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 September 30, 1996

                         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, Georgia             30071
       (Address of principal executive offices)         (Zip Code)

       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 September 30, 1996,  the  Registrant  had 4,380,525  shares of Common
Stock, $.01 par value per share outstanding.
<PAGE>


                                     INDEX




                                                                      Page


PART I - FINANCIAL  INFORMATION


Item I - Financial Statements

      Condensed Consolidated Financial Statements:

      Balance Sheet as of September 30, 1996 (unaudited)
      and December 31, 1995.......................................... 3

      Statements of Income for the three months and nine months
      ended September 30, 1996 and September 30, 1995
      (unaudited).................................................... 4

      Statements of Cash Flows for the nine months ended 
      September 30, 1996 and September 30, 1995 (unaudited).......... 5

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


Item II - Management's Discussion

      Management's Discussion and Analysis of Financial Condition
      and Results of Operations...................................... 8



PART II - OTHER INFORMATION.......................................... 16

                                       2
<PAGE>
                  LUISKI INTERNATIONAL, INC. AND SUBSIDIARIES
                      CONDENSED CONSOLIDATED BALANCE SHEET

                                           September 30,        December 31,
                                               1996                 1995       
                                           -------------        ------------  
                                            (unaudited)


ASSETS

CURRENT
       Cash                                 $   389,308     $       200,989
  Accounts Receivable, 
  net allowance for doubtful 
  accounts of $3,900,000 and 
  $1,050,000, as of 1996 and 1995, 
  respectively                               38,257,324          33,013,943
  Inventories                                44,521,525          43,295,440
  Prepaid Expenses and Other 
  Current Assets                              4,712,599           3,840,889
                                         --------------       -------------

                  TOTAL CURRENT ASSETS       87,880,756          80,351,261


FURNITURE, AUTOS, AND EQUIPMENT, 
  at cost, less Accumulated 
  Depreciation and 
  Amortization of
  $3,369,374 and $2,645,806 
  as of 1996 and 1995, respectively           2,941,773           3,101,973

OTHER ASSETS                                    253,412             254,828
                                                -------             -------
  TOTAL ASSETS                           $   91,075,941     $    83,708,062
                                         ===============    ================

LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES
  Accounts Payable:  Affiliate          $    14,141,121     $      9,245,742
  Accounts Payable:  Trade                   24,121,641           24,491,010
  Accrued Expenses and Other 
  Current Liabilities                         2,072,474            1,964,893
                                        ---------------     ----------------

TOTAL CURRENT LIABILITIES                    40,335,236           35,701,645

REVOLVING CREDIT LOAN                        26,392,150           20,965,263

CAPITAL LEASE OBLIGATIONS                       820,628              702,114
                                        ---------------     ----------------
   TOTAL LIABILITIES                         67,548,014           57,369,022

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                           5,048,957            7,860,070
                                        ---------------       --------------
    TOTAL STOCKHOLDERS' EQUITY               23,527,927           26,339,040
                                        ---------------       --------------
  TOTAL LIABILITIES AND STOCKHOLDERS' 
  EQUITY                                $    91,075,941       $   83,708,062
                                        ===============       ===============

            See notes to condensed consolidated financial statements
 
                                      3
<PAGE>
                  LUISKI INTERNATIONAL, INC. AND SUBSIDIARIES
                   CONDENSED CONSOLIDATED STATEMENT OF INCOME
                                  (Unaudited)

                      Three months ended                 Nine months ended
                        September 30,                      September 30,
                    1996              1995             1996            1995
                    ----              ----             ----            ---- 

Net Sales        $  110,480,302   $96,060,729      $ 310,664,576  $293,441,679

Cost of Sales       102,903,391    88,851,108        289,071,696   271,942,535

Gross Profit          7,576,911     7,209,621         21,592,880    21,499,144

Selling, General 
  and Administrative
  Expenses            9,432,853     6,949,836         23,505,161    21,917,754
                  -------------   -----------    ---------------  ------------

  (Loss) from 
    Operations       (1,855,942)      259,785        (1,912,281)      (418,610)

Other Charges (Net)     671,561       781,066          1,648,832     1,713,540
                  -------------   -----------    --------------  -------------

  Loss before Income 
  Taxes              (2,527,503)     (521,281)       (3,561,113)    (2,132,150)

Income Taxes           (608,000)     (142,870)         (750,000)      (755,000)
                  -------------   -----------     -------------   ------------ 

  Net Loss        $  (1,919,503)  $  (378,411)    $  (2,811,113)  $ (1,377,150)
                  =============   ===========     =============   ============ 

(Loss) per 
 Common and 
 Common Equivalent 
 Shares Outstanding:  
 Primary and Fully 
 Diluted          $       (0.44)  $      (0.09)   $       (0.64)  $      (0.31)
                  =============   ============    =============   ============ 

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






            See notes to condensed consolidated financial statements



                                       4
<PAGE>

                   LUISKI INTERNATIONAL, INC. AND SUBSIDIARIES
                      CONDENSED CONSOLIDATED BALANCE SHEET
                                   (Unaudited)

                                                  Nine months ended
                                                    September 30,
                                                    -------------
 
                                          1996                      1995       
                                          ----                      ----       

CASH FLOWS FROM OPERATING 
ACTIVITIES

Net Loss                      $      (2,811,113)           $   (1,377,150)
Adjustments to reconcile
 Net Loss to Net Cash 
 provided (used) by 
 operating activities
Depreciation and 
 Amortization                           723,251                   694,619

Changes in Operating Assets
 Accounts Receivable                 (5,243,381)               (8,959,845)
Inventories                          (1,226,085)               (5,176,549)
Prepaid Expenses and Other             (871,710)               (1,718,239)
Other Assets                              1,416                    20,375
Changes in Operating Liabilities
Accounts Payable:  Affiliate          4,895,379                (2,315,607)
Accounts Payable and Accrued 
 Expenses                              (261,788)               18,490,168
                                     ----------                ----------
Total Adjustments                    (1,982,918)                1,034,922
Net Cash provided (used) 
 by Operating Activities             (4,794,031)                 (342,228)
                                     ----------                ---------- 

CASH FLOWS FROM INVESTING 
 ACTIVITIES
Capital Expenditures                  (563,051)                 (529,596)

CASH FLOWS FROM FINANCING 
 ACTIVITIES
Proceeds from Revolving 
 Credit Loan                         5,426,887                   804,524
Repayment of Capital 
 Lease Obligations                     118,514                  (321,785)
                                     ---------                 --------- 
Net Cash provided by
 Financing Activities                5,545,401                   482,739
                                     ---------                 ---------

INCREASE/(DECREASE) IN CASH 
 AND CASH EQUIVALENTS                  188,319                  (389,085)
CASH AND CASH 
  EQUIVALENTS:  BEGINNING              200,989                   834,355
                                    ----------                 ---------
CASH AND CASH 
  EQUIVALENTS:  ENDING              $ 389,308                    445,270
                                    ==========                 =========

SUPPLEMENTAL DISCLOSURE 
 OF CASH FLOW INFORMATION
Cash paid during 
 period for Interest                $1,630,259                 $1,621,050
                                    ==========                 ==========

Cash paid during 
 period for Interest                $    -                     $     -
                                    ==========                 ==========

            See notes to condensed consolidated financial statements
 
                                        5
<PAGE>


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


Note 1. Condensed 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 nine month period ended September
30, 1996 are not necessarily  indicative of the results that may be expected for
the  year  ending  December  31,  1996.  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, 1995, which are incorporated
by reference herein.

Note 2. 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  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% of the  eligible
inventory or $15,000,000. 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 September 30, 1996, the Company owed $26,392,150 under
its revolving credit loans.

Note 3. Contingencies
 
     In March  1994,  several  shareholders  of the Company  filed class  action
lawsuits in the United  States  District  Court for the Eastern  District of New
York  against the Company and certain of its  officers  asserting  violation  of
Section 10(b) of the Securities Exchange act of 1934 and Rule 10(b)5 promulgated
thereunder.  These actions,  since consolidated into a single action, purport to
be based on statements  contained in a press release and SEC Form 10-Q issued by
the  Company  in the  latter  part  of  1993  and  is  entitled  "In  re  Liuski
International,  Inc.  Securities  Litigation," Civil Action No. 94-CV-1045.  The
plaintiffs'  consolidated amended complaint asserts that the Company's purported
omissions or  misrepresentations  falsely  inflated  the value of the  Company's
stock.  The plaintiffs  seek to represent  purchasers who acquired the Company's
common stock during various periods, the earliest of which commenced on November
8, 1993 and ended on March 4, 1994.  No class has been  certified  to this date.
The complaint demands damages in an unspecified amount. In September,  1995, the
plaintiffs filed and served a second amended and consolidated complaint.


                                       6

<PAGE>

     On December 4, 1995,  the Company and its named  officers filed a motion to
dismiss  the action for  failure to state a cause of action and failure to plead
fraud with  particularity.  That motion has been fully briefed by both sides and
submitted to the court.  To date,  no decision has been made on the motion.  The
Company also moved for a stay of discovery  pending  determination of the motion
to dismiss.  That motion was  granted by  Magistrate  Judge Boyle by order dated
December 13, 1995. The Company and its named officers intend to defend this suit
vigorously.

                                       7
<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

Nine months ended September 30, 1996 and 1995
---------------------------------------------

     Net Sales:  Net sales for the nine  months  ended  September  30, 1996 were
$310,664,576  representing an increase of $17,222,897  (5.8%) from $ 293,441,679
for the nine  months  ended  September  30,  1995.  Sales from the  distribution
centers in the following regions changed as follows:  Southeast  region,  39.5%;
Northeast region (including Canadian  distribution  center),  (20.6)%;  Mid- and
Southwest region,  (18.7)%;  Western region,  9.5%; Pacific region,  (71.5)% and
Mail Order, (30.5)%. Part of the decrease in the Northeast and Southwest regions
and increase in the  Southeast  region was caused by crediting  corporate  sales
previously  allocated to New York to Georgia in conjunction  with the relocation
of corporate sales personnel to the Georgia office.

     At the  beginning  of March,  1996,  the Company  changed its  computerized
management  information  systems software.  As a result of this transition,  the
Company  experienced  problems  that  adversely  impacted its ability to process
orders and ship  products,  which  negatively  impacted  sales during the second
quarter.  Sales were also affected as a result of increased pricing to allow for
the recovery of shipping costs related to certain heavy low margin products.  To
a lesser  extent,  sales during the nine months ended  September 30, 1996,  were
negatively  affected by the  shortages the Company  experienced  with respect to
certain multimedia kits.

     Sales of the Company's  Magitronic brand of personal computers and notebook
computers for the nine months ended September 30, 1996, increased to $66,417,372
(21.4% of net sales) from $49,732,256  (16.9 % of net sales) for the nine months
ended  September  30, 1995.  The Company  believes that the increase in sales of
these  products  was due to the  success  of the  Company's  high  end  notebook
computers,  competitive pricing, fast delivery of custom-made systems as well as
the growing  acceptance  of the  Company's  Magitronic  brand in the market.  In
addition,  sales of Magitronic computers for the nine months ended September 30,
1995, were negatively affected by production problems associated with relocating
the Company's assembly operations from Melville, New York, to Norcross, Georgia.
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. To enhance the visibility of Magitronic  products,  in January,  1996, the
Company created a separate  Magitronic  division that will focus on distributing
Magitronic products through new distribution channels including third party mail
order  businesses and other  distributors.  Sales of this division through these
new distribution channels was $2,543,517 for the nine months ended September 30,
1996.  Because the Company is attempting to  distribute  products  through third
party mail order businesses, the Company discontinued its own mail order efforts
in June of 1996.

                                       8

<PAGE>

     While the Company  distributes  products from more than 70 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 third  calendar  quarter  is  generally  a period of  stronger  net sales in
comparison to the first two quarters of the year.

     Gross Profit: Gross profit increased by $93,736 to $21,592,880 (6.9% of net
sales) for the nine months ended September 30, 1996, from  $21,499,144  (7.3% of
net  sales) for the nine  months  ended  September  30,  1995.  During the third
quarter of 1996, the Company re-examined its methods of assessing and estimating
the adequacy of allowances for doubtful  vendor  receivables and determined that
such  allowances  were  inadequate  and needed to be increased.  The lower gross
margin as a  percentage  of net sales was  primarily  a result of  increases  in
reserves  and  writeoffs  with  respect to vendor  related  receivables  such as
rebates, returns, price protection and co-operative advertising in the amount of
$2,160,808  (0.7% of net  sales).  The  Company  also  increased  its  inventory
obsolescence  reserve  in the  amount of  $203,000  (0.1% of net  sales).  These
increases in reserves and writeoffs were somewhat offset by increased  levels of
sales of Magitronic personal computers and notebook  computers,  which generally
have  higher  margins.  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:  In  1995,  the  Company
initiated  and  completed a strategic  streamlining  program  that  included the
relocation of the Company's  corporate  headquarters and assembly  operations as
well  as the  restructuring  and  consolidation  of the  Company's  distribution
system.  Prior to the  streamlining  program,  the  Company's  headquarters  and
primary  assembly  facility  were  located in  Melville  (NY) and the  Company's
products were supplied from ten distribution  centers.  During 1995, the Company
moved its  headquarters  and primary  assembly  operations  to Norcross (GA) and
consolidated  its   distribution   centers  from  ten  to  four.  The  strategic
streamlining program was implemented to provide the Company with the opportunity
to improve operating efficiencies and economies of scale.

     For the  nine  months  ended  September  30,  1996,  selling,  general  and
administrative  expenses  increased by  $1,587,407 to  $23,505,161  (7.6% of net
sales) from $21,917,754  (7.5% of net sales) for the nine months ended September
30,  1995.  Due to its  expansion  of  extending  credit and growth in accounts
receivables  in total and in age,  in the third  quarter  of 1996,  the  Company
re-examined its method of assessing the adequacy of its allowance for doubtful
accounts  receivable and determined that such allowance  needed to be increased.
The allowance  increased by $2,850,000  (0.9% of net sales).  This increase was,
however,  somewhat  offset  by  the  efficiencies  generated  by  the  strategic
streamlining program, as well as the nonrecurrance of $995,000 in costs incurred
through  September  30,1995,  to implement this program.  Additional  savings of
approximately  $200,000 were achieved through reductions of rent,  telephone and
other office expenses. Salaries,  employment taxes and employee benefits for the
nine months ended September 30, 1996,  decreased to $13,096,125 from $13,954,646
for the nine months ended September 30, 1995.

                                       9
<PAGE>


     Other Charges:  Net interest  expense  increased to $1,653,577 for the nine
months ended  September 30, 1996,  from  $1,559,034 for the first nine months of
1995 as a  result  of  increased  borrowings,  which  was  partially  offset  by
decreases in interest costs due to the Company's new revolving  credit loan. The
interest rate paid by the Company under its revolving  credit loan was 1/4% over
the prime rate or 125 basis points over LIBOR.

     Net Loss:  Net loss  increased by $1,433,963  to  $2,811,113  (-0.9% of net
sales)  for the  nine  months  ended  September  30,  1996,  from a net  loss of
$1,377,150 (0.5 % of net sales) for the nine months ended September 30, 1995.

                                       10
<PAGE>


Three months ended September 30, 1996 and 1995
----------------------------------------------


     Net  Sales:  Net  sales for the three months ended September 30, 1996, were
$110,480,302  representing an increase of $14,419,573  (15.1%) from  $96,060,729
for the three  months ended  September  30,  1995.  Sales from the  distribution
centers in the following regions changed as follows:  Southeast  region,  59.2%;
Northeast region (including Canadian  distribution  center),  (15.5)%;  Mid- and
Southwest region,  (5.7)%;  Western region,  16.8%; Pacific region,  (65.9)% and
Mail Order,  (99.0)%.  The mail order business was  discontinued in June,  1996.
Although  the  Company's  business is not highly  seasonal,  the third  calendar
quarter is generally a period of stronger net sales in  comparison  to the first
two quarters of the year.

     Sales of the Company's  Magitronic brand of personal computers and notebook
computers  for  the  three  months  ended  September  30,  1996,   increased  to
$23,160,758  (21.0% of net sales) from $17,931,008  (18.7% of net sales) for the
three months ended September 30, 1995.  Sales of Magitronic  personal  computers
during the third quarter of 1995 were affected by production  problems resulting
from the relocation of the assembly  facilities from New York to Georgia.  These
production problems included longer delivery times and quality control issues.


     Gross Profit: Gross profit increased by $367,290 to $7,576,911 (6.9% of net
sales) for the three months ended September 30, 1996,  from $7,209,621  (7.5% of
net sales) for the three  months  ended  September  30,  1995.  During the third
quarter of 1996, the Company re-examined its methods of assessing and estimating
the adequacy of allowances for doubtful  vendor  receivables and determined that
such  allowances  were  inadequate  and needed to be increased.  The lower gross
margin as a  percentage  of net sales was  primarily  a result of  increases  in
reserves with respect to vendor related  receivables  such as rebates,  returns,
price protection and co-operative advertising in the amount of $585,022 (0.5% of
net sales). The company also increased its inventory obsolescence reserve in the
amount of  $203,000  (0.1% of net  sales).  These  increases  in  reserves  were
somewhat offset by increased  levels of sales of Magitronic  personal  computers
and notebook computers,  which generally have higher margins.  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: As previously mentioned, in
1995, the Company initiated and completed a strategic  streamlining program that
included the  relocation of the Company's  corporate  headquarters  and assembly
operations  as well as the  restructuring  and  consolidation  of the  Company's
distribution system.

     For the three  months  ended  September  30,  1996,  selling,  general  and
administrative  expenses  increased by  $2,483,017  to  $9,432,853  (8.5% of net
sales) from $6,949,836  (7.2% of net sales) for the three months ended September
30,  1995.  Due to it's  expansion  of  extending  credit and growth in accounts
receivables  in total and in age,  in the third  quarter  of 1996,  the  Company
re-examined it's method of assessing the adequacy of it's allowance for doubtful
accounts  receivable and determined that such allowance  needed to be increased.
The allowance  increased by $1,625,000  (1.5% of net sales).  Additionally,  the
Company  recorded  direct  writeoffs  for bad debt which  totaled  approximately
$550,000. Salaries, employment taxes, and employee benefits for the three months
ended September 30, 1996,  decreased to $4,618,165 from $4,650,990 for the three
months ended September 30, 1995.

 
                                       11
<PAGE>

    Other  Charges: Net  interest  expense  increased to $666,739 for the three
months ended  September 30, 1996, from $681,350 for the third quarter of 1995 as
a result of increased  borrowings,  which was  partially  offset by decreases in
interest costs due to the Company's new revolving credit loan. The interest rate
paid by the Company under its revolving credit loan was 1/4% over the prime rate
or 125 basis points over LIBOR.

     Net Loss:  Net loss  increased by $1,541,092  to  $1,919,503  (-1.7% of net
sales)  for the  three  months  ended  September  30,  1996,  from a net loss of
$378,411 (0.4 % of net sales) for the three months ended September 30, 1995.

                                       12

<PAGE>

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
nine months ended September 30, 1996, net cash used by operating  activities was
$5,876,568 compared to net cash used by operating activities of $342,228 for the
nine months ended September 30, 1995. The change in net cash flow from operating
activities  between the nine months ended  September  30, 1996 and September 30,
1995,  in the  amount of  $5,534,340,  was  primarily  due to  higher  growth in
accounts receivable and inventories.  In addition,  one of the Company's vendors
provided a special discount to pay early for a large purchase of inventory.  The
Company may experience  shifts in cash flow in the future,  particularly  if its
suppliers  provide more  restrictive  credit terms than the Company is currently
afforded.  For the nine month periods ended September 30, 1996 and September 30,
1995, the Company generally paid its suppliers approximately 35-40 days from the
date of invoice.  Terms vary from 1 day to 60 days. The Company takes most early
pay discounts when offered.

     Working capital was $47,545,520 as of September 30, 1996 and $44,649,616 as
of  December 31, 1995.  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  $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 September  30, 1996 and  December  31,  1995,  the Company owed
$26,392,150 and $20,965,263, respectively, under its revolving credit loans. The
Company has no obligations under letters of credit at September 30, 1996 and had
no such obligations outstanding as of December 31, 1995, leaving an availability
under its  revolving  credit loan of  $8,607,850  on  September  30,  1996,  and
$14,034,737 on December 31, 1995.

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.  Most products are 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 44 days during the first nine months of 1996 and 1995. The Company
takes a physical  inventory  monthly,  which is then  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.

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<PAGE>

     Accounts  Receivable:  The Company  primarily sells its products on a cash,
C.O.D., or terms of up-to-30 days basis,  however, the Company has expanded it's
extension  of  credit  terms.   The  Company's   average  days'  receivable  was
approximately  31 days for the nine month period ended  September 30, 1996,  and
approximately  20 days for the nine month period ended  September 30, 1995. This
increase in the average days sales receivable results from the Company extending
credit to more of its customers.


MANAGEMENT ESTIMATES

     Financial   statements  prepared  in  conformity  with  generally  accepted
accounting principles  necessitate 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

     Stock Based  Compensation:  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 Company intends to adopt this
statement  during its year  ending  December  31,  1996.  Other than  additional
disclosures in the financial statements regarding stock options granted pursuant
to the Company's 1991 and 1994 Stock Option Plans,  this statement will not have
an effect on the Company's consolidated financial statements.

     Long-Lived  Assets:  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 intends to adopt this statement during the year ending
December  31,  1996.  Management  does not believe  this  statement  will have a
material impact on the Company's consolidated financial statements.

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<PAGE>

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.

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<PAGE>


 
                           PART II - OTHER INFORMATION



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 nine months of
1996)


     (b) No reports on Form 8-K were filed by the  Registrant  during the period
ended September 30, 1996.

                                       16

<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: November 18, 1996


                                        LIUSKI INTERNATIONAL, INC.




                                        By: /s/Hsing-Yen Liu                
                                        ------------------------
                                            Hsing-Yen Liu
                                            Chairman

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