FORM 10-Q

                       SECURITIES AND EXCHANGE COMMISSION

                             Washington, D.C. 20549

                                   (Mark One)
              |x| 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: 0-20730

                              MICRO WAREHOUSE, INC.
             (Exact name of registrant as specified in its charter)

           Delaware                                   06-1192793
(State or other jurisdiction of          (I.R.S. Employer Identification Number)
incorporation or organization)

               535 Connecticut Avenue, Norwalk, Connecticut 06854
                    (Address of principal executive offices)

                                 (203) 899-4000
              (Registrant's telephone number, including Area Code)

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 |_|

Indicate the number of shares outstanding of each of issuer's class of common
stock as the latest practicable date:

Class: COMMON STOCK     Outstanding Shares At September 30, 1997: 34,631,840
<PAGE>

                              MICRO WAREHOUSE, INC.

                                      INDEX

                                                                            Page
PART I - FINANCIAL INFORMATION

  Item 1 - Financial Statements (unaudited)

    Consolidated Balance Sheets ...........................................  3

    Consolidated Statements of Income .....................................  4

    Consolidated Statements of Cash Flows .................................  5

    Notes to Unaudited Consolidated Financial Statements ..................  6

  Item 2 - Management's Discussion and Analysis of Financial 
           Condition and Results of Operations ............................  9

PART II - OTHER INFORMATION................................................ 14

SIGNATURE ................................................................. 15

EXHIBIT 11................................................................. 16


                                       2
<PAGE>

                         PART I - FINANCIAL INFORMATION

ITEM 1 - FINANCIAL STATEMENTS

                              MICRO WAREHOUSE, INC.
                           CONSOLIDATED BALANCE SHEETS
                                 (in thousands)

                                                     September 30,  December 31,
                                                       1997            1996
                                                       ----            ----
ASSETS                                               (unaudited)     (audited)
Current assets:
  Cash and cash equivalents                            $  65,212     $  32,234 
  Marketable securities at market value                   20,660        20,022
  Accounts receivable, net of allowance for                          
   doubtful accounts ($12,032 and $10,876 at                         
   September 30, 1997 and December 31, 1996,                         
   respectively)                                         202,062       203,687
                                                                     
  Inventories                                            157,278       201,119
  Prepaid expenses and other current assets               13,549        17,886
  Tax refunds                                             18,928        16,433
  Deferred taxes                                          11,307         3,447
                                                       ---------     ---------
     Total current assets                                488,996       494,828
                                                       ---------     ---------
Property, plant and equipment, net                        31,576        29,712
Goodwill, net                                             86,366        66,291
Non-current deferred taxes                                12,615        14,443
Other assets                                               2,154         2,568
                                                       ---------     ---------
     Total assets                                      $ 621,707     $ 607,842
                                                       =========     =========
                                                                     
LIABILITIES AND STOCKHOLDERS' EQUITY                                 
Current liabilities:                                                 
  Accounts payable                                     $ 162,720     $ 127,723
  Accrued expenses                                        52,155        52,445
  Litigation settlement accrual                           16,100            --
  Loans payable, bank                                         --        40,505
  Deferred revenue                                         3,268         2,327
  Equipment obligations                                      452           298
                                                       ---------     ---------
    Total current liabilities                            234,695       223,298
Equipment obligations and other                              203           376
                                                       ---------     ---------
    Total liabilities                                    234,898       223,674
                                                       ---------     ---------
Stockholders' equity:                                                
  Preferred stock, $.01 par value Authorized                         
    - 100 shares; none issued:                                --            --
  Common stock, $.01 par value:                                      
    Authorized - 50,000 shares; issued and                           
      outstanding; 34,632 and 34,359 shares at                       
      September 30, 1997 and December 31, 1996,              
      respectively                                           346           343
  Additional paid-in-capital                             284,856       270,762
                                                                     
  Deferred compensation                                   (9,066)          421
  Loan to officer                                         (1,400)       (1,400)
  Retained earnings                                      125,585       117,071
  Cumulative translation adjustment                      (13,416)       (3,047)
  Valuation adjustment for marketable securities             (96)           18
                                                       ---------     ---------
    Total stockholders' equity                           386,809       384,168
                                                       ---------     ---------
    Total liabilities and stockholders' equity         $ 621,707     $ 607,842
                                                       =========     =========


See accompanying notes to unaudited consolidated financial statements.


                                       3
<PAGE>

                              MICRO WAREHOUSE, INC.
               CONSOLIDATED STATEMENTS OF INCOME For the three and
                  nine months ended September 30, 1997 and 1996
                      (in thousands, except per share data)
          ------------------------------------------------------------
                                   (unaudited)

<TABLE>
<CAPTION>
                                             Three Months Ended      Nine Months Ended
                                               September 30,           September 30,
                                             1997         1996        1997        1996
                                          ----------   ----------  ----------  ----------
<S>                                       <C>          <C>         <C>         <C>       
Net Sales                                 $  522,072   $  437,981  $1,551,994  $1,389,546

Cost of goods sold                           435,615      359,289   1,294,161   1,127,325
                                          ----------   ----------  ----------  ----------

  Gross margin                                86,457       78,692     257,833     262,221

Selling, general and administrative
  expenses                                    77,844       61,510     225,040     203,333
Write-off of goodwill                             --           --          --       5,977
Restructuring costs                               --           --          --      21,226
Merger costs                                      --           --          --       6,113
                                          ----------   ----------  ----------  ----------

Income from operations before interest,
  litigation provision, income taxes and
  extraordinary charge                         8,613       17,182      32,793      25,572

Interest income, net                           1,439          846       4,011       1,208

Provision for settlement of class
action and derivative litigation                20,700           --      20,700          --
                                          ----------   ----------  ----------  ----------

Income (loss) before income taxes
  and extraordinary charge                   (10,648)      18,028      16,104      26,780

Income tax provision (benefit)                (3,530)       7,303       7,590      15,746
                                          ----------   ----------  ----------  ----------

Income (loss) before extraordinary
  charge                                      (7,118)      10,725       8,514      11,034

Extraordinary  charge, net of taxes
  of $1,078                                       --           --          --       1,584
                                          ----------   ----------  ----------  ----------

Net income (loss)                            ($7,118)  $   10,725  $    8,514  $    9,450
                                          ==========   ==========  ==========  ==========

Net income (loss) per share                   ($0.21)  $     0.31  $     0.24  $     0.27
                                          ==========   ==========  ==========  ==========

Net income (loss) per share before
  extraordinary charge                        ($0.21)  $     0.31  $     0.24  $     0.32
                                          ==========   ==========  ==========  ==========

Weighted average number of shares
  outstanding                                 34,550       34,630      34,919      34,667
                                          ==========   ==========  ==========  ==========
</TABLE>


See accompanying notes to unaudited consolidated financial statements.


                                       4
<PAGE>

                              MICRO WAREHOUSE, INC.
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
              For the nine months ended September 30, 1997 and 1996
                                 (in thousands)
           -----------------------------------------------------------
                                   (unaudited)

                                                             1997        1996
                                                             ----        ----
Cash flows from operating activities:
  Net income                                              $   8,514   $   9,450

  Adjustments to reconcile net income to
    net cash provided by operating activities:
      Depreciation and amortization                          12,062       8,514
      Litigation settlement charge                           20,700          --
      Restructuring cost - non-cash portion                      --       3,457
      Extraordinary charge                                       --       1,900
      Write-off of goodwill                                      --       5,977
      Write-off of deferred financing costs                      --         762
      Deferred taxes                                         (6,032)        417
  Changes in assets and liabilities:
      Accounts receivable, net                               (6,458)    (18,180)
      Inventories                                            40,338      22,236
      Prepaid expenses and other current assets              (2,578)      3,752
      Other assets                                               72         844
      Accounts payable                                       31,286      (4,944)
      Accrued expenses                                        2,522      12,680
      Deferred revenue                                          936        (168)
      Other                                                  (1,832)       (225)
                                                          ---------   ---------
        Total adjustments                                    91,016      37,022
                                                          ---------   ---------
        Net cash provided by operating activities            99,530      46,472
                                                          ---------   ---------

Cash flows from investing activities:
  Sales (purchases) of marketable securities, net              (752)      6,553
  Purchases or adjustments to cost of acquisitions
    of businesses, represented by:
        Goodwill                                            (18,642)     (6,900)
        Other net assets                                        654      (2,119)
   Acquisition of property, plant and equipment             (11,659)     (7,860)
                                                          ---------   ---------
Net cash (used) by investing activities                     (30,399)    (10,326)

Cash flows from financing activities:
  Net proceeds from issuance of common stock                  3,228       5,456
  Borrowings (repayments) under lines of credit, net        (37,473)     18,521
  Repayment of notes payable                                     --     (21,900)
  Principal payments of obligations under capital leases        (87)       (312)
                                                          ---------   ---------
        Net cash provided (used) by financing activities    (34,332)      1,765
                                                          ---------   ---------
Effect of exchange rate changes on cash                      (1,821)       (419)
                                                          ---------   ---------
Net change in cash                                           32,978      37,492
Cash and cash equivalents:
  Beginning of period                                        32,234      81,614
                                                          ---------   ---------
  End of period                                           $  65,212   $ 119,106
                                                          =========   =========


See accompanying notes to unaudited consolidated financial statements.


                                       5
<PAGE>

                              MICRO WAREHOUSE, INC.
              NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
             (Amounts in thousands, except share and per share data)

--------------------------------------------------------------------------------

1.    FINANCIAL STATEMENTS

      The consolidated financial statements include the accounts of Micro
      Warehouse, Inc. and its subsidiaries (the "Company") and have been
      prepared, without audit, pursuant to the rules and regulations of the
      Securities and Exchange Commission (the "SEC"). 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, these financial statements should be read in
      conjunction with the audited financial statements and the notes thereto
      included in the Company's Annual Report to Shareholders which was filed as
      an exhibit to its Annual Report on Form 10-K for the fiscal year ended
      December 31, 1996.

      In the opinion of management, the accompanying unaudited consolidated
      financial statements contain all adjustments necessary to present fairly
      the financial position of the Company at September 30, 1997 and the
      results of operations for the three and nine months ended September 30,
      1997 and 1996 and cash flows for the nine months ended September 30, 1997
      and 1996.

2.    BUSINESS COMBINATIONS

      In October 1996, the Company acquired the business of USA Flex in a
      business combination accounted for as a purchase. USA Flex directly
      markets IBM PC-compatible ("Wintel")computers and peripherals. The total
      cost of the acquisition was $26,762 which exceeded the fair value of the
      net assets acquired by $22,053. Commencing in 1997 the goodwill recorded
      as a result of the USA Flex acquisition is being amortized over 15 years.
      Initially, the Company had commenced amortization of this goodwill over a
      40 year period.

      In February 1997, the Company acquired two businesses with operations in
      Canada and Australia. The total cost of the acquisitions was $3,829 which
      exceeded the fair value of the net assets acquired by $3,816.

      In July 1997, the Company acquired the business of OnLine Interactive,
      Inc., a Seattle, Washington based reseller of electronic software ("OLI").
      The cost of the acquisition was $14,159 in cash plus a potential future
      earnout payment of a maximum of $6,000 based on certain 1998 operating and
      performance targets and other contingencies, including any change of the
      Company's Chief Executive Officer (See Note 7). The cost of the
      acquisition exceeded the fair value of the net assets by an estimated
      $14,800. Additionally, the Company entered into two-year employment
      contracts with five key OLI employees which provide base compensation,
      cash incentives and stock options and grants. The Company granted these
      employees an aggregate of 125,000 stock options at $16.63 per share
      vesting over four years. Additionally, these employees are eligible to
      receive 125,000 shares of stock. These shares will be granted over a three
      and one-half year period based upon achieving certain operating and
      performance targets and continuation of employment. Deferred compensation
      expense in the aggregate of $2,078 was recorded and will be amortized over
      the three and one-half years.


                                       6
<PAGE>

      The excess cost over the fair value of the net assets acquired for the
      1997 acquisitions has been allocated on a preliminary basis to goodwill,
      which is subject to change as the valuation of such net assets are
      finalized. As a result of the analysis performed to date, management has
      determined that the appropriate amortization periods for such goodwill
      range from 5 to 15 years.

3.    STOCK-BASED COMPENSATION

      In June 1997, the Stockholders of the Company approved an amendment to the
      1994 stock option plan (as amended, the "Plan") which increased the number
      of shares reserved for issuance from 1,000,000 to 4,000,000. In January
      1997, the Company approved a comprehensive option grant program providing
      a total of 2,017,000 options to directors and all qualified full-time
      employees of the Company and authorized the exchange of 360,000
      outstanding stock options. The exercise price for options under these
      programs is $12.63 per share. The Company recorded deferred compensation
      expense of $8,387, the difference between the exercise price and closing
      market price on the date of stockholder approval. Such amount is being
      amortized over the 5 year vesting period of the options.

      During 1997, the Company granted pursuant to the Plan additional options
      to purchase 225,000 shares of common stock with exercise prices ranging
      from $11.69 to $28.25 per share. Also during 1997, the Company granted
      options to purchase 390,000 shares of common stock to senior executives
      outside of its stock option plans. The exercise prices of these options
      range from $10.75 to $17.32 per share.

      Compensation expense relating to these grants for the three months and
      nine months ended September 30, 1997 was $420 and $1,260, respectively.

4.    LEGAL PROCEEDINGS

      A charge of $20.7 million was recorded in the third quarter of 1997 for
      the proposed settlements of the consolidated class action and derivative
      lawsuit that arose out of the facts underlying the Company's announcements
      in September and October, 1996 that it intended to restate certain prior
      financial statements covering the 1992 through 1995 fiscal years. The
      charge of $20.7 million was comprised of $31.1 million for the settlements
      of the consolidated class action and derivative lawsuit plus estimated
      legal fees, offset by insurance proceeds of $10.9 million. The settlements
      are contingent upon negotiation and execution of definitive settlement
      stipulations and hearings and approvals by the U.S. District Court.

      The settlement of these matters excludes a separate action relating to the
      issues underlying the Company's restated financial statements brought in
      the U.S. District Court in Connecticut against the Company and certain of
      its present and former officers and directors by the State Board of
      Administration of Florida covering its purchase of less than 60,000
      shares. The settlement also excludes the lawsuit brought by holders of
      approximately 1.3 million shares of the Company's stock against the
      Company and certain of its officers, former officers and directors in
      Santa Clara County, California, arising out of the stock merger between
      the Company and Inmac Corp. on January 25, 1996. The Company is unable to
      predict the outcome or the financial impact of these litigations and,
      accordingly, has made no provision therefor in the consolidated financial
      statements.

      In addition, the staff of the SEC is conducting a formal investigation
      into the events underlying the restatement. The Company is cooperating
      with the staff in its investigation.


                                       7
<PAGE>

5.    NEW ACCOUNTING STANDARD

      In February 1997, the Financial Accounting Standards Board issued
      Statement of Financial Accounting Standards No. 128, "Earnings Per Share"
      which specifies the computation, presentation and disclosure requirements
      for earnings per share. This statement is effective for both interim and
      annual periods ending after December 15, 1997. Early implementation is not
      permitted. The Statement will require the replacement of the Company's
      previous presentation of primary earnings per share with a dual
      presentation of basic and diluted earnings per share. The Company expects
      that the application of this standard will result in basic earnings per
      share for certain prior year periods that are higher than previously
      reported primary earnings per share. The Company does not expect that the
      application of this standard will have a material effect on the
      calculation of diluted earnings per share as compared to primary earnings
      per share previously reported.

6.    HEDGING INSTRUMENTS

      The Company is utilizing forward exchange contracts to manage exposure to
      foreign currency price fluctuations on intercompany loans to its foreign
      subsidiaries. Outstanding agreements involve the exchange of one currency
      for another at a fixed rate. The Company's credit exposure is limited to
      the replacement cost, if any, of the instruments and the Company only
      enters into such agreements with highly rated counterparties. The Company
      does not enter into forward exchange contracts for trading or speculative
      purposes and matches the term and notional amount of the contracts to the
      underlying intercompany loans.

      At September 30, 1997 the Company had outstanding forward exchange
      contracts of $50.0 million which mature in 38 days or less. The single
      largest currency represented is the British pound followed by the German
      deutsche mark and Dutch guilder.

7.    SUBSEQUENT EVENT

      On October 26, 1997 Linwood A. Lacy, Jr. resigned as President and Chief
      Executive Officer of the Company. Peter Godfrey, who remains Chairman of
      the Board of Directors of the Company, has been appointed to these
      positions. As a result of this resignation, the Company became committed
      to pay the OLI shareholders $2,000 of the $6,000 contingent earnout (See
      Note 2).


                                       8
<PAGE>

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

Overview

Micro Warehouse, Inc. (the "Company") is a specialty catalog retailer and direct
marketer of brand name personal computers, computer software, accessories,
peripheral and networking products to commercial and consumer customers. The
Company markets its products through frequent mailings of its distinctive,
colorful catalogs, Internet catalog sites on the worldwide web and dedicated
telemarketing account managers who focus on corporate, education and government
accounts. The Company offers brand name hardware and software from leading
vendors such as Adobe, Apple, Compaq, Hewlett Packard, IBM, Iomega, Microsoft,
Motorola, 3Com, and Toshiba.

Through its three core catalogs, MicroWarehouse, MacWarehouse and Data Comm
Warehouse, various specialty catalogs and its Internet sites, the Company offers
a broad assortment of more than 25,000 computer products at competitive prices.
With colorful illustrations, concise product descriptions and relevant technical
information, each catalog title focuses on a specific segment of the computer
market. The catalogs are recognized as a leading source for computer hardware,
software and other products.

RESULTS OF OPERATIONS

The table below sets forth certain items expressed as a percent of net sales for
each of the interim periods presented:

                                         Three Months Ended    Nine Months Ended
                                            September 30,        September 30,
                                           1997       1996       1997      1996
                                           ----       ----       ----      ----
Net sales                                 100.0%     100.0%     100.0%    100.0%
Cost of sales                              83.4       82.0       83.4      81.1
                                          -----      -----      -----     -----
Gross margin                               16.6       18.0       16.6      18.9
Selling, general and administrative        
  expenses                                 14.9       14.1       14.5      14.6
Write-off of goodwill, restructuring        
  and merger costs                          -          -          -         2.5
                                          -----      -----      -----     -----
Income from operations before 
  interest, litigation provision, 
  income taxes and extraordinary 
  charge                                    1.7        3.9        2.1       1.8
Interest income, net                         .3         .2         .2        .1
Provision for settlement of class
  action and derivative litigation          4.0        -          1.3       -
                                          -----      -----      -----     -----
Income before income taxes and
extraordinary charge                       (2.0%)      4.1%       1.0%      1.9%

Three Months Ended September 30, 1997 Compared to Three Months Ended September
30, 1996

Net sales increased by $84.1 million or 19.2% to $522.1 million for the three
months ended September 30, 1997, from $438.0 million for the three months ended
September 30, 1996. This increase in net sales was primarily attributable to
continued growth in the Wintel business which increased by approximately 34%.
Worldwide Macintosh ("Mac") sales were nominally higher. The Mac business


                                       9
<PAGE>

represented approximately 40% of total worldwide sales, down from approximately
47% in the same period last year.

Domestic sales for the three months ended September 30, 1997 increased $83.0
million or 27.6% from the prior year to $383.5 million. Wintel sales increased
approximately 50%, due to significant increases in Wintel desktop and notebook
PC's, monitors and printers. Mac sales increased approximately 8%. Wintel CPU
sales increased by approximately 80% while Wintel CPU unit volume grew by
approximately 110% over the same period last year. The average order size
increased 15.6% to $548. Circulation increased 25.0% to 26.9 million catalogs.
The Wintel sales growth in the U.S. without the USA Flex and Inmac businesses
acquired in 1996 was approximately 49%. USA Flex sales in the quarter were $15.0
million and Inmac sales of $15.5 million declined 21.6% from the prior year.

International sales for the three months ended September 30, 1997 increased by
$1.2 million or 0.9% from the prior year to $138.6 million. International Wintel
sales were up approximately 10%, offsetting a decline of approximately 16% in
Mac sales. International sales decreased to 26.6% of total net sales in the
three months ended September 30, 1997 from 31.4% in the same period in 1996. The
average order size decreased 16.2% to $421. Circulation increased by 1.3% to 5.7
million catalogs. In addition, translation of international sales at 1997
exchange rates reduced sales in dollars by approximately 8.0% as compared to
last year.

Gross margin, which consists of net sales less product and transportation costs,
decreased as a percentage of net sales to 16.6% in 1997 from 18.0% for the same
period in 1996. The decline in gross margin was due to a continuing shift in mix
towards lower margin Wintel products, a decline in the Mac and DataComm margins
in the US, and lower margins in all categories in Europe.

Selling, general and administrative expenses increased by 26.6% to $77.8 million
for the three months ended September 30, 1997 from $61.5 million for the same
period in 1996 and increased as a percentage of net sales to 14.9% from 14.1%.
The principal reason for the percentage increase was an increase in payroll
costs due to headcount increases in the domestic telemarketing and
administration areas of the Company ($5.6 million). These increases were offset
partially by lower net advertising costs which declined from 2.2% of sales to
1.7% of sales.

Operating income before interest, litigation provision, income taxes and
extraordinary charges for the three months ended September 30, 1997 was $8.6
million as compared to $17.2 million for the same period in 1996. International
operations for the three months ended September 30, 1997 operated at a loss of
$3.0 million ($3.6 million loss after interest expense) compared to income of
$0.1 million in 1996, resulting primarily from losses in Germany, France and
Finland.

Net interest income increased to $1.4 million for the three months ended
September 30, 1997 from $0.8 million for the same period in 1996. The increase
was due primarily to the higher level of cash and cash equivalents in the third
quarter of 1997 available for investment and the lower level of debt due to the
early extinguishment of Inmac's debt.

The effective income tax rate was a benefit of 33.2% of pretax income in the
three months ended September 30, 1997 versus 40.5% of a provision of pretax
income for the same period in 1996. This change was primarily the result of
providing a benefit on the litigation settlements at US statutory rates and not
providing a tax benefit on certain foreign losses.

Nine Months Ended September 30, 1997 Compared to Nine Months Ended September 30,
1996


                                       10
<PAGE>

Net sales increased by $162.5 million or 11.7% to $1,552.0 million in the nine
months ended September 30, 1997 from $1,389.5 million in the nine months ended
September 30, 1996. This increase in net sales was primarily attributable to
continued growth in the Wintel business which increased by approximately 30%,
including USA Flex net sales of $53.5 million. The worldwide Mac business
declined approximately 6%. The Mac business represented approximately 42% of
total worldwide sales, down from approximately 50% in the same period last year.
Worldwide average order size increased 7.1% to $498 and worldwide catalog
circulation increased 8.6% to 93.0 million. Domestic sales increased 17.2% to
$1,087.7 million and international sales increased 0.6% to $464.3 million. In
addition, translation of international sales at 1997 exchange rates reduced
sales in dollars by approximately 5.3% as compared to last year.

Gross margin for the nine months ended September 30, 1997 decreased as a
percentage of net sales to 16.6% in 1997 from 18.9% for the same period in 1996.
The decline in gross margin was due to a continuing shift in mix towards lower
margin Wintel products, a decline in the Mac and DataComm margins in the US, and
lower margins in all categories in Europe, particularly the legacy Inmac
business in Europe.

Selling, general and administrative expenses increased by 10.7% to $225.0
million for the nine months ended September 30, 1997 from $203.3 million for the
same period in 1996 and decreased as a percentage of net sales to 14.5% from
14.6%. The principal reason for the percentage decline in 1997 was due to lower
net advertising costs which declined from 2.3% of sales to 1.4% of sales,
resulting from increased co-op income and lower catalog costs ($10.5 million).
These savings were offset by higher domestic payroll costs due to headcount
increase in the telemarketing and administration areas ($10.9 million), legal
and insurance costs ($2.4 million), stock option compensation expense
($1.3 million) and bad debt expenses ($0.8 million), as well as certain fixed
asset write-offs ($0.5 million) and transition costs for the integration of the
Company's operation in Australia ($0.8 million). The stock option compensation
expense relates to the January 1997 stock option grants and represents the
difference between the option grant price on January 23,1997 and the price of
the Company's stock on June 10, 1997, the date of Stockholder approval of the
expanded Plan. This aggregate difference of $8.4 million is being amortized over
the five year vesting period of the options granted.

Operating income before interest, litigation provision, income taxes and
extraordinary charges for the nine months ended September 30, 1997 was $32.8
million as compared to $25.6 million for the same period in 1996. Operating
income in 1996 included a $6.0 million write-off of goodwill and restructuring
and merger costs relating to the acquisition of Inmac of $21.2 million and $6.1
million, respectively. Operating income for international operations for the
nine months ended September 30, 1997 was a loss of $3.7 million compared to a
profit of $8.3 million in 1996, resulting primarily from losses in Germany,
Australia and Finland as well as declining profitability in France.

Net interest income increased to $4.0 million for the nine months ended
September 30, 1997 from $1.2 million for the same period in 1996. The increase
was due primarily to the higher level of cash and cash equivalents in 1997
available for investment and the lower level of debt due to the early
extinguishment of Inmac's debt.

The effective income tax rate was 47.1% of before tax income in the nine months
ended September 30, 1997 versus 58.8% for the same period in 1996. Excluding the
pretax charge of $20.7 million for the litigation settlement the effective
income tax rate for the nine months ended September 30, 1997 was 43.0% of before
tax income. The 1997 effective income tax rate does not provide any income tax
benefit to the foreign losses. The 1996 effective income tax rate includes
non-deductible merger costs and goodwill write-offs.

Liquidity and Capital Resources


                                       11
<PAGE>

As of September 30, 1997, the Company had cash and short-term investments
totaling $85.9 million compared to $52.3 million at December 31, 1996. This
increase was primarily due to a reduction in inventories and an increase in
accounts payable offset by business acquisitions and line of credit repayments.
Inventories decreased to $157.3 million at September 30, 1997 from $201.1
million at December 31, 1996. Accounts receivable decreased to $202.1 million at
September 30, 1997 from $203.7 million at December 31, 1996. In 1997 the Company
completed its system integration of its domestic inventory, accounts
receivables, customer database and product listings. The integration of these
systems as well as better monitoring of inventory levels improved inventory
turnover from approximately 10 times in the first quarter of 1997 to
approximately 12 times in the third quarter of 1997. The current ratio was 2.1
to 1 at September 30, 1997 compared to 2.2 to 1 at December 31, 1996 and working
capital was $254.3 million compared to $271.5 million for the same periods,
respectively. Overall, operations generated cash of $89.0 million for the nine
months ended September 30, 1997. 

Capital expenditures for the nine months ended September 30, 1997 were $11.7
million, primarily for computer systems and distribution equipment both in the
United States and internationally. Although the Company's primary capital need
will be to fund its working capital requirements for expected sales growth and
funding of litigation settlement payments, the Company expects that future
growth will also require continued expansion of its computer systems and
distribution capacity.

The Company has a multi-currency borrowing facility of $75 million. The purpose
of this facility is to provide working capital financing for the Company and its
foreign subsidiaries. The Company had no borrowings under this facility as of
September 30, 1997. Additionally, at September 30, 1997, the Company had unused
lines of credit in the United Kingdom and France, which provided for unsecured
borrowings up to 1.8 million British pounds and 45 million French francs,
respectively, for working capital purposes.

The Company is utilizing forward exchange contracts to manage exposure to
foreign currency risk related to intercompany loans to its foreign subsidiaries.
At September 30, 1997 the Company had outstanding forward exchange contracts of
$50.0 million which mature in 38 days or less. The single largest currency
represented is the British pound followed by the German deutsche mark and Dutch
guilder.

The Company believes that its existing cash reserves, cash flow from operations
and existing credit facilities will be sufficient to satisfy its cash needs for
at least the next 12 months including settlement of the class and derivative
litigations but without consideration of uncertainties surrounding other
litigation pending against the Company.

Outlook

The Company experienced disappointing financial results in its USA Flex and
international businesses as discussed above. USA Flex experienced operating
losses of $1.0 million and $4.3 million for the three and nine months ended
September 30, 1997, respectively. The Company's international operations
experienced operating losses of $3.0 million and $3.7 million for the three and
nine months ended September 30, 1997, respectively. The Company is in the
process of reviewing these operations to determine appropriate courses of
action.

Apple Computer, Inc. ("Apple") continues to experience difficulties and has
significantly downsized its operations. It continues to search for a new CEO to
replace Steve Jobs who is currently acting as interim CEO. It has effectively
terminated its licensing program for Macintosh "clones", announced its intention
to reduce the number of wholesale distributors of its own Macintosh computers
and announced more restrictive 


                                       12
<PAGE>

price protection and other terms for 1998. It has also announced its intention
to offer its products direct to end user customers via an internet site. All
these matters and the ongoing uncertainties concerning Apple may adversely
affect the Company's worldwide Macintosh related sales.

Statement under the Private Securities Litigation Reform Act

With the exception of the historical information contained in this report, the
matters described herein contain forward-looking statements that involve risk
and uncertainties including but not limited to economic, competitive,
governmental, technological and litigation factors outside of the control of the
Company. These factors more specifically include : uncertainties surrounding the
electronic software reselling business attributable to technological and
commercial issues; uncertainties attributable to internet commerce generally;
uncertainties surrounding the demand for and supply of products manufactured by
and compatible with those of Apple products; competition from other catalog,
retail store, on-line and other resellers of computer products; issues
surrounding the Company's European business and the ultimate outcome of the not
yet settled litigation proceedings and SEC formal investigation brought in
connection with the Company's reported accounting errors. These and other
factors are described generally in the MD&A section of the Company's 1996 Annual
Report to Stockholders and most specifically in the paragraphs in that section
captioned "Liquidity and Capital Resources," "Impact of Inflation and
Seasonality", and "Outlook." Forward-looking statements are typically identified
by the words "believe," "expect," "anticipate," "intend," "estimate," and
similar expressions. Readers are cautioned not to place undue reliance on these
forward-looking statements, which speak only as of their dates.


                                       13
<PAGE>

                           Part II - OTHER INFORMATION

Item 1. Legal Proceedings

      The information required by this item appears on page 1 of the Company's
      1996 Annual Report to Stockholders under the caption "Restatement of
      Financial Statements" and in Note 17 to Notes to Consolidated Financial
      Statement on page 36 of the Company's 1996 Annual Report to Stockholders,
      all of which information is incorporated herein by reference. For an
      update to this information, see Note 4 to Notes to Unaudited Consolidated
      Financial Statements in this Form 10-Q.

Item 2. Changes in Securities

      None

Item 3. Defaults Upon Senior Securities

      None

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

      None

Item 5. Other Information

      None

Item 6. Exhibits and Reports on Form 8-K

      (a)   Exhibits

      Exhibit 11 STATEMENT RE COMPUTATION OF PER SHARE EARNINGS

      (b)   Reports on Form 8-K

      1.    The Company filed a Form 8-K pursuant to Item 5 therein on September
            4, 1997 to report that it had reached a tentative settlement of the
            consolidated securities class action lawsuit pending in the U.S.
            District Court for the District of Connecticut.

      2.    The Company filed a Form 8-K pursuant to Item 5 therein on October
            27, 1997 to report that Linwood A. Lacy, Jr. had resigned as
            President and Chief Executive Officer and that Peter Godfrey,
            Chairman of the Board of Directors of the Company, had been
            appointed to those positions.


                                       14
<PAGE>

                              MICRO WAREHOUSE, INC.

                                    FORM 10-Q

                               September 30, 1997
                      -------------------------------------


                                    SIGNATURE

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



                                       MICRO WAREHOUSE, INC.

                                       The Registrant

Date:  November 14, 1997
                                       By /s/ Wayne P. Garten
                                          --------------------------------------
                                          WAYNE P. GARTEN
                                          Senior Vice President and
                                          Chief Financial Officer

                                          (Duly Authorized Officer of the 
                                          Registrant and Principal Financial
                                          Officer)


                                       15