Buy Com Inc – ‘10-Q’ for 3/31/00

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Quarterly Report   —   Form 10-Q
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Document/Exhibit                   Description                      Pages   Size 

 1: 10-Q        Buy.Com - 10-Q - 3/31/2000                            38    163K 
 2: EX-27.1     Financial Data Schedule                                2      7K 

10-Q   —   Buy.Com – 10-Q – 3/31/2000
Document Table of Contents

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UNITED STATES 
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

__________________

FORM 10-Q 

(Mark One)                                                                      
 [X]  QUARTERLY REPORT UNDER SECTION 13 OR 5(d) OF THE SECURITIES EXCHANGE ACT
OF 1934                                                           

[_]  For the quarterly period ended March 31, 2000                          

OR

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

For the transition period from _____________ to _____________     

Commission file number 000-29295

BUY.COM INC.
(Exact name of registrant as specified in its charter)

Delaware                                        33-0816584
(State or other jurisdiction of                        (I.R.S. Employer         
incorporation or organization)                        Identification No.)       

85 Enterprise                                                 
Aliso Viejo, California                                 92656         
(Address of principal executive office)                   (Zip code)            

(949) 389-2000  
(Registrant's telephone number, including area code)  

N/A 
(Former name, former address and former fiscal year, if changed since last  
report) 

     Indicate by check mark whether the registrant:  (1) has filed all documents
and 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 _____        
---               

The number of shares outstanding of the Registrant's Common Stock, par
value $0.0001, as of May 1, 2000 was 131,615,126.                               

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INDEX 
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                                                        [Enlarge/Download Table]

PART I      FINANCIAL INFORMATION                                                                  Page
---------------------------------                                                                  ----
                                                                                                       
Item 1.     Consolidated Balance Sheets at December 31, 1999 and March 31, 2000 (unaudited).......  1  

            Unaudited Consolidated Statements of Operations for the Three Months Ended March 31,       
            1999 and 2000.........................................................................  2  

            Unaudited Consolidated Statements of Cash Flows for the Three Months Ended March 31,       
            1999 and 2000.........................................................................  3  

            Notes to Consolidated Financial Statements............................................  4  

Item 2.     Management's Discussion and Analysis of Financial Condition and Results of Operations.  9  

Item 3.     Quantitative and Qualitative Disclosures about Market Risk............................ 30  

PART II     OTHER INFORMATION                                                                          
-----------------------------                                                                          

Item 1.     Legal Proceedings..................................................................... 31  

Item 2.     Changes in Securities and Use of Proceeds............................................. 32  

Item 3.     Defaults Upon Senior Securities....................................................... 33  

Item 4.     Submission of Matters to a Vote of Security Holders................................... 33  

Item 5.     Other Information..................................................................... 34  

Item 6.     Exhibits and Reports on Form 8-K...................................................... 34  

            A.  Exhibits.......................................................................... 34  

            B.  Reports on Form 8-K............................................................... 34  

Signatures........................................................................................ 35  

 In this Report, "BUY.COM" the "Company," "we," "us" and "our"
collectively refers to BUY.COM INC. and its subsidiaries.                       

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BUY.COM INC.  
------------  
CONSOLIDATED BALANCE SHEETS 
--------------------------- 
(amounts in thousands, except share and per share amounts)  

                                                        [Enlarge/Download Table]

                                       ASSETS                                                                           

                                                                                     March 31,           December 31,   
                                                                                        2000                 1999       
                                                                                -----------------    -----------------  
                                                                                   (unaudited)                          
                                                                                                                        
Current Assets:                                                                                                         
       Cash and cash equivalents                                                 $         144,479    $          24,693 
       Accounts receivable, net of allowances of $1,530 and $1,104 at                                                   
          March 31, 2000 and December 31, 1999, respectively                                24,258               18,151 
       Prepaid expenses and other current assets                                            36,938               31,605 
                                                                                 -----------------    ----------------- 
                  Total current assets                                                     205,675               74,449 
Property and equipment, net                                                                 18,543               16,607 
Intangibles, net                                                                            25,516               28,156 
Other noncurrent assets                                                                        661                  496 
                                                                                 -----------------    ----------------- 
                                                                                 $         250,395    $         119,708 
                                                                                 =================    ================= 

                           LIABILITIES AND STOCKHOLDERS' EQUITY                                                         

Current Liabilities:                                                                                                    
       Accounts payable                                                          $          54,678    $          71,231 
       Line of credit                                                                            -               12,377 
       Other liabilities and accrued expenses                                                6,211                4,768 
       Deferred revenue                                                                      2,643                1,222 
       Income taxes payable                                                                      3                    3 
       Note Payable to stockholder                                                               -                5,000 
       Current portion of long-term debt                                                       325                  321 
                                                                                 -----------------    ----------------- 
                  Total current liabilities                                                 63,860               94,922 

Long-Term Debt, net of current portion                                                       1,654                1,738 
                                                                                 -----------------    ----------------- 

Commitments and Contingencies                                                                                           

Stockholders' Equity:                                                                                                   
       Convertible Preferred stock - Series A and Series B, $0.0001 par                                                 
       value;                                                                                                           
          Authorized shares - 150,000,000 at March 31, 2000; issued and                                                 
            outstanding--22,098,982 at December 31, 1999 and 0 at March 31,                                             
            2000, including additional paid-in capital                                           -              104,939 
       Common stock, $0.0001 par value;                                                                                 
          Authorized shares-850,000,000 at March 31, 2000; Issued and                                                   
            outstanding--93,041,193 at December 31, 1999; 131,615,126 at March                                          
            31, 2000                                                                            13                   10 
          Additional paid-in capital                                                       369,246               72,659 
       Deferred Compensation                                                                (5,822)              (8,850)
       Accumulated Deficit                                                                (178,556)            (145,710)
                                                                                 -----------------    ----------------- 
                  Total stockholders' equity                                               184,881               23,048 
                                                                                 -----------------    ----------------- 
                                                                                 $         250,395    $         119,708 
                                                                                 =================    ================= 

The accompanying notes are an integral part of these consolidated statements  
balance sheets. 

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BUY.COM INC.  
------------  
CONSOLIDATED STATEMENTS OF OPERATIONS 
------------------------------------- 
(amounts in thousands, except share and per share amounts)  

                                                        [Enlarge/Download Table]

                                                              Three Months Ended         
                                                                    March 31,            
                                                       --------------------------------- 
                                                            2000               1999      
                                                       ----------------   -------------- 
                                                                 (unaudited)             
                                                                                         
Net revenues                                           $        207,616   $      107,932 
Cost of goods sold                                              198,743          108,115 
                                                       ----------------   -------------- 

Gross profit (loss)                                               8,873            (183) 

Operating expenses:                                                                      
    Sales and marketing                                          24,520           12,322 
    Product development                                           4,370              830 
    General and administrative                                    6,275            3,079 
    Depreciation and amortization                                 4,036              854 
    Amortization of deferred compensation                         1,201            2,115 
    Charge for warrants                                             170                - 
                                                       ----------------   -------------- 
          Total operating expenses                               40,572           19,200 
                                                       ----------------   -------------- 

          Operating loss                                        (31,699)         (19,383)

Other income (expense):                                                                  
    Interest income                                               1,388              114 
    Other                                                          (114)              17 
                                                       ----------------   -------------- 

          Total other income                                      1,274              131 

Net loss before equity in losses of joint ventures              (30,425)         (19,252)

Equity in losses of joint ventures                                2,421                - 
                                                       ----------------   -------------- 

Net loss                                               $        (32,846)  $      (19,252)
                                                       ================   ============== 

Net loss per share:                                                                      
    Basic and diluted                                  $          (0.28)  $        (0.22)
                                                       ================   ============== 

Weighted average number of common shares outstanding:                                    
    Basic and diluted                                       115,544,187       88,300,193 

The accompanying notes are an integral part of these consolidated 
statements. 

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BUY.COM INC.  
------------  
CONSOLIDATED STATEMENTS OF CASH FLOWS 
------------------------------------- 
(amounts in thousands)  

                                                                [Download Table]

                                                          Three Months Ended      
                                                               March 31,          
                                                    ----------------------------- 
                                                       2000               1999    
                                                    ----------         ---------- 
                                                             (unaudited)          
                                                                                  
Cash flows from operating activities:                                             
   Net loss                                         $ (32,846)         $ (19,252) 
   Adjustments to reconcile net loss to                                           
    net cash used in operating activities                                         
    Depreciation and amortization                       4,036                854  
    Loss on disposal of fixed assets                      161                  -  
    Amortization of deferred compensation               1,201              2,115  
    Charge for warrants                                   170                  -  
    Changes in assets and liabilities:                                            
      Accounts receivable                              (6,107)            (1,877) 
      Prepaid expenses and other current                                          
       assets                                          (5,503)                903 
      Other noncurrent assets                            (165)               (331)
      Accounts payable                                (16,553)             15,614 
      Accrued expenses and other liabilities            1,443                (151)
      Deferred revenue                                  1,421               1,119 
                                                  -----------          ---------- 
       Net cash used in operating activities          (52,742)             (1,006)
                                                  -----------          ---------- 

Cash flows from investing activities:                                             
   Purchase of property and equipment                  (3,632)               (728)
   Proceeds from sale of equipment                        456                   - 
                                                  -----------          ---------- 
       Net cash used in investing activities           (3,176)               (728)
                                                  -----------          ---------- 

Cash flows from financing activities:                                             
   Net proceeds from Initial Public Offering           192,305                  - 
   Repayments to stockholder                            (5,000)                 - 
   Exercise of stock options                               856                  3 
   Repayments under line of credit, mortgage and                                  
      other obligations                                (12,457)                (6)
                                                  ------------         ---------- 
       Net cash provided by (used in) financing                                   
         activities                                    175,704                 (3)
                                                  ------------         ---------- 

Net increase (decrease) in cash and cash                                          
  equivalents                                          119,786             (1,737)

Cash, beginning of period                               24,693              9,221 
                                                  ------------         ---------- 
Cash, end of period                                $   144,479          $   7,484 
                                                  ============         ========== 

Supplemental cash flow information:                                               
  Cash paid during the year for:                                                  
    Interest                                       $     1,295          $      26 
                                                  ============         ========== 
    Income taxes                                   $         6          $       - 
                                                  ============         ========== 

Summary of non-cash investing and financing                                       
  activity:                                                                       
    Stock issued in connection with domain name                                   
    purchases                                      $       316          $     430 
                                                  ============         ========== 

The accompanying notes are an integral part of these consolidated 
statements. 

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BUY.COM, INC

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED) 

1.  COMPANY BACKGROUND                                                          

     BUY.COM INC. and its subsidiaries, collectively (the "Company" or
"BUY.COM"), is a multi-category Internet superstore, offering a selection of    
brand name computer hardware and peripherals, software, books, videos, DVDs,    
computer games, music, clearance equipment, golf related products, consumer     
electronics and travel services.  Through nine online specialty stores, the     
Company offers products in a convenient, intuitive shopping interface that      
features extensive product information and multi-media presentations. The       
Company's e-commerce portal, www.buy.com, links all of the nine specialty stores
and is designed to enhance the customer's online shopping experience 24 hours a 
day, seven days a week.  BUY.COM uses a business model that includes outsourcing
the majority of its operating infrastructure, such as distribution and          
fulfillment functions, customer service and support, credit card processing, and
the hosting of the Company's system infrastructure and database servers.        

       BUY.COM (formerly BuyComp, LLC and Buy Corp.) was organized in June
1997 and began offering products for sale through its web site in November 1997.
From BUY.COM's inception through mid-November 1997, the Company had no sales.   
During this period, the Company's operating activities primarily involved the   
development of the necessary infrastructure and the original BuyComp.com web    
site.  In August 1998, the Company changed its web site designation to          
www.buy.com.                                                                    

2.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES                                  

Unaudited Interim Financial Information                                         

      The interim consolidated financial statements as of March 31, 2000
have been prepared by BUY.COM pursuant to the rules and regulations of the      
Securities and Exchange Commission (the "SEC") for interim financial reporting. 
These consolidated statements are unaudited and, in the opinion of management,  
include all adjustments (consisting of normal recurring adjustments and         
accruals) necessary to present fairly the consolidated balance sheets,          
consolidated operating results, and consolidated cash flows for periods         
presented in accordance with generally accepted accounting principles.  The     
consolidated balance sheet at December 31, 1999 has been derived from the       
audited consolidated financial statements at that date.  Operating results for  
the three months ended March 31, 2000 may not be indicative of the results for  
the year ending December 31, 2000.  Certain information and footnote disclosures
normally included in financial statements prepared in accordance with generally 
accepted accounting principles have been omitted in accordance with the rules   
and regulations of the SEC.  These consolidated financial statements should be  
read in conjunction with the audited consolidated financial statements, and     
accompanying notes, included in the Company's final prospectus related to its   
initial public offering filed with the SEC on February 8, 2000.                 

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Use of Estimates                                                                

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

Cash and Cash Equivalents                                                       

    For the purposes of consolidated statements of cash flows, the Company
considers investment instruments with an original majority of three months or   
less to be cash equivalents.  Cash equivalents are comprised of investments in  
money market funds, government mortgage backed bonds and highly rated corporate 
securities.                                                                     

Revenue Recognition                                                             

Net revenues include product sales net of returns and allowances, 
advertising sales, warranty sales net of amounts paid to the national insurance 
provider, and gross outbound shipping and handling charges. The Company         
recognizes revenue from product sales, net of discounts, coupon redemption and  
estimated sales returns, when the products are shipped to customers. Gross      
outbound shipping and handling charges are included in net sales. The Company   
provides an allowance for sales returns, which is based on historical           
experience. In certain cases, credit card companies require the Company to      
charge customers' credit cards to obtain authorization. In such cases, the      
Company defers revenue recognition until it has confirmed shipment of the goods 
to the customer. For all product sales transactions with its customers, the     
Company acts as a principal, takes title to all products sold upon shipment,    
bears credit risk, and bears inventory risk for returned products that are not  
successfully returned to suppliers, although these risks are mitigated through  
arrangements with credit card issuers, shippers and suppliers.                  

    The Company recognizes revenue from advertising sales ratably over the
term of the advertising campaigns, which usually range from one to twelve       
months. To the extent that advertising customers have paid the Company for      
advertisements that have yet to be published on the Company's Web site, the     
Company defers revenue recognition until such advertisements are delivered. In  
1999, the Company entered into a three-year advertising contract. Under the     
terms of this contract, the Company will receive monthly payments of equal      
amounts. This long-term contract comprised less than 10% of the Company's       
advertising revenues for the three months ended March 31, 2000. The Company has 
no other advertising contract with a term in excess of one year.                

Recent Accounting Pronouncements                                                

On December 3, 1999, the Securities and Exchange Commission staff 
released Staff Accounting Bulletin ("SAB") No. 101, Revenue Recognition, to     
provide guidance on the recognition, presentation and disclosure of revenue in  
financial statements. While SAB No. 101 provides a framework by which to        
recognize revenue in the financial statements, the Company believes that        
adherence to this SAB will not have a material impact on the Company's financial
statements.                                                                     

3.  BUSINESS ACQUISITIONS, DISPOSITIONS, AND INVESTMENTS                        

Business Disposition                                                            

     In October 1999, the Company declared a common stock dividend of 75% of
the capital stock, on an "as converted" basis, of one wholly owned subsidiary,  
BUYNOW INC. ("BUYNOW") to                                                       

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all stockholders of record as of October 13, 1999. The Company effected the     
dividend in April 2000, and on the date of the dividend, the Company owned      
preferred stock representing 25% of the capital stock of BUYNOW, on an "as      
converted" basis. The BUYNOW preferred stock has a liquidation preference over  
the common stock and is convertible into BUYNOW common stock.                   

International Joint Ventures                                                    

In 1999, the Company entered into a letter of intent with SOFTBANK
America, Inc. ("SOFTBANK America") to form three international joint ventures in
which the Company would have 50% ownership interests. The parties are currently 
in discussions regarding these agreements and the ownership structure is subject
to change. For purposes of this report, the Company assumes that it has a 40%   
ownership interest and will therefore not maintain sufficient voting control to 
consolidate these joint ventures. The loss associated with these joint ventures 
is included in the line item "Equity in losses of joint ventures" for the three 
months ended March 31, 2000. In the event the final definitive agreements       
provide for a different ownership interest, we would be required to adjust our  
percentage of losses for the period.                                            

4.  LONG TERM DEBT                                                              

     On February 14, 2000, the Company repaid all of the outstanding amounts
under its credit facility with a commercial bank, totaling $12.4 million. On    
April 20, 2000, the Company cancelled its $15 million credit facility with this 
commercial bank.                                                                

    The Company replaced its irrevocable standby letter of credit, used to
secure its office space, in the amount of $2.6 million from its previous        
commercial lender with a new $2.6 million irrevocable standby letter of credit  
from a new commercial bank.                                                     

      In April 2000, the Company sold an office building to a trust controlled
by Scott A. Blum (the "Founder/Shareholder") for approximately $1.3 million, the
fair market value on the date of sale. The Company used the proceeds from the   
sale of the building to repay its outstanding loan for such building.           

5.  STOCKHOLDER'S EQUITY                                                        

      On February 8, 2000, the Company completed an initial public offering in
which the underwriters sold to the public 16,100,000 shares of common stock,    
including 2,100,000 shares in connection with the exercise of the underwriters' 
over-allotment option, at $13.00 per share. The Company's proceeds from the     
offering, after deducting underwriting discounts and commissions, were $12.09   
per share, or $194,649,000 in the aggregate. As of the closing date of that     
offering, all of the convertible preferred stock outstanding was converted into 
an aggregate of 22,098,982 shares of common stock.                              

6.  LOSS PER SHARE                                                              

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     Basic earnings per share is computed by dividing the net earnings
available to common stockholders for the period by the weighted average number  
of common shares outstanding during the period.  Diluted earnings per share is  
computed by dividing the net earnings for the period by the weighted average    
number of common and common equivalent shares outstanding during the period.    

The following represents the calculations for basic and diluted net loss per
share:                                                                          

                                                                [Download Table]

                                                    Three months ended          
                                                         March 31,              

Basic:                                             2000                 1999    
                                               ------------         ----------- 
                                                       (unaudited)              
                                                                                
Net loss...............................        $    (32,846)        $   (19,252)
Weighted average common shares.........         115,544,187          88,300,193 
                                               ------------         ----------- 
Net loss per common share..............        $      (0.28)        $     (0.22)
                                               ============         =========== 

Diluted:                                                                        
Net loss...............................        $    (32,846)        $   (19,252)
Weighted average common shares.........         115,544,187          88,300,193 
Stock options adjustment............                      -                   - 
                                               ------------         ----------- 
Average common shares outstanding......         115,544,187          88,300,193 
                                               ------------         ----------- 
Net loss per common share..............        $      (0.28)        $     (0.22)
                                               ============         =========== 

All of the Company's stock options and warrants are excluded from diluted loss  
per share since their effect is antidilutive.                                   

8.  COMMITMENTS AND CONTINGENCIES                                               

       Please refer to "Part II - Other Information - Item 1" of this report
for a discussion of Legal Proceedings.                                          

9.  RELATED PARTY TRANSACTIONS                                                  

        Effective in January 2000, the Company cancelled an office space lease
agreement with a trust controlled by the Founder/Shareholder.                   

         On February 14, 2000, the Company repaid a $5.0 million loan to a trust
controlled by the Founder/Shareholder.  Interest paid in connection with this   
loan was approximately $253,000.                                                

In April 2000, the Company sold an office building to a trust 
controlled by the Founder/Shareholder for approximately $1.3 million, the fair  
market value on the date of sale.                                               

  On April 20, 2000, the Company terminated its $15 million credit
facility with a commercial bank.  Upon termination of the credit facility, the  
obligations of the Founder/Shareholder's trust, as a guarantor, were terminated.

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        On April 26, 2000, we effected a dividend of 75% of the capital stock,
on an "as converted" basis of BUYNOW to all of the stockholders of record as of 
October 13, 1999.  As a part of the dividend, several of our officers and       
directors received shares of BUYNOW common stock.  The Company also entered into
a technology and trademark license agreement to license BUYNOW its e-commerce   
technology related to the BUYNOW business, and a license to use the BUYNOW      
trademark and domain name rights.  The Company entered into a non-competition   
agreement with BUYNOW that imposes certain restrictions on BUYNOW's business.   
BUYNOW also issued the promissory note to the Company for approximately $600,000
for accrued intercompany debt.                                                  

10.  INCOME TAXES                                                               

        The Company incurred taxable losses for federal and state purposes for
the three months ended March 31, 2000 and the three months ended March 31, 1999.
Accordingly, the Company did not incur any federal income tax expense for those 
periods other than the minimum required taxes for certain state and local       
jurisdictions.                                                                  

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PART 2.                                                                         

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

         This report on Form 10-Q contains forward-looking statements based on
our current expectations, estimates and projections about our industry,         
management's beliefs and certain assumptions made by us that are based on our   
current expectations, assumptions, estimates and projections about us and our   
industry.  Words such as "anticipates," "expects," "intends," "plans,"          
"believes," "may," "estimates" and similar expressions are intended to identify 
forward-looking statements.  In addition, any statements that refer to          
expectations, projections or other characterizations of future events or        
circumstances, including any underlying assumptions, are forward-looking        
statements. Such statements include, but are not limited to, statements         
concerning strategic relationships and distribution arrangements, the ability to
sustain growth and expand resources, the occurrence of system failures, the     
amount of product and advertising revenues, the growth of gross product margin, 
expansion into new product categories and international expansion, pending legal
proceedings, the need for additional capital, projected operating losses, the   
growth and retention of our customer base, potential contractual, intellectual  
property or employment issues, attraction and retention of key executives,      
technical personnel and other property or employment issues, and potential "Year
2000" problems.  Such statements are not guarantees of future performance and   
are subject to certain risks, uncertainties and assumptions that are difficult  
to predict.  Therefore, our actual results could differ materially and adversely
from those expressed in any forward-looking statements as a result of various   
factors. Further, the information contained in this Form 10-Q is not a complete 
description of our business or the risks associated with an investment in our   
common stock. The section entitled "Risk Factors" set forth in this Form 10-Q   
and similar discussions in our prospectus related to our initial public offering
filed with the SEC on February 8, 2000, discusses some of the important risk    
factors that may affect our business, results of operations and financial       
condition.  You should carefully consider those risks, in addition to the other 
information in this report and in our other filings with the SEC, before        
deciding to invest in our company or to maintain or increase your investment.   
We undertake no obligation to revise or update publicly any forward-looking     
statements for any reason.                                                      

OVERVIEW                                                                        

        BUY.COM is a leading multi-category Internet superstore based on our
net revenues and the amount of traffic to our Web site.  We offer a             
comprehensive selection of brand name computer hardware and peripherals,        
software, books, videos, DVDs, computer games, music, consumer electronics,     
golf-related products and travel services at everyday low prices.  BUY.COM was  
organized as a California limited liability company in June 1997 under the name 
BuyComp LLC and was incorporated in Delaware as Buy Corp. in August 1998.  In   
November 1998, we changed our name to BUY.COM INC.                              

      We derive revenues principally from the sale of products and, to a
lesser extent, from paid advertisements on our Web site.  We recognize product  
revenue upon shipment of products.  We generally recognize advertising revenue  
straight line over the period of time an advertisement runs on our site.  In    
some circumstances, our agreements with advertisers require consumer action, in 
which cases, we recognize advertising revenue when the consumer action is       
completed.                                                                      

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   We have employed a business model that includes outsourcing the
majority of our infrastructure to leading national distribution and fulfillment 
providers with established expertise.  Through this model, we capitalize on the 
cost efficiencies achieved by our distribution providers and minimize our       
infrastructure and operating expenses, enabling us to pass significant savings  
on to our customers.  Additionally, by aligning with leading distributors in    
each of our product categories, we can use their significant inventories and    
distribution capabilities to offer a broader selection of products at lower     
costs than traditional retailers can.                                           

        Consistent with our merchandising strategy, we have started to raise
prices on many of our products.  Since the second quarter of 1999, we have      
increased our product margins without experiencing a decline in overall sales   
volumes or customer levels.  Although we intend to continue these selective     
price increases, under our long-term business model, we expect to maintain lower
relative product margins than many other online and offline retailers, while    
generating high sales volumes.  For this reason, our ability to become and      
remain profitable depends upon our ability to substantially increase our net    
revenues.  We cannot be certain that our sales growth will continue or that we  
will ever become profitable.                                                    

      To date, our sales of computer hardware and software products have
accounted for the vast majority of our net revenues. Our sales of products in   
other categories constituted less than 15% of our net revenues for the three    
months ended March 31, 2000 and for the three months ended March 31, 1999. None 
of these other categories individually constituted more than 10% of our net     
revenues during these periods. As we continue to expand into new product        
categories, we expect sales of products other than computer hardware and        
software to be an increasingly larger component of our business in the future.  
Product sales, including shipping and handling, accounted for 95.1% of net      
revenues for the three months ended March 31, 2000 and 98.6% of net revenues for
the three months ended March 31, 1999.                                          

      Shipping and handling net revenues were $8.1 million for the three
months ended March 31, 2000 and  $6.3 million for the three months ended March  
31, 1999. The gross profit on our shipping and handling net revenues during     
these periods was $1.8 million and $3.6 million, respectively. Shipping and     
handling results are a direct function of our product sales and are an integral 
part of our merchandising and pricing strategy. Accordingly, we believe shipping
and handling net revenues and the corresponding gross profit on these net       
revenues cannot be viewed independent of product sales and gross profit.        

We currently generate additional revenues from vendor co-op 
advertising as well as media advertising. Vendor co-op advertising is a standard
practice in the retailing sector, where product vendors set aside certain       
amounts of advertising funds to be paid to retailers in exchange for specific   
marketing and in-store placement of their products. We also generate advertising
media revenue from click-through advertisements that direct the customer to the 
advertiser's Web site. These media advertising revenues are generally derived   
from short-term advertising contracts in which we typically guarantee a minimum 
number of advertising impressions to be delivered to users over a specified     
period of time for a fixed fee. In the cases where we guarantee a minimum number
of advertising impressions, we defer a portion of the advertising revenues until
the minimum number of impressions has been achieved. Advertising sales accounted
for 4.9% of net revenues for the three months ended March 31, 2000 and 1.4% of  
net revenues for the three months ended March 31, 1999.                         

Our net revenues are also net of coupon redemptions. Coupon 
redemptions result in a reduction of gross revenues in the period the coupons   
are redeemed by an amount equal to the value of the coupons redeemed. Coupon    
redemptions were $2.3 million, or 1.1% of net revenues, for the three           

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months ended March 31, 2000. We had no coupon redemptions for the three months  
ended March 31, 1999.                                                           

 We are expanding our business into international markets both
independently and through joint ventures with third parties that will provide   
expertise in local markets and financial resources to the joint ventures.       
However, we cannot assure you that we will be successful in our efforts to      
expand internationally and a number of factors may affect our ability to do so, 
including our ability to staff and manage foreign operations, tariffs and other 
trade barriers, and our ability to adapt to foreign regulatory requirements     
affecting e-commerce.                                                           

        We have incurred significant losses since our inception and our cost
of sales and operating expenses have increased dramatically.  This trend        
reflects the costs associated with the formation of BUY.COM, as well as our     
increased efforts to promote the BUY.COM brand, build market awareness, attract 
new customers, recruit personnel, build operating infrastructure, and develop   
and expand our Web site and related transaction-processing systems.  We intend  
to continue to invest heavily in marketing and promotion, Web site development, 
and technology and operating infrastructure development.  We believe that we    
will continue to incur substantial operating losses for the foreseeable future. 
Although we have experienced significant revenue growth in recent periods, this 
growth may not be sustainable, and we may never achieve profitability.          

RESULTS OF OPERATIONS                                                           

Net Revenues                                                                    

         Net revenues were $207.6 million for the three months ended March 31,
2000, a 92.4% increase from $107.9 million for the three months ended March 31, 
1999. The increase resulted from significant growth in our customer base and    
repeat purchases from our existing customers. The increase is also due to the   
launch of new online stores. Net revenues for the three months ended March 31,  
2000 include the effect of $2.3 million in coupon redemptions for the quarter   
compared to no coupon redemptions for the three months ended March 31, 1999.    

Cost of Goods Sold                                                              

       Cost of goods sold consists primarily of the cost of products sold,
and the related distribution and fulfillment costs, including shipping.  Cost of
goods sold increased to $198.7 million for the three months ended March 31, 2000
from $108.1 million for the three months ended March 31, 1999 primarily as a    
result of the significant increase in our net revenues.  Gross margin increased 
to 4.3% for the three months ended March 31, 2000 from (0.2%) for the three     
months ended March 31, 1999.  This increase in gross margin was primarily       
attributable to more sophisticated merchandising and pricing management of the  
company's product mix and an increased contribution of higher margin advertising
revenues.                                                                       

Sales and Marketing Expenses                                                    

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Sales and marketing expenses consist primarily of advertising and     
promotional expenses, as well as credit card fees, outsourced customer service  
fees, and payroll associated with our advertising and marketing personnel. Sales
and marketing expenses increased to $24.5 million for the three months ended    
March 31, 2000 from $12.3 million for the three months ended March 31, 1999.    
Sales and marketing expenses as a percentage of net revenues increased to 11.8% 
for the three months ended March 31, 2000 from 11.4% for the three months ended 
March 31, 1999. The increase, both as a percentage of net revenues and in       
absolute dollars, was primarily attributable to the expansion of our advertising
campaigns both online and in more traditional media. The increase in our sales  
and marketing expenses was also due, to a lesser extent, to increased personnel 
and related expenses required to implement our marketing strategy as well as the
costs associated with the sponsorship of the buy.com Tour. We intend to continue
to pursue an aggressive branding and marketing campaign in order to attract new 
customers and retain existing customers. As a result, we expect marketing and   
sales expenses to continue to increase in absolute dollars in future periods.   

Product Development Expenses                                                    

Product development expenses consist primarily of personnel and other 
expenses associated with developing and enhancing our Web site, as well as      
associated facilities and related expenses.  Product development expenses       
increased to $4.4 million for the three months ended March 31, 2000 from        
$830,000 for the three months ended March 31, 1999.  Product development        
expenses as a percentage of net revenues increased to 2.1% for the three months 
ended March 31, 2000 from 0.8% for the three months ended March 31, 1999.  The  
increase was primarily due to increased personnel and outside consulting costs  
required to enhance the features, content, and functionality of our online      
stores and transaction processing systems.  We intend to continue to enhance our
technology and information systems and expect product development expenses to   
continue to increase in absolute dollars in future periods.                     

General and Administrative Expenses                                             

General and administrative expenses consist primarily of payroll and  
related expenses for executive and administrative personnel, facilities         
expenses, professional fees, and other general corporate expenses.  General and 
administrative expenses increased to $6.3 million for the three months ended    
March 31, 2000 from $3.1 million for the three months ended March 31, 1999.     
General and administrative expenses as a percentage of net revenues increased to
3.0% for the three months ended March 31, 2000 from 2.8% for the three months   
ended March 31, 1999.  The increase was primarily attributable to increased     
headcount and related expenses associated with the hiring of additional         
personnel, and increased professional expenses.  We expect general and          
administrative expenses to continue to increase in absolute dollars as we expand
our sales, increase our staff, and incur additional costs related to the growth 
of our business.                                                                

Depreciation and Amortization Expenses                                          

Depreciation and amortization expenses consist primarily of the       
amortization of goodwill associated with business acquisitions, as well as fixed
asset depreciation. Depreciation and                                            

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amortization increased to $4.0 million for the three months ended March 31, 2000
from $854,000 for the three months ended March 31, 1999. Depreciation and       
amortization expenses as a percentage of net revenues increased to 2.0% for the 
three months ended March 31, 2000 from 0.8% for the three months ended March 31,
1999. The increase is primarily attributable to the amortization of the         
acquisition of BuyGolf in October 1999, which is being amortized over a three-  
year period. The increase is also attributable, to a lesser extent, to          
additional depreciation of fixed assets acquired during the period.             

Amortization of Deferred Compensation                                           

   Amortization of deferred compensation represents the difference
between the exercise price of stock option grants and the deemed fair value of  
our stock at the time of such grants.  Such amounts are amortized over the      
vesting for such grants, which is typically four years, using the double        
declining balance method.  Amortization of deferred compensation decreased to   
$1.2 million for the three months ended March 31, 2000 from $2.1 million for the
three months ended March 31, 1999.  Amortization of deferred compensation       
decreased to 0.6% for the three months ended March 31, 2000 from 2.0% for the   
three months ended March 31, 1999.  The decrease is due to fewer grants issued  
below the deemed fair value of the stock and to the double declining balance    
method used to account for such deferred compensation.                          

Charge for Warrants                                                             

          Charge for warrants represents the amortization of the warrants issued
to one of our suppliers. The charge for warrants was $170,000 and there was no  
charge during the previous year.                                                

Other Income (Expense)                                                          

     Total other income increased to $1.3 million for the three months
ended March 31, 2000 from $131,000 for the three months ended March 31, 1999.   
The increase was largely due to interest income related to the net proceeds from
our initial public offering.                                                    

Equity in Losses of Joint Ventures                                              

       Equity in losses of joint ventures represents the losses associated
with our ownership interest in our joint venture partnerships, including our    
international business initiatives and Buytravel.com.  The equity in losses of  
joint ventures was $2.4 million for the three months ended March 31, 2000 and   
there was no charge during the three months ended March 31, 1999.  This         
treatment assumes that our ownership interest in the international joint        
ventures is 40% and our ownership interest in Buytravel.com is 50%.  However, we
are currently in discussions regarding our international joint venture          
agreements and the ownership structure of these joint ventures is subject to    
change.                                                                         

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Net Loss                                                                        

      Our net loss increased to $32.8 million for the three months ended
March 31, 2000 from $19.3 million for the three months ended March 31, 1999.    
The increase in net loss was primarily due to increased operating expenses,     
increase in amortization of goodwill, and increase in equity in losses of joint 
ventures.                                                                       

Liquidity and Capital Resources                                                 

      At March 31, 2000, our principal sources of liquidity consisted of
$144.5 million of cash compared to $24.7 million of cash at December 31, 1999.  
In February 2000, we completed an initial public offering in which the          
underwriters sold to the public 16,100,000 shares of common stock, including    
2,100,000 shares in connection with the exercise of the underwriters' over-     
allotment option, at $13.00 per share.  Our proceeds from the offering, after   
deducting underwriting discounts and commissions and other offering expenses    
payable by us were approximately $192.2 million in the aggregate.  We regularly 
invest in short-term government mortgage backed bonds, highly rated corporate   
securities and money market funds.                                              

    Net cash used in operating activities was $52.7 million and $1.0
million for the three months ended March 31, 2000 and 1999, respectively.  Net  
operating cash flows for the three months ended March 31, 2000 were primarily   
attributable to approximately $32.8 million in net losses, approximately $16.6  
million in a reduction of accounts payable, and to a lesser extent, increases in
accounts receivable, payments made in connection with the sponsorship of the    
buy.com Tour, and partially offset by non-cash charges for depreciation and     
amortization.  Net operating cash flows for the three months ended March 31,    
1999 were primarily attributable to net losses offset by an increase in accounts
payable and non-cash charges for depreciation and amortization.                 

       Net cash used in investing activities was $3.2 million and $728,000
for the three months ended March 31, 2000 and 1999, respectively, and primarily 
consisted of purchases of fixed assets.                                         

       Net cash provided by financing activities of $175.7 million for the
three months ended March 31, 2000 resulted primarily from net proceeds from our 
initial public offering offset by the repayment of our credit facility and a    
promissory note to a stockholder.                                               

We anticipate that we will have negative cash flows for the 
foreseeable future.  We also currently anticipate that we will invest           
approximately $20.0 million to $30.0 million in capital expenditures over the   
next twelve months to expand our infrastructure.  These expenditures will       
include enhancements in our Web site to improve functionality and navigation,   
incorporating features that are intended to improve the customer shopping       
experience and scalability and performance of our Web site.  We expect to fund  
these expenditures with working capital, including the proceeds from our initial
public offering.                                                                

          As of March 31, 2000, our principal commitments consisted primarily of
obligations in connection with the acquisition of fixed assets and leases,      
commitments for advertising and promotional arrangements and commitments related
to our joint venture with United Airlines, Inc.                                 

      We have also entered into a binding letter of intent with SOFTBANK
America, Inc. and its affiliates to form three separate international joint     
ventures in various international territories.  Under                           

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the letter of intent we would have a 50% ownership interest in each of the joint
ventures and would commit approximately $7.7 million in connection with the     
formation of these international joint ventures. However, the parties are       
currently in discussions regarding this letter of intent and our ownership      
structure is subject to change. Depending on the ultimate resolution of the     
ownership structure, our capital contribution requirements may change. In the   
event additional funding for the joint ventures is required, we may be required 
to invest additional capital into one or more of the joint ventures or seek     
third party investors which would dilute our ownership in the joint ventures.   
There can be no assurance that additional financing for the joint ventures will 
be available on acceptable terms, if at all.                                    

        In connection with our 50% joint venture with United Airlines, Inc.,
we will make capital contributions, in proportion to our respective ownership   
interests, necessary to provide advertising and marketing support for           
Buytravel.com. We are required to make a $2.0 million initial capital investment
to Buytravel.com. In addition, we have each agreed to provide $18.0 million in  
marketing support to Buytravel.com over three years from the effective date of  
the agreement. This marketing support may be in the form of cash marketing      
expenditures for Buytravel.com or other in kind co-branded marketing activities 
such as promotional e-mail distributions and placement of Buytravel.com         
advertisements in our marketing materials.                                      

        We believe that our current cash balances will be sufficient to meet
our anticipated operating cash needs for at least the next 12 months. However,  
any projections of future cash needs and cash flows are subject to substantial  
uncertainty. If current cash that may be generated from operations is           
insufficient to satisfy our liquidity requirements, we may seek to sell         
additional equity securities, obtain a line of credit or seek other ways to fund
our operations. There can be no assurance that financing will be available in   
amounts or on acceptable terms, if at all. In addition, we will periodically    
consider the acquisition of or investment in complimentary businesses, products,
services and technologies which may impact our liquidity requirements or cause  
us to issue additional equity securities.                                       

YEAR 2000                                                                       

         Many existing computer systems and software were coded to accept only
two digit entries in the date code field and did not distinguish 21st century   
dates from 20th century dates.  Prior to January 1, 2000, there was a great deal
of concern regarding this inability of computer systems and software to         
adequately distinguish such dates, which induced companies, including us, to    
complete various compliance and remediation work leading up to the Year 2000.   
To date, we have not experienced any Year 2000 problems in our computer systems 
or operations.  However, other companies, including us, could experience latent 
Year 2000 problems such as system failures or miscalculations causing           
disruptions of operations, including, among other things, a temporary inability 
of our third party systems to provide access to our Web site and transaction    
processing systems and a failure of our credit card processing agent to process 
our orders.  Any such latent Year 2000 problems could result in a decrease in   
sales of products, an increase in allocation of resources to address such       
problems without additional revenue commensurate with such dedication of        
resources, or other costs which could have a material adverse affect on our     
business.                                                                       

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RISK FACTORS                                                                    

   Before deciding to invest in us or to maintain or increase your
investment, you should carefully consider the risks described below before      
making an investment decision.  The risks and uncertainties described below, in 
addition to the other information in this report and our other filings with the 
SEC, including our prospectus filed with the SEC on February 8, 2000 are not the
only ones facing us. Additional risks and uncertainties not presently known to  
us or that we currently deem immaterial may also impair our business operations.
If any of the following risks actually occur, our business, results of          
operations and financial condition could be materially and adversely affected,  
the value of our stock could decline, and you may lose all or part of your      
investment.                                                                     

Ingram Micro's failure to supply and fulfill our computer hardware and software 
products could reduce our revenues and harm our business                        

  We depend on Ingram Micro, Inc. to provide all of our computer
hardware and software products and to fulfill our customers' orders.  To date, a
substantial majority of our product sales revenues has been derived from        
computer hardware and software products acquired from Ingram Micro.  We cannot  
guarantee that Ingram Micro will continue to supply a sufficient quantity of    
inventory on a timely basis to satisfy our order requirements.  If Ingram Micro 
were to terminate or refuse to renew our distribution arrangement with them, we 
would have to purchase our computer hardware and software products from other   
distributors.  In addition, in the event we do not purchase at least $350.0     
million of products from Ingram Micro during the term of our agreement with     
them, our current pricing schedules could be revised. Ingram Micro's termination
of or failure to renew our contract could cause significant delays in our       
ability to fulfill our customers' orders, and we may not be able to locate      
another distributor that can provide comparable fulfillment, processing and     
shipping services in a timely manner, on acceptable commercial terms, if at all.
Our distribution agreement with Ingram Micro terminates in March 2001.          

          We are also subject to risks associated with Ingram Micro's ability to
replenish its inventory in a timely manner.  To the extent Ingram Micro         
maintains computer hardware and software products in-stock, we have an          
obligation to purchase these items exclusively from them.  Due to this          
purchasing arrangement, our customers' orders could be significantly delayed if 
we need to seek other distributors to fulfill our customers' orders.  Our       
distribution agreement with Ingram Micro does not require them to set aside any 
amount of inventory to fulfill our orders or to give our orders priority over   
other resellers to whom they sell.  Furthermore, some vendors may decide, for   
reasons outside our control, not to offer particular products for sale on the   
Internet.  These vendors may also cause Ingram Micro not to sell products to us.
Ingram Micro's delay or inability to supply our orders would substantially harm 
our business.                                                                   

        Our future success also depends on our ability to provide timely and
accurate order fulfillment.  We depend on Ingram Micro to process and ship      
substantially all of the computer hardware and software products that we sell to
our customers.  However, we have limited control over their shipping and        
processing procedures.  Ingram Micro's systems and operations are vulnerable to 
damage or interruption from fire, flood, power loss, telecommunications failure,
physical and electronic break-ins, earthquakes and similar events.  We do not   
carry sufficient business interruption insurance to compensate us for any losses
that could occur as a result of Ingram Micro's inability to perform for any     
reason.                                                                         

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We are dependent on several third party providers to fulfill a number of our    
retail functions.  If these parties are unwilling or unable to continue         
providing services to us, our business could be seriously harmed                

  We are currently dependent on our distribution and fulfillment
providers to manage inventory, process orders and distribute products to our    
customers in a timely manner.  In addition to our contract with Ingram Micro for
computer hardware and software products, we have supply and distribution        
contracts with Ingram Entertainment Inc. for videos, DVDs, games and the        
purchase and fulfillment of our consumer electronics products, Nashville        
Computer Liquidators L.P. for our clearance products and Valley Media, Inc. for 
music products.  We do not have any long-term agreements with any of these third
parties.  We purchase all of our books from the Ingram Book Company, which are  
shipped and processed by Ingram Fulfillment Services, Inc. and we use Las Vegas 
Golf & Tennis, Inc. as the primary source for the golf equipment and accessories
that we sell.  In addition, our joint venture with United Airlines relies on a  
third party for the supply and fulfillment of the travel services that we offer.
If we do not maintain our existing relationships with these providers on        
acceptable commercial terms, we may not be able to continue to offer a broad    
selection of merchandise at low prices, and customers may refuse to shop at our 
online store.  In addition, manufacturers may decide, for reasons outside our   
control, not to offer particular products for sale on the Internet.  Other      
manufacturers have chosen not to authorize any Internet resellers or Internet   
resellers without a traditional "brick and mortar" retail store.  If we are     
unable to supply products to our customers, or if other product manufacturers   
refuse to allow their products to be sold via the Internet, our business would  
suffer severely.                                                                

         We rely on our distributors to fulfill a number of traditional retail
functions, including maintaining inventory and preparing merchandise for        
shipment to individual customers.  In the future, our vendors may not be willing
to provide these services at competitive rates.  In addition, vendors may refuse
to develop the communications technology necessary to support our direct        
shipment infrastructure. We also have no effective means to ensure that our     
providers will continue to perform these services to our satisfaction.  Our     
customers could become dissatisfied and cancel their orders or decline to make  
future purchases if we or our providers are unable to deliver products on a     
timely basis.  If our customers become dissatisfied with our distributors and   
third party service providers, our reputation and the BUY.COM brand could       
suffer.                                                                         

          Our operations are also heavily dependent upon a number of other third
parties for customer service and support, credit card processing, and hosting   
our system infrastructure and database servers.  In addition, our distributors  
and fulfillment providers use the Federal Express Corporation, United Parcel    
Service and the United States Postal Service to deliver substantially all of our
products.  If the services of any of these third parties become unsatisfactory, 
our customers may experience lengthy delays in receiving their orders, and we   
may not be able to find a suitable replacement on a timely basis or on          
commercially reasonable terms.                                                  

We have incurred substantial losses and expect to continue to incur losses for  
the foreseeable future                                                          

  We have not achieved profitability since our inception, and we
incurred net losses of $130.2 million for the year ended December 31, 1999 and  
$32.8 million for the three months ended March 31, 2000.  We expect to continue 
to incur losses for the foreseeable future due to additional costs and expenses 
related to:                                                                     

-  the implementation of our business model and our pricing 
strategies;                                           

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     -  brand development, marketing and other promotional activities;

-  the expansion of our product and service offerings;      

        -  the continued development of our Web site, transaction processing
systems and network infrastructure;                   

-  the development of strategic relationships; and          

         -  our ability to effectively merchandise and manage our product mix.

 Because we sell a substantial portion of our products at very
competitive prices, we have extremely low and sometimes negative gross margins  
on our product sales.  Our ability to become profitable depends on, among other 
things:                                                                         

         -  our ability to generate and sustain substantially higher net sales
  with improved gross margins while maintaining reasonable
operating expense levels;                             

   -  our ability to generate significant advertising revenue; and

        -  our ability to provide other higher margin products and services.

We have only been operating our online business since November 1997 and face    
challenges related to early stage companies in rapidly evolving markets         

   We were founded in June 1997 and began our online operations in
November 1997.  You should consider our prospects in light of the risks and     
difficulties frequently encountered by early stage companies in the rapidly     
evolving online commerce market.  These risks include, but are not limited to,  
an unpredictable business environment, the difficulty of managing growth and the
use of our business model.  To address these risks, we must, among other things:

-  expand our customer base;                                

-  enhance our brand recognition;                           

-  expand our product and service offerings;                

    -  access sufficient product inventory to fulfill our customers'
orders;                                               

  -  successfully implement our business and marketing strategy;

-  provide superior customer service and order processing;  

         -  respond effectively to competitive and technological developments;
and                                                   

-  attract and retain qualified personnel.                  

Our future operating results may fluctuate and cause the price of our common    
stock to decline                                                                

        Our limited operating history and the emerging nature of the markets
in which we operate make it difficult to accurately predict our future revenues.
We expect that our revenues and                                                 

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operating results will fluctuate significantly from quarter to quarter, due to a
variety of factors, many of which are beyond our control. If our quarterly      
revenues or operating results fall below the expectations of investors or       
securities analysts, the price of our common stock could significantly decline. 
The factors that could cause our operating results to fluctuate include, but are
not limited to:                                                                 

-  our ability to build and maintain customer loyalty;      

        -  the introduction of new or enhanced Web pages, services, products
and strategic alliances by us and our competitors;    

      -  price competition on the Internet or higher wholesale prices in
general;                                              

 -  the success of our brand building and marketing campaigns;

         -  our ability to effectively merchandise and manage our product mix;

-  our ability to increase advertising revenues;            

         -  our ability to maintain and expand our distribution relationships;

       -  fluctuations in the amount of customer spending on the Internet;

-  increases in the cost of online or offline advertising;  

-  unexpected increases in shipping costs or delivery times;

          -  government regulations related to use of the Internet for commerce;

 -  our ability to maintain, upgrade and develop our Web site,
    transaction processing systems and network infrastructure;

     -  technical difficulties, system downtime or Internet brownouts;

        -  the amount and timing of operating costs and capital expenditures
relating to expansion of our business, operations and 
infrastructure; and                                   

          -  general economic conditions and economic conditions specific to the
Internet and online commerce.                         

Our business model is new and unproven, and we may not be able to achieve       
profitability                                                                   

          We are subject to risks due to the unproven and evolving nature of our
business model and aggressive pricing strategy.  The success of our business    
model depends on the volume of customers that visit our Web site and purchase   
our products, as well as our ability to generate significant online advertising 
revenues.  To this end, we have worked hard to build our brand name and enhance 
our customer loyalty by selling our products at extremely low prices and        
maintaining very low, and sometimes negative, gross margins on our product      
sales.  We intend to implement various strategies to improve our gross margins  
going forward, which may include raising prices on products and product         
categories from time to time.  To the extent we raise the prices on our         
merchandise, our product sales may decline.  We may also have to increase our   
prices if distributors receive pressure from                                    

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manufacturers to discontinue sales to us as a result of our low price strategy. 
If the amount of traffic to our Web site decreases due to price increases or    
otherwise, we may become less attractive to our current and potential           
advertisers. As a result, our margins and advertising revenues may decline.     

Our recent growth has strained our resources, and if we are unable to manage and
sustain our growth, our operating results will be impaired                      

       We have rapidly expanded our operations and anticipate that we must
continue to expand our operations to address potential market opportunities.  If
we are unable to manage growth effectively or if we experience disruptions      
during our expansion, our operating results will suffer.  Recent increases in   
our employee base and the volume of our merchandise sales have placed, and are  
expected to continue to place, significant demands on our management,           
operational and financial resources.  For example, we expanded from seven       
employees at December 31, 1997 to 248 employees at March 31, 2000.  Our new     
employees include a number of key managerial and technical employees who have   
not yet been fully integrated into our management team, and we expect to add    
additional key personnel in the near future.  To manage growth in our           
operations, we will need to improve or replace our existing Web site, financial 
systems, procedures and controls.  In addition, we will need to expand, train   
and manage our increasing employee base.  We will also need to expand our       
finance, administrative, technical and operations staff.                        

System failures could prevent access to our online store and harm our business  
and results of operations                                                       

   Our sales would decline and we could lose existing or potential
customers if they are not able to access our online store or if our online      
store, transaction processing systems or network infrastructure do not perform  
to our customers' satisfaction.  Any network interruptions or problems with our 
Web site could:                                                                 

-  prevent customers from accessing our online stores;      

-  reduce our ability to fulfill orders;                    

-  reduce the number of products that we sell;              

-  cause customer dissatisfaction; or                       

-  damage our reputation.                                   

        We have experienced brief computer system interruptions in the past,
and these interruptions may recur.  If the number of customers visiting our Web 
site continues to increase, we will need to expand and upgrade our technology,  
transaction processing systems and network infrastructure significantly.  We may
not be able to make timely upgrades to our systems and infrastructure to        
accommodate increases in the number of customers.                               

Our systems and operations are also vulnerable to damage or 
interruption from a number of sources, including fire, flood, power loss,       
telecommunications failure, physical and electronic break-ins, earthquakes and  
other similar events.  For example, all of our servers are currently located in 
Southern California, a seismically active region.  Our servers are also         
vulnerable to computer viruses, physical or electronic break-ins and similar    
disruptions.  Any substantial disruption of this sort could completely impair   
our ability to generate revenues from our Web site.  We do not presently have a 

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formal disaster recovery plan in effect and do not carry sufficient business    
interruption insurance to compensate us for losses that could occur.            

We rely on a relatively new management team and need additional personnel to    
grow our business                                                               

          Several of our executive officers are relatively new, and we intend to
continue to hire key management personnel.  For example, our future success     
depends in part on the continued services of Gregory J. Hawkins, our Chief      
Executive Officer, and Mitch C. Hill, our Chief Financial Officer.  We may      
experience difficulty assimilating our recently hired managers, and we may not  
be able to successfully locate, hire, assimilate and retain other qualified key 
management and technical personnel.  Our business is also largely dependent on  
the personal efforts and abilities of other members of senior management, as    
well as other key personnel.  Any of our officers or employees can terminate    
their employment relationship at any time.  We do not maintain key person life  
insurance on any member of our management team.  The loss of any key employee or
our inability to attract or retain other qualified employees could harm our     
business and results of operations.                                             

    Our future success depends on our ability to attract, retain and
motivate highly skilled technical, managerial, editorial, merchandising,        
marketing and customer service personnel.  We plan to hire additional personnel 
in all areas of our business.  Competition for technical and other types of     
personnel is intense, particularly in the Internet industry.  As a result, we   
may be unable to successfully attract or retain qualified personnel.            

Online security risks could seriously harm our business                         

        A significant barrier to e-commerce and online communications is the
secure transmission of confidential information over public networks.  Anyone   
who is able to circumvent our security measures could misappropriate proprietary
information or cause interruptions in our operations. We may be required to     
expend significant capital and other resources to protect against potential     
security breaches or to alleviate problems caused by any breach.  We rely on    
licensed encryption and authentication technology to provide the security and   
authentication necessary for secure transmission of confidential information,   
including credit card numbers.  Advances in computer capabilities, new          
discoveries in the field of cryptography, or other events or developments may   
result in a compromise or breach of the algorithms that we use to protect       
customer transaction data.  In the event someone circumvents our security       
measures, it could seriously harm our business and reputation, and we could lose
customers.  Security breaches could also expose us to a risk of loss or         
litigation and possible liability for failing to secure confidential customer   
information.                                                                    

If we are not able to generate significant advertising revenue, we may not be   
able to achieve profitability                                                   

        Our future success will depend in part on the willingness of product
manufacturers and other advertisers to advertise on our Web site.  The market   
for Internet advertising is new and rapidly evolving.  As a result, there is    
significant uncertainty about the demand for and market acceptance of Internet  
advertising.  In addition, the number of Web sites that offer advertising       
opportunities has dramatically increased in the last year, thus increasing the  
competition for available advertising revenue. We cannot assure you that the    
market for Internet advertising will continue to expand, that it will become    
sustainable or that we will be able to continue to provide an attractive forum  
for advertisers.  If the market for Internet advertising fails to develop,      
develops more slowly than we expect or if we do not provide an attractive forum 
for advertisers, our business may not achieve profitability.                    

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        Because our advertising revenues carry higher gross margins than our
product sales, any decline in our advertising revenues would have a             
disproportionate impact on our overall gross margin.  If our current and        
potential advertisers find Internet advertising to be less effective for        
promoting their products and services than traditional advertising, they may    
choose to decrease or discontinue advertising on the Internet or on our Web     
site.  If our advertising revenues decline, we may not be able to replace these 
revenues through other programs or through our product sales.                   

Our recent and planned expansion into new product categories and business areas 
is costly, risky and may not be profitable                                      

      We have pursued an aggressive expansion strategy in the past year,
opening several new online stores and acquiring BuyGolf.com.  Continued         
expansion of our operations requires substantial expenses and development,      
operations and editorial resources, and strains our management, financial and   
operational resources.  We may choose to continue to expand our operations by:  

-  developing new Web sites;                                

         -  pursuing new or complementary products, services or sales formats;

        -  expanding the breadth and depth of the products and services that
we offer; or                                          

     -  expanding our market presence through relationships with third
parties.                                              

          As we expand into other product or service offerings, we risk diluting
our brand name, confusing customers and decreasing interest from our            
advertisers.  In addition, we could be exposed to additional or unexpected risks
as we enter into new business areas and may be forced to abandon our current    
business model or alter our strategic plans.  If our expansion efforts are      
unsuccessful, our business may suffer, and we may lose potential market         
opportunities.                                                                  

      In addition, we may pursue the acquisition of new or complementary
businesses or technologies, although we have no present understandings,         
commitments or agreements with respect to any material acquisitions or          
investments.  We may not be able to expand our efforts and operations in a cost-
effective or timely manner and these efforts may not achieve market acceptance. 
Furthermore, any new business or Web site that we launch that is not favorably  
received by customers could damage our reputation or the BUY.COM brand.         

If sales from our computer products decline, our operating results will suffer  

          Our operating results substantially depend on product revenue from the
sale of computer hardware, software products and peripherals.  To date, a       
substantial majority of our product sales revenues are derived from computer    
hardware and software products.  We expect that revenue from these products will
continue to represent more than a majority of our total product revenues during 
the next twelve months.  We could experience declines in these product sales due
to several factors, including, but not limited to:                              

    -  decreased customer demand for computer hardware, software and
peripheral products;                                  

-  increased price competition from our competitors;        

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        -  technological obsolescence of the computer hardware, software and
peripheral products that we offer; or                 

    -  decisions by manufacturers of computer products to curtail or
           eliminate the sale of products or categories of products over the
Internet or by us.                                    

     If we are unable to maintain our current sales levels of computer
hardware, software and peripheral products, our financial condition and results 
of operations would suffer.                                                     

We must continue to develop and maintain the BUY.COM brand, which is costly and 
may not generate corresponding revenues                                         

          Maintaining and strengthening the BUY.COM brand is an important factor
in attracting new customers, building customer loyalty and attracting           
advertisers.  Accordingly, we intend to continue to pursue an aggressive        
promotional strategy to enhance our brand.  These initiatives have involved, and
are expected to continue to require, significant expenditures.  If we are       
unsuccessful in our promotional efforts, we may never be able to recover these  
expenses or increase our revenues or margins.  We also believe potential        
customers and advertisers are driven to our online store because of our strong  
brand recognition.  If advertisers do not believe our Web site is an effective  
marketing and sales channel for their merchandise, or if customers do not       
perceive us as offering a desirable way to purchase merchandise, our branding   
efforts will suffer and we may lose customers.                                  

         Our ability to build and strengthen the BUY.COM brand depends largely
on:                                                                             

-  the success of our advertising and promotional efforts;  

          -  our ability to provide our customers with a broad range of products
at competitive prices with timely fulfillment; and    

-  our ability to provide high quality customer service.    

         To promote the BUY.COM brand in response to competitive pressures, we
may increase our marketing budget or otherwise increase our financial commitment
to creating and maintaining brand loyalty among our customers.  For example, we 
spent approximately $71.3 million for the year ended December 31, 1999, and     
approximately $24.5 million for the three months ended March 31, 2000 and we    
expect these expenses to continue to increase for the foreseeable future.  We   
cannot be certain that our advertising efforts will be a successful means of    
customer acquisition or that this allocation of resources will provide          
additional revenues equal to this dedication of our resources.  If we fail to   
promote and maintain our brand, or if we incur excessive expenses attempting to 
promote and maintain our brand, our business may suffer.                        

If we do not respond to technological change, our stores could become obsolete, 
and we could lose customers                                                     

     The development of our Web site entails significant technical and
business risks.  To remain competitive, we must continue to enhance and improve 
the responsiveness, functionality and features of our online stores.  The       
Internet and the e-commerce industry are characterized by:                      

-  rapid technological change;                              

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-  changes in customer requirements and preferences;        

   -  frequent new product and service introductions embodying new
technologies; and                                     

-  the emergence of new industry standards and practices.   

        The evolving nature of the Internet could render our existing online
stores and systems obsolete.  Our success will depend, in part, on our ability  
to:                                                                             

      -  license or acquire leading technologies useful in our business;

-  enhance our existing online stores;                      

    -  enhance our network infrastructure and transaction processing
systems;                                              

        -  develop new services and technology that address the increasingly
       sophisticated and varied needs of our current and prospective
customers; and                                        

-  adapt to technological advances and emerging industry and
           regulatory standards and practices in a cost-effective and timely
manner.                                               

         Future advances in technology may not be beneficial to, or compatible
with our business.  Furthermore, we may not use new technologies effectively or 
adapt our Web site and transaction processing systems to customer requirements  
or emerging industry standards on a timely basis.  Our ability to remain        
technologically competitive may require substantial expenditures and lead time. 
If we are unable to adapt to changing market conditions or user requirements in 
a timely manner, our stores may become obsolete and we will lose customers.     

If the software, hardware, computer technology and other systems and services we
use are not Year 2000 compliant, our operations could suffer and we could lose  
customers                                                                       

      Many existing computer systems and software products were coded to
accept only two digit entries in the date code field and did not distinguish    
21st century dates from 20th century dates.  If these systems have not been     
properly corrected, there could be system failures or miscalculations causing   
disruptions of operations, including, among other things, a temporary inability 
to process transactions, send invoices or engage in normal business activities. 
Additionally, despite the fact that many computer systems are currently         
processing 21st century dates correctly, these companies, including us, could   
experience latent Year 2000 problems.  Any such latent Year 2000 problems could 
result in a decrease in sales of products, an increase in allocation of         
resources to address such problems without additional revenue commensurate with 
such dedication of resources, or other costs which could have a material adverse
affect on our business.                                                         

We may be subject to liability for sales and other taxes                        

        We currently collect sales or other similar taxes on the shipment of
goods in the States of California, Massachusetts and Tennessee.  However, one or
more states could seek to impose additional income tax obligations or sales tax 
collection obligations on out-of-state companies, such as ours, which engage in 
or facilitate online commerce.  A number of proposals have been made at state   
and local levels that could impose taxes on the sale of products and services   
through the Internet or the income derived                                      

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from these sales. These proposals, if adopted, could substantially impair the   
growth of e-commerce and adversely affect our ability to become profitable.     
Furthermore, since our service is available over the Internet in multiple states
and in foreign countries, these jurisdictions may require us to qualify to do   
business in these states and foreign countries. If we fail to qualify in a      
jurisdiction that requires us to do so, we could face liabilities for taxes and 
penalties.                                                                      

We may be unable to protect our Internet domain names, which are essential to   
our business                                                                    

       Our Internet domain names are critical to our brand recognition and
our overall success.  We have many domain names relating to our brand, including
BUY.COM and each domain name for our specific online stores and subcategories.  
If we are unable to protect these domain names, our competitors could capitalize
on our brand recognition.  The acquisition and maintenance of domain names      
generally are regulated by governmental agencies and their designees.  The      
regulation of domain names in the United States and in foreign countries has    
changed and is subject to further change in the future.  As a result, we may be 
unable to acquire or maintain relevant domain names in the United States and in 
other countries where we conduct business.  Furthermore, the relationship       
between regulations governing domain names and laws protecting trademarks and   
similar proprietary rights is unclear.  Therefore, we may be unable to protect  
our own domain names or prevent third parties from acquiring domain names that  
are similar to, infringe upon or otherwise decrease the value of our domain     
names, trademarks and other intellectual property rights.                       

Our operating results could be impaired if we become subject to burdensome      
government regulations and legal uncertainties concerning the Internet          

   Due to the increasing popularity and use of the Internet, it is
possible that a number of laws and regulations may be adopted with respect to   
the Internet, relating to:                                                      

-  user privacy;                                            

-  pricing, usage fees and taxes;                           

-  content;                                                 

-  copyrights;                                              

-  distribution;                                            

-  characteristics and quality of products and services; and

-  online advertising and marketing.                        

       The adoption of any additional laws or regulations may decrease the
popularity or impede the expansion of the Internet and could seriously harm our 
business.  A decline in the popularity or growth of the Internet could decrease 
demand for our products and services, reduce our advertising revenues and       
margins and increase our cost of doing business.  Moreover, the applicability of
existing laws to the Internet is uncertain with regard to many important issues,
including property ownership, intellectual property, export of encryption       
technology, libel and personal privacy.  The application of laws and regulations
from jurisdictions whose laws do not currently apply to our business, or the    
application of existing laws and regulations to the Internet and other online   
services, could also harm our business.                                         

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Our growth and operating results could be impaired by the risks associated with 
our planned international expansion                                             

A key component of our business strategy is to expand our   
international sales, and we intend to establish a physical presence in          
international markets in the future.  For example, we have already initiated    
expansion into Europe and Canada.  Conducting business in foreign countries     
involves inherent risks, including, but not limited to:                         

-  unexpected changes in regulatory requirements;           

-  export restrictions;                                     

-  tariffs and other trade barriers;                        

-  difficulties in protecting intellectual property rights; 

-  difficulties in staffing and managing foreign operations;

-  problems collecting accounts receivable;                 

-  longer payment cycles;                                   

-  political instability;                                   

-  fluctuations in currency exchange rates; and             

-  potentially adverse tax consequences.                    

If we are unable to successfully defend against pending legal actions against   
us, we could face substantial liabilities                                       

     We are currently a party to pending legal actions against us, the
outcomes of which are uncertain and could result in significant judgments       
against us.  In March 1999, a class action suit was filed against us in the     
Orange County, California Superior Court alleging that we intentionally         
mispriced products and charged for orders knowing the orders could not be       
fulfilled.  Another class action suit was filed against us in Camden County, New
Jersey in March 1999 based on facts similar to the class action pending in      
Orange County.                                                                  

       In February 2000, an action was filed against us in Alameda County,
California Superior Court alleging that we sold gift certificates that included 
an expiration date and that were not redeemable for cash in violation of        
California law.                                                                 

       In March 2000, a class action suit was filed against us in the U.S.
District Court for the Central District of California alleging that we provide  
personal customer information to our third party advertising server without     
informing our customers or seeking their approval.  In April 2000, another class
action was also filed against us in the U.S. District Court for the Central     
District of California based on similar facts to the federal class action filed 
in March 2000.  Another class action was filed against us in Orange County,     
California Superior Court in April 2000 based on similar facts to the federal   
class actions.                                                                  

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        Defending against these lawsuits may involve significant expense and
diversion of management's resources.  Furthermore, due to the inherent          
uncertainties of litigation, we may not prevail in these actions. In addition,  
our ongoing operations may continue to subject us to significant litigation and 
costs in the future.  For a more detailed description of these legal actions,   
see ''Part II, Item 1, Legal Proceedings.''                                     

The success of our business depends on the continued growth of the Internet as a
viable commercial marketplace                                                   

         Our success depends upon the widespread acceptance of the Internet as
a vehicle to purchase products.  The e-commerce market is at an early stage of  
development, and demand and continued market acceptance is uncertain.  We cannot
predict the extent to which customers will shift their purchasing habits from   
traditional to online retailers.  If customers or manufacturers are unwilling to
use the Internet to conduct business and exchange information, our business will
fail.  It is possible that the Internet may not become a viable long-term       
commercial marketplace due to the potentially inadequate development of the     
necessary network infrastructure, the delayed development of enabling           
technologies and performance improvements and the high cost of shipping         
products.  The commercial acceptance and use of the Internet may not continue to
develop at historical rates, or may not develop as quickly as we expect.  In    
addition, concerns over security and privacy may inhibit the growth of the      
Internet.                                                                       

Because we face intense competition in various retail segments and operate in an
industry with limited barriers to entry, some of our competitors may be better  
positioned to capitalize on the rapidly growing e-commerce market               

The e-commerce market is new, rapidly evolving and intensely
competitive.  Many of our current and potential competitors have longer         
operating histories, larger customer bases, greater brand recognition and       
significantly greater financial, marketing, technical, management and other     
resources than we do.  Some of our competitors have and may continue to use     
aggressive pricing or inventory availability practices and devote substantially 
more resources to Web site and system development than us.  We expect that      
competition will further intensify in the future.  Because barriers to entry are
limited, current and new competitors can launch Web sites at a relatively low   
cost and can expand their operations rapidly.  New technologies and the         
expansion of existing technologies may also increase the competitive pressure we
face.  Increased competition may result in reduced operating margins, loss of   
market share and diminished brand recognition.                                  

        We believe that the primary competitive factors in the online market
include brand recognition, price, product selection, ease of use, customer      
service, available content and value added services.  We currently compete with 
a variety of online vendors that specialize in computer hardware and software   
products, as well as those who sell books, music, videos, DVDs and other        
entertainment products, consumer electronics, golf-related products and travel  
services.  Moreover, all of the products we sell in our online stores are       
typically available from traditional retailers.  Consequently, we must compete  
with companies in the online commerce market as well as the traditional retail  
industry.                                                                       

        We would also realize significant competitive pressure if any of our
distribution providers were to initiate their own retail operations.  Since our 
distributors have access to merchandise at very low costs, they could sell      
products at lower prices and maintain a higher gross margin on their product    
sales than we can.  In this event, our current and potential customers may      
decide to purchase directly from these distributors.  Increased competition from
any distributor capable of maintaining high sales volumes and acquiring product 
at lower prices than us could significantly reduce our market share.            

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Our growth and operating results could be impaired if we are unable to meet our 
future capital needs                                                            

         Based on our current operating plan, we anticipate that our currently
available funds, will be sufficient to satisfy our anticipated needs for working
capital, capital expenditures and business expansion for at least the next      
twelve months.  After that time, we may need additional capital. Alternatively, 
we may need to raise additional funds sooner to:                                

-  fund more rapid expansion;                               

-  develop new product lines or enhanced services;          

-  fund acquisitions; or                                    

-  respond to competitive pressures.                        

      If we raise additional funds by issuing equity or convertible debt
securities, the percentage ownership of our stockholders will be diluted.       
Furthermore, any new securities could have rights, preferences and privileges   
senior to those of our common stock.  We currently do not have any commitments  
for additional financing.  We cannot be certain that additional financing will  
be available when and to the extent required, or that, if available, it will be 
on acceptable terms.  If adequate funds are not available on acceptable terms,  
we may not be able to fund our expansion, develop or enhance our products or    
services or respond to competitive pressures.                                   

If we are unable to successfully manage the transition of our leadership, our   
business could suffer                                                           

         In the fall of 1999, Scott A. Blum, our founder, majority stockholder
and former Chief Executive Officer and Chairman, resigned from our Board of     
Directors, deposited all of his shares of our common stock into a voting trust, 
and withdrew from participation in our management, business and operations.  Mr.
Blum had previously resigned as our Chief Executive Officer and terminated his  
employment with us in March 1999.  As of March 31, 2000, Mr. Blum's shares      
represented approximately 47% of our outstanding capital stock.  Prior to       
leaving the company, Mr. Blum was primarily responsible for conceiving,         
developing and implementing our business model and recruiting our Board of      
Directors and our current management team.  In addition, Mr. Blum was directly  
involved in the creation, development and implementation of our corporate image 
and advertising strategy.  Mr. Blum's withdrawal from our business and our      
inability to replace Mr. Blum could harm our business.                          

If we are unable to protect our trademarks and intellectual property rights, our
reputation and brand could be impaired, and we could lose customers             

    We regard our trademarks, trade secrets and similar intellectual
property as critical to our success.  We rely on trademark and copyright law,   
trade secret protection and confidentiality and/or license agreements with      
employees, customers, providers and others to protect our proprietary rights.   
We cannot be certain that we have taken adequate steps to protect our           
proprietary rights, especially in countries where the laws may not protect our  
rights as fully as in the United States.  In addition, third parties may        
infringe or misappropriate our proprietary rights, and we could be required to  
incur significant expenses to preserve them.  We have applied for the           
registration of some of our trademarks and service marks in the United States   
and some other countries.  Even if we are able to register these names,         
registration may not adequately protect us against infringement by others.      
Effective trademark, service mark, copyright and trade secret protection may not
be available in every country in which our                                      

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products and services are made available online. If we are not able to protect  
our trademarks and other intellectual property, we may experience difficulties  
in achieving and maintaining brand recognition and customer loyalty.            

Intellectual property claims against us could be costly and result in the loss  
of significant rights                                                           

      Other parties may assert infringement or unfair competition claims
against us.  In the past, other parties have sent us notices of claims of       
infringement of intellectual property rights, and we expect to receive other    
notices in the future.  We cannot predict whether third parties will assert     
claims of infringement against us, or whether any past or future assertions or  
prosecutions will adversely affect our business.  If we are forced to defend    
against any of these claims, whether meritless or not, we may face costly       
litigation and diversion of technical and management personnel.  As a result of 
these disputes, we may have to expend significant resources to develop or       
acquire non-infringing property.  Alternatively, we may need to pursue royalty  
or licensing agreements, which may not be available on acceptable terms, if at  
all.                                                                            

SOFTBANK and its affiliates control a majority of our outstanding common stock  
which will enable them to control many significant corporate actions and may    
prevent a change in control that would otherwise be beneficial to our           
stockholders                                                                    

        SOFTBANK and its affiliates own approximately 29% of our outstanding
stock.  In addition, as a result of a voting trust agreement with our largest   
stockholder, approximately 47% of our outstanding stock must be voted by the    
trustees to mirror the voting of all shares that are not subject to the terms of
the voting trust agreement on significant stockholder actions, as defined in the
voting trust agreement.  On routine stockholder actions, the trustees have the  
discretion to vote the trust shares in any manner determined by a majority of   
the trustees.  Because SOFTBANK and its affiliates will control a majority of   
the shares not subject to the voting trust, they will effectively control the   
votes of approximately 76% of our common stock on significant corporate actions 
and 29% on routine corporate governance matters.  This control by SOFTBANK and  
its affiliates could have a substantial impact on matters requiring the vote of 
the stockholders, including the election of our directors and most of our       
corporate actions.  This control could delay, defer or prevent others from      
initiating a potential merger, takeover or other change in our control, even if 
these actions would benefit our stockholders and us.  This control could        
adversely affect the voting and other rights of our other stockholders and could
depress the market price of our common stock.                                   

Our stock price may be volatile, which may result in losses to our stockholders 

      The trading price of our common stock is likely to be volatile and
could fluctuate widely in response to many of the following factors, some of    
which are beyond our control:                                                   

-  variations in our operating results;                     

          -  announcements of technological innovations, new services or product
lines by us or our competitors;                       

   -  changes in expectations of our future financial performance,
             including financial estimates by securities analysts and investors;

         -  changes in operating and stock price performance of other Internet
and online commerce companies;                        

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-  conditions or trends in the Internet industry;           

-  additions or departures of key personnel; and            

-  future sales of our common stock.                        

         Domestic and international stock markets often experience significant
price and volume fluctuations.  These fluctuations, as well as general economic 
and political conditions unrelated to our performance, may adversely affect the 
price of our common stock.  In particular, the market prices for stocks of      
Internet and technology-related companies often reach levels that bear no       
established relationship to the operating performance of these companies.  These
market prices are generally not sustainable, could vary widely and may be       
especially volatile.                                                            

A large number of additional shares may be sold into the public market in the   
near future, which may cause the market price of our common stock to decline    
significantly, even if our business is doing well                               

    A substantial number of our common stock may become eligible for
resale in the near future upon the expiration of time restrictions imposed by   
law and by contract.  Sales of such additional shares in the public market could
reduce the market price of our common stock.  These sales also might make it    
more difficult for us to sell equity or equity-related securities in the future 
at a time and price that we deem appropriate.                                   

ITEM 3.   QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK            

     Our exposure to market rate risk for changes in interest rates is
related primarily to our investment portfolio.  We have not used derivative     
financial instruments in our investment portfolio.  Our short term investments  
are comprised of U.S. government obligations and public corporate debt          
securities with maturities of less than ninety days at the date of purchase.    
Interest rate fluctuations impact the carrying value of the portfolio.  We do   
not believe that the future market risks related to the above securities will   
have material adverse impact on our financial position, results of operations or
liquidity.                                                                      

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PART II  OTHER INFORMATION

ITEM 1.   LEGAL PROCEEDINGS                                                     

         In March 1999, a class action suit was filed against us in the Orange
County, California Superior Court alleging breach of contract, fraud and        
violation of consumer protection laws based on an error in the pricing of a     
computer monitor that was offered for sale on our Web site.  Shortly thereafter 
in March 1999, a similar class action case was filed in Camden County, New      
Jersey.  Both actions claim that we intentionally mispriced the monitors as a   
scheme to cause more people to visit our site.  Plaintiffs also claim that we   
attempted the same scheme with other products.  The plaintiffs are seeking      
compensatory and punitive damages in addition to injunctive relief.  Neither    
action sets forth the amount of damages sought by the plaintiffs.  The New      
Jersey action alleges that the class of plaintiffs consists of all persons who  
ordered the computer monitor at the mistaken price.  The California action also 
focuses on the monitor error and alleges that the class of plaintiffs consists  
of all individuals who have attempted to purchase computer hardware or software 
and have been unable to do so because we refused to provide the product at the  
agreed upon price.  The judge in the New Jersey action has granted a temporary  
stay of the New Jersey action to monitor the progress of the California action. 
A class has not yet been certified in either action.                            

      We have been contacted by the Federal Trade Commission and the New
York State Attorney General's office regarding print and Web advertisements we  
ran in August and September 1999 for a particular promotion of the Compaq       
Presario 5304 system.  The inquiries concern the location and sufficiency of the
information we provided about the terms of the manufacturer rebate for the      
system and the advertised price.  We have reached a tentative settlement with   
each agency and are awaiting their final approval of the settlements.           

          On February 14, 2000 an action was filed against us in Alameda County,
California Superior Court alleging that we sold gift certificates that included 
an expiration date and that were not redeemable for cash in violation of        
California law.  The plaintiff has brought this action on behalf of the general 
public of California and seeks injunctive relief, an unspecified amount of      
restitution, attorneys' fees, and other relief.                                 

          On March 13, 2000 a class action suit was filed against us in the U.S.
District Court for the Central District of California alleging that we collect, 
use and disclose personally identifiable customer information to our third party
advertising server and other advertisers without first informing our customers  
or seeking their permission in violation of several federal statutes.  The      
complaint seeks damages of up to $10,000 per class member per violation, actual 
and punitive damages, restitution, attorneys' fees and costs plus injunctive and
other equitable relief.  On April 7, 2000 a companion lawsuit was filed in the  
Superior Court of the State of California, County of Orange alleging violations 
of state statutory and common law based upon the same facts and federal causes  
of action as alleged in the federal class action.  The complaint seeks statutory
damages of up to $5,000 per class member per violation, plus actual and punitive
damages or restitution, attorneys' fees and costs and injunctive and other      
equitable relief.  On April 25, 2000 a third class action suit was filed in the 
United States District Court for the Central District of California alleging    
violation of the same federal statutes as those in the federal class action     
filed on March 13, 2000.  As with the first two class actions, the complaint    
alleges that we collect, use and disclose personally identifiable information of
our consumers without first informing them or obtaining their consent.  The     
complaint seeks unspecified statutory damages, compensatory damages, punitive   
damages, attorneys' fees and costs, plus declaratory, injunctive and            

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other equitable relief, including disgorgement of all profits and restitution of
all monies acquired by means of any act or practice declared to be unlawful. We 
have only recently been served with these complaints and have not yet filed     
responsive pleadings. The classes have not yet been certified in any of these   
actions.                                                                        

          Although we intend to defend ourselves vigorously, each of these class
actions could result in significant expenses and diversion of management time   
and other resources.  Further, the outcome of the class actions filed against us
is uncertain.  Therefore, we can give no assurance that we will prevail in these
suits against us.  See "Risk Factors--If we are unable to successfully defend   
against pending legal actions against us, we could face substantial             
liabilities."                                                                   

          We are not currently involved in any other material legal proceedings,
nor have we been involved in any such proceeding that has had a significant     
effect on our company.  We are not aware of any other material legal proceedings
pending against us.                                                             

ITEM 2.   CHANGES IN SECURITIES AND USE OF PROCEEDS                             

        (c) Sales of Unregistered Securities.  During the three months ended
March 31, 2000, following the exercise of options to purchase shares of common  
stock that had been granted under the 1998 Stock Option/Stock Issuance Plan by  
our employees, consultants and directors, we issued an aggregate of 348,656     
shares of common stock for an aggregate purchase price of approximately         
$832,339.  All of such sales of common stock were made pursuant to the exemption
from the registration requirements of the Securities Act afforded by Rule 701 or
Section 4(2) promulgated under the Securities Act.                              

     In March of 2000, the Board of Directors approved the issuance of
1,923 shares of common stock pursuant to a Services Agreement between us and    
View Designs, Inc., in consideration for their services.  The shares were issued
in April 2000 in a transaction which was exempt from the registration           
requirements of the Securities Act pursuant to Section 4(2) of such Act.        

          In February 2000, we also issued an additional 24,375 shares of common
stock pursuant to a Domain Name Transfer Agreement between us and Clik Design   
Inc. and El Cerrito Plaza Travel in partial consideration for the transfer of a 
domain name.  The shares were issued pursuant to the exemption from the         
registration requirements of the Securities Act afforded by Section 4(2) of such
Act.                                                                            

         (d) Use of Proceeds from Sales of Registered Securities.  On February
11, 2000, we completed an initial public offering (the "Offering") of our common
stock, $0.0001 par value.  The managing underwriters in the Offering were       
Merrill Lynch & Co., Merrill Lynch, Pierce, Fenner & Smith Incorporated, Bear,  
Stearns & Co. Inc., Hambrecht & Quist LLC and U.S Bancorp Piper Jaffray Inc.    
(the "Underwriters").  The shares of common stock sold in the Offering were     
registered under the Securities Act of 1933, as amended, on a Registration      
Statement on Form S-1 (the "Registration Statement") (Reg. No. 333-89737) that  
was declared effective by the SEC on February 7, 2000.  The Offering commenced  
on February 8, 2000 and terminated on February 11, 2000 after all 16,100,000    
shares of common stock registered under the Registration Statement were sold.   
All 16,100,000 shares of common stock registered under the Registration         
Statement (including 2,100,000 shares sold pursuant to the exercise of the      
Underwriters' over-allotment option) were sold at a price of $13.00 per share.  
The aggregate price of the Offering amount registered was $209,300,000.  In     
connection with the Offering, we paid an aggregate of $14,651,000 in            
underwriting discounts and commissions to the Underwriters.  In addition, the   
following table sets forth an estimate of all expenses incurred in connection   
with the Offering, other than underwriting discounts and commissions.  All      
amounts shown are estimated except                                              

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for the fees payable to the SEC, National Association of Securities Dealers,    
Inc. ("NASD") and Nasdaq National Market.                                       

                                                                [Download Table]
                                                                  
SEC registration fee                                    $   61,700
NASD filing fee                                             19,820
Nasdaq National Market listing fee                          95,000
Blue Sky fees and expenses                                   5,000
Printing and engraving expenses                            668,500
Legal fees and expenses                                    729,000
Accounting fees and expenses                               545,200
Transfer Agent fees                                          2,000
Insurance Premiums                                         200,000
Miscellaneous                                               94,780
                                                        ----------
Total                                                   $2,421,000

      After deducting the underwriting discounts and commissions and the
estimated Offering expenses described above, we received net proceeds from the  
Offering of approximately $192.2 million.  As of March 31, 2000, the Company had
used approximately $47.7 million of the net proceeds from the Offering for      
capital expenditures associated with system upgrades and expansion, marketing   
activities, including our sponsorship of the buy.com Tour, repayment of         
indebtedness under our credit facility and our indebtedness to The Scott A. Blum
Separate Property Trust, and to fund operating losses and for working capital   
all as described elsewhere in this report.  Except for the repayment of a $5.0  
million debt to The Scott A. Blum Separate Property Trust, none of the net      
proceeds of the Offering were paid directly or indirectly to any director,      
officer, general partner of ours or their associates, persons owning 10% or more
of any class of equity securities, or an affiliate of ours, other than in the   
form of wages or salaries and bonuses paid out in the ordinary course of        
business.                                                                       

ITEM 3.  DEFAULTS UPON SENIOR SECURITIES                                        

None.                                                       

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

On January 7, 2000, in an Action by Written Consent of the  
Stockholders, holders of a majority of our shares approved each of the following
matters:                                                                        

         (i)   Special Executive Option Plan:  A new equity incentive plan for
-----------------------------                   
               officers of the Company or other highly compensated individuals
and non-employee Board members.                 

        (ii)  1999 Stock Incentive Plan:  A new equity incentive program for
-------------------------                       
              employees (including officers), non-employee Board members and
               consultants of BUY.COM which became effective upon the Offering
               and incorporates and serves as the successor program for all of
our predecessor equity incentive programs.      

   (iii) 1999 Employee Stock Purchase Plan: A new equity incentive
---------------------------------               
             program under which eligible employees may purchase shares of
           our common stock, at semi-annual intervals, through payroll
deductions.                                     

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        (iv)  Reverse Stock Split:  An amendment to our Amended and Restated
-------------------                             
              Certificate of Incorporation to effect a 5 for 8 reverse stock
split.                                          

       (v)   Amendment and Restatement of Certificate of Incorporation and
             -------------------------------------------------------------
             Bylaws:  The amendment and restatement of the our Amended and
------                                          
              Restated Certificate of Incorporation and Bylaws, which, among
               other things, implemented certain anti-takeover measures.  Such
              amendment and restatement became effective upon the closing of
the Offering.                                   

          (vi)  Director Classification:  The appointment of directors to one of
-----------------------                         
             three classes of the Board of Directors with Messrs. Richion,
         Sculley and Thorson elected as Class I directors, Messrs.
             Ingram, Kendall and Russell elected as Class II directors and
        Messrs. Burnham, Hawkins and Roszak elected as Class III
            directors. The terms of the directors expire as follows: (i)
             Class I directors at the 2001 annual meeting of stockholders;
     (ii) Class II directors at the 2002 annual meeting of
              stockholders; and (iii) Class III directors at the 2003 annual
meeting of stockholders.                        

ITEM 5.  OTHER INFORMATION                                                  

None.                                                     

ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K                                   

A.  Exhibits                                              

3.1  Registrant's Amended and Restated Certificate of Incorporation 
  (incorporated herein by this reference to Exhibit 3.2 of the
      Registration Statement on Form S-1 filed on October 27, 1999, as
amended)                                                  

      3.2  Registrant's Amended and Restated Bylaws (incorporated herein by this
        reference to Exhibit 3.4 of the Registration Statement on Form S-1
filed on October 27, 1999, as amended)                    

27.1  Financial Data Schedule                                         

B.  Reports on Form 8-K                                   

None.                                             

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SIGNATURES

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

                        BUY.COM INC.
                        (Registrant)

                                 By: /s/ Mitch C. Hill
                                                 -------------------------------
                                   Mitch C. Hill
                                             Chief Financial Officer
                                              (principal financial and
                                         accounting officer)

Dated:  May 12, 2000                                                            

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EXHIBIT INDEX 

Exhibit Number       Description                                                
--------------       -----------                                                

3.1               Registrant's Amended and Restated Certificate of        
                 Incorporation (incorporated herein by this reference to
                     Exhibit 3.2 of the Registration Statement on Form S-1 filed
on October 27, 1999, as amended)      

3.2               Registrant's Amended and Restated Bylaws (incorporated  
                     herein by this reference to Exhibit 3.4 of the Registration
             Statement on Form S-1 filed on October 27, 1999, as
amended)                              

27.1               Financial Data Schedule                                  

Dates Referenced Herein   and   Documents Incorporated by Reference

				Referenced-On Page
This ‘10-Q’ Filing		Date		First		Last			Other Filings
		12/31/00		6					10-K,  10-K/A
Filed on:		5/12/00		37
		5/1/00		1
		4/26/00		10
		4/25/00		33
		4/20/00		8		9
		4/7/00		33
For Period End:		3/31/00		1		35
		3/13/00		33
		2/14/00		8		33
		2/11/00		34
		2/8/00		6		34			424B4
		2/7/00		34					S-1/A
		1/7/00		35
		1/1/00		17
		12/31/99		2		25
		12/3/99		7
		10/27/99		36		38			S-1
		10/13/99		8		10
		3/31/99		2		16
		12/31/97		22
									List all Filings