8-K

 
                       SECURITIES AND EXCHANGE COMMISSION
                            Washington, D.C.  20549


                                    FORM 8-K


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

                         Date of Report:  July 6, 1998



                            CREATIVE COMPUTERS, INC.
                            ------------------------
             (Exact Name of Registrant as Specified in its Charter)



                                    Delaware
                                    --------
                        (State or Other Jurisdiction of
                         Incorporation or Organization)



          0-25790                              95-4518700
          -------                              ----------
  (Commission File Number)                  (I.R.S. Employer
                                           Identification No.)


                             2555 West 190th Street
                           Torrance, California 90504
                           --------------------------
              (Address of Principal Executive Offices) (Zip Code)



                                 (310) 354-5600
                                 --------------
                        (Registrant's telephone number,
                              including area code)

 
Item 5.  Other Events.

     On July 6, 1998, Creative Computers, Inc., (the "Registrant"), announced
that the Registrant intends to separate its Internet auction subsidiary, uBid,
Inc. ("uBid"), from the Registrant's other businesses and operations.  As part
of the plan to separate uBid from the Registrant, uBid has filed a registration
statement covering an initial public offering of uBid Common Stock (the
"Offering").  Upon completion of the Offering, the Registrant will own
approximately 80% of uBid's Common Stock.  The Registrant intends to distribute
to its stockholders, subject to certain conditions, all of these remaining
shares of uBid in a tax-free spin-off transaction in 1999 (the "Distribution").
The Distribution cannot occur earlier than 180 days following the consummation
of the Offering.

     The net proceeds from the proposed Offering are expected to be used by uBid
to repay the outstanding debt (the "Payable") owed by it to the Registrant
(approximately $3 million at May 31, 1998 and expected to be approximately $4
million upon closing of the Offering), for working capital, and for the
development of uBid's infrastructure.  The Registrant intends to use the funds
received from uBid upon repayment of the Payable for the Registrant's working
capital purposes.

     The Registrant expects to receive, prior to the consummation of the
Offering, an opinion from PricewaterhouseCoopers LLP to the effect that the
Distribution will qualify as a tax-free distribution for federal income tax
purposes under Section 355 of the Internal Revenue Code (the "PwC Opinion").
The Registrant may also decide, in its sole discretion, to seek a private letter
ruling from the Internal Revenue Service to the same effect as the PwC Opinion
(the "Letter Ruling").  Completion of the Distribution will be subject to the
satisfaction, or waiver by the Board of Directors of the Registrant (the
"Board"), in its sole discretion, of the following conditions:  (i) the receipt
of the PwC Opinion, in form and substance satisfactory to the Registrant, and
confirmation of that opinion at the time of the Distribution; (ii) if a Letter
Ruling is applied for, a Letter Ruling shall have been obtained and remain
effective to the effect that, among other things, the Distribution will qualify
as a tax-free distribution for federal income tax purposes under Section 355 of
the Internal Revenue Code of 1986, as amended, and will not result in
recognition of any gain or loss for federal income tax purposes to the
Registrant, uBid, or the Registrant's or uBid's respective stockholders, and
such ruling shall be in form and substance satisfactory to the Registrant; (iii)
any material governmental approvals and third-party consents necessary to
consummate the Distribution shall have been obtained and shall be in full force
and effect; (iv) no order, injunction or decree issued by any court or agency of
competent jurisdiction or other legal restraint or prohibition preventing the
consummation of the Distribution shall be in effect, and no other event outside
the control of the Registrant shall have occurred or failed to occur that
prevents the consummation of the Distribution; and (v) no other events or
developments shall have occurred subsequent to the consummation of the Offering
that, in the judgment of the Board, would result in the Distribution having a
material adverse effect on the Registrant or on the stockholders of the
Registrant.

     There is no assurance that the foregoing conditions to the completion of
the Distribution will be satisfied and, consequently, there is no assurance that
the Distribution will occur.

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     Reference is made to the press release filed as Exhibit 99 hereto.  The
information set forth in Exhibit 99 is hereby incorporated by reference herein.

     This Report contains certain forward-looking statements which involve known
and unknown risks, uncertainties or other factors not under the Registrant's
control which may cause the actual results, performance or achievements of the
Registrant or uBid to be materially different from the results, performance or
other expectations implied by these forward-looking statements.  Such forward-
looking statements include, among other things, discussions of the Registrant's
and uBid's plans for the Offering and the Distribution, and expectations
concerning market position, future operations, liquidity and capital resources,
acquisitions, and achievement of financial benefits in connection therewith.
Although the Registrant believes that the expectations reflected in the forward-
looking statements are reasonable, the Registrant can give no assurance that
such expectations will prove to be correct.  Some of these risk factors include,
but are not limited to, the inability to complete the Offering or to complete
the Distribution, as well as those disclosed in the Registrant's report on Form
10-K for the fiscal year ended December 31, 1997 and in its other filings with
the Securities and Exchange Commission.  The Registrant assumes no duty to
update any forward-looking statements.

     Item 7.  Financial Statements and Exhibits.

     (a)  Not applicable.

     (b)  Not applicable.

     (c)  Exhibits

          99  Text of Press Release dated July 6, 1998.

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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 hereunto duly authorized.


                                    CREATIVE COMPUTERS, INC.


Date:  July 9, 1998                 /s/ Rick Finkbeiner
                                    -----------------------------------
                                    Richard Finkbeiner
                                    Chief Financial Officer
 

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                               Index to Exhibits


Exhibit     Description
- -------     -----------
   99       Text of Press Release dated July 6, 1998

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EX-99

 
                                                                      EXHIBIT 99

                   CREATIVE COMPUTERS, INC. ANNOUNCES PLANNED
                          SPIN-OFF OF UBID THROUGH IPO
                                        

     TORRANCE, Calif.--(BUSINESS WIRE)--July 6, 1998--Creative Computers, Inc.
("Creative") (NASDAQ:MALL) announced today that its wholly-owned subsidiary,
uBid, has filed a registration statement for an initial public offering
("Offering") of 1,580,000 shares of common stock to the public and has granted
to the underwriters an over-allotment option for up to 237,000 additional common
shares. It is estimated that the initial public offering price will be between
$12 and $14 per common share. The net proceeds from the Offering will be used to
repay the then outstanding payable to Creative (approximately $3.0 million as of
May 31, 1998 and expected to be approximately $4.0 million at the time of
consummation of the Offering), for working capital needs to include planned
advertising and brand development expenditures to continue to rapidly grow its
customer base, and for the development of uBid's infrastructure.

     Upon completion of the Offering, Creative Computers will own approximately
80 percent of the capital stock of uBid. Creative intends to separate the
companies in a distribution of Creative's approximate 80% ownership of uBid
common stock to Creative's stockholders through a tax-free spin-off in 1999.
However, the Distribution can happen no sooner than 180 days following the
closing of the Offering and will be subject to the receipt of a tax opinion
and/or a favorable ruling from the Internal Revenue Service regarding the tax-
free nature of the transaction and certain other conditions, including the
absence of any change in market conditions or circumstances that causes the
Board of Directors to conclude that the distribution is not in the best interest
of Creative stockholders.  The distribution would be made in the form of a
dividend of uBid common stock without the payment of further consideration.

     "Creative has decided to spin-off uBid by first raising capital through an
initial public offering and then distributing Creative's ownership in uBid to
its stockholders, thereby allowing uBid to operate as a stand-alone company,"
stated Frank Khulusi, Creative's President and Chief Executive Officer.
"Several business purposes underlie these decisions.  These transactions are
anticipated to be beneficial to Creative because we will be able to better focus
our efforts on our core direct sales business.  In addition, uBid, by being in
the Internet online auction industry, is in a very dynamic and evolving area
that requires considerable capital to continue to fund its planned growth.  We
believe that raising funds through consummation of the Offering provides the
most effective source of capital for uBid.  In addition, we believe that both
uBid employees and Creative stockholders will benefit by being able to
participate as stockholders in uBid as a stand-alone, publicly-traded entity.
Also, the consummation of the distribution of the common stock from Creative to
its stockholders will remove current restrictions on uBid as a result of certain
contractual restrictions on Creative that are applicable to uBid as part of
Creative. "

     uBid operates an online auction for excess merchandise, offering close-out
and refurbished products to consumers and small to medium-sized businesses.
uBid's Internet auctions feature a rotating selection of brand-name computers
and consumer electronics which typically sell at significant discounts to prices
found at traditional retailers. uBid has grown 

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rapidly since its first auction during the last week of December 1997. In
January 1998, uBid had net revenues of $157,000 and in the month of June 1998
net revenues have grown to approximately $3.0 million. uBid currently runs seven
auctions per week, offering as many as 1,000 items per auction. During the month
of June 1998, uBid recorded more than one million visits to its Website and had
over 60,000 registered users. uBid's website can be found at www.ubid.com.

     The offering will be lead-managed by Merrill Lynch & Co. with William Blair
& Company acting as the co-manager.

    A registration statement relating to these securities has been filed with
the Securities Exchange Commission but has not yet become effective. These
securities may not be sold nor may offers to buy be accepted prior to the time
the registration statement becomes effective. This announcement shall not
constitute an offer to sell or the solicitation of an offer to buy nor shall
there be any sale of these securities in any state in which such offer,
solicitation or sale would be unlawful prior to the registration or
qualification under the securities laws of any such state.

     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. Factors that could cause actual results to differ materially
from Creative's expectations include the risks of non-consummation of the
Offering and the proposed distribution to Creative's stockholders and the risk
that the business purposes and assumed benefits of the proposed transactions may
not materialize.

CONTACT:  Creative Computers, Inc.
Frank Khulusi (President/CEO) or
Richard M. Finkbeiner (CFO), 310/354-5600

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