SECURITIES AND EXCHANGE COMMISSION
                               Washington, D.C. 20549
                                      Form 10-Q


(Mark One)
[X]      QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
         EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 1999.

                                                        OR

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

For the transition period from _______________ to ___________

                           Commission File Number 0-17156

                                  MERISEL, INC.
              (Exact name of registrant as specified in its charter)

Delaware                                             95-4172359
(State or other jurisdiction of            (I.R.S. Employer Identification No.)
incorporation or organization)

200 Continental Boulevard
El Segundo, CA                                               90245-0984
(Address of principal executive offices)                      (Zip code)


Registrant's telephone number, including area code (310) 615-3080

---------------------------------------------------------------
Former name, former address, and former fiscal year, if changed since last year

         Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the  Securities  Exchange  Act of
1934  during  the  preceding  12 months  (or for such  shorter  period  that the
Registrant was required to file such reports),  and (2) has been subject to such
filing requirements for the past 90 days.

                                 Yes X No _____

         Indicate  the  number of  shares  outstanding  of each of the  issuer's
classes of common stock, as of the latest practicable date:
                          Number of Shares Outstanding
               Class                                 August 12, 1999
Common Stock, $.01 par value                         80,278,829 Shares


<PAGE>
<TABLE>
<CAPTION>




                                                   MERISEL, INC.

                                                       INDEX


                                                                                      Page Reference
PART I   FINANCIAL INFORMATION
<S>                                                                                   <C>

                  Consolidated Balance Sheets as of                                        1-2
                  June 30, 1999 and December 31, 1998

                  Consolidated Statements of Operations for the
                  Three Months and Six Months Ended June 30, 1999 and 1998                   3

                  Consolidated Statements of Cash Flows for the
                  Six Months Ended June 30, 1999 and 1998                                    4

                  Notes to Consolidated Financial Statements                                5-9

                  Management's Discussion and Analysis of                                  10-20
                  Financial Condition and Results of Operations

                  Quantitative and Qualitative Market Risk Disclosure                        20

PART II  OTHER INFORMATION                                                                 21-22

                  SIGNATURES                                                                 23
</TABLE>


<PAGE>


                    SPECIAL NOTE REGARDING FORWARD-LOOKING INFORMATION


         Certain  statements  contained in this  Quarterly  Report on Form 10-Q,
including  without  limitation   statements  containing  the  words  "believes,"
"anticipates,"    "expects"   and   words   of   similar   import,    constitute
"forward-looking statements" within the meaning of Section 27A of the Securities
Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934,
as amended.  Such  forward-looking  statements  involve known and unknown risks,
uncertainties and other factors which may cause the actual results,  performance
or achievements of Merisel,  Inc. (the "Company"),  or industry  results,  to be
materially  different  from any  future  results,  performance  or  achievements
expressed  or implied by such  forward-looking  statements.  These  factors  may
include,  but  are  not  limited  to,  the  effect  of (i)  economic  conditions
generally,  (ii) industry growth,  (iii)  competition,  (iv) liability and other
claims asserted  against the Company,  (v) the loss of significant  customers or
vendors, (vi) operating margins,  (vii) business  disruptions,  and (viii) other
risks  detailed  in this  report.  These  factors are  discussed  in more detail
elsewhere in this report. Given these  uncertainties,  readers are cautioned not
to  place  undue  reliance  on  such  forward-looking  statements.  The  Company
disclaims any obligation to update any such factors or to publicly  announce the
result of any revisions to any of the  forward-looking  statements  contained or
incorporated by reference herein to reflect future events or developments.


<PAGE>





                                           PART 1. FINANCIAL INFORMATION


Item 1.  Financial Statements
<TABLE>
<CAPTION>

                                          MERISEL, INC. AND SUBSIDIARIES
                                            CONSOLIDATED BALANCE SHEETS
                                                  (In thousands)
                                                    (Unaudited)

                                                      ASSETS

                                                                                June 30,               December 31,
                                                                                  1999                     1998
                                                                           -------------------      -------------------
<S>                                                                         <C>                     <C>
CURRENT ASSETS:
Cash and cash equivalents                                                             $21,079                  $36,341
Accounts receivable (net of allowances
of $17,078 and $20,476 for 1999 and 1998, respectively)                               225,467                  202,128
Inventories                                                                           493,167                  587,317
Prepaid expenses and other current assets                                              14,966                   14,193
Deferred income taxes                                                                     905                      865
                                                                           -------------------      -------------------
  Total current assets                                                                755,584                  840,844

PROPERTY AND EQUIPMENT, NET                                                            89,885                   79,719

COST IN EXCESS OF NET ASSETS
  ACQUIRED, NET                                                                        24,095                   24,309

OTHER ASSETS                                                                              520                      448
                                                                           -------------------      -------------------

TOTAL ASSETS                                                                         $870,084                 $945,320
                                                                           ===================      ===================


</TABLE>









             See  accompanying  notes  to  consolidated  financial statements.



<PAGE>
<TABLE>
<CAPTION>


                                          MERISEL, INC. AND SUBSIDIARIES
                                            CONSOLIDATED BALANCE SHEETS
                                         (In thousands, except share data)
                                                    (Unaudited)

                                       LIABILITIES AND STOCKHOLDERS' EQUITY

                                                                                  June 30,             December 31,
                                                                                    1999                   1998
                                                                             -------------------    --------------------

<S>                                                                           <C>                    <C>
CURRENT LIABILITIES:
Accounts payable                                                                  $570,424               $623,673
Accrued liabilities                                                                 32,859                 31,737
Long-term debt and capitalized lease obligations - current                           3,062                  3,692
                                                                             -------------------    --------------------
  Total current liabilities                                                        606,345                659,102

Long-term debt                                                                     129,160                129,360
Capitalized lease obligations                                                        2,276                  2,605
                                                                             -------------------    --------------------
TOTAL LIABILITIES                                                                  737,781                791,067

STOCKHOLDERS' EQUITY
Preferred stock, $.01 par value, authorized 1,000,000
  shares; none issued or outstanding
Common stock, $.01 par value, authorized
  150,000,000 shares; 80,278,833 and 80,272,683 shares
  outstanding for 1999 and 1998, respectively                                          803                    803
Additional paid-in capital                                                         282,392                282,380
Accumulated deficit                                                               (141,988)              (118,495)
Accumulated other comprehensive income                                              (8,904)               (10,435)
                                                                             -------------------    --------------------
Total stockholders' equity                                                         132,303                154,253
                                                                             -------------------    --------------------

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY                                        $870,084               $945,320
                                                                             ===================    ====================

</TABLE>









             See  accompanying  notes  to  consolidated  financial statements.



<PAGE>
<TABLE>
<CAPTION>


                                                                  MERISEL, INC. AND SUBSIDIARIES
                                                            CONSOLIDATED STATEMENTS OF OPERATIONS
                                                           (In thousands, except per share data)
                                                                            (Unaudited)

                                                           Three Months Ended                         Six Months Ended
                                                                June 30,                                  June 30,
                                                        1999              1998                    1999               1998
                                                  ----------------     ----------------    ------------------    -----------------

<S>                                               <C>                      <C>               <C>                      <C>
NET SALES                                         $1,266,622               $1,096,439        $2,521,819               $2,198,109

COST OF SALES                                      1,206,202                1,034,736         2,396,271                2,074,655
                                                  ----------------     ----------------    ------------------    -----------------

GROSS PROFIT                                          60,420                   61,703           125,548                  123,454

SELLING, GENERAL &
  ADMINISTRATIVE EXPENSES                             61,279                   47,959           116,401                   97,052

LITIGATION-RELATED
  (RECOVERY)/CHARGE                                   (9,000)                                    12,000
                                                  ----------------     ----------------    ------------------    -----------------

OPERATING INCOME (LOSS)                                8,141                   13,744            (2,853)                  26,402

INTEREST EXPENSE                                       3,979                    3,890             6,796                    7,673

OTHER EXPENSE                                          6,766                    4,531            13,393                    9,621
                                                  ----------------     ----------------    ------------------    -----------------

(LOSS) INCOME BEFORE INCOME TAXES                     (2,604)                   5,323           (23,042)                   9,108

INCOME TAX PROVISION                                     380                      215               451                      364
                                                  ----------------     ----------------    ------------------    -----------------

NET (LOSS) INCOME                                    $(2,984)                  $5,108          $(23,493)                  $8,744
                                                  ================     ================    ==================    =================

NET (LOSS) INCOME PER SHARE (BASIC AND DILUTED)
                                                      $(0.04)                   $0.06            $(0.29)                   $0.11
                                                  ================     ================    ==================    =================

WEIGHTED AVERAGE NUMBER OF SHARES:
  BASIC                                               80,279                   80,216            80,278                   80,184
  DILUTED                                             80,279                   81,531            80,278                   80,557
                                                  ================     ================    ==================    =================


</TABLE>








               See  accompanying  notes  to  consolidated  financial statements.


<PAGE>
<TABLE>
<CAPTION>


                                          MERISEL, INC. AND SUBSIDIARIES
                                       CONSOLIDATED STATEMENTS OF CASH FLOWS
                                                  (In thousands)
                                                    (Unaudited)

                                                                                    Six Months Ended June 30,
                                                                                  1999                     1998
                                                                            ------------------      -------------------
<S>                                                                        <C>                       <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net (loss) income                                                                $(23,493)                  $8,744
Adjustments to reconcile net (loss) income to net
  cash provided by operating activities:
  Depreciation and amortization                                                     8,800                    5,118
  Provision for doubtful accounts                                                   7,547                    5,104
Changes in operating assets and liabilities:
  Accounts receivable                                                             (31,087)                  14,668
  Inventories                                                                      94,150                   31,739
  Prepaid expenses and other current assets                                          (845)                  (8,642)
  Accounts payable                                                                (53,248)                  86,073
  Accrued liabilities                                                               1,415                    4,223
                                                                            ------------------      -------------------
Net cash provided by operating activities                                           3,239                  147,027
                                                                            ------------------      -------------------

CASH FLOWS FROM INVESTING ACTIVITIES:
  Purchase of property and equipment                                              (18,708)                 (13,827)
                                                                            ------------------      -------------------
Net cash used for investing activities                                            (18,708)                 (13,827)
                                                                            ------------------      -------------------

CASH FLOWS FROM FINANCING ACTIVITIES:
  Borrowings under revolving line of credit                                       172,150                   27,200
  Repayments under revolving line of credit                                      (172,150)                 (27,200)
  Repayments under other financing arrangements                                    (1,159)                    (844)
  Proceeds from issuance of Common Stock                                               12                      585
                                                                            ------------------      -------------------
Net cash used for financing activities                                             (1,147)                    (259)
                                                                            ------------------      -------------------

EFFECT OF EXCHANGE RATE CHANGES ON CASH                                             1,354                     (940)
                                                                            ------------------      -------------------

NET (DECREASE) INCREASE IN CASH AND
  CASH EQUIVALENTS                                                                (15,262)                 132,001

CASH AND CASH EQUIVALENTS, BEGINNING OF
  PERIOD                                                                           36,341                   36,447
                                                                            ------------------      -------------------
CASH AND CASH EQUIVALENTS, END OF PERIOD                                          $21,079                 $168,448
                                                                            ==================      ===================


</TABLE>








              See  accompanying  notes  to  consolidated  financial statements.


<PAGE>


MERISEL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)


1. General

Merisel,  Inc., a Delaware  corporation and a holding company (together with its
subsidiaries,  "Merisel" or the "Company"), is a leading distributor of computer
hardware and software products.  Through its main operating subsidiary,  Merisel
Americas,  Inc. ("Merisel Americas"),  and its subsidiaries the Company operates
three distinct business units: United States distribution, Canadian distribution
and the Merisel  Open  Computing  Alliance  ("MOCA(TM)").  The  Company  markets
products and services  throughout the United States and Canada, and has achieved
operational  efficiencies that have made it a valued partner to a broad range of
computer  resellers,   including  value-added  resellers  ("VARs"),   commercial
resellers,   and  retailers.   Through   MOCA(TM),   the  Company  supports  Sun
Microsystems' UNIX(R)-based products and complementary third-party products.

The information for the three months and six months ended June 30, 1999 and 1998
has not been audited by independent  accountants,  but includes all  adjustments
(consisting  of  normal  recurring  accruals)  which  are,  in  the  opinion  of
management, necessary for a fair presentation of the results for such periods.

Certain information and footnote  disclosures  normally included in consolidated
financial  statements  prepared in accordance with generally accepted accounting
principles have been omitted  pursuant to the requirements of the Securities and
Exchange Commission, although the Company believes that the disclosures included
in  these  financial  statements  are  adequate  to  make  the  information  not
misleading.  Certain amounts for 1998 have been reclassified to conform with the
1999  presentation.  The consolidated  financial  statements as presented herein
should be read in conjunction  with the  consolidated  financial  statements and
notes  thereto  included in Merisel's  Annual Report on Form 10-K for the fiscal
year ended December 31, 1998.

2. New Accounting Pronouncement

In June 1998, the Financial Accounting Standards Board ("FASB") issued Statement
of Financial Accounting Standard No. 133, "Accounting for Derivative Instruments
and  Hedging   Activities"  ("SFAS  133"),  which  is  effective  for  financial
statements  issued for periods  beginning  after June 15, 2000, as amended.  The
Company will adopt SFAS 133 as required in January  2001.  SFAS 133 requires all
derivatives  to be recorded on the balance  sheet at fair value with  changes in
fair value reflected in income or equity,  depending on the nature of the hedge.
The Company is in the process of  evaluating  the effect that this new  standard
will have on the Company's financial statements.



<PAGE>


MERISEL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
(UNAUDITED)


3. Fiscal Year

The  Company's  fiscal year is the 52- or 53-week  period ending on the Saturday
nearest to December  31. The  Company's  second  quarter is the  13-week  period
ending on the Saturday nearest to June 30. For simplicity of  presentation,  the
Company has described the interim  periods and year-end period as of June 30 and
December 31, respectively.

4. Comprehensive Income

In June 1997,  the FASB issued  Statement of Financial  Accounting  Standard No.
130,  "Reporting for  Comprehensive  Income"  ("SFAS 130").  SFAS 130, which the
Company  adopted  in the  first  quarter  of  1998,  establishes  standards  for
reporting and displaying  comprehensive  income and its components in a full set
of general purpose  financial  statements.  Comprehensive  income is computed as
follows:
<TABLE>
<CAPTION>

                                                              (In thousands)                         (In thousands)
                                                            Three Months Ended                      Six Months Ended
                                                                 June 30,                               June 30,
                                                         1999                1998                1999              1998
                                                         ----                ----                ----              ----
<S>                                                <C>                 <C>                   <C>               <C>

Net income                                              $(2,984)             $5,108             $(23,493)          $8,744
Other comprehensive income -
   Foreign currency translation adjustments                 783              (1,208)               1,531           (1,091)
                                                    ----------------    ----------------     -------------    ---------------

Comprehensive income                                    $(2,201)             $3,900             $(21,962)          $7,653
                                                    ================    ================     =============    ===============
</TABLE>


5. Earnings Per Share ("EPS")

The Company  calculates  earnings  per share in  accordance  with  Statement  of
Financial  Accounting Standard No. 128, "Earnings Per Share." Basic earnings per
share is  calculated  using the  average  number of common  shares  outstanding.
Diluted  earnings  per share is computed  on the basis of the average  number of
common  shares  outstanding  plus  the  effect  of  outstanding  stock  options,
excluding those that would be anti-dilutive, using the "treasury stock" method.



<PAGE>


MERISEL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
(UNAUDITED)


The following table is a  reconciliation  of the weighted average shares used in
the  computation  of basic and  diluted  EPS for the  income  statement  periods
presented herein:
<TABLE>
<CAPTION>

                                                       (In thousands)                       (In thousands)
                                                     Three months Ended                    Six Months Ended
                                                          June 30,                             June 30,
Weighted average shares outstanding                1999               1998               1999                1998
-----------------------------------                ----               ----               ----                ----
<S>                                            <C>                 <C>                <C>               <C>

Basic                                                 80,279             80,216             80,278              80,184
Assumed exercises of stock options                                        1,315                                    373
                                              ---------------    ---------------    ---------------     ---------------

Diluted                                               80,279             81,531             80,278              80,557
                                              ===============    ===============    ===============     ===============
</TABLE>

6.    Supplemental Disclosure of Cash Flow Information
<TABLE>
<CAPTION>

Cash paid (received) in the  three-month  and six-month  periods ended June 30 for interest and income taxes was as
follows:
                                            (In thousands)                              (In thousands)
                                          Three Months Ended                           Six Months Ended
                                               June 30,                                    June 30,
                                      1999                  1998                  1999                  1998
                                      ----                  ----                  ----                  ----
   <S>                              <C>                    <C>                   <C>                   <C>

   Interest                          $7,706                 $8,104                $6,848                $7,336
   Income taxes                       $(284)                  $133                  $189                 $(116)
</TABLE>


7.       Segment Information

During 1998, the Company provided certain  information about operating segments,
geographic areas in which the Company  operates,  major customers,  and products
and services,  in accordance with Statement of Financial Accounting Standard No.
131, "Disclosure about Segments of an Enterprise and Related Information" ("SFAS
131").  The Company has  determined it has three  operating  segments under SFAS
131: the United States distribution  segment, the Canadian distribution segment,
and MOCA. Each of these segments has a dedicated  management team and is managed
separately  primarily  because  of  geography  (United  States and  Canada)  and
differences  in product  categories,  marketing  strategies  and  customer  base
(MOCA).



<PAGE>


MERISEL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
(UNAUDITED)


The Company does not maintain separate stand-alone financial statements prepared
in accordance  with  generally  accepted  accounting  principles for each of its
operating  segments.  In accordance  with SFAS 131, the Company has prepared the
following  tables which present  information  related to each operating  segment
included in internal management reports.
<TABLE>
<CAPTION>

                                                                      (In thousands)
                                                                    Three Months Ended
                                                                      June 30, 1999
                                      -------------------------------------------------------------------------------
                                           United
                                           States              MOCA               Canada                Total
                                          -----------        ------------        ----------         ---------------
<S>                                          <C>               <C>                 <C>                <C>
Net sales to external customers              $794,916          $261,510            $210,196           $1,266,622
Segment profit contribution(A)                                   10,909(A)                                10,909 (A)
Segment operating (loss) profit(A)             (4,545)                                1,777               (2,768)(A)
</TABLE>
<TABLE>
<CAPTION>

                                                                      (In thousands)
                                                                    Three Months Ended
                                                                      June 30, 1998
                                      -------------------------------------------------------------------------------
                                           United
                                           States              MOCA               Canada                Total
                                          ----------         ----------          ----------           ------------
<S>                                        <C>               <C>                   <C>                <C>
Net sales to external customers            $756,883          $148,387              $191,169           $1,096,439
Segment profit contribution(A)                                  5,376(A)                                   5,376(A)
Segment operating profit(A)                   9,324                                    (956)               8,368(A)

</TABLE>
<TABLE>
<CAPTION>

                                                                      (In thousands)
                                                                     Six Months Ended
                                                                      June 30, 1999
                                      -------------------------------------------------------------------------------
                                           United
                                           States              MOCA               Canada                Total
                                          ------------        -----------        -----------        --------------
<S>                                        <C>                 <C>                 <C>                <C>
Net sales to external customers            $1,584,597          $463,312            $473,910           $2,521,819
Segment profit contribution(A)                                   18,420(A)                                18,420 (A)
Segment operating (loss) profit(A)            (26,565)                                5,292              (21,273)(A)
</TABLE>
<TABLE>
<CAPTION>

                                                                      (In thousands)
                                                                     Six Months Ended
                                                                      June 30, 1998
                                      -------------------------------------------------------------------------------
                                           United
                                           States              MOCA               Canada                Total
                                         -----------        -----------           ---------          -------------
<S>                                      <C>                 <C>                   <C>                <C>
Net sales to external customers          $1,506,920          $264,648              $426,541           $2,198,109
Segment profit contribution(A)                                 11,927(A)                                  11,927(A)
Segment operating profit(A)                  12,616                                   1,859               14,475(A)
</TABLE>



<PAGE>


MERISEL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
(UNAUDITED)





<TABLE>
<CAPTION>


Geographical Area Net Sales:
                                     (In thousands)                              (In thousands)
                                   Three months ended                           Six months ended
                                        June 30,                                    June 30,
                                1999                 1998                  1999                  1998
                                ----                 ----                  ----                  ----
<S>                           <C>                     <C>                <C>                    <C>
United States                 $1,056,426              $905,270           $2,047,909             $1,771,568
Canada                           210,196               191,169              473,910                426,541
                          -----------------     ----------------     -----------------     -----------------

Total Net Sales               $1,266,622            $1,096,439           $2,521,819             $2,198,109
                          =================     ================     =================     =================
</TABLE>


Note A: For each of its operating  segments,  the Company evaluates  performance
based upon operating (loss) profit or profit contribution.  However, the Company
has  not   historically   allocated   corporate   overhead,   depreciation   and
amortization,  or shared operating expenses to the MOCA operating segment.  As a
result,  the Company  believes that the segment profit  contribution for MOCA in
the tables  above would be  substantially  lower than the amounts  shown if such
costs were allocated.  Corporate  overhead,  amortization  and shared  operating
expenses are allocated to Canada on a pro rata basis.  Segment  operating (loss)
profit  for  the  United  States  business  includes  all  corporate   overhead,
amortization and shared operating expenses not allocated to Canada, and in 1999,
segment operating loss includes the litigation-related  charge and the insurance
recovery.



<PAGE>


Item 2.    MANAGEMENT'S DISCUSSION AND ANALYSIS OF
           FINANCIAL CONDITION AND RESULTS OF OPERATIONS


GENERAL

Merisel,  Inc., a Delaware  corporation and a holding company (together with its
subsidiaries,  "Merisel" or the "Company"), is a leading distributor of computer
hardware and software products.  Through its main operating subsidiary,  Merisel
Americas,  Inc. ("Merisel Americas"),  and its subsidiaries the Company operates
three distinct business units: United States distribution, Canadian distribution
and the Merisel  Open  Computing  Alliance  ("MOCA(TM)").  The  Company  markets
products and services  throughout the United States and Canada, and has achieved
operational  efficiencies that have made it a valued partner to a broad range of
computer  resellers,   including  value-added  resellers  ("VARs"),   commercial
resellers,   and  retailers.   Through   MOCA(TM),   the  Company  supports  Sun
Microsystems' UNIX(R)-based products and complementary third-party products.

RESULTS OF OPERATIONS

Three  Months Ended June 30, 1999 as Compared to the Three Months Ended June 30,
1998.

Net sales increased 16% from  $1,096,439,000  in the quarter ended June, 30 1998
to $1,266,622,000 in the quarter ended June 30, 1999. The increase resulted from
a 17% increase in net sales for the U.S. and a 10% increase in Canada.  The U.S.
growth rate resulted from increased  sales of 76% in the MOCA business  segment,
36% for the retail  customer  group,  and 4% for the commercial  customer group,
offset  in part by a  decline  in sales of 1% for the VAR  customer  group.  The
growth rate in the MOCA  business  segment  reflected  in  substantial  part the
acquisition  by the  Company  of  several  new large Sun  Microsystems  reseller
accounts  during  1998,  and the  Company  does not expect  that  growth rate to
continue. Without the addition of such new accounts, the growth rate in the MOCA
business segment would have been approximately 45%. The growth rate in Canada in
terms of Canadian dollars was 11%.

Hardware and accessories  accounted for 79% of net sales and software  accounted
for 21% of net sales in the second  quarter of 1999,  as compared to 78% and 22%
for the same categories, respectively, for the second quarter of 1998.

Gross profit decreased 2.1% or $1,283,000 from $61,703,000 in the second quarter
of 1998 to  $60,420,000  in the 1999 period.  Gross  profit as a  percentage  of
sales,  or gross margin,  decreased  from 5.6% in the 1998 period to 4.8% in the
1999 period.  Gross  margins in the United States and Canada were 4.5% and 6.1%,
respectively,  for the  second  quarter  of 1999,  compared  to 5.6%  and  5.7%,
respectively,  for  the  second  quarter  of  1998.  Margins  in the  U.S.  were
significantly  negatively  affected by  changing  vendor  terms and  conditions,
including the reduction of vendor rebates and changes in price protection. Gross
margins were also negatively affected by the launch of Microsoft Office 2000 and
continued  intense price  competition.  In Canada,  the increase in margins as a
percentage of sales was achieved  through a concerted effort focused on customer
mix and  new-account  recruitment as well as the more effective  usage of system
tools to

<PAGE>



                    MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                 FINANCIAL CONDITION AND RESULTS OF OPERATIONS
                                 (Continued)


manage  pricing.  The Company has  committed  resources  to address the issue of
declining margins in the U.S. by focusing  attention on more profitable  product
lines,  expanding the Company's  customer base and  intensifying  recruitment of
higher margin customers,  using new sales tools, and enhancing  customer support
by  segmenting  customers  by  business  model  and  geographical  location  and
assigning  those  customers  to  dedicated  sales  teams.  The  Company  is also
continuing  efforts to improve the  controls  and  management  supervision  over
margin management  related  activities such as sales execution and processes and
is adjusting selling prices to offset reduced vendor rebate opportunities. There
is  no  assurance  that  the  Company's  efforts  to  improve  margins  will  be
successful.   In  addition,   changing   manufacturer   terms  and   conditions,
particularly in price protection, have contributed to greater inventory risk and
necessitated  changes in purchasing practices that in turn have affected selling
and pricing.

Selling, general and administrative expenses increased by 27.8% from $47,959,000
in the second  quarter  of 1998 to  $61,279,000  in the second  quarter of 1999,
increasing  as a percentage  of sales from 4.4% of sales in 1998 to 4.8% for the
same  period in 1999.  Contributing  to the  increase in the 1999  quarter  were
depreciation  expenses  of  approximately  $3.5  million  related to the SAP R/3
operating  system  and other  strategic  initiatives;  post  "go-live"  costs of
approximately $1.0 million for expenses  associated with the SAP implementation;
approximately  $1.0  million of payroll and  payroll-related  costs of employees
directly associated with the SAP project,  which payroll costs for periods prior
to implementation had been capitalized and which will continue to be incurred in
future periods;  approximately $1.4 million in expenses related to the Company's
strategic  initiatives;  and costs of approximately $1.3 million associated with
Year 2000 compliance. The Company expects to incur approximately the same amount
in the third  quarter  of 1999 in  connection  with Year  2000  compliance.  The
remainder  of the  increase  resulted  largely  from  increased  variable  costs
associated  with growth of the  Company's  business and other costs  incurred to
support growth.

In the second  quarter of 1999,  the  Company  recorded a  $9,000,000  insurance
recovery  representing  insurance  reimbursement of a portion of the $21,000,000
charge  recorded in the first quarter of 1999 relating to the  settlement of the
litigation  pending in Delaware  Chancery  Court between the Company and certain
holders and former holders of the Company's  12-1/2% Senior Notes. See Part II -
Item 1. "Legal Proceedings."

As a result of the above items,  operating  income  decreased by $5,603,000 from
$13,744,000  for the  second  quarter  of 1998 to income of  $8,141,000  for the
second quarter of 1999. Excluding the $9,000,000 insurance recovery, the Company
would have had an operating loss of $859,000 for the second quarter of 1999.


<PAGE>


                    MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                 FINANCIAL CONDITION AND RESULTS OF OPERATIONS
                                 (Continued)


Six Months  Ended June 30,  1999 as  Compared  to the Six Months  Ended June 30,
1998.

For the six  months  ended  June  30,  1999,  net  sales  increased  by 15% from
$2,198,109,000  for the six months ended June 30, 1998 to $2,521,819,000 for the
six months ended June 30, 1999. The increase resulted from a 16% increase in net
sales for the U.S.  and an 11%  increase  in Canada.  The growth  rate  reflects
improved  year-over-year  performance  due to  substantially  the  same  factors
summarized  in the  discussion of sales for the three months ended June 30, 1999
and 1998.  The growth rate in Canada in terms of Canadian  dollars was 15%,  but
the  decline in the value of the  Canadian  dollar  hampered  the growth rate in
terms of U.S. dollars.

Hardware and accessories  accounted for 79% of net sales and software  accounted
for 21% of net sales in the first six months of 1999, as compared to 77% and 23%
for the same categories, respectively, in the first six months of 1998.

Gross profit  increased 1.7% or $2,094,000 from  $123,454,000  for the first six
months of 1998 to $125,548,000 for the first six months of 1999. Gross profit as
a percentage of sales, or gross margin,  decreased from 5.6% for the 1998 period
to 5.0% for the 1999 period.  Gross margins in the United States and Canada were
4.8% and 5.8%, respectively,  for the first six months of 1999, compared to 5.6%
and 5.8%, respectively, for the first six months of 1998. The decrease in margin
in the U.S. is attributable to substantially the same factors  summarized in the
discussion of gross profit for the three months ended June 30, 1999 and 1998.

Selling, general and administrative expenses increased by 19.9% from $97,052,000
in the six months  ended June 30, 1998 to  $116,401,000  in the six months ended
June 30, 1999. Selling,  general and administrative  expenses as a percentage of
sales  increased from 4.4% of sales in 1998 to 4.6% for the same period in 1999.
The increase  resulted in large part from the  increased  expenses in the second
quarter of 1999 described above as well as the SAP training of 1,400  associates
over an eight-week period during the first quarter.

Results for the six months ended June 30, 1999 also  reflected  the  $21,000,000
charge  recorded  by the  Company in the first  quarter of 1999  relating to the
settlement  of the  litigation  pending in Delaware  Chancery  Court between the
Company and certain  holders and former holders of the Company's  12-1/2% Senior
Notes,  offset in part by the  $9,000,000  insurance  recovery  recorded  by the
Company in the second quarter.

As a result of the above items,  operating  income decreased by $29,255,000 from
$26,402,000  for the year ended 1998 to a loss of $2,853,000  for the year ended
1999.  Excluding the  litigation-related  charge and related insurance recovery,
the Company  would have had operating  income of  $9,147,000  for the year ended
1999.


<PAGE>


                        MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                     FINANCIAL CONDITION AND RESULTS OF OPERATIONS
                                      (Continued)


Interest Expense; Other Expense; and Income Tax Provision

Interest  expense for the Company  increased 2.3% from $3,890,000 in the quarter
ended June 30, 1998 to $3,979,000  in the quarter  ended June 30, 1999.  For the
six months ended June 30, 1999, interest expense for the Company decreased 11.4%
from  $7,673,000  in the 1998  period  to  $6,796,000  in the 1999  period.  The
decrease in interest expense is primarily  attributable to the capitalization of
interest related to the SAP implementation in the first quarter of 1999.

Other expenses for the Company  increased from $4,531,000 and $9,621,000 for the
three and six months  ended  June 30,  1998,  respectively,  to  $6,766,000  and
$13,393,000  for the same  periods in 1999,  respectively.  The  increase is due
primarily to asset securitization fees which increased $1,893,000 and $3,627,000
for the three and six month periods,  respectively. The increased securitization
fees are due to increased  sales of accounts  receivable  in order to fund sales
growth and daily  operations,  to meet greater  working  capital needs resulting
from  changing  vendor  terms and  conditions,  and to take  advantage of vendor
early-pay  opportunities.  The  average  proceeds  resulting  from  the  sale of
accounts receivable at month end under the Company's  securitization  facilities
increased  from  $276,442,000  for  the  six  months  ended  June  30,  1998  to
$348,718,000 for the same period in 1999.

The income tax provision  increased from an expense of $215,000 and $364,000 for
the three and six months  ended June 30,  1998,  respectively,  to an expense of
$380,000 and $451,000 for the same periods in 1999. In both periods,  the income
tax rate  reflects  primarily  the minimal  statutory  tax  requirements  in the
various  states and  provinces in which the Company  conducts  business,  as the
Company has sufficient  net operating  loss  provisions to offset federal income
taxes in the current period.

Consolidated Net Income

On a consolidated  basis,  net income for the Company  decreased from $5,108,000
and $8,744,000  for the three and six months ended June 30, 1998,  respectively,
to net losses of $2,984,000 and  $23,493,000  for the three and six months ended
June 30, 1999, respectively,  due to the factors described above. Net income per
share  decreased from $.06 per share for the three months ended June 30, 1998 to
a net loss of $.04 per share for the  three  months  ended  June 30,  1999.  Net
income per share decreased from $.11 per share for the six months ended June 30,
1998 to a net loss of $.29 per share for the six months ended June 30, 1999.


<PAGE>


                        MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                     FINANCIAL CONDITION AND RESULTS OF OPERATIONS
                                     (Continued)


SYSTEMS AND PROCESSES

In April 1999,  Merisel  completed the conversion of its U.S.  operations to the
SAP R/3  client/server  operating  system.  The Company  converted  its Canadian
operations from a mainframe to the SAP client/server  operating system in August
1995. With the U.S.  implementation  complete,  the U.S. and Canadian operations
are each operating on a single platform.  SAP is an enterprise-wide system which
integrates  substantially  all  functional  areas of the business in a real-time
environment.   The  new  system  is  designed  to  provide  greater  transaction
functionality,  real-time information access,  automated controls,  flexibility,
and custom pricing applications.

YEAR 2000 ISSUES

Introduction

The term  "Year  2000  issue" is a general  term used to  describe  the  various
problems  that  may  result  from the  improper  processing  of  dates  and date
sensitive  calculations  by  computers  and other  equipment as the year 2000 is
approached  and  reached.  These  problems  generally  arise  from the fact that
computers and equipment have  historically  used two-digit fields that recognize
dates  using the  assumption  that the first two  digits are "19." On January 1,
2000,  systems using  two-digit date fields could recognize a date using "00" as
the year 1900 rather  than the year 2000.  Year 2000  Project and the  Company's
State of Readiness

The  Company  believes  that  implementation  of the SAP  operating  system will
address its major Year 2000 issues for its core  information  technology  ("IT")
systems.  See "Systems and  Processes"  above.  The Company has developed and is
executing a plan for  addressing  the  remainder  of its Year 2000 issues  which
focuses on the following  six areas:  core IT systems;  off-line IT  subsystems;
technical   infrastructure  (e.g.,   networks,   servers,   desktop  computers);
vendor/customer interfaces (consisting of electronic data interchange or "EDI");
facilities  (including  security  systems,  elevators,  and  heating and cooling
systems); and third-party suppliers, vendors and customers ("External Parties").
For the first five areas, the Company's Year 2000 plan consists of the following
phases:  (1) conducting an inventory of items with Year 2000  implications;  (2)
assessment of Year 2000  compliance;  (3) remediation or replacement of material
items that are determined not to be Year 2000 compliant;  (4) testing (including
re-testing  of  material  items  that  were  remediated  or  replaced);  and (5)
certification of Year 2000 compliancy.

The Company has completed the  inventory and  assessment  phases with respect to
all areas. The remediation and testing phases are  substantially  completed and,
along with the  certification  phase, are on schedule to be completed during the
third quarter of 1999. In addition, during July


<PAGE>


                        MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                      FINANCIAL CONDITION AND RESULTS OF OPERATIONS
                                      (Continued)


1999 the Company successfully  completed integration testing of its core systems
and uncovered no material  issues.  The Company  currently plans to complete the
five phases of its Year 2000 plan outlined  above by the beginning of the fourth
quarter of 1999.

Costs

The Company currently estimates that the aggregate cost of its Year 2000 project
will be approximately $3.2 million,  which is substantially  below the Company's
original  budget  estimate of $4.2  million,  although the total amount could be
greater  than the current  estimate.  Approximately  $1.9 million had been spent
through the first half of 1999. The aggregate cost estimate excludes the cost of
implementing the SAP operating system in the U.S. and costs incurred pursuant to
the  Company's   technology   upgrade  strategy  where  the  upgrades  were  not
accelerated  due to Year 2000 issues.  In addition,  a portion of the  estimated
total costs of the Year 2000 project will be funded by  reallocation of existing
resources  rather  than  incurring   incremental  costs.  This  reallocation  of
resources  is not  expected  to  have a  significant  impact  of the  day-to-day
operations of the Company,  including any material effect on the  implementation
of any IT project.  The Company's aggregate cost estimate does not include costs
that may be  incurred  by the  Company  as a result of the  failure of any third
parties,  including  suppliers,  to become Year 2000 ready or costs to implement
any  contingency.  The Year 2000  project  costs are  expensed by the Company as
incurred.

Risks

The  Company  believes  that the  completion  of its Year 2000  project  and the
implementation  of the SAP  operating  system  in the U.S.  will  result  in the
Company being Year 2000  compliant in a timely manner.  However,  the failure to
correct a material  Year 2000 problem could result in an  interruption  in, or a
failure of,  certain  normal  business  activities  or  operations,  which could
materially and adversely affect the Company's  results of operations,  liquidity
and  financial  condition.  In addition,  if third parties that provide goods or
services  that  are  critical  to the  Company's  business  activities  fail  to
adequately  address  their Year 2000 issues,  there could be a similar  material
adverse  effect on the Company.  The Company  believes that its most  reasonably
likely worst case scenario is the failure of such a third party.  Such a failure
could result in, for example,  the inability of the Company to ship  product,  a
telecommunications  failure  at one or more of the  Company's  call  centers,  a
decrease in customer orders,  delays in product deliveries from vendors or power
outages at one or more of the  Company's  facilities.  The  Company's  Year 2000
project is expected to  significantly  reduce the Company's level of uncertainty
about the Year 2000 problem and, in particular,  about the Year 2000  compliance
and readiness of material External Parties.  The Company believes that, with the
completion of its Year 2000 project as scheduled, the possibility of significant
interruptions of normal operations should be reduced.



<PAGE>


                        MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                     FINANCIAL CONDITION AND RESULTS OF OPERATIONS
                                      (Continued)


Contingency Plans

As part of the Company's Year 2000 project, Year 2000-specific contingency plans
are being developed and will be substantially  completed by the end of the third
quarter.  The  Company  expects  that these  plans will  continue to be modified
throughout  1999 as the Company  obtains  additional  information  regarding the
status of the Year 2000 readiness of External Parties. In addition,  as a normal
course of business,  the Company maintains and deploys contingency plans as part
of its disaster  recovery  program that are  designed to address  various  other
potential business  interruptions.  These plans may be applicable to address the
failure of  External  Parties to provide  goods or  services to the Company as a
result of their failure to be Year 2000 ready.  During 1999, the Company intends
to expand its  disaster  recovery  program to cover  systems for which  detailed
contingency plans do not currently exist.

Readers are cautioned that forward-looking statements contained under "Year 2000
Issues" should be read in conjunction with the Company's  disclosures  under the
heading: "SPECIAL NOTE REGARDING FORWARD-LOOKING INFORMATION" on page ii.

VARIABILITY OF QUARTERLY RESULTS AND SEASONALITY

Historically,  the  Company  has  experienced  variability  in its net sales and
operating margins on a quarterly basis and expects these patterns to continue in
the  future.   Management  believes  that  the  factors  influencing   quarterly
variability  include:  (i) the overall  growth in the  computer  industry;  (ii)
shifts in short-term demand for the Company's products resulting,  in part, from
the  introduction  of new  products or updates of existing  products;  (iii) the
intensity  of  price  competition  among  the  Company  and its  competitors  as
influenced by various  factors;  and (iv) the fact that virtually all sales in a
given quarter result from orders booked in that quarter. In addition,  quarterly
variability  could be  affected  by the Year 2000 issue by  shifting  demand for
computer  products during 1999 and future years. Due to the factors noted above,
as well as the dynamic  characteristics  of the  computer  product  distribution
industry,  the  Company's  revenues  and  earnings  may be subject  to  material
volatility, particularly on a quarterly basis.

Additionally,   the  Company's  net  sales  in  the  fourth  quarter  have  been
historically  higher than in its other three quarters.  Management believes that
the pattern of higher fourth  quarter  sales is partially  explained by customer
buying patterns relating to calendar year-end business and holiday purchases. As
a result of this pattern,  the Company's  working  capital  requirements  in the
fourth quarter have typically been greater than other quarters. Net sales in the
Canadian  operations  are also  historically  strong in the first quarter of the
fiscal year,  which is primarily due to buying  patterns of Canadian  government
agencies. See "Liquidity and Capital Resources" below.


<PAGE>


                        MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                     FINANCIAL CONDITION AND RESULTS OF OPERATIONS
                                      (Continued)


LIQUIDITY AND CAPITAL RESOURCES

Cash Flow Activity

Net cash provided by operating  activities  during the six months ended June 30,
1999 was $3,239,000.  The primary source of cash from operating activities was a
decrease in inventory of $94,150,000  from the unusually high level of inventory
at the end of 1998.  The  primary  uses of cash  during  the  period  include an
increase in accounts  receivable of  $31,087,000  and a $53,248,000  decrease in
accounts  payable  that  resulted in part from  industry-wide  changes in vendor
terms and conditions and an increased use of vendor early-pay opportunities.

Net cash used in  investing  activities  consisted  of capital  expenditures  of
$18,708,000.

Net  cash  used  for  financing  activities  was  $1,147,000  and was  comprised
primarily of repayments under capitalized lease obligations and bank debt.

Securitization Facilities

Funds  generated by the sale of  receivables  in the U.S.  are provided  through
Merisel  Capital  Funding,  Inc.  ("Merisel  Capital  Funding"),  a wholly owned
subsidiary of Merisel  Americas.  Merisel Capital Funding's sole business is the
ongoing  purchase of trade  receivables from Merisel  Americas.  Merisel Capital
Funding  sells  these   receivables,   in  turn,   under  an  agreement  with  a
securitization  company, whose purchases yield proceeds of up to $500,000,000 at
any point in time.  Merisel Capital Funding is a separate  corporate entity with
separate  creditors who, upon its liquidation,  are entitled to be satisfied out
of  Merisel  Capital  Funding's  assets  prior to any  value  in the  subsidiary
becoming available to the subsidiary's  equity holder. This agreement expires in
October 2003.

Funds are also provided to Merisel Canada,  Inc.  ("Merisel  Canada")  through a
receivables purchase agreement with a securitization company. In accordance with
this agreement,  Merisel Canada sells receivables to the securitization company,
which  yields  proceeds  of up to  CND$150,000,000  at any  point in  time.  The
facility  expires  December  13,  2000,  but is  extendible  by notice  from the
securitization company, subject to the Company's approval.

Under these  securitization  agreements,  the receivables are sold at face value
with payment of a portion of the purchase price being  deferred.  As of June 30,
1999, the total amount outstanding under these agreements was $467,445,000. Fees
incurred in connection  with the sale of accounts  receivable  for the three and
six months  ended June 30,  1999 were  $5,916,000  and  $12,292,000  compared to
$4,023,000 and  $8,665,000  incurred for the three and six months ended June 30,
1998 and are recorded as other expense.


<PAGE>


                          MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                       FINANCIAL CONDITION AND RESULTS OF OPERATIONS
                                        (Continued)


Debt Obligations, Financing Sources and Capital Expenditures

At June 30, 1999, Merisel, Inc. had outstanding $125,000,000 principal amount of
12-1/2% Senior Notes due 2004 (the "12.5%  Notes").  The 12.5% Notes provide for
an  interest  rate of  12.5%  payable  semi-annually.  By  virtue  of  being  an
obligation of Merisel, Inc., the 12.5% Notes are effectively subordinated to all
liabilities of the Company's subsidiaries, including trade payables, and are not
guaranteed by any of the Company's  subsidiaries.  The indenture relating to the
12.5% Notes contains certain covenants that, among other things,  limit the type
and amount of additional indebtedness that may be incurred by the Company or any
of its subsidiaries  and imposes  limitations on investments,  loans,  advances,
asset sales or transfers,  dividends and other payments,  the creation of liens,
sale-leasebacks, transactions with affiliates and certain mergers.

At June 30, 1999, the Company had promissory notes outstanding with an aggregate
balance  of  $5,797,000.  Such  notes  provide  for  interest  at  the  rate  of
approximately 7.7% per annum and are repayable in 48 and 60 monthly installments
that  commenced  February  1,  1996,  with  balloon  payments  of  $500,000  and
$3,900,000 due on January 1, 2000 and January 1, 2001,  respectively.  The notes
are collateralized by certain of the Company's real property and equipment.

Merisel Americas is party to a Loan and Security  Agreement dated as of June 30,
1998 (the "Loan and  Security  Agreement")  with Bank of America  NT&SA  ("BA"),
acting as agent, that provides for borrowings on a revolving basis. The Loan and
Security Agreement permits  borrowings of up to $100,000,000  outstanding at any
one time  (including  face  amounts of letters  of  credit),  subject to meeting
certain  availability  requirements  under a  borrowing  base  formula and other
limitations.  Borrowings under the Loan and Security  Agreement are secured by a
pledge  of  substantially  all  of  the  inventory  held  by  Merisel  Americas.
Borrowings  bear interest at the rate of LIBOR plus a specified  margin,  or, at
the Company's option, the agent's prime rate. An annual fee of 0.375% is payable
with  respect to the unused  portion of the  commitment.  The Loan and  Security
Agreement has a termination  date of June 30, 2003. No amounts were  outstanding
under the Loan and Security Agreement as of June 30, 1999.

In addition to its requirements for working capital for operations,  the Company
presently  anticipates that its capital expenditures will be between $35,000,000
and  $45,000,000  for  1999,  primarily  consisting  of  costs  associated  with
information  systems,  including systems for enhancing  electronic  services and
growing  the  Company's  infrastructure,  developing  and  implementing  the SAP
operating  system,   developing  the  Company's  configuration  and  co-location
capabilities,  and upgrading warehouse systems and other Company facilities. The
Company intends to fund its capital  expenditures  primarily through  internally
generated cash and lease financing.


<PAGE>


                      MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                   FINANCIAL CONDITION AND RESULTS OF OPERATIONS
                                    (Continued)


At June 30, 1999, the Company had cash and cash  equivalents of $21,079,000.  In
the opinion of management,  anticipated  cash from operations in 1999,  together
with proceeds from the sale of  receivables  under the Company's  securitization
agreements,  trade  credit  from  vendors  and  borrowings  under the  Company's
revolving credit facility, will be sufficient to meet the Company's requirements
for the next 12 months, without the need for additional financing. This assumes,
however,   that  there  are  not  material  adverse  changes  in  the  Company's
relationships with its vendors,  customers or lenders. Any unforeseen event that
adversely  impacts the industry or the Company's  position in the industry could
have a direct and material unfavorable effect on the liquidity of the Company.

ASSET MANAGEMENT

Merisel attempts to manage its inventory  position to maintain levels sufficient
to achieve high product  availability  and same-day order fill rates.  Inventory
levels may vary from period to period,  due to factors  including  increases  or
decreases in sales levels,  Merisel's practice of making large-volume  purchases
when  it  deems  such  purchases  to be  attractive,  and  the  addition  of new
manufacturers and products.  The Company has negotiated  agreements with many of
its manufacturers  that contain stock balancing and price protection  provisions
intended  to  reduce,  in part,  Merisel's  risk of loss due to  slow-moving  or
obsolete inventory or manufacturer price reductions.  The Company is not assured
that these  agreements  will  succeed in reducing  this risk.  In the event of a
manufacturer  price  reduction,  the  Company  generally  receives  a credit for
products  in  inventory.  In  addition,  the  Company  has the right to return a
certain percentage of purchases,  subject to certain limitations.  Historically,
price protection and stock return privileges, as well as the Company's inventory
management  procedures,  have  helped  to  reduce  the risk of loss of  carrying
inventory.  In the past year,  however,  certain computer systems  manufacturers
that are among the Company's  largest  vendors have  announced  changes in price
protection  and other  terms and  conditions  that  could  adversely  affect the
Company.  The  Company  is working  closely  with  these  manufacturers  and has
developed buying procedures and controls to manage inventory purchases to reduce
the potential  adverse  impact from these  changes  while  balancing the need to
maintain sufficient levels of inventory. There is no assurance that such efforts
will be successful in preventing a material adverse effect on the Company.

The  Company   purchases   exchange   contracts  to  minimize  foreign  exchange
transaction  gains and losses.  The Company  intends to continue the practice of
purchasing  foreign exchange  contracts.  However,  the risk of foreign exchange
transaction losses cannot be completely eliminated.

The Company  offers  credit terms to  qualifying  customers  and also sells on a
prepay,  early pay, credit card and  cash-on-delivery  basis.  In addition,  the
Company has  developed a number of customer  financing  alternatives,  including
escrow  programs  and  selected  bid  financing  arrangements.  The Company also
arranges  a wide  variety  of  programs  through  which  third  parties  provide
financing  to  certain  of its  customers.  These  programs  include  floor plan
financing and hardware and software  leasing.  With respect to credit sales, the
Company attempts

<PAGE>



                    MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                 FINANCIAL CONDITION AND RESULTS OF OPERATIONS
                                 (Continued)


to control its bad debt exposure by monitoring customers'  creditworthiness and,
where  practicable,  through  participation in credit  associations that provide
customer  credit  rating  information  for certain  accounts.  In addition,  the
Company purchases credit insurance as it deems appropriate.

COMPETITION

Competition  in  the  computer  products   distribution   industry  is  intense.
Competitive factors include price, brand selection,  breadth and availability of
product  offering,  purchasing  arrangements,  financing  options,  shipping and
packaging accuracy,  speed of delivery, level of training and technical support,
marketing services and programs, and ability to influence a buyer's decision.

Certain of Merisel's  competitors have substantially greater financial resources
than  Merisel.  Merisel's  principal  competitors  for  its  U.S.  and  Canadian
distribution  businesses  include  large United  States-based  distributors  and
aggregators such as Gates/Arrow, GE IT Distribution Group, Inacom, Ingram Micro,
Pinacor,  Synnex  Information  Technologies,  Inc.  and  Tech  Data,  as well as
regional distributors and franchisers.

Merisel  also  competes  with  manufacturers  that  sell  directly  to  computer
resellers,  sometimes  at prices  below  those  charged by Merisel  for  similar
products. The Company believes its broad product offering, product availability,
prompt  delivery  and  support  services  may  offset  a  manufacturer's   price
advantage.  In addition,  many  manufacturers  concentrate their direct sales on
large computer  resellers  because of the relatively high costs  associated with
dealing with small-volume computer resellers.



Item 3.  QUANTITATIVE AND QUALITATIVE MARKET RISK DISCLOSURE

No material  changes have occurred in the  quantitative  and qualitative  market
risk  disclosure of the Company as presented in the  Company's  Annual Report on
Form 10-K for the year ended December 31, 1998.


<PAGE>


                         PART II - OTHER INFORMATION


Item 1. Legal Proceedings

On September 4, 1997,  the Company  filed suit in Delaware  Chancery  Court (the
"Delaware Action") seeking a declaratory judgment with respect to certain issues
that arose between the Company and certain  holders of the Company's 12.5% Notes
("Noteholders")  pursuant  to the  Limited  Waiver  and  Voting  Agreement  (the
"Limited Waiver Agreement"). On September 11, 1997, certain Noteholders filed an
answer  to  the  Company's  complaint  in  the  Delaware  Action  as  well  as a
counterclaim  against  the  Company  asserting  claims for breach of the Limited
Waiver Agreement,  unjust enrichment and a declaratory judgment (the "Noteholder
Suit").  The Noteholder Suit also asserted a claim for unjust enrichment against
Dwight A. Steffensen, the Company's Chief Executive Officer. The Noteholder Suit
sought damages in excess of $100 million from the Company.  On May 10, 1999, the
Company and Mr. Steffensen entered into a settlement agreement (the "Agreement")
with the  Noteholders  that  provides  for all of the  parties to dismiss  their
claims  against each other with  prejudice.  The Agreement also provided for the
dismissal of an action brought by the Noteholders  against Stonington  Partners,
Inc.  alleging  tortious  interference.  On June 4, 1999, the Delaware  Chancery
Court entered an order  dismissing the Delaware  Action and the Noteholder  Suit
with prejudice. As a result of the settlement,  the Company recorded a charge in
the first  quarter of 1999 of $21 million,  which  represented  amounts  payable
pursuant to the  settlement as well as certain  costs related to the  settlement
and the  litigation.  Under an  agreement  with its  insurers,  the Company will
recover $9 million of the litigation and settlement costs.

On March 16, 1998, the Company  received a summons and  complaint,  filed in the
Superior  Court of  California,  County of Santa  Clara,  in a matter  captioned
Official  Unsecured  Creditors  Committee  of Media Vision  Technology,  Inc. v.
Merisel,  Inc. The plaintiff  alleges that certain  executive  officers of Media
Vision Technology,  Inc. ("Media Vision") committed fraud and breached fiduciary
duties owed to Media Vision  through,  inter alia, the improper  recognition and
reporting of sales, revenue and income and the failure to properly recognize and
report product returns during 1993 and 1994,  thereby  overstating the financial
condition of Media Vision as reflected in its financial statements for 1993. The
plaintiff further alleges that the Company aided, abetted, conspired and/or made
possible such acts and omissions of the Media Vision  executives.  The plaintiff
seeks to recover compensatory damages, including interest thereon, exemplary and
punitive  damages,  and costs  including  attorneys'  fees. On May 6, 1998,  the
Company filed a motion to dismiss the complaint on various legal grounds as well
as a motion to strike the punitive  damages prayer.  In response to the motions,
the plaintiff filed a first amended complaint on August 31, 1998, adding a claim
for unfair  business  practices  under  California  Business & Professions  Code
ss.17200  and  additional  allegations.  The  plaintiff's  filing of an  amended
complaint mooted the Company's  original motions.  The Company filed a motion to
dismiss  the  amended  complaint  on various  grounds and a motion to strike the
punitive  damages prayer.  In its opposition to the Company's  motion to strike,
the plaintiff withdrew its prayer for punitive damages. On January 15, 1999, the
Court issued an Order  staying  prosecution  of the action under the doctrine of
exclusive  concurrent  federal  jurisdiction.  Plaintiff has advised the Company
that  intends to file a motion to seek relief  from the stay.  A hearing on such
motion is expected  to take place in October  1999.  The  Company  has  defended
itself vigorously against this claim and will continue to do so.


<PAGE>


The  Company is  involved  in certain  other  legal  proceedings  arising in the
ordinary course of business, none of which is expected to have a material impact
on the financial condition or business of Merisel.



Item 6. Exhibits and Reports on Form 8-K

         (a)      Exhibits

10.1     Amendment No. 1 to Loan and Security  Agreement dated
         as of May 11,  1999 by and  among  Merisel  Americas,
         Inc.,  Bank of  America  National  Trust and  Savings
         Association, as Agent and a Lender.

10.2     Amendment No. 5 to Purchase  Agreement and Waiver dated as of May 12,
         1999 among Merisel  Americas,  Inc., Merisel Capital  Funding,  Inc.,
         Redwood  Receivables  Corporation and General Electric Capital
         Corporation.

10.3     Severance Agreement dated as of March 3, 1999 between Merisel, Inc. and
         James E. Illson.

10.4     Severance Agreement dated as of March 3, 1999 between Merisel, Inc. and
         Timothy N. Jenson.

10.5     Promissory Note dated March 17, 1999 between Timothy N. Jenson and
         Merisel, Inc.

10.6     Promissory Note dated June 17, 1999 between Kristin M. Rogers and
         Merisel Americas, Inc.



         (b) The  following  Reports on Form 8-K were filed  during the  quarter
ended June 30, 1999.

                  None.



<PAGE>


                               SIGNATURES





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

Date: August 13, 1999


                                           Merisel, Inc.



                                           By  /s/ Timothy N. Jenson
                                              --------------------------------
                                               Timothy N. Jenson
                                               Chief Financial Officer and
                                               Senior Vice President, Finance