<PAGE>

                          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

    For the quarterly period ended June 28, 1997


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

            For the transition period from _____________ to _____________

Commission File Number: 0-19902


                              DAMARK INTERNATIONAL, INC.
                (Exact name of Registrant as specified in its charter)

          Minnesota                                              41-1551116
(State or other jurisdiction of                               (I.R.S. Employer 
 incorporation or organization)                              Identification No.)

                              7101 Winnetka Avenue North
                            Minneapolis, Minnesota  55428
                       (Address of principal executive offices)
                                      (Zip code)

                                    (612) 531-0066
                 (Registrant's telephone number, including area code)

                                    Not Applicable
                 (Former name, former address and former fiscal year, 
                            if changed since last report)

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

    Yes   X         No
        ------         ------

On August 11, 1997, there were 8,015,815 shares of Class A Common Stock, $.01
par value, of Damark International, Inc. outstanding.

<PAGE>

                              DAMARK INTERNATIONAL, INC.

                                        INDEX
                                        -----

PART  I.  FINANCIAL INFORMATION                                            PAGE
                                                                           ----
    Item 1:   Financial Statements.

              Consolidated Statements of Operations
              For the Quarter and First Half ended June 28, 1997
              and June 29, 1996                                              1

              Consolidated Balance Sheets
              As of June 28, 1997 and December 31, 1996                      2

              Consolidated Statements of Cash Flows
              For the First Half ended June 28, 1997 and June 29, 1996       3

              Notes to Consolidated Financial Statements                     4

    Item 2:   Management's Discussion and Analysis of
              Financial Condition and Results of Operations                  6

PART II.  OTHER INFORMATION

    Item 4:   Submission of Matters to a Vote of Security Holders           10

    Item 6:   Exhibits and Reports on Form 8-K                              10

<PAGE>

                              DAMARK INTERNATIONAL, INC.

                        CONSOLIDATED STATEMENTS OF OPERATIONS
                   (AMOUNTS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
                                     (UNAUDITED)

<TABLE>
<CAPTION>
                                                                 Quarter Ended             First Half Ended
                                                            -----------------------     -----------------------
                                                             June 28,     June 29,       June 28,     June 29,
                                                               1997         1996           1997         1996
                                                            ----------   ----------     ----------   ----------
<S>                                                          <C>          <C>            <C>          <C>
Net revenues  . . . . . . . . . . . . . . . . . . . . . . .  $147,494     $124,133       $276,116     $241,030
Cost of products and services . . . . . . . . . . . . . . .   105,738       89,203        198,962      174,655
                                                            ----------   ----------     ----------   ----------
   Gross profit . . . . . . . . . . . . . . . . . . . . . .    41,756       34,930         77,154       66,375
Marketing and administrative expenses . . . . . . . . . . .    38,172       32,695         72,800       64,414
                                                            ----------   ----------     ----------   ----------
   Operating income . . . . . . . . . . . . . . . . . . . .     3,584        2,235          4,354        1,961
Interest income (expense), net  . . . . . . . . . . . . . .      (278)          89           (455)          74
Other income (expense), net . . . . . . . . . . . . . . . .       (66)           8            (52)          13
                                                            ----------   ----------     ----------   ----------
   Income before income taxes . . . . . . . . . . . . . . .     3,240        2,332          3,847        2,048
Income tax provision  . . . . . . . . . . . . . . . . . . .    (1,101)        (816)        (1,307)        (717)
                                                            ----------   ----------     ----------   ----------
   Net income . . . . . . . . . . . . . . . . . . . . . . .  $  2,139     $  1,516       $  2,540     $  1,331
                                                            ----------   ----------     ----------   ----------
                                                            ----------   ----------     ----------   ----------

   Earnings Per Share:
       Net income per common share  . . . . . . . . . . . .  $    .25       $  .17       $    .30     $    .15

       Weighted average number of common and dilutive
       common equivalent shares outstanding . . . . . . . .     8,595        8,930          8,502        8,815
                                                            ----------   ----------     ----------   ----------
                                                            ----------   ----------     ----------   ----------
</TABLE>

             See accompanying notes to consolidated financial statements.

                                          1
<PAGE>

                              DAMARK INTERNATIONAL, INC.

                             CONSOLIDATED BALANCE SHEETS
                             (DOLLAR AMOUNTS IN THOUSANDS)
                                     (UNAUDITED)

                                         ASSETS

<TABLE>
<CAPTION>
                                                        June 28,    December 31,
                                                         1997           1996
                                                      ----------     ----------
<S>                                                    <C>            <C>
Current Assets:
  Cash and cash equivalents . . . . . . . . . . . . .  $     36       $      2
  Trade accounts receivable, net. . . . . . . . . . .    46,605         30,985
  Due from vendors and other, net . . . . . . . . . .     5,799          6,602
  Merchandise inventories . . . . . . . . . . . . . .    74,060         53,016
  Deferred catalog costs. . . . . . . . . . . . . . .    10,528          6,613
  Other . . . . . . . . . . . . . . . . . . . . . . .     1,404          1,257
                                                      ----------     ----------
    Total current assets. . . . . . . . . . . . . . .   138,432         98,475

Property and Equipment, net . . . . . . . . . . . . .    35,950         35,904
Intangible and Other Assets, net. . . . . . . . . . .     8,029          8,411
                                                      ----------     ----------
                                                       $182,411       $142,790
                                                      ----------     ----------
                                                      ----------     ----------

                         LIABILITIES AND SHAREHOLDERS' EQUITY

Current Liabilities:
  Accounts payable. . . . . . . . . . . . . . . . . .  $ 68,628       $ 41,880
  Accrued liabilities . . . . . . . . . . . . . . . .    14,965         15,226
  Deferred membership income, net . . . . . . . . . .    16,661         16,292
  Deferred income taxes . . . . . . . . . . . . . . .     2,413          2,413
  Borrowings under revolving credit facility. . . . .    13,600          3,000
                                                      ----------     ----------
    Total current liabilities . . . . . . . . . . . .   116,267         78,811

Deferred Income Taxes . . . . . . . . . . . . . . . .     1,435          1,435
                                                      ----------     ----------

Shareholders' Equity:
  Class A Common Stock, $.01 par, 20 million shares
    authorized; 8,015,815 and 8,052,147 shares issued 
    and outstanding at June 28, 1997 and December 31, 
    1996, respectively. . . . . . . . . . . . . . . .        81             81
  Class B Common Stock, $.01 par, 2 million shares                         
    authorized; none issued and outstanding . . . . .        --             --
  Paid-in capital . . . . . . . . . . . . . . . . . .    75,262         75,637
  Accumulated deficit . . . . . . . . . . . . . . . .   (10,634)       (13,174)
                                                      ----------     ----------
    Total shareholders' equity  . . . . . . . . . . .    64,709         62,544
                                                      ----------     ----------
                                                       $182,411       $142,790
                                                      ----------     ----------
                                                      ----------     ----------
</TABLE>

             See accompanying notes to consolidated financial statements.

                                          2
<PAGE>

                              DAMARK INTERNATIONAL, INC.

                        CONSOLIDATED STATEMENTS OF CASH FLOWS
                            (DOLLAR AMOUNTS IN THOUSANDS)
                                     (UNAUDITED)

<TABLE>
<CAPTION>
                                                                      First Half Ended
                                                                 -------------------------
                                                                   June 28,       June 29,
                                                                     1997           1996
                                                                 -----------    ----------
<S>                                                               <C>            <C>
OPERATING ACTIVITIES:
     Net income  . . . . . . . . . . . . . . . . . . . . . . . .  $  2,540       $ 1,331
    Adjustments to reconcile net income to net cash provided
       by (used in) operating activities:
         Depreciation and amortization . . . . . . . . . . . . .     3,898         3,467
         Gain on sale of land  . . . . . . . . . . . . . . . . .      (152)           --
         Changes in working capital items -
            Receivables  . . . . . . . . . . . . . . . . . . . .   (14,817)        4,241
            Merchandise inventories  . . . . . . . . . . . . . .   (21,044)       (2,831)
            Deferred catalog costs and other current assets  . .    (4,062)       (1,213)
            Accounts payable and accrued liabilities . . . . . .    26,487        (1,375)
            Deferred membership income . . . . . . . . . . . . .       369         1,323
                                                                 -----------    ----------
            Net cash provided by (used in) operating activities.    (6,781)        4,943
                                                                 -----------    ----------

INVESTING ACTIVITIES:
    Property and equipment additions, net  . . . . . . . . . . .    (3,340)       (2,844)
    Other, net . . . . . . . . . . . . . . . . . . . . . . . . .       (70)         (671)
                                                                 -----------    ----------
            Net cash used in investing activities  . . . . . . .    (3,410)       (3,515)
                                                                 -----------    ----------

FINANCING ACTIVITIES:
    Borrowings under revolving credit facility, net  . . . . . .    10,600            --
    Payments on long term debt . . . . . . . . . . . . . . . . .        --          (250)
    Repurchase and retirement of common stock  . . . . . . . . .      (454)       (3,757)
    Net proceeds from employee exercise of stock options . . . .        79           131
                                                                 -----------    ----------
            Net cash provided by (used in) financing activities.    10,225        (3,876)
                                                                 -----------    ----------
            Increase (decrease) in cash and cash equivalents . .        34        (2,448)

    Cash and cash equivalents, beginning of period . . . . . . .         2         8,670
                                                                 -----------    ----------
    Cash and cash equivalents, end of period . . . . . . . . . .  $     36       $ 6,222
                                                                 -----------    ----------
                                                                 -----------    ----------
SUPPLEMENTAL CASH FLOW  INFORMATION:
    Interest paid during the period  . . . . . . . . . . . . . .  $    240       $    50
    Income taxes paid during the period  . . . . . . . . . . . .       630           875
                                                                 -----------    ----------
                                                                 -----------    ----------
</TABLE>

             See accompanying notes to consolidated financial statements.

                                          3
<PAGE>

                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                           
 1) BASIS OF PRESENTATION

    The consolidated financial statements included herein have been prepared 
    by Damark International, Inc. (the "Company") without audit, pursuant to 
    the rules and regulations of the Securities and Exchange Commission.  The 
    information furnished in these financial statements includes normal 
    recurring adjustments and reflects all adjustments which, in the opinion 
    of management, are necessary for a fair presentation of such financial 
    statements.  Certain information and footnote disclosures normally 
    included in financial statements prepared in accordance with generally 
    accepted accounting principles have been condensed or omitted pursuant to 
    such rules and regulations.  Although the Company believes that the 
    disclosures are adequate to make the information presented not 
    misleading, it is suggested that these financial statements be read in 
    conjunction with the audited consolidated financial statements and notes 
    thereto included in the Company's 1996 Annual Report to Shareholders and 
    the Form 10-K filed with the Securities and Exchange Commission.

    Due to the seasonality of the Company's business, net revenues and 
    operating results for the quarter and first half ended June 28, 1997 are 
    not necessarily indicative of the results to be expected for the full 
    year.

    The Company's fiscal year ends on December 31; however, each quarter ends 
    on the last Saturday of a thirteen week period.  As a result, the 
    operating results for the first half of 1997 and 1996 included 179 and 
    181 days, respectively.  In the Company's opinion, this difference in 
    days does not materially affect the comparability of the financial 
    results for the periods presented.

(2) EARNINGS PER COMMON SHARE

    Primary and fully diluted earnings per common share are based on the 
    weighted average number of common and common equivalent shares 
    outstanding during each period.  Common equivalent shares include, among 
    others, the dilutive effect of stock options which are assumed to be 
    exercised or converted into common shares as of the beginning of the 
    applicable period. Fully diluted earnings per share did not differ 
    significantly from primary earnings per share for any period presented.

    On March 3, 1997, the Financial Accounting Standards Board released 
    Statement of Financial Accounting Standards No. 128, "Earnings Per Share" 
    ("FASB No. 128"). FASB No. 128 establishes standards for computing and 
    presenting earnings per share ("EPS") and is effective December 15, 1997. 
     Under FASB No. 128, the presentation of primary EPS is replaced with a 
    presentation of basic EPS and fully diluted EPS is replaced with diluted 
    EPS.  Although early adoption of FASB No. 128 is not permitted, FASB No. 
    128 requires the restatement of prior years' earnings per share amounts.  
    Earnings per share, determined in accordance with FASB No. 128, would 
    have been as follows for the second quarter and first half of 1997 and 
    1996:

                                                  Basic         Diluted
                     Quarter Ended                 EPS             EPS
              ------------------------------    ---------      ----------
              June 28, 1997. . . . . . . . .      $.27           $.25

              June 29, 1996. . . . . . . . .       .18            .17
                                                ---------      ----------
                                                ---------      ----------

                     First Half Ended
              ------------------------------
              June 28, 1997. . . . . . . . .      $.32           $.30

              June 29, 1996. . . . . . . . .       .15            .15
                                                ---------      ----------
                                                ---------      ----------

                                          4
<PAGE>

                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                     (CONTINUED)

(3) FINANCING ARRANGEMENTS

    In June 1997, the Company amended its bank credit facility.  The Company 
    currently has a $50 million credit facility, consisting of a revolving 
    line of credit and letter of credit facility available through March 
    1999.  The credit facility includes a $45 million sublimit available for 
    working capital and stand-by letter of credit requirements with the 
    entire facility available for documentary letters of credit, in each case 
    subject to a defined borrowing base. Borrowings outstanding under the 
    line of credit bear interest, at the Company's option, at the prime rate 
    of interest or LIBOR plus 1.75% and are collateralized by receivables, 
    inventories, intangible assets and property and equipment other than 
    buildings, land and vehicles. At June 28, 1997, the Company had 
    borrowings outstanding of $13.6 million under its revolving line of 
    credit and letters of credit outstanding of $5.9 million.

    The agreement with respect to the credit facility includes covenants 
    which, among other matters, require the Company to satisfy certain 
    financial tests and ratios and places certain limitations on the 
    incurrence of additional indebtedness and the level of capital 
    expenditures.  The Company is in compliance with all covenants of its 
    credit facility at June 28, 1997.

(4) COMMITMENTS AND CONTINGENCIES

    During first half 1997, stock option transactions were as follows:

<TABLE>
<CAPTION>
                                                               Weighted Average
                                                   Shares       Exercise Price
                                                -----------    -----------------
    <S>                                        <C>            <C>
    Options outstanding, January 1, 1997 . .     1,188,672         $  8.31
      Options granted. . . . . . . . . . . .        64,000           13.15
      Options canceled . . . . . . . . . . .        (8,335)           8.11
      Options exercised. . . . . . . . . . .       (11,168)           7.11
                                                -----------      ----------
    Options outstanding, June 28, 1997 . . .     1,233,169         $  8.56
                                                -----------      ----------
                                                -----------      ----------

    Options exercisable, June 28, 1997 . . .       768,185         $  8.19
                                                -----------      ----------
                                                -----------      ----------
</TABLE>

(5) COMMON STOCK

    During the first half of 1997 and 1996, the Company repurchased 47,500 
    and 508,000 shares, respectively, of its Class A Common Stock in open 
    market transactions. 

                                           5
<PAGE>

                   MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
                         CONDITION AND RESULTS OF OPERATIONS

RESULTS OF OPERATIONS

The selected financial data presented below under the caption "Statements of 
Operations Data" for each of the periods presented are derived from the 
Company's consolidated financial statements and express the specific item 
noted as a percentage of the Company's net revenues for the applicable 
period. 

<TABLE>
<CAPTION>
                                                 Second Quarter        First Half
                                               ------------------  -------------------
                                                1997       1996      1997     1996
                                               --------  --------  --------  ---------
    <S>                                         <C>       <C>       <C>       <C>
    STATEMENTS OF OPERATIONS DATA:
        Net revenues . . . . . . . . . . . . .   100.0%    100.0%    100.0%    100.0%
        Gross profit . . . . . . . . . . . . .    28.3      28.1      27.9      27.5
        Marketing and administrative expenses.    25.9      26.3      26.4      26.7
        Operating income . . . . . . . . . . .     2.4       1.8       1.6       0.8
        Net income . . . . . . . . . . . . . .     1.5       1.2       0.9       0.6
                                               --------  --------  --------  ---------
                                               --------  --------  --------  ---------
</TABLE>

Net revenues for second quarter 1997 of $147.5 million increased $ 23.4 
million, or 18.8%, as compared with net revenues for second quarter 1996.  
This increase in net revenues was primarily the result of an increase in 
overall circulation from 34.1 million catalogs mailed during second quarter 
1996 to 40.4 million catalogs mailed during second quarter 1997 and an 
increase in sales per catalog mailed to $3.76, as compared with sales 
productivity per catalog mailed of $3.71 in second quarter 1996.  The sales 
productivity, on a per catalog basis, in second quarter 1997 reflects the 
increased mix of product sales to members of the Company's club, members 
generally have the highest sales productivity rate, to 49% of product sales, 
as compared with 46% of product sales in second quarter 1996 and the 
availability of more flexible installment billing plans being offered to its 
customers.

During first half 1997, net revenues of $276.1 million increased by $35.1 
million or 14.6%, as compared to $241.0 million in first half 1996.  This 
increase in net revenues was primarily the result of the increase in catalogs 
mailed in first half 1997, as compared to first half 1996 and an increase in 
sales per catalog mailed to $3.88 in first half 1997, as compared to $3.69 
per catalog mailed in first half 1996 

<TABLE>
<CAPTION>
                                                      Second Quarter        First Half
                                                    ------------------  -------------------
                                                      1997       1996      1997     1996
                                                    --------  --------  --------  ---------
    <S>                                              <C>       <C>       <C>       <C>
    CATALOG STATISTICS:
      Number of catalogs mailed (in thousands) . .   40,400    34,100    75,000    67,800
      Average order - total company. . . . . . . .   $  180    $  168    $  176    $  168
      Response rate - total company. . . . . . . .     2.09%     2.21%     2.21%     2.19%
      Sales per catalog:
         Front-end (new) customers . . . . . . . .    $1.86     $2.06     $1.93     $2.07
         Non-club (back-end) customers . . . . . .    $3.57     $3.24     $3.57     $3.40
         Club (back-end) customers . . . . . . . .    $9.71     $8.51     $9.01     $8.02
         Total company . . . . . . . . . . . . . .    $3.76     $3.71     $3.88     $3.69
                                                    --------  --------  --------  ---------
                                                    --------  --------  --------  ---------
</TABLE>

Product returns from customers decreased to 14.3% of gross product sales in 
second quarter 1997, as compared with 15.4% in second quarter 1996, due 
primarily to reduced product returns in the computer and electronic 
categories. During second quarter, the Company implemented a revised product 
return policy which, among other things, generally shortened the overall 
period for which customers were allowed to return products .  Product returns 
for first half 1997 were 15.0%, consistent with the overall product return 
rate for first half 1996.

                                          6
<PAGE>

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

In addition to product shipments, net revenues include membership fees earned 
from the Company's clubs.  These fees increased from $12.4 million in second 
quarter 1996 to $15.7 million in second quarter 1997.  Approximately 185,000 
new club members were added during second quarter 1997, as compared with 
134,000 new members in second quarter 1996.  The increase in new members 
added during second quarter 1997 was primarily the result of  the success of 
the Vacation Passport and Insiders' clubs which were introduced during the 
last half of 1996.  During second quarter 1997, the number of members 
renewing their membership for an additional year continued to increase as 
195,000 members renewed during second quarter 1997, as compared with 177,000 
members in second quarter 1996.  Total club membership was 1,134,000 at June 
28, 1997, as compared with 1,015,000 members at June 29, 1996.

<TABLE>
<CAPTION>
                                                        Second Quarter            First Half
                                                    ----------------------  -----------------------
                                                       1997       1996         1997        1996
                                                    ----------  ----------  ----------  -----------
    <S>                                              <C>        <C>         <C>         <C>
    MEMBERSHIP STATISTICS:
      Members, at period end . . . . . . . . . . .  1,134,000   1,015,000   1,134,000   1,015,000
      Number of new members. . . . . . . . . . . .    185,000     134,000     364,000     244,000
      Number of members renewed. . . . . . . . . .    195,000     177,000     392,000     361,000
                                                    ----------  ----------  ----------  -----------
                                                    ----------  ----------  ----------  -----------
</TABLE>

The Company's overall product profit margin is affected by the mix of sales 
of the six primary product categories which the Company sells, the mix of 
sales to Preferred Buyers' Club and Insiders' Club members who receive a 10% 
discount, and shipping and handling  revenue.  Products with higher price 
points, such as computers, consumer electronics and home office products, 
generally have lower percentage profit margins but provide higher actual 
dollar margin contribution per unit.  Conversely, products with lower price 
points, such as home decor, home improvement and sports/fitness products, 
generally have higher percentage profit margins but provide less actual 
dollar margin contribution per unit.
<TABLE>
<CAPTION>
                                                      Second Quarter        First Half
                                                    ------------------  -------------------
                                                      1997       1996      1997     1996
                                                    --------  --------  --------  ---------
    <S>                                              <C>       <C>       <C>       <C>
    PERCENT OF SALES BY CUSTOMER SEGMENT:
       Front-end customers . . . . . . . . . . . . .    28%       28%       26%       30%
       Non-club customers. . . . . . . . . . . . . .    23        26        24        24
       Club customers. . . . . . . . . . . . . . . .    49        46        50        46
                                                    --------  --------  --------  ---------
                                                       100%      100%    100.0%    100.0%
                                                    --------  --------  --------  ---------
                                                    --------  --------  --------  ---------

     PERCENT OF SALES BY PRODUCT SEGMENT:
       Computers . . . . . . . . . . . . . . . . . .  31.7%     29.1%     32.1%     30.6%
       Home Office . . . . . . . . . . . . . . . . .  13.7      15.7      14.9      17.2
       Consumer Electronics. . . . . . . . . . . . .  17.9      16.8      17.8      16.8
       Home Decor. . . . . . . . . . . . . . . . . .  13.2      13.1      13.6      12.5
       Home Improvements . . . . . . . . . . . . . .  16.8      16.0      15.2      14.3
       Sports/Fitness. . . . . . . . . . . . . . . .   6.7       9.3       6.4       8.6
                                                    --------  --------  --------  ---------
                                                     100.0%    100.0%    100.0%    100.0%
                                                    --------  --------  --------  ---------
                                                    --------  --------  --------  ---------
</TABLE>

The overall gross profit margin, as a percentage of net revenues, increased 
to 28.3% in second quarter 1997, as compared with 28.1% for second quarter 
1996 and increased to 27.9% in first half 1997, as compared to 27.5% in first 
half 1996, primarily as a result of the increase in new club members and 
increased membership fees received from the larger number of renewing club 
members.  The increased product margins realized during the second quarter 
and first half of 1997, as compared with comparable periods in 1996, were 
partially offset by a higher mix of product sales to Preferred Buyers' Club 
and Insiders' members and the increased sales mix of lower margin computer 
and other electronics products.

                                          7
<PAGE>

Marketing and administrative expenses totaled $38.2 million, or 25.9% of net 
revenues, in second quarter 1997, as compared with $32.7 million, or 26.3% of 
net revenues,  in second quarter 1996.  This decrease in selling and 
administrative expenses, as a percent of net revenue is the result of greater 
advertising leverage during second quarter 1997 due to an increase in average 
order and sales productivity rates which resulted from increased installment 
plan sales and  increased sales mix to club customers.  On a year to date 
basis, marketing and administrative expenses decreased, as a percent of net 
revenues, from 26.7% in first half 1996 to 26.3% in first half 1997.  The 
Company is continuing to incur additional administrative and other costs in 
connection with the expansion of its infrastructure capabilities and 
information technology resources.

The Company reported net interest expense of $278,000 in second quarter 1997, 
resulting from interest costs associated with increased borrowings under the 
Company's bank credit facility.  Currently, the Company is experiencing 
increased working capital requirements as a result of its increased 
receivable and inventory levels.  In second quarter 1996, the Company 
reported net interest income of $89,000, primarily as a result of income 
earned from short term investment of its excess cash.

The Company's effective tax rate was 34.0% and 35.0% for second quarter 1997 
and 1996, respectively.

As a result of the above factors, the Company reported net income of $2.1 
million, or $.25 per share, for second quarter 1997, as compared with net 
income of $1.5 million, or $.17 per share, for second quarter 1996.  For 
first half 1997, the Company reported net income of $2.5 million or $0.30 per 
share, as compared to $1.3 million or $0.15 per share in first half 1996.  
The weighted average number of common shares outstanding during second 
quarter 1997 decreased to 8.6 million shares, as compared with 8.9 million 
shares outstanding during second quarter 1996, primarily as a result of the 
Company's ongoing stock repurchase program.

LIQUIDITY AND CAPITAL RESOURCES 

The Company's liquidity, as measured by its net working capital, was $22.2 
million at June 28, 1997, as compared with $19.7 million at December 31, 
1996. The Company's current ratio was 1.2 to 1.0 at June 28, 1997, as 
compared with 1.3 to 1.0 at December 31, 1996.

Net cash used in operating activities totaled $6.8 million for first half 
1997, as compared with cash provided by operating activities of $4.9 million 
during the same period in 1996.  During 1997, the Company's net working 
capital requirements increased primarily due to its introduction of six and 
ten pay installment payment billing plans offered to its customers and 
increased inventory levels required to meet increased customer demand.  
Deferred club membership revenue, recorded net of initial direct 
acquisition-related costs, totaled $16.7 million at June 28, 1997.  

During first half 1997, the Company made capital expenditures of 
approximately $4.6 million, as compared with approximately $2.8 million 
during first half 1996.  The expenditures during first half 1997 consisted 
primarily of computer hardware and software enhancements to enable the 
Company to provide improved customer service levels and higher operational 
efficiency standards in an anticipated future growth period.  In addition, 
the Company will open an additional teleservices center during third quarter 
1997.  The Company continues to evaluate its needs for additional investment 
to further improve customer satisfaction and enhance information technologies 
and infrastructure capabilities.  Management currently anticipates that the 
Company will spend between $9 and $11 million for capital expenditures during 
the year ended December 31, 1997.

In June 1997, the Company amended its bank credit facility.  The Company 
currently has a $50 million credit facility consisting of a revolving line of 
credit and letter of credit facility available through March 1999.  The 
credit facility includes a $45 million sublimit available for working capital 
and stand-by letter of credit requirements with the entire facility available 
for documentary letters of credit, in each case subject to a defined 
borrowing base. Borrowings outstanding under the line of credit bear 
interest, at the Company's option, at the prime rate of interest or LIBOR 
plus 1.75% and are collateralized by receivables, inventories, intangible 
assets and property and equipment other than buildings, land and vehicles.  
At June 28, 1997, the Company had letters of credit of $5.9 million and 
borrowings of $13.6 million outstanding under its credit facility.

                                          8
<PAGE>

      The Company offers its customers varying installment billing plans with 
no finance charges payable to the Company.  As a result, the Company 
supported installment plan receivables aggregating $35.9 million and $24.3 
million at June 28, 1997 and December 31, 1996, respectively.  The Company's 
receivable balance at any time is generally reflective of sales volume 
fluctuations as approximately 30% to 35% of its net revenues are financed by 
customers on one of the Company's installment plans.  With the recent 
offering of six pay and ten pay installment plans to its customers, the 
Company anticipates that its overall receivable balance will continue to 
increase.  As a result, the Company is currently exploring alternative 
methods to finance these receivables over the longer term.  In the shorter 
term, the Company expects to fund its receivables from internal operations 
and from availability under its revolving credit facility.

In December 1996, the Company's Board of Directors authorized the Company to 
repurchase up to 400,000 shares of its common stock.  During the first half 
of 1997, the Company repurchased 47,500 shares of its common stock under this 
program.

The Company currently anticipates that cash generated from operations and 
available borrowing capacity under its current credit facility will be 
sufficient to fund the Company's operations, expected working capital 
requirements and capital expenditures for the remainder of 1997. Because the 
Company anticipates the expansion of its offerings of extended payment plans 
to customers, it is currently exploring alternative methods of financing 
these receivables over the longer term.  Of course, there can be no assurance 
that the Company will be able to, among other things, consummate any such 
alternative methods of financing.

SEASONALITY

The Company's business is subject to significant seasonal variations in 
consumer demand which the Company believes are generally associated with the 
direct marketing and retail industries.  Historically, the Company's net 
revenues are the largest during the fourth calendar quarter and a significant 
portion of its earnings have been realized during that period.  The Company's 
operating results during this period may be affected by holiday spending 
patterns, as well as the timing and effectiveness of catalog mailings and 
general economic and other conditions.  In anticipation of its peak selling 
season, the Company hires additional flex-time employees in its teleservices, 
order processing and distribution areas, increases its merchandise 
inventories, and incurs significant catalog production and mailing costs.  
The Company's annual operating results could be adversely affected if, among 
other factors, the Company's revenues were to be substantially below seasonal 
expectations during the October through December period or if a sufficient 
number of qualified employees would not be available on a flex-time or other 
non-permanent basis.

INFLATION

Excluding increases in postage and paper costs, inflation has not had and is 
not expected to have a material impact on the Company's operating results but 
there can be no assurance that the Company's business will not be affected by 
inflation in the future.  The Company did experience significant increases in 
the cost of paper and postage during 1995.  While the increases in these 
areas have subsided, continued cost increases in these areas could have a 
material impact on advertising and other promotional costs in future periods. 
 

FORWARD-LOOKING INFORMATION

Forward-looking statements contained herein are made pursuant to the safe 
harbor provisions of the Private Securities Litigation Reform Act of 1995.  
Certain important factors exist that could cause results to differ materially 
from those anticipated by some of the statements made above.  Investors are 
cautioned that all forward-looking statements involve risks and uncertainty.  
The factors, among others, that could cause actual results to differ 
materially include: consumer spending and debt levels, interest rates, 
continuity of relationships with or purchases from major vendors, product 
mix, competitive pressure on sales and pricing, increases in catalog 
production and other costs which cannot be recovered through improved pricing 
of products and services, and the Company's ability to design, develop, and 
successfully introduce and market new and existing club concepts.
  
                                          9
<PAGE>

                             PART II.  OTHER INFORMATION


ITEM 4.  Submission of Matters to a Vote of Security Holders.

         The Company held its annual meeting of shareholders on April 17, 1997.
         Pursuant to Regulation 14 of the Securities Exchange Act of 1934, 
         proxies for such meeting were solicited.  The following matters were 
         voted on at the meeting:

<TABLE>
<CAPTION>
                                                                   Withhold
                                                    Votes For     Authority
                                                  ------------  -------------
    <S>                                           <C>            <C>              <C>           <C>
    1)   To elect the following individuals
         to serve as members of the Company's
         Board of Directors until the Annual
         Meeting of Shareholders in the
         year 2000:

         Jack W. Eugster                           7,209,784        396,662
         Harold Roitenberg                         7,209,625        396,821

                                                      Votes         Votes           Broker        Votes
                                                       For         Abstained       Non-Votes     Against
                                                  ------------  -------------    ------------  -------------
    2)   To approve the amendment increasing
         to 1,200,000 the shares authorized
         under the DAMARK International, Inc.
         1991 Stock Option Plan.

                                                  6,066,192         20,903              --       1,519,350

    3)   To ratify the appointment of Arthur
         Andersen LLP as independent auditors
         of the Company for 1997.

                                                  7,588,584          7,753              --          10,107

</TABLE>

ITEM 6.  Exhibits and Reports on Form 8-K

         a.   Exhibits:

              Exhibit 10.1 - Third Amendment to Credit Agreement, dated as of
                             June 23, 1997, by and between the Registrant, the
                             Banks named therein and First Bank National
                             Association, as Agent for the Banks. 

              Exhibit 10.2 - Nonqualified Stock Option Agreement for Stephen J.
                             Hemsley  (Filed as Exhibit 4.3 to the Company's
                             Registration Statement on Form S-8 
                             (no. 333-31773)).

              Exhibit 11 -   Computation of Earnings per Share. 

              Exhibit 27 -   Financial Data Schedule

         b.   No Form 8-K's were filed during the quarter ended June 28, 1997.


                                          10
<PAGE>

                                      SIGNATURE
                                           

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.

                                       DAMARK INTERNATIONAL, INC.

Date:  August 11, 1997                 By:  /s/ Arlyn J. Lomen
                                          -----------------------------------
                                            Arlyn J. Lomen
                                            Senior Vice President - Finance &
                                            Administration Group and Chief 
                                            Financial Officer 


                                           11