----

**UNITED      STATES**

**SECURITIES      AND EXCHANGE COMMISSION**

**Washington,      D.C. 20549**

**FORM      10-Q**

| x | QUARTERLY                REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE                ACT OF                1934 |
|---|--------------------------------------------------------------------------------------------------------------------------------------|

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

**MERISEL,      INC.**

**(Exact      name of registrant as specified in its charter)**

| **Delaware**                                                  | **01-17156**                                                   | **95-4172359**                                        |
|---------------------------------------------------------------|----------------------------------------------------------------|-------------------------------------------------------|
| (State                or other jurisdiction of incorporation) | (Commission                File Number)                        | (I.                R. S. Employer identification No.) |
|                                                          |                                                           |                                                  |
|                                                          | **127                W. 30****th****Street, 5****th****Floor** |                                                  |
|                                                          | **New                York, NY**                                | **10001**                                             |
|                                                          | (Address                of principal executive offices)        | (Zip                Code)                             |

----

**MERISEL,      INC. AND SUBSIDIARIES**

**Nine      months Ended September 30, 2006**

**TABLE      OF CONTENTS**

| **PART                I FINANCIAL INFORMATION**  |
|-------------------------------------------------------|
| Item                1.                           | Financial                Statements |
|                                                  | Consolidated                Balance Sheets as of September 30, 2006                (Unaudited) and December 31, 2005 (Audited)  |
|                                                  | Unaudited                Consolidated Statements of Operations for                the Three and Nine Months Ended September 30, 2006 and 2005 and Audited                Predecessor Combined Statements of Operations for the Two Months                Ended                February 28, 2005  |
|                                                  | Unaudited                Consolidated Statements of Cash Flows for the                Nine Months Ended September 30, 2006 and 2005 and Audited Predecessor                Combined Statements of Cash Flows for the Two Months Ended February                28,                2005  |
|                                                  | Notes                to Unaudited Consolidated Financial                Statements  |
| Item                2.                           | Management’s                Discussion and Analysis of Financial Condition                and Results of Operations  |
| Item                3.                           | Quantitative                and Qualitative Disclosures About Market                Risk  |
| Item                4.                           | Controls                and Procedures  |
| **PART                II OTHER INFORMATION**     |
| Item                1.                           | Legal                Proceedings  |
| Item                6.                           | Exhibits  |
|                                                  | SIGNATURES  |

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Table          of Contents

**SPECIAL      NOTE REGARDING FORWARD-LOOKING INFORMATION**

| ·   | the                implementation of the Company’s business strategies and                goals; |
|--------------------|--------------------------------------------------------------------------------------------------------|

| ·   | the                integration of past and future                acquisitions; |
|--------------------|--------------------------------------------------------------------------------|

| ·   | the                Company’s dependence on its senior management and key personnel and its                ability to attract and retain additional qualified personnel; |
|--------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | the                Company’s ability to expand its business, including through any future                acquisitions; |
|--------------------|------------------------------------------------------------------------------------------------------------------------------|

| ·   | a                deterioration in economic conditions                generally; |
|--------------------|---------------------------------------------------------------------------------|

| ·   | competitive                pricing and other competitive pressures in the graphic image arts                industry; |
|--------------------|-----------------------------------------------------------------------------------------------------------------------|

| ·   | changes                in technology creating obsolescence; |
|--------------------|-------------------------------------------------------------|

| ·   | the                Company’s involvement as a defendant in litigation or incurrence of                judgments, fines or legal costs; |
|--------------------|----------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | the                loss of significant customers; and |
|--------------------|-------------------------------------------------------|

| ·   | other                risks detailed in “Business - Risk Factors” in the Company’s most recent                Annual Report on Form 10-K on file with the                SEC. |
|--------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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Table            of Contents

**PART      1. FINANCIAL INFORMATION**

**Item      1.** **Financial      Statements**

MERISEL,      INC. AND SUBSIDIARIES

|                                                                                               |   | **September                30, 2006** |   | **December                31, 2005** |   |
|----------------------------------------------------------------------------------------------------|--------|---------------------------------------|--------|--------------------------------------|--------|
| Current                assets:                                                                     |   | (Unaudited)                           |   | (Audited)                            |   |
| Cash                and cash equivalents                                                           |   | $                                     | 13,134 |                                 | $      | 12,548 |   |
| Accounts                receivable, net of allowance of $921 and $948,                respectively |   |                                  | 18,343 |                                 |   | 17,416 |   |
| Inventories                                                                                        |   |                                  | 1,738  |                                 |   | 1,615 |   |
| Prepaid                expenses and other current assets                                           |   |                                  | 1,343  |                                 |   | 711 |   |
| Asset                held for sale                                                                 |   |                                  | 914    |                                 |   | - |   |
| Total                current assets                                                                |   |                                  | 35,472 |                                 |   | 32,290 |   |
|                                                                                               |   |                                  |   |                                 |   |   |   |
| Property                and equipment, net                                                         |   |                                  | 7,362  |                                 |   | 6,982 |   |
|                                                                                               |   |                                  |   |                                 |   |   |   |
| Restricted                cash                                                                     |   |                                  | 2,762  |                                 |   | 6,775 |   |
| Other                assets                                                                        |   |                                  | 117    |                                 |   | 183 |   |
| Intangible                assets, net                                                              |   |                                  | 6,562  |                                 |   | 7,034 |   |
| Trademarks                                                                                         |   |                                  | 10,466 |                                 |   | 10,452 |   |
| Goodwill                                                                                           |   |                                  | 15,303 |                                 |   | 12,733 |   |
| Non-current                assets of discontinued operations                                       |   |                                  | -      |                                 |   | 914 |   |
|                                                                                               |   |                                  |   |                                 |   |   |   |
| Total                assets                                                                        |   | $                                     | 78,044 |                                 | $      | 77,363 |   |
|                                                                                               |   |                                  |   |                                 |   |   |   |
|                                                                                               |   |                                  |   |                                 |   |   |   |

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Table          of Contents

|                                                                                                                                             |   | **September                30, 2006** |     | **December                31, 2005** |   |
|--------------------------------------------------------------------------------------------------------------------------------------------------|--------|---------------------------------------|----------|--------------------------------------|--------|
|                                                                                                                                             |   | (Unaudited)                           |     | (Audited)                            |   |
| Current                liabilities:                                                                                                              |   |                                  |     |                                 |   |
| Accounts                payable                                                                                                                  |   | $                                     | 3,262    |                                 | $      | 2,166 |   |
| Accrued                liabilities                                                                                                               |   |                                  | 5,374    |                                 |   | 6,241 |   |
| Capital                lease obligations, current maturities                                                                                     |   |                                  | 413      |                                 |   | 536 |   |
| Installment                notes, current maturities                                                                                             |   |                                  | 698      |                                 |   | 719 |   |
| Income                tax payable                                                                                                                |   |                                  | -        |                                 |   | 1,808 |   |
| Customer                deposits                                                                                                                 |   |                                  | 8        |                                 |   | 51 |   |
| Total                current liabilities                                                                                                         |   |                                  | 9,755    |                                 |   | 11,521 |   |
|                                                                                                                                             |   |                                  |     |                                 |   |   |   |
| Note                payable, bank                                                                                                                |   |                                  | 8,630    |                                 |   | 8,630 |   |
| Capital                lease obligations, less current maturities                                                                                |   |                                  | 265      |                                 |   | 481 |   |
| Installment                notes, less current maturities                                                                                        |   |                                  | 1,023    |                                 |   | 1,376 |   |
| Other                liabilities                                                                                                                 |   |                                  | 768      |                                 |   | 317 |   |
| Total                liabilities                                                                                                                 |   |                                  | 20,441   |                                 |   | 22,325 |   |
|                                                                                                                                             |   |                                  |     |                                 |   |   |   |
| Stockholders’                equity:                                                                                                       |   |                                  |     |                                 |   |   |   |
| Convertible                preferred stock, $.01 par value, authorized1,000,000                shares; 150,000 shares issued andoutstanding      |   |                                  | 24,721   |                                 |   | 23,295 |   |
| Common                stock, $.01 par value, authorized 30,000,000shares;                8,183,735 issued and 7,769,755 and 7,773,755outstanding |   |                                  | 82       |                                 |   | 82 |   |
| Additional                paid-in capital                                                                                                        |   |                                  | 274,134  |                                 |   | 275,601 |   |
| Accumulated                deficit                                                                                                               |   |                                  | (240,467 | )                                    |   | (242,757 | ) |
| Unamortized                deferred compensation                                                                                                 |   |                                  | -        |                                 |   | (332 | ) |
| Treasury                stock at cost, 413,980 and 409,980 sharesrepurchased                                                                     |   |                                  | (867     | )                                    |   | (851 | ) |
| Total                stockholders’ equity                                                                                                  |   |                                  | 57,603   |                                 |   | 55,038 |   |
|                                                                                                                                             |   |                                  |     |                                 |   |   |   |
| Total                liabilities and stockholders’ equity                                                                                  |   | $                                     | 78,044   |                                 | $      | 77,363 |   |

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MERISEL,      INC. AND SUBSIDIARIES

|                                                                                                        |   | **Three                Months Ended September 30,** |   | **Nine                months Ended September 30,** |   | **Two                Months Ended February 28,** |   |
|-------------------------------------------------------------------------------------------------------------|--------|-----------------------------------------------------|--------|----------------------------------------------------|--------|--------------------------------------------------|--------|
|                                                                                                        |   | **2006**                                            |   | **2005**                                           |   | **2006**                                         |   | **2005** |   | **2005** |   |
|                                                                                                        |   | (Unaudited)                                         |   | (Unaudited)                                        |   | (Unaudited)                                      |   | (Unaudited) |   | (Audited) |   |
|                                                                                                        |   | Successor                                           |   | Successor                                          |   | Successor                                        |   | Successor |   | Predecessor |   |
| Net                sales                                                                                    |   | $                                                   | 20,677 |                                               | $      | 19,970                                           |   | $ | 59,782 |   | $ | 41,165 |   | $ | 8,532 |   |
|                                                                                                        |   |                                                |   |                                               |   |                                             |   |   |   |   |   |   |   |   |   |   |
| Cost                of sales                                                                                |   |                                                | 10,110 |                                               |   | 10,123                                           |   |   | 29,831 |   |   | 19,772 |   |   | 5,011 |   |
|                                                                                                        |   |                                                |   |                                               |   |                                             |   |   |   |   |   |   |   |   |   |   |
| Gross                profit                                                                                 |   |                                                | 10,567 |                                               |   | 9,847                                            |   |   | 29,951 |   |   | 21,393 |   |   | 3,521 |   |
|                                                                                                        |   |                                                |   |                                               |   |                                             |   |   |   |   |   |   |   |   |   |   |
| Selling,                general & administrative expenses                                               |   |                                                | 9,098  |                                               |   | 7,945                                            |   |   | 27,397 |   |   | 17,025 |   |   | 4,615 |   |
| Restructuring                charge                                                                         |   |                                                | -      |                                               |   | -                                                |   |   | 724 |   |   | - |   |   | - |   |
|                                                                                                        |   |                                                |   |                                               |   |                                             |   |   |   |   |   |   |   |   |   |   |
| Operating                income (loss)                                                                      |   |                                                | 1,469  |                                               |   | 1,902                                            |   |   | 1,830 |   |   | 4,368 |   |   | (1,094 | ) |
|                                                                                                        |   |                                                |   |                                               |   |                                             |   |   |   |   |   |   |   |   |   |   |
| Interest                expense, net                                                                        |   |                                                | 86     |                                               |   | 120                                              |   |   | 312 |   |   | 74 |   |   | 73 |   |
|                                                                                                        |   |                                                |   |                                               |   |                                             |   |   |   |   |   |   |   |   |   |   |
| Income                (loss) from continuing operations before provision for income                tax      |   |                                                | 1,383  |                                               |   | 1,782                                            |   |   | 1,518 |   |   | 4,294 |   |   | (1,167 | ) |
|                                                                                                        |   |                                                |   |                                               |   |                                             |   |   |   |   |   |   |   |   |   |   |
| Income                tax provision                                                                         |   |                                                | 194    |                                               |   | 27                                               |   |   | 212 |   |   | 63 |   |   | - |   |
|                                                                                                        |   |                                                |   |                                               |   |                                             |   |   |   |   |   |   |   |   |   |   |
| Income                (loss) from continuing operations                                                     |   |                                                | 1,189  |                                               |   | 1,755                                            |   |   | 1,306 |   |   | 4,231 |   |   | (1,167 | ) |
|                                                                                                        |   |                                                |   |                                               |   |                                             |   |   |   |   |   |   |   |   |   |   |
| Income                (loss) from discontinued operations, net of taxes                                     |   |                                                | (19    | )                                                  |   | -                                                |   |   | 984 |   |   | - |   |   | - |   |
| Gain                on sale of discontinued operations                                                      |   |                                                | -      |                                               |   | 3,491                                            |   |   | - |   |   | 5,643 |   |   | - |   |
| Net                income (loss)                                                                            |   |                                                | 1,170  |                                               |   | 5,246                                            |   |   | 2,290 |   |   | 9,874 |   |   | (1,167 | ) |
| Preferred                stock dividends                                                                    |   |                                                | 485    |                                               |   | 448                                              |   |   | 1,426 |   |   | 1,318 |   |   | - |   |
| Net                income (loss) available to common stockholders                                           |   | $                                                   | 685    |                                               | $      | 4,798                                            |   | $ | 864 |   | $ | 8,556 |   | $ | (1,167 | ) |
|                                                                                                        |   |                                                |   |                                               |   |                                             |   |   |   |   |   |   |   |   |   |   |
| Net                income per share (basic and diluted):                                                    |   |                                                |   |                                               |   |                                             |   |   |   |   |   |   |   |   |   |   |
| Net                income (loss) from continuing operations available to common                stockholders |   | $                                                   | 0.09   |                                               | $      | 0.17                                             |   | $ | (0.02 | ) | $ | 0.38 |   |   | N/A |   |
| Income                from discontinued operations, net of taxes                                            |   |                                                | 0.00   |                                               |   | 0.00                                             |   |   | 0.13 |   |   | 0.00 |   |   | N/A |   |
| Gain                on sale of discontinued operations                                                      |   |                                                | 0.00   |                                               |   | 0.46                                             |   |   | 0.00 |   |   | 0.74 |   |   | N/A |   |
| Net                income available common stockholders                                                     |   | $                                                   | 0.09   |                                               | $      | 0.63                                             |   | $ | 0.11 |   | $ | 1.12 |   |   | N/A |   |
| Weighted                average number of shares                                                            |   |                                                |   |                                               |   |                                             |   |   |   |   |   |   |   |   |   |   |
| Basic                                                                                                       |   |                                                | 7,698  |                                               |   | 7,624                                            |   |   | 7,699 |   |   | 7,624 |   |   | N/A |   |
| Diluted                                                                                                     |   |                                                | 7,703  |                                               |   | 7,743                                            |   |   | 7,737 |   |   | 7,727 |   |   | N/A |   |

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MERISEL,      INC. AND SUBSIDIARIES

|                                                                                                        |   |  **Nine                months Ended September 30,** |   | **Two                Months Ended February 28,** |   |
|-------------------------------------------------------------------------------------------------------------|--------|----------------------------------------------------------|--------|--------------------------------------------------|--------|
|                                                                                                        |   | **2006**                                                 |   | **2005**                                         |   | **2005** |   |
| CONTINUING                OPERATIONS                                                                        |   | (Unaudited)                                              |   | (Unaudited)                                      |   | (Audited) |   |
| CASH                FLOWS FROM OPERATING ACTIVITIES:                                                        |   | Successor                                                |   | Successor                                        |   | Predecessor |   |
| Net                income (loss)                                                                            |   | $                                                        | 2,290  |                                             | $      | 9,874 |   | $ | (1,167 | ) |
| Less:                income from discontinued operations                                                    |   |                                                     | 984    |                                             |   | 5,643 |   |   | - |   |
| Net                income from continuing operations                                                        |   |                                                     | 1,306  |                                             |   | 4,231 |   |   | (1,167 | ) |
| Adjustments                to reconcile net income to net cash used in operating                activities: |   |                                                     |   |                                             |   |   |   |   |   |   |
| Non-cash                deferred compensation                                                               |   |                                                     | 152    |                                             |   | 289 |   |   | - |   |
| Stock-based                compensation expense                                                             |   |                                                     | 139    |                                             |   | - |   |   | - |   |
| Deferred                compensation payment                                                                |   |                                                     | -      |                                             |   | (759 | ) |   | - |   |
| Deferred                occupancy costs                                                                     |   |                                                     | 132    |                                             |   | 268 |   |   | - |   |
| Deferred                income taxes                                                                        |   |                                                     | -      |                                             |   | - |   |   | 533 |   |
| Depreciation                and amortization                                                                |   |                                                     | 1,875  |                                             |   | 1,147 |   |   | 284 |   |
| Changes                in operating assets and liabilities:                                                 |   |                                                     |   |                                             |   |   |   |   |   |   |
| Accounts                receivable                                                                          |   |                                                     | (127   | )                                                |   | (1,351 | ) |   | (1,792 | ) |
| Inventories                                                                                                 |   |                                                     | (109   | )                                                |   | 199 |   |   | 189 |   |
| Prepaids                and other current assets                                                            |   |                                                     | (698   | )                                                |   | 368 |   |   | 27 |   |
| Restricted                cash - security deposits                                                          |   |                                                     | 4,013  |                                             |   | (381 | ) |   | 7 |   |
| Accounts                payable                                                                             |   |                                                     | 894    |                                             |   | 96 |   |   | (122 | ) |
| Accrued                liabilities                                                                          |   |                                                     | (2,789 | )                                                |   | (2,026 | ) |   | (52 | ) |
| Net                cash provided by (used in) operating activities                                          |   |                                                     | 4,788  |                                             |   | 2,081 |   |   | (2,093 | ) |
|                                                                                                        |   |                                                     |   |                                             |   |   |   |   |   |   |
| CASH                FLOWS FROM INVESTING ACTIVITIES:                                                        |   |                                                     |   |                                             |   |   |   |   |   |   |
| Acquisitions,                net of cash acquired                                                           |   |                                                     | (3,663 | )                                                |   | (37,734 | ) |   | - |   |
| Increase                in due from stockholder                                                             |   |                                                     | -      |                                             |   | - |   |   | 231 |   |
| Capital                expenditures                                                                         |   |                                                     | (799   | )                                                |   | (1,069 | ) |   | (9 | ) |
| Net                cash (used in) provided by investing activities                                          |   |                                                     | (4,462 | )                                                |   | (38,803 | ) |   | 222 |   |
|                                                                                                        |   |                                                     |   |                                             |   |   |   |   |   |   |
| CASH                FLOWS FROM FINANCING ACTIVITIES:                                                        |   |                                                     |   |                                             |   |   |   |   |   |   |
| Capital                lease payments                                                                       |   |                                                     | (433   | )                                                |   | (484 | ) |   | (119 | ) |
| Bank                debt repayments                                                                         |   |                                                     | (444   | )                                                |   | (112 | ) |   | - |   |
| Bank                debt assumed                                                                            |   |                                                     | -      |                                             |   | - |   |   | 400 |   |
| Purchase                of treasury stock                                                                   |   |                                                     | (16    | )                                                |   |   |   |   |   |   |
| Net                cash (used in) provided by financing activities                                          |   |                                                     | (893   | )                                                |   | (596 | ) |   | 281 |   |
|                                                                                                        |   |                                                     |   |                                             |   |   |   |   |   |   |
| NET                DECREASE IN CASH AND CASH EQUIVALENTS FROM CONTINUING                OPERATIONS          |   |                                                     | (567   | )                                                |   | (37,318 | ) |   | (1,590 | ) |
|                                                                                                        |   |                                                     |   |                                             |   |   |   |   |   |   |
| DISCONTINUED                OPERATIONS                                                                      |   |                                                     |   |                                             |   |   |   |   |   |   |
| Cash                provided by discontinued operations                                                     |   |                                                     | 1,153  |                                             |   | 1,532 |   |   | - |   |
| NET                CASH PROVIDED BY DISCONTINUED OPERATIONS                                                 |   |                                                     | 1,153  |                                             |   | 1,532 |   |   | - |   |
|                                                                                                        |   |                                                     |   |                                             |   |   |   |   |   |   |
| NET                INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS                                         |   |                                                     | 586    |                                             |   | (35,786 | ) |   | (1,590 | ) |
|                                                                                                        |   |                                                     |   |                                             |   |   |   |   |   |   |
| CASH                AND CASH EQUIVALENTS, BEGINNING OF PERIOD                                               |   |                                                     | 12,548 |                                             |   | 46,861 |   |   | 2,053 |   |
| CASH                AND CASH EQUIVALENTS, END OF PERIOD                                                     |   | $                                                        | 13,134 |                                             | $      | 11,075 |   | $ | 463 |   |
|                                                                                                        |   |                                                     |   |                                             |   |   |   |   |   |   |

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|                                                        |   | **(in                thousands)**                                      |   |
|-------------------------------------------------------------|--------|------------------------------------------------------------------------|--------|
|                                                        |   |   **For                the Nine months ended September 30,** |   | **For                the Two Months Ended February 28,** |   |
| Cash                paid during the period for:             |   | **2006**                                                               |   | **2005** |   | **2005** |   |
| Income                taxes                                 |   | $                                                                      | 2,331  |   | $ | - |   | $ | - |   |
| Interest                expense                             |   |                                                                   | 749    |   |   | - |   |   | 70 |   |
| Non-cash                investing and financing activities: |   |                                                                   |   |   |   |   |   |   |   |   |
| Preferred                dividends accumulated              |   |                                                                   | 1,426  |   |   | 1,318 |   |   | - |   |

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MERISEL,      INC. AND SUBSIDIARIES

| 1.   | General |
|----------------|---------|

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| 2.   | Basis                of Presentation |
|----------------|--------------------------------------|

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| 3.   | Discontinued                Operations |
|----------------|----------------------------------------|

| 4.   | Use                of Estimates |
|----------------|---------------------------------|

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| 5.   | Restructuring                Charge |
|----------------|-------------------------------------|

|                                     |   | (In                thousands)                   |       |
|------------------------------------------|--------|-------------------------------------------------|------------|
|                                     |   | **December                31, 2005****Balance** | ** ** |  **Net                Charges** | ** ** |  **Payments** | ** ** | **September                30, 2006 Balance** |   |
| Type                of cost:             |   |                                            |       |   |   |   |   |   |   |
| Severance                related         |   | $                                               | -          |   | $ | 616 |   | $ | (616 | ) | $ | - |   |
| Facility,                lease and other |   |                                            | -          |   |   | 108 |   |   | (108 | ) |   | - |   |
| Total                                    |   | $                                               | -          |   | $ | 724 |   | $ | (724 | ) | $ | - |   |

| 6.   | Inventories |
|----------------|-------------|

|                                    |   | **September                30, 2006** |   | **December                31, 2005** |   |
|-----------------------------------------|--------|---------------------------------------|--------|--------------------------------------|--------|
| Raw                materials            |   | $                                     | 1,271  |                                 | $      | 1,260 |   |
| Work                in process          |   |                                  | 478    |                                 |   | 372 |   |
| Reserve                for obsolescence |   |                                  | (11    | )                                    |   | (17 | ) |
| Total                inventory, net     |   | $                                     | 1,738  |                                 | $      | 1,615 |   |

| 7.   | Stock-Based                Compensation |
|----------------|-----------------------------------------|

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|                                                 |  Historical                  Values  |
|------------------------------------------------------|------------------------------------------------|
| Risk-free                  interest rate             | 3.7%                                           |
| Expected                  volatility of common stock | 90.86%                                         |
| Dividend                  yield                      | 0.0%                                           |
| Expected                  option term                | 5                  years                       |

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|                                                                                                                                                         |   | **For                the three months ended September 30,** |   | **For                the nine months ended September 30,** |   |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|-------------------------------------------------------------|--------|------------------------------------------------------------|--------|
| In                thousands, except per share amounts                                                                                                        |   | **2005**                                                    |   | **2005**                                                   |   |
|                                                                                                                                                         |   |                                                        |   |                                                       |   |
| Net                income available to common stockholders - As Reported                                                                                     |   | $                                                           | 4,798  |                                                       | $      | 8,556 |   |
| Deduct:                Total stock-based employee compensation expense determined under                fair                value based method for all awards |   |                                                        | 94     |                                                       |   | 278 |   |
| Net                income - Pro Forma                                                                                                                        |   | $                                                           | 4,704  |                                                       | $      | 8,278 |   |
|                                                                                                                                                         |   |                                                        |   |                                                       |   |   |   |
| Earnings                per Share (Basic):                                                                                                                   |   |                                                        |   |                                                       |   |   |   |
| As                Reported                                                                                                                                   |   | $                                                           | 0.63   |                                                       | $      | 1.12 |   |
| Pro                Forma                                                                                                                                     |   | $                                                           | 0.62   |                                                       | $      | 1.09 |   |
|                                                                                                                                                         |   |                                                        |   |                                                       |   |   |   |
| Earnings                Per Share (Diluted):                                                                                                                 |   |                                                        |   |                                                       |   |   |   |
| As                Reported                                                                                                                                   |   | $                                                           | 0.62   |                                                       | $      | 1.11 |   |
| Pro                Forma                                                                                                                                     |   | $                                                           | 0.61   |                                                       | $      | 1.07 |   |

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|                                                                                                          |   | **2006**         |    |
|---------------------------------------------------------------------------------------------------------------|--------|------------------|---------|
|                                                                                                          |   |  **Shares** |    | **Weighted****Average****Exer.                Price** |   |
| Outstanding                at December                31, 2005                                                |   |             | 330,200 |   |   | 9.17 |   |
| Granted                                                                                                       |   |             | -       |   |   | N/A |   |
| Exercised                                                                                                     |   |             | -       |   |   | N/A |   |
| Canceled                                                                                                      |   |             | -       |   |   | N/A |   |
| Outstanding                at September                30, 2006                                               |   |             | 330,200 |   |   | 9.17 |   |
| Options                exercisable at September 30, 2006                                                      |   |             | 180,200 |   |   | 9.88 |   |
| Weighted                average fair value at date of grant of options granted during the                year |   |             | N/A     |   |   | N/A |   |

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|                               |   | **Options                Outstanding** |    | **Options                Exercisable** |   |
|------------------------------------|--------|----------------------------------------|---------|----------------------------------------|--------|
|                               |   |                                   |    | **Weighted**                           |   |   |   |   |   |   |   |
|                               |   |                                   |    | **Average**                            |   | **Weighted** |   |   |   | **Weighted** |   |
|                               |   | **Number**                             |    | **Remaining**                          |   | **Average** |   | **Number** |   | **Average** |   |
| **Range                of**        |   | **Outstanding**                        |    | **Life**                               |   | **Exercise** |   | **Exercisable** |   | **Exercise** |   |
| **Exercise                Prices** |   | **at                9/30/06**          |    | **In                Years**            |   | **Price** |   | **at                9/30/06** |   | **Price** |   |
|                               |   |                                   |    |                                   |   |   |   |   |   |   |   |
| $18.75                             |   |                                   | 200     |                                   |   | 1 |   | $ | 18.75 |   |   | 200 |   | $ | 18.75 |   |
| $17.50                             |   |                                   | 30,000  |                                   |   | 5 |   | $ | 17.50 |   |   | 30,000 |   | $ | 17.50 |   |
| $5.00                to $12.00     |   |                                   | 300,000 |                                   |   | 9 |   | $ | 8.33 |   |   | 150,000 |   | $ | 8.33 |   |
|                               |   |                                   |    |                                   |   |   |   |   |   |   |   |   |   |   |   |   |
| $5.00                to $18.75     |   |                                   | 330,200 |                                   |   |   |   |   |   |   |   | 180,200 |   |   |   |   |

|                                                    |   | **Shares** |   | **Weighted                  Average Grant-Date Fair Value** |   |
|---------------------------------------------------------|--------|------------|--------|-------------------------------------------------------------|--------|
| Nonvested                  shares at December 31, 2005  |   |       | 75,000 |                                                        | $      | 4.61 |   |
| Granted                                                 |   |       | 7,500  |                                                        | $      | 7.00 |   |
| Vested                                                  |   |       | -      |                                                        |   | - |   |
| Cancelled                                               |   |       | -      |                                                        |   | - |   |
| Nonvested                  shares at September 30, 2006 |   |       | 82,500 |                                                        | $      | 4.83 |   |

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| 8.   | Accrued                Liabilities |
|----------------|------------------------------------|

|                                                       |   | **September                30, 2006** |   | **December                31, 2005** |   |
|------------------------------------------------------------|--------|---------------------------------------|--------|--------------------------------------|--------|
| **Accrued                liabilities:**                    |   |                                  |   |                                 |   |   |   |
| Lease                commitments and other accruals        |   | $                                     | 1,698  |                                 | $      | 1,395 |   |
| Compensation                and other benefit accruals     |   |                                  | 3,247  |                                 |   | 4,680 |   |
| State                and local sales taxes and other taxes |   |                                  | 429    |                                 |   | 166 |   |
| Total                accrued liabilities                   |   | $                                     | 5,374  |                                 | $      | 6,241 |   |

| 9.   | Earnings                Per Share and Stockholders Equity |
|----------------|-----------------------------------------------------------|

| 10.   | Related                Party Transactions |
|-----------------|-------------------------------------------|

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| 11.   | Commitments                and Contingencies |
|-----------------|----------------------------------------------|

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| 12.   | Acquisitions |
|-----------------|--------------|

| **(in                thousands)**                              |   |
|----------------------------------------------------------------|--------|
| Trade                accounts receivable                       |   | $ | 12,178 |   |
| Inventory                                                      |   |   | 1,406 |   |
| Other                current assets                            |   |   | 299 |   |
| Fixed                assets                                    |   |   | 3,773 |   |
| Restricted                cash                                 |   |   | 2,310 |   |
| Other                assets                                    |   |   | 39 |   |
| Intangible                assets                               |   |   | 5,900 |   |
| Trademark                                                      |   |   | 10,311 |   |
| Goodwill                                                       |   |   | 10,996 |   |
| Accounts                payable                                |   |   | (3,969 | ) |
| Accrued                liabilities                             |   |   | (2,085 | ) |
| Long-term                debt and capital lease obligations    |   |   | (9,935 | ) |
| Total                purchase price, net of $424 cash received |   | $ | 31,223 |   |

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| **(in                thousands)**                              |   |
|----------------------------------------------------------------|--------|
| Trade                accounts receivable                       |   | $ | 3,165 |   |
| Inventory                                                      |   |   | 543 |   |
| Other                assets                                    |   |   | 79 |   |
| Fixed                assets                                    |   |   | 2,958 |   |
| Goodwill                                                       |   |   | 2,436 |   |
| Trademark                                                      |   |   | 141 |   |
| Other                intangible assets                         |   |   | 2,140 |   |
| Accounts                payable                                |   |   | (1,009 | ) |
| Accrued                liabilities                             |   |   | (658 | ) |
| Long-term                debt and capital lease obligations    |   |   | (2,536 | ) |
| Total                purchase price, net of $454 cash received |   | $ | 7,259 |   |

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| **(in                thousands)**      |   |
|----------------------------------------|--------|
| Inventory                              |   | $ | 14 |   |
| Fixed                assets            |   |   | 120 |   |
| Goodwill                               |   |   | 842 |   |
| Trademark                              |   |   | 2 |   |
| Other                intangible assets |   |   | 121 |   |
| Accounts                payable        |   |   | (55 | ) |
| Accrued                liabilities     |   |   | (14 | ) |
| Total                purchase price    |   | $ | 1,030 |   |

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| **(in                thousands)**                              |
|----------------------------------------------------------------|
| Accounts                receivable                             | $                800 |
| Prepaid                expenses and other current assets       | 28 |
| Fixed                assets                                    | 462 |
| Goodwill                                                       | 1,029 |
| Trademark                                                      | 3 |
| Other                intangible assets                         | 139 |
| Accounts                payable                                | (147) |
| Accrued                liabilities                             | (163) |
| Notes                payable and capital leases                | (164) |
| Deferred                Liabilities                            | (219) |
| Total                purchase price, net of $317 cash received | $                1,768 |

| Pro                Forma, unaudited, in thousands, except per share amounts |   | **Three                months ended September 30,** |   | **Nine                months ended September 30,** |   |
|-----------------------------------------------------------------------------|--------|-----------------------------------------------------|--------|----------------------------------------------------|--------|
|                                                                        |   | **2006**                                            |   | **2005**                                           |   | **2006** |   | **2005** |   |
|                                                                        |   |                                                |   |                                               |   |   |   |   |   |
| Total                revenue                                                |   | $                                                   | 20,677 |                                               | $      | 22,992 |   | $ | 61,260 |   | $ | 66,204 |   |
| Net                income from continuing operations                        |   |                                                | 1,189  |                                               |   | 1,782 |   |   | 1,411 |   |   | 3,799 |   |
| Basic                and Diluted earnings per share                         |   | $                                                   | 0.15   |                                               | $      | 0.23 |   | $ | 0.18 |   | $ | 0.49 |   |

| 13.   | Debt |
|-----------------|------|

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| 14.   | Intangibles |
|-----------------|-------------|

|                                  |   |  **September                30, 2006**  |   |  **December                31, 2005**  |   |
|---------------------------------------|--------|---------------------------------------------------|--------|--------------------------------------------------|--------|
| Customer                relationships |   | $                                                 | 2,973  |                                             | $      | 3,026 |   |
| Non-compete                agreements |   |                                              | 2,763  |                                             |   | 3,100 |   |
| Software                licenses      |   |                                              | 6      |                                             |   | 12 |   |
| Employee                agreements    |   |                                              | 247    |                                             |   | 313 |   |
| Trade                know-how         |   |                                              | 573    |                                             |   | 583 |   |
| Total                                 |   | $                                                 | 6,562  |                                             | $      | 7,034 |   |

|  **For                the Twelve-Month Period Ended September 30,**  |   |
|--------------------------------------------------------------------------------|--------|
|                                                                           |   |  Amount  |   |
| 2007                                                                           |   | $ | 1,166 |   |
| 2008                                                                           |   |   | 1,160 |   |
| 2009                                                                           |   |   | 1,145 |   |
| 2010                                                                           |   |   | 692 |   |
| 2011                                                                           |   |   | 326 |   |
| Thereafter                                                                     |   |   | 2,073 |   |
| Total                                                                          |   | $ | 6,562 |   |

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| 15.   | Subsequent                Events |
|-----------------|----------------------------------|

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**Item      2. Management’s Discussion and Analysis of Financial      Condition and Results of Operations**

*The      following discussion of the Company’s consolidated historical results of      operations and financial condition should be read in conjunction with its      unaudited consolidated financial statements and the notes thereto included      elsewhere in this report. *

**RESULTS      OF OPERATIONS **
*(amounts      in thousands except as noted or in per share data)*

**LIQUIDITY      AND CAPITAL RESOURCES **

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| **(in                thousands)**                |   | **Payment                due by period** |   |
|--------------------------------------------------|--------|------------------------------------------|--------|
|  **Contractual                Obligations** |   |  **Total**                          |   | **Less                than 1 Year** |   |  **1-3                Years** |   |  **3-5                Years** |   | **More                than 5 Years** |   |
| Long-Term                Debt Obligations        |   |                                     | 10,351 |   |   | 698 |   |   | 9,553 |   |   | 100 |   |   | - |   |
| Capital                Lease Obligations         |   |                                     | 678    |   |   | 413 |   |   | 251 |   |   | 14 |   |   | - |   |
| Operating                Lease Obligations       |   |                                     | 25,472 |   |   | 3,694 |   |   | 7,602 |   |   | 7,891 |   |   | 6,285 |   |
| Contingent                Payment Obligations    |   |                                     | 13,117 |   |   | 4,939 |   |   | 8,178 |   |   | - |   |   | - |   |
| Total                                            |   | $                                        | 49,618 |   | $ | 9,744 |   | $ | 25,584 |   | $ | 8,005 |   | $ | 6,285 |   |

**CRITICAL      ACCOUNTING POLICIES AND**
**ESTIMATES      **

**Item      3. Quantitative and Qualitative Disclosures About Market      Risk**

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**Item      4. Controls and Procedures**

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**PART      II - OTHER INFORMATION**

**Item      1. Legal Proceedings**

**Item      6. Exhibits **

| (a)   | Exhibits |
|-----------------|----------|

Exhibit      31.1-Certification of Chief Executive Officer      pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

Exhibit      31.2-Certification of Chief Financial Officer      pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

Exhibit      32-Certification of Chief Executive Officer and      Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant      to Section 906 of the Sarbanes-Oxley Act of 2002.

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**SIGNATURES**

|                                      |                                                                             |                                              |
|-------------------------------------------|----------------------------------------------------------------------------------|---------------------------------------------------|
|                                      | **MERISEL,              INC.**                                                   |
|                                 |                                                                        |                                         |
| Date: November              14, 2006 | By:                                                                    | /s/ Donald              R.              Uzzi |
|                                      | Donald R. Uzzi                                                                   |
|                                      | Title:              Chairman, Chief Executive Officer and              President |

|         |                                        |                                               |
|--------------|---------------------------------------------|----------------------------------------------------|
|         |                                        |
|    |                                   |                                          |
|         | By:                               | /s/ Jon              H.              Peterson |
|         | Jon H. Peterson                             |
|         | Title:              Chief Financial Officer |

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**EXHIBIT      INDEX**

| Exhibit                Number | Exhibit                Description                                                                                                                                                                                                                                                                                                                                                   |
|-------------------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| 3.1                           | Restated                Certificate of Incorporation of Merisel, Inc., as amended, filed                as                Exhibit 3.1 to the Company’s Annual Report on Form 10-K for the year ended                December 31, 2005, and incorporated herein by                reference.                                                                                    |
| 3.2                           | Bylaws,                as amended, of Merisel, Inc., s Exhibit 3.2 to the Company’s Annual Report                on Form 10-K for the year ended December 31, 2005, and incorporated                herein                by reference.                                                                                                                                        |
| 10.1                          | Asset                Purchase Agreement dated as of October 4, 2006 by and among Merisel,                Merisel FD, Fuel and the shareholders of Fuel signatories thereto,                filed                as Exhibit 2.1 to the Company's Current Report on Form 8-K filed                with the                SEC on October 6, 2006 and incorporated herein by reference. |
| 31.1                          | Certification                of Chief Executive Officer pursuant                to Section 302 of the Sarbanes-Oxley Act of 2002.                                                                                                                                                                                                                                                    |
| 31.2                          | Certification                of Chief Financial Officer pursuant                to Section 302 of the Sarbanes-Oxley Act of 2002.                                                                                                                                                                                                                                                    |
| 32                            | Certification                of Chief Executive Officer and Chief                Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted                pursuant                to Section 906 of the Sarbanes-Oxley Act of                2002.                                                                                                                            |