-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, TRWWMpyz1MgMWl//wsnpJs4/DZBVNHhiPNvedkVzjQRk2Ypvyh9m9SD0ERnDGPPE xuXBMHX7BTHCsOw+QqmTfA== 0001104659-07-086105.txt : 20071129 0001104659-07-086105.hdr.sgml : 20071129 20071129171904 ACCESSION NUMBER: 0001104659-07-086105 CONFORMED SUBMISSION TYPE: 8-K/A PUBLIC DOCUMENT COUNT: 6 CONFORMED PERIOD OF REPORT: 20070917 ITEM INFORMATION: Financial Statements and Exhibits FILED AS OF DATE: 20071129 DATE AS OF CHANGE: 20071129 FILER: COMPANY DATA: COMPANY CONFORMED NAME: PC MALL INC CENTRAL INDEX KEY: 0000937941 STANDARD INDUSTRIAL CLASSIFICATION: RETAIL-CATALOG & MAIL-ORDER HOUSES [5961] IRS NUMBER: 954518700 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K/A SEC ACT: 1934 Act SEC FILE NUMBER: 000-25790 FILM NUMBER: 071275706 BUSINESS ADDRESS: STREET 1: 2555 WEST 190TH STREET CITY: TORRANCE STATE: CA ZIP: 90504 BUSINESS PHONE: 3103545600 MAIL ADDRESS: STREET 1: 2555 WEST 190TH STREET CITY: TORRANCE STATE: CA ZIP: 90504 FORMER COMPANY: FORMER CONFORMED NAME: IDEAMALL INC DATE OF NAME CHANGE: 20000620 FORMER COMPANY: FORMER CONFORMED NAME: CREATIVE COMPUTERS INC DATE OF NAME CHANGE: 19950215 8-K/A 1 a07-30357_18ka.htm 8-K/A

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K/A

(Amendment No. 1)

CURRENT REPORT

PURSUANT TO SECTION 13 OR 15(d) OF THE

SECURITIES EXCHANGE ACT OF 1934

Date of Report (date of earliest event reported): September 17, 2007

PC MALL, INC.

(Exact Name of Registrant as Specified in its Charter)

Delaware	000-25790	95-4518700
(State or Other Jurisdiction of	(Commission File Number)	(I.R.S. Employer
Incorporation or Organization)		Identification No.)

2555 West 190^th Street, Suite 201

Torrance, California 90504

(Address of Principal Executive Offices) (Zip Code)

(310) 354-5600

(Registrant’s telephone number,

including area code)

(Former Name or Former Address, if Changed Since Last Report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

o Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

EXPLANATORY NOTE

On September 18, 2007, PC Mall, Inc. (“PC Mall”) filed a Current Report on Form 8-K (the “Initial 8-K”) reporting the completion of its acquisition of SARCOM, Inc. (“SARCOM”). Pursuant to this Amendment No. 1 to the Initial 8-K, PC Mall hereby amends and supplements Item 9.01 of the Initial 8-K to file the financial statements and pro forma financial information not filed with the Initial 8-K. The audited financial statements for SARCOM as of December 31, 2006 and 2005 and for the years then ended are filed as Exhibit 99.2 to this Form 8-K/A and the related unaudited interim financial statements as of June 30, 2007 and for the six months ended June 30, 2007 and 2006 are filed as Exhibit 99.3 to this Form 8-K/A and each is incorporated herein by reference. The unaudited pro forma combined financial statements as of June 30, 2007 and for the six months then ended, and for the year ended December 31, 2006 are filed as Exhibit 99.4 to this Form 8-K/A and are incorporated herein by reference. The Initial 8-K is only amended to the extent specifically provided herein and shall not otherwise be deemed amended or superseded in any other respect.

This Report, including the exhibits hereto, contains forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended. Such statements include information regarding PC Mall’s expectations, goals or intentions, including, but not limited to, statements regarding the effects of the acquisition of SARCOM, the valuation of the assets, the purchase price allocation and the amount and timing of any amortization expense. These forward-looking statements are based on management’s current expectations, estimates, forecasts and projections about PC Mall and are subject to risks and uncertainties that could cause actual results and events to differ materially from those stated in the forward-looking statements. These risks and uncertainties include, but are not limited to: PC Mall’s ability to successfully integrate the acquired business and realize the anticipated benefits from such acquisition, variations in the final valuation of the acquired assets and liabilities, adjustments to the purchase price allocation, and potential impairment of intangible assets and goodwill in the event that changes in circumstances indicate their respective carrying values may not be recoverable. Risks and uncertainties that could cause PC Mall’s actual results to differ from those set forth in any forward-looking statement are discussed in more detail under “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in PC Mall’s Form 10-Q for the quarterly period ended September 30, 2007, as well as similar disclosures in PC Mall’s subsequent SEC filings. Forward-looking statements contained in this Report are made only as of the date hereof, and PC Mall undertakes no obligation to update or revise the forward-looking statements, whether as a result of new information, future events or otherwise:

Item 9.01 Financial Statements and Exhibits.

(a) Financial statements of businesses acquired.

Pursuant to paragraph (a)(4) of Item 9.01 of Form 8-K, the attached audited financial statements of SARCOM were omitted from disclosure contained in the Initial 8-K. Included herein as Exhibit 99.2 to this Form 8-K/A, and incorporated by reference, are the following documents:

Audited Financial Statements of SARCOM, Inc.:

• Independent Auditor’s Report

• Balance Sheets as of December 31, 2006 and 2005

• Statements of Operations for the years ended December 31, 2006 and 2005

• Statements of Cash Flows for the years ended December 31, 2006 and 2005

• Notes to Financial Statements

Pursuant to paragraph (a)(4) of Item 9.01 of Form 8-K, the attached unaudited interim financial statements of SARCOM were omitted from disclosure contained in the Initial 8-K. Included herein as Exhibit 99.3 to this Form 8-K/A and incorporated by reference, are the following documents:

Unaudited Interim Financial Statements of SARCOM, Inc.:

• Balance Sheet as of June 30, 2007

• Statements of Operations for the six months ended June 30, 2007 and 2006

• Statements of Cash Flows for the six months ended June 30, 2007 and 2006

• Notes to Financial Statements

(b) Pro forma financial information.

Pursuant to paragraph (b)(2) of Item 9.01 of Form 8-K, the attached pro forma financial statements were omitted from disclosure contained in the Initial 8-K. Included herein as Exhibit 99.4 to this Form 8-K/A and incorporated herein by reference, are the following required unaudited pro forma combined financial statements of PC Mall:

Unaudited Pro Forma Combined Financial Statements:

• Unaudited Pro Forma Combined Balance Sheet as of June 30, 2007

• Unaudited Pro Forma Combined Statement of Operations for the Six Months Ended June 30, 2007

• Unaudited Pro Forma Combined Statement of Operations for the Year Ended December 31, 2006

• Notes to Unaudited Pro Forma Combined Financial Statements

(d) Exhibits.

Exhibit No.		Description

2.1*		Agreement and Plan of Merger, dated as of August 17, 2007, by and among PC Mall, Inc., Mall Acquisition 2, Inc., SARCOM, Inc., Zohar CDO 2003-1, Limited, Zohar II 2005-1, Limited, Charles E. Sweet, Robert F. Angart & Company, John R. Strauss, Daniel A. Schneider and Howard Schapiro.

10.1*		Third Amendment to Amended and Restated Loan and Security Agreement, dated as of September 17, 2007, by and among PC Mall, Inc., certain subsidiaries of PC Mall, Inc., Wachovia Capital Finance Corporation (Western) and certain other financial institutions.

10.2*		Registration Rights Agreement, dated as of September 17, 2007, by and among PC Mall, Inc., Zohar CDO 2003-1, Limited, Zohar II 2005-1, Limited, Charles E. Sweet, Robert F. Angart & Company, John R. Strauss, Daniel A. Schneider and Howard Schapiro.

23.1		Consent of Plante & Moran, PLLC, Independent Registered Public Accounting Firm with respect to SARCOM, Inc.

99.1*		Press release, dated September 17, 2007.

99.2		Financial Statements of SARCOM, Inc. as of and for the years ended December 31, 2006 and 2005.

99.3		Unaudited Interim Financial Statements of SARCOM, Inc. as of June 30, 2007 and for the Six Months Ended June 30, 2007 and 2006.

99.4		Unaudited Pro Forma Combined Financial Statements and Related Notes of PC Mall, Inc.

* Previously filed as exhibits to PC Mall, Inc.’s Current Report on Form 8-K (File No. 000-25790) filed with the SEC on September 18, 2007.

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.

	PC MALL, INC.
	(Registrant)


Date: November 29, 2007	By:	/s/ Brandon H. LaVerne
		Brandon H. LaVerne
		Interim Chief Financial Officer

Index to Exhibits

Exhibit No.		Description

23.1		Consent of Plante & Moran, PLLC, Independent Registered Public Accounting Firm with respect to SARCOM, Inc.

99.2		Financial Statements of SARCOM, Inc. as of and for the years ended December 31, 2006 and 2005.

99.3		Unaudited Interim Financial Statements of SARCOM, Inc. as of June 30, 2007 and for the Six Months Ended June 30, 2007 and 2006.

99.4		Unaudited Pro Forma Combined Financial Statements and Related Notes of PC Mall, Inc.

EX-23.1 2 a07-30357_1ex23d1.htm EX-23.1

EXHIBIT 23.1

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

We consent to the inclusion of our report dated February 9, 2007, except for Note 16 as to which the date is November 29, 2007, on the financial statements of SARCOM, Inc. as of and for the years ended December 31, 2006 and 2005 in this Current Report on Form 8-K/A of PC Mall, Inc. (Commission File No. 000-25790) and to its incorporation by reference in the Registration Statements on Form S-8 (No. 333-00848, No. 333-76851, No. 333-79337, No. 333-82257, No. 333-38860, No. 333-66068, No. 333-105620, No. 333-120708, No. 333-133003 and No. 333-141237) of PC Mall, Inc.

/s/ Plante & Moran, PLLC

Cleveland, Ohio

November 29, 2007

EX-99.2 3 a07-30357_1ex99d2.htm EX-99.2

EXHIBIT 99.2

SARCOM, INC.

Financial Statements

As of and for the years ended December 31, 2006 and 2005

(With Independent Auditor’s Report Thereon)

SARCOM, Inc.

Contents

Report Letter		1

Financial Statements

Balance Sheet		2

Statement of Operations		3

Statement of Stockholders’ Deficit		4

Statement of Cash Flows		5

Notes to Financial Statements		6-17

Independent Auditor’s Report

To the Board of Directors

SARCOM, Inc.

We have audited the accompanying balance sheet of SARCOM, Inc. (the “Company”) as of December 31, 2006 and 2005 and the related statements of operations, stockholders’ deficit, and cash flows for the years then ended. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of SARCOM, Inc. at December 31, 2006 and 2005 and the results of its operations and cash flows for the years then ended, in conformity with accounting principles generally accepted in the United States of America.

Cleveland, Ohio

February 9, 2007, except for Note 16,

as to which the date is November 29, 2007

SARCOM, Inc.

Balance Sheet
(000s omitted)

	December 31, 2006		December 31, 2005

Assets
Current Assets
Cash and cash equivalents	$	515	$	1,321
Accounts receivable - Net:
Trade	36,069		30,796
Unbilled	889		588
Other	2,870		4,235
Inventory	2,915		898
Prepaid expenses and other current assets	699		608

Total current assets	43,957		38,446
Property and Equipment - Net (Note 2)	2,406		2,654

Other Assets	508		620

Total assets	$	46,871	$	41,720

Liabilities and Stockholders’ Deficit
Current Liabilities
Accounts payable	$	14,262	$	7,435
Current portion of long-term obligations (Note 3)	967		2,034
Current portion of capital lease obligation (Note 10)	165		226
Accrued and other current liabilities	6,536		6,550

Total current liabilities	21,930		16,245
Long-term Obligations (Note 3)	31,555		33,696
Capital Lease Obligations (Note 10)	89		141

Deferred Gain on Capital Lease Termination (Note 8)	125		167

Mandatorily Redeemable Preferred Stock (Note 5)	55,459		51,195

Stockholders’ Deficit	(62,287)		(59,724)

Total liabilities and stockholders’ deficit	$	46,871	$	41,720

See Notes to Financial Statements.

SARCOM, Inc.

Statement of Operations
(000s omitted)

	Year Ended
	December 31, 2006		December 31, 2005

Net Sales and Service Revenues	$	236,876	$	207,525

Cost of Sales and Service	200,876		176,083

Gross Profit	36,000		31,442

Operating Expenses
General and administrative expenses	29,456		26,600
Restructuring (Note 11)	-		1,500
Depreciation and amortization	1,462		1,679

Total operating expenses	30,918		29,779

Operating Income	5,082		1,663

Nonoperating Expense - Interest expense	(3,382)		(2,914)

Income (Loss) Before Yield on Mandatorily Redeemable Preferred Stock	1,700		(1,251)

Yield on Mandatorily Redeemable Stock (Note 5)	(4,263)		(3,935)

Net Loss	$	(2,563)	$	(5,186)

See Notes to Financial Statements.

SARCOM, Inc.

Statement of Stockholders’ Deficit

(000s omitted)

	Common Stock		Additional Paid-in Capital		Accumulated Deficit		Total

Balance - January 1, 2005	$	56	$	57,537	$	(112,131)	$	(54,538)

Net loss	-		-		(5,186)		(5,186)

Balance - December 31, 2005	56		57,537		(117,317)		(59,724)

Net loss	-		-		(2,563)		(2,563)

Balance - December 31, 2006	$	56	$	57,537	$	(119,880)	$	(62,287)

See Notes to Financial Statements.

SARCOM, Inc.

Statement of Cash Flows

(000s omitted)

	Year Ended
	December 31, 2006	December 31, 2005

Cash Flows from Operating Activities
Net loss	$(2,563)	$(5,186)
Adjustments to reconcile net loss to net cash from operating activities:
Depreciation and amortization	1,462	1,679
Yield on mandatorily redeemable preferred stock	4,263	3,935
Bad debt expense	8	57
Acquisition of GTF operating assets	-	(17,115)
Restructuring charge	-	1,500
Interest on restructured debt	98	79
Amortization of gain on capital lease transaction	(42)	(42)
Loss on disposal of assets	-	18
Changes in operating assets and liabilities which provided (used) cash:
Accounts receivable	(4,217)	(9,108)
Inventory	(2,017)	1,307
Prepaid expenses and other current assets	(91)	(56)
Other assets	(103)	-
Accounts payable	6,827	3,528
Accrued and other liabilities	(14)	1,259

Net cash provided by (used in) operating activities	3,611	(18,145)

Cash Flows from Investing Activities
Purchase of property and equipment	(998)	(843)
Proceeds from sale of minority interest in unconsolidated investee	-	1,691

Net cash provided by (used in) investing activities	(998)	848

Cash Flows from Financing Activities
Payments of debt issuance cost	-	(647)
Principal payments on long-term debt	(1,067)	(2,816)
Net (repayments on) proceeds from revolving credit facilities	(2,239)	21,917
Payments on capital lease obligation	(113)	(118)

Net cash provided by (used in) financing activities	(3,419)	18,336

Net (Decrease) Increase in Cash and Cash Equivalents	(806)	1,039

Cash and Cash Equivalents - Beginning of year	1,321	282

Cash and Cash Equivalents - End of year	$515	$1,321

See Notes to Financial Statements.

SARCOM, Inc.

Notes to Financial Statements

December 31, 2006 and 2005
(000s omitted, except share and per share amounts)

Note 1 - Nature of Business and Significant Accounting Policies

SARCOM, Inc. (the “Company”) provides technology solutions primarily to businesses. Services include product procurement, service support, system design, and implementation and education. The Company’s customers are generally “Fortune 1000” companies, professional firms, and governmental, education, and nonprofit organizations located in the United States.

During June 2005, the Company’s wholly owned subsidiaries, SARCOM Desktop Solutions, Inc., SARCOM Enterprise Educational Services, Inc., and SARCOM Educational Services, LLC, were merged into SARCOM Inc. As a result, the Company now reports its financial results as a single reporting unit.

The investment in Global Technology Finance, LLC (GTF) (23 percent ownership at January 1, 2005) is accounted for by the equity method. In January 2005, the Company terminated its management agreement with GTF and sold its remaining investment in GTF for $1,691. In addition, the Company entered into an asset purchase agreement with GTF to purchase accounts receivable, inventory, vendor accounts receivable, and secure existing open orders placed by GTF, net of management fees owed, totaling approximately $17,115 during 2005.

At December 31, 2006 and 2005, Patriarch Partners Agency Services, LLC, an equity fund, holds certain long-term obligations and owns 82.5 percent of the common stock outstanding. The fund also owns 80 percent of the preferred stock outstanding at the end of each year.

Use of Estimates - The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reported period. Actual results could differ from those estimates.

Revenues and Cost Recognition - Product sales are recognized when products are shipped and title transfers to customers. Service revenues are recognized when the applicable services are provided. Included in sales and service revenues is maintenance service contract revenue, which is recognized ratably over the lives of the contracts. Maintenance labor and material costs on service contracts are recorded when incurred. Sales commissions associated with maintenance service contracts are deferred and recognized ratably over the lives of the contracts.

Cash and Cash Equivalents - The Company considers all highly liquid investments purchased with an original maturity of three months or less to be cash equivalents.

SARCOM, Inc.

Notes to Financial Statements

December 31, 2006 and 2005
(000s omitted, except share and per share amounts)

Trade Accounts Receivable - The Company provides its services to customers based on an evaluation of each customer’s financial condition, generally without requiring collateral. In addition, the Company has obtained credit insurance covering certain product sales to protect them in the event of a customer’s nonpayment. Accounts receivable are due within 30 days and are stated net of an allowance for doubtful accounts. Accounts outstanding longer than the contractual payment terms are considered past due. The Company determines its allowance for doubtful accounts by considering a number of factors, including the length of time trade accounts receivable are past due, the Company’s previous loss history, the customer’s current ability to pay its obligation to the Company, and the condition of the general economy and industry as a whole. All accounts or portions thereof deemed to be uncollectible are charged against the allowance for doubtful accounts in the period that determination is made. The allowance for doubtful accounts totaled $448 and $417 at December 31, 2006 and 2005, respectively.

Vendor Invoice Rebates - Certain vendors provide incentive rebates related to purchasing activities, product training, advertising, and other sales and market development activities. The Company recognizes these rebates when it has completed its obligation to perform under the specific incentive arrangement. Rebates related to purchasing activities are included in sales and service revenues. Rebates related to product training, advertising, and other sales and marketing development activities are recorded as reductions of selling, general, and administrative expenses.

Inventory - Inventory consists principally of computer equipment and service parts and is valued at the lower of cost or market (primarily replacement cost), using the first-in, first-out (FIFO) method.

Property and Equipment - Property and equipment are stated at cost. Depreciation is computed using the straight-line method over the estimated useful lives of the assets. Expenditures for maintenance and repairs are charged to operations as incurred. Amortization of the capital lease equipment is computed using the straight-line method over the period of the lease and is included in depreciation and amortization expense. The Company capitalizes direct costs associated with the purchase and development of internal use software.

Debt Issuance Costs - Debt issuance costs of $647 were incurred by the Company during 2005 in connection with obtaining the debt to finance the GTF asset acquisition. These costs are being amortized over the term of the related debt. Accumulated amortization totaled $413 and $198 at December 31, 2006 and 2005, respectively.

Income Taxes - A current tax liability or asset is recognized for the estimated taxes payable or refundable on tax returns for the year. Deferred taxes are provided for temporary differences arising from assets and liabilities whose basis is different for financial reporting and income tax purposes.

SARCOM, Inc.

Notes to Financial Statements

December 31, 2006 and 2005
(000s omitted, except share and per share amounts)

Accounting for Uncertainty in Income Taxes (FIN 48) - In July 2006, the FASB issued FASB Interpretation No. 48 (FIN 48), Accounting for Uncertainty in Income Taxes. FIN 48 clarifies the guidance for the recognition and measurement of income tax benefits related to uncertain tax positions in accordance with SFAS No. 109, Accounting for Income Taxes. FIN 48 will be effective for the fiscal year beginning January 1, 2007. The Company is currently assessing the impact this interpretation will have on its financial statements.

Reclassification - Certain 2005 amounts have been reclassified to conform to the 2006 presentation.

Note 2 - Property and Equipment

Property and equipment are summarized as follows:

	2006			2005			Depreciable Life - Years

Equipment and computer equipment	$		8,377	$		10,600	3-7
Furniture and fixtures	1,919			2,317			3-5
Software costs	4,324			4,123			3-5
Leasehold improvements		1,619			1,718		3-15

Total cost	16,239			18,758

Accumulated depreciation and amortization		(13,833)			(16,104)

Net property and equipment		$	2,406		$	2,654

Depreciation and amortization expense was $1,246 and $1,482 for the years ended December 31, 2006 and 2005, respectively.

SARCOM, Inc.

Notes to Financial Statements

December 31, 2006 and 2005
(000s omitted, except share and per share amounts)

Note 3 - Long-term Debt

Long-term obligations at December 31 are as follows:

	2006		2005

Revolving credit facility that allows for borrowings up to the lesser of $30,000 or the borrowing base as defined in the agreement. Customer cash payments are directly applied to amounts outstanding under the facility. The credit agreement expires in January 2008, at which time all principal is due to the financial institution. The Company has the option of paying monthly interest based on either the bank rate as defined in the agreement plus .5 percent (effective rate of 8.75 percent and 7.75 percent at December 31, 2006 and 2005, respectively) or LIBOR (8.10 percent at December 31, 2006) with certain restrictions. As of December 31, 2006, $16,000 of the facility was carried under the LIBOR option with the remaining amount under the bank rate. All amounts were carried under the bank rate at December 31, 2005	$	19,678	$	21,917

Related party note payable due to the majority stockholder. Interest is due monthly at variable rates (effective rate of approximately 13 percent and 12 percent at December 31, 2006 and 2005, respectively). All principal and unpaid interest is due in January 2009	10,200		10,200

During 2005, the Company converted a revolving credit agreement with the majority stockholder into a term note payable to the majority stockholder. Interest is due monthly at variable rates (effective rate of approximately 13 percent and 12 percent at December 31, 2006 and 2005, respectively). All principal and unpaid interest is due in January 2009. As of December 31, 2006, the balance is classified as current as management intends and has the ability to make prepayments as stated in the bank credit facility agreement	967		2,034

Related party restructuring note payable due to the majority stockholder. Interest compounds monthly at 6 percent. All principal and interest are due in January 2009	1,677		1,579

Total	32,522		35,730

Less current portion	967		2,034

Long-term portion	$	31,555	$	33,696

The balance of the above debt matures (including prepayments in accordance with the bank credit facility agreement) as follows:

2007		$	967
2008		19,678
2009		11,877

	Total	$	32,522

Related party interest expense for the years ended December 31, 2006 and 2005 was $1,682 and $1,245, respectively.

SARCOM, Inc.

Notes to Financial Statements

December 31, 2006 and 2005
(000s omitted, except share and per share amounts)

Substantially all of the Company’s tangible assets are pledged as collateral under the revolving credit facility and the related party debt; however, the related party debt has been subordinated to the revolving credit facility. Under the revolving credit facility, the Company is required to comply with certain restrictive financial covenants. For the year ended December 31, 2005, the Company did not meet a covenant relating to its net loss for the year. However, the covenant was subsequently waived and amended by the lending institution.

Note 4 - Related Party Transactions

Through January 2005, the Company was party to a management agreement (the “Agreement”) with Global Technology Finance, LLC (GTF). The Agreement appoints the Company as manager to perform various services for GTF. As manager, the Company acted as agent for GTF, which includes arranging for the purchase and sale of computer equipment and software, servicing of related accounts receivable, maintenance of records, and employment of required employees. As compensation for these management services, the Company received monthly management fees. Management fees were calculated based upon a variable percentage (based on defined gross margin and accounts receivable targets) of GTF’s gross margin. Management fees earned were payable to the extent they exceed a defined management fee holdback and to the extent the holdback was greater than the aggregate management fee earned during the preceding two-month period divided by 61 times the current days sales outstanding. The Company sold its interest in GTF in January 2005 for $1,691.

Revenues from services provided to GTF and management fees totaled approximately $316 in 2005. There were no amounts due to or due from GTF at December 31, 2006 or 2005.

The Company also leases a building from a related party with minority ownership. The lease expires in December 2009 with provisions for an early termination buyout and is being accounted for as an operating lease. Rent expense totaled $540 for both years ended December 31, 2006 and 2005. Future annual lease payments are $540 through 2009.

Note 5 - Mandatorily Redeemable Preferred Stock

The Company has 40,000 shares of Series A preferred stock with a liquidation value of $1,000 per share. The liquidation value, plus accrued but unpaid dividends, is payable at any time, beginning on September 1, 2012 and ending on September 1, 2015, that any holder elects to redeem such shares.

SARCOM, Inc.

Notes to Financial Statements

December 31, 2006 and 2005
(000s omitted, except share and per share amounts)

Dividends accrue on the preferred stock on a daily basis at a rate of 8 percent of the liquidation value (defined as $1,000 per share) plus accumulated and unpaid dividends thereon. Three percent of dividends accrued are payable in cash to the extent that the Company has maintained an average cash balance of $2,500 for the preceding fiscal quarter; otherwise, all dividends are paid in the form of additional preferred stock based on the value of $1,000 per share. No dividends have been declared as of December 31, 2006 and the revolving credit facility described in Note 3 does not permit the Company to declare or pay any cash dividends.

In any liquidation of the Company, each share of preferred stock will be generally entitled to a liquidation preference before any distribution may be made on the Company’s common stock. However, there is limited common stock (approximately 11 percent, valued at $1,319 at December 31, 2006 and 2005) which has rights superior to the preferred stock during liquidation.

During 2005, certain key employees were granted restricted rights to 8,000 shares of currently outstanding Series A preferred stock. These shares are restricted until a sale occurs, as defined in the stockholder agreement. The restricted stock grant has an indefinite vesting period and no compensation expense will be recognized unless a sale occurs. Compensation expense, if any, will be based on the fair value of the preferred shares at the date of vesting.

SARCOM, Inc.

Notes to Financial Statements

December 31, 2006 and 2005
(000s omitted, except share and per share amounts)

Note 6 - Common Stock

Common stock at December 31, 2006 and 2005 is as follows:

	2006		2005

Class A - $.01 par value (voting): Authorized - 9,000,000 shares Issued and outstanding - 5,591,406 shares	$	56	$	56
Class B - $.01 par value (nonvoting): Authorized - 1,000,000 shares Issued and outstanding - 0 shares	-		-

Total	$	56	$	56

Note 7 - Retirement Plans

The Company sponsors a 401(k) plan for substantially all employees. The Company, at its discretion, contributes 50 percent of participants’ contributions, up to 6 percent of participants’ eligible compensation. The Company may contribute additional discretionary contributions on behalf of the participants. There were no discretionary contributions for 2006 or 2005.

SARCOM, Inc.

Notes to Financial Statements

December 31, 2006 and 2005
(000s omitted, except share and per share amounts)

Note 8 - Deferred Gain on Capital Lease Transaction

In 2002, the Company renegotiated lease terms on a lease with a related party. The change in the lease terms changed the lease classification from a capital to an operating lease. The $335 gain on termination of the capital lease has been deferred and is being amortized in proportion to the related gross rental expense over the lease term. A total of $42 was amortized in 2006 and 2005, reducing rental expense.

Note 9 - Operating Leases

The Company leases office operating facilities and equipment under noncancelable operating leases expiring at various dates through 2011. Most of the office leases have renewal options and require the Company to pay for insurance, common area maintenance, and escalations in operating expenses over the base year.

Rent expense for operating leases was $1,837 and $1,975 for the years ended December 31, 2006 and 2005, respectively.

Future minimum lease payments under noncancelable operating leases consist of the following at December 31, 2006:

Years Ending December 31		Amount

2007		$	1,736
2008		1,463
2009		1,166
2010		527
2011		525

	Total	$	5,417

Note 10 - Capital Leases

The Company has entered into capital lease agreements for certain equipment with interest ranging from approximately 7 percent to 13 percent. Minimum lease payments of $15 are due monthly, with the final payment dates ranging from April 2007 to June 2009.

SARCOM, Inc.

Notes to Financial Statements

December 31, 2006 and 2005
(000s omitted, except share and per share amounts)

Property under capital leases consists of the following at December 31:

	2006		2005

Equipment	$	844	$	636
Less accumulated depreciation	(574)		(325)

Net	$	270	$	311

Depreciation expense on property under capital leases is included in the depreciation amount disclosed in Note 2.

The future minimum lease payments under capital leases are as follows:

Years Ending December 31		Amount

2007		$	183
2008		72
2009		23

	Total	278

	Less amount representing interest	24

	Present value of net minimum lease payments	254

	Less current obligations	165

	Long-term obligations under capital leases	$	89

Note 11 - Restructuring Expenses

During 2005, as part of its restructuring efforts, the Company incurred turnaround expenses totaling $1,500 payable to Patriarch Partners Agency Services, LLC. No such expenses were incurred during 2006.

Note 12 - Income Taxes

The Company accounts for deferred income taxes in accordance with Statement of Financial Accounting Standards No. 109 (SFAS 109), Accounting for Income Taxes. This standard requires that deferred taxes be provided for the temporary differences between the financial reporting and the income tax basis of the Company’s assets and liabilities by applying enacted statutory rates applicable to future years to the basis differences.

The primary reasons for the difference between the federal statutory income tax rate and the Company’s effective income tax rate is the treatment of the yield on mandatorily redeemable preferred stock as a nondeductible expense for income tax purposes and the change in the valuation allowance recognized for deferred tax assets during 2006 and 2005.

SARCOM, Inc.

Notes to Financial Statements

December 31, 2006 and 2005
(000s omitted, except share and per share amounts)

Deferred income taxes arise from timing differences resulting from income and expense items reported for financial accounting and tax purposes in different periods. Differences for which deferred taxes are provided relate primarily to tax basis goodwill amortization, the use of accelerated depreciation methods of property and equipment for income tax purposes, and net operating loss carryforwards of approximately $14,000, which begin expiring in 2023.

Deferred tax assets at December 31, 2006 and 2005 total approximately $9,000 and $9,500, respectively, and deferred tax liabilities totaled approximately $1,000 in each year. A valuation allowance has been recognized for the amount of the net deferred tax assets at December 31, 2006 and 2005 due to the uncertain nature of their ultimate realization based upon the Company’s historical operating losses.

Note 13 - Contingencies

The Company is subject to various claims and legal proceedings covering a wide range of matters that arise in the ordinary course of its business activities.

Based on the facts presently known, the Company does not believe that the outcome of these proceedings will have a material adverse effect on its financial condition.

Note 14 - Management’s Plans

The Company’s financial statements have been presented on the basis that the Company will continue as a going concern, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business.

The Company has incurred significant losses over the past several years. As a result, management has taken certain actions to improve profitability and maintain adequate financing. Management has also implemented comprehensive cost reductions which they anticipate will lead to improved gross and operating margins. Additionally, restructuring activities and the related costs are also anticipated to be significantly reduced in future periods. Management believes that the above actions will enable the Company to achieve profitable operations and maintain sufficient cash flows to continue operations.

SARCOM, Inc.

Notes to Financial Statements

December 31, 2006 and 2005
(000s omitted, except share and per share amounts)

Note 15 - Cash Flows

Cash paid for interest totaled $3,352 and $2,566 in 2006 and 2005, respectively.

Significant noncash investing and financing activities are as follows:

	2006		2005

Equipment acquired via capital lease obligation	$	136	$	149
Note payable issued for restructuring charge	-		1,500

SARCOM, Inc.

Notes to Financial Statements

December 31, 2006 and 2005
(000s omitted, except share and per share amounts)

Note 16 – Subsequent Events

On September 17, 2007, the Company was acquired by PC Mall, Inc. pursuant to the terms of an Agreement and Plan of Merger (the “Agreement”) dated August 17, 2007. The initial total purchase price of $55,000 consisted of $47,500 in cash and 633,981 shares of PC Mall Inc. common stock valued at $7,500.

The initial total purchase price was subject to a post-closing debt and net asset value adjustment as defined in the Agreement. On November 6, 2007, the Company and PC Mall settled on the net asset value adjustment, and 122,478 shares of PC Mall common stock were returned to PC Mall as consideration for the net asset value adjustment owed to PC Mall of $2,102.

The Company’s gross versus net revenue recognition policies regarding certain third party contracts and software licensing and the classification of certain indirect expenses differed from that of PC Mall, Inc. The accounting for these two matters has been restated in the reissued financial statements dated November 29, 2007 for the years ended December 31, 2006 and 2005 to correspond to the accounting policies of PC Mall, Inc.

The revenue adjustment related to third party contracts and software licensing resulted in certain contracts reported in revenue on a net basis in accordance with EITF 99-19 rather than gross, resulting in a decrease to both net sales and service revenue and cost of sales and service on the statement of operations of $10,676 and $11,104 in 2006 and 2005, respectively. The reclassification of certain indirect expenses resulted in a decrease to cost of sales and service and an increase to general and administrative expenses of $6,790 and $6,251 for 2006 and 2005, respectively. The reclassifications had no impact on net income, the balance sheet, statement of stockholders’ deficit or statement of cash flows for 2006 or 2005.

EX-99.3 4 a07-30357_1ex99d3.htm EX-99.3

EXHIBIT 99.3

SARCOM, INC.

Unaudited Financial Statements

As of June 30, 2007 and

for the six months ended June 30, 2007 and 2006

SARCOM, Inc.

Unaudited Balance Sheet

(000s omitted)

	June 30, 2007

Assets
Current Assets
Cash and cash equivalents	$	227
Accounts receivable - Net:
Trade	36,279
Unbilled	595
Other	3,485
Inventory	3,818
Prepaid expenses and other current assets	852

Total current assets	45,256
Property and Equipment - Net	2,545

Other Assets	418

Total assets	$	48,219

Liabilities and Stockholders’ Deficit

Current Liabilities
Accounts payable	$	16,396
Current portion of capital lease obligation (Note 9)	254
Accrued and other current liabilities	6,523

Total current liabilities	23,173
Long-term Obligations (Note 2)	30,046
Capital Lease Obligations (Note 9)	48

Deferred Gain on Capital Lease Termination (Note 7)	104

Mandatorily Redeemable Preferred Stock (Note 4)	57,703

Stockholders’ Deficit	(62,855)

Total liabilities and stockholders’ deficit	$	48,219

SARCOM, Inc.

Unaudited Statements of Operations

(000s omitted)

	6 months ended
	June 30, 2007		June 30, 2006

Net Sales and Service Revenues	$	135,918	$	107,985

Cost of Sales and Service	115,495		91,147

Gross Profit	20,423		16,838

Operating Expenses
General and administrative expenses	16,488		14,667
Depreciation and amortization	628		791

Total operating expenses	17,116		15,458

Operating Income	3,307		1,380

Nonoperating Expense - Interest expense	(1,631)		(1,625)

Income (Loss) Before Yield on Mandatorily Redeemable Preferred Stock	1,676		(245)

Yield on Mandatorily Redeemable Stock (Note 4)	(2,244)		(2,071)

Net Loss	$	(568)	$	(2,316)

SARCOM, Inc.

Unaudited Statements of Cash Flow

(000s omitted)

	6 months ended
	June 30, 2007		June 30, 2006

Cash Flows from Operating Activities
Net loss	$	(568)	$	(2,316)
Adjustments to reconcile net loss to net cash from operating activities:
Depreciation and amortization	628		791
Yield on mandatorily redeemable preferred stock	2,244		2,071
Amortization of gain on capital lease transaction	(21)		(21)

Interest on restructured debt	50		47
Changes in operating assets and liabilities which provided (used) cash:
Accounts receivable	(531)		661
Inventory	(903)		(1,009)
Prepaid expenses and other current assets	(153)		(232)
Other assets	(17)		(51)
Accounts payable	2,134		171
Accrued and other liabilities	(13)		(403)

Net cash provided by (used in) operating activities	2,850		(291)

Cash Flows from Investing Activities
Purchase of property and equipment	(487)		(257)

Net cash used in investing activities	(487)		(257)

Cash Flows from Financing Activities
Principal payments on long-term debt	(967)		(200)
Net repayments on revolving credit facilities	(1,559)		(455)
Payments on capital lease obligation	(125)		(112)

Net cash used in financing activities	(2,651)		(767)

Net Decrease in Cash and Cash Equivalents	(288)		(1,315)

Cash and Cash Equivalents - Beginning of year	515		1,321

Cash and Cash Equivalents - End of year	$	227	$	6

SARCOM, INC.

NOTES TO FINANCIAL STATEMENTS

(OOOs omitted, except share and per share amount)

Note 1 - Nature of Business and Significant Accounting Policies

At June 30, 2007, Patriarch Partners Agency Services, LLC, an equity fund, holds certain long-term obligations and owns 82.5 percent of the common stock outstanding and 80 percent of the preferred stock outstanding.

We have prepared the unaudited consolidated financial statements included herein in accordance with accounting principles generally accepted in the United States of America for interim financial reporting. In the opinion of management, all adjustments, consisting only of normal recurring items which are necessary for a fair presentation, have been included. The results of the interim periods are not necessarily indicative of the results that may be expected for any other interim period or for the full year. These unaudited consolidated financial statements should be read in conjunction with the Company’s audited consolidated financial statements and the notes thereto for the year ended December 21, 2006 and 2005.

Cash and Cash Equivalents - The Company considers all highly liquid investments purchased with an original maturity of three months or less to be cash equivalents.

Accounting for Uncertainty in Income Taxes (FIN 48) - In July 2006, the FASB issued FASB Interpretation No. 48 (FIN 48), Accounting for Uncertainty in Income Taxes. FIN 48 clarifies the guidance for the recognition and measurement of income tax benefits related to uncertain tax positions in accordance with SFAS No. 109, Accounting for Income Taxes. FIN 48 is effective for the fiscal year beginning January 1, 2007. The Company adopted FIN 48 on January 1, 2007. The adoption of FIN 48 did not have a material impact on the Company’s financial statements.

Note 2 - Long-term Debt

Long-term obligations at June 30, 2007 are as follows:

Revolving credit facility that allows for borrowings up to the lesser of $30,000 or the borrowing base as defined in the agreement. Customer cash payments are directly applied to amounts outstanding under the facility. The credit agreement expires in January 2008, at which time all principal is due to the financial institution. The facility is expected to be refinanced either with the current financial institution or a new financial institution, thus the entire balance is included in long-term portion. The Company has the option of paying monthly interest based on either the bank rate as defined in the agreement plus .5 percent (effective rate of 8.75 percent at June 30, 2007) or LIBOR + 2.75% (8.07 percent at June 30, 2007) with certain restrictions. As of June 30, 2007, $14,000 of the facility was carried under the LIBOR option with the remaining amount under the bank rate.	$	18,119

Related party note payable due to the majority stockholder. Interest is due monthly at variable rates (effective rate of approximately 13 percent at June 30, 2007). All principal and unpaid interest is due in January 2009.	10,200

Related party restructuring note payable due to the majority stockholder. Interest compounds monthly at 6 percent. All principal and interest are due in January 2009.	1,727

Total	30,046

Less current portion	-

Long-term portion	$	30,046

Related party interest expense for the six months ended June 30, 2007 and 2006 was $766 and $838, respectively.

Note 3 - Related Party Transactions

The Company leases a building from a related party with minority ownership. The lease expires in December 2009 with provisions for an early termination buyout and is being accounted for as an operating lease. Rent expense totaled $270 for both the six months ended June 2007 and 2006. Future annual lease payments are $540 through 2009.

Note 4 - Mandatorily Redeemable Preferred Stock

Dividends accrue on the preferred stock on a daily basis at a rate of 8 percent of the liquidation value (defined as $1,000 per share) plus accumulated and unpaid dividends thereon. Three percent of dividends accrued are payable in cash to the extent that the Company has maintained an average cash balance of $2,500 for the preceding fiscal quarter; otherwise, all dividends are paid in the form of additional preferred stock based on the value of $1,000 per share. No dividends have been declared as of June 30, 2007 and the revolving credit facility described in Note 2 does not permit the Company to declare or pay any cash dividends.

In any liquidation of the Company, each share of preferred stock will be generally entitled to a liquidation preference before any distribution may be made on the Company’s common stock. However, there is limited common stock (approximately 11 percent, valued at $1,319 at June 30, 2007) which has rights superior to the preferred stock during liquidation.

Note 5 - Common Stock

Common stock at June 30, 2007 is as follows:

Class A - $.01 par value (voting): Authorized - 9,000,000 shares Issued and outstanding - 5,591,406 shares	$	56
Class B - $.01 par value (nonvoting): Authorized - 1,000,000 shares Issued and outstanding - 0 shares	-

Total	$	56

Note 6 - Retirement Plans

Note 7 - Deferred Gain on Capital Lease Transaction

In 2002, the Company renegotiated lease terms on a lease with a related party. The change in the lease terms changed the lease classification from a capital to an operating lease. The $335 gain on termination of the capital lease has been deferred and is being amortized in proportion to the related gross rental expense over the lease term. A total of $21 was amortized for the six months ended June 30, 2007 and 2006, reducing rental expense.

Note 8 - Operating Leases

Rent expense for operating leases was $820 and $972 for the six months ended June 30, 2007 and 2006, respectively. Future minimum lease payments under noncancelable operating leases consist of the following at June 30, 2007:

Years Ending December 31		Amount

2007 (remaining)		$	774
2008		1,439
2009		1,212
2010		587
2011		556

	Total	$	4,658

Note 9 - Capital Leases

The Company has entered into capital lease agreements for certain equipment with interest ranging from approximately 7 percent to 13 percent. Minimum lease payments of $22 are due monthly, with the final payment dates ranging from February 2008 to May 2010.

As of June 30, 2007, future minimum lease payments under capital leases are as follows:

Years Ending December 31		Amount

2007 (remaining)		$	129
2008		143
2009		62

	Total	334

	Less amount representing interest	32

	Present value of net minimum lease payments	302

	Less current obligations	254

	Long-term obligations under capital leases	$	48

Note 10 - Contingencies

The Company is subject to various claims and legal proceedings covering a wide range of matters that arise in the ordinary course of its business activities.

Based on the facts presently known, the Company does not believe that the outcome of these proceedings will have a material adverse effect on its financial condition.

Note 11 - Management’s Plans

Note 12 - Cash Flows

Cash paid for interest totaled $1,545 and $1,523 for the six months ending June 30, 2007 and 2006, respectively.

Significant noncash investing and financing activities for the six months ending June 30, are as follows:

	2007	2006

Equipment acquired via capital lease obligation	$173	$136

Note 13 – Subsequent Event

EX-99.4 5 a07-30357_1ex99d4.htm EX-99.4

EXHIBIT 99.4

PC MALL, INC.

Unaudited Pro Forma Combined Financial Statements

The following unaudited pro forma combined financial statements have been derived from the historical consolidated financial statements of PC Mall, Inc. (“PC Mall”) and SARCOM, Inc. (“SARCOM”) to give effect to PC Mall’s acquisition of SARCOM. On September 17, 2007, PC Mall completed the acquisition of SARCOM and paid an initial total purchase price of approximately $55.7 million, including transaction costs, which was subject to post-closing debt and net asset value adjustment. The initial purchase price consisted of $47.5 million in cash and 633,981 shares of PC Mall stock. On November 6, 2007, we and the sellers agreed on a final net asset value adjustment, resulting in a decrease in the purchase price by approximately $2.1 million, which was repaid to us at the sellers’ option in shares of our common stock issued to them as part of the transaction. As a result, the sellers tendered back to us a total of 122,478 shares of our common stock, which has been recorded as a reduction of the purchase price as of June 30, 2007 in our unaudited pro forma combined financial statements presented herein.

The unaudited pro forma combined balance sheet as of June 30, 2007 reflects adjustments as if the acquisition had occurred on June 30, 2007, and reflects the preliminary allocation of the purchase price to the SARCOM assets acquired and liabilities assumed based upon their respective estimated fair values. The unaudited pro forma combined statements of operations for the year ended December 31, 2006 and for the six months ended June 30, 2007 reflect adjustments as if the acquisition had taken place on January 1, 2006. The pro forma adjustments described in the accompanying notes are based on various assumptions that PC Mall’s management believes are reasonable in the circumstances, and the unaudited pro forma combined financial statements have been prepared based on preliminary estimates of fair values which are subject to change. Therefore, the actual amounts recorded as of the completion of the allocation of the purchase price may differ materially from the information presented in these unaudited pro forma combined financial statements. The unaudited pro forma combined financial information is presented for informational purposes only. The pro forma data is not necessarily indicative of what PC Mall’s financial position or results of operations actually would have been had PC Mall completed the acquisition as of the dates indicated. In addition, the unaudited pro forma combined financial information does not purport to project the future financial position or operating results of the combined company.

The unaudited pro forma combined financial statements, including the notes thereto, should be read in conjunction with the audited consolidated financial statements of PC Mall included in its Annual Report on Form 10-K for the year ended December 31, 2006 filed with the SEC on March 12, 2007, as amended on April 30, 2007, its Quarterly Reports on Form 10-Q for the quarters ended March 31, 2007, June 30, 2007 and September 30, 2007 filed with the SEC on May 15, 2007, August 14, 2007 and November 14, 2007, and its Current Reports on Form 8-K filed with the SEC from the end of our prior fiscal year through the date of this report.

PC MALL, INC.

Unaudited Pro Forma Combined Balance Sheet

As of June 30, 2007

(Dollars in Thousands)

	Historical	Historical	Pro Forma		Pro Forma
	PC Mall	SARCOM	Adjustments		PC Mall
Assets
Current assets:
Cash and cash equivalents	$4,812	$227			$5,039
Accounts receivable, net	119,613	40,359			159,972
Inventories, net	50,601	3,818			54,419
Prepaid expenses and other current assets	11,238	852			12,090
Deferred income taxes	4,577				4,577
Total current assets	190,841	45,256			236,097
Property and equipment, net	7,193	2,545			9,738
Deferred income taxes	3,013				3,013
Goodwill	3,914		$24,514	(a)	28,428
Intangible assets, net	669		5,000	(b)	5,669
Other assets	729	418			1,147
Total assets	$206,359	$48,219	$29,514		$284,092

Liabilities, Redeemable Stock and Stockholders’ Equity
Current Liabilities:
Accounts payable	$93,516	$16,396			$109,912
Accrued expenses and other current liabilities	22,351	5,271			27,622
Deferred revenue	10,565	1,506			12,071
Line of credit	8,329		$46,995	(c)	55,324
Note payable – current	600		175	(c)	775
Total current liabilities	135,361	23,173	47,170		205,704
Note payable	3,600	30,046	(28,996)	(c)	4,650
Other long term liabilities		152			152
Total liabilities	138,961	53,371	18,174		210,506
Redeemable common stock			6,051	(d)	6,051
Mandatorily redeemable preferred stock		57,703	(57,703)	(e)	-
Stockholders’ equity:
Common stock	13	56	(56)	(e)	13
Additional paid-in capital	88,429	57,537	(57,400)	(f)	88,566
Treasury stock, at cost	(1,015)				(1,015)
Accumulated other comprehensive income	984				984
Accumulated deficit	(21,013)	(120,448)	120,448	(g)	(21,013)
Total stockholders’ equity	67,398	(62,855)	62,992		67,535
Total liabilities, redeemable stock and stockholders’ equity	$206,359	$48,219	$29,514		$284,092

The accompanying notes are an integral part of the unaudited pro forma combined financial statements. References in the table above are to the corresponding letter in Note 2: Pro Forma Adjustments.

PC MALL, INC.

Unaudited Pro Forma Combined Statement of Operations

For the Six Months Ended June 30, 2007

(In Thousands, Except Per Share Amounts)

	Historical	Historical	Pro Forma		Pro Forma
	PC Mall	SARCOM	Adjustments		PC Mall

Net sales	$519,738	$135,918			$655,656
Cost of goods sold	453,994	115,495			569,489
Gross profit	65,744	20,423			86,167
Selling, general and administrative expenses	55,902	17,116	$ 625	(h)	73,643
Operating profit	9,842	3,307	(625)		12,524
Interest expense, net	1,730	1,631	298	(i)	3,659
Income before income taxes	8,112	1,676	(923)		8,865
Income tax expense	3,245	-	301	(j)	3,546
Yield on mandatorily redeemable stock	-	(2,244)	2,244	(k)	-
Net income (loss)	$4,867	$(568)	$1,020		$5,319
Basic and Diluted Income Per Common Share
Basic	$0.39				$0.41
Diluted	0.36				0.38
Weighted average number of common shares outstanding:
Basic	12,407		512		12,919
Diluted	13,543		512		14,055

The accompanying notes are an integral part of the unaudited pro forma combined financial statements. References in the table above are to the corresponding letter in Note 2: Pro Forma Adjustments.

PC MALL, INC.

Unaudited Pro Forma Combined Statement of Operations

For the Year Ended December 31, 2006

(In Thousands, Except Per Share Amounts)

	Historical	Historical	Pro Forma		Pro Forma
	PC Mall	SARCOM	Adjustments		PC Mall

Net sales	$1,005,820	$236,876			$1,242,696
Cost of goods sold	881,902	200,876			1,082,778
Gross profit	123,918	36,000			159,918
Selling, general and administrative expenses	113,500	30,918	$1,250	(h)	145,668
Operating profit	10,418	5,082	(1,250)		14,250
Interest expense, net	3,940	3,382	476	(i)	7,798
Income before income taxes	6,478	1,700	(1,726)		6,452
Income tax expense	2,522	-	(10)	(j)	2,512
Yield on mandatorily redeemable stock	-	(4,263)	4,263	(k)	-
Net income (loss)	$3,956	$(2,563)	$2,547		$3,940
Basic and Diluted Income Per Common Share
Basic	$0.33				$0.31
Diluted	0.31				0.29
Weighted average number of common shares outstanding:
Basic	12,052		512		12,564
Diluted	12,908		512		13,420

The accompanying notes are an integral part of the unaudited pro forma combined financial statements. References in the table above are to the corresponding letter in Note 2: Pro Forma Adjustments.

PC MALL, INC.

Notes to Unaudited Pro Forma Combined Financial Statements

1. Basis of Presentation and Acquisition of SARCOM

On September 17, 2007, we completed the acquisition of SARCOM, a provider of advanced technology solutions, pursuant to the terms of an Agreement and Plan of Merger, dated as of August 17, 2007 for an initial total purchase price of approximately $55.7 million, including transaction costs. The total purchase price was subject to a post-closing debt and net asset value adjustment (see below for a discussion of the final net asset value adjustment on November 6, 2007). The aggregate purchase price paid at closing included a total of $48.2 million in cash and approximately $7.5 million in shares of our common stock, the number of shares being based on the average closing price of our stock on the Nasdaq Global Market for the 20 consecutive trading days immediately preceding the acquisition closing date. Under that formula, at closing, we issued an aggregate of 633,981 shares of our common stock to the sellers as payment of the stock component of the purchase price. We financed the cash component of the purchase price through borrowings under our existing credit facility.

On November 6, 2007, we and the sellers agreed on a final net asset value adjustment, resulting in a decrease in the purchase price by approximately $2.1 million, which was to be repaid, at the sellers’ option, in either cash or shares of our common stock based on a per share price determined by the average closing price for the 20 consecutive trading days ending on the date of final determination of the net asset value adjustment. As a result, in settlement of the $2.1 million net asset value adjustment, the sellers tendered back to us a total of 122,478 shares of our common stock previously issued to them. For purposes of the pro forma combined financial statements presented herein, we have recorded the net asset value settlement as a reduction of the purchase price as of June 30, 2007.

In determining the purchase price for accounting purposes, we measured the fair value of the shares issued in accordance with EITF No. 99-12, “Determination of the Measurement Date for the Market Price of Acquirer Securities Issued in a Purchase Business Combination.” We used an average closing price of our common stock over the four days prior to the close of the SARCOM acquisition, resulting in a total fair value of approximately $6.2 million for the 511,503 shares of common stock ultimately issued and an adjusted total purchase price of $54.4 million.

Pursuant to a registration rights agreement entered into with each of the recipients of the shares of our common stock issued in the SARCOM acquisition, if we were unable to file, within 30 days following the close of the SARCOM transaction, a registration statement with the SEC covering the sale of the shares held by each of such recipients, the recipients of such shares would then have the right to require us to repurchase all, or any portion, of the shares held by the recipients at the same formula price at which the original number of shares was determined. As such, we have treated the shares issued as redeemable common stock and classified the redemption amount of $6.1 million outside of the stockholders’ equity section on our Unaudited Pro Form Combined Balance Sheet as of June 30, 2007. In addition, the excess of accounting value over the redemption amount of the shares of approximately $136,000 was included in additional paid-in capital.

The unaudited pro forma combined balance sheet as of June 30, 2007 reflects adjustments as if the acquisition had occurred on June 30, 2007, and reflects the preliminary allocation of the purchase price to the SARCOM assets acquired and liabilities assumed based upon their respective estimated fair values. The unaudited pro forma combined statements of operations for the year ended December 31, 2006 and for the six months ended June 30, 2007 reflect adjustments as if the acquisition had taken place on January 1, 2006. The pro forma adjustments described in the accompanying notes are based on various assumptions and estimates that PC Mall’s management believes are reasonable under the circumstances. The unaudited combined financial statements do not purport to present the financial position or results of operations of PC Mall had the transaction and events assumed therein occurred on the dates specified, nor are they necessarily indicative of the results of operations that may be achieved in the future. The unaudited pro forma combined financial statements, including the notes thereto, should be read in conjunction with the audited consolidated financial statements of PC Mall included in its Annual Report on Form 10-K for the year ended December 31, 2006 filed with the SEC on March 12, 2007, as amended on April 30, 2007, our Quarterly Report on Form 10-Q for the quarter ended March 31, 2007, June 30, 2007 and September 30, 2007 filed with the SEC on May 15, 2007, August 14, 2007 and November 14, 2007, respectively, and our Current Reports on Form 8-K filed with the SEC from the end of our prior fiscal year through the date of this report.

2. Pro Forma Adjustments

The following adjustments give pro forma effect to the SARCOM transaction described above:

a. Adjustment to record goodwill related to excess of fair value of assets acquired and liabilities assumed resulting from a preliminary purchase price allocation as follows (in thousands):

Total purchase price, adjusted	$	54,408

Cash	$	227
Accounts receivable	36,874
Inventory	3,818
Other accounts receivable	3,485
Property and equipment, net	2,545
Other assets	1,270
Intangible assets:
Customer relationships	$	4,310
Trade names	400
Software licenses	250
Non-compete agreements	40
Total intangible assets	5,000
Total assets acquired	$	53,219

Accounts payable	$	(16,396	)
Accrued expenses and other liabilities	(5,423		)
Deferred revenue	(1,506		)
Total liabilities assumed	$	(23,325	)

Total allocated to goodwill	$	24,514

b. Adjustment to record total fair value of $5.0 million relating to acquired intangible assets based on a preliminary purchase price allocation. See note a. above for detail.

c. Represents an adjustment to record $48.2 million of PC Mall’s debt to finance the SARCOM acquisition under PC Mall’s existing facility and term note, and the pay-off of SARCOM’s historical outstanding debt of $30.0 million at close of the transaction.

d. Represents the redemption value of the 511,503 net shares of PC Mall common stock issued in the SARCOM transaction. The redemption value of these 511,503 net shares has been classified as redeemable common stock and classified outside of the stockholders’ equity section of our consolidated balance sheet due to a put right held by the holders of such shares pursuant to a registration rights agreement entered into by us and the shareholders at close of the transaction. The holders of such shares had the right to require us to repurchase all, or any portion, of the shares held by them if we were unable to file a registration statement with the SEC within 30 days of the close of the SARCOM transaction.

e. Adjustment to record the cash pay-out to the preferred shareholders to settle SARCOM’s mandatorily redeemable preferred stock and to settle the outstanding common stock of SARCOM at close of the transaction.

f. Includes $137,000 which represents the excess of accounting value over the redemption amount of the 511,503 net shares issued in the SARCOM transaction in accordance with EITF 99-12, “Determination of the Measurement Date for the Market Price of Acquirer Securities Issued in a Purchase Business Combination,” recorded as additional paid-in capital, and the elimination of SARCOM’s historical addition paid-in capital of $57.5 million.

g. Adjustment to SARCOM’s historical stockholders’ equity to eliminate $120.4 million of SARCOM’s accumulated deficit.

h. Adjustment to record amortization expense related to the $5.0 million of intangibles acquired in the SARCOM transaction, which was based on a preliminary allocation of the purchase price, using an estimated useful life of four years.

i. Adjustment to eliminate SARCOM’s historical interest expense of $1.6 million and $3.4 million for the six months ended June 30, 2007 and year ended December 31, 2006, respectively, and to record interest expense of $1.9 million and

$3.9 million for the six months ended June 30, 2007 and for the year ended December 31, 2006 on PC Mall’s debt which financed the acquisition of SARCOM at PC Mall’s effective annual interest rate of 8.0% at the close of the acquisition.

j. Adjustment to record income tax expense on the pro forma adjustments at PC Mall’s applicable effective income tax rate for each of the periods.

k. Adjustment to record elimination of yield on mandatorily redeemable preferred stock which was cancelled at close of the SARCOM transaction.

***

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