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

                                    FORM 10-Q

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

                  For the Quarterly Period Ended June 30, 1997

                         Commission File Number 0-19378

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

                     Delaware                          11-3065217
          (State or other jurisdiction of           (I.R.S. Employer
          incorporation or organization)           Identification No.)

          6585 Crescent Drive, Norcross,                  30071
                      Georgia                          (Zip Code)
          (Address of principal executive
                     offices)



     Registrant's telephone number, including area code: (770) 447-9454


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 
                                      ___  ___

As of June 30, 1997, the Registrant had 4,380,525  shares of Common Stock,  $.01
par value per share outstanding.

<PAGE>
                         PART I - FINANCIAL INFORMATION


Item 1.  Financial Statements.

         INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

                                                                            Page
          Consolidated Financial Statements:

         Balance sheets as of June 30, 1997 (unaudited)
         and December 31, 1996................................................3

         Statements of operations for the three months and six months
         ended June 30, 1997 and June 30, 1996 (unaudited)....................4

         Statements of cash flows for the six months ended June 30, 1997
         and June 30, 1996 (unaudited)........................................5

         Notes to Condensed Consolidated Financial Statements.................6

         Management's Discussion and Analysis of Financial Condition
          and Results of Operations...........................................7

                                       2
<PAGE>
                           LIUSKI INTERNATIONAL, INC.
                                AND SUBSIDIARIES
                     CONDENSED CONSOLIDATED BALANCE SHEETS

                                                       June 30,     December 31,
                                                         1997          1996
                                                     (unaudited)
Assets
Current assets:
         Cash and cash equivalents                      $-         $     18,065
         Accounts receivable, net of allowance
            for doubtful accounts of
            $4,100,000 in 1997 and
            $3,208,000 in 1996                       38,856,740      31,994,144
            Inventories, net of allowance for        25,997,753      49,872,618
            inventory obsolescence of
            $1,100,000 in 1997 and
            $1,600,000 in 1996
         Prepaid expenses and other current assets    4,851,659       5,592,192
                                                   ------------    ------------

Total current assets                                 69,706,152      87,477,019

Furniture, Autos and Equipment, at cost               2,758,584       2,741,814
  less accumulated depreciation and
  amortization of $3,953,882 in 1997 and
  $3,425,870 in 1996

Other assets                                            275,759         235,145
                                                   ------------    ------------
                                                   $ 72,740,495    $ 90,453,978
                                                   ============    ============


 Liabilities and Shareholders' Equity
 Current liabilities:
  Revolving credit loan                            $ 28,265,280    $ 28,614,929
  Accounts payable - affiliate                       10,164,830      13,889,474
  Accounts payable - trade                           19,340,862      26,209,403
  Accrued expenses and other                          2,891,406       2,810,144
                                                   ------------    ------------
 Total current liabilities                           60,662,378      71,523,950

 Capital lease obligations                              540,679         406,428
                                                    ------------    ------------
 Total liabilities                                   61,203,057      71,930,378


 Commitments and Contingencies

 Stockholders' equity:
  Preferred stock; $.01 par value -
                  1,000,000 shares authorized,            --              --
                  none issued
  Common stock; $.01 par value - 7,000,000
                  shares authorized; 4,380,525
                  issued and outstanding                 43,806          43,806
  Additional paid-in capital                         18,435,164      18,435,164
  Retained earnings                                  (6,941,532)         44,630
                                                   ------------    ------------
Total stockholders' equity                           11,537,438      18,523,600
                                                   ------------    ------------
                                                   $ 72,740,495    $ 90,453,978
                                                   ============    ============
See notes to condensed consolidated
financial statements

                                       3
<PAGE>
 <TABLE>
<CAPTION>
                                    LIUSKI INTERNATIONAL, INC. AND SUBSIDIARIES
                                   CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                                                     (Unaudited)


                                    Three months ended                Six months ended
                                        June 30,                          June 30,
                              -----------------------------    ------------------------------
                                  1997             1996              1997            1996
                                  ----             ----              ----            ----

<S>                          <C>              <C>              <C>              <C>          
Net sales                    $  79,573,901    $ 101,556,939    $ 173,009,679    $ 200,184,274
Cost of sales                   75,541,912       95,417,967      164,669,403      186,168,305
                             -------------    -------------    -------------    -------------
Gross profit                     4,031,989        6,138,972        8,340,276       14,015,969
Selling, general and
administrative                   6,718,656        7,509,739       13,849,930       14,072,308
                             -------------    -------------    -------------    -------------

Loss from operations            (2,686,667)      (1,370,767)      (5,509,654)         (56,339)
Other charges, net               1,213,148          484,326        1,876,508          977,271
                             -------------    -------------    -------------    -------------
Loss before income taxes        (3,899,815)      (1,855,093)      (7,386,162)      (1,033,610)
Income taxes                          --           (454,000)        (400,000)        (142,000)
                             -------------    -------------    -------------    -------------
Net loss                     $  (3,899,815)   $  (1,401,093)   $  (6,986,162)   $    (891,610)
                             =============    =============    =============    =============
Earnings per share of
common and common
equivalent shares
outstanding: Primary and
fully diluted                $       (0.89)   $       (0.32)   $       (1.59)   $       (0.20)
                             =============    =============    =============    =============
Weighted average number of
common and common
equivalent shares
outstanding: Primary and
fully diluted                    4,380,525        4,380,525        4,380,525        4,380,525
                             =============    =============    =============    =============
</TABLE>
See notes to condensed consolidated financial statements

                                       4
<PAGE>
                           LIUSKI INTERNATIONAL, INC.
                             CONDENSED CONSOLIDATED
                            STATEMENTS OF CASH FLOWS
                                  (Unaudited)


                                                             June 30,
                                                  ----------------------------
                                                        1997           1996
                                                        ----           ----
Cash Flows from Operating
Activities
Net loss                                          $ (6,986,162)   $   (891,610)
                                                  ------------    ------------
Adjustments to reconcile net
  income to net cash provided
  by operating activities:
  Depreciation and amortization                        528,012         463,195
Provision for losses on accounts receivable            892,000       1,225,000
Provision for inventory obsolescence                  (500,000)        501,341
Changes in operating assets and
liabilities:
  Accounts receivable                               (7,754,596)     (7,213,739)
  Inventories                                       24,374,865      (2,387,239)
  Prepaid expenses and other                           740,533        (429,436)
  Other assets                                         (40,614)          1,043
  Accounts payable - affiliate                      (3,724,644)      5,023,574
Accounts payable and
accrued expenses                                    (6,787,279)     (2,780,803)
                                                  ------------    ------------
Total adjustments                                    7,728,277      (5,597,064)
                                                  ------------    ------------
Net cash used by operating activities                  742,115      (6,488,674)
                                                  ------------    ------------

Cash Flows from Investing
Activities
  Capital expenditures                                (544,782)       (320,255)
                                                  ------------    ------------

Cash Flows from Financing
Activities
  Proceeds from revolving credit loan                 (349,649)      7,764,343
  Repayment of capital lease obligations               134,251        (182,210)
                                                  ------------    ------------
Net cash provided (used) by financing activities      (215,398)      7,582,133

Net increase (decrease) in cash
  and cash equivalents                                 (18,065)        773,204
Cash and cash equivalents,
  beginning of year                                     18,065         200,989
                                                  ------------    ------------

Cash and cash equivalents, end of year            $       --      $    974,193
                                                  ============    ============

Supplemental  disclosure of cash flow
information:
  Cash paid during the period for:

    Interest                                      $    766,262    $    997,581
                                                  ============    ============
    Income taxes                                  $       --      $       --
                                                  ============    ============

See notes to condensed consolidated financial statements

                                       5
<PAGE>

                   LIUSKI INTERNATIONAL, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (unaudited)



Note 1. Consolidated Financial Statements

     The accompanying unaudited condensed consolidated financial statements have
been prepared in accordance with generally  accepted  accounting  principles for
interim  financial  information and with the  instructions to Form 10-Q and Rule
10-01 of Regulation S-X. Accordingly, they do not include all of the information
and footnotes required by generally accepted accounting  principles for complete
financial statements. In the opinion of Management,  all adjustments (consisting
of only normal recurring accruals)  considered necessary for a fair presentation
have been  included.  Operating  results for the six month period ended June 30,
1997 are not necessarily  indicative of the results that may be expected for the
year ending December 31, 1997. For further information refer to the consolidated
financial  statements  and footnotes  thereto in the Company's  Annual Report on
Form 10-K for the year  ended  December  31,  1996,  which are  incorporated  by
reference herein.

Note 2. Restatement of Interim Financial Information

     The Company is  currently in the process of  restating  its 10-Q  unaudited
condensed consolidated financial statements for the quarterly period ended March
31, 1997. The restatement is required to properly match first quarter sales with
cost of sales. Additionally,  in light of the Company's decrease in inventories,
the Company  re-examined its methods of assessing and estimating the adequacy of
its allowance for inventory  obsolescence  and determined  that such  allowances
needed to be decreased as of March 31, 1997.

Note 3. Revolving Credit Loan

     In June 1995, the Company signed a $50,000,000  credit  facility  replacing
the Company's  existing  $25,000,000  revolving credit loan and $14,000,000 line
for the  floorplanning  of  inventory.  The new facility  provides for revolving
borrowings  of  up  to  $35,000,000,   limited  by  available  collateral,   and
$15,000,000  for  inventory  floorplanning.  Amounts  available on the revolving
credit  loan  are  based  on a  formula  of the  sum  of up to  85% of  eligible
receivables  and the lesser of 50% (30% for  Magitronic  goods) of the  eligible
inventory or $15,000,000.  Under the loan agreement,  in the absence of default,
outstanding  borrowings  bear interest at 1/4% per annum above the lending banks
prime rate or 125 basis points above LIBOR rates and mature in June,  1998.  The
debt is  collateralized by a lien on all of the Company's assets. As of June 30,
1997, the Company owed $28,265,280 under its revolving credit loans.

     As of December 31, 1996,  the Company is in violation of certain  financial
covenants  under  its  credit  facility  agreement.  The  Company's  lender  has
preserved all of the rights available to it as a result of the Company's default
of these financial covenants.  Consequently, the balance of the revolving credit
loan is classified as a current  liability at June 30, 1997. As a consequence of
this default,  the interest rate paid by the Company under its revolving  credit
loan was  increased  as of April 14,  1997 to 2 1/4% over the prime rate and the
LIBOR rates are no longer  available.  The Company  has  received  notice of the
lender's  intention to terminate the credit facility as of October 31, 1997. The
Company is currently  pursuing  other  lending  options,  as well as  continuing
negotiations with its current lender.

Note 4. Contingencies

     None

                                       6
<PAGE>


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

GENERAL
The following  discussion and analysis  should be read in  conjunction  with the
Condensed Consolidated Financial Statements and Notes thereto.

RESULTS OF OPERATIONS

Six months ended June 30, 1997 and 1996
---------------------------------------

     Net  Sales:  Net  sales  for  the six  months  ended  June  30,  1997  were
     ----------
$173,009,679  representing a decrease of $27,174,595  (13.6%) from  $200,184,274
for the six months ended June 30, 1996. The Company's net sales were  negatively
affected by  shortages  of working  capital  resulting  in the  inability of the
Company to maintain  sufficient  inventory of certain of the Company's products.
In addition, the mail order business was discontinued in June, 1996.

     Sales of the Company's  Magitronic brand of personal computers and notebook
computers for the six months ended June 30, 1997 decreased to $35,721,194 (20.6%
of net sales)  from  $43,256,614  (21.6% of net sales) for the six months  ended
June 30, 1996.  This decrease is  substantially  attributable  to lower sales of
notebook computers in the first quarter, and price decreases in components which
have resulted in a corresponding price decrease in Magitronic personal computers
and notebook computers.  Specifically,  Intel central processing units ("CPU's")
have dropped in price by fifty percent (50%), and monitor and CD Rom prices also
have  decreased  dramatically.  These price  decreases  have  intensified  price
competition in the industry. In addition, there has been substantial turnover in
Magitronic  product  management.  Included in Magitronic  personal computers are
private-label  and brand-name  components that the Company also sells separately
in its  distribution  business.  In addition,  the company also sells components
separately under the Magitronic name.

     While the Company  distributes  products from more than 40 U.S.  suppliers,
the loss of major  suppliers or a shortage in a particular  product could have a
material  adverse impact on the Company  during the relatively  brief period the
Company  believes  it would  need to  establish  alternate  sources of supply at
required volume levels.  Although the Company's business is not highly seasonal,
the  second  calendar  quarter  is  generally  a period of  weaker  net sales in
comparison to the rest of the year.

     Gross Profit:  Gross profit  decreased by $5,675,693 to $8,340,276 (4.8% of
     ------------
net sales) for the six months ended June 30, 1997 from $14,015,969  (7.0% of net
sales)  for the six months  ended  June 30,  1996.  The lower  gross  margin was
primarily  due  to  the  reduced  sales  of the  Company's  Magitronic  notebook
computers which generally have higher margins, and price decreases in components
which have resulted in a  corresponding  price  decrease in Magitronic  personal
computers and notebook computers. Additionally, margins were negatively impacted
by turnover in key product management  positions which caused the Company to not
take full advantage of various vendor pricing and incentive  programs.  Over the
last few years, the computer industry has experienced  intense price competition
and Management  believes that the price  competitive  conditions in the industry
will continue.

     Selling, General and Administrative Expenses: For the six months ended June
     --------------------------------------------
30, 1997, selling,  general and administrative expenses decreased by $222,378 to
$13,849,930 (8.0% of net sales) from $14,072,308 (7.0% of net sales) for the six
months ended June 30,  1996.  The  decrease is  primarily  due to a  substantial
reduction in the Company's workforce as the Company continues to reduce staff in
order to reduce expenses. Headcount has been reduced by thirty-one percent (31%)
since the  beginning  of March,  1997.  As a result of this  reduction in force,
salaries,  employment taxes and employee  benefits for the six months ended June
30, 1997 decreased to $6,940,533  from  $8,477,960 for the six months ended June
30,  1996.  This  decrease  was  partially  offset  by  an  increase  due  to an
advertising  and  promotional  campaign  during the three months ended March 31,
1997 which amounted to $560,835.

                                       7
<PAGE>

     Other  Charges:  Net interest  expense  increased to $1,276,182 for the six
     --------------
months ended June 30, 1997 from  $986,838 for the first half of 1996 as a result
of  increased  borrowings  and a 2.0%  increase,  as of April 14,  1997,  in the
interest  rate the Company is paying on its  revolving  credit loan.  Due to the
default under its credit facility agreement, the Company is paying interest at 2
1/4% over the prime rate on its revolving credit facility and no LIBOR rates are
currently  available.  Additionally,  the Company  incurred costs of $580,000 in
settlement  of  various  discrimination  issues  brought on by  fourteen  former
employees.

     Net Loss:  Net loss  increased by  $6,094,552  to  $6,986,162  (4.0% of net
     --------
sales) for the six months ended June 30, 1997 from a net loss of $891,610  (0.4%
of net sales) for the six months ended June 30, 1996.


Three months ended June 30, 1997 and 1996
-----------------------------------------

     Net  Sales:  Net  sales  for the  three  months  ended  June 30,  1997 were
     ----------
$79,573,901 representing a decrease of $21,983,038 (21.6%) from $101,556,939 for
the three months ended June 30, 1996.  The Company's  net sales were  negatively
affected by  shortages  of working  capital  resulting  in the  inability of the
Company to maintain  sufficient  inventory of certain of the Company's products.
The Company's mail order business was  discontinued  in June 1996.  Although the
Company's  business is not highly  seasonal,  the second  quarter is generally a
period of weaker net sales in comparison to the rest of the year.

     Sales of the Company's  Magitronic brand of personal computers and notebook
computers  for the three  months ended June 30, 1997  decreased  to  $19,569,556
(24.6% of net sales) from $20,588,640  (20.3% of net sales) for the three months
ended June 30,  1996.  This  decrease  is  substantially  attributable  to price
decreases in components which have resulted in a corresponding price decrease in
Magitronic  personal  computers  and  notebook  computers.  Specifically,  Intel
central processing units ("CPU's") have dropped in price by fifty percent (50%),
and  monitor  and CD Rom prices also have  decreased  dramatically.  These price
decreases have intensified price competition in the industry. In addition, there
has been substantial turnover in Magitronic product management.

     Gross Profit:  Gross profit  decreased by $2,106,983 to $4,031,989 (5.1% of
     ------------
net sales) for the three months ended June 30, 1997 from $6,138,972 (6.0% of net
sales) for the three  months  ended June 30,  1996.  The lower gross  margin was
primarily  due to  price  decreases  in  components  which  have  resulted  in a
corresponding  price  decrease in  Magitronic  personal  computers  and notebook
computers.  Additionally,  margins were  negatively  impacted by turnover in key
product management positions which caused the Company to not take full advantage
of various vendor pricing and incentive  programs.  Over the last few years, the
computer  industry has  experienced  intense price  competition  and  Management
believes that the price competitive conditions in the industry will continue.

     Selling,  General and Administrative  Expenses:  For the three months ended
     ----------------------------------------------
June 30,  1997,  selling,  general  and  administrative  expenses  decreased  by
$1,091,083 to $6,418,656 (8.4% of net sales) from $7,509,739 (7.7% of net sales)
for the three  months ended June 30,  1996.  The decrease is primarily  due to a
substantial  reduction in the  Company's  workforce as the Company  continues to
reduce  staff  in order to  reduce  expenses.  Headcount  has  been  reduced  by
thirty-one percent (31%) since the beginning of March, 1997. As a result of this
reduction in force,  salaries,  employment  taxes and employee  benefits for the
three months ended June 30, 1997 decreased to $3,015,068 from $4,260,960 for the
three months ended June 30, 1996.

                                       8
<PAGE>

     Other  Charges:  Net interest  expense  increased to $593,589 for the three
     --------------
months  ended June 30, 1997 from  $523,951  for the second  quarter of 1996 as a
result of increased  borrowings during a part of the period and a 2.0% increase,
as of April  14,  1997,  in the  interest  rate the  Company  is  paying  on its
revolving  credit loan. Due to the default under its credit facility  agreement,
the Company is paying  interest  at 2 1/4% over the prime rate on its  revolving
credit facility and no LIBOR rates are currently  available.  Additionally,  the
Company  incurred  costs of $580,000  in  settlement  of various  discrimination
issues brought on by fourteen former employees.

    Net Loss:  Net loss  increased by  $2,498,722  to  $3,899,815  (4.9% of net
     --------
sales) for the three  months  ended June 30, 1997 from a net loss of  $1,401,093
(1.4% of net sales) for the three months ended June 30, 1996.


IMPACT OF INFLATION

     The  Company  has  not  been  adversely   affected  by  inflation   because
technological  advances and competition  within the microcomputer  industry have
generally caused prices of products sold by the Company to decline.  The Company
has flexibility in its pricing because it has no long-term contracts with any of
its  customers  and,  accordingly,   could,  if  necessary,   and  depending  on
competitive factors, pass along price changes to its customers.


LIQUIDITY AND CAPITAL RESOURCES

     The Company  finances its growth  through  borrowings  under its  revolving
credit loan,  equity capital and credit terms from its major  suppliers.  In the
six months ended June 30, 1997,  net cash provided by operating  activities  was
$742,115 compared to net cash used by operating activities of $6,488,674 for the
six months  ended  June 30,  1996.  The  change in net cash flow from  operating
activities  between the six months ended June 30, 1997 and June 30, 1996, in the
amount of $7,230,789 was primarily due to a significant reduction in inventories
which was  partially  offset by a decrease  in accounts  payable.  Additionally,
accounts receivable grew due to a sale of approximately $8.3 million in May 1997
which was  collected  subsequent to June 30, 1997.  The Company will  experience
shifts in cash flow in the future,  in part because suppliers are providing more
restrictive  credit terms than the Company  historically has been afforded.  For
the six  month  periods  ended  June 30,  1997 and June 30,  1996,  the  Company
generally paid its suppliers  approximately 35-45 days from the date of invoice.
Terms vary from 1 day to 60 days.

     Working  capital was  $9,043,774 as of June 30, 1997 and  $15,953,069 as of
December  31,  1996.  On June 23,  1995,  the  Company  signed a new three  year
$50,000,000 credit facility replacing its existing $25,000,000  revolving credit
loan and a $14,000,000  line for  floorplanning  of inventory.  The new facility
provides for revolving cash  borrowings of up to $35,000,000 and $15,000,000 for
inventory  floorplanning.  Borrowings  under  the  revolving  credit  loan  bear
interest  at 125 basis  points  over LIBOR or the prime rate plus 1/4%.  Amounts
available  under the revolving  credit loan are based on a formula of the sum of
up to 85% of eligible  receivables  and 50% of eligible  inventory not to exceed
$15,000,000.  At  June  30,  1997  and  December  31,  1996,  the  Company  owed
$28,265,280 and $28,614,929, respectively, under its revolving credit loans. The
Company was obligated  under letters of credit in the amount of $742,800 on June
30, 1996 and had no such obligations  outstanding as of December 31, 1996. As of
June 30, 1997 and December 31, 1996, the Company had $0 and $1,641,424 available
for  cash  borrowings  under  its  revolving  credit  loan  and  $5,105,966  and
$11,128,407   available   for  the   floorplanning   of   inventory   purchases,
respectively.

     As of December 31, 1996,  the Company is in violation of certain  financial
covenants  under  its  credit  facility  agreement.  The  Company's  lender  has
preserved all of the rights available to it as a result of the Company's default
of these financial covenants.  Consequently, the balance of the revolving credit
loan is classified as a current  liability at June 30, 1997. As a consequence of
this default,  the interest rate paid by the Company under its revolving  credit
loan was  increased  as of April 14,  1997 to 2 1/4% over the prime rate and the
LIBOR rates are no longer  available.  The Company  has  received  notice of the
lender's  intention to terminate the credit facility as of October 31, 1997. The
Company is currently  pursuing  other  lending  options,  as well as  continuing
negotiations with its current lender.

                                       9
<PAGE>

ASSET MANAGEMENT

     Inventory:   Management  attempts  to  maximize  product  availability  and
delivery while  minimizing  inventory levels so as to lessen the risk of product
obsolescence  and price  fluctuations.  Historically,  most  products  have been
stocked to provide a 30 to 45-day  supply.  The Company often reduces  prices of
products in its  inventory  in order to improve its turnover  rate.  The Company
turned its  inventory on an average every 41 days during the first six months of
1997 and every 44 days for the first six months of 1996.  This  decrease  in the
average days in inventory  resulted  from the  Company's  initiative of reducing
aged  inventory  through  either  returning  the goods to vendors  for credit or
selling to customers at reduced prices.  Additionally,  inventory was negatively
affected  in the  first six  months  of 1997 by  shortages  of  working  capital
resulting in the  inability of the Company to maintain  sufficient  inventory of
certain of the Company's products.  The Company takes a physical inventory every
month which is compared to its perpetual inventory and monitors inventory levels
daily according to sales made by product and distribution center.

    Most of the Company's U.S.  suppliers provide price  protection,  by way of
credits,  against  price  reductions  by the  supplier  between  the time of the
initial  sale to the  Company  and the  subsequent  sale by the  Company  to its
customer.  Such suppliers accept defective  merchandise returned within 12 to 15
months  after  shipment to the Company and some permit the Company to rotate its
inventory by returning slow moving inventory for other inventory.

     Accounts  Receivable:  The Company  primarily sells its products on a cash,
     --------------------
C.O.D. or terms of up to 30 days basis.  The Company's  average days' receivable
was  approximately  37 days for the six month  period  ended  June 30,  1997 and
approximately  33 days  for the six  month  period  ended  June 30,  1996.  This
increase in the average days sales receivable resulted primarily from a customer
sale of approximately $8.3 million in May 1997 which was collected subsequent to
June 30, 1997.

MANAGEMENT ESTIMATES

     Financial   statements  prepared  in  conformity  with  generally  accepted
accounting principles  necessitates the use of management estimates.  Management
has estimated  reserves for inventory  obsolescence and  uncollectible  accounts
receivable  based upon  historical and developing  trends,  aging of items,  and
other   information   it  deems   pertinent  to  estimate   collectibility   and
realizability. It is possible that these reserves will change within a year, and
the  effect  of the  change  could be  material  to the  Company's  consolidated
financial statements.

RECENT ACCOUNTING PRONOUNCEMENTS

     The Financial  Accounting Standards Board has issued Statement of Financial
Accounting Standards No. 123, "Accounting for Stock-Based  Compensation",  which
establishes   financial  and  reporting   standards  for  stock-based   employee
compensation plans. The Standard encourages,  but does not require, companies to
recognize  compensation  expense  based  upon the fair  value of grants of stock
options and other equity instruments to employees.  Companies which do not adopt
the expense recognition  provision of the Standard,  must disclose pro forma net
income and earnings per share.  The Company  adopted this  statement  during its
year ended December 31, 1996 and continues to apply the prior accounting rules.

     The Financial  Accounting Standards Board has issued Statement of Financial
Accounting  Standards  No. 121,  "Accounting  for the  impairment  of Long-Lived
Assets  and for  Long-Lived  Assets to be  Disposed  of",  which  requires  that
long-lived assets and certain identifiable intangibles to be held and used by an
entity be reviewed for impairment  whenever  events or changes in  circumstances
indicate  that the  carrying  amount  of an asset  may not be  recoverable.  The
Company  adopted this  statement  during its year ended  December 31, 1996.  The
statement did not have a material impact on the Company's consolidated financial
statements.

     In June 1996, the Financial Accounting Standards Board issued SFAS No. 125,
"Accounting for Transfers and Servicing of Financial  Assets and  Extinguishment
of Liabilities".  This Standard provides consistent standards for distinguishing
transfers of  financial  assets that are sales from  transfers  that are secured
borrowings.  This Standard is effective for transfers and servicing of financial
assets and extinguishment of liabilities  occurring after December 31, 1996. The
adoption of this Standard is not expected to impact the  Company's  consolidated
financial statements.

                                       10
<PAGE>

     In March 1997,  the Financial  Accounting  Standards  Board issued SFAS No.
128,  "Earnings  per Share".  This new Standard  simplifies  the  standards  for
computing earnings per share and requires presentation of two new amounts, basic
and diluted  earnings per share.  The Company will be required to  retroactively
adopt this Standard  when it reports its  operating  results for the quarter and
year ending  December 31,  1997.  The Company does not expect the effect of this
new Standard to be material.

FORWARD-LOOKING INFORMATION MAY PROVE INACCURATE

     This report contains  forward-looking  statements and information  that are
based on management's  beliefs,  as well as assumptions made by, and information
currently  available  to,  management.  When  used in this  document,  the words
"anticipate,"  "believe,"  "estimate" and "expect," and similar  expressions are
intended to  identify  forward-looking  statements.  Such  statements  involve a
number of risks and uncertainties. Among the factors that could cause results to
differ  materially  are the  following:  business  conditions  and growth in the
industry,  general  economic  conditions,   rapid  or  unexpected  technological
changes,  product development,  inventory risks due to shifts in product demand,
competition,  domestic  and  foreign  government  regulations,  fluctuations  in
foreign  exchange  rates,  rising  costs for  components  or  unavailability  of
components,  the timing of orders booked,  and the risk factors listed from time
to time in the Company's SEC reports.

                                       11
<PAGE>



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


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

     The Company held its Annual Meeting of  Stockholders  on July 18, 1997. The
Company's stockholders elected Edwin J. Feinberg and Eric R. Bashford as Class 3
directors,  ratified  the  appointment  of BDO  Seidman,  LLP  as the  Company's
Independent  Auditors  for the  calendar  year ending  December  31,  1997,  and
approved an  amendment  of the 1994 Stock  Option Plan to increase the number of
shares of the Company's Common Stock that may be granted thereunder from 650,000
to 850,000 by the following stockholders' vote:

     (a) Election of Directors

                                   Votes received                   Votes
       Name                 (Net of all votes withheld)            withheld
       ----                 ---------------------------            --------
Edwin J. Feinberg                    3,881,182                      67,345
Eric R. Bashford                     3,881,482                      67,045


     (b) Ratification of the appointment of Independent Public Accountants:

                           For                3,914,066
                           Against               25,061
                           Withheld               9,400


     (c)  Approval of an amendment to the 1994 Stock Option Plan to increase the
number of shares of the  Company's  Common Stock that may be granted  thereunder
from 650,000 to 850,000:

                           For                3,656,268
                           Against              273,119
                           Withheld              19,140


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

     (a) (i) Exhibit 11 (statement concerning computation of per share earnings)
and exhibit 15 (letter concerning  unaudited interim financial  information) are
each hereby  incorporated  by reference  from "Notes to  Condensed  Consolidated
Financial  Statements"  of Part I -  Financial  Information,  Item 1 - Financial
Statements, contained in this Form 10-Q.

        (ii) Exhibit 27 (financial data schedule for the first six months of
1997)

     (b) No reports on Form 8-K were filed by the Registrant  during the quarter
ended June 30, 1997.

                                       12
<PAGE>

                                   SIGNATURES

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


Dated: August 18, 1997


                                         LIUSKI INTERNATIONAL, INC.




                                         By:/s/ Ting Y. Tsai
                                            ------------------------------------
                                            Ting Y. Tsai
                                            Chief Financial Officer


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