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, 2000

                                       OR

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

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

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

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

     As of April 11, 2001,  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 $3,644,512  (2,892,470 shares at a closing
price of $1.26).

     As of April 11, 2001, the  Registrant had 8,030,882  shares of Common Stock
outstanding.

                       Documents Incorporated By Reference
                                      None.



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                                TABLE OF CONTENTS




                                                                                                           PAGE
                                     PART I

<S>                                                                                                          <C>
Item  1.  Business.......................................................................................     1
Item  2.  Properties.....................................................................................    10
Item  3.  Legal Proceedings..............................................................................    10
Item  4.  Submission of Matters to a Vote of Security Holders............................................    10

                                     PART II

Item  5.  Market for the Registrant's Common Equity and Related Stockholder Matters......................    11
Item  6.  Selected Financial Data........................................................................    12
Item  7.  Management's Discussion and Analysis of Financial Condition and Results of Operations..........    14
Item  7A. Quantitative and Qualitative Market Risk Disclosure............................................    21
Item  8.  Financial Statements and Supplementary Data....................................................    23
Item  9.  Changes in and Disagreements with Accountants on Accounting and Financial Disclosure...........    44

                                    PART III

Item  10. Directors and Executive Officers of the Registrant.............................................    45
Item  11. Executive Compensation.........................................................................    45
Item  12. Security Ownership of Certain Beneficial Owners and Management.................................    45
Item  13. Certain Relationships and Related Transactions.................................................    45

                                     PART IV

Item  14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K...............................    45

</TABLE>


<PAGE>


               SPECIAL NOTE REGARDING FORWARD-LOOKING INFORMATION



         Certain  statements  contained  in this  Annual  Report  on Form  10-K,
including  without  limitation   statements  containing  the  words  "believes,"
"anticipates,"    "expects"   and   words   of   similar   import,    constitute
"forward-looking statements" within the meaning of Section 27A of the Securities
Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934,
as amended.  Such  forward-looking  statements  involve known and unknown risks,
uncertainties and other factors which may cause the actual results,  performance
or achievements of Merisel,  Inc. (the "Company"),  or industry  results,  to be
materially  different  from any  future  results,  performance  or  achievements
expressed or implied by such forward-looking statements.  These factors include,
but are not limited to, the effect of (i) economic  conditions  generally,  (ii)
industry  growth,  (iii)  competition,  (iv) liability and other claims asserted
against the Company,  (v) the loss of  significant  customers  or vendors,  (vi)
operating margins, (vii) business disruptions, (viii) the ability to attract and
retain qualified personnel,  and (ix) other risks detailed in this report. 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 distributor of computer hardware
and  software  products  and a provider of logistics  and  electronic  services.
Through  its  main  operating   subsidiary  Merisel  Americas,   Inc.  ("Merisel
Americas") and its  subsidiaries,  the Company operates a Canadian  distribution
business and a U.S. software licensing  business.  In addition,  through a newly
formed subsidiary,  Optisel, Inc. ("Optisel"),  the Company operates a logistics
business  which,  combined with certain  electronic-fulfillment-business  assets
acquired  from Value  America,  the Company  intends to expand to include a full
range  of   logistics   and   electronic-services   capabilities   to  offer  to
manufacturers, retailers, and e-tailers in a broad range of industries.

The Company's Canadian  distribution business ("Merisel Canada") offers products
and  services  to a broad  range of reseller  customers,  including  value-added
resellers  ("VARs"),  commercial  resellers,  retailers and Internet  resellers.
Merisel supports the growth of its partners in Canada with business  development
and educational services,  expert technical support, flexible financing options,
certified configuration services, and progressive e-business solutions.  Merisel
Canada  distributes  more than 37,000  products  (as  measured by distinct  part
numbers  assigned by  manufacturers  and other  suppliers)  from the  industry's
leading hardware and software  manufacturers.  These manufacturers include 3Com,
Compaq, Hewlett-Packard,  IBM/Lotus, Microsoft, NEC, Palm, Symantec, Toshiba and
ViewSonic.  The breadth of Merisel  Canada's  product  line,  together  with its
distribution network, enables the Company to provide its Canadian customers with
a single supply source and prompt product delivery.

Merisel's  software  licensing  business provides U.S.  resellers with more than
12,000  licensing  products from 10 leading  manufacturers,  including  Computer
Associates,  Corel,  Network  Associates,  Symantec,  and Veritas.  The software
licensing  business  involves the distribution of multiple-end user licenses for
software  products and  requires  minimal  distribution  of boxed  product.  The
business was started in 1997 and, by 1999, 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
manufacturer strategies.

Optisel   offers   end-to-end   e-services   and   logistics   capabilities   to
manufacturers,   retailers,  e-tailers,   distributors  and  others.  Leveraging
Merisel's  world-class  systems and  logistics  expertise,  Optisel is currently
offering highly  efficient  logistics and  distribution  services.  In addition,
Optisel  will  provide  future  clients  with a  front-end,  Web-based  customer
interface and other  e-service  offerings,  including  marketing and advertising
services, Web development and design, and interactive call center management and
customer  service,  that will  complement  the existing  back-end  logistics and
distribution capabilities. With this wide-ranging,  end-to-end service offering,
Optisel  will  compete  against  service  providers  in both the  logistics  and
e-services industries.

The  Company's  sales  were  approximately  $2.1  billion  for  2000,  excluding
approximately  $796  million in sales  generated by the  Company's  Merisel Open
Computing Alliance business, which was sold by the Company in the fourth quarter
of 2000. Of these sales,  68% were generated by U.S.  distribution (of which 14%
were  generated  by  software  licensing)  and 32% were  generated  by  Canadian
distribution.  See  "Notes  to  Consolidated  Financial  Statements  - Note 15 -
Segment Information."

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

Background and Business Strategy

General. The Company was incorporated 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").  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 the Merisel Open Computing  Alliance  ("MOCA").  MOCA
provides enterprise-class solutions for Sun Microsystems servers and the Solaris

<PAGE>


operating  system  to Sun  Microsystems-authorized  resellers  and  consultants.
Effective as of October 27,  2000,  the Company  completed  the sale of its MOCA
business  unit to Arrow  Electronics,  Inc.  See  "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 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 "Management's Discussion and Analysis of Financial Condition and
Results  of  Operations  -  Liquidity  and  Capital  Resources."  As part of the
wind-down,  total headcount for the U.S. distribution business combined with the
Company's information technology, finance and corporate functions, which support
all of the Company's  businesses,  was reduced from 559 to 104. In addition,  as
part of the  wind-down  the U.S.  distribution  business  eliminated  all of its
warehouses except for Chicago,  Illinois and Hayward,  California (which will be
utilized by Optisel),  sold all of its  inventory  and  discontinued  all of its
non-software licensing manufacturer relationships.

Canadian  Distribution.  Revenues for the Canadian distribution business in 2000
were 29% lower than 1999 revenues,  declining from approximately $926 million to
$660 million.  Management  believes that Merisel Canada's declining revenues for
2000  primarily  resulted  from  management's  need to focus on the  problems in
Merisel's U.S.  distribution business and from credit issues related to the U.S.
business.  In June 2000, the Canadian  distribution business began to experience
cash flow problems due to diminishing manufacturer credit support, which was due
primarily to heightened  manufacturer concerns regarding the U.S. business. As a
result of the diminished  manufacturer  support and related product availability
challenges and management  focus on the U.S.  business,  Merisel Canada began to
lose customers and revenues declined. In the third quarter of 2000, the Canadian
management  team,  which had  assumed the  leadership  of a  consolidated  North
American  distribution business in December 1999, returned to Canada to focus on
the Canadian business. By the end of that quarter,  Merisel Canada had completed
a major  restructuring  that cut costs and reduced headcount from  approximately
620  employees to  approximately  425. As a part of the  restructuring,  Merisel
Canada's product  offering was refocused on the most profitable  suppliers while
less profitable supplier relationships were discontinued.  Over the past several
months, Merisel Canada has reduced its number of manufacturer relationships from
more than 250 to approximately  110. By February 2001,  Merisel Canada's overall
restructuring  efforts had earned back significant  manufacturer credit support.
With the current  cost  structure,  management  believes  this level of business
should be sufficient to return Merisel Canada to profitability and to a positive
cash flow  position for the first  quarter of 2001 and for 2001.  The Company is
focused on continuing to improve the  performance  of the business.  At the same
time,  the Company is  considering  strategic  options  with  respect to Merisel
Canada, including the potential sale of that business.

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,  including Microsoft. Revenues 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.  For the first quarter
of 2001,  revenues for the software  licensing  business  increased 54% over the
prior quarter to  approximately  $5 million and the Company expects  substantial
further  increases  quarter-over-quarter  during  2001.  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  manufacturers  beyond the 10 manufacturers whose products it currently
distributes.  Management  believes  that by focusing on its  software  licensing
business,   reducing  operating   expenses,   and  capitalizing  on  its  strong
relationships  with certain  customers,  the  business  has the  potential to be
returned to a successful business model, albeit on a much smaller scale.

Optisel.  On  November  10,  2000 the  Company  acquired  substantially  all the
e-services assets of Charlottesville,  Virginia-based Value America,  Inc. for a
purchase price of $2,375,000.  Through its newly formed subsidiary Optisel,  the
Company will operate an e-services and logistics  business,  or commerce service
provider  ("CSP"),  leveraging its  distribution  and logistics  capabilities to
generate services revenue and providing a front-end Web-based customer interface
and other e-service offerings, including marketing and advertising services, Web
development  and design,  and  interactive  call center  management and customer
service.  The  Company  expects to complete  the  development  of the  front-end
interface  and  required  systems  integration  to enable  Optisel's  e-services
offering by the end of the third quarter of 2001.  Through Optisel,  the Company
plans to offer a complete  turnkey  e-commerce  solution  to  manufacturers  and
retailers who sell their products through  traditional  channels and are looking
to move into the e-commerce  arena or that have not been  successful  with their
own e-commerce efforts.


<PAGE>


With the logistics aspect of the business fully  operational,  Optisel currently
offers traditional product-fulfillment services to companies that seek logistics
expertise  while  continuing to recruit  e-services  customers to bring on board
once its front-end interface is available. In connection with the MOCA sale, the
Company  entered  into a services  agreement  under  which MOCA  outsourced  the
operation of its  information  technology  ("IT") systems and  distribution  and
logistics functions.  Under that agreement,  Optisel is currently providing MOCA
with  distribution  and  logistics  services to support more than a half billion
dollars in annual sales  volume.  The  agreement,  which  provided for a minimum
six-month term, has been extended through the end of July and may be extended at
Arrow's option through the end of October 2001 and beyond with mutual  agreement
of the  parties.  Optisel  recently  signed  an  agreement  with an  established
European  conglomerate  to provide  logistics-only  services  that  augment  the
customer's third-party distribution efforts in the U.S. marketplace. The initial
assignment  under  the  agreement  is  short-term  but  there is  potential  for
additional  opportunities  with that  customer.  Optisel  will not  generate any
additional  revenues  until at least  mid-2001,  and is not  expected to achieve
break-even  results until 2002 or later.  Revenues for the Optisel  business for
2000  were  $1,587,000,  all  of  which  were  generated  by the  MOCA  services
agreement.  In  addition,  the Company is  considering  strategic  options  with
respect to its Optisel  business,  including  narrowing the scope of services it
offers as well as potential business combinations or joint ventures.

The Computer Products Distribution Industry

The Company's  Canadian  distribution  and U.S.  software  licensing  businesses
compete in the computer products distribution industry. The primary participants
in the computer  products  distribution  industry are  manufacturers,  wholesale
distributors and resellers.  The supply chain was traditionally based on a model
through which  manufacturers  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,   like  the  Company's  Canadian
distribution  business,  purchase a wide range of products in bulk directly from
manufacturers  and then ship products in smaller  quantities  to many  different
types of resellers.  Niche  distributors like the Company's  software  licensing
business  operate  similarly  but with a  narrower  product  offering.  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  for product  availability,  flexible
financing  alternatives,  technical support,  prompt and efficient delivery and,
with respect to full-line  distributors like Merisel Canada, their broad product
offering.  In addition, as resellers intensify their focus on sales and customer
service, they are increasingly relying on distributors for "back-office" support
services, such as product procurement, configuration, fulfillment, logistics and
end-user financing.  Manufacturers benefit from using wholesale  distribution as
an  alternative  to direct sales to  resellers  by not having to maintain  large
sales forces, warehouse facilities and distribution networks. Manufacturers also
rely on wholesale distributors to provide marketing and support services as well
as credit for reseller customers.

The  computer  products  distribution  industry  has  historically   experienced
double-digit  growth  throughout  North  America.  However,  growth rates in the
latter part of 2000 and going into 2001 have been substantially lower and may be
negative in the  short-term.  Trends in wholesale  distribution  include  custom
configuration  of products by  distributors,  various  supply  chain  management
strategies to eliminate time and cost, and accelerated development of electronic
commerce and information systems.  Additional industry dynamics include changing
terms and  conditions  from  major  systems  manufacturers,  aggressive  pricing
practices,  industry  consolidation,  and the  emergence  of Internet  and other
"virtual" businesses that operate with minimal infrastructure.

In order to compete  more  effectively  and lower their  costs,  major  computer
systems  manufacturers  that rely on the  two-tier  distribution  model  have in
recent years taken steps to reduce their own  inventories and the inventories of
their distributors and resellers. One such strategy has been to increase 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.

The Logistics Industry

Through the  provision of  warehousing  and product  fulfillment  services,  the
Company's  Optisel  business  competes within the  well-established  third party
logistics  industry.  This industry has  experienced  significant  growth within
recent years as an increasing  number of companies have chosen to focus on their
core competencies and to outsource warehousing and delivery

<PAGE>


to logistics  experts.  The  emergence of  e-businesses  that  maintain  minimal
physical  infrastructure  have contributed to this trend.  Also  contributing to
this  trend  is the need for  businesses  to  service  a more  highly  dispersed
customer base as the tasks of picking and packing small  quantities and shipping
to a vast number of addresses make the fulfillment  process more of a challenge.
It is  anticipated  that the demand for  reliable,  cost-effective  and scalable
business-to-business and  business-to-customer  logistics services will continue
to grow.

The e-Services Industry

The  Company's  Optisel  business  also  competes  within  the  Internet-driven,
e-services  industry as a commerce  service provider  ("CSP").  The Internet has
emerged as a significant  global  communications  medium,  enabling  millions of
people to share  information and conduct  business  electronically.  A number of
factors have  contributed to the growth of the Internet and its commercial  use,
including:  (i) the large and growing  installed  base of personal  computers in
homes and businesses; (ii) improvements in network infrastructure and bandwidth;
(iii) easier and cheaper access to the Internet; (iv) increased awareness of the
Internet  among  consumer  and  business  users;  and (v) the rapidly  expanding
availability  of online  content and commerce  that  increases  the value of the
Internet to users.

The increasing  functionality,  accessibility  and overall usage of the Internet
have made it an attractive  commercial medium. Via the Internet,  businesses can
interact  directly  with end  users,  both  businesses  and  consumers,  and can
frequently adjust their featured  selections,  shopping  interfaces and pricing.
The  ability  to  reach  and  serve  a  large  and  global  group  of end  users
electronically  from a  central  location  and the  potential  for  personalized
low-cost customer interaction provide additional economic benefits.  Traditional
brick-and-mortar   businesses  are  increasingly   augmenting  their  sales  and
marketing  strategies with online initiatives.  In addition,  many manufacturers
are realizing  that they need to utilize the Internet in their sales and channel
strategies.  As a result,  an increasingly  broad base of products is being sold
successfully online, including computers,  travel services,  brokerage services,
automobiles and music, as well as software products.

There are a number of advantages to outsourcing electronic commerce,  including:
(i) avoiding the large,  upfront  investment  required to purchase and implement
software applications and computer hardware;  (ii) a shorter time to market with
an electronic  commerce  solution;  (iii) the  opportunity  to shift the ongoing
financial and technology  risk to a proven service  provider;  and (iv) allowing
businesses  to  focus  on  their  specific  core  competency.  Because  of these
advantages,  Merisel  believes  that an  increasing  number of  businesses  will
outsource their  electronic  commerce needs. As a result,  the Company  believes
that the market for e-services will continue to grow rapidly.  Accordingly,  the
Company believes that a substantial market opportunity exists for comprehensive,
cost-effective e-services that are integrated with a physical logistics delivery
infrastructure for retailers, e-tailers, manufacturers and distributors.

Canadian Distribution and U.S. Software Licensing Businesses

Products and Suppliers. Merisel has established and developed long-term business
relationships  with many of the leading  manufacturers in the computer  products
industry.  Merisel  Canada  offers more than  37,000  products  (as  measured by
distinct part numbers assigned by manufacturers and other suppliers),  including
software licensing products,  from approximately 110 suppliers,  including 3Com,
Compaq,  Hewlett-Packard,  IBM/Lotus,  Intuit,  Lexmark,  Microsoft,  NEC, Palm,
Symantec, Toshiba and ViewSonic.

The Company's U.S.  software  licensing  business offers its reseller  customers
over  12,000  products  from  10  leading   manufacturers,   including  Computer
Associates,  Corel,  Network  Associates,  Symantec  and  Veritas.  The software
licensing  business  involves the distribution 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, Merisel's U.S. software licensing business
offered  products  from 21  manufacturers  and  ranked  number  one in  software
licensing  sales for key  manufacturers  such as Microsoft and Novell.  Although
many of these distribution  arrangements were terminated during 2000, management
of Merisel's software licensing business have maintained positive  relationships
with many key software  manufacturers beyond the 10 manufacturers whose products
it currently  distributes.  The Company is currently engaged in activities aimed
at reestablishing these key relationships and rebuilding its product offering.

Merisel enters into written  distribution  agreements with the  manufacturers of
the products it distributes.  As is customary in the industry,  these agreements
usually provide non-exclusive  distribution rights and often contain territorial
restrictions  that  limit  the  countries  in  which  Merisel  is  permitted  to
distribute the products.  The Company's suppliers generally warrant the products
distributed 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.  The  agreements  generally  provide
Merisel with  stock-balancing  and  price-protection  provisions  that partially
reduce Merisel's risk of loss due to slow-moving inventory,

<PAGE>


supplier price  reductions,  product  updates or  obsolescence.  Stock balancing
provisions  typically  give the  distributor  the right to return  for credit or
exchange for other products a portion of the inventory items purchased, within a
designated  period of time. Under  price-protection  provisions,  suppliers will
credit the  distributor  for  declines in  inventory  value  resulting  from the
supplier's price reductions if the distributor complies with certain conditions.
In the  past  few  years,  certain  major  PC  manufacturers  have  reduced  the
availability of price protection for distributors. Through buying procedures and
controls  to manage  inventory  purchases,  the Company  seeks to reduce  future
potential adverse impact from these changes while balancing the need to maintain
sufficient levels of inventory.  There is no assurance that such efforts will be
successful in the future in preventing a material adverse effect on the Company.
The Company's  agreements with its suppliers,  which generally have a term of at
least one year,  may contain  minimum  purchase  amounts and  generally  contain
provisions permitting early termination by either party upon written notice.

Although  Merisel  Canada  distributes  more than  37,000  products  supplied by
approximately  110  manufacturers,  57.8% of net sales in 2000 (as  compared  to
67.1% in 1999 and 69.9% in 1998) were derived from products  supplied by Merisel
Canada's 10 largest  vendors.  The sale of products  manufactured  by Compaq and
Hewlett-Packard  accounted for approximately 14.3% and 15.0%,  respectively,  of
net sales in 2000 (as compared to 16.8% and 15.8%,  respectively,  in 1999,  and
19.6% and 14.3%,  respectively,  in 1998). No other  manufacturer  accounted for
more than 10 percent of Merisel  Canada's  sales in any of those years.  Because
reseller  customers  often prefer to deal with a single source for many of their
product  needs,  the loss of the ability to  distribute a  particularly  popular
product could result in losses of sales unrelated to the product.  The loss of a
direct  relationship  between  Merisel Canada and any of its key suppliers could
have an adverse impact on the Company's business and financial results.

Merisel Canada and, on a smaller scale,  Merisel's  software  licensing business
provide manufacturers with access to a large base of computer resellers, as well
as the means to reduce inventory, credit, marketing and overhead costs typically
associated with maintaining direct reseller relationships.  Merisel develops and
implements  promotional programs for specific manufacturers to increase customer
purchasing  depth and breadth.  Promotional  programs  include  bundled  offers,
growth-goal  incentives,  and  reseller  training  events  as  well  as  channel
communication vehicles such as targeted direct mail, fax and advertising.

Customers and Customer Services.  In 2000, Merisel sold products and services to
approximately 8,000 Canadian resellers through Merisel Canada, but experienced a
decline in active  customers  during the course of the year as its revenues fell
off.  During the first quarter of 2001,  Merisel  Canada had an active  customer
base of  approximately  4,000  resellers.  In the U.S.  in 2000,  the  Company's
software  licensing  business sold products and services to more than 3,000 U.S.
resellers.  With the  dramatic  decline in  revenues 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 smaller customers often do not have the resources to establish a large
number  of  direct  purchasing   relationships  or  stock  significant   product
inventories,  nor can they meet manufacturers'  minimum purchase requirements or
obtain acceptable credit. Consequently,  they tend to purchase a high percentage
of their  products  from  distributors,  which can meet  their  inventory  needs
quickly and efficiently.  Larger resellers often establish direct  relationships
with manufacturers for their more popular products but utilize  distributors for
slower-moving  products and for fill-in orders of fast-moving  products that may
not be available on a timely basis from  manufacturers.  Merisel  generally does
not  have  contracts  with  its  reseller  customers.  Merisel  Canada's  top 20
customers  accounted for approximately  34.1% of Merisel Canada's total sales in
2000.  One customer  accounted for 7.8%,  9.6% and 7.6% of Merisel  Canada's net
sales in 2000, 1999 and 1998,  respectively,  one customer accounted for 6.1% of
sales in 1998,  and no other  customers  accounted for more than 5% of sales for
any of those years.

Single-Source  Provider.  As a  full-line  distributor,  Merisel  Canada  offers
computer  resellers a single  source for more than 37,000  competitively  priced
hardware and software  products.  By purchasing from Merisel  Canada,  resellers
need only  comply  with a single set of  ordering,  billing  and  product-return
procedures.  Resellers  may also  benefit  from  attractive  volume  pricing and
financing programs.  In addition,  within specified time limits and/or specified
volume limits,  resellers are generally allowed to return products for credit to
be applied against future purchases from Merisel Canada.

Customers and Sales Organizations. Merisel supports resellers who offer product,
and often  value-added  services,  to corporate or individual  end-user clients.
Merisel Canada's sales organization is organized into three primary divisions to
serve the varying  requirements of different  customer groups in the industry as
follows:   VARs  and  education   resellers;   large  system  integrators;   and
retail/Internet  customers.  The VAR division provides  specialized services and
technical  products to value-added  resellers and system  integrators  who offer
support,  service and consulting to clients.  Small and  medium-sized  resellers
rely very heavily on distribution for financial credit,  next-day delivery (they
do not stock the product themselves),  and manufacturer and product information.
Merisel Canada  services this market  largely  through inside sales efforts with
support

<PAGE>


from its  marketing  and  financial  services  departments.  The sales  division
dedicated  to large  system  integrators  focuses on large  dealers  catering to
Fortune 500  companies  as well as on  companies  such as Dell  Computer to whom
Merisel Canada offers direct customer-fulfillment services. The Company provides
EDI  transaction  support,  and  dedicated  field and  inside  sales  support to
large-volume national accounts. The retail/Internet  division services resellers
and retailers who are focused on the consumer  market.  Customers  include large
retailers  such as mass merchants and national  computer chain stores;  Internet
resellers;  and independent  retailers.  Customers served by this division often
require  unique  services and support,  such as demand  projections,  customized
marketing programs and product stocking support.

Merisel  Canada's  inside  sales  and  technical  specialists  are  trained  for
efficiency  and  responsiveness.  This  efficiency  is  augmented  by  Merisel's
screen-synchronization  technology,  which  automatically  displays  a  customer
profile on the sales  representative's  computer  screen  when a customer  calls
Merisel. The Company's systems allow its sales representatives to enter customer
orders,  obtain  descriptive  information  regarding  products,  check inventory
status,  determine customer credit availability,  and obtain special pricing and
promotion information.  In addition,  customers may access SELline II, Merisel's
electronic business and information  service,  which offers ordering options and
access  to most of the  above  information  24 hours a day,  seven  days a week.
Merisel Canada also provides  resellers with direct access to technical  support
engineers  through  a  dedicated  hotline,  offering  specialized  pre-sale  and
post-sale  technical  support for product  lines sold by Merisel.  In  addition,
Merisel's  technical  engineers  provide regular product  training for Merisel's
sales  representatives  to help them increase their product  knowledge and their
ability to answer resellers' questions.

Merisel's software licensing business caters specifically to resellers 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.  Customer  service  (particularly  with
respect  to the  complexities  of  manufacturers'  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.

Prompt Delivery.  By 1996, Merisel's Information and Logistics Efficiency System
("MILES") had been installed in all of the Company's distribution centers in the
U.S. and Canada.  The  successful  implementation  of MILES has resulted in high
rates of inventory and shipping accuracy. The Company believes that its shipping
accuracy rates are the highest in the industry at 99.993%. For shipment of boxed
products  through  Merisel  Canada,  orders received by 6:00 p.m. local time are
typically  shipped the same day,  provided the  required  inventory is in stock.
Merisel delivers products from its distribution  centers via Purolator  Courier,
UPS and other carriers by customer request. Most customers receive orders within
one or two  working  days  of  shipment.  Merisel  also  provides  customer-paid
overnight air handling upon request.  These services allow resellers to minimize
inventory  investment  and  serve  their  customers  responsively.  To  expedite
delivery  and further  minimize  reseller  inventories,  Merisel  also  provides
fulfillment  services,  through  which the  Company  ships  orders  directly  to
resellers' customers.

Financing Programs.  Merisel's credit policy for qualified resellers  eliminates
the need for them to establish multiple credit relationships with a large number
of  manufacturers.  In  addition,  the  Company  arranges  floor-plan  and lease
financing  through  a number of  credit  institutions  and  allows  credit  card
purchases by qualified  customers.  Merisel's  Direct Ship program  provides for
direct shipment to and billing of the reseller's customer.

Information  Services.  Merisel  provides its reseller  customers  with detailed
information on products,  pricing,  promotions and developments in the industry.
The  Company's  corporate  and  Merisel  Canada  Web sites and  SELline II offer
technical product  information on thousands of products and links to many of the
industry's  leading  manufacturers.  In addition,  resellers can obtain  current
information on programs and services,  daily product  promotions,  and strategic
Merisel  announcements.   They  can  also  download   return-authorization   and
system-return  forms, and track product  shipments with links to Purolator,  UPS
and Federal  Express.  Merisel's Web site also offers secure,  24-hour access to
SELline II, Merisel's  electronic business and information service, so resellers
can place their product orders through the site.  SELline II provides  resellers
with real-time  access to pricing  information,  credit  information,  technical
descriptions,  product  availability and promotional  information.  Merisel also
utilizes EDI systems to allow  large-volume  customers to  communicate  with the
Company's  computer system  directly for order  processing and account data. The
Company also offers API business-to-business  connections, which allow resellers
and  manufacturers  to directly  connect  their systems to Merisel's SAP system,
enabling supply-chain integration and synchronization.


<PAGE>



Optisel

Customers and Customer Services.  Optisel is actively recruiting  customers that
it can service  solely with its existing  back-end  logistics  and  distribution
capability  prior to  completion of the front-end  interface.  Optisel  recently
signed  an  agreement  with an  established  European  conglomerate  to  provide
logistics-only  services  that  augment the  client's  third-party  distribution
efforts into the U.S. marketplace. The initial assignment under the agreement is
short-term  but  there is  potential  for  additional  opportunities  with  that
customer.  In addition,  in connection  with the MOCA sale, the Company  entered
into a services  agreement  under which MOCA  outsourced the operation of its IT
systems and  distribution and logistics  functions,  which are being provided by
Optisel.  This agreement,  which provided for a minimum six-month term, has been
extended  through the end of July and may be extended at Arrow's  option through
the end of October 2000 and beyond with mutual  agreement of the parties.  While
Optisel  offers  traditional  product-fulfillment  services to any company  that
seeks  logistics  expertise,  Optisel  will  ultimately  offer a full  suite  of
logistics and  e-services to e-tailers  and to  manufacturers  and retailers who
sell their products  through  traditional  channels and are looking to move into
the e-commerce business.

Warehousing and Fulfillment. By utilizing Merisel state-of-the-art  distribution
centers and leveraging the Company's advanced Merisel  Information and Logistics
Efficiency System  ("MILES"),  Optisel offers its clients inventory and shipping
accuracy rates that the Company believes are among the highest  available in the
world today at 99.993%.  Orders  received by 6:00 p.m.  local time are typically
shipped the same day, provided the required inventory is in stock. Optisel ships
product  primarily via UPS and FedEx,  and via other carriers by client request.
Most orders are received  within one or two working  days of  shipment.  Optisel
also offers overnight air handling upon request.

Operations, Distribution and Systems

Locations.  At March 31, 2001, the Company operated four distribution centers in
North America: two in the United States and two in Canada.

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

In 1993,  the Company  began  designing an SAP R/3  enterprise-wide  information
system that would  integrate all  functional  areas of the  business,  including
sales and distribution, inventory management, financial services, and marketing,
in a real-time  environment.  Merisel  converted its Canadian  operations from a
mainframe  system  to the  new SAP  system  in  August  1995,  and  successfully
completed  the  conversion of its U.S.  operations in April 1999.  The system is
designed  to  support   business   growth  by  providing   greater   transaction
functionality,  increased  flexibility,  enhanced  reporting  capabilities,  and
custom-pricing  applications.  Prior  to  implementing  SAP  R/3  for  its  U.S.
operations,  Merisel  implemented  a new  version  of  SELline.  This  Web-based
application was built on a Microsoft platform and provides enhanced  procurement
and inquiry functions to Merisel's resellers as well as real-time  interfaces to
SAP R/3.

Since April 1999, system  performance,  stability and availability have improved
significantly.  SAP performs with  sub-second,  on-line response time and has an
average  systems-availability  rate of 99.999 percent.  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 both through SAP and Merisel's data warehouse system.

In addition, SAP has provided a solid base for application development, allowing
Merisel to expedite the development cycle for functionality  improvements in the
system. SAP has enabled new systems capabilities benefiting government resellers
and numerous  advancements in Merisel's electronic commerce offering,  including
enhancements  to SELline II, the Company's  electronic  business and information
service.

In support of the Optisel  business,  Merisel's core systems are being expanded.
Enhancements  have  been  made to SAP R/3 to add  functionality  needed  for the
logistics model. This functionality includes new interfaces to SAP for automated
purchase  order  and SKU  set-up,  as well as  capability  to carry  zero-priced
products in the system and charge fees for services.  Additionally,  the SAP R/3
system has been  upgraded to the latest  version of SAP (4.6D).  This version of
SAP  provides  broader  capability  for  interfacing  directly  to SAP  and  for
accessing  real-time  information.  Further development is currently underway to
provide  support  for  the  e-services  aspect  of  Optisel's   business.   This
development includes the set-up and

<PAGE>


configuration of Siebel 2000, as well as corresponding changes to SAP R/3 needed
to support  the Siebel  environment.  Siebel  2000 is  expected  to provide  the
Company with functionality that includes Web-based order entry and inquiry, call
center support, content management,  marketing management, and reporting. Siebel
2000 will have real-time connections to SAP for seamless order fulfillment.

Competition

Competition  in  the  computer  products   distribution   industry  is  intense.
Competitive  factors  include price,  breadth and  availability  of products and
services, credit availability and financing options, shipping accuracy, speed of
delivery,  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
than Merisel.  Merisel's principal competitors for its Canadian distribution and
software  licensing  businesses include large United  States-based  distributors
such as  Ingram  Micro  and Tech  Data,  as well as  regional  distributors  and
franchisers.  Merisel also  competes  with  manufacturers  that sell directly to
computer  resellers  and end users,  sometimes at prices below those  charged by
Merisel for similar  products,  and larger  resellers and e-tailers that sell to
resellers.   The  Company   believes  its  broad   product   offering,   product
availability,  prompt delivery and support  services may offset a manufacturer's
price advantage. In addition, many manufacturers  concentrate their direct sales
on large computer resellers because of the relatively high costs associated with
dealing with small-volume computer resellers.

Because  Optisel will offer  services  ranging from  Internet-based  transaction
functionality  and electronic  services to warehousing and product  fulfillment,
this business will compete in both the e-services and logistics industries, both
of which are intensely  competitively.  Within the e-services industry,  Optisel
will compete with several small e-services companies, such as Aqueduct (formerly
BuyNow.com),  Digital River, and Escalate,  many of which began operating in the
1998/1999 timeframe and which cater to manufacturers and retailers. In addition,
it is  anticipated  that  there  may be new  entries  into  the  marketplace  by
independent  software  vendors  (ISVs)  that  offer ASP  services  or large data
centers/hosting  companies, such as EDS. Within the logistics industry,  Optisel
competes with (i) traditional  third-party  logistics  providers,  such as Excel
Logistics and GATX  Logistics;  (ii) the logistics arms of well-known  carriers,
such as FedEx,  UPS, and Purolator  Courier;  and (iii) a variety of traditional
distributors,  such as Ingram Micro,  Tech Data, and  Fingerhut,  that are newly
leveraging their core competencies to compete in the fee-based  logistics arena.
Some  traditional  distributors,  such as Ingram  Micro and Tech Data,  are also
establishing   e-services  capabilities  to  augment  their  logistics  services
offerings.

Management  believes that the principal  competitive  factors in the  e-services
industry are speed to market, cost and system scalability and that the principal
competitive  factors in the logistics  industry are  accuracy,  cost and systems
capabilities.  Management  believes  Optisel's  full  spectrum of services  will
assist it in competing against companies with service offerings that are limited
to either  e-services  or  logistics.  Many of Optisel's  current and  potential
competitors  have longer  operating  histories,  larger customer bases,  greater
brand  recognition  and  significantly  greater  financial,  marketing and other
resources than Optisel. In addition, larger,  well-established and well-financed
entities may acquire, invest in or form joint ventures with smaller competitors.
Optisel  may be  unable to  compete  successfully  against  current  and  future
competitors,  and any inability to do so could have a material adverse effect on
Optisel's business.

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 Canadian
distribution and U.S. software licensing  businesses.  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,  in  Canada,  the  Company's  net sales in the  first  and  fourth
quarters  have  been  historically  higher  than  in  its  other  two  quarters.
Management believes that the pattern of higher first and fourth quarter sales is
partially  explained by buying patterns of Canadian  government  agencies in the
first  quarter and  customer  buying  patterns  relating  to  calendar  year-end
business  and  holiday  purchases  in the  fourth  quarter.  As a result of this
pattern, the Company's working capital requirements

<PAGE>


in the fourth  quarter have  typically  been greater  than other  quarters.  The
Company  expects that it would also  experience  this type of seasonality in its
Optisel  business.  See  "Management's  Discussion  and  Analysis  of  Financial
Condition and Results of Operations - Liquidity and Capital Resources."

Employees

As of March 31, 2001, Merisel had approximately 570 employees, of which 404 were
employees  of Merisel  Canada.  Merisel  continually  seeks to enhance  employee
morale and strengthen its relations with employees.

Environmental Compliance

The Company believes that it is in substantial compliance with all 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.

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  manufacturer
rebates  and  changes  by  manufacturers  in terms and  conditions,  which  have
resulted in a shift of costs to distributors, and economies of scale achieved by
growing  distributors  that decreased  their costs.  Merisel Canada  attempts to
address the gross  margin  issue  through  pricing and other  actions.  If these
efforts to increase  or  maintain  gross  margins  are not  successful  or if an
increase in gross  margins  results in a  significant  decline in sales  volumes
without a corresponding  decrease in operating expenses,  Merisel Canada may not
be able to achieve satisfactory levels of profitability.

Vendor Terms and Conditions. Like other wholesale distributors, Merisel Canada's
business is subject to the risk that the value of its inventory will be affected
adversely by vendor price reductions or by product  obsolescence  resulting from
technological changes or product updates. It is the policy of most manufacturers
of microcomputer  products to protect  distributors  who purchase  directly from
them from the loss in value of  inventory  due to  product  obsolescence  or the
manufacturer's  price  reductions.  Over the past few  years,  certain  major PC
manufacturers  that are among Merisel  Canada's largest vendors have reduced the
availability of price  protection for  distributors  and changed other terms and
conditions.   Through  buying   procedures  and  controls  to  manage  inventory
purchases,  Merisel Canada seeks to reduce  potential future adverse impact from
these  changes  while  balancing  the  need to  maintain  sufficient  levels  of
inventory.  There is no assurance  that such efforts will be  successful  in the
future in  preventing  a  material  adverse  effect on the  Company.  Unforeseen
changes in  current  price  protection  policies  or other  changes in terms and
conditions  of any of  Merisel  Canada's  major  vendors  could  have a material
adverse effect on the Company.

Dependence  on Key Vendors.  In 2000,  57.8% of Merisel  Canada's net sales were
derived from products  supplied by its 10 largest vendors,  as compared to 67.1%
in 1999 and  69.9% in 1998.  As is  customary  in the  industry,  the  Company's
agreements with these vendors provide non-exclusive  distribution rights and may
generally be terminated by the vendor on short notice.  The  termination  of the
Company's  distribution  agreement  with one of its key  vendors,  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.  Over the last
couple of years, several large manufacturers have elected to reduce their number
of distribution relationships, and the Company expects that this trend is likely
to  continue.  Future  decisions  by  manufacturers  to reduce  their  number of
distribution  partners could result in Merisel  Canada's loss of vendors,  which
could have a material adverse effect on the Company.

Size of Competitors.  The Company's competitors in its Canadian distribution and
U.S. software licensing businesses 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  and may be able to form
stronger relationships with manufacturers.  The Company does not believe 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.  A continuation of industry
consolidation not involving the Company may exacerbate this  disadvantage.  Many
of Optisel's  competitors for both e-services and logistics  services are larger
and have substantially greater resources than Optisel,  which may permit them to
offer more competitively priced-services. See "Competition" above.


<PAGE>


Direct Sales by  Manufacturers.  Several  computer  product  manufacturers  have
expanded their direct selling  efforts to resellers and end users.  Although the
Company does not believe that its  business has been  significantly  affected by
these   developments,   continued  efforts  by  manufacturers  to  change  their
businesses  to  compete  with the  direct  sales  model by  increasing  sales of
computer  products  outside  the  traditional  distribution  channel  may have a
material adverse effect on the Company.

Customer Credit Exposure.  Through its Canadian  distribution and U.S.  software
licensing  businesses,  the Company sells  products to a large  customer base of
value-added resellers, commercial resellers, retailers and Internet resellers. A
significant  portion of such sales is 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 its  customers,  resulting  in the  customers'
inability to repay the  Company.  This risk would be increased in the event of a
general economic downturn affecting a large number of the Company's customers.

Size of Software Licensing and Optisel  Businesses.  The Company's U.S. software
licensing  and  Optisel  businesses  are not  currently  profitable  and are not
generating  sufficient revenue to cover required fixed expenses to operate these
businesses.  Because these are the only businesses comprising the Company's U.S.
operations,  which have  significant  fixed operating and overhead costs,  these
businesses  may not be  viable  if they do not  grow  substantially  or if their
revenues were to decrease.

Item 2. Properties.

At March 31, 2001, the Company maintained  distribution centers in two locations
in the United  States and two  locations  in Canada.  Additionally,  the Company
maintains  United  States  administrative  and  sales  offices  in  El  Segundo,
California;  offices  for Optisel in  Charlottesville,  Virginia;  and  Canadian
administrative  and sales offices in Toronto,  Ontario;  Montreal,  Quebec;  and
Vancouver, British Columbia.

The  Company's  headquarters  are located in El Segundo,  California,  where the
Company leases a 50,700 square-foot facility.

The Company owns a 61,000 square-foot  facility and 29 acres of undeveloped land
in Cary,  North  Carolina,  which the  Company is  seeking  to sell.  All of the
Company's other facilities are leased.  The Company believes that its facilities
provide sufficient space for its present needs.

In connection with the Company's  wind-down of its U.S.  distribution  business,
the Company closed four U.S. distribution facilities during the third quarter of
2000 and one U.S. distribution facility during the fourth quarter of 2000.

Item 3. Legal Proceedings.

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


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

None.


<PAGE>



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 Stock  Market,  as
adjusted by a one-for-ten  reverse  stock split that was effective  February 14,
2001.

                                            High              Low
                Fiscal Year 1999
                     First quarter....       28 3/4           12 1/2
                     Second quarter...       31 7/8           11 9/16
                     Third quarter....       24 3/8           15
                     Fourth quarter...       17 13/16         11 9/16
                Fiscal Year 2000
                     First quarter....       31 1/4           11 1/4
                     Second quarter...       17 3/16          7 3/16
                     Third quarter....       12 3/16          5 5/8
                     Fourth quarter...       6 7/8            1 9/16


As of March 31,  2001,  there were 909 record  holders of the  Company's  Common
Stock.

Merisel has never declared or paid any dividends on its Common Stock.

Information  on the  sale of  150,000  shares  of  convertible  preferred  stock
("Convertible  Preferred")  to an  affiliate  of  Stonington  Partners,  Inc. is
included  in  "Item  7 -  Management's  Discussion  and  Analysis  of  Financial
Condition  and Results of  Operations-Debt  Obligations,  Financing  Sources and
Capital Expenditures." The issuance of the Convertible Preferred was exempt from
registration  under  Section  4(2) of the  Securities  Act of 1933,  as amended,
because the  transaction  constituted a private  placement and did not involve a
public offering.


<PAGE>
<TABLE>
<CAPTION>



Item 6. Selected Financial Data.

                                                                       Year Ended December 31,
                                                    1996          1997         1998          1999          2000
                                                -----------   -----------   -----------  -----------   -----------
                                                              (In thousands, except per share amounts)
<S>                                             <C>           <C>            <C>           <C>           <C>
Income Statement Data:(1, 2 and 3)
Net sales.....................................  $ 5,176,475   $ 3,591,056   $ 3,937,930   $4,231,396    $2,093,529
Cost of sales.................................    4,923,070     3,385,585     3,721,651    4,046,094     2,020,111
                                                -----------   -----------   -----------  -----------   -----------
Gross profit..................................      253,405       205,471       216,279      185,302        73,418
Selling, general & administrative expenses....      282,780       176,173       180,090      211,990       176,752
Restructuring charge..........................                                                 3,200        17,636
Impairment losses.............................       42,033        14,100                      3,800        52,833
Litigation related charge.....................                                                12,000
                                                -----------   -----------   -----------  -----------   -----------
Operating (loss) income.......................      (71,408)       15,198        36,189      (45,688)     (173,803)
Interest expense..............................       39,080        28,608        17,125       17,849        10,920
Loss on sale of European, Mexican, and
Latin American operations.....................       33,455
Debt restructuring costs......................                      5,230
Other expense, net............................       17,508        11,495        17,096       21,926         5,382
                                                -----------   -----------   -----------  -----------   -----------
(Loss) income before income taxes.............     (161,451)      (30,315)        1,968      (85,463)     (190,105)
(Benefit) provision for income taxes..........        1,539           496           417          939           620
                                                -----------   -----------   -----------  -----------   -----------
Net (loss)  income from  continuing  operations
before extraordinary item.....................     (162,990)      (30,631)        1,551      (86,402)     (190,725)
Discontinued operations:
Income from discontinued operations                  22,615        18,534        16,959       25,234        20,757
Gain on sale of discontinued operations                                                                     25,178
                                                -----------   -----------   -----------  -----------   -----------
(Loss) income before extraordinary item.......     (140,375)      (12,097)       18,510      (61,168)     (144,790)
Extraordinary (loss) gain on extinguishment of
debt, net.....................................                     (3,744)                                  49,003
                                                -----------   -----------   -----------  -----------   -----------
Net (loss) income.............................    $(140,375)     $(15,841)      $18,510     $(61,168)     $(95,787)
                                                ===========   ============  ===========  ===========   ===========

Share Data (4):
Net (loss) income per diluted share...........  $   (46.79)   $     (4.77)  $      2.30  $     (7.62)  $    (12.01)
Weighted average number of diluted
   Shares.....................................        3,000         3,322         8,049        8,028         8,031
Balance Sheet Data: (2)
Working capital...............................  $   159,627   $   169,164   $   132,616  $   117,340   $     6,166
Total assets..................................      681,129       696,104       834,458      736,206       178,281
Long-term and subordinated debt...............      294,763       133,429       131,856      130,264        23,803
Total debt....................................      294,950       133,429       135,657      133,170        25,166
Stockholders' equity..........................       14,997       137,508       154,253       95,173        13,418
</TABLE>

(1)  Merisel's  fiscal year is the 52- or 53-week  period ending on the Saturday
     nearest to December 31. For clarity of presentation  throughout this Annual
     Report on Form 10-K, Merisel has described fiscal years presented as if the
     year ended on December 31. Except for 1997, all fiscal years presented were
     52 weeks in duration.  The selected financial data set forth above includes
     those balances and activities related to the Company's  Australian business
     until its disposal  effective  January 1, 1996 and the Company's  European,
     Mexican and Latin  American  businesses  until their disposal on October 4,
     1996,  effective as of September 27, 1996. It also includes  results of the
     Company's wholly owned subsidiary Merisel FAB, Inc. through its disposal as
     of March 28, 1997.

(2)  The  Company  has  reclassified  certain  items in its 1996,  1997 and 1998
     financial  statements to conform to the 1999 and 2000 presentations.  These
     reclassifications   principally   consist  of  costs  associated  with  the
     Company's  flooring  arrangements.  The  impact to the 1996,  1997 and 1998
     financial  statements is to reduce general and  administrative  expenses by
     $2,998,000, $3,002,000 and $4,461,000,  respectively, to decrease net sales
     by $1,349,000,  $1,351,000 and  $2,007,000,  respectively,  and to increase
     interest expense by $1,649,000, $1,651,000, and $2,454,000, respectively.



<PAGE>



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

(4)  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.



<PAGE>


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


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,  Canadian  distribution  and the Merisel Open  Computing  Alliance
("MOCA").  Effective as of October 27, 2000,  the Company  completed the sale of
its MOCA business unit to 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  November  10,  2000,  the  Company  acquired  substantially  all  the
e-services  assets of Value  America,  Inc.  through the Company's  newly formed
subsidiary Optisel, which will leverage the Company's distribution and logistics
capabilities  to operate an  e-services  and  logistics  business.  As a result,
Merisel  today  operates  a  Canadian  distribution  business,  a U.S.  software
licensing business and Optisel.

Discontinued Operations

Effective as of October 27, 2000, the Company completed the sale to Arrow of its
MOCA  business  unit,   which  provides   enterprise-class   solutions  for  Sun
Microsystems  servers and the Solaris operating system to authorized  resellers.
The stock sale  agreement  pursuant  to which the sale was made  provided  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 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  $36.25  million,  which will be
recorded in the quarter ended March 31, 2001.

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

Contraction of U.S. Distribution Business

With respect to the U.S.  distribution  business,  in December  2000 the Company
determined that, primarily as a result of a significant contraction in sales and
continuing  substantial  operating  losses,  such business 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 "Liquidity and Capital Resources" below.

Optisel Business

With the significant  contraction of the U.S. distribution business, the Company
began  exploring  possibilities  for leveraging its  distribution  and logistics
capabilities  to  generate   services  revenue   utilizing  the  Company's  core
competencies.  Following  the sale of MOCA,  on  November  10,  2000 the Company
acquired  substantially all the assets of Charlottesville,  Virginia-based Value
America,  Inc. for a purchase price of $2,375,000.  Through the Company's  newly
formed subsidiary Optisel, the Company will conduct its logistics and electronic
services  business,   offering  a  complete  turnkey   e-commerce   solution  to
manufacturers and retailers who sell their products through traditional channels
and are looking to move into the e-commerce  arena.  Optisel will provide future
clients  with a  front-end  Web-based  customer  interface  and other  e-service
offerings,  including  marketing and advertising  services,  web development and
design,  and interactive call center management and customer service,  that will
complement  Merisel's existing back-end  logistics and distribution  capability.
The Company expects to complete the  development of the front-end  interface and
required systems integration by the end of the third quarter of 2001. Optisel is

<PAGE>

recruiting  customers  for its  existing  back-end  logistics  and  distribution
capability  prior to completion of the front-end  interface.  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 is providing  fee-based
distribution  and logistics  services and IT services for MOCA.  The  agreement,
which provided for a minimum  six-month term, has been extended  through the end
of July and may be extended at Arrow's  option  through the end of October  2001
and beyond with mutual  agreement of the parties.  Optisel will not generate any
additional  revenues  until at least  mid-2001,  and is not  expected to achieve
break-even results until 2002 or later. Optisel currently employs 61 associates,
excluding  IT  resources  shared with the  Canadian  distribution  and  software
licensing businesses, and is expected to have direct operating expenses for 2001
of between $5,000,000 and $8,000,000.

Results of Operations

Including  discontinued   operations,   the  Company  reported  a  net  loss  of
$95,787,000,  or $12.01  loss per  share,  for 2000,  compared  to a net loss of
$61,168,000, or $7.62 loss per share, for 1999 and net income of $18,510,000, or
$2.30 per  diluted  share,  for 1998.  These  results  include  net income  from
discontinued  operations of  $20,757,000,  $25,234,000 and $16,959,000 for 2000,
1999 and 1998, respectively. The discussion and analysis below is limited to the
Company's continuing operations and includes the U.S. distribution business.

Comparison of Fiscal Years Ended December 31, 2000 and December 31, 1999

The  Company's  net  sales  decreased  50.5%  from  $4,231,396,000  in  1999  to
$2,093,529,000  for the year ended December 31, 2000. Net sales for 2000 include
$660,216,000  generated by the Canadian  distribution  business.  This  decrease
resulted  from  sales  declines  of 56.7% and 28.7%  for the U.S.  and  Canadian
distribution  businesses,  respectively.  The  decrease  in net  sales for these
businesses was due to a number of factors. The decrease experienced in the first
part of 2000 primarily resulted from  restructuring  activities during the first
half of the first  quarter  and from  decreased  customer  orders in reaction to
Merisel's price changes implemented in the latter half of the first quarter. The
decline in sales contributed to excess inventory  positions resulting in a delay
in some vendor payments while  inventory  levels were reduced to be in line with
the lower sales levels. These circumstances, combined with vendor concern caused
by the bankruptcy filings of three major  distributors  during the first half of
2000,  contributed to a significant loss of vendor credit support.  This loss of
credit support affected the Company's ability to obtain sufficient  inventory in
the U.S. distribution business, which significantly reduced product availability
and caused further declines in sales for the U.S. distribution business, leading
to the ultimate decision to wind down the U.S. distribution business. Management
believes  that  the  sales  decline  experienced  by the  Canadian  distribution
business  resulted  primarily from management's need to focus on problems in the
U.S.  distribution  business and diminished vendor credit support, due primarily
to heightened vendor concerns regarding the U.S.  business,  and related product
availability  challenges.  Revenues  for the  Optisel  business  for  2000  were
$1,587,000,  all of  which  were  generated  by  the  MOCA  transition  services
agreement.

In the Canadian  distribution  business,  hardware and accessories accounted for
78% of net sales and software  accounted for 22% of net sales for the year ended
December 31, 2000 as compared to 81% and 19%, respectively,  for such categories
for the year ended December 31, 1999. The U.S.  distribution business will focus
solely on software licensing in the future.

Gross profit  decreased 60% from  $185,302,000  in 1999 to  $73,418,000 in 2000,
which primarily reflects the decline in sales in the 2000 period and adjustments
to inventory, accounts receivable and vendor related reserves to reflect current
realizable  value.  Gross  profit as a  percentage  of sales,  or gross  margin,
decreased  from 4.38% in 1999 to 3.51% in 2000.  Gross  margins in the U.S.  and
Canadian distribution businesses were 2.53% and 5.51%,  respectively,  for 2000,
compared to 3.90% and 6.10%,  respectively,  for 1999.  Additional  factors that
contributed to lower margins were the sale of products by the U.S.  distribution
business at cost during the  wind-down  period, a shift in product mix toward
lower margin products, and lower back-end rebates.


<PAGE>




Selling,  general and administrative  expenses decreased by $35,238,000 or 16.6%
from  $211,990,000  for the year ended December 31, 1999 to $176,752,000 for the
year ended December 31, 2000. Selling,  general and administrative expenses as a
percentage  of sales  increased  from 5.0% of sales in 1999 to 8.4% for the same
period in 2000,  due  primarily  to reduced  sales  volumes in relation to fixed
costs.

During the third quarter of 2000,  the Company  announced a  restructuring  plan
that would significantly  reduce its facilities and workforce.  As a result, the
Company  recorded a restructuring  charge of $10,964,000 in the third quarter of
2000. 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. As a result,
the Company recorded a restructuring  charge of $6,672,000 in the fourth quarter
of 2000.

During 2000, the Company  recorded  aggregate  impairment  losses of $52,833,000
consisting of a second quarter  charge of $19,487,000  related to the impairment
of goodwill attributable to the U.S. distribution business, a $20,808,000 fourth
quarter  charge to adjust the  carrying  value of the  Company's  SAP  operating
system  to its fair  value,  and  third  and  fourth  quarter  charges  totaling
$12,538,000 for impairment of redundant and non-used assets primarily  resulting
from the restructuring and wind-down of the U.S. distribution business.

As a  result  of the  above  items,  the  Company  had an  operating  loss  from
continuing  operations  of  $173,803,000  for the year ended  December  31, 2000
compared to an operating  loss of  $45,688,000  for the year ended  December 31,
1999.  Excluding  the  restructuring-related  charges  and the asset  impairment
charges, the Company would have had an operating loss of $103,334,000 in 2000.

Interest Expense; Other Expense; Income Tax Provision

Interest  expense for the Company  decreased 38.8% from $17,849,000 for the year
ended  December 31, 1999 to  $10,920,000  for the year ended  December 31, 2000,
which was  primarily a result of  purchases by the Company of  outstanding  debt
securities. See "Extraordinary Gain" below.

Other  expense for the Company  decreased  from  $21,926,000  for the year ended
December  31, 1999 to  $5,382,000  for the year ended  December  31,  2000.  The
decrease  is  primarily  related  an  $8,917,000  gain  recorded  on the sale in
September 2000 of the building in El Segundo, California owned by the Company, a
$1,538,000 gain recorded on the sale of the Company's Marlborough, Massachusetts
call center in January 2000 and a $7,810,000  reduction in asset  securitization
fees related to lower balances  outstanding during the year as a result of lower
sales.

The income tax provision decreased from $939,000 for the year ended December 31,
1999 to $620,000 for 2000. 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  income  taxes.  The
Company has not recognized a tax provision  benefit in either year, having fully
utilized its ability to carryback  those losses and obtain refunds of taxes paid
in prior  years.  A  valuation  allowance  has been  fully  established  against
available  net  operating  loss  carry  forwards.  See  "Notes  to  Consolidated
Financial Statements - Note 11 - Income Taxes".

Extraordinary Gain

During 2000, the Company purchased  $101,197,000  aggregate  principal amount of
its  outstanding  12-1/2%  Senior  Notes due 2005  (the  "12.5%  Notes")  for an
aggregate  cost  of  $50,982,000.   As  a  result,  the  Company  recognized  an
extraordinary  gain, net of unamortized  debt issuance costs,  of  approximately
$49,003,000 in 2000.


<PAGE>



Consolidated Net Loss

The Company reported a net loss of $61,168,000, or $7.62 loss per share, in 1999
compared to a net loss of $95,787,000, or $12.01 loss per share, in 2000.

Comparison of Fiscal Years Ended December 31, 1999 and December 31, 1998

The  Company's  net  sales  increased  7.5%  from   $3,937,930,000  in  1998  to
$4,231,396,000 for the year ended December 31, 1999. This increase resulted from
sales  growth  of  6.7%  and  10.3%  for  the  U.S.  and  Canadian  distribution
businesses,  respectively.  Sales growth  resulted  primarily from growth in the
retail customer and national/major customer groups.

In the Canadian  distribution  business,  hardware and accessories accounted for
81% of net sales and software  accounted for 19% of net sales for the year ended
December 31, 1999 as compared to 82% and 18%, respectively,  for such categories
for the year ended December 31, 1999.

Gross profit decreased 14.3% from  $216,279,000 in 1998 to $185,302,000 in 1999.
Gross profit as a percentage of sales, or gross margin,  decreased from 5.49% in
1998 to 4.38% in 1999.  Gross  margins  in the U.S.  and  Canadian  distribution
businesses were 3.90% and 6.10%,  respectively,  for 1999, compared to 5.33% and
6.08%,  respectively,  for 1998. Margins for the U.S. distribution business were
negatively  affected by (i) changing  vendor terms and  conditions,  including a
reduction in vendor rebates and an increase in price protection  exposure,  (ii)
competitive  pricing  pressures,  and (iii) sales of comparatively  lower margin
systems  product  increasing at a greater rate than higher  margin  product as a
result of a significant increase in sales of Compaq product following the launch
of Compaq's Distributor Alliance Program under which the Company was one of four
distributors  and resellers able to source product  directly from Compaq.  Gross
profit for 1999 was further negatively  affected by an $8.1 million charge taken
in  the   fourth   quarter   of   1999   reflecting   higher   than   historical
inventory-related  provisions.  That charge is in  addition to the  obsolescence
reserves that are accrued in the normal course of business  throughout the year,
and was taken to address the increased  exposure related to inventory on hand at
December 31, 1999 due in part to the factors noted above. Excluding this charge,
gross margins would have been 4.57%.

Selling,  general and administrative  expenses increased by $31,900,000 or 17.7%
from  $180,090,000  for the year ended December 31, 1998 to $211,990,000 for the
year ended December 31, 1999. Selling,  general and administrative expenses as a
percentage  of sales  increased  from 4.6% of sales in 1998 to 5.0% for the same
period in 1999.  Contributing  to the  increase  for the year were  depreciation
expenses   related  to  the  SAP  R/3  operating   system  and  other  strategic
initiatives,  which were part of an overall increase in depreciation  expense of
$11,289,000,  or an increase from  $10,046,000 in 1998 to $21,335,000  for 1999.
Additionally,  the  Company  incurred  $1,821,000  in post  "go-live"  costs for
expenses associated with the SAP implementation; and payroll and payroll-related
costs of employees  directly  associated  with the SAP  project,  which had been
capitalized in periods prior to implementation.  Costs associated with Year 2000
compliance  of  approximately  $2,179,000  were also incurred  during 1999.  The
remaining  increase in  selling,  general and  administrative  expenses  relates
primarily to increased variable costs in support of sales growth.

Results  for the year also  reflected  the  $21,000,000  charge  recorded by the
Company  in  the  first  quarter  of  1999  relating  to the  settlement  of the
litigation  pending in Delaware  Chancery  Court between the Company and certain
holders and former holders of the 12.5% Notes,  offset in part by the $9,000,000
insurance recovery recorded by the Company in the second quarter.

In  connection  with  the  Company's  plan to  combine  its  U.S.  and  Canadian
distribution  businesses  announced in December 1999, the Company  evaluated the
fixed asset  investments  that were made to support those business  units.  As a
result, in the fourth quarter of 1999 the Company recorded a $3,800,000 non-cash
asset  impairment   charge  related  to  redundant  assets  resulting  from  the
combination.

In the fourth quarter of 1999, the Company  announced  that, in connection  with
the  combination  of its U.S. and  Canadian  distribution  businesses,  it would
reduce its  workforce by  approximately  400  full-time  positions.  The planned
reduction,  which was effective in January 2000,  was  accomplished  through the
elimination  of  duplicative  positions  in  marketing,  product  and  inventory
management,  and sales  under  the  newly  formed  North  American  distribution
business unit, and by the realignment of finance and  administrative  functions.
This workforce  reduction included the elimination of approximately 85 full-time
positions  through the sale of the Company's  Marlborough call center during the
first  quarter of 2000 and the  anticipated  reduction of another 125  positions
through  not  filling  attrition-related  vacancies.  As a result,  the  Company
recorded a restructuring charge of $3,200,000 in the fourth quarter of 1999 that
primarily  consists  of  termination   benefits  including   severance  pay  and
outplacement  services to be provided to the  approximately  190 employees  that
were involuntarily affected by the reduction in workforce.


<PAGE>



As a result of the above items, the Company had an operating loss of $45,688,000
for the year ended December 31, 1999 compared to operating income of $36,189,000
for the year  ended  December  31,  1998.  Excluding  the  restructuring-related
charge,  the asset impairment charge and the  litigation-related  charge, net of
related recovery, taken in 1999, the Company would have had an operating loss of
$26,688,000 in 1999.

Interest Expense; Other Expense; Income Tax Provision

Interest  expense for the Company  increased 4.2% from  $17,125,000 for the year
ended  December 31, 1998 to  $17,849,000  for the year ended  December 31, 1999.
This  increase was  primarily  attributable  to increases in average  borrowings
outstanding under the Company's revolving line of credit.

Other  expense for the Company  increased  from  $17,096,000  for the year ended
December 31, 1998 to  $21,926,000  for the year ended  December  31,  1999.  The
increase is primarily  attributable to an increase in asset  securitization fees
due to increased sales of accounts  receivable and an increase in the underlying
rate associated with the fees that the Company pays on the sale of receivables.

The income tax provision increased from $417,000 for the year ended December 31,
1998 to $939,000 for 1999. 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  income  taxes.  The
Company did not recognize a tax provision  benefit in either year,  having fully
utilized its ability to carryback  those losses and obtain refunds of taxes paid
in prior years. The provision for 1999 also includes  approximately  $400,000 in
reserves  against tax exposure related to outstanding tax issues under review by
tax agencies. See "Notes to Consolidated Financial Statements - Note 11 - Income
Taxes."

Consolidated Net Income

The Company  reported net income of $18,510,000,  or $2.30 per diluted share, in
1998 compared to a net loss of $61,168,000, or $7.62 loss per share, in 1999.


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 Canadian
distribution and U.S. software licensing  businesses.  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,  in  Canada,  the  Company's  net sales in the  first  and  fourth
quarters  have  been  historically  higher  than  in  its  other  two  quarters.
Management believes that the pattern of higher first and fourth quarter sales is
partially  explained by buying patterns of Canadian  government  agencies in the
first  quarter and  customer  buying  patterns  relating  to  calendar  year-end
business  and  holiday  purchases  in the  fourth  quarter.  As a result of this
pattern,  the Company's working capital  requirements in the fourth quarter have
typically been greater than other  quarters.  The Company  expects that it would
also experience this type of seasonality in its Optisel business.
See "Liquidity and Capital Resources."

Liquidity and Capital Resources

Cash Flows Activity for the Year Ended December 31, 2000

Net cash used by operating  activities of continuing  operations during the year
ended December 31, 2000 was  $70,764,000.  The primary use of cash is a decrease
in accounts payable of $371,382,000 and the net loss for the year, excluding the
non-cash charges for depreciation and bad debt provisions.  The accounts payable
decrease was primarily the result of the

<PAGE>


termination  of vendor  relationships  of the U.S.  distribution  business.  The
decrease  was offset by declines in inventory  of  $300,157,000  and in accounts
receivable  of  $77,613,000,  both of which were also  primarily  related to the
wind-down of the U.S. distribution business excluding software licensing.

Net cash provided by investing  activities in 2000 was  $132,353,000 and related
to cash  proceeds  of  $14,123,000  from the sale of the  Company's  El  Segundo
building in September  2000,  cash proceeds of  $1,765,000  from the sale of the
Marlborough,  Massachusetts  call  center in January  2000 and cash  proceeds of
$120,593,000 from the sale of MOCA in October 2000.

Net cash used for  financing  activities in 2000 was  $42,730,000  and consisted
primarily of $50,982,000 used to purchase  $101,197,000  aggregate  principal of
the 12.5% Notes,  which was offset by  $15,000,000 of proceeds from the issuance
of Convertible  Preferred.  In addition,  $6,807,000 was used to make repayments
under capitalized lease obligations and promissory notes,  including  $4,057,000
related to the El Segundo building sold in September 2000.

Cash Flows Activity for the Year Ended December 31, 1999

Net cash provided by operating  activities of continuing  operations  during the
year ended  December  31,  1999 was  $20,553,000.  The  primary  sources of cash
include  a  decrease  in  inventory  of  $99,344,000,  a  decrease  in  accounts
receivable  of $8,571,000  and a decrease in other  prepaid and tax assets.  The
inventory decrease resulted in part from a stricter enforcement of payment terms
by some of the Company's  larger  vendors,  which  impacted  credit  lines.  The
Company also took actions to reduce inventory in order to counter inventory risk
associated with changing vendor terms and  conditions,  particularly  related to
price protection  policies.  The decrease in receivables is related primarily to
decreased  marketing and cooperative  advertising  and other vendor  receivables
resulting from changes in vendor programs and a decreased volume of pass-through
programs.  The primary  uses of cash were a  $48,316,000  reduction  in accounts
payable  and the net loss for the  year,  excluding  the  non-cash  charges  for
depreciation  and bad debt  provisions.  Accounts  payable  declined  due to the
decrease in inventory  noted above and to the stricter  enforcement  of terms by
major manufacturers to more closely match payables with inventory levels.

Net cash used in investing  activities in 1999 consisted of capital expenditures
of $29,013,000. The expenditures were primarily related to costs associated with
information  systems,  including systems for enhancing  electronic  services and
growing  the  Company's  infrastructure,  developing  and  implementing  the SAP
operating  system,   developing  the  Company's  configuration  and  co-location
capabilities, and upgrading warehouse systems and other Company facilities.

Net cash used by financing in 1999 was $3,145,000 and was comprised primarily of
scheduled repayments against promissory notes outstanding.


Cash Flows Activity for the Year Ended December 31, 1998

Net cash provided by operating  activities of continuing  operations  during the
year ended  December  31,  1998 was  $53,066,000.  The  primary  sources of cash
include an increase in accounts  payable of  $126,734,000.  The primary  uses of
cash were an increase in accounts  receivable of $44,269,000  and an increase in
inventory of $52,806,000.  The increase in accounts  receivable is primarily the
result of increased  sales  during 1998.  The increase in inventory is primarily
attributable to large purchases near the end of the fourth quarter made with the
expectation of a higher sales volume that did not  materialize.  The increase in
inventories also contributed to the increase in accounts payable.

Net cash used in investing  activities in 1998 consisted of capital expenditures
of $50,067,000. The expenditures were primarily related to costs associated with
development of SAP and with other information systems as well as the purchase by
the Company of its call center facility in Cary, North Carolina.

Net cash used by financing  in 1998 was $891,000 and was  comprised of scheduled
debt  payments  of  $1,572,000,  offset in part by  proceeds  received  from the
issuance of common stock.




<PAGE>


Debt Obligations, Financing Sources and Capital Expenditures

During 2000, the Company purchased  $101,197,000  aggregate  principal amount of
its 12.5% Notes for an aggregate cost of $50,982,000.  As a result,  the Company
recognized an  extraordinary  gain, net of unamortized  debt issuance  costs, of
approximately  $49,003,000  in 2000.  At December  31, 2000,  Merisel,  Inc. had
outstanding  $23,803,000  principal  amount of the 12.5% Notes. In January 2001,
the Company purchased an additional $20,175,000 of the 12.5% Notes, reducing the
outstanding  balance of the 12.5% Notes to  $3,628,000,  which were  redeemed in
February 2001. 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.

Merisel Americas was party to a Loan and Security Agreement dated as of June 30,
1998 with Bank of America NT&SA,  acting as agent,  that provided for borrowings
on a revolving basis. In October 2000, the Company cancelled the facility.

The Company has  historically  obtained a large  portion of its working  capital
financing  under   receivables   securitization   facilities.   Under  its  U.S.
securitization  facility,  the Company  would sell its trade  receivables  on an
ongoing basis to its wholly owned  subsidiary  Merisel  Capital  Funding,  Inc.,
which in turn would sell such receivables to a securitization company,  yielding
proceeds  equal to a  percentage  of the  receivables  that  had  been  sold and
remained  outstanding  at any point in time. In connection  with the sale of the
MOCA  business  to  Arrow,  the U.S.  securitization  facility  was  amended  to
terminate  MOCA's  participation  in the facility upon completion of the sale to
Arrow.  The  amendment  also reduced the maximum  proceeds  available  under the
facility to $60 million  through  November  15,  2000 and to  declining  amounts
thereafter  until the  termination  of the  facility  on January 31,  2001.  The
Company terminated the facility on November 3, 2000.

Effective  December 15, 1995,  Merisel Canada,  Inc.  ("Merisel Canada") entered
into a receivables  purchase agreement with a securitization  company to provide
funding for Merisel Canada.  In accordance  with this agreement,  Merisel Canada
sold  receivables  to the  securitization  company,  yielding  proceeds of up to
$150,000,000  Canadian  dollars at any point in time.  The agreement  expired on
January  12,  2001,  at which date  Merisel  Canada  entered  into an  agreement
providing for a new financing facility described below.

Under the securitization facilities, the receivables are sold at face value with
payment of a portion of the purchase  price being  deferred.  As of December 31,
2000,  the total  amount  outstanding  under the Merisel  Canada  agreement  was
$46,941,000.  Fees incurred in connection  with the sale of accounts  receivable
under all agreements  for the years ended  December 31, 2000,  December 31, 1999
and  December  31,  1998  were   $11,948,000,   $19,744,000,   and  $17,096,000,
respectively, and are recorded as other expense.

Merisel  Canada is party to a Loan  Agreement  dated as of January 12, 2001 (the
"Loan Agreement") with Congress Financial Corporation (Canada),  acting as agent
(the  "Agent"),  that  provides for  borrowings on a revolving  basis.  The Loan
Agreement  permits  borrowings of up to  CDN$100,000,000  outstanding at any one
time (including  face amounts of letters of credit),  subject to meeting certain
availability  requirements under a borrowing base formula and other limitations.
Borrowings under the Loan Agreement are secured by a pledge of substantially all
of  Merisel  Canada's  assets,  including  inventory  and  accounts  receivable.
Borrowings  bear interest at the prime rate of a Canadian bank designated by the
Agent plus 0.75%, for Canadian  dollar-denominated loans, at the prime rate of a
U.S. bank designated by the Agent plus 0.25%, for U.S. dollar-denominated loans,
or at LIBOR plus 2% for  Eurodollar  loans.  A fee of 0.25% per annum is payable
with respect to the unused portion of the  commitment.  The Loan Agreement has a
termination date of January 12, 2004. As of March 30, 2001,  CDN$85,583,000  was
outstanding  under  the Loan  Agreement.  The Loan  Agreement  contains  various
covenants  that provide for,  among other  things,  the  maintenance  of certain
financial ratios and certain other restrictions.

In  June  2000,  an  affiliate  of  Stonington   Partners,   Inc.,   which  owns
approximately 62.4% of the Company's outstanding common stock, purchased 150,000
shares of 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.  At December 31, 2000,  $677,000 of accrued dividends
was recorded.

At  December  31,  2000,  the  Company  had  $46.9  million  in  cash  and  cash
equivalents.  At March 30, 2001,  the Company had $40.9 million in cash and cash
equivalents,  which  reflects  the  receipt of a net $36.25  million  additional
payment  from  Arrow  in  connection  with the sale of  MOCA.  See  "Overview  -
Discontinued Operations" above.


<PAGE>



With respect to the Company's Canadian distribution  business, in the opinion of
management, anticipated cash from operations in 2001, together with trade credit
from vendors and borrowings  under Merisel  Canada's  revolving credit facility,
will be sufficient to meet Merisel Canada's requirements for the next 12 months,
without the need for  additional  financing or cash  contributions  from Merisel
Americas.  Those requirements  include anticipated capital  expenditures of less
than  CDN$2,000,000  during  2001.  This  assumes,  however,  that there are not
material  adverse changes in Merisel  Canada's  relationships  with its vendors,
customers or lenders.  Any unforeseen event that adversely  impacts the industry
or Merisel  Canada's  position in the industry  could have a direct and material
unfavorable effect on the liquidity of Merisel Canada.

With  respect to the  Company's  U.S.  operations,  the Company has  obligations
relating  to the  wind-down  of the U.S.  distribution  business  in addition to
working  capital and capital  expenditure  requirements  related to its software
licensing and Optisel businesses.  The Company expects that expenditures related
to the wind-down will consume a substantial amount of the Company's cash balance
at March 31, 2001 and  believes  the  aggregate  amount  could be as high as $15
million to $20 million.  A large portion of those  expenditures  will be made in
2001.  The Company  presently  anticipates  that  capital  expenditures  for its
Optisel and software licensing  businesses will be between $4.0 million and $7.0
million for 2001.  Management  believes  that,  with its current cash,  expected
revenues and cash flow from U.S. operations, and its ability to reduce operating
expenses, it has sufficient liquidity for the next 12 months.

Inflation

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

Asset Management

Merisel's  Canadian  distribution  business  attempts  to manage  its  inventory
position to maintain levels sufficient to achieve high product  availability and
same-day order fill rates.  Inventory levels may vary from period to period, due
to factors  including  increases  or  decreases  in sales  levels,  special term
large-volume purchases,  and the addition of new manufacturers and products. The
distribution  agreements  entered  into  between  the  Company  and its  vendors
generally provide Merisel with stock-balancing and  price-protection  provisions
that  partially  reduce  Merisel's  risk of loss due to  slow-moving  inventory,
supplier price  reductions,  product  updates or  obsolescence.  Stock balancing
provisions  typically  give the  distributor  the right to return  for credit or
exchange for other products a portion of the inventory items purchased, within a
designated  period  of time,  but are not  generally  provided  by the  major PC
systems manufacturers.  Under price-protection provisions, suppliers will credit
the  distributor  for declines in inventory  value resulting from the supplier's
price  reductions if the distributor  complies with certain  conditions.  In the
past few years,  certain major PC manufacturers have reduced the availability of
price  protection for  distributors.  Through buying  procedures and controls to
manage inventory purchases, the Company seeks to reduce future potential adverse
impact from these changes while balancing the need to maintain sufficient levels
of inventory.  There is no assurance that such efforts will be successful in the
future in preventing a material adverse effect on the Company.

The Company  offers  credit terms to  qualifying  customers  and also sells on a
prepay,  early-pay,  credit card and  cash-on-delivery  basis. In addition,  the
Company has  developed a number of customer  financing  alternatives,  including
escrow  program.  The Company also  arranges a wide variety of programs  through
which  third  parties  provide  financing  to  certain of its  customers.  These
programs  include floor plan financing and hardware and software  leasing.  With
respect to credit sales,  the Company  attempts to control its bad debt exposure
by  monitoring  customers'  creditworthiness  and,  where  practicable,  through
participation  in  credit  associations  that  provide  customer  credit  rating
information for certain  accounts.  In addition,  the Company  purchases  credit
insurance as it deems  appropriate.  If the Company's  receivables  experience a
substantial  deterioration  in their  collectibility  or if the  Company  cannot
obtain credit insurance at reasonable rates, the Company's  financial  condition
and results of operations may be adversely impacted.

Item 7A. Quantitative and Qualitative Market Risk Disclosure

Investments

At December 31, 2000, the Company had cash  investments  of $45,131,000  held in
overnight,   interest-bearing  accounts  invested  through  high-credit  quality
financial institutions.


<PAGE>



Foreign Currency Risk

The Company  purchases  forward dollar contracts to hedge commitments to acquire
inventory for sale and to hedge short-term advances to its Canadian  subsidiary.
The Company does not use the contracts for speculative or trading  purposes.  At
December  31,  2000,  the  Company  had seven  short-term  U.S.  dollar  forward
contracts with a face value of approximately  $22,000,000 outstanding.  The size
of the contracts  ranged from $500,000 to  $10,726,000  with a weighted  average
contract  value of  approximately  $3,100,000.  Forward  rates on the  contracts
ranged from 1.520 to 1.549 with the weighted average forward rate  approximating
1.542. The contracts matured at various dates in January 2001.

Long-term Debt

With respect to its outstanding  debt, the Company is subject to risk related to
fluctuations  in market  interest  rates.  The table below provides  information
concerning fixed rate long-term debt outstanding at December 31, 2000, including
principal amounts maturing each year,  average interest rate and fair value. All
of such debt was redeemed during the quarter ended March 31, 2001.

<TABLE>
<CAPTION>
                                                                                                Total
                               2001        2002        2003         2004          Total       Fair Value
                               ----        ----        ----         ----          -----       ----------
<S>                         <C>             <C>         <C>          <C>       <C>            <C>
12.5% Senior Notes          23,803,000      0           0            0         23,803,000     20,930,557
Average Interest Rate         12.5%       12.5%       12.5%        12.5%          12.5%
</TABLE>



Asset Securitization

Fees incurred in connection with the sale of trade accounts receivable under the
Company's asset  securitization  agreements  typically are based upon commercial
paper rates.  As of December 31, 2000,  the total amount  outstanding  under the
Canadian asset securitization  agreement was $46,941,000 and the average cost of
securitization   was  approximately   5.02%.   During  2000,  the  total  amount
outstanding under this agreement averaged $63,806,000,  and the weighted average
cost of securitization was 6.46%.






<PAGE>


Item 8. Financial Statements and Supplementary Data.


                          INDEPENDENT AUDITORS' REPORT



Merisel, Inc.:

We have audited the accompanying  consolidated  balance sheets of Merisel,  Inc.
and subsidiaries as of December 31, 1999 and 2000, and the related  consolidated
statements of operations,  changes in stockholders'  equity,  and cash flows for
each of the three years in the period ended  December 31, 2000.  Our audits also
included the financial  statement  schedule  listed at Item 14. 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  and  the  financial
statement  schedule,   when  considered  in  relation  to  the  basic  financial
statements  taken as a whole,  present  fairly,  in all material  respects,  the
financial  position of Merisel,  Inc. and  subsidiaries at December 31, 1999 and
2000,  and the results of their  operations and their cash flows for each of the
three years in the period ended December 31, 2000 in conformity  with accounting
principles generally accepted in the United States of America.

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,  as discussed
in Note 5, 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.



DELOITTE & TOUCHE LLP

Los Angeles, California
April 12, 2001



<PAGE>
<TABLE>
<CAPTION>


                         MERISEL, INC. AND SUBSIDIARIES

                           CONSOLIDATED BALANCE SHEETS
                        (In thousands, except share data)

                                                                                               December 31,
                                                                                            1999         2000
                                        ASSETS

<S>                                                                                     <C>              <C>
Current assets:
     Cash and cash equivalents.......................................................   $    57,557  $    46,865
     Accounts receivable (net of allowances of $12,974 and $25,218 at December              152,631       34,364
        31, 1999 and 2000, respectively).............................................
     Inventories....................................................................        364,438       60,859
     Prepaid expenses and other current assets.......................................         9,433        4,258
     Deferred income taxes...........................................................           914          880
     Net assets of discontinued operations...........................................        43,136
                                                                                          ----------    ---------
          Total current assets.......................................................       628,109      147,226
Property and equipment, net..........................................................        83,885       27,054
Cost in excess of net assets acquired, net...........................................        23,755        3,666
Other assets                                                                                    457          335
                                                                                          ----------    ---------
     Total assets....................................................................   $   736,206  $   178,281
                                                                                          ==========    =========
                         LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:
     Accounts payable................................................................   $   474,859  $    99,057
     Accrued liabilities.............................................................        33,004       40,640
     Long-term debt and capitalized lease obligations--current.......................         2,906        1,363
                                                                                          ----------    ---------
          Total current liabilities..................................................       510,769      141,060
Long-term debt.......................................................................       128,900       23,803
Capitalized lease obligations........................................................         1,364

Commitments and contingencies

Stockholders' equity:
        Convertible preferred stock, $.01 par value; authorized 1,000,000 shares;
        150,000 shares issued and outstanding........................................                     15,677
     Common stock,  $.01 par value;  authorized  15,000,000  shares;  issued and
        outstanding  8,027,881  and  8,030,905  shares at December  31, 1999 and
        2000,
        respectively.................................................................           803          803
     Additional paid-in capital......................................................       282,492      281,896
     Accumulated deficit.............................................................      (179,663)    (275,450)
     Accumulated other comprehensive loss............................................        (8,459)      (9,508)
                                                                                          ----------    ---------
          Total stockholders' equity.................................................        95,173       13,418
                                                                                          ----------    ---------
     Total liabilities and stockholders' equity......................................   $   736,206  $   178,281
                                                                                          ==========    =========


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



<PAGE>
<TABLE>
<CAPTION>


                         MERISEL, INC. AND SUBSIDIARIES

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

                                                                          For the Years Ended December 31,
                                                                          1998           1999          2000
<S>                                                                  <C>            <C>            <C>
Net sales..........................................................  $  3,937,930   $  4,231,396   $  2,093,529
Cost of sales......................................................     3,721,651      4,046,094      2,020,111
                                                                     ------------   ------------   ------------
Gross profit.......................................................       216,279        185,302         73,418
Selling, general and administrative expenses.......................       180,090        211,990        176,752
Restructuring charge...............................................                        3,200         17,636
Impairment losses..................................................                        3,800         52,833
Litigation-related charge..........................................                       12,000
                                                                     ------------   ------------   ------------
Operating income (loss)............................................        36,189        (45,688)      (173,803)
Interest expense, net..............................................        17,125         17,849         10,920
Other expense, net.................................................        17,096         21,926          5,382
                                                                     ------------   ------------   ------------
Income (loss)  from continuing operations
before income taxes and extraordinary item.........................         1,968        (85,463)      (190,105)
Income tax provision...............................................           417            939            620
Income (loss)  from continuing operations
before extraordinary item..........................................         1,551        (86,402)      (190,725)
Discontinued operations:
   Income from discontinued operations.............................        16,959         25,234         20,757
   Gain on sale of discontinued operations.........................                                      25,178
                                                                     ------------   ------------   ------------
Income (loss) before extraordinary item                                    18,510        (61,168)      (144,790)
Extraordinary gain on extinguishment of debt                                                             49,003
                                                                     ------------   ------------   ------------
Net income (loss)..................................................  $     18,510   $    (61,168)  $    (95,787)
                                                                     ============   ============    ===========

Net income (loss) per share (basic and diluted):
Income (loss) from continuing operations before extraordinary items
   available to common stockholders................................  $       .19    $    (10.76)   $    (23.83)
Discontinued operations:
   Income from operations..........................................         2.11           3.14           2.58
   Gain on sale....................................................                                       3.14
Extraordinary gain.................................................                                       6.10
                                                                     ------------   ------------   ------------
Net income (loss)available to common stockholders..................  $      2.30    $     (7.62)   $    (12.01)
                                                                     ============   ============    ===========
Weighted average number of shares:
   basic...........................................................         8,021          8,028          8,031
   diluted.........................................................         8,049          8,028          8,031
                                                                     ============   ============    ===========

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




<PAGE>
<TABLE>
<CAPTION>


                         MERISEL, INC. AND SUBSIDIARIES

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



                                                                                             Accumulated
                                                                   Additional                  Other
                            Preferred Stock      Common Stock        Paid-in    Accumulated  Comprehensive          Comprehensive
                            Shares   Amount    Shares    Amount    Capital      Deficit        Loss          Total      Income
                           -------- --------  --------   ------    --------     ---------    -----------    ------  -------------
<S>                       <C>        <C>      <C>        <C>       <C>         <C>            <C>          <C>        <C>
Balance  at  December  31, 1997              8,007,850  $   801    $ 281,701   $ (137,005)   $ (7,989)     $137,508
 Exercise of stock options
  and other................                     19,418        2          679                                    681
 Comprehensive Income:
   Translation adjustment..                                                                    (2,446)       (2,446) $     (2,446)
   Net income...........                                                           18,510                    18,510        18,510
                                                                                                                           ------
Total Comprehensive Income                                                                                               $ 16,064
                           -------- --------  --------   ------    --------     ---------    -----------    --------     =========
Balance at December 31, 1998                 8,027,268      803      282,380     (118,495)    (10,435)      154,253
  Exercise of stock options
   and other................                       613                   112                                    112
  Comprehensive Income:
    Translation adjustment..                                                                    1,976         1,976      $  1,976
    Net income...........                                                         (61,168)                  (61,168)      (61,168)
                                                                                                                        -----------
 Total Comprehensive Loss                                                                                               $ (59,192)
                           -------- --------  --------   ------    --------     ---------    -----------    --------     =========
Balance  at  December  31, 1999              8,027,881      803      282,492     (179,663)      (8,459)      95,173
 Sale of convertible
   preferred stock........  150,000  $15,000                                                                 15,000
   Accrual of convertible
     preferred stock
     dividend.............               677                            (677)
   Exercise of stock options
     and other............                       3,024                    81                                     81
   Comprehensive Income:
     Translation adjustment                                                                     (1,049)      (1,049) $     (1,049)
     Net loss.............                                                        (95,787)                  (95,787)      (95,787)
                                                                                                                          --------
Total Comprehensive Loss..                                                                                               $(96,836)
                           -------- --------  --------   ------    --------     ---------    -----------    --------     =========
Balance at December 31,
   2000                    150,000  $15,677  8,030,905     $803     $281,896    $(275,450)     $(9,508)     $13,418
                           ======== ========  ========   =======   ========     =========    ===========    ========

             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,
                                                                                     1998        1999       2000
                                                                                   --------     -------   --------
<S>                                                                             <C>             <C>       <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
    Net income (loss)...........................................................  $   18,510  $  (61,168)$  (95,787)
    Less: income from discontinued operations, net..............................      16,959      25,234     20,757
    Income (loss) from continuing operations....................................       1,551     (86,402)  (116,544)
    Adjustments to reconcile net (loss) income to net cash provided by
        operating activities:
        Depreciation and amortization...........................................      10,825      22,115     19,290
        Provision for doubtful accounts.........................................      12,585      14,442     38,991
        Impairment losses.......................................................                   3,800     52,833
        Deferred income taxes...................................................        (221)          2         34
        Gain on sale of property and equipment..................................                     (65)   (10,575)
        Gain on sale of MOCA....................................................                            (25,178)
        Restricted stock units compensation expense.............................                     100         22
        Extraordinary gain on extinguishment of debt............................                            (49,003)
        Changes in assets and liabilities
            Accounts receivable.................................................     (44,269)      8,571     77,613
            Inventories.........................................................     (52,806)     99,344    300,157
            Prepaid expenses and other current assets...........................       4,825       3,854      5,244
            Accounts payable....................................................     126,734     (47,221)  (371,382)
            Accrued liabilities.................................................      (6,158)      2,012      7,734
                                                                                  ------------  --------- -----------
                Net cash provided by (used for) operating activities............      53,066      20,552    (70,764)
                                                                                  ------------  --------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
    Purchase of property and equipment..........................................     (50,067)    (29,013)    (4,628)
    Proceeds from sale of MOCA..................................................                            120,593
    Proceeds from sale of property and equipment................................                             16,388
                                                                                  ------------  --------- -----------
               Net cash (used for) provided by investing activities.............     (50,067)    (29,013)   132,353
                                                                                  ------------  --------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
    Borrowings under revolving line of credit...................................      75,401     464,701     40,000
    Repayments under revolving line of credit...................................     (75,401)   (464,701)   (40,000)
    Proceeds from issuance of convertible preferred stock.......................                             15,000
    Purchase of bonds...........................................................                            (50,982)
    Repayments under other financing arrangements...............................      (1,572)     (3,157)    (6,807)
    Net proceeds from the issuance of convertible notes.........................
    Proceeds from issuance of common stock......................................         681          12         59
                                                                                  ------------  --------- -----------
                Net cash used for financing activities..........................        (891)     (3,145)   (42,730)
                                                                                  ------------  --------- -----------
EFFECT OF EXCHANGE RATE CHANGES ON CASH.........................................      (2,216)        852        641
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS
OF CONTINUING OPERATIONS........................................................        (106)     21,216    (10,692)
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR....................................      36,447      36,341     57,557
                                                                                  ------------  --------- -----------
CASH AND CASH EQUIVALENTS, END OF  PERIOD YEAR..................................  $   36,341  $   57,557 $   46,865
                                                                                  ============  ========= ===========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
    Cash paid(received) during the year for:
    Interest..................................................................... $   14,698  $   18,571 $   15,064
    Income taxes................................................................         655         309     (1,751)
    Noncash activities:
    Capital lease obligations entered into......................................       4,480         670
    Sale of property for note receivable........................................                                500
    Preferred dividend accrued..................................................                                677


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



<PAGE>




                         MERISEL, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                        DECEMBER 31, 1998, 1999 and 2000


1. Summary of Significant Accounting Policies

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").  Effective as of 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 November 10, 2000,  the Company
acquired  substantially all the e-services assets of Value America, Inc. ("Value
America")  through the Company's  newly formed  subsidiary  Optisel,  which will
leverage the Company's  distribution  and logistics  capabilities  to operate an
e-services  and  logistics  business.  As a result,  Merisel  today  operates  a
Canadian distribution business, a U.S. software licensing business and Optisel.

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.

Management's  Plan--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 and the
previous sale of MOCA, the Company's current operations consist primarily of its
Canadian  distribution   business,  a  new  logistics  and  e-services  business
operating as Optisel  which  includes  the  fulfillment  of  fee-based  services
provided to MOCA under a transition services agreement that currently expires in
July 2001,  but is extendible  through  October 2001,  and a software  licensing
distribution  business.  Primarily as a result of the Company's decision to wind
down its U.S.  distribution  business as well as the poor operating  performance
experienced  by  the  Canadian  distribution  business  and  the  United  States
distribution  business  prior to the decision to wind down its  operations,  the
Company  incurred  a net  loss  of  $95,787,000  in  2000  which  increased  its
accumulated deficit to $275,450,000 at December 31, 2000.

The Company has developed an operating plan for 2001 that focuses upon returning
its Canadian distribution business to profitability,  maximizing cash in winding
down its U.S.  distribution  business,  and  prudently  investing in the further
development  of Optisel and its  software  licensing  business.  At December 31,
2000, the Company had approximately  $46,865,000 of cash and cash equivalents on
hand.   Further,   on  January  12,  2001,  the  Company   entered  into  a  new
CDN$100,000,000  Loan Agreement with Congress  Financial  Corporation to support
the financing  and operating  needs of its Canadian  distribution  business.  On
March 19,  2001,  the Company  received  an  additional  $36,250,000  of cash in
connection  with the sale of MOCA.  Management  believes that,  with its cash on
hand,  anticipated cash from operations,  trade credit from vendors,  borrowings
under Merisel Canada's  revolving credit facility and, primarily with respect to
its U.S.  operations,  its ability to reduce  operating  expenses,  it will have
sufficient cash flow and working capital to meet the Company's  future operating
needs and cash requirements through December 31, 2001.


<PAGE>



                         MERISEL, INC. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)


As a result of the wind-down of the U.S. distribution  business, the Company has
made certain  estimates as to the carrying value of assets and liabilities.  The
most significant  estimates relate to the collection of accounts  receivable and
the recoverability of inventory and vendor-related  receivables. At December 31,
2000, the Company has recorded accounts receivable, inventory and vendor-related
reserves  associated  with  its  U.S.   distribution  business  of  $11,466,000,
$8,034,000  and  $28,719,000.  In the  opinion  of  management,  these  reserves
appropriately adjust these assets to their net realizable values.

Risks and Uncertainties--The  Company believes that the diversity and breadth of
its  products,  services and  customers in its  Canadian  distribution  business
significantly mitigate the risk that a material adverse impact will occur in the
near  term  as a  result  of  changes  in its  customer  base,  competition,  or
composition of its markets. However, continued pricing pressures, or the loss of
a major vendor, or other unanticipated  occurrences could result in a materially
adverse  impact to that  business.  Although  Merisel  Canada  regularly  stocks
products and accessories supplied by approximately 110 manufacturers, 58% of the
Company's  net sales for its  Canadian  businesses  in 2000  were  derived  from
products supplied by its ten largest vendors.

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, sales returns and recoverability of long-term assets.

New  Accounting  Pronouncements--Statement  of  Financial  Accounting  Standards
("SFAS") No. 133, Accounting for Derivative  Instruments and Hedging Activities,
is effective for all fiscal years  beginning  after June 15, 2000.  SFAS 133, as
amended and  interpreted,  establishes  accounting  and reporting  standards for
derivative  instruments,  including certain derivative  instruments  embedded in
other contracts, and for hedging activities. All derivatives, whether designated
in hedging  relationships or not, will be required to be recorded on the balance
sheet at fair value.  If the  derivative is  designated  in a fair-value  hedge,
changes  in the fair  value  of the  derivative  and the  hedged  value  will be
recognized currently in earnings. If the derivative is designated in a cash-flow
hedge,  changes in the fair value of the  derivative  will be  recorded in other
comprehensive  income ("OCI") and then  recognized in the income  statement when
the  hedged  item  affects  earnings.  SFAS 133  defines  new  requirements  for
designation  and  documentation  of  hedging  relationships  as well as  ongoing
effectiveness  assessments  in order to use hedge  accounting.  For a derivative
that does not  qualify as a hedge,  changes  in fair  value  will be  recognized
currently in  earnings.  The Company  expects  that at January 1, 2001,  it will
record approximately  $700,000 as a cumulative transition adjustment relating to
the adoption of SFAS 133.

In 2000, the Company  adopted the Securities and Exchange  Commission's  ("SEC")
Staff Accounting Bulletin No. 101 ("SAB 101"), "Revenue Recognition in Financial
Statements," SAB 101 summarized certain of the SEC's views on the application of
generally accepted accounting  principles to revenue  recognition.  There was no
material impact upon the consolidated  financial  statements as a result of this
adoption.

Revenue  Recognition,  Returns  and  Sales  Incentives--The  Company  recognizes
revenue from hardware and software  sales as products are shipped.  The Company,
subject to certain  limitations,  permits its customers to exchange  products or
receive  credits  against  future  purchases.  The Company  offers its customers
several  sales  incentive  programs  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.  The  allowances  for sales  returns  and costs of  customer
incentive programs are accrued concurrently with the recognition of revenue.


<PAGE>



                         MERISEL, INC. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)



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  expense  for  2000,  1999  and  1998  is net  of  interest  income  of
$3,400,000, $1,804,000 and $1,743,000, 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.

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

Cost in Excess of Net Assets  Acquired--Cost  in excess of net  assets  acquired
resulted from the  acquisition  in 1990 of  Compuserve,  a Canadian  division of
Microamerica,  Inc. Accumulated amortization was $1,874,000 and $1,910,000 as of
December  31,  1999 and 2000,  respectively.  The cost in  excess of net  assets
acquired is being  amortized  over a period of 40 years using the  straight-line
method.

Impairment of  Long-Lived  Assets--The  Company  reviews the  recoverability  of
intangible  assets,  including cost in excess of net assets acquired,  and other
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 4 -  "Impairment
Losses").

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

Concentration of Credit Risk--Financial  instruments that subject the Company to
credit risk consist  primarily of cash equivalents,  trade accounts  receivable,
and forward foreign currency exchange contracts.  The Company invests its excess
cash with high-quality financial institutions. Credit risk with respect to trade
accounts  receivable  is generally not  concentrated  due to the large number of
entities comprising the Company's customer base and their geographic dispersion.
The Company performs ongoing credit  evaluations of its customers,  maintains an
allowance  for  potential  credit losses and  maintains  credit  insurance.  The
Company actively evaluates the  creditworthiness  of the financial  institutions
with which it conducts business.

Fair Values of Financial  Instruments--The fair values of financial instruments,
other than long-term debt,  closely  approximate their carrying value because of
their  short-term  nature.  The estimated fair value of long-term debt including
current  maturities,  based on reference to quoted market prices,  was less than
its carrying value by approximately  $2,872,000 as of December 31, 2000 and less
than its carrying value by approximately $47,500,000 as of December 31, 1999.

Foreign Currency  Translation--Assets  and liabilities of the Company's Canadian
subsidiary  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. In addition,
the Company  advances  funds to its Canadian  subsidiary in the normal course of
business  that  are  not  expected  to be  repaid  in  the  foreseeable  future.
Translation  adjustments  resulting  from these  advances  are also  included in
Accumulated Other Comprehensive Loss.


<PAGE>



                         MERISEL, INC. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)


Foreign Exchange Instruments--The Company's use of derivatives is limited to the
purchase of spot and forward  foreign  currency  exchange  contracts in order to
minimize foreign exchange  transaction  gains and losses.  The Company purchases
forward Canadian and U.S. dollar  contracts to hedge short-term  advances to its
Canadian  subsidiary and to hedge  commitments to acquire inventory for sale and
does not use the  contracts  for trading  purposes.  As of December 31, 1999 and
2000,  there were  approximately  $65,380,000 and  $22,000,000,  respectively in
outstanding  foreign  exchange  contracts.  In 1998, 1999, and 2000, the Company
recorded net foreign  currency  transaction  losses of $1,885,000,  $264,000 and
$946,000, respectively. These amounts are included in other expense.

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

Fiscal  Periods--The  Company's  fiscal year is the 52-week period ending on the
Saturday  nearest to December 31 and its fiscal quarters are the 13-week periods
ending on the Saturday  nearest to March 31, June 30,  September 30 and December
31. For  clarity  of  presentation,  the  Company  has  described  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.

2. Litigation Related Charge

During  fiscal  year 1999,  a  $21,000,000  charge was  recorded  by the Company
relating to the settlement of the litigation  pending in Delaware Chancery Court
between  the Company and  certain  holders and former  holders of the  Company's
12-1/2%  Senior Notes due 2004 (the "12.5% Notes") which was offset in part by a
$9,000,000 insurance recovery received by the Company.

3. Restructuring Charges

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.

On December 14, 2000, the Company  announced its plan to wind down virtually all
of its U.S. distribution business. Pursuant to this plan, the Company recorded a
restructuring  charge  of  $6,672,000.  Approximately  $921,000  of  the  charge
consists of termination  benefits and $5,751,000  relates to lease  termination,
facility  closures,  and  other  costs for all but two of the  Company's  United
States locations.

During the fourth  quarter of 1999,  the Company  announced  that, in connection
with the combination of its U.S. and Canadian distribution businesses,  it would
reduce its  workforce by  approximately  400  full-time  positions.  The planned
reduction,  which was effective in January 2000,  was  accomplished  through the
elimination  of  duplicative  positions  in  marketing,  product  and  inventory
management,  and sales  under  the  newly  formed  North  American  distribution
business unit, and by the realignment of finance and  administrative  functions.
As a result,  the Company  recorded a restructuring  charge of $3,200,000 in the
fourth  quarter  of  1999  that  primarily  consisted  of  termination  benefits
including  severance  pay and  outplacement  services  to be  provided  to those
employees that were involuntarily affected by the reduction in workforce.



<PAGE>



                         MERISEL, INC. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)


As of December 31, 2000,  $13,743,000 of total  restructuring costs had not been
paid  and were  included  in  accrued  liabilities  on the  balance  sheet.  The
following table displays the activity and balances of the restructuring  reserve
account from December 31, 1999 to December 31, 2000:
<TABLE>
<CAPTION>

                                  December 31,       3rd Quarter         4th Quarter                       December 31, 2000
                                      1999          Restructuring       Restructuring        Payments           Balance
                                    Balance            Charges             Charges
<S>                               <C>                 <C>               <C>                 <C>                <C>
Type of cost:
Severance and related costs             2,740             7,098                 921            (5,545)             5,214
Facility, lease and other                 460             3,866               5,751            (1,548)             8,529
                                ----------------- ------------------- ------------------ ----------------- -------------------
Total                                   3,200            10,964               6,672            (7,093)            13,743
                                ================= =================== ================== ================= ===================

</TABLE>

4. Impairment Losses

As a result  of the  Company's  decision  to wind  down  its  U.S.  distribution
business and the previous sale of MOCA, the Company's Canadian  distribution and
software licensing businesses represent the only significant on-going businesses
utilizing  the Company's SAP  operating  system.  The carrying  value of SAP was
greater than the estimated  undiscounted operating cash flows expected to result
from these ongoing  businesses over the remaining expected life of SAP. As such,
in 2000 the Company  recorded an impairment  charge of $20,808,000 to adjust SAP
to its estimated fair market value using a discounted cash flow model.

Also in 2000,  as a result  of  continuing  losses,  the  Company  reviewed  the
recoverability of certain  identifiable  intangible assets to determine if there
had been any impairment. The review of the Company's intangible assets indicated
that  the  excess  of  cost  over  net  assets  acquired  related  to  the  U.S.
distribution  business  was  impaired.  Accordingly,  the  Company  recorded  an
impairment loss totaling  $19,487,000,  representing  the  unamortized  goodwill
attributable to the U.S. distribution business.

In both the quarter ended  September 30, 2000 and the quarter ended December 31,
2000, the Company announced  restructuring plans that significantly  reduced its
facilities and workforce.  In relation to this, the Company  evaluated the fixed
asset  investments  that  supported  these former  facilities  and personnel and
recorded a $12,538,000 impairment charge related to redundant and no longer used
assets.  A  $3,800,000  impairment  charge was also  recorded in 1999 related to
redundant and no longer used assets pursuant to a  restructuring  plan announced
in the fourth quarter of 1999.

5. Discontinued Operations

Effective as of October 27, 2000, the Company completed the sale to Arrow of its
MOCA  business  unit,   which  provides   enterprise-class   solutions  for  Sun
Microsystems  servers and the Solaris operating system to authorized  resellers.
The stock sale  agreement  pursuant  to which the sale was made  provided  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 $37,500,000  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  $179.8 million of which approximately $57.5 million
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  $25.2  million.  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 will be recorded
in the quarter ended March 31, 2001.

In  connection  with the  sale,  Merisel  and  Arrow  entered  into a  fee-based
transition  services  agreement  pursuant to which  Merisel  provides  logistics
management, order processing, configuration and information technology services.
The agreement  had an initial term of six months but has been  extended  through
July 27, 2001, and is extendible at Arrow's option through  October 31, 2001 and
beyond with mutual agreement of the parties.


<PAGE>



                         MERISEL, INC. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)


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

Summarized financial information for the discontinued operations is as follows:
<TABLE>
<CAPTION>

                                                                1998           1999      2000 (1)
                                                      --------------- -------------- -------------
<S>                                                   <C>             <C>            <C>

Net Sales                                                   $613,047       $957,283      $796,184
Cost of Sales                                                576,902        901,532       744,017
                                                      --------------- -------------- -------------

Gross Profit                                                  36,145         55,751        52,167

Selling, General & Administrative Expenses                    15,378         23,481        24,084
                                                      --------------- -------------- -------------

Operating Income                                              20,767         32,270        28,083

Other Expense                                                  3,808          7,036         7,326
                                                      --------------- -------------- -------------

Net Income                                                   $16,959        $25,234       $20,757
                                                      =============== ============== =============


(1)      Year 2000 data is for January through October 2000.
</TABLE>

                                                              At December 31,
                                                                    1999
                                                                    ---

Current Assets                                                   $112,001
Total Assets                                                      112,725
Current Liabilities                                                69,589
Total Liabilities                                                  69,589
Net assets of discontinued operations                              43,136


6. Extraordinary Gain on Debt Extinguishment

In thirteen separate  transactions in 2000, the Company  purchased  $101,197,000
aggregate principal amount of its outstanding 12-1/2% Senior Notes due 2005 (the
"12.5%  Notes").  The aggregate cost to purchase the 12.5% Notes was $50,982,000
and,  as a  result,  the  Company  recognized  an  extraordinary  gain,  net  of
unamortized  debt issuance  costs, of $49,003,000 in the year ended December 31,
2000.

In the first  quarter of 2001,  the Company  purchased or redeemed the remaining
$23,803,000 principal amount of 12.5% Notes outstanding at an aggregate purchase
price of $20,931,000, resulting in an extraordinary gain of $2,872,000.

7.  Preferred Stock

In  June  2000,  an  affiliate  of  Stonington   Partners,   Inc.,   which  owns
approximately 62.4% 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

<PAGE>



                         MERISEL, INC. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)



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. At December 31, 2000, $677,000 of accrued dividends was recorded.

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.

8.  Acquisitions

On November 10, 2000, the Company acquired  substantially  all of the e-services
assets and assumed  certain  liabilities  of Value America for  $2,375,000.  The
Company  accounted for the  acquisition as a purchase and the purchase price has
been  allocated  to the  acquired  assets  and  liabilities.  Pro  forma  income
statement  information  for  this  acquisition  has  not  been  provided  as the
financial statement impact is not significant.

9. Sale of Accounts Receivable

Effective  December 15, 1995,  Merisel Canada,  Inc.  ("Merisel Canada") entered
into a receivables  purchase agreement with a securitization  company to provide
funding for Merisel Canada.  In accordance  with this agreement,  Merisel Canada
sold  receivables  to the  securitization  company,  yielding  proceeds of up to
$150,000,000  Canadian  dollars at any point in time.  The agreement  expired on
January  12,  2001,  at which date  Merisel  Canada  entered  into an  agreement
providing for a new financing facility with Congress Financial Corporation. (see
Note 12 ).

Under an agreement that was fully  terminated on November 3, 2000, the Company's
wholly owned subsidiary  Merisel  Americas sold trade  receivables on an ongoing
basis to its wholly owned  subsidiary  Merisel Capital Funding,  Inc.  ("Merisel
Capital Funding").  Pursuant to an agreement with a securitization  company (the
"Receivables  Purchase and Servicing  Agreement"),  Merisel Capital Funding,  in
turn, sold such receivables to the  securitization  company on an ongoing basis.
Merisel  Capital  Funding's sole business was the purchase of trade  receivables
from Merisel  Americas  and Merisel  Open  Computing  Alliance,  Inc.,  upon the
commencement of MOCA's operations as a separate subsidiary on April 3, 2000.

Under the  securitization  facilities,  the receivables  were sold at face value
with payment of a portion of the purchase price being  deferred.  As of December
31, 2000 and 1999,  the total  amount  outstanding  under these  agreements  was
$46,941,000 and $370,059,000, respectively. Fees incurred in connection with the
sale of accounts  receivable under these agreements for the years ended December
31,  2000,  1999  and  1998  were  $11,948,000,  $19,744,000,  and  $17,096,000,
respectively, and are recorded as other expense.

10. Property and Equipment

Property and equipment consisted of the following (in thousands):
<TABLE>
<CAPTION>
                                                          Estimated
                                                            Useful
                                                             Life            December 31,
                                                          (in Years)
                                                                      ----------------------------
                                                                         1999            2000
                                                                      ------------   -------------
<S>                                                                   <C>            <C>
     Land...............................................              $   3,324      $     883
     Buildings..........................................      20          9,011          3,331
     Equipment and computer hardware and software.......    3 to 7      128,084         79,476
     Furniture and fixtures.............................    3 to 5        8,917          6,993
     Leasehold improvements.............................    3 to 20      11,078          5,088
     Construction in progress...........................                  2,953            253
                                                                      ------------   -------------
     Total..............................................                163,367         96,024
     Less accumulated depreciation and amortization.....                (79,482)       (68,970)
                                                                      ------------   -------------
     Property and equipment, net........................              $  83,885      $  27,054
                                                                      ============   =============
</TABLE>
<PAGE>



                         MERISEL, INC. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)


11. Income Taxes

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

                                                        For the Years Ended December 31,
                                                       1998          1999           2000
                                                    -----------   ------------   -----------
<S>                                                <C>           <C>           <C>
     Domestic...............................       $      2,702  $    (86,499) $   (170,238)
     Foreign................................               (734)          856       (19,867)
                                                    -----------   ------------   -----------
     Total..................................       $      1,968  $    (85,643) $   (190,105)
                                                    ===========   ============   ===========
</TABLE>

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

                                                        For the Years Ended December 31,
                                                         1998          1999         2000
                                                    -----------   ------------   -----------
<S>                                                     <C>          <C>           <C>
     Current:
          State..................................    $       360   $       457  $       302
          Foreign................................            278           531          284
                                                    -----------   ------------   -----------
          Total Current..........................            638           988          586
                                                    -----------   ------------   -----------
     Deferred:
          Foreign................................           (221)          (49)          34
                                                    -----------   ------------   -----------
          Total deferred.........................           (221)          (49)          34
                                                    -----------   ------------   -----------
          Total provision........................    $       417   $       939  $       620
                                                    ===========   ============   ===========
</TABLE>


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

                                                                        December 31,
                                                                     1999          2000
                                                                  -----------   -----------
<S>                                                              <C>           <C>
          Net operating loss..........................           $    72,614   $    91,724
          Expense accruals............................                14,552        45,556
          State taxes.................................                    43           904
          Property and goodwill.......................               (13,283)      (12,208)
                                                                  -----------   -----------
                                                                      73,926       125,976
          Valuation allowances........................               (73,012)     (125,096)
                                                                  -----------   -----------
               Total..................................           $       914   $       880
                                                                  ===========   ===========
     Net deferred tax asset...........................           $       914   $       880
                                                                  ===========   ===========

</TABLE>



<PAGE>



                         MERISEL, INC. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)


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

                                                                              For the Years Ended
                                                                                  December 31,
                                                                  ---------------------------------------------
                                                                      1998             1999            2000
<S>                                                                    <C>            <C>              <C>
     Statutory rate..............................................      35.0%          (35.0)%          (35.0)%
     Change in valuation allowance...............................     (51)             35.8             34.5
     State income taxes, less effect of federal deduction........      11.3              .4               .6
     Goodwill amortization.......................................       5.6              .4               .3
     Foreign losses with benefits at less than statutory rate....      13.4              .1
     Utilization of net operating losses of foreign subsidiary...       2.9             (.6)
     Other.......................................................       4.0                              (.1)
                                                                   ------------    -------------    -----------
     Effective tax rate..........................................      21.2%            1.1%              .3%
                                                                   ============    =============    ===========
</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 has adjusted its deferred tax asset to reflect the
estimated  limitation.  At December 31, 1999 and 2000, the Company had available
U.S. Federal net operating loss  carryforwards of $181,795,000 and $216,616,000,
after  adjusting  for the  estimated  limitation,  which expire at various dates
beginning  December 31, 2012.  As of December 31, 2000,  $89,408,000  of the net
operating loss  carryforwards  is restricted as a result of the ownership change
and  $127,208,000  is not.  The  restricted  net  operating  loss is  limited to
$7,476,000 per year.

12. Debt

At December 31, 2000, Merisel, Inc. had outstanding $23,803,000 principal amount
of the 12.5%  Notes.  In January  2001,  the  Company  purchased  an  additional
$20,175,000  principal  amount  of the 12.5%  Notes,  reducing  the  outstanding
balance of the 12.5% Notes to $3,628,000,  which were redeemed in February 2001.
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 January 2001,  Merisel  Canada  entered into an agreement for a new revolving
credit facility. (see "Subsequents Events - Note 17")

13. Commitments and Contingencies

The Company leases certain of its facilities and equipment  under  noncancelable
operating leases.  Future minimum rental payments under leases that have initial
or remaining  noncancelable  lease terms in excess of one year are $4,556,000 in
2001,  $3,965,000 in 2002,  $2,617,000 in 2003,  $1,473,000 in 2004, $112,000 in
2005 and $479,000 thereafter. Certain of the leases contain inflation escalation
clauses  and  requirements  for the payment of property  taxes,  insurance,  and
maintenance  expenses.  Rent  expense  for 1998,  1999 and 2000 was  $9,131,000,
$10,177,000 and $9,373,318, respectively.



<PAGE>



                         MERISEL, INC. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)


The Company also leases certain computer  equipment under capitalized leases and
has the option to purchase the equipment  for a nominal cost at the  termination
of the lease.

         Property and equipment  includes the following  amounts for leases that
have been capitalized:
<TABLE>
<CAPTION>

                                                                         December 31,        December 31,
                                                                             1999                2000
                                                                             ----                ----
       <S>                                                                <C>                 <C>
         Computer equipment......................................         $5,445,000          $5,560,000
         Less accumulated depreciation...........................          2,370,000           4,266,000
                                                                       ------------------ -------------------
           Total.................................................         $3,075,000          $1,294,000
                                                                       ================== ===================
</TABLE>


         Future  minimum  payments  for  capitalized  leases  were as follows at
December 31, 2000.
<TABLE>
<CAPTION>


         <S>                                                                      <C>
         2001..........................................................           $1,424,000
         Less amount representing interest.............................               61,000
                                                                             --------------------
         Present value of net minimum lease payments...................           $1,363,000
                                                                             ====================
</TABLE>


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

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

14. Employee Stock Options and Benefit Plans

On December 19, 1997, the Company's  stockholders approved the Merisel Inc. 1997
Stock Award and Incentive Plan (the"Stock Award and Incentive Plan").  Under the
Stock Award and Incentive Plan,  incentive stock options and nonqualified  stock
options  as well as  other  stock-based  awards  may be  granted  to  employees,
directors, and consultants.  The plan authorized the issuance of an aggregate of
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, 2000, 426,261 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, 2000,  33,507  options
remain  outstanding  under the  Company's  other  employee  stock option  plans,
however,  no new options may be issued  under  these  plans.  In addition to the
shares  issuable  under the Stock Award and  Incentive  Plan,  5,000  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.  As of
December 31, 2000, there were 16,000  restricted stock units  outstanding.  Each
restricted  stock unit represents 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.  Compensation  expense,  measured by the
fair value at the grant date of the Company's common

<PAGE>



                         MERISEL, INC. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)


stock issuable in respect of the units,  totaled $245,000 and is being amortized
over  the  related  three-year  vesting  period.  Upon  the  attainment  of  the
performance criteria specified, the remaining compensation expense for the units
will be  recognized  by the Company in full.  During 1999 and 2000,  the Company
recorded  approximately  $100,000 and $22,000 of compensation expense related to
the restricted stock units outstanding.  The following  summarizes the aggregate
activity in all of the  Company's  plans for the three years ended  December 31,
2000:

<TABLE>
<CAPTION>
                                       1998                              1999                            2000
                            ----------------------------      ----------------------------   -----------------------------
                                              Weighted                       Weighted                           Weighted
                                              Average                         Average                           Average
                               Shares      Exer. Price         Shares       Exer. Price          Shares       Exer. Price
                             ------------ --------------       --------    -------------        ----------  --------------
<S>                           <C>                <C>             <C>           <C>                <C>             <C>
Outstanding at
   Beginning of year           667,353          41.00           594,715           37.90         549,410             34.40
Granted                         58,340          32.90            69,125            5.20         170,350             21.32
Exercised                       (7,775)         21.60              (615)          20.10          (3,025)            19.83
Canceled                      (123,203)         53.20          (113,815)          35.00        (353,552)            30.75
Outstanding at end
   of year                     594,715          37.90           549,410           34.40         363,183             31.87
                             -------------                     ----------                      ------------
Weighted average fair
   value  at date of grant
   of options  granted
   during the year
                                $21.30                           $16.10                          $11.73
                             -------------                     ----------                      ------------

</TABLE>


<PAGE>



                         MERISEL, INC. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)


The following table summarizes  information  about stock options  outstanding at
December 31, 2000:
<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 12/31/00      In Years       Price           at 12/31/00          Price
     -------------------     -------------    -----------   -----------      --------------     ------------

      <S>                      <C>              <C>           <C>                <C>              <C>
       $30.0000 to $30.0000           2,615       1             $3.0000                 2,615         $30.0000
       $0.0000 to $113.7500          16,200       2             $1.4043                   200        $113.7500
     $117.5000 to $117.5000             200       3           $117.5000                   200        $117.5000
     $150.0000 to $150.0000             200       4           $150.0000                   200        $150.0000
       $58.7500 to $63.1250           1,950       5            $62.6763                 1,950         $62.6763
       $18.7500 to $26.2500           4,175       6            $21.8151                 4,175         $21.8151
       $16.2500 to $43.1000         239,675       7            $37.6178               237,180         $37.8291
       $26.8750 to $40.6000           9,995       8            $38.4723                 7,075         $39.0352
       $20.0000 to $21.8750           1,673       9            $20.2802                 1,004         $20.1177
       $17.5000 to $22.1880          86,500       10           $20.4989                30,000         $17.5000
                                ------------                                     -------------
       $0.0000 to $150.0000         363,183                                           284,599
                                ============                                     =============

</TABLE>


The  Company  has  adopted  the  disclosure-only  provisions  of SFAS  No.  123,
"Accounting for Stock-Based Compensation." Accordingly, no compensation cost has
been  recognized  for the stock  option  plans.  Had  compensation  cost for the
Company's  stock option plans been  determined  based on their fair value at the
grant  date for  options  granted  in 1998,  1999 and 2000  consistent  with the
provisions  of SFAS No. 123, the  Company's  net income (loss) and income (loss)
per share would have been adjusted to the pro forma amounts indicated below:
<TABLE>
<CAPTION>

                                                        (In thousands, except per share amounts)
                                                                1998       1999          2000
                                                             ---------  ---------       --------
<S>                                                          <C>         <C>            <C>
   Net Income (Loss) - As Reported                           $18,510     $(61,168)      $(95,787)
   Net Income (Loss) - Pro Forma                             $18,204     $(61,249)      $(95,894)

   Net Income (Loss) Per Share (Basic & Diluted)
   As Reported                                                $ 2.30       $(7.62)       $(12.01)
   Pro Forma                                                  $ 2.26       $(7.63)       $(12.02)

</TABLE>



<PAGE>



                         MERISEL, INC. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)


The fair value of each option granted during 1998, 1999 and 2000 is estimated on
the  date of  grant  using  the  Black-Scholes  option  pricing  model  with the
following weighted average assumptions:

                                      1998              1999         2000
                                    -----------     ------------    ---------
  Expected life                        5.0              5.0           5.0
  Expected volatility                 76.97%           76.78%        89.18%
  Risk-free interest rate              5.35%            5.81%         6.34%
  Dividend Yield                       0.00%            0.00%         0.00%



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  $892,000,  $1,250,000
and  $840,070 to the plan during the years ended  December  31,  1998,  1999 and
2000,  respectively.  The  contributions  to the 401(k) plan were in the form of
cash,  which was used to purchase  shares of the  Company's  common stock on the
open market.

15. 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 three operating segments: the United
States distribution  segment,  the Canadian  distribution  segment, and MOCA. As
described in Note 5, effective  October 27, 2000, the Company completed the sale
of its MOCA business segment. MOCA has been treated as a discontinued  operation
in the accompanying  financial  statements.  The segment data included below has
been restated to exclude amounts related to the MOCA business unit. As described
in  Note 8, on  November  10,  2000,  the  Company,  through  its  wholly  owned
subsidiary Optisel, Inc., acquired substantially all of the e-services assets of
Value America.  Optisel has a separate management team and strategy and has been
determined to be an operating segment under SFAS 131.

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


<PAGE>



                         MERISEL, INC. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

<TABLE>
<CAPTION>


                                                              2000
                                                         (in thousands)
                              ---------------------------------------------------------------------
                                  US         Canada      Optisel (1)    Eliminations     Total

<S>                            <C>           <C>             <C>         <C>            <C>
Net sales to external customers1,431,726     660,216         1,587                     2,093,529
Depreciation and amortization     17,588       1,502           200                        19,290
Operating loss                  (158,235)    (13,950)       (1,618)                     (173,803)
Long-lived Assets                  7,968      20,512         2,575                        31,055
Total segment assets              67,199     108,454         2,628                       178,281
Capital expenditures               1,701         152         2,775                         4,628

</TABLE>
<TABLE>
<CAPTION>



                                                              1999
                                                         (in thousands)
                              ---------------------------------------------------------------------
                                  US         Canada        Optisel      Eliminations     Total

<S>                            <C>           <C>                         <C>            <C>
Net sales to external customers3,305,026     926,370                                   4,231,396
Depreciation and amortization     20,364       1,751                                      22,115
Operating profit                 (54,787)      9,099                                     (45,688)
Long-lived Assets                100,443       7,654                                     108,097
Total segment assets           1,105,180     185,959                      (554,933)      736,206
Capital expenditures              27,910       1,103                                      29,013


</TABLE>
<TABLE>
<CAPTION>


                                                              1998
                                                         (in thousands)
                              ---------------------------------------------------------------------
                                  US         Canada        Optisel      Eliminations     Total

<S>                            <C>           <C>            <C>          <C>            <C>
Net sales to external customers3,098,261     839,668                                   3,937,929
Depreciation and amortization      8,915       1,910                                      10,825
Operating profit                  28,182       8,007                                      36,189
Long-lived Assets                 95,639       8,837                                     104,476
Total segment assets           1,311,466     180,234                      (657,242)      834,458
Capital expenditures              44,505       5,562                                      50,067


(1)  Optisel's assets are located in the United States.
</TABLE>


<PAGE>



                         MERISEL, INC. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

16.  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 outstanding stock options using the "treasury stock" method.

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:
<TABLE>
<CAPTION>

                                                                  (in thousands)
                                                               For the Years Ended
                                                                   December 31,
Weighted average shares outstanding                          1998         1999        2000
-----------------------------------                          ----         ----        ----

<S>                                                         <C>          <C>         <C>
Basic                                                       8,021        8,028       8,031
Assumed exercises of stock options                             28

Diluted                                                     8,049        8,028       8,031
                                                        ==========      =========  =========
</TABLE>
<TABLE>
<CAPTION>

                                                        1998            1999            2000
                                                   --------------- --------------- ---------------
<S>                                                      <C>           <C>            <C>
Income(Loss) from continuing operations                  $1,551       ($86,402)       $(190,725)
Preferred stock dividends                                                                  (677)
                                                   --------------- --------------- ---------------
Loss available to common stockholders                     1,551        (86,402)        (191,402)
Income from discontinued operations                      16,959         25,234           20,757
Gain on sale of discontinued operations                                                  25,178

Extraordinary gain on extinguishment of debt                                             49,003
                                                   --------------- --------------- ---------------
Net Income (Loss) available to common stockholders      $18,510       ($61,168)        $(96,464)
                                                   =============== =============== ===============
</TABLE>



17. Subsequent Events

Merisel  Canada is party to a Loan  Agreement  dated as of January 12, 2001 (the
"Loan Agreement") with Congress Financial Corporation (Canada),  acting as agent
(the  "Agent"),  that  provides for  borrowings on a revolving  basis.  The Loan
Agreement  permits  borrowings of up to  CDN$100,000,000  outstanding at any one
time (including  face amounts of letters of credit),  subject to meeting certain
availability  requirements under a borrowing base formula and other limitations.
Borrowings under the Loan Agreement are secured by a pledge of substantially all
of  Merisel  Canada's  assets,  including  inventory  and  accounts  receivable.
Borrowings  bear interest at the prime rate of a Canadian bank designated by the
Agent plus 0.75%, for Canadian  dollar-denominated loans, at the prime rate of a
U.S. bank designated by the Agent plus 0.25%, for U.S. dollar-denominated loans,
or at LIBOR plus 2% for  Eurodollar  loans.  A fee of 0.25% per annum is payable
with respect to the unused portion of the  commitment.  The Loan Agreement has a
termination date of January 12, 2004. As of March 30, 2001,  CDN$85,583,000  was
outstanding  under  the Loan  Agreement.  The Loan  Agreement  contains  various
covenants  that provide for,  among other  things,  the  maintenance  of certain
financial ratios and certain other restrictions.



<PAGE>



                         MERISEL, INC. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)


18. Quarterly Financial Data (Unaudited)

Selected  financial  information for the quarterly  periods for the fiscal years
1999 and 2000 is presented below (in thousands, except per share amounts):
<TABLE>
<CAPTION>

                                                                                     1999
                                                        ---------------------------------------------------------------
                                                            March 31          June 30     September 30   December 31
                                                        ---------------   -------------  -------------  -------------
<S>                                                           <C>               <C>         <C>            <C>
     Net sales                                               $1,049,284        $999,191    $1,100,712     $1,082,209
     Gross profit                                                53,176          45,056        47,148         39,922
     Net loss from continuing operations                        (24,474)         (9,757)      (17,637)       (34,534)
     Income from discontinued operations                          3,965           6,773         5,921          8,575
     Net loss                                                   (20,509)         (2,984)      (11,716)       (25,959)

     Net income (loss) per share (basic and diluted):
     Net loss from continuing operations                       (3.05)            (1.22)          (2.20)        (4.30)
     Income from discontinued operations                        0.49              0.84            0.74          1.07
     Net loss                                                  (2.55)             (.37)          (1.46)        (3.23)


</TABLE>
<TABLE>
<CAPTION>

                                                                                     2000
                                                        ---------------------------------------------------------------
                                                            March 31          June 30     September 30   December 31
                                                        ---------------   -------------  -------------  -------------
<S>                                                            <C>              <C>          <C>            <C>
     Net sales                                                 $904,565         $628,283     $399,480       $161,201
     Gross profit                                                39,423           25,344          419          8,232
     Net loss from continuing operations                        (21,166)        (47,737)      (57,474)       (64,348)
     Discontinued operations before extraordinary item:
        Income from discontinued operations                       7,719            9,183          3,228          627
        Gain on sale of discontinued operations                                                               25,178
     Loss before extraordinary item                             (13,447)        (38,554)      (54,246)       (38,543)
     Extraordinary gain on extinguishment of debt                                21,656        10,514         16,833
     Net loss                                                   (13,447)        (16,898)      (43,732)       (21,710)

     Net income (loss) per share (basic and diluted):
     Net loss from continuing operations                       (2.64)            (5.94)          (7.15)        (8.10)
     Discontinued operations:
        Income from discontinued operations                     0.96              1.14            0.40          0.08
        Gain on sale of discontinued operations                                                                 3.14
     Extraordinary gain                                                           2.70            1.31          2.10
     Net loss                                                  (1.67)            (2.10)          (5.44)        (2.79)
</TABLE>


In the first quarter of 1999, a  $21,000,000  charge was recorded by the Company
relating to the settlement of the litigation  pending in Delaware Chancery Court
between the Company and certain  holders and former  holders of the 12.5% Notes.
In the second quarter of 1999, the Company  recorded a $9,000,000  offset to the
litigation  charge due to the negotiation and receipt of an insurance  recovery.
In the  fourth  quarter  of 1999 the value of certain  investments  in  software
development  and  facilities  was  determined to be of diminished or no value in
connection  with  the   combination  of  the  U.S.  and  Canadian   distribution
businesses.  As a result,  the  Company  recorded a  $3,800,000  non-cash  asset
impairment  charge.  The Company  also  recorded a  restructuring  charge in the
fourth quarter of 1999 for  $3,200,000  relating to severance  costs  associated
with such  combination.  In the second quarter of 2000,  the Company  recorded a
$19,487,000 impairment charge related to goodwill. In the third quarter of 2000,
the  Company   recorded  an  asset   impairment   charge  of  $9,859,000  and  a
restructuring  charge  of  $10,964,000  related  to  the  restructuring  of  its
operations.  In the  fourth  quarter  or 2000,  the  Company  recorded  an asset
impairment  charge of  $23,487,000  and a  restructuring  charge  of  $6,672,000
related to the wind-down of its U.S. distribution business.


<PAGE>
<TABLE>
<CAPTION>



                                   SCHEDULE II

                          MERISEL, INC. AND SUBSIDIARIES

                        VALUATION AND QUALIFYING ACCOUNTS

                         DECEMBER 31, 1998, 1999 AND 2000

                                              Balance at     Charged to                    Balance at
                                             December 31,    Costs and                    December 31,
                                                 1997        Expenses       Deductions        1998
                                            -------------- --------------- -------------- ---------------
<S>                                             <C>             <C>            <C>             <C>
Accounts receivable--Doubtful accounts.....     $13,318,000     $12,585,000    $10,091,000     $15,812,000
Accounts receivable--Other (1).............       1,784,000      13,104,000     13,328,000       1,560,000

                                              Balance at     Charged to                     Balance at
                                             December 31,     Costs and                    December 31,
                                                1998          Expenses       Deductions        1999
                                            -------------- --------------- -------------- ---------------
Accounts receivable--Doubtful accounts.....     $15,812,000     $14,442,000    $21,740,000      $8,514,000
Accounts receivable--Other (1).............       1,560,000      15,427,000     12,527,000       4,460,000

                                              Balance at     Charged to                     Balance at
                                             December 31,     Costs and                    December 31,
                                                1999          Expenses       Deductions        2000
                                            -------------- --------------- -------------- ---------------
Accounts receivable--Doubtful accounts.....      $8,514,000     $38,991,000    $25,512,000     $21,993,000
Accounts receivable--Other (1).............       4,460,000       4,725,000      5,960,000       3,225,000

</TABLE>

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


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

               None.


<PAGE>


                                    PART III


Item 10.  Directors and Executive Officers of the Registrant.

The  information  required by this item will be filed by  amendment to this Form
10-K with the Securities and Exchange Commission on or before April 30, 2001.

Item 11.  Executive Compensation.

The  information  required by this item will be filed by  amendment to this Form
10-K with the Securities and Exchange Commission on or before April 30, 2001.


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

The  information  required by this item will be filed by  amendment to this Form
10-K with the Securities and Exchange Commission on or before April 30, 2001.

Item 13.  Certain Relationships and Related Transactions.

The  information  required by this item will be filed by  amendment to this Form
10-K with the Securities and Exchange Commission on or before April 30, 2001.

                                     PART IV

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

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

         (1)  Financial Statements included in Item 8:

              Independent Auditors' Report.

              Consolidated Balance Sheets at December 31, 1999 and 2000.

              Consolidated  Statements of Operations for each of the three years
              in the period ended December 31, 2000.

              Consolidated  Statements  of Changes in  Stockholders'  Equity for
              each of the three years in the period ended December 31, 2000.

              Consolidated  Statements of Cash Flows for each of the three years
              in the period ended December 31, 2000.

              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.



<PAGE>



         (3)  Exhibits:

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

         (b) The  Following  Reports on Form 8-K were filed  during the  quarter
ended December 31, 2000:

         Current Report on Form 8-K, dated November 13, 2000 which reports the
         completion of the sale by Merisel Americas, Inc. of the outstanding
         capital stock of Merisel Open Computing Alliance, Inc. to Arrow
         Electronics, Inc.


<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: April 13, 2001               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                      April 13, 2001
------------------------------------               (Principal Accounting Officer)
Allyson Vanderford

/s/Albert J. Fitzgibbons III                                  Director                             April 13, 2001
------------------------------------
Albert J. Fitzgibbons III


/s/Bradley J. Hoecker                                         Director                             April 13, 2001
------------------------------------
Bradley J. Hoecker


/s/Timothy N. Jenson                                          Director                             April 13, 2001
------------------------------------
Timothy N. Jenson


/s/Dr. Arnold Miller                                          Director                             April 13, 2001
------------------------------------
Dr. Arnold Miller


/s/David G. Sadler                                            Director                             April 13, 2001
------------------------------------
David G. Sadler


/s/Lawrence J. Schoenberg                                     Director                             April 13, 2001
------------------------------------
Lawrence J. Schoenberg

</TABLE>


<PAGE>


                                  EXHIBIT INDEX

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

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

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

3.4      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  Preferred Stock of Merisel,
         Inc., filed as exhibit 99.2 to the Company's Current Report on Form 8-K
         dated June 9, 2000.**

*10.1    1983 Employee  Stock Option Plan of Softsel  Computer  Products,  Inc.,
         as amended,  together with Form of Incentive  Stock Option  Agreement
         and Form of  Nonqualified  Stock Option  Agreement  under 1983 Employee
         Stock  Option  Plan,  filed as  exhibits  4.4,  4.5 and  4.6,
         respectively  to the Form S-8  Registration Statement of Softsel
         Computer  Products,  Inc.,  No.  33-35648,  filed with the  Securities
         and Exchange Commission on June 29, 1990.**

*10.2    1991 Employee Stock Option Plan of Merisel,  Inc. together with Form of
         Incentive Stock Option Agreement and Form of Nonqualified  Stock Option
         Agreement  under the 1991 Employee Stock Option Plan,  filed as exhibit
         10.1 to the  Company's  Quarterly  Report on Form 10-Q for the  quarter
         ended June 30, 1991.**

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

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

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

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

*10.7    Form of Restricted  Stock Unit Agreement  under the Merisel,  Inc. 1997
         Stock Award and Incentive Plan,  filed as exhibit 10.8 to the Company's
         Annual Report on Form 10-K for the year ended January 1, 2000.

10.8     Amended  and  Restated  Receivables  Transfer  Agreement  dated as of
         September  27,  1996 by and between Merisel  Americas,  Inc.  and
         Merisel  Capital  Funding,  Inc.,  filed as exhibit  10.53 to the
         Company's Current Report on Form 8-K, dated April 17, 1996.**

10.9     Amended and Restated Receivables Purchase and Servicing Agreement dated
         as of September 27, 1996, by and between Merisel Capital Funding, Inc.,
         Redwood  Receivables  Corporation,  Merisel Americas,  Inc. and General
         Electric Capital  Corporation,  filed as exhibit 10.54 to the Company's
         Current Report on Form 8-K, dated April 17, 1996.**


<PAGE>



10.10    Annex X to Receivables  Transfer Agreement and Receivables Purchase and
         Servicing  Agreement dated as of October 2, 1995, filed as exhibit 10.3
         to the  Company's  Quarterly  Report on Form 10-Q for the quarter ended
         September 30, 1995.**

10.11    Amendment No. 1 and Waiver to Amended and Restated  Receivables
         Purchase and Servicing Agreement dated as of  November 7, 1996 among
         Merisel  Capital  Funding,  Inc.,  Redwood  Receivables  Corporation,
         Merisel Americas,  Inc. and General  Electric  Capital  Corporation,
         filed as exhibit 2.5 to the Company's Annual Report on Form 10-K for
         the year ended December 31, 1996.**

10.12    Amendment No. 1 and Waiver to Amended and Restated  Receivables
         Transfer  Agreement  dated as of November 7, 1996 by and between
         Merisel Americas,  Inc. and Merisel Capital Funding,  Inc., filed as
         exhibit 2.6 to the Company's Annual Report on Form 10-K for the year
         ended December 31, 1996.**

10.13    Amendments to Securitization Agreements, dated as of December 19, 1997,
         among Merisel Americas,  Inc.,  Merisel Capital Funding,  Inc., Redwood
         Receivables Corporation and General Electric Capital Corporation, filed
         as exhibit 10.19 to the  Company's  Annual Report on Form 10-K for year
         ended December 31, 1997.**

10.14    Amendments  to  Securitization  Agreements,  dated as of July 31, 1998,
         among Merisel Americas,  Inc.,  Merisel Capital Funding,  Inc., Redwood
         Receivables Corporation and General Electric Capital Corporation, filed
         as exhibit 10.5 to the Company's  Quarterly Report on Form 10-Q for the
         quarter ended June 30, 1998.**

10.15    Amendment No. 4 and Waiver to Purchase  Agreement,  dated of as
         February 22, 1999, among Merisel Americas, Inc.,  Merisel  Capital
         Funding,  Inc.,  Redwood  Receivables  Corporation and General
         Electric  Capital Corporation,  filed as  exhibit  10.15 to the
         Company's  Annual  Report on Form  10-K for the year  ended
         December 31, 1998.**

10.16    Amendment No. 5 to Purchase  Agreement and Waiver dated as of May 12,
         1999 among Merisel  Americas,  Inc., Merisel Capital Funding,  Inc.,
         Redwood Receivables  Corporation and General Electric Capital
         Corporation, filed as  exhibit  10.2 to the  Company's  Quarterly
         Report on Form 10-Q for the  quarter  ended June 30, 1999.**

10.17    Amendment  No. 6 to Purchase  Agreement  and Waiver  dated as of August
         13, 1999 among  Merisel  Americas, Inc.,  Merisel  Capital  Funding,
         Inc.,  Redwood  Receivables  Corporation and General  Electric  Capital
         Corporation,  filed as exhibit 10.1 to the Company's  Quarterly  Report
         on Form 10-Q for the quarter ended September 3, 1999.**

10.18    Amendments to  Securitization  Agreements  and Waiver dated as of March
         10, 2000, among Merisel Americas,  Inc., Merisel Capital Funding, Inc.,
         Redwood Receivables Corporation and General Electric Corporation, filed
         as exhibit  10.19 to the  Company's  Annual Report on Form 10-K for the
         year ended December 31, 1999.**

10.19    Amendment No. 8 to Purchase  Agreement  dated as of May 19, 2000 among
         Merisel  Americas,  Inc.,  Merisel Capital Funding,  Inc., Rosewood
         Receivables  Corporation and General Electric Capital Corporation,
         filed as exhibit 10.1 to the Company's Quarterly Report on Form 10-Q
         for the quarter ended June 30, 2000.**

10.20    Amendments to Securitization  Agreements and Waiver, dated as of August
         18, 2000 between Merisel Americas, Inc., Merisel Capital Funding, Inc.,
         Rosewood   Receivables   Corporation  and  General   Electric   Capital
         Corporation, filed as exhibit 10.1 to the Company's Quarterly Report on
         Form 10-Q for the quarter ended September 30, 2000.**

10.21    Amendments to Securitization Agreements and Waiver, dated as of October
         16, 2000 between Merisel Americas, Inc., Merisel Capital Funding, Inc.,
         Rosewood Receivables Corporation and General Electric Capital
         Corporation, filed as exhibit 10.2 to the Company's Quarterly
         Report on Form 10-Q for the quarter ended September 30, 2000.**

10.22    Loan  Agreement  between  Congress  Financial  Corporation  (Canada),
         the financial  institutions  listed therein and Merisel Canada Inc.
         dated January 12, 2001.

*10.23   Retention  Agreement dated as of April 4, 2001 between Merisel
         Americas, and Jeffrey Hansen.

*10.24   Retention  Agreement dated as of April 1, 2001 between Merisel,  Inc.,
         Merisel Americas,  Inc. and Timothy N. Jenson.

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

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

*10.27   Change of Control  Agreement  dated as of February  1, 2001  between
         Merisel  Canada  Inc.  and  Mitchell Martin.

*10.28   Change of Control  Agreement dated as of August 18, 1999 between
         Merisel,  Inc.,  Merisel  Americas,  Inc. and James Stephens.

*10.29   Retention Agreement dated August 10, 2000 between Merisel Americas,
         Inc. and James Stephens.

*10.30   Change of Control  Agreement dated as of August 18, 1999 between
         Merisel,  Inc.,  Merisel  Americas,  Inc.and  Karen A.  Tallman,  filed
         as  exhibit  10.3 to the  Company's  Quarterly  Report on Form 10-Q for
         the quarter ended September 30, 1999.**

*10.31   Retention  Agreement  dated August 10, 2000 between  Merisel  Americas,
         Inc.  and  Karen  Tallman,  filed  as  exhibit  10.4  to the  Company's
         Quarterly  Report  on Form 10-Q for the  quarter  ended  September  30,
         2000.**

*10.32   Change of Control Agreement dated as of April 27, 2000 between Merisel,
         Inc., Merisel Americas,  Inc. and  Allyson Vanderford.

*10.33   Severance Agreement dated as of December 21, 2000 between Merisel
         Americas, Inc. and Allyson Vanderford.

*10.34   Waiver and Release Agreement dated November 8, 2000 between Merisel,
         Inc. and Dwight A. Steffensen.

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

21       Subsidiaries of the Registrant.

23       Consent of Deloitte & Touche LLP, Independent Accountants.
--------
*Management   contract   or   executive   compensation   plan  or   arrangement.
**Incorporated by reference.