SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                    FORM 10-K
                        FOR ANNUAL AND TRANSITION REPORTS
                     PURSUANT TO SECTIONS 13 OR 15(d) OF THE
                         SECURITIES EXCHANGE ACT OF 1934

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

        For the fiscal year ended December 31, 1997

                                       OR

[  ]    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
        EXCHANGE ACT OF 1934 [NO FEE REQUIRED]

        For the transition period from            to
                         Commission file number 0-17156

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

           Delaware                                           95-4172359
(State or other jurisdiction of                           (I.R.S. Employer
  incorporation or organization)                          Identification No.)

                           200 Continental Boulevard
                          El Segundo, California               90245-0948
                     (Address of principal executive offices)  (Zip Code )


Registrant's telephone number, including area code: (310) 615-3080

Securities registered pursuant to Section 12(b) of the Act: None.

Securities registered pursuant to Section 12(g) of the Act: Common Stock, $0.01
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 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. [X]

     As of March  30,1998,  the  aggregate  market value of voting stock held by
non-affiliates  of the  Registrant  based on the last sales price as reported by
the Nasdaq  National  Market  System was  $89,536,602   (29,845,534  shares at a
closing price of $3.00).

     As of March 30, 1998, the Registrant had 80,212,918  shares of Common Stock
outstanding.
                       Documents Incorporated By Reference

Portions of the  Registrant's  definitive  Proxy  Statement  for its 1998 annual
meeting of stockholders are incorporated by reference into Part III.


<PAGE>

<TABLE>
<CAPTION>

                                TABLE OF CONTENTS




                                                                                                          PAGE
                                     PART I
<S>                                                                                                       <C>

Item  1. Business.....................................................................................     1
Item  2. Properties...................................................................................     8
Item  3. Legal Proceedings............................................................................     8
Item  4. Submission of Matters to a Vote of Security Holders..........................................    10

                                     PART II

Item  5. Market for the Registrant's Common Equity and Related Stockholder Matters....................    11
Item  6. Selected Financial Data......................................................................    12
Item  7. Management's Discussion and Analysis of Financial Condition and Results of Operations........    13
Item  8. Financial Statements and Supplementary Data..................................................    24
Item  9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.........    45

                                    PART III

Item 10. Directors and Executive Officers of the Registrant...........................................    46
Item 11. Executive Compensation.......................................................................    46
Item 12. Security Ownership of Certain Beneficial Owners and Management...............................    46
Item 13. Certain Relationships and Related Transactions...............................................    46

                                     PART IV

Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K.............................    46

</TABLE>


<PAGE>


               SPECIAL NOTE REGARDING FORWARD-LOOKING INFORMATION



         Certain  statements  contained  in this  Annual  Report  on Form  10-K,
including  without  limitation   statements  containing  the  words  "believes,"
"anticipates,"    "expects"   and   words   of   similar   import,    constitute
"forward-looking statements" within the meaning of Section 27A of the Securities
Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934,
as amended.  Such  forward-looking  statements  involve known and unknown risks,
uncertainties and other factors which may cause the actual results,  performance
or achievements of Merisel,  Inc. (the "Company"),  or industry  results,  to be
materially  different  from any  future  results,  performance  or  achievements
expressed or implied by such forward-looking statements.  These factors include,
but are not limited to, the effect of (i) economic  conditions  generally,  (ii)
industry  growth,  (iii)  competition,  (iv) liability and other claims asserted
against the Company,  (v) the loss of  significant  customers  or vendors,  (vi)
operating margins, (vii) business disruptions, (viii) the ability to attract and
retain qualified personnel,  and (ix) other risks detailed in this report. These
factors  are  discussed  in more detail  elsewhere  in this  report,  including,
without  limitation,  under the captions  "Business",  "Legal  Proceedings"  and
"Management's  Discussion  and  Analysis of Financial  Condition  and Results of
Operations". Given these uncertainties, readers are cautioned not to place undue
reliance  on  such  forward-looking   statements.   The  Company  disclaims  any
obligation to update any such factors or to publicly  announce the result of any
revisions to any of the forward-looking  statements contained or incorporated by
reference herein to reflect future events or developments.


<PAGE>



                                     PART I

Item 1. Business.

Overview

Merisel,  Inc., a Delaware  corporation and a holding company (together with its
subsidiaries,  "Merisel" or the "Company"), is a leading distributor of computer
hardware, networking equipment and software products. Through its main operating
subsidiary,  Merisel Americas,  Inc. ("Merisel Americas"),  and its subsidiaries
the Company  markets  products and  services  throughout  North  America and has
achieved operational  efficiencies that have made it a valued partner to a broad
range  of  computer  resellers,   including   value-added   resellers  ("VARs"),
commercial  resellers/dealers,  and  retailers.  The Company  also  operates the
Merisel  Open  Computing  Alliance  (MOCA(TM)),  which  primarily  supports  Sun
Microsystems'  UNIX(R)-based  product sales and  installations.  The Company was
incorporated in 1980 as Softsel,  Inc. and changed its name to Merisel,  Inc. in
1990 in connection with the acquisition of Microamerica, Inc.

At December 31, 1997,  Merisel  stocked more than 25,000 products from more than
500 of the  computer  hardware and software  industry's  leading  manufacturers,
including  American  Power  Conversion,  Apple,  Compaq,  Corel,  Creative Labs,
Digital Equipment Corporation, Epson America, Hewlett-Packard, IBM/Lotus, Intel,
Iomega,  Kingston  Technology,  Lexmark,  Microsoft,  NEC Technologies,  Novell,
Okidata, Seagate, Sony, Sun Microsystems, Symantec, 3Com/U.S. Robotics, Toshiba,
ViewSonic  and  Western  Digital.  Merisel  sells  products  to more than 45,000
computer  resellers  throughout  North  America,  including  VARs,  large retail
chains, commercial resellers/dealers,  computer superstores, mass merchants, Sun
Microsystems resellers,  system integrators and original equipment manufacturers
("OEMs").  The breadth of Merisel's  product  line,  together with its extensive
distribution network, enables the Company to provide its customers with a single
supply source and prompt product delivery.

During 1996,  Merisel  determined  to sell  substantially  all of its assets and
operations  outside  of North  America  and  pursued  a  business  plan that was
developed to address liquidity and capital structure issues by controlling costs
and  curtailing  non-essential  capital  expenditures  as well as  disposing  of
assets.  In March  1996,  effective  as of  January 1,  1996,  Merisel  sold its
Australian operations to Tech Pacific Holdings Ltd. ("Tech Pacific"). On October
4,  1996,  Merisel  completed  the sale of  substantially  all of its  European,
Mexican and Latin American businesses (such businesses are referred to herein as
"EML") to CHS  Electronics,  Inc.  ("CHS").  In addition,  as of March 28, 1997,
Merisel  completed  the sale of  substantially  all of the  assets of its wholly
owned  subsidiary,  Merisel  FAB,  Inc.  ("Merisel  FAB"),  which  operated  the
ComputerLand  Franchise and Datago Aggregation  Business,  to SYNNEX Information
Technologies,  Inc. ("Synnex"). On April 12, 1997, the Company sold its minority
interest in a corporation  engaged in the distribution of computer  hardware and
software  products  in the former  Soviet  Union.  As a result of the  foregoing
transactions,   the  Company's   operations  are  now  focused   exclusively  on
distribution in North America.  The Company's sales were $3.85 billion for 1997,
excluding  revenues from  operations sold in the first quarter of 1997. Of these
sales, 80% were generated in the United States and 20% were generated in Canada.
See "Management's Discussion and Analysis of Financial Condition and Results of
Operations."

In 1997, the Company pursued a business strategy (the "1997 Business  Strategy")
focused on profitable  North  American  revenue growth and improving its capital
structure.   Under  the  1997  Business   Strategy,   Merisel   concentrated  on
strengthening and building its sales  infrastructure  and controlling  operating
expenses.  Other  priorities  in 1997  included  continuing  efforts  to achieve
operational   excellence,   addressing   financial   controls  and  policies  by
emphasizing  margin  improvements and tight expense control,  and implementing a
strategy  focused on the United States and Canada.  The Company's  1998 business
strategy calls for improving  margins and profitably  growing the business,  and
incorporates a North  American  focus along with the following key  initiatives:
implementing    the   SAP    operating    system   in   the   U.S.;    enhancing
configuration/channel  assembly capabilities;  and expanding electronic commerce
services.

Also during 1997, the Company  pursued and completed a debt  restructuring  plan
that resulted in the  repayment of  substantially  all of its operating  company
indebtedness  with  the  proceeds  of a  $152  million  equity  investment.  See
"Management's  Discussion  and  Analysis of Financial  Condition  and Results of
Operations."



<PAGE>


The Industry

The computer products  distribution industry is growing rapidly throughout North
America,  with the rise in demand for computer products and the increased use of
wholesale  distribution  by  manufacturers  for sales support of their products.
There are two types of  businesses  that assist  manufacturers  in getting their
products  to market:  those that sell  directly to end users  ("resellers")  and
those that sell to resellers ("wholesale distributors").

Resellers sell directly to end users, such as large corporate  accounts,  small-
to  medium-sized  businesses  and home users.  Resellers fall into the following
channel segments: VAR, commercial reseller or dealer, and retailer.  VARs, which
comprise one of the largest channel  segments,  typically add value by combining
proprietary  software and/or services with  off-the-shelf  hardware or software.
OEMs and systems integrators fall under the VAR channel segment.

Wholesale distributors sell to resellers. Distributors generally purchase a wide
range of products in bulk directly from  manufacturers and then ship products in
smaller   quantities  to  many  different  types  of  resellers.   With  product
proliferation and increasingly complex technologies, resellers are becoming more
dependent on  wholesale  distributors  to provide  value-added  services,  which
simplify and/or increase profit potential for reseller businesses.  As a result,
wholesale distributors are increasingly expanding their core competencies beyond
product  distribution  to  include  offerings  such  as  configuration,  channel
assembly,  financial  services,  training,  marketing  services,  telemarketing,
electronic services and technical support.

Business Strategy

Merisel offers leading products and services to resellers at competitive prices.
The Company provides cost-effective customer service to targeted customer groups
through its inside and field sales forces and specialized marketing programs. In
1997, the Company continued to actively pursue sales via "electronic  commerce,"
which  encompasses  the  Internet  and  other  electronic  interfaces  to market
products,  establish accounts and take orders at typically lower operating costs
than traditional sales methods.

Providing Leading Products and Services.  The Company's  objective is to offer a
broad range of leading brands in each of the product  categories it carries.  By
stocking a broad mix of products,  the Company  meets the needs of resellers who
prefer to deal with a single source for many of their product requirements.  The
Company continually evaluates new products, the demand for current products, and
its overall  product mix and seeks to develop  distribution  relationships  with
suppliers of products that enhance the Company's product offerings.  The Company
believes that the size of its reseller customer base,  combined with the breadth
and  quality of its  marketing  support  programs,  give  Merisel a  competitive
advantage over smaller,  regional  distributors  in developing  and  maintaining
supplier relationships.

Customer  Service  and  Satisfaction.  Merisel  believes  that a high  level  of
customer  satisfaction is important to achieve and maintain  success in the very
competitive  computer  products  distribution  industry.  The  Company  measures
customer  satisfaction  by such  standards as accuracy and efficiency in product
delivery and the provision of comprehensive  services and  information.  Merisel
strives on an ongoing  basis to improve its  operational  processes  in order to
achieve increasingly high levels of customer satisfaction.

Resellers can place their orders via SELline,  Merisel's remote  order-entry and
information  service,  accessible via the Internet from Merisel's  corporate Web
site.  For larger  customers,  the Company has also  installed  electronic  data
interchange  ("EDI") systems,  which allow  participating  customers to directly
access Merisel's computer system for order processing and account information.

Targeting Customer Groups. Merisel serves a variety of reseller channels,  which
have diverse product, financing and support requirements.  Merisel was among the
first major wholesale distributors in the industry to offer its various customer
groups a channel-dedicated  sales force as well as customized product offerings,
financing  programs and marketing and technical support  programs,  all of which
are  tailored to address  the  differing  needs of these  customer  groups.  The
Company  intends to  continue  focusing on the  profitability  of the markets it
serves to  identify  customer  opportunities  and  develop  sales and  marketing
programs that serve these groups more effectively.



<PAGE>


Products

Merisel  distributes more than 25,000 hardware and software products for MS-DOS,
Windows,   NT,   OS/2,   Macintosh   and  Sun   Microsystems/UNIX(R)   operating
environments.  Hardware  products include  computer  components such as servers,
printers,  monitors,  disk drives and other  storage  devices,  modems and other
connectivity  devices,  routers,  switching  products,  communication/networking
(local and wide area) products,  plug-in boards, and accessories.  The Company's
software mix includes  business  application  software  for  spreadsheets,  word
processing  programs,  desktop  publishing  and graphics  packages,  educational
software and games, as well as a broad offering of operating systems,  including
local area networks, advanced language, and utility products.

In fiscal 1997, net sales of hardware and accessories for the Company's  ongoing
U.S. and Canadian  distribution  businesses  accounted for  approximately 77% of
sales, while software product sales accounted for the remaining 23% of sales.

Manufacturers and Manufacturer Services

Merisel has established and developed long-term business relationships with many
of the leading  manufacturers in the computer industry.  The Company's suppliers
include American Power Conversion,  Apple, Compaq, Corel, Creative Labs, Digital
Equipment Corporation, Epson America, Hewlett-Packard, IBM/Lotus, Intel, Iomega,
Kingston Technology,  Lexmark,  Microsoft,  NEC Technologies,  Novell,  Okidata,
Sony, Sun Microsystems,  Symantec,  3Com/U.S.  Robotics,  Toshiba, ViewSonic and
Western Digital.  Merisel is one of only three distributors in the United States
authorized to sell Sun Microsystems products.

Merisel enters into written  distribution  agreements with the  manufacturers of
the products it distributes.  As is customary in the industry,  these agreements
usually provide non-exclusive  distribution rights and often contain territorial
restrictions  that  limit  the  countries  in  which  Merisel  is  permitted  to
distribute the products.  The agreements  generally  provide  Merisel with stock
balancing and price protection  provisions which partially reduce Merisel's risk
of loss due to slow-moving inventory, supplier price reductions, product updates
or  obsolescence.  The Company's  agreements,  which generally have a term of at
least one year,  may contain  minimum  purchase  amounts and  generally  contain
provisions permitting earlier termination by either party upon written notice.

Although Merisel regularly stocks products and accessories supplied by more than
500 manufacturers,  69% of net sales for the North American Business in 1997 (as
compared to 60% in 1996 and 55% in 1995) was derived from  products  supplied by
Merisel's  10  largest  vendors,  with  the  sale of  products  manufactured  by
Microsoft,   Hewlett-Packard,   Sun  Microsystems  and  Compaq   accounting  for
approximately  15%,  12%, 12%, and 10%,  respectively,  of net sales in 1997 (as
compared to 14%, 9%, 10% and 10%, respectively, in 1996, and 18%, 6%, 7% and 8%,
respectively,  in 1995).  Because reseller customers often prefer to deal with a
single  source  for many of their  product  needs,  the loss of the  ability  to
distribute  a  particularly  popular  product  could  result  in losses of sales
unrelated to the product.  The loss of a direct relationship between the Company
and any of its key  suppliers  could  have an  adverse  impact on the  Company's
business and financial results.

Merisel  provides its  manufacturers  with access to one of the largest bases of
computer  resellers in North America,  as well as the means to reduce inventory,
credit,  marketing,  and overhead costs typically  associated  with  maintaining
direct reseller relationships.  Through its product marketing group, the Company
develops and  implements  promotional  programs for  specific  manufacturers  to
increase  customer  purchasing depth and breadth.  Promotional  programs include
bundle offers,  growth goal incentives,  and reseller training events as well as
channel communication vehicles such as target direct mail, fax and advertising.

In  addition,  the  Company  provides  manufacturers  with  the  opportunity  to
participate in Merisel's  Softeach  computer products training forum. Each year,
more than 4,000  resellers  and dozens of leading  manufacturers  gather for two
days  of  intensive,   small  group  seminars  in  cities  across  the  country.
Manufacturers  can take  advantage  of this forum to train  resellers  on how to
market their products and increase sales.


<PAGE>


Customers and Customer Services

In 1997,  Merisel  sold  products  and  services  to more than  45,000  computer
resellers  throughout North America.  Merisel's  smaller  customers often do not
have  the   resources  to   establish  a  large  number  of  direct   purchasing
relationships  or stock  significant  product  inventories,  nor can  they  meet
manufacturers'  minimum  purchase  requirements  or  obtain  acceptable  credit.
Consequently,  they tend to purchase a high  percentage  of their  products from
distributors  such as Merisel,  which can meet their inventory needs quickly and
efficiently.   Larger  resellers  often  establish  direct   relationships  with
manufacturers  for their more  popular  products  but utilize  distributors  for
slower-moving  products and for fill-in orders of fast-moving products which may
not be  available  on a timely  basis  from  manufacturers.  No single  customer
accounted for more than 4% of Merisel's net sales in 1997, 1996 or 1995.

Single Source  Provider.  Merisel offers computer  resellers a single source for
more than  25,000  competitively  priced  hardware  and  software  products.  By
purchasing from Merisel,  the reseller only needs to comply with a single set of
ordering,  billing and  product  return  procedures  and may also  benefit  from
attractive  volume  pricing and  third-party  financing  programs.  In addition,
resellers are generally  allowed,  within specified time limits and/or specified
volume  limits,  to return  products  for  credit to be applied  against  future
purchases from Merisel.

Prompt Delivery.  In the United States and Canada,  orders received by 5:00 p.m.
local time are typically shipped the same day,  provided the required  inventory
is in stock.  Merisel maintains sufficient inventory levels in the United States
to  fill  consistently  in  excess  of 95% of all  units  ordered  on the day of
receipt.  As  part  of  a  continuing  effort  to  improve  accuracy,  Merisel's
Information and Logistical  Efficiency  System  ("MILES") was first installed in
the Company's  Atlanta  warehouse in early 1994. By 1996,  installation  of this
custom  computerized  warehouse  management  system was completed in all nine of
Merisel's North American warehouses.  The successful implementation of MILES has
resulted in significant  improvements in inventory and shipping  accuracy rates.
The Company believes that its shipping  accuracy rates are currently the highest
in the industry at 99.993%.

Merisel  typically  delivers  products from its regional  warehouses via Federal
Express, United Parcel Service, and other common carriers. Most customers in the
United States receive orders within one or two working days of shipment. Merisel
also provides customer-paid  overnight air handling upon request. These services
allow  resellers  to minimize  inventory  investment  and serve their  customers
responsively. For larger customers in the United States, Merisel also provides a
fulfillment service to ship orders directly to resellers' customers which speeds
delivery and further minimizes reseller inventories.

Financing Programs.  Merisel's credit policy for qualified resellers  eliminates
the need for them to establish multiple credit relationships with a large number
of  manufacturers.  In  addition,  the  Company  arranges  floor  plan and lease
financing  through  a number of  credit  institutions  and  allows  credit  card
purchases by qualified customers.  To allow certain resellers to purchase larger
orders in the United States, the Company can arrange alternative  financing such
as escrow programs and special bid financing.

Information  Services.  Merisel provides its reseller customers with a series of
publications  containing detailed information on products,  pricing,  promotions
and  developments  in the industry.  Merisel also publishes the Merisel  Product
Catalog,  which lists Merisel's current product offerings.  Merisel's  corporate
Web site offers technical product information on thousands of products and links
to more than 400 of the industry's leading  manufacturers.  Resellers can obtain
current  information  on  programs  and  services,   daily  product  promotions,
strategic  Merisel  announcements  and  the  Merisel  Open  Computing  Alliance.
Customers can communicate  with Merisel  Customer  Service via e-mail,  download
return  authorization  and system return forms, and track product shipments with
links to Federal Express and UPS. Merisel's Web site also offers secure, 24-hour
access to SELline,  Merisel's  remote  order-entry and information  service,  so
resellers  can place their  product  orders  through the  Company's  Web site at
www.merisel.com.  SELline  provides  resellers with real-time access to pricing,
credit information, technical descriptions, product availability and promotional
information.



<PAGE>


Training and Technical Support. Through Merisel's Educational Services offering,
resellers  and their  customers  can choose from a broad  selection  of training
solutions  on  UNIX(R),   networking  systems,  the  Internet,   intranet,  data
communications  and  mainstream  software  applications.  Merisel also  provides
training and product  information  to resellers  through  Softeach,  a series of
manufacturer-hosted  computer  products  training  forums.  Each year, more than
4,000  resellers  and  dozens of  leading  manufacturers  gather for two days of
intensive,  small group  seminars in cities  across the  country.  In  addition,
Merisel's Tech Trax Technology Training Seminars are designed to provide Merisel
resellers  with   technology-focused   training  on  how  to  sell  and  support
profitable, high-end solutions.

Merisel provides resellers with direct access to the Company's technical support
engineers  through  a  dedicated  hot  line.  Resellers  can take  advantage  of
specialized  technical  support for virtually all product lines sold by Merisel.
In addition,  Merisel's engineers provide regular product training for Merisel's
sales  representatives  to help them increase their product  knowledge and their
ability to answer resellers' questions.

Sales and Marketing

During 1997, the Company's sales organization for its core distribution business
in the United States was organized  into four sales  divisions to serve the VAR,
retail,   commercial   reseller/dealer  and  Sun  Microsystems  reseller  market
segments. The VAR division offers specialized services and technical products to
value-added  resellers,  system integrators and OEMs who offer service,  support
and  consulting  to  clients  in  addition  to selling  computer  products.  The
Company's MOCA(TM) division is dedicated primarily to selling and supporting Sun
Microsystems and  Sun-complementary  UNIX-based  products through its own sales,
marketing,  operations,  and technical support departments.  The retail division
primarily  services  mass  merchants  and  computer  chain  stores,   while  the
commercial  reseller/dealer  division offers direct  fulfillment  services,  EDI
transaction  support  and  dedicated  field and inside  support to  large-volume
national accounts.

The Company's sales department for its  distribution  business in Canada is also
structured  to reflect the various  customer  segments.  In February  1997,  the
Company launched its MOCA(TM) division in Canada.

The Company's sales force is composed of field sales  representatives who manage
relations with the larger accounts and inside sales  representatives who solicit
and receive product orders and answer customer inquiries.  When a customer calls
Merisel, screen synchronization  technology automatically causes a sales profile
to  appear  on the  sales  representative's  computer  screen.  Customer  orders
generally are placed via a toll-free  telephone  call to Merisel's  inside sales
representatives and, in the United States, are entered on Merisel's SalesNet for
Windows  order-entry system, a proprietary local area network created by Merisel
to speed the process of taking and  processing  orders.  Using the  SalesNet for
Windows database,  sales  representatives can immediately enter customer orders,
obtain  descriptive  information  regarding  products,  check inventory  status,
determine customer credit  availability and obtain special pricing and promotion
information.

In 1993, the Company introduced its Vantage Loyalty incentive program to provide
increased services,  support and better pricing to larger volume customers.  The
Vantage  program was enhanced in late 1996 with the launch of the "Vantage Visa"
card as a frequent  buyer  program to reward  resellers  for more  frequent  and
higher volume purchases.  The Vantage Visa program offers unique promotional and
bundling opportunities to resellers.

The Company is continuing to expand its participation in "electronic  commerce",
which  represents   growing  sales   opportunities  in  the  computer   products
distribution  industry.  Electronic  commerce is the overall term applied to the
development  and  maintenance  of  business-to-business  relationships  via such
electronic  services as EDI,  on-line  systems,  electronic mail, and Web sites.
Electronic commerce can simplify account set-up, ordering, shipping, and support
and thereby  facilitate  sales while it decreases  both  selling and  purchasing
costs. Electronic commerce is becoming an increasingly significant factor as the
computer products distribution industry evolves.


<PAGE>


Merisel utilizes EDI systems to allow large-volume customers to communicate with
the Company's computer system directly for order processing and account data. In
addition,  Merisel began to actively  promote its electronic  commerce  offering
with the  introduction of SELline in 1994. This system was the industry's  first
graphical  user  interface  ("GUI")  application  to allow  customers  to access
specific,  customized  information  directly  from various  databases  owned and
maintained  by the  Company.  This  information  includes  access  to  real-time
pricing,  credit,  product  descriptions and availability  information.  SELline
usage increased with the 1996 introduction of the Company's World Wide Web site,
which  allows  customers  Internet  access  to  key  technical  information  and
hyperlink access to more than 400 manufacturer Internet sites from one location.
In November  1996,  the Web site enabled  Merisel to introduce the  distribution
industry's first national  Web-based  order-entry system that features a SELline
interface for 24-hour, secure order processing.  Since its introduction in 1994,
SELline has had more than 36,000 customer enrollees in the U.S. and Canada.

Configuration and Channel Assembly

Configuration  involves the assembly of computer  products from multiple vendors
into a  single  unit or  system,  which  conforms  to the  specific  needs of an
individual end user. While at one time  configuration was a very minor aspect of
a  wholesale  distributor's  business,  it has  become  a  major  initiative  as
manufacturers  outsource  this segment of production to wholesale  distributors.
Channel  assembly  involves the  distributor at an earlier phase of the assembly
process,  is  conducted  on a  vendor-specific  basis and  entails  high-volume,
standardized production.

Through 1996, Merisel  outsourced its configuration  business to two third-party
providers, the Cerplex Group, Inc. and Vanstar Corporation. In 1997, the Company
took these responsibilities in-house and currently performs system configuration
in its  Hayward,  California  and  Toronto,  Canada  warehouse  facilities.  The
Hayward, California facility handles all of Merisel's configuration requirements
for its resellers throughout North America.

Merisel intends to meet the evolving channel assembly and configuration needs of
its business  partners as the demand for such  services  continues to grow.  The
Company has dedicated  resources assigned to these important  initiatives and is
making  ongoing  investments  in  systems  and  facilities  for  such  purposes.
Merisel's  current  strategy  calls  for the  Company  to  continue  to  perform
high-end,  custom  configuration in its Hayward and Toronto  facilities,  and to
attain  ISO9002   certification  for  all  channel  assembly  and  configuration
opportunities.  The Company  will  continue to  evaluate  market  trends and its
business  partner  needs and is  planning  on opening  additional  strategically
located facility as needed.

Operations, Distribution and Investment in Systems

Locations.  At December 31, 1997, the Company operated nine distribution centers
throughout North America:  seven in the United States and two in Canada.  All of
these distribution centers are leased.

Systems.  Merisel has made  significant  investments  in advanced  computer  and
warehouse  management systems for its North American operations to support sales
growth  and  improve  service  levels.  All of  Merisel's  nine  North  American
warehouses utilize the MILES  computerized  warehouse  management system,  which
uses infrared bar coding and advanced  computer hardware and software to improve
shipping,  receiving and picking  accuracy  rates.  See  "Customers and Customer
Services - Prompt Delivery" above.

<PAGE>

Merisel is in the process of converting its North American operations to the SAP
client/server   operating  system.  SAP  is  an  enterprise-wide   system  which
integrates all functional areas of the business including order entry, inventory
management and finance in a real-time  environment.  The Company began designing
the new system in 1993 and converted its Canadian operations from a mainframe to
the SAP  client/server  operating  system  in  August  1995.  The new  system is
designed to provide greater transaction functionality,  flexibility,  and custom
pricing  applications.  In the early  implementation  stages,  the  Canadian SAP
system produced results and response times below the Company's expectations. The
response  time and capacity  limitations  of the Canadian SAP system  prompted a
delay in the U.S.  implementation of SAP, and related operating results added to
Merisel's fourth quarter 1995 net operating loss. See  "Management's  Discussion
and  Analysis of  Financial  Condition  and Results of  Operations--  Results of
Operations."  This system is now fully  implemented in Canada,  is performing to
expectations  and for more than two years has been operating with essentially no
unscheduled downtime.

The Company has resumed the  conversion of its United  States  operations to the
SAP  system.  In the fourth  quarter of 1997,  the Company  completed  the first
planning phase of the U.S. SAP system  implementation  and is proceeding  with a
plan to complete the  implementation  in late 1998 or early 1999. The design and
implementation  of these new systems are complex  projects  and involve  certain
risks.  As a result,  the United States system  implementation  could be delayed
beyond 1998.  However,  Merisel  believes that the stability and availability of
its Canadian  system will serve as an advantage by providing a working system on
which to test and fine-tune the Company's North American  protocols.  Until such
implementation,  the Company will continue to modify its existing  United States
systems and may experience  difficulty in processing  transactions,  which could
adversely affect operating income and cash flows. See  "Management's  Discussion
and Analysis of Financial  Condition  and Results of  Operations - Liquidity and
Capital Resources."

Competition

Competition  in  the  computer  products   distribution   industry  is  intense.
Competitive factors include price, brand selection,  breadth and availability of
product  offering,  purchasing  arrangements,  financing  options,  shipping and
packaging accuracy,  speed of delivery, level of training and technical support,
marketing services and programs, and ability to influence a buyer's decision.

Certain of Merisel's  competitors have substantially greater financial resources
than Merisel.  Merisel's principal competitors include large United States-based
distributors and aggregators such as Gates/Arrow, Inacom, Ingram Micro, MicroAge
and Tech Data, as well as regional distributors and franchisers.

Merisel  also  competes  with  manufacturers  that  sell  directly  to  computer
resellers,  sometimes  at prices  below  those  charged by Merisel  for  similar
products. The Company believes its broad product offering, product availability,
prompt  delivery  and  support  services  may  offset  a  manufacturer's   price
advantage.  In addition,  many  manufacturers  concentrate their direct sales on
large computer  resellers  because of the relatively high costs  associated with
dealing with small-volume computer reseller customers.

Variability of Quarterly Results and Seasonality

Historically,  the  Company  has  experienced  variability  in its net sales and
operating margins on a quarterly basis and expects these patterns to continue in
the  future.   Management  believes  that  the  factors  influencing   quarterly
variability  include:  (i) the overall  growth in the  computer  industry;  (ii)
shifts in short-term demand for the Company's products resulting,  in part, from
the introduction of new products or updates of existing products;  and (iii) the
fact that  virtually all sales in a given  quarter  result from orders booked in
that quarter.  Due to the factors noted above, as well as the dynamic  qualities
of the computer  products  distribution  industry,  the  Company's  revenues and
earnings  may be subject to  material  volatility,  particularly  on a quarterly
basis.

Additionally,  in the U.S.  and Canada,  the  Company's  net sales in the fourth
quarter  have  been  historically  higher  than  in its  other  three  quarters.
Management believes that the pattern of higher fourth quarter sales is partially
explained by customer buying patterns relating to calendar year-end business and
holiday  purchases.  As a result of this pattern,  the Company's working capital
requirements  in the fourth  quarter  have  typically  been  greater  than other
quarters.  Net sales in the Canadian  operations are also historically strong in
the first quarter of the fiscal year,  which is primarily due to buying patterns
of Canadian  government  agencies.  See  "Management's  Discussion  and Analysis
Financial   Condition   and  Results  of  Operations  -  Liquidity  and  Capital
Resources."

<PAGE>

Employees

As of December 31, 1997,  Merisel had  approximately  2,300  employees.  Merisel
believes it has good relations with its employees.

Environmental Compliance

The Company believes that it is in substantial compliance with all environmental
laws applicable to it and its operations.

Item 2. Properties.

At December  31,  1997,  the Company  maintained  distribution  centers in seven
locations  throughout  the United States and in two locations in Canada.  All of
the  Company's  distribution  centers  are  leased.  Additionally,  the  Company
maintains  United  States  administrative  and  sales  offices  in  El  Segundo,
California;  Marlborough,  Massachusetts;  and Cary, North Carolina,  as well as
Canadian administrative and sales offices in Toronto, Ontario; Montreal, Quebec;
and Vancouver, British Columbia.

The  Company's  headquarters  are located in El Segundo,  California,  where the
Company  owns  a  112,500   square-foot   facility  and  leases  another  50,700
square-foot facility. In addition, the Company owns 29 acres of undeveloped land
in Cary,  North  Carolina.  The Company  believes  that its  facilities  provide
sufficient space for its present needs, and that additional  suitable space will
be available on reasonable terms, if needed.

Item 3. Legal Proceedings.

In June 1994, Merisel and certain of its officers and/or directors were named in
putative  securities class actions filed in the United States District Court for
the  Central  District  of  California,  consolidated  as  In re  Merisel,  Inc.
Securities  Litigation.  Plaintiffs,  who are seeking  damages in an unspecified
amount, purport to represent a class of all persons who purchased Merisel common
stock  between  November  8,  1993 and June 7, 1994 (the  "Class  Period").  The
complaint, as amended and consolidated, alleges that the defendants inflated the
market price of  Merisel's  common stock with  material  misrepresentations  and
omissions  during  the  Class  Period.  Plaintiffs  contend  that  such  alleged
misrepresentations   are  actionable  under  Section  10(b)  and  20(a)  of  the
Securities Exchange Act of 1934 and Rule 10b-5 promulgated thereunder. Following
the  granting  of  defendant's  first  motion to  dismiss on  December  5, 1994,
plaintiffs filed a second  consolidated and amended complaint December 22, 1994.
On April 3, 1995,  Federal  District  Judge Real  dismissed the  complaint  with
prejudice.  On August 8, 1997 the Court of Appeals  for the Ninth  Circuit  (the
"Court of Appeals")  reversed the  dismissal  and remanded the case to the trial
court.  On August 22,  1997,  the Company  filed a petition  for  rehearing  and
suggestion of rehearing en banc (the "Petition")  with the Court of Appeals.  On
January  30,  1998,  the Court of  Appeals  issued an order  amending  its prior
opinion and denying the Company's petitions for rehearing and rehearing en banc.
In light of this order,  the Federal  District Court has scheduled a hearing for
April 13, 1998.  The Company intends to defend itself vigorously against this
claim.

In January  1997,  the Company  received  notice that Tech Pacific had brought a
claim in the  Supreme  Court of New  South  Wales,  Sydney  Registry  Commercial
Division,  against Merisel;  its subsidiary Merisel Asia, Inc. ("Merisel Asia");
Patrick T. Woods, former managing director of Merisel Australia;  and Michael D.
Pickett,  former CEO and  Chairman of Merisel,  in a proceeding  captioned  Tech
Pacific Holdings Limited, v. Merisel,  Inc., et. al. In March 1996, Tech Pacific
purchased  Merisel  Pty,  Ltd  ("Merisel   Australia"),   Merisel's   Australian
subsidiary,  for a purchase  price of $9,900,000  pursuant to the Share Purchase
Agreement dated as of March 7, 1996 between  Merisel Asia and Tech Pacific.  The
claim asserts  various  breaches of  representations  and  warranties as well as
misleading  and deceptive  conduct under  relevant  provisions of Australian law
with respect to the financial  position of Merisel  Australia as  represented by
oral and written  disclosures.  The plaintiffs seek to recover specified damages
exceeding AUS$8.3 million (or approximately US$5.6 million as of March 27, 1998)
as well as  unspecified  damages  plus costs and  expenses  associated  with the
claim. The Company intends to defend itself  vigorously  against this claim. The
Company  does not  believe  that the  outcome  of the claim will have a material
adverse effect on the Company or its financial condition.



<PAGE>


Effective  April 14, 1997, the Company  entered into a Limited Waiver and Voting
Agreement (the "Limited Waiver  Agreement") with holders of more than 75% of the
outstanding principal amount of the Company's 12-1/2% Senior Notes due 2004 (the
"12.5% Note").  Pursuant to the terms of the Limited Waiver Agreement,  upon the
fulfillment of certain  conditions,  holders of the 12.5% Notes would  exchanged
(the "Exchange")  their 12.5% Notes for common stock of the Company (the "Common
Stock"), which would equal approximately 80% of the outstanding shares of Common
Stock immediately after the Exchange. The Limited Waiver Agreement also provided
that,  immediately  after the  consummation  of the Exchange,  the Company would
issue certain  warrants to the existing  holders of Common Stock. The conditions
to the Exchange  were not met and, on September  19,  1997,  the Limited  Waiver
Agreement terminated in accordance with its terms. See "Management's  Discussion
and Analysis of Financial  Condition  and Results of  Operations."  Prior to the
termination  of the Limited  Waiver  Agreement  on September  19, 1997,  certain
disagreements  arose  between the Company and certain  holders of the  Company's
12.5% Notes ("Noteholders") over the interpretation of the Company's obligations
under the Limited Waiver Agreement,  including that the Limited Waiver Agreement
did not require  either the Board of Directors  of the Company (the  "Board") or
the Company to recommend to its stockholders  proposals relating to the proposed
debt  restructuring  in which the  Noteholders  would have exchanged their 12.5%
Notes for Common Stock (the "Noteholder Restructuring") and that the Company was
not obligated to seek confirmation of a "prepackaged  plan" of reorganization by
means of the "cramdown" provisions of the Bankruptcy Code. On September 4, 1997,
the  Company  filed suit in  Delaware  Chancery  Court (the  "Delaware  Action")
seeking a declaratory judgment with respect to these issues. The Company intends
to  vigorously  prosecute  its  claim in the  Delaware  Action.  There can be no
assurance,  however, that the Company will ultimately be successful with respect
to its claims.

On September  11, 1997,  certain  Noteholders  filed an answer to the  Company's
complaint in the Delaware  Action as well as a counterclaim  against the Company
asserting claims for breach of the Limited Waiver  Agreement,  unjust enrichment
and a declaratory  judgment (the  "Noteholder  Suit").  The Noteholder Suit also
asserts  a claim  for  unjust  enrichment  against  Dwight  A.  Steffensen,  the
Company's Chief Executive  Officer.  The Noteholder Suit seeks damages in excess
of $100 million from the Company. The Company's alleged breaches include,  among
other  things,  that the  Board  changed  its  recommendation  with  respect  to
proposals  relating  to  the  Noteholder  Restructuring.  The  Company  and  Mr.
Steffensen  filed  motions  for  judgment  on the  pleadings  on October 7, 1997
seeking to have the  Noteholder  Suit  dismissed.  On January 5, 1998, the Court
denied  both  motions.  The Company and Mr.  Steffensen  believe  that they have
strong defenses to each of the claims  asserted and intend to defend  themselves
vigorously.  There can be no assurance,  however,  as to the ultimate outcome of
these claims.

In  addition,   on  September  19,  1997,  the  Company   received  notice  from
representatives  of  the  lenders  under  the  agreements  relating  to  certain
operating company debt that, in connection with the Company's  repayment of such
debt,  such  lenders  believe that they are owed  approximately  $2.7 million in
fees.  On October 31,  1997,  the Company  received a further  letter  demanding
payment of such fees.  The  Company  does not believe any such fees are owed and
has so notified  the  lenders.  There can be no  assurance,  however,  as to the
ultimate outcome of this claim.

On March 16, 1998, the Company  received a summons and  complaint,  filed in the
Superior  Court of  California,  County of Santa  Clara,  in a matter  captioned
Official  Unsecured  Creditors  Committee  of Media Vision  Technology,  Inc. v.
Merisel,  Inc. The plaintiffs  allege that certain  executive  officers of Media
Vision Technology,  Inc. ("Media Vision") committed fraud and breached fiduciary
duties owed to Media Vision  through,  interalia,  the improper  recognition and
reporting of sales, revenue and income and the failure to properly recognize and
report product returns during 1993 and 1994,  thereby  overstating the financial
condition of Media Vision as reflected in its financial statements for 1993. The
plaintiffs further allege that the Company aided, abetted, conspired and/or made
possible such acts and omissions of the Media Vision executives.  The plaintiffs
seek to recover compensatory damages,  including interest thereon, exemplary and
punitive  damages,  and costs including  attorneys' fees. The Company intends to
defend itself vigorously against this claim.

The  Company is  involved  in certain  other  legal  proceedings  arising in the
ordinary course of business, none of which is expected to have a material impact
on the financial condition or business of Merisel.


<PAGE>



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

On December 19, 1997, the Company held a special  meeting of  stockholders  (the
"Special  Meeting") for the following  purposes:  (i) to approve an amendment of
the Company's  certificate of incorporation to increase the number of authorized
shares of common stock from 50,000,000 to 150,000,000 (the "Charter Amendment");
(ii) to approve the issuance of up to  44,014,379  shares of common stock of the
Company to  Phoenix  Acquisition  Company  II,  L.L.C.  upon  conversion  of the
approximately $133.8 million outstanding  principal amount of a convertible note
dated September 19, 1997 issued by the Company and Merisel  Americas (the "Stock
Issuance");  and (iii) to approve the adoption of the Merisel,  Inc.  1997 Stock
Award and Incentive  Plan (the "1997 Plan").  With respect to such matters,  the
Company's  stockholders  cast  votes as  follows:  (i) to  approve  the  Charter
Amendment - 22,391,523 for, 1,204,461 against, 105,756 abstentions,  and 736,050
broker  non-votes;  (ii) to approve the Stock Issuance - 23,281,860 for, 314,742
against, 105,138 abstentions, and 736,050 broker non-votes; and (iii) to approve
the 1997 Plan - 22,380,381 for, 1,786,944 against, and 270,465 abstentions.



<PAGE>



                                     PART II


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

The Company's  Common Stock is traded on the National  Market tier of the Nasdaq
Stock Market under the symbol MSEL. The following table sets forth the quarterly
high and low sale  prices  for the  Common  Stock as  reported  by the  National
Market.
<TABLE>
<CAPTION>

                <S>                        <C>               <C>
                                            High              Low
                Fiscal Year 1996
                     First quarter....     5 7/8             2 1/4
                     Second quarter...     5 1/16            2 1/4
                     Third quarter....     3 13/16           1 13/16
                     Fourth quarter...     2 5/16            1 5/8

                Fiscal Year 1997
                     First quarter....     2 1/2             1 9/16
                     Second quarter...     2 7/16            1 1/32
                     Third quarter....     4 7/8             1 7/8
                     Fourth quarter...     5 21/32           3 3/8
</TABLE>

On March 30,  1998,  the closing sale price for the  Company's  Common Stock was
$3.00 per share.  As of March 30, 1998,  there were 1,131 record  holders of the
Company's Common Stock.

Merisel has never declared or paid any dividends to stockholders.  The indenture
relating to the Company's 12-1/2% Senior Notes due 2004 currently  prohibits the
payment of dividends by the Company.  See "Management's  Discussion and Analysis
of  Financial  Condition  and  Results  of  Operations--Liquidity   and  Capital
Resources."

Information on the issuance of 50,000,000  shares of the Company's  Common Stock
to Phoenix  Acquisition  Company II, L.L.C.  ("Phoenix) is included in "Item 7 -
Management's  Discussion  and  Analysis of  Financial  Condition  and Results of
Operations - Overview - Debt  Restructuring."  The  issuances of Common Stock to
Phoenix were exempt from  registration  under Section 4(2) of the Securities Act
of 1933, as amended, because the transaction constituted a private placement and
did not involve a public offering.

<PAGE>


Item 6. Selected Financial Data.
<TABLE>
<CAPTION>

                                                                      Year Ended December 31,
                                                   -----------------------------------------------------------------
                                                    1993            1994          1995         1996           1997
                                                   --------      ---------      --------     ---------      --------
                                                              (In thousands, except per share amounts)
<S>                                             <C>             <C>           <C>           <C>            <C>
Income Statement Data:(1)
Net sales.....................................  $ 3,085,851     $ 5,018,687   $ 5,956,967   $ 5,522,824    $ 4,048,972
Cost of sales.................................    2,827,315       4,676,164     5,633,278     5,233,570      3,807,888
                                                -----------     -----------   ------------   -----------    -----------
Gross profit..................................      258,536         342,523       323,689       289,254        241,084
Selling, general & administrative expenses....      187,152         281,796       317,195       295,021        191,406
Impairment losses.............................                                     51,383        42,033         14,100
Restructuring charge..........................                                      9,333
                                                -----------     -----------   ------------   -----------    -----------
Operating income (loss).......................       71,384          60,727       (54,222)      (47,800)        35,578
Interest expense..............................       17,810          29,024        37,583        37,431         26,957
Loss on sale of European, Mexican, and
Latin American operations.....................                                                   33,455
Debt Restructuring Costs......................                                                                   5,230
Other expense.................................        2,722          11,752        13,885        20,150         14,992
                                                -----------     -----------   ------------   -----------    -----------
Income (loss) before income taxes.............       50,852          19,951      (105,690)     (138,836)       (11,601)
Provision (benefit) for income taxes..........       20,413           8,341       (21,779)        1,539            496
                                                -----------     -----------   ------------   -----------    -----------
Net income (loss) Before Extraordinary Item...       30,439          11,610       (83,911)     (140,375)       (12,097)
Extraordinary Loss on Extinguishment of
  Debt........................................                                                                   3,744

Net Income (Loss).............................  $    30,439     $    11,610   $   (83,911)   $ (140,375)    $  (15,841)
Per Share Data:
Net income (loss) per diluted share...........  $      1.00     $      0.38   $     (2.82)   $    (4.68)    $     (.48)
Weighted average number of diluted shares.....       30,454          30,389        29,806        30,001         33,216
Balance Sheet Data:
Working capital...............................  $   359,765     $   399,848   $   280,864    $  190,544     $  197,154
Total assets..................................      936,283       1,191,870     1,230,334       731,039        747,111
Long-term and subordinated debt...............      208,500         357,685       356,271       294,763        133,429
Total debt....................................      259,429         395,556       382,395       294,950        133,429
Stockholders' equity..........................      223,857         236,164       154,466        14,997        137,508

</TABLE>

(1)  Merisel's  fiscal year is the 52- or 53-week  period ending on the Saturday
     nearest to December 31. For clarity of presentation  throughout this Annual
     Report on Form 10-K,  Merisel has described  year-ends  presented as if the
     year ended on December  31. The 1997 fiscal year was 53 weeks in  duration,
     and all  other  fiscal  years  presented  were 52  weeks in  duration.  The
     selected  financial  data set  forth  above  includes  those  balances  and
     activities related to the Company's  Australian business until its disposal
     effective  January 1, 1996 and the  Company's  European,  Mexican and Latin
     American  businesses until their disposal on October 4, 1996,  effective as
     of September 27, 1996.  It also includes  Merisel FAB results from the date
     such  business  was acquired on January 31, 1994 through its disposal as of
     March 28,  1997.  See  "Management's  Discussion  and Analysis of Financial
     Condition and Results of Operations."



<PAGE>


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


Overview

The Company was founded in 1980 as Softsel,  Inc. and has grown through internal
growth and acquisitions of other computer  products  distributors.  By 1989, the
Company  had  achieved  annual  revenues  of  $629,400,000  principally  through
internal  expansion.  In April 1990,  the Company  acquired  Microamerica,  Inc.
("Microamerica"),  another  distributor  of computer  products with net sales of
approximately  $526,000,000  for the year ended December 31, 1989. In connection
with this  acquisition,  the Company  changed  its name to Merisel,  Inc. In the
years following the Microamerica  acquisition,  the Company's revenues increased
rapidly,  reaching $5.0 billion in 1994 and $6.0 billion in 1995.  This increase
partially  reflected the substantial  growth in both domestic and  international
sales as the worldwide market for computer  products  expanded and manufacturers
increasingly  turned to wholesale  distributors  for product  distribution.  The
growth also reflected the Company's  acquisition of certain assets of the United
States  Franchise and  Distribution  Division of Vanstar  Corporation  (formerly
ComputerLand  Corporation),  through its wholly owned  subsidiary,  Merisel FAB,
Inc.  ("Merisel FAB"),  which  contributed  additional  revenues in excess of $1
billion during each of the three years ended 1994, 1995, and 1996.

Following  substantial  losses for the fiscal year ended  December 31, 1995 (see
"Results of Operations" below),  during 1996 the Company pursued a business plan
to address  liquidity  and capital  structure  issues by  controlling  costs and
curtailing   non-essential   capital   expenditures  as  well  as  disposing  of
substantially  all of the  Company's  assets  and  operations  outside  of North
America.

Asset Dispositions

On March 7, 1996, Merisel sold its wholly owned Australian  subsidiary,  Merisel
Pty Ltd. ("Merisel  Australia"),  to Tech Pacific.  The sale was effective as of
January 1, 1996.  Under the terms of the sale  agreement,  the Company  received
consideration  of  $9,900,000  in the form of repayment of certain  intercompany
debt obligations for $8,500,000 and $1,400,000 in non-cash asset transfers.  The
Company  recognized a $1,900,000 charge as an impairment loss for the write down
of Merisel  Australia's  net assets to their net realizable  value in the fourth
quarter of 1995. See "Item 3. Legal Proceedings."

On October 4, 1996, the Company  completed the sale of substantially  all of its
European, Mexican and Latin American businesses ("EML") to CHS Electronics, Inc.
("CHS").   The  sale  was  effective  as  of  September  17,  1996.  A  loss  of
approximately  $33,455,000,  including  $7,400,000 of direct selling costs,  was
recorded in  connection  with the sale.  The final sales price was  $147,631,000
based on the  combined  closing  balance  sheet  of EML,  and  consisted  of (i)
$110,379,000  in  cash,   (ii)  the  assumption  of  Merisel's   European  asset
securitization agreement,  against which $26,252,000 was outstanding at closing,
and (iii) a short term  receivable of  $11,000,000  due at various dates through
1997 . The initial cash payment of $110,379,000 was used to reduce the Company's
debt and improve its working capital.

As of March 28, 1997, the Company completed the sale of substantially all of the
assets  of  Merisel  FAB to a wholly  owned  subsidiary  of  SYNNEX  Information
Technologies, Inc. ("Synnex"). The sales price, computed based upon the February
21,  1997  balance  sheet of Merisel  FAB,  was  $31,992,000  consisting  of the
assumption by the buyer of $11,992,000 of trade payables and accrued liabilities
and a $20,000,000  extended payable due to Vanstar  Corporation.  As part of the
sale, the Company agreed to extend rebates to Synnex on future purchases, not to
exceed  $2,000,000.  In  anticipation  of this sale,  the  Company  recorded  an
impairment charge in the fourth quarter of 1996 for $2,033,000 to adjust Merisel
FAB's assets to their fair value.

<PAGE>

Debt Restructuring

Although the Company was  profitable in the fourth  quarter of 1996, the Company
did  not  believe  that  it  could  satisfy  its  debt  obligations   without  a
restructuring of its  $125,000,000  principal amount of 12 1/2% Senior Notes due
2004 (the "12.5% Notes") and/or the  approximately  $150,000,000  of outstanding
indebtedness  of certain  subsidiaries  of the Company (the  "Operating  Company
Debt"),  which required principal  repayments of $40,000,000 if the Company made
the June 30,  1997  interest  payment  on the  12.5%  Notes,  and an  additional
$30,000,000  if the Company made its December 31, 1997  interest  payment on the
12.5% Notes.

Accordingly,  Merisel commenced negotiations with an ad hoc committee of holders
of the 12.5% Notes and,  effective April 14, 1997, entered into a Limited Waiver
and Voting Agreement (the "Limited Waiver  Agreement") with holders of more that
75% of the  outstanding  principal  amount of the 12.5%  Notes (the  "Consenting
Noteholders").  Pursuant to the terms of the Limited Waiver Agreement,  upon the
fulfillment  of certain  conditions,  holders of the 12.5% Notes would  exchange
(the "Exchange")  their 12.5% Notes for common stock of the Company (the "Common
Stock")  that  would  equal  approximately  80% of the  shares of  Common  Stock
outstanding  immediately  after the Exchange.  The Limited Waiver Agreement also
provided that,  immediately after the consummation of the Exchange,  the Company
would issue  warrants (the  "Warrants") to purchase up to 17.5% of the shares of
Common Stock  outstanding  immediately after the Exchange to existing holders of
Common Stock. The Warrants would be issued in two series and would have exercise
prices of $1.34 and $1.74 per  share,  respectively.  While the  Limited  Waiver
Agreement was in effect, the Consenting  Noteholders agreed to waive any default
arising from the  nonpayment  of interest  due in 1997 on the 12.5%  Notes.  The
conditions to the Exchange were not met and, on September 19, 1997,  the Limited
Waiver  Agreement  terminated in accordance  with its terms and the Company paid
the  interest  due  with  respect  to the  12.5%  Notes.  See  "Item  3 -  Legal
Proceedings".

On  September  19,  1997,  the  Company  and  Merisel  Americas  entered  into a
definitive Stock and Note Purchase  Agreement with Phoenix  Acquisition  Company
II, L.L.C.  ("Phoenix"),  a Delaware limited liability company whose sole member
is Stonington  Capital  Appreciation  1994 Fund, L.P.  Pursuant to the Stock and
Note Purchase  Agreement,  on September 19, 1997, Phoenix acquired a Convertible
Note for $137,100,000  (the  "Convertible  Note") and 4,901,316 shares of Common
Stock (the  "Initial  Shares")  for  $14,900,000.  The  Convertible  Note was an
unsecured obligation of the Company and Merisel Americas and provided that, upon
the  satisfaction  of  certain  conditions,   including  obtaining   stockholder
approval,  the  Convertible  Note would  automatically  convert into  45,098,684
shares of Common Stock (the  "Conversion  Shares").  The  Conversion  Shares and
Initial Shares would together  represent  50,000,000 shares of Common Stock at a
purchase price of $3.04 per share, and  approximately  62.4% of the Common Stock
outstanding  immediately  following the issuance of the Conversion  Shares.  The
Company  used the  proceeds  from the  issuance  of the  Initial  Shares and the
Convertible Note to repay  substantially  all of the Operating  Company Debt. On
October  10,  1997,  Phoenix  exercised  its  option  to  convert,  without  any
additional  payment,  $3,296,286  principal  amount of the Convertible Note into
1,084,305 shares of Common Stock,  representing the maximum amount that could be
converted  prior to  obtaining  stockholder  approval.  On  December  19,  1997,
following  receipt  of  stockholder  approval,  the  remaining  portion  of  the
Convertible Note was converted into Common Stock. As of March 31, 1998,  Phoenix
owned  50,000,000  shares  of  Common  Stock,  or  approximately  62.4%  of  the
outstanding Common Stock. See "Notes to Consolidated Financial Statements - Note
7 - "Income Taxes"  regarding the impact of the  restructuring  on the Company's
available net operating loss carryforwards.

Results of Operations

As a result of the asset dispositions  described above, the Company's operations
are now focused  exclusively in North America.  The North American  Business (as
defined below) produced  approximately $3.8 billion and $3.4 billion in revenues
for 1997 and 1996,  respectively.  Former Operations (as defined below) produced
approximately  $202  million  and $2.1  billion in  revenues  for 1997 and 1996,
respectively.  Because the North  American  Business now  represents the ongoing
business of the Company,  the following discussion and analysis will compare the
results of operations  solely for the North American  Business unless  otherwise
indicated.

As used in this  discussion  and analysis,  the term "North  American  Business"
refers to Merisel's United States and Canadian operations,  and the term "Former
Operations" refers to those operations  disposed of since the beginning of 1996,
namely EML, Merisel FAB and the Australian operations.

<PAGE>
<TABLE>
<CAPTION>

The following  table sets forth the results of operations for the North American
Business and for the Former Operations for the fiscal years indicated.

                                                         (in thousands)

                    North American Business                       Former Operations                     Consolidated Total
                 /-------December 31,--------\            /-------December 31,--------\          /---------December 31,----------\

                   1995        1996         1997          1995         1996         1997        1995           1996         1997
                ----------   ----------   ----------   ----------   ----------  ----------    -----------   ----------    ----------
<S>             <C>          <C>          <C>          <C>          <C>         <C>           <C>           <C>           <C>
Net Sales       $3,427,821   $3,441,343   $3,846,795   $2,529,146   $2,081,481  $  202,177     $5,956,967   $5,522,824    $4,048,972
Cost of Sales    3,242,903    3,262,105    3,613,389    2,390,375    1,971,465     194,499      5,633,278    5,233,570     3,807,888
                ----------   ----------   ----------   ----------   ----------  ----------    -----------   ----------    ----------
Gross Profit       184,918      179,238      233,406      138,771      110,016       7,678        323,689      289,254       241,084

SG&A               181,042      193,521      185,206      136,153      101,500       6,200        317,195      295,021       191,406
Impairment
  loss              19,500                    14,100       31,883       42,033                     51,383       42,033        14,100
Restructuring
  charge             5,228                                  4,105                                   9,333
                ----------   ----------   ----------   ----------   ----------  ----------    -----------   ----------    ----------
Operating
(loss)Income    $  (20,852)  $  (14,283)  $   34,100   $  (33,370)  $  (33,517) $    1,478    $  (54,222)   $  (47,800)   $   35,578
                ==========   ==========   ==========   ==========   =========== ==========    ==========    ==========    ==========
</TABLE>


Comparison of Fiscal Years Ended December 31, 1997 and  December 31, 1996

The Company's net sales for the North  American  Business  increased  11.8% from
$3,441,343,000 in 1996 to  $3,846,795,000  for the year ended December 31, 1997.
This increase  resulted from increased sales of 18.2% in Canada and 10.3% in the
United States. The growth rate in Canada in terms of Canadian dollars was steady
throughout  the  year,  but the  decline  in the  value of the  Canadian  dollar
hampered the growth rate in terms of U.S.  dollars,  particularly  in the fourth
quarter of the year.  U.S.  sales growth was lower in the first half of the year
(-1.1% and 5.2% for the first and second quarters,  respectively) despite double
digit rates of growth in MOCA(TM) and VAR sales.  This was partially  related to
declines  in  Retail  sales,   which   reflected   the  Company's   decision  to
substantially  reduce its retail  sales  activities  in early  1996,  in part to
address liquidity issues and constraints.  The Company  recommitted  significant
resources  to  rebuilding  its  retail  customer  base  in  early  1997,   which
contributed   to  fourth   quarter   growth  in  retail  sales  of  28.2%  on  a
year-over-year  basis.  Growth rates in all other  customer areas also increased
measurably  during the second  half of 1997 over 1996  levels,  contributing  to
combined U.S.  growth rates of 16.6% and 20.6% in the third and fourth  quarters
of 1997, respectively, on a year-over-year basis.

In the North American  Business,  hardware and accessories  accounted for 77% of
net  sales,  and  software  accounted  for 23% of net sales  for the year  ended
December 31, 1997 as compared to 76% and 24%, respectively,  for such categories
for the year ended December 31, 1996.

Gross profit for the North American  Business  increased 30.2% from $179,238,000
in 1996 to $233,406,000 in 1997. Both years were affected by significant  margin
adjustments.  In 1996, the Company  recorded  $27,338,000  in charges  primarily
related to customer disputes and vendor reconciliation  issues. In 1997, through
the process of  resolving  these  customer  disputes  and vendor  reconciliation
issues,  margins were  favorably  affected by adjustments  totaling  $7,245,000.
Excluding the effect of these margin  adjustments,  gross profit would have been
5.88% and 6.0% for 1997 and 1996,  respectively.  The decrease in adjusted gross
profit is attributed  primarily to competitive  pricing pressures and the impact
of  liquidity  constraints  on the  Company's  ability to purchase on  favorable
terms.  The Company is addressing  the margin issue by targeting  specific areas
for margin  improvement  including  sales  execution,  product mix,  pricing and
customer mix. However, the Company continues to face intense competitive pricing
pressures,  and  the  Company's  efforts  to  improve  its  margins  may  not be
successful.



<PAGE>


Selling,  general and  administrative  expenses for the North American  Business
decreased by $8,315,000 or 4.3% from  $193,521,000  for the year ended  December
31, 1996 to $185,206,000 for the year ended December 31, 1997. Selling,  general
and administrative  expenses in 1996 include approximately  $10,500,000 in costs
related to  professional  fees  incurred as part of the 1996  business  plan for
process  improvements,  professional  fees related to lender  negotiations,  and
severance charges related to management changes.  In 1997, selling,  general and
administrative  expenses included  compensation  charges of $1,950,000  incurred
pursuant to employment  contracts of certain  executive  officers of the Company
and related to the debt  restructuring  completed  during 1997.  Excluding these
charges in both years,  selling,  general and  administrative  expenses  did not
change  significantly  in total dollars,  but decreased as a percentage of sales
from 5.3% in 1996 to 4.8% in 1997.  This decrease is primarily  attributable  to
efforts to  control  operating  expenses  even  though  sales  growth  increased
throughout  the  year.  Selling,   general  and  administrative   costs  include
depreciation  and  amortization   expense  totaling   $11,073,000  in  1997  and
$12,360,000 in 1996.

In the fourth quarter of 1997, the Company  recorded a non-cash asset impairment
charge of $14,100,000  against  capitalized costs associated with the previously
scheduled  implementation  of the SAP information  system in the U.S., which was
delayed in 1996.  Through  implementation  planning  that  resumed in the fourth
quarter 1997 and a recently  completed  evaluation of SAP in its upgraded  form,
the Company identified costs that will not provide future value, and it is these
costs that are the basis of the impairment  charge.  See "Notes to Consolidated
Financial Statements - Note 2 - Impairment Losses."

As a result of the above items,  the Company's  North  American  Business had an
operating profit of $34,100,000 for the year ended December 31, 1997 compared to
an operating loss of $14,283,000 for the year ended December 31, 1996. Excluding
the margin  adjustments taken in both years, the professional fees and severance
costs noted in 1996, the restructuring  related  compensation  costs in 1997 and
the impairment charge taken in 1997, the Company's North American Business would
have had operating income of $42,905,000 in 1997 as compared to operating income
of $23,555,000 in 1996.


Interest Expense; Other Expense; Income Tax Provision

Interest  expense for the Company,  including Former  Operations,  decreased 28%
from  $37,431,000  for the year ended December 31, 1996 to  $26,957,000  for the
year ended  December 31, 1997.  This  decrease  was  attributable  to: (i) lower
average  borrowings  resulting  from a $72,500,000  debt paydown in October 1996
using  proceeds from the sale of EML;  (ii)  scheduled  debt  payments  totaling
$13,090,000; and (iii) elimination of substantially all of the Operating Company
Debt on September 19, 1997, using substantially all of the $152,000,000 proceeds
from the issuance of the Initial Shares and the Convertible  Note. These factors
were offset in part by an increase in interest rates under the Operating Company
Debt during 1997 prior to its elimination in September of 1997.

Other  expense for the Company,  including  Former  Operations,  decreased  from
$20,150,000  for the year ended  December 31, 1996 to  $14,992,000  for the year
ended  December 31, 1997.  This decrease is primarily  attributable  to one-time
financing charges paid in the first quarter of 1996 of approximately  $3,125,000
related to amendments of financing  agreements which have since been terminated.
Additionally,  the Company  recorded a gain of $1,530,000 in 1997 on the sale of
property held in North Carolina.

Also during 1997,  the Company  incurred  $5,230,000 in expenses  related to the
Company's  efforts  to  effect  a  restructuring  of its  debt.  These  expenses
represent  professional  fees and other  costs  associated  with the  terminated
Limited Waiver Agreement with the holders of the 12.5% Notes, and costs incurred
as a result of the change in control that occurred as a result of the conversion
of the Convertible Note.

The income tax provision  decreased from  $1,539,000 for the year ended December
31, 1996 to $496,000 for 1997. In 1997,  the income tax provision  reflects only
the minimum  statutory tax  requirements  in the various states and provinces in
which the Company conducts business, as the Company has sufficient net operating
loss  provisions  from prior year losses.  The Company has not  recognized a tax
provision benefit in either year, having fully utilized its ability to carryback
those  losses and obtain  refunds of taxes  paid in prior  years.  In 1996,  the
Company  recognized  additional  tax  provision  expense  that  represented  the
establishment  of a valuation  allowance  against a previously  recognized state
deferred tax asset. (See "Notes to Consolidated  Financial Statements - Note 7 -
Income Taxes".)

<PAGE>

Consolidated Loss

The Company, including Former Operations, reported a net loss of $15,841,000, or
$0.48 per diluted  share,  in 1997  compared to a net loss of  $140,375,000,  or
$4.68  per  diluted  share,  in  1996.  Included  in the  1997  net  loss  is an
extraordinary  loss on the  extinguishment  of debt of $3,744,000,  or $0.12 per
diluted share, related to the repayment of the Operating Company Debt.

Comparison of Fiscal Years  Ended December 31, 1996 and December 31, 1995

The  Company's net sales for the North  American  Business  increased  0.4% from
$3,427,821,000 in 1995 to  $3,441,343,000  for the year ended December 31, 1996.
This increase  resulted from increased sales of 12.4% in Canada offset by a 2.0%
decrease in sales in the United States.  In the third quarter of 1995, the North
American  Business  sold  approximately  $124,000,000  of Microsoft  Windows '95
following  its launch in August 1995.  Excluding  the effect of this  additional
revenue  in 1995,  net sales in 1996  would  have  increased  2.0% in the United
States and 14.5% in Canada over 1995 levels.  The Canadian  sales increase is in
line with the growth in the  industry  for the markets in which that  subsidiary
competes.  In the United  States,  the Company  did not keep pace with  industry
growth  rates,  due  to  liquidity  constraints,  cost  controls  which  Merisel
implemented to conserve cash outflow and competitive pressures.

In the North American  Business,  hardware and accessories  accounted for 76% of
net  sales,  and  software  accounted  for 24% of net sales  for the year  ended
December  31,  1996  as  compared  to  69%  and  31%  for  the  same  categories
respectively, for the year ended December 31, 1995. Software sales were a larger
percentage of total sales in 1995 due to the sales  generated from the Microsoft
Windows '95 launch in August 1995.

Gross profit for the North American Business decreased 3.1% from $184,918,000 in
1995 to  $179,238,000  in 1996.  Gross profit as a percentage of sales, or gross
margin, decreased from 5.4% in 1995 to 5.2% in 1996. Both years were affected by
large margin adjustments.  In 1995, the Company recorded a $25,800,000 charge to
margin in the United States related to accounts payable  reconciliation  issues.
In 1996,  the  Company  recorded  charges of  $17,750,000  related  to  customer
disputes,  vendor  reconciliations  and other issues in the United  States,  and
$9,588,000  for similar  issues in Canada.  Excluding the effect of these margin
adjustments,  gross profit would have been $174,079,000 or 6.1% of net sales and
$36,639,000 or 6.4% of net sales in the United States and Canada,  respectively,
for the year ended December 31, 1995, as compared to $168,531,000 or 6.0% of net
sales and  $38,045,000  or 5.9% of net sales in the United  States  and  Canada,
respectively,  for the year ended  December 31,  1996.  The decrease in adjusted
gross profit is primarily attributable to the impact of liquidity constraints on
the Company's  ability to purchase on favorable  terms and  competitive  pricing
pressures.

Selling,  general and  administrative  expenses for the North American  Business
increased  by 6.9% from  $181,042,000  for the year ended  December  31, 1995 to
$193,521,000   for  the  year  ended   December  31,  1996.   Selling,   general
administrative  expenses in 1995 included a fourth  quarter charge of $8,200,000
to adjust the value of certain  assets and  liabilities.  Excluding  this fourth
quarter 1995 charge,  selling,  general and  administrative  expenses would have
increased  approximately  $20,679,000  in 1996  over  1995.  Of  this  increase,
$10,500,000  related to professional  fees incurred as part of the 1996 Business
Plan for process  improvements  and lender  negotiations  and severance  charges
related to management changes.  Selling,  general and administrative expenses in
1996  excluding  these  charges were  $183,021,000.  The  remaining  increase in
expenses is primarily  related to higher  operating  costs  associated  with the
installation of new computer systems.  Selling, general and administrative costs
include  depreciation and amortization  expense totaling $11,756,000 in 1995 and
$12,360,000 in 1996.

In the fourth  quarter of 1995, the North  American  business  recorded an asset
impairment  charge  of  $19,500,000  in  order  to  adjust   capitalized  system
development costs related to the installation of new computer  systems.  Also in
1995,  $5,228,000 in  restructuring  charges were recorded in the North American
Business  as  a  result  of  the  planned  closure  of  a  warehouse  and  other
restructuring activities. No such charges were deemed necessary in 1996.



<PAGE>


As a result of the  above  items,  the  operating  loss for the  North  American
Business of  $20,852,000  for the year ended  December  31, 1995  improved to an
operating  loss of $14,283,000  for the year ended December 31, 1996.  Excluding
the margin  adjustments taken in both years, the professional fees and severance
costs incurred in 1996, the fourth quarter charges to operating expense taken in
1995, the impairment charge in 1995, and the  restructuring  charge in 1995, all
of which are quantified  above,  the Company would have had operating  income of
$37,876,000 in 1995 as compared to operating income of $23,555,000 in 1996.


Interest Expense; Other Expense; Income Tax Provision

Interest expense for the Company,  including Former  Operations,  decreased 0.4%
from  $37,583,000  for the year ended December 31, 1995 to  $37,431,000  for the
year  ended  December  31,  1996.  The  decrease  resulted  from  lower  average
borrowings  in the fourth  quarter  of 1996,  largely  offset by higher  average
interest rates and higher average  borrowings in the first three quarters of the
year.

Other  expense for the Company,  including  Former  Operations,  increased  from
$13,885,000  for the year ended  December 31, 1995 to  $20,150,000  for the year
ended  December  31,  1996.  The increase  was  primarily  attributable  to fees
incurred  in  connection  with an  increase in the  Company's  trade  receivable
securitizations  in 1996.  The  increase  in  securitization  fees is  primarily
attributable to an increase in the amount of net receivables sold.

The income tax provision  increased from a benefit of  $21,779,000  for the year
ended December 31, 1995 to an expense of $1,539,000 for the same period in 1996.
The Company has not  recognized  a tax  provision  benefit  with  respect to its
current losses,  having fully utilized its ability to carryback those losses and
obtain refunds of taxes paid in prior years. Further, the Company has recognized
a tax  provision  expense  that  primarily  represents  the  establishment  of a
valuation  allowance  against a previously  recognized state deferred tax asset.
See "Notes to Consolidated Financial Statements - Note 7 - Income Taxes."


Consolidated Loss

The Company, including Former Operations,  reported an increase in net loss from
$83,911,000 in 1995 to  $140,375,000  in 1996. The net loss per share  increased
from $2.82 in 1995 to $4.68 in 1996.


Systems and Processes; Year 2000 Issues

Merisel has made significant investments in new, advanced computer and warehouse
management systems for its North American operations to support sales growth and
improve  service  levels.  All of Merisel's nine North  American  warehouses now
utilize Merisel's  Information and Logistical  Efficiency  System  ("MILES"),  a
computerized  warehouse  management  system,  which uses infrared bar coding and
advanced computer hardware and software to maintain high picking,  receiving and
shipping accuracy rates.

Merisel  is in the  process  of  converting  its  U.S.  operations  to  the  SAP
client/server operating system. The Company plans to convert its U.S. operations
to the SAP system no later than the first part of 1999.  The  Company  converted
its Canadian  operations from a mainframe to the client/server  operating system
in August 1995. SAP is an enterprise-wide system which integrates all functional
areas of the business including order entry, inventory management and finance in
a  real-time  environment.  The  new  system  is  designed  to  provide  greater
transaction functionality,  automated controls,  flexibility, and custom pricing
applications.


<PAGE>

The  Company  believes  that  implementation  of the SAP  operating  system will
address  its major  "year 2000  issues",  which  arise in cases  where  computer
systems or any equipment with computer chips use two-digit fields that recognize
dates  using the  assumption  that the first two digits are "19".  On January 1,
2000, any clock or date recording  mechanism  including date sensitive  software
that uses only two digits to represent  the year may recognize a date using "00"
as the year  1900  rather  than the year  2000.  This  could  result in a system
failure or  miscalculations  causing  disruption of operations,  including among
other things a temporary  inability to process  transactions,  send  invoices or
engage in similar activities.

The  Company  is  currently  engaged  in a review of its  computer  systems  and
applications,  including packaged software used by the Company, not addressed by
the SAP operating system. The Company expects to make any modifications required
to  resolve  year  2000  issues  in a timely  manner  and to have  the  majority
completed  by early  1999  leaving  adequate  time to  assess  and  correct  any
significant  issues that may materialize.  The Company is seeking  assurances of
year 2000  compliance  from its  suppliers  of software  and other  products and
services used internally that might raise year 2000 issues.  The Company is also
expecting to initiate formal  communications with selected vendors and customers
to  determine  the extent to which the  Company  is  vulnerable  to those  third
parties'  failure to remediate their own year 2000 issues.  The Company can give
no guarantee that the systems of other companies on which the Company's  systems
rely will be converted on time or that failure to convert by another  company or
a conversion  that is incompatible  with the Company's  systems would not have a
material  adverse  effect on the Company.  The Company is taking steps to reduce
the likelihood that such failures could affect the Company's systems through any
electronic communications.

The Company does not expect that the review and  modifications  described  above
(excluding the cost of implementing  the SAP operating  system in the U.S.) will
require  material  expenditures.  If  the  Company  is  unable  to  successfully
implement the SAP  operating  system  sufficiently  in advance of the year 2000,
however,  additional  expenditures could be required and such expenditures could
be substantial. See "Liquidity and Capital Expenditures" below.

The design and  implementation  of these new systems are  complex  projects  and
involve certain risks. Until such  implementation,  the Company will continue to
modify its existing  U.S.  systems and may  experience  difficulty in processing
transactions,  which could adversely  affect operating income and cash flows. In
addition,  if the  modifications  required  to address the  Company's  year 2000
issues  are not made,  or are not  timely,  the year 2000  issues  could  have a
material  impact on the  operations  and financial  results and condition of the
Company.


Variability of Quarterly Results and Seasonality

Historically,  the  Company  has  experienced  variability  in its net sales and
operating margins on a quarterly basis and expects these patterns to continue in
the  future.   Management  believes  that  the  factors  influencing   quarterly
variability  include:  (i) the overall  growth in the  computer  industry;  (ii)
shifts in short-term demand for the Company's products resulting,  in part, from
the introduction of new products or updates of existing products;  and (iii) the
fact that  virtually all sales in a given  quarter  result from orders booked in
that  quarter.  Due  to  the  factors  noted  above,  as  well  as  the  dynamic
characteristics  of the computer product  distribution  industry,  the Company's
revenues and earnings may be subject to material  volatility,  particularly on a
quarterly basis.

Additionally,  in the U.S.  and Canada,  the  Company's  net sales in the fourth
quarter  have  been  historically  higher  than  in its  other  three  quarters.
Management believes that the pattern of higher fourth quarter sales is partially
explained by customer buying patterns relating to calendar year-end business and
holiday  purchases.  As a result of this pattern,  the Company's working capital
requirements  in the fourth  quarter  have  typically  been  greater  than other
quarters.  Net sales in the Canadian  operations are also historically strong in
the first quarter of the fiscal year.  This is primarily due to buying  patterns
of Canadian government agencies. See "Liquidity and Capital Resources" below.

<PAGE>

Liquidity and Capital Resources


General Discussion of Liquidity over the Periods Presented

From the time the  Company  was  founded  in 1980  through  the end of 1993,  it
experienced  accelerated  growth  that was fueled by a  combination  of industry
growth, industry consolidation and acquisitions. By the end of the first quarter
of 1994, the Company's  internal growth and  acquisitions  had created a complex
organization with operations in more than eleven countries. The rapid growth put
a tremendous  burden on the Company's  management to  effectively  integrate the
diverse operations and implement several new initiatives including new warehouse
systems,  a centralized  European  distribution  center, and an integrated North
American  operating system.  At the same time, the industry  continued to evolve
resulting in increasing competitive pressures on gross margins.

To fund the new  initiatives,  working  capital  growth  and  acquisitions,  the
Company  incurred  significant  debt which,  combined with the decreasing  gross
margins and increases in interest rates, resulted in declining profitability and
increased debt service  requirements.  Despite declining earnings and increasing
debt burden,  the Company had sufficient  cash reserves and available  borrowing
capacity to meet its debt  obligations and to fund continued  growth during 1994
and throughout  1995, and considered the  investments in new initiatives to be a
vital component of long-term growth and profitability.

During the fourth quarter of 1995, the Company recorded  $89,400,000 in negative
adjustments to its operating earnings.  These adjustments  included (i) a charge
to trade  accounts  payable for  $25,800,000  to address  vendor  reconciliation
issues,  (ii) impairment  losses of $30,000,000 on intangible  assets associated
with the Company's ComputerLand  franchise business,  (iii) impairment losses of
$19,500,000   related  to  cost  overruns  on  the   implementation   of  system
installations,  and (iv) other  adjustments to asset and liability  values. As a
result,  the Company  incurred  substantial  losses during the fourth quarter of
1995,  and was  required to  negotiate  with  lenders  under  various  financing
agreements to amend such agreements and waive certain defaults.

In order to comply with the  requirements  of its lenders,  Merisel  developed a
plan in April 1996 that sought to maximize  cash flow by  controlling  costs and
curtailing non-essential capital expenditure investments during the remainder of
1996. However,  while these amended agreements were considered by the Company to
be sufficient to allow it to operate without the need for additional  sources of
financing in 1996,  because a substantial  amount of the Operating  Company Debt
was due in mid-1997,  the Company  anticipated  that it would need to dispose of
certain assets, and/or obtain new financing  arrangements,  in order to position
itself  to  meet  this  obligation.  Accordingly,  the  Company  began  actively
exploring  all of its strategic  options with the  assistance of Merrill Lynch &
Co.  in  early  1996,  which  included  the  sale of  certain  of its  operating
subsidiaries.  This  effort  led to the sale of EML in  October  1996.  From the
proceeds of this sale, the Company repaid  $72,500,000  principal  amount of the
Operating  Company  Debt  and  negotiated  an  extension  of the due date on the
remaining  principal  outstanding to January 31, 1998.  However,  this extension
also stipulated  that if the Company made its June 30, 1997 interest  payment on
the 12.5%  Notes,  then the Company  would have to make an  aggregate  principal
repayment of $40,000,000 on the Operating Company Debt.  Further, if the Company
were to have made the  December  31, 1997  interest  payment on the 12.5% Notes,
then the  Company  would  have been  required  to make an  additional  principal
repayment of $30,000,000.

The  Company  did not  believe  that it  would  be  able to make  the  principal
repayments  on such debt,  as described  above,  and  therefore  began  actively
pursuing a restructuring  plan with the debtholders  under its various financing
agreements.  Additionally,  beginning  in the fourth  quarter  of 1996,  Merisel
aggressively  pursued a strategy of  proactively  working with vendors and other
creditors to negotiate  more  flexible  trading  terms and thereby  improve cash
flow.

On September 19, 1997, the Company issued the Initial Shares and the Convertible
Note to Phoenix and used the proceeds  therefrom to repay  substantially  all of
the  outstanding  Operating  Company  Debt.  On December  19,  1997,  the entire
outstanding Convertible Note was converted into Common Stock, which improves the
Company's liquidity position by substantially decreasing the Company's aggregate
outstanding indebtedness and, consequently, interest expense.


<PAGE>

Cash Flows Activity For The Year Ended December 31, 1997

Net cash used by operating  activities  during the year ended  December 31, 1997
was  $44,968,000.  The  primary  uses  of  cash  were an  increase  in  accounts
receivable  of  $70,119,000  and an increase in  inventory of  $70,196,000.  The
primary sources of cash were an increase in accounts  payable of $76,203,000 and
$15,563,000  of  cash  generated  from  operations.  The  increase  in  accounts
receivable  is primarily  the result of  increased  sales of 18.8% in the fourth
quarter of 1997.  The increase in  inventory  relates  partially to  investments
required to meet the demands of increased  sales volume and to strategic  volume
purchases that the Company took advantage of late in the fourth quarter of 1997.
The  increase  in  inventories  also  contributed  to the  increase  in accounts
payable.

Net cash used in  investing  activities  in 1997 was  $2,270,000  consisting  of
capital expenditures of $7,290,000,  which was partially offset by proceeds from
the sale of land held in North Carolina  totaling  $5,020,000.  The expenditures
were primarily for the maintenance and improvement of existing facilities.

Net cash  provided by  financing in 1997 was  $40,307,000.  Sources of cash from
financing  activities included $61,740,000 in proceeds received from the sale of
receivables under the Company's asset securitization facilities and $139,901,000
in net proceeds  from the issuance of Initial  Shares and the  Convertible  Note
(which consists of $152,000,000 in gross proceeds less $12,099,000 in investment
banking,  legal,  accounting and other direct costs). Uses of cash for financing
activities include scheduled debt payments of $13,634,000 and the extinguishment
of Operating Company Debt of $147,700,000.

As noted above, a portion of the Company's funds are also generated  through the
sale  of  receivables  by  Merisel  Capital  Funding,   Inc.  ("Merisel  Capital
Funding"),  a wholly  owned  subsidiary  of Merisel  Americas.  Merisel  Capital
Funding's  sole  business is the  ongoing  purchase  of trade  receivables  from
Merisel  Americas.  Merisel  Capital Funding sells these  receivables,  in turn,
under an agreement with a securitization company, whose purchases yield proceeds
of up to  $300,000,000  at any  point  in time.  Merisel  Capital  Funding  is a
separate  corporate  entity  with  separate  creditors  who,  in  the  event  of
liquidation,  are  entitled to be  satisfied  out of Merisel  Capital  Funding's
assets  prior  to  any  value  in  the  subsidiary  becoming  available  to  the
subsidiary's equity holder. As a result of losses the Company incurred in fiscal
year 1996,  Merisel  Americas and Merisel  Capital  Funding were obliged and did
obtain  amendments  and waivers  with  respect to certain  covenants  under this
facility, which expires October 2000.

Effective  December 15, 1995,  Merisel Canada,  Inc.  ("Merisel Canada") entered
into a receivables  purchase agreement with a securitization  company to provide
funding for Merisel Canada.  In accordance  with this agreement,  Merisel Canada
sells receivables to the securitization  company, which yields proceeds of up to
$150,000,000  Canadian  dollars.  The facility expires December 12, 2000, but is
extendible by notice from the securitization  company,  subject to the Company's
approval.

Effective  October 16, 1995,  Merisel U.K. Ltd.  ("Merisel U.K.") entered into a
receivables purchase agreement with a securitization  company to provide funding
for Merisel U.K. This facility,  including $26,300,000  outstanding  thereunder,
was assumed by CHS in connection  with the purchase of EML  effective  September
27, 1996.

Under these  securitization  facilities,  the receivables are sold at face value
with payment of a portion of the purchase price being  deferred.  As of December
31, 1997, the total amount  outstanding under these facilities was $310,560,000.
Fees incurred in  connection  with the sale of accounts  receivable  under these
facilities  for the years ended  December  31, 1997 and  December  31, 1996 were
$16,030,000 and $16,029,000, respectively, and are recorded as other expense.


Cash Flows Activity for the Year Ended December 31, 1996

Net cash  provided by operating  activities  during the year ended  December 31,
1996 was $29,249,000. The primary sources of cash from operating activities were
decreases in accounts  receivable,  inventories,  and income taxes receivable of
$132,480,000, $91,059,000 and $33,470,000, respectively. The primary use of cash
from  operations  during  the  period  was a  decrease  in  accounts  payable of
$179,304,000.  Lower inventory and accounts receivable levels resulted primarily
from  improved  management  of  inventories  and  collections.  The  decrease in
inventories also contributed to the decrease in accounts payable.


<PAGE>

Net cash provided from investing activities in 1996 was $101,041,000, consisting
of  proceeds  from  the sale of EML and the  Company's  Australian  business  of
$110,379,000  and $8,515,000,  respectively,  partially  offset by the Company's
earn-out  obligation  under the  Merisel  FAB  acquisition  of  $13,409,000  and
property and equipment expenditures of $9,652,000, net of proceeds from the sale
of property and equipment of $5,975,000. Expenditures for property and equipment
were primarily  attributed to the upgrading of the Company's  computer  systems,
expenditures for a new warehouse management system and the upgrading of existing
facilities and leasehold improvements.

Net cash used in financing activities in 1996 was $82,765,000, related primarily
to repayments of indebtedness of the Company's operating subsidiaries consisting
of  $43,195,000  of  repayments  of  11.5%  senior  notes,  $17,792,000  of  net
repayments  under a revolving  credit  agreement,  the  payment of a  $4,400,000
installment of subordinated  notes and payments of $17,742,000  under other bank
facilities.


Cash Flows Activity For The Year Ended December 31, 1995

Net cash used for operating activities in 1995 was $62,386,000.  Sources of cash
from  operating  activities  consisted  of a  $98,756,000  increase  in accounts
payable and a $23,872,000 increase in accrued  liabilities.  The primary uses of
cash in 1995 were a net loss of  $83,911,000  and increases in  inventories  and
accounts receivable of $43,524,000 and $103,553,000, respectively. The increases
in inventories and accounts  receivable were primarily  related to the Company's
higher sales  volumes,  especially  in December  1995.  The increase in accounts
payable was due to increased purchasing associated with higher sales volumes.

Net cash used for investing  activities in 1995 was  $49,082,000,  consisting of
property and equipment expenditures. The expenditures for property and equipment
were primarily for the upgrading of the Company's computer systems, expenditures
for a new warehouse  management system and the upgrading of existing  facilities
and leasehold improvements.

Net cash provided by financing  activities in 1995 was  $108,346,000,  comprised
principally of proceeds from the net sales of an interest in the Company's trade
accounts  receivable of $125,320,000,  partially offset by a net repayment under
domestic  lines  of  credit  of  $7,685,000  and  net  repayments  under  local
subsidiaries' lines of credit of $9,980,000.


Debt Obligations, Financing Sources and Capital Expenditures

At December  31, 1997,  Merisel,  Inc. had  outstanding  $125,000,000  principal
amount of the 12.5% Notes. The 12.5% Notes provide for an interest rate of 12.5%
payable  semi-annually.  By virtue of being an obligation of Merisel,  Inc., the
12.5% Notes are  effectively  subordinated  to all  liabilities of the Company's
subsidiaries,  including  trade  payables,  and are not guaranteed by any of the
Company's  subsidiaries.  The  Indenture  relating to the 12.5%  Notes  contains
certain  covenants  that,  among  other  things,  limit  the type and  amount of
additional  indebtedness  that  may be  incurred  by the  Company  or any of its
subsidiaries  and imposes  limitations on investments,  loans,  advances,  asset
sales or  transfers,  dividends  and  other  payments,  the  creation  of liens,
sale-leasebacks, transactions with affiliates and certain mergers.

At December 31,  1997,  the Company had  promissory  notes  outstanding  with an
aggregate balance of $8,429,000.  Such notes provide for interest at the rate of
approximately 7.7% per annum and are repayable in 48 and 60 monthly installments
that  commenced  February 1, 1996,  with balloon  payments due at maturity.  The
notes  are  collateralized  by  certain  of  the  Company's  real  property  and
equipment.


<PAGE>

In January  1998,  the  Company and Merisel  Americas  entered  into a Revolving
Credit  Agreement  and  Convertible  Promissory  Note due July 2,  1998 (the "BT
Note") with Bankers Trust Company ("BT"), which permits borrowings thereunder by
Merisel  Americas of up to $46,500,000  outstanding at any one time. In order to
induce BT to enter into the BT Note,  Stonington Capital Appreciation 1994 Fund,
L.P.  (the  "Fund"),  the  sole  owner of  Phoenix  Acquisition  Company  L.L.C.
("Phoenix"),  which owns approximately 62.4% of the outstanding shares of common
stock of the Company,  caused its wholly owned subsidiary  Stonington  Financing
Inc.  ("SFI") to enter into a note put agreement (the "Note Put Agreement") with
BT.  Pursuant to the Note Put  Agreement,  BT may require SFI to purchase the BT
Note in the event of a default by Merisel Americas, including failure to pay the
BT Note at maturity. In the event SFI purchases the BT Note pursuant to the Note
Put  Agreement,  the BT Note is  convertible  into shares of common stock of the
Company at the option of SFI at a conversion  rate equal to the average  closing
price of the  Company's  common  stock on NASDAQ for the  fifteen  trading  days
immediately preceding the conversion. SFI and Merisel Americas also entered into
an agreement  wherein  Merisel  Americas  covenants  that, in the event BT gives
notice to SFI pursuant to the Note Put  Agreement  requiring SFI to purchase the
BT Note,  it will use its best  efforts  to  refinance  the BT Note prior to its
final maturity date.

Merisel  Americas may borrow  under the BT Note  through May 31,  1998,  and all
outstanding  borrowings mature on July 2, 1998.  Borrowings bear interest at the
rate of LIBOR plus 3% or, at the  Company's  option,  BT's prime rate plus 2%. A
commitment  fee of 0.5% is payable  with  respect  to the unused  portion of the
commitment.

In addition to its requirements for working capital for operations,  the Company
presently  anticipates that its capital expenditures will be between $30,000,000
and  $40,000,000  for  1998,  primarily  consisting  of  costs  associated  with
implementing the SAP operating system, developing the Company's channel assembly
capabilities,  enhancing  electronic  services,  upgrading warehouse systems and
other  Company  facilities,  and  building  the sales  infrastructure.  However,
aggregate costs could exceed these estimates,  depending on the timing and scope
of the SAP implementation.  The Company intends to fund its capital expenditures
primarily through internally generated cash and lease financing.

At December 31, 1997, the Company had cash and cash  equivalents of $36,447,000.
In the opinion of management, anticipated cash from operations in 1998, together
with borrowings under the Company's  securitization  facilities and trade credit
from vendors, will be sufficient to meet the Company's requirements for the next
12 months,  without the need for additional  financing,  assuming the BT Note is
refinanced or replaced with other sources of internal or external funding.  This
assumes,  however,  that there are not material adverse changes in the Company's
relationships with its vendors,  customers or lenders. Any unforeseen event that
adversely  impacts the industry or the Company's  position in the industry could
have a direct and material unfavorable effect on the liquidity of the Company.

Inflation.  Due to the short-term  nature of Merisel's  contracts and agreements
with  customers and vendors,  the Company does not believe that  inflation had a
material impact on its operations.


<PAGE>

Asset Management

Merisel attempts to manage its inventory  position to maintain levels sufficient
to achieve high product  availability  and same-day order fill rates.  Inventory
levels may vary from period to period,  due to factors  including  increases  or
decreases in sales levels,  Merisel's practice of making large-volume  purchases
when  it  deems  such  purchases  to be  attractive,  and  the  addition  of new
manufacturers and products.  The Company has negotiated  agreements with many of
its manufacturers which contain stock balancing and price protection  provisions
intended  to  reduce,  in part,  Merisel's  risk of loss due to  slow-moving  or
obsolete inventory or manufacturer price reductions.  The Company is not assured
that these  agreements  will  succeed in reducing  this risk.  In the event of a
manufacturer  price  reduction,  the  Company  generally  receives  a credit for
products  in  inventory.  In  addition,  the  Company  has the right to return a
certain percentage of purchases,  subject to certain limitations.  Historically,
price protection and stock return privileges, as well as the Company's inventory
management  procedures,  have  helped  to  reduce  the risk of loss of  carrying
inventory.

Historically,  the Company has purchased foreign exchange  contracts to minimize
foreign  exchange  transaction  gains and  losses.  While  such  contracts  were
temporarily  not available to the Company in the latter part of 1996,  they were
again being purchased as of early 1997. No material  negative  financial  impact
was experienced during the time the contracts were not being used.

The Company  offers  credit terms to  qualifying  customers  and also sells on a
prepay,  credit  card  and  cash-on-delivery  basis.  The  Company  also  offers
financing for its sales to certain of its customers  through  various floor plan
financing  companies.  With  respect to credit  sales,  the Company  attempts to
control its bad debt exposure by  monitoring  customers'  creditworthiness  and,
where  practicable,  through  participation in credit  associations that provide
customer  credit  rating  information  for certain  accounts.  In addition,  the
Company purchases credit insurance as it deems appropriate.



<PAGE>


Item 8. Financial Statements and Supplementary Data.


                          INDEPENDENT AUDITORS' REPORT



Merisel, Inc.:

We have audited the accompanying  consolidated  balance sheets of Merisel,  Inc.
and subsidiaries as of December 31, 1996 and 1997, and the related  consolidated
statements of operations,  changes in stockholders'  equity,  and cash flows for
each of the three years in the period ended  December 31, 1997.  Our audits also
included the financial  statement  schedule  listed at Item 14. 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  in  accordance  with  generally   accepted  auditing
standards.  Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement.  An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements.  An audit also includes
assessing the  accounting  principles  used and  significant  estimates  made by
management,  as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion,  such consolidated  financial  statements present fairly, in all
material respects,  the financial position of Merisel,  Inc. and subsidiaries at
December 31, 1996 and 1997,  and the results of their  operations and their cash
flows for each of the three  years in the  period  ended  December  31,  1997 in
conformity with generally accepted accounting principles.  Also, in our opinion,
such  financial  statement  schedule,  when  considered in relation to the basic
consolidated  financial  statements  taken as a  whole,  present  fairly  in all
material respects the information set forth therein.


DELOITTE & TOUCHE LLP

Los Angeles, California
February 23, 1998



<PAGE>

<TABLE>
<CAPTION>


                         MERISEL, INC. AND SUBSIDIARIES

                           CONSOLIDATED BALANCE SHEETS
                        (In thousands, except share data)

                                                                                              December 31,
                                                                                       -------------------------
                                                                                            1996        1997
                                                                                       ------------- -----------
                                        ASSETS



<S>                                                                                     <C>          <C>
CURRENT ASSETS:
     Cash and cash equivalents.......................................................    $  44,678   $   36,447

     Accounts receivable (net of allowances of $23,684 and $18,549 at December
        31, 1996 and 1997, respectively).............................................      168,295      162,895
     Inventories.....................................................................      392,557      462,752
     Prepaid expenses and other current assets.......................................       16,925       12,352
     Income taxes receivable.........................................................        2,183
     Deferred income tax benefit.....................................................          482          644
                                                                                         ----------- -----------
          Total current assets.......................................................      625,120      675,090
PROPERTY AND EQUIPMENT, NET..........................................................       61,430       40,142
COST IN EXCESS OF NET ASSETS ACQUIRED, NET...........................................       41,724       25,381
OTHER ASSETS.........................................................................        2,765        6,498
     TOTAL ASSETS....................................................................    $ 731,039   $  747,111
                                                                                         =========== ===========

                         LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES:
     Accounts payable................................................................    $ 383,548   $  437,211
     Accrued liabilities.............................................................       37,544       37,268
     Income taxes payable............................................................                     1,695
     Long-term debt--current.........................................................        9,084        1,762
     Subordinated debt--current......................................................        4,400
                                                                                         ----------- -----------
          Total current liabilities..................................................      434,576      477,936
LONG-TERM DEBT.......................................................................      268,079      131,667
SUBORDINATED DEBT....................................................................       13,200
CAPITALIZED LEASE OBLIGATIONS........................................................          187

COMMITMENTS AND CONTINGENCIES

STOCKHOLDERS' EQUITY:

     Preferred stock, $.01 par value; authorized 1,000,000 shares; none issued or
        outstanding
     Common stock, $.01 par value; authorized 150,000,000 shares; outstanding
        30,078,500 and 80,078,500 at December 31, 1996 and 1997, respectively........          301          801
     Additional paid-in capital......................................................      142,300      281,701
     Accumulated deficit.............................................................     (121,164)    (137,005)
     Cumulative translation adjustment...............................................       (6,440)      (7,989)
                                                                                         ----------- -----------
          Total stockholders' equity.................................................       14,997      137,508
     TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY......................................    $ 731,039   $  747,111
                                                                                         =========== ===========
</TABLE>


                 See accompanying  notes to consolidated  financial statements.




<PAGE>

<TABLE>
<CAPTION>


                         MERISEL, INC. AND SUBSIDIARIES

                      CONSOLIDATED STATEMENTS OF OPERATIONS
                     (In thousands, except per share amount)

                                                                           For the Years Ended December 31,
                                                                       -------------------------------------
                                                                         1995           1996          1997
                                                                       -----------  ------------  ------------
<S>                                                                    <C>          <C>           <C>
NET SALES..........................................................    $5,956,967   $5,522,824    $4,048,972
COST OF SALES......................................................     5,633,278    5,233,570     3,807,888
GROSS PROFIT.......................................................       323,689      289,254       241,084
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES.......................       317,195      295,021       191,406
IMPAIRMENT LOSSES..................................................        51,383       42,033        14,100
RESTRUCTURING CHARGE...............................................         9,333
                                                                       -----------  ------------  ------------
OPERATING (LOSS) INCOME............................................       (54,222)     (47,800)       35,578
INTEREST EXPENSE...................................................        37,583       37,431        26,957
LOSS ON SALE OF EUROPEAN, MEXICAN AND
   LATIN AMERICAN OPERATIONS.......................................                     33,455
DEBT RESTRUCTURING COSTS...........................................                                    5,230
OTHER EXPENSE, NET.................................................        13,885       20,150        14,992
                                                                       -----------  ------------  ------------
LOSS BEFORE INCOME TAXES...........................................      (105,690)    (138,836)      (11,601)
(BENEFIT) PROVISION FOR INCOME TAXES...............................       (21,779)       1,539           496
                                                                       -----------  ------------  ------------
NET LOSS BEFORE EXTRAORDINARY ITEM.................................       (83,911)    (140,375)      (12,097)
EXTRAORDINARY  LOSS ON EXTINGUISHMENT OF DEBT......................                                    3,744
                                                                       -----------  ------------  ------------
NET LOSS...........................................................    $  (83,911)  $ (140,375)   $  (15,841)
                                                                       ===========  ============  ============
NET LOSS PER SHARE (BASIC AND DILUTED):
NET LOSS BEFORE EXTRAORDINARY ITEM.................................    $    (2.82)  $    (4.68)   $     (.36)
EXTRAORDINARY LOSS.................................................                                     (.12)
                                                                       -----------  ------------  ------------
NET LOSS...........................................................    $    (2.82)  $    (4.68)   $     (.48)
                                                                       ===========  ============  ============
WEIGHTED AVERAGE NUMBER OF SHARES
       (BASIC AND DILUTED).........................................        29,806       30,001        33,216
                                                                       ===========  ============  ============
</TABLE>

              See accompanying  notes to consolidated  financial statements.





<PAGE>
<TABLE>
<CAPTION>



                         MERISEL, INC. AND SUBSIDIARIES

           CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
                        (In thousands, except share data)


                                                                                 Retained
                                                                    Additional   Earnings       Cumulative
                                                                      Paid-in   (Accumulated    Translation
                                                   Common Stock       Capital      Deficit)      Adjustment      Total
                                               -------------------  ----------  -------------  --------------  -----------
                                                 Shares    Amount
                                               ---------- --------
<S>                                            <C>        <C>       <C>         <C>            <C>             <C>
BALANCE AT DECEMBER 31, 1994...............    29,716,600 $    297  $  141,249  $    103,122   $     (8,504)   $  236,164
   Exercise of stock options and other.....       146,900        2         689                                        691
   Cumulative translation adjustment.......                                                           1,522         1,522
   Net loss................................                                          (83,911)                     (83,911)
                                               ---------- --------  ----------  -------------  --------------  -----------
BALANCE AT DECEMBER 31, 1995...............    29,863,500      299     141,938        19,211         (6,982)      154,466
   Exercise of stock options and other.....       215,000        2         362                                        364
   Cumulative translation adjustment.......                                                             542           542
   Net loss................................                                         (140,375)                    (140,375)
                                               ---------- --------  ----------  -------------  --------------  -----------
BALANCE AT DECEMBER 31, 1996...............    30,078,500      301     142,300      (121,164)        (6,440)       14,997
   Sale of  stock..........................     4,901,316       49      14,851                                     14,900
   Conversion of Note into Common Stock....    45,098,684      451     124,550                                    125,001
   Cumulative translation adjustment.......                                                          (1,549)       (1,549)
   Net loss................................                                          (15,841)                     (15,841)
                                               ---------- --------  ----------  -------------  --------------  -----------
BALANCE AT DECEMBER 31, 1997...............    80,078,500 $    801  $  281,701  $   (137,005)  $     (7,989)   $  137,508
                                               ========== ========  ==========  =============  ==============  ===========
</TABLE>

                 See accompanying  notes to consolidated  financial statements.



<PAGE>

<TABLE>
<CAPTION>

                         MERISEL, INC. AND SUBSIDIARIES

                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (In thousands)


                                                                                 For the Years Ended December 31,
                                                                                  1995           1996         1997
                                                                                ----------  -----------   -----------
<S>                                                                             <C>          <C>          <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
    Net loss ...................................................................$(83,911)   $ (140,375)   $  (15,841)
    Adjustments  to  reconcile  net  income to net cash  provided  by (used for)
    operating activities:
        Depreciation and amortization ..........................................  20,509        18,789        11,311
        Provision for doubtful accounts ........................................  16,335        17,421         7,361
        Impairment losses.......................................................  51,383        42,033        14,100
        Loss on Sale of European, Mexican and Latin American businesses.........                33,455
        Deferred income taxes...................................................   5,471         6,175           162
        Gain on sale of fixed assets............................................                              (1,530)
        Changes in assets and liabilities, net of the effects from acquisitions:
            Accounts receivable.................................................(103,553)      132,480       (70,119)
            Inventories......................................................... (43,524)       91,059       (70,196)
            Prepaid expenses and other current assets...........................  (8,186)      (14,612)          654
            Income taxes receivable............................................. (35,116)       33,470         2,021
            Accounts payable....................................................  98,756      (179,304)       76,203
            Accrued liabilities.................................................  23,872       (11,342)         (789)
            Income taxes payable................................................  (4,422)                      1,695
                                                                                ----------  -----------   -----------
                Net cash (used for) provided by  operating activities........... (62,386)       29,249       (44,968)
CASH FLOWS FROM INVESTING ACTIVITIES:
    Purchase of property and equipment.......................................... (49,082)       (9,652)       (7,290)
    Proceeds from sale of property and equipment................................                 5,975         5,020
    Payment of earn out obligation from ComputerLand acquisition................               (13,409)
    Cash proceeds from sale of Australian business..............................                 8,515
    Cash proceeds from sale of European, Mexican and Latin American businesses..               110,379
    Other investing activities..................................................                  (767)
                                                                                ----------  -----------   -----------
               Net cash (used for) provided by  investing activities............ (49,082)      101,041        (2,270)
                                                                                ----------  -----------   -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
    Borrowings under revolving line of credit................................... 937,275     1,448,358       726,308
    Repayments under revolving line of credit...................................(944,960)   (1,466,150)     (811,516)
    Repayments under senior notes...............................................               (43,195)      (56,805)
    Repayments under subordinated debt agreement................................                (4,400)      (17,600)
    Repayments under other financing arrangements...............................  (9,980)      (17,742)       (1,721)
    Proceeds from sale of accounts receivable................................... 125,320                      61,740
    Net  proceeds from the issuance  of  convertible notes......................                             125,001
    Proceeds from issuance of common stock......................................     691           364        14,900
                                                                                ----------  -----------   -----------
                Net cash provided by (used for) financing activities............ 108,346       (82,765)       40,307
                                                                                ----------  -----------   -----------
EFFECT OF EXCHANGE RATE CHANGES ON CASH.........................................     967        (4,225)       (1,300)
                                                                                ----------  -----------   -----------
NET INCREASE(DECREASE) IN CASH AND CASH EQUIVALENTS.............................  (2,155)       43,300        (8,231)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD..................................   3,533         1,378        44,678
                                                                                ----------  -----------   -----------
CASH AND CASH EQUIVALENTS, END OF PERIOD........................................$  1,378    $   44,678    $   36,447
                                                                                ==========  ===========   ===========

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION--
    Cash paid(received) during the year for:
    Interest (net of interest capitalized of  $3,281 for 1995)..................$ 27,118    $   30,456    $   33,385
    Income taxes................................................................  10,747       (36,068)       (3,362)
    Noncash activities:
    Capital lease obligations entered into......................................   5,708           187

</TABLE>

                  See accompanying  notes to consolidated  financial statements.



<PAGE>


                         MERISEL, INC. AND SUBSIDIARIES

               CONSOLIDATED STATEMENTS OF CASH FLOWS --(Continued)





SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVITIES

Effective  March 28, 1997, the Company sold  substantially  all of the assets of
its wholly owned  subsidiary,  Merisel FAB,  Inc..  The recorded  sale price was
$31,992,000,  consisting of the  assumption of $11,992,000 of trade payables and
accrued liabilities and a $20,000,000  extended payable due to a third party, in
full consideration for the assets (see Note 4 - "Dispositions").

On  October  10,  1997,  Phoenix  Acquisition  Company  II,  L.L.C.  ("Phoenix")
exercised  its option to convert,  without any  additional  payment,  $3,296,286
principal amount of the convertible note into 1,084,305 shares of Common Stock.

On December 19, 1997, following receipt of stockholder  approval,  approximately
$133.8 million  outstanding  principal  amount of the  convertible  note held by
Phoenix was converted,  without any additional  payment, to 44,014,379 shares of
Common Stock. The proceeds from the issuance of the convertible note were offset
by professional  fees and other direct costs of approximately  $12,099,000 which
was  recorded  as a  reduction  to  additional  paid in  capital  at the time of
conversion.

         See accompanying  notes to consolidated  financial statements.



<PAGE>



                         MERISEL, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                        DECEMBER 31, 1995, 1996 AND 1997


1. Summary of Significant Accounting Policies

General-- Merisel,  Inc., a Delaware corporation and a holding company (together
with its subsidiaries,  "Merisel" or the "Company"), is a leading distributor of
computer hardware,  networking equipment and software products. Through its main
operating  subsidiary,  Merisel Americas,  Inc.  ("Merisel  Americas"),  and its
subsidiaries the Company markets products and services  throughout North America
and has achieved operational  efficiencies that have made it a valued partner to
a broad range of computer resellers,  including  value-added resellers ("VARs"),
commercial  resellers/dealers,  and  retailers.  The Company  also  operates the
Merisel  Open  Computing  Alliance  (MOCA(TM)),  which  primarily  supports  Sun
Microsystems' UNIX-based product sales and installations.


Risks and Uncertainties --The Company believes that the diversity and breadth of
the  Company's  product  and  service  offerings,  customers,  and  the  general
stability  of the  economies  in the markets in which it operates  significantly
mitigate  the risk that a severe  impact will occur in the near term as a result
of changes in its customer  base,  competition,  or  composition of its markets.
Although Merisel regularly stocks products and accessories supplied by more that
500  manufacturers,  69% of the  Company's  net  sales  for the  North  American
Business in 1997 (as  compared to 60% in 1996 and 55% in 1995) were derived from
products supplied by Merisel's ten largest vendors.

The preparation of financial  statements in conformity  with generally  accepted
accounting   principles  requires  management  to  make  certain  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.  Significant
estimates include  collectibility of accounts  receivable,  inventory,  deferred
income taxes,  accounts payable,  sales returns and  recoverability of long-term
assets.

New  Accounting   Pronouncement--In  February  1997,  the  Financial  Accounting
Standards Board ("FASB") issued Statement of Financial  Accounting  Standard No.
128,  "Earnings  per Share"  ("SFAS  128"),  which is  effective  for  financial
statements  issued  for  periods  ending  after  December  15,  1997.  SFAS  128
simplifies the previous  standards for computing  earnings per share ("EPS") and
requires the disclosure of basic and diluted earnings per share. The Company has
adopted  SFAS 128 in  presenting  EPS  disclosure  for 1997 and the prior  years
presented.  Because  of the  anti-dilutive  effect  that  the  Company's  equity
instruments have on EPS in the years  presented,  basic and diluted EPS are both
computed  by  dividing  the net loss by the  weighted  average  number of shares
outstanding.

In June 1997,  the FASB issued  Statement of Financial  Accounting  Standard No.
130,  "Reporting for  Comprehensive  Income"  ("SFAS 130").  SFAS 130 requires a
statement of comprehensive income to be included in the financial statements for
fiscal  years  beginning  after  December  15,  1997.  The Company is  presently
developing a statement to comply with these requirements and, accordingly,  will
include such statement beginning with the first quarter of 1998.

In addition,  in June of 1997, the FASB issued Financial Accounting Standard No.
131, "Disclosure about Segments of an Enterprise and Related Information" ("SFAS
131), which requires disclosure of certain information about operating segments,
geographic areas in which the Company operates, major customers and products and
services. The Company will evaluate the effect that this new standard has on the
Company's financial statement presentation, and the required information will be
reflected in the financial statements for the year ended December 31, 1998.




<PAGE>


                         MERISEL, INC. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)


Revenue  Recognition,  Returns  and  Sales  Incentives--The  Company  recognizes
revenue from hardware and software  sales as products are shipped.  The Company,
subject to certain  limitations,  permits its customers to exchange  products or
receive  credits  against  future  purchases.  The Company  offers its customers
several sales incentive  programs which,  among others,  include funds available
for  cooperative  promotion of product  sales.  Customers earn credit under such
programs  based  upon the volume of  purchases.  The cost of these  programs  is
partially   subsidized  by  marketing   allowances  provided  by  the  Company's
manufacturers.  The allowances for sales returns and costs of customer incentive
programs are accrued concurrently with the recognition of revenue.

Cash and Cash  Equivalents--The  Company considers all highly liquid investments
purchased  with  initial   maturities  of  three  months  or  less  to  be  cash
equivalents.  As of  December  31,  1997,  cash  and cash  equivalents  included
$9,500,000 in restricted cash balances.

Inventories--Inventories  are  valued  at the lower of cost or  market;  cost is
determined on the average cost method.

Property  and  Depreciation--Property  and  equipment  are  stated  at cost less
accumulated  depreciation.  Depreciation is provided on the straight-line method
over the  estimated  useful lives of the assets,  generally  three to ten years.
Leasehold  improvements  are amortized over the shorter of the life of the lease
or the improvement.

The  Company  capitalizes  all direct  costs  incurred  in the  construction  of
facilities and the  development  and  installation of new computer and warehouse
management systems. Such amounts include the costs of materials and other direct
construction   costs,   purchased   computer  hardware  and  software,   outside
programming and consulting fees, direct employee salaries and interest.

Cost in Excess of Net Assets  Acquired--Cost  in excess of net  assets  acquired
resulted  from the  acquisition  in January  1994 of Merisel  FAB,  Inc.,  which
operated the ComputerLand  Franchise and Datago  Aggregation  Business ("Merisel
FAB"),   and  the  acquisition  in  1990  of  Microamerica,   Inc.   Accumulated
amortization  was  $14,429,000  and $7,672,000 as of December 31, 1996 and 1997,
respectively. The cost in excess of net assets acquired from Microamerica,  Inc.
is being amortized over a period of 40 years using the straight line method. The
cost in excess of net assets  acquired from Merisel FAB was being amortized over
an aggregate period of 25 years. As of March 28, 1997, the Company completed the
sale of substantially  all of the assets of Merisel FAB. In connection with such
sale,  the cost in excess of net assets  acquired  related  to Merisel  FAB were
written off (see Note 4 - "Dispositions").

The Company reviews the recoverability of intangible assets and other long lived
assets to determine if there has been any permanent impairment.  This assessment
is  performed  based  on the  estimated  undiscounted  future  cash  flows  from
operating  activities  compared with the carrying value of intangible assets. If
the  undiscounted  future  cash  flows  are less  than the  carrying  value,  an
impairment loss is recognized,  measured by the difference  between the carrying
value and fair value of the assets (see Note 2 - "Impairment Losses").

Income  Taxes--Deferred income taxes represent the amounts which will be paid or
received  in future  periods  based on the tax rates that are  expected to be in
effect when the temporary differences are scheduled to reverse.

At December 31, 1995, the cumulative  amount of undistributed  earnings on which
the Company has not  recognized  United  States  income taxes was  approximately
$7,000,000,   representing   primarily   earnings  in  the  Company's   Canadian
subsidiary.  No  undistributed  foreign  earnings  remained in the Company as of
December 31, 1997.

Concentration of Credit Risk--Financial instruments which subject the Company to
credit risk consist  primarily of cash equivalents,  trade accounts  receivable,
and forward foreign currency  exchange  contracts.  Concentration of credit risk
with respect to trade accounts  receivable are generally  diversified due to the
large  number of  entities  comprising  the  Company's  customer  base and their
geographic  dispersion.  The Company performs ongoing credit  evaluations of its
customers,  maintains an allowance  for  potential  credit losses and in certain
locations  maintains  credit  insurance as the Company  deems  appropriate.  The
Company actively evaluates the  creditworthiness  of the financial  institutions
with which it conducts business.

<PAGE>

                         MERISEL, INC. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)



Fair Values of Financial  Instruments--The fair values of financial instruments,
other than long-term debt,  closely  approximate their carrying value because of
their short term nature.  The estimated  fair value of long-term  debt including
current maturities, based on reference to quoted market prices, was greater than
its carrying value as of December 31, 1997 by $10,000,000, and was less than the
carrying value as of December 31, 1996 by approximately $60,776,000.

Foreign Currency Translation--Assets and liabilities of foreign subsidiaries are
translated  into United  States  dollars at the  exchange  rate in effect at the
close of the period.  Revenues and expenses of these subsidiaries are translated
at the  average  exchange  rate  during  the  period.  The  aggregate  effect of
translating the financial  statements of foreign subsidiaries at the above rates
is included in a separate component of stockholders'  equity entitled Cumulative
Translation  Adjustment.  In addition,  the Company advances funds in the normal
course of business to certain of its foreign subsidiaries which are not expected
to be repaid in the foreseeable future.  Translation  adjustments resulting from
these advances are also included in Cumulative Translation Adjustment.

Foreign Exchange Instruments--The Company's use of derivatives is limited to the
purchase of foreign  exchange  contracts in order to minimize  foreign  exchange
transaction gains and losses.  The Company purchases forward dollar contracts to
hedge short-term  advances to its foreign subsidiary and to hedge commitments to
acquire  inventory for sale and does not use the contracts for trading purposes.
The Company's foreign exchange rate contracts minimize the Company's exposure to
exchange  rate  movement  risk,  as any gains or losses on these  contracts  are
offset by gains and  losses on the  transactions  being  hedged.  There  were no
outstanding  foreign exchange  contracts as of December 31, 1996. As of December
31, 1997, there were approximately  $42,000,000 in outstanding  foreign exchange
contracts. In 1995, there was a net foreign currency loss of $806,000, primarily
due to the devaluation of the Mexican Peso. In 1996, the Company  recorded a net
foreign  currency  gain of  $161,000  which was also  primarily  related  to the
performance of the Mexican Peso against the United States  dollar.  In 1997, the
Company  recorded a net foreign  currency  loss of $351,000.  These  amounts are
recorded as other expense.

Fiscal Periods--The Company's fiscal year is the 52- or 53-week period ending on
the  Saturday  nearest to  December  31 and its fiscal  quarters  are the 13- or
14-week periods ending on the Saturday  nearest to March 31, June 30,  September
30 and  December  31. For clarity of  presentation,  the  Company has  described
year-ends  presented  as if the  years  ended on  December  31 and  quarter-ends
presented  as if the  quarters  ended on March  31,  June 30,  September  30 and
December 31. The 1995 and 1996 fiscal years were 52 weeks in duration.  The 1997
fiscal year was 53 weeks in duration.  All quarters  presented  for 1996 and the
first three  quarters of 1997 were 13 weeks in duration.  The fourth  quarter of
1997 was 14 weeks in duration.

2. Impairment Losses

Impairment  of  long-lived  assets  is  recognized  when  events or  changes  in
circumstances indicate that the carrying value of the asset, or related group of
assets, may not be recoverable.

In 1993,  the Company  undertook  the process of converting  its North  American
Operations to SAP.  Although  this process was completed in Canada in 1995,  the
Company  delayed  the  implementation  in the  United  States  and  recorded  an
impairment  charge of  $19,500,000.  In the fourth  quarter of 1997, the Company
renewed  its  implementation  efforts.  As  part of this  process,  the  Company
reviewed  previously  capitalized  costs and determined  that a portion of these
costs no longer  provided  value to the Company  primarily due to changes in the
SAP  implementation  strategy  and the  planned  implementation  of a  different
version of SAP. As a result, a $14,100,000 impairment charge was recorded.





<PAGE>

                         MERISEL, INC. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)


In the quarter ended  September 30, 1996, the Company  determined that a portion
of the carrying value for certain of its  identifiable  intangible  assets would
not be recovered from their use in future operations.  Accordingly, these assets
were written down to their fair values as of September  30, 1996.  An impairment
was recognized on the intangible  assets of Merisel FAB, due to declining  sales
growth, margins and earnings, and the resulting negative trend in projected cash
flows.  The  intangible  assets of Merisel FAB were acquired in January 1994 and
had a net book value of $87,500,000 in 1995 prior to the impairment  losses.  In
the fourth quarter of 1995, the fair value of the intangible assets was measured
by discounting  future  expected cash flows,  which resulted in a required write
down of  $30,000,000.  Another  impairment  charge of $40,000,000 was recognized
against these assets in the third quarter of 1996 on the same basis. In December
1996, the Company recorded an additional $2,033,000 charge to adjust Merisel FAB
assets to their fair value based on the provisions of a definitive  agreement to
sell such assets in the first quarter of 1997. (See Note 4 "Dispositions.")

In March 1996,  effective  January 1, 1996, the Company sold its interest in its
wholly owned Australian subsidiary,  Merisel Pty Ltd. ("Merisel Australia"),  to
Tech  Pacific  Holdings  Ltd.  Under the  terms of the  agreement,  the  Company
received  consideration  of  $9,900,000  in the  form of  repayment  of  certain
intercompany  debt  obligations  for $8,500,000 and $1,400,000 in non-cash asset
transfers.  The Company recognized a $1,900,000 charge as an impairment loss for
the write down of the Australian net assets to their net realizable value in the
fourth quarter of 1995.

3. Debt Restructuring and Equity Investment

On  September  19,  1997,  the  Company  and  Merisel  Americas  entered  into a
definitive Stock and Note Purchase  Agreement with Phoenix  Acquisition  Company
II, L.L.C.  ("Phoenix"),  a Delaware limited liability company whose sole member
is Stonington  Capital  Appreciation  1994 Fund, L.P.  Pursuant to the Stock and
Note Purchase  Agreement,  on September 19, 1997 Phoenix  acquired a Convertible
Note for $137,100,000  (the  "Convertible  Note") and 4,901,316 shares of Common
Stock (the  "Initial  Shares")  for  $14,900,000.  The  Convertible  Note was an
unsecured obligation of the Company and Merisel Americas and provided that, upon
the  satisfaction  of  certain  conditions,   including  obtaining   stockholder
approval,  the  Convertible  Note would  automatically  convert into  45,098,684
shares of Common Stock (the "Conversion Shares").

The Company used  substantially  all of the  $152,000,000  in proceeds  from the
issuance of the Initial Shares and the Convertible Note to repay indebtedness of
its  operating   subsidiaries   consisting  of  $80,697,000   principal   amount
outstanding under a revolving credit agreement,  $53,798,000 principal amount of
its 11.5% senior notes, and $13,200,000  principal amount of subordinated notes.
In connection with these repayments,  the Company recorded an extraordinary loss
on the  extinguishment  of debt of $3,744,000.  This amount consisted of a "make
whole" premium of $960,000 required to be paid with respect to the prepayment of
the   subordinated   notes,   unamortized   prepaid   financing   fees  totaling
approximately  $2,546,000 and other costs totaling $238,000.  Additionally,  the
Company incurred  $5,230,000 in other expenses related to the Company's  efforts
to effect a  restructuring  of its  debt.  These  costs  include  $4,380,000  of
professional  fees and other costs  associated with the termination of a Limited
Waiver  Agreement  with the holders of its 12.5%  Senior  Notes due 2004 ("12.5%
Notes") and  $850,000  in costs that were  incurred as a result of the change in
control that occurred upon the conversion of the Convertible Note. Additionally,
selling,  general and administrative  expenses include  compensation  charges of
$1,950,000  incurred  pursuant  to  employment  contracts  of certain  executive
officers of the Company related to the debt restructuring.

On October  10,  1997,  Phoenix  exercised  its option to  convert,  without any
additional  payment,  $3,296,286  principal  amount of the Convertible Note into
1,084,305 shares of Common Stock,  representing the maximum amount that could be
converted  prior to  obtaining  stockholder  approval.  On  December  19,  1997,
following  receipt  of  stockholder  approval,  the  remaining  portion  of  the
Convertible  Note was converted into Common Stock.  The $152,000,000 in proceeds
from the issuance of the Initial Shares and the  Convertible  Note was partially
offset by  professional  fees and other direct costs  related  thereto  totaling
approximately $12,099,000, which were recorded as a reduction to additional paid
in capital at the time of  conversion.  As of December 31, 1997,  Phoenix  owned
50,000,000  shares of Common Stock,  or  approximately  62.4% of the outstanding
Common Stock.

<PAGE>

                         MERISEL, INC. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)


4.  Dispositions

On October 4, 1996,  Merisel  completed  the sale of its  European,  Mexican and
Latin American  subsidiaries ("EML") to CHS Electronics,  Inc. ("CHS"). The sale
was effective as of September 27, 1996. A loss of  $33,455,000,  which  includes
approximately  $7,400,000 of direct costs  related to the sale,  was recorded on
such sale. The sale price,  computed based on the combined closing balance sheet
of EML, was  $147,631,000,  consisting  of (i)  $110,379,000  in cash,  (ii) the
assumption of Merisel's  European asset  securitization  agreement against which
$26,252,000  was  outstanding at closing and (iii) a receivable for  $11,000,000
which has since been collected.

As of March 28, 1997, the Company completed the sale of substantially all of the
assets of its wholly owned  subsidiary,  Merisel FAB, Inc.  ("Merisel FAB") to a
wholly owned subsidiary of SYNNEX Information Technologies, Inc. ("Synnex"). The
sale price,  computed  based upon the February 21, 1997 balance sheet of Merisel
FAB, was  $31,992,000  consisting  of the buyer  assuming  $11,992,000  of trade
payables  and accrued  liabilities  and a  $20,000,000  extended  payable due to
Vanstar  Corporation.  As part of the sale, the Company agreed to extend rebates
to Synnex on future purchases, not to exceed $2,000,000. In connection with this
sale,  the Company  recorded an impairment  charge in the fourth quarter of 1996
for $2,033,000 to adjust Merisel FAB's assets to their fair value.

In  addition,  effective  January 1, 1996,  the  Company  completed  the sale of
Merisel  Australia  (see Note 2).  Following is summarized  pro forma  operating
results  assuming  that the  Company  had sold EML,  Merisel  FAB,  and  Merisel
Australia as of January 1, 1996.

<TABLE>
<CAPTION>

                                             (Unaudited)
                                 (in thousands except per share data)
                                   Twelve Months Ended December 31,
                                     1996                    1997
                               ---------------         ---------------
        <S>                    <C>                     <C>
        Net Sales              $    3,441,343            $  3,846,795
        Gross Profit                  179,238                 233,406
        Net loss                      (60,751)                (17,994)
                               ===============         ================
        Net loss per basic &
        diluted share          $        (2.02)           $      (0.54)
                               ===============         ================
        Weighted Average
        basic & diluted
        Shares Outstanding             30,001                  33,216
                               ===============         ================

</TABLE>

EML is not an incorporated entity for which historical financial statements were
prepared. The historical balances used in preparing the above pro forma balances
represent  combined  balances  obtained  from the separate  unaudited  financial
statements for the  individual  entities  comprising  EML. The pro forma results
include adjustments for general and administrative  expenses that would not have
been eliminated due to the sale of EML. The pro forma  adjustments  also include
adjustments for  amortization of intangible  assets and for interest  expense on
debt repaid with a portion of the proceeds  from the sale,  net of the effect of
an interest  rate  increase  resulting  from the  renegotiation  of certain debt
agreements  as a result  of the  sale.  Historical  balances  obtained  from the
unaudited  financial  statements of Merisel FAB and Merisel  Australia were also
used in preparing the pro forma balances above.



<PAGE>


                         MERISEL, INC. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)



5. Sale of Accounts Receivable

The Company's wholly owned subsidiary, Merisel Americas, sells trade receivables
on an ongoing basis to its wholly owned subsidiary Merisel Capital Funding, Inc.
("Merisel  Capital  Funding").  Pursuant to an agreement  with a securitization
company (the "Receivables  Purchase and Servicing  Agreement"),  Merisel Capital
Funding,  in turn,  sells such receivables to the  securitization  company on an
ongoing basis, which yields proceeds of up to $300,000,000 at any point in time.
Merisel  Capital  Funding's  sole business is the purchase of trade  receivables
from Merisel  Americas.  Merisel Capital Funding is a separate  corporate entity
with its own separate  creditors,  which in the event of its liquidation will be
entitled to be satisfied out of Merisel  Capital  Funding's  assets prior to any
value in Merisel Capital Funding becoming available to Merisel Capital Funding's
equity holders. This facility expires in October 2000.

Effective  December 15, 1995,  Merisel Canada,  Inc.  ("Merisel Canada") entered
into a receivables  purchase agreement with a securitization  company to provide
funding for Merisel Canada.  In accordance  with this agreement,  Merisel Canada
sells receivables to the securitization  company, which yields proceeds of up to
$150,000,000  Canadian  dollars.  The facility expires December 12, 2000, but is
extendible by notice from the securitization  company,  subject to the Company's
approval.

Effective  October 16, 1995,  Merisel U.K. Ltd.  ("Merisel U.K.") entered into a
receivables purchase agreement with a securitization  Company to provide funding
for Merisel U.K. This facility,  including $26,252,000  outstanding  thereunder,
was assumed by CHS in connection  with the purchase of EML  effective  September
27, 1996.

Under these  securitization  facilities,  the receivables are sold at face value
with payment of a portion of the purchase price being  deferred.  As of December
31, 1997 the total amount  outstanding  under these facilities was $310,560,000.
Fees incurred in connection  with the sale of accounts  receivable for the years
ended  December  31,  1995,  1996 and 1997  were  $10,291,000,  $16,029,000  and
$16,030,000, respectively, and are recorded as other expense.


6. Property and Equipment

Property and equipment consisted of the following (in thousands):
<TABLE>
<CAPTION>

                                                       Estimated
                                                        Useful
                                                          Life
                                                       (in Years)
                                                                          December 31,
                                                                        ----------------
                                                                        1996       1997
                                                                      ---------- ---------
     <S>                                                              <C>        <C>
     Land  .............................................              $  5,818   $  2,440
     Building...........................................      20         3,880      3,880
     Equipment..........................................   3 to 10      65,628     66,455
     Furniture and fixtures.............................    3 to 5       8,575      6,733
     Leasehold improvements.............................   3 to 20       9,025      8,166
     Construction in progress...........................                21,850     14,589
                                                                      ---------- ---------
     Total..............................................               114,776    102,263
     Less accumulated depreciation and amortization.....               (53,346)   (62,121)
                                                                      ---------- ---------
     Property and equipment, net........................              $ 61,430   $ 40,142
                                                                      ========== =========

</TABLE>

<PAGE>

                         MERISEL, INC. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)


7. Income Taxes

The  components  of loss before  income  taxes  consisted of the  following  (in
thousands):
<TABLE>
<CAPTION>

                                                       For the Years Ended December 31,
                                                  --------------------------------------------
                                                      1995            1996           1997
                                                  -------------  --------------  -------------
<S>                                               <C>            <C>             <C>
Domestic.........................................   $ (71,884)      $(100,139)     $(18,442)
Foreign..........................................     (33,806)        (38,697)        2,601
                                                  -------------  --------------  -------------
Total............................................   $(105,690)      $(138,836)     $(15,841)
                                                  =============  ==============  =============
</TABLE>


The  (benefit)  provision  for  income  taxes  consisted  of the  following  (in
thousands):
<TABLE>
<CAPTION>

                                                       For the Years Ended December 31,
                                                  --------------------------------------------
                                                      1995            1996           1997
                                                  -------------  --------------  -------------
     <S>                                          <C>            <C>             <C>
     Current:
          Federal.....................              $(24,627)      $ (1,706)
          State.......................                   130            360            $ 312
          Foreign.....................                (2,753)        (3,290)             346
                                                  -------------  --------------  -------------
          Total Current...............               (27,250)        (4,636)             658
                                                  -------------  --------------  -------------
     Deferred:
          Domestic....................                 7,120          4,659
          Foreign.....................                (1,649)         1,516             (162)
                                                  -------------  --------------  -------------
          Total deferred..............                 5,471          6,175             (162)
                                                  -------------  --------------  -------------
          Total provision (benefit)...              $(21,779)      $  1,539            $ 496
                                                  =============  ==============  =============
</TABLE>

Deferred  tax  liabilities  and  assets  were  comprised  of the  following (in
thousands):

<TABLE>
<CAPTION>
                                                                        December 31,
                                                                    1996           1997
                                                                 ------------  ------------
     <S>                                                         <C>           <C>
     Deferred tax assets
          Net operating loss..........................            $26,328         $51,744
          Expense accruals............................             11,919          16,164
          State taxes.................................               (372)            109
          Property and goodwill.......................             10,697          (4,361)
          Other, net..................................              2,033           2,314
                                                                 ------------  ------------
                                                                   50,605          65,970
          Valuation allowances........................            (50,123)        (65,327)
                                                                 ------------  ------------
               Total..................................              $ 482         $   643
                                                                 ============  ============
     Net deferred tax asset...........................              $ 482        $    643
                                                                 ============  ============
</TABLE>

<PAGE>

                         MERISEL, INC. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)


The major elements  contributing to the difference between the federal statutory
tax rate and the effective tax rate are as follows:
<TABLE>
<CAPTION>

                                                                             For the Years Ended
                                                                                December 31,
                                                                  --------------------------------------------
                                                                     1995             1996            1997
                                                                  -------------  --------------   ------------
     <S>                                                           <C>           <C>              <C>
     Statutory rate..............................................     (35.0)%          (35.0)%      (35.0)%
     Increase in U.S. valuation allowance........................       9.3             27.3         32.7
     State income taxes, less effect of federal deduction........       0.1               .2          1.3
     Foreign income subject to tax at other than statutory rate..       3.2
     Goodwill amortization.......................................       0.4               .2          1.5
     Foreign losses with benefits at less than statutory rate....       0.1              7.2
     Utilization of net operating losses of foreign subsidiary...                       (1.0)         1.2
     Other.......................................................       1.3              2.2          1.5
                                                                  -------------  --------------   ------------
     Effective tax rate..........................................     (20.6)%            1.1%         3.2%
                                                                  =============  ==============   ============
</TABLE>

Upon the issuance of the Conversion Shares, the Company experienced an ownership
change for Federal income tax purposes, resulting in an annual limitation on the
Company's  ability to utilize its net  operating  loss  carryforwards  to offset
future taxable income.  The annual  limitation was determined by multiplying the
value of the Company's equity before the change by the long-term tax exempt rate
as defined by the Internal Revenue Service.  The Company has estimated that this
limitation   could  reduce   available  net  operating  loss   carryforwards  by
approximately  $23,000,000  and has  adjusted  its deferred tax asset to reflect
such  estimated  limitation.  At  December  31,  1996 and 1997,  the Company had
available net operating  loss  carryforwards  of $77,643,000  and  $125,378,000,
after  adjusting  for the estimated  limitation,  which expires at various dates
through December 31, 2012.


8. Debt

At December  31, 1997,  Merisel,  Inc. had  outstanding  $125,000,000  principal
amount of the 12.5% Notes. The 12.5% Notes provide for an interest rate of 12.5%
payable  semi-annually.  By virtue of being an obligation of Merisel,  Inc., the
12.5% Notes are  effectively  subordinated  to all  liabilities of the Company's
subsidiaries,  including  trade  payables,  and are not guaranteed by any of the
Company's  subsidiaries.  The  indenture  relating to the 12.5%  Notes  contains
certain  covenants  that,  among  other  things,  limit  the type and  amount of
additional  indebtedness  that  may be  incurred  by the  Company  or any of its
subsidiaries and impose limitations on investments,  loans,  advances,  sales or
transfers of assets, the making of dividends and other payments, the creation of
liens, sale-leaseback transactions with affiliates and certain mergers.

At December 31,  1997,  the Company had  promissory  notes  outstanding  with an
aggregate balance of $8,429,000.  Such notes provide for interest at the rate of
approximately 7.7% per annum and are repayable in 48 and 60 monthly installments
that  commenced  February 1, 1996,  with balloon  payments due at maturity.  The
notes  are  collateralized  by  certain  of  the  Company's  real  property  and
equipment.  At December 31, 1996, the Company's  only capital lease  obligations
were  $187,000  related to Merisel  FAB's  operations.  These  obligations  were
assumed  by Synnex as part of the sale of  Merisel  FAB in the first  quarter of
1997.

9. Commitments and Contingencies

The Company leases certain of its facilities and equipment  under  noncancelable
operating leases. Future minimum rental payments, under leases that have initial
or remaining  noncancelable  lease terms in excess of one year are $8,717,000 in
1998,  $7,089,000 in 1999, $5,043,000 in 2000, $4,315,000 in 2001, $3,011,000 in
2002  and  $3,298,000  thereafter.  Certain  of  the  leases  contain  inflation
escalation   clauses  and  requirements  for  the  payment  of  property  taxes,
insurance,  and maintenance  expenses.  Rent expense for 1995, 1996 and 1997 was
$14,840,000, $16,284,000 and $10,487,000, respectively.

<PAGE>

                         MERISEL, INC. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)


The Company has  arrangements  with  certain  finance  companies  that   provide
inventory and accounts  receivable  financing  facilities for its customers.  In
conjunction  with these  arrangements,  the  Company  has  inventory  repurchase
agreements  with the  finance  companies  that would  require  it to  repurchase
certain  inventory if repossessed  from the customers by the finance  companies.
Such repurchases have been insignificant in the past.

In June 1994, Merisel and certain of its officers and/or directors were named in
putative  securities class actions filed in the United States District Court for
the  Central  District  of  California,  consolidated  as  In re  Merisel,  Inc.
Securities  Litigation.  Plaintiffs,  who are seeking  damages in an unspecified
amount, purport to represent a class of all persons who purchased Merisel common
stock  between  November  8,  1993 and June 7, 1994 (the  "Class  Period").  The
complaint, as amended and consolidated, alleges that the defendants inflated the
market price of  Merisel's  common stock with  material  misrepresentations  and
omissions  during  the  Class  Period.  Plaintiffs  contend  that  such  alleged
misrepresentations   are  actionable  under  Section  10(b)  and  20(a)  of  the
Securities Exchange Act of 1934 and Rule 10b-5 promulgated thereunder. Following
the  granting  of  defendant's  first  motion to  dismiss on  December  5, 1994,
plaintiffs filed a second  consolidated and amended complaint December 22, 1994.
On April 3, 1995,  Federal  District  Judge Real  dismissed the  complaint  with
prejudice.  On August 8, 1997 the Court of Appeals  for the Ninth  Circuit  (the
"Court of Appeals")  reversed the  dismissal  and remanded the case to the trial
court.  On August 22,  1997,  the Company  filed a petition  for  rehearing  and
suggestion of rehearing en banc (the "Petition")  with the Court of Appeals.  On
January  30,  1998,  the Court of  Appeals  issued an order  amending  its prior
opinion and denying the Company's petitions for rehearing and rehearing en banc.
In light of this order,  the Federal  District Court has scheduled a hearing for
April 13, 1998.  The Company intends to defend itself vigorously against this
claim.

In January  1997,  the Company  received  notice that Tech Pacific had brought a
claim in the  Supreme  Court of New  South  Wales,  Sydney  Registry  Commercial
Division,  against Merisel;  its subsidiary Merisel Asia, Inc. ("Merisel Asia");
Patrick T. Woods, former managing director of Merisel Australia;  and Michael D.
Pickett,  former CEO and  Chairman of Merisel,  in a proceeding  captioned  Tech
Pacific Holdings Limited, v. Merisel,  Inc., et. al. In March 1996, Tech Pacific
purchased  Merisel  Pty,  Ltd  ("Merisel   Australia"),   Merisel's   Australian
subsidiary,  for a purchase  price of $9,900,000  pursuant to the Share Purchase
Agreement dated as of March 7, 1996 between  Merisel Asia and Tech Pacific.  The
claim asserts  various  breaches of  representations  and  warranties as well as
misleading  and deceptive  conduct under  relevant  provisions of Australian law
with respect to the financial  position of Merisel  Australia as  represented by
oral and written  disclosures.  The plaintiffs seek to recover specified damages
exceeding AUS$8.3 million (or approximately US$5.6 million as of March 27, 1998)
as well as  unspecified  damages  plus costs and  expenses  associated  with the
claim. The Company intends to defend itself  vigorously  against this claim. The
Company  does not  believe  that the  outcome  of the claim will have a material
adverse effect on the Company or its financial condition.


<PAGE>

                         MERISEL, INC. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)


Effective  April 14, 1997, the Company  entered into a Limited Waiver and Voting
Agreement (the "Limited Waiver  Agreement") with holders of more than 75% of the
outstanding principal amount of the Company's 12-1/2% Senior Notes due 2004 (the
"12.5% Note").  Pursuant to the terms of the Limited Waiver Agreement,  upon the
fulfillment of certain  conditions,  holders of the 12.5% Notes would  exchanged
(the "Exchange")  their 12.5% Notes for common stock of the Company (the "Common
Stock"), which would equal approximately 80% of the outstanding shares of Common
Stock immediately after the Exchange. The Limited Waiver Agreement also provided
that,  immediately  after the  consummation  of the Exchange,  the Company would
issue certain  warrants to the existing  holders of Common Stock. The conditions
to the Exchange  were not met and, on September  19,  1997,  the Limited  Waiver
Agreement terminated in accordance with its terms. See "Management's  Discussion
and Analysis of Financial  Condition  and Results of  Operations."  Prior to the
termination  of the Limited  Waiver  Agreement  on September  19, 1997,  certain
disagreements  arose  between the Company and certain  holders of the  Company's
12.5% Notes ("Noteholders") over the interpretation of the Company's obligations
under the Limited Waiver Agreement,  including that the Limited Waiver Agreement
did not require  either the Board of Directors  of the Company (the  "Board") or
the Company to recommend to its stockholders  proposals relating to the proposed
debt  restructuring  in which the  Noteholders  would have exchanged their 12.5%
Notes for Common Stock (the "Noteholder Restructuring") and that the Company was
not obligated to seek confirmation of a "prepackaged  plan" of reorganization by
means of the "cramdown" provisions of the Bankruptcy Code. On September 4, 1997,
the  Company  filed suit in  Delaware  Chancery  Court (the  "Delaware  Action")
seeking a declaratory judgment with respect to these issues. The Company intends
to  vigorously  prosecute  its  claim in the  Delaware  Action.  There can be no
assurance,  however, that the Company will ultimately be successful with respect
to its claims.

On September  11, 1997,  certain  Noteholders  filed an answer to the  Company's
complaint in the Delaware  Action as well as a counterclaim  against the Company
asserting claims for breach of the Limited Waiver  Agreement,  unjust enrichment
and a declaratory  judgment (the  "Noteholder  Suit").  The Noteholder Suit also
asserts  a claim  for  unjust  enrichment  against  Dwight  A.  Steffensen,  the
Company's Chief Executive  Officer.  The Noteholder Suit seeks damages in excess
of $100 million from the Company. The Company's alleged breaches include,  among
other  things,  that the  Board  changed  its  recommendation  with  respect  to
proposals  relating  to  the  Noteholder  Restructuring.  The  Company  and  Mr.
Steffensen  filed  motions  for  judgment  on the  pleadings  on October 7, 1997
seeking to have the  Noteholder  Suit  dismissed.  On January 5, 1998, the Court
denied  both  motions.  The Company and Mr.  Steffensen  believe  that they have
strong defenses to each of the claims  asserted and intend to defend  themselves
vigorously.  There can be no assurance,  however,  as to the ultimate outcome of
these claims.

In  addition,   on  September  19,  1997,  the  Company   received  notice  from
representatives  of  the  lenders  under  the  agreements  relating  to  certain
operating company debt that, in connection with the Company's  repayment of such
debt,  such  lenders  believe that they are owed  approximately  $2.7 million in
fees.  On October 31,  1997,  the Company  received a further  letter  demanding
payment of such fees.  The  Company  does not believe any such fees are owed and
has so notified  the  lenders.  There can be no  assurance,  however,  as to the
ultimate outcome of this claim.

On March 16, 1998, the Company  received a summons and  complaint,  filed in the
Superior  Court of  California,  County of Santa  Clara,  in a matter  captioned
Official  Unsecured  Creditors  Committee  of Media Vision  Technology,  Inc. v.
Merisel,  Inc. The plaintiffs  allege that certain  executive  officers of Media
Vision Technology,  Inc. ("Media Vision") committed fraud and breached fiduciary
duties owed to Media Vision  through,  interalia,  the improper  recognition and
reporting of sales, revenue and income and the failure to properly recognize and
report product returns during 1993 and 1994,  thereby  overstating the financial
condition of Media Vision as reflected in its financial statements for 1993. The
plaintiffs further allege that the Company aided, abetted, conspired and/or made
possible such acts and omissions of the Media Vision executives.  The plaintiffs
seek to recover compensatory damages,  including interest thereon, exemplary and
punitive  damages,  and costs including  attorneys' fees. The Company intends to
defend itself vigorously against this claim.

The  Company is  involved  in certain  other  legal  proceedings  arising in the
ordinary course of business, none of which is expected to have a material impact
on the financial condition or business of Merisel.


<PAGE>

                         MERISEL, INC. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)



10. Employee Stock Options and Benefit Plans

On December 19, 1997, the Company's  stockholders approved the Merisel Inc. 1997
Stock Award and Incentive Plan (the "Stock Award and Incentive Plan"). Under the
Stock Award and Incentive Plan,  incentive stock options and nonqualified  stock
options  as well as  other  stock-based  awards  may be  granted  to  employees,
directors, and consultants.  The plan authorized the issuance of an aggregate of
8,000,000  shares of Common Stock less the number of shares of Common Stock that
remain  subject to  outstanding  option grants under any of the Company's  other
stock-based  incentive  plans  for  employees  and are not  either  canceled  in
exchange  for  options  granted  under the Stock  Award  and  Incentive  Plan or
forfeited. The optionees, option prices, vesting provisions,  dates of grant and
number of shares granted under the plans are  determined  primarily by the Board
of Directors or the committee authorized by the Board of Directors to administer
such plans, although incentive stock options must be granted at prices which are
no less than the fair market value of the Company's  Common Stock at the date of
grant.  On December 22, 1998, the Company  granted options under the Stock Award
and Incentive  Plan in exchange for  previously  granted  employee stock options
that were then  outstanding and that had an exercise price greater than the then
market price of the Common  Stock,  subject to the agreement of each optionee to
cancel the  outstanding  options.  As of December  31, 1997,  1,435,000  options
remain  outstanding  under the  Company's  other  employee  stock option  plans,
however,  no new options may be issued  under  these  plans.  In addition to the
shares  issuable  under the Stock Award and  Incentive  Plan,  50,000 shares are
reserved  for  issuance   under  the  Company's   1992  Stock  Option  Plan  for
Non-Employee  Directors.  The following summarizes the aggregate activity in all
of the Company's plans for the three years ended December 31, 1997:

<TABLE>
<CAPTION>

                                      1995                             1996                            1997
                           ----------------------------     ---------------------------    -----------------------------
                                           Wgtd Avg.                         Wgtd Avg.                     Wgtd Avg.
                             Shares        Exer. Price       Shares          Exer. Price      Shares       Exer. Price
                           -------------  ------------      -------------   -------------  -------------- --------------

<S>                        <C>             <C>              <C>             <C>            <C>            <C>
Outstanding at
   beginning of year        1,902,625         9.03             3,191,289          7.30        1,368,345          7.48
Granted                     1,680,241         5.91               354,500          2.45        6,146,323          3.86
Exercised                    (112,422)        2.99              (215,000)          .67
Canceled                     (279,155)       12.43            (1,962,444)         7.04         (841,143)         6.41
                          ------------                     -------------                    -------------
Outstanding at end
   of year                  3,191,289         7.30             1,368,345          7.48        6,673,525          4.10
                          ------------                      -------------                    -------------

Option price range for
  Exercised shares                       $2.20-$6.25                       $0.01-$2.20                         $0.00
                                         -----------                     -------------                         -----

Weighted average fair
   value  at date of grant,
    of options  granted
    during the year             $3.80                              $1.61                          $2.55
                          ------------                      -------------                    -------------
</TABLE>




<PAGE>
<TABLE>
<CAPTION>


                         MERISEL, INC. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)


The following table summarizes  information  about stock options  outstanding at
December 31, 1997:

                                       Options Outstanding                        Options Exercisable
                            -------------------------------------------    -----------------------------------
                                              Weighted
                                              Average       Weighted                             Weighted
                                Number       Remaining      Average             Number           Average
         Range of            Outstanding        Life        Exercise          Exercisable        Exercise
      Exercise Prices        at 12/31/97      In Years       Price            at 12/31/97         Price
-------------------------  ---------------  ------------- ------------      -----------------  ---------------
<S>                         <C>              <C>           <C>               <C>                 <C>
   $  3.0000  to  $  3.0000         92,727       4           $  3.0000                87,727        $  3.0000
   $  11.3750  to  $11.3750         43,250       5           $ 11.3750                43,250        $ 11.3750
   $  11.7500  to  $11.8750         59,000       6           $ 11.8686                53,400        $ 11.8680
   $   4.3100  to  $19.8750      4,776,623       7           $  4.4314               980,050        $  4.8051
   $  4.5790  to  $  6.3125        200,500       8           $  5.7481               104,000        $  5.7601
   $  1.8750  to  $  2.8125        703,875       9           $  2.6915               568,500        $  2.7622
   $   1.6250  to  $ 2.3100        797,550       10          $  2.0744                     0        $       0
                            ---------------                                  -----------------

   $   1.6250  to  $19.8750      6,673,525                                         1,836,927
                            ===============                                  =================
</TABLE>

The Company has adopted the disclosure-only provisions of Statement of Financial
Accounting  Standards  No.  123,  "Accounting  for  Stock-Based   Compensation."
Accordingly,  no  compensation  cost has been  recognized  for the stock  option
plans.  Had  compensation  cost  for  the  Company's  stock  option  plans  been
determined  based on their fair value at the grant date for  options  granted in
1995,  1996 and  1997  consistent  with the  provisions  of SFAS  No.  123,  the
Corporation's  net loss and loss per share  would  have been  reduced to the pro
forma amounts indicated below:
<TABLE>
<CAPTION>

                                      (In thousands, except per share amounts)
                                      1995             1996               1997
                                  ---------------   ---------------    ----------------
    <S>                              <C>              <C>                 <C>
    Net Loss - As Reported           $(83,911)        $(140,375)          $( 15,841)
    Net Loss - Pro Forma             $(84,480)        $(140,994)          $( 16,914)

    Loss Per Share - As Reported     $  (2.82)        $   (4.68)          $    (.48)
    Loss Per Share - Pro Forma       $  (2.83)        $   (4.70)          $    (.51)
</TABLE>

The fair value of each option granted during 1995, 1996 and 1997 is estimated on
the  date of  grant  using  the  Black-Scholes  option  pricing  model  with the
following weighted average assumptions:
<TABLE>
<CAPTION>

                                      1995             1996               1997
                                  ----------------  ---------------    ----------------
    <S>                           <C>               <C>                <C>
    Expected life                        5.0              5.0               5.0
    Expected volatility                 72.41%           72.69%            73.84%
    Risk-free interest rate             6.27%             6.32%             5.76%
    Dividend Yield                      0.00%             0.00%             0.00%

</TABLE>



<PAGE>


                         MERISEL, INC. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)


The Company  offers a 401(k)  savings plan under which all  employees who are 21
years of age with at least one year of service are eligible to participate.  The
plan permits eligible employees to make contributions up to certain limitations,
with  the  Company  matching  certain  of  those  contributions.  The  Company's
contributions vest 25% per year. The Company  contributed  $125,000 and $506,000
to the plan during the years ended December 31, 1995 and 1997, respectively. The
Company did not make any matching  contributions  on behalf of its  employees in
1996.


11. Segment Information

The  Company's  operations  primarily  involve  a single  industry  segment--the
wholesale   distribution  of  computer  hardware  and  software  products.   The
geographic  areas in which the  Company  operates  on an  ongoing  basis are the
United States,  and Canada,  after taking into account the sale of the Company's
other  foreign  businesses  during 1996.  Net sales,  operating  income  (before
interest, other non-operating expenses and income taxes) and identifiable assets
by geographical area were as follows (in thousands):

<TABLE>
<CAPTION>

                                         United                          Other
                                         States         Canada       International    Eliminations    Consolidated
                                      ------------- ---------------- -------------- ----------------  -------------
<S>                                   <C>            <C>              <C>            <C>              <C>
1995:
    Net sales.......................   $ 3,996,346    $   572,569     $ 1,388,052                       $ 5,956,967
                                      ============= ================ ==============                   =============
    Operating loss..................   $   (37,825)   $    (3,637)    $   (12,760)                      $   (54,222)
                                      ============= ================ ==============                   =============
    Identifiable assets.............   $   738,220    $   135,482     $   375,878      $   (19,246)     $ 1,230,334
                                      ============= ================ ============== ================  =============
1996:
    Net sales.......................   $ 3,818,923    $   643,730     $ 1,060,171                       $ 5,522,824
                                      ============= ================ ==============                   =============
    Operating income (loss)......... $     (44,295)   $    (5,406)    $     1,901                       $   (47,800)
                                      ============= ================ ==============                   =============
    Identifiable assets............. $     623,707    $   126,691                      $   (19,359)     $   731,039
                                      ============= ================                ================  =============
1997:
    Net sales....................... $    3,288,241   $   760,731                                       $ 4,048,972
                                      ============= ================                                  =============
    Operating income ............    $       27,667   $     7,911                                       $    35,578
                                      ============= ================                                  =============
    Identifiable assets............. $      603,414   $   152,648                      $    (8,951)     $   747,111
                                      ============= ================                ================  =============


</TABLE>


<PAGE>


                         MERISEL, INC. AND SUBSIDIARIES


             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)


12. Quarterly Financial Data (Unaudited)

Selected  financial  information for the quarterly  periods for the fiscal years
ended 1996 and 1997 is presented below (in thousands, except per share amounts):

<TABLE>
<CAPTION>

                                                             1996
                                      --------------------------------------------------------
                                         March 31        June 30     September 30  December 31
                                      -------------- ------------- --------------- -----------
     <S>                               <C>           <C>            <C>             <C>
     Net sales......................    $1,536,589    $1,442,668    $1,393,532      $1,150,035
     Gross profit...................        87,223        79,587        57,193          65,251
     Net loss.......................       (13,508)      (11,404)     (117,138)          1,675
     Net loss per share.............         (0.45)        (0.38)        (3.90)            .06


                                                             1997
                                      --------------------------------------------------------
                                         March 31        June 30     September 30  December 31
                                      -------------- ------------- --------------- -----------
     Net sales......................    $1,113,100      $895,754      $965,238      $1,074,880
     Gross profit...................        64,977        55,654        58,508          61,945
     Net (loss) income before
       extraordinary item...........         1,130         2,046       (5,333)          (9,939)
     Net (loss) income..............         1,130         2,046       (9,077)          (9,939)
     Net (loss) income per basic
     and diluted share before
     extraordinary item.............           .04           .07         (.17)            (.24)
     Net (loss) income per
       basic and diluted share......           .04           .07         (.29)            (.24)
</TABLE>



The Company recorded  adjustments  related to vendor account  reconcilations and
customer  disputes that amounted to $2,200,000 in each of the first two quarters
of 1996 and $23,000,000 in the third quarter of 1996.  Additionally,  charges in
the third quarter of 1996 were recognized for further impairment of certain long
lived  assets for  $40,000,000  and for the loss on the sale of  certain  assets
totaling  $33,455,000.  In the  fourth  quarter of 1996,  net income  includes a
$2,033,000  charge to adjust  Merisel  FAB's assets to their fair value based on
the  provisions  of a  definitive  agreement  to sell  such  assets in the first
quarter of 1997. In the third quarter of 1997, the Company  recorded  $9,324,000
in expenses related to its debt restructuring  efforts.  These expenses included
$1,950,000 in  compensation  to executive  officers of the Company in connection
with the successful restructuring,  $3,630,000 related to the termination of the
Limited Waiver  Agreement with certain holders of the Company's 12.5% Notes, and
$3,744,000 in extraordinary  loss on the  extinguishment  of debt. In the fourth
quarter of 1997, the Company recorded  additional  charges of $1,600,000 related
to the conversion of the Convertible  Note and the resulting  change in control.
The Company also recognized an asset impairment  charge in the fourth quarter of
1997 for $14,100,000  against  capitalized  costs associated with the previously
scheduled  implementation  of the SAP information  system in the U.S., which was
delayed in 1996 and has since been resumed in the fourth quarter of 1997.




<PAGE>


<TABLE>
<CAPTION>
                                   SCHEDULE II

                         MERISEL, INC. AND SUBSIDIARIES

                        VALUATION AND QUALIFYING ACCOUNTS

                        DECEMBER 31, 1995, 1996 AND 1997


                                             Balance at     Charged to                   Balance at
                                             December 31,    Costs and                  December 31,
                                                1994          Expenses    Deductions        1995
                                            -------------- ------------- ------------- --------------
<S>                                          <C>            <C>           <C>            <C>
Accounts receivable--Doubtful accounts.....   $16,511,000   $16,335,000   $12,647,000    $20,199,000
Accounts receivable--Other (1).............     9,048,000    23,100,000    27,561,000      4,587,000

                                             Balance at     Charged to                   Balance at
                                             December 31,    Costs and                  December 31,
                                                1995          Expenses    Deductions        1996
                                            -------------- ------------- ------------- --------------
Accounts receivable--Doubtful accounts.....   $20,199,000   $17,421,000   $17,858,000    $19,762,000
Accounts receivable--Other (1).............     4,587,000    14,355,000    15,020,000      3,922,000

                                             Balance at     Charged to                   Balance at
                                             December 31,    Costs and                  December 31,
                                                1996          Expenses    Deductions        1997
                                            -------------- ------------- ------------- --------------
Accounts receivable--Doubtful accounts.....   $19,762,000    $7,361,000   $10,521,000    $16,602,000
Accounts receivable--Other (1).............     3,922,000    16,232,000    18,207,000      1,947,000

</TABLE>

(1)  Accounts  receivable--Other  includes  allowances for net sales returns and
     uncollectible cooperative advertising credits.

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

               None.



<PAGE>



                                    PART III

Item 10. Directors and Executive Officers of the Registrant.

The  information  required by this item is  incorporated  herein by reference to
information  contained in the Company's  definitive proxy statement for its 1998
annual meeting of stockholders  (the "1998 Proxy  Statement") under the captions
"Election  of  Directors  -  Information  Regarding  Nominees  and the  Board of
Directors,"  "Election  of  Directors - Executive  Officers"  and  "Election  of
Directors - Section 16(a) Beneficial Ownership Reporting Compliance."

Item 11. Executive Compensation.

The information required by this item is incorporated herein by reference to the
information  contained in the 1998 Proxy Statement under the captions  "Election
of Directors - Executive Compensation - Summary Compensation Table; - Options in
1997; - Compensation Committee Interlocks and Insider Participation;"  "Election
of Directors - Employment and  Change-in-Control  Arrangements" and "Election of
Directors - Director Compensation."


Item 12. Security Ownership of Certain Beneficial Owners and Management.

The information required by this item is incorporated herein by reference to the
information contained in the 1998 Proxy Statement under the caption "Election of
Directors - Ownership of Common Stock."

Item 13. Certain Relationships and Related Transactions.

The information required by this item is incorporated herein by reference to the
information contained in the 1998 Proxy Statement under the caption "Election of
Directors - Cerain Relationships and Related Transactions."



                                     PART IV

Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K

    (a) List of documents filed as part of this Report:

          (1) Financial Statements included in Item 8:

              Independent Auditors' Report.

              Consolidated Balance Sheets at December 31, 1996 and 1997.

              Consolidated  Statements of Operations for each of the three years
              in the period ended December 31, 1997.

              Consolidated  Statements  of Changes in  Stockholders'  Equity for
              each of the three years in the period ended December 31, 1997.

              Consolidated  Statements of Cash Flows for each of the three years
              in the period ended December 31, 1997.

              Notes to Consolidated Financial Statements.

          (2) Financial Statement Schedules included in Item 8:

              Schedule II--Valuation and Qualifying Accounts.



<PAGE>




             Schedules  other  than that  referred  to above  have been  omitted
             because  they are not  applicable  or are not  required  under  the
             instructions contained in Regulation S-X or because the information
             is included elsewhere in the Consolidated  Financial  Statements or
             the Notes thereto.

          (3)   Exhibits

             The exhibits listed on the accompanying Index of Exhibits are filed
             as part of this Annual Report.

    (b) The  Following  Reports on Form 8-K were filed during the quarter  ended
        December 31, 1997:

             Current  Report on Form 8-K,  dated  October 22, 1997;  and Current
             Report on Form 8-K, dated December 19, 1997.



<PAGE>


                                   SIGNATURES

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

Date: March 30, 1998
                                  MERISEL, INC.

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

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

<TABLE>
<CAPTION>
                                       Title                                               Date
Signature
<S>                           <C>                                                          <C>


/s/Dwight A. Steffensen          Chairman, Chief Executive Officer and President            March 30,1998
   Dwight A. Steffensen                     (Principal Executive Officer)


/s/James E. Illson         Director, Executive Vice President - Operations                  March 30,1998
   James E. Illson           and Finance and Chief Financial Officer (Principal
                                        Financial and Accounting Officer)


/s/Albert J. Fitzgibbons III                         Director                               March 30,1998
   Albert J. Fitzgibbons III


/s/Bradley J. Hoecker                                Director                               March 30,1998
   Bradley J. Hoecker


/s/Robert J. McInerney                               Director                               March 30,1998
   Robert J. McInerney


/s/Stephen M. McLean                                 Director                               March 30,1998
   Stephen M. McLean


/s/Dr. Arnold Miller                                 Director                               March 30,1998
   Dr. Arnold Miller


/s/Thomas P. Mullaney                                Director                               March 30,1998
   Thomas P. Mullaney


/s/Lawrence J. Schoenberg                            Director                               March 30,1998
   Lawrence J. Schoenberg

</TABLE>



<PAGE>


                                  EXHIBIT INDEX


     2.1   Purchase Agreement dated as of August 29, 1996 between CHS
           Electronics, Inc., Merisel, Inc. and Merisel Europe, Inc. (15)

     2.2   First Amendment to Purchase Agreement dated as of October 4, 1996
           between CHS Electronics, Inc., Merisel, Inc. and Merisel Europe,
           Inc. (15)

     2.3   Settlement Agreement and Release dated February 13, 1997 by and among
           CHS Electronics, Inc., Merisel, Inc. and Merisel Europe, Inc. (15)

     2.4   Asset Purchase Agreement dated January 15, 1997 by and among SYNNEX
           Information Technologis, Inc., SynFab, Inc. and Merisel FAB, Inc.
           (19)

     2.5   Amendment No. 1 to the Asset Purchase Agreement dated as of March 6,
           1997 by and among Merisel, Inc., Merisel FAB, Inc., SYNNEX
           Information Technologies, Inc. and ComputerLand Corporation,
           successor-in-interest to SynFab, Inc. (19)

     3.1   Restated Certificate of Incorporation of Merisel, Inc. (1)

     3.2   Amendment to Certificate of Incorporation of Merisel, Inc. dated
           August 22, 1990. (5)

     3.3   Amendment to Certificate of Incorporation of Merisel, Inc. dated
           December 19, 1997. (21)

     3.4   Bylaws, as amended, of Merisel, Inc. (7)

     4.1   Indenture  dated October 15, 1994 between Merisel, Inc. and
           NationsBank of Texas,  N.A., as Trustee,  relating to the Company's
           12.5% Senior Notes Due 2004,  including the form of such Senior Notes
           attached as Exhibit A thereto. (11)

     4.2   Form of Limited Waiver and Voting Agreement, dated as of April 11,
           1997, by and among Merisel, Inc. and the holders of the 12 1/2%
           Senior Notes due December 31, 2004. (19)

     4.3   Form of Limited  Waiver and  Agreement to Amend dated as of April 14,
           1997 by and  among  Merisel,  Inc.,  Merisel  Europe,  Inc.,  and the
           holders  of the  Revolving  Credit  Agreement  and  the  Senior  Note
           Purchase Agreement. (19)

    10.1   1983 Employee Stock Option Plan of Softsel Computer  Products,  Inc.,
           as amended,  together with Form of Incentive  Stock Option  Agreement
           and Form of Nonqualified  Stock Option  Agreement under 1983 Employee
           Stock Option Plan. (6)*

    10.2   1991 Employee Stock Option Plan of Merisel, Inc. together with Form
           of Incentive Stock Option Agreement and Form of Nonqualified Stock
           Option Agreement under the 1991 Employee Stock Option Plan. (7)*

    10.3   Amendment to the Company's 1991 Employee Stock Option Plan dated
           January 16, 1997. (19)*

    10.4   Merisel, Inc. 1992 Stock Option Plan for Nonemployee Directors. (9)*

    10.5   Softsel Computer Products, Inc. Executive Deferred Compensation Plan.
          (10)*

    10.6   Merisel, Inc. 1997 Stock Award and Incentive Plan. (22)*


<PAGE>


    10.7   Form of Nonqualified Stock Option Plan under the 1997 Stock Award and
           Incentive Plan.

    10.8   Merisel, Inc. Amended and Restated 401(k) Retirement Savings Plan.
           (12)*

    10.9   Lease between Registrant and Pacifica Holding Company dated April 6,
           1989. (2)

   10.10   Lease Agreement dated October 27, 1988 by and between Rosewood
           Development Corporation and Microamerica, Inc. re: property located
           in Marlborough, Massachusetts. (3)

   10.11   Lease Agreement dated May 23, 1990 by and between Kilroy-Freehold El
           Segundo Company and Softsel/Microamerica, Inc. re: property located
           in El Segundo, California. (4)

   10.12   Lease Agreement dated October 1991 by and between Koll Hayward
           Associates II and Merisel, Inc. (8)

   10.13   Annex X to Receivable Transfer Agreement and Receivables Purchase and
           Servicing Agreement dated as of October 2, 1995. (13)

   10.14   Form of Receivables Purchase Agreement between Merisel Canada, Inc.
           and Canadian Master Trust dated as of December 15, 1995. (14)

   10.15   Amended and Restated Receivables Transfer Agreement dated as of
           September 27, 1996 by and between Merisel Americas, Inc. and Merisel
           Capital Funding, Inc. (15)

   10.16   Amended and Restated Receivables and Servicing Agreement dated as of
           September 27, 1996, by and between Merisel Capital Funding, Inc.,
           Redwood Receivables Corporation, Merisel Americas, Inc. and General
           Electric Capital Corporation. (15)

   10.17   Amendment No. 1 and Waiver to Amended and Restated Receivables
           Purchase and Servicing Agreement dated as of November 7, 1996 among
           Merisel Capital Funding, Inc., Redwood Receivables Corporation,
           Merisel Americas, Inc. Electric and General Capital Corporation. (19)

   10.18   Amendment No. 1 and Waiver to Amended and Restated Receivables
           Transfer Agreement dated as of November 7, 1996 by and between
           Merisel Americas, Inc. and Merisel Capital Funding, Inc. (19)

   10.19   Amendments to Securitization Agreements, dated as of December 19,
           1997, among Merisel Americas, Inc., Merisel Capital Funding, Inc.,
           Redwood Receivables Corporation and General Electric Capital
           Corporation.

   10.20   Form of Security Agreement between Merisel Properties, Inc. and
           Heller Financial, Inc. dated December 29, 1995. (14)
<PAGE>

   10.21   Deed of Trust, Security Agreement, Assignment of Leases and Rents and
           Fixture Filing between Merisel Properties, Inc. and Heller Financial,
           Inc. dated December 29, 1995. (14)

   10.22   Share Purchase Agreement between Merisel, Inc., Merisel Asia, Inc.
           and Tech Pacific Holdings Ltd. dated March 7, 1996. (14)

   10.23   Retention Agreement between Merisel, Inc. and Thomas P. Reeves dated
           October 1, 1995. (13)*

   10.24   Employment Agreement dated February 12, 1996 between Dwight A.
           Steffensen and Merisel, Inc. (16)*

   10.25   Employment Agreement between Dwight A. Steffensen and Merisel, Inc.
           dated February 12, 1997. (19)*

   10.26   First Amendment to Employment Agreement dated as of December 15, 1997
           between Merisel, Inc. and Dwight A. Steffensen.*

  10.27    Employment Agreement between Merisel, Inc. and James Illson dated
           August 19, 1996. (17)*

  10.28    First Amendment to Employment Agreement dated as of July 26, 1997
           between Merisel, Inc., Merisel Americas, Inc., and  James E. Illson.
           (20)*

   10.29   Employment Agreement, dated as of September 5, 1996, between Merisel,
           Inc. and James D. Wittry. (18)*

   10.30   Letter Agreement dated November 29, 1996 between Merisel, Inc. and
           Timothy N. Jenson. (18)*

   10.31   Amendment to Letter Agreement dated April 9, 1996 between Merisel,
           Inc. and Timothy N. Jenson. (18)*

   10.32   Amendment to Letter Agreement dated August 22, 1996 between Merisel,
           Inc. and Timothy N. Jenson. (18)*
<PAGE>

   10.33   Change of Control Agreement dated as of July 26, 1997 between
           Merisel, Inc., Merisel Americas, Inc., and Timothy N. Jenson. (20)*

   10.34   Employment Agreement between Robert McInerney and Merisel, Inc. dated
           February 3, 1997. (19)*

   10.35   First Amendment to Employment Agreement dated as of July 26, 1997
           between Merisel, Inc., Merisel Americas, Inc., and Robert J.
           McInerney. (20)*

   10.36   Change of Control Agreement dated as of June 23, 1997 between
           Merisel, Inc., Merisel Americas, Inc., and Karen A. Tallman. (20)*

   10.37   Stock and Note Purchase  Agreement,  dated September 19, 1997,  among
           Phoenix  Acquisition  Company  II,  L.L.C,  Merisel,   Inc.,  Merisel
           Americas, Inc., and incorporated herein by this reference. (23)

   10.38   Convertible Promissory Note dated September 19, 1997 of Merisel, Inc.
           and Merisel Americas, Inc.

   10.39   Registration Rights Agreement, dated September 19, 1997, by and among
           Merisel, Inc., Merisel Americas, Inc. and Phoenix Acquisition Company
           II, L.L.C, and incorporated herein by this reference. (23)

   10.40   Revolving Credit Agreement and Convertible Promissory Note due July
           2, 1998, between Merisel, Inc., Merisel Americas, Inc. and Bankers
           Trust Company dated January 26, 1998. (24)

   10.41   Letter Agreement dated January 26, 1998, between Merisel Americas,
           Inc. And Stonington Financing, Inc. (24)

      21   Subsidiaries of the Registrant.

      27   Financial Data Schedule for the years ended December 31, 1995, 1996
           and 1997.

--------
      *    Management contract or executive compensation plan or arrangement.

    (1)    Filed as an exhibit to the Form S-1 Registration Statement of Softsel
           Computer Products, Inc. No. 33-23700, and incorporated herein by this
           reference.

    (2)    Filed as an exhibit to the Quarterly Report on Form 10-Q for the
           quarter ended September 30, 1989 of Softsel Computer Products, Inc.,
           and incorporated herein by this reference.

    (3)    Filed as an exhibit to the Quarterly Report on Form 10-Q for the
           quarter ended March 31, 1990 of Softsel Computer Products, Inc., and
           incorporated herein by this reference.

    (4)    Filed as an exhibit to the Quarterly Report on Form 10-Q for the
           quarter ended June 30, 1990 of Softsel Computer Products, Inc., and
           incorporated herein by this reference.
<PAGE>

    (5)    Filed as an  exhibit  to the  Quarterly  Report  on Form 10-Q for the
           quarter ended  September 30, 1990,  and  incorporated  herein by this
           reference.

    (6)    Filed as an exhibit to the Form S-8 Registration Statement of Softsel
           Computer Products,  Inc., No. 33-35648, filed with the Securities and
           Exchange Commission on June 29, 1990, and incorporated herein by this
           reference.

    (7)    Filed as an  exhibit  to the  Quarterly  Report  on Form 10-Q for the
           quarter  ended  June  30,  1991,  and  incorporated  herein  by  this
           reference.

    (8)    Filed  as an  exhibit  to the  Form  S-3  Registration  Statement  of
           Merisel,  Inc., No. 33-45696,  filed with the Securities and Exchange
           Commission  on  February  14,  1992 and  incorporated  herein by this
           reference.

    (9)    Filed as an  exhibit  to the  Quarterly  Report  on Form 10-Q for the
           quarter  ended  June  30,  1992,  and  incorporated  herein  by  this
           reference.

   (10)    Filed as an exhibit to the Quarterly Report on Form 10-Q for the
           quarter ended September 30, 1992 of Merisel, Inc., and incorporated
           herein by this reference.

   (11)    Filed as an  exhibit  to the  Quarterly  Report  on Form 10-Q for the
           quarter ended  September 30, 1994,  and  incorporated  herein by this
           reference.

   (12)    Filed as an exhibit to the Annual Report on Form 10-K for the year
           ended December 31, 1994, and incorporated herein by this reference.

   (13)    Filed as an  exhibit  to the  Quarterly  Report  on Form 10-Q for the
           quarter ended  September 30, 1995,  and  incorporated  herein by this
           reference.

   (14)    Filed as an exhibit to Amendment  No. 2 to the Annual  Report on Form
           10-K/A for the year ended December 31, 1995, and incorporated  herein
           by this reference.

   (15)    Filed as an exhibit to the Current Report on Form 8-K dated April 17,
           1996, and incorporated herein by this reference.

   (16)    Filed as an  exhibit  to the  Quarterly  Report  on Form 10-Q for the
           quarter  ended  June  30,  1996,  and  incorporated  herein  by  this
           reference.

   (17)    Filed as an exhibit to the Current Report on Form 8-K dated October
           18, 1996, and incorporated herein  by this reference.

   (18)    Filed as an  exhibit  to the  Quarterly  Report on Form 10-Q for the
           quarter  September  30,  1996,  and  incorporated   herein  by  this
           reference.
<PAGE>

   (19)    Filed as an exhibit to the Annual Report on Form 10-K for the year
           ended December 31, 1996, and incorporated herein by this reference.

   (20)    Filed as an  exhibit  to the  Quarterly  Report  on Form  10-Q for
           the quarter ended September 30, 1997, and incorporated herein by this
           reference.

   (21)    Filed as Annex I to Schedule 14A dated October 6, 1997, and
           incorporated herein by this reference.

   (22)    Filed as Annex II to Schedule 14A dated October 6, 1997, and
           incorporated herein by this reference.

   (23)    Filed as an exhibit to the Current Report on Form 8-K,  dated
           September 19, 1997, and incorporated herein by this reference.

   (24)    Filed as an exhibit to the Current  Report on Form 8-K dated
           January 26, 1998, and incorporated herein by this reference.