SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                   FORM 10-QSB

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

For the quarterly period ended September 30, 1997
                                    OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934

For the transition period from _______ to _______

                       Commission file number: 33-83894-NY

                                  LOIS/USA INC.

(Exact name of the Registrant as specified in its charter)
         Delaware                                      13-3441962
         (State or other jurisdiction of               (I.R.S. Employer
         incorporation or organization)                Identification No.)

                  40 West 57th Street, New York, New York 10019
               (Address of principal executive offices) (Zip Code)

                                     N/A
(Former name, former address and former fiscal year, if changed from last
report)

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

               APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
                 PROCEEDINGS DURING THE PRECEDING FIVE YEARS:

Indicate by check mark whether the Registrant has filed all documents and
reports required to be filed by Section 12, 13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distributions of securities under a
plan confirmed by a court. 
Yes___ No___. 

                    APPLICABLE ONLY TO CORPORATE ISSUERS:

State the number of shares outstanding of each of the Issuer's classes of
common equity, as of the latest practicable date: 2,379,861 
Transitional Small Business Disclosure Format (check one): Yes____ No_X_.

<PAGE>

PART I-FINANCIAL INFORMATION                                           Page
                                                                       Number
Item 1.    Financial Statements

           Consolidated Balance Sheets as of
             December 31, 1996 and
             September 30, 1997...........................................F-1

           Consolidated Statements of Operations for the
             Three Months Ended September 30, 1996
             and 1997.....................................................F-2

           Consolidated Statements of Operations for the
             Nine Months Ended September 30, 1996
             and 1997.....................................................F-3

           Consolidated Statements of Changes In
             Stockholder's (Deficit) For the Nine Months
             Ended September 30, 1997.....................................F-4

           Consolidated Statements of Cash Flows for
             the Nine Months Ended September 30, 1996
             and 1997.....................................................F-5

           Notes to Consolidated Financial Statements.....................F-6

Item 2.    Management's Discussion and Analysis of
             Financial Condition and Results of
             Operations..................................................F-12

PART II-OTHER INFORMATION

Item 6.           Exhibits and Reports on Form 8-K.......................F-16

SIGNATURE................................................................F-17

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<TABLE>
<CAPTION>
                         LOIS/USA INC. AND SUBSIDIARIES

                           CONSOLIDATED BALANCE SHEETS

                                   (UNAUDITED)

                                 (000's omitted)

                                            DECEMBER 31,   SEPT. 30,   
                                               1996          1997     
ASSETS                                        -----          ----     
<S>                                         <C>            <C>        
CURRENT ASSETS:                                                       
   Cash and cash equivalents                $     567       $   359   
   Accounts receivable, net                    21,788        22,834   
   Expenditures billable to clients             1,702         1,072   
   Other current assets                           470           704   
                                                -----       -------   
                    Total current assets       24,527        24,969   

PROPERTY AND EQUIPMENT, at cost                2,948          3,151
   Less-Accumulated depreciation and          (2,112)        (2,456)  
      amortization                             -----          -----
              Net property and equipment         836            695   
                                               -----          -----   
OTHER ASSETS:                                                         
 Deferred financing costs                        350             550  
 Goodwill                                      1,118          13,133  
 Other assets                                    165             156  
                                               -----          ------  
                Total other assets            18,633          13,839  
                                              ------          ------  
                Total assets                 $43,996         $39,503  
                                             =======         =======  
                                                                      
                                            December 31,    Sept. 30,        
LIABILITIES AND STOCKHOLDERS                   1996            1997        
EQUITY (DEFICIT)                                                
                                                                
<S>                                         <C>             <C>            
 CURRENT LIABILITIES:                                           
 Bank overdraft                            $2,865               $    -     
 Accounts payable                          29,285               30,705     
 Accrued expenses and                                           
   other current liabilities                1,423                  900     
 Bank loans                                 1,580                2,500     
 Advanced billings                          2,362                1,033     
 Rent payable - Current                     1,333                1,077     
                                            ------               ------     
    Total current liabilities              38,848               36,215     
                                           ------               ------     
 OTHER LIABILITIES:                                             
  Lease related reserves                   4,834                4,025     
  Equity subject to put rights               270                    -     
  Deferred purchase price                  5,939                2,724     
                                          ------                -----     
  Total other liabilities                 11,043                6,749     
                                          ------               ------     
    Total liabilities                     49,891               42,964     
                                          ------                -----     
                                                                
                                                                
REDEEMABLE PREFERRED STOCK                   -                  2,160     
                                                                
STOCKHOLDERS' EQUITY (DEFICIT):                                 
 Preferred stock, par value                                     
 $.01 per share:                                                
   1,000,000 shares authorized;                                 
   no shares issued and                                         
   outstanding                                                  
 Common stock, par value $.01 per                               
 share: 20,000,000 shares                                       
 authorized; 2,555,875 and                                      
 2,367,090 issued and                                           
 outstanding                                 26                  24      
 Additional paid-in capital               5,757               4,897      
 Accumulated deficit                    (11,678)            (10,542)     
                                         ------              ------      
   Total stockholder's
     equity (deficit)                    (5,895)             (5,621)     
   Total liabilities and
      stockholders'
      equity (deficity)                 $43,996             $39,503      
                                        =======             =======      
                                                                
                                                                
  The accompanying notes are an integral part of these consolidated statements.
</TABLE>
<PAGE>


<TABLE>
<CAPTION>

                        LOIS/USA INC. AND SUBSIDIARIES
                     CONSOLIDATED STATEMENTS OF OPERATIONS
            FOR THE THREE MONTHS ENDED SEPTEMBER 30, 1996 AND 1997

                                  (UNAUDITED)

              (000's omitted, except for per share and share data)

INCOME:                                                   1996             1997
                                                          ----             ----
<S>                                                     <C>              <C>   
         Commissions and fees                           $7,942           $6,844
                                                       -------           ------
OPERATING EXPENSES:
         Salaries and related costs, net                 4,553           4,652
         Other operating expenses                        2,369           1,885
         Amortization and depreciation                     288             292
                                                         -----            ----
                  Total operating expenses               7,210           6,829
                                                         -----           -----
OPERATING INCOME                                           732              15

NONOPERATING EXPENSES:
         Interest, net                                     119              20
         Amortization of deferred financing costs           36             106
                                                           ---             ---
                  Total nonoperating expenses              155             126
                                                           ---             ---

INCOME BEFORE PROVISION FOR
         INCOME TAXES                                      577           (111)

PROVISION FOR INCOME TAXES                                 312              3
                                                           ---            ----

NET INCOME (LOSS)                                          265           (114)

PREFERRED STOCK
         DIVIDEND REQUIREMENT                                 -            54
                                                           ----          ----

NET INCOME (LOSS) APPLICABLE
         TO COMMON STOCK                                   $265        ($168)
                                                           ====         ==== 
NET INCOME (LOSS) PER COMMON
         SHARE                                             $.10        ($.07)
                                                           ====        ======
WEIGHTED AVERAGE NUMBER OF
         COMMON AND COMMON EQUIVALENT
         SHARES OUTSTANDING                            2,536,836    2,366,683
                                                       =========    =========

The accompanying notes are an integral part of these consolidated statements.
</TABLE>
<PAGE>

<TABLE>
<CAPTION>

                        LOIS/USA INC. AND SUBSIDIARIES
                     CONSOLIDATED STATEMENTS OF OPERATIONS
             FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1996 AND 1997

                                  (UNAUDITED)

              (000's omitted, except for per share and share data)

REVENUE:                                                1996              1997
                                                         ---              ----
<S>                                                   <C>              <C>    
         Commissions and fees                         $21,630          $22,746

OPERATING EXPENSES:
         Salaries and related costs, net               13,675           14,324
         Other operating expenses                       6,167            6,022
         Amortization and depreciation                    612              979
                                                       ------           ------

                  Total operating expenses             20,454           21,325
                                                       ------           ------

OPERATING INCOME                                        1,176            1,421

NONOPERATING EXPENSES:
         Interest, net                                    113               66
         Amortization of deferred financing costs          64              178
                                                           --              ---
                  Total nonoperating expenses             177              244
                                                          ---              ---

INCOME BEFORE PROVISION FOR                               999            1,177
 INCOME TAXES

PROVISION FOR INCOME TAXES                                481               37
                                                          ---               --
NET INCOME (LOSS)                                         518            1,140

PREFERRED STOCK
         DIVIDEND REQUIREMENT                              -                58
                                                          ----            ----

NET INCOME APPLICABLE
         TO COMMON STOCK                                 $518            $1,082
                                                         ====            ======

NET INCOME PER COMMON                                    $.21              $.44
         SHARE                                           ====              ====

WEIGHTED AVERAGE NUMBER OF                                
         COMMON  AND COMMON EQUIVALENT
         SHARES  OUTSTANDING                        2,522,093         2,450,770
                                                    =========         =========


 The accompanying notes are an integral part of these consolidated statements.
</TABLE>
<PAGE>

<TABLE>
<CAPTION>
            
                                          LOIS/USA INC. AND SUBSIDIARIES

                       CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDER'S EQUITY (DEFICIT)

                                   FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1997

                                             (Unaudited 000's omitted)

                                         Common       Common         Additional
                                         Stock        Stock          Paid-in          Accumulated
                                         Shares       Par Value      Capital          Deficit         Total

<S>                                      <C>           <C>           <C>              <C>              <C>      
BALANCE, January 1, 1997                 2,556         $     26      $  5,757         $(11,678)        $ (5,895)

EJL Settlement - return of shares         (189)              (2)         (863)                             (865)
(Note 2)
Preferred stock dividend                                                    3              (4)               (1)
Net income                                --              --               --             1,140            1,140
BALANCE, Sept.  30, 1997                 2,367         $     24       $  4,897         $(10,542)        $ (5,621)
                                         =====         ========        =======         ========         =========

  The accompanying notes are an integral part of these consolidated statements
</TABLE>
<PAGE>

<TABLE>
<CAPTION>

                        LOIS/USA INC. AND SUBSIDIARIES
                     CONSOLIDATED STATEMENTS OF CASH FLOWS
             FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1996 AND 1997
                                  (UNAUDITED)
                                (000's omitted)

<S>                                                                                       <C>                      <C> 
CASH FLOWS FROM OPERATING ACTIVITIES:                                                     1996                     1997
                                                                                          ----                     ----
Net income                                                                                $518                   $1,140
Adjustments to reconcile net income to net cash
used in operating activities:
         Present value interest on deferred purchase price                                  -                        57
         Depreciation and amortization                                                     612                      979
         Amortization of deferred financing costs                                           64                      178
         Decrease in deferred tax asset                                                    117                        -
         Loss on sale of asset                                                              -                        16
Increase in accounts receivable                                                         (2,387)                  (1,046)
Decrease in expenditures billable to clients                                             1,583                      630
Increase in prepaid income taxes                                                           (76)                       -
Increase decrease in other current assets                                                  517                     (234)
Decrease in other assets                                                                                              9
Decrease in bank overdraft                                                                  -                    (2,865)
Increase (decrease) in accounts payable                                                 (3,233)                     355
Decrease in accrued expenses                                                                -                      (523)
Decrease in advanced billings                                                               -                    (1,329)
         NET CASH USED IN                                                                ------                   ------
         OPERATING ACTIVITIES                                                           (2,285)                  (2,633)
                                                                                         -----                    ----- 
CASH FLOWS FROM INVESTING ACTIVITIES:
         Purchase of fixed assets                                                         (114)                    (158)
         Cash paid for acquisition, net of cash acquired                                (3,138)                      -
         Cash paid for acquisition                                                        (592)                    (118)
                  NET CASH USED IN INVESTING
                    ACTIVITIES                                                          (3,844)                    (276)
                                                                                         -----                      ---
CASH FLOWS FROM FINANCING ACTIVITIES:
Cash paid for preferred dividends                                                                                    (1)
Proceeds from redeemable preferred stock                                                   -                      2,160
Net Proceeds of credit facility                                                          5,300                      920
Increase in deferred financing costs                                                      (225)                    (378)
                                                                                           ---                      --- 
         NET CASH PROVIDED BY FINANCING ACTIVITIES                                       5,075                    2,701
                                                                                         -----                    -----
         NET DECREASE IN CASH AND CASH EQUIVALENTS                                      (1,054)                    (208)

CASH AND CASH EQUIVALENTS, beginning of period                                           1,729                      567
                                                                                         -----                      ---

CASH AND CASH EQUIVALENTS, end of period                                                  $675                     $359
                                                                                          ====                      ===
SUPPLEMENTAL DISCLOSURE OF CASH
FLOW INFORMATION:
Cash paid during the period for:
Interest                                                                               $   213                   $   53
Income taxes                                                                           $    91                   $   37

  The accompanying notes are an integral part of these consolidated statements.

</TABLE>
<PAGE>


                        LOIS/USA INC. AND SUBSIDIARIES

                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                  (UNAUDITED)

1.       BASIS OF PRESENTATION

The consolidated financial statements included herein have been prepared by
the Company, without audit, pursuant to the rules and regulations of the
Securities and Exchange Commission. Certain information and footnote
disclosure normally included in financial statements prepared in accordance
with generally accepted accounting principles have been condensed or omitted
from this report, as is permitted by such rules and regulations; however, the
Company believes that the disclosures are adequate to make the information
presented not misleading. These financial statements should be read in
conjunction with the financial statements and the notes thereto included in
the Company's Annual Report on Form 10-KSB, for the year ended December 31,
1996.

In the opinion of management, the information furnished reflects all
adjustments, all of which are of normal recurring nature, necessary for a fair
presentation of the results for the reported interim periods. Results of
operations for interim periods are not necessarily indicative of results for
the full year.

In May 1997, the Company issued 2,160 shares of Series A Convertible Preferred
Stock. The Series A Convertible Preferred Stock has a cumulative dividend.
Accordingly, net income per common share is computed on the basis of net income
reduced by the dividend requirement accumulating during the period ("net income
applicable to common stock").

In June 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standard No. 130, Reporting Comprehensive Income ("SFAS
130"), which establishes standards for reporting and display of comprehensive
income, its components and accumulated balances. Comprehensive income is
defined to include all changes in equity, except those resulting from
investments by owners and distributions to owners. Among other disclosures,
SFAS 130 requires that all items that are required to be recognized under
current accounting standards as components of comprehensive income be reported
in a financial statement that is displayed with the same prominence as other
financial statements.

SFAS 130 is effective for financial statements for periods beginning after
December 15, 1997 and requires comparative information for earlier years to be
restated. Because of the recent issuance of this standard, management has been
unable to fully evaluate the impact, if any, the standard may have on future
financial statement disclosures. Results of operations and financial position,
however, will be unaffected by implementation of this standard.

In June 1997, the Financial Standards Board issued Statement of Financial
Accounting Standard No. 131, Disclosures about Segments of an Enterprise and
Related Information ("SFAS 131"), which supersedes Statement of Financial
Accounting Standard No. 14, Financial Reporting for Segments of Business
Enterprise. SFAS 131 establishes standards for the manner in which public
companies report information


<PAGE>

about operating segments in annual financial statements and requires reporting
of selected information about operating segments in interim financial
statements issued to the public. It also establishes standards for disclosure
regarding products and services, geographic areas and major customers. SFAS
131 defines operating segments as components of a company about which separate
financial information is available that is evaluated regularly by the
operating decision maker in deciding how to allocate resources and in
assessing performance.

SFAS 131 is effective for financial statements for periods beginning after
December 15, 1997 and requires comparative information for earlier years to be
restated. The Company operates in a single business segment and, accordingly,
the implementation of SFAS 131 is not presently expected to have an impact on
the Company's consolidated financial statements.

2.       ACQUISITION OF EISAMAN, JOHNS & LAWS ADVERTISING, INC.

On February 12, 1996, Lois/USA acquired all of the outstanding shares of
Eisaman, Johns & Laws Advertising, Inc. ("EJL"), a national advertising agency
established in 1959, with its principal advertising offices in Los Angeles,
Chicago, Houston and Detroit. For its fiscal years February 28, 1993, 1994 and
1995, EJL had unaudited commission and fee revenues of $19,087,000,
$18,151,000 and $17,011,000, respectively, and unaudited net income (loss) of
$18,000, ($5,000) and ($788,000), respectively.

Pursuant to the original Stock Purchase Agreement (the "Original Agreement"),
between the Company and the shareholders of EJL (the "Sellers"), the Company
made an initial cash payment of $4,000,000 and issued to the Sellers 333,333
shares of the Company's common stock, par value $.01 per share ("Common
Stock"), which were valued at $6.00 per share.

The Original Agreement provided that the Sellers were to receive as additional
purchase price, an amount equal to the lesser of: (i) 5% of the combined revenue
of Lois/USA and EJL, as defined in the Original Agreement, or (ii) $12,000,000
(the "Additional Purchase Price") over a period of five years from the date of
the acquisition. Payments were to be made in the ratio of 75% cash and 25% in
Common Stock, valued at $6.00 per share for the first four quarters and
thereafter valued at the fair market value of the Common Stock as defined in the
Original Agreement. At least $1,750,000 of Additional Purchase Price was payable
for the year ending December 31, 1996. Additionally, the Original Agreement
provided that the Sellers would receive minimum Additional Purchase Price cash
payments of $6,000,000. If, by December 31, 1999, the Sellers had not received
such cash payments, the difference between the $6,000,000 amount and the cash
paid through that date was to be paid to the Sellers by (i) first, allowing the
Sellers to require the Company to repurchase, or "put" to the Company, shares of
Common Stock issued to them as Additional Purchase Price (but not the 333,333
shares of Common Stock issued at the initial closing), on a last issued, first
repurchased basis, at the per share values at which the shares were issued, and
(ii) second, if such repurchases did not cause the total cash Additional
Purchase Price payments to equal $6,000,000, making a cash payment to the
Sellers of the remaining difference. In 2001, the Sellers were also to receive a
final payment of $750,000, payable in shares of Common Stock. The final $750,000
payment is not a component of the calculations above.

The Company accounted for the acquisition using the purchase method of
accounting, and since February 12, 1996, the Company's consolidated financial
statements have included EJL's assets, liabilities and results of operations.
At the date of acquisition the minimum guaranteed Additional Purchase Price of
$6,750,000 was recorded as a liability on the Company's consolidated balance
sheet (which was reduced to $5,939,000 as of December 31, 1996 as the result
of payments made through that date) and the excess of the minimum guaranteed
purchase price of $12,750,000 over the fair market value of the net assets
acquired and liabilities assumed was reflected in the Company's consolidated
financial statements as goodwill. This purchase resulted in recording goodwill
in the amount of $18,825,064. The goodwill is being amortized on a
straight-line basis over a period of 20 years. None of the recorded goodwill
will be deductible for income tax purposes. As a result of the
non-deductibility of goodwill, the Company's effective tax rate will be
adversely impacted.

In May 1997, the Company and the Sellers agreed to revise the terms of the
Original Agreement (the "Revised Agreement".) Under the Revised Agreement, the
Sellers will receive a total of $9,646,000, comprised of (i) the $4,000,000 cash
paid at the closing, (ii) cash payments of $811,000 made during 1996,
(iii) $1,135,000 through the retention of 189,183 shares (of the total of
378,366 shares) of Common Stock issued to the Sellers through December 31, 1996
under the Original Agreement (the remaining 189,183 shares to be returned to the
Company), and (iv) future cash payments totaling $3,700,000, payable $135,000
quarterly commencing June 1999 through March 2004 and then $50,000 quarterly
commencing June 2004 through March 2009. The adjusted purchase price pursuant to
the Revised Agreement, with the future payments discounted at a rate of 6.5% per
annum, is $8,612,000, which is $4,408,000 less than the purchase price recorded
under the Original Agreement. The recording of the effects of the terms of the
acquisition, was reflected in the Company's consolidated financial statements in
the second quarter of fiscal 1997, had the effect, relative to December 31, 1996
amounts, of (i) reducing goodwill by $4,408,000, (ii) reducing the liability for
future payments by $3,273,000, (iii) eliminating the $270,000 for redeemable
common stock, and (iv) reducing stockholders' equity by $865,000. The reduction
in goodwill will reduce the annual amortization by $220,000.

The following unaudited pro forma consolidated results of operations for the
nine months ended September 30, 1996 is presented as if the EJL acquisition had
been made on the terms in the Original Agreement at the beginning of the period
presented. The unaudited pro forma information is not necessarily indicative of
either the results of operations that would have occurred had the purchase been
made during the periods presented or the future results of the combined
operations under the ownership and management of the Company.


         (In thousands except per share amounts)            1996

         Commissions and fees                             $21,959
         Operating income                                    (385)
         Net (loss)                                           (12)
         Net loss per common share                          $(.01)

3.       REDUCING REVOLVING CREDIT FACILITY

Concurrent with the Company's January, 1995 registered direct placement of
shares of its common stock (the "Offering") and the repayment of a
subordinated loan, the Company entered into a $2 million reducing revolving
credit facility (the "Reducing Revolving Credit Agreement") with The Chase
Manhattan Bank ("Chase"). Upon consummation of the Company's Offering, the
Company borrowed $2 million under the Reducing Revolving Credit Agreement
which, when added to the net proceeds of the Company's Offering, enabled the
Company to repay the subordinated loan. Amounts outstanding under the Reducing
Revolving Credit Agreement bear interest at the highest rate determined with
reference to one of several fluctuating rate bases. The 1995 and 1996 interest
rates under the credit facility were 10% and 9.7%, respectively. The Reducing
Revolving Credit Agreement contains certain affirmative and negative covenants
customary in an agreement of this nature. The terms of the Reducing Revolving
Credit Agreement prohibit the Company from paying dividends on its common
stock.

Borrowings under the Reducing Revolving Credit Agreement are secured by (a)
all of the assets of the Company's operating subsidiaries, (b) a pledge of all
shares of capital stock of the Company's operating subsidiaries held by the
Company, (c) a pledge of all shares of the Company's capital stock held by
Messrs. Lois and Veru, and (d) an assignment in favor of Chase of the key-man
life insurance policies on Mr. Lois (in an amount not less than $2 million)
and Mr. Veru (in an amount not less than $1 million).

Concurrent with the acquisition of EJL in February 1996, Chase amended the
Reducing Revolving Credit Agreement to increase the amount available under the
facility to $3,833,000, extend the maturity date through June 30, 1999 and
require quarterly amortization of $250,000 commencing March 31, 1996. The
Company will be required to prepay amounts outstanding under the Reducing
Revolving Credit Agreement equal to 100% of Excess Cash Flow (as defined in the
Reducing Revolving Credit Agreement) up to $300,000 for any year and 50% of
Excess Cash Flow above $300,000 for any year. Excess Cash Flow is defined as
actual cash flow of the Company less 110% of debt amortization. For the year
ended December 31, 1995, this requirement was waived. At December 31, 1996, the
balance outstanding under this agreement was $1,580,000 and an additional
$1,253,000 was available. However, as a result of defaults with respect to other
covenants in the agreement, at December 31, 1996 Chase had suspended the
Company's right to obtain additional borrowings. Subsequent to year end the
Company repaid all amounts outstanding under the Reducing Revolving Credit
Agreement. In May 1997, Chase extended to the Company a new $2.5 million line of
credit, to replace the Reducing Revolving Credit Agreement, having collateral
terms essentially the same as those of the Reducing Revolving Credit Agreement.
The replacement line of credit bears interest at the rate of 2% above the Chase
prime rate and expires in June 1998.

In 1996, the Company had a $2 million uncommitted line of credit. There were
no borrowings outstanding as of December 31,1996. Of this facility, $150,000
has been set aside for a contingent letter of credit in favor of the landlord
of the office space leased in New York would be payable in an event of
default. Amounts borrowed will bear interest at a rate to be negotiated upon
borrowing.

There were approximately $268,000 in fees and expenses incurred in connection
with the initial Reducing Revolving Credit Agreement. These costs were being
amortized over the initial three-year period of the loan. Costs to extend the
facility of approximately $175,000 were being amortized over the period from
1996 through 1999. Concurrent with the new credit facility from Chase in May
1997, all deferred financing fees are being amortized over a 13 month period
ending June 30, 1998.

In October 1997, the Company entered into a revolving credit facility with Sanwa
Business Credit Corporation ("Sanwa") which provides for borrowings up to $25
million based on a specified percentage of eligible accounts receivable. The
Sanwa credit facility has a term of three years, with borrowings bearing
interest at 2.5% above the London Interbank Offered Rate ("LIBOR"). Borrowings
are secured by essentially all of the assets of the Company, including the
common shares and assets of the Company's subsidiaries. Upon the execution of
the new facility the Company initially borrowed approximately $2.5 million,
which was used to repay amounts outstanding under the Chase Reducing Revolving
Credit Facility and the Chase Reducing Revolving Credit Facility was terminated.
The $2.5 million initially borrowed under the Sanwa facility was subsequently
repaid.

4.       REDEEMABLE PREFERRED STOCK

In May 1997, the Company privately offered and sold 2,160 shares of 10% Series A
Convertible Preferred Stock (the "Series A Convertible Preferred Stock") at
$1,000 per share. Net proceeds to the Company, after the payment of placement
agent fees and offering costs, were approximately $2 million.

<PAGE>


The Series A Preferred Stock is convertible by the holders thereof into shares
of the Company's common stock, at a conversion price of $6.50 per share
beginning September 16, 1997. The Company is required to redeem the Series A
Preferred Stock, if not earlier converted or redeemed, for $1,000 per share on
May 19, 2002.

Dividends on the Series A Preferred Stock are payable quarterly at a rate of
$25 per share. Holders were given the right to elect to receive the first four
dividend payments in the form of shares of the Company's common stock, valued
at $6.50 per share, and the holders of 1,375 shares of the Series A Preferred
Stock have so elected. The Company issued 398 shares of common stock in July
1997 for the dividend payable at that time.

<PAGE>

                     MANAGEMENT'S DISCUSSION OF FINANCIAL
                      CONDITION AND RESULTS OF OPERATIONS

RESULTS OF OPERATIONS

Three Months Ended September 30, 1996 compared to Three Months Ended September
30, 1997.

Revenues from commissions and fees for the three months ended September 30, 1997
decreased by $1,098,000 or 13.8% to $6,844,000 from $7,942,000 for the third
quarter of 1996. The decline in revenues in the third quarter was primarily the
result of lower revenues for the Company's Los Angeles agency, which experienced
a loss of clients and a reduction in revenues during the third quarter of 1997.
The Company cannot predict when, or if, the Los Angeles agency will obtain new
clients or assignments to replace the lost business; however, in October 1997
the staffing of the Los Angeles agency was reduced to bring it into line with
its reduced volume of revenue.

Operating expenses decreased from $7,210,000 for the three months ended
September 30, 1996 to $6,829,000 for the three months ended September 30, 1997,
but increased from 90.8% of revenues in the 1996 period to 99.8% of revenues in
the 1997 period due to the decline in revenues. Personnel expenses were 57.3% of
revenues in the three months ended September 30, 1996, as compared to 68.0% of
revenues in the three months ended September 30, 1997, due to the decline in Los
Angeles revenues. As discussed above, the staffing of the Los Angeles agency was
reduced subsequent to September 30, 1997. Other operating expenses decreased
from $2,369,000 for the three months ended September 30, 1996 to $1,885,000 for
the three months ended September 30, 1997, a decline of $484,000 from 29.8% of
revenues to 27.5% of revenues. The decrease reflects both the effects of the
cost reduction and control measures initiated in the last half of 1996, and the
effect of the decline in revenues on expenses, which fluctuate with the volume
of client assignments. Operating expenses, exclusive of depreciation and
amortization, increased from 85.5% of revenues for the three months ended
September 30, 1996 to 95.5% of revenues for the three months ended September 30,
1997 due to the decline in revenues.

Interest expense, net of interest income, declined from $119,000 for the three
months ended September 30, 1996 to $20,000 for the three months ended September
30, 1997 due to lower average borrowings. The amortization of deferred financing
costs increased by $70,000 as a result of the amortization of all remaining
costs related to the Chase Reducing Revolving Credit facility's replacement by
the Sanwa facility.

Due principally to the decline in revenues, the Company incurred a net loss of
$114,000 for the third quarter of 1997, as compared to net income of
$265,000 for the third quarter of 1996.

Nine months ended September 30, 1996 compared to Nine Months ended September
30, 1997

Revenues from commissions and fees increased to $22,746,000 for the nine months
ended September 30, 1997 from $21,630,000 for the nine months ended September
30, 1996. The net increase of $1,116,000 or 5.2% for the year to date period
reflects the offsetting effects of the 13.8% decline in third quarter revenues
discussed above and a 16.2% increase in revenues experienced in the first half
of 1997, which resulted from both assignments from new clients and increased
assignments from existing clients. The Company's revenues will fluctuate from
period to period as the result of the effects of the timing of client
advertising expenditures. As a result, the rate of growth or decline in the
Company's revenues in any one quarter may not be indicative of future trends.

Operating expenses increased from $20,454,000 for the nine months ended
September 30, 1996 to $21,325,000 for the nine months ended September 30, 1997,
but decreased from 94.6 of revenues in the nine months ended September 30, 1996
to 93.8% of revenues for the nine months ended September 30, 1997. Operating
expenses decreased to 63.0% of revenues for the nine months ended September 30,
1997 from 63.2% of revenues for the nine months ended September 30, 1996 as a
result of reducing salaries and related costs. Other operating expenses
decreased to 26.5% of revenues for the 1997 year to date period from 28.5% for
the comparable period in fiscal 1996. Salaries and related costs had been
reduced to 60.8% of revenues through June 30, 1997, but the third quarter
decline in revenues in the Los Angeles agency had an adverse effect of this
percentage. As discussed above, subsequent to September 30, 1997 the Company
reduced staffing levels in Los Angeles.

Operating expenses, exclusive of depreciation and amortization, decreased from
91.7% of revenues in the nine months ended September 30, 1996 to 89.4% of
revenues for the nine months ended September 30, 1997. Depreciation and
amortization increased by $367,000, reflecting nine months of amortization of
the EJL assets and goodwill in the current year.

Interest expenses, net of interest income, decreased by $47,000, from net
interest expense of $113,000 in the nine months ended September 30, 1996 to net
interest expense of $66,000 for the nine months ended September 30, 1997 due to
lower borrowings, while the amortization of deferred financing costs increased
by $114,000 principally as the result of the amortization of all remaining costs
related to the Chase Reducing Revolving Credit facility's replacement by the
Sanwa facility.

LIQUIDITY AND CAPITAL RESOURCES

The Company's 1996 net loss and its acquisition of EJL were primarily
responsible for its negative working capital at December 31, 1996 of
$14,321,000. The Company's working capital deficit was reduced to $11,246,000 at
September 30, 1997 as a result of cash flow from operations of $232,000, net of
the elimination of the Company's bank overdraft of $2,865,000 at December 31,
1996 and additional capital of $2,160,000 raised through the issuance of the
Series A Convertible Preferred Stock.

At December 31, 1996, $1,580,000 was outstanding under the Chase Reducing
Revolving Credit Facility. An additional $2 million, of which $150,000 is being
used to support a contingent letter of credit securing the Company's New York
lease, was available under a separate line of credit obtained from Chase.
However, as the result of certain defaults with respect to covenants in the
agreements, Chase had, at December 31, 1996, suspended the Company's right to
obtain additional borrowings under the agreements. Subsequent to December 31,
1996, the Company repaid all amounts outstanding, and in May 1997, Chase
extended a new $2.5 million one-year line of credit to the Company. The
collateral terms are essentially the same as those of the Reducing Revolving
Credit Agreement. The replacement line of credit bears interest at the rate of
2% above Chase's prime rate and expires in June 1998.

The Company acquired EJL in February 1996. Under the Original Agreement, the
Company was required to make annual additional purchase price payments through
February 2001 to the Sellers equal to 5% of the revenues of the acquired
operations, subject to certain adjustments, up to a maximum of $12,000,000.
Payments were to be made 75% in cash and 25% through the issuance of shares of
the Company's common stock. A minimum payment of $1,750,000 was required, and
made, in 1996, the cash portion of which ($811,000) was financed with the bank
overdraft. In May 1997, the Company and the former owners of EJL agreed to a
revision to the Original Agreement. Under the Revised Agreement, the total
purchase price has been reduced to $9.6 million, of which $5.9 million has been
paid through December 31, 1996 through cash payments of $4.8 million and the
issuance of 189,183 shares of common stock, and the remaining $3.7 million will
be paid in cash in varying monthly installments from June 1999 through March
2009. Accordingly, the acquisition of EJL will not place demands on the
Company's capital resources until 1999.

In May 1997, the Company raised additional capital of approximately $2 million
through the private placement of 2,160 shares of Series A Convertible Preferred
Stock (the "Series A Convertible Preferred Stock"). The Series A Convertible
Preferred Stock accrues annual dividends of $100 per share, payable quarterly,
which will reduce the net income attributable to the Company's common stock, and
related earnings per share. However, the holders of 1,375 shares of the Series A
Convertible Preferred Stock have elected to receive dividends for the first year
in the form of shares of the Company's common stock, valued at the rate of $6.50
per share. Therefore, assuming no conversions, the Series A Convertible
Preferred Stock will only require cash dividends of approximately $39,000 in
1997. The Series A Convertible Preferred Stock may be converted, at the
Company's option, into shares of the Company's common stock, at a conversion
price of $6.50 per share, beginning September 16, 1997.

The Company's growth strategy includes the acquisition of existing advertising
agencies. Although the Company currently has no specific acquisition plans or
commitments, any future acquisitions may require material capital expenditures
or commitments that could place significant constraints on future working
capital. As a result, and to reduce both the immediate cash needs and the risk
that the Company will significantly overpay for an acquisition, the Company has,
and will, generally attempt to negotiate acquisitions that involve the payment
of a portion of the total purchase price on a deferred basis based on the
post-acquisition performance of the acquired operations. Additionally, the
Company attempts to negotiate the payment of a portion of the acquisition price
in the form of the issuance of shares of the Company's common stock, and will
offer various forms of participation in the Company's Stock Option Plan to key
employees as a means of incentivizing future performance.

In October 1997 the Company obtained a new revolving credit facility from Sanwa
Business Credit Corporation ("Sanwa") which provides for borrowings up to $25
million based on a specified percentage of eligible accounts receivable. The
Company will use the funds available under this credit facility both to finance
its periodic operating requirements and to fund cash portions of the costs of
future acquisitions. Amounts available under the facility are limited for the
first 30 days. The Sanwa credit facility has a term of three years, with
borrowings bearing interest at 2.5% above the LIBOR rate. Borrowings are secured
by essentially all of the assets of the Company, including the common shares and
assets of the Company's subsidiaries. Upon the execution of the new facility the
Company initially borrowed $2.5 million, which was used to repay amounts
outstanding under the Chase Reducing Revolving Credit Facility. The $2.5 million
initially borrowed under the Sanwa facility was subsequently repaid.

The Company believes that cash flows from operations, together with funds
available under the Company's credit facility with Sanwa, and the working
capital obtained from the issuance of the Series A Stock will be sufficient to
meet the Company's cash needs for its existing business and any potential
acquisitions over the next twelve months.

<PAGE>

PART II OTHER INFORMATION


Item 6.           Exhibits and Reports on Form 8-K

(a)               Exhibits

                  10.1 Loan and Security Agreement by and among
                  LOIS/USA West, Inc., LOIS/USA Chicago, Inc. and LOIS/USA New
                  York, Inc., as Borrowers, The Lenders named therein, and
                  Sanwa Business Credit Corporation, as Agent and Lender dated
                  as of October 28, 1997

(b)               Reports on Form 8-K

                  (i) Current Report on Form 8-K dated October 29, 1997.

<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.


                                                     LOIS/USA INC.


Date:  November 14, 1997                    By /s/   ROBERT K. STEWART
                                               -----------------------
                                                     ROBERT K. STEWART
                                                     Executive Vice President
                                                     Chief Financial and
                                                     Accounting Officer