UNITED STATES

                       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 quarter ended     September 30, 1996    Commission File Number   0-28524

                              HIREL HOLDINGS, INC.
             (Exact name of registrant as specified in its charter)

               Delaware                        65-0666239
            (State or other jurisdiction of              (I.R.S. Employer
            incorporation or organization)              Identification No.)

            650 S.W. 16th Terrace
            Pompano Beach, Florida                              33069
            (Address of principal executive offices)        (Zip code)

Registrant's telephone number, including area code:         (954) 942-5390


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  and  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 the  issuer's  classes of
common stock,  as of the latest  practicable  date: At November 13, 1996,  there
were  4,818,750  shares  of  the  Registrant's  $.001  par  value  common  stock
outstanding.



<PAGE>



HIREL HOLDINGS, INC. AND SUBSIDIARIES
------------------------------------------------------------------------------


INDEX TO 10-QSB
------------------------------------------------------------------------------



Part I:  Financial Information

Item 1.  Financial Statements

Consolidated Balance Sheet as of September 30, 1996 [Unaudited]3

Consolidated Statements of Operations for the three and nine months ended
September 30, 1996 and 1995 [Unaudited].......................4

Consolidated Statements of Cash Flows for the nine months ended
September 30, 1996 and 1995 [Unaudited].......................5

Notes to Consolidated Financial Statements....................6......7

Item 2: Management's Discussion and Analysis of Financial Condition
        and Results of Operations.............................8......11

Part II.  Other Information...................................12

Signature Page................................................13






                 .   .   .   .   .   .   .   .   .   .   .   .


                                        2

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<TABLE>


PART I:  FINANCIAL INFORMATION
Item 1.  Financial Statements

HIREL HOLDINGS, INC. AND SUBSIDIARIES
------------------------------------------------------------------------------


CONSOLIDATED BALANCE SHEET AS OF SEPTEMBER 30, 1996
[UNAUDITED]
------------------------------------------------------------------------------


<S>                                                                    <C>

Assets:
Current Assets:
  Cash and Cash Equivalents                                             $ 4,084,442
  Accounts Receivable [Net of Allowance for Doubtful Accounts
   of $23,918]                                                              747,380
  Inventory                                                               1,343,993
  Other Current Assets                                                      672,485
                                                                        -----------

  Total Current Assets                                                    6,848,300

Property and Equipment - Net                                                768,900
                                                                        -----------

Other Assets:
  Loans Receivable - Related Parties                                        385,864
  Other Assets                                                              124,466
                                                                        -----------

  Total Other Assets                                                        510,330

  Total Assets                                                          $ 8,127,530
                                                                        ===========

Liabilities and Stockholders' Equity:
Current Liabilities:
  Line of Credit                                                        $ 1,540,221
  Accounts Payable                                                          619,251
  Other Current Liabilities                                                 204,123
                                                                        -----------

  Total Current Liabilities                                               2,363,595

Loan Payable - Related Party                                                 13,111
                                                                        -----------

Commitments and Contingencies                                                    --

Stockholders' Equity:
  Preferred Stock - $.001 Par Value, 1,000,000 Shares Authorized,
   None Issued or Outstanding                                                    --

  Common Stock, $.001 Par Value, 24,000,000 Shares Authorized,
   4,813,750 Shares Issued and Outstanding                                    4,814

  Paid-in Capital                                                         5,963,674

  Retained Earnings [Deficit]                                              (217,664)

  Total Stockholders' Equity                                              5,750,824

  Total Liabilities and Stockholders' Equity                            $ 8,127,530
                                                                        ===========


See Notes to Consolidated Financial Statements.

                                         3
</TABLE>

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<TABLE>

HIREL HOLDINGS, INC. AND SUBSIDIARIES
------------------------------------------------------------------------------


CONSOLIDATED STATEMENTS OF OPERATIONS
[UNAUDITED]
------------------------------------------------------------------------------


                                   Three months ended         Nine months ended
                                      September 30,             September 30,
                                      -------------             -------------
<S>                            <C>           <C>           <C>          <C>  

                                  1 9 9 6       1 9 9 5      1 9 9 6       1 9 9 5
                                  -------       -------      -------       -------
Net Sales:
  Computer Equipment            $5,617,666   $ 5,410,515   $18,114,722  $14,674,588
  Computer Equipment - Related Party    --            --           --     2,491,111
  Fuel Injection Systems           324,127            --    1,253,521            --
                                ----------   -----------   ----------   -----------

  Total Net Sales                5,941,793     5,410,515   19,368,243    17,165,699
                                ----------   -----------   ----------   -----------

Cost of Goods Sold:
  Computer Equipment             5,366,022     5,177,509   17,218,900    16,519,952
  Fuel Injection Systems           221,452            --      828,038            --
                                ----------   -----------   ----------   -----------

  Total Cost of Goods Sold       5,587,474     5,177,509   18,046,938    16,519,952
                                ----------   -----------   ----------   -----------

  Gross Profit                     354,319       233,006    1,321,305       645,747
                                ----------   -----------   ----------   -----------

Expenses:
  General and Administrative Expenses527,936     196,031    1,442,090       436,141
  Research and Development          70,644            --      150,580            --
                                ----------   -----------   ----------   -----------

  Total Expenses                   598,580       196,031    1,592,670       436,141
                                ----------   -----------   ----------   -----------

  Operating [Loss] Income         (244,261)       36,975     (271,365)      209,606
                                ----------   -----------   ----------   -----------

Other Income [Expense]:
  Rental Income - Related Party      9,000            --       18,000            --
  Interest Expense                 (36,930)       (5,103)    (100,831)       (5,103)
  Interest Income                   32,843            --       32,843            --
  Interest Income - Related Parties  8,210            --       22,960            --
  Loss on Sale of Asset                 --            --      (41,574)           --
                                ----------   -----------   ----------   -----------

  Total Other Income [Expense]      13,123        (5,103)     (68,602)       (5,103)
                                ----------   -----------   ----------   -----------

  [Loss] Income Before Pro Forma
   Income Tax Adjustments         (231,138)       31,872     (339,967)      204,503

Pro Forma Income Tax
  Adjustments                           --         4,920           --        69,870
                                ----------   -----------   ----------   -----------

  Pro Forma Net [Loss] Income   $ (231,138)  $    26,952   $ (339,967)  $   134,633
                                ==========   ===========   ==========   ===========

  Pro Forma [Loss] Earnings
   Per Share                    $     (.05)  $       .01   $     (.08)  $       .05
                                ==========   ===========   ==========   ===========

Weighted Average Common Shares
  Outstanding                    4,559,375     2,750,000    4,021,761     2,750,000
                                ==========   ===========   ==========   ===========

See Notes to Consolidated Financial Statements.

                                         4
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<TABLE>

HIREL HOLDINGS, INC. AND SUBSIDIARIES
------------------------------------------------------------------------------


CONSOLIDATED STATEMENTS OF CASH FLOWS
[UNAUDITED]
------------------------------------------------------------------------------


                                                               Nine months ended
                                                                 September 30,
                                                             1 9 9 6       1 9 9 5
                                                             -------       -------
<S>                                                        <C>         <C> 

Operating Activities:
  Net [Loss] Income                                        $ (339,967)  $   204,503
                                                           ----------   -----------
  Adjustments  to Reconcile Net [Loss] Income to Net Cash [Used for] Provided by
   Operating Activities:
   Depreciation                                                75,477         4,428
   Amortization                                                69,060            --
   Loss on Sale of Asset                                       41,574            --
   Provision for Losses on Accounts Receivable                 21,099           940

  Changes in Assets and Liabilities:
   [Increase] Decrease in:
     Accounts Receivable                                     (418,059)        2,440
     Inventory                                               (942,127)      (51,379)
     Other Current Assets                                    (666,528)       (1,332)
     Other Assets                                             (73,458)           --

   Increase [Decrease] in:
     Accounts Payable                                         (49,707)      (45,592)
     Other Current Liabilities                                (13,385)      (39,629)
                                                           ----------   -----------

   Total Adjustments                                       (1,956,054)     (130,124)
                                                           ----------   -----------

  Net Cash - Operating Activities                          (2,296,021)       74,379
                                                           ----------   -----------

Investing Activities:
  Purchase of Property and Equipment                          (44,267)         (109)
  Proceeds from Sale of Equipment                              85,000            --
  Advances - Related Party                                   (162,660)     (476,274)
                                                           ----------   -----------

  Net Cash - Investing Activities                            (121,927)     (476,383)
                                                           ----------   -----------

Financing Activities:
  Payment of Loan Renewal Fee                                 (25,000)           --
  Distributions                                              (384,317)     (726,061)
  Advances from Line of Credit                              6,039,318     1,384,093
  Repayments on Line of Credit                             (5,159,903)     (643,891)
  Advances from Related Parties                               287,483       449,584
  Repayments to Related Parties                              (304,261)           --
  Proceeds from Equity Sales                                  649,000            --
  Net Proceeds from Initial Public Offering                 4,841,829            --
                                                           ----------   -----------

  Net Cash - Financing Activities                           5,944,149       463,725
                                                           ----------   -----------

  Net Increase in Cash and Cash Equivalents                 3,526,201        61,721

Cash and Cash Equivalents - Beginning of Periods              558,241        88,581
                                                           ----------   -----------

  Cash and Cash Equivalents - End of Periods               $4,084,442   $   150,302
                                                           ==========   ===========

See Notes to Consolidated Financial Statements.


                                         5
</TABLE>

<PAGE>



HIREL HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
[UNAUDITED]
------------------------------------------------------------------------------


[1] Basis of Presentation

The unaudited  consolidated  financial statements as of and for the period ended
September 30, 1996 give retroactive effect to the acquisition by Hirel Holdings,
Inc. [the "Company"] of all of the outstanding  common stock of Hirel Marketing,
Inc. [an S corporation] ["HMI"] and Hirel Technologies, Inc. ["HTI"] on July 22,
1996.  HTI is the  successor  to Hirel  Technologies,  Ltd.  ["HTL"],  a limited
partnership.  The  financial  statements  of  the  Company  are  presented  on a
consolidated  basis  commencing  July 22, 1996.  Prior to that date the separate
results of HMI and HTI [including  HTL as predecessor  from inception on October
24, 1995] have been consolidated on a basis consistent with that of consolidated
financial  statements  in a manner  similar to a pooling of interests and giving
retroactive  effect to the issuance of 2,750,000  shares of the Company's common
stock to the  stockholders of HMI, and 1,000,000  shares of the Company's common
stock  to  the  stockholders  of  HTI.  Additionally,   the  S  corporation  and
partnership  equity  sections  of HMI and HTL as  predecessor  to HTI have  been
reclassified  to additional  paid-in  capital.  No adjustment of assets to "fair
value" has been recorded and all  intercompany  balances and  transactions  have
been eliminated.

In  opinion of  management,  the  accompanying  unaudited  financial  statements
included in the Form 10- QSB reflect all adjustments  [consisting only of normal
recurring  accruals]  necessary  to make the interim  financial  statements  not
misleading.  The results of operations for the interim periods presented are not
necessarily indicative of the results to be expected for the full year.

The following pro forma  unaudited  information  gives effect to the results the
Company  would have  reflected  for three months and nine months  periods  ended
September 30, 1995 had the predecessor of HTL [Cutler Induction  Systems,  Inc.]
been included in the consolidated statements of operations.

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

Net Sales - Computer Equipment                $ 5,401,515        $17,165,699
Net Sales - Fuel Injection Systems                174,052           661,197
                                              -----------        ----------

  Total Net Sales                             $ 5,584,567        $17,826,896
  ---------------                             ===========        ===========

Net Loss                                      $  (644,653)       $(1,260,605)
--------                                      ===========        ===========

Net Loss Per Share                            $      (.17)       $     (.34)
------------------                            ===========        ==========

Weighted Average Common Shares Outstanding      3,750,000         3,750,000

For  further  information,  refer  to the  financial  statements  and  footnotes
included in the Company's Form SB-2, filed July 22, 1996.

[2] Inventory

The components of inventory as of September 30, 1996 are as follows:

Raw Materials                  $   279,772
Work-in-Process                     35,732
Finished Goods                   1,028,489
                               -----------

  Total                        $ 1,343,993
  -----                        ===========


                                        6

<PAGE>



HIREL HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Sheet #2
[UNAUDITED]
------------------------------------------------------------------------------



[3] Income Taxes

Income taxes are provided,  where  appropriate,  on historical  earnings of each
combining  company.  Pro forma income tax adjustments are provided to reflect an
estimate of income tax expense had the  consolidated  companies  been subject to
federal and state income taxes for each period presented.

[4] Earnings Per Share

Earnings  per share is based on the  weighted  average  number of common  shares
outstanding  for each  period  presented  and  gives  retroactive  effect to the
combination  discussed in Note 1, and to the public offering of 1,063,750 shares
of the  Company's  common stock on July 22, 1996.  The Company does not have any
common stock equivalents outstanding.

[5] Initial Public Offering

On July 22, 1996,  the Company  realized net proceeds of $4,841,829  through the
sale of 1,063,750 shares of common stock.




                      .   .   .   .   .   .   .   .   .   .

                                        7

<PAGE>



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



Three Months Ended September 30, 1996 Compared to Three Months Ended 
September 30, 1995

The  Consolidated  Statement of Operations for the three months ended  September
30, 1996  reflects  Total Net Sales of  $5,941,793,  Gross Profit of $354,319 or
6.0%, and Pro Forma Net Loss of $231,138.  The Combined  Statement of Operations
for the three  months  ended  September  30, 1995  reflected  Total Net Sales of
$5,410,515,  Gross Profit of $233,006 or 4.3% and Income Before Pro Forma Income
Tax Adjustments of $31,872.

Any comparisons  between the Consolidated  Statement of Operations for the three
months ended  September  30, 1996 and the three months ended  September 30, 1995
must be made in light of the discussion that follows. The Consolidated Statement
of Operations for the three months ended September 30, 1996 includes the results
of operations for parent company, Hirel Holdings,  Inc. ["HHI"], and both of its
wholly-owned subsidiaries, Hirel Marketing, Inc. ["HMI"] and Hirel Technologies,
Inc.  ["HTI"].  The Combined  Statement of Operations for the three months ended
September 30, 1995 includes only the operations of HMI, and does not include the
operations  for HHI,  which did not commence  business  until July 22, 1996, the
effective date of the Company's  initial public offering,  or HTI, which did not
commence  business  [through a predecessor  entity] until October 24, 1995.  The
sections  below compare the operations of HMI and HTI for the three months ended
September 30, 1996 and September 30, 1995 separately.

HHI incurred a net loss of $74,360 for the three months ended September 30, 1996
consisting  primarily of payroll of $66,055 and expenses associated with being a
public company of $41,148 offset by interest  income of $32,843 on investment of
the net proceeds from the Company's initial public offering.

Hirel Marketing, Inc.

Hirel  Marketing,  Inc.  ["HMI"]  is the  subsidiary  of the  Company  that is a
distributor of  microcomputer  hardware,  peripherals and related  communication
products.  Net Sales  increased by $207,151 or 3.8%,  to $5,617,666 in the third
quarter 1996 from $5,410,515 in the third quarter 1995. Gross Profit on computer
equipment sold increased by approximately $19,000 or 8%. The Gross Profit margin
for the third  quarter of 1996 was 4.48%,  which  compared  to the Gross  Profit
margin of 4.31% for the third quarter of 1995.

On June 21, 1995, HMI obtained a $1,000,000 line of credit.  This line of credit
is used to finance letters of credit used by HMI to purchase inventory. The line
of credit  allows HMI the option of paying upon  presentation  or financing  the
inventory  purchases for up to 90 days. The line of credit  carries  interest at
the  Citibank  prime rate [8.5% at  September  30, 1996] plus 2% to a maximum of
18%. The line of credit is subject to renewal annually, is collateralized by all
corporate assets, and is guaranteed by Vincent Montelione, President of HHI. The
line of credit was increased to $2,000,000 on December 26, 1995. As of September
30, 1996,  borrowings under the line of credit were  $1,540,221,  as compared to
$740,202 as of September 30, 1995.  Interest expense associated with the line of
credit was $36,930 for the three months  ended  September  30, 1996  compared to
$5,103 for the three months ended  September  30,  1995.  Management  intends to
continue to seek favorable  opportunities  to purchase  inventory  using,  where
appropriate,  financing  available  through the line of credit and the  proceeds
from the Company's initial public offering.

In  the  third  quarter  1996,   total  General  and   Administrative   Expenses
attributable to HMI were $197,004  compared to $196,031 for the third quarter of
1995.

Income Before Pro Forma Income Tax Adjustments attributable to the operations of
HMI remained relatively  unchanged decreasing from $31,872 for the quarter ended
September 30, 1995 to $29,942 for the quarter ended September 30, 1996.



                                        8

<PAGE>



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


Hirel Technologies, Inc.

Hirel  Technologies,   Inc.  ["HTI"],  through  its  predecessor  entity,  Hirel
Technologies,  Ltd.  ["HTL"]  began  operations  on October 24,  1995.  HTI is a
subsidiary  of the  Company  that  develops  and sells fuel  injection  systems,
related  components  and other products  designed to enhance the  performance of
gasoline  powered  engines.  For the quarter ended  September 30, 1996,  HTI had
total  revenue of  $324,127,  of which  $225,264  came from  original  equipment
manufacturer  ["OEM"] customers and the remaining $98,863 resulted from sales to
aftermarket  purchasers.  A  single  unaffiliated  OEM  customer  accounted  for
approximately 69% of revenues for the fiscal quarter ended September 30, 1996.

The General and Administrative Expenses for the quarter ended September 30, 1996
totaled  $223,728,  and  consisted  primarily  of payroll and  payroll  taxes of
$100,418,  rent of  $24,684,  insurance  of  $16,312,  telephone  of $11,111 and
depreciation of $21,005.  Research and Development  Expenses incurred during the
quarter ended September 30, 1996 were $70,644. Management believes that HTI will
continue to incur Research and  Development  Expenses as it endeavors to develop
new products and enhancements of existing  products that are consistent with the
current  product line. The loss from  operations for the quarter ended September
30, 1996 was $186,720 as a result of research and development expenses and other
expenses  related  to the  creation  of an  infrastructure  for HTI.  Management
believes that these losses may continue for the next six to nine months.

While the quarter ended  September 30, 1996 reflects the  operations of HTI, the
comparative quarter ended September 30, 1995, does not reflect the operations of
Cutler Induction Systems, Inc., a Florida corporation ["Cutler"] that originally
developed the intellectual  property rights acquired by HTL from Cutler and that
is  related  to HTL by  certain  common  beneficial  ownership.  For a  complete
discussion  of the  acquisition  of certain  property  rights by HTL and certain
issues related thereto,  please see the Registration  Statement [Form SB-2, File
No.  333-4686-A]  as filed  with the  Securities  and  Exchange  Commission  and
effective  as of July 22, 1996.  As noted in the footnote 1 of the  Consolidated
Financial  Statements,  had the results of Cutler been included in the statement
of operations  for HTI for the quarter ended  September 30, 1995,  the loss from
operations  would have been $676,525.  Net sales of Fuel  Injection  Systems for
that period  were  $174,052,  as  compared  to  $324,127  sold by HTI during the
quarter ended September 30, 1996.

Nine Months Ended September 30, 1996 Compared to Nine Months Ended 
September 30, 1995

The Consolidated Statement of Operations for the nine months ended September 30,
1996  reflects  Total Net Sales of  $19,368,243,  Gross Profit of  $1,321,305 or
6.8%,  and Pro  Forma  Net Loss of  $339,967,  compared  to Total  Net  Sales of
$17,165,699,  Gross  Profit of  $645,747  or 3.8% and Pro  Forma  Net  Income of
$134,633 for the nine months ended September 30, 1995.

As noted previously, any comparisons between the Statement of Operations for the
nine months ended  September  30, 1996 and the nine months ended  September  30,
1995 must be made in light of the  discussion  that  follows.  The  Consolidated
Statement of  Operations  for the nine months ended  September 30, 1996 includes
the  results  of  operations  for HHI and its  subsidiaries,  HMI and  HTI.  The
Combined  Statement of Operations  for the nine months ended  September 30, 1995
includes only the results of operations of HMI, and does not include the results
of  operations  for HHI or HTI.  The  sections  below  compare  the  results  of
operations  of HMI and HTI for the nine  months  ended  September  30,  1996 and
September 30, 1995, separately.

HHI incurred a net loss of $111,360 for the nine months ended September 30, 1996
consisting primarily of payroll of $103,055 and expenses associated with being a
public company of $41,148 offset by interest  income of $32,843 on investment of
the net proceeds from a sale of the Company's common stock.




                                        9

<PAGE>



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



Hirel Marketing, Inc.

Net Sales of computer  equipment  were  $18,114,722  for the nine  months  ended
September 30, 1996, which reflects an increase of approximately $949,000 or 5.5%
compared to the nine months ended  September 30, 1995.  The Gross Profit for the
nine months ended  September 30, 1996 increased to 4.9% compared to 3.8% for the
nine months ended September 30, 1995.  Management believes that this increase in
Gross Profit was, in part,  reflective  of enhanced  buying  opportunities  as a
result of the  availability  of the line of credit which is more fully described
above.  Interest expense associated with the line of credit was $100,831 for the
nine months ended September 30, 1996.

General and Administrative Expenses for the nine months ended September 30, 1996
were $647,345 compared to $436,141 for the nine months ended September 30, 1995.
The increase was  primarily  attributable  to an increase in payroll and payroll
taxes of approximately  $50,000  resulting from commissions paid on the increase
in net sales as well as increases in advertising, bad debts, insurance, rent and
telephone expenses of approximately $75,000.  Furthermore,  HMI incurred certain
loan origination fees in connection with obtaining the $1,000,000 line of credit
referenced  above,  as well as the increase in the line of credit to $2,000,000.
Amortization of loan  origination fees and related bank charges included General
and  Administrative  Expenses for the nine months ended  September 30, 1996 were
approximately  $116,000  compared to  approximately  $21,000 for the nine months
ended September 30, 1995.

Income  Before  Income  Taxes  attributable  to HMI for the  nine  months  ended
September  30, 1996 was  $181,042,  as compared to $204,503  for the nine months
ended September 30, 1995, a decrease of 11.5%.

Hirel Technologies, Inc.

As  previously  noted,  HTI [through its  predecessor  HTL] began  operations on
October 24, 1995.  For the nine months ended  September 30, 1996,  HTI had total
sales of $1,253,521 in Fuel Injection  Systems,  of which $725,924 came from OEM
customers  and $527,597  were from sales to after market  purchasers.  The Gross
Profit was $425,483 or 33.9%.  The General and  Administrative  Expenses for HTI
during the nine months ended September 30, 1996 totaled  $650,542,  and Research
and Development Expenses during that period totaled $150,580.

General and Administrative  Expenses consisted  primarily of payroll and payroll
taxes of $355,170, rent of $75,914,  insurance of $40,914,  telephone of $31,649
and  depreciation  of $66,966.  The total loss of HTI for the nine months  ended
September  30,  1996 was  $409,649,  of  which  $368,075  was the loss  from the
operations  after interest  expense,  but before a $41,574 loss on the sale of a
capital asset.

As noted previously, the Pro Forma Combined Statement of Operations for the nine
month period ended September 30, 1995, does not reflect the operations of Culter
Induction Systems, Inc. As set forth in footnote 1, had the operations of Culter
been included in the  statement of operations  for HTI for the nine months ended
September  30,  1995,  the loss  before pro forma  income  taxes would have been
$1,465,108  compared  to the loss before pro forma  income  taxes of HTI for the
nine months ended September 30, 1996 of $409,649.

Reference is made to the amended  Form  10-QSB-A  for Hirel  Holdings,  Inc. and
Subsidiaries  for the quarter ended June 30, 1996,  wherein  adjustments  in the
amount of $245,000 were made to the  previously  reported  financial  statements
resulting in a pro forma net loss of $202,530 and $108,829 for the three and six
months ended June 30, 1996.

                                       10

<PAGE>



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



Liquidity and Capital Resources

Cash and cash equivalents at September 30, 1996 were $4,084,442,  an increase in
cash of $3,526,201.  This increase as reflected on the Consolidated Statement of
Cash Flows is primarily the result of the following:

Net cash used for operating  activities was $2,296,021 for the nine months ended
September 30, 1996, compared to net cash generated from operating  activities of
$74,379 for the same period in 1995.  This change is primarily  attributable  to
the  increases in accounts  receivable  of  $418,059,  inventory of $942,127 and
other current assets of $666,528.

Net cash used in  investing  activities  was  $121,927 for the nine months ended
September 30, 1996, due largely to an increase in loans receivable-related party
of $162,660. This was partially offset by proceeds from the sale of equipment of
$85,000.

Net cash provided by financing  activities totaled $5,944,149 for the nine month
period  ending  September  30, 1996, as compared to $463,725 for the nine months
ended  September 30, 1995.  This change is primarily the result of proceeds from
draws  under the line of credit  in  excess  of  repayments  on the same line of
$879,415, proceeds from equity sales of $649,000, and net proceeds of $4,841,829
from the initial public offering of the Company's common stock.

HMI  continues  to  maintain  a  $2,000,000  short-term  line of  credit  with a
financial institution.  Amounts outstanding under the line were $1,540,221 as of
September 30, 1996. HMI intends to repay the  outstanding  borrowings  under the
line through normal  conversion of its short-term trade assets.  The Company was
not dependent upon trade terms for material,  supplies and other working capital
needs incurred during the nine months ended September 30, 1996.

Impact of Inflation

Inflation has not been a major factor in the Company's business since inception.
There can be no assurances that this will continue.

                                       11

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PART II. OTHER INFORMATION



Item 1.  Legal Proceedings.

         Not applicable

Item 2.  Changes in Securities.

         Not applicable

Item 3.  Defaults Upon Senior Securities.

         Not applicable

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

         Not applicable

Item 5.  Other Information.

         Not applicable

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

         Not applicable


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SIGNATURE
------------------------------------------------------------------------------




Pursuant to the  requirements  of the  Securities  and Exchange Act of 1934, the
Registrant  has duly  caused  this  report on Form  10-QSB/A to be signed on its
behalf by the undersigned thereon duly authorized.


                                        HIREL HOLDINGS, INC.




                                        By: /s/ William H. Aden
                                            William H. Aden,
                                     Duly Authorized and Chief Financial Officer
November 19, 1996

                                       13

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