.4     The form of Option Agreement used under the Employee Stock
                  Purchase Plan - incorporated by reference to exhibit filed
                  with the Registrant's Registration Statement on Form S-8 (File
                  No. 33-83398).

         10.5     Registrant's 401(k) Plan - incorporated by reference to
                  exhibit filed with the Registrant's Registration Statement on
                  Form S-1 (File No. 33-60954).

         10.6     Lease dated March 17, 1992 for Registrant's facilities at 1941
                  Ringwood Avenue; Suite 100, San Jose, California --
                  incorporated by reference to exhibit filed with the
                  Registrant's Registration Statement on Form S-1 (File No.
                  33-60954).

         10.7     Second Amendment to Third Amended and Restated Credit
                  Agreement dated as of July 21, 1999 - incorporated by
                  reference to exhibit filed with the Registrant's Report on
                  Form 10-Q for the quarter ended June 30, 1999.

         10.8     Third Amended and Restated Credit Agreement dated as of
                  November 12, 1998, conformed to include the First Amendment
                  thereto, effective May 14, 1999 - incorporated by reference to
                  exhibit filed with the Registrant's Report on Form 10-Q for
                  the quarter ended June 30, 1999.

         10.9     Form of Indemnification Agreement - incorporated by reference
                  to exhibit filed with the Registrant's Registration Statement
                  on Form S-1 (File No. 33-60954).

         10.10    IBM Authorized Distributor Agreement dated May 17, 1993
                  between IBM Corporation and Registrant - incorporated by
                  reference to exhibit filed with the Registrant's Registration
                  Statement on Form S-1 (File No. 33-60954).

         10.11    Lease dated February 17, 1999 for Registrant's facilities at
                  4048 Castle Avenue, New

                                       61

<PAGE>

                  Castle, Delaware - incorporated by reference to exhibit filed
                  with the Registrant's Report on Form 10-Q for the quarter
                  ended March 31, 1999.

         10.12    Third Amendment and Restated Credit Agreement dated as of
                  November 12, 1998 by and among the Registrant, the Banks named
                  therein and California Bank & Trust, as Agent for the Banks -
                  incorporated by reference to exhibit filed with the
                  Registrant's Report on Form 8-K filed on November 30, 1998, as
                  amended on Form 8-K/A filed on December 11, 1998.

         10.13    Asset Purchase Agreement dated as of November 5, 1998 by and
                  between the Company, Almo Corporation, Almo Distributing
                  Pennsylvania, Inc., Almo Distributing Maryland, Inc., Almo
                  Distributing Minnesota, Inc., Almo Distributing Wisconsin,
                  Inc. and Almo Distributing, Inc. - incorporated by reference
                  to exhibit filed with the Registrant's Report on Form 8-K
                  filed on November 30, 1998, as amended on Form 8-K/A filed on
                  December 11, 1998.

         10.14    Fourth Amendment to Third Amended and Restated Credit
                  Agreement dated December 8, 1999 by and among the Registrant,
                  the Banks named therein and California Bank & Trust, as agent
                  for the Banks - incorporated by reference to exhibit filed
                  with the Registrant's Report on Form 10-K for the fiscal year
                  ended December 31, 1999.

         10.15    Fifth Amendment to Third Amended and Restated Credit Agreement
                  dated December 31, 1999 by and among the Registrant, the Banks
                  named therein and California Bank & Trust, as agent for the
                  Banks - incorporated by reference to exhibit filed with the
                  Registrant's Report on Form 10-K for the fiscal year ended
                  December 31, 1999.

         10.16    Lease dated August 1, 1999 for Registrant's facilities at 1941
                  Ringwood Avenue, Suite 200, San Jose, California -
                  incorporated by reference to exhibit filed with the
                  Registrant's Report on Form 10-K for the fiscal year ended
                  December 31, 1999.

         10.17    Asset Purchase Agreement between Bell Microproducts, Inc. and
                  Pemstar Inc. April 30, 1999 - incorporated by reference to
                  exhibit filed with the Registrant's Report on Form 8-K filed
                  on June 23, 1999.

         10.18    Amendment to Asset Purchase Agreement between Bell
                  Microproducts, Inc. and Pemstar Inc. June 4, 1999 -
                  incorporated by reference to exhibit filed with the
                  Registrant's Report on Form 8-K filed on June 23, 1999.

         10.19    Asset Purchase Agreement between Bell Microproducts - Future
                  Tech, Inc., Future Tech International, Inc., Bell
                  Microproducts, and Leonard Keller, dated May 14, 1999, as
                  amended June 1, 1999 - incorporated by reference to exhibit
                  filed with the Registrant's Report on Form 8-K filed on August
                  4, 1999.

         10.20*   Management Retention Agreements between the Registrant and the
                  following executive officers of the Registrant: W. Donald Bell
                  and Remo E. Canessa - incorporated by reference to exhibit
                  filed with the Registrant's Report on Form 10-Q for the
                  quarter ended September 30, 1999.

         10.21    Waiver and Third Amendment to Third Amended and Restated
                  Credit Agreement dated as of October 15, 1999 - incorporated
                  by reference to exhibit filed with the Registrant's Report on
                  Form 10-Q for the quarter ended September 30, 1999.

         10.22    Distribution Agreement dated as of January 11, 2000 between
                  the Registrant and International Business Machines Corporation
                  - incorporated by reference to exhibit filed with the
                  Registrant's form 10-Q/A for the quarter ended September 30,
                  1999.

         10.23*   Employment Agreement dated as of July 1, 1999 between the
                  Registrant and W. Donald Bell, the Registrant's Chief
                  Executive Officer - incorporated by reference to exhibit filed
                  with the Registrant's

                                       62

<PAGE>

                  Report on Form 8-K filed on January 13, 2000.

         10.24    Office and warehouse lease, dated March 21, 1991, as amended
                  by Amendment No. 1, Amendment No. 2, Amendment No. 3,
                  Amendment No. 4 and Amendment No. 5 relating to Rorke Data
                  facilities in Eden Prairie, Minnesota--incorporated by
                  reference to exhibit filed with the Registrant's Report on
                  Form 10-Q for the quarter ended June 30, 2000.

         10.25    Lease, dated June 16, 2000, relating to Bell Microproducts -
                  Future Tech facilities in Miami, Florida--incorporated by
                  reference to exhibit filed with the Registrant's Report on
                  Form 10-Q for the quarter ended June 30, 2000.

         10.26*    Management Retention Agreement dated March 20, 2000, between
                   the Company and Lawrence Leong--incorporated by reference to
                   exhibit filed with the Registrant's Report on Form 10-Q for
                   the quarter ended June 30, 2000.

         10.27    Sixth Amendment to Third Amended and Restated Credit Agreement
                  dated May 15, 2000 by among the Registrant, the Banks named
                  therein and California Bank & Trust, as agent for the
                  Banks--incorporated by reference to exhibit filed with the
                  Registrant's Report on Form 10-Q for the quarter ended June
                  30, 2000.

         10.28    Seventh Amendment to Third Amended and Restated Credit
                  Agreement dated June 22, 2000 by and among the Registrant, the
                  Banks named therein and California Bank & Trust, as Agent for
                  the Banks--incorporated by reference to exhibit filed with the
                  Registrant's Report on Form 10-Q for the quarter ended June
                  30, 2000.

         10.29    Securities Purchase Agreement dated July 6, 2000 between the
                  Registrant and The Retirement Systems of Alabama--incorporated
                  by reference to exhibit filed with the Registrant's Report on
                  Form 10-Q for the quarter ended September 30, 2000.

         10.30    Stock Purchase Agreement dated July 17, 2000 between the
                  Registrant and Interx Media PLC--incorporated by reference to
                  exhibit filed with the Registrant's Report on Form 10-Q for
                  the quarter ended September 30, 2000.

         10.31    Fourth Amended and Restated Credit Agreement dated as of
                  October 10, 2000, among Bell Microproducts, the listed
                  financial institutions and California Bank & Trust, as
                  agent--incorporated by reference to exhibit filed with the
                  Registrant's Report on Form 10-Q for the quarter ended
                  September 30, 2000.

         10.32*   Management Retention Agreements between the Registrant and the
                  following executive officers of the Registrant: Philip M.
                  Roussey, Brian J. Clark, Gary Gammon and Robert J.
                  Sturgeon--incorporated by reference to Exhibit 10.32 to the
                  Registrant's Annual Report on Form 10K for the year ended
                  December 31, 2000.

         10.33*   Employment Agreement dated as of October 18, 2000, between the
                  Registrant and James E. Ousley--incorporated by reference to
                  Exhibit 10.33 to the Registrant's Annual Report on Form 10K
                  for the year ended December 31, 2000.

         10.34*   Management Retention Agreement dated May 7, 2001 between the
                  Registrant and Benedictus Borsboom - incorporated by reference
                  to Exhibit 10.1 to the Registrant's Quarterly Report on Form
                  10Q for the quarter ended March 31, 2002

         10.35*   1998 Stock Plan, as amended and Restated through February 20,
                  2002 - incorporated by reference to Exhibit 10.2 to the
                  Registrant's Quarterly Report on Form 10Q for the Quarter
                  ended March 31, 2002.

         10.36*   Amendment to Employment Agreement dated as of July 1, 1999
                  between the Registrant and W. Donald

                                       63

<PAGE>

                  Bell date as of April 30, 2002 - incorporated by reference to
                  Exhibit 10.1 to the Registrant's Quarterly Repot on Form 10Q
                  for the quarter ended September 30, 2002.

         10.37*   Executive Employment and Non-Compete Agreement dated as of
                  August 13, 2002 between the Registrant and James E. Illson -
                  incorporated by reference to Exhibit 10.2 to the Registrant's
                  Quarterly Report on Form 10-Q for the quarter ended September
                  30, 2002.

         10.38*   Management Retention Agreements dated as of August 6, 2002
                  between the Registrant and the following executive officers:
                  W. Donald Bell, Ian French, Nick Ganio, Richard J. Jacquette,
                  Phillip M. Roussey and Robert J. Sturgeon - incorporated by
                  reference to Exhibit 10.3 to the Registrant's Quarterly Report
                  on Form 10-Q for the quarter ended September 30, 2002.

         10.39    Syndicated Credit Agreement effective as of December 2, 2002
                  by and among Ideal Hardware Limited, Bell Microproducts Europe
                  Export Limited, BM Europe Partners C.V., Bell Microproducts
                  Europe BV, Bank of America, N.A. and certain banks and
                  financial institutions.

         10.40    Syndicated Composite Guarantee and Debenture effective as of
                  December 2, 2002 by and among Ideal Hardware Limited, certain
                  other companies listed and Bank of America, N.A.

         10.41    Priority Agreement effective as of December 2, 2002 by and
                  among Bell Microproducts Limited, National Westminster Bank
                  PLC and Bank of America, N.A.

         10.42    First Union National Bank Loan and Security Agreement dated
                  May 14, 2001 - incorporated by reference to Exhibit 10.1 to
                  the Registrant's Quarterly Report on Form 10-Q for the quarter
                  ended June 30, 2001.

         10.43    First Amendment to Loan and Security Agreement dated as of
                  December 31, 2002 by and among the Registrant, certain
                  subsidiaries of the Registrant, certain financial institutions
                  and Congress Financial Corporation.

         10.44*   Service Agreement dated July 26, 2000 between the Registrant
                  and Ian French.

         21.1     Subsidiaries of the Registrant

         23.1     Consent of PricewaterhouseCoopers LLP, independent accountants

         24.1     Power of Attorney (Contained on Signature page of this Form
                  10-K).

         99.1     Certification of Chief Executive Officer Pursuant to Section
                  906 of Sarbanes-Oxley Act of 2002.

         99.2     Certification of Chief Financial Officer Pursuant to Section
                  906 of Sarbanes-Oxley Act of 2002.

----------------
         *    Management contract or compensatory plan, contract or arrangement
              required to be filed as an exhibit to this Form 10-K.

                                       64