UNITED STATES
                       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, 2003

                                       OR

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

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

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

               Delaware                                 95-4172359
(State or Other Jurisdiction               (I.R.S. Employer Identification No.)
of Incorporation or Organization)

      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. [ ]

     Indicate by check mark whether the registrant is an accelerated filer
(as defined in Exchange Act Rule 12b-).
YES   __   NO   X
               ---

     As of June 30, 2003, 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 $11,983,034 (2,616,383 shares at a closing
price of $4.58).

     As of March 26, 2004, the Registrant had 7,616,373 shares of Common Stock
outstanding.

                       Documents Incorporated By Reference

                                        None.


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                                TABLE OF CONTENTS




                                                                                                              PAGE
                                     PART I

<S>   <C>                                                                                                     <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............................................     9

                                     PART II

Item  5.  Market for the Registrant's Common Equity and Related Stockholder Matters......................     9
Item  6.  Selected Financial Data........................................................................    10
Item  7.  Management's Discussion and Analysis of Financial Condition and Results of Operations..........    11
Item  7A. Quantitative and Qualitative Market Risk Disclosure............................................    19
Item  8.  Financial Statements and Supplementary Data....................................................    20
Item  9.  Changes in and Disagreements with Accountants on Accounting and Financial Disclosure...........    41
Item  9A. Controls and Procedures........................................................................    41

                                    PART III

Item  10. Directors and Executive Officers of the Registrant.............................................    42
Item  11. Executive Compensation.........................................................................    44
Item  12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder
          Matters........................................................................................    46
Item  13. Certain Relationships and Related Transactions.................................................    47
Item  14. Principal Accounting Fees and Services.........................................................    47

                                     PART IV

Item  15. Exhibits, Financial Statement Schedules, and Reports on Form 8-K...............................    48

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               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. For a
detailed discussion of certain of these factors, see "Business - Certain
Business Factors." These factors are also discussed 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 software licensing solution
provider. The Company operates its software licensing business through its main
operating subsidiary Merisel Americas, Inc. ("Merisel Americas"). Until July 28,
2001, the Company also operated a Canadian distribution business, which
distributed computer hardware and software products to a broad range of reseller
customers in Canada. In addition, prior to 2001 the Company operated a full-line
U.S. computer products distribution business which, excluding software
licensing, the Company determined to wind down in December 2000.

Merisel's software licensing business provides U.S. customers with nearly 20,000
licensing products from leading software publishers, including Microsoft,
Lotus/IBM, Network Associates, Executive Software, Macromedia, Borland, Computer
Associates, Corel, Panda Software and Symantec. The software licensing business
involves the sale of multiple end user licenses for software products and
requires minimal distribution of boxed product. Merisel began operating its
software licensing business as a separate division of its U.S. distribution
business in 1997 and, by 1999, it had earned the reputation as a leader in
operational efficiency and customer service. Today, Merisel's software licensing
business is focused on leveraging its positive reputation in the marketplace and
growing revenues in key vertical markets in support of software publisher
strategies.

The Company's net sales were approximately $81.6 million in 2002 and $96.0
million in 2003. In 2002, the Company changed its fiscal year from the Saturday
closest to December 31 to December 31. The Company had net sales on December 31,
2001 of $929,000 or 1.14% of total net sales, which were included in net sales
for fiscal year 2002 due to this change.

As a result of the sale of Merisel Open Computing Alliance ("MOCA"), a
distributor of Sun Microsystems products, and the Canadian distribution business
and the wind-down of its U.S. distribution business, excluding software
licensing, the Company has substantial cash balances that are in excess of what
it believes it requires for liquidity for its ongoing business and to meet
obligations related to the wind-down. The Company is actively seeking and
exploring acquisition and other investment opportunities, primarily outside the
computer products distribution industry.

For a discussion of certain business and other factors that may have an adverse
effect on the Company, see "Certain Business Factors" and Item 7. "Management's
Discussion and Analysis of Financial Condition and Results of Operations."

The Company files annual, quarterly and special reports, proxy statements and
other information with the SEC. The Company's SEC filings are available free of
charge to the public over the Internet at the SEC's website at
http://www.sec.gov. Our SEC filings can also be accessed on Merisel's website at
http://www.merisel.com by a link to the SEC's website as soon as they are filed
with or furnished to the SEC. You may also read and copy any document Merisel
files with the SEC at its public reference rooms in Washington, D.C., New York,
NY and Chicago, IL. Please call the SEC at (800) SEC-0330 for further
information on the public reference rooms.

Background and Business Strategy

General. The Company was incorporated in 1980 under the name Softsel Computer
Products, Inc. and changed its name to Merisel, Inc. in 1990 in connection with
the acquisition of Microamerica, Inc. ("Microamerica"). In the years following
the Microamerica acquisition, the Company's revenues increased rapidly through
both internal growth and acquisition. This increase 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. From 1996 through the first quarter of
1997, the Company engaged in the process of divesting of its operations outside
of the United States and Canada and its non-distribution operations, which
resulted in the Company's operations being focused exclusively in the United
States and Canada and consisting of three distinct business units: United States
distribution, Canadian distribution and MOCA. On October 27, 2000, the Company
completed the sale of its MOCA business unit to Arrow Electronics, Inc. See Item
7. "Management's Discussion and Analysis of Financial Condition and Results of
Operations - Overview."

In December 2000, the Company determined that, primarily as a result of a
significant contraction in sales and continuing substantial operating losses,
the U.S. distribution business would focus solely on software licensing and that
the balance of the U.S. distribution business would be wound down. Although the
wind-down was substantially completed by the end of the first

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quarter of 2001, the Company has substantial  remaining  obligations  related to
the U.S.  distribution  business,  primarily with respect to leases and vendors.
See Item 7.  "Management's  Discussion  and Analysis of Financial  Condition and
Results  of  Operations  -  Liquidity  and  Capital  Resources."  As part of the
wind-down, the U.S. distribution business sold all of its non-software licensing
inventory  and  discontinued  all of  its  non-software  licensing  manufacturer
relationships.

On July 28, 2001, the Company sold its Canadian distribution business ("Merisel
Canada") to SYNNEX Information Technologies, Inc. See Item 7. "Management's
Discussion and Analysis of Financial Condition and Results of Operations -
Overview."

Through its subsidiary Optisel, Inc. ("Optisel"), in November 2000, the Company
acquired substantially all the e-services assets of Value America, Inc. with the
intention of leveraging the Company's distribution and logistics capabilities to
operate a logistics and electronic services business. In connection with the
sale of the MOCA business to Arrow in October 2000, the Company entered into a
transition services agreement with Arrow pursuant to which Optisel provided
fee-based distribution and logistics services and information technology
services for MOCA through February 1, 2002. In connection with the sale of
Merisel Canada to Synnex, Merisel and Synnex entered into a fee-based transition
services agreement pursuant to which Optisel provided information technology
services to Merisel Canada through September 10, 2001. Optisel did not generate
any significant revenue except under these two transition services agreements.
As a result of economic conditions and Optisel's lack of success in generating
Internet-related business, the Company decided to discontinue operation of the
Optisel business during the fourth quarter of 2001.

Software Licensing. During 2000, the Company's software licensing business was
adversely affected by the contraction of the U.S. distribution business and the
termination of many vendor relationships. Net sales for the U.S. software
licensing business were approximately $68 million, $68 million and $56 million
for the first, second and third quarters of 2000, respectively, and declined to
$3.2 million for the fourth quarter of 2000. Despite the precipitous decline in
net sales for the U.S. software licensing business, the Company determined that,
with its strong reputation in software licensing and its positive relationships
with many key software publishers, the business had the potential to be returned
to a successful business model, albeit on a much smaller scale. Since the fourth
quarter of 2000, net sales for the software licensing business have increased
significantly to approximately $27.5 million in the fourth quarter of 2003.

Today, Merisel's software licensing business strategy is to (i) grow its
customer base and increase its customer loyalty by focusing on providing
superior customer service and (ii) reduce its vendor concentration by expanding
its product breadth through the development of new relationships with key
software publishers. Merisel's strategy includes creating and maintaining a
knowledgeable outcall-driven sales team that provides greater value to customers
than taking orders.

Merisel currently concentrates its marketing and sales efforts on the security,
mobile technology and storage markets due to our expertise and product
offerings. The growth of antivirus solutions, content filtering and firewall
technology spending is expected to increase significantly in the coming years,
and Merisel believes the demand for mobile information services, mobile access
to enterprise networks and advanced wireless applications and other mobile
technologies will continue to accelerate. Merisel also focuses on creating
increasingly efficient systems that take advantage of modern technologies to
improve the customer experience.

Acquisition Strategy. At December 31, 2003 the Company had $44,948,000 of cash,
which it believes exceeds what it requires for liquidity for its ongoing
business and to meet obligations related to the wind-down. The Company also has
available a U.S. Federal net operating loss carryforward valued at approximately
$266,165,000 at December 31, 2003. The Company is actively seeking and exploring
acquisition and other investment opportunities, primarily outside the computer
products distribution industry, that will allow it to better utilize some or all
of its net operating loss carryforward and cash balances.

The Computer Products Distribution Industry

The Company's software licensing business competes in the computer products
industry. The primary participants in the computer products industry are
software publishers, wholesale distributors, solution providers and resellers.
The supply chain was traditionally based on a model through which software
publishers would sell directly to wholesalers, resellers and end users;
wholesale distributors would sell to resellers; and resellers would sell to
other resellers and directly to end users. As the industry continues to mature,
the roles of channel players are becoming less clearly defined. Generally,
full-line wholesale distributors purchase a wide range of products in bulk
directly from manufacturers and software publishers and then ship products in
smaller quantities to many different types of resellers. Solution providers like
the Company's software licensing business operate similarly to both wholesale
distributors and resellers, but with a narrower product offering. The Company

<PAGE>


believes that by focusing solely on software licensing, it has the potential to
become a leading solution provider in this important category. As the software
industry continues to shift from the sale of boxed product to licensing, the
Company believes that its opportunities will increase. Types of resellers
include corporate resellers, value-added resellers or "VARs," system
integrators, direct marketers, independent dealers, mass merchants and computer
chain stores, and resellers conducting business via the Internet ("e-tailers").
Resellers are often further defined and distinguished by the types of
value-added services they provide and by the end-user markets they serve, such
as large corporate accounts, small to medium-sized businesses, and home users.

Resellers rely on wholesale distributors and/or solution providers for product
availability, flexible financing alternatives, technical support, prompt and
efficient delivery. In addition, some resellers are increasingly relying on
distributors for "back-office" support services, such as product procurement,
fulfillment, logistics and a broad product offering. Software publishers benefit
from using wholesale distributors and solution providers as an alternative to
direct sales to customers by not having to maintain large sales forces,
warehouse facilities and financing capabilities. Software publishers also rely
on distributors and solution providers to provide marketing and support services
as well as credit for customers. Resellers and end users rely on solution
providers for in depth product knowledge, customized services, and greater
customer support.

The computer products industry has historically experienced double-digit growth
throughout North America. However, according to an Equity Research report on
Technology Distribution published by Raymond James and Associates, Inc., growth
rates were substantially lower during 2000 and were negative during 2001, 2002
and 2003, but are expected to improve moving into 2004. Trends in the computer
products supply chain include custom configuration of products by distributors,
various supply chain management strategies to eliminate time and cost, and an
increase in the use of "eBusiness" solutions. Electronic business, or eBusiness,
refers to the use of electronic systems and applications to exchange information
and transact business. Electronic business can simplify account set-up,
ordering, shipping and support, and thereby facilitate sales while decreasing
both selling and purchasing costs. Electronic business continues to increase in
significance in the computer products distribution industry.

Products and Suppliers

The Company's software licensing business offers its customers nearly 20,000
products from leading software publishers, including Microsoft, Lotus/IBM,
Network Associates, Executive Software, Macromedia, Borland, Computer
Associates, Corel, Panda Software and Symantec. The software licensing business
involves the sale of multiple-end user licenses for software products, generally
for installation on multiple systems, and requires minimal distribution of boxed
software product. Prior to the contraction of the Company's U.S. distribution
business during 2000, Merisel's U.S. software licensing business offered
products from 21 software publishers and ranked number one in software licensing
sales for key software publishers such as Microsoft and Novell. Although many of
these distribution arrangements were terminated during 2000, management of
Merisel's software licensing business has maintained positive relationships with
many key software publishers beyond the software publishers whose products it
currently distributes.

Merisel enters into written agreements with the software publishers of the
products it sells. As is customary in the industry, these agreements usually
provide non-exclusive rights and often contain territorial restrictions that
limit the countries in which Merisel is permitted to sell the products. The
Company's suppliers generally warrant the products sold by the Company and allow
the Company to return defective products, including those that have been
returned to the Company by its customers, as well as products discontinued by
the supplier. Because software licensing involves very limited distribution of
boxed product, the Company maintains minimal inventory, most of which consists
of documents and software media that may be shipped in connection with a
software license purchase. Accordingly, unlike the computer products industry
generally, there is little, if any, risk of loss due to slow-moving inventory,
supplier price reductions, product updates or obsolescence. The Company's
agreements with its suppliers, which typically have a term of at least one year,
generally contain provisions permitting early termination by either party upon
written notice.

The Company's software licensing business provides software publishers with
access to Merisel's customer base, as well as the means to reduce credit,
marketing and overhead costs typically associated with maintaining direct
customer relationships. Merisel develops and implements marketing and sales
programs for specific software publishers to increase customer purchasing depth
and breadth. Programs include bundled offers, growth-goal incentives,
telemarketing campaigns, web advertising and customer training events as well as
channel communication vehicles such as targeted direct mail, e-mail blasts,
webcasts, monthly newsletters and advertising.



<PAGE>


The sale of products supplied by two of the Company's vendors, Network
Associates and Symantec, accounted for approximately 93.5% and 1.0% in 2003,
79.8% and 13.8% in 2002 and 71.2% and 23.4% in 2001, respectively, of net sales
for the Company's U.S. software licensing business. Despite the loss of a direct
relationship between the Company and Symantec effective during the third quarter
of 2002, the Company experienced overall sales and margin growth during the
fourth quarter of 2002. However, the loss of a direct relationship with its
remaining primary vendor could have a material adverse impact on the Company's
business and financial results. During the first quarter of 2004, the Company
was notified of impending changes in the channel which will impact a number of
the products it currently distributes. Because of these changes, typical
seasonality, and changes in the Company's sales organization, the Company
expects to experience a decline in revenue and margin during the first quarter
of 2004. See Item 1 - "Certain Business Factors - Dependence on Key Software
publishers."

Customers and Customer Services

With the dramatic decline in net sales of the software licensing business as the
U.S. distribution business contracted in 2000, the number of active customers
declined to a fraction of prior levels. The software licensing business is
focused on reestablishing customer relationships and broadening its customer
base through proactive marketing to prospective new customers. Merisel's
customer base is largely comprised of, and Merisel's recruitment efforts are
mainly focused on, value-added customers that service small-to-medium size
businesses and enterprise solution providers. In the computer products industry
generally, larger customers often establish direct relationships with software
publishers for their more popular products but utilize distributors and/or
software solution providers for slower-moving products and for fill-in orders of
fast-moving products that may not be available on a timely basis from software
publishers. Customer service (particularly with respect to the complexities of
software publishers' licensing processes), quick response to bid requests, and
electronic ordering capabilities are critically important to software licensing
customers. Merisel has had a long-standing reputation as a leader in these areas
and is currently leveraging this positive reputation in the marketplace to
rebuild and grow its software licensing business.

Merisel generally does not have contracts with its customers. Merisel's largest
customers include Comp-E-Ware, Expert Networks, Future Com, PC Connection,
Softchoice, Software House International and Software Spectrum. Merisel's top 10
customers for its software licensing business accounted for 71.8% of total
software licensing net sales in 2003. Merisel had two customers for its software
licensing business that individually accounted for more than 10% of total U.S.
software licensing net sales in 2003, accounting for 25.2% and 15.7% of net
sales. Merisel's top 10 customers for its software licensing business accounted
for 64.8% of total software licensing net sales in 2002. Merisel had one
customer for its software licensing business that accounted for more than 10% of
total U.S. software licensing net sales in 2002, accounting for 19.8% of net
sales. Merisel's top 10 customers for its software licensing business accounted
for 76.0% of total software licensing net sales in 2001. Merisel had two
customers for its software licensing business that accounted for more than 10%
of total U.S. software licensing net sales in 2001, accounting for 24.2% and
15.0% of net sales. The loss of one or more of the Company's major customers
could have a material adverse effect on the Company. See Item 1 "Certain
Business Factors - Dependence on Major Customers."

Single-Source Provider. The software licensing products currently offered by
Merisel fall mainly in the categories of anti-virus, desktop applications,
graphics, IT management, security, storage and storage management, system
utilities, system applications and web-based solutions products. Merisel
believes that, while it is no longer a full-line distributor of computer
hardware and software products, it can offer significant value by becoming a
single-source provider of software licensing products to its customers and
focusing on providing superior customer service for software licensing only.
Merisel is focused on reestablishing relationships with major software
publishers whose products it does not currently distribute and establishing
relationships with software publishers in emerging technologies in order to
expand its product offering.

Customers and Sales Organizations. Merisel's software licensing business caters
specifically to customers who serve the software needs of corporate,
institutional and government clients. This business serves its customers through
a team of highly trained sales representatives that receive cross-training on
all of the products sold through the business. This cross training is unique in
the industry and leads to enhanced customer service with every sales
representative trained to assist customers with every software product.
Merisel's team of licensing professionals is dedicated to servicing and
supporting customers through a customer-centric approach that focuses on
thoroughly understanding vendor solutions as well as the needs of the reseller
and its customers. The sales team's efforts include the introduction of new
products and programs to expand the customers' product offerings and enhance
their value proposition to their customers.



<PAGE>


Financing Programs. Merisel offers various credit terms to qualifying customers
and also sells on a pre-pay and credit card basis. Merisel's credit policy for
qualified customers allows them to use their Merisel credit line for software
licensing purchasing, increasing their credit availability to be used for other
products with full-line distributors. 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. The Company establishes reserves for estimated credit losses in the
normal course of business. If the Company's receivables experience a substantial
deterioration in their collectibility, the Company's financial condition and
results of operations may be adversely impacted. See Item 1. "Certain Business
Factors - Dependence on Major Customers; - Customer Credit Exposure."

Information Services. Merisel provides its customers with state-of-the-art
e-business solutions. The Company's Web site provides information on Merisel's
programs and services, strategic announcements, publisher products and links,
and access to SELline, the Company's advanced on-line configuration, query and
procurement tool. SELline offers secure, 24-hour access and real-time interfaces
to Merisel's information technology systems so that customers can identify
products, place quotations and orders and review order and shipment status at
their convenience. Software publishers' up-to-date promotions, product news,
programs and trial download information are listed on SELline to help educate
customers. The Company also offers various types of electronic interfaces with
its partners, including EDI, XML, and flat file. In addition, Merisel is the
only self-hosted solution provider for Network Associates. In this capacity, the
Company deploys McAfee's anti-virus managed services to the end user on behalf
of the reseller.

Operations and Systems

Merisel has made significant investments in advanced ERP, warehouse management,
and customer relationship management systems to support sales growth and improve
service levels. Merisel's distribution center is co-located with its offices in
El Segundo, California and utilizes a computerized warehouse management system
to improve shipping, receiving and picking accuracy rates.

The Company utilizes an SAP R/3 enterprise-wide information system that
integrates all functional areas of the business, including sales and
distribution, inventory management, financial services and marketing, in a
real-time environment. The system is designed to support business growth by
providing greater functionality, up-to-date technology, increased flexibility
and enhanced reporting capabilities. SAP has provided a solid base for
application development, allowing Merisel to expedite the development cycle for
functionality improvements in the system. The Company's SAP system performs with
sub-second, on-line response time. Availability for all of Merisel's core
systems has averaged 99.9 percent or above since April 1999. SAP also enforces a
high degree of data integrity, which better supports Merisel's reporting needs.
The Company is currently on the 4.6D version of SAP.


Competition

Competition in the computer products distribution industry is intense. Key
competitive factors in the distribution of software licenses include price,
breadth of products, credit availability and financing options, availability of
technical support and product information, marketing services and programs, and
ability to influence a buyer's decision.

Certain of Merisel's competitors have substantially greater financial resources
and broader product offerings than Merisel. Merisel's principal competitors for
software licensing business include large United States-based distributors such
as Ingram Micro and Tech Data, as well as a number of regional distributors and
resellers. Because of the nature of software licensing, Merisel competes with
software publishers that sell directly to computer resellers and end users to a
more limited extent than in other areas of computer products distribution. See
Item 1. "Certain Business Factors - Size of Competitors."

Variability of Quarterly Results and Seasonality

Historically, the industry in which the Company operates has experienced
variability in its net sales and operating margins on a quarterly basis and the
Company expects these patterns to continue in the future with respect to its
software licensing business. See Item 7. "Management's Discussion and Analysis
of Financial Condition and Results of Operations - Variability of Quarterly
Results and Seasonality."



<PAGE>


Employees

As of March 26, 2004, Merisel had approximately 40 employees. Merisel
continually seeks to enhance employee morale and strengthen its relations with
employees. None of the employees are represented by unions and Merisel considers
its employee relations to be good.

Environmental Compliance

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

Certain Business Factors

In addition to the other information in this report, readers are cautioned to
carefully consider the following business factors that may affect the future
operations and performance of the Company.

Size of Software Licensing Business. The Company's software licensing business
is not currently profitable and is not generating sufficient revenue to cover
selling, general and administrative expenses and other costs required to operate
this business. The Company believes that, in order to compete effectively in
software licensing, it must maintain high service levels, specialized sales and
marketing infrastructure, specific software licensing management expertise, and
state-of-the-art information technology capabilities that entail fixed costs
that cannot be further reduced significantly. To become profitable, the
Company's software licensing business must grow significantly and the Company
must add key software publishers. The Company believes that it will only be able
to achieve revenue levels that will allow its software licensing business to be
profitable if the Company is successful in adding new vendors. There is no
assurance that the Company will be successful in doing so.

Dependence on Major Customers. For 2003, 10 customers accounted for
approximately 71.8% of the Company's revenues, with the top two customers
individually accounting for approximately 25.2% and 15.7%. The Company is
focused on increasing its customer base and decreasing the percentage of net
sales and receivables attributable to a small number of customers. Until that
has been accomplished, however, the loss of one or more of the Company's major
customers could have a material adverse effect on the Company.

Dependence on Key Software Publishers. In 2003, 93.5% of Merisel's sales were
derived from products supplied by its largest vendor. As is customary in the
industry, the Company's agreements with these vendors provide non-exclusive
distribution rights and may be terminated by either party on short notice. The
termination of the Company's distribution agreement with its key vendor, or a
material change in the terms of the distribution agreement, including a decrease
in rebates, could have a material adverse effect on the Company.

Customer Credit Exposure.  Substantially all of the Company's sales are financed
by the Company.  As a result, the Company's business could be adversely affected
in the event of the  deterioration of the financial  condition of one or more of
its customers,  particularly one of the Company's larger customers, resulting in
the customer's inability to pay amounts owed to the Company.  This risk would be
increased in the event of a general economic  downturn  affecting a large number
of the  Company's  customers.  At December 31, 2003,  the  Company's two largest
customers  combined  represented  43.2%,  or $8,941,000,  of the Company's total
trade receivables.  On March 15, 2004, the Company was notified by one customer,
with  a  current  outstanding   accounts  receivable  balance  of  approximately
$746,000, that it does not have sufficient liquidity to repay the amount it owes
the Company, and has requested an extended repayment plan. There is no assurance
that the  customer's  restructured  business plan will be successful or that the
amounts owed will be collected. The Company believes,  taking into consideration
all factors  mentioned above, it has established an adequate reserve against the
December 31, 2003 accounts receivable balance.

Size of Competitors. The Company's competitors in its software licensing
business include distributors with businesses that are substantially larger than
the Company's. Because of their size and the fact that many of these larger
competitors operate world-wide businesses, these firms can achieve greater
economies of scale than the Company, allowing them to offer more favorable
pricing and other terms to resellers, and may be able to form stronger
relationships with software publishers. The Company believes that it can achieve
operating expense levels as a percentage of sales as low as those that can be
achieved by its much larger competitors only if it significantly increases its
revenues. See "Competition" above.



<PAGE>


Gross Margin Pressure. Historically, the computer distribution industry in
general and the Company in particular have experienced declines in gross
margins. The decline has resulted in part from a reduction in publisher rebates
and changes by software publishers in terms and conditions, which have resulted
in a shift of costs to distributors, solution providers and resellers; in
addition, economies of scale achieved by growing distributors have decreased
their costs and allowed them to sell products at lower gross margins. Merisel
attempts to address the gross margin issue through pricing and other actions.
However, because of the size of Merisel's business relative to its largest
competitors and Merisel's need to significantly increase its revenues in order
for its software licensing business to become profitable, the Company is
particularly vulnerable to competitive pricing actions of its competitors.


Acquisition Strategy. Any failure by us to successfully complete acquisitions
that enhance our businesses prospects could harm our business and financial
prospects. As part of our business strategy, we frequently engage in discussions
with third parties regarding possible acquisitions in order to further our
strategic objectives. In order to pursue this strategy successfully, we must
identify suitable acquisition candidates, complete these transactions, some of
which may be large and complex, and integrate the acquired companies.
Integration and other risks of acquisitions can be more pronounced for larger
and more complicated transactions, or if multiple acquisitions are pursued
simultaneously.


Integration issues are complex, time-consuming and expensive and, without proper
planning and implementation, could significantly disrupt our business. The
challenges involved in integration include:

         o demonstrating to customers and software publishers that the
         transaction will not result in adverse changes in client service
         standards or business focus and helping customers conduct business
         easily;

         o consolidating and rationalizing corporate IT infrastructure,
         including implementing information management and system processes that
         enable increased customer satisfaction, improved productivity and lower
         costs;

         o consolidating administrative infrastructure, including IT systems,
         and manufacturing operations and maintaining adequate controls
         throughout the integration;

         o coordinating sales and marketing efforts to communicate our
         capabilities effectively;

         o preserving marketing or other important relationships and resolving
         potential conflicts that may arise;

         o minimizing the diversion of management attention from ongoing
         business concerns;

         o persuading employees that business cultures are compatible,
         maintaining employee morale and retaining key employees while
         implementing restructuring programs;

         o coordinating and combining operations, subsidiaries and affiliated
         entities, relationships and facilities, which may be subject to
         additional constraints imposed by local laws and regulations and also
         may result in contract terminations or renegotiations and labor and tax
         law implications; and

         o managing integration issues shortly after or pending the completion
         of other independent reorganizations.

Even if an acquisition is successfully integrated, we may not receive the
expected benefits of the transaction. Managing acquisitions requires varying
levels of management resources, which may divert our attention from other
business operations. These transactions may result in significant costs and
expenses and charges to earnings. As a result of the foregoing, any completed,
pending or future transactions may contribute to financial results that differ
from the investment community's expectations in a given quarter.


Economic Downturn. The economic downturn could adversely affect our revenue,
gross margins and expenses. Our revenue and gross margins depend significantly
on the overall demand for software products and services. Softening demand for
our products and services caused by the ongoing economic downturn may result in
decreased revenue, earnings or growth rates and problems with our ability to
realize customer receivables. The economy has weakened and market conditions
continue to be challenging. As a result, individuals and companies are delaying
or reducing expenditures, including those for information technology. In
addition, if our customers experience financial difficulties, we could suffer
losses associated with the outstanding portion of accounts receivable. During
the current downturn, we have experienced gross margin declines,

<PAGE>


reflecting the effect of competitive pressures. Our selling, general and
administrative expenses have been impacted due in part to an increase in bad
debt write-offs and additions to reserves in our receivables portfolio. Further
delays or reductions in information technology spending could have a material
adverse effect on demand for our products and services and consequently our
results of operations, prospects and stock price.


Terrorist Acts. Terrorist acts and acts of war may seriously harm our business
and revenue, costs and expenses and financial condition. Terrorist acts or acts
of war (wherever located around the world) may cause damage or disruption to the
Company, our employees, facilities, partners, suppliers or customers, which
could significantly impact our revenue, costs and expenses and financial
condition. The terrorist attacks that took place in the United States on
September 11, 2001 were unprecedented events that have created many economic and
political uncertainties, some of which may materially harm our business and
results of operations. The long-term effects on our business of the September
11, 2001 attacks are unknown. The potential for future terrorist attacks, the
national and international responses to terrorist attacks or perceived threats
to national security, and other acts of war or hostility have created many
economic and political uncertainties that could adversely affect our business
and results of operations in ways that cannot presently be predicted.


Business Disruptions. Business disruptions could seriously harm our future
revenue and financial condition and increase our costs and expenses. Our
operations could be subject to natural disasters and other business disruptions,
which could seriously harm our revenue and financial condition and increase our
costs and expenses. Our corporate headquarters are located in California, near
major earthquake faults. The ultimate impact on us, our significant suppliers
and our general infrastructure of being located near major earthquake faults is
unknown, but our revenue and financial condition and our costs and expenses
could be significantly impacted in the event of a major earthquake. In addition,
some areas, including California, have experienced, and may continue to
experience, ongoing power shortages, which have resulted in "rolling blackouts."
These blackouts could cause disruptions to our operations or the operations of
our software publishers or customers. We maintain insurance for losses and
interruptions caused by certain types of business interruptions; however, there
is no assurance that a particular loss may be insured.

Item 2. Properties.

The Company's  headquarters and  distribution  center are located in El Segundo,
California,  where the Company leases a 50,700 square-foot facility.  This lease
will  expire on  November  1, 2004.  The  Company  expects to either  extend its
current  lease or enter into a new lease  agreement  at another  location  on or
before this date. Based on the current size of the Company, it is estimated that
approximately  15,000  square  feet  will be  required  and  will be  leased  at
substantially  the same cost per square  foot as the  current  lease,  including
$15-$25 per square foot of leasehold improvements.  The Company owns 29 acres of
undeveloped land in Cary, North Carolina,  which the Company is seeking to sell.
The  Company  believes  that its  facilities  provide  sufficient  space for its
present needs.  Based on current growth rates, and excluding  acquisitions,  the
Company expects to have capital  expenditures of approximately  $350,000 for the
software  licensing  business  over the next three years,  the majority of which
will be incurred during the next twelve months.

Item 3. Legal Proceedings.

In February 2004, the Company was served with a summons and complaint in an
adversary proceeding captioned Bridge Information Systems, Inc. et al, Debtor,
Scott P. Peltz, Chapter 11 Plan Administrator v. Merisel Americas, Inc. and MOCA
(the "Complaint"). The Complaint was filed in the United States Bankruptcy
Court, Eastern District of Missouri, Eastern Division, Case No. 01-41593-293.
The Complaint alleges that Debtor made preferential transfers of money to
Merisel Americas, Inc. ("Americas") in the amount of approximately $6.3 million
and an additional amount to MOCA, a former subsidiary of Americas, which were
avoidable and seeks to recover such transfers. The Company believes that any
such transfers alleged in the Complaint are the obligations of MOCA and not that
of the Company. The Company has been advised by counsel to Arrow Electronics,
Inc. ("Arrow"), the parent company of MOCA, that Arrow has agreed to provide
indemnification to the Company with respect to the allegations set forth in the
Complaint.

The Company is involved in certain legal proceedings arising in the ordinary
course of business, and in connection with discontinued vendors related to the
Company's wound down business, none of which is expected to have a material
impact on the financial condition or results of operations of Merisel. The
Company made estimates of its potential exposures and has established reserves
for potential losses related to such proceedings. There can be no assurance that
the Company's reserves will fully cover any possible exposure.



<PAGE>


In addition, over the last several years the Company has disposed of a number of
businesses, including all of its operations outside the United States, many of
which had obligations that had been guaranteed by the Company. In connection
with those dispositions, the Company sought either to have any guarantees
released or to be indemnified against any liabilities under guarantees. The
Company may not have identified all guarantees to be released and, in at least
one instance, the indemnification provided to the Company is no longer of any
value. Due to the nature of these indemnifications, the Company's exposure under
the agreements cannot be estimated and no amounts have been recorded for such
indemnities.

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

None.

                                     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. All stock prices are closing prices per The Nasdaq National
Market.

                                            High              Low
                Fiscal Year 2002
                     First quarter....       2 5/16          1 1/2
                     Second quarter...       3 3/4           2
                     Third quarter....       3 3/4           1 7/16
                     Fourth quarter...       2 1/4           1 1/4

                Fiscal Year 2003
                     First quarter....       3 1/2           1 7/8
                     Second quarter...       4 9/16          2 1/16
                     Third quarter....       6 1/16          4 1/4
                     Fourth quarter...       7 1/4           4 7/8


The last reported sale price of the Company's Common Stock on the Nasdaq
National Market on March 26, 2004 was $5.15 per share. As of March 26, 2004,
there were 876 record holders of the Company's Common Stock. This number does
not include beneficial owners of the Company's Common Stock which is held in
nominee or "street" name accounts through brokers.

Merisel has never declared or paid any dividends on its Common Stock and does
not anticipate paying dividends on the Common Stock in the foreseeable future.



<PAGE>
<TABLE>
<CAPTION>


Item 6. Selected Financial Data.

                                                                      Years Ended December 31,
                                                    1999          2000          2001         2002          2003
                                                              (In thousands, except per share and footnote amounts)
Income Statement Data(1, 2 and 3):
<S>                                              <C>           <C>             <C>           <C>           <C>
Net sales.....................................   $4,231,396    $2,091,942      $336,053      $81,638       $96,042
Cost of sales.................................    4,046,094     2,018,974       303,997       72,270        90,763
                                                -----------   -----------   -----------  -----------   -----------
Gross profit..................................      185,302        72,968        32,056        9,368         5,279
Selling, general & administrative expenses....      211,990       174,684        23,380        5,673         4,313
Restructuring charge (income).................        3,200        17,036          (102)         465           650
Impairment losses.............................        3,800        52,833           288                      1,800
Impairment losses related to Canada...........                                   28,111
Litigation related charge.....................       12,000
Gain on debt extinguishment (4)...............                    (49,003)       (2,872)
                                                -----------   -----------   -----------  -----------   -----------
Operating income (loss).......................      (45,688)     (122,582)      (16,749)       3,230        (1,484)
Interest expense (income), net................       17,849        10,920          (255)        (983)         (751)
Other expense (income), net...................       21,926         5,382           178         (169)       (2,474)
                                                -----------   -----------   -----------  -----------   -----------
Income (loss) before income taxes.............      (85,463)     (138,884)      (16,672)       4,382         1,741
Provision (benefit) for income taxes..........          939           620           445         (755)         (744)
                                                -----------   -----------   -----------  -----------   -----------
Income (loss) from operations.................      (86,402)     (139,504)      (17,117)       5,137         2,485
Discontinued operations:
Income (loss) from discontinued operations           25,234        18,539        (6,352)       1,973           275
Gain on sale of discontinued operations                            25,178        36,250
                                                -----------   -----------   -----------  -----------   -----------
Net income (loss).............................     $(61,168)     $(95,787)      $12,781       $7,110        $2,760
Preferred stock dividends.....................                        677         1,292        1,399         1,514
                                                -----------   -----------   -----------  -----------   -----------
Net income (loss) available to common
stockholders..................................     $(61,168)     $(96,464)      $11,489       $5,711        $1,246
                                                ===========   ===========   ===========  ===========   ===========
Share Data (5):
Net income (loss) per diluted share...........  $     (7.62)  $    (12.01)  $      1.44   $     0.74    $     0.16
Weighted average number of diluted
   Shares.....................................        8,028         8,031         7,989        7,735         7,617
Balance Sheet Data:
Working capital...............................  $   117,340   $     8,741   $    31,886  $    38,062   $    42,813
Total assets..................................      736,206       178,281        68,955       72,844        67,212
Long-term and subordinated debt...............      130,264        23,803
Total debt....................................      133,170        25,166
Stockholders' equity..........................       95,173        13,418        35,395       41,750        44,663
</TABLE>

(1)  For the years 1999 through 2001, Merisel's fiscal year was the 52- or
     53-week period ending on the Saturday nearest December 31. For clarity of
     presentation throughout this Annual Report on Form 10-K, Merisel described
     these fiscal years presented as if the year ended on December 31. All
     fiscal years presented were 52 weeks in duration. Effective for the year
     ended December 31, 2002 the Company changed its fiscal year end to a
     calendar year end of December 31. This change did not have a material
     effect on the results presented. Additionally, the selected financial data
     set forth above includes those balances and activities related to the
     Company's wholly owned subsidiary Merisel Canada through its disposal as of
     July 28, 2001.

(2)  The Company has reclassified its consolidated financial statements to
     exclude results related to the MOCA and Optisel business units, which are
     included in discontinued operations.

(3)  The Company has reclassified certain items in its 2001 and 2002
     consolidated financial statements to conform to the 2003 presentation
     pursuant to EITF 02-16, Accounting by a Customer (Including a Reseller) for
     Certain Consideration Received from a Vendor. These reclassifications
     principally consist of costs associated with consideration received from
     vendors. The impact to the 2001 consolidated financial statements is to
     decrease cost of goods sold by $9,000 and to decrease interest income by
     $9,000. The impact to the fiscal year 2002 consolidated financial

<PAGE>

     statements is to decrease cost of goods sold by $1,082,000, to
     increase general and administrative expenses by $43,000 and to decrease
     interest income by $1,039,000. Amounts in 1999 and 2000 were not
     determinable and have not been reclassified.

(4)  The Company early adopted Statement of Financial Accounting Standard No.
     145, "Reporting Gains and Losses from Extinguishment of Debt" in 2002. The
     adoption resulted in the retroactive reclassification of gain on debt
     extinguishment from an extraordinary item to a component of operations.

(5)  Per share amounts and weighted average common shares outstanding
     calculations reflect the impact of a one-for-ten reverse stock split that
     was effective February 14, 2001.


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

For an understanding of the significant factors that influenced the Company's
performance during the past three years, the following discussion and analysis
should be read in conjunction with Item 6. "Selected Financial Data" and the
consolidated financial statements and the related notes included elsewhere in
this annual report.

This discussion contains forward-looking statements based upon current
expectations that involve risks and uncertainties, such as our plans,
objectives, expectations and intentions. Actual results and the timing of events
could differ materially from those anticipated in these forward-looking
statements as a result of a number of factors, including those factors set forth
in Item 1. "Certain Business Factors" and other factors presented throughout
this filing.

Overview

The Company was founded in 1980 as Softsel Computer Products, Inc. and changed
its name to Merisel, Inc. in 1990 in connection with the acquisition of
Microamerica, Inc. ("Microamerica"). From 1996 through the first quarter of
1997, the Company engaged in the process of divesting of its operations outside
of the United States and Canada and its non-distribution operations, which
resulted in the Company's operations being focused exclusively in the United
States and Canada and consisting of three distinct business units: United States
distribution, which included software licensing, Canadian distribution and the
Merisel Open Computing Alliance ("MOCA"). On October 27, 2000, the Company
completed the sale of its MOCA business unit to Arrow Electronics, Inc.
("Arrow"). Additionally, on December 14, 2000, the Company announced that the
U.S. distribution business would focus solely on software licensing and that the
balance of the U.S. distribution business would be wound down. On July 28, 2001,
the Company completed the sale of its Canadian distribution business ("Merisel
Canada") to Synnex Information Technologies, Inc. ("Synnex"). On November 10,
2000, the Company acquired substantially all the e-services assets of Value
America, Inc. through the Company's newly formed subsidiary Optisel with the
intention of leveraging the Company's distribution and logistics capabilities to
operate a logistics and electronic services business. As a result of economic
conditions generally and with respect to Internet-related businesses
specifically and Optisel's lack of success in generating business, the Company
decided to discontinue operation of the Optisel business during the fourth
quarter of 2001.

As a consequence of the foregoing events, Merisel's only business today is its
software licensing business. Merisel's software licensing strategy is to
increase revenues primarily by expanding its small and medium business customer
base. The Company also believes that increasing its vendor breadth and
maintaining a low operating cost structure is key to its future success. Over
the past several years, the software licensing industry has become an
increasingly commoditized industry and software publishers have decreased back
end rebate opportunities, causing significant contraction of the Company's gross
margins. In an effort to combat this effect, the Company has sought
relationships with vendors whose products provide higher selling margins.
Additionally, the Company has streamlined its operating systems and other
operating costs while continuing to provide a high level of customer service. In
addition to operating the software licensing business, the Company is actively
seeking and exploring acquisition and other investment opportunities, primarily
outside the computer products distribution industry.

Discontinued Operations

On October 27, 2000, the Company completed the sale of its MOCA business unit, a
distributor of Sun Microsystems products, to Arrow for a purchase price of $110
million, subject to adjustments based on changes in working capital reflected on
the closing balance sheet of Merisel Open Computing Alliance, Inc., plus an
additional amount up to $37.5 million payable by the end of March 2001 based
upon MOCA's ability to retain existing and gain additional business (the
"Additional Payment"). The actual purchase price (excluding the Additional
Payment but including amounts received as deferred purchase price payments) was
approximately $179.8 million of which approximately $57.5 million was for
amounts outstanding under

<PAGE>


the Merisel asset securitization facility. Based on the purchase price the
Company realized a gain, net of costs associated with the sale, of approximately
$25.2 million. In March 2001 the Company received an Additional Payment of $37.5
million which, after deducting certain obligations relating to the payment,
netted $36.3 million, which was recorded in the quarter ended March 31, 2001 and
resulted in a gain of $36.3 million.

Through Optisel, in November 2000 the Company acquired substantially all the
e-services assets of Value America, Inc. with the intention of leveraging the
Company's distribution and logistics capabilities to operate a logistics and
electronic services business. In connection with the sale of the MOCA business
to Arrow, the Company entered into a transition services agreement with Arrow
pursuant to which Optisel provided fee-based distribution and logistics services
and information technology services for MOCA through February 1, 2002. In
connection with the sale of Merisel Canada to Synnex, Merisel and Synnex entered
into a fee-based transition services agreement pursuant to which Optisel
provided information technology services to Merisel Canada through September 10,
2001. Optisel did not generate any significant revenue except under these two
transition services agreements. As a result of general economic conditions and
Optisel's lack of success in generating Internet-related business, the Company
discontinued operations of the Optisel business during the fourth quarter of
2001.

The Company has reclassified, as discontinued operations, its consolidated
financial statements to reflect the sale of the MOCA business and the
discontinuance of Optisel's operations and to segregate the revenues, direct
costs and expenses (excluding any allocated costs), assets and liabilities, and
cash flows of the MOCA and Optisel businesses. The net operating results and net
cash flows of these businesses have been reported as "Discontinued Operations"
in the accompanying consolidated financial statements.

Wind Down of U.S. Distribution Business

In December 2000 the Company determined that, primarily as a result of a
significant contraction in net sales and continuing substantial operating
losses, it would focus solely on software licensing and the balance of the U.S.
distribution business would be wound down. Although the wind-down was
substantially completed by the end of the first quarter of 2001, the Company has
substantial remaining obligations related to the U.S. distribution business,
primarily with respect to leases, vendors and employee severance. See Item 7.
"Liquidity and Capital Resources" below.

Sale of Merisel Canada

On July  28,  2001,  the  Company  completed  the  sale  of  Merisel  Canada,  a
distributor of computer hardware and software products,  to Synnex. The purchase
price was CDN$30,000,000,  of which CDN$1,000,000 is reflected as a liability on
the Company's balance sheet at December 31, 2002,  pending resolution of certain
indemnification  claims.  In connection  with this  transaction,  in the quarter
ended June 30, 2001 the Company  recorded an impairment  charge of approximately
$29,416,000 with respect to Merisel Canada related to the excess book value over
expected cash  consideration less transaction fees. During the fourth quarter of
2001 the closing  balance sheet of Merisel Canada was finalized and agreed to by
the Company  and Synnex.  This  resulted  in a payment of  CDN$2,000,000  to the
Company,  which was recorded as a $1,305,000 adjustment to the impairment charge
previously recorded in the second quarter of 2001.

Results of Operations

Including discontinued operations, the Company reported net income available to
common stockholders of $1,246,000 or $0.16 per share for 2003, compared to
$5,711,000 or $0.74 per share for 2002 and $11,489,000, or $1.44 per share, for
2001. These results include income from discontinued operations of $275,000 for
2003, $1,973,000 for 2002 and a loss from discontinued operations of $6,352,000
for 2001. The discussion and analysis below is limited to the Company's
continuing operations and includes the U.S. and Canadian distribution
businesses.

Management analyzes the software licensing business separately from the business
being wound down, to the extent possible given the fact that a significant
amount of resources is shared between the groups. Over the past couple of years,
the Company reduced selling, general and administrative expenses that were
shared between the software licensing group and the wound down business as
certain settlements were reached with vendors and customers of the wound down
business. The Company does not expect that significant further cost reductions
of the Company's software licensing business will be possible in the future.


<PAGE>


The following table of summary selected financial data shows the analysis
management uses to evaluate results of the business (amounts in thousands):
<TABLE>
<CAPTION>

                         ------------------------------     ---------------------------------    ---------------------------------
                                     2001                                 2002                                 2003
                         ------------------------------     ---------------------------------    ---------------------------------
                         Software   Other       Total       Software   Other         Total       Software   Other         Total
                         Licensing  Business                Licensing   Business                 Licensing   Business
                         ---------- ---------- --------     ---------- ----------- ----------    ---------- ----------- ----------
<S>                       <C>       <C>        <C>           <C>                    <C>           <C>        <C>         <C>
Net sales                 39,085    296,968    336,053       81,638                 81,638        96,042                 96,042

Gross profit               2,508     29,548     32,056        4,552      4,816       9,368         4,177      1,102       5,279

Gross margin                 6.4%      10.0%       9.5%         5.6%       5.9%       11.5%          4.4%       1.1%        5.5%

Operating income (loss)   (6,355)   (10,394)   (16,749)      (3,640)     6,870       3,230        (1,972)       488      (1,484)

Interest and other          (178)       255         77          154        998       1,152            96      3,129       3,225
income (expense), net

Net income (loss) from
continuing operations     (6,653)   (10,464)   (17,117)      (3,606)     8,743       5,137        (1,996)     4,481       2,485

</TABLE>

Comparison of Fiscal Years Ended December 31, 2003 and December 31, 2002

Net Sales - Net sales increased 17.6% from $81,638,000 in 2002 to $96,042,000
for the year ended December 31, 2003. This increase is due primarily to the
growth of our largest software publisher and to a lesser extent to the Company's
gain in market share and expansion of its sales force during the period. There
are no assurances that these growth rates will continue in future periods and it
is expected that sales will decline during the first quarter of 2004, due to a
combination of seasonality experienced by our primary software publisher,
changes by some of our software publishers in their channel strategies, and
changes in the Company's sales organization.

Gross Profit - Gross profit decreased 43.6% from $9,368,000 in 2002 to
$5,279,000 in 2003. In the years ended December 31, 2002 and 2003, gross profit
reflects reductions of costs of sales of $4,816,000 and $1,102,000,
respectively, primarily as a result of favorable vendor settlements from the
wound down business. Excluding these reductions to cost of sales, gross margins
were 5.6% in 2002 compared to 4.4% in 2003. The decrease in software licensing
gross margins is attributable primarily to increased pricing pressure and
declining backend rebates. Although the Company is taking actions to stop the
decline of gross margins, including seeking relationships with software
publishers whose products provide higher selling margins, there is no assurance
that they will be successful in doing so.

Selling,  General  and  Administrative  - Selling,  general  and  administrative
expenses  decreased by  $1,360,000 or 24.0% from  $5,673,000  for the year ended
December 31, 2002 to $4,313,000 for the year ended  December 31, 2003.  Selling,
general  and  administrative  expenses  for 2002 and  2003  include  adjustments
totaling   $2,519,000  and  $1,836,000,   respectively,   related  to  favorable
settlements or collections  experienced with non-inventory vendors and customers
of  the  Company's  wound  down  U.S.  distribution  business.  Excluding  these
adjustments,  selling,  general  and  administrative  expense  would  have  been
$8,192,000  or 10.0%  and  $6,149,000  or 6.4% of net  sales  for 2002 and 2003,
respectively.  This decrease was caused primarily by cost reductions made during
recent  periods  in  the  staffing  of  the  Company's  information   technology
department.  These decreases were partially offset by increased  expenditures in
the sales and marketing areas. The Company does not believe that it will be able
to  make   significant   further   reductions   in  its  selling,   general  and
administrative expense levels.

Restructuring - During 2003, in connection with the wind-down of the U.S.
distribution business (excluding software licensing), the Company recorded
additional restructuring charges of $650,000. The additional charge is primarily
due to $208,000 of severance costs and $442,000 of charges related to leases of
equipment and disposed facilities. During 2002, the Company recorded additional
restructuring charges of $465,000. The additional charge is primarily due to
$265,000 of severance costs and $200,000 of charges related to leases of
equipment and disposed facilities.

Impairment Losses - In May 2002 the Company completed the sale of an office
building in Cary, North Carolina. The $3,000,000 purchase price was paid $25,000
in cash and the remainder in a promissory note due May 20, 2004 or earlier in
certain circumstances (the "Note"). The Note bears interest at the prime rate
plus 2.25% payable monthly and is secured by the property. The Company recorded
the Note at a discounted amount of $2,714,000 which approximated the carrying
value

<PAGE>


of the property and is included in other assets in the accompanying consolidated
balance sheets. The Company recognized no gain or loss on the sale of the
property, net of actual disposal costs. In connection with the sale, the Company
agreed to lend the purchaser up to an additional $1,000,000, at terms similar to
the Note described above, to fund improvements to the property after the
purchaser has funded $1,000,000 in initial improvements. As of December 31, 2003
no additional amounts have been loaned.

In April 2003, the purchaser informed the Company that the purchaser's plans for
developing the property securing the Note may not be economically feasible; and
therefore the purchaser was likely to default on the Note and stop making any
further payments. The Company discontinued recognizing interest income on the
loan and considered appropriate actions to maximize the underlying value of this
Note, including potentially foreclosing on the property. In the third quarter of
2003, management reached the determination that the note receivable was impaired
due to the purchaser's continuing default and failure to pursue developing the
property in the near future, as had been the purchaser's original plan.
Therefore, management in consultation with is real estate advisors recorded an
impairment loss of $1,800,000 to reduce the book value of the Note to the
estimated fair value of the property at the time. Management continues to
evaluate possible alternatives to maximize the value of the note including
possible foreclosure, joint venture, or concessions with the existing purchaser.

Operating Loss - As a result of the above items, the Company had income from
operations of $3,230,000 for the year ended December 31, 2002 compared to an
operating loss of $1,484,000 for the year ended December 31, 2003. Excluding the
restructuring-related charges and the asset impairment charge, the Company would
have had operating income of $3,695,000 in 2002 compared to operating income of
$966,000 in 2003.

Interest Income - Interest income for the Company decreased from $983,000 for
the year ended December 31, 2002 to $751,000 for the year ended December 31,
2003. The change primarily reflects lower average interest rates experienced on
the Company's cash balances during the 2003 period.

Other Expense (Income) - Other income for the Company increased from $169,000
for the year ended December 31, 2002 to $2,474,000 for the year ended December
31, 2003. Other income in the 2003 period primarily reflects a $2,448,000
receipt from the settlement of a bankruptcy claim related to certain
indemnifications and guarantees obtained from the purchaser of certain of the
Company's subsidiaries.

Income Taxes - The income tax benefit decreased from $755,000 for the year ended
December 31, 2002 to $744,000 for 2003. In both years,  the income tax provision
provides for only the minimum  statutory tax  requirements in the various states
in which the  Company  conducts  business,  as the Company  had  sufficient  net
operating losses from prior years to offset U.S. federal and state income taxes.
In 2002 the  provision  consisted of $297,000  related to minimum  statutory tax
requirements,  offset by income  tax  refunds  from  various  agencies  totaling
$530,000  and a release of  $521,000  of  previously  recorded  tax  contingency
reserves  resulting  from the  resolution  of certain tax  matters.  In 2003 the
provision  consisted of $120,000 related to minimum  statutory tax requirements,
offset by income tax refunds from various  federal and state tax audits totaling
$864,000.  A valuation allowance has been fully established against deferred tax
assets resulting from available net operating loss carry forwards. See "Notes to
Consolidated Financial Statements - Note 6 - Income Taxes".

Net Income - The Company reported net income available to common stockholders of
$5,711,000, or $0.74 per share, in 2002 compared to net income available to
common stockholders of $1,246,000, or $0.16 per share, in 2003. The Company's
software licensing business is not currently profitable because it is not
generating sufficient revenue to cover selling, general and administrative
expenses and other costs required to operate the business. The Company believes
that, in order to compete effectively in software licensing distribution, it
must maintain high service levels, specialized sales and marketing
infrastructure, specific software licensing management expertise, and
state-of-the-art information technology capabilities that entail fixed costs
that cannot be further reduced significantly. The Company believes that it will
only be able to achieve revenue levels that will allow its software licensing
business to be profitable if the Company is successful in adding new vendors.
There is no assurance that the Company will be successful in doing so.


Comparison of Fiscal Years Ended December 31, 2002 and December 31, 2001

Net Sales - Excluding net sales of $295,682,000 generated by the Canadian
distribution business in 2001, net sales increased 102.2% from $40,371,000 in
2001 to $81,638,000 for the year ended December 31, 2002. Net sales for the
Company's software licensing business increased 108.9% in 2002 to $81,638,000
from $39,085,000 in 2001.



<PAGE>


Gross Profit - Excluding gross profit of $17,003,000 generated by the Canadian
distribution business in 2001, gross profit decreased 37.8% from $15,053,000 in
2001 to $9,368,000 in 2002. In the years ended December 31, 2001 and 2002, gross
profit reflects reductions of costs of sales of $12,450,000 and $4,816,000,
respectively, primarily as a result of favorable vendor settlements. Excluding
results of the Canadian distribution business and the reductions to cost of
sales, gross margins were 6.4% in 2001 compared to 5.6% in 2002. The decrease in
software licensing gross margins is attributable primarily to increased pricing
pressure.

Selling, General and Administrative - Excluding selling, general and
administrative expense of $15,041,000 incurred by the Canadian distribution
business in 2001, selling, general and administrative expenses decreased by
$2,666,000 or 32.0% from $8,339,000 for the year ended December 31, 2001 to
$5,673,000 for the year ended December 31, 2002. Selling, general and
administrative expenses for 2001 and 2002 include adjustments totaling
$11,110,000 and $2,519,000, respectively, related to favorable settlements or
collections experienced with vendors and customers of the Company's wound down
U.S. distribution business. Excluding these adjustments, and results of the
Canadian distribution business, selling, general and administrative expense
would have been $19,449,000 or 48.2% and $8,192,000 or 10.0% of net sales for
2001 and 2002, respectively. This decrease was caused primarily by cost
reductions that have been made during recent periods.

Restructuring - During 2002, in connection with the wind-down of the U.S.
distribution business (excluding software licensing), the Company recorded
additional restructuring charges of $465,000. The additional charge is primarily
due to $265,000 of severance costs and $200,000 of charges related to leases of
equipment and disposed facilities. During 2001, in connection with the wind-down
of the U.S. distribution business (excluding software licensing), the Company
was able to negotiate favorable settlements related to certain lease and
contract commitments. As a result, the Company was able to reduce the accrued
liability related to previously recorded restructuring charges by $102,000. The
adjustment was primarily due to $569,000 of favorable settlements reached with
lessors of disposed facilities, net of $467,000 of additional charges related to
severance costs.

Impairment Losses - On July 28, 2001, the Company completed the sale to Synnex
of Merisel Canada. The purchase price was CDN$30,000,000, of which CDN$1,000,000
was deposited in an escrow account pending resolution of indemnification claims.
As a result of the pending sale of Merisel Canada, the Company reviewed the
recoverability of its long-lived assets, including identifiable intangible
assets, to determine if there had been any impairment. Based on this review, the
Company recorded an impairment charge of $29,416,000 as of June 30, 2001. The
impairment charge includes $13,000,000 for the SAP operating system, $8,900,000
for the Company's foreign translation adjustment, $3,600,000 for the unamortized
goodwill attributable to Merisel Canada, and $3,916,000 related to various other
assets. During the fourth quarter of 2001, the closing balance sheet of Merisel
Canada was finalized and agreed to by the Company and Synnex. This resulted in a
payment of CDN$2,000,000 to the Company, which is recorded as a $1,305,000
adjustment to the impairment charge previously recorded in the second quarter of
2001.

Gain on Debt Extinguishment - In January 2001, the Company purchased $20,175,000
of its outstanding 12-1/2% Senior Notes due 2004 (the "12.5% Notes") for an
aggregate cost of $17,149,000, reducing the outstanding balance of the 12.5%
Notes to $3,628,000, which were redeemed at a total cost of $3,782,000 in
February 2001. As a result, the Company recognized a gain of approximately
$2,872,000 for the year ended December 31, 2001.

Operating Loss - As a result of the above items, the Company had a loss from
operations of $16,749,000 for the year ended December 31, 2001 compared to
operating income of $3,230,000 for the year ended December 31, 2002. Excluding
the restructuring-related charges, the asset impairment charges and the gain on
debt extinguishment, the Company would have had operating income of $8,676,000
in 2001 compared to $3,695,000 in 2002.

Interest Income - Interest income for the Company increased from $255,000 for
the year ended December 31, 2001 to $983,000 for the year ended December 31,
2002. The change primarily reflects the fact that the Company had no
indebtedness during 2002 as a result of the sale of Merisel Canada in July 2001,
which eliminated the interest associated with its revolving credit facility, and
interest income earned on invested cash balances in 2002. See "Gain on Debt
Extinguishment" above.

Other Expense (Income) - Other expense for the Company decreased from an expense
of $178,000 for the year ended December 31, 2001 to income of $169,000 for the
year ended December 31, 2002. The decrease is primarily related to a $206,000
reduction in asset securitization fees related to the termination of the
Company's asset securitization facilities and the sale of fixed assets in 2002.


<PAGE>


Income Taxes - The income tax provision decreased from $445,000 for the year
ended December 31, 2001 to a benefit of $755,000 for 2002. In both years, the
income tax provision provides for only the minimum statutory tax requirements in
the various states and provinces in which the Company conducts business, as the
Company had sufficient net operating losses from prior years to offset U.S.
federal and state income taxes. In 2002 the provision, which consisted of
$297,000 related to minimum statutory tax requirements, is offset by income tax
refunds from various agencies totaling $530,000 and a release of $521,000 of
previously recorded tax contingency reserves resulting from the resolution of
certain tax matters. A valuation allowance has been fully established against
deferred tax assets resulting from available net operating loss carry forwards.
See "Notes to Consolidated Financial Statements - Note 6 - Income Taxes".

Net Income - The Company's software licensing business is not currently
profitable because it is not generating sufficient revenue to cover selling,
general and administrative expenses and other costs required to operate the
business. The Company believes that, in order to compete effectively in software
licensing distribution, it must maintain high service levels, specialized sales
and marketing infrastructure, specific software licensing management expertise,
and state-of-the-art information technology capabilities that entail fixed costs
that cannot be further reduced significantly. The Company believes that it will
only be able to achieve revenue levels that will allow its software licensing
business to be profitable if the Company is successful in adding new vendors.
There is no assurance that the Company will be successful in doing so.

The Company reported net income available to common stockholders of $11,489,000,
or $1.44 per share, in 2001 compared to net income available to common
stockholders of $5,711,000, or $0.74 per share, in 2002.

Variability of Quarterly Results and Seasonality

Historically, the industry in which the Company operates has experienced
variability in its net sales and operating margins on a quarterly basis and
expects these patterns to continue in the future with respect to its U.S.
software licensing business. 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 to existing products; (iii)
intensity of price competition among the Company and its competitors as
influenced by various factors; and (iv) 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, and the results for any
quarterly period may not be indicative of results for a full fiscal year.

Additionally, 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. As a result of this
pattern, the Company's working capital requirements in the fourth quarter have
typically been greater than other quarters.

Liquidity and Capital Resources

Cash Flows Activity for the Years Ended December 31, 2003, 2002 and 2001

Net cash used in operating activities was $1,793,000, $11,006,000 and
$53,352,000 during the years ended December 31, 2003, 2002 and 2001,
respectively. In all periods, cash used in operations primarily relates to the
extinguishment of liabilities and commitments associated with the wind-down of
the U.S. distribution business, excluding software licensing, and the growth in
the software licensing business through credit sales.

Net cash used in investing activities in 2003 was $37,000 and consisted
primarily of $62,000 used to purchase securities, offset by $25,000 of proceeds
from the sale of property, plant and equipment. Net cash used in investing
activities in 2002 was $32,000 and consisted primarily of proceeds of $667,000
from the sale of Merisel Canada, offset by $637,000 used to purchase securities.
Net cash provided by investing activities in 2001 consisted primarily of
proceeds of $36,250,000 from the sale of MOCA and $15,991,000 from the sale of
Merisel Canada.

Net cash used in financing activities was $6,000 and $516,000 in 2003 and 2002,
respectively, which related to the repurchase of treasury stock. Net cash
provided by financing activities in 2001 was $13,342,000 and included revolver
borrowings of $35,962,000 associated with new credit facility entered into by
Merisel Canada upon the expiration of a receivables purchase agreement (see
"Notes to Consolidated Financial Statements - Note 3 - Sale of Accounts
Receivable"). Cash used in financing activities was $20,931,000 for the purchase
of the remainder of the 12.5% Notes.


<PAGE>


Debt Obligations, Financing Sources and Capital Expenditures

In 2001, the Company purchased all of the outstanding $23,803,000 principal
amount of 12.5% Senior Notes. As a result, none of the 12.5% Notes remain
outstanding and the Company's obligations under the indenture relating to the
12.5% Notes have been discharged.

In June 2000, an affiliate of Stonington Partners, Inc., which owns
approximately 65.6% of the Company's outstanding common stock, purchased 150,000
shares of convertible preferred stock (the "Convertible Preferred") issued by
the Company for an aggregate purchase price of $15 million. The Convertible
Preferred provides for an 8% annual dividend payable in additional shares of
Convertible Preferred. Dividends are cumulative and will accrue from the
original issue date whether or not declared by the Board of Directors.
Cumulative accrued dividends of $3,367,000 and $4,881,000 were recorded at
December 31, 2002 and 2003, respectively. At the option of the holder, the
Convertible Preferred is convertible into the Company's common stock at a per
share conversion price of $17.50. At the option of the Company, the Convertible
Preferred can be converted into Common Stock when the average closing price of
the Common Stock for any 20 consecutive trading days is at least $37.50. At the
Company's option, on or after June 30, 2003, the Company may redeem outstanding
shares of the Convertible Preferred initially at $105 per share and declining to
$100 on or after June 30, 2008, plus accrued and unpaid dividends. In the event
of a defined change of control, holders of the Convertible Preferred have the
right to require the redemption of the Convertible Preferred at $101 per share
plus accrued and unpaid dividends. As of December 31, 2003, no redemptions have
been made and the Company has no plans to exercise its redemption rights in the
foreseeable future.

The Company leases certain of its facilities and equipment  under  noncancelable
operating leases. As of December 31, 2003, there are no noncancelable  operating
leases that have initial or remaining noncancelable lease terms in excess of one
year. The Company's lease on its El Segundo, California headquarters will expire
on November 1, 2004.  The Company  expects to either extend its current lease or
enter into a new lease  agreement  at another  location  on or before this date.
Based on the current size of the Company,  it is  estimated  that  approximately
15,000 square feet will be required and will be leased at substantially the same
cost per square foot as the current lease,  including $15-$25 per square foot of
leasehold   improvements.   Based  on  current   growth  rates,   and  excluding
acquisitions,  the Company expects to have capital expenditures of approximately
$350,000  for the software  licensing  business  over the next three years,  the
majority of which will be incurred during the next twelve months.

The Company has historically obtained a large portion of its working capital
financing under receivables securitization facilities and, to a lesser extent,
revolving credit facilities. With the sale of the MOCA business and Merisel
Canada and the wind down of the U.S. distribution business excluding software
licensing, the Company no longer has any of these financing facilities. Because
the software licensing business requires the maintenance of minimal levels of
inventory, the working capital requirements are much less than the Company's
historical needs for its distribution business and it is able to meet its
working capital needs without the need for any financing facility, in large part
because of its substantial cash balances. As revenues of the software licensing
business grow, the Company may seek to establish a working capital financing
facility to provide additional funding for that business and for acquisitions.

The Company has obligations relating to the wind-down of its U.S. distribution
business in addition to working capital requirements related to its software
licensing business. The Company expects that expenditures related to the
wind-down will consume some amount of the Company's cash balance at December 31,
2003.

The Company is involved in certain legal proceedings arising in the ordinary
course of business, and in connection with discontinued vendors related the
company's wound down business, none of which is expected to have a material
impact on the financial condition or results of operations of Merisel. The
Company made estimates of its potential exposures and has established reserves
for potential losses related to such proceedings. There can be no assurance that
the Company's reserves will fully cover any possible exposure.

In addition, over the last several years the Company has disposed of a number of
businesses, including all of its operations outside the United States, many of
which had obligations that had been guaranteed by the Company. In connection
with those dispositions, the Company sought either to have any guarantees
released or to be indemnified against any liabilities under guarantees. The
Company may not have identified all guarantees to be released and, in at least
one instance, the indemnification provided to the Company is no longer of any
value. Due to the nature of these indemnifications, the Company's exposure under
the agreements cannot be estimated and no amounts have been recorded for such
indemnities.

Management believes that, with its cash balances and anticipated cash balances
after wind-down related expenditures, which balances are substantial in relation
to the Company's working capital needs, as well as expected revenues and cash
flow from operations, it has sufficient liquidity. However, the Company's

<PAGE>

operating cash flow can be impacted by macroeconomic factors outside of its
control. If the Company were to use a significant amount of cash to fund one or
more acquisitions, the Company could have less liquidity to meet its working
capital needs.

Contractual Obligations, Commitments and Off Balance Sheet Arrangements

The  Company  has  various   contractual   obligations  which  are  recorded  as
liabilities  in our  consolidated  financial  statements.  The  following  table
summarizes  our  contractual  obligations  at  December  31, 2003 and the future
periods in which such obligations are expected to be settled in cash. Additional
details   regarding   these   obligations  are  provided  in  footnotes  to  the
consolidated   financial   statements  at  Item  8.  Financial   Statements  and
Supplementary Data.
<TABLE>
<CAPTION>

  ------------------------------------------ -----------------------------------------------------------------------------
               (in thousands)                                           Payment due by period
  ------------------------------------------ -----------------------------------------------------------------------------

           Contractual Obligations              Total       Less than 1      1-3 Years       4-5 Years      More than 5
                                                               Year                                            Years
  ------------------------------------------ ------------ ---------------- -------------- ---------------- ---------------
<S>                                                 <C>           <C>             <C>             <C>              <C>
  Long-Term Debt Obligations                       -0-           -0-             -0-             -0-              -0-

  Capital Lease Obligations                        -0-           -0-             -0-             -0-              -0-

  Operating Lease Obligations                     776           776              -0-             -0-              -0-

  Purchase Obligations                             -0-           -0-             -0-             -0-              -0-

  Other Long-Term Liabilities Reflected on        751            -0-             751             -0-              -0-
  Balance Sheet under GAAP

  Total                                         1,527           776              751             -0-              -0-

</TABLE>

Critical Accounting Policies and Estimates

The preparation of financial statements in conformity with generally accepted
accounting principles requires the appropriate application of certain accounting
policies, many of which require the Company to make estimates and assumptions
about future events and their impact on amounts reported in the Company's
consolidated financial statements and related notes. Since future events and
their impact cannot be determined with certainty, the actual results will
inevitably differ from the Company's estimates. Such differences could be
material to the consolidated financial statements.

The Company believes the application of its accounting policies, and the
estimates inherently required therein, are reasonable. These accounting policies
and estimates are constantly reevaluated, and adjustments are made when facts
and circumstances dictate a change.

The Company's accounting policies are more fully described in Item 8. "Financial
Statements and Supplementary Data". The Company has identified certain critical
accounting policies which are described below.

Revenue Recognition, Returns and Sales Incentives-- The Company derives revenues
from software licensing, product updates and customer support services and
training and consulting services purchased directly from third party vendors.
The Company records revenue from software licensing when there is persuasive
evidence of an arrangement, the fee is fixed and determinable, collection is
reasonably assured and delivery of the product has occurred (as prescribed by
Statement of Position ("SOP") 97-2, "Software Revenue Recognition"). In
arrangements that include software licenses and professional services and/or
product updates ("multiple elements"), the Company allocates revenue based on
vendor specific objective evidence ("VSOE") of fair value of all elements,
defers revenue for the undelivered items and recognizes as revenue the fair
value of the delivered items based on VSOE of each element determined by the
price for which the element is sold separately.

The Company recognizes product updates and customer support services revenue
that they provide ratably over the term of the arrangement. Revenue from
training and consulting services is recognized when the services are completed.

The Company recognizes revenue on a gross basis as (a) the Company has sole
discretion in determining the price for which it sells software licenses and
services, (b) its suppliers impose no control or limitations on the Company's
pricing, (c) the Company assumes all credit risk associated with its customers,
(d) the Company often actively assists the customer in the selection of its
products and services and (e) the Company has the discretion to purchase the
products and services it offers from a variety of different suppliers and
distributors.


<PAGE>

The Company frequently monitors its customers' financial condition and credit
worthiness and only sells products, licenses or services to customers where, at
the time of the sale, collection is reasonably assured. The Company, subject to
certain limitations including approval of its software publishers, may permit
its customers to return products and to exchange products or receive credits
against  future  purchases.  The  Company  offers its  customers  several  sales
incentive  programs  that,  among other  things,  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 vendors.
A provision  for  estimated  product  returns  and costs of  customer  incentive
programs  is  recorded  concurrently  as a  component  of  net  sales  with  the
recognition of revenue.

Concentration of Credit Risk - The Company performs ongoing credit evaluations
of its customers and maintains an allowance for potential credit losses;
however, credit risk with respect to trade accounts receivable is currently a
significant risk to the Company. At December 31, 2003, the Company's two largest
customers represented 43.2%, or $8,941,000, of the Company's total trade
receivables. The Company performs ongoing credit evaluations of its customers'
financial conditions and establishes reserves for credit losses accordingly
based on historical experience and the age of outstanding receivables.

Use of Estimates--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,
accounts payable and accrued liabilities.

Restructuring and Wind Down Reserves - At December 31, 2003, the Company had
$13,883,000 and $7,915,000, respectively, of accounts payable and accrued
liabilities. Of the accounts payable amount recorded, $2,193,000 is related to
the U.S. distribution business (excluding software licensing), representing the
remaining liabilities and reserves against vendor-related receivables associated
with those former vendors with whom the Company has not yet reached a
settlement. Accrued liabilities primarily represent restructuring accruals,
liabilities associated with maintenance and other arrangements the Company has
incurred under contracts with systems and telecommunications vendors, sales tax
liabilities and other reserves. As part of its ongoing wind-down efforts, the
Company is negotiating with both inventory and other vendors and the actual
payments made by the Company under settlement agreements could differ from the
amounts accrued.

Item 7A. Quantitative and Qualitative Market Risk Disclosure

Investments

At December 31, 2003, the Company had cash investments of $43,904,000 held in
overnight, interest-bearing accounts invested through high-credit quality
financial institutions. Additionally, the Company had cash balances of
$1,044,000 maintained in various checking accounts at December 31, 2003.


<PAGE>


Item 8. Financial Statements and Supplementary Data.


                          INDEPENDENT AUDITORS' REPORT


To the Board of Directors and Stockholders of
Merisel, Inc.:
El Segundo, California

We have audited the accompanying consolidated balance sheets of Merisel, Inc.
and subsidiaries as of December 31, 2002 and 2003, and the related consolidated
statements of income, changes in stockholders' equity, and cash flows for each
of the three years in the period ended December 31, 2003. Our audits also
included the financial statement schedule listed in the index at Item 15(a)(2).
These financial statements and the financial statement schedule are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements and the financial statement schedule based
on our audits.

We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. 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, 2002 and 2003, and the results of their operations and their cash
flows for each of the three years in the period ended December 31, 2003, in
conformity with accounting principles generally accepted in the United States of
America. Also, in our opinion, the financial statement schedule referred to
above, when considered in relation to the basic consolidated financial
statements taken as a whole, presents fairly, in all material respects, the
information set forth therein.

As discussed in Note 1, during the year ended December 31, 2000 the Company
decided to cease activities associated with virtually all of its United States
distribution business excluding software licensing. Additionally the Company
sold its MOCA business unit effective October 27, 2000. The gain on the sale and
results of operations of MOCA prior to the sale are included in discontinued
operations in the accompanying consolidated statements of operations. During the
year ended December 31, 2001, the Company discontinued its Optisel business. The
results of operations of Optisel are included in discontinued operations in the
accompanying consolidated statements of operations. Also, effective July 28,
2001 the Company completed the sale of Merisel Canada.



DELOITTE & TOUCHE LLP

Los Angeles, California
March 26, 2004



<PAGE>
<TABLE>
<CAPTION>


                         MERISEL, INC. AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEETS
                        (In thousands, except share data)

                                                                                              December 31,
                                                                                            2002         2003
                                        ASSETS

Current assets:
<S>                                                                                     <C>          <C>
     Cash and cash equivalents.......................................................   $    46,795  $    44,948
     Accounts receivable (net of allowances of $1,185 and $1,286 at December
        31, 2002 and 2003, respectively).............................................        21,664       19,585
     Inventories....................................................................              3           13
     Prepaid expenses and other current assets.......................................           165           65
                                                                                        --------------------------
          Total current assets.......................................................        68,627       64,611
Property and equipment, net..........................................................           883          883
Other assets ........................................................................         3,334        1,718
                                                                                        ------------- ------------
     Total assets....................................................................   $    72,844  $    67,212
                                                                                        ============= ============

                         LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:
     Accounts payable................................................................   $    18,157  $    13,883
     Accrued liabilities.............................................................        12,408        7,915
                                                                                        --------------------------
          Total current liabilities..................................................        30,565       21,798

Long-term liabilities                                                                           529          751

Commitments and Contingencies

Stockholders' equity:
     Convertible preferred stock, $.01 par value; authorized 1,000,000 shares;
        150,000 shares issued and outstanding........................................       18,368       19,882
     Common stock, $.01 par value; authorized 150,000,000 shares; 8,026,375
        shares issued and 7,619,095 shares outstanding at December 31, 2002;
        8,026,375 shares issued  and 7,616,395 shares outstanding at December 31, 2003           76           76
     Additional paid-in capital......................................................       279,814      278,300
     Accumulated deficit.............................................................      (255,559)    (252,799)
     Treasury stock..................................................................          (840)        (846)
     Accumulated other comprehensive loss............................................          (109)          50
                                                                                        ------------- ------------
          Total stockholders' equity.................................................        41,750       44,663
                                                                                        ------------- ------------
     Total liabilities and stockholders' equity......................................   $    72,844  $    67,212
                                                                                        ============= ============

</TABLE>

              See accompanying notes to consolidated financial statements.



<PAGE>
<TABLE>
<CAPTION>


                         MERISEL, INC. AND SUBSIDIARIES

                        CONSOLIDATED STATEMENTS OF INCOME
                    (In thousands, except per share amounts)

                                                                          For the Years Ended December 31,
                                                                          2001           2002          2003

<S>                                                                  <C>            <C>            <C>
Net sales..........................................................  $    336,053   $     81,638   $     96,042
Cost of sales......................................................       303,997         72,270         90,763
                                                                     ------------   ------------   ------------
Gross profit.......................................................        32,056          9,368          5,279
Selling, general and administrative expenses.......................        23,380          5,673          4,313
Restructuring charges..............................................          (102)           465            650
Impairment losses..................................................           288                         1,800
Impairment related to the sale of Merisel Canada...................        28,111
Gain on extinguishment of debt.....................................        (2,872)
                                                                     ------------   ------------   ------------
Operating income (loss)............................................       (16,749)         3,230         (1,484)
Interest income, net...............................................           255            983            751
Other expense (income), net........................................           178           (169)        (2,474)
                                                                     ------------   ------------   ------------
Income (loss) from operations before income taxes..................       (16,672)         4,382          1,741
Income tax provision (benefit).....................................           445           (755)          (744)
                                                                     ------------   ------------   ------------
Income (loss) from operations......................................       (17,117)         5,137          2,485
Discontinued operations:
   Income (loss) from discontinued operations......................        (6,352)         1,973            275
   Gain on sale of discontinued operations.........................        36,250
                                                                     ------------   ------------   ------------
Net income ........................................................  $     12,781   $      7,110   $      2,760
                                                                     ============   ============   ============

Preferred stock dividends..........................................         1,292          1,399          1,514
                                                                     ------------   ------------   ------------
Net income available to common stockholders........................  $     11,489   $      5,711   $      1,246
                                                                     ============   ============   ============

Net income (loss) per share (basic and diluted):
Income (loss) from operations less preferred stock dividends.......  $      (2.30)   $      0.48    $      0.12
Discontinued operations:
   Income (loss) from discontinued operations......................         (0.80)          0.26           0.04
   Gain on sale of discontinued operations.........................          4.54
                                                                     ------------   ------------   ------------
Net income ........................................................  $       1.44    $      0.74    $      0.16
                                                                     ============   ============   ============

Weighted average number of shares (basic and diluted):                      7,989          7,735          7,617
                                                                     ============   ============   ============


</TABLE>
                  See accompanying notes to consolidated financial statements.




<PAGE>


                         MERISEL, INC. AND SUBSIDIARIES

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

<TABLE>
<CAPTION>
                                                                                      Accumulated
                                                             Additional                  Other
                                                              Paid-in    Accumulated  Comprehensive  Treasury          Comprehensive
                            Preferred Stock   Common Stock     Capital     Deficit      Loss           Stock    Total      Income
                          ------------------  --------------- ---------  -----------  -------------  --------  ------- -------------
                           Shares    Amount   Shares   Amount
                          --------  --------  ------- -------
<S>                       <C>        <C>     <C>          <C>   <C>        <C>          <C>          <C>         <C>     <C>
Balance   at   December
 31, 2000...............  150,000    15,677  8,030,905    80    282,619    (275,450)    (9,508)                  13,418
   Accrual of convertible
     Preferred stock
     dividend..........               1,292                      (1,292)
   Exercise of stock
   options and
     Other.............                            (61)              16                                              16
   Treasury Stock                             (188,200)   (2)                                          $(326)      (328)
   Comprehensive Income:
     Translation adjustment                                                              9,508                    9,508  $   9,508
     Net income........                                                      12,781                              12,781     12,781
                                                                                                                            --------
Total Comprehensive Income                                                                                               $  22,289
                          -------  -------  -----------------  -----------  -------------  --------  --------    ========   ========
Balance   at   December
 31, 2001...............  150,000    16,969  7,842,644    78    281,343    (262,669)                    (326)    35,395
   Accrual of convertible
     Preferred stock
     dividend...........              1,399                      (1,399)
   Exercise  of stock
   options and
     Other, net.........                         1,000             (130)                                           (130)
   Treasury Stock                             (224,549)   (2)                                          $(514)     (516)
   Comprehensive Income:
     Unrealized  loss  on
     investments........                                                                  (109)                    (109) $    (109)
     Net income..........                                                     7,110                               7,110      7,110
                                                                                                                             -------
Total Comprehensive Income                                                                                               $   7,001
                          -------  -------  -----------------  -----------  -------------  --------  --------    ========   ========
Balance   at   December
 31, 2002...............  150,000    18,368  7,619,095     76   279,814    (255,559)      (109)         (840)    41,750
   Accrual of convertible
     Preferred stock
     dividend............             1,514                      (1,514)
   Exercise    of   stock
   options and
     Other...............
   Treasury Stock                               (2,700)                                                   (6)        (6)
   Comprehensive Income:
     Unrealized  gain  on
     investments.........                                                                  159                      159  $     159
     Net income..........                                                     2,760                               2,760      2,760
                                                                                                                              ------
Total Comprehensive Income                                                                                               $   2,919
                           ========   ======= ==========  =====   =========   =========      =====       ======   =======     ======
Balance   at   December
31, 2003...............   150,000   $19,882  7,616,395    $76    $278,300 $(252,799)       $50          $(846)   $44,663
                           ========   ======= ==========  =====   =========   =========      =====       ======   =======     ======

                         See accompanying notes to consolidated financial statements.

</TABLE>

<PAGE>
<TABLE>
<CAPTION>


                         MERISEL, INC. AND SUBSIDIARIES

                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (In thousands)

                                                                                   For the Years Ended December 31,
                                                                                     2001        2002        2003
CASH FLOWS FROM OPERATING ACTIVITIES:
<S>                                                                               <C>         <C>         <C>
    Net income (loss)...........................................................  $   12,781  $    7,110  $    2,760
    Less: income (loss) from discontinued operations, net.......................      (6,352)      1,973         275
    Less: gain on sale of MOCA..................................................      36,250
                                                                                  ------------ ----------  -----------
    Income (loss) from operations...............................................     (17,117)      5,137       2,485
    Adjustments to reconcile income (loss)  from operations to net cash used in
operating activities:
        Gain on extinguishment of debt..........................................      (2,872)
        Depreciation and amortization...........................................       5,048          28
        Provision for doubtful accounts.........................................      (7,774)        932         350
        Impairment losses.......................................................         288                   1,800
        Non-cash deferred compensation..........................................                    (109)        159
        Gain on sale of property and equipment..................................                    (168)        (25)
        Impairment related to the sale of Merisel Canada........................      28,111
        Restricted stock units compensation expense (income)....................          13        (133)
        Changes in assets and liabilities:
            Accounts receivable.................................................     (25,849)    (13,765)      1,729
            Inventories.........................................................      17,417         114         (10)
            Prepaid expenses and other current assets...........................       5,973         (47)        (84)
            Accounts payable....................................................     (39,340)      6,394      (4,274)
            Accrued liabilities.................................................     (17,250)     (9,389)     (3,923)
                                                                                  ------------ ----------  -----------
                Net cash  used in operating activities..........................     (53,352)    (11,006)     (1,793)
                                                                                  ------------ ----------  -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
    Purchase of property and equipment..........................................        (114)
    Proceeds from sale of Merisel Canada........................................      15,991         667
    Proceeds from sale of MOCA..................................................      36,250
    Purchase of securities......................................................                    (637)        (62)
    Transaction costs on sale of building.......................................                    (234)
    Proceeds from sale of property and equipment................................         820         172          25
                                                                                  ------------ ----------  -----------
               Net cash provided by (used in) investing activities..............      52,947         (32)        (37)
                                                                                  ------------ ----------  -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
    Borrowings under revolving line of credit...................................      35,962
    Proceeds from issuance of common stock and purchase of treasury stock, net..        (326)       (516)         (6)
    Purchase of bonds...........................................................     (20,931)
    Repayments under other financing arrangements...............................      (1,363)
                                                                                  ------------ ----------  -----------
                Net cash provided by (used in) financing activities.............      13,342        (516)         (6)
                                                                                  ------------ ----------  -----------
EFFECT OF EXCHANGE RATE CHANGES ON CASH.........................................         (75)
NET CASH PROVIDED BY (USED IN) DISCONTINUED OPERATIONS..........................      (4,149)      2,771         (11)
                                                                                  ------------ ----------  -----------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS............................       8,713      (8,783)     (1,847)
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR....................................      46,865      55,578      46,795
                                                                                  ------------ ----------  -----------
CASH AND CASH EQUIVALENTS, END OF  PERIOD YEAR..................................  $   55,578  $   46,795  $   44,948
                                                                                  ============ ==========  ===========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
    Cash paid (received) during the year for:
    Interest....................................................................  $    1,911
    Income taxes................................................................       5,787        (234)       (700)
    Noncash investing and financing activities:
    Sale of property for note receivable........................................                   2,975
    Preferred dividend accrued..................................................       1,292       1,399       1,514
    Unrealized (gain) loss on securities........................................                     109        (159)

Effective July 28, 2001, the company sold Merisel Canada to Synnex  Technologies,  Inc.  ("Synnex").  In connection  with the sale,
the following assets and liabilities were purchased by Synnex:

    Cash received in the sale of Merisel Canada, net of cash sold                    $16,662
    Total assets sold to Synnex                                                     (102,800)
    Total liabilities sold to Synnex                                                  86,809

                   See accompanying notes to consolidated financial statements.

</TABLE>

<PAGE>



                         MERISEL, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                        DECEMBER 31, 2001, 2002 and 2003

1. Description of Business and Basis of Presentation

General-- The Company was founded in 1980 as Softsel Computer Products, Inc. and
changed its name to Merisel, Inc. in 1990 in connection with the acquisition of
Microamerica, Inc. ("Microamerica"). From 1996 through the first quarter of
1997, the Company engaged in the process of divesting of its operations outside
of the United States and Canada and its non-distribution operations, which
resulted in the Company's operations being focused exclusively in the United
States and Canada and consisting of three distinct business units: United States
distribution, Canadian distribution and the Merisel Open Computing Alliance
("MOCA"). On October 27, 2000, the Company completed the sale of its MOCA
business unit to Arrow Electronics, Inc. ("Arrow"). Additionally, on December
14, 2000, the Company announced that the U.S. distribution business would focus
solely on software licensing and that the balance of the U.S. distribution
business would be wound down. Effective as of July 28, 2001, the Company
completed the sale of its Canadian distribution business ("Merisel Canada") to
Synnex Information Technologies, Inc. ("Synnex"). On November 10, 2000, the
Company acquired substantially all the e-services assets of Value America, Inc.
through the Company's newly formed subsidiary Optisel with the intention of
leveraging the Company's distribution and logistics capabilities to operate a
logistics and electronic services business. The acquisition was accounted for as
a purchase and the purchase price, including assumption of certain liabilities,
was $2,375,000. As a result of economic conditions generally and with respect to
Internet-related businesses specifically and Optisel's lack of success in
generating business, the Company decided to discontinue operation of the Optisel
business during the fourth quarter of 2001. As a consequence of the foregoing
events, Merisel's only business today is its software licensing business. The
Company is, however, actively seeking and exploring acquisition and other
investment opportunities, primarily outside the computer products distribution
industry.

The consolidated financial statements retroactively reflect the effect of the
one-for-ten reverse stock split, which was effective February 14, 2001.
Accordingly, all disclosures involving the number of shares of Merisel common
stock outstanding, issued or to be issued, and all per share amounts,
retroactively reflect the impact of the reverse stock split.

Consolidation Policy - The consolidated financial statements include the
accounts of Merisel Americas, Inc., Merisel Properties, Inc. and Merisel
Corporate. All material intercompany accounts and transactions have been
eliminated in consolidation.

Management's Plans--As stated previously, on December 14, 2000, the Company
announced its decision to wind down virtually all of its U.S. distribution
business, excluding software licensing. As a result of that decision, the
decision to discontinue Optisel and the sales of MOCA and Merisel Canada, the
Company's current operations consist of its software licensing distribution
business. Primarily as a result of wind-down related gains of $4,481,000 and
income from discontinued operations of $275,000 recognized in 2003, the Company
had net income available to common stockholders of $1,246,000, after preferred
stock dividends of $1,514,000, which decreased its accumulated deficit to
$252,799,000 at December 31, 2003.

The Company has developed an operating plan for 2004 that focuses upon growing
its software licensing distribution business, maximizing cash in winding down
its U.S. distribution business, and seeking acquisition opportunities. At
December 31, 2003, the Company had approximately $44,948,000 of cash and cash
equivalents on hand. Management believes that, with its cash balances and
anticipated cash balances after wind-down related expenditures, which balances
are substantial in relation to the Company's working capital needs, as well as
expected revenues and cash flow from operations, it has sufficient liquidity for
the foreseeable future. If the Company were to use a significant amount of cash
to fund one or more acquisitions, the Company could have less liquidity to meet
its working capital needs.

2.       Summary of Significant Accounting Policies

Risks and Uncertainties--In  2003, 93.5% of the Company's software licensing net
sales were derived from products supplied by one vendor.  The termination of the
Company's  distribution  agreement with its key vendor,  or a material change in
the terms of the distribution agreement,  including a decrease in rebates, could
have a material adverse effect on the Company. For

<PAGE>



                         MERISEL, INC. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

2003, 10 customers accounted for approximately 71.8% of the Company's net sales,
with the top two customers individually accounting for approximately 25.2% and
15.7% of net sales. The Company is focused on increasing its customer base and
decreasing the percentage of revenues and receivables concentrated with a small
number of customers. Until that has been accomplished, the loss of one or more
of the Company's major customers could have a material adverse effect on the
Company. Substantially all of the Company's software licensing net sales are
financed by the Company. As a result, the Company's business could be adversely
affected in the event of the deterioration of the financial condition of one or
more of its customers, particularly one of the Company's larger customers,
resulting in the customer's inability to pay amounts owed to the Company. This
risk would be increased in the event of a general economic downturn affecting a
large number of the Company's customers.

Concentration of Credit Risk-- Financial instruments that subject the Company to
credit risk consist primarily of cash equivalents and trade accounts receivable.
The Company invests its excess cash with high-quality financial institutions and
actively evaluates the creditworthiness of the financial institutions with which
it conducts  business.  The Company performs  ongoing credit  evaluations of its
customers  and  maintains an allowance for  potential  credit  losses;  however,
credit risk with respect to trade accounts receivable is currently a significant
risk to the Company.  At December 31, 2003, the Company's two largest  customers
combined  represented  42.8%,  or  $8,941,000,  of  the  Company's  total  trade
receivables. On March 15, 2004, the Company was notified by one customer, with a
current outstanding accounts receivable balance of approximately  $746,000, that
it does not have  sufficient  liquidity  to repay the amount it owes the Company
and has requested an extended  repayment  plan.  There is no assurance  that the
customer's  restructured  business  plan will be  successful or that the amounts
owed will be collected. The Company believes, based on historical write-offs and
identified  credit risks,  it has  established an adequate  reserve  against the
December 31, 2003 accounts receivable balance.

Use of Estimates--The preparation of financial statements in conformity with
accounting principles generally accepted in the United States of America
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 the allowance for
doubtful accounts and certain amounts related to restructuring and wind-down
activities recorded in accounts payable and accrued liabilities.

Fiscal Periods-- Effective December 31, 2002, the Company's fiscal year ends on
December 31 and its fiscal quarters end on March 31, June 30, September 30 and
December 31. Prior to December 31, 2002, the Company's fiscal year was the
52-week period ending on the Saturday nearest to December 31 and its fiscal
quarters were the 13-week periods ending on the Saturday nearest to March 31,
June 30, September 30 and December 31. For clarity of presentation of prior
years, the Company has described fiscal years presented as if the years ended on
December 31 and fiscal quarters presented as if the quarters ended on March 31,
June 30, September 30 and December 31.

Cash and Cash Equivalents--The Company considers all highly liquid investments
purchased with initial maturities of three months or less to be cash
equivalents. The Company invests excess cash in interest-bearing accounts.
Interest income earned on cash balances for 2001, 2002 and 2003 was $1,578,000,
$829,000 and $752,000, respectively.

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

Property and Depreciation--Property and equipment are stated at cost less
accumulated depreciation. Depreciation is computed using 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.

Investments - As of December 31, 2002 and 2003, other assets include
approximately $529,000 and $751,000, respectively, of equity securities,
classified as available-for-sale. These securities are carried at fair value
with any unrealized gain or loss recorded as other comprehensive income (loss).



<PAGE>



                         MERISEL, INC. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

Impairment of Long-Lived Assets--The Company reviews the recoverability of
long-lived assets to determine if there has been any impairment. This assessment
is performed based on the estimated undiscounted future cash flows from
operating activities compared with the carrying value of the related asset. 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 the estimated fair value of the assets (see Note 8 - "Impairment
Losses").

Vendor Rebates and Promotions - The Company receives income from certain
suppliers in the form of rebates, promotions and trade discounts. Agreements are
made with each individual supplier and income is earned as buying levels are met
and/or marketing costs are incurred. Rebate income, including trade discounts,
is recorded as a reduction of cost of sales, and cooperative promotional income
is recorded as a reduction of operating expenses. Any amount of cooperative
promotional income exceeding related operating expenses is recorded as a
reduction of cost of goods sold. Cost of goods sold includes term discounts
earned from certain vendors for early payment of accounts payable in the amount
of approximately $9,000, $1,039,000 and $1,619,000 for the years ended December
31, 2001, 2002 and 2003, respectively.

Income Taxes--Income taxes are accounted for under an asset and liability
approach that requires the recognition of deferred income tax assets and
liabilities for the expected future consequences of events that have been
recognized in the Company's consolidated financial statements and income tax
returns. Management provides a valuation allowance for deferred income tax
assets when it is considered more likely than not that all or a portion of such
deferred income tax assets will not be realized.

Fair Values of Financial Instruments--Financial instruments include cash and
cash equivalents, accounts receivable and investments in securities. The fair
values of cash and cash equivalents and accounts receivable approximate their
carrying value because of their short-term nature. Investments in securities are
recorded at fair market value as determined by quoted market prices.

Foreign Currency Translation--Assets and liabilities of Merisel Canada are
translated into United States dollars at the exchange rate in effect at the
close of the period. Revenues and expenses are translated at the average
exchange rate during the period. The aggregate effect of translating the
financial statements at the above rates is included in a separate component of
stockholders' equity entitled "Accumulated Other Comprehensive Loss". As
previously stated, effective July 28, 2001, the Company completed the sale of
Merisel Canada. In the second quarter of 2001, the Company recorded an
impairment charge equal to the entire translation adjustment in anticipation of
the sale of Merisel Canada.

Foreign Exchange Instruments--At December 31, 2003, the Company had no foreign
exchange instruments outstanding. Prior to the sale of Merisel Canada, the
Company's use of derivatives was limited to the purchase of spot and forward
foreign currency exchange contracts in order to minimize foreign exchange
transaction gains and losses. The Company purchased forward Canadian and U.S.
dollar contracts to hedge short-term advances to Merisel Canada and to hedge
commitments to acquire inventory for sale and did not use the contracts for
trading purposes. In 2001 the Company recorded a net foreign currency
transaction loss of $229,000. This amount is included in other expense in the
accompanying consolidated statements of income.

Revenue Recognition, Returns and Sales Incentives-- The Company derives revenues
from software licensing, product updates and customer support services and
training and consulting services purchased directly from third party vendors.
The Company records revenue from software licensing when there is persuasive
evidence of an arrangement, the fee is fixed and determinable, collection is
reasonably assured and delivery of the product has occurred (as prescribed by
Statement of Position ("SOP") 97-2, "Software Revenue Recognition"). In
arrangements that include software licenses and professional services and/or
product updates ("multiple elements"), the Company allocates revenue based on
vendor specific objective evidence ("VSOE") of fair value of all elements,
defers revenue for the undelivered items and recognizes as revenue the fair
value of the delivered items based on VSOE of each element determined by the
price for which the element is sold separately.

The Company recognizes revenue related to product updates and customer support
services that they provide ratably over the term of the arrangement. Revenue
from training and consulting services is recognized when the services are
completed.


<PAGE>



                         MERISEL, INC. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

The Company recognizes revenue on a gross basis as (a) the Company has sole
discretion in determining the price for which it sells software licenses and
services, (b) its suppliers impose no control or limitations on the Company's
pricing, (c) the Company assumes all credit risk associated with its customers,
(d) the Company often actively assists the customer in the selection of its
products and services and (e) the Company has the discretion to purchase the
products and services it offers from a variety of different suppliers and
distributors.

The Company frequently monitors its customers' financial condition and credit
worthiness and only sells products, licenses or services to customers where, at
the time of the sale, collection is reasonably assured. The Company, subject to
certain limitations including approval of its software publishers, may permit
its customers to return products and to exchange products or receive credits
against future purchases. The Company offers its customers several sales
incentive programs that, among other things, 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 vendors.
A provision for estimated product returns and costs of customer incentive
programs is recorded concurrently as a component of net sales with the
recognition of revenue.

Accounting for Stock-Based Compensation - Statement of Financial Accounting
Standards ("SFAS") No. 123, "Accounting for Stock-Based Compensation," as
amended by SFAS No. 148, requires companies to estimate employee stock
compensation expense based on the fair value method of accounting. However, the
statement allows the alternative of continued use of the intrinsic value method
described in Accounting Principles Board ("APB") Opinion No. 25, "Accounting for
Stock Issued to Employees," if pro forma disclosure of fair value amounts is
provided. The Company has elected the alternative of continued use of APB
Opinion No. 25.

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 2001, 2002 and 2003
consistent with the provisions of SFAS No. 123, the Company's net income and net
income per share would have been adjusted to the pro forma amounts indicated
below:
<TABLE>
<CAPTION>

                                                                        (In thousands, except per share
                                                                                   amounts)
                                                                         2001         2002         2003
<S>                                                                     <C>          <C>          <C>
   Net income - As Reported                                             $12,781      $7,110       $2,760
   Deduct: Total stock-based employee compensation expense
   determined under fair value based method for all awards              $  (105)       $(32)        $(31)
                                                                     ------------- ------------ -----------
   Net income - Pro Forma                                               $12,676      $7,078       $2,729
                                                                     ============= ============ ===========

   Net income Per Share (Basic & Diluted)
   As Reported                                                            $1.44       $0.74        $0.16
   Pro Forma                                                              $1.42       $0.73        $0.16
</TABLE>

Reclassifications--Certain reclassifications were made to prior year statements
to conform to the current year presentation.

New Accounting Pronouncements-- In April 2002, the FASB issued SFAS No. 145,
which rescinds SFAS No. 4, "Reporting Gains and Losses from Extinguishment of
Debt," and also amends other existing authoritative pronouncements to make
various technical corrections, clarify meanings, or describe their applicability
under changed conditions. A principal effect will be the prospective
characterization of gains and losses from debt extinguishments used as part of
an entity's risk management strategy. Under SFAS No. 4, all gains and losses
from early extinguishment of debt were required to be aggregated and, if
material, classified as an extraordinary item, net of related income tax effect.
Under SFAS No. 145, gains and losses from extinguishment of debt are not
classified as extraordinary items unless they meet much more narrow criteria in
APB Opinion No. 30. SFAS No. 145 may be adopted early, but is otherwise
effective for fiscal years beginning after May 15, 2002, and must be adopted
with retroactive effect. The Company elected to adopt the provisions of SFAS No.
145 early, which resulted in the reclassification of $2,872,000 in 2001 related
to early extinguishment of debt previously recorded as an extraordinary item to
a component of operating income (loss) in the accompanying consolidated
statements of income.


<PAGE>



                         MERISEL, INC. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

In June 2002, the FASB issued SFAS No. 146, "Accounting for Costs Associated
with Exit or Disposal Activities." SFAS No. 146 requires that costs associated
with an exit or disposal activity be recognized when incurred as opposed to an
entity's commitment to an exit plan as previously allowed. The provisions of
SFAS No. 146 are effective for exit or disposal activities initiated
after December 31, 2002, with early application encouraged. The Company's
adoption of FSAS No. 146 on January 1, 2003 had no impact on its consolidated
financial position or results of operations.

In December 2002, the FASB issued SFAS No. 148, "Accounting for Stock-Based
Compensation - Transition and Disclosure." This statement amends SFAS No. 123,
to provide alternative methods of transition for an entity that voluntarily
changes to the fair value based method of accounting for stock-based employee
compensation. It also amends the disclosure provisions of SFAS No. 123 to
require prominent disclosure about the effects on reported net income of an
entity's accounting policy decisions with respect to stock-based employee
compensation. This statement also amends APB Opinion No. 28, "Interim Financial
Reporting" to require disclosure about those effects in interim financial
statements. SFAS No. 148 is effective for financial statements for fiscal years
ending after December 15, 2002. The Company has elected not to change to the
fair value based method of accounting for stock-based compensation at this time
and has complied with the disclosure requirements of SFAS No. 148.

In May 2003, the FASB issued SFAS No. 150, "Accounting for Certain Financial
Instruments with Characteristics of both Liabilities and Equity" which is
effective for financial instruments entered into or modified after May 31, 2003
and to all other instruments that exist as of the beginning of the first interim
financial reporting period beginning after June 15, 2003. This Statement
establishes standards for how an issuer classifies and measures certain
financial instruments with characteristics of both liabilities and equity. The
Company's adoption of SFAS No. 150 on July 1, 2003 had no impact on its
consolidated financial position or results of operations.


In November 2001, the Emerging Issues Task Force ("EITF") issued EITF Issue No.
01-9, "Accounting for Consideration Given by a Vendor to a Customer or a
Reseller of the Vendor's Products." This new guidance provides that
consideration from a vendor to a reseller is generally presumed to be a
reduction of the selling prices of the vendor's products, and, therefore, should
be characterized as a reduction of revenue when recognized in the vendor's
income statement. The Company recognizes consideration given to a customer in
conformity with EITF No. 01-9.


EITF Issue No.  02-16  "Accounting  by a Customer  (Including  a  Reseller)  for
Certain Consideration  Received from a Vendor" was issued January 2003 regarding
the  circumstances  under which cash  consideration  received from a vendor by a
reseller  should be  considered  (a) an adjustment of the prices of the vendor's
products or services  and,  therefore,  characterized  as a reduction of cost of
sales when recognized in the reseller's income statement, (b) an adjustment to a
cost incurred by the reseller and,  therefore,  characterized  as a reduction of
that cost when recognized in the reseller's income  statement,  or (c) a payment
for assets or services delivered to the vendor and, therefore,  characterized as
revenue when recognized in the reseller's income statement. The Company adopted,
effective  January 1, 2003,  the  provisions  of EITF 02-16  which  resulted  in
certain amounts, including trade discounts and promotional marketing allowances,
being reclassified from interest income and selling,  general and administrative
expenses,  respectively,  to cost of goods sold for all periods  presented.  The
impact to the 2001  consolidated  financial  statements  is to decrease  cost of
goods sold by $9,000 and to decrease  interest  income by $9,000.  The impact to
the fiscal year 2002  consolidated  financial  statements is to decrease cost of
goods sold by $1,082,000,  to increase  general and  administrative  expenses by
$43,000 and to decrease interest income by $1,039,000.

3. Sale of Accounts Receivable

Under securitization facilities, the Company and its subsidiaries have sold
trade receivables to financial institutions. All of the facilities expired or
terminated in 2000 and 2001 and no amounts were outstanding as of December 31,
2003. Under the securitization facilities, the receivables were sold at face
value with payment of a portion of the purchase price being deferred. Fees
incurred in connection with the sale of accounts receivable under these
agreements for the year ended December 31, 2001 were $206,000, and are recorded
as a component of other expense in the accompanying consolidated statements of
income.



<PAGE>



                         MERISEL, INC. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

4. Property and Equipment

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

                                                           Estimated
                                                          Useful Life
                                                          (in Years)         December 31,
                                                                      ----------------------------
                                                                         2002            2003
                                                                      ------------   -------------
<S>                                                                   <C>            <C>
     Land...............................................              $     883      $     883
     Equipment and computer hardware and software.......    3 to 7           95             95
     Furniture and fixtures.............................    3 to 5           27             27
                                                                      ------------   -------------
     Total..............................................                  1,005          1,005
     Less accumulated depreciation and amortization.....                    122            122
                                                                      ------------   -------------
     Property and equipment, net........................                   $883           $883
                                                                      ============   =============
</TABLE>

In May 2002 the Company completed the sale of an office building in Cary, North
Carolina. The $3,000,000 purchase price was paid $25,000 in cash and the
remainder in a promissory note due May 20, 2004 or earlier in certain
circumstances (the "Note"). The Note bears interest at the prime rate plus 2.25%
payable monthly and is secured by the property. The prime rate was 4.00% at
September 30, 2003. The Company recorded the Note at a discounted amount of
$2,714,000 which approximated the carrying value of the property and is included
in other assets in the accompanying consolidated balance sheets. The Company
recognized no gain or loss on the sale of the property, net of actual disposal
costs. In connection with the sale, the Company agreed to lend the purchaser up
to an additional $1,000,000, at terms similar to the Note described above, to
fund improvements to the property after the purchaser has funded $1,000,000 in
initial improvements. As of December 31, 2003 no additional amounts have been
loaned. During 2003, the purchaser informed the Company that the purchaser's
plans for developing the property securing the Note may not be economically
feasible, resulting in an impairment of the Note. See "Note 8 - Impairment
Losses" for discussion on current status on repayment of the Note.

5. Accounts Payable and Accrued Expenses

Accounts payable and accrued expenses consist of the following at December 31
(in thousands):
<TABLE>
<CAPTION>

                                                                    2002            2003
                                                                 -----------     -----------
Accounts payable:
<S>                                                                <C>             <C>
      Trade payables                                               $ 15,037        $ 11,379
      Wind-down payables related to discontinued vendors              3,120           2,504
                                                                 -----------     -----------
        Total accounts payable                                     $ 18,157        $ 13,883
                                                                 ===========     ===========

Accrued liabilities:
      Restructuring accruals (see Note 7)                            $2,882          $1,929
      Compensation and other benefit accruals                         1,819             962
      State and local sales taxes and other taxes                     1,724           1,454
      Other                                                           5,983           3,570
                                                                 -----------     -----------
        Total accrued liabilities                                  $ 12,408         $ 7,915
                                                                 ===========     ===========

</TABLE>


<PAGE>

                         MERISEL, INC. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

6. Income Taxes

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

                                                        For the Years Ended December 31,
                                                       2001          2002           2003
<S>                                                <C>           <C>           <C>
     Domestic...............................       $    (16,731) $      4,382  $      1,741
     Foreign................................                 59
                                                   ------------- ------------- -------------
     Total..................................       $    (16,672) $      4,382  $      1,741
                                                   ============= ============= =============
</TABLE>

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

                                                        For the Years Ended December 31,
                                                         2001          2002         2003
     Current:
<S>                                                  <C>          <C>              <C>
          Federal................................                  $    (1,273) $      (821)
          State..................................            148           518           77
          Foreign................................            297
                                                   ------------- ------------- -------------
          Total provision........................            445          (755)        (744)
                                                   ============= ============= =============
</TABLE>



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

<TABLE>
<CAPTION>
                                                                        December 31,
                                                                     2002          2003
<S>                                                              <C>           <C>
          Net operating loss..........................           $    97,797   $   101,367
          Expense accruals............................                 8,343         3,299
                                                                 ------------- ------------
                                                                     106,140       104,666
          Valuation allowances........................              (106,140)     (104,666)
                                                                 ------------- ------------
               Total..................................           $        -    $        -
                                                                 ============= ============
</TABLE>

The major elements contributing to the difference between the federal statutory
tax rate and the effective tax rate on income from continuing operations are as
follows:
<TABLE>
<CAPTION>
                                                                              For the Years Ended
                                                                                  December 31,
                                                                  ---------------------------------------------
                                                                      2001             2002            2003
<S>                                                                   <C>              <C>              <C>
     Statutory rate..............................................     (35.0)%          35.0%            35.0%
     Change in valuation allowance...............................      25.2           (47.5)           (79.1)
     State income taxes, less effect of federal deduction........       0.5            (4.4)             4.4
     Goodwill amortization.......................................
     Foreign rate differential...................................       1.5
     Capital asset basis differential............................      (7.7)           (4.7)            (6.0)
     Expiration and limitation of NOL's..........................      12.8
     Other.......................................................       5.0             4.4              3.0
                                                                   ------------    -------------    -----------
     Effective tax rate..........................................       2.3%          (17.2)%          (42.7)%
                                                                   ============    =============    ===========
</TABLE>

In 1997 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  adjusted  its  deferred tax asset to reflect the

<PAGE>




                         MERISEL, INC. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

estimated  limitation.  At December 31,  2003,  the Company had  available  U.S.
Federal net  operating  loss  carryforwards  of  $266,165,000,  which  expire at
various dates beginning December 31, 2012. As of December 31, 2003,  $72,810,000
of the net  operating  loss  carryforwards  is  restricted  as a  result  of the
ownership change and the remaining amount of $193,355,000 is not restricted. The
restricted net operating loss is subject to an annual  limitation of $7,476,000.
The Company has certain state net operating  losses,  which, due to limitations,
are not expected to be fully utilized and may expire. The Company has recorded a
full valuation  allowance against the net deferred income tax assets at December
31, 2002 and 2003 based upon the Company's estimate of the future realization of
deferred income tax assets.

7. Restructuring Charges

On December 14, 2000, the Company  announced its plan to wind down virtually all
of its U.S.  distribution  business (excluding software licensing).  Pursuant to
this plan, the Company recorded a restructuring  charge of $6,672,000,  of which
$600,000  related to Optisel and has been reported as  discontinued  operations.
Approximately  $921,000 of the charge consists of severance costs and $5,151,000
related  to  lease  termination  and  facility  closures  for all but two of the
Company's United States locations.

During the third quarter of 2000, the Company announced plans that it would
reduce its workforce by approximately 1,000 full-time positions. As a result,
the Company recorded a restructuring charge of $10,964,000. Approximately
$7,098,000 of the charge consists of termination benefits including severance
pay and outplacement services to be provided to those employees that were
involuntarily affected by the reduction in workforce. The charge also reflects
approximately $3,866,000 of lease termination fees related to the planned
closure of certain warehouses and offices.

During 2001 the Company adjusted the restructuring charges previously taken in
relation to the wind-down of its U.S. distribution business (excluding software
licensing) reducing the charge by $102,000. The adjustment is primarily due to
$569,000 of favorable settlements reached with lessors of disposed facilities,
net of $467,000 of additional charges related to severance costs associated with
six employees.

During 2002 the Company recorded additional restructuring charges in relation to
the wind-down of its U.S. distribution business (excluding software licensing)
of $465,000. The adjustment is primarily due to $200,000 of additional charges
related to facility lease costs and $265,000 of additional charges related to
severance costs associated with four employees.

During 2003 the Company recorded additional restructuring charges in relation to
the wind-down of its U.S. distribution business (excluding software licensing)
of $650,000. The adjustment is due to $208,000 of additional charges related to
severance costs associated with approximately ten employees and $442,000,
primarily related to facility lease costs.





<PAGE>


                         MERISEL, INC. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

As of December 31, 2003, $1,929,000 of total restructuring costs had not been
paid and was included in accrued liabilities in the accompanying consolidated
balance sheets. Future payments of these liabilities are expected to be
approximately $1,364,000 and $565,000 in 2004 and 2005, respectively. The
following tables display the activity and balances of the restructuring reserve
account from December 31, 2000 to December 31, 2003 (in thousands):
<TABLE>
<CAPTION>

                                  December 31,
                                      2002             Net                           December 31, 2003
                                    Balance       Charges (Benefit)      Payments           Balance
                                ----------------- ------------------- ---------------- -------------------
Type of cost:
<S>                                   <C>               <C>               <C>                   <C>
Severance and related costs           $   283           $ 208             $(491)                $ 0
Facility, lease and other               2,599             442            (1,112)              1,929
                                ----------------- ------------------- ---------------- -------------------
Total                               $   2,882           $ 650           $(1,603)             $1,929
                                ================= =================== ================ ===================

                                  December 31,
                                      2001               Net                           December 31, 2002
                                    Balance       Charges (Benefit)      Payments           Balance
                                ----------------- ------------------- ---------------- -------------------
Type of cost:
Severance and related costs         $   1,176           $ 265           $(1,158)              $ 283
Facility, lease and other               4,184             200            (1,785)              2,599
                                ----------------- ------------------- ---------------- -------------------
Total                               $   5,360           $ 465           $(2,943)             $2,882
                                ================= =================== ================ ===================

                                  December 31,
                                      2000               Net                           December 31, 2001
                                    Balance       Charges (Benefit)      Payments           Balance
                                ----------------- ------------------- ---------------- -------------------
Type of cost:
Severance and related costs         $   5,443           $ 467           $(4,734)             $1,176
Facility, lease and other               7,929           (569)            (3,176)              4,184
                                ----------------- ------------------- ---------------- -------------------
Total                                $ 13,372         $ (102)           $(7,910)             $5,360
                                ================= =================== ================ ===================

</TABLE>

8. Impairment Losses

On July 28, 2001, the Company completed the sale of Merisel Canada to Synnex.
The purchase price was CDN$30,000,000, of which CDN$1,000,000 was deposited in
an escrow account pending resolution of indemnification claims made during the
12 months after closing. The amount was received in July 2002. As a result of
the pending sale of Merisel Canada, the Company reviewed the recoverability of
its long-lived assets, including identifiable intangible assets, to determine if
there had been any impairment. Based on this review, the Company recorded an
impairment charge of $29,416,000 as of June 30, 2001. The impairment charge
includes $13,000,000 for the SAP operating system, $8,900,000 for the Company's
foreign translation adjustment, $3,600,000 for the unamortized goodwill
attributable to Merisel Canada, and $3,916,000 related to various other assets.
During the fourth quarter of 2001, the closing balance sheet of Merisel Canada
was finalized and agreed to by the Company and Synnex. This resulted in a
payment of CDN$2,000,000 to the Company, which is recorded as a $1,305,000
adjustment to the impairment charge previously recorded in the second quarter of
2001.

As a result of the pending sale of an office building located in Cary, North
Carolina, the Company reviewed the carrying value on its books to determine if
there had been any impairment. Based on this review, the Company recorded an
impairment charge of $288,000 in the fourth quarter of 2001 to adjust the
carrying value of the building to the estimated selling price, less estimated
selling expenses.

In April 2003, the purchaser of the office building located in Cary, North
Carolina informed the Company that the purchaser's plans for developing the
property securing the Note may not be economically feasible; and therefore the
purchaser was likely to default on the Note and stop making any further
payments. The Company discontinued recognizing interest income on the loan and
considered appropriate actions to maximize the underlying value of this Note,
including potentially foreclosing on the property. In the third quarter of 2003,
management obtained a real property market valuation of the property securing
the

<PAGE>



                         MERISEL, INC. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)


Note and determined that the Note was impaired due to the continuing default of
the holder and the underlying value of the collateral securing the Note. The
Company recorded an impairment loss of $1,800,000 to reduce the book value of
the Note to the estimated fair value of the property. See "Note 4 - Property and
Equipment" for details of the sale.

9. Discontinued Operations

On October 27, 2000, the Company completed the sale of its MOCA business unit to
Arrow Electronics, Inc. The stock sale agreement pursuant to which the sale was
made provided for a purchase price of $110,000,000, subject to adjustments based
on changes in working capital reflected on the closing balance sheet of MOCA,
plus an additional amount up to $37,500,000 payable by the end of March 2001
based upon MOCA's ability to retain existing and gain additional business (the
"Additional Payment"). The actual purchase price (excluding the Additional
Payment but including amounts received as deferred purchase price payments) was
approximately $179,800,000 of which approximately $57,500,000 was for amounts
outstanding under the Merisel asset securitization facility. Based on the
purchase price the Company realized a gain, net of costs associated with the
sale, of approximately $25,200,000. In March 2001 the Company received an
Additional Payment of $37,500,000 which, after deducting certain obligations
relating to the payment, netted $36,250,000, which was recorded in the quarter
ended March 31, 2001 and resulted in a gain of $36,250,000 in 2001.

Through Optisel, in November 2000 the Company acquired substantially all the
e-services assets of Value America, Inc. with the intention of leveraging the
Company's distribution and logistics capabilities to operate a logistics and
electronic services business. In connection with the sale of the MOCA business
to Arrow, the Company entered into a transition services agreement with Arrow
pursuant to which Optisel provided fee-based distribution and logistics services
and information technology services for MOCA through February 1, 2002. In
connection with the sale of Merisel Canada to Synnex, Merisel and Synnex entered
into a fee-based transition services agreement pursuant to which Optisel
provided information technology services to Merisel Canada through September 10,
2001. Optisel did not generate any significant revenue except under these two
transition services agreements. As a result of economic conditions generally and
with respect to Internet-related businesses specifically and Optisel's lack of
success in generating business, the Company decided to discontinue operation of
the Optisel business during the fourth quarter of 2001.

The Company has reclassified its consolidated financial statements to reflect
the sale of the MOCA business and the discontinuance of Optisel's operations and
to segregate the revenues, direct costs and expenses (excluding any allocated
costs), assets and liabilities, and cash flows of the MOCA and Optisel
businesses. The net operating results and net cash flows of these businesses
have been reported as "Discontinued Operations" in the accompanying consolidated
statements of income and cash flows. At December 31, 2003, there are no
remaining assets or liabilities of the discontinued operations. At December 31,
2002 there were no assets and $418,000 of liabilities recorded as discontinued
operations in the accompanying consolidated balance sheets.

Summarized financial information for the discontinued operations for the year
ended December 31, is as follows (in thousands):
<TABLE>
<CAPTION>

                                                           2001           2002           2003
                                                      --------------- -------------- --------------

<S>                                                       <C>             <C>                <C>
Net Sales                                                 $10,538         $1,105             $0
Cost of Sales                                               5,757            202              0
                                                      --------------- -------------- --------------

Gross Profit                                                4,781            903              0

Selling, General & Administrative Expenses                 11,133         (1,070)          (275)
                                                      --------------- -------------- --------------

Net Income (loss)                                         ($6,352)        $1,973           $275
                                                      =============== ============== ==============
</TABLE>




<PAGE>


                         MERISEL, INC. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

10. Gain on Debt Extinguishment

In the first quarter of 2001, the Company purchased or redeemed the remaining
$23,803,000 principal amount of the 12.5% Senior Notes due 2005 outstanding at
an aggregate purchase price of $20,931,000, resulting in a gain on
extinguishment of debt of $2,872,000. As a result, none of the 12.5% Notes
remain outstanding and the Company's obligations under the indenture relating to
the 12.5% Notes have been discharged.

11. Commitments and Contingencies

The Company leases certain of its facilities and equipment under noncancelable
operating leases. As of December 31, 2003, there are no noncancelable operating
leases that have initial or remaining noncancelable lease terms in excess of one
year. Rent payments for 2001, 2002 and 2003 were $3,221,000, $893,000 and
$868,000 respectively, including amounts charged to the restructuring reserve.
Amounts representing rent expense for 2001, 2002 and 2003 were $2,551,000,
$223,000, and $217,000, respectively.

In February  2004,  the Company  was served with a summons and  complaint  in an
adversary proceeding  captioned Bridge Information Systems,  Inc. et al, Debtor,
Scott P. Peltz, Chapter 11 Plan Administrator v. Merisel Americas, Inc. and MOCA
(the "Complaint"). The Complaint alleges that Debtor made preferential transfers
of money to Merisel Americas,  Inc.  ("Americas") in the amount of approximately
$6.3 million and an additional  amount to MOCA, a former subsidiary of Americas,
which were avoidable and seeks to recover such transfers.  The Company  believes
that any such transfers alleged in the Complaint are the obligations of MOCA and
not that of the  Company.  The  Company  has been  advised  by  counsel to Arrow
Electronics,  Inc. ("Arrow"),  the parent company of MOCA, that Arrow has agreed
to provide  indemnification  to the Company with respect to the  allegations set
forth in the Complaint.

The Company is involved in certain legal proceedings arising in the ordinary
course of business, and in connection with discontinued vendors related to the
Company's wound down business, none of which is expected to have a material
impact on the financial condition or results of operations of Merisel. The
Company made estimates of its potential exposures and has established reserves
for potential losses related to such proceedings. There can be no assurance that
the Company's reserves will fully cover any possible exposure.

In addition, over the last several years the Company has disposed of a number of
businesses, including all of its operations outside the United States, many of
which had obligations that had been guaranteed by the Company. In connection
with those dispositions, the Company sought either to have any guarantees
released or to be indemnified against any liabilities under guarantees. The
Company may not have identified all guarantees to be released and, in at least
one instance, the indemnification provided to the Company is no longer of any
value. Due to the nature of these indemnifications, the Company's exposure under
the agreements cannot be estimated and no amounts have been recorded for such
indemnities.

12.  Stock

In June 2000, an affiliate of Stonington Partners, Inc., which owns
approximately 65.6% of the Company's outstanding common stock, purchased 150,000
shares of convertible preferred stock (the "Convertible Preferred") issued by
the Company for an aggregate purchase price of $15,000,000. The Convertible
Preferred provides for an 8% annual dividend payable in additional shares of
Convertible Preferred. Dividends are cumulative and will accrue from the
original issue date whether or not declared by the Board of Directors.
Cumulative accrued dividends amounted to $1,969,000, $3,368,000 and $4,881,000
as of December 31, 2001, 2002 and 2003, respectively.

At the option of the holder, the Convertible Preferred is convertible into the
Company's common stock at a per share conversion price of $17.50. At the option
of the Company, the Convertible Preferred can be converted into Common Stock
when the average closing price of the Common Stock for any 20 consecutive
trading days is at least $37.50. At the Company's option, on or after June 30,
2003, the Company may redeem outstanding shares of the Convertible Preferred
initially at $105 per share and declining to $100 on or after June 30, 2008,

<PAGE>

                         MERISEL, INC. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

plus accrued and unpaid dividends. In the event of a defined change of control,
holders of the Convertible Preferred have the right to require the redemption of
the Convertible Preferred at $101 per share plus accrued and unpaid dividends.
As of December 31, 2003, no redemptions have been made and the Company has no
plans to exercise its redemption rights in the foreseeable future.

13. Employee Stock Options and Benefit Plans

Employee Stock Options - 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 800,000 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 after
December 19, 1997 and are not either canceled in exchange for options granted
under the Stock Award and Incentive Plan or forfeited. At December 31, 2003,
707,099 shares were available for grant under the Stock Award and Incentive
Plan. The grantees, terms of the grant (including option prices and 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 are 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, 1997, 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, 2003, 78,425 options remain outstanding under the Stock Award
and Incentive plan.

As of December 31, 2003, 2,520 options, including 600 options issued to
non-employee Directors, 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, 4,000
shares are reserved for issuance under the Company's 1992 Stock Option Plan for
Non-Employee Directors.

During  1999,  the  Company  issued  51,500  restricted  stock  units to certain
employees under the Stock Award and Incentive  Plan. Each restricted  stock unit
represented  the right to receive one share of common stock of the Company at no
cost to the employee.  The  restricted  stock units cliff vest after three years
with  provisions  for  accelerated   vesting  in  the  event  certain  operating
performance  targets are met. As of December 31, 2002 all restricted stock units
had either been exercised or cancelled, therefore there were no restricted stock
units outstanding at December 31, 2002 and 2003. Compensation expense,  measured
by the fair value at the grant date of the  Company's  common stock  issuable in
respect  of the units,  totaled  $135,000  and was  amortized  over the  related
three-year   vesting  period.   During  2000  and  2001  the  Company   recorded
approximately  $22,000  and  $13,000  of  compensation  expense  related  to the
restricted stock units outstanding. During 2002, $133,000 of previously recorded
compensation  expense related to the restricted  stock units was reversed due to
<PAGE>


                         MERISEL, INC. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

the cancellation of the awards. The following  summarizes the aggregate activity
in all of the Company's plans for the three years ended December 31, 2003:

<TABLE>
<CAPTION>

                                       2001                              2002                            2003
                            ----------------------------      ----------------------------   -----------------------------
                                              Weighted                       Weighted                           Weighted
                                              Average                        Average                            Average
                               Shares       Exer. Price         Shares      Exer. Price         Shares         Exer. Price
                            -----------   --------------      -----------  ---------------   ------------   ---------------
Outstanding at
<S>                            <C>                  <C>          <C>               <C>           <C>                 <C>
   Beginning of year           363,183              31.87        204,965           27.17         179,270             26.46
Granted                         25,000               2.00
Exercised                                                         (1,000)
Canceled                      (183,218)             33.16        (24,695)          33.30         (98,325)            33.39
                             ----------                       ------------                   ------------
Outstanding at end
  of year                      204,965              27.17        179,270           26.46          80,945             18.04
                             ----------                       ------------                   ------------
Options exercisable at
year end                       164,497                           151,770                          60,945
                             ----------                       ------------                   ------------
Weighted average fair
   value  at date of grant
   of options  granted
   during the year               $1.47                               N/A                             N/A
                             ----------                       ------------                   ------------
</TABLE>

The following table summarizes information about stock options outstanding at
December 31, 2003:
<TABLE>
<CAPTION>

                                        Options Outstanding                        Options Exercisable

                            --------------------------------------------   ------------------------------------
                                               Weighted
                                                Average      Weighted                             Weighted
                                 Number        Remaining     Average             Number           Average
         Range of             Outstanding        Life        Exercise         Exercisable         Exercise
      Exercise Prices         at 12/31/03      In Years       Price           at 12/31/03          Price

      <S>                      <C>               <C>            <C>             <C>                <C>
         $150.00 to $150.00              200       1            $150.00                   200          $150.00
           $58.75 to $58.75              200       2             $58.75                   200           $58.75
           $18.75 to $19.38            1,400       3             $19.29                 1,400           $19.29
           $23.10 to $43.10           14,020       4             $42.07                14,020           $42.07
           $40.60 to $40.60              125       5             $40.60                   125           $40.60
           $17.50 to $22.19           40,000       7             $18.67                37,500           $18.44
             $2.00 to $2.00           25,000       8              $2.00                 7,500            $2.00
                                  -----------                                        ---------
           $2.00 to $150.00           80,945                                           60,945
                                  ===========                                        =========
</TABLE>



The fair value of each option granted during 2001 was estimated on the date of
grant using the Black-Scholes option pricing model with the following weighted
average assumptions. There were no stock options granted in 2002 or 2003:

                                                             2001
  Expected life                                               5.0
  Expected volatility                                        95.77%
  Risk-free interest rate                                     3.47%
  Dividend Yield                                              0.00%
<PAGE>
                         MERISEL, INC. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

Benefit Plan - The Company offers a 401(k) savings plan under which all
employees who are 21 years of age with at least 30 days 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 $234,000,
$109,000 and $78,000 to the plan during the years ended December 31, 2001, 2002
and 2003, respectively. The contributions to the 401(k) plan were in the form of
cash, which prior to the second quarter of 2001 was used to purchase shares of
the Company's common stock on the open market.

Stock repurchase program - The Company has a stock repurchase program, where it
expects to repurchase up to $1,000,000 of its outstanding common stock. The
Company repurchased $328,000, $516,000 and $6,000 under the program in 2001,
2002 and 2003, respectively.

14. Segment Information

The Company implemented SFAS 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. In accordance with
SFAS 131, the Company had determined it had two operating segments: the United
States distribution (which included software licensing) and the Canadian
distribution segment. For the years ended December 31, 2002 and 2003, the
Company operated a single segment, the United States distribution Business.

In accordance with SFAS 131, the Company has prepared the following table which
present information related to each operating segment included in internal
management reports (in thousands).

                                                        2001
                                       -----------------------------------------
                                            US         Canada         Total
                                       ------------- ------------ --------------
Net sales to external customers           $40,371      $295,682      $336,053
Depreciation and amortization               2,793         2,255         5,048
Operating income (loss)                    10,476       (27,225)      (16,749)
Non current assets                          3,509                       3,509
Total segment assets                       68,955                      68,955
Capital expenditures                                        114           114

15.  Earnings Per Share

The Company calculates earnings per share ("EPS") in accordance with SFAS No.
128, "Earnings Per Share". Basic earnings per share is calculated using the
average number of common shares outstanding. Diluted earnings per share is
computed on the basis of the average number of common shares outstanding plus
the effect of dilutive outstanding stock options using the "treasury stock"
method. There were no significant dilutive common stock equivalents for the
years ended December 31, 2001, 2002 or 2003.

<PAGE>

                         MERISEL, INC. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

The following tables reconcile the weighted average shares used in the
computation of basic and diluted EPS and income available to common stockholders
for the income statement periods presented herein (in thousands except share
data):
<TABLE>
<CAPTION>

                                                                   For the Years Ended
                                                                       December 31,
Weighted average shares outstanding                               2001           2002         2003
-----------------------------------                               ----           ----         ----

<S>                                                              <C>            <C>          <C>
Basic and diluted                                                7,989          7,735        7,617
                                                        =============== ============== ============

                                                                 2001            2002        2003
                                                        --------------- -------------- ------------
Income (loss) from operations                                (17,117)          5,137        2,485
Preferred stock dividends                                     (1,292)         (1,399)        (1,514)
                                                        --------------- -------------- ------------
Income (loss) available to common stockholders               (18,409)          3,738            971
Income (loss) from discontinued operations                    (6,352)          1,973            275
Gain on sale of discontinued operations                       36,250
                                                        --------------- -------------- ------------
Net income available to common stockholders                  $11,489          $5,711         $1,246
                                                        =============== ============== ============

</TABLE>

16. Quarterly Financial Data (Unaudited)

Selected financial information for the quarterly periods for the years ended
2002 and 2003 is presented below (in thousands, except per share amounts):
<TABLE>
<CAPTION>

                                                                                     2002
                                                        ---------------------------------------------------------------
                                                            March 31          June 30     September 30   December 31
                                                        ---------------    -------------  ------------- --------------
<S>                                                            <C>               <C>           <C>          <C>
     Net sales...................................              $15,773           $17,845       $20,714      $27,306
     Gross profit................................                1,338             1,818         2,875        3,337
     Income (loss) from operations...............                 (638)              437         1,187        4,151
     Discontinued operations:....................
        Income from discontinued operations......                1,066                              49          858
     Net income                                                    428               437         1,236        5,009

     Earnings per share:
     Income (loss) from operations                               (0.13)             0.01          0.11         0.49
     Discontinued operations:....................
        Income from discontinued operations......                 0.14                                         0.12
     Net income .................................                 0.01              0.01          0.11         0.61


                                                                                     2003
                                                        ---------------------------------------------------------------
                                                            March 31          June 30     September 30   December 31
                                                        ---------------    -------------  ------------- --------------
     Net sales...................................              $18,463           $24,665       $25,370      $27,544
     Gross profit................................                1,216             1,152         1,383        1,528
     Income from operations......................                  951               435         1,062           37
     Discontinued operations:....................
        Income from discontinued operations......                                                               275
     Net income                                                    951               435         1,062          312

     Earnings per share:
     Income (loss) from operations                                0.08              0.00          0.09        (0.05)
     Discontinued operations:....................
        Income from discontinued operations......                                                              0.04
     Net income .................................                 0.08              0.00          0.09        (0.01)

</TABLE>
<PAGE>


                         MERISEL, INC. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

During 2002 the Company recorded reductions of cost of sales in the amounts of
$492,000, $810,000, $1,982,000 and $1,532,000 in the first, second, third and
fourth quarters, respectively. These amounts related primarily to settlements
reached with product vendors. The Company also recorded restructuring charges of
$279,000 and $220,000 during the first and fourth quarters of 2002,
respectively, and a reversal of previously recorded charges of $34,000 in the
second quarter of 2002. Additionally, in the fourth quarter of 2002, the Company
settled and/or reviewed certain matters related to its U.S. distribution
business (excluding software licensing), resulting in an aggregate adjustment of
$2,519,000 to previously established reserves. Of this amount, $1,840,000
related to favorable settlements experienced with information technology vendors
of the Company's U.S. distribution business and is reflected as a reduction of
selling, general and administrative expenses.

During 2003 the Company recorded reductions of cost of sales in the amounts of
$486,000, $89,000, $182,000 and $344,000 in the first, second, third and fourth
quarters, respectively. These amounts related primarily to settlements reached
with product vendors. The Company also recorded restructuring charges of
$256,000, $214,000 and $228,000 during the first, third and fourth quarters of
2003, respectively, and a reversal of previously recorded charges of $48,000 in
the second quarter of 2003. Additionally the Company settled and/or reviewed
certain matters related to its U.S. distribution business (excluding software
licensing) during 2003, which resulted in reductions of selling, general and
administrative expenses in the amounts of $1,070,000, $210,000, $280,000 and
$276,000 in the first, second, third and fourth quarters, respectively.

                                  ******

<PAGE>
<TABLE>
<CAPTION>


                                   SCHEDULE II

                         MERISEL, INC. AND SUBSIDIARIES

                        VALUATION AND QUALIFYING ACCOUNTS

                        DECEMBER 31, 2001, 2002 AND 2003

                                              Balance at     Charged to                         Balance at
                                             December 31,    Costs and                          December 31,
                                                2000         Expenses         Deductions           2001
                                            --------------  --------------- ---------------    --------------
<S>                                             <C>            <C>             <C>                <C>
Accounts receivable--Doubtful accounts.....     $21,993,000    ($7,774,000)    $13,665,000        $554,000
Accounts receivable--Marketing.............       3,225,000                      3,076,000         149,000
                                            --------------------------------------------------------------
                                                $25,218,000    ($7,774,000)    $16,741,000        $703,000
                                            ==============================================================

                                              Balance at     Charged to                         Balance at
                                             December 31,     Costs and                         December 31,
                                                2001          Expenses        Deductions            2002
                                            --------------  --------------- ---------------    --------------
Accounts receivable--Doubtful accounts.....        $554,000     $1,003,000        $410,000      $1,147,000
Accounts receivable--Marketing.............         149,000       ($71,000)         40,000          38,000
                                            --------------------------------------------------------------
                                                  $703,000        $932,000        $450,000      $1,185,000
                                            ==============================================================

                                              Balance at     Charged to                     Balance at
                                             December 31,     Costs and                    December 31,
                                                2002          Expenses       Deductions        2003
                                            --------------  --------------- ---------------    --------------
Accounts receivable--Doubtful accounts.....      $1,147,000        326,000         249,000       1,224,000
Accounts receivable--Marketing.............          38,000         24,000                          62,000
                                            --------------------------------------------------------------
                                                 $1,185,000        350,000         249,000       1,286,000
                                            ==============================================================

</TABLE>



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

               None.


Item 9A.  Controls and Procedures

The Company completed an evaluation, under the supervision and with the
participation of the Company's chief executive officer and chief financial
officer of the effectiveness of the Company's disclosure controls and procedures
pursuant to Rule 13a-14 of the Exchange Act. Based on this evaluation, the
Company's chief executive officer and chief financial officer concluded that, as
of the period covered by this report, the Company's disclosure controls and
procedures were effective with respect to timely communicating to them all
material information required to be disclosed in this report as it related to
the Company and its subsidiaries.

There have been no significant changes in the Company's internal controls or in
other factors that occurred during the period covered by this report that could
significantly affect the internal controls subsequent to the date the Company
completed this evaluation.


<PAGE>



                                    PART III


Item 10.  Directors and Executive Officers of the Registrant.

The following individuals are the executive officers and directors of the
Company as of March 15, 2004:
<TABLE>
<CAPTION>


 Name                                        Age     Position
 ----                                        ---     --------
<S>                                         <C>      <C>
Albert J. Fitzgibbons III (2) (3)             58     Director
Bradley J. Hoecker (1) (2)                    42     Director
Timothy N. Jenson                             45     Chief Executive Officer, Chief Financial Officer,
                                                     President, Assistant
                                                     Secretary and Director
Dr. Arnold Miller (1)(3)                      75     Director
Lawrence J. Schoenberg (1)(2)(3)              71     Director
Traci Barnett                                 44     Vice President, Sales and Marketing
Allyson Vanderford                            35     Vice President, Finance, Treasurer and Assistant Secretary
</TABLE>

(1)      Member of Audit Committee
(2)      Member of Nominating Committee
(3)      Member of Compensation Committee

         Albert J. Fitzgibbons III has been a member of the Board of Directors
since December 1997 as a Class I director, and his term extends through the
Company's 2004 annual meeting of stockholders. Mr. Fitzgibbons is a Partner and
a Director of Stonington Partners, Inc. ("Stonington"), and a Partner and a
Director of Stonington Partners, Inc., II ("Stonington II"), positions that he
has held since 1993. He served as a Director of Merrill Lynch Capital Partners,
Inc. ("MLCP"), a private investment firm associated with Merrill Lynch & Co.
("ML&C"), from 1988 to May 2001 and a Consultant to MLCP from 1994 to December
2000. He was a Partner of MLCP from 1993 to 1994 and Executive Vice President of
MLCP from 1988 to 1993. Mr. Fitzgibbons was also a Managing Director of the
Investment Banking Division of ML&C from 1978 to July 1994.

         Bradley J. Hoecker has been a member of the Board of Directors since
December 1997 as a Class II director, and his term extends through the Company's
2005 annual meeting of stockholders. Mr. Hoecker is a Partner and Director of
Stonington and a Partner and Director of Stonington II since 1997. Prior to
being named partner in 1997, Mr. Hoecker was a Principal of Stonington since
1993. He was a Consultant to MLCP from 1994 to December 2000 and was an
Associate in the Investment Banking Division of MLCP from 1989 to 1993.

         Timothy N. Jenson joined the Company in 1993 as Vice President and
Treasurer and was elected Senior Vice President - Finance in 1998. Mr. Jenson
became Chief Financial Officer in August 1998 and was elected Executive Vice
President in January 2000. Mr. Jenson was appointed Chief Executive Officer and
President in April 2001. Also in April 2001, Mr. Jenson was elected to the Board
of Directors as a Class III director, with a term extending through the
Company's 2006 annual meeting of stockholders. From 1989 to 1993, Mr. Jenson
served as Vice President at Citicorp North America, Inc. where he provided
financial services, banking products and advisory services to multinational
companies, including the Company. Previously, Mr. Jenson served as Vice
President of Corporate Banking at Bank of America for five years.

         Dr. Arnold Miller was elected to the Board of Directors in August 1989
as a Class II director, and his term extends through the Company's 2005 annual
meeting of stockholders. Since its formation in 1987, he has been President of
Technology Strategy Group, a consulting firm organized to assist businesses and
government in the fields of corporate strategy development, international
technology transfer and joint ventures, as well as business operations support.
Prior to forming Technology Strategy Group, Dr. Miller was employed at Xerox
Corporation, a computer products and information services company, for 14 years,
where his most recent position was Corporate Vice President with responsibility
for worldwide electronics operations.

         Lawrence J. Schoenberg was elected to the Board of Directors following
the acquisition by the Company of Microamerica, Inc. ("Microamerica") in April
1990. He is a Class I director, with a term of office extending through the
Company's 2004 annual meeting of stockholders. Mr. Schoenberg had previously
served as a director of Microamerica from 1983 to April 1990. From 1967 through
1990, Mr. Schoenberg served as Chairman of the Board and Chief Executive Officer

<PAGE>


of AGS Computers,  Inc. ("AGS"),  a computer  software company.  From January to
December  1991,  Mr.  Schoenberg  served  as  Chairman  and as a  member  of the
executive  committee of the Board of Directors  of AGS. Mr.  Schoenberg  retired
from AGS in 1992.  Mr.  Schoenberg is also a director of  Government  Technology
Services,  Inc., a reseller and  integrator  for the federal  government,  and a
director of Cellular Technology Services, Inc., a software company.

         Traci Barnett joined the Company in April 2001 as its Vice President,
Sales and Marketing. From 2000 to March 2001, Ms. Barnett was employed by
WhatZnew.com, an internet computer products reseller, as its Senior Vice
President of Sales. From 1992 to March 2000, Ms. Barnett was employed by Ingram
Micro where she held various positions including Director, Sales and Director,
Product Management.

         Allyson Vanderford joined the Company in April 1998 as Manager of
Financial Planning and Analysis. In December 1999 she was promoted to the
position of Director of Financial Planning and Analysis and in April 2001, she
was appointed Vice President, Finance and Treasurer. From 1995 to 1998, Ms.
Vanderford was employed by the auditing firm of Deloitte & Touche, LLP where she
held the positions of staff accountant and senior accountant. From 1992 to 1995,
Ms. Vanderford was employed by the Company. During such time Ms. Vanderford held
various positions, including Senior Staff Accountant and General Accounting
Supervisor.

         There are no family relationships among the Company's directors or
executive officers. There are no material proceedings to which any of our
directors or executive officer or any of their associates, is a party adverse to
the Company or any of its subsidiaries, or has a material interest adverse to
the Company or any of its subsidiaries.

         To the Company's knowledge none of the Company's directors or executive
officers has been convicted in a criminal proceeding during the last five years
(excluding traffic violations or similar misdemeanors), and none of the
Company's directors or executive officers was a party to any judicial or
administrative proceeding during the last five years (except for any matters
that were dismissed without sanction or settlement) that resulted in a judgment,
decree or final order enjoining the person from future violations of, or
prohibiting activities subject to, federal or state securities laws, or a
finding of any violation of federal or state securities laws.

         The Board of Directors maintains an Audit Committee which is currently
comprised of Dr. Miller and Messrs. Hoecker and Schoenberg.

         The Board of Directors designated Lawrence Schoenberg, an independent
director, as its audit committee financial expert. Mr. Schoenberg has an MBA in
accounting from the Wharton School, was the Chief Financial Officer of AGS, the
chairman of the audit committee of several public companies and has sat on
several committees of the American Institute of Certified Public Accountants.

Section 16(a) Beneficial Ownership Reporting Compliance

         Section 16(a) of the Exchange Act requires the Company's executive
officers and directors to file reports of ownership and changes in ownership
with the Securities and Exchange Commission and to furnish the Company with
copies of all such reports they file. Based on its review of the copies of such
reports received by it and on written representations from such persons, the
Company believes that, during 2003, all filing requirements applicable to its
directors and executive officers were complied with.

Code of Business Conduct

         In 2002, the Board of Directors adopted and approved the Company Code
of Business Conduct (the "Code") (filed with the Company's Annual Report on Form
10-K for the year ended December 31, 2002). All of the Company's employees are
subject to the standards and requirements set forth in the Code and are required
to sign a certificate of compliance. The Code can be found on the Company's
website www.merisel.com under Investor Relations.


<PAGE>



Item 11.  Executive Compensation.

         Summary Compensation Table

         The following table sets forth the cash and non-cash compensation for
each of the last three fiscal years awarded to or earned by the Chief Executive
Officer, and the Company's two other executive officers (the "named executive
officers").
<TABLE>
<CAPTION>

                                                                             Long Term
                                                                           Compensation      All Other
Name and                                       Annual Compensation            Awards        Compensation
Principal Position               Year          Salary($) Bonus($)         SARs/Options(#)      ($)(1)
------------------               ----          ------------------         ---------------      ------

<S>                            <C>             <C>        <C>                     <C>           <C>
Timothy N. Jenson              2003            400,000    421,094(2)             -0-            6,000
  Chief Executive Officer,     2002            400,000    661,590(2)             -0-            5,500
  President, Chief Financial   2001            373,077    300,000                -0-           70,100
  Officer and Assistant
  Secretary

Traci Barnett                  2003            179,769     50,000                -0-            6,000
  Vice President,              2002            170,961     61,500                -0-            5,500
  Sales and Marketing          2001(3)         101,538        -0-              25,000           2,369

Allyson Vanderford             2003            139,321     50,000                -0-            5,679
  Vice President,              2002            124,038     50,000                -0-            5,221
  Finance and Treasurer        2001            114,230     25,000                -0-            4,176

</TABLE>

(1)  Includes amounts contributed by the Company to the Company's 401(k) plan as
     follows: Mr. Jenson - $6,000 in 2003, $5,500 in 2002, and $5,100 in 2001;
     Ms. Barnett - $6,000 in 2003, $5,500 in 2002 and $2,369 in 2001; and Ms.
     Vanderford - $5,679 in 2003, $5,221 in 2002, and $4,176 in 2001. For Mr.
     Jenson, the amount for 2001 also includes the forgiveness of a loan used to
     purchase shares of the Company's common stock.

(2)  Consists of bonus compensation payable pursuant to a retention agreement
     entered into as of April 1, 2001 between Mr. Jenson and the Company. See
     "Employment and Change of Control Arrangements" below. Portions of such
     bonus payments have been deferred by Mr. Jenson pursuant to the Deferred
     Compensation Agreement between Mr. Jenson and the Company dated December
     18, 2001.

(3)  Ms. Barnett's employment by the Company commenced April 30, 2001.



<PAGE>




Options in 2003

         The following table summarizes stock option exercises during 2003 to or
by the named executive officers and the value of the options held by such
persons as of December 31, 2003. The amounts listed in such tables reflect a
one-for-ten reverse stock split that was effective on April 14, 2001.
<TABLE>
<CAPTION>

                       Aggregated Option Exercises in 2003
                      and Value of Options at 2003 Year End

                                                  Number of Securities                 Value of Unexercised
                              Shares             Underlying Unexercised               In-the-Money Options at
                            Acquired on      Options at Fiscal Year End (#)           Fiscal Year End ($)(1)
                                                                                      ----------------------
           Name            Exercise (#)     Exercisable        Unexercisable       Exercisable     Unexercisable
           ----            ------------     -----------        -------------       -----------     -------------
<S>                              <C>            <C>                  <C>             <C>             <C>
Timothy N. Jenson........       -0-             22,500               2,500              ---              ---
Traci Barnett............       -0-              7,500              17,500           29,325           68,425
Allyson Vanderford.......       -0-                ---                 ---              ---              ---
----------
(1) The fair market value of the Common Stock as of December 31, 2003 was $5.91.
</TABLE>

Compensation Committee Interlocks and Insider Participation

        The members of the Compensation Committee of the Board of Directors,
who are appointed by the Board of Directors,  are Messrs. Fitzgibbons and
Schoenberg and Dr. Miller.

Director Compensation

         Each nonemployee director is entitled to receive an annual retainer fee
of $24,000, $1,000 for each Board of Directors meeting attended ($500 for
meetings held telephonically), $1,000 quarterly for acting as the chairman of a
committee of the Board of Directors, and $500 for each committee meeting
attended plus reimbursement for travel expenses incurred in attending Board of
Directors and committee meetings. In prior years, Messrs. Fitzgibbons and
Hoecker have waived their rights to receive any compensation for services as
directors other than reimbursement of travel expenses however, beginning January
1, 2004, Messrs. Fitzgibbons and Hoecker have requested to receive such
compensation.

         The Company's 1992 Stock Option Plan for Nonemployee Directors (the
"Nonemployee Director Plan") provides for annual grants of nonqualified stock
options to purchase 1,000 shares of Common Stock to each member of the Company's
Board of Directors who is not otherwise an employee or officer of the Company or
any subsidiary of the Company. No stock options were granted under the
Nonemployee Director Plan during 1997 or 1998 and in March 1998, the Board of
Directors voted to suspend the Plan. Beginning in 1998, nonemployee directors
were able to elect on an annual basis to take up to 25 percent of their annual
retainer fee in shares of Common Stock in lieu of cash, based on the market
price of the Common Stock on the first day of the quarter following each annual
meeting of stockholders.

Employment and Change of Control Arrangements

        The Company has entered into a retention agreement with Mr. Jenson,
effective as of April 1, 2001. Pursuant to this retention agreement, Mr. Jenson
serves as the Chief Executive Officer and President of the Company with an
annual base salary of $400,000. In addition, the retention agreement provides
that Mr. Jenson will be entitled to certain bonus payments based upon the
achievement of specified objectives that relate to the generation of cash. The
Company has no obligation to retain or continue Mr. Jenson as an employee and
his employment status as an "at-will" employee of the Company is not affected by
the retention agreement. If Mr. Jenson's employment with the Company is
terminated for any reason other than as a result of (i) termination for Cause
(as defined in the agreement), (ii) death or permanent disability, or (iii) Mr.
Jenson's resignation without Good Reason (as defined in the agreement), the
Company will pay Mr. Jenson a lump sum payment equal to his annual base salary
and an amount equal to any unpaid bonuses and the Company will reimburse Mr.
Jenson for the cost of his COBRA payments for one year following the termination
of his employment. Mr. Jenson has received bonus payments of $661,590 in 2002
and $421,094 in 2003 under the retention agreement.


<PAGE>
        In August 2000, the Company entered into a bonus agreement that provided
for the payment of the following bonuses to Mr. Jenson, provided that Mr. Jenson
was an employee of the Company at the time such amounts were payable or in the
event Mr. Jenson's employment terminated except under the circumstances
described in the preceding paragraph: $100,000 upon completion of the sale or
accounts receivable refinancing of the Company's Merisel Open Computing Alliance
business; $100,000 upon completion of the sale, restructuring and/or winding
down in all material respects of the Company's U.S. distribution business; and
$50,000 upon achievement of quarterly profitability for the Company's Canadian
distribution business or upon completion of the sale and/or winding down in all
material respects of that business. Mr. Jenson has received aggregate payments
of $200,000 under the bonus agreement, which has been superseded by the
retention agreement described above before payment of a bonus related to the
Company's Canadian distribution business.

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

         The following table sets forth as of March 15, 2004 certain information
regarding beneficial ownership of the Company's Common Stock by each stockholder
known by the Company to be the beneficial owner of 5% or more of the outstanding
Common Stock as of such date, each director and named executive officer of the
Company and all directors and executive officers as a group. Unless otherwise
indicated, the stockholders have sole voting and investment power with respect
to shares beneficially owned by them, subject to community property laws, where
applicable. The address for those individuals for which ad address is not
otherwise indicated is: c/o Merisel, Inc., 200 Continental Boulevard, El
Segundo, California 90245.
<TABLE>
<CAPTION>

Name and Address                                 Amount and Nature of               Percent of
                                                 Beneficial Ownership              Shares Owned
<S>                                                        <C>                        <C>
Traci Barnett...............................               8,000  (1)                      *
Albert J. Fitzgibbons III...................                 -0-  (2)                      *
Bradley J. Hoecker..........................                 -0-  (2)                      *
Timothy N. Jenson...........................             133,883  (3)(4)                 1.75%
Dr. Arnold Miller...........................                 500  (5)                      *
Phoenix Acquisition Company II, L.L.C.......           6,170,409  (6)(7)                  .22%
 767 5th Avenue, 48th Floor
 New York, New York 10153
Lawrence J. Schoenberg......................              36,358  (5)                      *
Allyson Vanderford..........................               2,852  (3)                      *
All Directors and Executive Officers........             181,593  (3)(8)                 2.38%
  as a Group (7 Persons)
</TABLE>

*Less than 1%
(1)   Includes 7,500 shares issuable with respect to stock options exercisable
      within 60 days after March 15, 2004.
(2)   Each of Messrs. Fitzgibbons and Hoecker is a director or partner of
      certain affiliates of Phoenix Acquisition Company II,
      L.L.C. ("Phoenix") and, therefore, may be deemed to beneficially own the
      6,170,409 shares of Common Stock beneficially owned by Phoenix. Each of
      Messrs. Fitzgibbons and Hoecker disclaims such beneficial ownership. The
      address of each of Messrs. Fitzgibbons and Hoecker is the same as that
      given for Phoenix.
(3)   Includes shares held in the Company's 401(k) plan for the accounts of the
      following individuals: Mr. Jenson-7,623; Ms. Vanderford-2,352. The
      administrative committee of the Company's 401(k) plan directs the voting
      of shares held in the plan.
(4)   Includes  25,000 shares  issuable with respect to stock  options
      exercisable  within 60 days after March 15, 2004 and 101,260 shares for
      which Mr. Jenson shares voting and investment power with his spouse.
(5)   Includes 300 shares issuable with respect to stock options exercisable
      within 60 days after March 15, 2004.
(6)   Includes 1,170,409 shares of Common Stock into which the Convertible
      Preferred Stock beneficially owned by Phoenix is convertible within
      60 days after March 15, 2004.
(7)   All information regarding share ownership (except for (6) above) is taken
      from and furnished in reliance upon the Schedule 13D filed by Phoenix
      pursuant to Section 13(d) of the Securities Exchange Act of 1934.
      Stonington Capital Appreciation 1994 Fund, L.P. (the "Fund") is the sole
      member of Phoenix. Stonington Partners, L.P. ("Stonington LP") is the
      general partner of the Fund, and Stonington Partners, Inc. II ("Stonington
      II") is the general partner of Stonington LP. The Fund is managed by
      Stonington. The following individuals are the directors and/or officers of
      Stonington and Stonington II and have shared voting and dispositive powers
      with respect to the Common Stock held by Phoenix: Alexis P. Michas; James
      J. Burke, Jr.; Robert F. End; Albert J. Fitzgibbons III; and Bradley J.
      Hoecker. Stonington LP, Stonington II, Stonington and each of the
      directors and officers of Stonington II and Stonington disclaim beneficial
      ownership of these shares.
(8)   Includes 33,100 shares issuable with respect to stock options exercisable
      within 60 days after March 15, 2004.


<PAGE>


Equity Compensation Plan Information

         The following table provides information regarding (i) the aggregate
number of securities (consisting of Merisel Common Stock) to be issued under all
of Merisel's stock option plans upon exercise of outstanding options, warrants
and other rights and their weighted-average exercise price as of December 31,
2003 and (ii) the number of securities remaining available for issuance under
such plans. All of the Company's equity compensation plans have been approved by
the Company's stockholders.


<TABLE>
<CAPTION>

                                                                                               Number of securities
                                  Number of securities                                        remaining available for
                               to be issued upon exercise         Weighted-average              future issuance under
                                                                  exercise price of             equity compensation
                                of outstanding options,      outstanding options, warrants   plans (excluding securities
Plan Category                     warrants and rights                and rights               reflected in column (a))
-------------                     -------------------                ----------              ------------------------
                                          (a)                             (b)                              (c)
<S>                                <C>                               <C>                         <C>
Equity compensation plans
   approved by stockholders            80,945 (1)                       $18.04                         707,099 (2)

(1)      Consists of the 1991 Employee Stock Option Plan,  1992 Stock Option Plan for  Non-Employee  Directors and 1997 Stock Award
         and Incentive Plan (the "1997 Plan").
(2)      All such shares are available for issuance under the 1997 Plan.
</TABLE>

Item 13.  Certain Relationships and Related Transactions.

         Merisel has entered into Indemnity Agreements with some of its
directors and executive officers, which agreements require Merisel, among other
things, to indemnify them against certain liabilities that may arise by reason
of their status or service as directors, officers, employees or agents of
Merisel (other than liabilities arising from conduct in bad faith or which is
knowingly fraudulent or deliberately dishonest), and, under certain
circumstances, to advance their expenses incurred as a result of proceedings
brought against them.

        In 1999, the Company made an interest-free loan to Mr. Jenson in the
amount of $65,000 for the sole purpose of purchasing shares of the Company's
common stock. The terms of the loan provided for the entire principal amount to
be forgiven on the earlier of (i) the date the Company released its earnings for
fiscal year 1999, provided that the Company's pre-tax net income equaled at
least a specified amount, and (ii) March 2, 2001. The terms of the loan also
provided for the entire principal amount to be forgiven upon termination of Mr.
Jenson's employment by the Company other than as a result of termination for
cause or resignation by Mr. Jenson without good reason (each as defined in the
severance agreement between the Company and Mr. Jenson). The loan was forgiven
on March 2, 2001 in accordance with its terms.

Item 14.  Principal Accountant Fees and Services.

Audit and Non-Audit Fees

           The following table presents fees for professional audit services
rendered by the Company's principal accounting firm, Deloitte & Touche LLP
("D&T") for the audit of the Company's annual financial statements and review of
the quarterly financial statements for 2002 and 2003, and fees billed for other
services rendered by D&T in accordance with new SEC definitions and rules.


                                                2002                     2003
                                                ----                     ----
Audit fees                                  $142,350                 $106,525

Audit-related fees (1)                      $163,054                 $108,628

Tax fees (2)                                 $42,136                  $61,294

All other fees                                   -0-                      -0-

Total                                       $347,540                 $276,447
<PAGE>

         (1)      Audit-related fees were primarily for acquisition related due
                  diligence and accounting consultation in 2002 and 2003.

         (2)      Tax fees were primarily for tax compliance and consulting.


        In accordance with existing Audit Committee policy and the more recent
requirements of the Sarbanes-Oxley Act, all services to be provided by D&T are
subject to pre-approval by the Audit Committee. This includes audit services,
audit-related services, tax services and other services. In some cases,
pre-approval is provided by the full Audit Committee for up to a year, and
relates to a particular category or group of services and is subject to a
specific budget. In other cases, Dr. Miller, as the Designated Member, has the
delegated authority from the Audit Committee to pre-approve additional services,
and such pre-approvals are then communicated to the full Audit Committee. All of
the fees listed above have been approved by the Audit Committee.


                                     PART IV


Item 15.  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, 2002 and 2003.

              Consolidated Statements of Operations for each of the three years
              in the period ended December 31, 2003.

              Consolidated Statements of Changes in Stockholders' Equity for
              each of the three years in the period ended December 31, 2003.

              Consolidated Statements of Cash Flows for each of the three years
              in the period ended December 31, 2003.

              Notes to Consolidated Financial Statements.

         (2)  Financial Statement Schedules included in Item 8:

              Schedule II - Valuation and Qualifying Accounts.

              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 Report on Form 8-K was furnished during the quarter
             ended December 31, 2003:

         Report on Form 8-K filed on October 30, 2003 announcing third quarter
         results.


<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 29, 2004             MERISEL, INC.



                                 By:/s/Timothy N. Jenson
                                   ----------------------------------------
                                   Timothy N. Jenson
                                   Chief Executive Officer, President and
                                   Chief Financial Officer
                                  (Principal Executive and 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>

             Signature                                          Title                                   Date



<S>                                                    <C>                                          <C>
/s/Allyson Vanderford                                  Vice President-Finance                      March 29, 2004
------------------------------------               (Principal Accounting Officer)
Allyson Vanderford

/s/Albert J. Fitzgibbons III                                  Director                             March 29, 2004
------------------------------------
Albert J. Fitzgibbons III


/s/Bradley J. Hoecker                                         Director                             March 29, 2004
------------------------------------
Bradley J. Hoecker


/s/Timothy N. Jenson                                          Director                             March 29, 2004
------------------------------------
Timothy N. Jenson


/s/Dr. Arnold Miller                                          Director                             March 29, 2004
------------------------------------
Dr. Arnold Miller


/s/Lawrence J. Schoenberg                                     Director                             March 29, 2004
------------------------------------
Lawrence J. Schoenberg

</TABLE>


<PAGE>
<TABLE>
<CAPTION>


Index of Exhibits
     Merisel, Inc.


     Exhibit      Description                                          Method of Filing

     <S>         <C>                                                   <C>
     3.1          Restated Certificate of Incorporation of             Filed as an exhibit to the Form S-1
                  Merisel, Inc.                                        Registration Statement of Softsel
                                                                       Computer Products, Inc., No. 33-23700.**

     3.2          Amendment to Certificate of Incorporation            Filed as exhibit 3.2 to the Company's
                  of Merisel, Inc. dated August 22, 1990.              Quarterly Report on Form 10-Q for the
                                                                       quarter ended September 30, 1990.**

     3.3          Amendment to Certificate of Incorporation            Filed as Annex I to the Company's
                  of Merisel, Inc. dated December 19, 1997             Schedule 14A dated October 6, 1997.**

     3.4          Certificate of Amendment to the Restated             Filed as Exhibit 3.4 to the Company's
                  Certificate of Incorporation of Merisel,             Annual Report on Form 10-K for the year
                  Inc. dated February 13, 2001.                        ended December 31, 2000.

     3.5          Bylaws, as amended, of Merisel, Inc.                 Filed as exhibit 3.1 to the Company's
                                                                       Quarterly Report on Form 10-Q for the
                                                                       quarter ended June 30, 1991.**

     4.1          Certificate of Designation of Convertible            Filed as exhibit 99.2 to the Company's
                  Preferred Stock of Merisel, Inc.                     Current Report on Form 8-K dated June 9,
                                                                       2000.**

     *10.1        1991 Employee Stock Option Plan of Merisel,          Filed as exhibit 10.1 to the Company's
                  Inc. together with Form of Incentive Stock           Quarterly Report on Form 10-Q for the
                  Option Agreement and Form of Nonqualified            quarter ended June 30, 1991.**
                  Stock Option Agreement under the 1991
                  Employee Stock Option Plan.

     *10.2        Amendment to the 1991 Employee Stock Option          Filed as exhibit 10.67 to the Company's
                  Plan of Merisel, Inc. dated January 16,              Annual Report on Form 10-K for the year
                  1997.                                                ended December 31, 1996.**

     *10.3        Merisel, Inc. 1992 Stock Option Plan for             Filed as exhibit 10.1 to the Company's
                  Non-employee Directors.                              Quarterly Report on Form 10-Q for the
                                                                       quarter ended June 30, 1992.**

     *10.4        Merisel, Inc. 1997 Stock Award and                   Filed as Annex II to the Company's
                  Incentive Plan.                                      Schedule 14A dated October 6, 1997.**

     *10.5        Form of Nonqualified Stock Option Agreement          Filed as exhibit 10.7 to the Company's
                  under the Merisel, Inc. 1997 Stock Award             Annual Report on Form 10-K for the year
                  and Incentive Plan.                                  ended December 31, 1997.**

     *10.6        Deferred Compensation Agreement between              Filed as exhibit 10.1 to the Company's
                  Merisel, Inc. and Timothy N. Jenson dated            Quarterly Report on Form 10-Q for the
                  September 18, 2001.                                  period ended September 31, 2001. **

<PAGE>


     Exhibit      Description                                          Method of Filing

     *10.7        Amendment to Deferred Compensation                   Filed as exhibit 10.9 to the Company's
                  Agreement between Merisel, Inc. and Timothy          Annual Report on Form 10-K for the year
                  N. Jenson dated December 18, 2001.                   ended December 31, 2000.
     *10.8        Retention Agreement dated as of April 1,             Filed as exhibit 10.24 to the Company's
                  2001 between Merisel, Inc., Merisel                  Annual Report on Form 10-K for the
                  Americas, Inc. and Timothy N. Jenson.                period ended December 31, 2000.

     *10.9        Promissory Note dated March 17, 1999                 Filed as exhibit 10.5 to the Company's
                  between Timothy N. Jenson and Merisel, Inc.          Quarterly Report on Form 10-Q for the
                                                                       period ended March 30, 1999.**

     *10.10       Bonus Agreement dated as of August 10, 2000          Filed as exhibit 10.3 to the Company's
                  between Merisel Americas, Inc. and Timothy           Quarterly Report on Form 10-Q for the
                  N. Jenson.                                           quarter ended September 30, 2000.**

     *10.11       Change of Control Agreement dated as of              Filed as exhibit 10.32 to the Company's
                  April 27, 2000 between Merisel, Inc.,                Annual Report on Form 10-K for the year
                  Merisel Americas, Inc. and Allyson                   ended December 31, 2001. **
                  Vanderford.
     *10.12       Severance Agreement dated as of December             Filed as exhibit 10.33 to the Company's
                  21, 2000 between Merisel Americas, Inc. and          Annual Report on Form 10-K for the year
                  Allyson Vanderford.                                  ended December 31, 2001. **

     10.13        Registration Rights Agreement, dated                 Filed as exhibit 99.4 to the Company's
                  September 19, 1997, by and among Merisel,            Current Report on Form 8-K, dated
                  Inc., Merisel Americas, Inc. and Phoenix             September 19, 1997.**
                  Acquisition Company II, L.L.C.

     10.14        Stock Subscription Agreement by and between          Filed as exhibit 99.1 to the Company's
                  Merisel, Inc. and Phoenix Acquisition                Current Report on Form 8-K, dated June
                  Company II., L.L.C. dated as of June 2,              9, 2000.**
                  2000.

     10.15        Share Purchase Agreement, dated as of July           Filed as exhibit 2.1 to the Company's
                  2, 2001, by and between Merisel Americas,            Current Report on Form 8-K, dated July
                  Inc., a Delaware corporation, and SYNNEX             2, 2001.**
                  Information Technologies, Inc., a
                  California corporation.

     10.16        Real Property Purchase and Sale Agreement            Filed as exhibit 10.1 to the Company's
                  dated as of December 10, 2001 by and                 Quarterly Report on Form 10-Q, for the
                  between HD Acquisitions, LLC and Merisel             quarter ended June 30, 2002.**
                  Properties, Inc.

     10.17        Tenth Amendment to Real Property Purchase            Filed as exhibit 10.2 to the Company's
                  and Sale Agreement dated as of May 10, 2002          Quarterly Report on Form 10-Q, for the
                  between DCF I, LLC, the successor in                 quarter ended June 30, 2002.**
                  interest to HD Acquisitions, LLC, and
                  Merisel Properties, Inc.



<PAGE>


     Exhibit      Description                                          Method of Filing

     10.18        Consent to Assignment of Land Purchase               Filed as exhibit 10.3 to the Company's
                  Agreement dated May 10, 2002 between                 Quarterly Report on Form 10-Q, for the
                  Merisel Properties, Inc., HD Acquisitions,           quarter ended June 30, 2002. **
                  LLC and DCF I, LLC.

     10.19        Purchase Money Note dated May 20, 2002               Filed as exhibit 10.4 to the Company's
                  issued by DCF I, LLC to Merisel Properties,          Quarterly Report on Form 10-Q, for the
                  Inc.                                                 quarter ended June 30, 2002. **

     10.20        Purchase Money Deed of Trust dated May 20,           Filed as Exhibit 10.5 to the Company's
                  2002 between DCF I, LLC, as Grantor, Karen           Quarterly Report on Form 10-Q, for the
                  Tallman, as Trustee, and Merisel                     quarter ended June 30, 2002. **
                  Properties, Inc., as Beneficiary.

     10.21        Construction Promissory Note dated May 20,           Filed as exhibit 10.6 to the Company's
                  2002 issued by DCFI, LLC to Merisel                  Quarterly Report on Form 10-Q, for the
                  Properties, Inc.                                     quarter ended June 30, 2002. **

     10.22        Deed of Trust and Security Agreement dated           Filed as exhibit 10.7 to the Company's
                  May 20, 2002 between DCF I, LLC, as                  Quarterly Report on Form 10-Q, for the
                  Grantor, Karen Tallman, as Trustee, and              quarter ended June 30, 2002. **
                  Merisel Properties, Inc., as Beneficiary.

     10.23        Construction Loan Agreement dated May 20,            Filed as exhibit 10.8 to the Company's
                  2002 between DCF I, LLC, Anthony Dilweg and          Quarterly Report on Form 10-Q, for the
                  Merisel Properties, Inc.                             quarter ended June 30, 2002. **

     10.24        Amended and Restated Registration Rights             Filed as exhibit 10.1 to the Company's
                  Agreement dated June 9, 2000 (executed               Quarterly Report on Form 10-Q, for the
                  November 7, 2002) between Merisel, Inc. and          quarter ended September 30, 2002.**
                  Phoenix Acquisition.

     14.1         Code of Business Conduct                             Filed as exhibit 99.2 to the Company's
                                                                       Annual Report on Form 10-K, for the
                                                                       fiscal year ended December 31, 2002.

     21           Subsidiaries of the Registrant.                      Filed herewith

     23           Consent of Deloitte & Touche LLP,                    Filed herewith
                  Independent Accountants.

     31.1         Certification of the Chief Executive                 Filed herewith
                  Officer pursuant to Section 302 of the Sarbanes-Oxley Act of
                  2002.

     31.2         Certification of the Chief Financial                 Filed herewith
                  Officer pursuant to Section 302 of the Sarbanes-Oxley Act of
                  2002.



<PAGE>


     Exhibit      Description                                          Method of Filing

     The following exhibit accompanies this Report pursuant to Section 906 of
     the Sarbanes-Oxley Act of 2002 and shall not be deemed "filed" by the
     Company for purposes of Section 18 of the Securities Exchange Act of 1934,
     as amended.

     32           Certification of Chief Executive Officer             Filed herewith
                  and Chief Financial Officer pursuant to 18
                  U.S.C. Section 1350.

       ------------------------
     * Management contract or executive compensation plan or arrangement. **
     Incorporated by reference.

</TABLE>