##### Table of Contents

FORM 10-Q

SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

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

For the quarterly period ended: June 30,
2004

OR

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

for the transition period from __________ to __________

Commission File Number: 0-25790

PC Mall, Inc.(Exact name of registrant as specified in its charter)

|                                                               |  |                                        
|-------------------------------------------------------------- |  | ---------------------------------------
|Delaware                                                       |  | 95-4518700                             
|(State or other jurisdiction of
incorporation or organization) |  | (I.R.S. Employer Identification Number)

2555 West 190th Street, Suite 201
Torrance, CA 90504
(address of principal executive offices)
(310) 354-5600
(Registrants telephone number, including area code)

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 whether the Registrant
is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act).  Yes [ 
]    No [X]

There were 11,173,632 outstanding shares of common stock at
August 5, 2004.



---

PC MALL, INC.

TABLE OF CONTENTS

|                                                                                                    |  |  |  |  |  |  |  | 
|--------------------------------------------------------------------------------------------------- |  |  |  |  |  |  |  | 
|                                                                                                   
|PART I - FINANCIAL INFORMATION                                                                     
|Item 1.  Financial Statements                                                                      
|Condensed Consolidated Balance Sheets                                                              
|Condensed Consolidated Statement of Operations                                                     
|Condensed Consolidated Statement of
    Stockholders' Equity                                       
|Condensed Consolidated Statement of Cash Flows                                                     
|Condensed Notes to
    Consolidated Financial Statements                                           
|Item 2. Management's
      Discussion and Analysis of Financial Condition and Results of Operations
|Item 3. Quantitative
      and Qualitative Disclosures About Market Risk                           
|Item 4. Controls and Procedures                                                                    
|PART II - OTHER INFORMATION                                                                        
|Item 2. Changes in Securities, Use of Proceeds, and Issuer Purchases of
    Equity Securities      
|Item 5. Other Matters                                                                              
|Item 6. Exhibits
      and Reports on Form 8-K                                                     
|Signature                                                                                          
|                                                                                                   





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##### Table of Contents

PART I - FINANCIAL INFORMATION

ITEM 1.   FINANCIAL STATEMENTS

PC MALL, INC. CONDENSED CONSOLIDATED BALANCE SHEETS(in thousands, except share data)

June 30,
        2004
        (unaudited)
        
        
        December 31, 2003AssetsCurrent assets:Cash and cash equivalents
        $
        6,344
        
        $
        7,819Accounts receivable, net of allowance for doubtful accounts
        
        85,395
        
        
        71,401Inventories
        
        62,640
        
        
        80,542Prepaid expenses and other current assets
        
        2,984
        
        
        3,909Deferred income taxes
        
        3,578
        
        
        3,578Total current
          assets
        
        160,941
        
        
        167,249Property and equipment, net
        
        10,156
        
        
        10,438Goodwill
        
        1,355
        
        
        861Deferred income taxes
        
        10,102
        
        
        9,269Other assets
        
        2,227
        
        
        1,353Total
          assets
        $
        184,781
        
        $
        189,170Liabilities and Stockholders' EquityCurrent liabilities:Accounts payable
        $
        65,694
        
        $
        83,856Accrued expenses and other current liabilities
        
        16,667
        
        
        16,621Deferred revenue
        
        11,136
        
        
        11,348Line of credit
        
        34,554
        
        
        26,202Notes payable - current
        
        500
        
        
        1,000Total current liabilities
        
        128,551
        
        
        139,027Notes payable
        
        3,000
        
        
        250Total liabilities


        
        131,551


        

        
        139,277Stockholders' equity:Preferred stock, $.001 par value, 5,000,000 shares
          authorized; none issued and outstanding
        
        -
        
        
        -Common stock, $.001 par value; 30,000,000 shares authorized;
          11,465,162 and 11,165,399 shares issued; and 11,170,962 and 10,871,199
          shares outstanding, respectively
        
        11
        
        
        11Additional paid-in capital
        
        82,433
        
        
        78,032Deferred stock-based compensation
        
        (1,906)
        
        
        -Treasury stock at
        cost: 294,200 shares
        
        (1,015)
        
        
        (1,015)Translation
        adjustment
        
        -
        
        
        1Retained earnings (accumulated deficit)
        
        (26,293)
        
        
        (27,136)Total stockholders' equity


        
        53,230
        
        
        49,893Total liabilities and
        stockholders' equity


        $
        184,781


        

        $
        189,170


See  condensed notes to  consolidated financial statements.



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Table of Contents

PC MALL, INC. CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS(unaudited, in thousands, except
per share data)

Three months ended
        
        Six
        months endedJune 30,
        
        June
        30,2004
        
        
        2003
        
        
        2004
        
        
        2003Net sales
        $

        270,496

        
        $

        218,862

        
$
        548,620
        
        $
        453,659Cost of goods sold
        

        235,773


        
        

        188,160


        

        478,639
        
        
        394,092Gross profit
        

        34,723


        
        

        30,702


        

        69,981
        
        
        59,567Selling,
          general and administrative expenses
        
        27,535


        
        
        23,095


        
        
        54,577
        
        
        47,116Advertising expense (see Note 2)
        

        5,528


        
        

        5,773


        

        13,122
        
        
        9,965Income from operations
        

        1,660


        
        

        1,834


        

        2,282
        
        
        2,486Interest expense, net
        

        510


        
        

        331


        

        911
        
        
        519Income  before income taxes
        

        1,150


        
        

        1,503


        

        1,371
        
        
        1,967Income tax provision
        

        443


        
        

        556


        

        528
        
        
        728Net income
        $

        707


        
        $

        947


        
$
        843
        
        $
        1,239Earnings per share:Basic
        $

        0.06


        
        $

        0.09


        
$
        0.08
        
        $
        0.12Diluted
        $

        0.06


        
        $

        0.09


        
$
        0.07
        
        $
        0.11Weighted average shares outstanding:Basic
        

        11,026


        
        

        10,535


        

        10,959
        
        
        10,566Diluted
        

        12,174


        
        

        11,115


        

        12,128
        
        
        11,119


See  condensed notes to  consolidated financial statements.



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##### Table of Contents

PC MALL, INC. 
CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS'
EQUITY(unaudited, in thousands)



Common Stock
    Additional
      Paid-in
      Capital
    Deferred Stock-Based
      Compensation
    Treasury Stock
    Translation Adjustment
    Retained
    Earnings(AccumulatedDeficit)
    TotalCommon SharesIssued
    OutstandingBalance at December 31, 2003
    11,165
    10,871
    
    $           11
    $         78,032
    $                -
    $          1,015)
    $             
    1
    $        (27,136)
    $          49,893Stock option exercises,
      including related income tax benefit
    300
    300
    
    -
    2,401
    -
    -
    -
    -
    2,401Deferred stock-based compensation
    -
    -
    
    -
    -
    (1,906)
    -
    -
    -
    (1,906)Additional paid-in-capital related
      to deferred stock-based compensation
    -
    -
    
    -
    2,000
    -
    -
    -
    -
    2,000Translation adjustment
    -
    -
    
    -
    -
    -
    -
    (1)
    -
    (1)Net Income
    -
    -
    
    -
    -
    -
    -
    -
    843
    843Balance at June 30, 2004
    11,465
    11,171
    
    $         11
    $         82,433
    $         (1,906)
    $         (1,015)
    $              -
    $        (26,293)
    $         53,230




See  condensed notes to  consolidated financial statements.



---



PC MALL, INC. 
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(unaudited, in thousands)

For the
          six months endedJune
          30,2004
        
        2003Cash flows from operating activities:Net income


        $


        843
        


        $


        1,239Adjustments to reconcile net
          income to net cash used in operating activities:Depreciation and amortization
        
        1,997
        
        
        2,090Provision for deferred
          income taxes
        
        528
        
        
        728Non-cash stock-based compensation
        
        184
        
        
        -Gain on sale of fixed assets
        
        (3)
        
        
        (64)Changes in operating assets and liabilities:Accounts receivable
        
        (13,994)
        
        
        (7,107)Inventories
        
        17,902
        
        
        (1,632)Prepaid expenses and other current assets
        
        925
        
        
        824Other assets
        
        13
        
        
        (106)Accounts payable
        
        (9,376)
        
        
        (1,816)Accrued expenses and other current
          liabilities
        
        (1,250)
        
        
        (2,492)Deferred revenue
        
        (212)
        
        
        (2,467)Total adjustments
        
        (3,286)
        
        
        (12,042)Net cash    used in operating activities
        
        (2,443)
        
        
        (10,803)Cash flows from investing activities:Purchase of property and equipment
        
        (1,601)
        
        
        (2,255)Proceeds from
        sale of property and equipment
        
        3
        
        
        64Net cash used in
        investing activities
        
        (1,598)
        
        
        (2,191)Cash flows from financing activities:Payments for
        deferred financing costs
        
        -
        
        
        (440)Payments for deferred offering
        costs
        
        (288)
        
        
        -Borrowings under notes payable
        
        2,750
        
        
        2,000Payments under notes payable
        
        (500)
        
        
        (417)Net borrowings
        under line of credit
        
        8,352
        
        
        12,867Decrease in book overdraft
        
        (8,786)
        
        
        (8,040)Principal payments of obligations under capital leases
        
        -
        
        
        (124)Repurchase of
        common stock
        
        -
        
        
        (459)Proceeds from stock issued under stock option plans
        
        1,039
        
        
        12Net cash
        provided by financing activities
        
        2,567
        
        
        5,399Effect on foreign
        currency on cash flow
        
        (1)
        
        
        -Net decrease in
        cash and cash equivalents
        
        (1,475)
        
        
        (7,659)Cash and cash equivalents:Beginning of period
        
        7,819
        
        
        11,422End of period

        $


        6,344
        
        $
        3,763


See  condensed notes to  consolidated financial statements.



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##### Table of Contents

PC MALL, INC.
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)

1.Basis of Presentation

> The
> consolidated interim financial statements include the accounts of PC Mall, Inc.,
> a Delaware corporation, (formerly IdeaMall, Inc. and Creative Computers, Inc.)
> and its wholly owned subsidiaries (collectively, the "Company") and have been
> prepared without audit pursuant to the rules and regulations of the Securities
> and Exchange Commission ("SEC"). Certain information and footnote disclosures
> normally included in financial statements prepared in accordance with generally
> accepted accounting principles have been condensed or omitted pursuant to such
> regulations.  These financial statements should be read in conjunction with
> the audited financial statements and the notes thereto included in the Company's
> Annual Report on Form 10-K for the year ended December 31, 2003 and with the
> Company's Quarterly Report on Form 10-Q for the period ended March 31, 2004.
> In
> the opinion of management, the accompanying unaudited condensed consolidated
> financial statements contain all adjustments consisting solely of normal
> recurring items necessary for a fair statement of the financial position of the
> Company at June 30, 2004 and December 31, 2003 and the results of operations for
> the three and six months ended June 30, 2004 and 2003, and cash flows for the
> six months ended June 30, 2004 and 2003.  The results of operations for
> the interim periods are not necessarily indicative of the results of operations
> for the full year.
> Stock Based Compensation
> The Company accounts for its stock option plans using the
> intrinsic value-based method of accounting prescribed by Accounting Principles
> Board Opinion No. 25, "Accounting for Stock Issued to Employees," ("APB 25") and
> related interpretations.  Under this method, compensation expense is
> recorded on the date of grant only if the current market price of the underlying
> common stock exceeded the exercise price.  Statement of Financial
> Accounting Standards No. 123, "Accounting for Stock-Based Compensation" ("SFAS
> 123") established accounting and disclosure requirements using a fair
> value-based method for stock option plans.  As allowed by SFAS 123, the
> Company continues to apply the intrinsic value-based method of accounting, and
> has adopted the disclosure requirements of SFAS 123.  Accordingly, the
> Company does not record compensation expense on issuance of stock options to
> employees, as all options issued to employees to date were granted at the
> then-current market value at the date of grant, except for the grant in March
> 2004 as discussed in Note 5.
> Had compensation cost
> on all grants been determined consistent with SFAS
> 123, the Company's net income and earnings per share would have been reduced to
> the pro forma amounts shown below (in thousands, except per share amounts).

Three months ended



    



    Six months endedJune30,



    



    June30,2004



    


    


    2003


    



    2004



    


    


    2003Net income (as reported)


    $



    707



    


    $



    947


    $



    843



    


    $



    1,239Less:
    compensation expense as determined under SFAS 123, net of related taxes


    



    (404)



    


    
    (261)


    



    (790)



    


    
    (539)Add:
    stock-based compensation expense included in reported net income,
    net of related taxes


    



    58



    


    
    -


    



    58



    


    
    -Pro forma net income


    $



    361



    


    $
    686


    $



    111



    


    $
    700Earnings per share - BasicAs reported


    $



    0.06



    


    $
    0.09


    $



    0.08



    


    $
    0.12Pro forma


    $



    0.03



    


    $
    0.07


    $



    0.01



    


    $
    0.07Earnings per share - DilutedAs reported


    $



    0.06



    


    $
    0.09


    $



    0.07



    


    $
    0.11Pro forma


    $



    0.03



    


    $
    0.06


    $



    0.01



    


    $
    0.06The fair value of each stock option grant has been estimated
      pursuant to SFAS 123 on the date of grant using the Black-Scholes option pricing model with the
following weighted average assumptions presented in the table for the respective
periods:Three months ended



    



    Six months endedJune30,



    



    June30,2004



    


    


    2003


    



    2004



    


    


    2003Risk
      free interest rates


    



    3.43%



    


    



    3.34%



    



    3.47%



    


    



    3.51%Expected
      dividend yield


    



    None



    


    



    None



    



    None



    


    



    NoneExpected
      lives


    



    7 years



    


    



    7 years



    



    7 years



    


    



    7 yearsExpected
      volatility


    



    116%



    


    



    126%



    



    116%



    


    



    127%Weighted average grant date fair
      value


    



    $15.51



    


    



    $3.49



    



    $14.96



    


    



    $3.33


> In June 2003, the Company issued a warrant
> to purchase 30,000 shares of the Company's common stock to a consulting firm for
> investor and public relations services.  The warrant was issued at an exercise
> price of $3.99 with a five-year term, and vested monthly over a one year period
> until it became fully vested in June 2004.  The Company valued the warrant at
> fair value (in accordance with FASB Statement No. 123, "Accounting for Stock
> Based Compensation") based on a Black-Scholes fair value calculation.  The
> warrant was valued at the date of grant and was re-measured at fair value at
> each subsequent reporting period.  Through June 30, 2004, the Company
> recorded a cumulative expense of approximately $0.4 million for the one-year
> vesting period ended June 30, 2004, which includes $0.1 million for the six
> months ended June 30, 2004.
> In June 2004, the Company issued an
> additional warrant to purchase 30,000 shares of the Company's common stock to
> the consulting firm.  The terms of the warrant are substantially the same as the
> June 2003 warrant, except for the exercise price on the date of grant, which was
> $19.22.  The Company will treat this warrant in the same manner as the June 2003
> warrant by re-measuring at fair value at each subsequent reporting period until
> it becomes fully vested in June 2005.
>   Reclassifications
>   Certain reclassifications have been made
>   to the 2003 financial statement amounts to conform to the 2004 presentation.

2.
Recent Accounting Pronouncements

> In November 2002, the FASB issued EITF No. 02-16, "Accounting by a Customer
> (Including a Reseller) for Certain Consideration Received from a Vendor" ("EITF
> 02-16"). EITF 02-16 requires that consideration received by a customer from a
> vendor is considered (a) an adjustment of the prices of the vendor's products or
> services and therefore, characterized as a reduction of cost of sales when
> recognized in the reseller's statement of operations, (b) an adjustment to a
> cost incurred by the reseller and, therefore, characterized as a reduction of
> that cost when recognized in the reseller's statement of operations, or (c) a
> payment for assets or services delivered to the vendor, and therefore,
> characterized as revenue when recognized in the reseller's statement of
> operations.  Adoption of EITF 02-16 was required for the Company for new
> agreements, including modifications of existing agreements, entered into after
> December 31, 2002.  For the quarter and six months ended  June 30,
> 2004, nearly all vendor consideration was recorded as an offset to cost of goods sold.  For the quarter and six months ended
> June 30, 2003, $0.4 million and $3.0 million of total vendor consideration was recorded as an offset to
> advertising expense, respectively.

---

3. Net Income Per Share

> Basic Earnings Per Share ("EPS") excludes dilution and is computed by dividing
>   net income by the weighted average number of common shares outstanding during
>   the reported periods.  Diluted EPS reflects the potential dilution that
>   could occur under the treasury stock method if stock options and other
>   commitments to issue common stock were exercised. The computation of Basic and
>   Diluted EPS is as follows (in thousands, except per share data):

Three months ended
        
        Six
          months endedJune
          30,
        
        June
          30,2004
        
        
        2003
        
        
        2004
        
        
        2003Net income
        
        $
        707
        
        
        $
        947
        
        
        $
        843
        
        
        $
        1,239Weighted average shares -
          Basic
        
        
        11,026
        
        
        
        10,535
        
        
        
        10,959
        
        
        
        10,566Effect of
          dilutive stock options and warrants (a)
        
        
        1,148
        
        
        
        580
        
        
        
        1,169
        
        
        
        553Weighted
          average shares - Diluted
        
        
        12,174
        
        
        
        11,115
        
        
        
        12,128
        
        
        
        11,119Earnings per share - Basic
        
        $
        0.06
        
        
        $
        0.09
        
        
        $
        0.08
        
        
        $
        0.12Earnings per share - Diluted
        
        $
        0.06
        
        
        $
        0.09
        
        
        
        0.07
        
        
        $
        0.11




(a)  Potential common shares of 14 and 13
for the three months ended June 30, 2004 and 2003, respectively, and 771 and 773
for the six months ended June 30, 2004 and 2003, respectively, have been excluded
from the earnings per share computations because the effect of their
inclusion would be anti-dilutive.

---

4. Segment Information

> The Company operates in
>   three reportable segments: 1) a rapid response supplier of technology
>   solutions for business, government and educational institutions as well as
>   consumers, comprised of corporate, public sector, inbound catalog and other sales, collectively referred to as the "Core Business,"  2)
>   a multi-category online discount retailer of new, refurbished and close-out products under the eCOST.com brand,
>   and 3) an online marketplace/auction business under the OnSale.com brand.   The OnSale.com segment, which was previously
>   reported as part of the Core Business, was established as a new segment
>   beginning in the third quarter of 2003, and prior period amounts have been
>   adjusted to reflect the new presentation.  The Company allocates resources to and
>   evaluates the performance of its segments based on operating income.  Corporate
>   expenses are included in the Company's measure of segment operating income for
>   management reporting purposes.
> Summarized segment information for continuing operations
> for the three months and six months ended June 30, 2004
>   and 2003 is as follows (in thousands):



Three months ended June 30, 2004
        
        Core Business
        
        eCOST.com
        
        OnSale
        ConsolidatedNet sales
        
        $
        231,604
        
        $
        38,884
        $
        8
        
        $
        270,496Gross profit
        
        
        30,408
        
        
        4,307
        
        8
        
        
        34,723Income from operations
        
        
        2,019
        
        
        (33)
        
        (326)
        
        
        1,660Three months ended June 30, 2003
        
        Core Business
        
        eCOST.com
        
        OnSale
        ConsolidatedNet sales
        
        $
        194,903
        
        $
        23,959
        $
        -
        
        $
        218,862Gross profit
        
        
        27,820
        
        
        2,882
        
        -
        
        
        30,702Income from operations
        
        
        1,815
        
        
        247
        
        (228)
        
        
        1,834Six months ended June 30, 2004
        
        Core Business
        
        eCOST.com
        
        OnSale
        ConsolidatedNet sales
        
        $
        471,397
        
        $
        77,208
        $
        15
        
        $
        548,620Gross profit
        
        
        61,610
        
        
        8,356
        
        15
        
        
        69,981Income from operations
        
        
        3,226
        
        
        (306)
        
        (638)

        

        

        2,282Six months ended June 30, 2003
        
        Core Business
        
        eCOST.com
        
        OnSale
        ConsolidatedNet sales
        
        $
        405,783
        
        $
        47,876
        $
        -
        
        $
        453,659Gross profit
        
        
        53,996
        
        
        5,571
        
        -
        
        
        59,567Income from operations
        
        
        2,530
        
        
        365
        
        (409)
        
        

      2,486


5.
eCOST.com 1999 Stock Incentive Plan

> In
> 1999, eCOST.com adopted its 1999 Stock Incentive Plan. As of June 30, 2004,
> options to purchase an aggregate of 656,000 shares of eCOST.com common stock
> were outstanding at a weighted average exercise price of $5.67.  The options
> have terms that (i) restrict exerciseability based on the earlier of a corporate
> transaction involving eCOST.com (e.g. a merger or consolidation or disposition
> of all or substantially all of the assets of eCOST.com) as defined, an initial
> public offering ("IPO") by eCOST.com or the lapse of a five or seven year period
> from date of grant, and (ii) for certain awards, provide repurchase rights to
> eCOST.com at the original exercise price in the event of employee termination,
> which rights terminate in the event of a corporate transaction or IPO. No
> options were exercisable at June 30, 2004 or for any prior period, and the
> time-based vesting terms were not deemed substantive as the awards are
> effectively contingent upon a corporate transaction or IPO of eCOST.com.  Due to
> such contingency, the Company has deemed the awards to be variable awards under
> APB 25 as the probability of these contingent events cannot be reasonably
> determined. As a result, a measurement date has not yet occurred for these
> awards. The Company will be required to recognize a compensation charge based on
> the intrinsic value of these awards when and if such contingent events occur in
> the future. Based on the mid-point of the offering price range as filed with the
> Securities and Exchange Commission by eCOST.com in connection with the potential
> offering, the aggregate charge the Company would recognize upon closing for
> these awards would be approximately $1.5 million.
> In
> March 2004 eCOST.com granted an option to purchase 400,000 shares of common
> stock to its Chief Executive Officer at an exercise price of $9.00 per share.
> This grant resulted in the recognition of deferred stock-based compensation
> based on the estimated deemed fair value of the common stock on the date of grant
> of $14.00. An aggregate of 25% of the shares of common stock subject to this
> option will vest upon the earlier of the completion of an IPO or three years
> from the date that eCOST.com granted this option. The remainder of the shares of
> common stock subject to this option will vest in equal quarterly installments
> over a three year period following whichever of these events occur first. Upon
> completion of an IPO, the Company would record a non-cash compensation charge of
> $0.4 million to reflect compensation expense related to the accelerated vesting
> of shares under this option as a result of an IPO.  In addition, the Company recognized
> compensation expense of $0.1 million in the three months ended June 30, 2004 in
> connection with the March 2004 option. The Company will also recognize
> additional compensation expense of $1.5 million relating to the March 2004
> option, which will be amortized over the remaining three-year vesting period.

6. Supplemental  Disclosure of Non-cash
Transactions

|                                                                         |   | Six months ended
      June 30,
|------------------------------------------------------------------------ | - | -------------------------------
|                                                                         |   | 2004                           
|Earnout provision
      pursuant to Pacific Business Systems acquisition | $ | 494                            
|Deferred initial public offering costs                                   |   | 712                            

7.          eCOST.com, Inc. Initial Public Offering

> On May 5, 2004, eCOST.com,
> Inc., a wholly-owned subsidiary of the Company, filed a registration statement
> with the Securities and Exchange Commission for a proposed public offering of
> its common stock.  Following the initial public offering, the Company will
> own no less than 80.1% of the common stock of eCOST.com (assuming full exercise
> of the underwriters' over-allotment option).  There can be no assurance as
> to when or if the initial public offering of eCOST.com will be completed. The
> Company has announced that it intends to distribute the remaining shares of
> eCOST.com to the Company's stockholders approximately six months following
> completion of an initial public offering. Completion of the distribution is
> contingent upon the satisfaction or waiver of a variety of conditions,
> including, among other things, the receipt of a favorable opinion of the
> Company's tax counsel as to the tax-free nature of the distribution for U.S.
> federal income tax purposes. As a result, the distribution may not occur at the
> contemplated time or may not occur at all.

8.          Other
Contingency

> On July 12, 2004, the
> Company's subsidiary, eCOST.com, received correspondence from MercExchange LLC
> alleging infringement of MercExchange's U.S. patents relating to e-commerce and
> offering to license its patent portfolio to the subsidiary. On July 15, 2004,
> eCOST.com received a follow-up letter from MercExchange specifying which of
> eCOST.com's technologies MercExchange believes infringe certain of its
> patents, alone or in combination with technologies provided by third parties.
> Some of those patents are currently being litigated by third parties, and
> eCOST.com is not involved in those proceedings. In addition, three of the four
> patents identified by MercExchange are under reexamination at the U.S. Patent
> and Trademark Office, which makes the scope of the claims of those patents
> uncertain.  In the July 15 letter, MercExchange also advised eCOST.com
> that it has a number of applications pending for additional patents. Each of the
> patents identified by MercExchange contains numerous claims, and eCOST.com only recently received these letters. As a result,
> eCOST.com has not yet
> had the opportunity to fully assess the merits of the identified patents or
> complete its evaluation of the possible impact on its business. MercExchange has
> filed lawsuits alleging infringement of some or all of its patents against third
> parties, resulting in settlements or verdicts in favor of MercExchange. At least
> one such verdict has been appealed to the United States Court of Appeals for the
> Federal Circuit.  Based on eCOST.com's investigation of this matter to
> date, the subsidiary believes that its current operations do not infringe any
> valid claims of the patents identified by MercExchange in these letters. There
> can be no assurance, however, that such claims will not be material or adversely
> affect the Company's or the subsidiary's business, financial position, results
> of operations or cash flows.

---

##### Table of Contents

ITEM 2.   MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONSOverview and Recent Developments
PC Mall, Inc. through its subsidiaries
(the "Company"), is a leading rapid response direct marketer of computer
hardware, software, peripheral, electronics, and other consumer products. 
The Company's headquarters is in Torrance, California.

The Company offers products to business, government and educational institutions
as well as individual consumers through dedicated outbound and inbound
telemarketing sales executives, the Internet, direct marketing techniques,
direct response catalogs, a direct sales force, and three retail showrooms.
The Company offers a broad selection of products through its
distinctive full-color catalogs under the PC Mall, MacMall, ClubMac, PC Mall Gov
and eCOST.com brands; its worldwide web sites on the Internet: pcmall.com,
macmall.com, clubmac.com, pcmallgov.com, and ecost.com; and other promotional
materials.  The Company also operates OnSale.com, an online marketplace and
auction, which was formally launched in October 2003.

The Company operates in three reportable
segments: 1) a rapid response supplier of technology solutions for business,
government and educational institutions as well as consumers, comprised of
corporate, public sector, inbound catalog and other sales, collectively referred
to as the "Core Business," 2) a multi-category online discount retailer of new,
refurbished, and close-out products under the eCOST.com brand; and 3) an online
marketplace/auction business under the OnSale.com brand.   The OnSale.com segment, which was previously reported as part
of the Core Business, was established as a new segment beginning in the third
quarter of 2003, and prior period amounts have been adjusted to reflect the new
presentation.  The Company allocates resources to and evaluates the performance
of its segments based on operating income.  Corporate expenses are included in
the Company's measure of segment operating income for management reporting
purposes.

Company management regularly reviews its
performance using a variety of financial and non-financial metrics including,
but not limited to, sales, shipments, average order size, gross margin, co-op
advertising revenues, advertising expense, personnel costs, sales account
executive productivity, accounts receivables aging, inventory turnover,
liquidity, and cash resources.  Company management compares the various
metrics against goals and budgets, and takes appropriate action to enhance
Company performance.

The Company plans to continue to focus
efforts on increasing market share by investing in the growth, training, and
retention of its outbound sales force.  This strategy is expected to result
in increased expenses associated with the infrastructure and training necessary
to achieve those goals, which could have an impact on profitability in the near
term.

In June 2003, the Company established a
Canadian call center serving the U.S. market.  The Canadian
call center had a net cost to the Company of $0.3 million and $0.8 million inthe three and six months ended June 30, 2004. 
The costs incurred for the comparable period in the prior year are minimal due
to its establishment late in the second quarter of the prior year.  The Company believes that the
Canadian call center allows it to access an abundant, highly educated labor pool
and provides cost advantages from a government labor credit that extends through approximately the end of 2007. 
During the period through 2007, the Company expects to annually claim labor
credits up to 35% of eligible compensation for qualifying employees under the
program.  The Company has submitted a claim for the year ended December 31,
2003 in the amount of $0.3 million and has accrued approximately $0.2 million
and $0.8 million of credits at March 31, 2004 and June 30, 2004.

In June 2002, the Company formed Onsale, Inc.
as a wholly-owned subsidiary.  The Company acquired the URL and software
that operated the original OnSale.com website for approximately $0.4 million
through bankruptcy proceedings of Egghead in December 2002.  In October
2003, the Company formally launched OnSale.com, an online marketplace including auctions.  The OnSale.com website
has been rebuilt on a technology platform using the latest .NET solutions.  As of
June 30, 2004, the Company has
invested approximately $0.9 million in capital expenditures and software
development costs in connection with its OnSale.com business.  As OnSale.com
is a marketplace service, and is not itself a seller of the products sold on its
website, the Company expects that for the
foreseeable future, revenue through OnSale.com will be immaterial.

Net sales of the Company are derived
primarily from the sale of computer hardware, software, peripherals,
electronics, and other consumer products to business, government and educational
institutions as well as individual consumers through dedicated outbound and
inbound telemarketing sales executives, the Internet, relationship-based
telemarketing techniques, direct response catalogs, a direct sales force, and three retail showrooms
located in Southern California and Tennessee. Gross profit consists of net sales
less product costs, inbound and outbound shipping costs and offset by certain marketing
development funds. Such funds are received
from manufacturers of products included in the Company's catalogs and web sites,
as well as co-operative advertising funds ("co-op") on products purchased from
manufacturers and vendors.

A substantial portion of the Company's
business is dependent on sales of HP products, Apple and Apple-related products, and
products of other vendors including Adobe, IBM, Ingram Micro, Microsoft, Sony, and Tech
Data. Products manufactured by HP represented 24% of the Company's net sales inthe three months ended
June 30, 2004. 
Products manufactured by Apple represented 16% of the Company's net sales inthe three months ended
June 30, 2004.

In 1999, eCOST.com adopted
its 1999 Stock Incentive Plan.   As of June 30, 2004, options to
purchase an aggregate of 656,000 shares of eCOST.com common
stock were outstanding at a weighted average exercise price of $5.67.  The
options have terms that (i) restrict exerciseability based on the earlier of a
corporate transaction involving eCOST.com (e.g. a merger or consolidation or disposition of all or
substantially all of the assets of eCOST.com) as defined, an initial public
offering ("IPO") by eCOST.com or the lapse of a five or seven year period from date of
grant, and (ii) for certain awards, provide repurchase rights to eCOST.com at the
original exercise price in the event of employee termination, which rights
terminate in the event of a corporate transaction or IPO. 
No options were exercisable at June 30, 2004 or for any prior period, and the
time-based vesting terms were
not deemed substantive as the awards are effectively contingent upon a corporate
transaction or IPO of eCOST.com.  Due to such contingency, the Company
has deemed the awards to be variable awards under APB 25 as the probability of
these contingent events cannot be reasonably determined.  As a result, a
measurement date has not yet occurred for these awards.  The Company will
be required to recognize a compensation charge based on the intrinsic value of
these awards when and if such contingent events occur in the future.  Based
on the mid-point of the offering price range as filed with the Securities and
Exchange Commission by eCOST.com in connection with the potential offering, the
aggregate charge the Company would recognize upon closing for these awards would
be approximately $1.5 million.

In March 2004, eCOST.com granted an option to purchase 400,000
shares of common stock to its Chief Executive Officer at an exercise price of
$9.00 per share.  This grant resulted in the recognition of deferred
stock-based compensation based on the estimated deemed fair value of the common stock
on the date of grant of $14.00.  An aggregate of 25% of the shares of common stock
subject to this option will vest upon the earlier of the completion of an eCOST.com
initial public offering or
three years from the date that eCOST.com granted this option.  The
remainder of the shares of common stock subject to this option will vest in
equal quarterly installments over a three year period following whichever of
these events occur first.  Upon completion of an eCOST.com initial public
offering, the Company would record a non-cash compensation charge of $0.4
million to reflect
compensation expense related to the accelerated vesting of shares under this
option as a result of such offering. 
In addition, the Company recognized compensation expense of $0.1 million in the
three months ended June 30, 2004 in connection with the March 2004 option. 
The Company will also recognize additional compensation expense of $1.5 million relating to the
March 2004 option, which will be amortized over the remaining three-year vesting period.

On July 12, 2004, the
Company's subsidiary, eCOST.com, received correspondence from MercExchange LLC
alleging infringement of MercExchange's U.S. patents relating to e-commerce and
offering to license its patent portfolio to the subsidiary. On July 15, 2004,
eCOST.com received a follow-up letter from MercExchange specifying which of
eCOST.com's technologies MercExchange believes infringe certain of its
patents, alone or in combination with technologies provided by third parties.
Some of those patents are currently being litigated by third parties, and
eCOST.com is not involved in those proceedings. In addition, three of the four
patents identified by MercExchange are under reexamination at the U.S. Patent
and Trademark Office, which makes the scope of the claims of those patents
uncertain.  In the July 15 letter, MercExchange also advised eCOST.com
that it has a number of applications pending for additional patents. Each of the
patents identified by MercExchange contains numerous claims, and eCOST.com only recently received these letters. As a result,
eCOST.com has not yet
had the opportunity to fully assess the merits of the identified patents or
complete its evaluation of the possible impact on its business. MercExchange has
filed lawsuits alleging infringement of some or all of its patents against third
parties, resulting in settlements or verdicts in favor of MercExchange. At least
one such verdict has been appealed to the United States Court of Appeals for the
Federal Circuit.  Based on eCOST.com's investigation of this matter to
date, the subsidiary believes that its current operations do not infringe any
valid claims of the patents identified by MercExchange in these letters. There
can be no assurance, however, that such claims will not be material or adversely
affect the Company's or the subsidiary's business, financial position, results
of operations or cash flows.

Critical Accounting Policies and Estimates

The Company's consolidated financial
statements have been prepared in accordance with accounting principles generally
accepted in the United States of America.  The preparation of the Company's
consolidated financial statements requires the Company to make estimates and
assumptions that affect the reported amounts of assets, liabilities, net sales
and expenses, as well as the disclosure of contingent assets and liabilities. The Company bases its estimates on historical experience and on
various other assumptions that are believed to be reasonable under the
circumstances, the results of which form the basis for making judgments about
carrying values of assets and liabilities that are not readily apparent from
other sources.  Actual results could differ from those estimates, and
revisions to estimates are included in the Company's results for the period in
which the actual amounts become known.

Management considers an accounting estimate to be critical if:

-- it requires assumptions to be made that were uncertain at the
time the estimate was made; and

-- changes in the estimate or different estimates that could have
been selected could have a material impact on the Company's results of operations or
financial condition.

Management has discussed the development and selection of these
critical accounting policies and estimates with the audit committee of the
Company's board
of directors.  The Company believes the critical accounting policies
described below affect the more significant judgments and estimates used in the
preparation of the Company's financial statements:

Revenue
Recognition.The Company adheres to the revised guidelines and
principles of sales recognition described in Staff Accounting Bulletin No. 104,
"Revenue Recognition" ("SAB 104"), issued by the staff of the Securities and
Exchange Commission (the "SEC") as a revision to Staff Accounting Bulletin No.
101, "Revenue Recognition" ("SAB 101").  While the wording of SAB 104 has
revised the original SAB 101, "Revenue Recognition", the revenue recognition
principles of SAB 101 remain largely unchanged by the issuance of SAB 104. 
Under SAB 104, sales are recognized when the title and risk of loss are passed
to the customer, there is persuasive evidence of an arrangement for sale,
delivery has occurred and/or services have been rendered, the sales price is
fixed or determinable and collectibility is reasonably assured.  Under
these guidelines, the majority of the Company's sales, including revenue from
product sales and gross outbound shipping and handling charges, are recognized
upon receipt of the product by the customer.  For all product sales shipped
directly from suppliers to customers, the Company takes title to the products
sold upon shipment, bears credit risk, and bears inventory risk for returned
products that are not successfully returned to suppliers; therefore, these
revenues are recognized at gross sales amounts.

Certain software
products and extended warranties that the Company sells (for which the Company
is not the primary obligor) are recognized on a net basis in accordance with SEC
Staff Accounting Bulletin No. 101, "Revenue Recognition" and EITF 99-19,
"Reporting Revenue Gross as a Principal versus Net as an Agent." Accordingly,
such revenues are recognized in net sales either at the time of sale or over the
contract period, based on the nature of the contract, at the net amount retained
by the Company, with no cost of goods sold.

Sales are reported net of estimated
returns and allowances, coupon redemptions and credit card chargebacks.  If
actual sales returns, allowances, discounts, coupon redemptions and credit card
chargebacks are greater than estimated by management, additional expense may be
incurred.

Allowance
for Doubtful Accounts Receivable. The Company
maintains an allowance for doubtful accounts receivable based upon estimates of
future collection.  The Company extends credit to its customers based upon
an evaluation of each customer's financial condition and credit history, and
generally does not require collateral.  The Company regularly evaluates
its customers' financial condition and credit and payment history in determining the
adequacy of its allowance for doubtful accounts.  The Company also
maintains an allowance for uncollectible vendor receivables which arise from
vendor rebate programs, price protections and other promotions.  The
Company determines the sufficiency of the vendor receivable allowance based upon
various factors, including payment history.  Amounts received from vendors
may vary from amounts recorded because of potential non-compliance with certain
elements of vendor programs.  If estimated allowances for uncollectible
accounts or vendor receivables subsequently prove insufficient, additional
allowance may be required.

Reserve
for Inventory Obsolescence. The Company maintains allowances for the
valuation of its inventory by estimating the obsolete or unmarketable inventory
based on the difference between inventory cost and market value determined by
general market conditions, nature, age and type of each product.  The
Company regularly evaluates the adequacy of its inventory reserve.  If the
inventory reserve subsequently proves insufficient, additional inventory
write-downs may be required.

Coupon Redemption Rate Estimates.
The Company accrues monthly expense related to promotional coupon rebates based
upon the quantity of eligible orders transacted during the period and the
estimated redemption rate.  The estimated expense is accrued and presented
as a reduction of net sales.  The estimated redemption rates used to
calculate the accrued coupon expense and related coupon liability are based
upon historical redemption experience rates for similar products or coupon
amounts.  Estimated redemption rates and the related coupon expense and
liability are regularly adjusted as actual coupon redemptions for the program
are processed.  If actual redemption rates are greater than anticipated,
additional expense may be incurred.

Deferred Advertising Revenue and
Costs.The Company produces and circulates catalogs
at various dates throughout the year and receives market development funds and
co-op advertising funds from vendors included in each catalog.  These funds are
recognized based on sales generated over the life of the catalog, approximately
eight weeks, as an offset to cost of sales in accordance with
EITF No. 02-16, "Accounting by a Customer (Including a Reseller) for Certain
Consideration Received from a Vendor" ("EITF 02-16"). 
The costs of developing, producing and circulating each catalog are deferred and
charged to advertising expense at the same rate as the co-op revenue based on
the life of the catalog.  Deferred advertising revenue is included in accrued
expenses and other current liabilities, offset by deferred advertising costs,
which are included in prepaid expenses and other current assets.

Results of OperationsThree Months Ended June 30, 2004 Compared to the Three Months Ended
June 30, 2003

Consolidated net sales for the quarter ended June 30, 2004 were $270.5 
million, an increase of $51.6 million, or 24%, over last year's second quarter sales of $218.9 million.  Core
Business sales for the quarter were $231.6 million, an increase of $36.7 million
over the prior year's second quarter, with corporate sales for the quarter growing
42% and public sector sales growing 21% compared to the prior year's second
quarter, partially due to a39% increase in combined account manager headcount
in those units. This growth was offset by a decline in the
Core Business catalog sales of 15% for the second quarter of 2004 compared to
prior year's second quarter.  eCOST.com
sales for the quarter were $38.9 million, an increase of $14.9 million, or 62%
over the prior year's second quarter.  The sales increase for eCOST.com was
primarily the result of a 47% increase in advertising expenditures and increased
sales to business customers assigned to a relationship manager. Active customers
of eCOST.com at the end of the quarter increased by 80% from same quarter last
year due to increased awareness of its website derived from additional
advertising spending during the second quarter of 2004 and the immediately
preceding quarter.  Sales to business customers assigned to relationship
managers increased 118% over the comparable prior year period primarily due to
an increase in the number of accounts managed.  For the quarter ended June
30, 2004, sales of HP and Apple products represented 24% and 16% of consolidated
net sales, compared to 18% and 21%, respectively, in the prior year's
comparable period.  OnSale.com sales for the second quarter of 2004 were
insignificant, and therefore have no meaningful comparison to the prior year's
quarter.
Consolidated gross profit was $34.7 million for the three months ended June 30,
2004, an increase of $4.0 million, or 13%, over the prior year's comparable
quarter.  For the Core Business, gross profit was $30.4 million, an
increase of $2.6 million, or 9% over the prior year's second quarter gross
profit.  For eCOST.com, gross profit for the second quarter of 2004 was
$4.3 million, an increase of $1.4 million, or 49% from the prior year's second
quarter.   As a percentage of sales, consolidated gross profit for the
three months ended June 30, 2004 was 12.8% versus 14.0% in the prior year's
second quarter.  For the Core Business, gross profit as a percentage of sales was 13.1% for
second quarter of the current year and 14.3% in the prior year's second quarter. 
The decline is
primarily the result of decreased vendor consideration received by the Company
as a percentage of sales, as well as aggressive pricing used to accelerate
customer acquisition.  eCOST.com gross profit as a
percentage of sales for three months ended June 30, 2004 and 2003 was 11.1% and
12.0%, respectively.  The decline
is primarily due to reduced vendor consideration and increased freight promotions. 
The Company's gross profit percentage may vary from quarter to quarter,
depending on the continuation of key vendor support programs, including price
protections, rebates and return policies, and based on product mix, pricing
strategies, acquisitions, competition and other factors.

Consolidated selling, general, and administrative ("SG&A")
expenses were $27.5 million for the three months ended June 30, 2004 which
includes $0.1 million charge for non-cash stock-based compensation, representing
an increase of $4.4 million, or 19% from the comparable period in the prior
year.  As a percent of sales, SG&A expenses decreased to 10.2% from
10.6% in the prior year. 
For the Core Business, SG&A expenses in the second quarter of 2004 were $24.1
million, an increase of $3.1 million, or 15%, compared to the second quarter of
the prior year.  As a percent of sales, SG&A expenses for the Core Business
decreased to
10.4%
compared with 10.8% in the second quarter last year.   SG&A for the
Core Business increased primarily due to higher personnel costs of $2.5 million;
however, such costs were 11 basis points lower as a percentage of sales,
contributing to the decrease in the SG&A percentage of sales.  For eCOST.com, SG&A
expenses in the second quarter of 2004 were $3.1 million, an increase of $1.3 million, or 68%, compared with the second quarter of the prior year.  As a
percent of sales, SG&A expenses for eCOST.com increased to 8.1% in the
second quarter of 2004 compared with
7.8% in the second
quarter last year.  SG&A expenses for eCOST.com include $0.3 millionin audit feesassociated in obtaining audited three-year financial statements and $0.1
million of stock-based compensation expense, offset
by operating leverage based on the 62% increase in sales compared to prior
year's comparable quarter.  For OnSale.com,
SG&A expenses in the second quarter of 2004 were $0.3 million, an increase
of $0.1 million, or 38% compared with the second quarter of the prior year. 
OnSale.com sales for the second quarters of 2003 and
2004 were insignificant, and therefore comparisons as a percent of net sales are
not meaningful.

Consolidated advertising expense for the second quarter of 2004
was $5.5 million, a decrease of $0.2 million over the prior year's second
quarter.  For the Core Business, advertising expense was $4.3 million
compared to $5.0 million in the prior year's second quarter, primarily due to a
$0.8 million decrease in advertising supporting the Company's inbound catalog
business.  Further, advertising expense were reduced in the prior year's
second quarter by $0.4 million of vendor consideration which was classified as
an offset to advertising expenses, but are classified in cost of goods sold in
the second quarter of 2004, as required by EITF 02-16.   For eCOST.com,
advertising expense for the second quarter of 2004 was $1.2 million compared to
$0.8 million in the comparable period in the prior year, as it expanded its
online advertising to drive new business.

Net interest expense
for the three months ended June 30, 2004 increased to $0.5 million,
from $0.3 million in the prior year's comparable quarter.  The increase in interest
expense resulted from increased daily average borrowings on the Company's Line of Credit.

The Company recorded
an income tax provision for the quarter ended June 30, 2004 of $0.4
million, down from $0.6 million in the comparable quarter in 2003.  The Company
utilized an effective tax rate of 38.5% for the quarter ended June 30, 2004 and 37.0%
for the quarter ended June 30, 2003.

Six Months Ended June 30, 2004 Compared to the Six Months Ended June 30, 2003

Consolidated net sales for the six months ended June 30, 2004 were $548.6
million, an increase of $95.0 million, or 21% over the six months ended
June 30, 2003.  Core business net sales for the six months ended June 30,
2004 were $471.4 million, an increase of $65.6 million, or 16% over the
six months ended June 30, 2003.  The increase was primarily due to a 39% increase in
corporate sales, and a 19% increase in public sector sales.  The increase was
partially offset by a 15% decrease in inbound catalog sales.  For the six
months ended June 30, 2004, net sales for eCOST.com were $77.2 million, an increase of $29.3 million or 61% over the first half of the prior year.  The
sales increase was primarily the result of a 73% increase in advertising
expenditures and increased sales to business customers assigned to a
relationship manager.  New customers during the six month period increased
by 86% compared to the same period last year due to increased awareness of the
eCOST.com website derived from additional advertising spending during the first
half of 2004.  Sales to business customers assigned to relationship
managers increased 111% over the comparable prior year period primarily due to
an increase in the number of accounts managed.For the six months
ended June 30, 2004, sales of HP and Apple products represented23% and 17%of consolidated net sales, compared to 18% and 21%, respectively, in the prior year'scomparable period.

Consolidated gross profit for the six months ended June 30, 2004
was $70.0 million, an increase of $10.4 million, or 17%, over the prior
year's comparable period.For the Core Business, gross profit was
$61.6 million, an increase of $7.6 million, or 14%, from the comparable period
in the prior year.  For eCOST.com, gross profit for the first half of 2004
was $8.4 million, an increase of $2.8 million, or 50% from the prior year's
comparable period.  As a percentage of sales, consolidated gross profit for
the six months ended June 30, 2004 was 12.8% versus 13.1% in the prior year. 
For the Core Business, gross profit as a percentage of sales for the six months
ended June 30, 2004 was 13.1% versus 13.3% in the prior year.  The gross profit
increase in the first half of 2004 included the impact of EITF 02-16 in the
prior year which resulted in approximately $2.8 million of vendor consideration
being classified in advertising in the first
half of 2003.  Such amounts were offset by an overall decrease in vendor consideration received
in the period, resulting in a decline in the Core Business gross profit
percentage.  For eCOST.com, gross profit as a percentage of sales for the
six months ended June 30, 2004 was 10.8% versus 11.6% in the prior
year, primarily due to reduced vendor consideration and increased freight promotions.  The Company's gross profit percentage
may vary from quarter to quarter, depending on the continuation of key vendor support programs, including price
protections, rebates and return policies, and based on product mix, pricing strategies,
acquisitions, competition and other factors.   See "Change in
Accounting Principle and Recent Accounting
Pronouncements" below for a discussion of the Company's adoption of EITF 02-16.
Consolidated selling, general and administrative expenses ("SG&A") were $54.6 million for
the six months ended June 30, 2004, an increase of $7.5 million, or 16%, from
the comparable period in the prior year. As a percent of net sales, SG&A for the six months ended June 30, 2004
decreased to 10.0% from 10.4% from the comparable period in the prior year. 
For the Core Business, SG&A for the six
months ended June 30, 2004 were $48.2 million, an increase of $5.3 million, or
12.4%, compared to the same period in the prior year.  As a percent of net
sales, SG&A for the Core Business
decreased to 10.2% for the six months ended June 30, 2004 compared with 10.6%
for the same period last year.  SG&A for the Core Business increased
primarily due to higher personnel costs of $4.1 million; however, such costs
were 13 basis points lower as a percentage of net sales, contributing to the
decrease in the SG&A percentage of sales.  For eCOST.com, SG&A for the six months ended June 30, 2004 were $5.8
million, an increase of $2.0 million, or 51% compared with the same six-month period in the prior
year.  As a percent of net sales, SG&A for eCOST.com decreased by 50 basis points to 7.5% for the six months ended June 30, 2003
from 8.0% for the comparable period last year.  SG&A for eCOST.com
increased primarily due to higher variable costs such as credit card processing
charges, as well as a 42% increase in account manager headcount, and a $0.5
million expense associated with obtaining three-year audited financial
statements.  SG&A as a percentage of sales was driven primarily by a 31
basis point decline in overall personnel costs as a percentage of sales.

Consolidated net advertising expense for the first half of 2004
was $13.1 million compared to $10.0 million in the prior year's comparable period.  
For the Core Business, net advertising expense was $10.2 million compared to $8.6
million in the first half of the prior year, primarily due to a $0.8 million
decrease in advertising supporting the Company's inbound catalog business. 
Further, Core Business advertising expense were reduced in the first half of the
prior year by $2.8 million of vendor consideration which was classified as an
offset to advertising expenses, but are classified in cost of goods sold in the
first half of 2004, as required by EITF 02-16.  For eCOST.com, net
advertising expense for the first half of 2004 was $2.8 million compared to $1.4
million for the comparable period in the prior year, primarily due to increased
internet advertising expenditures to accelerate customer acquisition.

Net interest expense for the six months ended June 30, 2004 increased to $0.9 million, from $0.5 million, compared to the same period in 2003. 
The increase in interest expense resulted from increased daily average
borrowings on the Company's Line of Credit.

The Company recorded an income tax provision for the six months
ended June 30, 2004 of $0.5
million, down from $0.7 million in the comparable quarter in 2003.  The Company
utilized an effective tax rate of  38.5% for the six months ended June 30,
2004 and 37.0% for the same period in the prior year.

Net income was $0.8
million, or $0.07 per share, for the six months ended June 30, 2004 compared to
net income of $1.2 million, or $0.11 per share, for the same period last year.

Liquidity and Capital Resources

Working Capital.The Company's primary capital need has been
funding the working capital requirements created by its growth in sales. 
Historically, the Company's primary sources of financing have come from cash
flow from operations, public and private issuances of its common
stock, and borrowings from financial
institutions.The Company believes that current
working capital, together with cash flows from operations and available lines of
credit, will be adequate to support the Company's current operating plans for at
least the next twelve months.  If the Company needs extra funds, such as for
additional acquisitions or expansion or to fund unexpected
losses, there are no assurances that adequate financing will be available at
acceptable terms, if at all.

As of June 30, 2004, the Company had cash and cash equivalents of $6.3 million
and working capital of $32.4 million.  Inventory decreased $17.9 million to
$62.6 million from December 31, 2003 as the Company sold through product
accumulated at year-end resulting from strategic buying opportunities. 
Accounts receivable increased $14.0 million to $85.4 million from December 31,
2003 resulting from increased business and governmental sales.  For the six months ended June 30, 2004, capital expenditures were $1.6 million versus
$2.3 million for the comparable period last year.Accounts payable and book overdraft decreased by a total of $18.2 million or 22%
during the six month period, reflecting lower purchases made during the June 2004
period as compared with December 2003, as the Company sold through its strategic inventory purchases made in the fourth quarter of 2003.

In April 2004, the Company agreed to extend to its eCOST.com subsidiary a line
of credit of up to $10.0 million for necessary working capital requirements
arising from expenses and liabilities incurred by eCOST.com in the ordinary
course of business. The Company's obligation under this line of credit will
terminate upon the earlier to occur of (i) the completion of an initial public
offering ("IPO") of eCOST.com's common stock, (ii) the sale of all or
substantially all of the assets or capital stock of eCOST.com, or (iii) June 30,
2005.As of June 30, 2004 no
amounts were outstanding under this line of credit.

The Company maintains a $75 million, asset-based revolving credit
facility from a lending unit of a large commercial bank (the "Line of Credit")
that commenced in March 2001.  In March 2003, the Line of Credit was
amended to extend the term by an additional three years to expire in March 2007,
and obtain improved terms for the Company.  The Line of Credit functions as
a working capital line of credit with a borrowing base of inventory and accounts
receivable, and bears interest at prime with a LIBOR option.  At June 30,
2004, the Prime Rate was 4.00%.  The Line of Credit is secured by
substantially all of the Company's assets.  The Line of Credit has as its
single financial covenant a minimum tangible net worth requirement and also
includes a commitment fee of 0.25% annually on the unused portion of the line up
to $60 million.  In May 2004, the Line of Credit was amended to provide for
a conditional release of eCOST.com as a co-borrower and release of eCOST.com's
assets as collateral, effective upon completion of an eCOST.com IPO.  The
Company also maintains a $40 million flooring credit facility, which functions
in lieu of a vendor trade payable for inventory purchases and does not bear
interest if paid within terms specific to each vendor (the "Flooring Facility"). 
The Flooring Facility is secured by substantially all of the Company's assets
and is also supported by a letter of credit issued under the Line of Credit in
the amount outstanding under the Flooring Facility from time to time.  The
amount outstanding under the Flooring Facility is applied against the credit
limit under the Line of Credit.  In April 2004, the Company extended the
Flooring Facility through March 2005.  The Company did not draw any
substantial amounts on the Flooring Facility during the three months ended June
30, 2004.  At June 30, 2004 and December 31, 2003, the Company had
$34.6 million and $28.2million of net working capital advances
outstanding under the Line of Credit, respectively, and had no borrowings under
the Flooring Facility at either period ended.  The Company had $39.6
million available to borrow for working capital advances under the Line of
Credit at June 30, 2004.  Loan availability under the Line of Credit
fluctuates daily and is affected by many factors including eligible assets
on-hand, opportunistic purchases of inventory and early pay discounts.  The
Company was in compliance with its financial covenants under the Line of Credit
at June 30, 2004.

In connection with and as a part of the  Line of Credit,
the Company entered into a term note (the "Term Note").  In June 2004, the
Company amended the Term Note to increase the borrowing base from $2.0 million
to $3.5 million and extended the maturity date from March 2005 to June 2011. 
As of June 30, 2004 the Company had borrowed $3.5 million under Term Note,
payable in equal monthly principal payments plus interest at prime.  As of
June 30, 2004, the Company has reflected $0.5 million of the principal amount of
the Term Note in current liabilities included as Notes payable - current, and
$3.0 million of the principal amount is included in non-current liabilities as
Notes payable based on the timing of scheduled payments.

As part of its growth strategy, the Company may, in the future, acquire other
companies in the same or complementary lines of business, and pursue other
business ventures. Any launch of a new business venture or any acquisition and
the ensuing integration of the operations of the acquired company with those of
the Company would place additional demands on the Company's management,
operating and financial resources.

Cash Flows.
Net cash used in operating activities were $3.3 million for the
six months ended
June 30, 2004.  The primary factors that affected the
Company's cash flow
from operations were inventories, accounts receivable and accounts payable.Inventory at June 30, 2004 decreased $17.9 million over December 31, 2003, and
inventory turns decreased to 16.5 from 18.1 inthe same period.  Accounts
receivable at June 30, 2004 increased $14.0 million to $85.4 million from
December 31, 2003 due to an increase in sales on account to corporate and government
customers.  Accounts payable and book overdraft decreased by a total of
$18.2 million or 22% during the six month period.  Net borrowings under the
Line of Credit increased by $8.4 million inthe six months ended June
30, 2004.

InflationInflation has not had a material impact upon operating results, and the Company does not expect it to have such an impact in the near
future.  There can be no assurances, however, that the Company's business will not be so affected by inflation.

Impact of Recently Issued Accounting Standards

In November 2002, the FASB issued EITF No. 02-16, "Accounting by a Customer
(Including a Reseller) for Certain Consideration Received from a Vendor" ("EITF
02-16"). EITF 02-16 requires that consideration received by a customer from a
vendor is considered (a) an adjustment of the prices of the vendor's products or
services and therefore, characterized as a reduction of cost of sales when
recognized in the reseller's statement of operations, (b) an adjustment to a
cost incurred by the reseller and, therefore, characterized as a reduction of
that cost when recognized in the reseller's statement of operations, or (c) a
payment for assets or services delivered to the vendor, and therefore,
characterized as revenue when recognized in the reseller's statement of
operations.  Adoption of EITF 02-16 was required for the Company for new
agreements, including modifications of existing agreements, entered into after
December 31, 2002.

---

Forward Looking Statements
Except for historical information, all of the statements, expectations and
assumptions contained in the foregoing are forward-looking statements. The
realization of any or all of these expectations is subject to a number of risks
and uncertainties and it is possible that the assumptions made by management may
not materialize, causing actual results to differ materially from the forward
looking statements. Such statements include the statements regarding the
Company's expectations, hopes or intentions regarding the future, including but
not limited to statements regarding cash position; expense reductions; sales
growth and market share; corporate and Public sector sales initiatives; the
effect of the Company's reinvestment in its sales force;
the impact of the Company's Canadian call center on operating results; the
prospects for the Company's OnSale.com and eCOST.com subsidiaries;
and the timing and
completion of the initial public offering of eCOST.com and the distribution of
eCOST.com common stock to the Company's stockholders. There can be no assurance
that either the initial public offering of eCOST.com or the distribution of
eCOST.com common stock by the Company will occur in the expected time frame or
at all, as a result of a variety of reasons, including but not limited to market
conditions, the satisfaction of conditions to the distribution, and the ability
of the Company to obtain an opinion as to the tax free nature of the
distribution.

There can be no assurance that the
transition in the Company's business strategy to increasingly corporate or
public sector sales or
outbound telemarketing sales models will be successful, that enhancements to
corporate and public sector account executive
support or other actions by the Company will result in improved productivity,

that infrastructure investments in the
Company's corporate sales or outbound telemarketing will result in expanded market share, or that
the Company will be profitable in 2004 or for the ensuing periods.  There
also can be no assurance that the growth in corporate sales, public sector, or
eCOST.com will continue, that the
Company's expansion of its corporate and public sector sales force will
increase sales sufficiently to offset costs, that Core Business sales,
particularly inbound catalog sales, will rebound to historic levels, or that cost
reductions, EBITDA or profitability for the Company's Core Business and
eCOST.com
will continue or improve.  Increases in the percentage of direct
sales by the Company's vendors could adversely affect the Company's business. 
In addition, the Company has recently submitted its first annual request for
refund for the Canadian labor credit.  The calculation of the credit
requires a determination of the eligibility of employees and related
compensation based on job functions and type of compensation.  There can
be no assurance that the ultimate amount refunded will not materially differ
from the Company's expectations.

In addition to the factors set forth above, other important factors that could
cause actual results to differ materially from the Company's expectations
include: competition from companies either currently in the market or entering
the market; competition from other catalog and retail store resellers and price
pressures related thereto; uncertainties surrounding the supply of and demand
for products manufactured by and compatible with Apple Computer or
Hewlett-Packard; the Company's reliance on Apple Computer, Hewlett-Packard, IBM,
and other vendors; risks due to shifts in market demand and/or price erosion of
owned inventory; general economic and computer industry conditions;
uncertainties relating to the relationship of increases in account managers and
productivity; increased expenses from online initiatives; the continued
acceptance of the Company's distribution channel by vendors and customers; the
timely availability and acceptance of new products; continuation of key vendor
relationships and support programs; the continuing development, maintenance, and
operation of the Company's information technology ("IT") and telephone systems;
changes and uncertainties in economic conditions that could affect the rate of
IT spending by the Company's customers; the ability of the Company to
successfully operate its facility in Canada; changes in pricing by the Company's
vendors; the timing and extent of repurchases under the Company's share
repurchase program; inability to convert back orders to completed sales; the
ability of the Company to hire and retain qualified sales account executives;
the effects of natural disasters or geopolitical events on the Company or the
general economy; dependence on key personnel; the effect of narrow gross
operating margins on operating results; quarterly fluctuations in results; the
ability of the Company to successfully expand into the public sector market; the
Company's dependence on one or more shipping companies for delivery of products;
the effect of increased postage, shipping or packaging costs; technological
changes and inventory obsolescence; dependence on the continued viability of the
Internet; volatility of the Company's stock price; and sales or use tax
collection.  In addition, if the Company needs extra funds, such as for
acquisitions or expansion or to fund a significant downturn in sales that causes
losses, there are no assurances that adequate financing will be available at
acceptable terms, if at all.Furthermore, third parties have asserted, and may in the future assert that the
Company or its subsidiaries' business or the technologies used infringe
intellectual property rights. Although the Company has not been subject to such legal
proceedings in the past, the Company may be subject to intellectual property
legal proceedings and claims in the ordinary course of  business. For
example, the Company's subsidiary, eCOST.com recently received letters from a
third party alleging that eCOST.com is currently infringing certain of its
patents. Based on eCOST.com's investigation of this matter to date, the
subsidiary believes that its current operations do not infringe any valid claims
of the patents identified in these letters.  If third parties claim
eCOST.com is infringing their intellectual property rights, it could incur
significant litigation costs, be required to pay damages, or change its business
or incur licensing expenses.  If the Company or any of its subsidiaries is forced to defend against
this or any other third-party infringement claims, it could face expensive and
time-consuming litigation and be required to pay monetary damages, which could
include treble damages and attorneys' fees for any infringement that is found to
be willful, and either be enjoined or required to pay ongoing royalties with
respect to any technologies found to infringe. Further, as a result of
infringement claims  against the Company or any of its subsidiaries or against
those who license technology to eCOST.com, we may be required, or deemed advisable, to
develop non-infringing technology, which could be costly and time-consuming, or
enter into costly royalty or licensing agreements.



The above list of risk factors is not intended to be exhaustive. 
Reference should also be made to the risk factors set forth from time to time in
the Company's SEC reports, including but not limited to those set forth in the
section entitled, "Certain Factors Affecting Future Results" in its Annual
Report on Form 10-K for 2003.

ITEM 3.   QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The Company's financial instruments consist primarily of cash.  As of
June 30, 2004, the carrying values of the Company's financial instruments
approximated their fair values based on current market prices and rates.

The Company has exposure to the risks of fluctuating interest
rates on its Line of Credit.  The variable interest rate on the Line of
Credit is tied to the prime rate or the London interbank offered rate at the
discretion of the Company.  If the variable rate on the Line of Credit
changes, the Company may be required to pay more interest.  However, the
Company believes that the near-term effect of any change in interest rates will
not be material to the Company's financial position, results of operations or
cash flows.

It is the Company's  policy not to enter into  derivative  financial  instruments,
and the Company does not have any  significant  foreign
currency  exposure.   Therefore,  the Company  does not have  significant
overall currency exposure as of June 30, 2004.

ITEM 4.   CONTROLS AND
PROCEDURES

As of the end of the period covered by this report, the Company carried
out an evaluation, under the supervision and with the participation of the Chief
Executive Officer and Chief Financial Officer, of the effectiveness of the
design and operation of the Company's disclosure controls and procedures. 
Based on this evaluation, the Chief Executive Officer and Chief Financial
Officer concluded that the Company's disclosure controls and procedures are
effective in timely alerting them to material information required to be
included in this report.

There has been no change in the Company's internal control over financial
reporting that occurred during the Company's most recent fiscal quarter that has
materially affected or is reasonably likely to materially affect the Company's internal
control over financial reporting.



---

PART II - OTHER
INFORMATION

ITEM 2.  CHANGES IN
SECURITIES, USE OF PROCEEDS AND ISSUER PURCHASES OF EQUITY SECURITIES

In July 1996, the
Company announced its plan to repurchase up to 1,000,000 shares of its Common
Stock. The shares will be repurchased from time to time at prevailing market
prices through open market or negotiated transactions, depending upon market
conditions. No limit was placed on the duration of the repurchase program. There
is no guarantee as to the exact number of shares that the Company will
repurchase. Subject to applicable securities laws, repurchases may be made at
such times and in such amounts as the Company's management deems appropriate.
The program can also be discontinued at any time management feels additional
purchases are not warranted. The Company did not purchase any shares of its
common stock during the three month period ended June 30, 2004. As of June 30,
2004, the Company has repurchased a total of 294,200 shares of its common stock
at an average price of $3.45 per share, of
which  254,200 shares were repurchased under the program, and 40,000 shares were
purchased in a private transaction.

ITEM 5.  OTHER MATTERS

On May 5, 2004, eCOST.com,
Inc., a wholly-owned subsidiary of the Company, filed a registration statement
with the Securities and Exchange Commission for a proposed public offering of
its common stock.  Following the initial public offering, the Company will own no
less than 80.1% of the common stock of eCOST.com (assuming full exercise of the
underwriters' over-allotment option). The registration statement is being
reviewed by the SEC and there can be no assurance as to when or if the initial
public offering will be completed. The Company has announced that it intends to
distribute the remaining shares of eCOST.com to the Company's stockholders
approximately six months following completion of the initial public offering.
Completion of the distribution is contingent upon the satisfaction or waiver of
a variety of conditions, including, among other things, the receipt of a
favorable opinion of the Company's tax counsel as to the tax-free nature of the
distribution for U.S. federal income tax purposes. As a result, the distribution
may not occur at the contemplated time and may not occur at all.

ITEM 6.   EXHIBITS AND REPORTS ON FORM 8-K

> a.  Exhibits
>     Exhibit Number
>     Description10.54
> 
> 
> 
>         Employment Agreement between the Company and Rob Newton
>         dated June 8, 200410.55
> 
> 
> 
>         Second Amendment to Loan and Security Agreement, dated
>         October 31, 2002, among Congress Financial Corporation and (Western),
>         the Registrant and certain subsidiaries of the Registrant.31.1
> 
> 
> 
>         Certification of the Chief Executive
>         Officer of the Registrant pursuant to Exchange Act Rule 13a-14(a)31.2
> 
> 
> 
>         Certification of the Chief Financial
>         Officer of the Registrant pursuant to Exchange Act Rule 13a-14(a)32.1
> 
> 
> 
>         Certification of the Chief
>         Executive Officer of Registrant furnished pursuant to 18 U.S.C. 1350, as adopted
>         by Section 906 of the Sarbanes-Oxley Act of 200232.2
> 
> 
> 
>         Certification of the Chief
>         Financial Officer of Registrant furnished pursuant to 18 U.S.C. 1350, as adopted
>         by Section 906 of the Sarbanes-Oxley Act of 2002b.  Reports on Form 8-K
> 
>     1.  Although we did not file any
>     reports on Form 8-K during the quarter covered by this Report, we furnished to the SEC a report on
>     Form 8-K on May 5, 2004 (pursuant to Item 12 of Form 8-K) disclosing an
>     earnings announcement of our financial results for the quarter
>     ended March 31, 2004.

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SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.

|                      |  |  |     |                                                                            
|--------------------- |  |  | --- | ---------------------------------------------------------------------------
|Date: August 10, 2004 |  |  |     | PC MALL, INC.                                                              
|                     
|                      |  |  | By: | /s/ Ted Sanders
        Ted Sanders
Chief Financial Officer                
|                     
|                      |  |  |     | (Duly Authorized Officer of
the Registrant and Principal
Financial Officer)



---

PC MALL, INC.

EXHIBIT INDEX

Exhibit Number
    Description10.54



        Employment Agreement between the Company and Rob Newton
        dated June 8, 200410.55



        Second Amendment to Loan and Security Agreement, dated
        October 31, 2002, among Congress Financial Corporation and (Western),
        the Registrant and certain subsidiaries of the Registrant.31.1



        Certification of the Chief Executive
        Officer of the Registrant pursuant to Exchange Act Rule 13a-14(a)31.2



        Certification of the Chief Financial
        Officer of the Registrant pursuant to Exchange Act Rule 13a-14(a)32.1



        Certification of the Chief
        Executive Officer of Registrant furnished pursuant to 18 U.S.C. 1350, as adopted
        by Section 906 of the Sarbanes-Oxley Act of 200232.2



        Certification of the Chief
        Financial Officer of Registrant furnished pursuant to 18 U.S.C. 1350, as adopted
        by Section 906 of the Sarbanes-Oxley Act of 2002