Edgar Filing: ALL AMERICAN SEMICONDUCTOR INC

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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13
OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934

FOR THE FISCAL YEAR ENDED DECEMBER 31, 2000
COMMISSION FILE NUMBER: 0-16207

ALL AMERICAN SEMICONDUCTOR, INC.
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(Exact name of registrant as specified in its charter)

Delaware 59-2814714
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)

16115 N.W. 52nd Avenue
Miami, Florida 33014
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(Address of principal executive offices) (Zip Code)

Registrant's telephone number, including area code: (305) 621-8282

Securities registered pursuant to Section 12(b) of the Act: None

Securities registered pursuant to Section 12(g) of the Act:
COMMON STOCK

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes [X] No [ ]

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [X]

As of March 20, 2001, 4,040,150 shares (including 32,141 held by a wholly-owned
subsidiary of the Registrant) of the common stock of ALL AMERICAN SEMICONDUCTOR,
INC. were outstanding, and the aggregate market value of the common stock held
by non-affiliates was $31,400,000.

Documents Incorporated by Reference:

Portions of the definitive proxy statement to be filed within 120 days after the
end of the Registrant's fiscal year are incorporated by reference into Part III.
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ALL AMERICAN SEMICONDUCTOR, INC.

FORM 10-K - 2000

TABLE OF CONTENTS

Part Item Page
No. No. Description No.
---- ---- ----------- ----

I 1 Business................................................ 1
2 Properties.............................................. 12
3 Legal Proceedings....................................... 13
4 Submission of Matters to a Vote of Security-Holders..... 13

II 5 Market for the Registrant's Common Equity and
Related Stockholder Matters........................... 13
6 Selected Financial Data................................. 15
7 Management's Discussion and Analysis of
Financial Condition and Results of Operations......... 16
7A Quantitative and Qualitative Disclosures about
Market Risk........................................... 25
8 Financial Statements and Supplementary Data............. 25
9 Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure................... 25

III 10 Directors and Executive Officers of the Registrant...... 25
11 Executive Compensation.................................. 25
12 Security Ownership of Certain Beneficial Owners and
Management............................................ 25
13 Certain Relationships and Related Transactions.......... 25

IV 14 Exhibits, Financial Statement Schedule, and Reports
on Form 8-K........................................... 26

PART I

ITEM 1. BUSINESS

GENERAL

All American Semiconductor, Inc. and its subsidiaries (collectively, the
"Company"; sometimes referred to herein as "Registrant") is a national
distributor of electronic components manufactured by others. The Company
distributes a full range of semiconductors (active components), including
transistors, diodes, memory devices, microprocessors, microcontrollers and other
integrated circuits, as well as passive components, such as capacitors,
resistors, inductors and electromechanical products, including cable, switches,
connectors, filters and sockets. These products are sold primarily to original
equipment manufacturers in a diverse and growing range of industries, including
manufacturers of computers and computer-related products; home office and
portable equipment; networking, satellite, wireless and other communications
products; Internet infrastructure equipment and appliances; automobiles;
consumer goods; robotics and industrial equipment; defense and aerospace
equipment; and medical instrumentation. The Company also sells products to
contract electronics manufacturers, or electronics manufacturing services, or
EMS, providers who manufacture products for companies in all electronics
industry segments. Through the Aved Memory Products and Aved Display
Technologies divisions of its subsidiary, Aved Industries, Inc., the Company
also designs and has manufactured under the label of its subsidiary's divisions,
certain board level products including memory modules and flat panel display
driver boards. See "Products." These products are also sold to original
equipment manufacturers.

While the Company reincorporated in Delaware in 1987, it and its predecessors
have operated since 1964. The Company was recognized by industry trade
publications as the 5th largest distributor of semiconductors and the 12th
largest electronic components distributor overall in the United States, out of
an industry group that numbers more than 1,000 distributors.

The Company's principal executive office is located at 16115 N.W. 52nd Avenue,
Miami, Florida 33014. Our headquarters for sales and marketing functions and the
office of our President and Chief Executive Officer are located at 230 Devcon
Drive, San Jose, California 95112. Our telephone number in Florida is (305)
621-8282.

THIS REPORT (PARTICULARLY "ITEM 1. BUSINESS" AND "ITEM 7. MANAGEMENT'S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS")
CONTAINS STATEMENTS THAT ARE FORWARD-LOOKING WITHIN THE MEANING OF SECTION 27A
OF THE SECURITIES ACT OF 1933, AS AMENDED, AND SECTION 21E OF THE SECURITIES
EXCHANGE ACT OF 1934, AS AMENDED. SEE "ITEM 7. MANAGEMENT'S DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - FORWARD-LOOKING
STATEMENTS; BUSINESS RISKS."

THE ELECTRONICS AND ELECTRONICS DISTRIBUTION INDUSTRIES

The electronics industry is one of the largest and fastest growing industries in
the United States. Industry associations estimate total U.S. factory sales of
electronic products will continue to grow. The growth of this industry has been
driven by increased demand for new products incorporating sophisticated
electronic components, such as laptop computers, home office and portable
equipment, networking, satellite, wireless and other communications products,
infrastructure equipment and appliances for the Internet, and multimedia
products; as well as the increased utilization of electronic components in a
wide range of industrial, automotive, consumer and military products. Worldwide
consumption of semiconductor products grew from $126 billion in 1998 to over
$200 billion in 2000. Analysts project that consumption of semiconductor
products will reach $319 billion in 2003.

The three product groups included in the electronic components subsegment of the
electronics industry are semiconductors, passive/electromechanical components,
and systems and computer products (such as disk drives, terminals and computer
peripherals). The Company believes that semiconductors and

passive/electromechanical products currently account for approximately 41% and
32%, respectively, of the electronic components distribution marketplace, while
systems and computer products account for the remaining 27%. The Company only
participates in the distribution of semiconductors and passive/electromechanical
products which account for two of the three industry product groups.

Distributors are an integral part of the electronics industry. During 2000, an
estimated $37 billion of electronic components were sold through distribution in
North America, up from $10 billion in 1992. In recent years, there has been a
growing trend for distribution to play an increasing role in the electronics
industry. Original equipment manufacturers and contract electronics
manufacturers which utilize electronic components are increasingly looking to
outsource their procurement, inventory and materials management processes to
third parties in order to concentrate their resources (including management
talent, personnel costs and capital investment) on their core competencies,
which include product development, sales and marketing. Large distribution
companies not only fill these procurement and materials management roles, but
further serve as a single supply source for original equipment manufacturers and
contract electronics manufacturers, offering a much broader line of products,
incremental quality control measures and more support services than individual
electronic component manufacturers. Management believes that original equipment
manufacturers and contract electronics manufacturers will continue to increase
their service and quality requirements, and that this trend will result in
original equipment manufacturers, contract electronics manufacturers and
electronic component manufacturers continuing to be dependent on distributors in
the future.

Electronic component manufacturers are under similar pressure to allocate a
larger share of their resources to research, product development and
manufacturing capacity as technological advances continue to shorten product
lifecycles. Electronic component manufacturers sell directly to only a small
number of their potential customers. This small segment of their customer base
accounts for a large portion of the total available revenues. It is not
economical for component manufacturers to provide a broad range of sales support
services to handle the large amount of customers that account for the balance of
available revenues. With their expanded technology and service capabilities,
large distributors have now become a reliable means for component manufacturers
to outsource their sales, marketing, customer service and distribution
functions. This trend particularly benefits larger distributors with nationwide
distribution capabilities such as the Company, as manufacturers continue to
allocate a larger amount of their customer base to a more limited number of full
service distribution companies.

As a result of the trends discussed above, management believes that distribution
will be involved in an increasing portion of the electronics industry.

Another prevalent trend in the electronics distribution industry has been the
consolidation of distribution companies. This trend has accelerated, especially
in terms of magnitude, in recent years. The Company believes that this
consolidation has to date created, and will continue in the future to create,
growth opportunities for the Company. The Company believes that consolidation
trends have caused customers to lose as many as three of their approved
distributors. As a result, the Company believes that the Company has increasing
opportunities to add customers and/or do more business with existing customers
as consolidation has required the customers to consider realigning their
distribution networks. Similarly, as a result of consolidation, many suppliers
have either lost a distributor or become a much less significant supplier to the
consolidated distribution company. As a result of this impact from
consolidation, the Company believes that suppliers have recently added, and will
continue in the future to add, new distributors to their distribution networks.
Management believes that the Company has benefited from, and will continue to
benefit in the future from, the consolidation trend.

BUSINESS STRATEGY

The Company's strategy is to continue its managed growth and to gain market
share by: (i) taking advantage of consolidation trends, (ii) increasing the
number of customers it sells to through a combination of expanding existing
sales offices, opening new sales offices and making selective acquisitions;
(iii) increasing sales to existing customers by continuing to add new suppliers
and expand its product offerings and service capabilities; and (iv) increasing
its participation in e-commerce.

The Company believes that investment in expansion and capabilities is necessary
to enable the Company to participate in the dynamics of its rapidly changing
industry and to achieve greater profitability in the future.

In an effort to accelerate internal growth, during 1998 the Company began to
enhance its management team in many areas and reformulate and implement
strategies for expansion. The first half of 1999 was marked with continued
pressure on profitability throughout the industry as well as turmoil resulting
from accelerated consolidation trends. During the second half of 1999 market
conditions began to change as the excessive supply environment reversed, product
lead times began to stretch and some product groups went on allocation. As a
result, gross profit margins began to increase slightly. This reversal of market
conditions, combined with the expansion and other strategic decisions
implemented by management, enabled the Company to achieve improved results and
greater market penetration during the second half of 1999 which improvements
accelerated during 2000 resulting in the highest sales and profitability levels
in the Company's history. Even though 2000 was a record year, during the fourth
quarter the industry experienced a rather dramatic slowdown which may continue
for several quarters. While management believes that it may be able to increase
market share and increase profitability in the future, there can be no assurance
that these goals will be achieved, particularly since their achievement depends
to a large extent on market conditions outside the Company's control.

Expansion

The Company had undergone significant expansion prior to 1998, including opening
new offices, relocating and expanding existing offices and acquiring other
companies, all in order to increase its sales volume, expand its geographic
coverage and become recognized as a national distributor. See "Sales and
Marketing-Sales Office Locations."

As a result of the implementation of the Company's business strategy, the
Company has experienced significant growth every year except 1998. In order to
effectively drive and manage its expansion, the Company continues to: (i)
restructure, enhance and expand its sales staff and sales management and
marketing teams; (ii) expand its quality control programs, including its total
quality management program and its continuous process improvement program
(referred to as "BPR" or Business Process Reengineering) that ensure quality
service, enhance productivity and, over time, reduce costs; (iii) expand its
corporate operations department; (iv) enhance its state-of-the-art distribution
technology; and (v) enhance its asset management capabilities through new
computer and telecommunications equipment and, during 2000, through the opening
of a west coast asset management group. To keep up with industry trends the
Company continues to make significant investments in its web site and Internet
capabilities as well as other forms of e-commerce; and in that regard during
1999 created its own web development group. The Company also continues to expand
its investment in its Field Application Engineer Program. In addition to adding
field application engineers to the program, in 2000 the Company created the All
American Technical Sales Program and opened the All American Technical Center.
Additionally, the Company continued to increase its investment in its materials
management solutions capabilities which is now referred to as Supply Chain
Management. As the Company has now developed a greater visibility at the
industry's top tier customer base, the Company has also created an Executive
Accounts Program. To better service the large customer base in the western part
of the United States and to enhance relationships with a supplier base that is
predominantly based in California, the Company has dramatically expanded its
west coast corporate offices and relocated the President and Chief Executive
Officer of the Company to San Jose to be based where sales and marketing
functions are headquartered. The Company has also expanded the operations of its
west coast programming and distribution center.

Since the beginning of 1998, the Company has opened five new sales offices in
the United States including one office which was opened during 2000. The Company
expanded its international presence during 1998 with the opening of a sales
office in Guadalajara, Mexico and a distribution center there in 2000. The
Company currently expects to continue to open new offices and may seek to
acquire additional companies in the future. The Company also plans to continue
its focus on improving the financial performance and market penetration of each
existing location.

Increasing Product Offerings

The Company intends to continue its effort to increase the number and breadth of
its product offerings, thereby allowing it to attract new customers and to
represent a larger percentage of the purchases being made by its existing
customers. As part of its efforts to attract new suppliers and expand its
product offerings, in the last few years the Company further expanded its
service capabilities and has opened new sales offices (see "Expansion").

During the last three years, and particularly during 2000, the Company added
many new suppliers and expects to add additional suppliers in the future. These
new suppliers are intended to offer larger growth opportunities than some of the
smaller suppliers that the Company has done business with in the past. New
supplier relationships generally require up-front investments that could take
substantial time to provide a return.

Service Capabilities

During the past several years, customers have been reducing their approved
vendor base in an effort to place a greater percentage of their purchases with
fewer, more capable distributors. As part of its overall strategy to increase
market penetration, the Company has endeavored to develop state-of-the-art
service capabilities. The Company refers to these service capabilities as
"distribution technology." The Company believes that it has developed service
capabilities comparable to some of the largest distributors in the industry,
which service capabilities the Company believes are not yet readily available at
many distributors of comparable size to the Company. The Company further
believes that these capabilities are not generally made available by the largest
distributors to middle market customers, which represent the vast majority of
the Company's customer base. See "Competition." Management believes that smaller
distributors generally do not have the ability to offer as broad an array of
services as the Company. The Company differentiates itself from its competition
by making state-of-the-art distribution technology available to both large and
middle market customers. Although the Company believes that this differentiation
will assist the Company's growth, there can be no assurance that such
differentiation exists to the extent that the Company currently believes or that
it will continue in the future.

The Company's distribution technology incorporates nationwide access to
real-time inventory and pricing information, electronic order entry and rapid
order processing. During the past few years, the Company has expanded its
service capabilities for just-in-time deliveries, bar coding, bonded inventory
programs, kitting and turnkey services, in-plant stores, in-plant terminals,
electronic data interchange programs, automatic inventory replenishment programs
and complete supply chain management solutions.

In order to further enhance its service capabilities, the Company has also
expanded its Field Application Engineer Program and the Company expects to hire
additional field application engineers in the future. In 2000, the Company
augmented its Field Application Engineer Program by starting the All American
Technical Sales Program. The All American Technical Sales Program is intended to
create another level of salespeople who are certified as technically competent
to assist customers in the design process and in design decisions without
actually being at the engineering level of a field application engineer.
Additionally, the Company opened the All American Technical Center, which is
being staffed with design specialists that can assist our sales force, our All
American Technical Sales people and our field application engineers when a
higher level of expertise is needed. The All American Technical Center staff
will also focus on creating reference designs and design tools to assist
customers and suppliers. These programs are intended to generate sales by
providing customers with engineering support and increased service at the design
and development stages. These programs are also intended to enhance the
technical capabilities of the Company's entire sales force through regular
training sessions. Management believes that this capability is also of great
importance in attracting new suppliers.

Another rapidly growing segment of electronics distribution is the sale of
programmable semiconductor products. Programmable semiconductors enable
customers to reduce the number of components they use by highly customizing one
semiconductor to perform a function that otherwise would require several
components to accomplish. This saves space and enables customers to reduce the
size and cost of their

products. In order to effectively sell programmable products, most major
distributors have established their own semiconductor programming centers. To
participate in this growing segment of the industry, the Company has a 20,000
square foot facility in Fremont, California (near San Jose) which incorporates a
programming and a distribution center. In order to service growing customer
demand as well as changing technologies, the Company increased its investments
in its programming capabilities during 1999 by purchasing additional programming
equipment and increasing its programming staff. In addition to enabling the
Company to address a rapidly growing market for programmable products, this
capability will allow the Company to attract new product lines that require
programming capabilities.

The Company believes that in the upcoming years an increasing amount of
transactions in its industry will be processed over the Internet. In this
regard, the Company designed and developed its own web site which became
operational during the first quarter of 1997. In order to further expand its
utilization of and functionality on the Internet, the Company created its own
web development team in 1999. Additionally, to further its e-commerce strategies
the Company has engaged with multiple third party Internet/e-commerce companies
to expand the visibility of the Company and the ways in which customers can
conduct commerce with the Company. These engagements are expected to expand and
improve customer service, increase revenues, reduce transaction costs and afford
the Company an opportunity to do business in a new and still developing
marketplace. While these engagements have increased operating costs and may
increase costs further in the future, many benefits are expected to be realized
from these investments, however, no assurances can be made that the Company will
realize such benefits.

The Company also provides value-added services relating to its
passive/electromechanical business.

Quality Controls and ISO Certification

The Company has a total quality management and a continuous process improvement
program, referred to as "BPR" or Business Process Reengineering, in order to
improve service, increase efficiency and productivity and, over time, reduce
costs. The expansion in capacity and service capabilities discussed above were
done within the confines of increasing strictness in quality control programs
and traceability procedures. As a result, the Company's Miami and Fremont
distribution centers and its Fremont programming center have all successfully
completed a procedure and quality audit that resulted in their certification
under the international quality standard of ISO 9002. This quality standard was
established by the International Standards Organization, or ISO, created by the
European Economic Community, or EEC. The ISO created uniform standards of
measuring a company's processes, traceability procedures and quality control in
order to assist and facilitate business among the EEC. The Company believes that
this certification is becoming a requirement of an increasing portion of the
customer base.

PRODUCTS

Active and Passive Components

The Company markets both semiconductors and passive products. Semiconductors,
which are active components, respond to or activate upon receipt of electronic
current. Active products include transistors, diodes, memory devices,
microprocessors, microcontrollers and other integrated circuits. Passive
components, on the other hand, are designed to facilitate completion of
electronic functions. Passive products include capacitors, resistors, inductors
and electromechanical products such as cable, switches, connectors, filters and
sockets. Virtually all of the Company's customers purchase both active and
passive products.

While the Company offers many of the latest technology semiconductor and passive
products, its focus historically had been on mature products that have a more
predictable demand, more stable pricing and more constant sourcing. Although the
Company continues to position itself as a leader in the more mature product
lines, as part of its growth strategy, the Company has expanded its focus to
include offering newer technology products as well as on selling high volumes of
commodity products. These newer technologies and commodity products are playing
a greater role in the overall sales mix of the Company and are expected to play
an even greater role in the overall sales mix to the extent the

Company's sales grow. Most of the commodity products, and many of the newer
technology products, have lower profit margins than the more mature product
lines.

The Company does not offer express warranties with respect to any of its
component products, instead passing on only those warranties, if any, granted by
its suppliers.

Flat Panel Display Products

The Company believes that one of the faster growing segments of the electronics
industry will result from the expanded utilization of flat panel displays. Flat
panel displays are commonly used in laptop computers and are currently replacing
standard cathode ray tubes in a variety of applications, including medical,
industrial and commercial equipment, as well as personal computers, televisions,
automated teller machines and video monitors. In addition to replacing cathode
ray tubes in traditional applications, as a result of the lower power
requirements and reduced space needs of flat panel displays, the advent of flat
panels is enabling the implementation of display applications that were not
achievable with cathode ray tubes, such as laptop and palmtop computers,
handheld and portable products and advertising displays.

In order to properly function in any application, flat panel displays need
certain electronic impulses. One solution for generating these electronic
impulses is the use of board level products that control and regulate the
electronic input that drives the flat panel display. These products are commonly
referred to as driver boards. In addition to the driver board, flat panel
displays require a back-light inverter to run the back-light, and cable
assemblies to connect the display, inverter and the driver board to each other
and to the equipment of which it is a part.

The Company has addressed the flat panel display market in four ways. First, the
Company has assembled a comprehensive offering of flat panel display products,
including products from manufacturers of flat panel displays, as well as
manufacturers of the necessary support products such as back-light inverters,
driver boards, cabling and touch-screen filaments. The second aspect in
addressing the flat panel display market is to develop the technical support
necessary to assist customers with integrating flat panel display applications.
In this regard the Company's Field Application Engineer Program and marketing
department have been developing expertise in flat panel display applications and
integration. Additionally, the Company has added flat panel display specialists
to its sales and marketing groups. In response to the growing need for support
of flat panel display business, during 1999 the Company formed its Display
Solutions Group to be a separate group within the Company dedicated entirely to
the support of flat panel display opportunities. Through its Display Solutions
Group, the Company has expanded its internal staff as well as developed
relationships with independent subcontractors, referred to as integrators, in
many different geographic locations. This strategy enables the Company to offer
a broad selection of products, services and solutions needed to service the
varying levels of support required by the customer base.

The third aspect to the Company's approach to the flat panel display marketplace
was accomplished with the creation of Aved Display Technologies. Aved Display
Technologies, which is run as a separate division, designs, develops and has
manufactured under its own label several proprietary driver board products for
flat panel display applications. In addition to Aved Display Technologies, the
Company also has other suppliers of flat panel display driver board products.

The fourth aspect to the Company's approach to the flat panel display
marketplace began with the creation of Integrated Display Technologies in the
fourth quarter of 2000. Integrated Display Technologies, which is run as a
separate division, is dedicated to addressing customer needs for design and
integration solutions for specialized applications.

Memory Modules

The Company also designs, has manufactured and sells memory modules under the
Aved Memory Products label. Memory products, which include the memory module
subsegment, represent one of the largest product sectors of semiconductor
revenues. Memory modules

facilitate the incorporation of expanded memory in limited space. In addition to
Aved Memory Products, the Company has other suppliers of memory module products.

With respect to all products manufactured or assembled for Aved Display
Technologies, Integrated Display Technologies and Aved Memory Products, the
Company offers a warranty for a period of one year against defects in
workmanship and materials under normal use and service, in their original
unmodified condition and in compliance with the Company's terms and conditions.

CUSTOMERS

The Company markets its products primarily to original equipment manufacturers
in a diverse and growing range of industries. The Company's customer base
includes manufacturers of computers and computer-related products; home office
and portable equipment; networking, satellite, wireless and other communications
products; Internet infrastructure equipment and appliances; automobiles;
consumer goods; robotics and industrial equipment; defense and aerospace
equipment; and medical instrumentation. The Company also sells products to
contract electronics manufacturers, or electronics manufacturing services
providers, who manufacture products for companies in all electronics industry
segments. The Company's customer list includes approximately 12,000 accounts.
During 2000, no customer accounted for more than 5% of the Company's sales and
the Company does not believe that the loss of any one customer would have a
material adverse impact on its business.

SALES AND MARKETING

Overall Strategy

The Company differentiates itself from its competitors in the marketplace by the
combination of products and services that it can provide to its customers. The
Company is a broad-line distributor offering over 60,000 different products
representing approximately 75 different component manufacturers. In addition,
the Company employs a decentralized management philosophy whereby branch
managers are given latitude to run their operations based on their experience
within their particular regions and the needs of their particular customer base.
This decentralization results in greater flexibility and a higher level of
customer service. Thus, the Company believes it can provide the broad product
offering and competitive pricing normally associated with the largest national
distributors, while still providing the personalized service levels usually
associated only with regional or local distributors. As a result of its size and
capabilities, the Company brings to the middle market customers a level of
service capabilities that the smaller distributor cannot provide.

The Company's marketing strategy is to be a preferred and expanding source of
supply for all middle market customers. The Company is achieving this by
providing a broader range of products and services than is available from
smaller and comparably sized distributors, and a higher level of attention than
these customers receive from the larger distributors. In addition, the Company
continues its efforts to become a more significant supplier for the top tier
customers by focusing on a niche of products not emphasized by the larger
distributors while providing the high level of quality, service and technical
capabilities required to do business with these accounts.

The Company's marketing strategy also includes the expansion of its e-commerce
capabilities by enhancing its web site functionality and developing its portal
capabilities to enable its customers to utilize the services available from the
Company's strategically selected e-commerce partners.

Marketing Techniques

As part of the Company's marketing strategy, the marketing department is based
in Silicon Valley near the headquarters of the vast majority of the supplier
base. The Company uses various techniques in marketing its products which
include: (i) direct marketing through personal visits to customers by
management, field salespeople and sales representatives, supported by a staff of
inside sales personnel who handle the quoting, accepting, processing and
administration of sales orders; (ii) ongoing advertising

in various national industry publications and trade journals; (iii) general
advertising, sales referrals and marketing support from component manufacturers;
(iv) the Company's telemarketing efforts; and (v) a web site and portals on the
Internet. The Company also uses its expanded service capabilities, its Field
Application Engineer Program, Display Solutions Group, Supply Chain Management
capabilities and its status as an authorized distributor as marketing tools. See
"Business Strategy-Service Capabilities" and "Suppliers."

Sales Personnel

As of March 1, 2001, the Company employed 413 people in sales on a full-time
basis, of which 170 are field salespeople (of which over 25 are a part of our
new All American Technical Sales Program), 160 are inside salespeople, 36 are in
management, 29 are in administration and 18 are engineers in the Field
Application Engineer Program. The Company also had 11 sales representatives
covering various territories where the Company does not have sales offices.
Salespeople are generally compensated by a combination of salary and commissions
based upon the gross profits obtained on their sales. Each branch is run by a
general manager who reports to a regional manager, who in turn reports to an
area manager. All area managers report to the Company's Senior Vice President of
Sales. Area, regional and general managers are compensated by a combination of
salary and incentives based on achieving gross profit goals.

Sales Office Locations

The Company currently operates 33 sales offices in 21 states, Canada and Mexico.
The locations of the sales offices are in each of the following geographic
markets: Huntsville, Alabama; Phoenix, Arizona; Orange County, Sacramento, San
Diego, San Fernando Valley, San Jose and Tustin, California; Toronto, Canada;
Denver, Colorado; Fort Lauderdale, Miami, Orlando and Tampa, Florida; Atlanta,
Georgia; Chicago, Illinois; Kansas City, Kansas; Baltimore, Maryland; Boston,
Massachusetts; Guadalajara, Mexico; Detroit, Michigan; Minneapolis, Minnesota;
Long Island and Rochester, New York; Raleigh, North Carolina; Cleveland, Ohio;
Portland, Oregon; Philadelphia, Pennsylvania; Austin and Dallas, Texas; Salt
Lake City, Utah; Seattle, Washington and Milwaukee, Wisconsin.

The Company also retains field sales representatives to market other territories
throughout the United States, Canada, Puerto Rico and Mexico. The Company may
consider opening branches in these other territories if the representatives
located there achieve certain sales levels.

Transportation

All of the Company's products are shipped through third party carriers. Incoming
freight charges are generally paid by the Company, while outgoing freight
charges are typically paid by the customer.

Seasonality

The Company's sales have not historically been materially greater in any
particular season or part of the year.

Foreign Sales

Sales to foreign countries aggregated approximately $31.6 million, $24.1 million
and $9.4 million for 2000, 1999 and 1998, respectively.

BACKLOG

As is typical of distributors, the Company has a backlog of customer orders.
While these customer orders are cancelable, the Company believes that its
backlog is usually an indicator of future sales. At December 31, 2000, the
Company had a backlog in excess of $158 million, compared to a backlog in excess
of $80 million at December 31, 1999 and $43 million at December 31, 1998. During
1998 and the first half of

1999 there was an excess availability of product throughout the industry. As a
result, customers kept much lower levels of product on order as delivery times
were short and prices were often declining. During the second half of 1999 these
conditions changed, lead times began to stretch and certain product groups were
being allocated by suppliers. As a result, customers began increasing the amount
of their scheduled orders. Conditions of tight supply often result in customers
placing scheduled orders for more product than they actually need (referred to
in the industry as double booking). When product availability improves,
customers begin to have more inventory than they need and the industry typically
experiences backlog cancellations and inventory corrections. During the second
half of 2000, lead times began to shorten and product availability improved. The
combination of improved product availability, a slowing economy and other
factors caused a sudden change in market conditions in our industry during the
fourth quarter of 2000. In response, customers began canceling their backlog of
orders. While the Company's backlog was at $158 million at December 31, 2000, it
had fallen to $131 million by February 28, 2001.

The Company believes that a substantial portion of its backlog represents
products due to be delivered within the next three months. Historically,
approximately 30% of the backlog relates to purchase orders which call for
scheduled shipments of inventory over a period of time, with the balance
representing products that are on back-order with suppliers. The scheduled
shipments enable the Company to plan purchases of inventory over extended time
periods to satisfy such requirements. At this point in time, the correlation of
backlog to future sales is less of an indicator than historically. In addition,
the Company has increased its practices of electronic data interchange
transactions where the Company purchases inventory based on electronically
transmitted customer forecasts that may not become an order until the date of
shipment and, therefore, may not be reflected in the Company's backlog.

SUPPLIERS

The Company generally purchases products from component manufacturers pursuant
to non-exclusive distribution agreements. Such suppliers generally limit the
number of distributors they will authorize in a given territory in order to
heighten the distributor's focus on their products as well as to prevent
over-distribution. Suppliers also limit the number of distributors in order to
reduce the costs associated with managing multiple distributors. As a factory
authorized distributor, the Company obtains sales referrals, as well as sales,
marketing and engineering support, from component manufacturers. This support
assists the Company in closing sales and obtaining new customers. The Company's
status as an authorized distributor is a valuable marketing tool as customers
recognize that when dealing with an authorized distributor they receive greater
support from the component manufacturers.

The Company believes that an important factor which suppliers consider in
determining whether to grant or to continue to provide distribution rights to a
certain distributor is that distributor's geographic coverage. In meeting its
goal of being recognized as a national distributor, the Company has opened and
acquired sales offices in a number of markets throughout the United States and
has advertised in national industry publications to demonstrate its distribution
capabilities to current and potential suppliers. Another important factor that
suppliers consider is whether the distributor has in place an engineering staff
capable of assisting customers in designing-in the suppliers' products at the
customer base. To address this requirement, the Company has a Field Application
Engineer Program which is currently staffed with 18 engineers. The Company's
Field Application Engineer Program is now augmented by the All American
Technical Sales Program started in 2000. During the last three years, the
Company has been successful in adding new suppliers.

Almost all distribution agreements are cancelable by either party, typically
upon 30 to 90 days notice. For the year ended December 31, 2000, the Company's
three largest suppliers accounted for 22%, 7% and 5% of consolidated purchases,
respectively. See Note 12 to Notes to Consolidated Financial Statements. While
most of the products that the Company sells are available from other sources,
the Company's future success will depend in large part on maintaining
relationships with existing suppliers and developing relationships with new
ones. While the Company believes that the loss of a key supplier could have an
adverse impact on its business in the short term, the Company would attempt to
replace the products offered by that supplier with the products of other
suppliers. If the Company were to lose its rights to distribute the products of
any particular supplier, there can be no assurance that the Company

would be able to replace the products which were available from that particular
supplier. The loss of, or significant disruption in relationships with, any of
the Company's largest suppliers or a significant number of other suppliers in a
short period of time could have a material adverse effect on the Company and its
operating results. The Company, from time to time, alters its list of authorized
suppliers in an attempt to provide its customers with a better product mix.

The Company believes that it benefits from technological change within the
electronics industry as new product introductions accelerate industry growth and
provide the Company with additional sales opportunities. The Company believes
its inventory risk due to technological obsolescence is significantly reduced by
certain provisions typically found in its distribution agreements addressing
price protection, stock rotation privileges, obsolescence credits and return
privileges. Price protection is typically provided in the form of a credit to
the Company for any inventory the Company has of products for which the
manufacturer reduces its prices. Stock rotation privileges typically allow the
Company to exchange inventory in an amount up to 5% of a prior period's
purchases. Obsolescence credits allow the Company to return products which a
manufacturer discontinues. Upon termination of a distribution agreement, the
return privileges generally require the manufacturer to repurchase the Company's
inventory at the Company's average purchase price, however, if the Company
terminates the distribution agreement, there is generally a 10% to 15%
restocking charge.

The vast majority of the Company's inventory is purchased pursuant to its
distribution agreements. The Company does not generally purchase product for
inventory unless it is a commonly sold product, there is an outstanding customer
order to be filled, a special purchase is available or unless it is an initial
stocking package in connection with a new line of products. As a result of the
Company's strategy in how it has positioned itself in a rapidly consolidating
industry, the Company has been successful in attracting many new suppliers in
recent periods. As a result, the Company has added many new stocking packages to
its inventory. These new stocking packages typically take time to become
productive. While management believes that these new product lines and the
resulting stocking packages should provide growth opportunities in the future,
there can be no assurance that this strategy will be successful.

FACILITIES AND SYSTEMS

Facilities

The Company's corporate headquarters and main distribution center are located in
a 110,800 square foot facility in Miami, Florida. The Company occupies this
facility through a lease which expires in 2014, subject to the Company's right
to terminate at any time upon twenty-four months prior written notice and the
payment of all outstanding debt owed to the landlord. The lease for this
facility contains three six-year options to renew at the then fair market value
rental rates.

The Company also leases approximately 20,000 square feet of space for its west
coast distribution and semiconductor programming center located in Fremont,
California (near San Jose). In Denver, Colorado the Company leases a 7,600
square foot facility which is dedicated to certain value-added services and a
regional distribution center.

In Tustin, California the Company leases a 13,900 square foot facility which
presently contains all operations for the separate divisions of Aved Display
Technologies and Aved Memory Products. See "Products." In December 2000, the
Company leased 26,700 square feet of space in Irvine, California which will
house the operations of the Company's newly created Integrated Display
Technologies division. The Company also intends to relocate to the Irvine
location the operations of Aved Display Technologies when construction of the
facility is completed. This will permit the expansion of the operations of Aved
Memory Products which will then occupy all of the existing facility in Tustin.

President and Chief Executive Officer of the Company and 8,000 square feet of
the space is being utilized for the sales operation. The remaining area of
approximately 4,000 square feet is presently being sublet.

In addition, the Company leases space for its other sales offices, which offices
range in size from approximately 1,000 square feet to 8,000 square feet. See
"Sales and Marketing-Sales Office Locations."

Due to the price erosion that is typical in its industry, as well as the
continued growth in the Company's revenues, the Company has utilized some of its
excess capacity as its unit volume shipped has increased significantly. As a
result of its capacity utilization, as well as the need to increase productivity
in its distribution centers, the Company is presently evaluating potential
investments to add further storage and automation to its existing distribution
centers.

Systems

The Company's systems and operations are designed to facilitate centralized
warehousing which allows salespeople across the country to have real-time access
to inventory and pricing information and allows a salesperson in any office to
enter orders electronically, which instantaneously print in the appropriate
distribution facility for shipping and invoicing. The combination of the
centralized distribution centers and the electronic order entry enable the
Company to provide rapid order processing at low costs. The system also provides
for automatic credit checks, which prohibit any product from being shipped until
the customer's credit has been approved. Additionally, the systems allow the
Company to participate with customers and suppliers in electronic data
interchange and to expand customer services, including just-in-time deliveries,
kitting programs, bar coding, automatic inventory replenishment programs, bonded
inventory programs, in-plant stores and in-plant terminals and complete supply
chain management solutions.

As a result of rapidly increasing advances in technology, the Company has
recognized that its computer and communications systems will be subject to
continual enhancements. In order to meet the increasing demands of customers and
suppliers, to maintain state-of-the-art capabilities and to participate in
e-commerce, the Company has continually been expanding, and in the future will
continue to develop and expand, its systems capabilities, including hardware and
software upgrades to meet its computer and communications needs. The Company
believes that these systems enhancements should assist the Company in increasing
sales, improving efficiencies and providing the potential for greater
profitability in future periods through increased employee productivity,
enhanced asset management, improved quality control capabilities and expanded
customer service capabilities. See "Business Strategy-Service Capabilities."
There can be no assurance, however, that these benefits will be achieved.

FOREIGN MANUFACTURING AND TRADE REGULATION

A significant number of the components sold by the Company are manufactured by
foreign companies and purchased by the Company from United States subsidiaries
or affiliates of those foreign manufacturers. As a result, the Company and its
ability to sell at competitive prices could be adversely affected by increases
in tariffs or duties, changes in trade treaties, currency fluctuations, economic
or financial turbulence abroad, strikes or delays in air or sea transportation,
and possible future United States legislation with respect to pricing and import
quotas on products from foreign countries. The Company's ability to be
competitive in or with the sales of imported components could also be affected
by other governmental actions and policy changes related to, among other things,
anti-dumping and other international anti-trust legislation and currency
fluctuations. The Company believes that these factors may have had an adverse
impact on its business during past years, and there can be no assurance that
such factors will not have a more significant adverse affect on the Company in
the future. Since all of the Company's purchases from foreign companies are
transacted with United States subsidiaries or affiliates of these foreign
manufacturers, the Company's purchases are paid for in U.S. dollars.

EMPLOYEES

As of March 1, 2001, the Company employed 777 persons, of which 413 are involved
in sales and sales management; 130 are involved in marketing; 75 are involved in
the distribution centers; 69 are involved in operations; 12 are involved in
management; 51 are involved in bookkeeping and clerical; and 27 are involved in
information technology. None of the Company's employees are covered by
collective bargaining agreements. The Company believes that management's
relations with its employees are good.

COMPETITION

The Company believes that there are over 1,000 electronic components
distributors throughout the United States, ranging in size from less than $1
million in revenues to companies with annual sales exceeding $13 billion
worldwide. These distributors can generally be divided into global distributors
who have operations around the world, national distributors who have offices
throughout the United States, regional distributors with offices in multiple
cities within the United States and local distributors with just one location.
With sales offices in 31 cities in 21 states, the Company competes as a national
distributor. Additionally, the Company is one of the few national distributors
which has offices in Canada and Mexico. The Company, which was recognized by
industry sources as the 5th largest distributor of semiconductors and the 12th
largest electronic components distributor overall in the United States, believes
its primary competition comes from the top 50 distributors in the industry.
Recently, there has been an emergence of additional competition from the advent
of third party logistics and fulfillment companies, businesses commonly referred
to as e-brokers and e-exchanges and several other forms of e-commerce companies
which have grown with the expanded use of the Internet. While the Company is
aggressively implementing its own e-commerce strategies, including its web site
and multiple portal development, there can be no assurance that the Company will
be able to defend its market share against the emergence of these or other new
business models.

The Company competes with many companies that distribute electronic components
and, to a lesser extent, companies that manufacture such products and sell them
directly. Some of these companies have greater name recognition and assets and
possess greater financial, personnel and other resources than does the Company.
The competition in the electronics distribution industry can be segregated by
target customers: major (or top tier) accounts; middle market accounts; small
accounts; and emerging growth accounts. Competition to be the primary supplier
for the major customers is dominated by the top tier distributors as a result of
the product offerings, pricing and distribution technology offered by these
distributors. The Company competes for a portion of the available business at
these major industry customers by seeking to provide the very best service and
quality and by focusing on products that are not emphasized by the top tier
distributors, or are fill-in or niche products. With its expanded product
offering and service capabilities and its quality assurance procedures in place,
the Company believes that it can compete for a bigger portion of the business at
the top tier customer base, although there can be no assurance that the Company
will be successful in doing so. The Company believes competition from the top
tier distributors for the middle and emerging market customer base is not as
strong since the largest distributors focus their efforts and resources on the
major account base. For this reason, the Company has focused strong efforts on
servicing this middle and emerging market customer base. The Company competes
for this business by seeking to offer a broader product base, better pricing and
more sophisticated distribution technology than the regional or local
distributors; by seeking to offer a broader product base and more sophisticated
distribution technology than comparably-sized distributors and by seeking to
offer to middle and emerging market companies a greater level of service than is
offered to them by the major national and global distributors. The Company
believes that today the top tier distributors are seeking to penetrate the
middle market customer base more than they have in the past.

ITEM 2. PROPERTIES

See "Item 1. Business-Facilities and Systems" and "Sales and Marketing-Sales
Office Locations" and Note 10 to Notes to Consolidated Financial Statements.

ITEM 3. LEGAL PROCEEDINGS

The Company is from time to time involved in litigation relating to claims
arising out of its operations in the ordinary course of business. Many of such
claims are covered by insurance or, if they relate to products manufactured by
others for which it distributes, the Company would expect that the manufacturers
of such products would indemnify the Company, as well as defend such claims on
the Company's behalf, although no assurance can be given that any manufacturer
would do so. The Company believes that none of these claims should have a
material adverse impact on its financial condition or results of operations.
There has been a recent trend throughout the United States of increased
grievances over various employee matters. While the Company is presently not
involved in any material litigation relating to such matters, the Company
believes that costs associated with such matters may increase in the future.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY-HOLDERS

No matters were submitted to a vote of the Company's stockholders during the
fourth quarter of 2000.

PART II

ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS

SALES PRICES OF COMMON STOCK

The Company's common stock trades on The Nasdaq Stock Market (Nasdaq National
Market) under the symbol SEMI. The following table sets forth the range of high
and low sale prices for the Company's common stock as reported on The Nasdaq
Stock Market during each of the quarters presented:

Quarter of Fiscal Year High Low
---------------------- ---- ---

1999
----
First Quarter 5 5/16 3 7/16
Second Quarter 4 17/32 2 1/2
Third Quarter 5 2 13/16
Fourth Quarter 4 1/2 2 11/16

2000
----
First Quarter 19 3 1/16
Second Quarter 18 15/16 8 3/4
Third Quarter 24 7/16 14 5/8
Fourth Quarter 21 7/8 7 25/32

2001
----
First Quarter (through March 20, 2001) 14 1/2 8 1/2

COMMON STOCK PURCHASE RIGHTS PLAN

In June 2000, the Board of Directors of the Company adopted a Common Stock
Purchase Rights Plan (the "Rights Plan") and authorized and approved a dividend
distribution of one right (each a "Right" and collectively the "Rights") for
each outstanding share of common stock of the Company to shareholders of record
at the close of business on June 23, 2000. Each share of common stock of the
Company that is issued after June 23, 2000 will also include one Right.

common stock (or 10% of such stock under certain circumstances). Upon such
occurrence, each Right (other than Rights owned by such person or group) will
entitle the holder to purchase from the Company the number of shares of the
Company's common stock having a market value equal to twice the exercise price
of the Right.

If the Company is acquired in a merger or other business combination
transaction, or sells more than 50% of its assets or earning power, after a
person or group has acquired 15% or more of the Company's outstanding common
stock (or 10% of such stock under certain circumstances), each Right (other than
Rights owned by such person or group) will entitle its holder to purchase, at
the Right's then-current exercise price, a number of the acquiring company's
common shares having a market value of twice such price.

Following the acquisition by a person or group of 15% or more of the Company's
common stock (or 10% of such stock under certain circumstances) and prior to an
acquisition of 50% or more of the common stock, the Board of Directors may
exchange the Rights (other than Rights owned by such person or group) at an
exchange ratio of one share of common stock per Right.

Prior to the acquisition by a person or group of beneficial ownership of 15% or
more of the Company's common stock (or 10% of such stock under certain
circumstances), the Rights are redeemable for $.001 per Right at the option of
the Board of Directors. The rights will expire on June 8, 2010.

REVERSE STOCK SPLIT

On June 1, 1999, the Company's shareholders approved a one-for-five reverse
stock split (the "Reverse Stock Split") of the Company's outstanding shares of
common stock. The Reverse Stock Split became effective for trading in the
Company's new common stock as of June 2, 1999. Immediately following the Reverse
Stock Split, there were 3,973,431 shares of common stock outstanding. The $.01
par value of the common stock remained the same after the Reverse Stock Split.
All references to shares of common stock, stock options, warrants, exercise
prices per share and per share amounts have been restated to reflect the effect
of the Reverse Stock Split.

As of March 20, 2001, there were approximately 350 holders of record of the
Company's common stock, based on the stockholders list maintained by the
Company's transfer agent. Many of these record holders hold these securities for
the benefit of their customers. The Company believes that, based upon
information provided by its transfer agent, it has over 5,900 beneficial holders
of its common stock.

DIVIDEND POLICY

The Company has never declared or paid cash dividends. Future dividend policy
will depend on the Company's earnings, capital requirements, financial condition
and other relevant factors. It is not anticipated, however, that the Company
will pay cash dividends on its common stock in the foreseeable future, inasmuch
as it expects to employ all available cash in the continued growth of its
business. In addition, the Company's revolving line of credit agreement
prohibits the payment of any dividends. See Note 7 to Notes to Consolidated
Financial Statements.

SALES OF UNREGISTERED SECURITIES

The Company has not issued or sold any unregistered securities during the
quarter ended December 31, 2000 except as follows:

Pursuant to the Company's Employees', Officers', Directors' Stock Option Plan,
as previously amended and restated, the Company granted during the quarter ended
December 31, 2000 stock options to purchase 6,450 shares of the Company's common
stock to 9 individuals at exercise prices ranging from $9.55 to $16.71 per share
(based on fair market value at date of grant). The stock options vest over a
five-year period and are exercisable over a six-year period. See Note 9 to Notes
to Consolidated Financial Statements. All of the stock options were granted by
the Company in reliance upon the exemption from registration available under
Section 4(2) of the Securities Act of 1933.

ITEM 6. SELECTED FINANCIAL DATA

The following selected consolidated financial data for the Company for and as of
the years 1996 through 2000 has been derived from the audited Consolidated
Financial Statements of the Company. Such information should be read in
conjunction with the Consolidated Financial Statements and related notes
included elsewhere in this report and "Item 7. Management's Discussion and
Analysis of Financial Condition and Results of Operations." All references to
shares of common stock and per share amounts have been restated to reflect the
effect of the Reverse Stock Split. For the Company's unaudited quarterly results
of operations for the eight quarters ended December 31, 2000, see "Quarterly
Results of Operations" in "Item 7. Management's Discussion and Analysis of
Financial Condition and Results of Operations."

Statement of Operations Data

Years Ended December 31 2000 1999 1998 1997 1996
--------------------------------------------------------------------------------------------------------------------------

Net Sales (1) ........................ $ 522,183,000 $ 329,563,000 $ 250,044,000 $ 265,640,000 $ 237,846,000
Cost of Sales (2) .................... (414,292,000) (265,064,000) (194,599,000) (207,173,000) (185,367,000)
------------- ------------- ------------- ------------- -------------
Gross Profit ......................... 107,891,000 64,499,000 55,445,000 58,467,000 52,479,000
Selling, General and
Administrative Expenses ............ (79,893,000) (56,357,000) (46,880,000) (48,257,000) (51,675,000)
Restructuring and Other Nonrecurring
Expenses (3) ....................... -- -- (2,860,000) -- (4,942,000)
------------- ------------- ------------- ------------- -------------
Income (Loss) from Continuing
Operations ......................... 27,998,000 8,142,000 5,705,000 10,210,000 (4,138,000)
Interest Expense (4) ................. (8,642,000) (4,985,000) (4,313,000) (4,797,000) (7,025,000)
------------- ------------- ------------- ------------- -------------
Income (Loss) from Continuing
Operations Before Income Taxes ..... 19,356,000 3,157,000 1,392,000 5,413,000 (11,163,000)
Income Tax (Provision) Benefit ....... (8,157,000) (1,358,000) (561,000) (2,163,000) 2,942,000
------------- ------------- ------------- ------------- -------------
Income (Loss) from Continuing
Operations Before Discontinued
Operations and Extraordinary Items.. 11,199,000 1,799,000 831,000 3,250,000 (8,221,000)
Discontinued Operations (5) .......... -- -- -- -- (1,757,000)
Extraordinary Items (6) .............. -- -- -- -- 58,000
------------- ------------- ------------- ------------- -------------
Net Income (Loss) .................... $ 11,199,000 $ 1,799,000 $ 831,000 $ 3,250,000 $ (9,920,000)
============= ============= ============= ============= =============

Earnings (Loss) Per Share (7):
Basic .............................. $2.92 $.46 $.21 $.83 $(2.51)
Diluted ............................ $2.70 $.46 $.21 $.82 $(2.47)

Balance Sheet Data

December 31 2000 1999 1998 1997 1996
--------------------------------------------------------------------------------------------------------------------------
Working Capital....................... $ 159,590,000 $ 91,217,000 $ 68,192,000 $ 63,308,000 $ 69,823,000
Total Assets.......................... 250,228,000 151,501,000 118,957,000 112,286,000 112,921,000
Long-Term Debt, Including
Current Portion..................... 128,124,000 71,867,000 50,978,000 46,900,000 58,221,000
Shareholders' Equity.................. 39,598,000 27,852,000 26,509,000 25,674,000 22,396,000
Book Value Per Common Share........... $9.80 $7.01 $6.67 $6.46 $5.65

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

(1) Net sales for 1996, including sales generated by the Company's computer
products division which was discontinued in the third quarter of 1996, were
$244,668,000.

(2) 1996 includes non-cash inventory write-offs of $2,000,000 associated with
the Company's restructuring of its kitting and turnkey operations.

(3) 1998 reflects a nonrecurring charge relating to a failed proposed merger.
The nonrecurring charge includes expansion costs incurred in anticipation
of supporting the proposed combined entity, employee-related expenses,
professional fees and other merger-related out of pocket costs. 1996
includes non-recurring expenses consisting of: $1,092,000 relating to
restructuring the Company's kitting and turnkey operations, $587,000
relating to the termination of certain employment agreements, $445,000
relating to relocating the Company's cable assembly division, $625,000
relating to the accrual of a postretirement benefit cost associated with an
amendment to an employment agreement with one of the Company's executive
officers, and $2,193,000 relating to an impairment of goodwill primarily
related to certain acquisitions.

(4) Interest expense for 1996 includes amortization and a write-down of
deferred financing fees of approximately $2,148,000 relating to obtaining
the Company's then $100 million credit facility.

(5) Reflects a loss from discontinued operations of $(166,000) (net of $125,000
income tax benefit) and a loss on disposal of $(1,591,000) (net of
$1,200,000 income tax benefit) relating to management's decision to
discontinue its computer products division.

(6) Reflects an after-tax gain of $272,000 (net of $205,000 income tax
provision) associated with the Company's settlement of a civil litigation
and an after-tax non-cash expense of $214,000 (net of $161,000 income tax
benefit) resulting from the early extinguishment of the Company's $15
million senior subordinated promissory note.

(7) Weighted average common shares outstanding after reflecting the Reverse
Stock Split for the years ended December 31, 2000, 1999, 1998, 1997 and
1996 were 3,828,978, 3,921,138, 3,937,021, 3,934,512 and 3,948,570,
respectively, for basic earnings per share and were 4,140,579, 3,924,166,
3,998,802, 3,956,967 and 4,021,152, respectively, for diluted earnings per
share.

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS

This discussion should be read in conjunction with "Item 6. Selected Financial
Data" and Notes to Consolidated Financial Statements contained in this report.

RESULTS OF OPERATIONS

Overview

The following table sets forth for the years ended December 31, 2000, 1999 and
1998, certain items in the Company's Consolidated Statements of Income expressed
as a percentage of net sales. All percentages are based on net sales.

Items as a Percentage
of Net Sales
--------------------------
Years Ended
December 31
--------------------------
2000 1999 1998
------ ------ ------
Net Sales ..................................... 100.0% 100.0% 100.0%
Gross Profit .................................. 20.7 19.6 22.2
Selling, General and Administrative Expenses... (15.3) (17.1) (18.7)
Restructuring and Other Nonrecurring Expenses.. -- -- (1.1)
Income from Operations ........................ 5.4 2.5 2.3
Interest Expense .............................. (1.7) (1.5) (1.7)
Income Before Income Taxes .................... 3.7 1.0 0.6
Net Income .................................... 2.1 0.5 0.3

COMPARISON OF YEARS ENDED DECEMBER 31, 2000 AND 1999

Sales

For the year ended December 31, 2000, the Company achieved a record sales level
at $522.2 million, a $192.6 million or 58.4% increase over net sales of $329.6
million for 1999. The dramatic increase in net sales was attributable to very
positive industry conditions and the benefits of the strategies that we have
been implementing over the past several years. This increase also reflects
contributions from new sales offices and increased market share in most
territories. Although sales for the year were strong, sales began to taper off
in the fourth quarter due to a general industry slowdown and inventory
corrections at the customer base.

Gross Profit

Gross profit was $107.9 million in 2000 compared to $64.5 million for 1999,
representing a 67.3% increase. The substantial increase in gross profit was due
to the increase in sales as well as an improvement in gross profit margins as a
percentage of net sales. Gross profit margins as a percentage of net sales were
20.7% for 2000, compared to 19.6% for 1999. While the gross profit for the year
was higher than the prior year, the gross profit margins began declining toward
the end of 2000, reflecting a general industry slowdown and greater availability
of product. In addition, we continue to develop long-term strategic
relationships with accounts that have required aggressive pricing programs and
we expect a greater number of low margin, large volume transactions. Management
therefore expects downward pressure on gross profit margins in the future.

Selling, General and Administrative Expenses

Selling, general and administrative expenses ("SG&A") was $79.9 million for
2000, compared to $56.4 million for 1999. The increase was primarily
attributable to an increase in variable expenses associated with the increases
in sales and gross profit as well as an increase in our infrastructure to
support the changing needs and additional requirements of our customers.
Furthermore, in an effort to drive expansion and internal growth, we have
increased and enhanced our management team and expanded our sales force in
almost every location. Due to these factors, we expect that SG&A will increase
in future periods.

SG&A as a percentage of net sales improved to 15.3% for the year ended December
31, 2000, from 17.1% for the 1999 period. This improvement reflects the
significant increase in sales which more than offset the increase in SG&A in
absolute dollars.

Income from Operations

Income from operations was $28.0 million for 2000, a 243.9% increase over income
from operations of $8.1 million for 1999. The significant increase in income
from operations was due to the increase in net sales and the increase in gross
profit margins which more than offset the increase in SG&A.

Interest Expense

Interest expense was $8.6 million for the year ended December 31, 2000, compared
to $5.0 million for 1999. The increase in interest expense resulted primarily
from an increase in average borrowings during 2000 to support the growth in
sales and the expanded infrastructure, as well as increases in inventory
purchases associated with initial stocking packages from new suppliers. Interest
expense for 2000 also reflects an increase in interest rates.

Net Income

Net income increased dramatically to a record $11.2 million, or $2.70 per share
(diluted), for the year ended December 31, 2000, a 522.5% increase over net
income of $1.8 million, or $.46 per share (diluted), for 1999. The increase in
net income reflects the increase in gross profit as well as the improvement in
SG&A as a percentage of sales, all of which was partially offset by the increase
in interest expense.

COMPARISON OF YEARS ENDED DECEMBER 31, 1999 AND 1998

Sales

For the year ended December 31, 1999, the Company achieved sales of $329.6
million, a $79.6 million or 31.8% increase over net sales of $250.0 million for
1998. The increase resulted from improved conditions in the industry as well as
from increased sales in most territories and contributions from two new sales
offices that were opened during the second quarter of 1999.

Gross Profit

Gross profit was $64.5 million in 1999 compared to $55.4 million for 1998,
representing a 16.3% increase. The increase in gross profit was due to the
increase in sales which more than offset a decline in gross profit margins as a
percentage of net sales. Gross profit margins as a percentage of net sales were
19.6% for 1999, compared to 22.2% for 1998. The decline in gross profit margins
reflected the competitive market and excess supply conditions during the first
half of 1999, a greater number of low margin, large volume transactions than in
the previous year, as well as continued changes in the Company's product mix. In
addition, we continued to experience lower margins relating to the development
of long-term strategic relationships with accounts which have required
aggressive pricing programs.

Selling, General and Administrative Expenses

SG&A was $56.4 million for 1999, compared to $46.9 million for 1998. The
increase in SG&A was primarily a result of an increase in our infrastructure to
support the changing needs and additional requirements of our customers and
increased variable expenses associated with the increases in sales and gross
profit. Furthermore, in an effort to drive expansion and internal growth, we
opened additional sales offices and increased and enhanced our management
personnel during 1999.

SG&A as a percentage of net sales improved to 17.1% for the year ended December
31, 1999, from 18.7% for the 1998 period. The decrease in SG&A as a percentage
of sales reflected the significant increase in sales which more than offset the
increase in SG&A in absolute dollars.

Income from Operations

Income from operations was $8.1 million for 1999, a 42.7% increase over income
from operations of $5.7 million for 1998. The increase in income from operations
was due to the increase in net sales, which more than offset the impact of the
decline in gross profit margins and the increase in SG&A. In addition, 1998
included a nonrecurring charge of $2.9 million relating to a failed proposed
merger.

Interest Expense

Interest expense was $5.0 million for the year ended December 31, 1999, compared
to $4.3 million for 1998. The increase in interest expense resulted from an
increase in average borrowings during 1999 to support the growth in sales and
the expanded infrastructure. Interest expense for 1999 also reflected a decrease
in the Company's borrowing rate.

Net Income

Net income increased dramatically to $1.8 million, or $.46 per share (diluted),
for the year ended December 31, 1999, a 116.5% increase over net income of
$831,000, or $.21 per share (diluted), for 1998. The increase in net income
reflected the increase in gross profit that was partially offset by the
increases in SG&A and interest expense. In addition, 1998 included a
nonrecurring charge of $1.7 million on an after-tax basis relating to a failed
proposed merger.

QUARTERLY RESULTS OF OPERATIONS

The following table presents unaudited quarterly results of operations for the
eight quarters ended December 31, 2000. We believe that all necessary
adjustments, consisting only of normal recurring adjustments, have been included
in the amounts stated below to present fairly such quarterly information.

(In thousands, except per share data)

2000 1999
----------------------------------------- ----------------------------------------
FIRST SECOND THIRD FOURTH First Second Third Fourth
QUARTER QUARTER QUARTER QUARTER Quarter Quarter Quarter Quarter
------- ------- ------- ------- ------- ------- ------- -------

Net Sales ....... $107,273 $125,994 $152,526 $136,390 $ 70,649 $ 79,874 $ 88,570 $ 90,470
Gross Profit .... 21,441 26,323 31,954 28,173 13,639 15,272 16,733 18,855
Income from
Operations .... 3,782 6,939 10,563 6,714 1,436 1,601 2,157 2,948
Net Income ...... 1,210 2,949 4,741 2,299 194 247 502 856
Diluted Earnings
Per Share (1).. $.30 $.71 $1.10 $.55 $.05 $.06 $.13 $.22

(1) As adjusted to reflect Reverse Stock Split effective on June 2, 1999.

LIQUIDITY AND CAPITAL RESOURCES

Working capital at December 31, 2000 improved significantly to $159.6 million,
compared to working capital of $91.2 million at December 31, 1999. The current
ratio improved to 2.93:1 at December 31, 2000, compared to 2.75:1 at December
31, 1999. The increases in working capital and in the current ratio were due
primarily to increases in accounts receivable and inventory. These changes in
accounts receivable and inventory more than offset an increase in accounts
payable. Accounts receivable levels at December 31, 2000 were $91.8 million,
compared to $53.2 million at December 31, 1999. The increase in accounts
receivable reflects the significant level of sales at the end of 2000 compared
to the end of 1999. Additionally, the average number of days that accounts
receivables were outstanding increased to 53 days as of December 31, 2000
compared to 52 days as of December 31, 1999. Inventory levels were $146.4
million at December 31, 2000 compared to $85.3 million at December 31, 1999. The
increase primarily reflects higher inventory levels needed to support a higher
level of sales and inventory relating to new suppliers added during 2000.
Accounts payable and accrued expenses increased to $81.2 million at December 31,
2000 from $51.6 million at December 31, 1999, primarily as a result of the
increase in purchases of inventory at the end of 2000 in connection with initial
stocking packages from new suppliers.

In September 2000, the Company's agreement with its consortium of banks was
amended whereby the line of credit facility was increased from $100 million to
$150 million and the term was extended to May 3, 2004. The line of credit
facility, which is based on eligible accounts receivable and inventories as
defined in the agreement, currently bears interest, at the Company's option, at
the prime rate plus .25% or LIBOR plus 2.25%. On a quarterly basis, the
applicable interest rate margins for the prime rate and LIBOR options may be
adjusted based upon our debt service coverage ratio for the 12 month period
ending on the last day of the immediately preceding calendar quarter and our
average excess loan availability for the three month period ending on the last
day of the immediately preceding calendar quarter. The applicable interest rate
margin for the prime rate option may adjust between 0% to .5% and the applicable
interest rate margin for the LIBOR option may adjust between 2.0% to 2.5%.
Borrowings under the credit facility are secured by all of the Company's assets
including accounts receivable, inventories and equipment. Under the credit
facility, the Company is required to comply with certain affirmative and
negative covenants as well as to comply with certain financial ratios. These
covenants, among other things, place limitations and restrictions on the
Company's borrowings, investments and transactions with affiliates and prohibit
dividends and stock redemptions. The credit facility requires the Company to
maintain certain minimum levels of tangible net worth throughout the term of the
agreement and a minimum debt service coverage ratio which is tested on a
quarterly basis. At December 31, 2000, outstanding borrowings under the credit
facility aggregated $120.5 million compared to $64.0 million at December 31,
1999. The increase in outstanding borrowings reflects the significant growth in
sales and the related increases in inventory and accounts receivable. See Note 7
to Notes to Consolidated Financial Statements.

On May 24, 1999, we announced that our Board of Directors authorized the
repurchase of up to $2 million in purchase price of the Company's common stock.
As of December 31, 2000, the Company repurchased 147,186 shares of its common
stock at an average price of $3.29 per share. Any shares of common stock
repurchased will be available for reissuance in connection with the Company's
stock option plans or for other corporate purposes. The Company presently does
not intend to make further stock repurchases at the current market prices.

The Company expects that its cash flows from operations and additional
borrowings available under the credit facility will be sufficient to meet its
current financial requirements over at least the next twelve months.

INFLATION AND CURRENCY FLUCTUATIONS

The Company does not believe that inflation significantly impacted its business
during 2000; however, inflation has had significant effects on the economy in
the past and could adversely impact the Company's results in the future. The
Company believes that currency fluctuations could have adverse effects on its
business if they make components manufactured abroad too expensive, cause
limitations in customer productions due to unfavorable export conditions or
cause the Company's offshore suppliers to limit exports to the United States. In
certain prior years, the Company believes that currency fluctuations have had
such adverse effects.

FORWARD-LOOKING STATEMENTS; BUSINESS RISKS

This report contains statements that are forward-looking within the meaning of
Section 27A of the Securities Act of 1933 and Section 21E of the Securities
Exchange Act of 1934, as amended. These forward-looking statements are made
pursuant to the safe harbor provisions of the Private Securities Litigation
Reform Act of 1995. When used in this report, the words "believes," "estimates,"
"plans," "expects," "intends," "anticipates," "contemplates," "may," "will,"
"shall," "assuming," "prospect," "should," "could," "looking forward" and
similar expressions, to the extent used, are intended to identify the
forward-looking statements. All forward-looking statements are based on current
expectations and beliefs concerning future events that are subject to risks and
uncertainties. Actual results may differ materially from the results suggested
in this report. In many cases, we cannot predict the risks or uncertainties that
could cause actual results to differ materially from those indicated in the
forward-looking statements. Factors that may cause or contribute to such
differences, and our business risks generally, include, but are not limited to,
the items described below, as well as in other sections of this report and in
other of our public filings and in our press releases.

We are dependent on a limited number of suppliers. If one or more of our largest
suppliers chooses not to sell products to us, our operating results could
suffer.

We rely on a limited number of suppliers for products which generate a
significant portion of our sales. Substantially all of our inventory has and
will be purchased from suppliers with which we have entered into non-exclusive
distributor agreements which are typically cancelable on short notice (generally
30 to 90 days). Products purchased from our three largest suppliers accounted
for approximately 34% of our consolidated purchases during the calendar year
ended December 31, 2000. No other supplier accounted for more than four percent
of our consolidated purchases during this period. While most of the products
that we sell are available from other sources, our future success will depend in
large part on maintaining relationships with existing suppliers and developing
relationships with new ones. We believe that the loss of a key supplier could
have an adverse impact on our business in the short term as we attempt to
replace the products offered by that supplier with the products of other
suppliers. If we were to lose our right to distribute the products of any
particular supplier, there can be no assurance that we would be able to replace
the products which were available from that particular supplier. The loss of, or
significant disruptions in relationships with, any of our largest suppliers or a
significant number of other suppliers in a short period of time, could have a
material adverse effect on our operating results.

We do not have long-term contracts with our customers and, as a result, our
customers may be able to cancel, reduce or delay their orders without penalty.

We typically do not obtain long-term purchase orders or commitments but instead
work with our customers to develop nonbinding forecasts of future orders. Based
on such nonbinding forecasts, we make commitments regarding the level of
business that we will seek and accept, and the levels and utilization of
personnel and other resources. A variety of conditions, both specific to each
individual customer and generally affecting each customer's industry, may cause
our customers to cancel, reduce or delay orders that were either previously made
or anticipated. Generally, our customers may cancel, reduce or delay purchase
orders and commitments without penalty or other charges associated with such
cancellation, reduction or delay. Significant or numerous cancellations,
reductions or delays in orders by customers could have a material adverse effect
on our operating results.

We are dependent on foreign manufacturers and subject to trade regulations which
expose us to political and economic risk.

A significant number of components sold by us are manufactured by foreign
companies. As a result, our ability to sell certain products at competitive
prices could be adversely affected by any of the following:

- increases in tariffs or duties;
- changes in trade treaties;
- strikes or delays in air or sea transportation;
- future United States legislation with respect to pricing and/or import
quotas on products imported from foreign countries; and
- turbulence in offshore economies or financial markets.

Our ability to be competitive with respect to sales of imported components could
also be affected by other governmental actions and policy changes, including
anti-dumping and other international antitrust legislation. In addition, adverse
currency fluctuations could have the effect of making components manufactured
abroad more expensive, cause limitations in customer productions due to
unfavorable export conditions or cause our offshore suppliers to limit exports
to the United States. Because we purchase products from United States
subsidiaries and affiliates of foreign manufacturers, our purchases are paid for
in U.S. dollars, which usually reduces or eliminates the potential adverse
effects of currency fluctuations. There can be no assurance that such factors
could not have a material adverse effect on our operating results in the future.

Our industry is subject to supply shortages. Any delay or inability to obtain
components may have an adverse effect on our operating results.

At various times there have been shortages of components in the electronics
industry and the availability of certain components have been limited by some of
our suppliers. Although such shortages and allocations have not had a material
adverse effect on our operating results, there can be no assurance that any
future shortages or allocations would not have such an effect on us.

Our industry is cyclical, which causes our operating results to fluctuate
significantly.

In the fall of 1999, our industry emerged from a four-year period of excess
supply. During the fourth quarter of 2000, a combination of improved product
availability, a slowing economy and other factors caused a sudden adverse change
in market conditions in our industry. We cannot predict the timing or the
severity of the cycles within our industry. The electronic components
distribution industry has historically been affected by general economic
downturns, which have often had an adverse economic effect upon manufacturers,
end-users of electronic components and electronic components distributors. In
addition, our industry directly depends on the continued growth of the
electronic components industry and indirectly on the level of end-user demand
for our customers' products. Due to changing conditions our customer base may
experience periods of inventory corrections which could adversely impact our
results. Furthermore, the timing of new product developments, the life-cycle of
existing electronic products, and

the level of acceptance and growth of new products can affect demand for
electronic components. In that regard, the Company supports certain new
technologies, the failure of which to be fully accepted or grow could have a
material adverse effect on our operating results. Overall, these market changes
and factors have caused in the past, and will likely cause in the future, our
operating results to fluctuate.

The prices of our components are subject to volatility.

A significant portion of the memory products we sell have historically
experienced volatile pricing. If market pricing for these products decreases
significantly, we may experience periods when our investment in inventory
exceeds the market price of such products. In addition, at times there are price
increases from our suppliers that we are unable to pass on to our customers.
These market conditions could have a negative impact on our sales and gross
profit margins unless and until our suppliers reduce the cost of these products
to us.

We may not be able to satisfy our funding requirements.

We may need to spend significant amounts of cash to: fund increases in expenses;
meet our working capital requirements; invest in capital equipment and
infrastructure; upgrade our information and communication systems; acquire
businesses or open divisions; or respond to unanticipated developments (such as
an increase in bad debts), increasing customer demands or competitive pressures.
If we do not have enough cash on hand, cash generated from our operations or
cash available under our credit facility to meet these cash requirements, we
will need to seek alternative sources of financing to carry out our growth and
operating strategies. We may not be able to raise needed cash on terms
acceptable to us, or at all. Financing may be on terms that are dilutive or
potentially dilutive. If alternative sources of financing are required but are
insufficient or unavailable, we will be required to modify our growth and
operating plans to the extent of available funding.

Our industry is highly competitive and competition could harm our ability to
sell our products and services and thereby reduce our market share.

The electronic components distribution industry is highly competitive. We
generally compete with local, regional and national distributors. Some of our
competitors have greater name recognition and financial, personnel and other
resources than we do. There can be no assurance that we will continue to compete
successfully with existing or new competitors and failure to do so could have a
material adverse effect on our operating results.

Emergence of new competitive business models could have adverse effects on our
business.

Recently, additional competition has emerged in the electronic components
distribution industry. This increased competition resulted from the advent of
third party logistics and fulfillment companies, businesses commonly referred to
as e-exchanges and e-brokers and several other forms of e-commerce companies
which have grown with the expanded use of the Internet. While we are
aggressively working on developing and implementing our e-commerce strategies,
including our website and multiple portal development, to confront these new
competitive business models, there can be no assurance that we will be able to
defend our market share against the emergence of these or other new business
models.

A reversal of the trend for distribution to play an increasing role in the
electronic components industry could affect our business.

In recent years, there has been a growing trend for original equipment
manufacturers and contract electronics manufacturers to outsource their
procurement, inventory and materials management processes to third parties,
particularly electronic component distributors. Although we do not currently
foresee this trend reversing, if it did, our business would be materially
adversely affected.

We may not be able to manage and sustain future growth.

Recently, we have experienced growth. If we are to continue our growth, we will
need to manage our expanding operations effectively and successfully integrate
into our operations any new businesses or divisions which we may acquire or
open. If we are unable to do so, particularly in instances in which we have made
significant investments, our failure could have a material adverse effect on our
operating results. We may be unsuccessful in sustaining continued growth if we
are unable to:

- secure adequate supplies of competitive products on a timely basis and
on commercially reasonable terms;
- expand sales to existing customers and increase our customer base;
- turn our inventories and collect our accounts receivable fully (and
consistent with historical bad debt levels) and in a timely manner,
especially with respect to new customers in emerging markets;
- maintain our existing key supplier relationships as well as develop
new relationships with leading suppliers of electronic components;
- hire and retain additional qualified management, marketing and other
personnel to successfully manage our growth, including personnel to
monitor our operations, control costs and maintain effective inventory
and credit controls; and
- invest to maintain and enhance our infrastructure, including
distribution center capacity, telecommunications and information
systems, and logistics services.

A decline in gross profit margins arising from a change in market conditions or
aggressive pricing programs could adversely affect our operating results.

During certain prior periods, we have experienced an increase in gross profit
margins as a result of favorable market conditions in the electronic components
distribution industry, including limited supply of certain products. However,
there is no assurance that negative changes in the economic environment
generally and/or in the electronic components industry in particular will not
occur. In fact, some of such negative changes in both the economic environment
generally and in the electronic components industry began to occur in the fourth
quarter of 2000 and continue to even a greater extent as of the date of this
report. Furthermore, we continue to develop long-term strategic relationships
with accounts which have required aggressive pricing programs. These factors
could result in a decline in our gross profit margins, materially adversely
affecting our operating results.

We are exposed to interest rate changes which could adversely affect our
operating results.

We are exposed to interest rate changes with respect to our credit facility,
which currently is based upon, at our option, the prime rate or LIBOR.

Our operations would be adversely affected if third party carriers were unable
to transport or were materially hindered in transporting our products.

All of our products are shipped through third party carriers, principally one
carrier. If a strike or other event prevented or materially hindered or
disrupted that carrier from transporting our products, there is no assurance
that other carriers would be available or have the capacity to deliver our
products to our customers. If adequate third party sources to ship our products
were not available at any time, our operating results would be materially and
adversely effected.

We depend on the continued services of our executive officers, and their loss
could affect our ability to successfully grow our business.

We are highly dependent upon the services of our President and Chief Executive
Officer. The permanent loss for any reason of our President and Chief Executive
Officer, or any one or more of our other key executives, could have a material
adverse effect upon our operating results. While we believe that we

would be able to locate suitable replacements for our executives if their
services were lost, there can be no assurance that we would, in fact, be able to
do so.

We must attract and retain personnel to help support our future growth, and
competition for personnel in our industry is intense.

We require the services of a substantial number of qualified personnel. Our
future success depends to a significant degree upon the continued contributions
of our management, engineering, sales, marketing, information technology,
distribution and finance personnel. The recent market for such skilled and
experienced personnel is characterized by intense competition and aggressive
recruiting, as well as a high degree of employee mobility. This market makes it
particularly difficult to attract and retain the qualified personnel we require.
The loss of or our inability to continue to attract and retain these key
personnel could harm our business.

Any acquisitions could be difficult to integrate, disrupt our business and
adversely affect our operations.

Our growth in the future may depend, in part, on our ability to acquire
compatible electronic components distributors or other businesses and to
integrate the acquired operations. There can be no assurance that we will be
able to locate additional appropriate acquisition candidates, or that we will be
successful in acquiring any identified candidates. In addition, we cannot be
certain that the operations of any acquired companies will be effectively
integrated or prove profitable. The completion of future acquisitions may
require the expenditure of sizable amounts of capital and management effort.
Moreover, unexpected problems encountered in connection with our acquisitions
could have a material adverse effect on our operating results.

Our officers and directors have and will continue to have significant control
over us.

If the Company's Chairman and President and Chief Executive Officer exercised
all of their outstanding stock options, they and their respective spouses and
children and related trusts would own an aggregate of approximately 659,000
shares, representing approximately 16% of the outstanding shares of common
stock. As a result of such stock ownership and their positions as executive
officers, as the members of the executive committee of our Board of Directors
and as two of the seven directors of All American, they are and will continue to
be in a position to control the day-to-day affairs of All American.

We may be exposed to product liability claims.

We are likely to be named as a defendant in any products liability action
brought by an end-user as a result of our value-added services and as a
participant in the distribution chain between the manufacturer and end-user.
Although to date there have been no material claims asserted against us for
products liability, there can be no assurance that such claims will not arise in
the future. In the event that any products liability claim is not covered by
insurance or we are not indemnified by or cannot recover damages from our
supplier of the product or another third party in the chain of distribution, we
may be required to fund some or all of a product liability claim, which could
have a material adverse effect on us.

Our shareholder rights plan, preferred stock and governing documents may
discourage potential acquisitions of our business.

We have a shareholders rights plan and have authorized preferred stock which is
available to be issued with such rights, preferences, privileges and limitations
as are determined by the Board of Directors. In addition, our Certificate of
Incorporation includes provisions designed to discourage attempts by others to

acquire control of us without negotiation with our Board of Directors, and to
attempt to ensure that such transactions are on terms favorable to all of our
shareholders. These provisions provide, among other things:

- that meetings of our shareholders may only be called by the Board of
Directors;
- that an affirmative vote of two-thirds of our outstanding shares of
common stock is required to approve certain business combinations
unless 65% of our Board approves such transaction;
- for three classes of directors with each class elected for a three
year staggered term;
- that our Board in evaluating a tender offer or certain business
combinations is authorized to give due consideration to all relevant
factors; and
- that actions of shareholders may not be taken by written consent of
shareholders in lieu of a meeting.

For various reasons, however, these provisions may not always be in the best
interest of our shareholders. These reasons include the fact that the provisions
of our Certificate of Incorporation (i) make it difficult to remove directors
even if removal would be in the best interest of our shareholders; (ii) make it
difficult for our shareholders to approve certain transactions that are not
approved by at least 65% of our Board, even if the transactions would be
beneficial to our shareholders; and (iii) eliminate the ability of our
shareholders to act without a meeting. Our shareholder rights plan, our
blank-check preferred stock and our governing documents may have the effect of
delaying, deterring or preventing a change in control of All American, could
discourage potential investors from bidding for our common stock at a premium
over the market price of the common stock and could adversely affect the market
price and the voting rights of the holders of the common stock.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The Company's credit facility bears interest based on interest rates tied to the
prime or LIBOR rate, either of which may fluctuate over time based on economic
conditions. As a result, the Company is subject to market risk for changes in
interest rates and could be subjected to increased or decreased interest
payments if market interest rates fluctuate. If market interest rates increase,
the impact may have a material adverse effect on the Company's financial
results. See "Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations-Liquidity and Capital Resources."

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

The Consolidated Financial Statements of the Company and its subsidiaries and
supplementary data required by this item are included in Item 14(a)(1) and (2)
of this report.

In addition, see "Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations-Quarterly Results of Operations" for
presentation of unaudited quarterly results of operations for the eight quarters
ended December 31, 2000.

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE

None.

PART III

ITEMS 10, 11, 12 AND 13. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT;
EXECUTIVE COMPENSATION; SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT; AND CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

The response to these items will be included in a definitive proxy statement
filed within 120 days after the end of the Registrant's fiscal year, which
definitive proxy statement is incorporated herein by this reference.

PART IV

ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULE, AND REPORTS ON FORM 8-K

(a) LIST OF DOCUMENTS FILED AS PART OF THIS REPORT PAGE

1. FINANCIAL STATEMENTS
Management's Responsibility for Financial Reporting.............. F-1
Independent Auditors' Report..................................... F-1
Consolidated Balance Sheets...................................... F-2
Consolidated Statements of Income................................ F-3
Consolidated Statements of Changes in Shareholders' Equity....... F-4
Consolidated Statements of Cash Flows............................ F-5
Notes to Consolidated Financial Statements....................... F-6

2. FINANCIAL STATEMENT SCHEDULE
Schedule II - Valuation and Qualifying Accounts.................. S-1

3. EXHIBITS

3.1 Certificate of Incorporation, as amended (incorporated by
reference to Exhibits 3.1 to the Company's Registration
Statement on Form S-1, File No. 33-15345-A, and to the Company's
Form 10-K for the fiscal year ended December 31, 1991), as
further amended by (i) Certificate of Amendment of Certificate
of Incorporation dated August 21, 1995 of the Company
(incorporated by reference to Exhibit 3.1 to the Company's Form
10-K for the year ended December 31, 1995) and (ii) Certificate
of Amendment of Certificate of Incorporation dated June 1, 1999
of the Company (incorporated by reference to Exhibit 3.1 to the
Company's Form 10-Q for the quarter ended June 30, 1999).
3.2 By-Laws, as amended July 29, 1994 (incorporated by reference to
Exhibit 3.1 to the Company's Form 10-Q for the quarter ended
June 30, 1994).
4.1 Specimen Certificate of Common Stock (incorporated by reference
to Exhibit 4.1 to the Company's Form 10-Q for the quarter ended
June 30, 1999).
4.2 Fiscal Agency Agreement, dated as of June 8, 1994, between the
Company and American Stock Transfer & Trust Co., as fiscal
agent, paying agent and securities registrar (incorporated by
reference to Exhibit 4.1 to the Company's Form 8-K dated June
14, 1994 and filed with the Securities and Exchange Commission
on June 15, 1994).
4.3 2000 Common Stock Purchase Rights Agreement, dated as of June 9,
2000, between the Company and American Stock Transfer & Trust
Company (incorporated by reference to Exhibit number 4.1 to the
Company's Registration Statement on Form 8-A, filed with the
Securities and Exchange Commission on June 13, 2000).
9.1 Form of Voting Trust Agreement attached as Exhibit "E" to
Purchase Agreement (incorporated by reference to Exhibit 9.1 to
the Company's Registration Statement on Form S-4, File No.
033-64019).
10.1 Form of Indemnification Contracts with Directors and Executive
Officers (incorporated by reference to Exhibit 10.1 to the
Company's Registration Statement on Form S-2, File No.
33-47512).
10.2 Lease Agreement for Headquarters dated May 1, 1994 between Sam
Berman d/b/a Drake Enterprises ("Drake") and the Company
(incorporated by reference to Exhibit 10.1 to the Company's Form
10-Q for the quarter ended March 31, 1994).
10.3 Lease Agreement for west coast corporate office and northern
California sales office in San Jose, California dated October 1,
1998 between San Jose Technology Properties, LLC and the Company
(incorporated by reference to Exhibit 10.3 to the Company's Form
10-K for the year ended December 31, 1998).
10.4 Promissory Notes, all dated May 1, 1994 payable to Drake, the
Company's landlord in the amounts of $865,000, $150,000 and
$32,718 (incorporated by reference to Exhibit 10.2 to the
Company's Form 10-Q for the quarter ended March 31, 1994).

10.5 Promissory Note, dated May 1, 1995, payable to Drake, the
Company's landlord, in the amount of $90,300 (incorporated by
reference to Exhibit 10.35 to Amendment No. 1 to the Company's
Registration Statement on Form S-1, File No. 33-58661).
10.6 Agreement between Drake and the Company dated May 1, 1994
(incorporated by reference to Exhibit 10.5 to the Company's Form
10-K for the year ended December 31, 1994).
10.7 Amended and Restated All American Semiconductor, Inc.
Employees', Officers', Directors' Stock Option Plan, as amended
through June 1, 1999 (incorporated by reference to Exhibit 10.1
to the Company's Form 10-Q for the quarter ended June 30,
1999).**
10.8 All American Semiconductor, Inc. 2000 Nonemployee Director Stock
Option Plan (incorporated by reference to Exhibit A to the
Company's Proxy Statement dated May 1, 2000 filed with the
Securities and Exchange Commission on May 1, 2000).**
10.9 Deferred Compensation Plan (incorporated by reference to Exhibit
10.5 to the Company's Registration Statement on Form S-2, File
No. 33-47512).**
10.10 Master Lease Agreement dated March 21, 1994, together with lease
schedules for computer and other equipment (incorporated by
reference to Exhibit 10.9 to the Company's Form 10-K for the
year ended December 31, 1994).
10.11 Employment Agreement dated as of May 24, 1995, between the
Company and Paul Goldberg (incorporated by reference to Exhibit
10.22 to Amendment No. 1 to the Company's Registration Statement
on Form S-1, File No. 33-58661), as amended by First Amendment
to Employment Agreement dated as of December 31, 1996, between
the Company and Paul Goldberg (incorporated by reference to
Exhibit 10.9 to the Company's Form 10-K for the year ended
December 31, 1996), as amended by Second Amendment to Employment
Agreement dated as of August 21, 1998, between the Company and
Paul Goldberg (incorporated by reference to Exhibit 10.1 to the
Company's Form 10-Q for the quarter ended September 30, 1998),
as amended by Third Amendment to Employment Agreement effective
as of January 1, 2000 and dated as of April 27, 2000, between
the Company and Paul Goldberg (incorporated by reference to
Exhibit 10.1 to the Company's Form 10-Q for the quarter ended
March 31, 2000).**
10.12 Employment Agreement dated as of May 24, 1995, between the
Company and Bruce M. Goldberg (incorporated by reference to
Exhibit 10.24 to Amendment No. 1 to the Company's Registration
Statement on Form S-1, File No. 33-58661), as amended by First
Amendment to Employment Agreement dated as of August 21, 1998,
between the Company and Bruce M. Goldberg (incorporated by
reference to Exhibit 10.2 to the Company's Form 10-Q for the
quarter ended September 30, 1998), as amended by Second
Amendment to Employment Agreement effective as of January 1,
2000 and dated as of April 27, 2000, between the Company and
Bruce M. Goldberg (incorporated by reference to Exhibit 10.2 to
the Company's Form 10-Q for the quarter ended March 31, 2000).**
10.13 Merger Purchase Agreement dated as of October 31, 1995, among
the Company, All American Added Value, Inc., All American
A.V.E.D., Inc. and the Added Value Companies (incorporated by
reference to Appendix A to the Proxy Statement/Prospectus
included in and to Exhibit 2.1 to the Company's Registration
Statement on Form S-4, File No. 033-64019).
10.14 Loan and Security Agreement (without exhibits or schedules)
among Harris Trust and Savings Bank, as a lender and
administrative agent, American National Bank and Trust Company
of Chicago, as a lender and collateral agent, and the Other
Lenders Party thereto and the Company, as borrower (incorporated
by reference to Exhibit 10.2 to the Company's Form 10-Q for the
quarter ended March 31, 1996).
10.15 Amendment No. 1 to Loan and Security Agreement dated August 2,
1996 (incorporated by reference to Exhibit 10.1 to the Company's
Form 10-Q for the quarter ended June 30, 1996).
10.16 Amendment No. 2 to Loan and Security Agreement dated November
14, 1996 (incorporated by reference to Exhibit 10.1 to the
Company's Form 10-Q for the quarter ended September 30, 1996).
10.17 Amendment No. 3 to Loan and Security Agreement dated July 31,
1998 (incorporated by reference to Exhibit 10.1 to the Company's
Form 10-Q for the quarter ended June 30, 1998).
10.18 Amendment No. 4 to Loan and Security Agreement dated March 23,
1999 (incorporated by reference to Exhibit 10.18 to the
Company's Form 10-K for the year ended December 30, 1998).

10.19 Amendment No. 5 to Loan and Security Agreement dated August 8,
2000 (incorporated by reference to Exhibit 10.1 to the Company's
Form 10-Q for the quarter ended June 30, 2000).
10.20 Amendment No. 6 to Loan and Security Agreement dated September
29, 2000 (incorporated by reference to Exhibit 10.1 to the
Company's Form 10-Q for the quarter ended September 30, 2000).
10.21 All American Semiconductor, Inc. 401(k) Profit Sharing Plan
(incorporated by reference to Exhibit 10.25 to the Company's
Form 10-K for the year ended December 31, 1994).**
10.22 Settlement Agreement dated December 17, 1996, by and among the
Company, certain of its subsidiaries and certain selling
stockholders of the Added Value Companies (incorporated by
reference to Exhibit 10.35 to the Company's Form 10-K for the
year ended December 31, 1996).
10.23 Settlement Agreement dated January 22, 1997, by and among the
Company, certain of its subsidiaries and Thomas Broesamle
(incorporated by reference to Exhibit 10.36 to the Company's
Form 10-K for the year ended December 31, 1996).
10.24 Form of Salary Continuation Plan (incorporated by reference to
Exhibit 10.37 to the Company's Form 10-K for the year ended
December 31, 1996).**
10.25 Promissory Note, dated October 1, 1996, payable to Sam Berman,
d/b/a Drake Enterprises, in the amount of $161,500 (incorporated
by reference to Exhibit 10.38 to the Company's Form 10-K for the
year ended December 31, 1996).
10.26 Note dated August 21, 1998, by Bruce Mitchell Goldberg and Jayne
Ellen Goldberg in favor of the Company in the principal amount
of $125,000 (incorporated by reference to Exhibit 10.5 to the
Company's Form 10-Q for the quarter ended September 30, 1998).
10.27 Employment Agreement effective as of January 1, 2000 and dated
as of April 27, 2000, between the Company and Howard L. Flanders
(incorporated by reference to Exhibit 10.3 to the Company's Form
10-Q for the quarter ended March 31, 2000).**
10.28 Employment Agreement effective as of January 1, 2000 and dated
as of April 27, 2000, between the Company and Rick Gordon
(incorporated by reference to Exhibit 10.4 to the Company's Form
10-Q for the quarter ended March 31, 2000).**
10.29 Lease Agreement for Integrated Display Technologies and Aved
Display Technologies divisions in Irvine, California dated
December 1, 2000 between Buckhead Industrial Properties, Inc.
and the Company.*
11.1 Statement Re: Computation of Per Share Earnings.*
21.1 List of subsidiaries of the Registrant.*
23.1 Consent of Lazar Levine & Felix LLP, independent certified
public accountants.*

------------------
* Filed herewith
** Management contract or compensation plan or arrangement required to be
filed as an exhibit to this report pursuant to Item 14(c) of Form 10-K.

(b) REPORTS ON FORM 8-K
No reports were filed during the fourth quarter of 2000.

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Registrant has duly caused this Annual Report on Form 10-K to
be signed on its behalf by the undersigned, thereunto duly authorized.

ALL AMERICAN SEMICONDUCTOR, INC.
(Registrant)

By: /s/ PAUL GOLDBERG
------------------------------------
Paul Goldberg, Chairman of the Board

Dated: March 30, 2001

Pursuant to the requirements of the Securities Exchange Act of 1934, this Annual
Report on Form 10-K has been signed below by the following persons on behalf of
the Registrant and in the capacities indicated on March 30, 2001.

/s/ PAUL GOLDBERG Chairman of the Board, Director
------------------------------------
Paul Goldberg

/s/ BRUCE M. GOLDBERG President and Chief Executive Officer,
------------------------------------ Director
Bruce M. Goldberg (Principal Executive Officer)

/s/ HOWARD L. FLANDERS Executive Vice President and Chief
------------------------------------ Financial Officer, Director
Howard L. Flanders (Principal Financial and Accounting
Officer)

/s/ RICK GORDON Senior Vice President of Sales,
------------------------------------ Director
Rick Gordon

/s/ ROBIN L. CRANDELL Director
------------------------------------
Robin L. Crandell

/s/ DANIEL M. ROBBIN Director
------------------------------------
Daniel M. Robbin

/s/ RICHARD E. SIEGEL Director
------------------------------------
Richard E. Siegel

MANAGEMENT'S RESPONSIBILITY FOR FINANCIAL REPORTING

The Company's management is responsible for the preparation of the Consolidated
Financial Statements in accordance with generally accepted accounting principles
and for the integrity of all the financial data included in this Form 10-K. In
preparing the Consolidated Financial Statements, management makes informed
judgements and estimates of the expected effects of events and transactions that
are currently being reported.

Management maintains a system of internal controls that is designed to provide
reasonable assurance that assets are safeguarded and that transactions are
executed and recorded in accordance with management's policies for conducting
its business. This system includes policies which require adherence to ethical
business standards and compliance with all laws to which the Company is subject.
The internal controls process is continuously monitored by direct management
review.

The Board of Directors, through its Audit Committee, is responsible for
determining that management fulfils its responsibility with respect to the
Company's Consolidated Financial Statements and the system of internal controls.

The Audit Committee, comprised solely of directors who are not officers or
employees of the Company, meets quarterly with representatives of management and
the Company's independent accountants to review and monitor the financial,
accounting, and auditing procedures of the Company in addition to reviewing the
Company's financial reports. The Company's independent accountants have full and
free access to the Audit Committee.

/s/ BRUCE M. GOLDBERG /s/ HOWARD L. FLANDERS
------------------------------- -------------------------------
Bruce M. Goldberg Howard L. Flanders
President, Executive Vice President,
Chief Executive Officer Chief Financial Officer

INDEPENDENT AUDITORS' REPORT

To The Board of Directors
All American Semiconductor, Inc.
Miami, Florida

We have audited the accompanying consolidated balance sheets of All American
Semiconductor, Inc. and subsidiaries as of December 31, 2000 and 1999 and the
related consolidated statements of income, changes in shareholders' equity and
cash flows for the three years in the period ended December 31, 2000. Our audits
also included the financial statement schedule listed in Part IV, Item 14(a) of
this Form 10-K. These financial statements and schedule are the responsibility
of the Company's management. Our responsibility is to express an opinion on
these financial statements and schedule based on our audits.

We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audits to obtain reasonable assurance about whether the financial
statements and schedule are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements and schedule. 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 consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of All
American Semiconductor, Inc. and subsidiaries at December 31, 2000 and 1999 and
the results of their operations and their cash flows for the three years in the
period ended December 31, 2000, in conformity with accounting principles
generally accepted in the United States of America. Also, in our opinion, the
related financial statement schedule, when considered in relation to the basic
consolidated financial statements taken as a whole, presents fairly in all
material respects the information set forth therein.

/s/ LAZAR LEVINE & FELIX LLP
-------------------------------
LAZAR LEVINE & FELIX LLP
New York, New York
March 2, 2001

F-1

ALL AMERICAN SEMICONDUCTOR, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

ASSETS DECEMBER 31 2000 1999
-----------------------------------------------------------------------------------------------

Current assets:
Cash ....................................................... $ 335,000 $ 173,000
Accounts receivable, less allowances for doubtful
accounts of $3,283,000 and $1,987,000 .................... 91,812,000 53,202,000
Inventories ................................................ 146,444,000 85,260,000
Other current assets ....................................... 3,745,000 4,637,000
------------- -------------
Total current assets ..................................... 242,336,000 143,272,000
Property, plant and equipment - net .......................... 4,255,000 4,482,000
Deposits and other assets .................................... 2,687,000 2,741,000
Excess of cost over fair value of net assets acquired - net... 950,000 1,006,000
------------- -------------
$ 250,228,000 $ 151,501,000
============= =============

LIABILITIES AND SHAREHOLDERS' EQUITY
-----------------------------------------------------------------------------------------------
Current liabilities:
Current portion of long-term debt .......................... $ 240,000 $ 273,000
Accounts payable and accrued expenses ...................... 81,234,000 51,584,000
Income taxes payable ....................................... 968,000 --
Other current liabilities .................................. 304,000 198,000
------------- -------------
Total current liabilities ................................ 82,746,000 52,055,000
Long-term debt:
Notes payable .............................................. 120,643,000 64,298,000
Subordinated debt .......................................... 6,043,000 6,089,000
Other long-term debt ....................................... 1,198,000 1,207,000
------------- -------------
210,630,000 123,649,000
------------- -------------
Commitments and contingencies

Shareholders' equity:
Preferred stock, $.01 par value, 1,000,000 shares
authorized, none issued .................................. -- --
Common stock, $.01 par value, 40,000,000 shares
authorized, 4,039,620 and 3,973,431 shares issued
and outstanding .......................................... 40,000 40,000
Capital in excess of par value ............................. 26,326,000 25,751,000
Retained earnings .......................................... 14,167,000 2,968,000
Treasury stock, at cost, 183,246 and 174,646 shares ........ (935,000) (907,000)
------------- -------------
39,598,000 27,852,000
------------- -------------
$ 250,228,000 $ 151,501,000
============= =============

See notes to consolidated financial statements

F-2

ALL AMERICAN SEMICONDUCTOR, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME

YEARS ENDED DECEMBER 31 2000 1999 1998
--------------------------------------------------------------------------------------

NET SALES .......................... $ 522,183,000 $ 329,563,000 $ 250,044,000
Cost of sales ...................... (414,292,000) (265,064,000) (194,599,000)
------------- ------------- -------------
Gross profit ....................... 107,891,000 64,499,000 55,445,000
Selling, general and
administrative expenses .......... (79,893,000) (56,357,000) (46,880,000)
Restructuring and other nonrecurring
expenses ......................... -- -- (2,860,000)
------------- ------------- -------------

INCOME FROM OPERATIONS ............. 27,998,000 8,142,000 5,705,000
Interest expense ................... (8,642,000) (4,985,000) (4,313,000)
------------- ------------- -------------

INCOME BEFORE INCOME TAXES ......... 19,356,000 3,157,000 1,392,000
Income tax provision ............... (8,157,000) (1,358,000) (561,000)
------------- ------------- -------------

NET INCOME ......................... $ 11,199,000 $ 1,799,000 $ 831,000
============= ============= =============

EARNINGS PER SHARE:
Basic ............................ $ 2.92 $ .46 $ .21
====== ====== ======
Diluted .......................... $ 2.70 $ .46 $ .21
====== ====== ======

See notes to consolidated financial statements

F-3

ALL AMERICAN SEMICONDUCTOR, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY

CAPITAL IN TOTAL
COMMON EXCESS OF RETAINED TREASURY SHAREHOLDERS'
SHARES STOCK PAR VALUE EARNINGS STOCK EQUITY
------------------------------------------------------------------------------------------------------------------

Balance, December 31, 1997...... 3,972,828 $ 40,000 $ 25,747,000 $ 338,000 $ (451,000) $ 25,674,000

Exercise of stock options....... 603 -- 4,000 -- -- 4,000

Net income...................... -- -- -- 831,000 -- 831,000
---------- ---------- ------------ ------------ ------------ --------------

Balance, December 31, 1998...... 3,973,431 40,000 25,751,000 1,169,000 (451,000) 26,509,000

Purchase of treasury shares..... -- -- -- -- (456,000) (456,000)

Net income...................... -- -- -- 1,799,000 -- 1,799,000
---------- ---------- ------------ ------------ ------------ --------------

Balance, December 31, 1999...... 3,973,431 40,000 25,751,000 2,968,000 (907,000) 27,852,000

EXERCISE OF STOCK OPTIONS....... 66,189 -- 394,000 -- -- 394,000

INCOME TAX BENEFIT FROM
STOCK OPTIONS EXERCISED......... -- -- 181,000 -- -- 181,000

PURCHASE OF TREASURY SHARES..... -- -- -- -- (28,000) (28,000)

NET INCOME...................... -- -- -- 11,199,000 -- 11,199,000
---------- ---------- ------------ ------------ ------------ --------------

BALANCE, DECEMBER 31, 2000...... 4,039,620 $ 40,000 $ 26,326,000 $ 14,167,000 $ (935,000) $ 39,598,000
========== ========== ============ ============ ============ ==============

See notes to consolidated financial statements

F-4

ALL AMERICAN SEMICONDUCTOR, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

YEARS ENDED DECEMBER 31 2000 1999 1998
--------------------------------------------------------------------------------------------------------

CASH FLOWS FROM OPERATING ACTIVITIES:
Net income ............................................ $ 11,199,000 $ 1,799,000 $ 831,000
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization ....................... 1,354,000 1,230,000 1,236,000
Loss on disposal of assets .......................... 78,000 -- --
Non-cash interest expense ........................... 381,000 294,000 352,000
Changes in assets and liabilities:
Increase in accounts receivable ................... (38,610,000) (15,381,000) (4,924,000)
Increase in inventories ........................... (61,184,000) (16,197,000) (1,154,000)
Decrease (increase) in other current assets ....... 892,000 (2,063,000) (500,000)
Increase in accounts payable and accrued expenses.. 29,690,000 10,383,000 2,075,000
Increase (decrease) in other current liabilities... 1,074,000 (43,000) (317,000)
------------ ------------ ------------
Net cash used for operating activities .......... (55,126,000) (19,978,000) (2,401,000)
------------ ------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of property and equipment ................. (1,058,000) (582,000) (564,000)
Decrease (increase) in other assets ................... (442,000) 299,000 (944,000)
------------ ------------ ------------
Net cash used for investing activities .......... (1,500,000) (283,000) (1,508,000)
------------ ------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net borrowings under line of credit agreement ......... 56,515,000 20,711,000 4,263,000
Increase in notes payable ............................. -- -- 10,000
Repayments of notes payable ........................... (274,000) (294,000) (339,000)
Purchase of treasury shares ........................... (28,000) (456,000) --
Net proceeds from issuance of equity securities ....... 575,000 -- 4,000
------------ ------------ ------------
Net cash provided by financing activities ....... 56,788,000 19,961,000 3,938,000
------------ ------------ ------------
Increase (decrease) in cash ........................... 162,000 (300,000) 29,000
Cash, beginning of year ............................... 173,000 473,000 444,000
------------ ------------ ------------
Cash, end of year ..................................... $ 335,000 $ 173,000 $ 473,000
============ ============ ============

SUPPLEMENTAL CASH FLOW INFORMATION:
Interest paid ......................................... $ 7,810,000 $ 4,410,000 $ 4,223,000
============ ============ ============
Income taxes paid ..................................... $ 7,369,000 $ 1,399,000 $ 1,756,000
============ ============ ============

SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING AND FINANCING ACTIVITIES:

During 1999 the Company entered into a capital lease in the amount of $495,000
for certain programming and telecommunications equipment.

See notes to consolidated financial statements

F-5

ALL AMERICAN SEMICONDUCTOR, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The Company is a national distributor of electronic components manufactured by
others. The Company distributes a full range of semiconductors (active
components), including transistors, diodes, memory devices, microprocessors,
microcontrollers and other integrated circuits, as well as passive components,
such as capacitors, resistors, inductors and electromechanical products,
including cable, switches, connectors, filters and sockets. The Company's
products are sold primarily to original equipment manufacturers in a diverse and
growing range of industries, including manufacturers of computers and
computer-related products; home office and portable equipment; networking;
satellite, wireless and other communications products; Internet infrastructure
equipment and appliances; automobiles; consumer goods; robotics and industrial
equipment; defense and aerospace equipment; and medical instrumentation. The
Company also sells products to contract electronics manufacturers or electronics
manufacturing services providers who manufacture products for companies in all
electronics industry segments. The Company also designs and has manufactured
certain board level products including memory modules and flat panel display
driver boards, both of which are sold to original equipment manufacturers.

The Company's financial statements are prepared in accordance with generally
accepted accounting principles ("GAAP"). Those principles considered
particularly significant are detailed below. GAAP requires management to make
estimates and assumptions affecting the reported amounts of assets, liabilities,
revenues and expenses. While actual results may differ from these estimates,
management does not expect the variances, if any, to have a material effect on
the Consolidated Financial Statements.

BASIS OF CONSOLIDATION AND PRESENTATION

The Consolidated Financial Statements of the Company include the accounts of all
subsidiaries, all of which are wholly-owned. All material intercompany balances
and transactions have been eliminated in consolidation. The Company has Canadian
and Mexican subsidiaries which conduct substantially all of their business in
U.S. dollars.

All references to shares of common stock, $.01 par value, stock options,
warrants, exercise prices per share and per share amounts have been restated to
reflect the effect of the Reverse Stock Split (as hereinafter defined). See Note
4 to Notes to Consolidated Financial Statements.

Prior years' financial statements have been reclassified to conform with the
current year's presentation.

CONCENTRATION OF CREDIT RISK/FAIR VALUES

Financial instruments that potentially subject the Company to concentrations of
credit risk consist principally of cash and accounts receivable. The Company,
from time to time, maintains cash balances which exceed the federal depository
insurance coverage limit. The Company performs periodic reviews of the relative
credit rating of its bank to lower its risk. The Company believes that
concentration with regards to accounts receivable is limited due to its large
customer base. Fair values of cash, accounts receivable, accounts payable and
long-term debt reflected in the December 31, 2000 and 1999 Consolidated Balance
Sheets approximate carrying value at these dates.

MARKET RISK

F-6

ALL AMERICAN SEMICONDUCTOR, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

INVENTORIES

Inventories are stated at the lower of cost (determined on an average cost
basis) or market.

FIXED ASSETS

Fixed assets are reflected at cost. Depreciation of office furniture and
equipment and computer equipment is provided on straight-line and accelerated
methods over the estimated useful lives of the respective assets. Amortization
of leasehold improvements is provided using the straight-line method over the
term of the related lease or the life of the respective asset, whichever is
shorter. Maintenance and repairs are charged to expense as incurred; major
renewals and betterments are capitalized.

EXCESS OF COST OVER FAIR VALUE OF NET ASSETS ACQUIRED (GOODWILL)

The excess of cost over the fair value of net assets acquired is being amortized
over periods ranging from 15 years to 40 years using the straight-line method.
The Company periodically reviews the value of its excess of cost over the fair
value of net assets acquired to determine if an impairment has occurred. As part
of this review the Company measures the estimated future operating cash flows of
acquired businesses and compares that with the carrying value of excess of cost
over the fair value of net assets.

REVENUE RECOGNITION

The Company recognizes revenues at the point of passage of title, which is
generally at the time of shipment.

In December 1999, the Securities and Exchange Commission ("SEC") issued Staff
Account Bulletin ("SAB") No. 101, "Revenue Recognition in Financial Statements",
which provides guidance related to revenue recognition based on interpretations
and practices followed by the SEC. Subsequently, SAB Nos. 101A and 101B were
issued delaying the implementation of SAB No. 101 to the fourth quarter of 2001.
The SAB requires companies to report any changes in revenue recognition as a
cumulative change in accounting principle at the time of implementation in
accordance with Accounting Principles Board ("APB") Opinion 20, "Accounting
Changes". We are currently evaluating the impact, if any, SAB No. 101 will have
on the Company's financial position or results of operations.

INCOME TAXES

The Company has elected to file a consolidated federal income tax return with
its subsidiaries. Deferred income taxes are provided on transactions which are
reported in the financial statements in different periods than for income tax
purposes. Deferred tax liabilities and assets are determined based on the
difference between the financial statement and tax basis of assets and
liabilities using enacted tax rates in effect for the year in which the
difference is expected to reverse. The effect on deferred tax assets and
liabilities of a change in tax rates is recognized in income in the period that
includes the enactment date. See Note 8 to Notes to Consolidated Financial
Statements.

EARNINGS PER SHARE

Earnings per common share is computed by dividing net income by the weighted
average, during each period, of the number of common shares outstanding and for
diluted earnings per share also common equivalent shares outstanding.

F-7

ALL AMERICAN SEMICONDUCTOR, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

The following average shares were used for the computation of basic and diluted
earnings per share:

YEARS ENDED DECEMBER 31 2000 1999 1998
--------------------------------------------------------------------------------

Basic .................... 3,828,978 3,921,138 3,937,021
Diluted .................. 4,140,579 3,924,166 3,998,802

STATEMENTS OF CASH FLOWS

For purposes of the statements of cash flows, the Company considers all
investments purchased with an original maturity of three months or less to be
cash.

COMPREHENSIVE INCOME

In 1998, the Company adopted Financial Accounting Standards Board Statement No.
130, "Reporting Comprehensive Income", which prescribes standards for reporting
comprehensive income and its components. The Company had no items of other
comprehensive income in any period presented and accordingly is not required to
report comprehensive income.

SEGMENTS OF AN ENTERPRISE AND RELATED INFORMATION

In 1998, the Company adopted Financial Accounting Standards Board Statement No.
131, "Disclosures about Segments of an Enterprise and Related Information",
which establishes standards for reporting about operating segments. The Company
has determined that no operating segment outside of its core business met the
quantitative thresholds for separate reporting. Accordingly, no separate
information has been reported.

PENSIONS AND OTHER POSTRETIREMENT BENEFITS

In 1998, the Company adopted Financial Accounting Standards Board Statement No.
132, "Employers' Disclosures about Pensions and Other Postretirement Benefits."
The effect of the adoption of this statement was not material.

STOCK BASED COMPENSATION

In 2000, the Company adopted Financial Accounting Standards Board Interpretation
No. 44, "Accounting for Certain Transactions Involving Stock Compensation", an
interpretation of APB No. 25, "Stock Issued to Employees". Interpretation No. 44
clarifies: the application of APB No. 25 for the definition of an employee for
purposes of applying APB No. 25; the criteria for determining whether a plan
qualifies as a noncompensatory plan; the accounting consequence of various
modifications to the terms of previously fixed stock options or awards; and the
accounting for an exchange of stock compensation awards in a business
combination. The effect of the adoption of this interpretation was not material.

NOTE 2 - PROPERTY, PLANT AND EQUIPMENT

DECEMBER 31 2000 1999
-------------------------------------------------------------------------------

Office furniture and equipment ............... $ 3,365,000 $ 4,758,000
Computer equipment ........................... 4,352,000 4,374,000
Leasehold improvements ....................... 2,243,000 2,104,000
------------ ------------
9,960,000 11,236,000
Accumulated depreciation and amortization .... (5,705,000) (6,754,000)
------------ ------------
$ 4,255,000 $ 4,482,000
============ ============

F-8

ALL AMERICAN SEMICONDUCTOR, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

NOTE 3 - STOCK REPURCHASE PROGRAM

During 1999, the Company's Board of Directors authorized the repurchase of up to
$2 million in purchase price of the Company's common stock. The stock
repurchases may, at the discretion of the Company's management, be made from
time to time at prevailing prices in the open market or through privately
negotiated transactions. The Company's management will base its decision on
market conditions, the price of the common stock and other factors. Any shares
of common stock repurchased will be available for reissuance in connection with
the Employees', Officers', Directors' Stock Option Plan, as previously amended
and restated (the "Option Plan"), or for other corporate purposes. For the years
ended December 31, 2000 and 1999, the Company repurchased 8,600 and 138,586
shares of its common stock at average prices of $3.18 and $3.30 per share,
respectively. The aggregate cost of the repurchased shares is reflected as
treasury stock on the Consolidated Balance Sheets. The Company presently does
not intend to make further stock repurchases at the current market prices.

NOTE 4 - REVERSE STOCK SPLIT

NOTE 5 - STOCK PURCHASE RIGHTS

Each Right initially entitles the registered holder to purchase from the
Company, but only when exercisable under the Rights Plan, one share of common
stock at a price of $95.00 per share, subject to certain future adjustments. The
Rights will be exercisable only if a person or group acquires 15% or more of the
Company's common stock (or 10% of such stock under certain circumstances) or
announces a tender offer the consummation of which would result in ownership by
a person or group of 15% or more of the common stock (or 10% or such stock under
certain circumstances). Upon such occurrence, each Right (other than Rights
owned by such person or group) will entitle the holder to purchase from the
Company the number of shares of the Company's common stock having a market value
equal to twice the exercise price of the Right.

F-9

ALL AMERICAN SEMICONDUCTOR, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

NOTE 6 - RESTRUCTURING AND OTHER NONRECURRING EXPENSES

During 1998, the Company was involved in merger discussions which led to a
letter of intent being signed in June 1998. Throughout 1998 the Company was
actively involved in the evaluation of and preparations for the integration of
operations in connection with the proposed merger. In October 1998, the merger
negotiations were terminated. As a result, the Company recorded a nonrecurring
charge in 1998, which included expansion costs incurred in anticipation of
supporting the proposed combined entity, certain employee-related expenses,
professional fees and other merger-related out of pocket costs, all of which
aggregated $2,860,000.

NOTE 7 - LONG-TERM DEBT

LINE OF CREDIT

In September 2000, the Company's agreement with its consortium of banks was
amended whereby the line of credit facility was increased from $100 million to
$150 million and the term was extended to May 3, 2004. The line of credit
facility, which is based on eligible accounts receivable and inventories as
defined in the agreement, currently bears interest, at the Company's option, at
the prime rate plus .25% or LIBOR plus 2.25%. On a quarterly basis, the
applicable interest rate margins for the prime rate and LIBOR options may be
adjusted based upon the Company's debt service coverage ratio for the 12 month
period ending on the last day of the immediately preceding calendar quarter and
the Company's average excess loan availability for the three month period ending
on the last day of the immediately preceding calendar quarter. The applicable
interest rate margin for the prime rate option may adjust between 0% to .5% and
the applicable interest rate margin for the LIBOR option may adjust between 2.0%
to 2.5%. Outstanding borrowings under the credit facility, which are secured by
all of the Company's assets including accounts receivable, inventories and
equipment, amounted to $120,489,000 at December 31, 2000 compared to $63,974,000
at December 31, 1999. Under the credit facility, the Company is required to
comply with certain affirmative and negative covenants as well as to comply with
certain financial ratios. These covenants, among other things, place limitations
and restrictions on the Company's borrowings, investments and transactions with
affiliates and prohibit dividends and stock redemptions. The credit facility
requires the Company to maintain certain minimum levels of tangible net worth
throughout the term of the agreement and a minimum debt service coverage ratio
which is tested on a quarterly basis.

SUBORDINATED DEBT

In June 1994, the Company completed a private placement (the "1994 Private
Placement") of 51.5 units, with each unit consisting of a 9% non-convertible
subordinated debenture due 2004 in the principal amount of $100,000 issuable at
par, together with 1,500 common stock purchase warrants exercisable at $15.75
per share. The 51.5 units issued represent debentures aggregating $5,150,000
together with an aggregate of 77,250 warrants. The debentures are payable in
semi-annual installments of interest only commencing December 1, 1994, with the
principal amount maturing in full on June 13, 2004. The Company is not required
to make any mandatory redemptions or sinking fund payments. The debentures are
subordinated to the Company's senior indebtedness including the Company's credit
facility and notes issued to the Company's landlord. The 77,250 warrants were
valued at $2.50 per warrant as of the date of the 1994 Private Placement and,
accordingly, the Company recorded the discount in the aggregate amount of
$193,125 as additional paid-in capital. This discount is being amortized over
the ten-year term of the debentures and approximately $19,000 was expensed in
2000, 1999 and 1998. All of these warrants expired during 1999.

F-10

ALL AMERICAN SEMICONDUCTOR, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

In May 1994, the Company executed a twenty-year promissory note in the amount of
$865,000 in favor of the Company's landlord to finance substantially all of the
tenant improvements necessary for the Company's Miami facility. This $865,000
note has a repayment schedule with varying monthly payments of principal after
the second year. At the same time, the Company entered into another promissory
note with the Company's landlord for $150,000 to finance certain personal
property for the facility. This $150,000 note is payable interest only for six
months and thereafter in 60 equal self-amortizing monthly payments of principal
and interest. These notes, which are subordinate to the Company's credit
facility, bear interest at 8% per annum and are payable monthly. Certain
additional improvements to the Company's Miami corporate facility aggregating
approximately $90,300 were financed as of May 1, 1995 by the landlord. This
$90,300 obligation is evidenced by a promissory note payable in 240 consecutive,
equal self-amortizing monthly installments of principal and interest. This note,
which is also subordinate to the Company's credit facility, accrues interest at
a fixed rate of 8% per annum. In October 1996, the Company executed a promissory
note in the amount of $161,500 with the Company's landlord to finance certain
additional improvements to the Company's Miami corporate facility. This note,
which is also subordinate to the credit facility, is payable monthly with
interest at 8.5% per annum and matures in October 2011.

Long-term debt of the Company as of December 31, 2000, other than the Company's
credit facility and obligations under capital leases, matures as follows:

2001 ................................................ $ 73,000
2002 ................................................ 86,000
2003 ................................................ 68,000
2004 ................................................ 59,000
2005 ................................................ 64,000
Thereafter .......................................... 6,968,000
----------
$7,318,000
==========

OBLIGATIONS UNDER CAPITAL LEASES

The Company is the lessee of programming and telecommunications equipment under
a capital lease expiring in 2002. The assets, aggregating $495,000, and
liability under this capital lease are recorded at the lower of the present
value of the minimum lease payments or the fair value of the assets. The assets
are depreciated over their estimated productive lives. As of December 31, 2000,
accumulated depreciation of these assets aggregated approximately $106,000. The
depreciation of assets under this capital lease is included in depreciation
expense.

Minimum future lease payments under this capital lease as of December 31, 2000
and for each of the remaining years and in the aggregate are approximately as
follows:

2001 ....................................................... $ 188,000
2002 ....................................................... 156,000
---------
Total minimum lease payments ............................... 344,000
Less amount representing interest .......................... (27,000)
---------
Total obligations under capital leases ..................... 317,000
Current portion ............................................ (167,000)
---------
$ 150,000
=========

The interest rate on this capital lease is 8.5% per annum and is imputed based
on the lower of the Company's incremental borrowing rate at the inception of the
lease or the lessor's implicit rate of return. This capital lease provides for a
purchase option.

F-11

ALL AMERICAN SEMICONDUCTOR, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

NOTE 8 - INCOME TAXES

The tax effects of the temporary differences that give rise to the deferred tax
assets and liabilities as of December 31, 2000 and 1999 are as follows:

2000 1999
Deferred tax assets: ---------- ----------
Accounts receivable .................... $1,332,000 $ 738,000
Inventory .............................. 638,000 387,000
Accrued expenses ....................... 887,000 574,000
Postretirement benefits ................ 600,000 541,000
Other .................................. 486,000 546,000
---------- ----------
3,943,000 2,786,000
Deferred tax liabilities:
Fixed assets ........................... 388,000 368,000
---------- ----------
Net deferred tax asset ................... $3,555,000 $2,418,000
========== ==========

At December 31, 2000, $2,856,000 of the net deferred tax asset was included in
"Other current assets" and $699,000 was included in "Deposits and other assets"
in the accompanying Consolidated Balance Sheet.

The components of income tax expense are as follows:

YEARS ENDED DECEMBER 31 2000 1999 1998
-------------------------------------------------------------------------------
CURRENT
Federal ............... $ 7,425,000 $ 466,000 $ 1,210,000
State ................. 1,869,000 90,000 210,000
----------- ----------- -----------
9,294,000 556,000 1,420,000
----------- ----------- -----------
DEFERRED
Federal ............... (697,000) 698,000 (749,000)
State ................. (440,000) 104,000 (110,000)
----------- ----------- -----------
(1,137,000) 802,000 (859,000)
----------- ----------- -----------
$ 8,157,000 $ 1,358,000 $ 561,000
=========== =========== ===========

A reconciliation of the difference between the expected income tax rate using
the statutory federal tax rate and the Company's effective tax rate is as
follows:

YEARS ENDED DECEMBER 31 2000 1999 1998
-------------------------------------------------------------------------------
U.S. Federal income tax statutory rate ................. 35.0% 34.0% 34.0%
State income tax, net of federal income tax benefit .... 5.9 3.3 4.2
Goodwill amortization and other - including
non-deductible items ................................. 1.2 5.7 2.1
---- ---- ----
Effective tax rate ..................................... 42.1% 43.0% 40.3%
==== ==== ====

The tax benefit associated with the disqualifying disposition of stock acquired
with incentive stock options under the Option Plan reduced taxes payable by
$181,000 as of December 31, 2000 and is reflected as a credit to capital in
excess of par value in the accompanying Consolidated Balance Sheet.

F-12

ALL AMERICAN SEMICONDUCTOR, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

NOTE 9 - CAPITAL STOCK, OPTIONS AND WARRANTS

In December 1995, in connection with certain acquisitions, the Company issued an
aggregate of 434,821 shares of common stock, including 32,141 shares, valued at
approximately $391,000, which were issued to the Company's wholly-owned
subsidiary. In addition, in connection with such acquisitions, certain selling
stockholders were granted an aggregate of 10,000 stock options (6,000 stock
options of which have since been canceled) to acquire the Company's common stock
at an exercise price of $11.565 per share exercisable, subject to a six-year
vesting period, through December 29, 2002. In connection with the Company
entering into a settlement agreement with certain of the selling stockholders in
December 1996, an aggregate of 19,000 shares of the Company's common stock was
canceled and certain selling stockholders were granted stock options to purchase
an aggregate of 10,000 shares of the Company's common stock at an exercise price
of $7.50 per share exercisable through December 30, 2001. At December 31, 2000,
5,000 of these options remained unexercised, 2,500 were exercised and 2,500 were
canceled.

In July 1995, the Company issued to a consulting firm a warrant to acquire 9,000
shares of the Company's common stock at an exercise price of $12.50 per share
exercisable through June 30, 2000, and was subsequently extended through
December 31, 2000. The warrant was issued in consideration of such consulting
firm entering into a new one-year consulting agreement with the Company covering
financial public relations/investor relations services. At December 31, 2000,
this warrant was unexercised and expired.

In connection with employment agreements between the Company and each of its
four executive officers entered into in May 1995, an aggregate of 200,000 stock
options were granted on June 8, 1995 to such four executive officers pursuant to
the Option Plan. These options have an exercise price of $9.375 per share and
are exercisable through June 7, 2005. As a result of the Company reaching
certain earnings per share levels during 2000, these options became fully
vested. At December 31, 2000 these options remained unexercised.

In connection with the public offering in 1995, the Company issued to the
underwriter common stock purchase warrants covering an aggregate of 104,650
shares of common stock (including warrants issued in connection with the
underwriter's exercise of the over-allotment option). These warrants were
exercisable at a price of $13.125 per share for a period of four years
commencing June 8, 1996. During 2000, all of these warrants were redeemed by the
Company for $13,000.

In June 2000, the Company established the 2000 Nonemployee Director Stock Option
Plan. The 2000 Nonemployee Director Stock Option Plan provides for awards of
options to purchase shares of common stock, $.01 par value per share, of the
Company to nonemployee directors of the Company. An aggregate of 75,000 shares
of the Company's common stock has been reserved for issuance under the 2000
Nonemployee Director Stock Option Plan. During 2000, the Company granted an
aggregate of 4,500 stock options to 3 individuals pursuant to the 2000
Nonemployee Director Stock Option Plan. These options have an exercise price of
$10.53 per share (based on fair market value at date of grant) and vest over a
two-year period and are exercisable over a ten-year period.

The Company has reserved 900,000 shares of common stock for issuance under the
Employees', Officers', Directors' Stock Option Plan, as previously amended and
restated.

F-13

ALL AMERICAN SEMICONDUCTOR, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

A summary of options granted under the option plans and related information for
the years ended December 31, 1998, 1999 and 2000 follows:

WEIGHTED AVERAGE
OPTIONS EXERCISE PRICE
------- --------------

Outstanding, December 31, 1997 545,664 $ 7.30
Granted 39,000 7.20
Exercised (603) 5.60
Canceled (17,750) 6.95
-------
Outstanding, December 31, 1998 566,311 7.30
Weighted average fair value of options granted during 1998 1.35
Granted 204,400 3.52
Exercised -- --
Canceled (55,863) 6.61
-------
Outstanding, December 31, 1999 714,848 6.29
Weighted average fair value of options granted during 1999 1.15
Granted 137,000 13.00
Exercised (66,189) 5.96
Canceled (35,625) 5.77
-------
Outstanding, December 31, 2000 750,034 7.57
=======
Weighted average fair value of options granted during 2000 4.36
Options exercisable:
December 31, 1998 166,416 6.10
December 31, 1999 184,416 5.96
December 31, 2000 386,939 7.51

Exercise prices for options outstanding as of December 31, 2000 ranged from
$3.27 to $16.71. The weighted-average remaining contractual life of these
options is approximately 5 years. Outstanding options at December 31, 2000 were
held by 168 individuals.

The Company applies APB 25 and related Interpretations in accounting for the
option plans. Accordingly, no compensation cost has been recognized for the
option plans. Had compensation cost for the option plans been determined using
the fair value based method, as defined in Financial Accounting Standards Board
Statement No. 123, "Accounting for Stock-Based Compensation," the Company's net
earnings and earnings per share would have been adjusted to the pro forma
amounts indicated below:

YEARS ENDED DECEMBER 31 2000 1999 1998
--------------------------------------------------------------------------
Net earnings:
As reported $ 11,199,000 $ 1,799,000 $ 831,000
Pro forma 10,853,000 1,665,000 800,000

Basic earnings per share:
As reported $ 2.92 $ .46 $ .21
Pro forma 2.83 .42 .20

Diluted earnings per share:
As reported $ 2.70 $ .46 $ .21
Pro forma 2.62 .42 .20

F-14

ALL AMERICAN SEMICONDUCTOR, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

The fair value of each option grant was estimated on the date of the grant using
the Black-Scholes option-pricing model with the following weighted-average
assumptions for 2000, 1999 and 1998, respectively: expected volatility of 47%,
40% and 60%; risk-free interest rate of 6.3%, 5.9% and 5.7%; and expected lives
of 5 to 8 years.

The effects of applying SFAS 123 in the above pro forma disclosures are not
indicative of future amounts as they do not include the effects of awards
granted prior to 1995. Additionally, future amounts are likely to be affected by
the number of grants awarded since additional awards are generally expected to
be made at varying amounts.

NOTE 10 - COMMITMENTS/RELATED PARTY TRANSACTIONS

In May 1994, the Company entered into a new lease with its then existing
landlord to lease a 110,800 square foot facility for its corporate headquarters
and Miami distribution center. The lease has a term expiring in 2014 (subject to
the Company's right to terminate at any time after the fifth year of the term
upon twenty-four months prior written notice and the payment of all outstanding
debt owed to the landlord). The lease gives the Company three six-year options
to renew at the fair market value rental rates. The lease is currently in its
seventh year and provides for annual fixed rental payments totaling
approximately $307,800 in year seven; and in each year thereafter during the
term, the rent shall increase once per year in an amount equal to the annual
percentage increase in the consumer price index not to exceed 4% in any one
year.

In Tustin, California the Company leases a 13,900 square foot facility which
presently contains all operations for the separate divisions of Aved Display
Technologies and Aved Memory Products. In December 2000, the Company leased
26,700 square feet of space in Irvine, California which will house the
operations of the Company's newly created Integrated Display Technologies
division. The Company also intends to relocate to the Irvine location the
operations of Aved Display Technologies when construction of the facility is
completed. This will permit the expansion of the operations of Aved Memory
Products which will then occupy all of the existing facility in Tustin.

During 1998, the Company entered into a new lease for approximately 20,000
square feet of space in San Jose, California to house its expanded west coast
corporate offices and the headquarters of the Company's sales and marketing
functions, as well as its northern California sales operation. Approximately
8,000 square feet of the space is being used for corporate offices including the
office of the President and Chief Executive Officer of the Company and 8,000
square feet of the space is being utilized for the sales operation. The
remaining area of approximately 4,000 square feet is presently being sublet.

The Company leases space for its other sales offices, which range in size from
approximately 1,000 square feet to 8,000 square feet. The leases for these
offices expire at various dates and include various escalation clauses and
renewal options.

F-15

ALL AMERICAN SEMICONDUCTOR, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

Approximate minimum future lease payments required under operating leases for
office leases as well as equipment leases that have initial or remaining
noncancelable lease terms in excess of one year as of December 31, 2000, are as
follows:

YEAR ENDING DECEMBER 31
-----------------------

2001 ................................................ $3,700,000
2002 ................................................ 3,000,000
2003 ................................................ 2,600,000
2004 ................................................ 1,700,000
2005 ................................................ 1,300,000
Thereafter .......................................... 5,300,000

Total rent expense for office leases, including real estate taxes and net of
sublease income, amounted to approximately $2,703,000, $2,451,000, and
$2,165,000 for the years ended December 31, 2000, 1999 and 1998, respectively.

In 1998, the Board of Directors approved a loan to the President and Chief
Executive Officer of the Company in the amount of $125,000 in connection with
his relocation to Silicon Valley. This loan, which was evidenced by a promissory
note and bore interest at 5% per annum, was forgiven effective December 31,
2000.

Effective January 1, 1988, the Company established a deferred compensation plan
(the "1988 Deferred Compensation Plan") for executive officers and key employees
of the Company. The employees eligible to participate in the 1988 Deferred
Compensation Plan (the "Participants") are chosen at the sole discretion of the
Board of Directors upon a recommendation from the Board of Directors'
Compensation Committee. Pursuant to the 1988 Deferred Compensation Plan,
commencing on a Participant's retirement date, he or she will receive an annuity
for ten years. The amount of the annuity shall be computed at 30% of the
Participant's Salary, as defined. Any Participant with less than ten years of
service to the Company as of his or her retirement date will only receive a pro
rata portion of the annuity. Retirement benefits paid under the 1988 Deferred
Compensation Plan will be distributed monthly. The Company paid benefits under
this plan of approximately $15,600 during each of 2000, 1999 and 1998, none of
which was paid to any executive officer. The maximum benefit payable to a
Participant (including each of the executive officers) under the 1988 Deferred
Compensation Plan is presently $30,000 per annum. At December 31, 2000, the cash
surrender values of insurance policies owned by the Company under the 1988
Deferred Compensation Plan, which provide for the accrued deferred compensation
benefits, aggregated approximately $170,000.

During 1996, the Company established a second deferred compensation plan (the
"Salary Continuation Plan") for executives of the Company. The executives
eligible to participate in the Salary Continuation Plan are chosen at the sole
discretion of the Board of Directors upon a recommendation from the Board of
Directors' Compensation Committee. The Company may make contributions each year
in its sole discretion and is under no obligation to make a contribution in any
given year. For 2000, 1999, and 1998 the Company committed to contribute
$235,000, $115,000, and $192,000 respectively, under this plan. Participants in
the plan will vest in their plan benefits over a ten-year period. If the
participant's employment is terminated due to death, disability or due to a
change in control of management, they will vest 100% in all benefits under the
plan. Retirement benefits will be paid, as selected by the participant, based on
the sum of the net contributions made and the net investment activity.

During 2000, employment agreements with two of the Company's executive officers
were amended whereby the term, among other things, was extended through December
31, 2005. In addition, during 2000 the Company entered into new agreements that
continue until December 31, 2003 with two other executive officers on similar
terms as were contained in their previous employment agreements with the

F-16

ALL AMERICAN SEMICONDUCTOR, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

Company. At December 31, 2000, in addition to incentive compensation, these
agreements provide for aggregate base salary of approximately $5,366,000 over
the remaining term of the agreements.

In connection with an employment agreement with an executive officer an unfunded
postretirement benefit obligation of $1,171,000 is included in the Consolidated
Balance Sheets at December 31, 2000 and 1999.

The Company maintains a 401(k) plan (the "401(k) Plan"), which is intended to
qualify under Section 401(k) of the Internal Revenue Code. All full-time
employees of the Company over the age of 21 are eligible to participate in the
401(k) Plan after completing 90 days of employment. Each eligible employee may
elect to contribute to the 401(k) Plan, through payroll deductions, up to 15% of
his or her salary, limited to $10,500 in 2000. The Company's 401(k) Plan
presently provides for standard matching contributions by the Company in the
amount of 25% on the first 6% contributed of each participating employee's
salary. The Company expensed $691,000, $599,000, and $521,000 for matching
contributions for the years ended December 31, 2000, 1999 and 1998,
respectively.

NOTE 11 - CONTINGENCIES

From time to time the Company may be named as a defendant in suits for product
defects, breach of warranty, breach of implied warranty of merchantability,
patent infringement or other actions relating to products which it distributes
which are manufactured by others. In those cases, the Company expects that the
manufacturer of such products will indemnify the Company, as well as defend such
actions on the Company's behalf although there is no guarantee that the
manufacturers will do so. In addition, the Company offers a warranty with
respect to products manufactured or assembled for Aved Display Technologies and
Aved Memory Products for a period of one year against defects in workmanship and
materials under normal use and service and in their original, unmodified
condition.

NOTE 12 - ECONOMIC DEPENDENCY

For each of the years ended December 31, 2000, 1999 and 1998, purchases from one
supplier were in excess of 10% of the Company's total annual purchases and
aggregated approximately $104,420,000, $62,950,000 and $39,893,000,
respectively. The net outstanding accounts payable to this supplier at December
31, 2000, 1999 and 1998 amounted to approximately $11,286,000, $7,545,000 and
$5,832,000, respectively.

F-17

ALL AMERICAN SEMICONDUCTOR, INC. AND SUBSIDIARIES

SCHEDULE II
VALUATION AND QUALIFYING ACCOUNTS

ADDITIONS ADDITIONS
BALANCE AT CHARGED TO CHARGED TO BALANCE
BEGINNING OF COSTS AND OTHER AT END
DESCRIPTION PERIOD EXPENSES ACCOUNTS DEDUCTIONS OF PERIOD
---------------------- ------------ ---------- ---------- ---------- ----------

Allowance for Doubtful
Accounts
2000 $1,987,000 $1,899,000 $ -- $ (603,000) $3,283,000
1999 $1,412,000 $ 824,000 $ -- $ (249,000) $1,987,000
1998 $1,166,000 $ 791,000 $ -- $ (545,000) $1,412,000

S-1