<PAGE>
 
                      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 September 30, 1996

                                      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 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
report

     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                             November 1, 1996
          -----               
Common Stock, $.01 par value                30,078,495 Shares
<PAGE>
 
                                 MERISEL, INC.

                                     INDEX
                                     -----
<TABLE>
<CAPTION>

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

          Consolidated Balance Sheets as of                                        1-2
          September 30, 1996 and December 31, 1995

          Consolidated Statements of Operations for the                              3
          Three Months and Nine Months Ended September 30, 1996 and 1995

          Consolidated Statements of Cash Flows for the                              4
          Nine Months Ended September 30, 1996 and 1995

          Notes to Consolidated Financial Statements                              5-11

          Management's Discussion and Analysis of                                12-25
          Financial Condition and Results of Operations

PART II   OTHER INFORMATION

PART II   OTHER INFORMATION                                                         26

          SIGNATURES                                                                28
</TABLE>

                                      ii
<PAGE>
 
                        PART 1.  FINANCIAL INFORMATION


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

                                    ASSETS
<TABLE>
<CAPTION>
                                           September 30,   December 31,
                                               1996            1995
                                           -------------   ------------
<S>                                        <C>             <C>
CURRENT ASSETS:
                                                $ 26,923     $    1,378

Cash and cash equivalents
Accounts receivable (net of allowances
  of $18,913 and $24,786 for 1996 and
   1995, respectively)                           195,895        413,057
Receivable from sale of assets                   123,261
Inventories                                      278,165        561,230
Prepaid expenses and other current                10,101         17,919
 assets
Income taxes receivable                            9,452         35,116
Deferred income tax benefit                                       6,657
                                                --------     ----------
   Total current assets                          643,797      1,035,357

PROPERTY AND EQUIPMENT, NET                       63,649         90,381

COST IN EXCESS OF NET ASSETS
  ACQUIRED, NET                                   44,168         93,287

OTHER ASSETS                                      10,830         11,309
                                                --------     ----------

TOTAL ASSETS                                    $762,444     $1,230,334
                                                ========     ==========
</TABLE>

          See accompanying notes to consolidated financial statements.
                                        

                                       1
<PAGE>
 
                        MERISEL, INC. AND SUBSIDIARIES
                          CONSOLIDATED BALANCE SHEETS
                       (In Thousands, Except Share Data)
                                  (Unaudited)

                     LIABILITIES AND STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
                                                      September 30,                 December 31,
                                                           1996                         1995
                                                      -------------                 ------------
<S>                                                   <C>                           <C>
CURRENT LIABILITIES:
Accounts payable                                          $ 320,767                   $  621,990
Accrued liabilities                                          58,088                       71,483
Short-term debt                                                                           21,620
Long-term debt - current                                     80,000                       35,000
Subordinated debt - current                                   4,400                        4,400
                                                          ---------                   ----------
   Total current liabilities                                463,255                      754,493

Long-term debt                                              272,705                      299,271
Subordinated debt                                            13,200                       17,600
Capitalized lease obligations                                                              4,504
                                                          ---------                   ----------
TOTAL LIABILITIES                                           749,160                    1,075,868

STOCKHOLDERS' EQUITY
Preferred stock, $.01 par value, authorized 1,000,000
   shares; none issued or outstanding
Common stock, $.01 par value, authorized
  50,000,000 shares; outstanding, 30,078,495 and
  29,863,500 shares for 1996 and 1995, respectively             300                          299
Additional paid-in capital                                  142,154                      141,938
(Accumulated deficit)Retained earnings                     (122,839)                      19,211
Cumulative translation adjustment                            (6,331)                      (6,982)
                                                          ---------                   ----------
Total stockholders' equity                                   13,284                      154,466
                                                          ---------                   ----------

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY                $ 762,444                   $1,230,334
                                                          =========                   ==========
</TABLE>
          See accompanying notes to consolidated financial statements.
                                        

                                       2
<PAGE>
 
                        MERISEL, INC. AND SUBSIDIARIES
                     CONSOLIDATED STATEMENTS OF OPERATIONS
                     (In Thousands, Except Per Share Data)
                                  (Unaudited)

<TABLE>
<CAPTION>
                               Three Months Ended               Nine Months Ended
                                   September 30,                  September 30,
                                1996         1995                1996        1995
                              ----------   ----------          ----------  ----------
<S>                           <C>          <C>                 <C>         <C>
NET SALES                     $1,393,532   $1,544,018          $4,372,789  $4,378,776

COST OF SALES                  1,336,339    1,454,765           4,148,786   4,110,825
                              ----------   ----------          ----------  ----------

GROSS PROFIT                      57,193       89,253             224,003     267,951

SELLING, GENERAL &
  ADMINISTRATIVE EXPENSES         84,082       75,205             245,640     226,314

RESTRUCTURING CHARGE                                                            9,333

IMPAIRMENT LOSS                   40,000                           40,000
                              ----------   ----------          ----------  ----------

OPERATING(LOSS) INCOME           (66,889)      14,048             (61,637)     32,304

LOSS ON SALE OF EUROPEAN,
MEXICAN AND LATIN AMERICAN
OPERATIONS                        33,455                           33,455

INTEREST EXPENSE                   9,613       11,229              29,085      30,962

OTHER EXPENSE                      5,726        2,953              16,492       9,774
                              ----------   ----------          ----------  ----------
LOSS BEFORE
   INCOME TAXES                 (115,683)        (134)           (140,669)     (8,432)

INCOME TAX  PROVISION
 (BENEFIT)                         1,455          119               1,381      (1,777)
                              ----------   ----------          ----------  ----------

NET LOSS                      $ (117,138)   $    (253)         $ (142,050) $   (6,655)
                              ==========    ==========         ==========  ==========

NET LOSS PER SHARE            $    (3.90)   $   (0.01)         $    (4.75) $    (0.22)
                              ==========    ==========         ==========  ==========

WEIGHTED AVERAGE NUMBER
   OF SHARES OUTSTANDING          30,038        29,819             29,924      29,756
                              ==========    ==========         ==========  ==========
</TABLE>
          See accompanying notes to consolidated financial statements.

                                       3
<PAGE>
 
                        MERISEL, INC. AND SUBSIDIARIES
                        ------------------------------
                     CONSOLIDATED STATEMENTS OF CASH FLOWS
                                (In Thousands)
                                  (Unaudited)
<TABLE>
<CAPTION>
                                                            Nine Months Ended September 30,
                                                               1996                1995
                                                            ---------            ----------
<S>                                                         <C>                   <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss                                                     $  (142,050)          $  (6,655)
Adjustments to reconcile net loss to net
   cash provided by operating
   activities:
   Depreciation and amortization                                  15,584              15,289
   Provision for doubtful accounts                                15,451              12,216
   Deferred income taxes                                           1,086                (150)
   Impairment loss                                                40,000
   Loss on sale of European, Mexican
    and Latin American businesses                                 33,455
   
Changes in assets and liabilities:
   Accounts receivable                                           103,639            (112,044)
   Inventories                                                   205,450            (146,642)
   Prepaid expenses and other assets                             (15,274)             (2,376)
   Income taxes receivable                                        30,913              (4,692)
   Accounts payable                                             (242,084)            336,353
   Accrued liabilities                                            (3,064)             18,537
   Income taxes payable                                                0              (4,422)
                                                             -----------           ---------
Net cash provided by operating activities                         43,106             105,414
                                                             -----------           ---------
CASH FLOWS FROM INVESTING ACTIVITIES:

Purchase of property and equipment                                (9,052)            (39,235)
Proceeds from the sale of property and                             5,976
 equipment
Payment of earn out obligation from ComputerLand acquisition     (13,409)
Cash proceeds from sale of Australian business                     8,515
Sale of unconsolidated investment                                                        800
Other investing activities                                         1,811                (753)
                                                             -----------           ---------
Net cash used for investing activities                            (6,159)            (39,188)
                                                             -----------           ---------
CASH FLOWS FROM FINANCING ACTIVITIES:

Borrowings under revolving line of credit                      1,192,650             673,641
Repayments under revolving line of credit                     (1,166,650)           (764,326)
Net (repayments) borrowings under other bank facilities          (15,170)             21,316
Repayment of senior notes                                        (14,000)
Repayment under subordinated debt agreement                       (4,400)
Proceeds from issuance of common stock                               215                 327
                                                             -----------           ---------
Net cash used in financing activities                             (7,355)            (69,042)
                                                             -----------           ---------

EFFECT OF EXCHANGE RATE CHANGES ON CASH                           (4,047)                750
                                                             -----------           ---------
NET INCREASE (DECREASE) IN CASH AND
   CASH EQUIVALENTS                                               25,545              (2,066)

CASH AND CASH EQUIVALENTS, BEGINNING OF
   PERIOD                                                          1,378               3,533
                                                             -----------           ---------

CASH AND CASH EQUIVALENTS, END OF PERIOD                     $    26,923           $   1,467
                                                             ===========           =========
</TABLE>
          See accompanying notes to consolidated financial statements.

                                       4
<PAGE>
 
MERISEL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)

1.   General

Merisel, Inc. ("Merisel" or the "Company") is a leader in the distribution of
computer hardware and software products. In addition, the Company, through its
wholly owned subsidiary, Merisel FAB, Inc. ("Merisel FAB" or the "Franchise and
Aggregation Business"), is an aggregator, or master reseller, of computer
systems and related products from major computer manufacturers to ComputerLand
franchisees and Datago resellers. The consolidated financial statements include
the accounts of Merisel and its consolidated subsidiaries. All significant
intercompany balances and transactions have been eliminated in consolidation.
Results of operations for the three months and nine months ended September 30,
1996 may not be indicative of the results of operations expected for the fiscal
year ended December 31, 1996.

The information for the three months and nine months ended September 30, 1996
and 1995 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. 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, 1995.

2.   New Accounting Standard

In October 1995, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards (SFAS) No. 123, "Accounting for Stock-Based
Compensation," which became effective for the Company beginning January 1, 1996.
SFAS No. 123 requires expanded disclosure of stock-based compensation
arrangements with employees and encourages (but does  not require) compensation
cost to be measured based on the fair value of the equity instrument awarded.
Companies are permitted, however, to continue to apply APB Opinion No. 25, which
recognizes compensation cost based on the intrinsic value of the equity
instrument awarded. The Company will continue to apply APB Opinion No. 25 to its
stock based compensation awards to employees and will disclose the required pro
forma effect on net income and earnings per share.

3.   Fiscal Periods

The Company's fiscal year is the 52 or 53 week period ending on the Saturday
nearest to December 31. The Company's three and nine month periods ended nearest
September 30, 1996 and 1995 were 13 and 39 week periods, respectively. For
simplicity of presentation, the Company has described the interim periods and
year-end period as if the quarter ended on September 30, and the year ended on
December 31, respectively.

                                       5
<PAGE>
 
MERISEL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
(UNAUDITED)

4.   Impairment Loss

In the quarter ended September 30, 1996, the Company determined that a portion
of the carrying value for certain of its identifiable intangible assets will not
be recovered from their use in future operations.  Accordingly, these assets
were written down to their fair values as of September 30, 1996.  An impairment
was recognized on the intangible assets of the Franchise and Aggregation
Business, due to declining sales growth, margins and earnings, and the resulting
negative trend in projected cash flows.  The intangible assets of the Franchise
and Aggregation Business were acquired in January 1994 (see Note 7) and had a
net book value of $57,600,000 at September 30, 1996, prior to the write down.
Fair value of the intangible assets was measured by discounting future expected
cash flows, which resulted in a required write down of $40,000,000.  An
impairment loss of $30,000,000 associated with these assets was previously
recorded in the fourth quarter of 1995.

5.   Dispositions

On October 4, 1996, Merisel completed the sale of substantially all of its
European, Mexican and Latin American businesses (such businesses are referred to
herein as "EML") to CHS Electronics, Inc. ("CHS").  The sale was effective as of
September 27, 1996.  A loss of $33,455,000, which includes approximately
$7,400,000 of direct costs, was recorded on such sale.  The sale price, computed
based on the September 30, 1996 combined closing balance sheet of EML, was
$149,500,000,  consisting of (i) $123,200,000 in cash, of which $16,500,000 is
being retained by CHS, subject to completion of the closing balance sheet audit
of EML, and (ii) the assumption of Merisel's European asset securitization
agreement against which $26,300,000 was outstanding at September 30, 1996.  The
purchase price is subject to adjustment, based on the results of the closing
balance sheet audit.

Following is summarized pro forma operating results assuming that the Company
had sold EML as of January 1, 1995.
<TABLE>
<CAPTION>

                                            Three Months Ended            Nine Months Ended
                                               September 30                 September 30
                                            1996          1995             1996          1995
                                         ---------    ----------      ------------   -----------
<S>                                      <C>           <C>            <C>            <C>
Net Sales                                $1,071,043    $1,210,053       $3,312,618    $3,367,845
(Loss) Income Before Taxes                  (76,332)        3,172         (101,534)          514
Net (Loss) Income                           (77,787)        3,053         (102,258)         (229)

Net (Loss) Income Per Share              $    (2.59)   $      .10       $    (3.42)   $     (.01)
Weighted Average Shares Outstanding          30,038        29,819           29,924        29,756
                                                       (In Thousands, Except Share Data)
</TABLE>

                                       6
<PAGE>
 
MERISEL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
(UNAUDITED)

EML is not an incorporated entity for which historical financial statements were
prepared.  The historical balances used in preparing the above proforma balances
represent combined balances obtained from the separate unaudited financial
statements for the individual entities comprising EML.  The proforma results
include adjustments for general and administrative expenses that would not have
been eliminated due to the sale of EML.  The proforma adjustments also include
adjustments for amortization of intangible assets and for interest expense on
debt repaid with a portion of the proceeds from the sale, net of the effect of
an interest rate increase resulting from the renegotiation of certain debt
agreements as a result of the sale.

6.   Restructuring Charge

During the first  six months of 1995, the Company recorded charges of $9,333,000
associated with resizing and restructuring several of the Company's operations.
The charge consisted of $4,578,000 of severance charges for the involuntary
termination of approximately 240 employees, $2,830,000 for anticipated warehouse
closures in North America and $1,925,000 for the anticipated consolidation of
certain warehouses in Europe.

As a result of the Company's sale of EML (see Note 5), the Company's intentions
regarding its restructuring plan changed.  In connection with such sale,
approximately $1,900,000 of the unused restructuring charge related to EML was
reversed and is offset against the loss on the sale of EML.  The remaining
unused restructuring charge of approximately $2,200,000 was used to offset
severance costs associated with corporate downsizing as a result of the sale of
EML and for fees related to the sale.  As of September 30, 1996, approximately
$1,057,000 of these charges remained in accrued liabilities.

7.   Acquisitions

On January 31, 1994, the Company, through its wholly owned subsidiary, Merisel
FAB, acquired certain assets of the ComputerLand franchise and Datago
aggregation businesses of Vanstar Corporation (formerly ComputerLand
Corporation) (the "ComputerLand Acquisition").  The Company paid $80,200,000 in
cash at closing for the acquired assets and $2,100,000 of direct acquisition
costs.  In addition, on February 2, 1996 the Company paid Vanstar $13,409,000,
which consisted of a negotiated settlement of the Company's earn out obligation
under the original purchase agreement related to the ComputerLand Acquisition of
$14,594,000, net of rebates of $1,185,000.  The acquisition has been accounted
for as a purchase.  Under the purchase method of accounting, an allocation of
the purchase price to the Merisel FAB assets and liabilities is required to
reflect fair values.  Based on an independent valuation prepared for the
Company, $82,300,000 of the purchase price and $14,000,000 of the additional
payment were allocated to intangible assets with an estimated aggregate life of
25 years. In the fourth quarter of 1995, the Company wrote down a portion of
these assets by $30,000,000 in recognition of an impairment loss.  In the
quarter ended September 30, 1996, an additional impairment loss of $40,000,000
was recognized related to these assets.

                                       7
<PAGE>
 
MERISEL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
(UNAUDITED)

In connection with the ComputerLand Acquisition, Merisel FAB entered into a
Distribution and Services Agreement (the "Services Agreement") with Vanstar
whereby Vanstar provides significant distribution and other support services to
the Franchise and Aggregation Business for a contractually agreed upon fee.
Effective July 12, 1995,  this agreement was extended until April 30, 1997.
Under the terms of the Services Agreement extension, Merisel and Vanstar agreed
that (i) the extended credit terms under the Services Agreement would be
increased to $31,400,000; and, (ii) the terms of the distribution fee would
be adjusted.  The amount of the extended credit will be reduced by a scheduled
amount of $844,000 monthly through October 31, 1996.  A final balance of
$23,500,000 will be payable in four scheduled payments between May 15, 1997 and
July 31, 1997.  If an inventory reduction plan is agreed upon between the two
parties, then the $23,500,000 may decrease on an accelerated basis.

8.   Sale of Accounts Receivable

The Company's wholly owned subsidiary Merisel Americas, Inc. ("Merisel
Americas") on an ongoing basis, sells trade receivables to its wholly owned
subsidiary, Merisel Capital Funding, Inc. ("Merisel Capital Funding").  Pursuant
to an agreement with a securitization company (the  "Receivables Purchase and
Servicing Agreement"),  Merisel Capital Funding, in turn, sells such receivables
to the securitization company on an ongoing basis, which yields proceeds of up
to $300,000,000 at any point in time.  Merisel Capital Funding's sole business
is the purchase of trade receivables from Merisel Americas.  Merisel Capital
Funding is a separate corporate entity with its own separate creditors, which
upon its liquidation will be entitled to be satisfied out of Merisel Capital
Funding's assets prior to any value in Merisel Capital Funding becoming
available to Merisel Capital Funding's equity holders. This facility expires in
October 2000.  As a result of the substantial losses incurred by the Company for
the three months and nine months ended September 30, 1996, Merisel Americas and
Merisel Capital Funding were required to, and did obtain, amendments and waivers
with respect to certain covenants under this facility.

Effective December 15, 1995, Merisel Canada, Inc. ("Merisel Canada") entered
into a receivables purchase agreement with a securitization company to provide
funding for Merisel's Canadian subsidiary. In accordance with this agreement,
Merisel Canada sells receivables to the securitization company, which yields
proceeds of up to $150,000,000 Canadian dollars. The facility expires December
12, 2000, but is extendible by notice from the securitization company, subject
to the Company's approval.

Effective October 16, 1995, Merisel U.K. Ltd. ("Merisel U.K.") entered into a
receivables purchase agreement with a securitization company to provide funding
for Merisel's U.K. subsidiary.  This facility, including $26,300,000 outstanding
thereunder, was assumed by CHS in connection with the purchase of EML.

                                       8
<PAGE>
 
MERISEL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
(UNAUDITED)

Under these securitization facilities, the receivables are sold at face value
with payment of a portion of the purchase price being deferred. As of September
30, 1996, the total amount outstanding under these facilities, excluding amounts
assumed by CHS, was $240,995,000. Fees incurred in connection with the sale of
accounts receivable under these three facilities for the three months and nine
months ended September 30, 1996 were $3,746,000 and $12,272,000, respectively, 
compared to $2,652,000 and $7,747,000 incurred for the three months and nine
months ended September 30, 1995 and are recorded as other expense.

9.   Debt

At September 30, 1996, the Company's subsidiaries, Merisel Americas and Merisel
Europe, Inc. ("Merisel Europe") had unsecured senior borrowing commitments,
which as amended, consisted of $86,000,000 of 9.58% senior notes (the "Senior
Notes") by Merisel Americas, and a $129,000,000 revolving credit agreement (the
Revolving Credit Agreement") by Merisel Americas and Merisel Europe, all of
which was outstanding.  Advances under the Revolving Credit Agreement bear
interest at specific rates based upon market reference rates plus a specified
percentage.  The average interest rate for the Revolving Credit Agreement at
September 30, 1996 was approximately 8.45%.  In the three months and nine months
ended September 30, 1996, the Company paid a total of $15,000,000 and
$35,000,000, respectively, in aggregate scheduled amortization payments under
the Senior Notes and Revolving Credit Agreement.

On October 4, 1996, the Company amended the Senior Notes and the Revolving
Credit Agreement and used a portion of the proceeds received from the sale of
EML to permanently reduce the outstanding borrowings on the Senior Notes and the
Revolving Credit Agreement by $29,000,000 and $43,500,000, respectively,
resulting in a principal balance outstanding of $57,000,000 and $85,500,000,
respectively. As amended these agreements require that the Company make an
aggregate of five consecutive principal payments of $1,500,000 each, on the
fifth calendar day of each month from February through June, 1997 plus an
additional principal repayment of  $7,500,000 on January 2, 1998. As amended,
the Senior Notes and Revolving Credit Agreement provide that if the Company
makes the June 30, 1997 interest payment on its 12.50% senior notes due December
31, 2004 (the "Notes") at any time before January 31, 1998, then the Company
shall make an aggregate principal repayment of an additional $40,000,000 on the
Senior Notes and the Revolving Credit Agreement.  The Senior Notes and the
Revolving Credit Agreement are due in full on January 31, 1998. In addition, the
interest rate on the Senior Notes increased to 11.5% and the Revolving Credit
Agreement interest rate increased by 2.35%.  The amendments also provide that
certain tax refunds and asset sale proceeds when received by the Company shall
be used to permanently prepay the Senior Notes and Revolving Credit Agreement.
The principal repayments will be shared ratably by the lenders under the
Revolving Credit Agreement and the holders of the Senior Notes.

                                       9
<PAGE>
 
MERISEL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
(UNAUDITED)

The Senior Notes and the Revolving Credit Agreement each contain various
covenants, including those which prohibit the payment of cash dividends, require
a minimum amount of tangible net worth, and place limitations on the acquisition
of assets. These agreements also require the Company or certain of its
subsidiaries to maintain certain specified financial ratios. Such financial
ratios include: interest coverage; minimum adjusted tangible net worth; minimum
earnings before interest, taxes, depreciation, amortization and securitization
expense; total debt equivalents to adjusted tangible net worth; inventory
turnover; minimum accounts payable; and minimum accounts payable to inventory.
As a result of the substantial losses incurred by the Company for the three
months and nine months ended September 30, 1996, the Company was required to
obtain, and did obtain waivers of various covenants, including financial ratio
covenants, contained in the Senior Notes and the Revolving Credit Agreement for
the Company's third fiscal quarter of 1996, and amendments of such covenants for
future periods.

At September 30, 1996, the Company had outstanding $125,000,000 principal amount
of the Notes due December 31, 2004. The Notes provide for an interest rate of
12.5% payable semiannually. By virtue of being an obligation of the Company, the
Notes are effectively subordinated to all liabilities of the Company's
subsidiaries, including trade payables. The Indenture relating to the 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 impose limitations on investments, loans, advances, sales or
transfers of assets, the making of dividends and other payments, the creation of
liens, sale-leaseback transactions with affiliates and certain mergers.  Without
a restructuring or refinancing of the Company's debt, the Company may be unable
to make its June 30, 1997 interest payment on the Notes and the additional
$40,000,000 repayment on the Senior Notes and the Revolving Credit Agreement
required before such interest payment can be made.  In addition, the restriction
on dividend payments contained in the Senior Notes Agreement and the Revolving
Credit Agreement could limit the ability of the Company to repay principal and
interest on the Notes if, and to the extent that, such limitations prevent cash
or other dividends from being paid to the Company. Further, in the event of a
default under the Senior Notes agreement and the Revolving Credit Agreement,
payments of principal and interest on the Notes are prohibited.

At September 30, 1996 Merisel Americas had outstanding an aggregate of
$17,600,000 of privately placed subordinated notes (as amended, the
"Subordinated Notes"). The Subordinated Notes, as amended, provide for interest
at the rate of 11.78% per annum and are repayable in four remaining equal annual
installments with the next installment due January 1997.   Commencing on
September 10, 1996, accrued interest on the Subordinated Notes is required to be
paid quarterly, rather than semi-annually.  The Subordinated Notes agreement
contain certain restrictive covenants, including those that limit the Company's
ability to incur debt, acquire the stock of or merge with other corporations, or
sell certain assets and prohibit the payment of dividends. The Subordinated
Notes also incorporate the financial covenants contained in the Senior Notes
agreement and the Revolving Credit Agreement.  In connection with the amendment
of the Revolving Credit Agreement and the Senior Notes described above, the
Company was required to obtain, and did obtain an amendment of the Subordinated
Note Purchase Agreement.

                                       10
<PAGE>
 
MERISEL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
(UNAUDITED)

At September 30, 1996, the Company had promissory notes outstanding with an
aggregate balance of $10,528,000.  Such notes provide for interest at the
rate of approximately 7.7% per annum and are repayable in 48 and 60 monthly
installments commencing February 1, 1996, with  payments due at maturity.  The
notes are collateralized by certain of the Company's real property and
equipment.  In addition, the Company had a capitalized real property lease in
the amount of approximately $2,200,000, which was repaid on October 17, 1996. At
September 30, 1995, the Company and its subsidiaries had outstanding $59,186,936
under various unsecured lines of credit denominated in local currencies.

10.  Net Loss Per Share

Net loss per share is computed by dividing net loss by the weighted average
number of shares of common stock outstanding during the related period,
including common stock options when dilutive.

11.  Supplemental Disclosure of Cash Flow Information

Cash paid (received) for interest and income taxes for the nine month periods
ended September 30, 1996 and 1995 was as follows:
<TABLE>
<CAPTION>
                         1996               1995
                         ----               ----
<S>                      <C>                <C>
                             (In Thousands)
      Interest            $ 36,208           $29,498
      Income taxes        $(30,370)          $ 7,034
</TABLE>

                                       11
<PAGE>
 
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS

                                        
GENERAL; LOSS ON SALE OF ASSETS
-------------------------------

Merisel, Inc. together with its subsidiaries ("Merisel" or the "Company") is a
leader in the distribution of computer hardware and software products.  Through
its full line, channel-specialized distribution business, Merisel combines the
comprehensive product selection and operational efficiency of a full-line
distributor with the customer support of a specialty distributor offering a
dedicated sales organization to each of its customer groups.  In addition,
through its wholly owned subsidiary, Merisel FAB, Inc. ("Merisel FAB" or the
"Franchise and Aggregation Business"), the Company is an aggregator, or master
reseller, of computer systems and related products from major computer
manufacturers, including Apple, Compaq, Hewlett-Packard and IBM, to a network of
approximately 730 independently owned computer product resellers in the United
States.

In April 1996, in order to comply with the requirements of its lenders, Merisel
developed a business plan for the remainder of fiscal 1996 that sought to
maximize cash flow by controlling costs, curtailing non-essential capital
expenditures, eliminating investments and disposing of assets.  On October 4,
1996, Merisel completed the sale of substantially all of its European, Mexican
and Latin American businesses (such businesses are referred to herein as "EML")
to CHS Electronics, Inc. ("CHS").  The sale was effective as of September 27,
1996.  A loss of $33,455,000, which includes approximately $7,400,000 of direct
costs, was recorded on such sale.  The sale price, computed based on the
September 30, 1996 combined closing balance sheet of EML, was $149,500,000,
consisting of (i) $123,200,000 in cash, of which $16,500,000 is being retained
by CHS, subject to completion of the closing balance sheet audit of EML, and
(ii) the assumption of Merisel's European asset securitization agreement against
which $26,300,000 was outstanding at September 30, 1996.  The purchase price is
subject to adjustment based on the results of the closing balance sheet.  In
addition, in March 1996 the Company sold its Australian operations. Merisel's
only remaining investment outside of North America is a minority interest in a
distribution business in Russia.

As a result of these asset dispositions, Merisel is now a North American
distributor of computer hardware and software products. In 1995, the North
American Business (as defined below) produced $4.6 billion in revenue and the
Former Operations (as defined below) produced $1.4 billion in revenue.  As the
North American Business represents the ongoing business of the Company, the
following discussion and analysis will compare the results of operations for the
three months and nine months ended September 30, 1996 for the North American
Business only.  As used in this discussion and analysis, the term "North
American Business" refers to Merisel's United States, Canadian and FAB
operations, the term "Distribution Business" refers to Merisel's United States
and Canadian distribution businesses and the term "Former Operations" refers to
those operations disposed of by Merisel in 1996, namely EML and the Australian
operations.

                                       12
<PAGE>
 
                    MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                 FINANCIAL CONDITION AND RESULTS OF OPERATIONS
                 ---------------------------------------------
                                  (continued)


RESULTS OF OPERATIONS

Three Months Ended September 30, 1996 as Compared to the Three Months Ended
---------------------------------------------------------------------------
September 30, 1995.
-------------------

The following table sets forth the unaudited results of operations for the North
American Business and for the Former Operations for the three months ended
September 30, 1996 and September 30, 1995.
<TABLE>
<CAPTION>

                                       Three Months Ended                        Three Months Ended
                                       September 30, 1996                        September 30, 1995
                                   (In Thousands) (Unaudited)                (In Thousands) (Unaudited)
                                North                                    North
                              American       Former      Consolidated  American      Former      Consolidated
                              Business     Operations       Total      Business    Operations       Total
<S>                          <C>           <C>           <C>           <C>          <C>           <C>
Net Sales                    $1,071,043      $322,489    $1,393,532    $1,210,052     $333,966      $1,544,018
Cost of Sales                 1,035,252       301,087     1,336,339     1,144,350      310,415       1,454,765
                             ----------      --------    ----------    ----------     --------      ----------
Gross Profit                     35,791        21,402        57,193        65,702       23,551          89,253
SG&A Expenses                    61,508        22,574        84,082        51,278       23,927          75,205
Impairment Loss                  40,000                      40,000
                             ----------      --------    ----------    ----------     --------      ----------
Operating (Loss) Income
                             $  (65,717)     $ (1,172)   $  (66,889)   $   14,424     $   (376)     $   14,048
</TABLE>

For the quarter ended September 30, 1996, net sales for the North American
Business decreased by 11.5% from $1,210,052,000 in the quarter ended September
30, 1995 to $1,071,043,000 in the quarter ended September 30, 1996.  Net sales
decreased by 14.5% in the United States,  increased by 13.4% in Canada and
decreased by 14.3% in the Franchise and Aggregation Business.  In the third
quarter of 1995, the North American Business sold approximately $156,000,000 of
Microsoft Windows'95 following its launch in August 1995.  Without this
additional revenue, net sales would have decreased in the United States by 0.5%,
increased in Canada by 25.1% and decreased  for the Franchise and Aggregation
Business by 14.3%.  The Company also lost market share, in the North American
Business due to competitive pressure, liquidity constraints and cost controls
implemented by the Company, which curtailed sales growth.  Canadian sales growth
in 1996 was positively impacted by reduced sales in 1995 related to Canada's
implementation of SAP software.

In the North American Business, hardware and accessories accounted for 80% of
net sales and software accounted for 20% of net sales in the third quarter of
1996, as compared to 71% and 29% for the same categories, respectively, in the
third quarter of 1995.  Software sales were a larger percentage of total sales
in the prior year, primarily due to the Microsoft Windows'95 launch.

                                       13
<PAGE>
 
                    MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                 FINANCIAL CONDITION AND RESULTS OF OPERATIONS
                 ---------------------------------------------
                                  (continued)

Gross profit for the North American Business decreased 45.5% from $65,702,000 in
1995 to $35,791,000 in 1996.  Gross profit as a percentage of sales or gross
margin, decreased from 5.4% in 1995 to 3.3% in 1996.  In 1995, the gross profit
as a percentage of sales for the Franchise and Aggregation Business and the
Distribution Business was 3.5% and 6.7%, respectively, compared to 3.5% and
3.3%, respectively, in 1996.   The decrease in gross profit is in part
attributable to $13,400,000 related to customer dispute issues in the United
States and $9,600,000 of vendor reconciliation adjustments and other issues.
Without these items, gross profit as a percentage of sales would have been 5.5%
for the Distribution Business.  The Company's Distribution Business continued to
experience competitive pricing pressures.  The decrease in the Franchise and
Aggregation Business' gross profit as a percentage of sales is the result of
intense price competition.

Selling, general and administrative expenses for the North American Business
increased by 20.0% from $51,278,000 in the third quarter of 1995 to $61,508,000
in the third quarter of 1996.  The $10,230,000 increase is due to severance
costs associated with carrying out the Company's 1996 business plan and
strategies, and to continuing professional fees and other costs to develop
business  plans and strategies and to improve certain business processes.
Additionally, the Company incurred increased expenses associated with its new
computer operating system.

In the third quarter of 1996, Merisel recorded a $40,000,000 asset impairment
adjustment related to the goodwill associated with Merisel FAB.  This writedown
of goodwill is in addition to the $30,000,000 writedown taken in the fourth
quarter of 1995.  This additional writedown was a result of declining sales
growth, margins and earnings, and the resulting negative trend in projected cash
flows for the Franchise and Aggregation Business.

As a result of the above items, operating income for the North American Business
of $14,424,000 in the third quarter of 1995 decreased to an operating loss of
$65,717,000 in the third quarter of 1996.

                                       14
<PAGE>
 
                    MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                 FINANCIAL CONDITION AND RESULTS OF OPERATIONS
                 ---------------------------------------------
                                  (continued)

Nine Months Ended September 30, 1996 as Compared to the Nine Months Ended
-------------------------------------------------------------------------
September 30, 1995
------------------

The following table sets forth the unaudited results of operations for the North
American Business and for the Former Operations for the nine months ended
September 30, 1996 and September 30, 1995.
<TABLE>
<CAPTION>
 
                                         Nine Months Ended                             Nine Months Ended
                                         September 30, 1996                           September 30, 1995
                                     (In Thousands) (Unaudited)                   (In Thousands) (Unaudited)
                                North                                       North
                              American           Former     Consolidated  American          Former      Consolidated
                              Business         Operations      Total      Business        Operations       Total
                                             (in thousands)                              (in thousands)
<S>                          <C>             <C>          <C>           <C>             <C>              <C>
Net Sales                    $3,312,618        $1,060,171   $4,372,789    $3,367,845       $1,010,931      $4,378,776
Cost of Sales                 3,161,837           986,949    4,148,786     3,171,371          939,454       4,110,825
                             ----------        ----------   ----------    ----------       ----------      ----------
Gross Profit                    150,781            73,222      224,003       196,474           71,477         267,951
SG&A Expenses                   174,320            71,320      245,640       155,304           71,010         226,314
Restructuring charges                                                          5,228            4,105           9,333
Impairment Loss                  40,000                         40,000
                             ----------        ----------   ----------    ----------       ----------      ----------
Operating (Loss) Income
                             $  (63,539)       $    1,902   $  (61,637)   $   35,942       $   (3,638)     $   32,304
</TABLE>

For the nine months ended September 30, 1996, net sales for the North American
Business  decreased by 1.6% from 3,367,845,000 in the nine months ended
September 30, 1995, to $3,312,618,000 in the nine months ended September 30,
1996.  Net sales increased by 0.1% in the United States, increased by 7.3% in
Canada and decreased by 10.2% in the Franchise and Aggregation Business.  In the
nine months ended September 30, 1995, the North American Business sold
approximately $156,000,000 of Microsoft Windows'95 following its launch in
August 1995.  Without this additional revenue, net sales would have increased in
the United States by 5.8%, increased in Canada by 10.4% and decreased for the
Franchise and Aggregation Business by 10.2%. The Company also lost market share
in the North American Business due to competitive pressures, liquidity
constraints and cost controls implemented by the Company which curtailed sales
growth.  Canadian sales growth in 1996 was positively impacted by reduced sales
in 1995 related to Canada's implementation of SAP software.

In the North American Business, hardware and accessories accounted for 80% of
net sales, and software accounted for 20% of net sales in the nine months ended
September 30, 1996, as compared to 75% and 25% for the same categories,
respectively, in the first nine months of 1995.  Software sales were a larger
percentage of total sales in the prior year primarily due to the Microsoft
Windows'95 launch.

                                       15
<PAGE>
 
                    MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                 FINANCIAL CONDITION AND RESULTS OF OPERATIONS
                 ---------------------------------------------
                                  (continued)

Gross profit for the North American Business decreased 23.3% from $196,474,000
in 1995 to $150,781,000 in 1996.  Gross profit as a percentage of sales or gross
margin, decreased from 5.8% in 1995 to 4.6% in 1996.  In 1995, gross profit as a
percentage of sales for the Franchise and Aggregation Business and the
Distribution Business was 4.0% and 6.5%, respectively, compared to 3.6% and
4.8%, respectively, in 1996.  The decrease in gross profit is in part
attributable to a $13,400,000 charge related to customer dispute issues in the
U.S. and $9,600,000 of vendor reconciliation adjustments and other issues in
Canada. Without these items, gross profit as a percentage of sales would have
been 5.3% for the Distribution Business. The Company's Distribution Business
continued to experience competitive pricing pressures.  The decrease in the
Franchise and Aggregation Business' gross profit as a percentage of sales is the
result of intense price competition and the effect of a revised pricing
structure offered to new and existing franchisees to deal with this competition.
The Company anticipates that it will continue to experience intense price
competition.

Selling, general and administrative expenses for the North American Business
increased by 12.2% from $155,304,000 in the nine months ended September 30, 1995
to $174,320,000 in the nine months ended September 30, 1996.  The $19,016,000
increase is due to severance costs associated with carrying out the Company's
1996 business plan and strategy, professional costs incurred to prepare the
Company's business plans and strategies, and continuing professional fees and
other costs to improve certain business processes including the supplier account
reconciliation process.  Additionally, the Company incurred increased expenses
associated with its new computer operating system.

In the third quarter of 1996, Merisel recorded a $40,000,000 asset impairment
adjustment related to the goodwill associated with Merisel FAB.  This writedown
of goodwill is in addition to the $30,000,000 writedown taken in the fourth
quarter of 1995.  This additional writedown was a result of declining sales
growth, margins and earnings, and the resulting negative trend in projected cash
flows for the Franchise and Aggregation Business.

As a result of the above items, operating income for the North American Business
of $35,942,000 in the nine months ended September 30, 1995 decreased to an
operating loss of $63,539,000 in the nine months ended September 30, 1996.

                                       16
<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, including the Former Operations, decreased
14.4% from $11,229,000 in the quarter ended September 30, 1995 to $9,613,000 in
the quarter ended September 30, 1996 and remained level at 0.7% of net sales.
For the nine months ended September 30, 1996, interest expense decreased 6.0%
from $30,962,000 in 1995 to $29,085,000 in 1996 and remained unchanged at 0.7%
of net sales.  The Company's average month-end borrowings increased 4% from
$384,000,000 in 1995 to $397,600,000 in 1996. The increase in average borrowings
in 1996 reflected primarily the need to finance higher levels of working capital
to support increased sales and the higher cash balance maintained by the
Company.borrowings in 1996 is primarily the result of the higher cash balances
maintained by the Company. The decrease in interest expense is primarily due to
lower interest expense related to customer flooring arrangements.

Other expenses for the Company, including Former Operations, increased from
$2,953,000 in the three months ended September 30, 1995 to $5,726,000 for the
same period in 1996. Other expenses for the Company, including the Former
Operations, increased from $9,774,000 in the  nine months ended September 30,
1995, to $16,492,000 for the same period in 1996.  The increase was primarily
attributable to fees incurred in connection with an increase in the Company's
trade receivable securitizations in 1996. The increase in securitization fees is
primarily attributable to an increase in the amount of net receivables sold. The
average month end proceeds from proceeds from accounts receivable sales under
all of the Company's various facilities increased from $150,000,000 in 1995
to $266,214,000 in 1996.

The income tax provision increased from a benefit of $1,777,000 for the nine
months ended September 30, 1995 to an expense of $1,341,000 for the same period
in 1996. The Company has not recognized a tax provision benefit with respect to
its current losses, due to having exhausted its ability to carryback those
losses and obtain refunds of taxes paid in prior years. Further, the Company has
recognized tax provision expense that primarily represents the establishment of
a valuation allowance against a previously recognized state deferred tax asset.

CONSOLIDATED LOSS

On a consolidated basis for the Company, including the Former Operations, net
loss increased from $6,655,000 in 1995 to $142,050,000 in 1996.  Net loss per
share increased from $0.22 in 1995 to $4.75 in 1996.

                                       17
<PAGE>
 
                    MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                 FINANCIAL CONDITION AND RESULTS OF OPERATIONS
                 ---------------------------------------------
                                  (continued)

1996 BUSINESS PLAN
------------------

In April 1996, in order to comply with the requirements of its lenders, Merisel
developed a business plan for the remainder of fiscal 1996 that sought to
maximize cash flow by controlling costs, curtailing non-essential capital
expenditures, limiting investments and disposing of assets.  On October 4, 1996,
the Company completed the sale of substantially all of the Company's European,
Mexican and Latin American businesses.  Merisel applied $72,500,000 of the
proceeds from the sale of EML subsequent to the end of the quarter to
permanently reduce its outstanding senior bank debt and senior privately issued
debt.  In connection with the sale, the Company also made several amendments to
its lending agreements.  See "Liquidity and Capital Resources" below. Although
the sale of EML caused Merisel's third quarter net loss to increase by
$33,455,000, the Company has retained approximately $50,000,000 in cash from the
transaction, which provides additional working capital to fund the remaining
operations.  See Notes 6 & 8 of Notes to Consolidated Financial Statements.

Following the sale of EML, the Company refocused its efforts on profitable
growth for its remaining North American distribution businesses.  Merisel's 1996
business plan assumed that the Company would not return to profitability until
the fourth quarter of 1996.  As the Company's focus changes from conserving cash
to managing for profitable growth, management continues to expect that Merisel
will return to profitability, if not by year end, within the next six months.
These expectations are based on the Company's ability to achieve expected sales
and gross margin levels and maintain the support of its trade creditors and
lenders.

Further, in light of the significant principal payments required by its lenders
in 1997, as well as other obligations described below, the Company may not be
able to finance its operations or amortize its debt in 1997 without either
refinancing or restructuring its borrowings or obtaining new sources of
financing, or some combination thereof, and there can be no assurance that it
will be able to  accomplish such restructuring or refinancing. See "Liquidity
and Capital Resources" below.

The preceding preliminary financial information constitutes forward looking
information and actual results could differ materially from current
expectations.  Among the factors that could impact actual results are the
following:  additional adjustments related to the Company's ongoing supplier
account reconciliation process in Canada, to customer disputes or to the
impairment of long term assets; significant changes in payment terms to or
product availability from the Company's key vendors; any further unanticipated
charges associated with the Company's computer and operating systems; any asset
dispositions or potential restructurings; and any reduction in customer demand
or deterioration of margins.

                                       18
<PAGE>
 
                    MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                 FINANCIAL CONDITION AND RESULTS OF OPERATIONS
                 ---------------------------------------------
                                  (continued)
                                        

LIQUIDITY AND CAPITAL RESOURCES
-------------------------------

The Company has financed its growth and cash needs primarily through borrowings,
securitizations of its trade receivables and sales of assets.

Net cash provided by operating activities during the nine months ended September
30, 1996 was $43,106,000. The primary sources of cash from operating
activities were decreases in inventories, accounts receivable and income taxes
receivable of, $205,450,000, $103,639,000 and $30,913,000, respectively.  The
primary uses of cash during the period were a net loss of $142,050,000 and a
decrease in accounts payable of $242,084,000.  Decreased inventory and accounts
receivable levels resulted primarily from improved management of inventories and
collections. The decrease in inventories also contributed to the decrease in
accounts payable.

Net cash used for investing activities in 1996 was $6,159,000, consisting of
payment of the Company's earn out obligation under the ComputerLand Acquisition
of $13,409,000 and property and equipment expenditures of $9,052,000, partly
offset by proceeds from the sale of property and equipment of $5,976,000 and by
proceeds received of $8,515,000 from the sale of the Company's Australian
operations. The expenditures for property and equipment were primarily for the
upgrading of the Company's computer systems, expenditures for a new warehouse
management system and the upgrading of existing facilities and leasehold
improvements. The Company presently anticipates that its capital expenditures
for 1996 will be approximately $12,885,000 consisting of costs of upgrading and
modifying the new computer system and the new warehouse management systems in
North America, purchase of warehouse and other equipment in North America, and
costs incurred in prior months, related to the development of computer systems
in the European operations that were sold at the end of the third quarter. In
addition, the Company has deferred non-essential capital expenditures to
maximize its cash flow in 1996. See "1996 Business Plan" above. The Company
intends to finance its anticipated capital expenditures with funds from existing
operations.

Net cash used in financing activities was $7,355,000, comprised primarily
of repayments of Senior Notes (as defined below) of $14,000,000, the payment of
the first installment of $4,400,000 of the Subordinated Notes (as defined
below), and repayment of $15,170,000 under other bank facilities, partially
offset by net borrowings under the Revolving Credit Agreement (as defined below)
of $26,000,000.

                                       19
<PAGE>
 
                    MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                 FINANCIAL CONDITION AND RESULTS OF OPERATIONS
                 ---------------------------------------------
                                  (continued)

The Company's wholly owned subsidiary Merisel Americas, Inc. ("Merisel
Americas") on an ongoing basis, sells trade receivables to its wholly owned
subsidiary, Merisel Capital Funding, Inc. ("Merisel Capital Funding").  Pursuant
to an agreement with a securitization company (the "Receivables Purchase and
Servicing Agreement"),  Merisel Capital Funding, in turn, sells such receivables
to the securitization company on an ongoing basis, which yields proceeds of up
to $300,000,000 at any point in time.  Merisel Capital Funding's sole business
is the purchase of trade receivables from Merisel Americas.  Merisel Capital
Funding is a separate corporate entity with its own separate creditors, which
upon its liquidation will be entitled to be satisfied out of Merisel Capital
Funding's assets prior to any value in Merisel Capital Funding becoming
available to Merisel Capital Funding's equity holders. This facility expires in
October 2000.  As a result of the substantial losses incurred by the Company for
the three months and nine months ended September 30, 1996, Merisel Americas and
Merisel Capital Funding were required to obtain, and did obtain, amendments and
waivers with respect to certain covenants under this facility.

Effective December 15, 1995, Merisel Canada, Inc. ("Merisel Canada") entered
into a receivables purchase agreement with a securitization company to provide
funding for Merisel's Canadian subsidiary. In accordance with this agreement,
Merisel Canada sells receivables to the securitization company, which yields
proceeds of up to $150,000,000 Canadian dollars. The facility expires December
12, 2000, but is extendible by notice from the securitization company, subject
to the Company's approval.

Effective October 16, 1995, Merisel U.K. Ltd. ("Merisel U.K.") entered into a
receivables purchase agreement with a securitization company to provide funding
for Merisel's U.K. subsidiary. This facility, including $26,300,000 outstanding
thereunder, was assumed by CHS in connection with the purchase of EML.

Under these securitization facilities, the receivables are sold at face value
with payment of a portion of the purchase price being deferred. As of September
30, 1996, the total amount outstanding under these facilities, excluding amounts
assumed by CHS, was $240,995,450. Fees incurred in connection with the sale of
accounts receivable under these three facilities for the three months and nine
months ended September 30, 1996 were $3,746,000 and $12,273,000, respectively,
compared to $2,652,000 and $7,747,000 incurred for the three months and nine
months ended September 30, 1995 and are recorded as other expense.

At September 30, 1996, the Company's subsidiaries, Merisel Americas and Merisel
Europe, Inc. ("Merisel Europe") had unsecured senior borrowing commitments,
which as amended, consisted of $86,000,000 of 9.58% senior notes (the "Senior
Notes") by Merisel Americas, and a $129,000,000 revolving credit agreement (the
"Revolving Credit Agreement") by Merisel Americas and Merisel Europe, all of
which was outstanding.  Advances under the Revolving Credit Agreement bear
interest at specific rates based upon market reference rates plus a specified
percentage.  The average interest rate for the Revolving Credit Agreement at
September 30, 1996 was approximately 8.45%.  In the three months and nine months
ended September 30,

                                       20
<PAGE>
 
                    MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                 FINANCIAL CONDITION AND RESULTS OF OPERATIONS
                 ---------------------------------------------
                                  (continued)

1996, the Company paid a total of $15,000,000 and $35,000,000, respectively, in
scheduled amortization payments under the Senior Notes and the Revolving Credit
Agreement.

On October 4, 1996, the Company amended the Senior Notes and the Revolving
Credit Agreement and used a portion of the proceeds received from the sale of
EML to permanently reduce the outstanding borrowings on the Senior Notes and the
Revolving Credit Agreement by $29,000,000 and $43,500,000, respectively,
resulting in a principal balance outstanding of $57,000,000 and $85,500,000,
respectively. As amended these agreements require that the Company make an
aggregate of five consecutive principal payments of $1,500,000 each, on the
fifth calendar day of each month from February through June, 1997, plus an
additional principal repayment of $7,500,000 on January 2, 1998. As amended,
the Senior Notes and Revolving Credit Agreement provide that if the Company
makes the June 30, 1997 interest payment on the 12.50% Senior Notes due December
31, 2004 (the "Notes") at any time before January 31, 1998, then the Company
shall make an aggregate principal repayment of an additional $40,000,000 on the
Senior Notes and the Revolving Credit Agreement.  The Senior Notes and the
Revolving Credit Agreement are due in full on January 31, 1998. In addition, the
interest rate on the Senior Notes increased to 11.5%.  The Revolving Credit
Agreement interest rate increased by 2.35%.  The amendments also provide that
certain tax refunds and asset sale proceeds when received by the Company shall
be used to permanently prepay the Senior Notes and Revolving Credit Agreement.
The principal repayments will be shared ratably by the lenders under the
Revolving Credit Agreement and the holders of the Senior Notes, although to the
extent that the Company has not borrowed the full amount available under the
Revolving Credit Agreement, the lenders' collective commitments under the
Revolving Credit Agreement will be reduced by the ratable amounts without any
payment by the Company.  The Company is also required to pay a commitment fee on
the unused available funds on the Revolving Credit Agreement.

The Senior Notes and the Revolving Credit Agreement each contain various
covenants, including those which prohibit the payment of cash dividends, require
a minimum amount of tangible net worth, and place limitations on the acquisition
of assets. These agreements also require the Company or certain of its
subsidiaries to maintain certain specified financial ratios. Such financial
ratios include: interest coverage; minimum adjusted tangible net worth; minimum
earnings before interest, taxes, depreciation, amortization and securitization
expense; total debt equivalents to adjusted tangible net worth; inventory
turnover; minimum accounts payable; and minimum accounts payable to inventory.
As a result of the substantial losses incurred by the Company for the three
months and nine months ended September 30, 1996, the Company was required to
obtain, and did obtain waivers of various covenants, including financial ratio
covenants, contained in the Senior Notes and the Revolving Credit Agreement for
the Company's third fiscal quarter of 1996, and amendments of such covenants for
future periods.

At September 30, 1996, the Company had outstanding $125,000,000 principal amount
of the Notes due December 31, 2004. The Notes provide for an interest rate of
12.5% payable semiannually. By virtue of being an obligation of the Company, the
Notes are effectively subordinated to all liabilities of the Company's
subsidiaries, including trade payables. The Indenture relating to the 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

                                       21
<PAGE>
 
                    MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                 FINANCIAL CONDITION AND RESULTS OF OPERATIONS
                 ---------------------------------------------
                                  (continued)

subsidiaries and impose limitations on investments, loans, advances, sales or
transfers of assets, the making of dividends and other payments, the creation of
liens, sale-leaseback transactions with affiliates and certain mergers.  Without
a restructuring or refinancing of the Company's debt, the Company may be unable
to make its June 30, 1997 interest payment on the Notes and the additional
$40,000,000 repayment on the Senior Notes and the Revolving Credit Agreement
required before such interest payment can be made.  In addition, the restriction
on dividend payments contained in the Senior Notes Agreement and the Revolving
Credit Agreement could limit the ability of the Company to repay principal and
interest on the Notes if, and to the extent that, such limitations prevent cash
or other dividends from being paid to the holding Company. Further, in the event
of a default under the Senior Notes agreement and the Revolving Credit
Agreement, payments of principal and interest on the Notes are prohibited.

At September 30, 1996 Merisel Americas had outstanding an aggregate of
$17,600,000 of privately placed subordinated notes (the "Subordinated Notes").
The Subordinated Notes, as amended, provide for interest at the rate of 11.78%
per annum and are repayable in four remaining equal annual installments with the
next installment due January 1997. Commencing on September 10, 1996, accrued
interest on the Subordinated Notes is required to be paid quarterly, rather than
semi-annually. The Subordinated Notes contain certain restrictive covenants,
including those that limit the Company's ability to incur debt, acquire the
stock of or merge with other corporations, or sell certain assets and prohibit
the payment of dividends. The Subordinated Notes also incorporate the financial
covenants contained in the Senior Notes and the Revolving Credit Agreement. In
connection with the amendment of the Revolving Credit Agreement and the Senior
Notes described above, the Company was required to obtain, and did obtain, an
amendment of the Subordinated Note Purchase Agreement.

At September 30, 1996, the Company had promissory notes outstanding with an
aggregate balance of $10,528,000.  Such notes provide for interest at the
rate of approximately 7.7% per annum and are repayable in 48 and 60 monthly
installments commencing February 1, 1996, with  payments due at maturity.  The
notes are collateralized by certain of the Company's real property and
equipment.  In addition the Company had a capitalized real property lease in the
amount of approximately $2,200,000, which was repaid on October 17,1996.  At
September 30, 1995 the Company and its subsidiaries had outstanding $59,186,936
under various unsecured lines of credit denominated in local currencies.

                                       22
<PAGE>
 
                    MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                 FINANCIAL CONDITION AND RESULTS OF OPERATIONS
                 ---------------------------------------------
                                  (continued)

In connection with the ComputerLand Acquisition, Merisel FAB and Vanstar entered
into a Distribution and Services Agreement (the "Services Agreement") pursuant
to which Vanstar provides significant distribution and other support services to
the Franchise and Aggregation Business for a contractually agreed upon fee.
Effective July 12, 1995, this agreement was extended until April 30, 1997. Under
the terms of the Services Agreement extension, Merisel and Vanstar agreed that
(i) the extended credit terms under the Services Agreement would be increased to
$31,400,000; and (ii) the terms of the distribution fee would be adjusted. The
amount of the extended credit will be reduced by a scheduled amount of $844,000
monthly through October 31, 1996. As of September 30, 1996, the Vanstar payable,
including the extended amount, was $25,188,000. A final balance of $23,500,000
will be payable in four scheduled payments between May 15, 1997 and July 31,
1997. If an inventory reduction plan is agreed upon between the two parties,
then the $23,500,000 may decrease on an accelerated basis. In addition, on
February 2, 1996, the Company paid Vanstar $13,409,000 which consisted of a
negotiated settlement of the Company's earn out obligation under the original
purchase agreement related to the ComputerLand acquisition of $14,594,000, net
of rebates of $1,185,000. See Note 5 to Consolidated Financial Statements.

Further, in light of the significant principal payments required by its lenders
in 1997, as well as other obligations described above, the Company may not be
able to finance its operations or amortize its debt in 1997 without either
refinancing or restructuring its borrowings or obtaining new sources of
financing, or some combination thereof, and there can be no assurance that it
will be able to accomplish such restructuring or refinancing.  See "1996
Business Plan" above.

SYSTEMS AND PROCESSES
---------------------

The Company began designing a new computer operating system in early 1993 and as
the first step in converting its North American operation converted its Canadian
operation to the new system in August 1995.  In the early implementation stages
the Canadian conversion produced results below the Company's expectations.  In
late February 1996, Merisel Canada's operating systems had begun to show results
closer to the Company's original projection.  However, this required substantial
additional development efforts and costs in the post-implementation period.
Accumulated expenditures incurred to develop these systems have been
significantly in excess of the amounts originally expected.  As the Company
implements its North American strategy, it intends to implement SAP in the
United States no sooner than 1998.

The Company is also reviewing certain of its existing accounting systems,
including shipping and billing processes, which may result in adjustments to
accounts receivable and/or inventory balances.

                                       23
<PAGE>
 
                    MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                 FINANCIAL CONDITION AND RESULTS OF OPERATIONS
                 ---------------------------------------------
                                  (continued)

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; and (iii) the
fact that virtually all sales in a given quarter result from orders booked in
that quarter.  Due to the factors noted above, as well as the fact that the
Company participates in a highly dynamic 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 purchases and holiday
purchases.  As a result of this pattern the Company's cash requirements in the
fourth quarter have typically been greater.  See "Liquidity and Capital
Resources" above.

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 in part to increases or decreases in
sales levels and Merisel's practice of making large purchases when it deems the
terms of such purchases to be attractive. Further contributing to inventory
level changes is the addition of new manufacturers and products.  The Company
has negotiated agreements with many of its manufacturers which 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.

Historically, the Company has purchased foreign exchange contracts to minimize
foreign exchange transaction gains and losses.  Currently such contracts are not
available to the Company.  Accordingly, the Company may suffer a negative impact
on its results of operations or financial condition as a result of its inability
to hedge foreign exchange transactions.

The Company offers credit terms to qualifying customers and also sells on a
prepay, credit card and cash-on-delivery basis.  The Company also offers
financing for its sales to certain of its customers through various floor plan
financing companies.  With respect to credit sales, the Company attempts to
control its bad debt exposure through monitoring of customers' creditworthiness
and, where practicable, through participation in credit associations that
provide credit rating information about its customers.  In certain markets, the
Company may elect to purchase credit insurance for certain accounts.

                                       24
<PAGE>
 
                    MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                 FINANCIAL CONDITION AND RESULTS OF OPERATIONS
                 ---------------------------------------------
                                  (continued)
                                        

COMPETITION
-----------

Competition in the computer products distribution industry is intense and is
based primarily on price, brand selection, breadth and availability of product
offering, financing options, 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 and
liquidity resources than Merisel. Merisel's principal competitors include large
United States-based international distributors such as Ingram Micro, MicroAge
and Tech Data Corporation, national distributors such as Gates/Arrow and
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 Franchise and Aggregation Business is subject to competition from other
franchisors and aggregators in obtaining and retaining franchisees and third-
party resellers, as well as competition from wholesale distributors with respect
to sales of products to customers in the Franchise and Aggregation Business
network. With respect to brand selection, the Company believes that an important
factor in the Franchise and Aggregation Business' ability to attract customers
is the fact that it is able to offer computer systems and other hardware
products from Apple, Compaq, Hewlett-Packard and IBM. These manufacturers
historically have sold their products directly to resellers and through a
limited number of master resellers such as the Franchise and Aggregation
Business. Recently, some of these manufacturers have moved to increase their
channels of distribution. The loss of any of these manufacturers, or any change
in the way any such manufacturer markets, prices or distributes its products,
could have a material adverse effect on the Franchise and Aggregation Business'
operations and financial results. The Franchise and Aggregation Business'
principal competitors are Intelligent Electronics, MicroAge and Inacom, all of
which maintain networks of franchisees and third-party dealers and which carry
products of one or more of the Company's major manufacturers. Certain of the
Franchise and Aggregation Business' competitors have greater financial resources
than the Company.

                                       25
<PAGE>
 
                          PART II - OTHER INFORMATION
                          ----------------------------


Item 1.   Legal Proceedings
          -----------------

In June 1994, Merisel, Inc. and certain of its officers and/or directors were
named in putative securities class actions filed in the United States District
Court for the Central District of California, consolidated as In re Merisel,
Inc. Securities Litigation.  Plaintiffs, who are seeking damages in an
unspecified amount, purport to represent a class of all persons who purchased
Merisel common stock between November 8, 1993 and June 7, 1994 (the "Class
Period").  The complaint, as amended and consolidated, alleges that the
defendants inflated the market price of Merisel's common stock with material
misrepresentations and omissions during the Class Period.  Plaintiffs contend
that such alleged misrepresentations are actionable under Section 10(b) and
20(a) of the Securities Exchange Act of 1934 and Rule 10b-5 promulgated
thereunder.  Following the granting of defendant's first motion to dismiss on
December 5, 1994, plaintiffs filed a second consolidated and amended complaint
on December 22, 1994.  On April 3, 1995, Federal District Judge Real dismissed
the complaint with prejudice.  The plaintiffs have appealed the dismissal.  The
parties' appellate briefing to the Ninth Circuit was completed on November 6,
1995.  On June 4, 1996, the Ninth Circuit heard oral argument regarding the
appeal.


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

     (a)  Exhibits


     10.53     Employment Agreement, dated as of September 5, 1996, between
               Merisel, Inc. and James D. Wittry.

     10.54     Letter Agreement dated June 1, 1995 between Merisel Americas,
               Inc. and Kristin M. Rogers.

     10.55     Amendment to Letter Agreement dated April 9, 1996 between Merisel
               Americas, Inc. and Kristin M. Rogers.

     10.56     Amendment to Letter Agreement dated August 30, 1996 between
               Merisel Americas, Inc. and Kristin M. Rogers.

     10.57     Retention Agreement dated April 5, 1996 between Merisel, Inc. and
               Kelly M. Martin.

     10.58     Letter Agreement dated June 1, 1995 between Merisel Americas,
               Inc. and Archie K. Miller.

                                       26
<PAGE>
 
     10.59     Amendment to Letter Agreement dated  August 28, 1996 between
               Merisel Americas, Inc. and Archie K. Miller.

     10.60     Retention Agreement dated April 5, 1996 between Merisel, Inc. and
               Bruce A.  Zeedik.

     10.61     Letter Agreement dated November 29, 1995 between Merisel, Inc.
               and Timothy N. Jenson.

     10.62     Amendment to Letter Agreement dated April 9, 1996 between
               Merisel, Inc. and Timothy N. Jenson.

     10.63     Amendment to Letter Agreement dated August 22, 1996 between
               Merisel, Inc. and Timothy N. Jenson.

     10.64     Amended and Restated Employment Agreement dated November 6, 1996,
               between Susan J. Miller-Smith and Merisel, Inc.

     27        Financial Data Schedule

     (b)       Reports on Form 8-K

     On October 18, 1996, the Company filed a Current Report on Form 8-K dated
     October 18, 1996 consisting of Item 2 and Item 7, which included pro forma
     financial information as of June 30, 1996 and for the six months ended June
     30, 1996 and for the year ended December 31, 1995.
 

                                       27
<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: November 15, 1996

                                  Merisel, Inc.
                                        
                                  By:  /s/ James E. Illson
                                      ---------------------------
                                       James E. Illson

                                       Senior Vice President, Finance,
                                       and Chief Financial Officer
                                       (Duly Authorized Officer and
                                       Principal Financial Officer)

                                       28
<PAGE>
 
EXHIBIT INDEX

Exhibits

     10.53     Employment Agreement, dated as of September 5, 1996, between
               Merisel, Inc. and James D. Wittry.

     10.54     Letter Agreement dated June 1, 1995 between Merisel Americas,
               Inc. and Kristin M. Rogers.

     10.55     Amendment to Letter Agreement dated April 9, 1996 between Merisel
               Americas, Inc. and Kristin M. Rogers.
               
     10.56     Amendment to Letter Agreement dated August 30, 1996 between
               Merisel Americas, Inc. and Kristin M. Rogers. 

     10.57     Retention Agreement dated April 5, 1996 between Merisel, Inc. and
               Kelly M. Martin.

     10.58     Letter Agreement dated June 1, 1995 between Merisel Americas,
               Inc. and Archie K. Miller.

     10.59     Amendment to Letter Agreement dated  August 28, 1996 between
               Merisel Americas, Inc. and Archie K. Miller.

     10.60     Retention Agreement dated April 5, 1996 between Merisel, Inc. and
               Bruce A.  Zeedik.

     10.61     Letter Agreement dated November 29, 1996 between Merisel, Inc.
               and Timothy N. Jenson.

     10.62     Amendment to Letter Agreement dated April 9, 1996 between
               Merisel, Inc. and Timothy N. Jenson.

     10.63     Amendment to Letter Agreement dated August 22, 1996 between
               Merisel, Inc. and Timothy N. Jenson.

     10.64     Amended and Restated Employment Agreement dated November 6, 1996,
               between Susan J. Miller-Smith and Merisel, Inc.

     27        Financial Data Schedule

                                       29