COMPGEEKS INC, S-1/A, 1999-11-10

COMPGEEKS INC
S-1/A, 1999-11-10
COMPUTER & COMPUTER SOFTWARE STORES

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<PAGE> 1

AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON NOVEMBER 10, 1999

REGISTRATION NO. 333-79601
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- --------------------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------

AMENDMENT NO. 2

FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------

COMPGEEKS, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

<TABLE>
<S> <C> <C>
DELAWARE 5734 33-0852937
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NUMBER)
</TABLE>

2370 OAK RIDGE WAY
VISTA, CALIFORNIA 92083
(760) 734-3681
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)

MR. FRANK SEGLER
CHAIRMAN AND CHIEF EXECUTIVE OFFICER
COMPGEEKS, INC.
2370 OAK RIDGE WAY
VISTA, CALIFORNIA 92083
(760) 734-3681
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF AGENT FOR SERVICE)

COPIES TO:

<TABLE>
<S> <C>
MARTIN C. NICHOLS, ESQ. MICHAEL J. CONNELL, ESQ.
ROSS L. BURNINGHAM, ESQ. VICTOR H. SIM, ESQ.
BROBECK, PHLEGER & HARRISON LLP MORRISON & FOERSTER, LLP
550 WEST C STREET, SUITE 1300 555 WEST FIFTH STREET, SUITE 3500
SAN DIEGO, CALIFORNIA 92101 LOS ANGELES, CALIFORNIA 90013
(619) 234-1966 (213) 892-5200
</TABLE>

APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
As soon as practicable after the effective date of this Registration Statement.

If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. [ ]

If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ] _______________

If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ] _______________

If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ] _______________

If delivery of the prospectus is expected to be made pursuant to Rule 434,
check the following box. [ ]

CALCULATION OF REGISTRATION FEE

<TABLE>
<S> <C> <C> <C> <C>
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PROPOSED MAXIMUM PROPOSED MAXIMUM
TITLE OF EACH CLASS OF AMOUNT TO BE OFFERING PRICE PER AGGREGATE OFFERING AMOUNT OF
SECURITIES TO BE REGISTERED REGISTERED SHARE(2) PRICE(2) REGISTRATION FEE
- ---------------------------------------------------------------------------------------------------------------------------------
Common Stock, par value $0.001 per
share.................................. 5,750,000(1) $11.00 $63,250,000 $16,958(3)
$ 626(4)
- ---------------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>

(1) Includes 750,000 shares of common stock that the underwriters have the
option to purchase to cover over-allotments, if any.

(2) Estimated pursuant to Rule 457 solely for the purpose of calculating the
amount of the registration fee.

(3) Previously paid in connection with the May 28, 1999 filing of this S-1
registration statement.

(4) Paid in connection with this filing of Amendment No. 1 to the Form S-1
registration statement.

THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933, AS AMENDED, OR UNTIL THE REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO
SECTION 8(a), MAY DETERMINE.

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<PAGE> 2

The information in this preliminary prospectus is not complete and may be
changed. We may not sell these securities until the registration
statement filed with the Securities and Exchange Commission is effective.
This preliminary prospectus is not an offer to sell nor does it seek an
offer to buy these securities in any jurisdiction where the offer or sale
is not permitted.

SUBJECT TO COMPLETION, DATED NOVEMBER 10, 1999

[COMPGEEKS LOGO]

5,000,000 Shares

Common Stock

-------------------------

This is our initial public offering and no public market currently exists
for our shares. The estimated initial public offering price is between $9.00 and
$11.00 per share.

We have applied to have our common stock listed on the Nasdaq National
Market under the symbol "CGKS."

INVESTING IN OUR COMMON STOCK INVOLVES RISKS. SEE "RISK FACTORS" BEGINNING
ON PAGE 4.

<TABLE>
<CAPTION>
PER SHARE TOTAL
--------- -----------
<S> <C> <C>
Public Offering Price.......................................
Underwriting Discounts and Commissions......................
Proceeds to CompGeeks, Inc..................................
</TABLE>

The underwriters have an option to purchase 750,000 additional shares from
us to cover over-allotments of shares.

NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR DETERMINED IF THIS
PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.

FIRST UNION SECURITIES, INC.

ING BARINGS

C.E. UNTERBERG, TOWBIN

GEORGE K. BAUM & COMPANY

, 1999
<PAGE> 3

DESCRIPTION OF PROSPECTUS ARTWORK:

FRONT COVER:

Page-sized light background image of a computer monitor. Corporate logo at top
of page.

OVERLEAF:

Page-sized light background image of facility. Two black circles at top of
page: left contains the compgeeks.com(sm) logo, and web site address (URL);
right contains Evertek(sm) logo and URL.

Two columns of text on page:

Left column headed by bold text reading "Business to Consumer" over "(Retail)".

Right column headed by bold text reading "Business to Business" over
"(Wholesale)".

Body of text reads:

Our business-to-consumer retail division sells directly to end-users from our
web site at www.compgeeks.com.

Our business-to-business wholesale division sells to computer resellers
worldwide, primarily via our web site at www.evertek.com.

Our experience, integrity, and creative approach to problem solving allow us
to provide competitive pricing while maintaining profitability.

Interspersed throughout this text are the following words in lavender text:

Integrity
Online Shopping
Retail
Amazing Values

Experience
Automated Support
Wholesale
Creative Solutions

Also on this page is a green oval containing black text reading:
"We own, stock, and ship all products we offer for sale from our fulfillment
facilities in Southern California. Our web sites allow users to view detailed
product information, select shipping methods, shop, and track orders online 24
hours a day, 7 days a week."

INSIDE SPREAD:

Light background of warehouse interior.

White text across top reads "Over 1.5 million cubic feet of warehouse"

Two black circles at top of spread: left corner contains the compgeeks.com(sm)
logo, and web site address (URL); right corner contains Evertek(sm) logo and
URL.

Left of spread depicts compgeeks.com web site pages.
Right of spread depicts Evertek web site pages.

Center of spread depicts images of various computer hardware products and
product category names in dark text. Inset at bottom center of spread are
photographs of facilities.

<PAGE> 4

TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary.......................................... 1
Risk Factors................................................ 5
Special Note Regarding Forward-Looking Statements........... 16
Use of Proceeds............................................. 17
Dividend Policy............................................. 17
Capitalization.............................................. 18
Dilution.................................................... 19
Selected Combined Financial Data............................ 20
Management's Discussion and Analysis of Financial Condition
and Results of Operations................................. 21
Quantitative and Qualitative Disclosures About Market
Risk...................................................... 29
Business.................................................... 30
Management.................................................. 42
Relationships and Related Transactions...................... 50
Principal Stockholders...................................... 51
Description of Securities................................... 53
Shares Eligible for Future Sale............................. 56
Underwriting................................................ 57
Legal Matters............................................... 59
Experts..................................................... 59
Where You Can Find More Information......................... 59
Index to Financial Statements............................... F-1
</TABLE>

-------------------------

NOTES TO READERS OF THIS PROSPECTUS

- Our principal executive offices are located at 2370 Oak Ridge Way, Vista,
California 92083. Our telephone number at that location is (760)
734-3681. Our Web site addresses are www.compgeeks.com, www.evertek.com
and www.wholesaleauction.com. INFORMATION CONTAINED ON OUR WEB SITES IS
NOT PART OF THIS PROSPECTUS.

- Our organizers incorporated CompGeeks, Inc. in Delaware in April 1999.
Evertek Computer Corporation, compgeeks.com and Evertek Trading Limited
are wholly owned subsidiaries of CompGeeks, Inc.
-------------------------

YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED IN THIS DOCUMENT OR TO
WHICH WE HAVE REFERRED YOU. WE HAVE NOT AUTHORIZED ANYONE TO PROVIDE YOU WITH
INFORMATION THAT IS DIFFERENT. THIS DOCUMENT MAY ONLY BE USED WHERE IT IS LEGAL
TO SELL THESE SECURITIES. THE INFORMATION IN THIS DOCUMENT MAY ONLY BE ACCURATE
ON THE DATE OF THIS DOCUMENT.
-------------------------

Until , 1999 (25 days after the date of this prospectus), all
dealers selling shares of our common stock, whether or not participating in this
offering, may be required to deliver a prospectus. This delivery requirement is
in addition to the obligation of dealers to deliver a prospectus when acting as
underwriters and with respect to their unsold allotments or subscriptions.

i
<PAGE> 5

PROSPECTUS SUMMARY

This summary highlights the material information in this prospectus. It may
not contain all of the information that is important to you. To understand this
offering fully, you should read the entire prospectus carefully, including the
risk factors and financial statements. Unless otherwise noted, all share amounts
including and subsequent to the share exchange in this prospectus give
retroactive effect to a .823 for 1 reverse stock split effected in July 1999.

We are an Internet wholesale supplier and discount retailer of computers
and peripherals to businesses, resellers and consumers. Our expertise in
purchasing manufacturers' excess inventories, close-outs and out-of-date
products allows us to provide competitive pricing while maintaining
profitability. We believe we have combined this expertise with superior customer
service to develop loyal, repeat customers. Our customer base has grown
substantially since 1994 largely through word-of-mouth. We own, stock and ship
all products we offer for sale, as opposed to many online retailers which
neither own nor control their inventory and are required to ship from third
party suppliers.

One of the central challenges to computer and peripheral manufacturers is
the high speed with which their current inventory becomes excess inventory:
today's leading-edge model is tomorrow's end-of-life product. We efficiently
acquire and resell excess, close-out and refurbished computers and peripherals,
and provide our suppliers with a much-needed alternative distribution channel.

We operate two channels of distribution: www.evertek.com, our
business-to-business channel that sells to computer dealers worldwide, and
www.compgeeks.com, our business-to-consumer channel. Our compgeeks.com division
sells to end-users both through our own Web site and through Internet auction
sites such as ONSALE, Inc. We believe our multiple sales channels allow us to
buy types and quantities of merchandise that exceed the sales capacity of our
direct competitors, allowing us to generally receive larger price discounts. Our
Web sites allow users to view detailed product information, select shipping
methods and track orders electronically.

Our business has grown rapidly, with sales increasing from $3.5 million in
1994 to $49.5 million for the year ended December 31, 1998. We have been
profitable throughout this period. During the first half of 1999, we averaged
over 750 retail orders per business day with an average value of over $90 per
order and over 130 wholesale orders per business day with an average value of
$1,400 per order.

Our objective is to be the leading Internet wholesale supplier and discount
retailer of computers and peripherals. Key elements of our business strategy
include:

- Expand and strengthen our relationships with our suppliers;

- Capitalize on our experience and varied sales channels;

- Broaden our product line; and

- Increase our customer base.
1
<PAGE> 6

In April 1999, we were incorporated in Delaware for the sole purpose of
effecting a share exchange with the stockholders of Evertek Computer
Corporation, compgeeks.com and Evertek Trading Limited and raising capital
through an initial public offering of common stock. In May 1999, we completed
the share exchange whereby all of outstanding common stock of Evertek Computer
Corporation, compgeeks.com and Evertek Trading Limited were exchanged for
17,707,000 newly issued shares of our common stock. The share exchange was
accounted for at historical cost in a manner similar to a pooling of interests.
Prior to the share exchange, we were not capitalized and had no financial
activity. Accordingly, the unaudited consolidated financial information included
in the prospectus for periods ended subsequent to May 1999 represent those of
the combined entity.

2
<PAGE> 7

THE OFFERING

Common stock offered by us...... 5,000,000 shares

Common stock outstanding after
this offering................... 19,572,861 shares

Use of proceeds................. To pay outstanding debt obligations to banks
and our founders, to distribute additional
retained earnings through the closing of
this offering in excess of $500,000 to our
founders, to increase our merchandise
inventory, to increase our sales and
marketing efforts and for other general
corporate uses. Please see "Use of
Proceeds."

Proposed Nasdaq National Market
Symbol........................ CGKS
3
<PAGE> 8

SUMMARY COMBINED FINANCIAL DATA

The following tables summarize the financial data for our business. We have
presented the following information to give pro forma effect to the
distributions made to shareholders and our conversion from S corporation status
to C corporation status. You should also read our Combined Financial Statements
and "Management's Discussion and Analysis of Financial Condition and Results of
Operations" in conjunction with the following.

<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED DECEMBER 31, JUNE 30,
--------------------------------------- -------------------------
1996 1997 1998 1998 1999
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
COMBINED STATEMENT OF INCOME
DATA:
Net sales...................... $15,772,172 $26,917,789 $49,514,651 $21,461,015 $36,425,347
Gross profit................... 3,025,794 5,409,764 9,533,792 4,805,844 5,846,625
Income from operations......... 1,625,893 2,621,886 4,918,856 2,908,236 2,748,903
Income before income taxes..... 1,611,966 2,650,599 4,990,215 2,905,511 2,643,946
Provision for income taxes..... 24,954 66,799 68,097 22,254 42,829
Net income..................... 1,587,012 2,583,800 4,922,118 2,883,257 2,601,117
Pro forma information(1):
Historical income before
provision for income
taxes...................... 1,611,966 2,650,599 4,990,215 2,905,511 2,643,946
Pro forma provision for
income taxes............... 644,786 1,060,240 1,996,086 1,162,204 1,057,578
----------- ----------- ----------- ----------- -----------
Pro forma net income......... $ 967,180 $ 1,590,359 $ 2,994,129 $ 1,743,307 $ 1,586,368
=========== =========== =========== =========== ===========
Pro forma net income per
basic and diluted
share(2)................... $ 0.20 $ 0.10
=========== ===========
Pro forma weighted average
common shares
outstanding................ 15,160,129 15,160,129
=========== ===========
</TABLE>

<TABLE>
<CAPTION>
AT JUNE 30, 1999
------------------------
ACTUAL AS ADJUSTED
---------- -----------
<S> <C> <C>
COMBINED BALANCE SHEET DATA:
Cash and cash equivalents................................... $ 254,470 $41,997,457
Inventory................................................... 4,701,776 4,701,776
Working capital............................................. 1,263,153 43,006,140
Total assets................................................ 9,053,800 50,796,787
Total stockholders' equity.................................. 1,723,418 46,007,003
</TABLE>

- -------------------------
(1) Pro forma net income reflects a provision for income taxes on a pro forma
basis as if we had been taxed as a C corporation.

(2) Pro forma net income per basic and diluted share is calculated assuming the
Exchange, as described in the Prospectus Summary, occurred on January 1,
1996.

The as adjusted balance sheet data listed above reflects the sale of
5,000,000 shares of common stock offered in this offering at an assumed initial
public offering price of $10.00 per share after deducting the estimated
underwriting discount and estimated offering expenses payable by us. Please see
"Use of Proceeds" and "Capitalization."
4
<PAGE> 9

RISK FACTORS

Any investment in our common stock involves a high degree of risk. You
should consider carefully the following information about these risks, together
with the other information contained in this prospectus, before you decide to
buy our common stock. If any of the following risks actually occur, our
financial condition or operating results would likely suffer. If this happens,
the trading price of our common stock could decline, and you may lose all or
part of the money you paid to buy our common stock.

RISKS RELATED TO OUR BUSINESS

WE HAVE A LIMITED ONLINE OPERATING HISTORY THAT MAKES EVALUATING OUR ELECTRONIC
COMMERCE BUSINESS DIFFICULT.

We have been doing business on the Internet since 1995 for our wholesale
division and since 1996 for our discount retail division. We therefore have only
a limited operating history as an electronic commerce company. As a result, we
can provide only limited information which you can use to evaluate our business
and prospects as an electronic commerce company. Also, you should consider the
risks and difficulties that early stage companies frequently encounter in the
new and rapidly evolving market of electronic commerce. These risks include the
following:

- our evolving and unpredictable business environment;

- our competitors that have more established electronic commerce
operations;

- our need and ability to manage growth; and

- the rapid evolution of technology in electronic commerce.

WE RELY HEAVILY ON RELATIONSHIPS WITH MANUFACTURERS, DISTRIBUTORS AND SUPPLIERS
TO PROVIDE US WITH MERCHANDISE TO SELL.

We rely heavily on certain manufacturers, distributors and suppliers to
provide us with merchandise for sale at our Web sites. We may not continue to
develop and maintain satisfactory relationships with these parties on acceptable
commercial terms. We also may not be able to obtain sufficient quality and
quantities of merchandise at competitive prices. We acquire the products we sell
both directly from manufacturers and indirectly through distributors and
suppliers. We have no long-term contracts or arrangements with manufacturers,
distributors or suppliers that guarantee availability of merchandise for our Web
sites. We cannot assure you that current manufacturers, distributors and
suppliers will continue to sell merchandise to us or that we will establish new
manufacturer, distributor or supplier relationships that ensure merchandise will
be available for sale. Most of the merchandise we sell carries a warranty from
the manufacturer or the supplier, and we are not obligated to accept returns of
these products. Nevertheless, we often accept returns from customers for which
we do not receive reimbursements from our manufacturers or suppliers, and the
levels of returned merchandise in the future may increase. We may also find that
we have to accept more returns in the future to maintain customer satisfaction.

WE DEPEND ON THIRD PARTIES FOR A LARGE PORTION OF OUR RETAIL SALES.

In 1998, the retail division had net sales of $17.8 million which accounted
for approximately 36% of overall sales. Of these orders from the retail
division, approximately $12.6 million or 71% resulted from our strategic
relationship with the ONSALE online auction. If we cannot maintain our
relationship with ONSALE, our business could be

5
<PAGE> 10

adversely affected. Revenue from ONSALE represented approximately 14%, 25% and
26% of total net sales for the years ended December 31, 1996, 1997 and 1998,
respectively, and approximately 13% of total net sales for the six months ended
June 30, 1999. While we expect revenues from ONSALE to decrease as an overall
percentage of revenues in future periods, we believe that revenues derived from
ONSALE may continue to represent a significant portion of our retail division
revenue for the foreseeable future.

WE NEED TO CONTINUE TO SUPPLY MERCHANDISE AT AN ATTRACTIVE PRICE TO SUCCESSFULLY
ATTRACT OUR TARGET CUSTOMERS.

Our future success depends on our ability to continue to supply merchandise
at an attractive price. An unexpected increase in price competition could
decrease our customer base or the demographic characteristics of our customers.
Either of these results could adversely affect our business. Our ability to
attract our target customers depends on several factors, including the
following:

- maintaining and developing good business relationships with
manufacturers, distributors and suppliers;

- consistently maintaining appropriate levels of inventory;

- monitoring and adapting to changing consumer preferences;

- effectively integrating leading-edge technology; and

- the technical expertise of our staff.

WE MAY NOT SUCCESSFULLY COMBINE COMPGEEKS.COM, EVERTEK AND EVERTEK TRADING.

On May 28, 1999 we combined compgeeks.com, Evertek and Evertek Trading. We
are significantly more complex and diverse than any of the companies were before
we completed the share exchange that made them our wholly owned subsidiaries. We
may not successfully integrate these businesses. Our inability to combine these
companies could adversely affect our business and result in the following:

- management diverting their time from regular duties to integrating the
businesses;

- the assimilation of new operations, sites and personnel could divert
staff and financial resources from regular operations;

- loss of customers and employees of these companies; and

- maintaining uniform standards, controls, procedures and policies.

FLUCTUATIONS IN OUR OPERATING RESULTS MAY NEGATIVELY AFFECT OUR STOCK PRICE.

We expect to experience fluctuations in our future operating results due to
a variety of factors, many of which are outside our control. It is possible that
in some future periods our results of operations may be below the expectations
of public market analysts and investors. In this event, the price of our common
stock is likely to fall. Factors that may affect our operating results include
the following:

- our ability to procure computers and peripherals directly from
manufacturers, distributors and suppliers at discounted prices;

- the announcement or introduction of new Web sites, services and products
by us, our strategic partners and our competitors;

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<PAGE> 11

- price competition or pricing changes in the computer and peripheral
industry;

- the level of use of the Internet and online services and consumer
acceptance of the Internet and other online services for the purchase of
consumer products that we offer;

- our ability to upgrade and develop our systems and infrastructure and
attract new personnel in a timely and effective manner;

- our ability to integrate operations and technologies from acquisitions;

- technical difficulties, system downtime or Internet brownouts;

- the amount of merchandise returned to us; and

- general economic conditions and economic conditions specific to the
Internet, electronic commerce and our industry.

In view of the rapidly evolving nature of our business and its limited
operating history, we believe that period-to-period comparisons of our operating
results are not necessarily meaningful, and you should not rely on them as an
indication of future performance. As a result of our limited operating history
and the emerging nature of the markets where we compete, we may not accurately
predict our revenues. If we do not accurately predict our revenues, we may not
budget our expenses accordingly, and this could adversely affect our business.

WE MAY NOT SUCCESSFULLY DEVELOP OUR "COMPGEEKS.COM" AND "EVERTEK" BRAND NAMES.

To be successful, we must strengthen awareness of our brand names. In order
to build our brand names, we must succeed in our marketing efforts, provide
high-quality services and products and increase the number of customers on our
Web sites. If our marketing efforts are not successful or if we cannot increase
awareness of our brand names, it could harm our business.

IF WE ARE UNABLE TO RETAIN KEY PERSONNEL OR ATTRACT NEW PERSONNEL, IT COULD
ADVERSELY AFFECT OUR BUSINESS.

The loss of the services of any of our key personnel or our inability to
successfully attract and retain qualified personnel in the future would
adversely affect our business. Our future success depends on the continued
service of our key personnel, including Frank Segler, our Chairman and Chief
Executive Officer, Scott Kusel, our President and Chief Operating Officer,
William C. Bousema, our Vice President, Chief Financial Officer and Secretary,
Doug Allen, our Vice President of Marketing and Greg Hansen, our Chief
Information Officer and General Counsel. We maintain no key person life
insurance. Our future success also depends on our ability to attract, retain,
integrate and motivate highly skilled employees. Competition for employees in
our industry is intense, particularly in the San Diego area, where our
headquarters are located. Please see "Management" for detailed information on
our key personnel.

IF WE DO NOT SUCCESSFULLY MANAGE OUR INVENTORY IT COULD HURT OUR BUSINESS.

We directly purchase most of the merchandise that we sell. We assume
inventory risks, including the risk that inventory will become obsolete or drop
in value. In the recent past we have sold merchandise at a discount or loss. It
is impossible to determine with certainty whether an item we purchase will sell
for more than the price we pay for it. Because we rely heavily on purchased
inventory, our success will depend on our ability to

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<PAGE> 12

turn our inventory rapidly, the ability of our buying staff to purchase
inventory at attractive prices relative to its resale value, and our ability to
manage customer returns. If we are unsuccessful in any of these areas, we may be
forced to sell our inventory at a discount or loss which could adversely affect
our business.

WE MAY NOT BE ABLE TO EXPAND OUR DIRECT SALES FORCE.

We intend to expand our internal sales force to sell more merchandise. This
involves a number of risks, including the following:

- the short period of time during which our sales force will have worked
for us;

- our ability to hire, retain, integrate and motivate additional sales and
sales support personnel;

- the length of time it takes new sales personnel to become productive; and

- the competition we face from other companies in hiring and retaining
sales personnel.

Our business could be adversely affected if we do not expand and maintain
an effective sales force.

OUR GROWTH MAY STRAIN OUR RESOURCES.

Our business has grown rapidly in the last three years. The number of our
employees in our combined entities has grown from 16 at March 31, 1996 to 65 at
June 30, 1999, and the scope of our operating and financial systems has expanded
significantly. Our rate of growth places a significant strain on our resources
for a number of reasons, including:

- the need for the continued development of our financial and information
management systems;

- the need to manage relationships with numerous strategic partners,
manufacturers, distributors and suppliers;

- difficulties in hiring and retaining skilled personnel necessary to
support our business; and

- the need to train and manage our growing employee base.

We cannot assure you that we will adequately address these risks. If we do
not, it could adversely affect our business.

WE FACE INTENSE COMPETITION IN THE ELECTRONIC COMMERCE MARKET.

The electronic commerce industry is rapidly evolving and intensely
competitive. We may not succeed in competing against our current and future
competitors. It is not difficult to enter the electronic commerce market, and
current and new competitors can launch new electronic commerce Web sites at
relatively low cost. We expect competition in electronic commerce to increase as
retailers, suppliers, manufacturers and direct marketers who have not
traditionally sold computer products and consumer goods directly to consumers
through the Internet enter this market segment. Furthermore, competition may
increase to the extent that mergers and acquisitions result in electronic
commerce companies with greater market share and revenues. Increased competition
or failure by us to compete successfully is likely to result in price
reductions, fewer customer orders, reduced gross margins, increased marketing
costs, loss of market share, or any combination of these problems.

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We believe that the principal competitive factors affecting our market are
competitive pricing, quality of customer service, brand name recognition,
quality of product information, breadth of merchandise offerings, cost of
customer acquisition and ease of use of electronic commerce sites. We may not be
able to maintain our competitive position against current and potential
competitors, especially those with greater resources in financial, marketing,
customer support, technical and other areas. As a result, they may secure
merchandise from suppliers on more favorable terms than we can. They may also
respond more quickly to changes in customer preference or devote greater
resources to the development, promotion and sale of their merchandise than we
can.

WE MAY NEED MORE CAPITAL.

We currently expect the net proceeds of this offering, together with our
available funds, to be sufficient to meet our needs for working capital,
including marketing and advertising expenses, capital expenditures and business
expansion for at least the next 18 months. After that time, we may need to raise
additional funds. However, we may need to raise additional funds sooner in order
to fund more rapid expansion, to develop new or enhanced services or products,
to respond to competitive pressures or to acquire complementary businesses,
products, services or technologies. If we issue additional common stock or
securities convertible into or exercisable for common stock, the percentage
ownership of our existing stockholders will decrease. In addition, we may issue
senior securities that have rights, preferences and privileges more favorable
than those of the common stock. We cannot assure you that we will have access to
additional financing on favorable terms or at all. If we cannot secure
additional financing, we may not be able to fund our expansion, take advantage
of unanticipated acquisition opportunities, develop or enhance services,
products or technologies, or respond successfully to competitive pressures.

WE MAY MAKE INVESTMENTS OR ACQUISITIONS THAT ARE NOT SUCCESSFUL.

We intend to make investments in or acquire complementary businesses,
products, services or technologies on an opportunistic basis when they will
assist us in carrying out our business strategy. If we buy a company, we could
have difficulty integrating the company's personnel and operations. In addition,
the key personnel of the acquired company may decide not to work for us. If we
acquire products, services or technologies, we could have difficulty in
assimilating them into our operations. These difficulties could disrupt our
ongoing business, distract our management and employees and increase our
expenses. Furthermore, we may have to incur debt or issue equity securities to
pay for any future acquisitions. Issuing equity securities could dilute the
interests of our stockholders.

OUR SUCCESS DEPENDS ON OUR ABILITY TO PROTECT OUR INTELLECTUAL PROPERTY.

We regard the software used to operate our Web sites, as well as our
various trademarks and copyrights, as proprietary. We will continue to attempt
to protect them under a combination of copyright, trade secret and trademark
laws, as well as by contractual restrictions on employees and third parties.
Despite these precautions, it may be possible for unauthorized parties to copy
our software or otherwise obtain and use information that we regard as
proprietary. Existing trade secrets and copyright laws provide only limited
protection. Certain provisions of other license and distribution agreements that
we intend to use, including provisions protecting against unauthorized use,
copying, transfer and disclosure, may be unenforceable under the laws of certain
jurisdictions. Furthermore, we may be required to negotiate limits on these
provisions from time to time. In addition,

9
<PAGE> 14

the laws of some foreign countries do not protect our proprietary rights to the
same extent as do the laws of the U.S. The steps we take may not be adequate to
deter misappropriation of proprietary information. We also may not detect
unauthorized use and take appropriate steps to enforce our intellectual property
rights. Significant and protracted litigation may be necessary to protect our
intellectual property rights, to determine the scope of the proprietary rights
of others or to defend against claims for infringement. Third parties may assert
claims against us alleging infringement, misappropriation or other violation of
proprietary rights, whether or not such claims have merit. These claims can be
time consuming and expensive to defend and could require us to cease the use and
sale of allegedly infringing services and products, to incur significant
litigation costs and expenses, to develop or acquire non-infringing technology
and to obtain licenses for the alleged infringing technology. We may be unable
to develop or acquire alternative technologies or obtain such licenses on
commercially acceptable terms.

WE FACE RISKS ASSOCIATED WITH MAINTAINING THE VALUE OF OUR DOMAIN NAMES.

We may be unable to prevent third parties from acquiring domain names that
are similar to, infringe on or otherwise decrease the value of our brands and
our trademarks and other proprietary rights. We currently hold various Web
domain names relating to our brand, including compgeeks.com, evertek.com and
wholesaleauction.com, among others. We may not be able to acquire or maintain
relevant domain names in all jurisdictions in which we conduct business.
Acquiring and maintaining domain names generally is regulated by governmental
agencies and their designees. This regulation in the U.S. and in foreign
countries may be subject to change. Governing bodies may establish additional
top-level domains, appoint additional domain name registrars or modify the
requirements for holding domain names. The relationship between regulations
governing domain names and laws protecting trademarks and similar proprietary
rights is unclear.

WE ARE VULNERABLE TO ADDITIONAL TAX OBLIGATIONS.

We currently collect sales tax only on retail sales of products delivered
to residents in the state of California. However, other states or foreign
countries may seek to impose sales tax, value added taxes, duties or other
collection obligations on us and other electronic commerce companies. A number
of proposals have been made at the state and local levels that would impose
additional taxes on the sale of goods and services through the Internet. These
proposals, if adopted, could substantially impair the growth of electronic
commerce and cause purchasing at our Web site to be less attractive to customers
than traditional retail purchasing. In 1998, the U.S. Congress passed
legislation limiting for three years the ability of the states to impose new
taxes on Internet-based transactions. Failure to renew this legislation could
result in the imposition by various states of taxes on electronic commerce. In
addition, this legislation does not prevent the application of existing state
tax laws to electronic commerce.

WE MAY FACE DIFFICULTIES IN SELLING OUR PRODUCTS INTERNATIONALLY AND MAY BE
SUBJECT TO ADDITIONAL RISKS ASSOCIATED WITH INTERNATIONAL OPERATIONS.

International sales accounted for approximately 1% of our revenues for the
six months ended June 30, 1999. We believe that our ability to increase net
sales will require expansion in foreign markets. In seeking to expand, we will
face new competitors. We cannot assure you that we will succeed in creating
localized versions of our Web content. Even if we succeed, our international
revenues may not offset the expense of establishing and maintaining
international operations. Weak international demand for our products

10
<PAGE> 15

could adversely affect our business. Additional difficulties and risks inherent
in doing business on an international level include but are not limited to:

- compliance with regulatory requirements and changes in those
requirements;

- export controls relating to technology, tariffs and other trade barriers;

- higher operational expenses;

- difficulties in staffing and managing foreign operations;

- difficulties in collection of accounts receivables;

- protection of intellectual property rights;

- political or economic instability;

- fluctuations in currency exchange rates; and

- potentially adverse tax consequences.

WE RELY HEAVILY ON THIRD PARTIES, INCLUDING INTERNET SERVICE PROVIDERS AND
TELECOMMUNICATIONS COMPANIES.

Our operations depend on a variety of third parties for Internet access,
telecommunications, operating software, merchandise delivery and credit card
transaction processing. We have limited control over these third parties, and we
cannot assure you that we will maintain satisfactory relationships with any of
them on acceptable commercial terms. Nor can we assure you that the quality of
products and services that they provide will remain at the levels needed to
enable us to conduct our business effectively.

We rely on Internet service providers to connect our Web sites to the
Internet. From time to time, we have experienced temporary interruptions in our
Web site connections and our telecommunications access. Frequent or prolonged
interruptions of these Web site connection services could decrease the number of
users and could result in significant losses of revenues. Our Web site software
and internally developed auction software depend on operating systems, databases
and server software that third parties produce and license to us. From time to
time, we have discovered errors and defects in this third party software and, in
part, we rely on these third parties to correct these errors and defects
promptly.

OUR NETWORK INFRASTRUCTURE COULD FAIL.

The performance, reliability and availability of our content and
syndication infrastructure are critical to our reputation and ability to attract
users and customers. Our computer and communications hardware are located at our
Vista facility and our Oceanside facility as well as third party locations. Our
ability to provide uninterrupted, secure online services depends on our ability
to protect our facilities and equipment against damage from unexpected adverse
events, including fire, earthquakes, power loss, water damage,
telecommunications failures, vandalism, computer viruses, hacker attacks, and
other malicious acts.

Since our insurance policies have low coverage limits, our insurance may
not adequately compensate us for any losses that may occur due to any system
failures or interruptions. We do not have insurance to cover any losses related
to business interruptions. Services based on sophisticated software and computer
systems often encounter development delays and the underlying software may
contain undetected errors

11
<PAGE> 16

that could cause system failures when introduced. Any system error or failure
that causes a significant interruption in the availability of our Web site or an
increase in response time could result in a loss of potential or existing
suppliers, users and customers. Expanding our network infrastructure could
require substantial financial, operational and management resources, all of
which could adversely affect our business.

WE MAY NOT BE ABLE TO BECOME YEAR 2000 COMPLIANT.

We have completed our internal tests to assure that our information
technology systems will function properly in the year 2000. Our computer systems
and software programs currently comply with year 2000 requirements. However, we
have not completed our year 2000 analysis with respect to all of our suppliers
and providers.

Until we contact all of our suppliers and providers and they respond, we
will not have completely evaluated whether our information technology systems or
non-information technology systems will need to be revised or replaced. If our
efforts to address year 2000 risks are not successful, or if our suppliers,
providers or other third parties with whom we conduct business do not
successfully address these risks, it could adversely affect our business. We may
sell products that are not year 2000 compliant, which could adversely affect our
sales and our relationships with customers. Please see "Management's Discussion
and Analysis of Financial Condition and Results of Operations -- Year 2000
Issues" for detailed information on our state of readiness, potential risks and
contingency plans regarding the year 2000 issue.

RISKS RELATED TO OUR INDUSTRY

EVENTS IN THE COMPUTER AND PERIPHERAL INDUSTRY COULD ADVERSELY AFFECT OUR
BUSINESS.

We derive virtually all our revenue directly or indirectly from the
computer and peripheral industry. Accordingly, our future growth depends on this
industry. The computer and peripheral industry is highly susceptible to adverse
events, including the following:

- technological developments reducing demand for computers and peripherals;

- a surplus of products in the computer and peripheral market; and

- changes in consumer trends.

WE ARE DEPENDENT ON THE CONTINUED DEVELOPMENT OF THE INTERNET INFRASTRUCTURE.

We depend almost entirely on the use of the Internet for our revenue. The
increased use of the Internet for commerce is essential for our business to
grow. Accordingly, our success depends in large part on the continued
development of the infrastructure for providing Internet access and services.
The Internet could lose its viability or its usage could decline due to many
factors, including:

- delays in the development of the Internet infrastructure;

- power outages;

- the adoption of new standards or protocols for the Internet; or

- changes or increases in governmental regulation.

We cannot be certain that the infrastructure or complementary services
necessary to maintain the Internet as a useful and easy means of buying goods
will continue to develop

12
<PAGE> 17

or that, if they do develop, the Internet will remain a viable marketing and
sales channel for the types of products and services that we offer.

WE ARE VULNERABLE TO THE RAPID EVOLUTION OF ELECTRONIC COMMERCE AND RELATED
TECHNOLOGY.

The Internet and the electronic commerce industry are characterized by
rapid technological change, changes in user and customer requirements, frequent
new service or product introductions embodying new technologies, and the
emergence of new industry standards and practices. Changes in the Internet,
electronic commerce and related technology could render our Web sites and
technology obsolete. To remain competitive, we must continue to enhance and
improve the customer service features, responsiveness and functionality of our
Web sites. Our success in achieving these goals depends on our ability to
develop or license new technologies and respond promptly and cost-effectively to
technological advances and emerging industry standards and practices. The
development and licensing of technologies relating to the Internet and
electronic commerce involve significant technical, financial and business risks.
We may not be successful in developing, licensing or integrating new
technologies or promptly adapting our Web sites, proprietary technology and
transaction-processing systems to customer needs or emerging industry standards.

The use of the Internet for retail transactions is a recent development,
and the continued demand and growth of a market for computer-related products
via the Internet is uncertain. The Internet may ultimately prove not to be a
viable commercial marketplace for a number of reasons, including the following:

- unwillingness of consumers to shift their purchasing from traditional
retailers to online purchases;

- lack of acceptable transaction and data security;

- concern for privacy of personal information;

- limitations on access and ease of use;

- congestion leading to delayed or extended response times;

- inadequate development of Internet infrastructure to keep pace with
increased levels of use; and

- increased government regulation and taxation.

WE MAY NOT BE ABLE TO OVERCOME SECURITY CONCERNS RELATING TO ELECTRONIC COMMERCE
AND CREDIT CARD FRAUD.

Our system is vulnerable to disruptions from computer viruses and attempts
by hackers to penetrate our network security. We may be required to expend
significant capital and other resources to protect against security breaches on
our Web sites or to alleviate problems caused by such breaches. If any
compromise of our security were to occur, it could damage our reputation and
expose us to a risk of loss, litigation and possible liability. A significant
barrier to online commerce and communications is the need for secure
transmission of confidential information over public networks. Concerns over the
security of transactions conducted on the Internet and other online services, as
well as a user's desire for privacy, may also inhibit the growth of the Internet
and other online services especially as a means of conducting commercial
transactions.

13
<PAGE> 18

Our business involves the storage and transmission of proprietary data,
such as credit card numbers and other confidential information. We cannot assure
you that our security measures will prevent security breaches or that our
failure to prevent such security breaches will not adversely affect our
business. Although credit card companies and others are in the process of
enhancing anti-theft and anti-fraud protections and we are continually
monitoring this issue, the risk from these activities could adversely affect us.
We cannot assure you that advances in computer capabilities, new discoveries in
the field of cryptography or other events or developments will not result in a
compromise or breach of the means used by us to protect customer transaction
data. A party who circumvents our security measures could misappropriate
confidential information or interrupt our operations.

WE MAY BE SUBJECT TO LIABILITY FOR MISUSE OF USERS' PRIVATE INFORMATION.

Under our privacy policy we will not willfully disclose any individually
identifiable information about any user to a third party without the user's
consent unless required by law. This policy is easily accessible on our Web
site. Despite this policy, however, if third persons were able to penetrate our
network security or otherwise misappropriate our users' personal information or
credit card information, we could be subject to liability. This liability could
include claims for unauthorized purchases with credit card information,
impersonation or other similar fraud. It could also include claims for other
misuses of personal information, such as for unauthorized marketing purposes.
These claims could result in litigation and adversely affect our business.

OUR BUSINESS IS SUBJECT TO SEASONAL FLUCTUATIONS.

We have also experienced, and expect to continue to experience, seasonality
in our business. We expect seasonal fluctuations in Internet usage including
reduced user traffic on our Web sites during the summer and year-end vacation
and holiday periods, when use of the Internet is typically lower.

RISKS RELATED TO THIS OFFERING

OUR STOCK PRICE MAY DECLINE BECAUSE OF THE SALE OF SHARES AFTER THIS OFFERING.

Sales of substantial amounts of our common stock in the market following
this offering, or the appearance that a large number of shares is available for
sale, could adversely affect the market price of our stock. These sales also
might make it more difficult for us to sell equity securities in the future at a
price that we deem appropriate. After this offering, we will have 19,572,861
outstanding shares of common stock. Of these shares, those offered in this
offering will be freely tradable.

THE LIQUIDITY OF OUR STOCK IS UNCERTAIN, SINCE IT HAS NEVER BEEN PUBLICLY
TRADED.

Prior to this offering, there has been no public market for our common
stock. We cannot predict if an active trading market in our common stock will
develop or how liquid that market might become.

THE PRICE OF OUR STOCK MAY DECLINE BELOW OUR INITIAL PUBLIC OFFERING PRICE.

The market price of the common stock may decline below the initial public
offering price. We have negotiated with the representatives of the underwriters
to determine the initial public offering price. This price may not be indicative
of prices that will prevail in

14
<PAGE> 19

the trading market. Please see "Underwriting" for more information regarding how
we determined the initial public offering price.

MARKET VOLATILITY MAY ADVERSELY AFFECT THE MARKET PRICE OF OUR STOCK.

The stock market has experienced extreme price and volume fluctuations. The
market prices of the securities of Internet-related companies have been
especially volatile. The trading price of our common stock could fluctuate
widely in response to a number of factors, including the following:

- our quarterly results of operations;

- changes in earnings estimates by analysts and whether our earnings meet
or exceed such estimates;

- announcements of technological innovations by us or our competitors;

- additions or departures of key personnel;

- other matters discussed elsewhere in this prospectus; and

- other events or factors, that may be beyond our control.

In the past, companies that have experienced fluctuations in the market
price of their stock have been the object of securities class action litigation.
If we were the object of securities class action litigation, it could result in
substantial costs and a diversion of our management's attention and resources.

THE INTERESTS OF OUR CONTROLLING STOCKHOLDERS MAY CONFLICT WITH YOUR INTERESTS.

We anticipate that the executive officers, directors and entities
affiliated with them will, in the aggregate, beneficially own approximately 75%
of our outstanding common stock following the completion of this offering. These
stockholders may be able to exercise control over all matters requiring approval
by our stockholders, including the election of directors and approval of
significant corporate transactions. This concentration of ownership may also
have the effect of delaying or preventing a change in control of us. Please see
"Principal Stockholders" for detailed information on the beneficial ownership of
our executive officers, directors and affiliates.

ANTI-TAKEOVER PROVISIONS IN OUR CHARTER DOCUMENTS AND DELAWARE LAW COULD MAKE A
THIRD-PARTY ACQUISITION OF US DIFFICULT.

We have incorporated provisions of our restated certificate of
incorporation, our restated bylaws and Delaware law which could make it more
difficult for a third party to acquire us, even if doing so might be beneficial
to you. Please see "Description of Securities" for detailed information on these
provisions.

YOU WILL SUFFER DILUTION IN THE VALUE OF YOUR SHARES.

Investors purchasing shares in this offering will incur immediate and
substantial dilution in net tangible book value per share. To the extent
outstanding options to purchase common stock are exercised, there will be
further dilution. Please see "Dilution" for detailed information on dilution
resulting from this offering.

SOME OF YOUR INVESTMENT WILL BE USED TO REPAY OUR OUTSTANDING DEBT AND TO
DISTRIBUTE RETAINED EARNINGS.

We will use some of the proceeds from this offering to distribute to our
founders retained earnings in excess of $500,000 through the closing of this
offering and to repay

15
<PAGE> 20

outstanding debt to banks and our founders. We previously distributed a portion
of our retained earnings to our founders in the form of promissory notes. These
notes represent those amounts on which the founders had previously paid tax, but
had allowed us to use to grow our business. You should realize that not all of
your investment will be used to expand our business. Please see "Use of
Proceeds" and "Business -- Share Exchange and S Corporation Status" for further
description of this debt.

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This prospectus may contain forward-looking statements based on our current
expectations, assumptions, estimates and projections about us and our industry.
These forward-looking statements involve risks and uncertainties. Our actual
results could differ materially from those anticipated in these forward-looking
statements as a result of factors more fully described in this "Risk Factors"
section and elsewhere in this prospectus. We do not plan to update or revise
these forward-looking statements to reflect new events or circumstances.

16
<PAGE> 21

USE OF PROCEEDS

We estimate the net proceeds to us from the sale of the 5,000,000 shares of
common stock in this offering will be approximately $45.5 million at an assumed
public offering price of $10.00 per share and after deducting the estimated
underwriting discount and estimated offering expenses, or approximately $52.4
million if the underwriters' over-allotment option is exercised in full.

We intend to use:

- approximately $3.4 million of the net proceeds to distribute all of our
retained earnings through the closing of this offering in excess of
$500,000 to our founders. This amount includes the repayment of
approximately $2.6 million of outstanding debt obligations to our
founders arising from a prior distribution, in the form of demand
promissory notes;

- approximately $6.0 million of the net proceeds to pay outstanding debt
obligations to banks;

- approximately $5.0 million of the net proceeds to increase our sales and
marketing efforts; and

- approximately $31.1 million of the net proceeds to increase our
merchandise inventory and for other general corporate purposes.

A portion of the proceeds also may be used to acquire or invest in
complementary businesses or products. From time to time, in the ordinary course
of business, we evaluate potential acquisitions of such businesses and products.
However, we have no present understandings, commitments or agreements with
respect to any material acquisition of businesses or products.

Until we apply the net proceeds to the above purposes, we intend to invest
these funds in short-term, interest-bearing, investment-grade securities.

The outstanding demand promissory notes to be repaid to our founders accrue
interest at an annual rate of 10%. As of June 30, 1999, the total outstanding
amount under our existing credit lines and note payable with our bank was
approximately $1.6 million. The credit lines and note payable accrued interest
at an annual rate of 2.75% in excess of the bank's LIBOR-Rate (8.16% at October
29, 1999).

On October 29, 1999, we entered into a $12 million revolving line of credit
agreement with Comerica Bank-California. The line of credit, which matures on
November 1, 2001 accrues interest at an annual rate of 2.15% in excess of the
bank's LIBOR Rate (7.56% at October 29, 1999). Proceeds from this line of credit
were used to pay-off and cancel the credit lines and note payable with the
former financial institution.

DIVIDEND POLICY

Before this offering we distributed dividends to our shareholders to permit
them to pay tax obligations incurred by them related to the business and to
distribute previously taxed income. See "Business -- Share Exchange and S
Corporation Status." We do not expect to pay any cash dividends for the
foreseeable future. We currently intend to retain future earnings, if any, to
finance the expansion of our business. Our board of directors will decide
whether to pay cash dividends in the future. Their decision will depend on our
financial condition, operating results, capital requirements and other factors
that they deem relevant.

17
<PAGE> 22

CAPITALIZATION

The following table sets forth our capitalization as of June 30, 1999 on an
actual basis, a pro forma basis to give effect to our conversion to a C
corporation and the related distributions of S corporation retained earnings in
excess of $500,000 to our founders and on an as adjusted basis to give effect to
our receipt of the estimated net proceeds from the sale of 5,000,000 shares
offered at an assumed initial public offering price of $10.00 per share. This
information should be read in conjunction with our financial statements included
in this prospectus.

<TABLE>
<CAPTION>
JUNE 30, 1999
----------------------------------
ACTUAL PRO FORMA AS ADJUSTED
------ --------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Total debt.................................... 5,672 5,672 --
Stockholders' equity:
Common stock, 25,000,000 shares of common
stock authorized on a pro forma basis and
75,000,000 shares of common stock
authorized on an adjusted basis;
14,572,861 shares of common stock issued
on an actual and pro forma basis; and
19,572,861 shares issued and outstanding
on an as adjusted basis.................. $ 7 $ 15 $ 20
Additional paid-in capital.................. -- 492 45,987
Retained earnings........................... 1,716 -- --
------ ------ -------
Total stockholders' equity.................... 1,723 507 46,007
------ ------ -------
Total capitalization................ $7,395 $6,179 $46,007
====== ====== =======
</TABLE>

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<PAGE> 23

DILUTION

Our pro forma net tangible book value as of June 30, 1999 was $507,003, or
$0.03 per share of common stock. Pro forma net tangible book value per share is
equal to the amount of our total tangible assets less total liabilities, divided
by the number of shares of common stock outstanding as of June 30, 1999 after
considering the share exchange. After giving effect to the sale of the 5,000,000
shares of common stock in this offering, assuming a public offering price of
$10.00 per share, the mid-point of the range set forth on the front cover, less
estimated underwriting discounts and estimated other expenses of this offering,
this represents an immediate increase in pro forma net tangible book value of
$2.32 per share to existing stockholders and an immediate dilution in pro forma
net tangible book value of $7.65 per share to new investors. The following table
illustrates this per share dilution:

<TABLE>
<S> <C> <C>
Assumed initial public offering price per share....... $10.00
Pro forma net tangible book value per share as of June
30, 1999.............................................. $0.03
Increase attributable to new investors.............. 2.32
-----
Pro forma net tangible book value per share after this
offering............................................ 2.35
------
Pro forma dilution per share to new investors......... $ 7.65
======
</TABLE>

The following table summarizes, on a pro forma basis as of June 30, 1999,
the total number of shares of common stock purchased from us, the total
consideration paid to us and the average price per share paid by existing
stockholders and by new investors:

<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION
-------------------- --------------------- AVERAGE PRICE
NUMBER PERCENT AMOUNT PERCENT PER SHARE
---------- ------- ----------- ------- -------------
<S> <C> <C> <C> <C> <C>
Existing stockholders....... 14,572,861 74% $ 7,003 --% $--
New investors............... 5,000,000 26 50,000,000 100 $10
---------- --- ----------- ---
Total............. 19,572,861 100% $50,007,003 100%
========== === =========== ===
</TABLE>

19
<PAGE> 24

SELECTED COMBINED FINANCIAL DATA

The selected data presented below under the captions "Combined Statement of
Income Data" for each of the years in the three-year period ended December 31,
1998 and "Combined Balance Sheet Data" as of December 31, 1997 and 1998, are
derived from the combined financial statements of the CompGeeks Companies, which
financial statements have been audited by KPMG LLP, independent certified public
accountants. The combined financial statements as of December 31, 1997 and 1998,
and for each of the years in the three year period ended December 31, 1998, are
included elsewhere in this prospectus. The selected data presented below for the
years ended December 31, 1994 and 1995 and the six months ended June 30, 1998
and 1999, and as of December 31, 1994, 1995 and 1996 are derived from the
unaudited combined financial statements of the CompGeeks Companies.

<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED DECEMBER 31, JUNE 30,
----------------------------------------------------------------- -------------------------
1994 1995 1996 1997 1998 1998 1999
---------- ---------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
COMBINED STATEMENT OF INCOME DATA:
Net sales...................... $3,460,371 $7,337,890 $15,772,172 $26,917,799 $49,514,651 $21,461,015 $36,425,347
Cost of goods sold............. 2,801,171 5,580,145 12,746,378 21,508,035 39,980,859 16,655,171 30,578,722
---------- ---------- ----------- ----------- ----------- ----------- -----------
Gross profit................... 659,200 1,757,745 3,025,794 5,409,764 9,533,792 4,805,844 5,846,625
Operating expenses:
Sales and marketing.......... 195,022 412,164 733,588 1,615,303 2,752,580 1,185,366 1,832,238
General and administrative... 202,442 263,056 666,313 1,172,575 1,862,356 712,242 1,265,484
---------- ---------- ----------- ----------- ----------- ----------- -----------
Total operating
expenses............ 397,464 675,220 1,399,901 2,787,878 4,614,936 1,897,608 3,097,722
---------- ---------- ----------- ----------- ----------- ----------- -----------
Income from operations......... 261,736 1,082,525 1,625,893 2,621,886 4,918,856 2,908,236 2,748,903
Other income (expense), net.... 8,498 65,432 (13,927) 28,713 71,359 (2,725) (104,957)
---------- ---------- ----------- ----------- ----------- ----------- -----------
Income before income taxes..... 270,234 1,147,957 1,611,966 2,650,599 4,990,215 2,905,511 2,643,946
Provision for income taxes..... 4,113 17,200 24,954 66,799 68,097 22,254 42,829
---------- ---------- ----------- ----------- ----------- ----------- -----------
Net income............ $ 266,121 $1,130,757 $ 1,587,012 $ 2,583,800 $ 4,922,118 $ 2,883,257 $ 2,601,117
========== ========== =========== =========== =========== =========== ===========
Pro forma information(1):
Historical income before
provision for income
taxes...................... $ 270,234 $1,147,957 $ 1,611,966 $ 2,650,599 $ 4,990,215 $ 2,905,511 $ 2,643,946
Pro forma provision for
income taxes............... 108,094 459,183 644,786 1,060,240 1,996,086 1,162,204 1,057,578
---------- ---------- ----------- ----------- ----------- ----------- -----------
Pro forma net income......... $ 162,140 $ 688,774 $ 967,180 $ 1,590,359 $ 2,994,129 $ 1,743,307 $ 1,586,368
========== ========== =========== =========== =========== =========== ===========
Pro forma net income per basic
and diluted share(2)......... $ 0.20 $ 0.10
=========== ===========
Pro forma weighted average
common shares outstanding.... 15,160,129 15,160,129
=========== ===========
</TABLE>

<TABLE>
<CAPTION>
AT DECEMBER 31,
------------------------------------------------------------ JUNE 30,
1994 1995 1996 1997 1998 1999
-------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
COMBINED BALANCE SHEET DATA:
Cash and cash equivalents....................... $208,039 $ 287,154 $ 980,528 $ 996,815 $ 956,665 $ 254,470
Inventory....................................... 96,862 263,439 415,766 1,331,794 3,139,224 4,701,776
Working capital................................. 276,531 986,838 1,553,337 2,746,152 5,571,306 1,263,153
Total assets.................................... 451,047 1,110,427 1,866,676 3,211,752 6,702,627 9,053,800
Total stockholders equity....................... $283,974 $1,027,726 $1,598,846 $2,906,446 $5,851,139 $1,723,418
</TABLE>

- -------------------------
(1) Pro forma net income reflects a provision for income taxes on a pro forma
basis as if we had been taxed as a C corporation.

(2) Pro forma net income per basic and diluted share is calculated assuming the
Exchange occurred on January 1, 1994.

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<PAGE> 25

MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion of our financial condition and results of
operations should be read in conjunction with the financial statements and the
notes to those statements included elsewhere in this prospectus. This discussion
may contain forward-looking statements that involve risks and uncertainties. Our
actual results may differ materially from those anticipated in these
forward-looking statements as a result of certain factors, such as those set
forth under "Risk Factors" and elsewhere in this prospectus.

OVERVIEW

The financial statements of compgeeks.com, Evertek Computer Corporation
("Evertek"), and Evertek Trading Limited, (collectively "the CompGeeks
Companies" or the "Company") are presented on a combined basis since all of the
companies are under common management and control. The combined financial
statements for the one-year periods ended December 31, 1996, 1997 and 1998
include the results of operations of compgeeks.com, for the period from its
inception on May 3, 1996 through June 30, 1999, of Evertek for the period from
the beginning of the earliest year presented, January 1, 1996 through June 30,
1999 and of Evertek Trading Limited for the period from its inception on August
15, 1996 through June 30, 1999. In April 1999, CompGeeks, Inc., was incorporated
in Delaware for the sole purpose of effecting a share exchange with the
CompGeeks Companies and raising capital through an initial public offering of
common stock. In May 1999, CompGeeks, Inc. completed the share exchange whereby
all of the outstanding common stock of the CompGeeks Companies was exchanged for
14,572,861 newly issued shares of CompGeeks, Inc. (the "Exchange"). The Exchange
was accounted for at historical cost in a manner similar to a pooling of
interests.

We are an Internet wholesale supplier and discount retailer of computers
and peripherals to businesses, resellers and consumers. Our expertise in
purchasing manufacturers' excess inventories, close-outs and out-of-date
products allows us to provide competitive pricing while maintaining
profitability. We believe we have combined this expertise with superior customer
service to develop a loyal, repeat customer base. Our customer base has grown
substantially since 1994 largely through word-of-mouth, fueled by superior
customer satisfaction. We own, stock and ship all products we offer for sale, as
opposed to many online retailers which neither own nor control their inventory
and are required to ship from third party suppliers.

We have been profitable on an annual basis since inception. Evertek
Computer Corporation, our business-to-business wholesale supplier, commenced
operations in 1990, and compgeeks.com, our business-to-consumer discount outlet
commenced operations in early 1996.

We operate two channels of distribution: www.evertek.com, our
business-to-business channel that sells to computer retail stores worldwide, and
www.compgeeks.com, our business-to-consumer channel. Our compgeeks.com division
sells to end-users both through our own Web site and through Internet auction
sites such as ONSALE, Inc. Our Web sites allow users to view detailed product
information, select shipping methods and track orders electronically.

Although our gross margins have been relatively stable on an annual basis
in the past, they have fluctuated on a quarterly basis. We expect these
quarterly fluctuations to continue in the future. These fluctuations result from
factors including product mix,

21
<PAGE> 26

inventory management, inbound and outbound shipping costs, the level of product
returns and the level of discount pricing.

Since 1998, we have increased the depth of our management team to help
implement our growth strategy. We recently expanded our senior management team
to include a Vice President, Chief Financial Officer, Chief Information Officer,
General Counsel, and Vice Presidents of Marketing and Electronic Commerce
Development.

Since inception, we have not spent significant amounts for marketing
activities. We plan to increase the amounts spent on these activities. To be
successful we must strengthen awareness of our brand name. In order to build our
brand name, we must succeed in our marketing efforts, provide high-quality
services and products and increase the number of customers on our Web sites.

We previously elected to be treated for federal and state income tax
purposes as an S corporation. As a result, our stockholders have declared our
earnings on their federal and California State income tax returns. We previously
distributed cash payments to our stockholders in amounts that approximated the
combined income tax liabilities, calculated on our taxable income, based on
appropriate statutory income tax rates. In February 1999, Evertek distributed
$1,137,941 to its sole shareholder for funds used in purchasing our Oceanside
building. Please see "Relationships and Related Transactions." In addition, in
May 1999, compgeeks.com and Evertek issued promissory notes in the aggregate
amount of approximately $2.6 million to our founders for the retained earnings
of these companies which we had not distributed, but on which the founders had
already paid personal income tax. These distributions for the years ended
December 31, 1997 and 1998 were $1,276,200 and $1,977,425, respectively and for
the six-months ended June 30, 1999 were $6,728,838. We will use a portion of the
proceeds from this offering to repay these outstanding debt obligations of
compgeeks.com and Evertek. Also, we will distribute retained earnings through
the closing of this offering in excess of $500,000 to our founders. Please see
"Use of Proceeds." Our S corporation status will terminate on the closing of
this offering.

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<PAGE> 27

RESULTS OF OPERATIONS

The following table sets forth certain statement of operations data
expressed as a percentage of net sales for the periods indicated:

<TABLE>
<CAPTION>
SIX MONTHS
YEAR ENDED ENDED
DECEMBER 31, JUNE 30,
-------------------- ------------
1996 1997 1998 1998 1999
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
COMBINED STATEMENT OF INCOME DATA:
Net sales.................................. 100% 100% 100% 100% 100%
Cost of goods sold......................... 81% 80% 81% 78% 84%
--- --- --- --- ---
Gross profit............................... 19% 20% 19% 22% 16%
Operating expenses:
Sales and marketing...................... 5% 6% 5% 6% 5%
General and administrative............... 4% 4% 4% 3% 4%
--- --- --- --- ---
Total operating expenses......... 9% 10% 9% 9% 9%
--- --- --- --- ---
Income from operations..................... 10% 10% 10% 13% 7%
Other income (expense), net................ -- -- -- -- --
--- --- --- --- ---
Income before income taxes................. 10% 10% 10% 13% 7%
Provision for income taxes................. -- -- -- -- --
--- --- --- --- ---
Net income....................... 10% 10% 10% 13% 7%
=== === === === ===
Pro forma information(1):
Historical income before provision for
income taxes.......................... 10% 10% 10% 14% 7%
Pro forma provision for income taxes..... 4% 4% 4% 6% 3%
--- --- --- --- ---
Pro forma net income..................... 6% 6% 6% 8% 4%
=== === === === ===
</TABLE>

- -------------------------
(1) Pro forma net income reflects a provision for income taxes on a pro forma
basis as if we had been taxed as a C corporation.

COMPARISON OF SIX MONTHS ENDED JUNE 30, 1999 AND 1998

NET SALES.

Net sales consists of product sales to customers and charges to customers
for outbound shipping and handling, net of product returns. Net sales for the
six months ended June 30, 1999 were $36.4 million, an increase of $14.9 million
from $21.5 million for the same six months in 1998. This growth was primarily
due to increased cash generated from operations that allowed us to increase the
depth of our inventory and the expansion of our customer base. The increase in
sales is primarily due to an increase in the volume of products sold. Sales was
not significantly impacted by changes in prices of the products sold. For the
six months ended June 30, 1999, our wholesale segment generated sales of $26.8
million, an increase of $13.9 million from $12.8 million for the same six months
in 1998. For the six months ended June 30, 1999, our retail segment generated
sales of $9.6 million, an increase of $0.9 million for the same quarter in 1998.
(Segment sales amounts are net of inter-segment sales.)

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<PAGE> 28

COST OF GOODS SOLD.

Cost of goods sold consists primarily of the costs of products sold to
customers and shipping and handling costs. Cost of goods sold for the six months
ended June 30, 1999 was $30.6 million, an increase of $13.9 million from $16.7
million for the same six months in 1998. Gross profit margin for the six months
ended June 30, 1999 and 1998 was 16.1% and 22.4%, respectively. The increase in
the cost of goods sold as a percentage of net sales resulted primarily from
changes in product mix, and from selling quantities of products at lower
margins. We occasionally acquire and sell lower margin goods in an effort to
establish relationships with new suppliers.

SALES AND MARKETING EXPENSES.

Sales and marketing expenses consist primarily of distribution facility
expenses, including rent, and payroll and related expenses for personnel engaged
in sales, customer service and distribution activities. Sales and marketing
expenses for the six months ended June 30, 1999 were $1.8 million, an increase
of $0.5 million from $1.2 million for the same six months in 1998. This increase
was primarily due to increased employee commission expenses which resulted from
the increase in net sales.

GENERAL AND ADMINISTRATIVE EXPENSES.

General and administrative expenses consist primarily of payroll and
related expenses for executive and administrative personnel, credit services,
merchant fees, facilities and other general corporate expenses. General and
administrative expenses for the six months ended June 30, 1999 was $1.3 million,
an increase of $0.7 million from $0.7 million for the same six months in 1998.
This increase resulted primarily from expenses associated with the hiring of
additional personnel, and increased credit services, merchant fees and rent
expense which resulted from the increase in sales.

OTHER INCOME (EXPENSE).

Other income (expense) consists of interest on our cash and cash
equivalents, net of interest expense attributable to borrowings under our bank
credit facility. Interest expense increased from the six months ended June 30,
1998 to the six months ended June 30, 1999 due to the interest related to
increased borrowings made under our lines of credit and the issuance of a note
payable to a bank in the six months ended June 30, 1999.

INCOME TAXES.

The provision for income taxes consists of California state S corporation
franchise tax and Hong Kong Internal Revenue Department taxes and for each of
the six months ended June 30, 1999 and 1998 was $43,000 and $22,000,
respectively.

NET INCOME.

The Company had net income of $2.6 million for the six months ended June
30, 1999, a decrease of $0.3 million from $2.9 million for the six months ended
June 30, 1998.

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<PAGE> 29

COMPARISON OF YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996

NET SALES.

Net sales for 1998 were $49.5 million, an increase of $22.6 million or 84%
from $26.9 million in 1997. Our net sales for 1997 increased $11.1 million or
70% from $15.8 million in 1996. In 1998 and 1997, this growth was primarily due
to increased cash generated from operations that allowed us to increase our
inventory and expand our customer base. The increase in sales is primarily due
to an increase in the volume of products sold. Sales was not significantly
impacted by changes in prices of the products sold. In 1998, our wholesale
segment generated sales of $31.7 million, an increase of $13.4 million or 73%
from $18.3 million in 1997. In 1998, our retail segment generated sales of $17.8
million, an increase of $9.2 million or 107% from $8.6 million in 1997. Our
wholesale segment sales for 1997 increased $5.2 million or 40% from $13.1
million in 1996. Our retail segment sales for 1997 increased $5.9 million or
219% from $2.7 million in 1996. (Segment sales amounts are net of inter-segment
sales.)

This growth was primarily due to increased cash generated from operations
that allowed us to increase the depth of our inventory and the expansion of our
customer base. The increase in sales is primarily due to an increase in the
volume of products sold. Sales was not significantly impacted by changes in
prices of the products.

COST OF GOODS SOLD.

Our cost of goods sold for 1998 was $40.0 million, an increase of $18.5
million or 86% from $21.5 million in 1997. Cost of goods sold for 1997 increased
$8.8 million or 69% from $12.7 million in 1996. For 1998, 1997 and 1996 our
gross profit margin was 19%, 20% and 19%, respectively. As net sales have
increased, we have been able to maintain relatively consistent gross profit
margins on an annual basis. However, we may not be able to maintain these gross
profit margins.

SALES AND MARKETING EXPENSES.

Sales and marketing expenses consist primarily of distribution facility
expenses including rent and payroll and related expenses for personnel engaged
in sales, customer service and distribution activities.

Our sales and marketing expenses for 1998 were $2.8 million, an increase of
$1.2 million or 75% from $1.6 million in 1997. Sales and marketing expenses for
1997 increased $0.9 million or 129% from $0.7 million in 1996. In 1998 and 1997,
the dollar increase was primarily due to increased payroll related expenses. We
expect sales and marketing expenses to increase in the future at a rate less
than the increase in the net sales rate.

GENERAL AND ADMINISTRATIVE EXPENSES.

General and administrative expenses consist primarily of payroll and
related expenses for executive and administrative personnel, credit services,
merchant fees, office facilities and other general corporate expenses.

General and administrative expenses for 1998 were $1.9 million, an increase
of $0.7 million or 58% from $1.2 million in 1997. General and administrative
expenses for 1997 increased $0.5 million or 71% from $0.7 million in 1996. For
1998 and 1997, the dollar increase was primarily attributable to expenses
associated with the hiring of

25
<PAGE> 30

additional personnel and increased credit services and merchant fees which
resulted from the increase in net sales. These expenses decreased as a
percentage of net sales for 1998 compared to 1997. We expect general and
administrative expenses to increase in absolute dollars as we expand our staff
and incur additional costs related to the growth of our business and being a
public company.

INCOME TAXES.

Compgeeks.com and Evertek have previously elected to be treated as S
corporations for federal and state income tax purposes under which we were not
subject to federal and state income tax with the liability being passed through
to our shareholders. As S corporations, the California tax code required us to
pay a franchise tax equal to approximately 1.5% of our taxable income, which
approximates book income. Income taxes related to Evertek Trading Limited are
not significant.

NET INCOME.

Net income was $4.9 million for 1998, an increase of $2.3 million or 88%
from $2.6 million in 1997 as a result of the factors discussed above. Net income
for 1997 increased $1.0 million or 63% from $1.6 million in 1996 as a result of
the factors discussed above.

LIQUIDITY AND CAPITAL RESOURCES

Since inception, we have financed our operations primarily through
reinvestment of our earnings as well as from traditional asset-backed bank
borrowings.

Cash and cash equivalents decreased to $0.3 million at June 30, 1999 from
$1.0 million at December 31, 1998 and $1.0 million at December 31, 1997.

Net cash provided by operating activities of $2.5 million in the six months
ended June 30, 1999 primarily resulted from net income and increases in accounts
payable offset by increases in inventory and accounts receivable. Net cash
provided by operating activities of $2.3 million for the year ended December 31,
1998 primarily resulted from net income and increases in accounts payable offset
by increases in accounts receivable and inventory.

Net cash used in investing activities primarily consisted of purchases of
equipment and systems, including computer equipment, fixtures and furniture.

Net cash used in financing activities of $3.1 million in the six months
ended June 30, 1999 primarily resulted from distributions to shareholders to pay
their individual tax liability on S corporation earnings and in connection with
a shareholder's purchase of our Oceanside facility from an unrelated party
partially offset by borrowings on our lines of credit and proceeds from a note
payable. Please see "Relationships and Related Transactions." Net cash used by
financing activities of $2.1 million for the year ended December 31, 1998
primarily resulted from distributions to shareholders to pay their individual
tax liability on S corporation earnings.

At June 30, 1999, our principal source of liquidity was cash and cash
equivalents and unused availability of our lines of credit. In 1997, we obtained
a credit line of $2.0 million, which we increased to $3.0 million in February
1999. In April 1999, we added an additional line which increased available
borrowings to a total of $5.0 million. As of June 30, 1999, we had borrowed $0.6
million under the lines of credit. In addition, as of June 30, 1999, we have
$1,000,000 outstanding under a note payable to a bank.

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<PAGE> 31

In October 1999 we obtained a $12 million revolving line of credit from
another financial institution and paid-off-in full the previous lines of credit
and note payable totaling $6 million.

As of June 30, 1999, our principal commitments consisted of obligations
outstanding under operating leases. Although we have no material commitments for
capital expenditures, we anticipate some increase in our capital expenditures
and lease commitments consistent with anticipated growth in operations,
infrastructure and personnel. We opened an additional distribution facility that
also became our new corporate headquarters in April 1999, as part of our
expansion plan. This required us to commit to an additional lease obligation and
to purchase additional capital equipment.

We currently anticipate that the net proceeds of this offering, together
with our available funds, will be sufficient to meet our anticipated needs for
working capital and capital expenditures through at least the next 18 months. We
may need to raise additional funds prior to the expiration of this period. If we
raise additional funds through the issuance of equity, equity-related or debt
securities, such securities may have rights, preferences or privileges senior to
those of the rights of our common stock and our stockholders may experience
additional dilution. We cannot be certain that additional financing will be
available to us when required on favorable terms, or at all.

PRODUCT MARKETING AGREEMENT

We entered an agreement with ONSALE, Inc., a leading Internet online
auction Web site, in 1996 which we amended in October 1997. This agreement
established us as a provider of computers and peripherals for sale on the ONSALE
auction Web site. We agreed to provide products for ONSALE's auction and to
fulfill orders entered through ONSALE, while ONSALE manages the auction process.
ONSALE pays us the actual merchandise selling price and shipping charges, less a
commission and any deductions for merchandise returns. The actual returns have
not been significant. Either party may cancel the agreement on 90 days written
notice. Our discount retail division derives a significant percentage of its
annual sales from ONSALE. For the years ended December 31, 1996, 1997 and 1998,
sales to ONSALE were 14% and 25% and 26%, respectively, of our net sales. If we
discontinue our business relationship with ONSALE, it would adversely affect us.

YEAR 2000 ISSUES

The computer systems and software programs of many companies and
governmental agencies are currently coded to accept or recognize only two digit
entries in the date code field. These systems may recognize a date using "00" as
the year 1900 rather than the year 2000. As a result, these computer systems
and/or software programs may need to be upgraded to comply with Year 2000
requirements or risk system failure or miscalculations causing disruptions of
normal business activities.

We have completed our internal tests to assure that our information
technology systems will function properly in the Year 2000. We believe that our
computer systems and software programs currently comply with Year 2000
requirements. However, we have not completed our Year 2000 analysis with respect
to all of our suppliers, providers and partners.

State of Readiness. We have made an assessment of the Year 2000 readiness
of our information technology systems, including the hardware and software that
enable us to provide and deliver our Web site and our non-information technology
systems. We believe our applications, databases and infrastructure are Year 2000
compliant. We will request

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<PAGE> 32

suppliers who supply significant hardware and software components to our
information technology systems to provide assurances of their Year 2000
compliance. We plan to complete this process during the first half of 1999. We
are currently assessing the materiality of our non-information technology
systems and will seek assurances of Year 2000 compliance from providers of these
systems. Our primary method of independent verification is documenting
statements of compliance and letters of assurance from various software and
hardware manufacturers. We are validating and documenting our compliance through
the use of third-party Year 2000 compliance testing software. Until this testing
is complete and all of these suppliers and providers are contacted, we will not
be able to completely evaluate whether our information technology systems or
non-information technology systems will need to be revised or replaced. If our
efforts to address Year 2000 risks are not successful, or if suppliers or other
third parties with whom we conduct business do not successfully address these
risks, it could adversely affect our business.

Costs. We have identified approximately $1,000 worth of capital equipment
and software that required upgrading or replacement for year 2000 compliance,
which we will spend after the first quarter of 1999. No expenditures were
incurred for Year 2000 remediation prior to the first half of 1999. Because
substantially all information technology systems currently in use were Year 2000
compliant at the time of deployment, remediation costs will be insignificant.
The $1,000 in capital expenditures that we have identified are primarily
allocated to the replacement of computer system mainboards, valued at under $100
each. We have funded Year 2000 remediation costs from cash flow from operations.

Risks. We are not currently aware of any Year 2000 compliance problems
relating to our proprietary software or our information technology or
non-information technology systems that would adversely affect our business,
without taking into account our efforts to avoid or fix such problems. We cannot
assure you that we will not discover Year 2000 compliance problems in our
proprietary software that will require substantial revisions. In addition, we
cannot assure you that third-party software, hardware or services incorporated
into our material information technology and non-information technology systems
will not need to be revised or replaced, all of which could be time consuming
and expensive. Our failure to fix our proprietary software or to fix or replace
third-party software, hardware or services on a timely basis could result in
lost revenues, increased operating costs, the loss of customers and other
business interruptions, any of which could adversely affect our business. Also,
the failure to adequately address Year 2000 compliance issues in our proprietary
software and our information technology and non-information technology systems
could result in claims of mismanagement, misrepresentation or breach of contract
and related litigation, which could be costly and time-consuming to defend.

In addition, we cannot assure you that governmental agencies, utility
companies, Internet access companies, third-party service providers and others
outside our control will be Year 2000 compliant. The failure by these entities
to be Year 2000 compliant could cause a systemic failure beyond our control,
such as a prolonged Internet, telecommunications or electrical failure, which
could also prevent us from delivering our Web site, decrease the use of the
Internet or prevent users from accessing our Web site. This could adversely
affect our business.

Contingency Plan. If Year 2000-related problems occur, we can revert to a
set of manual methods. We also maintain several supplier relationships for the
supply of services and products to minimize risks associated with non-compliant
suppliers.

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<PAGE> 33

RECENT ACCOUNTING PRONOUNCEMENTS

In June 1998, FASB issued SFAS No. 133 "Accounting for Derivative
Instruments and Hedging Activities." SFAS No. 133 establishes accounting and
reporting standards for derivative instruments and hedging activities. SFAS No.
133 requires the recognition of all derivative instruments as either assets or
liabilities in the statement of financial position and measurement of those
derivative instruments at fair value. SFAS No. 133 is effective for all fiscal
quarters of fiscal years beginning after June 15, 2000. Currently, we do not
hold derivative instruments or engage in hedging activities. The adoption of
this standard is not expected to have a material effect on our combined
financial statements taken as a whole.

In March 1998, the Accounting Standards Executive Committee of the American
Institute of Public Accountants issued Statement of Position 98-1, "Accounting
for the Costs of Computer Software Developed or Obtained for Internal Use." In
April 1998, the same committee issued Statement of Position 98-5, "Reporting on
the Costs of Start-Up Activities." These standards are effective for the first
quarter of the year ending December 31, 1999. The adoption of these standards
are not expected to have a material effect on our combined financial statements
taken as a whole.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

We are exposed to a variety of risks, including changes in interest rates
affecting the cost of our debt. As of December 31, 1998, our available
borrowings consisted of the bank lines of credit, of which zero was outstanding
at December 31, 1998. In March 1999, we executed a note payable in the amount of
$1,000,000 with our bank. The lines of credit and the note payable bear interest
at the London Interbank Offered Rate plus 2.75%, or at our option 0.5% in excess
of the bank's reference rate and are secured by our assets. These lines of
credit and the note payable were paid in full in October 1999 and were replaced
by a $12 million revolving line of credit from Comerica Bank-California. The
loan bears interest at the bank's LIBOR-Rate plus 2.15% (7.56%) at October 29,
1999, or at our option, at the bank's reference rate. In May 1999, we issued
notes payable to our shareholders in the total amount of $2,540,598. These notes
bear interest at 10%. Under our current policies, we do not use interest rate
derivative instruments to manage exposure to interest rate changes. A
hypothetical 100 basis point adverse move in interest rates would have increased
interest expense by $2,441 and $13,513 and decreased net income by $2,404 and
$13,311 for the year ended December 31, 1998 and the six months ended June 30,
1999, respectively.

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<PAGE> 34

BUSINESS

OVERVIEW

We are an Internet wholesale supplier and discount retailer of computers
and peripherals to businesses, resellers and consumers. We operate two channels
of distribution: www.evertek.com, our business-to-business channel that sells to
computer resellers worldwide, and www.compgeeks.com, our business-to-consumer
channel. Our compgeeks.com division sells to end-users both through our own Web
site and through Internet auction sites such as ONSALE, Inc. Our Web sites allow
users to view detailed product information, select shipping methods and track
orders electronically. Our customer base has grown substantially since 1994
largely through word-of-mouth.

INDUSTRY OVERVIEW

GROWTH OF THE INTERNET.

The Internet is an increasingly significant global medium for
communication, information and commerce. International Data Corporation, a
market research firm, has estimated that in 1999 the number of Internet users
will rise by 38% to 196 million users worldwide from 142 million users in 1998,
and it anticipates that the number will grow to approximately 503 million by end
of 2003. We believe that a number of factors have fueled the growth in Internet
usage and Web commerce:

- a large and growing installed base of PCs in the workplace and home;

- advances in the performance and speed of PCs and modems;

- improvements in network infrastructure;

- easier and cheaper access to the Internet; and

- increased awareness of, and comfort with, the Internet.

GROWTH OF ELECTRONIC COMMERCE.

IDC estimates that the total value of goods and services purchased over the
Internet will more than double to $111 billion in 1999 and grow to approximately
$730 billion by the end of 2002. We believe that our target market of consumers,
small and home offices and small retailers represents an attractive and rapidly
growing segment of the electronic commerce industry. Jupiter Communications
expects that domestic online consumer purchases of goods, excluding cars and
real estate, and travel services will grow from an estimated $3.0 billion in
1997 to approximately $41.6 billion by 2002. According to Jupiter, the single
largest domestic Web retail opportunity for the consumer and small office/home
office market is online sales of computer products, including hardware, software
and consumer electronics. Jupiter also estimates that by 2002 the online
consumer market for computer hardware, software and consumer electronics will
reach approximately $9.6 billion in the United States alone, compared to
estimated domestic online markets for books, music and toys of $3.6 billion,
$1.5 billion and $0.5 billion, respectively.

COMPUTER AND PERIPHERALS INDUSTRY.

Computers and peripherals are products that are ideally suited for sale
over the Internet. Consumers purchasing these types of products are typically
computer owners. According to IDC, worldwide PC shipments were over 103 million
units in 1998 and are expected to grow to over 118 million by 2000. The U.S. end
market for computer

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<PAGE> 35

hardware and peripherals is estimated by IDC to grow from approximately $86.3
billion in 1997 to $112.7 billion in 2001.

The computer peripherals market encompasses a wide variety of items
including CD-ROM drives, modems, video cards, scanners and hard drives. Dealers
sell peripherals to both computer buyers who create their own computer systems
and to buyers who wish to add functionality to their computers. As computer
technology has developed, the number of types of computer peripherals has
expanded dramatically and we expect this trend to continue. Broad new
technologies, including multimedia, have yielded new types of peripherals such
as scanners, sound cards, video cards and speakers. In addition, the maturation
of the computer industry has increased the number and range of peripherals
designed for specialized uses such as video editing and Internet telephony.

The computer peripherals industry includes several well-known brands,
including Creative Labs, Diamond Multimedia, Hewlett-Packard, IBM and Logitech,
as well as many small manufacturers. These manufacturers sell directly to the
end-user and through many channels, including to distributors, large retail
chains and original equipment manufacturers.

THE COMPGEEKS OPPORTUNITY

One of the central challenges to computer and peripheral manufacturers is
the high speed with which their current inventory becomes excess inventory:
today's leading-edge model is tomorrow's end-of-life product. As the
concept-to-market cycle time of a product is compressed, managing inventory
becomes increasingly difficult. Nearly every manufacturer in the computer and
peripheral industry periodically has excess inventory.

While computer and peripheral manufacturers typically have well established
distribution models for their current products, there is no common industry
approach for disposing of excess inventory. Manufacturers currently use the
following methods, among others:

- Sell through the Internet or a physical outlet store. Many companies,
including Dell, Compaq and Gateway, have Internet or physical outlet
stores. These stores typically are limited in the types of product they
can sell. Items must be made retail ready, which is not a common
attribute of excess inventory.

- Make a one-time sale to a large superstore or mass merchandiser. This
can be challenging for a manufacturer because of conflicts with their
existing distribution channels, which can be limited to selling current
models.

- Sell to Internet auction companies. Auction companies generally do not
purchase in large quantities and products sold through this channel must
be retail ready.

- Sell to brokers. A broker will typically not take possession of the
product and will often sell into manufacturers' existing channels.

These methods have usually proven unsatisfactory. Few companies have the
relationships or methodology to buy and sell large lots of excess inventory or
specialized items. We believe manufacturers have a strong interest in using a
single channel that can quickly and effectively dispose of large and varied lots
of merchandise without affecting their traditional sales channels.

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<PAGE> 36

THE COMPGEEKS SOLUTION

We efficiently acquire and resell excess, close-out and refurbished
computers and peripherals, and provide our suppliers with a much-needed
alternative distribution channel. Our strong and long-standing relationships
with suppliers and our diverse distribution channels allow us to have a
comprehensive understanding of the supply and demand characteristics of our
industry. By selectively purchasing large lots and efficiently allocating our
merchandise to our distribution channels, we provide our customers with both low
prices and in-demand products. To date we have accomplished the following:

- Developed expertise in procuring excess inventory. Over the last nine
years, we have developed relationships worldwide with many of the top
computer and peripheral manufacturers including Compaq, Creative Labs,
Dell, Gateway, IBM, Intel and Logitech. We have developed these
relationships through repeated transactions, although we do not have any
written agreements with these manufacturers, other than our surplus PC
reseller agreement with IBM. We generally buy large lots of excess or
niche items and effectively sell them into the most appropriate market.
We believe we are recognized within the industry as a trusted and
reliable buyer and reseller of these products.

- Created an efficient wholesale distribution outlet. As of June 30, 1999,
our wholesale division served approximately 4,000 accounts, including
computer dealers and other Internet resellers. The average order size of
these customers is approximately $1,300. All products listed on our site
are in stock in our warehouse and available for immediate shipment.
Orders placed by 2:00 p.m. are shipped on the same day. Electronic
SelfServe(sm), our proprietary Web-based software system, allows
customers to interact with us exclusively on the Internet. In the first
six months of 1999, we received over 140 wholesale orders per business
day.

- Introduced a discount retail outlet. Our discount retail division, which
is entering its fourth year of operation, has at least doubled its sales
each year. In 1998, this division processed approximately 163,000 orders.
The number of our customers grew from 53,000 at December 31, 1997 to
137,000 at December 31, 1998. At June 30, 1999, we had approximately
180,000 customers. Through our discount retail division, we sell products
directly to end-users, either through our Web site or through auction Web
sites such as ONSALE. All products listed on our site are in stock in our
warehouse and available for immediate shipment. Orders placed by noon are
shipped on the same day and over 90% of our orders are shipped within 24
hours. Our real-time, automated database reduces the risk of overselling
products.

THE COMPGEEKS STRATEGY

Our objective is to be the leading Internet wholesale supplier and discount
retailer of computers and peripherals. Our business strategy includes the
following key elements:

- Capitalize on our experience and varied sales channels. We intend to
capitalize on our knowledge of the market and our experience to continue
to build strong product sourcing opportunities and relationships. We
believe our multiple sales channels allow us to buy types and quantities
of merchandise that exceed the sales capacity of our direct competitors,
allowing us to generally receive larger price discounts. Additionally, we
use information gathered from our sourcing relationships to help us

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predict future supply and demand which in turn helps us manage our
pricing and sales-channel allocation strategies.

- Increase wholesale business penetration. We estimate that there are over
100,000 potential wholesale customers in the United States alone. As of
June 30, 1999, we had approximately 4,000 wholesale customers. We plan to
expand our customer base through an aggressive marketing campaign. While
in 1998 substantially all of our wholesale business sales were domestic,
we believe we will expand our international sales dramatically.

- Increase market awareness of our retail site. We believe that market
awareness is critical to attracting suppliers and customers. We intend to
implement a national print, radio, television and Internet advertising
campaign after this offering to promote our www.compgeeks.com site and
build brand identity. We plan to expand strategic relationships using
sites popular with our target market, and we will continue to market to
our existing customers via our subscriber-only e-mail list, among other
methods.

- Broaden our existing product line. We plan to increase the number of
different products we sell in both our wholesale and discount retail
divisions. Our suppliers consistently have inventory available that
exceeds our purchasing power. As of June 30, 1999, we had approximately
500 unique items in our inventory, and in 1998 we sold over 2,300 unique
items. We believe that increasing the number of unique products we sell
will expand both our wholesale and retail customer bases.

- Expand and strengthen strategic relationships with suppliers. Our
ability to attract, secure and obtain large quantities of merchandise is
key to our success and we plan to continue developing relationships with
suppliers. We have long-standing relationships with many of the major
computer and peripheral manufacturers, such as Compaq, Creative Labs,
Dell, Gateway, IBM, Intel and Logitech. We seek to be our suppliers'
preferred channel for liquidating excess merchandise. We believe our
unobtrusive sales process makes us a single convenient channel for
suppliers to liquidate large volumes of merchandise.

- Use technology to expand and enhance our business. We intend to use our
electronic commerce platform to enhance our service offerings and take
advantage of the unique characteristics of online retailing. To date, we
have developed proprietary technologies and implemented systems to
support secure and reliable online commerce in an intuitive, easy-to-use
format. We have also developed a real-time, automated database that makes
inventory adjustments and reduces the likelihood of overselling. We
intend to enhance our Web sites and improve our customers' online
shopping experience. We also intend to use technology to lower
transaction costs by automating some customer service functions and
enhancing the efficiency of relationships with our suppliers.

- Further develop our private label products. GeekKits(TM), our private
label, build-your-own computer systems, consist of unassembled compatible
components from which a user can construct a fully operational computer.
We intend to offer multiple GeekKit product lines geared to specific
segments including students, small businesses and gamers. We believe
GeekKits allow us to increase our average ticket price and distribute
multiple items in a single sale.

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PRODUCTS

Computers and peripherals are products that are ideally suited for sale
over the Internet since consumers purchasing these types of products are
typically computer owners. We offer a broad array of computers and peripherals.
The following is a list of the product types that we typically carry:

- Adapters

- Add-On Cards

- CD-ROM Drives

- Central Processing Units

- Computer Cables

- Computer Cases

- Computer Speakers

- Computer Systems

- CPU Cooling Fans

- Digital Still and Motion Cameras

- Hard Drives

- Keyboards

- Memory Modules and Chips

- Modems

- Monitors

- Motherboards

- Multimedia Kits

- Networking Products

- Notebook Computer Accessories

- Pointing Devices

- Power Supplies

- Printers

- Removable Storage

- Scanners

- Sound Cards

- Video Cards

We also sell GeekKits, our private label, build-your-own computer systems
that include from five to over 14 individual components. These kits include a
motherboard, case and power supply, and may include a floppy drive, hard-drive,
CD-ROM and a modem or other components depending on the complexity of the
system. The components in each system are compatible and work together as a
system. Our GeekKit line is aimed at the "computer savvy" customer who wants to
build his or her own system.

PRODUCT SOURCING

Most computer and peripheral companies generate excess inventory. These
manufacturers seek alternative distribution channels to dispose of their excess
inventory that do not conflict with their existing channels. We can efficiently
and unobtrusively distribute products through both our wholesale and discount
retail channels. Additionally, our multiple distribution channels enable us to
purchase products in larger quantities and at lower prices.

Over the past several years we have developed contacts worldwide at many of
the top computer and peripheral manufacturers. We obtain our merchandise
directly from computer and peripheral manufacturers and indirectly through other
vendors such as retailers and distributors. We source our products from over 200
suppliers. In 1998 no single supplier accounted for more than 10% of our
purchases. Since merchandise availability can be unpredictable, a strong base of
supplier relationships is important to our success. We believe we have
substantial access to additional sources of excess merchandise and are in a
position to build on our existing relationships and add new suppliers to
increase the breadth and depth of our product line. As a result, we maintain
regular

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contact with our suppliers to learn when new merchandise will become available,
often well in advance of others in the industry.

We strive to be flexible and capitalize on opportunities as they are
presented to us. We purchase our products through either direct price
negotiations or through a formal bidding process amongst a select group of
pre-qualified buyers. We have successfully purchased products through both of
these methods because:

- we have direct relationships with many of the top computer and peripheral
manufacturers;

- our experience and historical sales data help us understand the market;

- we can conclude a purchase and wire funds in a manner of hours;

- we can purchase large quantities of merchandise; and

- we can purchase large lots consisting of multiple product lines.

Part of our appeal to vendors seeking to dispose of excess inventory is our
ability to successfully complete production of, package, and re-sell
semi-finished goods. We use various methods to do this including re-painting,
metal stamping, producing custom cables and wire harnesses, and fabricating
entire subassemblies. Our history shows that this "throw-away" inventory
generates significant margins once completed. Similarly, we add value to
"un-sellable" merchandise by creatively combining disparate parts to produce
packages which are more valuable as a bundle than as individual components.

DISTRIBUTION

We stock and ship all of the products that we sell. We list our inventory
online using a real-time, automated database. All products we display are in
stock and ready to ship. We do all order processing and fulfillment in-house,
giving us the ability to regularly meet our goal of shipping 90% of orders
within 24 hours of receipt or by the end of the next business day.

WHOLESALE CHANNEL.

Our wholesale division has supplied computers and peripherals to qualified
computer resellers since 1990. As of June 30, 1999, we had approximately 4,000
active accounts. During the first six months of 1999, we averaged over 130
wholesale orders per day with an average order value of $1,400. International
sales for 1998 accounted for approximately 5% of our wholesale revenues, and we
plan to increase this percentage by devoting more efforts to international
distribution.

This division began Internet-based sales in 1995 through our Web site
www.evertek.com, and in the first six months of 1999 approximately 62% of our
wholesale orders were placed on the Internet. We have a direct sales force that
caters to our large strategic accounts. In early 1997, we launched Electronic
SelfServeSM, our proprietary Web-based software system that allows customers to
interact with us exclusively on the Internet. Some of its innovative features
are:

- Product display. This feature displays pictures, quantities, technical
specifications, weights and dimensions for everything we sell. Customers
can see exact in-stock quantities that are presented in real-time, 24
hours a day.

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- Online order entry. Customers can select from several methods of
shipment and payment and receive automatic volume discounts. We use
secure socket layer technology for securing credit card information.

- Online Order Tracking. We automatically link to the UPS and FedEx
Internet sites, so our customers can easily track their orders.

- Automated Returns. We supply warranty service online. Customers can
obtain return authorization numbers and receive instructions on return
procedures online.

- Order History. Every order placed by our customers since January 1997 is
online and available for display online. Customers can also see technical
specifications, pictures and other general information about their
purchases.

- Back End Management. Electronic SelfServe allows for the real-time
addition of inventory, editing and viewing of customer product and
shipping information and general management tools.

We also sell our merchandise through our Internet wholesale auction site,
www.wholesaleauction.com. This site specifically deals in excess and obsolete
inventory that we would otherwise have difficulty organizing and selling. This
site typically distributes product in lots purchased by the pallet, odds and
ends and non-working inventory.

DISCOUNT RETAIL CHANNEL.

Our discount retail division has been selling computers and peripherals to
retail customers on the Internet since 1996. Nearly 98% of our sales in this
division are over the Internet. We currently service our retail customers
through our Web site www.compgeeks.com and also supply product through third
party auction sites including ONSALE, FirstAuction, Amazon and eBay.

Our discount retail site carries a wider product selection than our
wholesale site and caters to the price-conscious computer user. During the six
months ended June 30, 1999, we averaged over 750 retail orders per business day
with an average order value of over $90 per invoice. Substantially all of our
retail sales to date have been domestic. This site offers an easy, secure and
desirable place to shop online. We provide a convenient, easy-to-use "shopping
cart" interface which features the following:

- posted inventory linked to a real-time database;

- online order tracking;

- data encryption for security;

- downloadable software device drivers; and

- the ability to contact us for customer service or technical support
directly from our Web site.

As part of our discount retail Web site expansion and enhancement, we
intend to develop a series of "micro-stores," Web sites targeted to specific
niche markets. We believe this will increase traffic on and revenue from our
primary retail Web sites as people become interested in learning what other
products we carry. Additionally, we feel that it will increase unit-sales of
inventory as we become known for providing merchandise desired by specific
communities of interest. These community sites could include product categories
we already have, as well as additional specialty categories.

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We have an agreement with a leading Internet auction site, ONSALE. We have
agreed to provide products for ONSALE's auction and to fulfill orders entered
through ONSALE, while ONSALE manages the auction process. ONSALE pays us the
actual merchandise selling price and shipping charges, less a commission and any
deductions for merchandise returns. Our discount retail division derives a
significant percentage of its annual sales from ONSALE. Our sales through ONSALE
included a cross section of all of our products sold in each of the three years.
Generally, we select products for sale through ONSALE when we have quantities
that we believe are in excess of the demand created through our own web sites.

SALES AND MARKETING

We sell to consumers as well as to computer retailers and resellers. To
achieve our objective of becoming the leading Internet wholesale supplier and
discount retailer of computers and peripherals, we are developing a marketing
strategy in order to strengthen our brand name and increase customer traffic to
our Web sites.

Advertising. We have taken a disciplined and selective approach in our
advertising strategy that primarily considers the costs of customer acquisition.
We attempt to maximize the return from promotional expenditures by choosing
advertising media based on the cost relative to the likely audience and ability
to generate increased traffic for our Web sites. To date, our marketing efforts
have been limited to word-of-mouth, radio, postcards and magazines. We intend to
significantly upgrade our marketing efforts with national print, radio,
television and Internet advertisements, product giveaways and the implementation
of an affiliate program.

Customer Electronic Mail Broadcasts. We actively market to our base of
customers using e-mail broadcasts. We had over 18,000 registrants at June 30,
1999. We currently send more than 110,000 e-mail messages each month announcing
new items at our Web sites, special products, site changes and new features. We
have a strict policy of sending only solicited e-mail, and a customer can remove
his or her name from our mailing list at any time.

Account Managers. While we expect Internet sales to account for an
increasing percentage of our overall sales, we recognize the importance of
having account managers for key accounts of our wholesale division. Our key
accounts purchase inventory in very large quantities, generally 1,000 units and
above, and require discounts from our normal prices. Account managers are
necessary to help us understand what our customers require and how to continue
to earn their business. Our retail division also employs account managers for
repeat customers. We intend to add to our sales force as we grow.

ORDER FULFILLMENT

We obtain products from our supplier network shortly before the products
are listed for sale on our Web sites. All products are held in inventory at our
distribution facilities and shipped directly to our customers. The product
fulfillment process, from receipt of products through shipment, is largely
automated, enabling us to capture real-time data on inventory receiving,
shipping and stock levels. Orders placed by 2:00 p.m. on our wholesale site, and
noon on our compgeeks.com site are shipped the same day. Approximately 90% of
the products shipped from our warehouses are shipped within 24 hours or by the
end of the next business day after the order is received, and our tight controls
have historically kept shipping errors at negligible levels. We believe that the
speed and

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accuracy of our order fulfillment process reinforces and enhances our customers'
overall purchase experience.

CUSTOMER SERVICE AND QUALITY CONTROL

We offer a one year warranty on most items we sell. While we do not always
receive a full warranty from our suppliers, we generally will, at our own
expense, extend a warranty to our customers to provide for the replacement or
upgrade of a product or a refund of the purchase price, at our option.

Wholesale customers may return items that are not to their satisfaction in
the first 48 hours after receipt. After this period, we only accept defective
items for warranty exchange.

Our discount retail division may be contacted by phone, fax, or e-mail.
Tracking information is also available from our Web site, 24 hours a day, 7 days
a week. While we try to provide as much automated, self-service customer support
as possible in the form of downloadable documentation, FAQ lists, and drivers,
live technical support and return authorization assistance is available via
telephone.

We also perform the following services for suppliers and customers:

- drop-shipping services;

- order fulfillment services;

- "kit assembly" services;

- re-labeling supplier's products under our own brand name; and

- technical support.

TECHNOLOGY

We believe that automation is one of the keys to our success. We
selectively use outside consultants and contractors for custom software design
to quickly and efficiently automate tedious, time-consuming processes. As we
grow, we will continue to automate our procedures to increase our efficiency and
order-processing capacity. We have adequate technological infrastructure to
handle our current business and expect to scale this infrastructure as our
business grows.

We have implemented an array of site management, customer interaction,
transaction-processing and fulfillment services and systems using a combination
of our own proprietary technologies and third-party technology. Our current
strategy is to focus our resources on expansion and enhancement of our existing
systems and to license commercially developed technology where available and
appropriate. We use a set of software applications for the following:

- accepting and validating customer orders,

- organizing, placing and managing orders with suppliers,

- managing and assigning inventory to customer orders,

- generating distribution processing instructions,

- managing shipment of products to customers and

- managing and tracking customer orders and account information.

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We employ a set of software solutions for sending broadcast e-mail messages
to customers on a frequent basis. This software extracts e-mail addresses from
our subscriber-only mailing list and sends messages to the designated recipients
as well as automatically servicing requests from customers to be added to or
removed from our mailing list.

Systems administrators and network managers monitor and control our Web
sites, transaction processing systems and network operations. The continued,
uninterrupted operation of our Web sites and transaction-processing systems is
essential to our business and it is the duty of our site operations staff to
ensure, to the greatest extent possible, its reliability, availability, and
security. We contract the services of an Internet service provider to supply our
connectivity to the Internet over dedicated digital links.

We believe our information technology infrastructure is scalable. With the
relatively simple installation of additional servers and software, we can
increase the amount of traffic our Web sites are able to handle without upgrades
to network infrastructure. Client/server hardware and software deployed for
in-house use is currently more than adequate and we can upgrade it as required
with minimal expense.

COMPETITION

Selling computers and peripherals over the Internet is a rapidly evolving
and intensely competitive industry. Current and new competitors can launch new
electronic commerce Web sites at relatively low cost. We expect competition in
electronic commerce to increase as traditional retailers, suppliers,
manufacturers and direct marketers of computer products enter this market
segment. Increased competition or our failure to compete successfully is likely
to result in price reductions, fewer customer orders, reduced gross margins,
increased marketing costs, loss of market share, or any combination of these
problems.

We currently compete with a variety of companies that sell personal
computer products and other consumer goods through a variety of sales channels
to customers. These competitors include:

- companies with electronic commerce sites including Buy.com Inc., Cyberian
Outpost, Inc., and Egghead.com;

- companies offering Internet auctions, such as ONSALE, Inc., uBid, Inc.,
and Internet Shopping Network, Inc., the FirstAuction site;

- catalog-based merchants with a significant electronic commerce offering,
including CDW Computers Centers, Inc., Multiple Zones International, Inc.
and Creative Computers, Inc.;

- traditional retailers of personal computer products such as Fry's
Electronics and CompUSA, Inc.;

- manufacturers including Dell Computer Corporation and Gateway, Inc. that
sell directly to consumers, including over the Internet; and

- mass merchandisers such as Wal-Mart Stores, Inc., Costco Wholesale
Corporation and Best Buy Co., Inc. that primarily sell through
traditional retail channels but also sell over the Internet and office
products retailers such as Office Depot Inc. and Staples, Inc. that
primarily sell through traditional retail channels but also sell over the
Internet.

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Current and potential competitors have established or may establish
cooperative relationships among themselves or directly with suppliers to obtain
exclusive or co-exclusive sources of merchandise. New competitors or
relationships among competitors, or among competitors and suppliers, may emerge
and rapidly acquire market share. For example, Dell Computer Corporation and
Amazon.com, Inc. recently announced that they have agreed to provide links from
their Web sites to new Web pages that advertise their respective products. Also,
manufacturers might elect to sell or liquidate their products directly over the
Internet.

In general, we have less competition in the used, refurbished and obsolete
product segments. In order to sell such goods, a company needs to tap into
markets that are not readily apparent. We do not anticipate a great deal of
competition for these segments.

INTELLECTUAL PROPERTY

Electronic SelfServe and the Electronic SelfServe logo are registered in
the United States Patent and Trademark Office as our service marks or
trademarks. Compgeeks.com, Geekbert, GeekKit, Genica, Don't be a dork . . . shop
at the Geeks!, Cyber SelfServe and Internet SelfServe are our trademarks or
service marks. We also do business under the trade names of Evertek and Computer
Geeks Discount Outlet. We believe the strength of our trademarks and service
marks benefit our business and we intend to continue to protect and promote our
registered and common law trademarks and service marks.

SHARE EXCHANGE AND S CORPORATION STATUS

On May 28, 1999, we issued 14,572,861 shares of our common stock in
exchange for all of the outstanding shares of compgeeks.com, Evertek and Evertek
Trading. Evertek and compgeeks.com had previously been treated for federal and
state income tax purposes as S corporations under subchapter S of the Internal
Revenue Code of 1986, as amended. As a result of this tax status, their
shareholders, rather than compgeeks.com or Evertek, have been taxed directly on
the earnings of these entities for federal and state income tax purposes. We
will continue to be taxed as an S corporation until the closing of this
offering, at which time we will be taxed at the applicable C Corporation federal
and state income tax rates.

Prior to the share exchange, compgeeks.com and Evertek issued promissory
notes in an aggregate amount of approximately $2.6 million to their founders for
the retained earnings of these companies which had not been distributed, but on
which the founders had already paid personal income tax. We will use a portion
of the proceeds from this offering to repay these outstanding debt obligations
of compgeeks.com and Evertek. We will distribute all of our retained earnings
through the closing of this offering in excess of $500,000 to our founders.
Please see "Use of Proceeds."

EMPLOYEES

As of June 30, 1999, we had approximately 65 full-time employees. We have
never had a work stoppage and, as of the date of this prospectus, no personnel
are represented under collective bargaining agreements. We consider our employee
relations to be good.

FACILITIES

Our principal office and fulfillment center for our discount retail
division is located in a 43,700 square foot facility located at 2370 Oak Ridge
Way, Vista, California. The principal office and fulfillment center for our
wholesale division is located in a

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25,000 square foot facility located at 2604 Temple Heights Drive, Oceanside,
California. We believe our current facilities will be adequate to meet our needs
for the foreseeable future.

LEGAL PROCEEDINGS

As of the date of this prospectus, we are not a party to any material legal
proceedings.

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MANAGEMENT
EXECUTIVE OFFICERS AND DIRECTORS

Set forth below is the name, age, position and a brief account of the
business experience of each of our executive officers and directors.

<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
Frank Segler............. 33 Chairman of the Board and Chief
Executive Officer
Scott Kusel.............. 34 President, Chief Operating Officer
and Director
William C. Bousema....... 48 Vice President, Chief Financial
Officer and Secretary
Doug Allen............... 37 Vice President of Marketing
Greg Hansen.............. 34 Chief Information Officer, General
Counsel, and Director
Christopher Herzog....... 31 Vice President of Electronic Commerce
Development
Randy Segler............. 30 Vice President of International
Operations
Patrick Thompson......... 33 Vice President and Controller
Robert K. Green(1)(2).... 37 Director
Stephen G. Holmes(1)(2).. 53 Director
</TABLE>

- -------------------------
(1) Member of the compensation committee.

(2) Member of the audit committee.

Frank Segler has served as our Chief Executive Officer and Chairman of the
Board since May 1999. Mr. Segler has been President of Evertek since July 1992.
Mr. Segler has been with compgeeks.com since January 1996 and served as its
President from May 1996 to December 1996 and as its Chairman of the Board since
December 1996. Mr. Segler has operated Evertek since 1990. Mr. Segler is Randy
Segler's brother.

Scott Kusel has served as our President, Chief Operating Officer and one of
our directors since May 1999. Since January 1996, Mr. Kusel has been with
compgeeks.com and has served as its Secretary since May 1996 and as its
President since December 1996. From June 1989 until January 1996, Mr. Kusel was
an owner of and served as the sales and purchasing manager at Optional
Enterprises, a private storage device company.

William C. Bousema has served as our Vice President, Chief Financial
Officer and Secretary since May 1999. From December 1996 until April 1999, Mr.
Bousema was a Director at Management Resource Center, Inc., a private investment
banking advisory services firm. From February 1995 to December 1996, Mr. Bousema
was Chief Financial Officer of Aquatec Water Systems, Inc., a manufacturer and
exporter of pumps and electronic control devices. Previously, Mr. Bousema was a
Vice President of Finance for The Irvine Company and was employed by Arthur
Andersen LLP. Mr. Bousema has served on several boards and currently serves as a
director of Second Harvest Food Bank of Orange County. Mr. Bousema is a
certified public accountant.

Doug Allen has served as our Vice President of Marketing since May 1999.
Mr. Allen has been sales manager of Evertek since December 1993.

Greg Hansen has served as our Chief Information Officer, General Counsel
and one of our directors since June 1999. From April 1997 to May 1999, Mr.
Hansen was an associate at Best Best & Krieger LLP. From November 1994 to March
1997, he was an

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associate at Chapin, Fleming, McNitt, Shea & Carter (formerly Chapin, Fleming &
Winet), and from May 1994 to November 1994 he was a senior law clerk at that
firm.

Christopher Herzog has served as our Vice President of Electronic Commerce
Development since May 1999. Mr. Herzog has acted in various capacities since
joining compgeeks.com at its inception in May 1996, most recently as the
Information Technology and Electronic Marketing Director. From February 1995 to
February 1996, he was a retail sales and technical support agent for Mac
Rentals, Inc., a computer retailer and leasing company. Mr. Herzog has over 13
years of professional experience in the computer industry.

Randy Segler has served as our Vice President of International Operations
since May 1999. Mr. Segler has been managing director of Evertek Trading Limited
since August 1996 and was sales manager from September 1995 to August 1996. From
January 1993 to September 1995, Mr. Segler was involved with real estate
investments. Mr. Segler is Frank Segler's brother.

Patrick Thompson has served as our Vice President and Controller since May
1999. Mr. Thompson has been an employee of Evertek since October 1995, and has
served as General Manager of Evertek since November 1997. From 1993 to October
1995 Mr. Thompson was a controller at Vision Technologies, a computer systems
integrator.

Robert K. Green has served as one of our directors since May 1999. Mr.
Green is the President and Chief Operating Officer of UtiliCorp United Inc., an
international energy and services company, since February 1996 and earlier
served as UtiliCorp's Managing Executive Vice President from January 1993 to
February 1996. He has held several executive positions at UtiliCorp's Missouri
Public Service division since 1988, including two years as President. Mr. Green
is Co-Chairman of the Kansas City Area Development Counsel, President of the
Heart of America Council and the Boy Scouts of America. Mr. Green also serves as
a director of UMB Bank, n.a. and Utilicorp United Inc.

Stephen G. Holmes has served as one of our directors since May 1999. Mr.
Holmes has been a principal of Global Capital Markets, Incorporated, a financial
intermediary that provides merger and acquisition services and access to
corporate debt and equity capital, since October 1995. From February 1992 to
October 1995, Mr. Holmes was the Chief Financial Officer and a director of
AmeriQuest Technologies, Inc., a consumer products distribution company. Mr.
Holmes also served as a partner of Arthur Andersen LLP prior to joining
AmeriQuest.

CLASSES OF THE BOARD

Our board currently has four members. Under our certificate of
incorporation and bylaws, beginning at our next annual meeting of stockholders,
we will divide our board into three classes of directors serving staggered
three-year terms, with one class of directors elected at each annual meeting of
stockholders.

BOARD COMMITTEES

The board established its audit committee in May 1999. It reviews, acts on
and reports to the board of directors on various auditing and accounting
matters, including selecting our auditors, the scope of the annual audit, fees
to be paid to the auditors, the performance of our independent auditors and our
accounting practices. The members of the audit committee are Messrs. Green and
Holmes.

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The board established a compensation committee in May 1999. The
compensation committee recommends, reviews and oversees the salaries, benefits
and stock option plans for our employees, consultants, directors and other
individuals compensated by us. The compensation committee also administers our
compensation plans. The members of the compensation committee are Messrs. Green
and Holmes.

DIRECTOR COMPENSATION

We do not pay directors cash compensation, however, we reimburse them for
the reasonable expenses of attending meetings of the board of directors or
committees. Under our 1999 Stock Incentive Plan, non-employee members of the
board of directors who join the board after the completion of this offering will
receive an option to purchase 12,345 shares of common stock on the date the
individual joins the board, so long as the individual has not previously been
employed by us or any parent or subsidiary corporation. Please see "-- Benefit
Plans."

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

Our compensation committee currently consists of Messrs. Green and Holmes.
Neither member of the compensation committee has been an officer or employee of
us at any time. None of our executive officers serves as a member of the board
of directors or compensation committee of any other company that has one or more
executive officers serving as a member of our board of directors or compensation
committee. Prior to the formation of the compensation committee in May 1999, the
board of directors as a whole made decisions relating to compensation of our
executive officers.

EMPLOYMENT AND SEVERANCE ARRANGEMENTS

All of our current employees have entered into agreements with us which
contain restrictions and covenants relating to the protection of our
confidential information, the assignment of inventions, and restrictions on
competition and soliciting our clients, employees, or independent contractors.
We have no employment agreements with any of our employees.

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<PAGE> 49

EXECUTIVE COMPENSATION

The following table shows all compensation received during the year ended
December 31, 1998 by our Chief Executive Officer and by our other executive
officers whose salary and bonus exceeded $100,000 in 1998 for services rendered
in all capacities to us during 1998.

SUMMARY COMPENSATION TABLE

<TABLE>
<CAPTION>
ANNUAL
COMPENSATION
------------ OTHER
NAME AND PRINCIPAL POSITION SALARY COMPENSATION
--------------------------- ------------ ------------
<S> <C> <C>
Frank Segler....................................... $104,000 $ 0
Chairman of the Board and Chief Executive Officer
Scott Kusel........................................ $120,000 $ 6,000(1)
President, Chief Operating Officer and Director
Doug Allen......................................... 0 $210,000(2)
Vice President of Marketing
</TABLE>

- -------------------------
(1) Mr. Kusel received an automobile lease allowance of $6,000 for 1998.

(2) Based on sales commissions for 1998 sales.

William C. Bousema became Vice President, Chief Financial Officer and
Secretary in May 1999 and is compensated at an annual base salary of $120,000.
Greg Hansen became Chief Information Officer and General Counsel in June 1999.
Mr. Hansen is compensated at an annual base salary of $150,000 and received a
$114,000 signing bonus.

OPTION GRANTS

There were no options granted in 1998 to our executive officers.

BENEFIT PLANS

1999 STOCK INCENTIVE PLAN.

Introduction. The CompGeeks 1999 Stock Incentive Plan became effective
when adopted by the board in May 1999. The stockholders approved the plan in May
1999.

Share Reserve. 1,646,000 shares of common stock have been authorized for
issuance under the 1999 Stock Incentive Plan. The share reserve will
automatically increase on the first trading day in January each calendar year,
beginning January 1, 2000, by an amount equal to 1.5% of the total number of
shares of common stock outstanding on the last trading day in December in the
preceding calendar year, but in no event will this annual increase exceed
246,900 shares. In addition, no participant in the 1999 Stock Incentive Plan can
receive stock options, separately exercisable stock appreciation rights and
direct stock issuances for more than 411,500 shares of common stock in total per
calendar year.

Programs. The 1999 Stock Incentive Plan is divided into five separate
programs:

45
<PAGE> 50

- the salary investment option grant program which may, at the plan
administrator's discretion, be activated for one or more calendar years
and, if so activated, will allow executive officers and other highly
compensated employees to use a portion of their base salary to acquire
special below-market stock options;

- the director fee option grant program which may, at the plan
administrator's discretion, be activated for one or more calendar years
and, if so activated, will allow non-employee board members to use a
portion of the annual retainer fee otherwise payable to them in cash each
year to acquire special below-market options.

Administration. Our compensation committee will administer the
discretionary option grant program and the stock issuance program. This
committee will determine which eligible individuals receive options or stock
issuances under those programs, the time or times when these option grants or
stock issuances are to be made, the number of shares subject to each grant or
issuance, the status of any granted option as either an incentive stock option
or a non-statutory stock option under the Federal tax laws, the vesting schedule
to be in effect for the option grant or stock issuance and the maximum term for
which any granted option is to remain outstanding. The compensation committee
will also have the authority to select the executive officers and other highly
compensated employees who may participate in the salary investment option grant
program in the event that program is activated for one or more calendar years.

Plan Features. Our 1999 Stock Incentive Plan will include the following
features:

- The holder of any options granted under the plan may pay the exercise
price in cash or in shares of common stock valued at fair market value on
the exercise date. The holder may also exercise the option through a
same-day sale program without any cash outlay by the holder.

- The compensation committee will have the authority to cancel outstanding
options under the discretionary option grant program in return for the
grant of new options for the same or different number of option shares
with an exercise price per share based on the fair market value of common
stock on the new grant date.

- The board of directors may issue stock appreciation rights under the
discretionary option grant program. These rights will provide the holders
with the election to surrender their outstanding options for an
appreciation distribution from us equal to the difference between the
fair market value of the common stock underlying the option and the
exercise price for those shares. We may make the payment in cash or in
shares of common stock.

46
<PAGE> 51

Change in Control. Our 1999 Stock Incentive Plan will include the
following change in control provisions, which may cause accelerated vesting of
outstanding option grants and stock issuances:

- In the event that we are acquired by merger or asset sale or a
board-approved sale of more than fifty percent of our stock by our
stockholders, each outstanding option under the discretionary option
grant program which is not assumed or continued by the successor
corporation will immediately become exercisable for all the option
shares, and all unvested shares will immediately vest, except to the
extent the our repurchase rights with respect to those shares are to be
assigned to the successor corporation.

- The plan administrator will have complete discretion to grant one or more
options which will become exercisable for all the option shares in the
event those options are assumed in the acquisition but the optionee's
service with us or the acquiring entity is subsequently terminated. The
vesting of outstanding shares under our 1999 Stock Incentive Plan may be
accelerated upon similar terms and conditions.

- The plan administrator may also grant options which will immediately vest
upon our acquisition, whether or not the successor corporation assumes
those options.

- The plan administrator may grant options and structure repurchase rights
so that the shares subject to those options or repurchase rights
immediately vest in connection with a successful tender offer for more
than 50% of our outstanding voting stock or a change in the majority of
our board of directors through one or more contested elections. This
accelerated vesting may occur either at the time of such transaction or
on the subsequent termination of the individual's service.

Salary Investment Option Grant Program. If the compensation committee
decides to put this program into effect for one or more calendar years, each of
our executive officers and other highly compensated employees selected for
participation may elect to reduce his or her base salary for that calendar year
by a specified dollar amount between $10,000 and $50,000. Each selected
individual who makes this election will automatically receive, on the first
trading day in January of the calendar year for which that salary reduction is
to be in effect, an option to purchase a number of shares of common stock
determined by dividing the salary reduction amount by two-thirds of the fair
market value per share of common stock on the grant date. The option will be
exercisable at a price per share equal to one-third of the fair market value of
the option shares on the grant date. As a result, the total spread on the option
shares at the time of grant, the fair market value of the option shares on the
grant date less the aggregate exercise price payable for those shares, will
equal the amount of salary invested in that option. The option will vest and
become exercisable in a series of 12 equal monthly installments over the
calendar year for which the salary reduction is in effect and will fully and
immediately vest on certain changes in the ownership or control of us.

Automatic Option Grant Program. Each member of the board of directors who
first joins the board of directors after the completion of this offering and who
has not previously been employed by us will automatically receive an option
grant for 12,345 shares on the date that person joins the board of directors.
Also, on the date of each annual stockholders meeting after the completion of
this offering, each non-employee director who is to continue to serve in that
capacity will automatically receive an option to purchase 4,115 shares of common
stock, provided that person has served on the board of directors for at least
six months.

47
<PAGE> 52

Each automatic grant will have a term of ten years, subject to earlier
termination if the optionee ceases to serve on the board of directors. The
option will be immediately exercisable for all of the option shares; however, we
may repurchase any unvested shares purchased under the option, at the exercise
price paid per share, if the optionee ceases to serve on the board of directors
prior to vesting in those shares. The shares subject to each 12,345 share
automatic option grant will vest over a three-year period in successive equal
annual installments on the individual's completion of each year of board service
over the three-year period measured from the option grant date. Each 4,115 share
automatic option grant will be fully vested at the time of grant. The shares
subject to each automatic grant will immediately vest in full on changes in
control or ownership of us or on the optionee's death or disability while a
director.

Director Fee Option Grant Program. If the board of directors puts this
program into effect in the future, then each non-employee director may elect to
use all or a portion of any annual retainer fee otherwise payable in cash to
acquire a below-market option grant. The option grant will automatically be made
on the first trading day in January in the year for which the retainer fee would
otherwise be payable in cash. The exercise price of the option will equal
one-third of the fair market value of the underlying shares on the grant date,
and the number of shares subject to the option will equal the amount of the
retainer fee applied to the program divided by two-thirds of the fair market
value per share of common stock on the grant date. As a result, the option will
be structured so that the fair market value of the option shares on the grant
date less the aggregate exercise price payable for those shares will be equal to
the portion of the retainer fee invested in that option. The option will become
exercisable in a series of 12 equal monthly installments over the calendar year
to which the election applies. However, the option will become immediately
exercisable for all the option shares on certain changes in the ownership or
control of us or on the death or disability of the optionee while serving as a
director.

Limited Stock Appreciation Rights. Limited stock appreciation rights will
automatically be included as part of each grant made under the automatic option
grant, salary investment option grant and director fee option grant programs.
The board of directors may grant limited stock appreciation rights to one or
more of our officers as part of their option grants under the discretionary
option grant program. Holders may surrender options with a limited stock
appreciation right to us only on the successful completion of a hostile tender
offer for more than 50% of our outstanding voting stock. In return for the
surrendered option, the optionee will be entitled to receive a cash distribution
from us in an amount per surrendered option share based on the highest price per
share of common stock paid in connection with the tender offer.

Amendment. The board of directors may amend or modify the 1999 Stock
Incentive Plan at any time, subject to any required stockholder approval. The
1999 Stock Incentive Plan will terminate no later than May 26, 2009.

EMPLOYMENT CONTRACTS, TERMINATION OF EMPLOYMENT AGREEMENTS AND CHANGE IN CONTROL
ARRANGEMENTS.

We do not currently have any employment agreements or severance programs in
effect with any of our executive officers named in the Summary Compensation
Table. We provide incentives such as salary, cash bonuses and option grants,
which typically vest over a four-year period, to attract and retain qualified
executives and other members of senior management.

48
<PAGE> 53

If we are acquired by merger or by selling substantially all of our assets,
each outstanding option held by some of our executive officers will
automatically vest in full on an accelerated basis, except to the extent the
successor entity assumes the options. In addition, the compensation committee as
plan administrator of the 1999 Stock Incentive Plan will have the authority to
grant options and to structure repurchase rights under that plan so that shares
subject to those options or repurchase rights will immediately vest in
connection with a change in control of us or a transfer of our assets. Vesting
will occur either at the time of a change in control or the later involuntary
termination of the optionholder's service.

49
<PAGE> 54

RELATIONSHIPS AND RELATED TRANSACTIONS

CompGeeks pays $12,600 monthly rent to Unified Holdings Trust for the
facility at 2604 Temple Heights Drive, Oceanside, California. Frank Segler is
the trustee of Unified Holdings Trust, a trust for the benefit of Mr. Segler and
other members of his family. This monthly rental payment is the same as was paid
to the previous unaffiliated third party lessor.

On May 10, 1999, we issued 10% demand promissory notes from compgeeks.com
to Frank Segler and Scott Kusel for $501,305 and $501,305, respectively, and
from Evertek to Frank Segler for $1,537,988. These notes represent payment of a
portion of the retained earnings in Evertek Computer Corporation and
compgeeks.com on which Messrs. Segler and Kusel had already paid personal income
tax. A portion of the net proceeds from this offering will be used to pay these
promissory notes.

During 1998, Evertek Trading Limited loaned $158,110 to Randy Segler. At
December 31, 1998, the balance due was $158,110. The loan had no terms and was
repaid in May 1999.

During 1998, compgeeks.com loaned $100,000 to Scott Kusel. At December 31,
1998, the balance due on the note was $88,000. The terms of the note provide for
interest commencing in April 1999 at the rate of 6%. The note is due and payable
in full in October 1999 and is secured by Mr. Kusel's residence.

50
<PAGE> 55

PRINCIPAL STOCKHOLDERS

The following table contains information with respect to the beneficial
ownership of our common stock as of June 30, 1999, and as adjusted to reflect
the sale of the shares of common stock in this offering, by:

- each person (or group of affiliated persons) who we know owns
beneficially 5% or more of our common stock,

- each of our directors,

- our executive officers listed in the Summary Compensation Table and

- all of our directors and executive officers as a group.

Except as indicated in the footnotes to this table, the persons named in
the table have sole voting and investment power over all shares of common stock
shown as beneficially owned by them. The address for those individuals for which
an address is not otherwise indicated is: 2370 Oak Ridge Way, Vista, California
92083.

<TABLE>
<CAPTION>
PERCENTAGE
BENEFICIALLY OWNED
NUMBER OF --------------------
BENEFICIALLY OWNED BEFORE AFTER
BENEFICIAL OWNER SHARES OFFERING OFFERING
- ------------------------------------------ ------------------ -------- --------
<S> <C> <C> <C>
Frank Segler(1)........................... 11,226,932 77.0% 57.4%
Scott Kusel............................... 2,502,160 17.2% 12.8%
Doug Allen(2)............................. -- * *
Greg Hansen(3)............................ * *
Randy Segler.............................. 843,769 5.8% 4.3%
19th Floor, Malaysia Building,
Wanchai, Hong Kong
Robert K. Green(4)........................ -- * *
20 West Ninth Street,
Kansas City, Missouri 64105
Stephen G. Holmes(4)...................... -- * *
19200 Von Karman Avenue,
Suite 525,
Irvine, CA 92612
All directors and executive officers as a
group (10 persons)(5)................... 14,572,861 100.0% 75.0%
</TABLE>

- -------------------------
* Less than 1% of total.

(1) Includes 8,724,772 shares beneficially owned by The Segler Family Trust, of
which Mr. Segler is a trustee.

(2) Excludes an option to purchase 23,044 shares anticipated to be granted to
Mr. Allen prior to the closing of this offering, 25% of which shall vest and
become exercisable 12 months after the closing of this offering, with the
remainder thereafter vesting and becoming exercisable in 36 equal monthly
installments.

(3) Excludes an option to purchase 40,000 shares anticipated to be granted to
Mr. Hansen prior to the closing of this offering, 50% of which shall vest
and become exercisable on May 31, 2000, with the remainder thereafter
vesting and becoming exercisable in 36 equal monthly installments.

51
<PAGE> 56

(4) Excludes an option to purchase 15,000 shares anticipated to be granted to
each of Mr. Green and Mr. Holmes prior to the closing of this offering,
33.3% of which shall vest and become exercisable 12 months after the closing
of this offering, 33.3% of which shall vest and become exercisable 24 months
after the closing of this offering, with the remainder thereafter vesting
and becoming exercisable 36 months after the closing of this offering.

(5) Excludes options to purchase an aggregate 232,548 shares anticipated to be
granted to all directors and executive officers as a group prior to or upon
the closing of this offering, a percentage of which shall vest and become
exercisable 12 months after the closing of this offering, with the remainder
thereafter vesting and becoming exercisable either in 36 equal monthly
installments or equal installments upon the 24th and 36th month after the
closing of this offering.

52
<PAGE> 57

DESCRIPTION OF SECURITIES

The following information describes our common stock and our certificate of
incorporation and bylaws as they will be in effect on the closing of this
offering. While this description includes the material terms related to our
securities, it is only a summary. You should also refer to our certificate of
incorporation and bylaws, which we have filed with the SEC as exhibits to the
registration statement of which this prospectus is a part. This description of
the common stock reflects changes to our capital structure that will take place
on the closing of this offering.

Our authorized capital stock consists of 75,000,000 shares of common stock,
par value $0.001 per share and 10,000,000 shares of preferred stock, par value
$0.001 per share.

COMMON STOCK

As of June 30, 1999, there were 14,572,861 shares of common stock
outstanding and held of record by three stockholders. Based upon the number of
shares outstanding and giving effect to the issuance of the 5,000,000 shares of
common stock in this offering, there will be 19,572,861 shares of common stock
outstanding.

Holders of common stock are entitled to one vote per share on all matters
submitted to a vote of stockholders and do not have cumulative voting rights.
Accordingly, holders of a majority of the shares of common stock entitled to
vote in any election of directors can elect all of the directors standing for
election. Holders of common stock are entitled to receive pro rata shares of
dividends, if any, declared by the board of directors out of legally available
funds. Holders of common stock have no preemptive, subscription, redemption or
conversion rights. The outstanding shares of common stock, and the shares
included in this offering, are fully paid and nonassessable.

PREFERRED STOCK

Our board of directors has the right to issue preferred stock without
further approval by our stockholders. If we issue preferred stock, its holders
may have voting rights and rights to receive distributions that are superior to
your rights as a holder of common stock. There are no shares of preferred stock
outstanding.

OPTIONS

We anticipate that as of the closing of this offering, we will grant
options to purchase a total of 492,214 shares of common stock at the per share
price of shares sold in this offering. We may also grant options to purchase up
to an additional 1,153,786 shares of common stock under our 1999 Stock Incentive
Plan. Please see "Management -- Benefit Plans" and "Shares Eligible for Future
Sale."

REGISTRATION RIGHTS

Certain individuals formerly affiliated with EVEREN Securities, Inc. will
receive warrants to purchase common stock in connection with this offering.
EVEREN Securities, Inc. is a predecessor of First Union Securities, Inc. These
warrant holders will have a limited piggyback right to require us to register
the common stock received on exercising the warrants. Please see "Underwriting"
for a description of these rights.

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<PAGE> 58

ANTI-TAKEOVER EFFECTS OF DELAWARE LAW AND OUR CERTIFICATE OF INCORPORATION AND
BYLAWS

We are subject to the provisions of Section 203 of the Delaware General
Corporation Law. With some exceptions, Section 203 prohibits a publicly held
Delaware corporation from engaging in a "business combination" with an
"interested stockholder" for a period of three years after the date of the
transaction in which the person became an interested stockholder, unless the
interested stockholder attained such status with the approval of the board of
directors or unless the business combination is approved in a prescribed manner.
A "business combination" includes mergers, asset sales and other transactions
resulting in a financial benefit to the interested stockholder. With some
exceptions, an "interested stockholder" is a person who, together with
affiliates and associates, owns, or within three years did own, 15% or more of
the corporation's voting stock. This statute could prohibit or delay the
accomplishment of mergers or other takeover or change in control attempts with
respect to us and, accordingly, may discourage attempts to acquire us.

In addition, provisions contained in our certificate and bylaws may have an
anti-takeover effect and may delay, defer or prevent a tender offer or takeover
attempt. This could discourage a potential acquiror who might otherwise be
willing to pay a premium over the market price for your shares. The provisions
will be in effect on the closing of this offering and are summarized in the
following paragraphs.

BOARD OF DIRECTORS VACANCIES. Our bylaws authorize the board of directors
to fill vacant directorships or increase the size of the board of directors.
This may deter a stockholder from removing incumbent directors and
simultaneously gaining control of the board of directors by filling the
vacancies with the stockholder's own nominees.

STAGGERED BOARD. Our bylaws divide our board into three classes. Beginning
at the next annual meeting of stockholders, some of the directors will be
elected at each annual meeting. The staggered board will discourage potential
acquirors by limiting their ability to change our board of directors.

STOCKHOLDER ACTION; SPECIAL MEETING OF STOCKHOLDERS. Our certificate
provides that stockholders cannot take action by written consent, but only at
duly called annual or special meetings of stockholders. Our bylaws further
provide that special meetings of our stockholders may be called only by the
President, Chief Executive Officer or Chairman of the board of directors or a
majority of the board of directors.

ADVANCE NOTICE REQUIREMENTS FOR STOCKHOLDER PROPOSALS AND DIRECTOR
NOMINATIONS. Our bylaws provide that stockholders seeking to bring business
before our annual meeting of stockholders, or to nominate candidates for
directors at our annual meeting of stockholders, must notify us in advance. We
must receive the notice at least 120 days before the first anniversary of the
date of our notice of the previous annual meeting of stockholders. The bylaws
also specify certain requirements for the form and content of a stockholder's
notice. These provisions may prevent stockholders from bringing matters before
our annual meeting of stockholders or from nominating candidates for directors
at our annual meeting of stockholders.

AUTHORIZED BUT UNISSUED SHARES. We can issue our authorized but unissued
shares of common stock and preferred stock without stockholder approval, subject
to certain limitations imposed by the Nasdaq National Market. We can use these
additional shares for a variety of corporate purposes, including future public
offerings to raise additional capital, corporate acquisitions and employee
benefit plans. The board's power to issue new common stock and preferred stock
could discourage an attempt to obtain control of us by means of a proxy contest,
tender offer, merger or other means.

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<PAGE> 59

LIMITATION OF LIABILITY AND INDEMNIFICATION MATTERS

Section 145 of the Delaware General Corporation Law empowers a corporation
to indemnify its directors and officers and to purchase insurance for liability
resulting from their capacity or status as directors and officers. This
provision does not limit the liability of a director for the following:

- any breach of the director's duty of loyalty to us or our stockholders;

- acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law;

- unlawful payments of dividends or unlawful stock purchases or
redemptions;

- for any transaction from which the director derived an improper personal
benefit; and

- the directors' responsibilities under some other laws, including the
Federal securities laws or state or Federal environmental laws.

Our certificate eliminates the personal liability of directors to the
fullest extent permitted by Delaware law. In addition, the certificate provides
that we may fully indemnify any officer or director from claims resulting from
the fact that he or she is or was one of our directors or officers or is or was
serving at our request as a director or officer of another enterprise. This
indemnification can cover expenses (including attorney's fees), judgments, fines
and amounts paid in settlement.

We have entered into agreements to indemnify our directors and executive
officers, in addition to the indemnification provided for in our bylaws. We
believe we must provide these benefits to attract and retain qualified directors
and executive officers. Our bylaws also permit us to secure insurance on behalf
of any officer, director, employee or other agent for any liability arising out
of his or her actions, regardless of whether Delaware law would permit
indemnification. We have applied for liability insurance for our officers and
directors.

At present, there is no pending litigation or proceeding involving any
director, officer, employee or agent which would trigger indemnification rights.
We are not aware of any threatened litigation or proceeding that may result in a
claim for such indemnification.

We have filed copies of our certificate and bylaws, and our agreement to
indemnify our officers and directors, as exhibits to the registration statement
filed with the SEC in connection with this offering. We encourage you to read
them.

TRANSFER AGENT AND REGISTRAR

The transfer agent and registrar for the common stock is U.S. Stock
Transfer Corporation.

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<PAGE> 60

SHARES ELIGIBLE FOR FUTURE SALE

The market price of our common stock could decline as a result of sales of
a large number of shares of our common stock in the market after this offering,
or the perception that those sales could occur. Those sales also might make it
more difficult for us to sell equity securities in the future at a time and
price that we deem appropriate. After this offering, we will have 19,572,861
shares of common stock outstanding. Of these shares, the 5,000,000 shares sold
in this offering are freely tradable. The holders of all remaining outstanding
shares have entered into lock-up agreements which prohibit sales into the public
market without the prior written consent of First Union Capital Markets Corp.
until 180 days from the date of this prospectus.

In general, under Rule 144, as currently in effect, a person (or persons
whose shares are required to be aggregated), including an affiliate, who has
beneficially owned shares for at least one year is entitled to sell, within any
three-month period commencing 90 days after the date of this prospectus, a
number of shares that does not exceed the greater of (1) 1% of the then
outstanding shares of common stock (approximately 195,728 shares immediately
after this offering) or (2) the average weekly trading volume in the common
stock during the four calendar weeks preceding the date on which notice of such
sale is filed, subject to certain restrictions. In addition, a person who has
not been our affiliate at any time during the 90 days preceding a sale and who
has beneficially owned the shares proposed to be sold for at least two years
would be entitled to sell those shares under Rule 144(k) without the volume
restrictions described above. If a holder acquired shares from one of our
affiliates, the holding period for the purpose of a sale under Rule 144
commences on the date of transfer from the affiliate.

On the closing of this offering, we intend to file a registration statement
to register for resale the 1,646,000 shares of common stock reserved for
issuance under our stock option plans. We expect that registration statement to
become effective immediately when filed. Shares issued on the exercise of stock
options granted under our stock option plans will be eligible for resale in the
public market from time to time subject to vesting and, in the case of some of
our options, the expiration of the lock-up agreements referred to below. We
anticipate that as of the closing of this offering we will grant options to
purchase a total of 492,214 shares of common stock at the per share price of
shares sold in this offering. At various times after 180 days from the date of
this prospectus these options will become exercisable and available for sale in
the public market.

Holders of warrants to purchase up to approximately 287,500 shares of
common stock, have a limited right to include their shares in future
registration statements relating to our securities. By exercising their
registration rights and causing a large number of shares to be registered and
sold in the public market, these holders may cause the price of the common stock
to fall. In addition, any demand to include the shares of these stockholders in
our registration statements could adversely affect our ability to raise needed
capital. Please see "Description of Securities -- Registration Rights" and
"Underwriting."

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<PAGE> 61

UNDERWRITING

Under the terms and conditions of an underwriting agreement, the
underwriters, who are represented by First Union Securities, Inc., ING Barings
LLC, C.E. Unterberg, Towbin and George K. Baum & Company, will each purchase
from us the number of shares of common stock shown below.

<TABLE>
<CAPTION>
NUMBER OF
UNDERWRITER SHARES
----------- ---------
<S> <C>
First Union Securities, Inc. ...............................
ING Barings LLC.............................................
C.E. Unterberg, Towbin......................................
George K. Baum & Company....................................
Total.............................................
========
</TABLE>

The underwriting agreement provides that the obligations of the
underwriters to purchase shares of common stock are subject to approval of
certain legal matters by their counsel and to various other conditions. Under
the terms and conditions of the underwriting agreement, if the underwriters
purchase any of the shares they must purchase and accept delivery of all of the
shares, other than those covered by the over-allotment option.

The underwriters initially will offer the shares of common stock directly
to the public at the public offering price shown on the cover page of this
prospectus and to certain dealers at that price, minus a concession not more
than $ per share. The underwriters may allow, and the dealers may reallow
to other dealers, concessions not more than $ per share. After the initial
public offering of the common stock, the offering price of the common stock and
other selling terms may be changed by the representatives. The representatives
have informed us that they do not intend to confirm sales to any account over
which they exercise discretionary authority.

We have granted the underwriters an option to purchase up to 750,000
additional shares of common stock on the same terms and conditions as shown on
the cover page of this prospectus. The underwriters may buy some or all of these
additional shares during the 30 days after the date of this prospectus solely to
cover over-allotments. If the option is exercised, each underwriter will
generally have a commitment to purchase a number of additional shares of common
stock proportionate to the underwriter's initial commitment shown in the
preceding table.

The common stock is offered for delivery when, as and if accepted by the
underwriters and subject to prior sale and to withdrawal, cancellation or
modification of the offering without notice. The underwriters reserve the right
to reject any order for the purchase of common stock.

We and all of our stockholders, officers and directors have agreed not to
(1) offer, sell, contract to sell, make any short sale, pledge or otherwise
dispose of, any shares of common stock or any options to acquire shares of
common stock securities convertible into or exercisable or exchangeable for any
other rights to purchase or acquire common stock or (2) enter into any swap or
other agreements that transfers all or a part of the economic consequences or
ownership of common stock for a period of 180 days from the date of this
prospectus, without the prior written consent of First Union Securities, Inc.

57
<PAGE> 62

We have agreed to issue to certain former affiliates of EVEREN Securities,
Inc. warrants to purchase up to 287,500 shares of common stock, at an exercise
price per share equal to 120% of the initial public offering price per share of
common stock. EVEREN Securities, Inc. is a predecessor of First Union
Securities, Inc. We have agreed to grant the warrants for investment banking
services rendered to us by EVEREN Securities prior to this offering, among other
things. The warrants are exercisable for a period of four years, commencing one
year from the effective date of the registration statement of which this
prospectus is a part and expire five years from the effective date. The warrants
will not be sold, offered for sale, transferred, assigned or hypothecated for a
period of one year from the effective date other than to certain affiliated
parties of the underwriters. The holders of the warrants will have no voting,
dividend or other shareholders' rights until the warrants are exercised. We have
granted the individuals receiving the warrants a right to participate in any
future registration of securities by us by registering the warrants or the
underlying stock. That right expires 5 years from the effective date.

The underwriters have reserved for sale, at the initial public offering
price, shares of common stock for certain of our directors, officers, employees,
friends and family under a directed share program. We expect these persons to
purchase, in total, no more than 5% of the common stock in this offering. The
number of shares available for sale to the general public in this offering will
be reduced to the extent these persons purchase reserved shares. Any reserved
shares not purchased will be offered by the underwriters on the same basis as
other shares in this offering.

We have agreed to indemnify the underwriters against certain liabilities,
losses and expenses, including liabilities under the Securities Act of 1933, or
to contribute to payments that the underwriters may be required to make in
respect of those liabilities.

Before this offering, there has been no public market for our common stock.
The initial public offering price for the shares of common stock in this
offering was determined by agreement between us and the underwriters. Among the
factors considered in determining that price were the history of and the
prospects for the industry in which we compete, an assessment of our management,
our present operations, our historical results of operations and the trend of
our revenues and earnings, our prospects for future earnings, the general
condition of the securities markets at the time of this offering and the price
of similar securities of generally comparable companies. We cannot assure you
that an active trading market will develop for our common stock or that our
common stock will trade in the public markets at or above the initial public
offering price.

In order to facilitate this offering, persons participating in it may
engage in transactions that stabilize, maintain or otherwise affect the price of
the common stock. Specifically, the underwriters may over-allot or otherwise
create a short position in the common stock for their own account by selling
more shares of common stock than we have sold them. The underwriters may elect
to cover any short position by purchasing shares of common stock in the open
market or by exercising the over-allotment option granted to the underwriters.
The underwriters may also engage in passive market making transactions in the
common stock on the Nasdaq National Market. In addition, the underwriters may
stabilize or maintain the price of the common stock by bidding for or purchasing
shares of common stock in the open market and may impose penalty bids, under
which selling concessions allowed to syndicate members or other broker-dealers
participating in this offering are reclaimed if shares of common stock
previously distributed in this offering are repurchased in connection with
stabilization transactions or otherwise. These activities may stabilize or
maintain the market price above that which might

58
<PAGE> 63

otherwise prevail in the open market. The imposition of a penalty bid may also
affect the price of the common stock if it discourages resales. We make no
representation as to the magnitude or effect of any stabilization or other
transactions. These transactions may take place on the Nasdaq National Market or
otherwise. The underwriters are not required to engage in these activities and
may end them at any time.

LEGAL MATTERS

We are being advised on the legality of the issuance of the shares of
common stock offered by this prospectus by Brobeck, Phleger & Harrison LLP, San
Diego, California. The underwriters are being advised on legal matters by
Morrison & Foerster, LLP, Los Angeles, California.

EXPERTS

The combined financial statements of the CompGeeks Companies as of December
31, 1997 and 1998, and for each of the years in the three-year period ended
December 31, 1998, have been included in this prospectus and in the registration
statement in reliance on the report of KPMG LLP, independent certified public
accountants, appearing elsewhere herein, and upon the authority of said firm as
experts in accounting and auditing.

WHERE YOU CAN FIND MORE INFORMATION

We have filed a Form S-1 registration statement with the SEC concerning the
shares of common stock to be sold in this offering. This prospectus does not
contain all the information about CompGeeks and this offering contained in the
registration statement. For example, in this prospectus we have summarized or
referred to our charter documents and agreements that have been filed as
exhibits to the registration statement. All material terms of each contract,
agreement or other document are described in this prospectus. However,
statements in this prospectus about the contents of any contract, agreement or
other document are not complete, and we qualify them by referring you to the
full text of the document filed as an exhibit to the registration statement.

You may read and copy all or any portion of the registration statement or
any other information at the SEC's public reference room at 450 Fifth Street,
N.W., Washington, D.C. 20549. You can request copies of these documents, on
payment of a duplicating fee, by writing to the SEC. Please call the SEC at
1-800-SEC-0330 for further information on the operation of the public reference
rooms. Our SEC filings, including the registration statement, are also available
to you on the Commission's Web site at www.sec.gov.

After this offering, we will be subject to the information and reporting
requirements of the Securities Exchange Act of 1934, and, accordingly will file
periodic reports, proxy statements and other information with the SEC. On
approval of the common stock for the quotation on the Nasdaq National Market,
such reports, proxy and information statements and other information may also be
inspected at the offices of Nasdaq Operations, 1735 K Street, N.W., Washington,
D.C. 20006. We intend to furnish our stockholders with annual reports containing
audited financial statements and with quarterly reports for the first three
quarters of each year containing unaudited interim consolidated financial
information.

59
<PAGE> 64

THE COMPGEEKS COMPANIES

INDEX TO FINANCIAL STATEMENTS

<TABLE>
<S> <C>
Report of Independent Accountants........................... F-2
Financial Statements:
Combined Balance Sheets................................... F-3
Combined Statements of Income............................. F-4
Combined Statements of Stockholders' Equity............... F-5
Combined Statements of Cash Flows......................... F-6
Notes to Combined Financial Statements.................... F-7
</TABLE>

F-1
<PAGE> 65

REPORT OF INDEPENDENT ACCOUNTANTS

The Boards of Directors of the CompGeeks Companies:

We have audited the accompanying combined balance sheets of the CompGeeks
Companies as of December 31, 1997 and 1998, and the related combined statements
of income, stockholders' equity, and cash flows for each of the years in the
three-year period ended December 31, 1998. These combined financial statements
are the responsibility of the Company's management. Our responsibility is to
express an opinion on these combined financial statements based on our audits.

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

In our opinion, the combined financial statements referred to above present
fairly, in all material respects, the combined financial position of the
CompGeeks Companies as of December 31, 1997 and 1998, and the results of their
operations and their cash flows for each of the years in the three-year period
ended December 31, 1998, in conformity with generally accepted accounting
principles.

KPMG LLP

San Diego, California
May 12, 1999

F-2
<PAGE> 66

THE COMPGEEKS COMPANIES

COMBINED BALANCE SHEETS

<TABLE>
<CAPTION>
DECEMBER 31, PRO FORMA
----------------------- JUNE 30, JUNE 30,
1997 1998 1999 1999
---------- ---------- ----------- -----------
(UNAUDITED) (UNAUDITED)
(NOTE 12)
<S> <C> <C> <C> <C>
ASSETS (PLEDGED)
Current assets:
Cash and cash equivalents........ $ 996,815 $ 956,665 $ 254,470
Accounts receivable, less
allowance for doubtful
accounts of $7,965 in 1997,
$13,256 in 1998 and $71,979 in
1999.......................... 598,110 1,909,339 2,508,129
Inventory........................ 1,331,794 3,139,224 4,701,776
Advance payments for inventory... 122,131 158,000 428,745
Deferred offering costs.......... -- -- 581,082
Prepaid expenses and other
current assets................ 2,608 13,456 31,333
Notes receivable from
stockholders.................. -- 246,110 88,000
---------- ---------- ----------
Total current assets........ 3,051,458 6,422,794 8,593,535
Property and equipment, net........ 137,989 265,873 421,138
Other assets....................... 22,305 13,960 39,127
---------- ---------- ----------
$3,211,752 $6,702,627 $9,053,800
========== ========== ==========

LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Bank overdraft................... $ -- $ 74,381 $ --
Lines of credit.................. -- -- 590,549
Note payable to bank............. -- -- 1,000,000
Notes payable to stockholders.... -- -- 2,540,598
Accounts payable................. 95,748 565,704 2,782,394
Accrued expenses................. 94,621 107,761 305,195
Customer deposits................ 114,937 103,642 111,646
---------- ---------- ----------
Total current liabilities... 305,306 851,488 7,330,382
---------- ---------- ----------
Stockholders' equity:
Common stock..................... 7,003 7,003 7,003 14,573
Additional paid-in capital....... -- -- -- 492,430
Retained earnings................ 2,899,443 5,844,136 1,716,415 --
---------- ---------- ---------- ----------
Total stockholders' equity......... 2,906,446 5,851,139 1,723,418 507,003
---------- ---------- ---------- ----------
Commitments and contingencies
$3,211,752 $6,702,627 $9,053,800
========== ========== ==========
</TABLE>

See accompanying notes to combined financial statements.

F-3
<PAGE> 67

THE COMPGEEKS COMPANIES

COMBINED STATEMENTS OF INCOME

<TABLE>
<CAPTION>
SIX MONTHS ENDED
DECEMBER 31, JUNE 30,
--------------------------------------- -------------------------
1996 1997 1998 1998 1999
----------- ----------- ----------- ----------- -----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Net sales....................... $15,772,172 $26,917,799 $49,514,651 $21,461,015 $36,425,347
Costs of goods sold............. 12,746,378 21,508,035 39,980,859 16,655,171 30,578,722
----------- ----------- ----------- ----------- -----------
Gross profit............. 3,025,794 5,409,764 9,533,792 4,805,844 5,846,625
Operating expenses:
Sales and marketing........... 733,588 1,615,303 2,752,580 1,185,366 1,832,238
General and administrative
expenses................... 666,313 1,172,575 1,862,356 712,242 1,265,484
----------- ----------- ----------- ----------- -----------
Total operating
expenses.............. 1,399,901 2,787,878 4,614,936 1,897,608 3,097,722
----------- ----------- ----------- ----------- -----------
Income from operations... 1,625,893 2,621,886 4,918,856 2,908,236 2,748,903
Other income (expense):
Interest expense.............. (20,671) (25,006) (20,135) (11,271) (111,485)
Interest income............... 2,744 9,337 21,396 6,619 5,045
Other......................... 4,000 44,382 70,098 1,927 1,483
----------- ----------- ----------- ----------- -----------
(13,927) 28,713 71,359 (2,725) (104,957)
----------- ----------- ----------- ----------- -----------
Income before income taxes...... 1,611,966 2,650,599 4,990,215 2,905,511 2,643,946
Provision for income taxes...... 24,954 66,799 68,097 22,254 42,829
----------- ----------- ----------- ----------- -----------
Net income............... $ 1,587,012 $ 2,583,800 $ 4,922,118 $ 2,883,257 $ 2,601,117
=========== =========== =========== =========== ===========
Pro forma information:
Historical income before
provision for income
taxes...................... $ 1,611,966 $ 2,650,599 $ 4,990,215 $ 2,905,511 $ 2,643,946
Pro forma provision for income
taxes...................... 644,786 1,060,240 1,996,086 1,162,204 1,057,578
----------- ----------- ----------- ----------- -----------
Pro forma net income.......... $ 967,180 $ 1,590,359 $ 2,994,129 $ 1,743,307 $ 1,586,368
=========== =========== =========== =========== ===========
Pro forma net income per basic
and diluted share.......... $ 0.20 $ 0.10
=========== ===========
Pro forma weighted average
common shares
outstanding................ 15,160,129 15,160,129
=========== ===========
</TABLE>

See accompanying notes to combined financial statements.

F-4
<PAGE> 68

THE COMPGEEKS COMPANIES

COMBINED STATEMENTS OF STOCKHOLDERS' EQUITY
YEARS ENDED DECEMBER 31, 1996, 1997 AND 1998

<TABLE>
<CAPTION>
COMMON STOCK ADDITIONAL TOTAL
--------------------- PAID-IN RETAINED STOCKHOLDERS'
SHARES AMOUNT CAPITAL EARNINGS EQUITY
----------- ------- ---------- ----------- -------------
<S> <C> <C> <C> <C> <C>
Balance, December 31,
1995..................... 50,000 $ 5,000 $ -- $ 986,638 $ 991,638
Issuance of common stock... 2,002 2,003 -- -- 2,003
Net income................. -- -- -- 1,587,012 1,587,012
Distributions to
stockholders............. -- -- -- (981,807) (981,807)
----------- ------- -------- ----------- -----------
Balance, December 31,
1996..................... 52,002 7,003 -- 1,591,843 1,598,846
Net income................. -- -- -- 2,583,800 2,583,800
Distributions to
stockholders............. -- -- -- (1,276,200) (1,276,200)
----------- ------- -------- ----------- -----------
Balance, December 31,
1997..................... 52,002 7,003 -- 2,899,443 2,906,446
Net income................. -- -- -- 4,922,118 4,922,118
Distributions to
stockholders............. -- -- -- (1,977,425) (1,977,425)
----------- ------- -------- ----------- -----------
Balance, December 31,
1998..................... 52,002 7,003 5,844,136 5,851,139
Net income (unaudited)..... -- -- -- 2,601,117 2,601,117
Distributions to
stockholders
(unaudited).............. -- -- -- (6,728,838) (6,728,838)
Issuance of shares in
connection with the
Exchange (unaudited)..... 14,520,859 -- -- -- --
----------- ------- -------- ----------- -----------
Balance, June 30, 1999
(unaudited).............. 14,572,861 $ 7,003 $ -- $ 1,716,415 $ 1,723,418
=========== ======= ======== =========== ===========
Pro forma presentation of
recapitalization in
connection with proposed
initial public offering
("IPO") (unaudited):
S Corporation
distributions to
shareholders
(unaudited)......... -- $ -- $ -- $(1,216,415) $(1,216,415)
Reclassification of
retained earnings to
common stock and
paid-in capital
(unaudited)......... -- 7,570 492,430 (500,000) --
Pro forma balance June 30,
1999 (unaudited)......... 14,572,861 $14,573 $492,430 $ -- $ 507,003
=========== ======= ======== =========== ===========
</TABLE>

See accompanying notes to combined financial statements.

F-5
<PAGE> 69

THE COMPGEEKS COMPANIES

COMBINED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED DECEMBER 31, JUNE 30,
--------------------------------------- --------------------------
1996 1997 1998 1998 1999
---------- ----------- ------------ ----------- ------------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Cash flows from operating activities:
Net income........................... $1,587,012 $ 2,583,800 $ 4,922,118 $ 2,883,257 $ 2,601,117
Adjustments to reconcile net income
to net cash provided by
operating activities:
Provision for doubtful
accounts...................... 35,772 18,013 28,336 16,473 58,723
Depreciation and amortization... 12,399 28,622 34,354 14,957 23,991
(Increase) decrease in assets:
Accounts receivable........... 79,178 (250,162) (1,339,565) (121,869) (657,513)
Advance payments for
inventory.................. -- (122,131) (35,869) (665,748) (270,745)
Inventory..................... (152,327) (916,028) (1,807,430) (1,982,361) (1,562,552)
Prepaid expenses and other
current assets............. (20,877) 56,304 (10,848) (5,040) (17,877)
Other assets.................. 16,188 (20,211) 8,345 (13,500) (25,167)
Increase (decrease) in
liabilities:
Accounts payable.............. 139,062 (83,630) 469,956 234,561 2,216,690
Accrued expenses.............. (66,808) 82,956 13,140 (15,186) 197,434
Customer deposits............. 76,787 38,150 (11,295) (12,172) 8,004
---------- ----------- ------------ ----------- ------------
Net cash provided by
operating activities..... 1,706,386 1,415,683 2,271,242 333,372 2,572,105
---------- ----------- ------------ ----------- ------------
Cash flows from investing
activities -- Purchases of property
and equipment...................... (33,208) (123,196) (162,238) (99,227) (179,256)
---------- ----------- ------------ ----------- ------------
Cash flows from financing activities:
Changes in in bank overdraft....... -- -- 74,381 379,220 (74,381)
Borrowings on lines of credit...... 1,516,705 1,885,861 18,301,820 1,657,478 16,597,026
Repayments on lines of credit...... (1,516,705) (1,885,861) (18,301,820) (1,350,000) (16,006,477)
Issuance of note payable to bank... -- -- -- -- 1,000,000
Payment of deferred offering
costs........................... -- -- -- -- (581,082)
Notes receivable from stockholders,
net............................. -- -- (246,110) -- 158,110
Issuance of common stock........... 2,003 -- -- -- --
Distributions to stockholders...... (981,807) (1,276,200) (1,977,425) (1,254,500) (4,188,240)
---------- ----------- ------------ ----------- ------------
Net cash used in financing
activities............... (979,804) (1,276,200) (2,149,154) (567,802) (3,095,044)
---------- ----------- ------------ ----------- ------------
Net increase (decrease) in cash and
cash equivalents................... 693,374 16,287 (40,150) (333,657) (702,195)
Cash and cash equivalents at
beginning of period................ 287,154 980,528 996,815 996,815 956,665
---------- ----------- ------------ ----------- ------------
Cash and cash equivalents at end of
period............................. $ 980,528 $ 996,815 $ 956,665 $ 663,158 $ 254,470
========== =========== ============ =========== ============
Supplemental disclosures of cash flow
information:
Income taxes paid............... $ 26,800 $ 34,297 $ 45,784 $ 6,435 $ 42,780
========== =========== ============ =========== ============
Interest paid................... $ 19,472 $ 25,006 $ 20,136 $ 11,566 $ 92,349
========== =========== ============ =========== ============
Supplemental disclosure of non-cash
financing activities -- issuance of
notes payable to stockholders for
declared distributions............. $ -- $ -- $ -- $ -- $ 2,540,598
========== =========== ============ =========== ============
</TABLE>

See accompanying notes to combined financial statements.

F-6
<PAGE> 70

THE COMPGEEKS COMPANIES

NOTES TO COMBINED FINANCIAL STATEMENTS

NOTE 1 -- DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation. The financial statements of compgeeks.com, Evertek
Computer Corporation ("Evertek"), and Evertek Trading Limited, (collectively
"the CompGeeks Companies" or the "Company") are presented on a combined basis as
pursuant to an agreement the companies are under common management and control.
Evertek is 100% owned by an individual who also owns 50% of compgeeks.com. The
other 50% of compgeeks.com is owned by another individual. Evertek Trading
Limited is owned 100% by the brother of the sole shareholder of Evertek. All
significant intercompany accounts and transactions are eliminated in the
combined financial statements. The combined financial statements include the
results of operations of compgeeks.com, Evertek, and Evertek Trading Limited for
the periods from May 3, 1996 through June 30, 1999, January 1, 1996 through June
30, 1999 and August 15, 1996 through June 30, 1999, respectively.

In April 1999, CompGeeks, Inc., was incorporated in Delaware for the sole
purpose of effecting a share exchange with the CompGeeks Companies and raising
capital through an initial public offering of common stock. In May 1999,
CompGeeks, Inc. completed the share exchange whereby all of outstanding common
stock of the CompGeeks Companies was exchanged for 17,707,000 newly issued
shares of CompGeeks, Inc. (the "Exchange"). The Exchange was accounted for at
historical cost in a manner similar to a pooling of interests. Prior to the
Exchange, CompGeeks, Inc. was not capitalized and had no financial activity.
Accordingly, the unaudited consolidated financial statements included herein for
periods ended subsequent to May 1999 represent those of CompGeeks, Inc.

Reverse Stock Split. In July 1999, the Company effected a 0.823 for one
reverse stock split. All share amounts including and subsequent to the Exchange
have been adjusted to reflect the share split.

Description of Business. The Company is a global, on-line wholesaler and
retailer of computer hardware that specializes in sales of excess inventory,
obsolete and distressed equipment, primarily bought from manufacturers.
compgeeks.com sells computers and computer peripherals to retail customers
primarily through its web site as well as through third party on-line auction
sites. Evertek Computer Corporation sells computer peripheral products on a
business-to-business wholesale basis worldwide primarily through its web site.
Evertek Trading Limited purchases computer peripheral products from Asian
manufacturers and sells substantially all products to Evertek.

ComputerGeeks Discount Outlet was incorporated in the state of California
in 1996. It changed its name to compgeeks.com in April 1999 and continues to do
business on the Internet under the name Computer Geeks Discount Outlet. Evertek
Computer Corporation was incorporated in the state of California in 1990.
Evertek Trading Limited was incorporated in Hong Kong in August 1996.

Unaudited Interim Financial Information. The interim financial statements
of the Company for the six months ended June 30, 1998 and 1999, included herein
have been prepared by the Company, without audit, pursuant to the rules and
regulations of the Securities and Exchange Commission. Certain information and
footnote disclosures normally included in the financial statements prepared in
accordance with generally

F-7
<PAGE> 71
THE COMPGEEKS COMPANIES

NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)

accepted accounting principles have been condensed or omitted pursuant to such
rules and regulations relating to interim financial statements. In the opinion
of management, the accompanying unaudited statements reflect all adjustments,
consisting only of normal recurring adjustments, necessary to present fairly the
financial position of the Company at June 30, 1999, and the results of their
operations and their cash flows for the six months ended June 30, 1998 and 1999.

Revenue Recognition. Revenue from sales of products is recognized upon
shipment of the product to the customer. Customer deposits reflect advance
payments required from certain customers prior to the shipment of product.
Provision for sales returns is recorded at the time of sale and shipment and is
determined by management based on the relationship of historical sales returns
to sales for the most recent 12 months. The Company evaluates the estimated
provision on a quarterly basis and the provision is adjusted to the extent
actual sales returns differ from estimated amounts.

Cash Equivalents. The Company considers all investment instruments with
original maturities of three months or less to be cash equivalents. Cash
equivalents at December 31, 1998 and December 31, 1997 include investments in
money market funds.

Inventory. Inventory consists of finished goods and is stated at the lower
of cost or market. Cost is determined using the weighted average cost method.
The Company maintains an allowance for the obsolescence of inventory. The
allowance is analyzed and adjusted on a quarterly basis based on a review of
specifically identifiable slow-moving and obsolete inventory. Certain foreign
vendors require payment for inventory prior to shipment. These amounts are
recorded as advance payments for inventory until such time as title to the
inventory has transferred.

Property and Equipment. Property and equipment is stated at cost, net of
depreciation and amortization. Depreciation of equipment, furniture and fixtures
is provided using the straight-line method over their estimated useful lives as
follows:

<TABLE>
<CAPTION>
USEFUL LIFE
-----------
<S> <C>
Equipment................................... 5
Furniture and Fixtures...................... 7
</TABLE>

Amortization of leasehold improvements is provided using the straight-line
method over the lesser of the lease term or the estimated useful life of the
asset.

Software and Website Development Costs. Prior to the implementation of
Statement of Position 98-1 (SOP 98-1), internal use software and website
development costs were expensed as incurred. In the first quarter of 1999, the
Company adopted SOP 98-1 which requires costs to be either expensed or
capitalized according to the nature and timing of the costs with respect to the
development of the related software. The Company has not capitalized any
software or website development costs for the six months ended June 30, 1999.

Product Warranty Costs. The Company in certain instances provides a
warranty for merchandise sold for a period which is longer than that provided by
the manufacturer. The Company records a provision for estimated warranty costs
at the time of sale for those

F-8
<PAGE> 72
THE COMPGEEKS COMPANIES

NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)

products by applying a factor to sales. The factor is determined by management
based on the relationship of historical warranty costs to sales for the most
recent 12 months. The Company evaluates the estimated warranty provision on a
quarterly basis and adjusts the provision to the extent actual warranty costs
differ from estimated amounts.

Income Taxes and Retained Earnings. compgeeks.com and Evertek Computer
Corporation (the "S Corporations") have elected to be treated as S Corporations
for federal and state income tax purposes. The S Corporations do not pay federal
income taxes on their taxable income since their stockholders are responsible
for individual federal income taxes on their respective share of the S
Corporations taxable income. California franchise taxes are provided at the
greater of a 1.5% rate or a minimum tax of $800. Income taxes for Evertek
Trading Limited are included in the combined financial statements based on
statutory rates applicable in Hong Kong. Deferred taxes are not material to the
combined financial statements.

The statements of income for the periods presented do not include a
provision for income taxes using C corporation tax rates. The unaudited pro
forma income tax adjustments recorded in the statements of income represent
estimated federal income taxes and California franchise taxes that would have
been required had the Company not elected to be treated as an S Corporation.

The S Corporations intend to terminate their S Corporation elections
immediately upon the closing of the proposed initial public offering. In
addition, the Company intends to distribute to the stockholders of the S
Corporation all but $500,000 of the undistributed S Corporation retained
earnings.

Stock Option Plan. The Company applies the intrinsic value-based method of
accounting prescribed by Accounting Principles Board ("APB") Opinion No. 25,
Accounting for Stock Issued to Employees, and related interpretations, in
accounting for its fixed plan stock options. As such, compensation expense is
recorded on the date of grant only if the current market price of the underlying
stock exceeds the exercise price.

Impairment of Long-Lived Assets and Long-Lived Assets to Be Disposed
Of. Long-lived assets and certain identifiable intangibles are reviewed for
impairment whenever events or changes in circumstances indicate that the
carrying amount of an asset may not be recoverable. Recoverability of assets to
be held and used is measured by a comparison of the carrying amount of an asset
to future net cash flows (undiscounted and without interest) expected to be
generated by the asset. If such assets are considered to be impaired, the
impairment to be recognized is measured as the amount by which the carrying
amount of the assets exceeds the fair value of the assets. Assets to be disposed
of are reported at the lower of the carrying amount or fair value less costs to
sell.

Pro Forma Net Income Per Share (unaudited). Pro forma basic net income per
share amounts are computed by dividing the pro forma net income by the weighted
average number of shares of common stock outstanding during the period. The
Company had no stock options or other potential common stock outstanding,
therefore there is no difference between basic and diluted pro forma net income
per share. The pro forma net income per share is computed using 15,160,129
shares which is based upon the 14,572,861 shares outstanding pursuant to the
Exchange, which is assumed to have

F-9
<PAGE> 73
THE COMPGEEKS COMPANIES

NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)

occurred on January 1, 1996, plus the assumed issuance of 587,268 shares of
common stock at an assumed initial public offering price of $10 per share, the
net proceeds of which would be sufficient to fund the distributions to
stockholders in excess of net income for 1999.

Fair Value of Financial Instruments. The carrying value of cash and cash
equivalents, accounts receivable, notes receivable from stockholders, bank
overdraft, accounts payable and accrued expenses approximate their fair value
due to the short-term maturity of these instruments. The carrying value of lines
of credit, note payable to bank, and notes payable to stockholders approximate
their fair value because the instruments have interest rates and terms that are
comparable to those currently offered to the Company for similar debt
instruments.

Advertising Costs. Advertising costs are expensed as incurred, and
amounted to $12,623, $30,028, $71,083 for the years ended December 31, 1996,
1997, and 1998, and $11,282 (unaudited) and $57,943 (unaudited) for the six
months ended June 30, 1998 and 1999, respectively.

Use of Estimates in the Preparation of Financial Statements. The
preparation of financial statements in conformity with generally accepted
accounting principles 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 revenue and expenses during the reporting period. Actual
results could differ from those estimates.

NOTE 2 -- CONCENTRATION OF CREDIT RISK

Financial instruments that subject the Company to concentrations of credit
risk consist primarily of cash and cash equivalents and trade accounts
receivable. The Company maintains cash and cash equivalents with various
domestic financial institutions and one foreign financial institution. The
Company performs periodic evaluations of the relative credit standing of these
institutions. From time to time, the Company's cash balances with any one
financial institution may exceed Federal Deposit Insurance Corporation insurance
limits. At December 31, 1997 and 1998 and June 30, 1999, the Company had
deposits of $375,291, $646,605 and $244,059 (unaudited), respectively, with two
domestic financial institutions. At December 31, 1997 and 1998 and June 30,
1999, the Company had deposits of $217,889, $273,476 and $10,411 (unaudited),
respectively, with one foreign financial institution.

The Company sells to end users, computer distributors and dealers
throughout the world and performs ongoing credit evaluations of its customers.
Most of the Company's sales terms are cash prepayment, COD or credit card
payment. However, the Company's ability to collect amounts due from customers is
affected by economic fluctuations that may impact its customers. The Company
performs ongoing credit evaluations, generally does not require collateral and
establishes an allowance for doubtful accounts based upon factors surrounding
the credit risk of customers, historical trends and other information; to date,
such losses have not been material.

F-10
<PAGE> 74
THE COMPGEEKS COMPANIES

NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)

For the year ended December 31, 1996, sales to one customer were $2,233,779
or 14% of all net sales generated by the Company.

For the year ended December 31, 1997, sales to one customer were $6,654,113
or 25% of all net sales generated by the Company and 1% of accounts receivable
at December 31, 1997.

For the year ended December 31, 1998, sales to one customer were
$12,647,894 or 26% of all net sales generated by the Company and 19% of accounts
receivable at December 31, 1998.

For the six months ended June 30, 1999 and 1998, sales to one customer were
$4,722,536 and $6,747,115, respectively or 13% and 31%, respectively of all net
sales generated by the Company and 18% of accounts receivable at June 30, 1999.

In October 1997, the Company entered into a one-year agreement with this
customer to provide the customer computers and peripherals for sale on their
auction web site. The agreement provides that the Company will provide products
for the customer's auction and will fulfill orders entered through the auction
web site. This customer pays the actual merchandise selling price and shipping
charges, less a commission and any deductions for merchandise returns. The
Company ships ordered products directly to the end customer who purchased the
products from the auction web site, and accordingly, recognizes revenue from
shipment. Both the Company and the customer continue to do business under the
terms of this agreement.

Sales to this customer for all periods are recorded by the retail segment.

NOTE 3 -- PROPERTY AND EQUIPMENT

Property and equipment is summarized as follows:

<TABLE>
<CAPTION>
DECEMBER 31, JUNE 30,
-------------------- -----------
1997 1998 1999
-------- -------- -----------
(UNAUDITED)
<S> <C> <C> <C>
Equipment......................................... $ 86,918 $174,810 $295,042
Leasehold improvements............................ 61,440 125,689 178,098
Furniture and Fixtures............................ 35,773 39,821 46,436
-------- -------- --------
184,131 340,320 519,576
Accumulated depreciation.......................... (46,142) (74,447) (98,438)
-------- -------- --------
$137,989 $265,873 $421,138
======== ======== ========
</TABLE>

NOTE 4 -- LINES OF CREDIT AND NOTE PAYABLE

At December 31, 1998, the Company had available a line of credit with its
primary bank in the amount of $2,000,000 for general operating cash needs which
provides for interest at the option of the Company at either a base rate equal
to 2.75% in excess of the bank's LIBOR-Rate or 0.5% in excess of the bank's
reference rate. The line of credit is secured by substantially all assets of the
Company. There was no balance outstanding on the line of credit at December 31,
1998. In April 1999, the Company amended its

F-11
<PAGE> 75
THE COMPGEEKS COMPANIES

NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)

agreement with the bank to provide for an additional line of credit which
provided for combined borrowings up to $5,000,000. The Company also has
available an unsecured line of credit with another bank of $65,000 for general
operating cash needs which provides for interest of 11.75%. There was no balance
outstanding at December 31, 1998. There is no expiration date on this line of
credit.

On March 5, 1999, the Company executed a promissory note with its primary
bank for $1,000,000. The interest rate and security for the note are identical
to those under the Company's lines of credit. The note is due December 31, 1999.

NOTE 5 -- COMMON STOCK

At December 31, 1997 and 1998, compgeeks.com, Evertek, and Evertek Trading
Limited have authorized shares of no par value common stock of 100,000,
1,000,000, and 1,000 shares, respectively, and 2,000, 50,000 and 2 shares issued
and outstanding, respectively.

NOTE 6 -- RETIREMENT PLANS

Evertek maintained a SAR/SEP plan covering substantially all of its
employees. The plan was funded only by employee contributions. Evertek made no
contribution for any of the three years ended December 31, 1998. As of January
1, 1999, Evertek discontinued the SAR/SEP plan and formed a 401k retirement
plan. Under this new plan, the Company will match 25% of the employees'
contributions, up to four percent of their gross wages.

As of January 1, 1998, compgeeks.com formed a profit sharing plan for the
benefit of certain employees and contributed $25,000 to the plan for the year
ended December 31, 1998.

NOTE 7 -- STOCK OPTIONS AND WARRANTS

CompGeeks, Inc. adopted a Stock Incentive Plan in May 1999. CompGeeks, Inc.
has authorized 1,646,000 shares of common stock for issuance under the plan. The
1999 Stock Incentive Plan is divided into five separate programs:

- the discretionary option grant program under which our eligible employees
may receive options to purchase shares of common stock at an exercise
price not less than 100% of the fair market value of those shares on the
grant date. Options granted under this program are non-compensatory as
the options will be granted to employees at fair market value;

- the stock issuance program under which eligible employees may purchase
shares of common stock directly, at a price of at least 100% of their
fair market value at the time of issuance, or receive shares as a bonus
tied to the performance of services. Stock granted under the stock
issuance program are non-compensatory as the stock is issued to employees
at fair market value. Any shares issued as a bonus will be recorded as
compensation expense based on the fair value at date of grant;

F-12
<PAGE> 76
THE COMPGEEKS COMPANIES

NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)

their base salary to acquire special below-market stock options. Options
issued under this program are compensatory. Compensation expense will be
measured by the excess of the fair value of the stock over the exercise
price of the option on the date of grant;

- the automatic option grant program, under which we will automatically
grant options at periodic intervals to eligible non-employee board
members to purchase shares of common stock at an exercise price equal to
100% of the fair market value of those shares on the grant date. Options
granted under this program are non-compensatory as the options are issued
to board members at fair market value; and

- the director fee option grant program which may, in the plan
administrator's discretion, be activated for one or more calendar years
and, if so activated, will allow non-employee board members to use a
portion of the annual retainer fee otherwise payable to them in cash each
year to acquire special below-market options. Options granted under this
program are compensatory. Compensation expense will be measured by the
excess of the fair value of the stock over the exercise price of the
options on the date of grant.

In connection with the closing of the offering, 492,214 options will be
granted to employees, officers and directors. 140,000 of the options vest as
follows: 50% vest and become exercisable after one year of service, with the
remainder thereafter vesting and becoming exercisable ratably over 36 monthly
installments. 30,000 of the options vest as follows: 33.3% vest and become
exercisable 12 months after the closing of the offering; 33.3% vest and become
exercisable 24 months after the closing of the offering, with the remainder
thereafter vesting and becoming exercisable 36 months after the closing of the
offering. The remaining 322,214 options vest as follows: 50% vest and become
exercisable 12 months after the closing of the offering, with the remainder
thereafter vesting and becoming exercisable ratably over 36 monthly
installments. All options will have a term of 10 years and will have an exercise
price equal to the fair market value on the date of grant. In accordance with
APB 25, no compensation expense will result from the grant of these options.

In connection with the offering, CompGeeks, Inc. will issue a warrant to
the underwriters of the offering to purchase shares of common stock equal to 5%
of the number of shares sold in the offering, or up to 287,500 shares. The price
of the warrant will be $0.01 and the exercise price per share of common stock
will be equal to 120% of the initial public offering price. The warrant has a
term of 5 years from the effective date of the offering. The value ascribed to
the warrants will be calculated using the Black-Scholes model and will be offset
against the proceeds from the offering.

F-13
<PAGE> 77
THE COMPGEEKS COMPANIES

NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)

NOTE 8 -- OTHER INCOME

Other income is summarized as follows:

<TABLE>
<CAPTION>
SIX MONTHS
ENDED
YEARS ENDED DECEMBER 31, JUNE 30,
-------------------------- ---------------
1996 1997 1998 1998 1999
------ ------- ------- ------ ------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Insurance settlement................... $ -- $31,916 $68,813 $ -- $ --
Gain on sale of assets................. -- 2,002 1,035 -- --
Miscellaneous.......................... 4,000 10,464 250 1,927 1,483
------ ------- ------- ------ ------
$4,000 $44,382 $70,098 $1,927 $1,483
====== ======= ======= ====== ======
</TABLE>

NOTE 9 -- COMMITMENTS AND CONTINGENCIES

Leases. The Company has noncancelable operating leases for offices and
distribution facilities and certain equipment that expire at various dates
through 2005. During February 1999, one of the stockholders of the Company
purchased a Company occupied facility from an unrelated party which the Company
now leases directly from the stockholder. Future minimum lease payments
subsequent to February 1999 related to this facility are reflected as related
party in the table below.

Future minimum lease payments under noncancelable operating leases as of
December 31, 1998 are as follows:

<TABLE>
<CAPTION>
YEAR ENDING RELATED
DECEMBER 31, OTHER PARTY TOTAL
- --------------------------------------- ------- -------- --------
<S> <C> <C> <C>
1999................................. $34,367 $128,333 $162,700
2000................................. 8,700 158,450 167,150
2001................................. 3,700 163,000 166,700
2002................................. 2,700 110,000 112,700
2003................................. 1,800 -- 1,800
------- -------- --------
$51,267 $559,783 $611,050
======= ======== ========
</TABLE>

Rent expense incurred for all operating leases amounted to $54,411,
$129,586, $149,450, and $103,701 (unaudited) for the years ended December 31,
1996, 1997, and 1998, and the six months ended June 30, 1999, respectively.

F-14
<PAGE> 78
THE COMPGEEKS COMPANIES

NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)

The Company began leasing an additional office and distribution facility
effective April 1, 1999 as part of its expansion. Future minimum payments under
this lease are as follows:

<TABLE>
<CAPTION>
YEAR ENDING
DECEMBER 31,
------------
<S> <C>
1999..................................... $ 126,000
2000..................................... 189,510
2001..................................... 222,249
2002..................................... 258,303
2003..................................... 295,020
Thereafter............................... 380,250
----------
$1,471,332
==========
</TABLE>

Contingencies. The Company has been involved in various claims and legal
proceedings in the ordinary course of business. The ultimate disposition of
these matters is not expected to have a material adverse effect on the Company's
combined financial statements taken as a whole.

NOTE 10 -- RELATED PARTY TRANSACTIONS

During 1998, compgeeks.com loaned $100,000 to a stockholder. At December
31, 1998, the balance due on the note was $88,000. The terms of the note provide
for interest commencing April 1999, at the rate of 6%. The note is due and
payable in full in October 1999 and is secured by the stockholder's residence.

During 1998, Evertek Trading Limited loaned $158,110 to its stockholder. At
December 31, 1998, the balance due was $158,110. The loan had no terms and was
repaid in May 1999.

In February 1999, a stockholder purchased the Company's Oceanside,
California headquarters and distribution facility from an unrelated party. (See
Note 9)

On May 10, 1999, the Company issued a 10% demand promissory note in the
amount of $501,305 from compgeeks.com to each of its two stockholders and a 10%
demand promissory note in the amount of $1,537,988 from Evertek to its sole
stockholder. These notes were issued in lieu of cash distributions to
stockholders.

Following the completion of the initial public offering, the Company's
Chairman and Chief Executive Officer will hold in excess of 50% of the
outstanding common stock and will have the ability to exercise control over
CompGeeks, Inc.

NOTE 11 -- SEGMENT INFORMATION

The Company believes that all of its material operations are part of the
computer industry, and it currently reports as a single industry segment. The
Company's two reportable segments are defined by sales distribution channel and
include wholesale (business-to-business) and retail (business-to-consumer)
segments. These segments are both geographically aligned business units and
include four world regions. Inter-segment sales are made at cost or prices
slightly above cost. The Company analyzes segment
F-15
<PAGE> 79
THE COMPGEEKS COMPANIES

NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)

performance based on revenues. Revenues derived from the wholesale and retail
segments are summarized below:

<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED DECEMBER 31, JUNE 30,
--------------------------------------- -------------------------
1996 1997 1998 1998 1999
----------- ----------- ----------- ----------- -----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Wholesale............ $14,545,773 $22,448,246 $38,950,065 $18,635,333 $30,551,191
Retail............... 2,677,678 8,960,473 18,206,949 8,809,620 9,583,729
Inter-Segment........ (1,451,279) (4,490,920) (7,642,363) (5,983,938) (3,709,573)
----------- ----------- ----------- ----------- -----------
$15,772,172 $26,917,799 $49,514,651 $21,461,015 $36,425,347
=========== =========== =========== =========== ===========
</TABLE>

Gross profit derived from the wholesale and retail segments is as follows:

<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED DECEMBER 31, JUNE 30,
--------------------------------------- -------------------------
1996 1997 1998 1998 1999
----------- ----------- ----------- ----------- -----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Wholesale............ $ 2,335,695 $ 3,319,122 $ 5,402,856 $ 2,659,919 $ 3,611,819
Retail............. $ 690,099 $ 2,090,642 $ 4,130,936 $ 2,145,925 $ 2,234,806
</TABLE>

The Company derived 9%, 3% and 1% of revenue in the years ending December
31, 1996, 1997 and 1998, respectively, from customers outside the United States.
All sales are settled in U.S. dollars. Revenue by geographic area is summarized
as follows:

<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED DECEMBER 31, JUNE 30,
--------------------------------------- -------------------------
1996 1997 1998 1998 1999
----------- ----------- ----------- ----------- -----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
North America........ $14,402,670 $26,040,297 $48,987,217 $21,296,617 $35,978,594
Asia................. 775,308 470,987 84,647 70,597 51,501
Europe............... 192,138 85,041 282,580 31,770 239,126
Other................ 402,056 321,474 160,207 62,031 156,126
----------- ----------- ----------- ----------- -----------
$15,772,172 $26,917,799 $49,514,651 $21,461,015 $36,425,347
=========== =========== =========== =========== ===========
</TABLE>

Total assets by segment as of December 31, 1997 and 1998 and June 30, 1999
are as follows:

<TABLE>
<CAPTION>
DECEMBER 31,
------------------------ JUNE 30,
1997 1998 1999
---------- ---------- -----------
(UNAUDITED)
<S> <C> <C> <C>
Wholesale................................ $2,214,066 $4,507,857 $7,157,408
Retail................................... 997,686 2,194,770 1,896,392
---------- ---------- ----------
$3,211,752 $6,702,627 $9,053,800
========== ========== ==========
</TABLE>

F-16
<PAGE> 80
THE COMPGEEKS COMPANIES

NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)

Capital expenditures for property and equipment by segment for the years
ended December 31, 1997 and 1998 and the six months ended June 30, 1999 are as
follows:

<TABLE>
<CAPTION>
DECEMBER 31, JUNE 30,
-------------------- --------------------
1997 1998 1999 1998
-------- -------- --------- -------
(UNAUDITED)
<S> <C> <C> <C> <C>
Wholesale.......................... $101,560 $127,321 $ 45,282 $73,131
Retail............................. 21,636 34,917 133,974 26,096
-------- -------- -------- -------
$123,196 $162,238 $179,256 $99,227
======== ======== ======== =======
</TABLE>

NOTE 12 -- PRO FORMA ADJUSTMENTS TO FINANCIAL STATEMENTS (UNAUDITED)

The unaudited pro forma combined balance sheet as of June 30, 1999, the
combined statements of income for the years ended December 31, 1996, 1997 and
1998, and the combined statement of changes in stockholders' equity for the six
months ended June 30, 1999 have been presented to give pro forma effect to the
distributions to be made to stockholders and the conversion of the Company from
S Corporation status to C Corporation status.

The following is a description of the unaudited pro forma adjustments:

(a) Prior to completion of the IPO, the S Corporations intend to
distribute to the stockholders amounts in excess of $500,000 of retained
earnings ($1,216,415 at June 30, 1999). Distributions totaling $6,728,838
have been declared through June 1999, $4,188,240 which were paid through
June 1999 and $2,540,598 for which notes payable to the stockholders have
been executed.

(b) In conjunction with the termination of the S Corporation election
income taxes are computed assuming an effective rate of 40% in accordance
with C Corporation tax rates.

F-17
<PAGE> 81
THE COMPGEEKS COMPANIES

NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)

The pro forma provision for income taxes consists of:

<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEARS ENDED DECEMBER 31, JUNE 30,
----------------------------------- -----------------------
1996 1997 1998 1998 1999
--------- ---------- ---------- ---------- ----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Current expense:
Federal.............. $ 615,427 $ 853,808 $1,699,530 $ 878,400 $ 767,977
State.............. 166,771 226,497 436,750 256,465 239,538
--------- ---------- ---------- ---------- ----------
782,198 1,080,305 2,136,280 1,134,865 1,007,515
--------- ---------- ---------- ---------- ----------

Deferred expense
(benefit):
Federal............ (119,501) (20,119) (124,946) 19,292 53,586
State.............. (17,911) 54 (15,248) 8,047 (3,523)
--------- ---------- ---------- ---------- ----------
(137,412) (20,065) (140,194) 27,339 50,063
--------- ---------- ---------- ---------- ----------
$ 644,786 $1,060,240 $1,996,086 $1,162,204 $1,057,578
========= ========== ========== ========== ==========
</TABLE>

Total pro forma provision for income taxes differs from the "expected" pro
forma tax expense (computed by applying the federal corporate income tax rate to
the pro forma income before taxes) as follows:

<TABLE>
<CAPTION>
SIX MONTHS
YEARS ENDED DECEMBER 31, ENDED JUNE 30,
------------------------- ---------------
1996 1997 1998 1998 1999
----- ----- ----- ----- -----
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Computed "expected" pro forma income
tax expense.......................... 34% 34% 34% 34% 34%
State income taxes, net of federal
benefit................................ 6% 6% 6% 6% 6%
-- -- -- -- --
40% 40% 40% 40% 40%
== == == == ==
</TABLE>

In accordance with SFAS No. 109, the Company, upon termination of its S
Corporation election, will be required to recognize a deferred tax asset for the
effect of cumulative temporary differences as of the date of termination. The
amount of deferred tax asset that would have been recognized at June 30, 1999
had the S corporation election been terminated as of that date is approximately
$246,000.

NOTE 13 -- SUBSEQUENT EVENT (UNAUDITED)

On October 29, 1999, the Company entered into a $12 million revolving line
of credit agreement with a financial institution. The line of credit, which
matures on November 1, 2001, accrues interest at an annual rate of 2.15% in
excess of the bank's LIBOR Rate (7.56% at October 29, 1999). Proceeds from this
line of credit were used to pay-off and cancel the credit lines and note payable
with the former financial institution.

F-18
<PAGE> 82
INSIDE BACK COVER:

White text at top of page over warehouse image reads "SOURCED GLOBALLY".
Three-dimensional blue and green globes depict eastern and western hemispheres.
White text reading "WE SEARCH THE WORLD OVER FOR THE BEST PRICES" arcs over
western hemisphere (foreground.) White text on black ovals point to various
equipment source locations.

OUTSIDE BACK COVER:

Page-sized light background image of computer monitor.
Centered at bottom third of page is CompGeeks, Inc. logo.

Below that, centered text: "Don't be a dork... shop at The Geeks."(sm)

Below that, centered text:

2370 Oak Ridge Way
Vista, CA 92083
Voice: 760.734.3681
Fax: 760.734.3682

Below that, centered text: "www.compgeeks.com", "www.evertek.com",
"www.wholesaleauction.com".

<PAGE> 83

[COMPGEEKS LOGO]
<PAGE> 84

PART II

INFORMATION NOT REQUIRED IN PROSPECTUS

ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION

The expenses to be paid by the Registrant are as follows. All amounts other
than the SEC registration fee, the NASD filing fees and the Nasdaq National
Market listing fee are estimates.

<TABLE>
<CAPTION>
AMOUNT TO
BE PAID
---------
<S> <C>
SEC registration fee........................................ $16,958
NASD filing fee............................................. *
Nasdaq National Market listing fee.......................... *
Legal fees and expenses..................................... *
Accounting fees and expenses................................ *
Printing and engraving...................................... *
Blue sky fees and expenses (including legal fees)........... *
Transfer agent fees......................................... *
Miscellaneous............................................... *
-------
Total....................................................... $ *
=======
</TABLE>

- -------------------------

* To be filed by amendment

ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS

Section 145 of the Delaware General Corporation Law authorizes a court to
award, or a corporation's board of directors to grant, indemnity to directors
and officers in terms sufficiently broad to permit such indemnification under
certain circumstances for liabilities (including reimbursement for expenses
incurred) arising under the Securities Act of 1933.

As permitted by the Delaware General Corporation Law, the Registrant's
Amended and Restated Certificate of Incorporation includes a provision that
eliminates the personal liability of its directors for monetary damages for
breach of fiduciary duty as a director, except for liability (1) for any breach
of the director's duty of loyalty to the Registrant or its stockholders, (2) for
acts or omissions not in good faith or that involve intentional misconduct or a
knowing violation of law, (3) under section 174 of the Delaware General
Corporation Law (regarding unlawful dividends and stock purchases) or (4) for
any transaction from which the director derived an improper personal benefit.

As permitted by the Delaware General Corporation Law, the Restated Bylaws
of the Registrant provide that (1) the Registrant is required to indemnify its
directors and officers to the fullest extent permitted by the Delaware General
Corporation Law, subject to certain very limited exceptions, (2) the Registrant
may indemnify its other employees and agents as set forth in the Delaware
General Corporation Law, (3) the Registrant is required to advance expenses, as
incurred, to its directors and executive officers in connection with a legal
proceeding to the fullest extent permitted by the Delaware General Corporation
Law, subject to certain very limited exceptions and (4) the rights conferred in
the bylaws are not exclusive.

II-1
<PAGE> 85

The Registrant has entered into indemnification agreements with each of its
directors and executive officers to give such directors and officers additional
contractual assurances regarding the scope of the indemnification set forth in
the Registrant's Amended and Restated Certificate of Incorporation and to
provide additional procedural protections. At present, there is no pending
litigation or proceeding involving a director, officer or employee of the
Registrant regarding which indemnification is sought, nor is the Registrant
aware of any threatened litigation that may result in claims for
indemnification.

Reference is also made to Section of the Underwriting Agreement, which
provides for the indemnification of officers, directors and controlling persons
of the Registrant against certain liabilities. The indemnification provision in
the Registrant's Certificate of Incorporation, bylaws and the indemnification
agreements entered into between the Registrant and each of its directors and
executive officers may be sufficiently broad to permit indemnification of the
Registrant's directors and executive officers for liabilities arising under the
Securities Act of 1933.

The Registrant has applied for liability insurance for its officers and
directors.

Reference is made to the following documents filed as exhibits to this
Registration Statement regarding relevant indemnification provisions described
above and elsewhere in this prospectus:

<TABLE>
<CAPTION>
DOCUMENT EXHIBIT NUMBER
-------- --------------
<S> <C>
Underwriting Agreement (draft dated ,
1999)................................................... 1.1
Form of Amended and Restated Certificate of
Incorporation of Registrant........................... 3.2
Form of Restated Bylaws of Registrant................... 3.4
Form of Director Indemnification Agreement.............. 10.4
Form of Officer Indemnification Agreement............... 10.5
</TABLE>

ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES

The Registrant has sold and issued the following securities since January
1, 1996:

On May 28, 1999 the founders of compgeeks.com, Evertek Computer Corporation
and Evertek Trading Limited, exchanged their shares for our shares so that
compgeeks.com, Evertek Computer Corporation and Evertek Trading Limited became
our wholly owned subsidiaries.

The above securities were offered and sold by the Registrant in reliance
upon Section 4(2) of the Securities Act of 1933 as a transaction not involving
any public offering. No underwriters were involved in connection with the sales
of securities referred to in this Item 15.

II-2
<PAGE> 86

ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

(a) Exhibits.

<TABLE>
<CAPTION>
NUMBER DESCRIPTION
- -------- -----------
<S> <C>
1.1+ Form of Underwriting Agreement.
3.1* Certificate of Incorporation, as amended.
3.2* Form of Amended and Restated Certificate of Incorporation to
be in effect upon the closing of this offering.
3.3* Bylaws.
3.4* Form of Restated Bylaws to be in effect upon the closing of
this offering.
4.1+ Specimen common stock certificate.
5.1 Form of Opinion of Brobeck, Phleger & Harrison LLP.
10.1+ Form of Warrant Agreement between us and affiliates of
EVEREN Securities, Inc., dated , 1999.
10.2+ Form of Common Stock Warrant between us and affiliates of
EVEREN Securities, Inc., dated , 1999.
10.3* Form of Employee Proprietary Information and Inventions
Agreement.
10.4* Form of Indemnification Agreement between us and each of our
directors.
10.5* Form of Indemnification Agreement between us and each of our
officers.
10.6* Share Exchange Agreement by and among compgeeks.com, Evertek
Computer Corporation, Evertek Trading, CompGeeks, Inc. and
the stockholders thereof dated May 28, 1999.
10.7* 1999 Stock Incentive Plan.
10.8* Demand Promissory Note between Computer Geeks Discount
Outlet, Inc. and Frank Segler dated May 10, 1999.
10.9* Demand Promissory Note between Computer Geeks Discount
Outlet, Inc. and Scott Kusel dated May 10, 1999.
10.10* Demand Promissory Note between Evertek Computer Corporation
and Frank Segler dated May 10, 1999.
10.11* Secured Promissory Note between Computer Geeks Discount
Outlet, Inc. and Scott Kusel dated October 8, 1998.
10.12* Lease between Oak Ridge 13, LLC and Computer Geeks Discount
Outlet, Inc. dated March 26, 1999.
10.13* Lease between Unified Holdings Trust and Evertek Computer
Corporation dated February 1, 1999.
10.14* IBM Surplus PC Reseller Agreement with Evertek Computer
Products dated April 1, 1999.
10.15++ Contract with ONSALE, Inc. dated October 2, 1997.
10.16+ Loan and Security Agreement by and between CompGeeks, Inc.
and Comerica Bank-California dated October 29, 1999.
10.17+ Revolving Note for $12,000,000 dated October 29, 1999 to
Comerica Bank-California.
10.18+ Trademark Security Agreement by and between CompGeeks, Inc.
and Comerica Bank-California dated October 29, 1999.
11.1+ Statement re: Computation of Basic and Diluted Net Loss Per
Share.
21.1* Subsidiaries of the Registrant.
23.1 Consent of KPMG LLP.
23.2 Consent of Brobeck, Phleger & Harrison LLP (included in
Exhibit 5.1).
</TABLE>

II-3
<PAGE> 87

<TABLE>
<CAPTION>
NUMBER DESCRIPTION
- -------- -----------
<S> <C>
24.1* Powers of Attorney (See Signature Page on Page II-6).
27.1* Financial Data Schedule.
</TABLE>

- -------------------------
+ To be filed by amendment.

++ We have sought confidential treatment pursuant to Rule 406 of portions of
the referenced exhibit.

* Previously filed.

(b) Financial Statement Schedule.

ITEM 17. UNDERTAKINGS

The undersigned Registrant undertakes to provide to the Underwriter at the
closing specified in the Underwriting Agreement, certificates in such
denominations and registered in such names as required by the Underwriter to
permit prompt delivery to each purchaser.

Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the SEC such indemnification is against
public policy as expressed in the Act, and is, therefore, unenforceable. In the
event that a claim for indemnification against such liabilities (other than the
payment by the Registrant of expenses incurred or paid by a director, officer or
controlling person of the Registrant in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or controlling person
in connection with the securities being registered, the Registrant will, unless
in the opinion of counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Act and will
be governed by the final adjudication of such issue.

The undersigned Registrant undertakes that:

(1) For purposes of determining any liability under the Securities Act
of 1933 the information omitted from the form of prospectus filed as part
of this registration statement in reliance upon Rule 430A and contained in
a form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or
(4), or 497(h) under the Securities Act of 1933 shall be deemed to be part
of this registration statement as of the time it was declared effective.

(2) For the purpose of determining any liability under the Securities
Act of 1933 each post-effective amendment that contains a form of
prospectus shall be deemed to be a new registration statement relating to
the securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.

II-4
<PAGE> 88

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933 the Registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized in San Diego, California, on this 10th
day of November, 1999.

COMPGEEKS, INC.

By: /s/ FRANK SEGLER
----------------------------------------
Name: Frank Segler
Title: Chairman and Chief Executive
Officer

Pursuant to the requirements of the Securities Act of 1933 this
Registration Statement has been signed by the following persons in the
capacities indicated on November 10, 1999:

<TABLE>
<CAPTION>
SIGNATURE TITLE(S) DATE
--------- -------- ----
<S> <C> <C>
/s/ FRANK SEGLER Chairman and Chief Executive November 10, 1999
- ------------------------------------ Officer (Principal Executive
Frank Segler Officer)

* President, Chief Operating November 10, 1999
- ------------------------------------ Officer and Director
Scott Kusel

/s/ WILLIAM C. BOUSEMA Vice President, Chief November 10, 1999
- ------------------------------------ Financial Officer and
William C. Bousema Secretary (Principal Financial
and
Accounting Officer)

/s/ GREG HANSEN Chief Information Officer, November 10, 1999
- ------------------------------------ General Counsel and Director
Greg Hansen

* Director November 10, 1999
- ------------------------------------
Robert K. Green

* Director November 10, 1999
- ------------------------------------
Stephen G. Holmes

*By: /s/ FRANK SEGLER November 10, 1999
------------------------------
Frank Segler
Attorney-In-Fact
</TABLE>

II-5
<PAGE> 89

THE COMPGEEKS COMPANIES

SCHEDULE II
VALUATION AND QUALIFYING ACCOUNTS
THREE YEARS ENDED DECEMBER 31, 1998

<TABLE>
<CAPTION>
COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E
-------- ---------- --------- -------------- ----------
BALANCE AT BALANCE AT
BEGINNING END
DESCRIPTION OF PERIOD ADDITIONS DEDUCTIONS (A) OF PERIOD
----------- ---------- --------- -------------- ----------
<S> <C> <C> <C> <C>
Allowance for inventory
obsolescence:
1998.............................. $45,000 $65,893 $(40,893) $70,000
======= ======= ======== =======
1997.............................. $25,000 $73,631 $(53,631) $45,000
======= ======= ======== =======
1996.............................. $ -- $35,996 $(10,996) $25,000
======= ======= ======== =======
Allowance for doubtful accounts:
1998.............................. $ 7,965 $28,336 $(23,045) $13,256
======= ======= ======== =======
1997.............................. $ 4,000 $18,013 $(14,048) $ 7,965
======= ======= ======== =======
1996.............................. $ -- $35,772 $(31,772) $ 4,000
======= ======= ======== =======
</TABLE>

- -------------------------

(a) Amount written off as either obsolete or uncollectible.

II-6
<PAGE> 90

INDEX TO EXHIBITS

<PAGE> 91

<TABLE>
<CAPTION>
NUMBER DESCRIPTION
- -------- -----------
<S> <C>
24.1* Powers of Attorney (See Signature Page on Page II-6).
27.1* Financial Data Schedule.
</TABLE>

- -------------------------
+ To be filed by amendment.

++ We have sought confidential treatment pursuant to Rule 406 of portions of
the referenced exhibit.

* Previously filed.

<PAGE> 1
Exhibit 5.1

---------- --, ----

CompGeeks, Inc.
2370 Oak Ridge Way
Vista, CA 92083

Re: CompGeeks, Inc. Registration Statement on Form S-1 for
5,750,000 Shares of Common Stock

Ladies and Gentlemen:

We have acted as counsel to CompGeeks, Inc., a Delaware
corporation (the "Company"), in connection with the proposed issuance and sale
by the Company of up to 5,750,000 shares of the Company's Common Stock (the
"Shares"), including 750,000 Shares which the Underwriters have the option to
purchase to cover over-allotments, if any, pursuant to the Company's
Registration Statement on Form S-1 (the "Registration Statement") filed with the
Securities and Exchange Commission under the Securities Act of 1933, as amended
(the "Act").

This opinion is being furnished in accordance with the
requirements of Item 16(a) of Form S-1 and Item 601(b)(5)(i) of Regulation S-K.

We have reviewed the Company's charter documents and the
corporate proceedings taken by the Company in connection with the issuance and
sale of the Shares. Based on such review, we are of the opinion that the Shares
have been duly authorized, and if, as and when issued in accordance with the
Registration Statement and the related prospectus (as amended and supplemented
through the date of issuance) will be legally issued, fully paid and
nonassessable.

We consent to the filing of this opinion letter as Exhibit 5.1 to
the Registration Statement and to the reference to this firm under the caption
"Legal Matters" in the prospectus which is part of the Registration Statement.
In giving this consent, we do not thereby admit that we are within the category
of persons whose consent is required under Section 7 of the Act, the rules and
regulations of the Securities and Exchange Commission promulgated thereunder, or
Item 509 of Regulation S-K.

<PAGE> 2
----------- --, --------
Page 2

This opinion letter is rendered as of the date first written above and we
disclaim any obligation to advise you of facts, circumstances, events or
developments which hereafter may be brought to our attention and which may
alter, affect or modify the opinion expressed herein. Our opinion is expressly
limited to the matters set forth above and we render no opinion, whether by
implication or otherwise, as to any other matters relating to the Company or the
Shares.

Very truly yours,

BROBECK, PHLEGER & HARRISON LLP

<PAGE> 1
EXHIBIT 23.1

INDEPENDENT AUDITORS' REPORT ON SCHEDULE AND CONSENT

The Boards of Directors of
The CompGeeks Companies:

The audits referred to in our report dated May 12, 1999, included the related
financial statement schedule as of December 31, 1998, and for each of the years
in the three-year period ended December 31, 1998, included in the registration
statement. This financial statement schedule is the responsibility of the
Company's management. Our responsibility is to express an opinion on this
financial statement schedule based on our audits. In our opinion, such
financial statement schedule, when considered in relation to the basic combined
financial statements taken as a whole, presents fairly in all material respects
the information set forth therein.

We consent to the use of our reports included herein and to the reference to our
firm under the heading "Experts" in the prospectus.

KPMG LLP

San Diego, California
November 10, 1999